<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 3, 1999
REGISTRATION NO. 333-91535
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PERKINELMER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
MASSACHUSETTS 8711 04-2052042
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
45 WILLIAM STREET, WELLESLEY, MASSACHUSETTS 02481
(781) 237-5100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GREGORY L. SUMME
CHAIRMAN,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PERKINELMER, INC.
45 WILLIAM STREET
WELLESLEY, MASSACHUSETTS 02481
(781) 237-5100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
DAVID E. REDLICK, ESQ. TERRANCE L. CARLSON, ESQ. LAWRENCE M. LEVY, ESQ.
HAL J. LEIBOWITZ, ESQ. PERKINELMER, INC. PHILIP J. FLINK, ESQ.
HALE AND DORR LLP 45 WILLIAM STREET BROWN, RUDNICK, FREED & GESMER
60 STATE STREET WELLESLEY, MASSACHUSETTS 02481 ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02109 TELEPHONE: (781) 237-5100 BOSTON, MASSACHUSETTS 02111
TELEPHONE: (617) 526-6000 TELECOPY: (781) 431-4255 TELEPHONE: (617) 856-8200
TELECOPY: (617) 526-5000 TELECOPY: (617) 856-8201
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and certain
other conditions under the Merger Agreement are met or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ------------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SOURCES OF ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial
information about PerkinElmer that is not included or delivered with this
document. Such information is available without charge to Vivid stockholders
upon written or oral request. If you would like to obtain this information, you
should contact PerkinElmer, Inc. at 45 William Street, Wellesley, Massachusetts
02481, attention: Diane J. Basile, Vice President, Investor Relations and
Corporate Communications. PerkinElmer's telephone number is (781) 237-5100.
To obtain timely delivery of requested documents prior to the special meeting of
Vivid stockholders, you must request them no later than January 6, 2000, which
is five business days prior to the meeting date.
You should also see "Where You Can Find More Information" in this proxy
statement/prospectus.
<PAGE> 3
SUBJECT TO COMPLETION, DATED DECEMBER 3, 1999
[VIVID TECHNOLOGIES, INC. CORPORATE LOGO]
VIVID TECHNOLOGIES, INC.
10E COMMERCE WAY
WOBURN, MASSACHUSETTS 01801
PROPOSED MERGER
Dear Stockholders:
We will hold a special meeting of our stockholders at Vivid's corporate
offices located at 10E Commerce Way, Woburn, Massachusetts on Thursday, January
13, 2000 at 10:00 a.m., local time. Attached is a notice of special meeting of
stockholders and a proxy statement/prospectus relating to the merger. This
document describes the merger in detail. We encourage you to read it carefully.
At the special meeting, you will be asked to consider and vote upon a
proposal described in this proxy statement/prospectus to approve and adopt a
merger agreement with PerkinElmer, Inc. (formerly known as EG&G, Inc.). Under
that agreement, Vivid Technologies, Inc. will become a wholly-owned subsidiary
of PerkinElmer. Based on the capitalization of Vivid and PerkinElmer as of
November 15, 1999, and the closing PerkinElmer share price on that date, Vivid
stockholders will own approximately 2.6% of the outstanding PerkinElmer common
stock after the merger.
So long as the market value of PerkinElmer's common stock is not less than
$30.99 or more than $46.49 at the time of the closing, you will receive in the
merger 0.1613 shares of PerkinElmer's common stock for each share of Vivid
common stock you own. If the market value of PerkinElmer's common stock falls
outside of this range, the merger agreement may be terminated by Vivid or
PerkinElmer in certain circumstances. PerkinElmer common stock is traded on the
New York Stock Exchange under the symbol "PKI." The closing price for
PerkinElmer common stock reported on the New York Stock Exchange on December 2,
1999 was $41.4375 per share.
This is PerkinElmer's prospectus relating to its offering of PerkinElmer
common stock to Vivid stockholders in the proposed merger and Vivid's proxy
statement. It contains important information concerning PerkinElmer, Vivid, the
terms of the proposed merger and the conditions that must be satisfied before
the merger can occur.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE MERGER AND CONCLUDED THAT IT IS IN THE BEST
INTERESTS OF VIVID AND ITS STOCKHOLDERS. YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
THE MERGER.
THE MERGER AND AN INVESTMENT IN SHARES OF PERKINELMER COMMON STOCK INVOLVE
RISKS. YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION ENTITLED
"RISK FACTORS" ON PAGE 7 OF THIS PROXY STATEMENT/PROSPECTUS.
We cordially invite you to attend the special meeting. However, whether or
not you plan to attend the special meeting, please complete, sign and date the
enclosed proxy and return it to us in the enclosed envelope. If you attend the
special meeting, you may vote in person, even though you have previously
returned your proxy. YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES YOU OWN.
Sincerely,
S. David Ellenbogen
Chairman of the Board and
Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE PERKINELMER COMMON STOCK TO BE ISSUED
IN THE MERGER OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION OF THE CONTRARY IS A CRIMINAL OFFENSE.
PROXY STATEMENT/PROSPECTUS DATED DECEMBER [ ], 1999
FIRST MAILED TO STOCKHOLDERS ON OR ABOUT DECEMBER [ ], 1999
<PAGE> 4
[Vivid Technologies, Inc. Corporate Logo]
10E COMMERCE WAY
WOBURN, MASSACHUSETTS 01801
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JANUARY 13, 2000
------------------------
To Our Stockholders:
A special meeting of stockholders of Vivid Technologies, Inc., a Delaware
corporation, will be held at 10:00 a.m., local time, on Thursday, January 13,
2000, at Vivid's corporate offices, located at 10E Commerce Way, Woburn,
Massachusetts, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of October 4, 1999, among PerkinElmer,
Inc., a Massachusetts corporation, Venice Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of PerkinElmer, and Vivid,
pursuant to which Venice Acquisition Corp. will be merged with and into
Vivid, with Vivid being the surviving corporation, at which time Vivid
will become a wholly-owned subsidiary of PerkinElmer.
2. To transact any other business as may properly come before the special
meeting or any adjournment or postponement of the special meeting,
including potential adjournments or postponements of the special meeting
to solicit additional proxies to approve and adopt the merger agreement
and the merger.
Vivid's board of directors has unanimously approved the merger agreement
and the merger and recommends that you vote for approval and adoption of the
merger agreement and the merger. This proposal is more fully described in the
proxy statement/prospectus that accompanies this notice which you should read
carefully before voting. A copy of the merger agreement is attached as Annex A
to the accompanying proxy statement/prospectus.
We have fixed the close of business on November 15, 1999 as the record date
for the determination of our stockholders entitled to vote at the Vivid special
meeting or at any adjournment or postponement of the special meeting. Only
holders of record of Vivid common stock at the close of business on the record
date may vote at the meeting. The affirmative vote of the holders of a majority
of the shares of Vivid common stock outstanding on the record date is required
to approve and adopt the merger agreement and the merger.
All holders of Vivid common stock are cordially invited to attend the Vivid
special meeting in person. However, to ensure your representation at the Vivid
special meeting, you are urged to complete, sign and return the enclosed proxy
card as promptly as possible in the enclosed postage-prepaid envelope. You may
revoke your proxy in the manner described in the accompanying proxy
statement/prospectus at any time before it is voted at the meeting. Executed
proxies with no instructions directing how to vote the shares will be voted
"FOR" approval and adoption of the merger agreement and the merger. If you fail
to return a properly executed proxy card or fail to vote in person at the Vivid
special meeting, the effect will be a vote "AGAINST" the merger agreement and
the merger.
By Order of the Board of Directors
of Vivid Technologies, Inc.
LAWRENCE M. LEVY
Secretary
Woburn, Massachusetts
December [ ], 1999
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID
ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU CAN REVOKE
YOUR PROXY AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
RISK FACTORS................................................ 7
Risks Relating to the Merger.............................. 7
Risks Relating to PerkinElmer............................. 10
Risks Relating to Vivid................................... 11
SELECTED HISTORICAL CONSOLIDATED AND PRO FORMA UNAUDITED
COMBINED FINANCIAL INFORMATION............................ 17
PerkinElmer's Selected Historical and Combined Pro Forma
Financial Information.................................. 18
Vivid's Selected Historical Consolidated Financial
Information............................................ 20
Comparative Per Share Data................................ 21
MARKET PRICE INFORMATION.................................... 22
PerkinElmer Market Price Information...................... 22
Vivid Market Price Information............................ 22
THE VIVID SPECIAL MEETING................................... 25
Date, Time and Place of Meeting........................... 25
What Will be Voted Upon................................... 25
Record Date and Outstanding Shares........................ 25
Votes Needed for a Quorum................................. 25
Vote Required to Approve the Merger....................... 25
Share Ownership of Management and Certain Stockholders.... 25
Effect of Abstentions and Broker Non-votes................ 25
Expenses of Proxy Solicitation............................ 25
How Proxies Will be Voted................................. 26
How You Can Revoke Your Proxy............................. 26
You Do Not Have Appraisal Rights.......................... 26
THE MERGER.................................................. 27
Background of the Merger.................................. 27
Joint Reasons for the Merger.............................. 30
PerkinElmer's Reasons for the Merger...................... 30
Vivid's Reasons for the Merger; Recommendation of the
Board of Directors of Vivid............................ 31
Opinion of Financial Advisor to Vivid..................... 33
Interests of Executive Officers and Directors of Vivid in
the Merger............................................. 38
Accounting Treatment of the Merger........................ 39
Regulatory Approvals...................................... 40
Material United States Federal Income Tax
Considerations......................................... 40
New York Stock Exchange Listing........................... 41
Resales of PerkinElmer Common Stock Issued in Connection
with the Merger;
Affiliate Agreements................................... 42
Cautionary Statement Concerning Forward-Looking
Statements............................................. 42
THE MERGER AGREEMENT........................................ 44
General................................................... 44
Conversion of Shares...................................... 44
Treatment of Vivid Stock Options.......................... 44
Exchange of Stock Certificates............................ 45
Representations and Warranties............................ 46
Covenants................................................. 47
Related Matters After the Merger.......................... 49
Conditions to Obligations to Effect the Merger............ 49
Termination; Fees and Expenses............................ 50
</TABLE>
i
<PAGE> 6
<TABLE>
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PAGE
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<S> <C>
Director and Officer Indemnification........................ 53
Amendment................................................. 54
OTHER AGREEMENTS............................................ 55
Stock Option Agreement.................................... 55
Stockholder Agreement..................................... 55
DESCRIPTION OF VIVID........................................ 56
Business.................................................. 56
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 63
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 69
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
HOLDERS AND MANAGEMENT OF VIVID........................... 78
NO APPRAISAL RIGHTS......................................... 80
COMPARISON OF STOCKHOLDER RIGHTS............................ 81
General................................................... 81
Capitalization............................................ 81
Voting Requirements and Quorums for Stockholders
Meetings............................................... 81
Dissenters' Rights........................................ 82
Stockholder Rights Agreement.............................. 82
Cumulative Voting......................................... 82
Proxies................................................... 83
Approval of Business Combinations and Asset Sales......... 83
Anti-Takeover Legislation................................. 83
Classification of Directors............................... 84
Inspection Rights......................................... 84
Annual Meeting of Stockholders............................ 84
Special Meetings of Stockholders.......................... 84
Notice of Stockholder Meetings............................ 85
Action by Consent of Stockholders......................... 85
Removal of Directors...................................... 85
Change in Number of Directors............................. 85
Indemnification and Limitation of Liability............... 85
Interested Director Transactions.......................... 86
Filling Vacancies on the Board of Directors............... 86
Dividends and Repurchases................................. 87
Classes of Stock.......................................... 87
STOCKHOLDER PROPOSALS....................................... 87
LEGAL MATTERS............................................... 88
EXPERTS..................................................... 88
WHERE YOU CAN FIND MORE INFORMATION......................... 88
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
ANNEXES
A -- AGREEMENT AND PLAN OF MERGER........................... A-1
B -- STOCK OPTION AGREEMENT................................. B-1
C -- STOCKHOLDER AGREEMENT.................................. C-1
D -- OPINION OF NEEDHAM & COMPANY........................... D-1
</TABLE>
ii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE THE COMPANIES PROPOSING TO MERGE?
A: PerkinElmer and Vivid are proposing to merge because we believe the resulting
combination will create a stronger, more competitive company capable of
achieving greater financial strength, operational efficiencies, earning power
and growth potential in the explosives and contraband detection and
industrial non-destructive testing businesses than either company would have
on its own.
Q: HOW WILL THESE TWO COMPANIES MERGE?
A: Under the terms of a merger agreement, a wholly-owned subsidiary of
PerkinElmer will merge with and into Vivid with Vivid surviving the merger as
a wholly-owned subsidiary of PerkinElmer.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: So long as the market value of PerkinElmer's common stock is not less than
$30.99 or more than $46.49 at the time of the closing, you will receive
0.1613 shares of PerkinElmer common stock for each share of Vivid common
stock that you own. If the market value of PerkinElmer common stock falls
outside of this range, the merger agreement may be terminated by Vivid or
PerkinElmer in certain circumstances unless the exchange ratio is adjusted.
PerkinElmer will not issue fractional shares of its common stock. Instead,
for each fractional share of PerkinElmer common stock you will receive cash,
without interest, based on the average of the weighted average of the daily
per share sales prices of PerkinElmer common stock on the New York Stock
Exchange for the five consecutive trading days ending on and including the
third trading day prior to the date of the special meeting of stockholders of
Vivid to consider the merger or, if the merger is completed more than five
business days after the special meeting of stockholders, the date the merger
is completed.
On October 4, 1999, the last full trading day before the public announcement
of the proposed merger, the last reported sale price of PerkinElmer common
stock on the New York Stock Exchange was $39.1875 per share. On December 2,
1999, the most recent practicable date prior to the printing of this proxy
statement/prospectus, the last reported sale price of PerkinElmer common
stock on the New York Stock Exchange was $41.4375 per share.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER OF PERKINELMER AND VIVID?
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger by January 14, 2000. However, we cannot predict the exact
timing because the merger is subject to governmental and other regulatory
approvals. In addition, if necessary or desirable, PerkinElmer and Vivid may
agree to complete the merger at a later date.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
A: The merger is intended to qualify as a reorganization under the Internal
Revenue Code. Accordingly, no gain or loss will be recognized by PerkinElmer,
Vivid or the merger subsidiary. Additionally, no gain or loss will be
recognized by Vivid stockholders to the extent they receive shares of
PerkinElmer common stock in the merger. In general, however, Vivid
stockholders will recognize taxable gain to the extent they receive cash in
the merger. Vivid stockholders should consult their tax advisors for a full
understanding of the tax consequences of the merger.
Q: WHO MUST APPROVE THE MERGER?
A: In addition to the approvals by PerkinElmer's board of directors and Vivid's
board of directors and governmental and other regulatory approvals, each of
which has already been obtained, the merger must be approved by Vivid's
stockholders.
Q: WHAT STOCKHOLDER VOTE IS REQUIRED TO APPROVE THE MERGER?
A: A majority of the outstanding shares of Vivid common stock entitled to vote
constitutes a quorum for the Vivid special meeting. The affirmative vote of
the holders of at least a majority of the outstanding shares of Vivid common
stock is required to approve the merger agreement and the merger.
1
<PAGE> 8
Q: WHY IS VIVID'S BOARD OF DIRECTORS RECOMMENDING APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER?
A: The Vivid board consulted with Vivid management and its financial and legal
advisors and considered a number of factors in determining to approve the
merger agreement and the merger and to recommend its approval to Vivid's
stockholders. These considerations included the premium being offered to
Vivid stockholders, the ability of Vivid's stockholders to participate in the
potential growth of PerkinElmer following the merger, the enhanced financial
and operational resources of PerkinElmer, the complementary product lines and
technology of the two companies and the tax-free nature of the transaction.
To review Vivid's reasons for the merger in greater detail, see "The Merger -
Vivid's Reasons for the Merger; Recommendation of the Board of Directors of
Vivid" on page 31.
Q: WHAT DO I NEED TO DO NOW?
A: We urge you to read this proxy statement/ prospectus, including its annexes,
carefully, and to consider how the merger will affect you as a stockholder.
You also may want to review the documents referenced under "Where You Can
Find More Information" on page 88.
Q: HOW DO I VOTE?
A: You may indicate how you want to vote on your proxy card and then sign and
mail your proxy card in the enclosed return envelope as soon as possible so
that your shares may be represented at the Vivid special meeting. You may
also attend the special meeting in person instead of submitting a proxy.
If you fail either to return your proxy card or to vote in person at the
special meeting, or if you mark your proxy "abstain," the effect will be a
vote against the merger agreement and the merger. If you sign and send in
your proxy without indicating how you want to vote, your proxy will be
counted as a vote for the merger agreement and the merger.
Q: IF MY SHARES ARE HELD IN A BROKERAGE ACCOUNT, WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker will not be able to vote your shares without instructions from
you on how to vote. Therefore, it is important that you follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares. If you fail to provide your broker with instructions, it will have
the same effect as a vote against the merger agreement and the merger.
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
A: You may change your vote at any time before the vote takes place at the Vivid
special meeting. To do so, you may either complete a new proxy card or send a
written notice stating that you would like to revoke your proxy. In addition,
you may attend the special meeting and vote in person. However, if you elect
to vote in person at the special meeting and your shares are held by a
broker, bank or other nominee, you must bring to the special meeting a letter
from the broker, bank or other nominee confirming your beneficial ownership
of the shares and your proxy from the broker to vote the shares.
Q: WHEN AND WHERE IS THE VIVID SPECIAL MEETING?
A: The special meeting of Vivid stockholders will be held at 10:00 a.m., local
time, on Thursday, January 13, 2000 at Vivid's corporate offices located at
10E Commerce Way, Woburn, Massachusetts.
Q: SHOULD I SEND IN MY CERTIFICATES NOW?
A: No. After we complete the merger, PerkinElmer will send instructions to you
explaining how to exchange your shares of Vivid common stock for the
appropriate number of shares of PerkinElmer common stock.
Q: WHO MAY I CONTACT WITH ANY ADDITIONAL QUESTIONS?
A: You may call Dean Ridlon of Vivid at 781-939-3976.
Q: ARE THERE ANY RISKS ASSOCIATED WITH THE MERGER?
A: The merger does involve risk. For a discussion of risks that you should
consider in evaluating the merger, see "Risk Factors" beginning on page 7.
2
<PAGE> 9
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See "Where You Can Find More Information" on page
88. We have included page references parenthetically to direct you to a more
complete description of the topics in this summary.
THE COMPANIES
PERKINELMER, INC.
45 William Street
Wellesley, Massachusetts 02481
(781) 237-5100
PerkinElmer (formerly known as EG&G, Inc.) is a global technology company that
designs and provides products and systems to the medical, pharmaceutical,
telecommunications, semiconductor, aerospace, photographic and a wide range of
other markets and delivers skilled support services to industrial customers.
VIVID TECHNOLOGIES, INC.
10E Commerce Way
Woburn, Massachusetts 01801
(781) 938-7800
Vivid is a developer, manufacturer and marketer of inspection systems that
detect plastic and other explosives in airline baggage, hand baggage and
parcels. Vivid's systems can also be used to identify a wide variety of other
substances, including drugs, currency and agricultural products.
THE MERGER
(PAGE 44)
Through the merger, Vivid will become a wholly-owned subsidiary of PerkinElmer.
Vivid stockholders will receive PerkinElmer common stock in exchange for their
shares of Vivid common stock. The merger agreement is attached to this proxy
statement/prospectus as Annex A. We encourage you to read the merger agreement
as it is the legal document that governs the merger.
VOTE REQUIRED
(PAGE 25)
Approval of the merger agreement and the merger requires the vote of a majority
of the outstanding shares of Vivid common stock.
S. David Ellenbogen and Jay A. Stein, officers and directors of Vivid, together
with three trusts formed by them, who collectively as of November 15, 1999
beneficially owned approximately 13.1% of the outstanding voting power of Vivid,
have already agreed under a stockholder agreement to vote in favor of the merger
agreement and the merger.
VIVID RECOMMENDATION TO STOCKHOLDERS
(PAGE 31)
The Vivid board unanimously voted to approve the merger agreement and the
merger. The Vivid board believes that the merger is advisable and in your best
interests and recommends that you vote FOR the proposal to approve the merger
agreement and the merger.
WHAT HOLDERS OF VIVID
COMMON STOCK WILL RECEIVE
(PAGE 44)
So long as the market value of PerkinElmer common stock is not less than $30.99
or more than $46.49 at the time of the closing, each share of Vivid common stock
will be exchanged for 0.1613 shares of PerkinElmer common stock.
PerkinElmer will not issue fractional shares of PerkinElmer common stock in
connection with the merger. Instead, you will receive cash with respect to
fractional shares.
OWNERSHIP OF PERKINELMER
FOLLOWING THE MERGER
(PAGE 44)
Based on 10,089,141 shares of Vivid common stock outstanding on November 15,
1999 and the closing price for PerkinElmer stock on that date, we anticipate
that Vivid stockholders will receive approximately 1,627,378 shares of
PerkinElmer common stock in the merger, or approximately 2.6% of the issued and
outstanding shares of PerkinElmer common stock following the merger. This
estimate is based on certain assumptions, including the market value of
PerkinElmer's common stock at the time of the
3
<PAGE> 10
merger and that no options to purchase Vivid common stock are exercised prior to
that time.
CONDITIONS TO THE MERGER
(PAGE 49)
The completion of the merger depends upon meeting a number of conditions,
including the following:
- the approval of Vivid's stockholders;
- the approval of the listing on the New York Stock Exchange of the
PerkinElmer common stock to be issued to Vivid stockholders in the
merger;
- the receipt of legal opinions regarding material tax consequences of the
merger; and
- other customary contractual conditions specified in the merger agreement.
Some of the conditions to the merger may be waived by the party entitled to
assert the condition.
INDEMNIFICATION
(PAGE 53)
For a period of six years after the merger, PerkinElmer will cause the surviving
corporation to maintain in effect a directors' and officers' liability insurance
policy covering each present and former director and officer of Vivid against
any costs or expenses pertaining to matters existing or occurring at or prior to
the merger.
NO SOLICITATION BY VIVID
(PAGE 48)
Vivid has agreed that it will not initiate or engage in any discussion regarding
a business combination of Vivid with any other party. Vivid has further agreed
to cause each of its officers, directors, employees, representatives and agents
not to initiate or engage in these discussions. There are limited exceptions to
these prohibitions to enable Vivid's board to fulfill its fiduciary duties to
Vivid's stockholders.
TERMINATION OF THE MERGER AGREEMENT
(PAGE 50)
PerkinElmer and Vivid can mutually agree to terminate the merger agreement
without completing the merger, and either PerkinElmer or Vivid can terminate the
merger agreement if any of the following occurs:
- the other party breaches any material representation, warranty, covenant
or agreement under the merger agreement and the breach is not cured
within 10 days of notice of the breach;
- the merger is not completed by April 30, 2000, with certain exceptions;
- a governmental entity prohibits the merger; or
- Vivid's stockholders fail to approve the merger at the Vivid special
meeting with certain exceptions.
PerkinElmer may also terminate the merger agreement if:
- Vivid's board withdraws or modifies its recommendation to the Vivid
stockholders to vote in favor of the merger agreement or the merger, or
fails to reconfirm its recommendation at the request of PerkinElmer after
receiving an alternative proposal or a tender or exchange offer;
- Vivid's board recommends that the Vivid stockholders enter into an
agreement with a third party to acquire at least 20% of Vivid's
outstanding shares of common stock or 20% of Vivid's assets;
- a third party commences a tender or exchange offer for at least 20% of
Vivid's outstanding shares of common stock and Vivid's board recommends
that Vivid's stockholders tender their shares, or within 10 days of such
offer takes no position with respect to such offer or fails to recommend
to its stockholders not to tender their shares of Vivid common stock;
- Vivid fails to call or hold the Vivid special meeting by April 30, 2000,
with certain exceptions; or
- the market value of PerkinElmer common stock is greater than $46.49 per
share at the time of the closing of the merger and Vivid does not elect
to adjust the exchange ratio so that the Vivid stockholders will receive
PerkinElmer common stock with a market value of $7.50 per share.
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Vivid may also terminate the merger agreement if:
- the market value of PerkinElmer common stock is less than $30.99 per
share at the time of the closing of the merger and PerkinElmer does not
elect to adjust the exchange ratio so that Vivid's stockholders will
receive PerkinElmer common stock with a market value of $5.00 per share.
If the merger agreement is terminated under certain circumstances, PerkinElmer
and Vivid may be required to pay the other party's out-of-pocket expenses in an
amount of up to $700,000. In addition, under certain circumstances, Vivid may be
required to pay PerkinElmer a fee of $2,500,000, inclusive of the payment of any
PerkinElmer expenses.
OPINION OF FINANCIAL ADVISOR TO VIVID
(PAGE 33)
In deciding to approve the merger, Vivid's board received an opinion from its
financial advisor Needham & Company, Inc. as to the fairness of the exchange
ratio from a financial point of view. The full text of the opinion is attached
as Annex D to this proxy statement/prospectus and should be read carefully in
its entirety. Needham's opinion is directed to Vivid's board and does not
constitute a recommendation to any stockholder with respect to matters relating
to the merger.
INTERESTS OF EXECUTIVE OFFICERS AND
DIRECTORS OF VIVID IN THE MERGER
(PAGE 38)
In considering the recommendation of Vivid's board, you should be aware of the
interests that executive officers and directors of Vivid have in the merger.
These include:
- retention arrangements;
- indemnification and directors' and officers' liability insurance;
- arrangements with S. David Ellenbogen and Jay A. Stein, officers and
directors of Vivid, under a stockholder agreement, which require them to
vote their shares to approve the merger and includes the option of
PerkinElmer to purchase Vivid shares beneficially owned by them which may
become exercisable if the merger is not completed;
- acceleration of the vesting of options held by two of the independent
directors of Vivid; and
- acceleration of royalty payments to be made to Hologic, Inc., a related
party of Vivid.
Vivid's executive officers and directors have stock options that will be
converted under the terms of Vivid's stock option plan into options to purchase
shares of PerkinElmer common stock. As of November 15, 1999, the executive
officers and directors of Vivid held stock options to purchase an aggregate of
608,000 shares of Vivid common stock of which 301,567 shares are exercisable
within 60 days of November 15, 1999 or upon completion of the merger, including
options to purchase 58,000 shares of Vivid common stock that become exercisable
upon completion of the merger. It is estimated that after the merger these
options will be exercisable for 98,070 shares of PerkinElmer common stock.
Options to purchase 40,000 shares held by executive officers of Vivid, none of
which are currently exercisable, will expire immediately prior to completion of
the merger.
In discussing the fairness of the merger to stockholders of Vivid, Vivid's board
took into account these interests. These interests are different from and in
addition to your and their interests as stockholders.
ACCOUNTING TREATMENT
(PAGE 39)
PerkinElmer will account for the merger as a purchase of a business, which means
that the assets and liabilities of Vivid, including intangible assets, will be
recorded at their fair value and the results of operations of Vivid will be
included in PerkinElmer's results from the date of acquisition.
MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS
(PAGE 40)
We have structured the merger so that no gain or loss generally will be
recognized by Vivid stockholders for federal income tax purposes on the exchange
of shares of Vivid common stock for shares of PerkinElmer common stock.
Tax matters are very complicated and the tax consequences of the merger to you
will depend on the facts of your own situation. You should
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consult your tax advisor for a full understanding of the tax consequences of the
merger to you.
VIVID STOCKHOLDERS' RIGHT OF APPRAISAL
(PAGE 80)
Under Delaware law, Vivid stockholders do not have rights of appraisal in
connection with the proposed merger.
HOW THE RIGHTS OF VIVID STOCKHOLDERS WILL
DIFFER AS A PERKINELMER STOCKHOLDER
(PAGE 81)
The rights of Vivid's investors as stockholders of PerkinElmer after the merger
will be governed by PerkinElmer's charter and bylaws and the laws of the
Commonwealth of Massachusetts. Those rights differ from rights of Vivid
stockholders under Vivid's charter and bylaws and the laws of the State of
Delaware.
FORWARD-LOOKING STATEMENTS
MAY PROVE INACCURATE
(PAGE 42)
We have made forward-looking statements in this document, and in documents that
are incorporated by reference, that are subject to risks and uncertainties.
Forward-looking statements include the information concerning possible or
assumed future results of operations of PerkinElmer, including the anticipated
cost savings and revenue enhancements from the merger. Also, when we use words
such as "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. You should note that many factors could
affect the future financial results of PerkinElmer and Vivid, and could cause
these results to differ materially from those expressed in our forward-looking
statements. These factors include the following:
- the risk that we are unable to achieve the anticipated cost savings and
revenue enhancements;
- the risk that we encounter greater than expected costs and difficulties
related to the integration of the businesses of PerkinElmer and Vivid;
- the risk that we are unable to firmly develop, introduce and gain
customer acceptance of new products;
- economic, political and competitive forces affecting our businesses; and
- the risk that our analyses of these risks and forces could be incorrect
and/or that the strategies developed to address them could be
unsuccessful.
PERKINELMER PRICE INFORMATION
(PAGE 22)
Shares of PerkinElmer common stock are listed on the New York Stock Exchange. On
October 4, 1999, the last full trading day prior to the public announcement of
the proposed merger, PerkinElmer common stock closed at $39.1875 per share. On
December 2, 1999, PerkinElmer common stock closed at $41.4375 per share.
VIVID PRICE INFORMATION
(PAGE 22)
Shares of Vivid common stock are listed on the Nasdaq National Market. On
October 4, 1999, the last full trading day prior to the public announcement of
the proposed merger, Vivid common stock closed at $3.5625 per share. On December
2, 1999, Vivid common stock closed at $6.00 per share.
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RISK FACTORS
You should carefully consider the following risk factors before you decide
whether to vote to approve and adopt the merger agreement and the merger. You
should also consider the other information in this proxy statement/prospectus
and the additional information in PerkinElmer's other reports on file with the
SEC and in the other documents incorporated by reference in this proxy
statement/prospectus. See "Where You Can Find More Information" on page 89.
RISKS RELATING TO THE MERGER
PERKINELMER'S STOCK PRICE IS VOLATILE AND THE VALUE OF PERKINELMER COMMON
STOCK ISSUED IN THE MERGER WILL DEPEND ON ITS MARKET PRICE AT THE TIME OF THE
MERGER. NO ADJUSTMENT WILL BE MADE TO THE EXCHANGE RATIO AS A RESULT OF
CHANGES IN THE MARKET PRICE OF PERKINELMER'S COMMON STOCK IF THE PERKINELMER
MARKET PRICE REMAINS BETWEEN $30.99 AND $46.49 PER SHARE.
So long as the market value of PerkinElmer common stock is not less than
$30.99 or more than $46.49 at the time of the closing, each share of Vivid
common stock will be exchanged for 0.1613 shares of PerkinElmer common stock. If
the market value of PerkinElmer common stock falls outside of this range, the
merger agreement may be terminated or renegotiated by Vivid or PerkinElmer in
certain circumstances. Any reduction in PerkinElmer common stock price will
result in your receiving less value in the merger. It is likely that you will
not know the exact value of PerkinElmer common stock to be issued in the merger
at the time of the Vivid special meeting. The market price of PerkinElmer common
stock, like that of shares of many other technology companies, has been and may
continue to be volatile. For example, from January 1, 1997 to December 2, 1999,
the PerkinElmer common stock traded as high as $44.125 per share and as low as
$18.00 per share.
Recently, the stock market in general and the shares of technology
companies in particular have experienced significant price fluctuations. The
market price may continue to fluctuate significantly in response to various
factors, including:
- quarterly variations in operating results or growth rates;
- the announcement of technological innovations;
- the introduction of new products by PerkinElmer and/or its competitors;
- changes in estimates by securities analysts;
- market conditions in the industry;
- announcements and actions by competitors;
- regulatory and judicial actions; and
- general economic conditions.
IF PERKINELMER DOES NOT MANAGE THE INTEGRATION OF VIVID AND OTHER ACQUIRED
COMPANIES SUCCESSFULLY, IT MAY BE UNABLE TO ACHIEVE DESIRED RESULTS.
As a part of its business strategy, PerkinElmer has in the past and expects
to continue in the future to enter into business combinations and acquisitions.
Acquisition transactions are accompanied by a number of risks, including:
- the difficulty of integrating the operations and personnel of the
acquired companies;
- the potential disruption of its ongoing business and distraction of
management;
- the difficulty of incorporating acquired technology and rights into
PerkinElmer's products and services;
- unanticipated expenses related to technology integration;
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- the maintenance of uniform standards, controls, procedures and policies;
- the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
- potential unknown liabilities associated with acquired businesses.
The combined company may not succeed in addressing these risks or any other
problems encountered in connection with these potential business combinations
and acquisitions which could disrupt PerkinElmer's business and cause increased
losses.
PERKINELMER MAY FACE CHALLENGES IN INTEGRATING PERKINELMER AND VIVID AND, AS A
RESULT, MAY NOT REALIZE THE EXPECTED BENEFITS OF THE ANTICIPATED MERGER.
Integrating the operations and personnel of PerkinElmer and Vivid will be a
complex process. PerkinElmer is uncertain that the integration will be completed
rapidly or will achieve the anticipated benefits of the merger. The successful
integration of PerkinElmer and Vivid will require, among other things,
integration of sales and marketing groups and coordination of development
efforts. The diversion of the attention of PerkinElmer's management and any
difficulties encountered in the process of combining the companies could cause
the disruption of, or a loss of momentum in, the activities of the combined
company's business. Further, the process of combining PerkinElmer and Vivid
could negatively affect employee morale and the ability of the combined company
to retain some of its key employees after the merger. In addition, the
announcement and completion of the merger could cause customers to delay or
change orders for products as a result of uncertainty over the integration of
products. The inability to successfully integrate the operations and personnel
of PerkinElmer and Vivid, or any significant delay in achieving integration,
could have a material adverse effect on the business, financial condition and
results of operations of the combined company after the merger.
IF PERKINELMER DOES NOT SUCCESSFULLY INTEGRATE VIVID OR THE MERGER'S BENEFITS
DO NOT MEET THE EXPECTATIONS OF FINANCIAL OR INDUSTRY ANALYSTS, THE MARKET
PRICE OF PERKINELMER'S COMMON STOCK MAY DECLINE.
The market price of PerkinElmer's common stock may decline as a result of
the merger if:
- the integration of PerkinElmer and Vivid is unsuccessful;
- PerkinElmer does not achieve the perceived benefits of the merger as
rapidly or to the extent anticipated by financial or industry analysts;
or
- the effect of the merger on PerkinElmer's financial results is not
consistent with the expectations of financial or industry analysts.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT THE MARKET PRICE OF
VIVID'S COMMON STOCK AND VIVID'S OPERATING RESULTS.
If the merger is not completed for any reason, Vivid may be subject to a
number of material risks, including the following:
- Vivid may be required to pay PerkinElmer a termination fee of $2,500,000
or reimburse PerkinElmer for expenses of up to $700,000;
- Vivid stockholders may experience dilutive effects to their stock
ownership because an option granted to PerkinElmer by Vivid pursuant to a
stock option agreement to acquire up to 2,000,012 shares of Vivid's
common stock may become exercisable;
- the market price of Vivid's common stock may decline to the extent that
the current market price of Vivid common stock reflects a market
assumption that the merger will be completed; and
- costs related to the merger, such as legal and accounting fees, must be
paid even if the merger is not completed.
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<PAGE> 15
IF THE MERGER IS NOT COMPLETED, VIVID MAY BE UNABLE TO ATTRACT ANOTHER
STRATEGIC PARTNER ON EQUIVALENT OR MORE ATTRACTIVE TERMS THAN THOSE BEING
OFFERED BY PERKINELMER.
If the merger is terminated and Vivid's board determines to seek another
merger or business combination, Vivid cannot assure that it will be able to find
a partner offering terms equivalent or more attractive than the price and terms
offered by PerkinElmer in the merger. In addition, PerkinElmer's option from
Vivid to acquire up to 2,000,012 shares of Vivid common stock, as well as its
option to acquire up to 1,303,000 shares of Vivid common stock beneficially
owned by two of Vivid's officers and directors and three trusts formed by them,
may have the effect of impeding a merger or business combination of Vivid with
any person other than PerkinElmer. You may read more about these options under
"Other Agreements."
VIVID MAY LOSE AN OPPORTUNITY TO ENTER INTO A MERGER OR BUSINESS COMBINATION
WITH ANOTHER PARTY ON MORE FAVORABLE TERMS BECAUSE OF PROVISIONS IN THE MERGER
AGREEMENT WHICH PROHIBIT VIVID AGAINST ENTERING INTO SUCH TRANSACTIONS OR
SOLICITING SUCH PROPOSALS.
While the merger agreement is in effect and subject to the fiduciary duties
of Vivid's directors under Delaware law, Vivid is prohibited from entering into
or soliciting, initiating or encouraging any inquiries or proposals that may
lead to a proposal or offer for a merger, consolidation, business combination,
sale of substantial assets, tender offer, sale of shares of capital stock or
other similar transactions with any person other than PerkinElmer. As a result
of this prohibition, Vivid may lose an opportunity to enter into a transaction
with another potential partner on more favorable terms.
VIVID'S OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE
THEM TO SUPPORT OR APPROVE THE MERGER.
The directors and officers of Vivid participate in arrangements that
provide them with interests in the merger that are different from, or in
addition to, yours. The directors and officers of Vivid may therefore be more
likely to vote to approve the merger agreement and the merger than if they did
not hold these interests. These interests include retention arrangements for
some of Vivid's officers, the obligation of PerkinElmer to provide continuing
indemnification for Vivid officers and directors, the acceleration of the
vesting of options to purchase up to a total of 8,000 Vivid shares held by two
of Vivid's independent directors and the acceleration of royalty payments to be
made to Hologic, Inc., a related party of Vivid. You should consider whether
these interests may have influenced these directors and officers to support or
recommend the merger. You should read more about these interests under "The
Merger -- Interests of Executive Officers and Directors of Vivid in the Merger."
UNCERTAINTIES ASSOCIATED WITH THE MERGER MAY CAUSE VIVID TO LOSE KEY
PERSONNEL.
Current and prospective Vivid employees may experience uncertainty about
their future roles with PerkinElmer until PerkinElmer's strategies with regard
to Vivid are announced or executed. Any uncertainty may adversely affect Vivid's
ability to attract and retain key management, sales, marketing and technical
personnel.
CUSTOMERS OF PERKINELMER AND VIVID MAY DELAY OR CANCEL ORDERS AS A RESULT OF
CONCERNS OVER THE MERGER.
The announcement and completion of the merger could cause existing and
potential customers of PerkinElmer and Vivid to delay or cancel orders for
products as a result of customer concerns and uncertainty over product
evolution, integration and support over the combined company's products. Such a
delay or cancellation of orders could have a material adverse effect on the
business, financial condition and results of operations of PerkinElmer or Vivid.
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<PAGE> 16
RISKS RELATING TO PERKINELMER
PERKINELMER IS SUBJECT TO THE FOLLOWING RISKS THAT MAY AFFECT ITS BUSINESS AND
OPERATIONS GENERALLY OR AFFECT MULTIPLE SEGMENTS OF ITS BUSINESS AND
OPERATIONS.
- PerkinElmer faces strong competition in many of the markets that it
serves, which affects its ability to sell its products and services and
the prices that it obtains. Some of PerkinElmer's competitors are larger
than it is and have greater financial and other resources.
- If PerkinElmer is unable to successfully implement the restructuring
plans that it has adopted, it will not be able to achieve anticipated
costs savings, its ability to produce and deliver the products and
services may be adversely affected and it may lose customers and key
personnel.
- PerkinElmer's business plan depends on its ability to continue to
innovate, develop new products and services based on such innovations and
introduce these new products and services successfully into the market.
If PerkinElmer is unable to successfully implement this business plan, it
could have a material adverse effect on PerkinElmer's business, financial
condition and results of operations.
- PerkinElmer's business plan depends on its ability to acquire attractive
businesses on favorable terms and integrate these businesses into
PerkinElmer's other operations. PerkinElmer is in the process of
integrating Lumen Technologies, which it acquired in December 1998, and
the analytical instruments division of PE Corporation, which it acquired
in May 1999. If PerkinElmer is unable to successfully implement this
business plan or integrate these acquisitions, it could have a material
adverse effect on PerkinElmer's business, financial condition and results
of operations.
- In many of PerkinElmer's segments, PerkinElmer serves as a supplier of
components to other businesses. As a result, PerkinElmer's success
depends on the business success of its customers.
- PerkinElmer needs to be able to continue to access the capital markets to
fund its growth.
- PerkinElmer's product businesses can be affected by currency risks.
- PerkinElmer needs to achieve satisfactory results in connection with
certain litigation to which it is a party, particularly its ongoing tax
litigation with the Internal Revenue Service.
- PerkinElmer needs to attract and retain key management, operational and
technical personnel.
- PerkinElmer is affected by general economic conditions.
- PerkinElmer could be impacted by unanticipated issues associated with
Year 2000 software problems.
- PerkinElmer's effective tax rates in the future could be affected by
changes in the geographic distribution of income, utilization of non-U.S.
net operating loss carryforwards, repatriation costs, resolution of
outstanding tax audit issued and changes in the portfolio of businesses.
PERKINELMER IS SUBJECT TO THE FOLLOWING RISKS THAT MAY AFFECT PARTICULAR
BUSINESS SEGMENTS.
Life Sciences
- PerkinElmer's business plan for this segment is significantly dependent
upon the successful introduction of products currently under development
as well as the expansion of the geographic markets for this segment's
products.
- Many of PerkinElmer's products in this segment are subject to regulation
by the Food and Drug Administration and other regulatory bodies.
- Many of PerkinElmer's products in this segment are used by pharmaceutical
companies and research laboratories, so the success of these products is
dependent upon the success of these customers.
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Optoelectronics
- PerkinElmer needs to continue the development of its amorphous silicon
technology and successfully introduce additional products based on this
technology to the market.
- PerkinElmer needs to successfully shift the production of certain
products of this segment to lower cost geographic areas such as Indonesia
and China in order to compete effectively.
Instruments
- PerkinElmer's ability to obtain Federal Aviation Administration
certification of its Z scan system for screening of checked baggage on a
timely basis will affect this business segment's success.
- PerkinElmer needs to successfully integrate the analytical instruments
business acquired from PE Corporation in May 1999.
Fluid Sciences
- Key customers for certain of this business segment's products manufacture
equipment used in semiconductor production. As a result, the success of
this segment's operations is dependent in part upon a recovery of
economic conditions in the semiconductor industry.
- PerkinElmer is in the process of implementing new lower cost
manufacturing processes for certain of this segment's products. The
success of this segment's operations depends in part upon PerkinElmer's
successfully implementing these new manufacturing processes.
- Key customers for the products of this segment are manufacturers of air
frames and engines for regional and business jets. As a result, the
success of this segment is dependent in part upon the growth of the
regional and business jet market.
- The success of PerkinElmer's operations in this segment depends in part
upon entering into long-term contracts for the sale of seals to major
engine manufacturers on favorable terms.
RISKS RELATING TO VIVID
VIVID MAY CONTINUE TO INCUR SIGNIFICANT LOSSES.
Vivid incurred net losses of $4.6 million for the fiscal year ended
September 30, 1999. These losses, most of which were incurred during the first
six months of this period, were substantially attributable to a significant
reduction in revenues. Vivid cannot assure that it will be able to increase its
revenues or reduce costs to be profitable on a sustained basis.
VIVID'S RELIANCE ON A SMALL NUMBER OF CUSTOMERS WITH DISCRETE PROJECTS FOR A
LARGE PORTION OF ITS REVENUES HAS HAD AND MAY CONTINUE TO HAVE A MATERIAL
ADVERSE EFFECT ON VIVID'S REVENUES AND RESULTS OF OPERATIONS.
In fiscal 1999, Vivid's revenues and results of operations were adversely
affected by its inability to replace a significant portion of revenues it
received during previous periods from a limited number of customers whose
projects or contracts had been completed or nearly completed. In fiscal 1999,
Vivid's sales to a United States government agency accounted for 16% of
revenues, sales to Manchester Airport UK accounted for 16% of revenues, sales to
Hochtief AG (the New Athens International Airport) accounted for 11% of revenues
and sales to BAA accounted for 13% of revenues. In fiscal 1998, Vivid's sales to
the BAA accounted for 42% of revenues, sales to the Airport Authority of Hong
Kong accounted for 12% of revenues and sales to the United States Federal
Aviation Administration, including research and development funding, accounted
for 16% of revenues. Vivid's continued reliance on a limited number of customers
with discrete projects for a substantial portion of its revenues could continue
to have a material adverse effect on its business, financial condition and
results of operations.
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<PAGE> 18
VIVID'S SALES OF CHECKED BAGGAGE EXPLOSIVES DETECTION SYSTEMS WILL BE
ADVERSELY AFFECTED UNLESS AND UNTIL VIVID OBTAINS FAA CERTIFICATION FOR A
SYSTEM.
Vivid does not have a checked baggage explosives detection system that has
been certified by the FAA. This has limited Vivid's sales of its checked baggage
explosives detection system in the United States, and may adversely affect its
sales in other countries. Vivid has experienced delays in its attempts to obtain
FAA certification for its MVT system, Vivid's next generation checked baggage
system, and believes that it will need to make further refinements to the system
in order to meet the FAA's certification requirements. Vivid cannot ensure that
the MVT or any other products that it may develop will ever meet the FAA or any
other certification standard.
THE FAILURE OR DELAY OF GOVERNMENTS TO MANDATE THE SCREENING OF BAGGAGE WITH
ADVANCED EXPLOSIVES DETECTION SYSTEMS COULD HAVE A MATERIAL ADVERSE EFFECT ON
SALES OF VIVID'S SYSTEMS.
The failure or delay of governments to mandate the screening of baggage
with advanced explosives detection systems has had and may continue to have a
material adverse effect on the sales of Vivid's systems. Sales of Vivid's
explosives detection systems for use in airports will continue to be dependent
upon governmental initiatives that require or support the screening of baggage
with advanced explosives detection systems. These mandates are influenced by
many factors outside the control of Vivid, including political and budgetary
concerns of governments, airlines and airports. In 1998, the European Civil
Aviation Conference, an organization with 37 member states, delayed the
implementation of 100% screening of international checked baggage to the year
2002, from its prior target date of the year 2000. Vivid, which has derived a
substantial portion of its revenues from Europe, believes that this delay has
had a material adverse effect on its business, financial condition and results
of operations.
CONTINUED FLUCTUATIONS IN OPERATING RESULTS COULD CAUSE THE PRICE OF VIVID
COMMON STOCK TO FALL.
Vivid's annual and quarterly operating results have fluctuated in the past
and are likely to fluctuate in the future. It is possible that Vivid's revenues
and operating results will be below the expectations of securities analysts and
investors in future quarters. If Vivid fails to meet or surpass the expectations
of securities analysts or investors, the market price of Vivid common stock will
most likely fall. Factors that affect Vivid's operating results include:
- the overall demand for explosives detection systems;
- the timing of regulatory approvals for Vivid's systems and the approval
of governmental initiatives to promote the use of explosives detection
systems;
- the timing of new product announcements and releases by Vivid and its
competitors;
- variations in the number and mix of products sold by Vivid;
- timing of customer orders and adjustments of delivery schedules to
accommodate customers' programs;
- the availability of components, materials and labor necessary to produce
Vivid's products;
- the timing and level of expenditures in anticipation of future sales; and
- pricing and other competitive conditions.
THE COMMERCIAL SUCCESS OF VIVID'S SYSTEMS WILL DEPEND IN LARGE PART ON THE
EXPANDED USE OF EXPLOSIVES DETECTION SYSTEMS.
The explosives detection industry is at a relatively early stage of
development. The commercial success of Vivid's systems will depend in large part
on the expanded use of explosives detection systems. Vivid cannot assure that
the explosives detection industry will develop further or that Vivid will market
its products effectively and obtain broader market acceptance for its products.
The market's acceptance of
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explosives detection systems on a broad basis will be dependent upon a number of
factors. These factors include:
- government appropriations and initiatives to support purchases of
explosives detection equipment;
- the real and perceived threat of terrorist attacks;
- the performance and price of Vivid's and its competitors' products;
- the expansion of applications for explosives detection technology; and
- customer reaction to existing explosives detection systems.
VIVID'S LENGTHY SALES CYCLE REQUIRES VIVID TO INCUR SIGNIFICANT EXPENSES WITH
NO ASSURANCE THAT VIVID WILL GENERATE REVENUE.
Customer decisions to purchase Vivid's systems often require significant
expenditures by Vivid without any assurance of success. These customer decisions
often precede the generation of sales, if any, by a year or more. Prior to a
sale, Vivid may be required to provide a potential customer with a demonstration
unit for extensive regulatory testing and evaluation free of charge. In
addition, customers may initially purchase one or a few units for extensive
testing and evaluation before making a decision regarding volume purchases.
Purchases may also be delayed to correspond to a customer's budgetary cycle or
as a result of regulatory approval requirements. Delays in anticipated purchase
orders have had and could continue to have a material adverse effect on Vivid's
business, financial condition and results of operations.
VIVID CONDUCTS ITS BUSINESS WORLDWIDE, WHICH EXPOSES IT TO A NUMBER OF
DIFFICULTIES INHERENT IN INTERNATIONAL ACTIVITIES.
Vivid's international business, which accounted for approximately 78% of
Vivid's revenues in fiscal 1998 and 73% of revenues in fiscal 1999, may be
materially and adversely affected by many factors including:
- international regulatory requirements and policy changes;
- favoritism towards local suppliers;
- difficulties in inventory management, accounts receivable collection and
the management of distributors or representatives;
- difficulties in staffing and managing foreign operations;
- political and economic changes and disruptions;
- governmental currency controls;
- currency exchange rate fluctuations; and
- tariff regulations.
Vivid anticipates that international sales will continue to account for a
significant percentage of its revenues.
FLUCTUATIONS IN THE FOREIGN CURRENCY EXCHANGE RATES IN RELATION TO THE U.S.
DOLLAR COULD HAVE A MATERIAL ADVERSE EFFECT ON VIVID'S OPERATING RESULTS.
Although Vivid's international sales have been denominated primarily in
U.S. dollars, changes in currency exchange rates that would increase the
relative value of the U.S. dollar may make it more difficult for Vivid to
compete with foreign manufacturers on price or otherwise have a material adverse
effect on its sales and operating results. On occasion, Vivid's sales have been
denominated in foreign currencies. A significant increase in Vivid's foreign
denominated sales would increase Vivid's risk associated with foreign currency
fluctuations. Vivid may enter into hedging transactions to limit this exposure.
Vivid cannot assure that these hedging transactions would be successful.
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VIVID'S FUTURE SUCCESS DEPENDS ON ITS ABILITY TO ENHANCE EXISTING PRODUCTS AND
TO DEVELOP NEW PRODUCTS.
Vivid has developed and marketed a limited number of products. Vivid
believes that its future success will depend in large part on its ability to
enhance its existing products and to develop new products to meet regulatory and
customer requirements. The uncertainties inherent with product development and
introduction create a risk that Vivid will be unsuccessful in introducing
products or product enhancements on a timely basis, if at all. The enhancement
and development of Vivid's products will be subject to risks associated with new
product development of explosives detection systems. These risks include:
- unanticipated delays;
- budget overruns;
- technical problems;
- regulatory approval from the FAA and foreign regulatory authorities; and
- other difficulties that could result in the abandonment or substantial
change in the commercialization of these enhancements or new products.
VIVID'S DISPUTE WITH A SUPPLIER OF COMPONENTS FOR ITS APS HAND BAG INSPECTION
SYSTEM COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Vivid relies on Gilardoni S.p.A, an Italian-based manufacturer, for two key
components for its APS systems. Vivid has experienced delays and other
difficulties in obtaining these components from Gilardoni. Vivid has advised
Gilardoni that unless Gilardoni is able to meet its contractual obligations,
Vivid may exercise its contractual right to obtain an alternative source of
these components. Vivid only has the right to seek an alternative source of
supply if Gilardoni is in breach of its contractual obligations. Gilardoni has
denied that it is in breach and has claimed that Vivid is in breach of its
contractual obligations. Vivid cannot assure that Gilardoni will improve its
performance, or that, if necessary, Vivid will be successful in finding an
alternative supplier for these components on a timely basis or on favorable
terms. Vivid's ongoing dispute with Gilardoni could divert management's
attention and resources, adversely affect sales of APS systems, and otherwise
have a material adverse effect on Vivid's business, financial condition and
results of operations.
INTENSE COMPETITION, RAPID TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY
STANDARDS AND REQUIREMENTS COULD DECREASE DEMAND FOR VIVID'S PRODUCTS OR MAKE
VIVID'S PRODUCTS OBSOLETE.
Vivid cannot assure that it will be able to compete successfully. Many of
Vivid's competitors have substantially greater manufacturing, marketing and
financial resources than Vivid. Intense competition, rapid technological change
and evolving industry standards and requirements could decrease demand for
Vivid's products or make Vivid's products obsolete. Two of Vivid's competitors
have developed products based upon alternative technology that have been
certified by the FAA. In addition, competitors may develop superior products or
products of similar quality for sale at the same or lower prices. Improvements
in current or new technologies could make competitors' products technically
equivalent or superior to Vivid's products, in addition to providing cost or
other advantages. Other advances or changes in industry standards or
requirements could make it more difficult for Vivid to meet those standards or
requirements or could render Vivid's products obsolete.
VIVID MAY BE UNABLE TO ATTRACT AND RETAIN MANAGEMENT AND OTHER PERSONNEL IT
NEEDS TO SUCCEED.
The loss of any of Vivid's executive officers or key research and
development personnel, its inability to attract or retain qualified personnel in
the future or delays in hiring required personnel could adversely affect Vivid's
business. Competition for such personnel, particularly software engineers and
other technical personnel, is intense. Vivid may be unable to attract and retain
all personnel necessary for the development of its business.
14
<PAGE> 21
VIVID MAY HAVE DIFFICULTY PROTECTING ITS INTELLECTUAL PROPERTY.
Vivid's ability to compete is affected by its ability to protect its
intellectual property. Vivid relies primarily on trade secret laws,
confidentiality procedures, patents, copyrights, trademarks and licensing
arrangements to protect its intellectual property. The steps Vivid has taken to
protect its technology may be inadequate. Existing trade secret, trademark and
copyright laws offer only limited protection. Vivid's patents could be
invalidated or circumvented. The laws of some foreign countries in which Vivid's
products are or may be developed, manufactured or sold may not protect Vivid's
products or intellectual property rights to the same extent as do the laws of
the United States. This may make the possibility of piracy of Vivid's technology
and products more likely. Vivid cannot assure that the steps that it has taken
to protect its intellectual property will be adequate to prevent
misappropriation of its technology.
VIVID'S OPERATIONS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.
Particular aspects of Vivid's technology could be found to infringe on the
intellectual property rights or patents of others. Other companies may hold or
obtain patents on inventions or may otherwise claim proprietary rights to
technology necessary to Vivid's business. Vivid cannot predict the extent to
which it may be required to seek licenses. Vivid cannot assure that the terms of
any licenses it may be required to seek will be reasonable.
VIVID'S BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED BY INFRINGEMENT CLAIMS
BY AMERICAN SCIENCE & ENGINEERING.
In May 1996, Vivid commenced an action in the United States District Court
for the District of Massachusetts against American Science & Engineering seeking
a declaration that Vivid does not infringe American Science & Engineering's
patents related to back scattered x-rays. American Science & Engineering filed a
counterclaim alleging that Vivid is infringing on one or more of eight American
Science & Engineering patents. In April 1997, the court dismissed American
Science & Engineering's counterclaim on summary judgment without granting leave
to file an amended counterclaim. In April 1998, American Science & Engineering
filed a motion in the Federal Court of Appeals for the First Circuit to appeal
this decision. The Court of Appeals heard oral arguments on this appeal in early
1999, but no decision has been announced. Although Vivid does not believe that
it is infringing any valid patent of American Science & Engineering, American
Science & Engineering could make a new counterclaim that raises more specific
infringement allegations. Failure of Vivid to prevail in this litigation could
have a material adverse effect on Vivid's business, financial condition and
results of operations.
VIVID COULD INCUR SUBSTANTIAL COSTS AS A RESULT OF PRODUCT LIABILITY CLAIMS
AND ADVERSE PUBLICITY IF VIVID'S SYSTEMS FAIL TO DETECT EXPLOSIVES.
If Vivid's explosives detection systems fail to detect an explosive, Vivid
could be subject to product liability claims and negative publicity, which could
cause Vivid to incur substantial costs and could have a material adverse effect
on Vivid's business, financial condition and results of operations. There are
many factors beyond Vivid's control that could result in the failure of its
products to detect explosives. These factors include:
- the reliability of a system's operators;
- the ongoing training of a system's operators; and
- the maintenance of Vivid's products by its customers.
Vivid currently maintains aviation product liability insurance. This insurance
may be insufficient to protect Vivid from product liability claims. Moreover,
there is a risk that product liability insurance may not continue to be
available to Vivid at a reasonable cost, if at all.
15
<PAGE> 22
PROVISIONS OF VIVID'S CHARTER MAKE A TAKEOVER OF VIVID MORE DIFFICULT, WHICH
COULD DISCOURAGE ATTRACTIVE TAKEOVER OFFERS AND LIMIT THE PRICE OTHERS MAY BE
WILLING TO PAY FOR VIVID COMMON STOCK.
Vivid's charter and provisions of Delaware corporate law contain provisions
that may make the acquisition of Vivid more difficult and discourage changes in
Vivid's management. In addition, Vivid has adopted a stockholder rights plan
that gives holders of its common stock the right to purchase shares of Vivid
common stock at a price substantially discounted from the then applicable market
price of Vivid common stock in the event of many potential takeover situations.
The provisions contained in Vivid's charter, Delaware corporate law and the
rights plan could limit the price that certain investors might be willing to pay
in the future for shares of Vivid common stock. These provisions do not apply to
the proposed merger between Vivid and PerkinElmer.
THE VOLATILITY OF VIVID'S STOCK PRICE COULD ADVERSELY AFFECT YOUR INVESTMENT
IN VIVID COMMON STOCK.
The market price of Vivid common stock has been and may continue to be
highly volatile. Vivid believes that a variety of factors could cause the price
of its common stock to fluctuate, perhaps substantially, including:
- announcements of developments related to Vivid's business, including
announcements of certification by the FAA or other regulatory authorities
of Vivid's or its competitors' products;
- quarterly fluctuations in Vivid's actual or anticipated operating results
and order levels;
- general conditions in the worldwide economy;
- announcements of technological innovations;
- new products or product enhancements by Vivid or its competitors;
- developments in patents or other intellectual property rights and
litigation; and
- developments in Vivid's relationships with its customers and suppliers.
In addition, in recent years the stock market in general and the markets
for shares of small capitalization and "high-tech" companies in particular have
experienced extreme price fluctuations which have often been unrelated to the
operating performance of affected companies. Any such fluctuations in the future
could adversely affect the market price of Vivid common stock and the market
price of Vivid common stock may decline.
YEAR 2000 READINESS DISCLOSURE; YEAR 2000 PROBLEMS COULD DISRUPT VIVID'S
BUSINESS.
The year 2000 problem is the potential for system and processing failure of
date-related data as the result of computer-controlled systems using two digits
rather than four digits to define the applicable year. This could result in
system failure or miscalculation causing disruptions of operations, including,
among other things, loss of customers or orders, increased operating costs,
inability to obtain inventory on a timely basis, disruptions in product
shipments, or other business interruptions of a material nature, as well as
claims of mismanagement, misrepresentation, or breach of contract. Undetected
year 2000 problems may cause Vivid to experience negative consequences or
significant costs. Vivid's vendors, suppliers or customers could experience
negative consequences or significant costs that could have a material adverse
effect on Vivid's business, financial condition or results of operations.
16
<PAGE> 23
SELECTED HISTORICAL CONSOLIDATED AND PRO FORMA UNAUDITED COMBINED
FINANCIAL INFORMATION
The following selected historical consolidated financial information of
PerkinElmer and Vivid has been derived from their respective historical
consolidated financial statements including their notes, and should be read in
conjunction with these consolidated financial statements and notes. The
historical financial statements of Vivid as of September 30, 1998 and 1999 and
for the three years in the period ended September 30, 1999 were audited by
Arthur Andersen LLP, independent public accountants, and begin on page F-1. The
historical consolidated financial statements of PerkinElmer as of December 28,
1997 and January 3, 1999 and for the three years in the period ended January 3,
1999 were audited by Arthur Andersen LLP, independent public accountants, and
are incorporated herein by reference. See "Where You Can Find More Information"
on page 89. The PerkinElmer historical financial information as of and for the
interim periods presented below have been prepared on the same basis as that
derived from historical financial statements prepared on an annual basis and, in
the opinion of management of PerkinElmer, includes all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of the
financial position and results of operations of PerkinElmer as of these dates
and for these periods. The results of the interim periods are not necessarily
indicative of the results to be expected for future periods.
PerkinElmer accounted for the Lumen and analytical instruments division
acquisitions as purchases in accordance with Accounting Principles Board ("APB")
Opinion No. 16. The unaudited pro forma combined financial information reflects
the proposed acquisition of Vivid as a purchase.
The unaudited pro forma combined financial information gives effect to the
proposed acquisition by PerkinElmer of Vivid and the acquisitions of Lumen and
the analytical instruments division of PE Corporation and should be read in
connection with the historical financial statements and related notes thereto
for PerkinElmer, Vivid, Lumen and the analytical instruments division. The
unaudited pro forma combined income statement information for the fiscal year
ended January 3, 1999 and the nine-month period ended October 3, 1999 gives
effect to these acquisitions as if they were completed as of December 29, 1997,
and combine PerkinElmer, Vivid, Lumen and the analytical instruments division's
historical income statements for each respective period as necessary. The
unaudited pro forma combined results for the fiscal year ended January 3, 1999
and the nine-month period ended October 3, 1999 exclude acquisition-related
charges of $2.3 million and $23 million for purchased in-process research and
development related to Lumen and the analytical instruments division,
respectively. Additionally, these pro forma statements of operations exclude an
estimated acquisition-related charge of $6.7 million for acquired in-process
research and development related to the proposed acquisition of Vivid.
PerkinElmer has not yet conducted an appraisal of this in-process research and
development and accordingly, the final amount may differ from this estimate. The
unaudited pro forma combined balance sheet as of October 3, 1999 includes the
historical balance sheet of PerkinElmer as of October 3, 1999 and Vivid as of
September 30, 1999 and gives effect to the proposed acquisition of Vivid as if
it had occurred on October 3, 1999.
The unaudited pro forma combined financial information is provided for
informational purposes only and is not necessarily indicative of PerkinElmer's
operating results that would have occurred had the acquisition been consummated
on the dates, or at the beginning of the period, for which the consummation of
the acquisition is being given effect, nor is it necessarily indicative of
PerkinElmer's future operating results. The unaudited pro forma adjustments do
not reflect any operating efficiencies and cost savings that PerkinElmer
believes are achievable.
The unaudited pro forma combined financial information has been prepared
using the purchase method of accounting, whereby the total cost of the
acquisitions has been allocated to the tangible and intangible assets acquired
and liabilities assumed based on their respective fair values at the effective
date of the acquisition. Such allocations will be based on studies and
independent valuations, which are currently being finalized. Accordingly, the
allocations reflected in the unaudited pro forma combined financial information
are preliminary and subject to revision. It is not expected that the financial
allocation of purchase price will produce materially different results from
those presented herein.
You should review the detailed unaudited pro forma combined financial
information beginning on page 69 for further discussion of these matters,
including footnotes.
17
<PAGE> 24
PERKINELMER'S SELECTED HISTORICAL AND COMBINED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIO ANALYSIS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------------------
1998 1998
PRO FORMA PRO FORMA
HISTORICAL BEFORE VIVID AFTER VIVID
1994 1995 1996 1997 1998 (UNAUDITED) (UNAUDITED)
-------- -------- -------- -------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations:
Sales.................. $823,836 $887,313 $928,287 $927,482 $ 854,382 $1,533,428 $1,572,146
Operating income (loss)
from continuing
operations............ (37,656) 50,628 56,265 27,019 119,724 (13,991) (8,512)
Income (loss) from
continuing
operations............ (49,471)(5) 33,340 34,264 9,562(3) 79,001(1) (44,651) (40,202)
Income from
discontinued
operations, net of
income taxes.......... 43,816(5) 34,700 25,892 24,130 23,001(1) * *
Net income (loss)...... (5,655)(5) 68,040 60,156 33,692(3) 102,002(1) * *
Basic earnings (loss)
per share:
Continuing
operations.......... (0.89)(5) 0.64 0.72 0.21(3) 1.74(1) (0.99) (0.86)
Discontinued
operations.......... 0.79(5) 0.68 0.55 0.53 0.51(1) * *
Net income (loss)..... (0.10)(5) 1.32 1.27 0.74(3) 2.25(1) * *
Diluted earnings (loss)
per share:
Continuing
operations.......... (0.89)(5) 0.64 0.72 0.21(3) 1.72(1) (0.99) (0.86)
Discontinued
operations.......... 0.79(5) 0.68 0.55 0.53 0.50(1) * *
Net income (loss)..... (.10)(5) 1.32 1.27 0.74(3) 2.22(1) * *
Return (loss) on
equity.............. (1.2)%(6) 16.8% 16.4% 9.7%(4) 28.0%(2) * *
Weighted-average common
shares outstanding:
Basic................. 55,271 51,483 47,298 45,757 45,322 45,322 46,913
Diluted............... 55,324 51,573 47,472 45,898 45,884 45,322 46,913
Financial Position:
Working capital........ $213,769 $228,441 $201,478 $209,027 $ 47,868 * *
Current ratio.......... 1.89:1 2.08:1 1.92:1 1.88:1 1.10:1 * *
Total assets........... 746,379 757,927 774,761 777,737 1,138,778 * *
Short-term debt........ 59,988 5,275 21,499 46,167 157,888 * *
Long-term debt......... 812 115,222 115,104 114,863 129,835 * *
Long-term
liabilities........... 60,153 63,816 76,087 95,940 124,799 * *
Stockholders' equity... 445,366 366,946 365,106 328,388 399,667 * *
Per share.............. 8.08 7.71 7.88 7.24 8.93 * *
Total debt/total
capital............... 12% 25% 27% 33% 42% * *
Common shares
outstanding........... 55,124 47,610 46,309 45,333 44,746 * *
Cash Flows:
Cash flows from
continuing
operations............ $ 44,364 $ 80,868 $ 48,291 $ 11,405 $ 40,853 * *
Cash flows from
discontinued
operations............ 51,519 69,297 31,867 23,433 28,702 * *
Cash flows from
operating
activities............ 95,883 150,165 80,158 34,838 69,555 * *
Depreciation and
amortization.......... 34,546 37,432 38,861 42,698 48,510 * *
Capital expenditures... 34,804 60,689 78,796 47,642 44,489 * *
Cost of acquisitions,
net of cash
acquired.............. 32,841 -- -- 3,611 217,937 * *
Proceeds from
dispositions of
businesses and sales
of property, plant and
equipment............. 2,872 15,238 1,744 24,287 210,505 * *
Purchases of common
stock................. 19,139 135,079 30,760 28,104 41,217 * *
Cash dividends per
common share.......... 0.56 0.56 0.56 0.56 0.56 * *
<CAPTION>
NINE MONTHS ENDED
-------------------------------------------------------
OCTOBER 3, OCTOBER 3,
1999 1999
PRO FORMA PRO FORMA
SEPTEMBER 27, OCTOBER 3, BEFORE VIVID AFTER VIVID
1998 1999 (UNAUDITED) (UNAUDITED)
------------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Operations:
Sales.................. $620,569 $ 935,888 $1,150,722 $1,168,280
Operating income (loss)
from continuing
operations............ 96,557 18,640 25,909 20,519
Income (loss) from
continuing
operations............ 65,084(9) (484)(8) (2,749) (6,415)
Income from
discontinued
operations, net of
income taxes.......... 16,450(9) 121,961(7) * *
Net income (loss)...... 81,534(9) 121,477(8) * *
Basic earnings (loss)
per share:
Continuing
operations.......... 1.43(9) (0.01)(8) (0.06) (0.14)
Discontinued
operations.......... 0.36(9) 2.69(7) * *
Net income (loss)..... 1.79(9) 2.68(8) * *
Diluted earnings (loss)
per share:
Continuing
operations.......... 1.41(9) (0.01)(8) (0.06) (0.14)
Discontinued
operations.......... 0.36(9) 2.69(7) * *
Net income (loss)..... 1.77(9) 2.68(8) * *
Return (loss) on
equity.............. 23.1% 26.5% * *
Weighted-average common
shares outstanding:
Basic................. 45,552 45,303 45,303 46,894
Diluted............... 46,089 45,303 45,303 46,894
Financial Position:
Working capital........ $238,881 $ (116,608) * $ (88,757)
Current ratio.......... 1.95:1 0.86:1 * 0.90:1
Total assets........... 836,968 1,665,020 * 1,736,654
Short-term debt........ 22,962 319,733 * 319,733
Long-term debt......... 114,867 114,952 * 114,952
Long-term
liabilities........... -- 184,853 * 184,853
Stockholders' equity... 377,377 516,895 * 575,335
Per share.............. 8.45 11.22 * 12.07
Total debt/total
capital............... 27% 46% * 43%
Common shares
outstanding........... 44,668 46,065 * 47,656
Cash Flows:
Cash flows from
continuing
operations............ $ 2,711 $ 52,917 * *
Cash flows from
discontinued
operations............ 47,613 530 * *
Cash flows from
operating
activities............ 50,324 53,447 * *
Depreciation and
amortization.......... 33,815 52,192 * *
Capital expenditures... 31,560 25,536 * *
Cost of acquisitions,
net of cash
acquired.............. 54,647 295,685 * *
Proceeds from
dispositions of
businesses and sales
of property, plant and
equipment............. 209,607 27,044 * *
Purchases of common
stock................. 41,217 (952) * *
Cash dividends per
common share.......... 0.42 0.42 * *
</TABLE>
- ---------------
* Not Applicable
18
<PAGE> 25
- ---------------
(1) Continuing operations includes net nonrecurring income items totaling $66.7
million pre-tax, $44.7 million after-tax ($0.99 basic earnings per share,
$.97 diluted earnings per share); nonrecurring items are more fully
discussed in PerkinElmer's consolidated financial statements and related
footnotes and the Management's Discussion and Analysis sections of its
Current Report on Form 8-K filed with the Securities and Exchange Commission
on November 23, 1999. Included in the $66.7 million of nonrecurring items is
an investment gain of $4.3 million, $2.7 million after-tax ($.06 basic and
diluted per share). Approximately $6.8 million pre-tax of nonrecurring
charges related to restructuring and other nonrecurring items are included
in discontinued operations.
(2) Return on equity before effects of nonrecurring items was 17.9%.
(3) Reflected an asset impairment charge of $28.2 million, and a cost of capital
reimbursement of $3.4 million, $21.2 million after-tax ($0.46 basic and
diluted loss per share).
(4) Return on equity before effects of nonrecurring items was 15.4%.
(5) Pre-tax items included a goodwill write-down of $40.3 million, restructuring
charges of $29.4 million, and an investment write-down of $2.1 million, in
the aggregate, $64.8 million after-tax ($1.18 basic and diluted loss per
share). Approximately $1.0 million pre-tax of nonrecurring charges are
related to restructuring and are included in discontinued operations.
(6) Return on equity before effects of nonrecurring items was 12.1%.
(7) Included gain on disposition of discontinued operations of $106.3 million,
net of incomes taxes, transaction and related costs.
(8) Continuing operations includes a net restructuring charge of $11.5 million,
goodwill write-downs of $18 million, gains on dispositions of $15.8 million
and a $23 million charge related to acquired in-process research and
development.
(9) Continuing operations includes net nonrecurring items totaling $69.0 million
pre-tax; $47.0 million after-tax ($1.03 basic earnings per share, $1.02
diluted earnings per share); nonrecurring items are more fully discussed in
PerkinElmer's consolidated financial statements and related footnotes and
the Management's Discussion and Analysis sections of its Current Report on
Form 8-K filed with the Securities and Exchange Commission on November 23,
1999. Included in the $69.0 million of nonrecurring items is an investment
gain of $4.3 million, $2.7 million after-tax ($.06 basic and diluted per
share). Approximately $6.8 million pre-tax of nonrecurring charges related
to restructuring and other nonrecurring items are included in discontinued
operations.
19
<PAGE> 26
VIVID'S SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues........................................... $14,437 $15,578 $31,702 $38,718 $21,185
Cost of revenues................................... 6,129 6,899 13,203 16,361 13,393
------- ------- ------- ------- -------
Gross margin..................................... 8,308 8,679 18,499 22,357 7,792
------- ------- ------- ------- -------
Operating expenses:
Research and development......................... 3,653 3,462 4,390 5,859 6,336
Selling and marketing............................ 1,077 1,395 3,556 4,335 3,729
General and administrative....................... 1,120 1,515 2,929 3,952 4,060
Restructuring and asset write-down............... -- -- -- -- 1,208
Litigation expenses.............................. 309 1,150 427 220 --
------- ------- ------- ------- -------
Total operating expenses.................. 6,159 7,522 11,302 14,366 15,333
------- ------- ------- ------- -------
Income (loss) from operations...................... 2,149 1,157 7,197 7,991 (7,541)
Interest and other income (expense), net........... (45) 8 862 1,477 978
------- ------- ------- ------- -------
Income (loss) before provision for income taxes.... 2,104 1,165 8,059 9,468 (6,563)
Provision (benefit) for income taxes............... 90 -- 2,193 2,838 (1,931)
------- ------- ------- ------- -------
Net income (loss)................................ $ 2,014 $ 1,165 $ 5,866 $ 6,630 $(4,632)
======= ======= ======= ======= =======
Net (loss) income per share
Basic............................................ $ 1.21 $ 0.69 $ 0.78 $ 0.68 $ (0.47)
======= ======= ======= ======= =======
Diluted.......................................... $ 0.28 $ 0.15 $ 0.60 $ 0.65 $ (0.47)
======= ======= ======= ======= =======
Weighted average number of shares outstanding
Basic............................................ 1,663 1,682 7,548 9,685 9,911
======= ======= ======= ======= =======
Diluted.......................................... 7,127 7,869 9,838 10,251 9,911
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................... $ 3,968 $(1,037) $29,297 $36,329 $31,769
Total assets....................................... 7,740 11,963 37,457 45,924 42,349
Redeemable preferred stock, including current
portion.......................................... 5,781 5,781 -- -- --
Stockholders' equity (deficit)..................... (1,045) 177 31,711 38,900 34,175
</TABLE>
20
<PAGE> 27
COMPARATIVE PER SHARE DATA
The following table summarizes certain per share information for
PerkinElmer and Vivid on a historical pro forma combined and equivalent pro
forma combined basis. You should read the information below along with the
selected historical consolidated financial data and the unaudited pro forma
combined financial data included elsewhere in this proxy statement/prospectus.
The pro forma combined financial data is not necessarily indicative of the
operating results of future operations or the actual results that would have
occurred had the transaction been completed at the beginning of the period
presented.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, OCTOBER 3,
1998 1999
------------ ------------
<S> <C> <C>
HISTORICAL-PERKINELMER
Income (loss) per share from continuing operations:
Basic................................................... $ 1.74 $(0.01)
Diluted................................................. $ 1.72 $(0.01)
Pro forma (before Vivid transaction) income (loss) per
share from continuing operations:
Basic................................................... $(0.99) $(0.06)
Diluted................................................. $(0.99) $(0.06)
Historical Book value per share(1)........................ $ 8.93 $11.22
Cash dividends per share.................................. $ 0.56 $ 0.42
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
SEPTEMBER 30,
------------------ JANUARY 1 - SEPTEMBER 30,
1998 1999 1999(4)
------- ------- -------------------------
<S> <C> <C> <C>
HISTORICAL-VIVID:
Net income (loss) per share -- basic........................ $ 0.68 $(0.47) $(0.14)
Net income (loss) per share -- diluted...................... $ 0.65 $(0.47) $(0.14)
Book value per share(1)..................................... $ 3.93 $ 3.43 $ 3.43
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, OCTOBER 3,
1998 1999
------------ -----------
<S> <C> <C>
PRO FORMA COMBINED-PER PERKINELMER SHARE AT .1613:1
CONVERSION(2):
Income (loss) from continuing operations:
Basic................................................... $(0.86) $(0.14)
Diluted................................................. $(0.86) $(0.14)
Book value per share(1)................................... N/A $12.07
EQUIVALENT PRO FORMA COMBINED-PER VIVID SHARE AT 6.2:1
CONVERSION(3):
Income (loss) from continuing operations:
Basic................................................... $(0.14) $ (.02)
Diluted................................................. $(0.14) $ (.02)
Book value per share(1)................................... N/A $ 1.95
</TABLE>
- ---------------
(1) Book value is computed by dividing total stockholders' equity by the number
of shares outstanding.
(2) PerkinElmer pro forma combined book value per share is computed by dividing
pro forma stockholders' equity by the pro forma number of shares of
PerkinElmer common stock which would have been outstanding had the merger
been completed as of each balance sheet date.
(3) Vivid equivalent pro forma combined amounts are calculated by multiplying
the PerkinElmer pro forma combined per share amounts and book value by the
exchange ratio assuming the exchange ratio is 0.1613 shares of PerkinElmer
common stock for each share of Vivid common stock.
(4) Vivid's historical basic and diluted net income (loss) per share for the
period from January 1, 1999 through September 30, 1999 has been calculated
by combining its quarterly results as reported. Accordingly, Vivid's
historical results for the quarter ended December 31, 1998 have not been
included in the calculation.
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<PAGE> 28
MARKET PRICE INFORMATION
PERKINELMER MARKET PRICE INFORMATION
PerkinElmer common stock (formerly known as EG&G, Inc.) has traded on the
New York Stock Exchange under the symbol "PKI" since October 26, 1999 and under
the symbol "EGG" since July 6, 1965.
The table below sets forth, for the periods indicated, the reported high
and low sale prices of PerkinElmer common stock on the New York Stock Exchange.
<TABLE>
<CAPTION>
PERKINELMER
COMMON STOCK
-------------------
HIGH LOW
-------- -------
<S> <C> <C>
FISCAL 1997
Quarter ended March 30, 1997............................ $24.625 $19.625
Quarter ended June 29, 1997............................. 21.125 18.125
Quarter ended September 28, 1997........................ 22.625 18.75
Quarter ended December 28, 1997......................... 22.9375 18.00
FISCAL 1998
Quarter ended March 29, 1998............................ 28.50 20.125
Quarter ended June 28, 1998............................. 33.75 27.125
Quarter ended September 27, 1998........................ 30.125 21.125
Quarter ended January 3, 1999........................... 29.4375 20.50
FISCAL 1999
Quarter ended April 4, 1999............................. 30.1875 25.50
Quarter ended July 4, 1999.............................. 36.25 26.50
Quarter ended October 3, 1999........................... 39.9375 31.50
Quarter ended January 2, 2000
(through December 2, 1999)............................ 44.125 36.625
</TABLE>
As of November 15, 1999, there were approximately 9,310 holders of record
of PerkinElmer common stock including multiple beneficial holders at
depositories, banks, and brokers listed as a single holder in the street name of
each respective depository, bank or broker.
On October 4, 1999, the last full trading day prior to the public
announcement of the proposed merger, the last reported sale price of PerkinElmer
common stock on the New York Stock Exchange was $39.1875 per share. On December
2, the most recent practicable date prior to the printing of this proxy
statement/prospectus, the last reported sale price of PerkinElmer common stock
on the New York Stock Exchange was $41.4375 per share.
In each of fiscal 1997 and 1998 and the first nine months of fiscal 1999,
PerkinElmer paid a regular quarterly dividend of $0.14 per share of PerkinElmer
common stock.
Because the market price of PerkinElmer common stock may fluctuate, the
market price per share of PerkinElmer common stock that holders of Vivid stock
will receive in the merger may increase or decrease prior to the merger.
VIVID MARKET PRICE INFORMATION
Vivid common stock has traded on the Nasdaq National Market under the
symbol "VVID" since December 1996.
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<PAGE> 29
The following table sets forth, for the periods indicated, the high and low
bid prices per share of Vivid common stock as reported on the Nasdaq National
Market.
<TABLE>
<CAPTION>
VIVID
COMMON STOCK
--------------------
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL 1998
Quarter ended December 31, 1997........................ $16.50 $10.375
Quarter ended March 31, 1998........................... 16.375 12.00
Quarter ended June 30, 1998............................ 15.75 10.50
Quarter ended September 30, 1998....................... 12.00 6.875
FISCAL 1999
Quarter ended December 31, 1998........................ 9.125 3.875
Quarter ended March 31, 1999........................... 6.25 3.375
Quarter ended June 30, 1999............................ 4.50 1.875
Quarter ended September 30, 1999....................... 4.6875 2.4375
FISCAL 2000
Quarter ended December 31, 1999
(through December 2, 1999)........................... 6.125 3.4375
</TABLE>
As of November 15, 1999, there were approximately 186 holders of record of
Vivid's common stock, including multiple beneficial holders at depositories,
banks and brokers listed as a single holder in the street name of each
respective depository, bank or broker.
The following table sets forth the closing prices per share of the common
stock of Vivid as reported on the Nasdaq National Market on October 4, 1999, the
business day preceding public announcement that PerkinElmer and Vivid had
entered into the merger agreement, and on December 2, 1999, the last full
trading day for which closing prices were available at the time of the printing
of this proxy statement/prospectus. This table also sets forth the equivalent
price per share of Vivid common stock on those dates. The equivalent price per
share is equal to the market value of one share of PerkinElmer common stock, as
defined in the merger agreement, on that date multiplied by the number of shares
of PerkinElmer common stock to be issued in exchange for each share of Vivid
common stock in the merger.
<TABLE>
<CAPTION>
VIVID EQUIVALENT
COMMON PER
DATE STOCK SHARE PRICE
---- ------- -----------
<S> <C> <C>
October 4, 1999........................................ $3.5625 $6.25
December 2, 1999....................................... $6.00 $6.77
</TABLE>
Vivid and PerkinElmer believe that Vivid common stock presently trades on
the basis of the value of PerkinElmer common stock expected to be issued in
exchange for the Vivid common stock in the merger, discounted primarily for the
uncertainties associated with the merger.
Vivid stockholders are advised to obtain current market quotations for
PerkinElmer common stock and Vivid common stock. We cannot predict or assure the
market prices of PerkinElmer common stock or Vivid common stock at any time
before the completion of the merger or the market price of PerkinElmer common
stock at any time after the merger. So long as the market value of PerkinElmer
common stock is not less than $30.99 or more than $46.49 at the time of the
closing of the merger, the exchange ratio will not be adjusted to compensate
Vivid stockholders for decreases in the market price of PerkinElmer common stock
which could occur before the merger becomes effective. In the event the market
price of PerkinElmer common stock decreases or increases prior to the completion
of the merger, the value of the PerkinElmer common stock to be received in the
merger in exchange for Vivid common stock would correspondingly decrease or
increase. If the market value of PerkinElmer common stock falls outside of the
range of $30.99 to $46.49 at the time of the closing of the merger, the exchange
ratio may be adjusted or the merger agreement may be terminated by Vivid or
PerkinElmer in certain circumstances.
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<PAGE> 30
Vivid has never declared or paid cash dividends on its capital stock and
does not plan to pay any cash dividends in the foreseeable future. Vivid's
current policy is to retain all of its earnings to finance future growth.
Vivid's bank line of credit, which expires February 29, 2000, prohibits the
payment of cash dividends without prior bank approval.
24
<PAGE> 31
THE VIVID SPECIAL MEETING
DATE, TIME AND PLACE OF MEETING
The special meeting of stockholders of Vivid will be held at 10 a.m., local
time, on Thursday, January 13, 1999 at Vivid's corporate offices located at 10E
Commerce Way, Woburn, Massachusetts.
WHAT WILL BE VOTED UPON
At the special meeting, Vivid stockholders at the close of business on
November 15, 1999 will be asked to approve and adopt the merger agreement and
approve the merger.
The merger agreement is attached to this proxy statement/prospectus as
Annex A. See the sections entitled "The Merger" and "The Merger Agreement."
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Vivid common stock at the close of business on
the record date are entitled to notice of and to vote at the meeting. As of the
close of business on the record date, there were 10,089,141 shares of Vivid
common stock outstanding and entitled to vote, held of record by approximately
186 stockholders, although Vivid has been informed that there are in excess of
3,400 beneficial owners. Each Vivid stockholder is entitled to one vote for each
share of Vivid common stock held as of the record date.
VOTES NEEDED FOR A QUORUM
The required quorum for the transaction of business at the meeting is a
majority of the shares of Vivid common stock outstanding on the record date.
VOTE REQUIRED TO APPROVE THE MERGER
The affirmative vote of a majority of the outstanding shares of Vivid
common stock is required to approve the merger agreement and the merger.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
On the record date, directors, executive officers and affiliates of Vivid
as a group beneficially owned 1,748,712 shares of Vivid common stock, or
approximately 16.8% of the outstanding Vivid shares on that date. S. David
Ellenbogen and Jay A. Stein, officers and directors of Vivid, together with
three trusts formed by them, beneficially owning 1,319,000 shares of Vivid
common stock, or approximately 13.1% of the outstanding shares on the record
date, have executed a stockholder agreement with PerkinElmer, under which they
have agreed to vote their shares in favor of the merger agreement and the
merger. See "Other Agreements -- Stockholder Agreement."
EFFECT OF ABSTENTIONS AND BROKER NON-VOTES
Abstentions will be included in determining the number of shares present
and voting at the special meeting and will have the same effect as votes against
the merger agreement and the merger. Broker non-votes will have the same effect
as votes against the merger agreement and the merger.
EXPENSES OF PROXY SOLICITATION
Vivid will pay the expenses of soliciting proxies to be voted at the
special meeting. Following the original mailing of the proxies and other
soliciting materials, Vivid and its agents also may solicit proxies by mail,
telephone, telegraph or in person. Vivid has retained a proxy solicitation firm,
Kissel-Blake Inc., to aid it in the solicitation process. Vivid will pay that
firm an estimated fee of $9,500, plus expenses. Following the original mailing
of the proxies and other soliciting materials, Vivid will request brokers,
custodians, nominees and other record holders of common stock to forward copies
of the proxy and other soliciting materials to persons for whom they hold shares
of common stock and to request authority for the
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<PAGE> 32
exercise of proxies. Upon the request of the record holders, Vivid will
reimburse them for their reasonable expenses.
HOW PROXIES WILL BE VOTED
The proxy accompanying this proxy statement/prospectus is solicited on
behalf of Vivid's board for use at the special meeting. You are requested to
complete, date and sign the accompanying proxy and promptly return it in the
enclosed envelope or otherwise mail it to Vivid. All properly signed proxies
received by Vivid prior to the vote at the special meeting that are not revoked
will be voted at the special meeting according to the instructions indicated on
the proxies or, if no direction is indicated, to approve the merger agreement
and the merger.
HOW YOU CAN REVOKE YOUR PROXY
You may revoke your proxy at any time before it is exercised at the special
meeting, by taking any of the following actions:
- delivering to the secretary of Vivid, by any means, including facsimile,
a written notice, bearing a date later than the date of the proxy,
stating that the proxy is revoked,
- signing and so delivering a proxy relating to the same shares and bearing
a later date prior to the vote at the meeting, or
- attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy.
Please note, however, that if your shares of common stock are held of
record by a broker, bank or other nominee and you wish to vote at the meeting,
you must bring to the meeting a letter from your broker, bank or other nominee
confirming your beneficial ownership of the shares and your proxy from the
broker to vote the shares.
YOU DO NOT HAVE APPRAISAL RIGHTS
You are not entitled to dissenters' rights or appraisal rights with respect
to the merger.
YOU SHOULD NOT SEND ANY CERTIFICATES REPRESENTING VIVID COMMON STOCK.
FOLLOWING THE EFFECTIVE TIME OF THE MERGER, YOU WILL RECEIVE INSTRUCTIONS FOR
THE SURRENDER AND EXCHANGE OF YOUR VIVID STOCK CERTIFICATES.
26
<PAGE> 33
THE MERGER
BACKGROUND OF THE MERGER
In mid-February 1999, management representatives of PerkinElmer and Vivid
met to discuss whether there was any mutual interest in pursuing a possible
business combination or other strategic alliance. At the meeting, the parties
exchanged public information regarding their respective businesses and the
recent changes in the industry. Neither party made any proposals regarding a
possible business combination at this meeting.
On February 24 and March 19, 1999, at a regularly scheduled and special
meeting of Vivid's board, Vivid management reported on the status of discussions
with various companies, including PerkinElmer, regarding a possible business
combination or strategic alliance. At those meetings, Vivid's management and
board focused primarily on a possible strategic business combination with a
company other than PerkinElmer.
On April, 4, 1999, Angelo Castellana, senior vice president of PerkinElmer,
telephoned S. David Ellenbogen, chairman and chief executive officer of Vivid,
to inquire whether they could meet to discuss the possible combination of the
two companies.
On April 12, 1999, Mr. Castellana met with Mr. Ellenbogen and William
Frain, chief financial officer of Vivid. At this meeting, the parties began to
more formally discuss the possibility of a business combination between Vivid
and PerkinElmer. Following this meeting, the senior management teams of
PerkinElmer and Vivid began to explore the feasibility of the proposed
combination.
On April 28, 1999, PerkinElmer and Vivid entered into a mutual
non-disclosure agreement that included PerkinElmer's agreement not to purchase
shares of Vivid common stock for a two year period other than in a negotiated
transaction.
On April 29, 1999, Mr. Castellana telephoned Mr. Ellenbogen to follow up on
issues raised during their April 12, 1999 meeting.
On May 3, 1999, Stephen DeFalco, vice president of business development of
PerkinElmer, met with representatives of Vivid management. At that meeting,
Vivid provided Mr. DeFalco with additional information concerning Vivid's
business and prospects.
On May 14, 1999, during a conference call with representatives of Vivid's
management, representatives of PerkinElmer expressed an interest in pursuing a
strategic business combination with Vivid in the form of a merger with a
PerkinElmer subsidiary.
Also on May 14, 1999, at a special meeting of Vivid's board, Vivid's
management reported on the status of discussions with various companies,
including PerkinElmer, regarding a possible business combination or strategic
alliance. At this meeting, Vivid's management and the Vivid board continued to
focus primarily on a possible strategic business combination with a company
other than PerkinElmer.
On May 26, 1999, representatives of PerkinElmer's management and research
and development staff met with Vivid's management at an off-site location. The
purpose of this meeting was for Vivid to provide a general overview of Vivid's
MVT checked baggage system. The parties also discussed Vivid's FAA certification
efforts.
On June 3, 1999, at a regular meeting of Vivid's board, Vivid management
reported on the status of discussions with various companies, including
PerkinElmer, regarding a possible business combination or strategic alliance. At
this meeting, management reported that its most active discussions continued to
be with a company other than PerkinElmer.
On June 4, 1999, Gregory L. Summe, chairman and chief executive officer of
PerkinElmer, and Mr. Ellenbogen met at an off-site location. At this meeting,
Mr. Summe made a more detailed proposal to Mr. Ellenbogen for a strategic
business combination between PerkinElmer and Vivid.
27
<PAGE> 34
On June 7, 1999, Vivid formally engaged Needham & Company, Inc. to serve as
Vivid's financial advisor with regard to the possible business combination of
Vivid and a company other than PerkinElmer. The agreement also provided that
Needham would serve as Vivid's financial advisor with regard to other potential
strategic business combinations.
On July 9, 1999, Mr. Castellana telephoned Mr. Ellenbogen to discuss
various issues relating to the proposed business combination.
On July 26, 1999, at a special meeting of Vivid's board, Vivid's management
reported on the status of discussions with various participants within the
explosives detection industry regarding a possible strategic business
combination. Vivid's management reported that Vivid's most serious discussions
were now with PerkinElmer. Vivid's management further reported that Vivid was no
longer actively pursuing discussions with the other company which had been the
primary focus of interest because Vivid's management believed that remaining as
an independent company was preferable to the terms offered by that other
company. Vivid's management received questions and comments from the directors
regarding the potential business combination with PerkinElmer. At this meeting,
Vivid's board discussed with Vivid's management the status of the explosives
detection system product lines of PerkinElmer and the possible risks and
benefits of the proposed combination. After consideration of Vivid's management
presentation, Vivid's board agreed that there should be continuing discussions
with PerkinElmer regarding a strategic business combination with a view to
reaching an agreement on the consideration to be received by Vivid stockholders.
During the remainder of July 1999, management of PerkinElmer and Vivid held
several conference calls to discuss the merger consideration to be paid by
PerkinElmer.
On August 3, 1999, at a special meeting of Vivid's board, Vivid's
management reported on the progress of its discussions with PerkinElmer, which
included a discussion of the merger consideration to be offered. Vivid's
management further reviewed with Vivid's board the potential strategic fit and
synergies of a combination with PerkinElmer. A representative of Needham
discussed the historical stock price performance of PerkinElmer's common stock
and publicly available financial information regarding PerkinElmer. Vivid's
management also updated Vivid's board on the status of its discussions with
other companies in the industry. At that time, Vivid's management did not
believe that any of the other discussions would be preferable to the PerkinElmer
proposal or Vivid remaining as an independent company.
On August 10, 1999, Mr. Castellana and Terrance Carlson, senior vice
president and general counsel of PerkinElmer, met with representatives of
Vivid's management at PerkinElmer's headquarters in Wellesley, Massachusetts, to
discuss the terms of a potential business combination between the two companies.
On August 11, 1999, representatives of PerkinElmer's management met with
Vivid's management and legal and accounting advisors at Vivid's headquarters in
Woburn, Massachusetts, to discuss the primary issues and terms of the potential
business combination between the two companies and to fix a timetable for the
proposed business combination.
On August 12, 1999, Mr. Castellana met with representatives of Vivid's
management and Needham at PerkinElmer's headquarters in Wellesley,
Massachusetts, to continue their discussions regarding the proposed business
combination.
From August 16 to August 25, 1999, PerkinElmer's management and the legal
and accounting advisors of PerkinElmer commenced a due diligence review of
Vivid. During this time period, representatives of PerkinElmer and Vivid held a
number of meetings and discussions regarding the terms of the proposed business
combination and the potential synergies and operational issues associated with
the proposed combination.
28
<PAGE> 35
On August 19, 1999, drafts of the merger agreement and related
documentation were distributed by counsel for PerkinElmer for review by the
parties. From that date to September 22, 1999, counsel for each of PerkinElmer
and Vivid negotiated various terms of the merger agreement and related
documents.
On August 24, 1999, Mr. Castellana and Mr. Ellenbogen met to discuss the
terms of the proposed business combination.
On August 31, 1999, Vivid received a competing proposal for a strategic
business combination from another company in the explosives detection industry
different from the company with whom Vivid had held discussions earlier in the
year. Vivid had conducted informal discussions over the course of the year with
that company but had not considered a combination with that company seriously
because it did not believe that the terms previously discussed were advantageous
to Vivid and its stockholders as compared to remaining an independent entity.
On September 1, 1999, at a special meeting of Vivid's board, Vivid's
management discussed with Vivid's board the new proposal received by the other
company and reviewed the status of the discussions with that company and with
PerkinElmer. Vivid's board discussed with Vivid's management the advantages and
disadvantages of a strategic alliance with this other company as compared to the
PerkinElmer proposal or remaining an independent company. Vivid's board directed
Vivid's management to perform a due diligence review of this other company and
proposal on an expedited basis, while deferring the final phase of PerkinElmer's
due diligence review of Vivid.
On September 7 and 15, 1999, representatives of PerkinElmer and its legal
advisors met with representatives of Vivid's management and its legal and
financial advisors to negotiate terms and conditions of the proposed merger
agreement and related documents.
On September 23, 1999, at a regularly scheduled meeting of Vivid's board,
Vivid's management reviewed the progress of the negotiations with PerkinElmer. A
representative of Needham reviewed financial analyses of the proposed business
combination. Outside legal counsel to Vivid then reviewed with the board its
fiduciary duties in considering the proposed combination and the terms of the
proposed merger agreement and related documentation. Vivid's management
presented a summary of the potential risks, synergies and benefits of the
proposed business combination. Vivid's board also considered and discussed with
Vivid's management and Vivid's legal and financial advisors the various
strategic alternatives available to Vivid, including the competing proposal and
the possibility of remaining independent. After consideration of the
presentations and discussions, Vivid's board concluded that the PerkinElmer
alternative was the best alternative to Vivid and its stockholders. Vivid's
board, however, determined that several outstanding issues in the merger
agreement needed to be resolved before the merger could be considered further.
On September 24, 1999, a special meeting of PerkinElmer's board was held to
review the terms of the merger agreement and related documents, and to consider
the approval of the merger agreement and the merger. Members of PerkinElmer's
management reviewed with PerkinElmer's board the terms of the merger agreement
and the merger. PerkinElmer's board, after considering the terms of the merger
agreement and other related documents and the various presentations, unanimously
approved the merger and the merger agreement and the related documentation.
PerkinElmer's board then authorized PerkinElmer's management to execute the
merger agreement and related agreements.
Negotiations among management of and counsel for PerkinElmer and Vivid
continued from September 24, 1999 through October 4, 1999. The parties
negotiated the terms of the merger agreement, including the exchange ratio,
termination rights and fees, non-solicitation provisions and the terms of the
related documentation. During this period, final agreement on these and other
issues was reached over the course of several discussions between management of
and counsel for PerkinElmer and Vivid.
On October 4, 1999, a special meeting of Vivid's board was held to review
the final terms of the merger agreement and related documents, and to consider
the approval of the merger agreement and merger. Vivid's legal and financial
advisors reviewed with the board the material changes to the terms of the merger
from those presented at the September 23rd meeting. A representative of Needham
presented
29
<PAGE> 36
that firm's oral opinion, confirmed in writing later that day, that the exchange
ratio was fair from a financial point of view to the holders of Vivid common
stock. Vivid's board, after considering the revised terms of the merger
agreement and other related documents and the various presentations, unanimously
approved the merger and the merger agreement and the related documentation,
concluding that the consideration to be paid to Vivid's stockholders in the
merger was fair to and in the best interest of Vivid and its stockholders.
Vivid's board then authorized Vivid's management to execute the merger agreement
and related agreements.
On the evening of October 4, 1999, Vivid, PerkinElmer and PerkinElmer's
subsidiary, Venice Acquisition Corp., executed the merger agreement and related
agreements.
JOINT REASONS FOR THE MERGER
PerkinElmer's board and Vivid's board each believe that the combined
company will have potential for greater financial strength, product development
advances and commercial success than either PerkinElmer or Vivid would have on
its own. PerkinElmer's board and Vivid's board identified a number of potential
benefits to the merger which they believe could contribute to the success of the
combined company and thus benefit stockholders of both companies, including the
following:
- The merger may enhance the combined company's ability to compete
effectively in the highly competitive explosives and contraband detection
industry.
- The merger of complementary product offerings may enable the combined
company to offer a more comprehensive, competitive range of products.
- The merger may provide the combined company with the financial resources
and expanded product offerings to expand the scope of distribution of the
combined company's products and to obtain efficiencies in the
development, marketing and sale of its product offerings.
- The combined experience, financial resources, size and breadth of product
offerings of the combined company may allow it to respond more quickly
and effectively to technological change, increased competition and market
demands in an industry experiencing rapid innovation and change.
- The combined company expects to have stronger presence in international
markets.
- Combined financial and technological resources may allow the combined
company to compete more effectively by providing the combined company
with enhanced ability to develop new products and greater functionality
for existing and future products.
- The existing PerkinElmer United States service and support infrastructure
will provide more rapid, efficient and effective deployment of Vivid's
products.
- The high degree of compatibility in the businesses of Vivid and
PerkinElmer and the potential for operational and financial efficiencies
as a result of the integration of the resources of Vivid and PerkinElmer.
PERKINELMER'S REASONS FOR THE MERGER
At a meeting held on September 24, 1999, PerkinElmer's board approved the
merger agreement, the merger and the related transactions. PerkinElmer's board
believes that the terms of the merger are fair to, and in the best interests of,
PerkinElmer and its stockholders.
The decision by PerkinElmer's board was based on several potential benefits
of the merger that it believes will contribute to the success of PerkinElmer.
These potential benefits include:
- the compatibility of PerkinElmer's and Vivid's businesses, including the
complementary nature of their product lines, Vivid's strong presence in
Europe, the complementary nature of their technology resulting in a
greater opportunity for FAA certification, Vivid's MVT technology
enabling
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<PAGE> 37
PerkinElmer to enter the non-destructive testing market and the expected
increase in maintenance and service revenue;
- the expectation that PerkinElmer will become a leader in advanced systems
by combining Vivid's ownership of a leading x-ray technology platform
with PerkinElmer's complementary manufacturing and service capability,
Vivid having the largest world-wide installed base of advanced automated
systems and Vivid's strong presence in the marketplace; and
- Vivid's low valuation due to depressed demand combined with the expected
growth in explosive detection and non-destructive testing systems.
PerkinElmer's board reviewed a number of factors in evaluating the merger,
including the following:
- historical information concerning PerkinElmer's and Vivid's respective
business focus, financial performance and condition, operations,
technology and management;
- PerkinElmer management's view of the financial condition, results of
operations and businesses of PerkinElmer and Vivid before and after
giving effect to the merger and the merger's potential effect on
stockholder value;
- current financial market conditions and historical stock market prices,
volatility and trading information;
- the consideration PerkinElmer will pay, and Vivid stockholders will
receive, in the merger in light of comparable merger transactions;
- the belief that the terms of the merger agreement are reasonable;
- the impact of the merger on PerkinElmer's customers and employees;
- results of the due diligence investigation of Vivid conducted by
PerkinElmer's management, advisors, accountants and counsel; and
- the expectation that the merger will be accounted for as a purchase.
The PerkinElmer board also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including the following:
- the risk that the potential benefits of the merger may not be realized;
- the possibility that the merger may not be completed, even if approved by
Vivid's stockholders;
- the risk that customer demand for explosives detection products may be
less than anticipated; and
- other applicable risks described in this proxy statement/prospectus under
"Risk Factors."
PerkinElmer's board concluded, however, that, on balance, the merger's
potential benefits to PerkinElmer and its stockholders outweighed the associated
risks. The discussion of the information and factors considered by PerkinElmer's
board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the merger, PerkinElmer's board
did not find it practicable to, and did not, quantify or otherwise assign
relative weight to the specific factors considered in reaching its
determination.
VIVID'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF
VIVID
At its meeting on October 4, 1999, Vivid's board determined that the merger
agreement and the merger were advisable, fair to and in the best interests of
Vivid and its stockholders. Vivid's board also approved the merger agreement and
the merger and recommended that the Vivid stockholders adopt the merger
agreement.
In reaching its decision to approve the merger agreement and the merger and
to recommend that the Vivid stockholders vote to adopt the merger agreement, the
Vivid board consulted with Vivid's
31
<PAGE> 38
management and its financial and legal advisors and considered a number of
factors, including the following:
PREMIUM AND FAIRNESS
- At the time it was approved by Vivid's board, the value of the shares of
PerkinElmer common stock to be received by Vivid stockholders in the
merger represented a premium to Vivid stockholders as compared to Vivid's
common stock price before the announcement of the merger agreement. The
value of that consideration, based upon the then market value of
PerkinElmer's common stock, was approximately $6.25 per Vivid share of
common stock. Vivid's stock price on October 4, 1999 was $3.5625 per
share.
- The merger agreement offers Vivid and its stockholders protection if the
price of PerkinElmer common stock falls below $30.99 per share, which
corresponds to $5.00 per share of Vivid common stock, by providing Vivid
with the right to terminate the merger agreement and the merger if
PerkinElmer does not adjust the exchange ratio to provide Vivid
stockholders with merger consideration equal to $5.00 per share.
- The merger agreement offers Vivid stockholders the opportunity to
participate in increases in the value of PerkinElmer common stock of up
to $46.49 per share, which corresponds to $7.50 per Vivid share. If the
market value of PerkinElmer common stock at the time of closing is above
$46.49 per share, PerkinElmer will have the right to terminate the merger
agreement and the merger if Vivid does not allow PerkinElmer to adjust
the exchange ratio to provide Vivid stockholders with merger
consideration equal to $7.50 per share.
- The opinion of Needham to Vivid's board that, subject to the assumptions
and limitations contained in its opinion, the exchange ratio was fair
from a financial point of view to the holders of Vivid's common stock,
and the financial presentations made by Needham in connection with
delivering its opinion.
PERKINELMER'S BUSINESS AND STOCK
- Information with respect to the financial condition and business of
PerkinElmer, including among other things PerkinElmer's recent and
historical stock and earnings performance, the demonstrated ability of
PerkinElmer to successfully implement its growth strategy, the
diversification of PerkinElmer's business, the ability of PerkinElmer to
access capital markets and its stated commitment to expanding Vivid's
business.
- PerkinElmer's experience in the development and marketing of airport and
other security systems.
- The quality and depth of PerkinElmer's management team.
- The opportunity for Vivid stockholders to participate as holders of
PerkinElmer common stock in a combined enterprise that has more diverse
business and greater financial, technical and marketing resources than
Vivid.
- The widely-held nature of PerkinElmer's common stock and the greater
liquidity that would be available to Vivid stockholders than they have
had with their Vivid shares because of the larger trading volume of
PerkinElmer's common stock.
STRATEGIC FIT BETWEEN THE TWO COMPANIES
- The expectation that the merger will provide Vivid greater access to
sales, marketing, management, technical and financial resources to
support its goals of developing new products and obtaining FAA
certification.
- The relative value that Vivid might contribute to the future business and
prospects of PerkinElmer.
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<PAGE> 39
GENERAL INDUSTRY AND MARKET CONDITIONS
- The likelihood of consolidation in the explosives and contraband
detection industry.
- The market prices, recent trading patterns and financial data relating to
other companies in the industry.
OTHER FACTORS
- The reports from Vivid's management and legal advisors on specific terms
of the merger agreement and the other agreements to be entered into in
connection with the merger.
- A review of strategic alternatives available to Vivid. During the past
year, Vivid considered possible alliances, combinations, strategic
investments and transactions with various participants in the explosives
detection industry. Vivid's board determined, after discussions with its
financial and legal advisors and management, that none of these
opportunities would have presented the synergistic complementary fit that
exists between Vivid and PerkinElmer or presented Vivid stockholders with
equivalent or more favorable value, liquidity and diversification as the
proposed merger.
- The opportunity for Vivid stockholders to receive PerkinElmer common
stock in a tax-free exchange.
- The interests of Vivid's employees, suppliers, creditors and customers,
economic conditions, and community and societal considerations.
- The performance of Vivid's common stock.
- The opportunity for Vivid stockholders to vote to approve or disapprove
the merger.
- The risk that the potential benefits of the merger may not be realized.
- The possibility that the merger may not be completed, even if approved by
Vivid's stockholders.
- Other applicable risks described in this proxy statement/prospectus under
"Risk Factors."
The foregoing discussion of the information and factors considered by
Vivid's board is not intended to be exhaustive but is believed to include the
material factors considered by Vivid's board. In view of the wide variety of
factors, both positive and negative, considered by Vivid's board, the board did
not find it practical to, and did not, quantify or otherwise assign relative
weights to the specific factors considered and individual directors may have
given differing weights to different factors.
OPINION OF FINANCIAL ADVISOR TO VIVID
Pursuant to an engagement letter dated June 7, 1999, as amended on October
4, 1999, Vivid retained Needham to furnish financial advisory and investment
banking services. Under this agreement, Needham advised Vivid and Vivid's board
with respect to the proposed merger and rendered an opinion as to the fairness,
from a financial point of view, of the proposed exchange ratio to the holders of
Vivid common stock. The proposed exchange ratio was determined through arm's
length negotiations between Vivid and PerkinElmer and not by Needham, although
Needham assisted Vivid in these negotiations.
At a meeting of Vivid's board on October 4, 1999, Needham delivered its
oral opinion, subsequently confirmed in writing, that, as of that date and based
upon and subject to the assumptions and other matters described in its written
opinion, the proposed exchange ratio was fair to the holders of Vivid common
stock from a financial point of view. THE NEEDHAM OPINION IS ADDRESSED TO
VIVID'S BOARD, IS DIRECTED ONLY TO THE FINANCIAL TERMS OF THE MERGER AGREEMENT,
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY VIVID STOCKHOLDER AS TO HOW THAT
STOCKHOLDER SHOULD VOTE AT THE VIVID SPECIAL MEETING.
The complete text of the Needham opinion, which sets forth the assumptions
made, matters considered, limitations on and scope of the review undertaken by
Needham, is attached to this document as Annex D. This summary of the Needham
opinion is qualified in its entirety by reference to the
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<PAGE> 40
Needham opinion. YOU SHOULD READ THE NEEDHAM OPINION CAREFULLY AND IN ITS
ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE FACTORS CONSIDERED,
AND THE ASSUMPTIONS MADE BY NEEDHAM.
In arriving at its opinion, Needham, among other things:
- reviewed a draft of the merger agreement dated October 4, 1999;
- reviewed certain publicly available information concerning Vivid and
PerkinElmer and certain other relevant historical financial and operating
data of Vivid furnished to Needham by Vivid;
- held discussions with members of senior management of Vivid and
PerkinElmer concerning their current and future business prospects and
joint prospects of the combined company, including synergies that may be
achieved by the combined company;
- reviewed various financial forecasts and projections relating to Vivid
and PerkinElmer prepared by Wall Street equity research analysts;
- compared publicly available financial data regarding a variety of
companies whose securities are traded in the public markets and that
Needham deemed relevant to similar data for Vivid;
- reviewed the financial terms of other business combinations that Needham
deemed generally relevant;
- reviewed the premiums or discounts paid by acquirers in other business
combinations that Needham deemed generally relevant;
- performed an accretion/dilution analysis and reviewed the impact of the
merger on PerkinElmer's projected operating results;
- reviewed the current and historical market closing prices and trading
data of Vivid common stock and PerkinElmer common stock; and
- performed and/or considered such other studies, analyses, inquiries and
investigations as Needham deemed appropriate.
Needham assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by or discussed with it
for purposes of rendering its opinion. In particular, Needham relied on publicly
available estimates of research analysts as to the future operating and
financial performance of Vivid and PerkinElmer. Needham relied on estimates of
Vivid's management of the synergies that may be achieved as a result of the
proposed merger. Needham did not assume any responsibility for or make or obtain
any independent evaluation, appraisal or physical inspection of the assets or
liabilities of Vivid or PerkinElmer. The Needham opinion states that it was
based on economic, monetary and market conditions existing as of its date.
Needham expressed no opinion as to what the value of PerkinElmer common stock
will be when issued to the stockholders of Vivid pursuant to the merger or the
prices at which the PerkinElmer common stock will actually trade at any time. In
addition, Needham was not asked to consider, and the Needham opinion does not
address:
- Vivid's underlying business decision to engage in the merger;
- the relative merits of the merger as compared to any alternative business
strategies that might exist for Vivid; or
- the effect of any other transaction in which Vivid might engage.
No limitations were imposed by Vivid on Needham with respect to the
investigations made or procedures followed by Needham in rendering its opinion.
Based on this information, Needham performed a variety of financial
analyses of the merger and the merger consideration. The following paragraphs
summarize the material financial analyses performed by Needham in arriving at
its opinion.
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<PAGE> 41
Contribution Analysis. Needham reviewed and analyzed the pro forma
contribution of each of Vivid and PerkinElmer to pro forma combined balance
sheet information as of June 30, 1999 and to pro forma projected calendar 1999
and 2000 operating results. Needham reviewed, among other things, the pro forma
contributions to revenues, net income, assets and stockholders' equity. This
analysis indicated that Vivid would have contributed
- 1.4% of projected calendar 1999 pro forma combined revenues,
- 2.0% of projected calendar 2000 pro forma combined revenues,
- 3.8% of projected calendar 2000 pro forma combined net income,
- 2.1% of the pro forma combined total assets, and
- 6.2% of the pro forma combined stockholders' equity.
Information as to projected calendar 1999 pro forma combined net income was
not meaningful, due to Vivid's projected loss for that period.
Based on the exchange ratio, Vivid's stockholders will own approximately
3.5% of PerkinElmer after the merger. The results of the contribution analysis
are not necessarily indicative of the contributions that the respective
businesses may have in the future.
Accretion/Dilution Analysis. Needham reviewed various pro forma financial
impacts of the merger on the holders of Vivid and PerkinElmer common stock based
on the proposed exchange ratio of 0.1613 and publicly available analyst
estimates of financial results of Vivid and PerkinElmer, and assuming selling,
general and administrative cost savings resulting from the merger of $5.0
million in 2000. Based upon these projections and assumptions, Needham noted
that the merger would result in accretion to the projected earnings per share of
PerkinElmer common stock for the fiscal year ending December 31, 2000. The
actual operating or financial results achieved by the combined company may vary
from projected results, and these variations may be material.
Selected Company Analysis. Using publicly available information, Needham
compared selected historical and projected financial and market data ratios for
Vivid to the corresponding data and ratios of certain other publicly traded
companies that Needham deemed relevant because their lines of businesses are
similar to Vivid's line of business. These selected companies consisted of:
<TABLE>
<S> <C>
American Science and Engineering, Magal Security Systems Ltd.
Inc. OSI Systems, Inc.
Barringer Technologies Inc. Thermedics Detection Inc.
InVision Technologies, Inc.
</TABLE>
The following table sets forth information concerning the following
multiples for the selected companies and for Vivid:
- Total market capitalization as a multiple of last twelve months'
earnings, or "LTM earnings";
- Total market capitalization as a multiple of projected calendar 1999
earnings;
- Total market capitalization as a multiple of projected calendar 2000
earnings;
- Total enterprise value as a multiple of LTM revenues;
- Total enterprise value as a multiple of projected calendar 1999 revenues;
- Total enterprise value as a multiple of projected calendar 2000 revenues;
and
- Market value as a multiple of historical book value.
Needham calculated multiples for the selected companies based on the
closing stock prices on October 1, 1999 and for Vivid based on an equivalent
price per share of Vivid common stock of $6.25. The equivalent price per Vivid
share was based on the closing price per share of PerkinElmer common stock on
October 1, 1999 of $38.75 and the exchange ratio of 0.1613.
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<PAGE> 42
<TABLE>
<CAPTION>
SELECTED COMPANIES
----------------------------------------
VIVID
IMPLIED
BY THE
HIGH LOW MEAN MEDIAN MERGER
----- ----- ----- ------ -------
<S> <C> <C> <C> <C> <C>
Total market capitalization to LTM earnings.............. 22.6x 10.4x 16.8x 19.9x NM
Total market capitalization to projected calendar 1999
earnings................................................. 21.2x 9.5x 13.8x 12.3x NM
Total market capitalization to projected calendar 2000
earnings............................................... 12.9x 8.3x 10.0x 8.7x 19.3x
Total enterprise value to LTM revenues................... 2.0x 0.4x 0.8x 0.6x 2.0x
Total enterprise value to projected calendar 1999
revenues............................................... 0.5x 0.3x 0.4x 0.3x 1.9x
Total enterprise value to projected calendar 2000
revenues............................................... 0.2x 0.2x 0.2x 0.2x 1.2x
Market value to historical book value.................... 1.7x 0.6x 1.1x 0.9x 1.9x
</TABLE>
- ---------------
NM = not meaningful due to net losses for Vivid for the periods indicated.
Selected Transaction Analysis. Needham also analyzed publicly available
financial information for 15 selected completed and pending mergers and
acquisitions of technology companies that represent transactions since August
1997 with transaction values of between $20 million and $200 million. In
examining these selected transactions, Needham analyzed:
- the premium of consideration offered to the acquired company's stock
price one day prior to the announcement of the transaction;
- the premium of consideration offered to the acquired company's stock
price one week prior to the announcement of the transaction;
- the premium of consideration offered to the acquired company's stock
price four weeks prior to the announcement of the transaction;
- the enterprise value as a multiple of net sales for the last twelve
months, or "LTM net sales"; and
- market value as a multiple of historical book value.
Needham also analyzed, for the selected transactions,
- the enterprise value as a multiple of earnings before interest and taxes
for the last twelve months,
- the enterprise value as a multiple of earnings before interest, taxes,
depreciation and amortization for the last twelve months, and
- market value as a multiple of net income for the last twelve months,
but determined that the results were not meaningful because of Vivid's net
losses for the last twelve months. In some cases, complete financial data was
not publicly available for the selected transactions and only partial
information was used in these instances. Needham calculated premiums and
multiples for Vivid based on the closing price of PerkinElmer common stock on
October 1, 1999 of $38.75, the exchange ratio of 0.1613, and the resulting
equivalent price per share of Vivid common stock of $6.25.
The following table sets forth information concerning the stock price
premiums in the selected transactions and the stock price premiums implied by
the proposed merger.
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
-------------------------------------------------
PERKINELMER/
HIGH LOW MEAN MEDIAN VIVID MERGER
------ ---- ----- ------ ------------
<S> <C> <C> <C> <C> <C>
One day stock price premium................... 94.8% (3.4)% 32.9% 32.3% 78.6%
One week stock price premium.................. 172.6% 6.5% 50.5% 38.0% 42.7%
Four week stock price premium................. 137.9% 7.5% 42.1% 31.2% 61.1%
</TABLE>
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<PAGE> 43
The following table sets forth information concerning the multiples of
aggregate transaction value to LTM net sales and the multiples of market value
to historical book value for the selected transactions and the same multiples
implied by the proposed merger.
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
------------------------------------------
PERKINELMER/
HIGH LOW MEAN MEDIAN VIVID MERGER
---- ---- ---- ------ ------------
<S> <C> <C> <C> <C> <C>
Aggregate enterprise value to LTM net sales.......... 2.6x 0.4x 1.3x 1.3x 2.0x
Market value to historical book value................ 6.1x 1.1x 2.8x 2.1x 1.9x
</TABLE>
No company, transaction or business used in the "Selected Company Analysis"
or "Selected Transaction Analysis" as a comparison is identical to Vivid,
PerkinElmer or the merger. Accordingly, these analyses are not simply
mathematical; rather, they involve complex considerations and judgments
concerning differences in the financial and operating characteristics and other
factors that could affect the acquisition, public trading or other values of the
selected companies, selected transactions, or the business segment, company or
transaction to which they are being compared.
Other Analyses. In rendering its opinion, Needham considered other
analyses, including a history of trading prices and volumes for Vivid and
PerkinElmer.
The summary set forth above does not purport to be a complete description
of the analyses performed by Needham in connection with the rendering of its
opinion. The preparation of a fairness opinion involves various determinations
as to the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, Needham believes that its analyses must be
considered as a whole and that considering any portions of its analyses and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying its opinion. In
its analyses, Needham made numerous assumptions with respect to industry
performance, general business and economic and other matters, many of which are
beyond the control of Vivid or PerkinElmer. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable.
Additionally, analyses relating to the values of business or assets do not
purport to be appraisals or necessarily reflect the prices at which businesses
or assets may actually be sold. Accordingly, these analyses and estimates are
inherently subject to substantial uncertainty. The Needham opinion and Needham's
related analyses were only one of many factors considered by Vivid's board in
its evaluation of the proposed merger and should not be viewed as determinative
of the views of Vivid's board or management with respect to the exchange ratio
or the proposed merger.
Under the terms of the Needham engagement letter, Vivid has paid or agreed
to pay Needham fees for rendering the Needham opinion and for financial advisory
services of $200,000 plus an amount equal to an aggregate of $700,000 if the
merger is completed. Vivid has also agreed to reimburse Needham for its
reasonable out-of-pocket expenses and to indemnify it against specified
liabilities relating to or arising out of services performed by Needham as
financial advisor to Vivid.
Needham is a nationally recognized investment banking firm. As part of its
investment banking services, Needham is frequently engaged in the evaluation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of securities, private
placements and other purposes. Needham was retained by Vivid's board to act as
Vivid's financial advisor in connection with the merger based on Needham's
experience as a financial advisor in mergers and acquisitions as well as
Needham's familiarity with technology companies. In the normal course of its
business, Needham may actively trade the equity securities of Vivid or
PerkinElmer for its own account or for the account of its customers and,
therefore, may at any time hold a long or short position in these securities.
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<PAGE> 44
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS OF VIVID IN THE MERGER
You should be aware of the interests that executive officers and directors
of Vivid have in the merger. These interests are different from and in addition
to your and their interests as stockholders. These include:
- retention arrangements providing certain officers and key employees of
Vivid with incentives to remain in the employment of PerkinElmer;
- indemnification and directors' and officers' liability insurance;
- arrangements with S. David Ellenbogen and Jay A. Stein, officers and
directors of Vivid, under the stockholder agreement, which requires them
to vote their shares to approve the merger agreement and the merger and
includes the option of PerkinElmer to purchase Vivid shares beneficially
owned by them which may become exercisable if the merger is not
completed;
- acceleration of the vesting of options held by two of the independent
directors of Vivid; and
- acceleration of royalty payments to be made to Hologic, Inc., a related
party of Vivid.
In discussing the fairness of the merger to the stockholders of Vivid,
Vivid's board took into account these interests. These interests are summarized
below:
Retention Agreements. In connection with the merger, James Aldo, William
J. Frain and Daniel J. Silva, officers of Vivid, and Kristoph D. Krug, a key
employee of Vivid, entered into retention agreements with PerkinElmer that
become effective immediately prior to the completion of the merger. The
retention agreements provide, among other things, for the following:
<TABLE>
<CAPTION>
OPTION GRANT
YEAR 2000 TO PURCHASE CAR
ANNUAL PERFORMANCE PERKINELMER ALLOWANCE
NAME BASE SALARY BONUS COMMON STOCK RETENTION BONUS PER MONTH
- ---- ----------- -------------- ------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
James Aldo.............. $190,000 up to $124,000 10,000 shares up to $290,000 $600
William J. Frain........ $140,000 up to $84,000 10,000 shares up to $240,000 $600
Kristoph D. Krug........ $185,000 up to $155,500 10,000 shares up to $185,000 $600
Daniel J. Silva......... $180,000 up to $108,000 10,000 shares up to $280,000 $600
</TABLE>
In addition, each of Messrs. Aldo, Frain and Silva are eligible to receive
a severance payment equal to two times his annual base salary if his employment
with PerkinElmer is terminated other than for cause or he terminates his
employment for good reason before the first anniversary of the merger. This
severance payment is reduced to one times annual base salary if such termination
occurs between the first and second anniversary of the merger.
Indemnity Arrangements. Pursuant to the merger agreement, PerkinElmer has,
for the periods specified in the merger agreement, agreed to (1) indemnify each
present director and officer of Vivid against liabilities or expenses incurred
in connection with claims arising out of or pertaining to matters occurring
prior to the merger and (2) maintain in effect directors' and officers'
liability insurance for the benefit of the directors and officers of Vivid with
coverage in amount and scope at least as favorable to such persons as Vivid's
existing coverage. See "Merger Agreement -- Director and Officer
Indemnification."
Ownership and Voting of Stock. As of November 15, 1999 directors and
executive officers of Vivid and their affiliates may be deemed to be beneficial
owners of approximately 16.8% of the outstanding shares of Vivid common stock.
See "Security Ownership of Certain Beneficial Holders and Management of Vivid."
Stockholder Agreement. S. David Ellenbogen, The Ellenbogen Family
Irrevocable Trust of 1996, S. David Ellenbogen 1996 Retained Annuity Trust, Jay
A. Stein and The Jay A. Stein 1996 Retained Annuity Trust, each a stockholder of
Vivid, have entered into a stockholder agreement dated as of October 4, 1999
with PerkinElmer and Venice Acquisition Corp. Under the stockholder agreement,
each
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<PAGE> 45
stockholder has agreed to vote all shares over which he or it exercises voting
control, totaling 1,319,000 shares of Vivid common stock as of November 15,
1999, in favor of approval and adoption of the merger agreement, the merger and
all agreements related to the merger. In addition, each stockholder granted
PerkinElmer's subsidiary, Venice Acquisition Corp., the right to purchase all
shares of Vivid common stock currently owned by the stockholder and any
additional shares of Vivid common stock he or it may acquire prior to the
completion of the merger at a purchase price of $6.25 per share, subject to
adjustment. The option may be exercised, in whole or part, on one or more
occasions after the date the merger agreement is terminated and prior to the
180th day of the merger agreement termination date, if prior to the termination
of the stockholder agreement this option has not been terminated and Vivid
enters into an agreement for an alternative transaction.
Vivid Stock Options. Assuming the merger is completed in January 2000,
options to purchase an aggregate of approximately 8,000 shares of Vivid common
stock granted to L. Paul Bremer III and Gerald Segel, independent directors of
Vivid, will accelerate upon the completion of the merger. The option
acceleration rights for the independent directors of Vivid are set forth below.
<TABLE>
<CAPTION>
OPTION SHARES
DATE OF NUMBER OF SHARES OF ACCELERATED
OPTION VIVID COMMON STOCK EXERCISE IN CONNECTION
INDEPENDENT DIRECTOR GRANT SUBJECT TO OPTION PRICE WITH MERGER
- -------------------- ------------- ------------------- -------- -------------
<S> <C> <C> <C> <C>
L. Paul Bremer III.................. July 22, 1996 10,000 $3.00 4,000
Gerald Segel........................ July 22, 1996 10,000 $3.00 4,000
</TABLE>
Agreements with Hologic, Inc. Vivid has an exclusive perpetual license to
use patents and technology developed by Hologic, Inc. for the development,
manufacture and sale of X-ray screening security systems for explosives, drugs,
currency and other contraband. Vivid also has a nonexclusive license to use this
technology for the development, manufacture and sale of X-ray-based products for
process control applications in the food and beverage industries. Each of
Hologic and Vivid has also granted to the other a non-exclusive, royalty-free
license to use any unpatented technology developed by the other in connection
with research and development activities. In addition, each of Hologic and Vivid
has the right to obtain from the other an exclusive license, on commercially
reasonable terms to be negotiated, for any patented new developments.
Vivid and Hologic have agreed that upon completion of the proposed merger
with PerkinElmer, their licensing arrangements will terminate, other than
Vivid's exclusive license to Hologic's existing patents and technology for the
development, manufacture and sale of x-ray screening security systems for
explosives, drugs, currency and other contraband. In addition, upon completion
of the merger, Vivid has agreed to accelerate the royalty provision contained in
the license agreement and to pay Hologic a one-time royalty payment of
$2,000,000. In the event that the merger is not completed for any reason on or
before April 30, 2000, Vivid shall be responsible for royalties for the quarters
ending December 31, 1999 and March 31, 2000, as required by the license
agreement, and the $2,000,000 payment to be paid upon completion of the merger
will be reduced by royalty payments for those quarters. The net amount of the
royalty payments shall bear interest at a rate of 9% per annum commencing May 1,
2000 until the date paid. In the event that the merger is not completed before
October 30, 2000, the termination of these arrangements will be null and void
and will have no further force or effect. S. David Ellenbogen and Dr. Jay A.
Stein, both of whom are directors of Vivid, are also directors of Hologic and
hold similar offices in Hologic as they do in Vivid. In addition, Glenn Muir, a
director of Vivid, serves as chief financial officer of Hologic and Gerald
Segel, a director of Vivid, serves as a director of Hologic. Mr. Ellenbogen and
Dr. Stein collectively beneficially own more than 5% of the outstanding voting
stock of Hologic.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for by PerkinElmer using the purchase method
of accounting for a business combination in accordance with APB Opinion No. 16.
Under this method of accounting, the assets and liabilities of Vivid, including
intangible assets, will be recorded at their fair market values. The
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<PAGE> 46
results of operations and cash flows of Vivid will be included in PerkinElmer's
financials prospectively as of the completion of the merger.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
including the rules and regulations promulgated thereunder, the merger may not
be completed until notifications have been furnished to the Federal Trade
Commission and the Antitrust Division of the Department of Justice and specified
waiting period requirements have been satisfied. PerkinElmer and Vivid filed
pre-merger notification and report forms with the FTC and the Antitrust Division
on October 14, 1999. Early termination of the waiting period with respect to the
merger was granted by the FTC on behalf of itself and the Antitrust Division on
November 9, 1999 and confirmed by letter dated November 12, 1999.
Notwithstanding the receipt of early termination, at any time before the
completion of the merger, the Antitrust Division, the FTC or a private person or
entity could seek under antitrust laws, among other things, to enjoin the merger
and any time after the effective time of the merger, to cause PerkinElmer to
divest itself, in whole or in part, of the surviving corporation of the merger
or of certain businesses conducted by the surviving corporation of the merger.
There can be no assurance that a challenge to the merger will not be made or
that, if a challenge is made, PerkinElmer will prevail. The obligations of
PerkinElmer and Vivid to complete the merger are subject to the condition that
any applicable waiting period under the Hart-Scott-Rodino Act shall have expired
without action by the Antitrust Division or the FTC to prevent completion of the
merger. See "The Merger Agreement -- Conditions to Obligations to Effect the
Merger."
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Treatment of Vivid Stockholders
In the opinion of Hale and Dorr LLP, counsel to PerkinElmer, and in the
opinion of Brown Rudnick Freed & Gesmer, counsel to Vivid, certain material
United States federal income tax considerations generally applicable to United
States holders of Vivid common stock who, pursuant to the merger, exchange their
Vivid common stock solely for PerkinElmer common stock, are described below.
Completion of the merger is conditioned upon PerkinElmer's receipt of an opinion
from Hale and Dorr (or Brown Rudnick if Hale and Dorr does not provide such an
opinion) and Vivid's receipt of an opinion from Brown Rudnick (or Hale and Dorr
if Brown Rudnick does not provide such an opinion) to the effect that the merger
will qualify for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code. The discussion below
assumes that the merger will be treated in accordance with the opinions of Hale
and Dorr and Brown Rudnick described in the preceding sentence and included as
exhibits 8.1 and 8.2 to the registration statement of which this proxy
statement/prospectus forms a part.
The discussion below is, and the opinions of Hale and Dorr and Brown
Rudnick will be, based upon current provisions of the Internal Revenue Code,
currently applicable U.S. Treasury regulations promulgated thereunder, and
judicial and administrative decisions and rulings. The opinions of Hale and Dorr
and Brown Rudnick will be based on the facts, representations and assumptions
set forth or referred to in their opinions, including representations contained
in certificates signed by officers of PerkinElmer and Vivid. The opinions are
not binding on the Internal Revenue Service or the courts, and there can be no
assurance that the Internal Revenue Service or the courts will not take a
contrary view. No ruling from the Internal Revenue Service has been or will be
sought. Future legislative, judicial or administrative changes or
interpretations could alter or modify the statements and conclusions set forth
below, could be applied retroactively and could affect the tax consequences of
the merger to the stockholders of PerkinElmer and Vivid.
The discussion below and the opinions of Hale and Dorr and Brown Rudnick do
not purport to deal with all aspects of federal income taxation that may affect
particular stockholders in light of their individual circumstances, and are not
intended for stockholders subject to special treatment under federal
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income tax law. Stockholders subject to special treatment include insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign persons, stockholders who hold their stock as part of a hedge,
appreciated financial position, straddle or conversion transaction, stockholders
who do not hold their stock as capital assets and stockholders who have acquired
their stock upon the exercise of employee or director options or otherwise as
compensation. In addition, the discussion below and such opinions do not
consider the effect of any applicable state, local or foreign tax laws.
You are urged to consult with your tax advisor as to the particular tax
consequences to you of the merger and related transactions described in this
proxy statement/prospectus, including the applicability and effect of any state,
local or foreign tax laws, and of changes in applicable tax laws.
The merger will constitute a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code. Accordingly, subject to the limitations and
qualifications referred to herein, the following tax consequences will result:
- No gain or loss will be recognized by PerkinElmer or Vivid solely as a
result of the merger.
- No gain or loss will be recognized by the holders of Vivid common stock
upon the receipt of PerkinElmer common stock solely in exchange for such
Vivid common stock in the merger.
- Cash payments received by holders of Vivid common stock in lieu of a
fractional share of PerkinElmer common stock will be treated as capital
gain (or loss) measured by the difference between the cash payment
received and the portion of the tax basis in the shares of Vivid common
stock surrendered that is allocable to the fractional share.
- Any gain (or loss) will be long-term capital gain (or loss) if the
fractional share of PerkinElmer common stock has been held for more than
one year at the completion of the merger.
- The aggregate tax basis of the PerkinElmer common stock received by each
Vivid stockholder in the merger will be the same as the aggregate tax
basis of the Vivid common stock surrendered in exchange therefor, reduced
by the portion of the stockholder's basis allocable to any cash payment
received in lieu of a fractional share.
- The holding period of the PerkinElmer common stock received by each Vivid
stockholder in the merger will include the holding period for the Vivid
common stock surrendered in exchange therefor, provided that the Vivid
common stock so surrendered is held as a capital asset at the completion
of the merger.
A successful Internal Revenue Service challenge to the "reorganization"
status of the merger would result in you recognizing gain or loss with respect
to each share of Vivid common stock surrendered in the merger equal to the
difference between your basis in your Vivid common stock and the fair market
value, as of the completion of the merger, of the PerkinElmer common stock
received (and cash, in the case of a fractional share) in exchange therefor. In
such event, your aggregate tax basis in the PerkinElmer common stock so received
would equal its fair market value, and your holding period for stock would begin
the day after the merger.
Treatment of Holders of PerkinElmer Common Stock
There will be no United States federal income tax consequences to the
holders of PerkinElmer common stock as a result of the completion of the merger.
NEW YORK STOCK EXCHANGE LISTING
It is a condition to the closing of the merger that the shares of
PerkinElmer common stock to be issued under the merger agreement be listed on
the New York Stock Exchange.
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RESALES OF PERKINELMER COMMON STOCK ISSUED IN CONNECTION WITH THE MERGER;
AFFILIATE AGREEMENTS
PerkinElmer common stock issued in connection with the merger will be
freely transferable, except that shares of PerkinElmer common stock received by
persons who are deemed to be "affiliates," as that term is defined by Rule 144
under the Securities Act of 1933, as amended, of Vivid at the completion of the
merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 under the Securities Act or as otherwise permitted under
the Securities Act. The executive officers and directors and persons who may be
affiliates of Vivid have each executed a written affiliate agreement providing,
among other things, that they will not offer, sell, transfer or otherwise
dispose of any of the shares of PerkinElmer common stock obtained as a result of
the merger except in compliance with the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
PerkinElmer and Vivid believe this document and the documents incorporated
by reference herein contain "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are
subject to risks and uncertainties and are based on the beliefs and assumptions
of management of PerkinElmer and Vivid, based on information currently available
to each company's management. When we use words such as "believes," "expects,"
"anticipates," "intends," "plans," "estimates," "should," "likely" or similar
expressions, we are making forward-looking statements. Forward-looking
statements include the information concerning possible or assumed future results
of operations of PerkinElmer and Vivid set forth:
- under "Summary," "Risk Factors," "Selected Historical Consolidated and
Unaudited Pro Forma Combined Financial Information," "The
Merger -- Background of the Merger," "-- Joint Reasons for the Merger,"
"-- PerkinElmer's Reasons for the Merger," "-- Vivid's Reasons for the
Merger; Recommendation of the Board of Directors of Vivid," "-- Opinion
of Financial Advisor to Vivid," "Description of Vivid -- Business,"
"-- Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Unaudited Pro Forma Combined Financial
Information"; and
- under "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in PerkinElmer's Annual Report on
Form 10-K/A and Quarterly Reports on Form 10-Q and Form 10-Q/A
incorporated by reference into this document.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of PerkinElmer or Vivid may differ materially from those expressed in the
forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. Stockholders
are cautioned not to put undue reliance on any forward-looking statements. For
those statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
For a discussion of some of the factors that may cause actual results to
differ materially from those suggested by the forward-looking statements, please
read carefully the information under "Risk Factors." In addition to these risk
factors and the other important factors discussed elsewhere in the documents
which are incorporated by reference into this proxy statement/prospectus, you
should understand that the following important factors could affect the future
results of PerkinElmer and Vivid and could cause results to differ materially
from those suggested by the forward-looking statements:
- increased competitive pressures, both domestically and internationally,
which may affect sales of PerkinElmer's and Vivid's products and impede
PerkinElmer's and Vivid's ability to maintain its market share and
pricing goals;
- changes in United States, global or regional economic conditions, which
may affect sales of the combined company's products and increased costs
associated with manufacturing and distributing such products;
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- changes in United States and global financial and equity markets,
including significant interest rate fluctuations, which may increase the
cost of external financing for PerkinElmer's and Vivid's operations, and
currency exchange rate fluctuations, which may negatively impact
PerkinElmer's reportable income;
- problems arising from the potential inability of computers to properly
recognize and process date-sensitive information beyond January 1, 2000,
which may result in an interruption in, or a failure of, normal business
activities or operations of PerkinElmer or Vivid or their respective
suppliers and customers;
- changes in laws or regulations, third party relations and approvals,
decisions of courts, regulators and governmental bodies, which may
adversely affect PerkinElmer's or Vivid's business or ability to compete;
and
- other risks and uncertainties as may be detailed from time to time in
PerkinElmer's or Vivid's public announcements and Securities and Exchange
Commission filings.
This list of factors that may affect future performance and the accuracy of
forward-looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as Annex A to this proxy
statement/prospectus and is incorporated by reference into this summary. This
summary is not complete and is qualified in its entirety by reference to the
merger agreement. We urge you to read the merger agreement in its entirety for a
complete description of the terms and conditions of the merger.
GENERAL
Following the adoption of the merger agreement by the stockholders of Vivid
and the satisfaction or waiver of the other conditions to the merger, a
wholly-owned subsidiary of PerkinElmer, named "Venice Acquisition Corp.", will
be merged into Vivid. Vivid will survive the merger as a wholly-owned subsidiary
of PerkinElmer. If all conditions to the merger are satisfied or waived, the
merger will become effective at the time of the filing by the surviving
corporation of a duly executed certificate of merger with the Secretary of State
of the State of Delaware.
CONVERSION OF SHARES
At the effective time of the merger, each issued and outstanding share of
Vivid common stock, other than shares held in the treasury of Vivid or shares
held by PerkinElmer, Venice Acquisition Corp. or any other wholly-owned
subsidiary of Vivid, will be converted into the right to receive 0.1613 shares
of PerkinElmer common stock, subject to the following limitations:
- if the market value, as defined below, of PerkinElmer's common stock is
greater than $46.49, which corresponds to $7.50 per Vivid share,
PerkinElmer has the right to notify Vivid that PerkinElmer desires to
terminate the merger agreement. Upon receipt of that notice, Vivid may
either accept the termination or agree to adjust the exchange ratio such
that holders of Vivid common stock will receive PerkinElmer common stock
having a market value of $7.50 per Vivid share.
- if the market value, as defined below, of PerkinElmer's common stock is
less than $30.99, which corresponds to $5.00 per Vivid share, Vivid has
the right to notify PerkinElmer that Vivid desires to terminate the
merger agreement. Upon receipt of that notice, PerkinElmer may either
accept the termination or agree to adjust the exchange ratio such that
holders of Vivid common stock will receive PerkinElmer common stock
having a market value of $5.00 per Vivid share.
The number of shares of PerkinElmer common stock issuable for each share of
Vivid common stock in the merger, as determined above, is referred to as the
"exchange ratio."
The "market value" of PerkinElmer common stock will be the weighted average
selling prices of PerkinElmer common stock as reported by the New York Stock
Exchange for the five consecutive trading days ending on the third trading day
prior to the date of the Vivid stockholder meeting called to consider and act
upon the proposed merger, so long as the merger is completed within five
business days of the meeting. If the merger is completed more than five business
days after the meeting, the market value of PerkinElmer's common stock will be
equal to the weighted average selling prices of the PerkinElmer common stock for
the five consecutive trading days ending on the date of the merger. We will
adjust the exchange ratio for any stock split, stock dividend or reorganization
relating to Vivid common stock or PerkinElmer common stock before the effective
time.
TREATMENT OF VIVID STOCK OPTIONS
At the effective time of the merger, each unexpired and unexercised
outstanding option to purchase shares of Vivid common stock, whether vested or
unvested, previously granted by Vivid under its stock option plans will be
assumed by PerkinElmer and converted into options to purchase shares of
PerkinElmer common stock. Each option to acquire one share of Vivid common stock
will be converted into an option to acquire the number of shares of PerkinElmer
common stock equal to the exchange ratio. Any fractional shares of PerkinElmer
common stock resulting from the conversion will be rounded down to
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the nearest share. The exercise price per share of PerkinElmer common stock
under the converted Vivid stock options will equal the aggregate exercise price
per share of the Vivid common stock under the original stock options divided by
the exchange ratio. The exercise price will be rounded up to the next highest
whole cent.
PerkinElmer will reserve for issuance a sufficient number of shares of its
common stock for delivery if all Vivid optionholders exercise their converted
options as described above. Promptly after the effective time of the merger,
PerkinElmer will file a registration statement on Form S-8 with respect to
shares of Vivid common stock subject to options. During the period that any
options remain outstanding, PerkinElmer will do its best to maintain the
effectiveness of any registration statements on Form S-8.
EXCHANGE OF STOCK CERTIFICATES
Fractional Shares. PerkinElmer will not issue any fractional shares of
PerkinElmer common stock in the merger. Instead, each holder of shares of Vivid
common stock exchanged pursuant to the merger at the exchange ratio who would
otherwise have been entitled to receive a fraction of a share of PerkinElmer
common stock will be entitled to receive cash, without interest, in an amount
equal to the product of the fractional share of PerkinElmer common stock
multiplied by the market value of the PerkinElmer common stock.
Surrender of Shares of Vivid Common Stock; Stock Transfer Books. Shortly
after the effective time of the merger, PerkinElmer will mail a notice and
transmittal form to each record holder of certificates representing Vivid common
stock advising the holders of the instructions for surrendering the certificates
for PerkinElmer common stock and for the payment of cash in lieu of fractional
shares. Holders of certificates who properly surrender their certificates in
accordance with the instructions in the notice will receive certificates
representing the number of shares of PerkinElmer common stock, cash in lieu of
any fractional shares of PerkinElmer common stock and any dividends or
distributions to which they are entitled. The surrendered certificates will be
canceled.
No Further Registration or Transfer of Vivid Common Stock. At the
effective time of the merger, the stock transfer books of Vivid will be closed
and there will be no further transfers of shares of Vivid common stock on the
records of Vivid. After the effective time of the merger, the holders of Vivid
stock certificates will cease to have any rights with respect to such shares of
Vivid common stock except as otherwise provided for in the merger agreement or
by applicable law.
Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made on or after the effective time of the merger with
respect to shares of PerkinElmer common stock will be paid to the holder of any
unsurrendered Vivid certificate with respect to the shares of PerkinElmer common
stock that the holder of the certificate is entitled to receive, and no cash
payment in lieu of fractional shares will be paid to the holder until the holder
surrenders the Vivid certificate as provided above and provides any customary
representations and certifications as are requested in the transmittal form sent
to each holder. Upon such surrender, PerkinElmer will pay to the person in whose
name the Vivid certificates representing such shares of PerkinElmer common stock
will be issued, without interest, any dividends or distributions with respect to
the shares of PerkinElmer common stock which have a record date on or after the
effective time of the merger and have become payable between the effective time
of the merger and the time of such surrender.
Lost Certificates. If any Vivid certificate is lost, stolen or destroyed,
a Vivid stockholder must provide an appropriate affidavit of that fact.
PerkinElmer may require the owner of such lost, stolen or destroyed Vivid
certificate to deliver a bond as indemnity against any claim that may be made
against PerkinElmer with respect to the Vivid certificates alleged to have been
lost, stolen or destroyed.
Holders of Vivid common stock should not send in their certificates until
they receive a transmittal form and instructions from PerkinElmer or its agents.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of
PerkinElmer, Vivid and Venice Acquisition Corp. These relate to:
- their organization, existence, good standing, corporate power and similar
corporate matters;
- their capitalization;
- their authorization, execution, delivery, required filings and consents
and performance and the enforceability of the merger agreement and
related matters;
- any filings with the Securities and Exchange Commission;
- the absence of certain changes in their business;
- the absence of undisclosed liabilities;
- required governmental and third-party consents;
- the absence of conflicts, violations and defaults under their corporate
charter and bylaws and other agreements and documents; and
- the accuracy of information provided in connection with this proxy
statement/prospectus.
Vivid also represented and warranted as to:
- its subsidiaries;
- brokers and finders;
- owned and leased real properties;
- taxes and tax returns;
- its employee benefit plans;
- litigation;
- its material contracts;
- its licenses and permits;
- insurance;
- compliance with laws;
- intellectual property;
- labor matters;
- environmental matters;
- its cash balance;
- its assets;
- its suppliers;
- the opinion of its financial advisor;
- amendments to its stockholder rights plan and license and services
agreement with Hologic, Inc.;
- the status of a dispute with Gilardoni S.p.A.;
- the actions by its board of directors that make certain sections of the
Delaware General Corporation Law inapplicable to the merger; and
- Year 2000 compliance.
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COVENANTS
Conduct of Business Prior to the Merger. Each of Vivid and its
subsidiaries has agreed that it will carry on its business in the ordinary
course in substantially the same manner as previously conducted, except as
contemplated by the merger agreement. Specifically, each of Vivid and each of
its subsidiaries has agreed not to, without the prior written consent of
PerkinElmer:
- accelerate, amend or change the period of exercisability of any
outstanding warrant, option or restricted stock or authorize cash in
exchange for any warrant, option or restricted stock;
- issue or sell any shares of capital stock or other securities, except
pursuant to the conversion or exercise of convertible securities, options
or warrants;
- effect a stock split or declare or make any dividends or other
distribution on its shares of capital stock;
- with certain exceptions, incur indebtedness or guarantee the obligations
of any other person or entity;
- increase the compensation payable to any of its officers or employees,
other than normal scheduled bonuses, enter into, adopt, terminate or
amend any employee benefit plan or employment or severance arrangement or
increase the compensation or fringe benefits of, or materially modify the
employment terms of, or accelerate the payment or vesting of any
compensation or benefits of, its directors, officers or employees
generally, pay any benefit not required by any existing employee benefit
plan or forgive the indebtedness of any employee;
- acquire any assets other than any assets it purchases in the ordinary
course of its business;
- acquire any business, corporation, partnership or other business;
- sell, lease, license or otherwise dispose of any assets or property other
than in the ordinary course of business;
- amend its charter or bylaws;
- adopt or implement any stockholder rights plan or modify, amend or
terminate the Vivid rights plan;
- change its accounting methods except as required by generally accepted
accounting principles;
- revalue any of its significant assets;
- pay its debt or taxes and perform other obligations other than in the
ordinary course of business;
- enter into a new license for any material intellectual property rights to
or from any third party;
- modify, amend or terminate any material contract or agreement or waive,
release or assign any material rights or claims;
- make or commit to any capital expenditure in excess of the capital budget
it furnished to PerkinElmer;
- make or rescind any tax election, settle or compromise any tax liability
or amend any tax return;
- initiate, compromise or settle any material litigation or arbitration
proceeding;
- close any facility or office;
- with certain exceptions, invest funds in debt securities or other
instruments that mature more than 90 days after the date of the
investment;
- fail to pay accounts payable or other obligations in the ordinary course
of business; and
- modify, amend or terminate the license agreement between Vivid and
Hologic.
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PerkinElmer and Vivid have agreed to use commercially reasonable efforts
to:
- take all appropriate action to complete the transactions contemplated by
the merger agreement as promptly as practical;
- obtain any consents, licenses, permits, waivers, approvals,
authorizations or orders from governmental entities or other third
parties required in connection with the transactions contemplated by the
merger agreement; and
- make all necessary filings and submissions with respect to the
transactions contemplated by the merger agreement under federal and state
securities laws, antitrust laws and other applicable laws.
PerkinElmer and Vivid have also agreed to use commercially reasonable
efforts to obtain any governmental clearances required under antitrust laws for
the closing of the merger. PerkinElmer has the right to direct any governmental
proceedings or negotiations relating to these governmental proceedings as long
as its allows Vivid a reasonable opportunity to participate in the proceedings.
PerkinElmer and its subsidiaries are not required either to divest any of their
businesses, product lines or assets or take other action that might adversely
affect PerkinElmer or PerkinElmer combined with Vivid, or to take any action
with respect to these government approvals if the Department of Justice or the
Federal Trade Commission authorizes its staff to seek a preliminary injunction
or restraining order to enjoin completion of the merger.
Vivid is Restricted from Trying to Sell to Another Party. Vivid has agreed
that it will not, directly or indirectly,
- encourage, solicit or initiate any inquiries or proposals (other than
with PerkinElmer) concerning any merger, consolidation, business
combination, sale of substantial assets, tender offer, sale of shares of
Vivid stock or similar transaction involving Vivid;
- provide any non-public information concerning the business, properties or
assets of Vivid to any person or entity, other than PerkinElmer, relating
to an unsolicited alternative acquisition proposal; or
- recommend or agree to any such inquiries or proposals.
However, although the merger agreement prohibits Vivid from trying to sell
to another party, it is still allowed to:
- furnish non-public information to, or enter into discussions or
negotiations with, any person or entity in connection with an unsolicited
bona fide written proposal if and only to the extent that
- Vivid's board believes in good faith, after consultation with its
financial advisor, that the alternative proposal may be completed on
the terms proposed and constitutes a more favorable transaction than
the transaction contemplated by the merger agreement and Vivid's board
determines in good faith after consultation with outside legal counsel
that such action is necessary to comply with its fiduciary duties to
stockholders under applicable law,
- before it furnishes such non-public information to, or engages such
person in negotiations, such person provides to Vivid's board an
executed confidentiality agreement with terms no more favorable to
such party than those contained in the agreement dated April 28, 1999
between PerkinElmer and Vivid, and
- prior to recommending a superior proposal, Vivid gives PerkinElmer
five business days prior notice of its proposal to give PerkinElmer
the opportunity to make a counter proposal, in which event Vivid will
consider PerkinElmer's counter proposal.
- comply with Rule 14d-9 and Rule 14e-2 promulgated under the Securities
Exchange Act of 1934, as amended, with regard to a proposal.
Vivid has agreed to notify PerkinElmer in writing within one day of receipt
of any proposal or request for non-public information in connection with a
proposal or for access to the properties, books or records
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of Vivid by any person or entity that informs Vivid that it is considering
making or has made a proposal. Vivid agrees to continue to keep PerkinElmer
informed on a current basis of all material developments with respect to the
status of any discussions and the material terms being discussed or negotiated.
Director and Officer Insurance and Indemnification. The merger agreement
provides that, for a period of six years after the merger, PerkinElmer will
cause the surviving corporation to maintain in effect a directors' and officers'
liability insurance policy covering each present and former director and officer
of Vivid against any costs or expenses pertaining to matters existing or
occurring at or prior to the merger.
RELATED MATTERS AFTER THE MERGER
At the time of the merger, Venice Acquisition Corp. will be merged into
Vivid and Vivid will become the surviving corporation in the merger and a
wholly-owned subsidiary of PerkinElmer. Each share of Venice Acquisition Corp.
common stock issued and outstanding immediately prior to the merger will be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the surviving corporation. The charter of
Vivid, as in effect immediately prior to the merger, will become the charter of
the surviving corporation, except that the authorized capital stock will be
changed to 1,000 shares of common stock. The bylaws of Venice Acquisition Corp.
will become the bylaws of the surviving corporation, except that the name will
be changed to Vivid Technologies, Inc.
CONDITIONS TO OBLIGATIONS TO EFFECT THE MERGER
The respective obligations of PerkinElmer and Vivid to effect the merger
are subject to the satisfaction or waiver of the following conditions:
- Vivid's stockholders must have approved the merger and the merger
agreement;
- all applicable waiting periods, and any extensions of these periods,
under the Hart-Scott-Rodino Act must have expired;
- the parties must have obtained all material government authorizations and
consents;
- the registration statement of which this proxy statement/prospectus is a
part must have become effective and not be the subject of a stop order;
- there must be no order, injunction or judgment, or statute, rule or
regulation, in effect that makes the merger illegal; and
- the New York Stock Exchange must have approved for listing the shares of
PerkinElmer common stock to be issued in the merger.
In addition, the obligations of PerkinElmer and Venice Acquisition Corp. to
effect the merger are subject to the satisfaction or waiver of the following
conditions:
- the representations and warranties of Vivid in the merger agreement:
- that are qualified as to materiality or material adverse effect must
be true and correct in all respects as of the date of the merger
agreement,
- that are not qualified as to materiality or material adverse effect
must be true and correct in all material respects as of the date of
the merger agreement, and
- must be true and correct as of the effective time without regard to
any materiality, material adverse effect or knowledge qualifications
contained therein, except (1) for changes contemplated by the merger
agreement, (2) to the extent such representations and warranties speak
as of an earlier date and (3) where the failures to be true and
correct without regard to any materiality, material adverse effect or
knowledge qualifications contained therein individually or in the
aggregate have not had and are not reasonably likely to have a
material adverse effect on the business, properties, financial
condition, results of operations or prospects
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of Vivid and its subsidiaries, taken as a whole, or a material adverse
effect on the ability of Vivid to consummate the transactions
contemplated by the merger agreement;
- Vivid performs or complies in all material respects with all obligations
required to be performed or complied with under the merger agreement at
or prior to the effective time of the merger;
- Vivid obtains all material third party consents;
- PerkinElmer receives a certificate executed on behalf of Vivid making
representations as required by the merger agreement; and
- PerkinElmer receives an opinion from its counsel (or Vivid's counsel if
its counsel does not provide such an opinion) to the effect the merger is
a reorganization for federal income tax purposes under Section 368(a) of
the Internal Revenue Code.
In addition, the obligation of Vivid to effect the merger is subject to the
satisfaction of the following conditions:
- the representations and warranties of PerkinElmer and Venice Acquisition
Corp. in the merger agreement:
- that are qualified as to materiality or material adverse effect must
be true and correct in all respects as of the date of the merger
agreement,
- that are not qualified as to materiality or material adverse effect
must be true and correct in all material respects as of the date of
the merger agreement, and
- must be true and correct as of the effective time without regard to
any materiality, material adverse effect or knowledge qualifications
contained therein, except (1) for changes contemplated by the merger
agreement, (2) to the extent such representations and warranties speak
as of an earlier date and (3) where the failures to be true and
correct without regard to any materiality, material adverse effect or
knowledge qualifications contained therein individually or in the
aggregate have not had and are not reasonably likely to have a
material adverse effect on the business, properties, financial
condition, results of operations or prospects of PerkinElmer and its
subsidiaries, taken as a whole, or a material adverse effect on the
ability of PerkinElmer to consummate the transactions contemplated by
the merger agreement;
- PerkinElmer and Venice Acquisition Corp. perform in all material respects
with all obligations required to be performed by them under the merger
agreement at or prior to the effective time of the merger;
- Vivid receives a certificate executed on behalf of PerkinElmer making
representations as required by the merger agreement; and
- Vivid receives an opinion from its counsel (or from PerkinElmer's counsel
if its counsel does not provide such an opinion) to the effect that the
merger is a reorganization for federal income tax purposes under Section
368(a) of the Internal Revenue Code.
TERMINATION; FEES AND EXPENSES
TERMINATION
The merger agreement may be terminated in the following ways at any time
prior to the effective time of the merger:
- by mutual written consent of PerkinElmer and Vivid;
- by either PerkinElmer or Vivid if the merger has not closed by April 30,
2000, except that the right to terminate the merger agreement under this
provision is not available to any party whose failure to fulfill any
obligation under the merger agreement has been a principal cause or
resulted in the failure of the merger to occur on or before such date;
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- by either PerkinElmer or Vivid if a governmental entity has issued a
final order, decree or ruling which cannot be appealed or taken any other
final action that permanently restrains, enjoins or otherwise prohibits
the merger;
- by PerkinElmer or Vivid if at the Vivid special meeting, including any
adjournment or postponement, Vivid does not obtain the requisite vote of
the stockholders of Vivid in favor of the merger agreement and the
merger, except that the right to terminate the merger agreement is not
available to any party if the failure to obtain stockholder approval was
caused by a breach of the merger agreement by that party;
- by PerkinElmer, if
- Vivid's board withdraws or modifies its recommendation to Vivid's
stockholders to vote in favor of the merger agreement or the merger;
- Vivid receives an alternative proposal and PerkinElmer requests that
Vivid's board reconfirm its recommendation to Vivid's stockholders to
vote in favor of the merger agreement or the merger and Vivid's board
fails to do so within five business days after its receipt of
PerkinElmer's request or, in the case of a tender or exchange offer,
within 10 business days after receipt of PerkinElmer's request;
- Vivid's board recommends that the stockholders of Vivid enter into an
agreement with a third party to acquire a significant portion of
Vivid, including 20% of the outstanding shares of Vivid common stock
or 20% of its assets;
- a third party other than PerkinElmer or an affiliate of PerkinElmer
commences a tender offer or exchange offer for 20% or more of the
outstanding shares of Vivid common stock and the Vivid board
recommends that the stockholders of Vivid tender their shares in such
tender or exchange offer or, within 10 business days after such tender
or exchange offer, fails to recommend that the stockholders of Vivid
do not tender their shares in such tender or exchange offer or takes
no position with respect to the acceptance of the offer; or
- Vivid fails to call or hold the special meeting by April 30, 2000,
unless primarily due to acts or omissions of the Securities and
Exchange Commission or PerkinElmer;
- by PerkinElmer or Vivid, if there has been a breach of any
representation, warranty, covenant or agreement by the other party which
would prevent the closing conditions from being satisfied and the breach
is not cured within 10 days after the breaching party receives a written
notice of the breach;
- by PerkinElmer if it has incurred more than an aggregate of $500,000 in
out-of-pocket expenses seeking to obtain approval of the merger under the
antitrust laws;
- by Vivid if the market value of PerkinElmer common stock is less than
$30.99 per share unless PerkinElmer, within two days after receipt of
written notice of Vivid's decision to terminate, elects to adjust the
exchange ratio so that the stockholders of Vivid will receive PerkinElmer
common stock with a market value of $5.00 in exchange for each share of
Vivid common stock; or
- by PerkinElmer if the market value of PerkinElmer common stock is greater
than $46.49 per share unless Vivid, within two days after receipt of
written notice of PerkinElmer's decision to terminate, elects to adjust
the exchange ratio so that the stockholders of Vivid will receive
PerkinElmer common stock with a market value of $7.50 in exchange for
each share of Vivid common stock.
If either PerkinElmer or Vivid terminates the merger agreement pursuant to
any of the reasons listed above, all obligations of the parties under the merger
agreement will terminate (with certain exceptions) and there will be no
liability, except for any liability for willful breaches of the merger
agreement, on the part of PerkinElmer, Vivid, Venice Acquisition Corp. or their
respective officers, directors, stockholders or affiliates.
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EXPENSES
Except as set forth below, PerkinElmer and Vivid will bear their own
expenses incurred in connection with the merger, other than the
Hart-Scott-Rodino Act (HSR) filing fee which will be paid by PerkinElmer and
expenses incurred with respect to the printing and filing of this proxy
statement/ prospectus and the registration statement, which PerkinElmer and
Vivid will share equally (excluding attorneys' fees).
In addition to any termination fee described below, Vivid has agreed to pay
up to a maximum of $500,000 to PerkinElmer for its fees and expenses paid in
connection with the merger if PerkinElmer terminates the merger agreement
because:
- Vivid receives an alternative proposal and PerkinElmer requests that the
Vivid board reconfirm its recommendation to the Vivid stockholders to
vote in favor of the merger agreement or the merger and the Vivid board
fails to do so within five business days after its receipt of
PerkinElmer's request or, in the case of a tender or exchange offer,
within 10 business days after receipt of PerkinElmer's request;
- Vivid's Board withdraws or modifies its recommendation to the Vivid
stockholders to vote in favor of the merger agreement and the merger;
- Vivid's board recommends that Vivid's stockholders enter into an
alternative transaction;
- a third party other than PerkinElmer or an affiliate of PerkinElmer
commences a tender or exchange offer for 20% or more of the outstanding
shares of Vivid common stock and Vivid's board recommends that Vivid's
stockholders tender their shares in such tender or exchange offer or,
within 10 business days after such tender or exchange offer, fails to
recommend that Vivid's stockholders do not tender their shares in such
tender or exchange offer or takes no position with respect to the
acceptance of the offer;
- Vivid fails to call or hold the special meeting by April 30, 2000, unless
primarily due to acts or omissions of the Securities and Exchange
Commission or PerkinElmer;
- the merger has not been completed by April 30, 2000 because Vivid cannot
represent as of the closing that its representations and warranties are
true;
- there has been a material breach of any representation, warranty or
covenant or agreement by Vivid that is not cured within 10 days following
receipt of notice of such breach from PerkinElmer; or
- Vivid fails to obtain the requisite vote of its stockholders to approve
the merger agreement, unless such failure was caused by a breach of the
merger agreement by PerkinElmer.
Vivid has also agreed to pay up to a maximum of $700,000 to PerkinElmer for
its fees and expenses paid in connection with the merger if Vivid terminates the
merger agreement because the market value of PerkinElmer common stock is less
than $30.99 per share (unless PerkinElmer, within two days after receipt of
written notice of Vivid's decision to terminate, elects to adjust the exchange
ratio so that the stockholders of Vivid will receive PerkinElmer common stock
with a market value of $5.00 in exchange for each share of Vivid common stock).
PerkinElmer agrees to pay up to a maximum of $500,000 to Vivid for its fees
and expenses paid in connection with the merger if Vivid terminates the merger
agreement because:
- the merger has not been completed by April 30, 2000 because PerkinElmer
cannot represent as of the closing that its representations and
warranties are true; or
- of a material breach of any representation, warranty or covenant or
agreement by PerkinElmer that was not cured within 10 days following
receipt of notice of such breach from Vivid.
PerkinElmer also agrees to pay up to a maximum of $700,000 to Vivid for its
fees and expenses paid in connection with the merger if PerkinElmer terminates
the merger agreement because the market value
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of PerkinElmer common stock is greater than $46.49 per share (unless Vivid,
within two days after receipt of written notice of PerkinElmer's decision to
terminate, elects to adjust the exchange ratio so that the stockholders of Vivid
will receive PerkinElmer common stock with a market value of $7.50 in exchange
for each share of Vivid common stock).
TERMINATION FEE
Vivid has agreed to pay PerkinElmer a $2,500,000 termination fee inclusive
of PerkinElmer's expenses if PerkinElmer terminates the merger agreement
because:
- Vivid's board withdraws or modifies its recommendation to Vivid's
stockholders to vote in favor of the merger agreement and the merger;
- Vivid receives an alternative proposal and PerkinElmer requests that
Vivid's board reconfirm its recommendation to Vivid's stockholders to
vote in favor of the merger agreement and the merger and Vivid's board
fails to do so within five business days after its receipt of
PerkinElmer's request or, in the case of a tender or exchange offer,
within 10 business days after receipt of PerkinElmer's request;
- Vivid's board recommends that Vivid's stockholders enter into an
agreement with a third party to acquire a significant portion of Vivid,
including 20% of the outstanding shares of Vivid common stock or 20% of
its assets;
- a third party other than PerkinElmer or an affiliate of PerkinElmer
commences a tender or exchange offer for 20% or more of the outstanding
shares of Vivid common stock and Vivid's board recommends that Vivid's
stockholders tender their shares in such tender or exchange offer or
within 10 business days after such tender or exchange offer fails to
recommend that Vivid's stockholders do not tender their shares in such
tender or exchange offer or takes no position with respect to the
acceptance of the offer;
- Vivid fails to call or hold the special meeting by April 30, 2000, unless
primarily due to acts or omissions of the Securities and Exchange
Commission or PerkinElmer;
- of a willful breach of any representation, warranty or covenant or
agreement by Vivid if, before such termination or within 12 months
thereafter, Vivid enters into an agreement to engage in or shall have
engaged in an alternative transaction; or
- Vivid fails to obtain the requisite vote of its stockholders to approve
the merger agreement if, at the time of such failure, there shall have
been announced and not unconditionally withdrawn an alternative
transaction relating to Vivid and within 12 months Vivid enters into an
agreement to engage in or shall have engaged in an alternative
transaction.
If applicable, any expenses and fees payable as described above shall be
paid within two business days after demand therefor.
DIRECTOR AND OFFICER INDEMNIFICATION
The merger agreement provides that after the merger, PerkinElmer and the
surviving corporation will defend, indemnify and hold harmless each present and
former director or officer of Vivid against all costs or expenses, including
attorneys' fees, judgments, fines, losses, claims, damages, liabilities or
amounts paid in settlement incurred in connection with or pertaining to any
matter existing or occurring at or prior to the merger to the fullest extent
that Vivid would have been permitted under applicable law, its certificate of
incorporation or bylaws. PerkinElmer and the surviving corporation are also
obligated to advance expenses as incurred to the fullest extent permitted under
applicable law so long as the person who receives the advance agrees to repay
the advances if it is ultimately determined that person is not entitled to
indemnification.
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The merger agreement also provides that for a period of six years after the
merger, PerkinElmer will cause the surviving corporation to maintain in effect,
to the extent available in the market, a directors' and officer's liability
insurance policy covering those persons who are currently covered by Vivid's
directors' and officers' liability insurance policy with respect to actions
taken in their capacities as directors and officers of Vivid. The new policy
will be substantially identical in scope and coverage to Vivid's existing
coverage. PerkinElmer is not required to spend more than 175% of the annual
premium paid by Vivid as of the date of the merger agreement for this coverage.
AMENDMENT
Generally, the boards of directors of PerkinElmer and Vivid may amend the
merger agreement by mutual agreement at any time prior to the completion of the
merger. However, after Vivid's stockholders approve the merger, any amendment
will be restricted by the Delaware corporation statute. Amendments must be in
writing and signed by all parties.
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OTHER AGREEMENTS
STOCK OPTION AGREEMENT
In connection with the merger agreement, PerkinElmer and Vivid entered into
a stock option agreement, dated as of October 4, 1999. The stock option
agreement grants PerkinElmer the right to purchase up to 2,000,012 shares of
Vivid common stock, constituting approximately 19.9% of Vivid's outstanding
common stock, at a price of $6.25 per share, subject to adjustment. The option
becomes exercisable only if Vivid receives a proposal for an alternative
transaction before the date the merger agreement is terminated and only after
one or more of the following has occurred:
- Vivid's board fails to recommend that Vivid's stockholders approve and
adopt the merger agreement and the merger;
- Vivid's board recommends that Vivid's stockholders tender their shares in
a tender or exchange offer commenced by a third party for more than 20%
of the outstanding shares of Vivid or within 10 days after such tender or
exchange offer fails to recommend against it;
- Vivid's board has approved or recommended an alternative transaction to
the stockholders of Vivid;
- Vivid did not receive approval of its stockholders in favor of the merger
agreement and the merger; and
- Vivid fails to call or hold the special meeting by April 30, 2000, unless
primarily due to acts or omissions of the Securities and Exchange
Commission or PerkinElmer.
Once the option is exercisable, PerkinElmer may exercise its option in whole or
in part, on one or more occasions, until its termination.
STOCKHOLDER AGREEMENT
As an inducement to PerkinElmer to enter into the merger agreement, some of
Vivid's stockholders, who beneficially own an aggregate of 1,319,000 shares of
Vivid common stock, entered into a stockholder agreement with PerkinElmer and
its wholly-owned subsidiary, Venice Acquisition Corp., dated as of October 4,
1999, irrevocably appointing Venice Acquisition Corp. as the stockholders'
lawful attorney and proxy to vote in all matters relating to the merger
agreement and the merger. The stockholders retain the right to vote their shares
on all other matters.
The proxy gives Venice Acquisition Corp., or any nominee of Venice
Acquisition Corp., the limited right to vote each of the 1,319,000 shares of
Vivid common stock as lawful attorney and proxy, at every Vivid stockholders
meeting and every written consent in lieu of such meeting, in favor of approval
of the merger and the merger agreement. The stockholder agreement terminates
upon the earlier of the merger becoming effective in accordance with the terms
and provisions of the merger agreement, 181 days after the termination of the
merger agreement and the date the stock option agreement between PerkinElmer and
Vivid is terminated under certain circumstances.
In addition, these Vivid's stockholders granted Venice Acquisition Corp.
the right to purchase all shares of Vivid common stock currently owned by them
and any additional shares of Vivid common stock they may acquire prior to the
completion of the merger at a purchase price of $6.25 per share, subject to
adjustment. The option may be exercised, in whole or in part, on one or more
occasions after the date the merger agreement is terminated and prior to the
180th day of the merger agreement termination date, if prior to the termination
of the stockholder agreement this option has not been terminated and Vivid
enters into an agreement for an alternative transaction.
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DESCRIPTION OF VIVID
BUSINESS
Vivid is a leading developer, manufacturer and marketer of inspection
systems that detect plastic and other explosives in airline baggage, hand
baggage and parcels. Vivid's family of explosives detection systems identify
suspect material by analyzing the physical characteristics of each item in a bag
or parcel using patented software and proprietary x-ray technology. Vivid's
systems can also be used to identify a wide variety of other substances,
including drugs, currency and agricultural products.
Vivid has sold systems for use in airports and high-security facilities
throughout Europe, the Asia-Pacific region, the Middle East and North America.
Examples of the airports using Vivid's systems are JFK International Airport in
New York, London Heathrow and London Gatwick, Paris Charles de Gaulle and Paris
Orly, Hong Kong International Airport at Chek Lap Kok, Malaysia's Kuala Lumpur
International Airport, Malpensa Airport in Milan, King Khalid International
Airport in Riyadh, Amsterdam Airport Schipol, the New Athens International
Airport, Manchester Airport in the United Kingdom and Zurich Airport.
Vivid was incorporated as a Massachusetts corporation in May 1989 under the
name QDR Security, Inc. QDR Security, Inc. changed its name to Vivitech, Inc. in
June 1989 and then to Vivid Technologies, Inc. in September 1989. In October
1996, Vivid reincorporated in the State of Delaware.
BACKGROUND
Checked Baggage Explosives Detection. During the 1970s and 1980s, in
response to hijackings and bombings, airports, governmental agencies and private
companies worldwide began to install x-ray systems to screen carry-on and
checked baggage. In the late 1980s, many countries began to install systems that
could detect plastic and other explosives in airline baggage.
Europe, led by the United Kingdom, has been at the forefront of deploying
explosives detection equipment. The United Kingdom's commercial airports have
substantially achieved 100% screening of international checked baggage in
response to a mandate from the United Kingdom Department of the Environment,
Transport and the Regions. The European Civil Aviation Conference, an
organization of 37 member states, has resolved to implement 100% screening of
international checked baggage by the end of 2002, an extension from its prior
target date of 2000.
The United Kingdom and Europe have generally adopted a multi-level checked
baggage screening approach that integrates the explosives detection equipment
directly into the airport baggage handling systems. Airports in Europe and
elsewhere deploying explosives detection equipment, including smaller airports,
have implemented freestanding systems in addition to or as an alternative to
integrated systems.
There are three levels of screening under the integrated approach:
- Level 1 inspection equipment is integrated into the existing airport
checked baggage handling system to screen rapidly all baggage on a
conveyor line. These inspection systems are often required to inspect
baggage during peak periods at the rate of 900 to 1,500 bags per hour, or
2.4 to 4.0 seconds per bag, in order to avoid delays in the baggage
handling process. No operator is used to review x-ray images of the
contents of a bag at this level. Bags determined to be suspect by the
Level 1 system are rejected and subjected to Level 2 inspection.
- In Level 2 inspection, x-ray images of the contents of bags rejected at
Level 1 are reviewed by an operator. Level 2 inspection systems are often
required to process baggage at the rate of 180 to 360 bags per hour, or
10 to 20 seconds per bag, typically as the suspect bag continues to
travel along a conveyor line. If the operator continues to believe that
the bag is suspect, the bag is forwarded for Level 3 inspection.
- In Level 3 inspection, bags are subjected to close operator scrutiny.
Level 3 systems can be slower to accommodate the greater precision
required for the operator to fully inspect the bag in order to
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avoid the undesirable and expensive final inspection process, which
requires the bag to be inspected by hand in the presence of the
passenger.
Under the Aviation Security Improvement Act of 1990, the FAA was directed
to develop a standard for explosives detection systems and to certify equipment
that meet this standard under realistic airport operating conditions. As a
result of the stringent requirements adopted by the FAA, only two systems have
been certified by the FAA. These systems do not meet the through-put
requirements for 100% screening of checked baggage similar to that being adopted
in Europe and the Asia/Pacific region. As a result, there has been only limited
use of explosives detection systems for checked baggage in the United States.
In the Asia/Pacific region, two major new airports in Malaysia and Hong
Kong purchased integrated systems and commenced operations in 1998 with 100%
checked baggage screening in place. Other countries in the region are also
planning to implement these systems at existing airports.
Several advanced explosives detection systems have been developed for
checked baggage screening, each with its own inherent advantages and
limitations. These systems include dual energy x-ray, trace detection and CT
systems. Dual energy x-ray systems measure the x-ray absorption properties of a
bag's contents at two different x-ray energies to determine if any of the items
have the physical characteristics of explosive materials. Trace detection
equipment, known as "sniffers," detects particulate and chemical traces of
explosive materials, collected by manually wiping or vacuuming the bag under
inspection. CT systems use hundreds of partial x-ray images, referred to as
slices, to analyze the contents of a bag.
Handbag Explosives Detection. There are currently no requirements for the
use of explosives detection systems to screen airplane carry-on items. However,
as the global implementation of hand baggage systems continues, Vivid believes
regulators will shift their focus to the detection of explosives in carry-on
items. Selected airports have recently begun to purchase explosives detection
equipment for carry-on items. Similarly, a number of governmental agencies and
private sector organizations in the United States and abroad are interested in
using advanced explosives detection equipment to enhance facility security.
Recent terrorist attacks, including the August 1998 bombings of two United
States embassies in Africa, have spurred the requests for additional funding to
upgrade security at domestic and international facilities. These upgrades may
include the purchase of handbag explosives detection systems.
PRODUCTS
Vivid develops, manufactures and markets a family of systems that can
detect explosives and other contraband in airline baggage and other parcels.
Vivid's product line includes Level 1 and Level 2 integrated explosives
detection systems for checked baggage, freestanding explosives detection systems
for Level 3, terminal and baggage hall inspection of checked baggage, and an
explosives detection system for carry-on baggage, hand baggage and parcels.
Vivid's systems use dual energy x-ray technology. These systems generate
x-ray beams at two different energy levels which pass through the inspected bag
and its contents. A portion of the beam is absorbed or scattered. The beam that
passes through the bag without being absorbed or scattered is referred to as the
transmitted beam. The transmitted beam contains information regarding the x-ray
absorption properties of the objects within the bag at each of the two levels of
energy. This information can be used to analyze the physical characteristics of
the objects within the bag. The transmitted beam also contains information that
can be used to make high quality images of the contents of a bag.
Product Features
The following is a description of some of the features of Vivid's checked
baggage explosives detection systems:
- Proprietary Quality Power Supply. Each of Vivid's checked baggage
explosives detection systems uses a proprietary power supply that
generates alternating high and low x-ray energy pulses at film safe
levels of exposure. The power supply is driven by an x-ray controller
that maintains a stable, repeatable fan-shaped x-ray beam.
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- High Resolution Detector. Vivid's checked baggage explosives detection
systems incorporate a high resolution detector array that collects data
from the transmitted x-ray beam consisting of more than one million
pixels of information per bag.
- Composition Analysis Technology. The detection systems use Vivid's
patented software to identify and separate the individual objects within
a bag, including objects between other items or within a container. These
programs also analyze the physical characteristics of each of those
objects to determine whether they match those of a targeted item, such as
explosives or other contraband. Additional programs detect materials such
as lead that could be used to shield an explosive device from this
analysis.
- Scatter Detection Enhancement Technology. Vivid has developed
proprietary scatter detection enhancement technology to increase its
systems' ability to detect configurations that are not readily detected
by x-ray absorption analysis techniques. Vivid's scatter detection
enhancement technology, which includes a combination of additional
detectors and software, measures and analyzes the x-rays that are
scattered by a bag. If the scatter levels indicate the possible presence
of a suspect material, the affected area is further analyzed to determine
if a threat is present. Vivid has incorporated scatter detection
enhancement technology in most of its checked baggage inspection
products, either as an option or a standard feature. Vivid also offers
this technology as an upgrade for existing systems.
- Computer-Generated Decisions Regarding the Contents of Baggage. Vivid's
composition and scatter detection analysis techniques result in a
computer-generated decision regarding the contents of the baggage
screened. Any bag that is determined to contain a suspect object will
cause the system to reject the bag. In the case of an operator-attended
system, such as a Level 2 or Level 3 system, an image of the rejected bag
is presented to an operator for detailed inspection. The bag image is
presented in high-resolution gray scale, with the suspect object
highlighted in color. The system can be programmed to sound an alarm, as
well as require the operator to acknowledge the alarm by pressing a
button to either reject or clear the bag.
- Integration with Airport Baggage Handling Systems. Vivid has integrated
its products into a wide range of airport baggage handling systems. These
products make use of control software developed by Vivid to facilitate
communication between the explosives detection system and the airport
baggage handling system. If no suspect object is detected by the system,
a "clear" status is sent to the baggage handling system, allowing the bag
to continue directly to the aircraft. If a suspect object is detected, a
"reject" message is sent to the baggage handling system, requiring the
next level of inspection.
Vivid's explosives detection systems are offered in a variety of
configurations depending on the application or installation requirements. The
following describes Vivid's primary product offerings:
Product Models
Integrated Checked Baggage Inspection Systems. These systems are designed
to be integrated into an airport's checked baggage handling equipment.
- VIS-M. The VIS-M is a single system alternative to separate Level 1 and
Level 2 systems. This model allows several x-ray system mainframes to be
interconnected with multiple remote Level 2 operator workstations. The
x-ray system mainframes transmit images of rejected bags to the Level 2
workstations for operator inspection. During off-peak periods,
workstations can be switched off, which reduces staffing requirements and
operating costs. The efficiency gained by the additional workstations
combined with enhanced baggage control software allows an operator to
review images of the contents of a bag while the bag continues to the
aircraft. This process eliminates the need and associated costs of a
secondary conveyor system to hold the bags while Level 2 inspection is
taking place.
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- MVT. The MVT is Vivid's most recently introduced system for integrated
screening of checked baggage. This system gathers significantly more data
than the VIS-M, by obtaining three different views of each bag. This
multi-view technique is designed to provide better measurements of the
physical characteristics of each item inside a bag. The system also
incorporates the multiple workstation capability of the VIS-M. Vivid is
working with the FAA to further enhance the MVT to obtain FAA
certification.
Freestanding Checked Baggage Inspection Systems. These systems are
intended to be installed in an airport terminal, such as in front of airline
check-in counters or in a baggage handling hall.
- H-1. The H-1 is an operator-attended system that inspects bags in the
upright position, as they tend to be carried by a passenger.
- VDS-II. The VDS-II is an operator-attended system that is designed to
serve as either a stand-alone or Level 3 inspection system. When used for
Level 2 inspection, the VDS-II can be integrated into an airport's
baggage handling system. The VDS-II combines Vivid's scatter detection
enhancement technology with a high-resolution image to enhance detection
capability. Vivid also offers a version of the VDS-II system to handle
oversized baggage.
Handbag Inspection System; APS. Vivid offers its APS system to inspect
carry-on baggage, hand baggage and parcels, for explosives or contraband
material. The APS system is similar in configuration to conventional x-ray
systems used to screen for concealed weapons. While an operator is required to
inspect each bag for weapons, the APS automatically alerts the operator to the
presence of suspect explosive materials. The APS system incorporates an advanced
proprietary operator interface that allows the operator to view the contents of
a bag using various imaging modes and magnifications to determine whether the
bag should be cleared or rejected for further inspection. The United States
General Services Administration has approved Vivid's APS systems for building
protection.
Other Products and Applications
Vivid is exploring opportunities with various governmental authorities and
agencies in the United States and internationally to use its equipment for the
detection of illicit drugs, the illegal export of currency and detection of
agricultural products.
MARKETING AND SALES
Vivid sells and markets its products through its direct sales force as well
as independent sales representatives and distributors. As of September 30, 1999,
Vivid had a 12 person marketing and sales staff. Two members of this staff are
located in the United Kingdom and one in Switzerland. Vivid also has a director
of business development for the United States based in New Jersey with a primary
focus on the non-aviation applications for Vivid's systems. The remainder of the
marketing and sales staff is headquartered at Vivid's offices in Woburn,
Massachusetts. The selling process for Vivid's products often involves a team
comprised of individuals from sales and marketing, engineering, operations and
senior management.
In the United States, Vivid works actively with the FAA, other government
agencies, airlines, airport operators and congressional committees to promote
its products for deployment in United States airports. Vivid believes that its
sales of checked baggage systems in the United States will be limited until it
is able to obtain FAA certification for a system. Vivid also works with United
States and foreign governmental agencies to promote its products for
non-aviation applications. Vivid markets its products through participation in
trade shows, publication of articles and advertising in trade journals,
participation in industry forums and standard setting organizations, and
distribution of sales literature. Vivid benefits from customer referrals and the
use of certain customer installations as demonstration sites for its systems.
In 1997, Vivid entered into an arrangement with Gilardoni S.p.A, an
Italian-based manufacturer of x-ray equipment, for the manufacture and sale of
the APS carry-on baggage explosives detection system. Under this arrangement,
Vivid has the exclusive right to manufacture and sell this system in the United
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States, the United Kingdom, other designated European countries and Mexico.
Vivid has agreed not to sell any competitive x-ray-based system within its
territory unless manufactured by Gilardoni or Vivid.
International sales account for a large percentage of Vivid's revenues.
International sales accounted for 78% of Vivid's revenues in fiscal 1998 and 73%
of Vivid's revenues in fiscal 1999. See Note 6 to Vivid's consolidated financial
statements.
In fiscal 1999, Vivid's sales to a United States government agency
accounted for 16% of revenues, sales to Manchester Airport, UK accounted for 16%
of revenues, sales to Hochtief AG (the New Athens International Airport)
accounted for 11% of revenues and sales to the BAA accounted for 13% of
revenues. In fiscal 1998, Vivid's sales to the BAA accounted for 42% of
revenues, sales to Airport Authority Hong Kong accounted for 12% of revenues and
sales to the FAA, including research and development funding, accounted for 16%
of revenues.
CUSTOMER SERVICE SUPPORT
Vivid provides customer support to assist in the installation and
integration of Vivid's products into its customers' facilities. Vivid offers a
number of customer support services, including applications, support, training,
systems preventative and corrective maintenance, and upgrades. Vivid generally
provides one-year parts warranty and offers primary and back-up service
contracts to its customers. As of September 30, 1999, Vivid's customer support
staff currently includes six support engineers at its headquarters in
Massachusetts, one support engineer in New York, nine support engineers
operating out of Vivid's offices in the United Kingdom and one support engineer
in the Asia-Pacific region.
REGULATION
The explosives detection systems manufactured and marketed by Vivid for use
in airports are subject to regulation by the FAA, corresponding foreign
governmental authorities and the United Nations International Civil Aviation
Organization, an organization that establishes standard practices for the
aviation industry on a worldwide basis. Sales of Vivid's explosives detection
systems for use in airports have been and will continue to be dependent upon
governmental initiatives to require or support the screening of baggage with
advanced explosives detection systems.
RESEARCH AND DEVELOPMENT
Vivid's research and development efforts are focused on developing new
products for the explosives and contraband detection system market and further
enhancing the functionality, reliability and performance of its existing product
line. Vivid's research and development personnel are involved in establishing
protocols, monitoring and interpreting and submitting test data to the FAA and
other domestic and foreign regulatory agencies to obtain the requisite
certifications, clearances and approvals for its products. During fiscal 1999,
Vivid focused its research and development personnel on the enhancement of its
products, particularly efforts to enhance its recently introduced MVT system,
with a goal of obtaining FAA certification of that system.
At September 30, 1999, Vivid had 42 employees engaged in research and
development and engineering. Vivid's research and development expenses were
approximately $4.4 million in fiscal 1997, $5.9 million in fiscal 1998 and $6.3
million in fiscal 1999. In addition, during each of these periods, a portion of
Vivid's research and development expenses related to work performed under
Vivid's FAA research and development grants were included under costs of goods
sold.
INTELLECTUAL PROPERTY
Vivid relies upon a combination of patent, copyright, trademark and trade
secret laws, non-disclosure agreements and other contractual provisions to
establish and maintain and protect its proprietary technology. Due to the rapid
technological change that characterizes the explosives detection system
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industry, Vivid believes that to maintain a competitive advantage it must
continue to improve existing technology, rely upon trade secrets and unpatented
proprietary know-how and develop new products.
Vivid has obtained seven patents and has pending two patent applications in
the United States. In addition, Vivid has pending patent applications in foreign
countries that correspond to the subject matter of several of its United States
patents and patent applications. Vivid's patents have expiration dates ranging
from 2011 to 2015.
Vivid has an exclusive perpetual license to use patents and technology
developed by Hologic, Inc. for the development, manufacture and sale of x-ray
screening security systems for explosives, drugs, currency and other contraband.
Vivid also has a nonexclusive license to use this technology for the
development, manufacture and sale of x-ray-based products for process control
applications in the food and beverage industries. Hologic and Vivid have also
granted to the other a non-exclusive, royalty-free license to use any unpatented
technology developed by the other in connection with research and development
activities. In addition, Hologic and Vivid have the right to obtain from the
other an exclusive license, on commercially reasonable terms to be negotiated,
for any patented new developments. Vivid and Hologic have agreed that upon
completion of the proposed merger with PerkinElmer, these arrangements will
terminate, other than Vivid's exclusive license to Hologic's existing patents
and technology for the development, manufacture and sale of x-ray screening
security systems for explosives, drugs, currency and other contraband.
In 1996, Vivid and PerkinElmer settled a patent infringement dispute. As
part of the settlement, Vivid and PerkinElmer granted each other broad rights to
use each other's then existing x-ray technology for an unlimited period of time.
COMPETITION
The markets for Vivid's products are highly competitive. Some of Vivid's
competitors have substantially greater manufacturing, marketing and financial
resources than Vivid. Competitors may develop superior products or products of
similar quality for sale at the same or lower prices. In addition, Vivid's
products may be rendered obsolete by new industry standards or changing
technology.
While several of Vivid's competitors currently market checked baggage
explosives detection products that use dual energy X-ray technology, Vivid
believes that it is able to compete favorably with these products based upon the
overall cost effectiveness of Vivid's systems as measured by a combination of
factors including effective explosives detection, throughput, low cost of
operation, installation and integration, price, reliability, and their proven
operation in a variety of airports.
Vivid's systems also compete with systems employing other technologies
including CT scanner technology and trace detection technology. A product based
upon CT scanner technology currently detects a wider range of explosives than
does Vivid's systems. In 1994, the FAA first certified this CT-based system and
a new model was certified in April 1998. In November 1998, the FAA certified a
new CT-based system developed by another company. This certification does not
apply to the commercial production model of this system, which Vivid believes is
still under development. CT systems operate at a significantly lower throughput
rate and significantly higher expense than Vivid's systems. None of Vivid's
products have been certified by the FAA. Products based upon trace detection
technology have lower throughput rates than those based on dual energy x-ray or
CT technology and generally have been installed as Level 3 or stand-alone
systems.
Vivid's APS system is intended to detect explosives in carry-on bags and
personal effects at airports and other high-security installations. This system
competes with conventional x-ray systems, which are lower in price, as well as
advanced explosives detection systems adapted by Vivid's competitors for this
use. Some of these newer systems are less expensive than the APS. The APS system
competes on the basis of detection capabilities, ease of use, price, expense of
operation and reliability.
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MANUFACTURING
Vivid's manufacturing operations consist primarily of assembly, test and
quality control. Vivid has adopted quality assurance procedures that include
standard design practices, component selection procedures, vendor control
procedures, and comprehensive reliability testing and analysis. As a result of
these efforts, Vivid has received ISO 9001 certification.
Vivid purchases a major portion of the parts and peripheral components for
its products. Most parts and materials are readily available from several supply
sources.
In 1997, Vivid entered into an agreement with Gilardoni S.p.A., which
requires Vivid to purchase two key components for its APS system from Gilardoni.
Vivid has experienced delays and other difficulties in obtaining these
components from Gilardoni.
BACKLOG
Backlog for Vivid's products totaled approximately $4.0 million as of
September 30, 1998 and September 30, 1999. Backlog consists of purchase orders
for a customer which has scheduled delivery within the next twelve months. In
some circumstances, orders included in backlog may be canceled or rescheduled by
customers without significant penalty. Backlog as of any particular date should
not be relied upon as indicative of Vivid's revenues for any future period.
EMPLOYEES
As of September 30, 1999, Vivid had approximately 108 full-time employees,
including 28 in manufacturing operations and quality assurance, 34 in research,
development and engineering, 31 in marketing, sales and customer support, and 15
in finance and administration and information systems. None of Vivid's employees
is represented by a union. Vivid considers its employee relations to be good.
PROPERTIES
Vivid leases its administrative headquarters and manufacturing facility
located in Woburn, Massachusetts. The facility consists of approximately 43,000
square feet, including 21,000 square feet dedicated to Vivid's manufacturing
operations. In July 1998, Vivid entered into a five-year lease agreement for
approximately 18,500 square feet of additional space in a building next to its
existing location in Woburn, Massachusetts. Vivid subleases approximately 10,000
square feet of this new facility to a third party. This sublease expires in
December 1999, at which time the entire facility will be available for use by
Vivid. Vivid has two offices in the United Kingdom, leasing approximately 1,000
square feet of space for sales and service. Vivid believes that its facilities
will be adequate for its needs for the foreseeable future and that suitable
additional space will be available at commercially reasonable prices as needed.
LEGAL PROCEEDINGS
In May 1996, Vivid commenced an action in the United States District Court
for the District of Massachusetts against American Science & Engineering seeking
a declaration that Vivid does not infringe American Science & Engineering
patents related to back scattered x-rays. American Science & Engineering filed a
counterclaim alleging that Vivid is infringing on one or more of eight American
Science & Engineering patents. In April 1997, the court dismissed American
Science & Engineering's counterclaim on summary judgment without granting leave
to file an amended counterclaim. In April 1998, American Science & Engineering
filed a motion in the Federal Court of Appeals for the First Circuit to appeal
this decision. The Court of Appeals heard oral arguments on this appeal in early
1999, but no decision has been announced.
In January 1999, Vivid filed suit in the Superior Court for the State of
California, County of San Diego, against InVision Technologies, Inc., Quantum
Magnetics, Inc., ESI International, Inc., and two private investigators whom
they had hired. The complaint alleges that the activities of InVision, Quantum
and their agents were designed to determine whether Vivid was in development of
quadrupole resonance
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technology and what kind of competitive threat Vivid posed to those companies.
Specifically, the complaint alleges that the acts of InVision and Quantum
constituted a misappropriation of trade secrets, indicated an attempt to induce
breaches of contracts of Vivid's employees, interfered with contractual
relations and constituted defamation. That lawsuit has been stayed by the state
court judge pending final outcome of a criminal investigation of a former
officer and director of Quantum who is also a former employee of Vivid. The
criminal investigation is ongoing.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with
"Risk Factors -- Risks Related to Vivid," "Description of Vivid -- Business,"
"Vivid's Selected Historical Consolidated Financial Information," Vivid's
Consolidated Financial Statements and the information described under the
caption "Risk Factors" above.
OVERVIEW
Vivid was founded in 1989 to develop, manufacture and market explosives
detection systems. Following its organization, Vivid undertook extensive
research and development, introducing its first free standing explosives
detection system in 1991, and its first integrated explosives detection systems
for Level 1 and Level 2 screening in 1993. Vivid commenced commercial shipments
of its integrated checked baggage explosives detection systems in January 1994.
As of September 30, 1999, Vivid had sold 294 checked baggage systems for use in
airports throughout Europe, the Asia/Pacific region, the Middle East, the United
States and Canada. Vivid has also developed a freestanding system, the APS
system, to screen hand baggage for explosives and weapons for use in airports
and protection of public, private, and government facilities. As of September
30, 1999, Vivid has sold 106 APS systems.
Vivid's sales are primarily to owners and operators of airports, including
foreign governments and regulatory authorities, and other government agencies
and departments that purchase non-aviation equipment. Vivid's revenues are
derived primarily from product sales. Vivid recognizes revenue from product
sales upon shipment to the customer, provided that no significant Vivid
obligations remain outstanding and collection of the related receivable is
deemed probable by management. Vivid accrues for anticipated warranty and
installation costs upon shipment. Vivid's revenues also include government
research and development grants and revenues from service, the sale of spare
parts and training, which have comprised less than 10% of revenues in the
periods presented. Vivid recognizes revenues under its development grants as
services are rendered. Vivid recognized development revenue from FAA grants of
$0.8 million in fiscal 1997, $2.7 million in fiscal 1998 and $1.2 million in
fiscal 1999.
Vivid's cost of revenues includes a royalty payable with respect to product
sales and other revenues derived from its license with Hologic. Under the terms
of this exclusive agreement, in January 1997 this royalty was reduced from 5% to
3% of revenues derived from the license upon Vivid reaching $50 million in
cumulative revenues subject to the exclusive license. Upon Vivid reaching $200
million of cumulative revenues subject to this exclusive license, the royalty
will be eliminated entirely. As of September 30, 1999, Vivid had reached
approximately $124 million in cumulative revenues. If the contemplated merger
with PerkinElmer is completed, Vivid has agreed to pay Hologic $2.0 million plus
all royalties accrued through September 30, 1999 for a fully paid-up license to
the Hologic technology.
A relatively few customers have accounted for a substantial portion of
Vivid's revenues.
- In fiscal 1999, Vivid's sales to a United States government agency
accounted for 16% of revenues, sales to Manchester Airport UK accounted
for 16% of revenues, sales to Hochtief AG (the New Athens International
Airport) accounted for 11% of revenues, and sales to the BAA accounted
for 13% of revenues.
- In fiscal 1998, Vivid's sales to the BAA accounted for 42% of revenues,
sales to Airport Authority Hong Kong accounted for 12% of revenues and
sales to the FAA, including research and development funding, accounted
for 16% of revenues.
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- In fiscal 1997, Vivid's sales to the BAA accounted for 39% of revenues,
sales to Airport Authority Hong Kong accounted for 19% of revenues and
sales to Toy Kanetus K.K., the baggage handling contractor for Malaysia's
Kuala Lumpur International Airport, accounted for 27% of revenues.
Vivid expects that revenues from these customers will decrease and revenues will
become increasingly dependent upon sales of upgrades, replacement equipment and
services.
A majority of Vivid's revenues have been generated by sales to customers
outside the United States. Vivid's foreign sales have occurred principally in
the United Kingdom, other Western European countries, the Asia/Pacific region
and the Middle East. Foreign sales accounted for 97% of Vivid's revenues in
fiscal 1997, 78% in fiscal 1998 and 73% in fiscal 1999. Vivid expects
international sales to remain a significant component of its business.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1999 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1998
Revenues. Vivid's revenues in fiscal 1999 decreased 45% to $21.2 million
from $38.7 million in fiscal 1998. This decrease was attributable to both a
decrease in product sales and in development revenue from the FAA. Vivid
attributes the slowdown in product sales primarily to the extension by the
European Civil Aviation Conference from 2000 to 2002 for all member states to
implement 100% screening of international checked luggage, and the lingering
effects of the economic troubles in Asia. In addition, Vivid believes that it
will be difficult to complete significant sales of its checked baggage screening
systems in the United States until such time as Vivid has an FAA certified
system. During fiscal 1999, Vivid shipped 37 checked baggage systems and 76 APS
systems, compared to 80 checked baggage systems and 28 APS systems in fiscal
1998.
Gross Margin. Vivid's gross margin in fiscal 1999 decreased to 37%
compared to 58% in fiscal 1998. The decrease was primarily attributable to
significant fixed manufacturing labor and overhead costs applied to a lower
volume of shipments of Vivid's checked baggage products. Also impacting gross
margin was product mix of shipments for fiscal 1999 with the majority of sales
coming from the APS system which has a lower average margin than Vivid's checked
baggage system.
Research and Development Expenses. Vivid's research and development
expenses increased 8% to $6.3 million, or 30% of revenues, in fiscal 1999 from
$5.9 million, or 15% of revenues, for fiscal 1998. The overall increase in
research and development expenses for fiscal 1999 was primarily attributable to
the addition of engineering personnel and consultants working on the development
of new products, including the next generation system, and product feature
changes to the APS system. The increase was also due to the reduction in FAA
grants that offset costs in fiscal 1998. At the end of the second quarter of
fiscal 1999, Vivid implemented a restructuring plan, including a workforce
reduction, which reduced research and development expenses for fiscal 1999 by
approximately $0.7 million from fiscal 1998.
Selling and Marketing Expenses. Vivid's selling and marketing expenses
decreased 14% to $3.7 million, or 18% of revenues, in fiscal 1999 from $4.3
million, or 11% of revenues, in fiscal 1998. This decrease was primarily
attributable to the decrease in commissions, public relations costs, trade show
and travel related costs, and advertising costs, which was slightly offset by an
increase in consulting and personnel related costs.
General and Administrative Expenses. Vivid's general and administrative
expenses decreased 3% to $4.1 million, or 19% of revenues, in fiscal 1999 from
$4.2 million, or 11% of revenues, in fiscal 1998. The decrease was primarily
attributable to a decrease in personnel and related costs and license fees and
patent amortization charges in connection with Vivid's restructuring in the
second quarter of fiscal 1999, which were slightly offset by an increase in
legal and administrative fees.
Restructuring and Asset Write Down. In the second quarter of fiscal 1999,
Vivid implemented a restructuring that included the shut down of a development
facility and the abandonment of certain technology, resulting in a nonrecurring
charge of approximately $1.2 million. The restructuring included a
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$1.1 million write-off of unamortized license fees and fixed assets related to
an abandoned technology, $76,000 of lease termination and certain other
contractual termination costs and $52,000 of severance costs for terminated
research and development personnel. The total cash impact of the restructuring
amounted to approximately $128,000, of which $12,000 remained unpaid as of
September 30, 1999.
During the second quarter of fiscal 1999, Vivid also implemented a cost
cutting plan to reduce operating costs. The cost cutting plan included a 10%
workforce reduction, the cost of which has not been included in the
restructuring described above. The costs associated with the workforce reduction
were paid by March 31, 1999 and are included in Vivid's statements of operations
in cost of revenues, research and development, selling and marketing, and
general and administrative expenses.
Interest and Other Income. Vivid's net interest and other income decreased
to $1.0 million in fiscal 1999 from $1.5 million in fiscal 1998. The decrease
was primarily attributable to a decrease in interest income attributable to
lower average cash balances available for investments and a reduction in other
income including gains on foreign exchange.
Provision for Income Taxes. During fiscal 1999, Vivid recognized a tax
benefit of approximately $1.9 million based upon the use of net operating
losses. Vivid's effective tax rate was 30% in fiscal 1998, which is lower than
the statutory tax rates primarily due to the use of tax credits and the tax
benefits associated with Vivid's foreign sales corporation.
FISCAL YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1997
Revenues. Vivid's revenues increased by approximately 22% to $38.7 million
in fiscal 1998 from $31.7 million in fiscal 1997. This increase was primarily
attributable to an increase in product sales of checked baggage systems and the
newly introduced hand baggage system. The increase in product sales was
primarily attributable to the total number of product shipments to Europe, the
Middle East, and the United States, including installations at JFK Terminal One,
partially offset by slightly lower average selling prices of Vivid's products
and a change in product mix. During fiscal 1998, Vivid shipped and installed 80
checked baggage units and 28 hand baggage units compared to 76 checked baggage
units and two hand baggage units in fiscal 1997. In fiscal 1998, Vivid
recognized approximately $2.7 million of revenue under a FAA research grant,
compared to $0.8 million in fiscal 1997.
Gross Margin. Vivid's gross margin was 58% of revenues in fiscal 1998 and
fiscal 1997. In fiscal 1998, the increase in unit sales, revenue associated with
Vivid's FAA development grant, service contracts and improved manufacturing
efficiencies, which increased margins, were offset by lower average selling
prices and the addition of sales of Vivid's hand baggage unit which had lower
margins than Vivid's checked baggage units.
Research and Development Expenses. Vivid's research and development
expenses increased by approximately 33% to $5.9 million, or 15% of revenues, in
fiscal 1998 from $4.4 million, or 14% of revenues, in fiscal 1997. The increase
was primarily attributable to the addition of engineering personnel and outside
consultants working on the development of new products, mainly the development
of a second generation explosives detection system in an effort to reach FAA
certification, and enhancements to existing products, including enhancements to
the APS system for carry-on baggage and the VIS-M. Development expenses incurred
under Vivid's FAA grants were included in costs of goods sold.
Selling and Marketing Expenses. Vivid's selling and marketing expenses
increased approximately 22% to $4.3 million, or 11% of revenues, in fiscal 1998
from $3.6 million, or 11% of revenues, in fiscal 1997. The increase was
primarily attributable to additional sales and support personnel as a result of
the expansion of operations in Europe and the United States and, to a lesser
extent, an increase in advertising, consulting and public relations, trade shows
and related travel costs.
General and Administrative Expenses. Vivid's general and administrative
expenses increased approximately 35% to $3.9 million, or 10% of revenues, in
fiscal 1998 from $2.9 million, or 9% of revenues, in fiscal 1997. The increase
was primarily attributable to an increase in personnel and related costs, patent
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amortization, and license fees, as well as additional overhead costs as the
headcount for Vivid increased approximately 14%.
Litigation Expenses. Vivid incurred $220,000 of litigation expenses in
fiscal 1998 and $427,000 in fiscal 1997, primarily in connection with Vivid's
patent litigation with American Science & Engineering and, to a lesser extent,
its patent litigation with PerkinElmer.
Interest Income. Vivid recognized net interest income of approximately
$1.3 million in fiscal 1998 compared to net interest income of $0.8 million in
fiscal 1997. The increase in fiscal 1998 was primarily attributable to higher
average cash balances resulting from the receipt of proceeds from Vivid's
initial public offering in fiscal 1997, and the generation of cash from
operations in fiscal 1998.
Provision for Income Taxes. Vivid's effective tax rate for fiscal 1998 was
30% compared to 27% in fiscal 1997. Vivid's effective tax rate in fiscal 1998
was lower than the statutory tax rates primarily due to the use of tax credits
and the tax benefits associated with Vivid's foreign sales corporation and
Massachusetts securities corporation. The increase in the provision for income
taxes in fiscal 1998 was primarily attributable to increased product sales in
the United States, which offset the benefit from the foreign sales corporation.
LIQUIDITY AND CAPITAL RESOURCES
Vivid has funded its operations and capital expenditures primarily through
internally generated cash flows, proceeds from the sale of securities and the
availability of a working capital line of credit. At September 30, 1999, Vivid
had working capital of $31.8 million including $19.7 million in cash and cash
equivalents and short-term investments. Vivid also had $1.1 million of long-term
investments. Subsequent to September 30, 1999, Vivid secured a $3.0 million bank
line of credit which expires February 29, 2000. The line of credit bears
interest at the bank's prime rate, which was 8.25% as of September 30, 1999.
During fiscal 1999, Vivid's net cash used in operating activities was
approximately $4.7 million, including, net loss adjusted for non-cash expenses,
including depreciation and amortization and write down of assets totaling $1.7
million, a $2.0 million increase of inventories and $1.1 million increase in
other current assets. The increase in inventory relates to purchases associated
with the production of the next generation system and the increased sales
activity of the APS system, and overall lower product sales of checked baggage
units. The increase in other current assets relates to Vivid's tax benefit.
During fiscal 1999, net cash provided by investing activities was
approximately $866,000, primarily attributable to the net decrease in investment
balances of $1.3 million offset by capital expenditures of approximately
$359,000.
During fiscal 1999, net cash used in financing activities was approximately
$93,000, primarily attributable to Vivid's purchase of treasury stock, offset by
exercises of stock options.
Vivid may be affected, for the foreseeable future, by economic conditions
and currency volatility in the regions of the world where it does business. As a
result, there are uncertainties that may affect future operations, including the
recoverability of receivables. It is not possible to determine the future effect
adverse economic conditions may have on Vivid's liquidity and earnings.
Vivid believes that its existing resources and the anticipated cash
generated from operations will be sufficient to fund its planned operations for
at least the next 12 months. The sufficiency of Vivid's resources to fund
working capital needs is subject to known and unknown risks, uncertainties and
other factors which may materially harm Vivid's business, including without
limitation the risk factors referred to in this proxy statement/prospectus.
YEAR 2000 READINESS DISCLOSURE
Vivid may be affected by year 2000 issues related to non-compliant
information technology systems, often referred to as IT systems, or non-IT
systems operated or sold by Vivid or by third parties. Vivid has substantially
completed assessment of its internal IT systems and non-IT systems. Vivid has
tested all
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products internally and has adopted a Year 2000 Qualification Test Procedure to
ensure that all products operate properly through the year 2000 and beyond. In
addition to internal testing, Vivid has received compliance certificates from
the FAA and BAA confirming that Vivid's existing products are year 2000
compliant. Vivid has also submitted a survey to vendors subject to year 2000
compliance. In addition to the survey, Vivid has internally tested components
supplied by outside vendors. Vivid has also performed an internal review of
in-house computers, network, operating system and financial reporting package
confirming year 2000 compliance.
Vivid is not currently aware of any year 2000 problems relating to systems
operated or sold by Vivid that would have a material adverse effect on Vivid's
business, results of operations or financial condition. Although Vivid believes
that its systems are year 2000 compliant, Vivid utilizes third-party equipment
and software that may not be year 2000 compliant. In addition, Vivid's products
and software are often sold to be integrated into or interface with third party
equipment or software. Failure of third-party equipment or software to operate
properly with regard to the year 2000 and thereafter could require Vivid to
incur unanticipated expenses to remedy any problems, which could have a material
adverse effect on Vivid business, financial condition and results of operations.
Vivid may also be vulnerable to any failures by its major suppliers,
service providers and customers to remedy their own internal IT and non-IT
system year 2000 issues which could, among other things, have a material and
adverse affect on Vivid's supplies and orders. Vivid is unable to estimate the
nature or extent of any potential adverse impact resulting from the failure of
third parties, such as its suppliers, service providers and customers, to
achieve year 2000 compliance. Moreover, such third parties, even if year 2000
compliant, could experience difficulties resulting from year 2000 issues that
may affect their suppliers, service providers and customers. As a result,
although Vivid does not currently anticipate that it will experience any
material shipment delays from their major product suppliers or any material
sales delays from its major customers due to year 2000 issues, these third
parties may experience year 2000 problems. Any such problems could have a
material adverse effect on Vivid's business, financial condition and results of
operations.
Other than its activities described above, Vivid does not have and does not
plan to develop a contingency plan to address year 2000 issues. Should any
unanticipated significant year 2000 issues arise, Vivid's failure to implement
such a contingency plan could have a material adverse affect on its business,
financial condition and results of operations.
To the extent that Vivid does not identify any material non-compliant IT
systems or non-IT systems operated by Vivid or by third parties, such as Vivid's
suppliers, service providers and customers, the most reasonably likely worst
case year 2000 scenario is a systemic failure beyond the control of Vivid, such
as a prolonged telecommunications or electrical failure, or a general disruption
in United States or global business activities that could result in a
significant economic downturn. Vivid believes that the primary business risks,
in the event of such failure or other disruption, would include but not be
limited to loss of customers or orders, increased operating costs, inability to
obtain inventory on a timely basis, disruptions in product shipments, or other
business interruptions of a material nature, as well as claims of mismanagement,
misrepresentation, or breach of contract, any of which could have a material
adverse effect on Vivid's business, financial condition and results of
operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Hedging. The accounts of Vivid's foreign subsidiary,
Vivid Technologies UK Ltd., are translated in accordance with SFAS No. 52,
Foreign Currency Translation. In translating the accounts of the foreign
subsidiary into U.S. dollars, assets and liabilities are translated at the rate
of exchange in effect at quarter-end, while stockholders' equity is translated
at historical rates. Revenue and expense accounts are translated using the
weighted average exchange rate in effect during the year. Foreign currency
transaction gains or losses for Vivid Technologies UK Ltd. are included in
Vivid's consolidated statements of operations since the functional currency for
this subsidiary is the U.S. dollar.
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Vivid had sales denominated in foreign currencies of approximately
$8,044,000 during fiscal 1997, $6,804,000 during fiscal 1998 and $2,815,000
during fiscal 1999. Vivid recognized a loss of $47,000 in fiscal 1997, a gain of
$36,000 in fiscal 1998 and a loss of $92,000 in fiscal 1999, related to such
foreign currency transactions which is included in other income (expense) in the
consolidated statement of operations.
Investment Portfolio. Vivid does not use derivative financial instruments
for investment purposes and only invests in financial instruments that meet high
credit quality standards, as specified in Vivid's investment policy guidelines;
the investment policy also limits the amount of credit exposure to any one
issue, issuer, and type of instrument.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities on the
balance sheet and measures those instruments at fair value. SFAS No. 133, as
amended by SFAS No. 137, is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. Vivid does not expect SFAS No. 133 to have a
material impact on its consolidated financial statements.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying unaudited pro forma combined financial information
reflects the following transactions in addition to PerkinElmer's proposed
acquisition of Vivid pursuant to a merger agreement dated as of October 4, 1999:
- On August 20, 1999, PerkinElmer sold the assets of its technical services
segment (government services business) to an affiliate of The Carlyle
Group LP.
- On May 28, 1999, PerkinElmer completed its acquisition of the analytical
instruments division of PE Corporation, a leading producer of high
quality analytical testing instruments.
- On December 16, 1998, PerkinElmer completed its acquisition of Lumen
Technologies, Inc., which is engaged in the business of developing,
manufacturing and marketing speciality light sources and related products
for markets requiring advance optical technologies.
PerkinElmer accounted for the Lumen and analytical instruments division
acquisitions as purchases in accordance with APB Opinion No. 16. The unaudited
pro forma combined financial information gives effect to the proposed
acquisition of Vivid as a purchase.
The following unaudited pro forma combined statements of operations give
effect to the acquisition of Vivid, Lumen and the analytical instruments
division and should be read in connection with the historical financial
statements and related notes thereto for PerkinElmer, Vivid, Lumen and the
analytical instruments division. The financial statements required to be filed
with the Securities and Exchange Commission for the Lumen and analytical
instruments division acquisitions were included as exhibits in Current Reports
on Form 8-K/A, filed by PerkinElmer on March 30, 1999 and August 11, 1999,
respectively. The unaudited pro forma combined statements of operations for the
fiscal year ended January 3, 1999 and the nine-month period ended October 3,
1999 give effect to these acquisitions as if they were completed as of December
29, 1997, and combine PerkinElmer, Vivid, Lumen and the analytical instruments
division's historical statements of operations for each respective period as
necessary. The unaudited pro forma combined results for the fiscal year ended
January 3, 1999 and the nine-month period ended October 3, 1999 exclude
acquisition-related charges of $23 million and $2.3 million for acquired
in-process research and development related to the analytical instruments
division and Lumen, respectively. Additionally, these pro forma statements of
operations exclude an estimated acquisition-related charge of $6.7 million for
acquired in-process research and development related to the proposed acquisition
of Vivid. PerkinElmer has not yet conducted an appraisal of this in-process
research and development and accordingly, the final amount may differ from this
estimate.
The unaudited pro forma combined statements of operations for the fiscal
year ended January 3, 1999 includes columns representing PerkinElmer's
historical results as adjusted for the 1998 divestitures of its Rotron and
Sealol Industrial Seals businesses, previously reported by PerkinElmer on a
Current Report Form 8-K dated April 16, 1998, for the fiscal twelve months then
ended, Lumen's historical results for the period ended December 15, 1998, the
date of the Lumen acquisition, ILC Technology, Inc.'s historical results for the
period from January 1 through March 12, 1998 (ILC was acquired by Lumen on March
12, 1998), the analytical instruments division's historical results for the
twelve month period ended December 31, 1998 (the analytical instruments division
previously had a June 30 year end) and Vivid's historical results for its fiscal
year ended September 30, 1998.
The unaudited pro forma combined statements of operations for the nine
months ended October 3, 1999 includes columns representing PerkinElmer's
historical results for the nine months then ended, the analytical instruments
division's historical results for the period from January 1, 1999 through May
28, 1999 (the date of the acquisition) and Vivid's historical results for the
nine months ended September 30, 1999. Based on Vivid's September 30, 1999 fiscal
year end, the historical results for Vivid for the quarter ended December 31,
1998 have not been included in this pro forma information. For the quarter ended
December 31, 1998, Vivid reported revenues of $3.6 million and a net loss of $2
million.
69
<PAGE> 76
The unaudited pro forma combined balance sheet as of October 3, 1999
includes the historical balance sheet of PerkinElmer as of October 3, 1999 and
Vivid as of September 30, 1999 and gives effect to the proposed acquisition of
Vivid as if it had occurred on October 3, 1999.
The unaudited pro forma combined financial information is provided for
informational purposes only and is not necessarily indicative of PerkinElmer's
operating results that would have occurred had the acquisitions been consummated
on the dates, or at the beginning of the period, for which the consummation for
the acquisitions is being given effect, nor is it necessarily indicative of
PerkinElmer's future operating results. The unaudited pro forma adjustments do
not reflect any operating efficiencies and cost savings that PerkinElmer hopes
to achieve.
The unaudited pro forma combined financial information has been prepared
using the purchase method of accounting, whereby the total cost of the
acquisitions has been allocated to the tangible and intangible assets acquired
and liabilities assumed based on their respective fair values at the effective
date of each acquisition. Such allocations will be based on studies and
independent valuations, which are currently being finalized. Accordingly, the
allocations reflected in the unaudited pro forma combined financial information
are preliminary and subject to revision. It is not expected that the purchase
price allocation will produce materially different results from those presented
herein.
70
<PAGE> 77
PERKINELMER
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
OCTOBER 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERKINELMER VIVID
HISTORICAL HISTORICAL PRO FORMA
OCTOBER 3, 1999 SEPTEMBER 30, 1999 ADJUSTMENTS PRO FORMA
--------------- ------------------ ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Cash, cash equivalents and marketable
securities........................... $ 88,429 $19,698 $ -- $ 108,127
Accounts receivable.................. 321,980 6,376 -- 328,356
Inventories.......................... 187,890 9,825 1,103(B) 198,818
Other current assets................. 133,413 4,043 -- 137,456
---------- ------- ------- ----------
Total current assets....... 731,712 39,942 1,103 772,757
Property, plant and equipment, net... 229,922 1,146 -- 231,068
Investments.......................... 14,361 1,084 -- 15,445
Intangible assets.................... 621,606 -- 28,182(C) 649,788
Other assets......................... 67,419 177 -- 67,596
---------- ------- ------- ----------
Total assets............... $1,665,020 $42,349 $29,285 $1,736,654
========== ======= ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Short-term debt and current portion
of long-term debt.................. $ 319,733 $ -- $ -- $ 319,733
Accounts payable..................... 133,177 1,616 -- 134,793
Accrued restructuring costs.......... 68,036 -- 2,000(H) 70,036
Accrued expenses..................... 327,374 6,558 3,020(G) 336,952
---------- ------- ------- ----------
Total current
liabilities.............. 848,320 8,174 5,020 861,514
Long-term debt....................... 114,952 -- -- 114,952
Other long-term liabilities.......... 184,853 -- -- 184,853
Preferred stock...................... -- -- -- --
Common stock and paid in capital..... 60,102 27,098 38,042(I) 125,242
Retained earnings.................... 727,020 7,424 (14,124)(I) 720,320
Accumulated other comprehensive
income............................. (3,439) -- -- (3,439)
Cost of shares held in treasury...... (266,788) (347) 347(I) (266,788)
---------- ------- ------- ----------
Total stockholders'
equity................... 516,895 34,175 24,265 575,335
---------- ------- ------- ----------
Total liabilities and
stockholders' equity..... $1,665,020 $42,349 $29,285 $1,736,654
========== ======= ======= ==========
</TABLE>
The accompanying unaudited notes are integral part of this pro forma combined
financial information.
71
<PAGE> 78
PERKINELMER
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED OCTOBER 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERKINELMER ANALYTICAL VIVID
HISTORICAL NINE INSTRUMENTS HISTORICAL
MONTHS DIVISION NINE MONTHS
ENDED HISTORICAL PRO FORMA ENDED
OCTOBER 3, PERIOD ENDED PRO FORMA PERKINELMER SEPTEMBER 30, PRO FORMA
1999 MAY 28, 1999 ADJUSTMENT BEFORE VIVID 1999 ADJUSTMENTS
--------------- ------------ ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sales................. $935,888 $214,834 $ -- $1,150,722 $17,558 $ --
Cost of Sales......... 611,661 136,125 (12,444)(B)(D) 735,342 10,715 --
-------- -------- -------- ---------- ------- --------
Gross Margin........ 324,227 78,709 12,444 415,380 6,843 --
Research and
development
expenses............ 49,972 18,914 -- 68,886 4,494 --
Selling, general and
administrative
expenses............ 218,908 85,287 2,683(C)(D) 306,878 5,474 1,057(C)
Restructuring charges,
net................. 11,520 -- -- 11,520 1,208 --
In-process research
and development
charge.............. 23,000 -- (23,000)(J) -- -- --
Asset impairment
charges............. 18,000 -- -- 18,000 -- --
Gains on
disposition......... (15,813) -- -- (15,813) -- --
-------- -------- -------- ---------- ------- --------
Operating income
(loss) from
continuing
operations........ 18,640 (25,492) 32,761 25,909 (4,333) (1,057)
Other income
(expenses).......... (19,433) (125) (8,656)(E) (28,214) 659 --
-------- -------- -------- ---------- ------- --------
Income (loss) from
continuing
operations before
income taxes...... (793) (25,617) 24,105 (2,305) (3,674) (1,057)
Provision (benefit)
for income taxes.... (309) (7,173) 7,926(F) 444 (1,065) --(F)
-------- -------- -------- ---------- ------- --------
Income (loss) from
continuing
operations........ $ (484) $(18,444) $ 16,179 $ (2,749) $(2,609) $ (1,057)
-------- -------- -------- ---------- ------- --------
Basic earnings per
share from
continuing
operations.......... $ (0.01) $ (0.06)
Diluted earnings per
share from
continuing
operations.......... $ (0.01) $ (0.06)
Weighted average
shares of common
stock outstanding:
Basic............... 45,303 45,303 1,591(K)
Diluted............. 45,303 45,303 1,591(K)
<CAPTION>
PRO FORMA
PERKINELMER
AFTER VIVID
-----------
<S> <C>
Sales................. $1,168,280
Cost of Sales......... 746,057
----------
Gross Margin........ 422,223
Research and
development
expenses............ 73,380
Selling, general and
administrative
expenses............ 313,409
Restructuring charges,
net................. 12,728
In-process research
and development
charge.............. --
Asset impairment
charges............. 18,000
Gains on
disposition......... (15,813)
----------
Operating income
(loss) from
continuing
operations........ 20,519
Other income
(expenses).......... (27,555)
----------
Income (loss) from
continuing
operations before
income taxes...... (7,036)
Provision (benefit)
for income taxes.... (621)
----------
Income (loss) from
continuing
operations........ $ (6,415)
----------
Basic earnings per
share from
continuing
operations.......... $ (0.14)
Diluted earnings per
share from
continuing
operations.......... $ (0.14)
Weighted average
shares of common
stock outstanding:
Basic............... 46,894
Diluted............. 46,894
</TABLE>
The accompanying unaudited notes are an integral part of this pro forma combined
financial information.
72
<PAGE> 79
PERKINELMER
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
FOR THE FISCAL YEAR ENDED JANUARY 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERKINELMER ILC TECH. ANALYTICAL
HISTORICAL LUMEN HISTORICAL INSTRUMENTS
FISCAL HISTORICAL JANUARY 1, DIVISION
YEAR ROTRON AND PERKINELMER PERIOD 1998 HISTORICAL
ENDED SEALOL ID BEFORE ENDED THROUGH PERIOD ENDED
JANUARY 3, PRO FORMA DIVESTITURES DECEMBER 15, MARCH 12, DECEMBER 31,
1999 ADJUSTMENTS(A) FISCAL 1998 1999 1998 1998
----------- -------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales.............................. $ 854,382 $ (22,666) $831,716 $135,003 $8,052 $558,657
Cost of Sales...................... 550,987 (14,064) 536,923 91,654 5,661 306,218
--------- --------- -------- -------- ------ --------
Gross Margin..................... 303,395 (8,602) 294,793 43,349 2,391 252,439
Research and development
expenses......................... 46,026 (302) 45,724 4,708 565 42,837
Selling, general and administrative
expense.......................... 203,740 (6,173) 197,567 23,850 989 189,025
Restructuring charges.............. 50,027 -- 50,027 -- -- --
In-process research and development
charge........................... 2,300 -- 2,300 -- -- --
Merger, spinoff & nonrecurring
charges.......................... -- -- -- 16,704 -- --
Asset impairment charge............ 7,400 -- 7,400 -- -- --
Gains on disposition............... (125,822) 125,822 -- -- -- --
--------- --------- -------- -------- ------ --------
Operating income (loss) from
continuing operations.......... 119,724 (127,949) (8,225) (1,913) 837 20,577
Other income (expense)............. (1,397) -- (1,397) (5,504) (55) 183
--------- --------- -------- -------- ------ --------
Income (loss) from continuing
operations..................... 118,327 (127,949) (9,622) (7,417) 782 20,760
Provision (benefit) for income
taxes............................ 39,326 (38,355) 971 1,824 238 5,813
--------- --------- -------- -------- ------ --------
Income (loss) from continuing
operations..................... $ 79,001 $ (89,594) $(10,593) $ (9,241) $ 544 $ 14,947
--------- --------- -------- -------- ------ --------
Basic earnings (loss) per share
from continuing operations....... $ 1.74 $ (1.98) $ (0.23)
Diluted earnings (loss) per share
from continuing operations....... $ 1.72 $ (1.95) $ (0.23)
Weighted average shares of common
stock outstanding:
Basic............................ 45,322 45,322 45,322
Diluted.......................... 45,884 45,322 45,322
<CAPTION>
VIVID
HISTORICAL
FISCAL YEAR
PRO FORMA ENDED PRO FORMA
PRO FORMA PERKINELMER SEPTEMBER 30, PRO FORMA PERKINELMER
ADJUSTMENTS BEFORE VIVID 1998 ADJUSTMENTS AFTER VIVID
----------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sales.............................. $ -- $1,533,428 $38,718 $ -- $1,572,146
Cost of Sales...................... 14,193(B)(D) 954,649 16,361 1,103(B) 972,113
-------- ---------- ------- ------- ----------
Gross Margin..................... (14,193) 578,779 22,357 (1,103) 600,033
Research and development
expenses......................... -- 93,834 5,859 -- 99,693
Selling, general and administrative
expense.......................... 13,374(C)(D) 424,805 8,507 1,409(C) 434,721
Restructuring charges.............. -- 50,027 -- -- 50,027
In-process research and development
charge........................... (2,300)(J) -- -- -- --
Merger, spinoff & nonrecurring
charges.......................... -- 16,704 -- -- 16,704
Asset impairment charge............ -- 7,400 -- -- 7,400
Gains on disposition............... -- -- -- -- --
-------- ---------- ------- ------- ----------
Operating income (loss) from
continuing operations.......... (25,267) (13,991) 7,991 (2,512) (8,512)
Other income (expense)............. (29,688)(E) (36,461) 1,477 -- (34,984)
-------- ---------- ------- ------- ----------
Income (loss) from continuing
operations..................... (54,955) (50,452) 9,468 (2,512) (43,496)
Provision (benefit) for income
taxes............................ (14,647)(F) (5,801) 2,838 (331)(F) (3,294)
-------- ---------- ------- ------- ----------
Income (loss) from continuing
operations..................... (40,308) (44,651) $ 6,630 $(2,181) $ (40,202)
-------- ---------- ------- ------- ----------
Basic earnings (loss) per share
from continuing operations....... $ (0.99) $ (0.86)
Diluted earnings (loss) per share
from continuing operations....... $ (0.99) $ (0.86)
Weighted average shares of common
stock outstanding:
Basic............................ 45,322 1,591(K) 46,913
Diluted.......................... 45,322 1,591(K) 46,913
</TABLE>
The accompanying unaudited notes are an integral part of this pro forma combined
financial information.
73
<PAGE> 80
PERKINELMER
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE 1 -- PRESENTATION
In August 1999, PerkinElmer sold its technical services segment (government
services business) to an affiliate of The Carlyle Group L.P. for $250 million.
Accordingly, the results of operations of the technical services segment have
been excluded from PerkinElmer's historical results from continuing operations
and classified separately as discontinued operations in accordance with APB
Opinion No. 30 for the fiscal year ended January 3, 1999 and the nine months
ended October 3, 1999. This transaction included the sale of the EG&G name,
trademarks and related rights. Effective October 26, 1999, EG&G, Inc. changed
its name to PerkinElmer and began trading on the New York Stock Exchange under
the symbol "PKI."
NOTE 2 -- PURCHASE PRICE ALLOCATION
The purchase price allocation related to the PE analytical instruments
acquisition is included in PerkinElmer's Quarterly Report on Form 10-Q for the
quarter ended July 4, 1999 and PerkinElmer's Current Report filed on Form 8-K/A,
dated August 11, 1999, related to the PE analytical instruments acquisition. The
purchase price allocation related to the Lumen acquisition is included in
PerkinElmer's Annual Report on Form 10-K for the year ended January 3, 1999 and
PerkinElmer's Current Report filed on Form 8-K/A, dated March 30, 1999. The
proposed purchase price for Vivid has been allocated to the estimated fair value
of assets to be acquired and liabilities to be assumed. The preliminary purchase
price allocation is based on PerkinElmer's estimates of respective fair values.
Some allocations will be based on studies and independent valuations that have
not yet been conducted. PerkinElmer's management does not believe that the final
purchase price allocation will produce materially different results than those
reflected in the pro forma combined financial statements. The components of the
estimated purchase price and preliminary allocation are as follows (in
thousands):
<TABLE>
<S> <C>
Stock issued to Vivid..................................... $ 62,475
Fair value of options exchanged........................... 2,665
Acquisition costs......................................... 2,000
--------
Total consideration and acquisition costs....... 67,140
--------
Preliminary allocation of purchase price:
Current assets.......................................... 42,350
Property, plant and equipment........................... 1,146
Other assets............................................ 1,261
In-process research and development..................... 6,700
Goodwill................................................ 28,182
Current liabilities..................................... (12,499)
--------
Total........................................... $ 67,140
========
</TABLE>
The fair value of the stock to be issued is based on the market price of
PerkinElmer's common stock on the date the proposed acquisition was announced.
Current liabilities include approximately $2 million of accrued
restructuring charges related to Vivid to be incurred in connection with the
proposed acquisition. The restructuring plans include initiatives to integrate
the operations of PerkinElmer and Vivid and to reduce overhead.
PerkinElmer's management is in the process of finalizing its restructuring
plans related to Vivid and, accordingly, the amounts recorded are based on
PerkinElmer's current estimate of those costs.
Approximately $6.7 million was allocated to acquired in-process research
and development for projects that have not reached technological feasibility
(and are not expected to do so prior to the closing date of the transaction) and
for which no alternative use exists. The estimated fair value will be based on a
risk-
74
<PAGE> 81
PERKINELMER
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
adjusted cash flow as determined by an independent third party appraiser. The
acquired in-process research and development charge has not been included in the
pro forma combined income statements due to its nonrecurring nature.
NOTE (A)
Represent adjustments to eliminate the results of operations of the Rotron
and Sealol Industrial Seals businesses that were sold by PerkinElmer on January
9, 1998 and April 1, 1998, respectively, as well as the related gains on
dispositions.
NOTE (B)
Adjustments relate to the write-up to fair value of the Vivid, Lumen and PE
analytical instruments work-in-process and finished goods inventory as of their
respective acquisition dates which totaled $1.1 million, $3.2 million and $9.9
million, respectively. These amounts are charged to cost of sales as the related
inventory is sold and have been included in cost of sales in the pro forma
combined statement of results of operations. PerkinElmer's historical
consolidated income statement for the nine months ended October 3, 1999 includes
$3.2 million and $9.9 million of inventory write-up amortization related to
Lumen and the PE analytical instruments division, respectively. These amounts
have been reversed through the pro forma adjustment to cost of sales for the
nine months ended October 3, 1999 because they are reflected in the pro forma
amounts for the year ended January 3, 1999.
NOTE (C)
Includes additional amortization related to goodwill and acquired
intangible assets amortization as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
1998 1999
-------- ---------
<S> <C> <C>
Goodwill................................................ $11,687 $ 2,903
Acquired intangibles.................................... 8,068 2,870
------- -------
Total amortization............................ 19,755 5,773
Pre-acquisition historical amortization................. 5,440 2,315
------- -------
Pro forma adjustment.................................. $14,315 $ 3,458
======= =======
Lumen and PE analytical instruments..................... $12,906 $ 2,401
Vivid................................................... 1,409 1,057
------- -------
Total......................................... $14,315 3,458
======= =======
</TABLE>
Goodwill represents the excess of consideration paid over the fair value of
net assets acquired and totaled approximately $28 million, $177 million and $175
million for Vivid, the PE analytical instruments division and Lumen,
respectively. The PE analytical instruments and Lumen goodwill is being
amortized over 40 years and 30 years, respectively. Vivid's goodwill will be
amortized over its expected useful life of 20 years.
Acquired intangibles includes the fair value assigned to trademarks, trade
names, patents and developed technology by an independent third party appraiser.
These intangible assets are being amortized over periods ranging from 10 to 40
years.
75
<PAGE> 82
PERKINELMER
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
NOTE (D)
Includes additional depreciation related to the write-up to fair value of
the Lumen and PE analytical instruments property, plant and equipment as of the
respective acquisition dates. The pro forma combined income statements include
additional depreciation expense related to those write-ups of $1.1 million and
$657,000 for cost of sales and $469,000 and $282,000 for selling, general and
administrative expenses for the fiscal year ended January 3, 1999 and nine
months ended October 3, 1999, respectively.
NOTE (E)
Reflects incremental interest expense related to financing the acquisitions
discussed herein. PerkinElmer financed the Lumen acquisition with available cash
and short-term debt consisting of commercial paper borrowings with a
weighted-average interest rate of 5.5% at year end January 3, 1999.
The PE analytical instruments acquisition was financed through a
combination of $75 million of available cash, $100 million of commercial paper
borrowings with a weighted-average interest rate of 5.2%, $100 million of money
market loans with a weighted average interest of 5.2% and one-year secured
promissory notes of $150 million issued by PerkinElmer to PE Corp. that bear
interest at 5.0%.
A 1/8 of one percent change in the base rate would change annual pro forma
interest expense by approximately $546,000. PerkinElmer may refinance a portion
of the outstanding debt with fixed rate debt at some future date. Additionally,
PerkinElmer utilized the net proceeds resulting from the sale of its technical
services segment to pay down approximately $210 million of outstanding debt
during the third quarter of fiscal 1999.
NOTE (F)
Income tax adjustments have been calculated using estimated statutory
income tax rates for the jurisdictions in which PerkinElmer and Vivid operate.
The primary difference between the provision calculated at statutory rates and
the amount reflected in the pro forma adjustments column for the periods
presented is attributable to nondeductible goodwill related to the Lumen and
proposed Vivid acquisitions. The pro forma consolidated provision for income
taxes may not represent amounts that would have resulted had PerkinElmer, Vivid,
the PE analytical instruments division and Lumen filed consolidated income tax
returns during the periods presented.
NOTE (G)
Includes adjustments to accrue transaction costs, record the deferred tax
effect resulting from purchase accounting and reflect the fair value of accrued
liabilities as of the acquisition date.
NOTE (H)
Includes adjustment to record the accrued restructuring charges discussed
in Note 2.
NOTE (I)
Reflects the elimination of Vivid's historical equity accounts and issuance
of PerkinElmer common stock and options in connection with the acquisition.
Additionally, the adjustment to retained earnings includes a $6.7 million charge
that was allocated to acquired in-process research and development. This amount
was expensed as a nonrecurring, non-tax deductible charge upon consummation of
the acquisition and has been reflected as a reduction to retained earnings. The
acquired in-process research and development charge has not been included in the
pro forma combined income statements due to its nonrecurring nature.
76
<PAGE> 83
PERKINELMER
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
NOTE (J)
Includes adjustments to eliminate the in-process research and development
charges related to Lumen and analytical instruments division of $2.3 million and
$23 million, respectively, from PerkinElmer's historical consolidated income
statement due to their nonrecurring nature.
NOTE (K)
Includes PerkinElmer shares to be issued in connection with the Vivid
acquisition.
77
<PAGE> 84
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
HOLDERS AND MANAGEMENT OF VIVID
The following table sets forth information concerning the beneficial
ownership of common stock of Vivid as of November 15, 1999 for the following
persons:
- each person or entity known by Vivid to own beneficially more than 5% of
the outstanding shares of Vivid's common stock;
- each of Vivid's current directors;
- the chief executive officer and the other four most highly compensated
executive officers of Vivid who were serving as executive officers at the
end of Vivid's last completed fiscal year and whose total annual salary
and bonus exceeded $100,000; and
- all directors and executive officers of Vivid as a group.
The percentage ownership is based on 10,089,141 shares of Vivid common
stock outstanding as of November 15, 1999. All shares subject to options and
warrants exercisable within 60 days after November 15, 1999 or upon completion
of the merger are deemed to be beneficially owned by the person or entity
holding that option or warrant and to be outstanding solely for calculating that
person's or entity's percentage ownership.
The information contained in the table is based upon information received
from or on behalf of the named person. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- ------------------------------------ ---------------------- ------------------
<S> <C> <C>
Jay A. Stein(1)(5)..................................... 767,000 7.6%
Vivid Technologies, Inc.
10E Commerce Way
Woburn, Massachusetts 01801
Massachusetts Capital Resource Company................. 746,284 7.4%
420 Boylston Street
Boston, Massachusetts 02116
Charles T. O'Neill, as Trustee(2)...................... 573,002 5.7%
O'Neill & Neylon
950 Winter Street
Waltham, Massachusetts 02154
Ascent Venture Partners L.P. .......................... 561,049 5.6%
60 State Street
Boston, Massachusetts 02109
S. David Ellenbogen(3)(5).............................. 446,500 4.4%
Frank Kenny(4)(5)...................................... 140,895 1.4%
Daniel J. Silva(5)..................................... 108,000 1.1%
James J. Aldo(5)....................................... 65,000 *
Glenn P. Muir(5)....................................... 58,750 *
William J. Frain(5).................................... 52,567 *
Gerald Segel(5)........................................ 32,500 *
L. Paul Bremer III(5).................................. 27,500 *
</TABLE>
78
<PAGE> 85
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- ------------------------------------ ---------------------- ------------------
<S> <C> <C>
Herbert Janisch........................................ 50,000 *
All directors and executive officers as a group (10
persons)(6).......................................... 1,748,712 16.8%
</TABLE>
- ---------------
* Less than 1% of Vivid's outstanding common stock.
(1) Dr. Stein's beneficial ownership includes 72,000 shares he holds as trustee
of trusts for the benefit of the children of S. David Ellenbogen. His
beneficial ownership also includes 124,886 shares held by Mr. O'Neill as
trustee of the Jay A. Stein 1996 Retained Annuity Trust. Dr. Stein disclaims
beneficial ownership of the shares he holds as trustee.
(2) Mr. O'Neill's beneficial ownership includes 237,500 shares he holds as
trustee of the Ellenbogen Family Irrevocable Trust of 1996, 210,616 shares
he holds as trustee of the S. David Ellenbogen 1996 Retained Annuity Trust
and 124,886 shares he holds as trustee of the Jay A. Stein 1996 Retained
Annuity Trust. Mr. O'Neill disclaims beneficial ownership of all the shares
held in these trusts.
(3) Mr. Ellenbogen's beneficial ownership includes 60,000 shares he holds as
trustee of the Jay A. Stein Irrevocable Trust of 1990. His beneficial
ownership also includes 210,616 shares held by Mr. O'Neill as trustee of the
S. David Ellenbogen 1996 Retained Annuity Trust. His beneficial ownership
excludes 242,500 shares held by Mr. O'Neill, as trustee of the Ellenbogen
Family Irrevocable Trust of 1996. Mr. Ellenbogen disclaims beneficial
ownership of shares he holds as trustee.
(4) Mr. Kenny's beneficial ownership includes 5,535 shares he holds as trustee
of the Beta Partners Profit Sharing Trust.
(5) The shares beneficially owned by each of Dr. Stein and Messrs. Ellenbogen,
Aldo, Bremer, Kenny, Muir, Segel, Silva, Frain and Janisch include shares
that may be acquired either immediately or within 60 days after November 15,
1999 or upon completion of the merger. Specifically, Dr. Stein may acquire
5,000 shares, Mr. Ellenbogen may acquire 11,000 shares, Mr. Aldo may acquire
58,000 shares, Mr. Bremer may acquire 27,500 shares, Mr. Kenny may acquire
17,500 shares, Mr. Muir may acquire 17,500 shares, Mr. Segel may acquire
27,500 shares, Mr. Silva may acquire 41,000 shares, Mr. Frain may acquire
46,567 shares and Mr. Janisch may acquire 50,000 shares.
(6) The number of shares shown as beneficially owned by all executive officers
and directors as a group include 301,567 shares which may be acquired within
60 days after November 15, 1999, or upon completion of the merger, upon
exercise of, and payment for, outstanding unexercised stock options.
79
<PAGE> 86
NO APPRAISAL RIGHTS
Appraisal rights under Delaware law are not available to stockholders of a
Delaware corporation:
- the securities of which are listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.;
and
- the stockholders of which are not required to accept in exchange for
their stock anything other than (1) stock in another corporation listed
on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the NASD and (2)
cash in lieu of fractional shares.
Vivid stockholders do not have appraisal rights under Delaware law with
respect to the merger because:
- Vivid common stock is listed on the Nasdaq National Market;
- Vivid stockholders are being offered shares of PerkinElmer common stock
which are traded on the New York Stock Exchange; and
- Vivid stockholders are being offered cash in lieu of fractional shares.
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COMPARISON OF STOCKHOLDER RIGHTS
GENERAL
The PerkinElmer charter and bylaws, the Massachusetts corporation statute
and other Massachusetts laws related to corporations currently govern the rights
of the holders of PerkinElmer common stock. The Vivid charter and bylaws, the
Delaware corporation statute and other Delaware laws related to corporations
currently govern the rights of Vivid stockholders. As a result of the merger,
Vivid stockholders will become holders of PerkinElmer's common stock and the
rights of the former Vivid stockholders will thereafter be governed by
PerkinElmer's charter and bylaws, the Massachusetts corporation statute and
other Massachusetts laws related to corporations.
The following summary sets forth certain differences between the
Massachusetts corporation statute and the Delaware corporation statute, between
the PerkinElmer charter and the Vivid charter and between the PerkinElmer bylaws
and the Vivid bylaws. Vivid stockholders are encouraged to review the full text
of each of the PerkinElmer charter, the PerkinElmer bylaws, the Vivid charter,
the Vivid bylaws, the Massachusetts corporation statute, the Delaware
corporation statute and other corporation-related laws of Massachusetts and
Delaware insofar as they relate to corporations organized in such states. The
PerkinElmer charter and the PerkinElmer bylaws have been filed as exhibits to
the material filed by PerkinElmer with the Securities and Exchange Commission.
For information as to how documents may be obtained, see "Where You Can Find
More Information."
CAPITALIZATION
PerkinElmer. PerkinElmer is authorized to issue 100,000,000 shares of
common stock and 1,000,000 shares of preferred stock, of which 70,000 shares
have been designated Series C junior participating preferred stock. On November
15, 1999, 60,039,018 shares of PerkinElmer common stock were issued and
outstanding and no shares of preferred stock were issued and outstanding.
PerkinElmer's board has the authority, without stockholder approval, to issue
shares of authorized but undesignated preferred stock from time to time in one
or more series and to fix the rights, preferences and other terms, including
voting rights, of each series of preferred stock, which rights, preferences and
other terms may be superior to that of the PerkinElmer common stock.
Vivid. Vivid is authorized to issue 30,000,000 shares of common stock and
1,000,000 shares of preferred stock, of which 30,000 shares have been designated
Series A junior participating preferred stock. On November 15, 1999, 10,089,141
shares of Vivid common stock were issued and outstanding and no shares of
preferred stock were issued and outstanding. Vivid's board has the authority,
without stockholder approval, to issue shares of authorized preferred stock from
time to time in one or more series and to fix the rights and preferences,
including voting rights, of each series of preferred stock, which rights,
preferences and other terms may be superior to that of the Vivid common stock.
VOTING REQUIREMENTS AND QUORUMS FOR STOCKHOLDERS MEETINGS
PerkinElmer. Each holder of PerkinElmer common stock is entitled to one
vote for each share and may not cumulate votes for the election of directors.
Each holder of PerkinElmer Series C junior participating preferred stock is
entitled to 1,000 votes (subject to adjustments) for each share on all matters
voted on by the holders of PerkinElmer common stock. The PerkinElmer bylaws
provide, in accordance with Massachusetts law, that the holders of a majority of
each class of the shares of the corporation then issued, outstanding and
entitled to vote constitute a quorum, and that when a quorum is present any
matter properly brought before a stockholders meeting generally requires, and
may be effected by, a majority stockholder vote. However, any election of
directors by stockholders requires a plurality of votes and any proposal to
merge or consolidate with another corporation requires a two-thirds vote.
Vivid. Each holder of Vivid common stock is entitled to one vote for each
share and may not cumulate votes for the election of directors. Each holder of
Vivid Series A junior participating preferred stock is entitled to 1,000 votes
(subject to adjustments) for each share on all matters voted on by the holders
of Vivid common stock. The Vivid charter and bylaws provide, in accordance with
Delaware law, that the holders of a majority of the shares of the corporation
then issued, outstanding and entitled to vote constitute a quorum, and that,
when a quorum is present, a majority vote is required to effect any matter,
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except as provided in the section below entitled "Approval of Business
Combinations and Asset Sales" and except that any election of directors by
stockholders requires a plurality vote.
DISSENTERS' RIGHTS
PerkinElmer. Under Massachusetts law, dissenting stockholders who follow
prescribed statutory procedures are entitled to dissenters' rights in connection
with any merger, consolidation or sale of all or substantially all of a
corporation's assets and in connection with the adoption of charter amendments
that may adversely affect the rights or preferences of stockholders.
Vivid. Under Delaware law, Vivid stockholders do not have dissenters'
rights in the case of mergers or consolidations where they are required to
accept in such a merger only (1) shares of the surviving or resulting
corporation, (2) shares of a corporation listed on a national securities
exchange or designated as a national market system security or an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 holders, (3) cash in lieu of fractional shares or
(4) any combination thereof.
STOCKHOLDER RIGHTS AGREEMENT
Under its stockholder rights agreement, each outstanding share of
PerkinElmer common stock has attached to it a stock purchase right. These stock
purchase rights trade with the PerkinElmer common stock and are not currently
exercisable. The stock purchase rights generally become exercisable upon the
earlier to occur of:
- ten days following a public announcement by PerkinElmer that a person or
group has acquired beneficial ownership of 20% or more of the
outstanding PerkinElmer common stock; or
- ten business days after the beginning of a tender offer or exchange
offer that would result in a person or group beneficially owning 30% or
more of the outstanding PerkinElmer common stock.
The stock purchase rights are exercisable for shares of PerkinElmer common
stock or Series C junior participating preferred stock depending upon the
circumstances under which the stock purchase rights are exercised. In some
cases, the exercise price of the stock purchase rights may be significantly
below the market value of PerkinElmer's common stock.
PerkinElmer may redeem the stock purchase rights at a price of $.01 per
right at any time until ten days after the date on which a person or group
acquires beneficial ownership of 20% or more of the outstanding PerkinElmer
common stock. The stock purchase rights will expire on the close of business on
February 8, 2005.
Vivid. Under its stockholder rights agreement, for each share of Vivid
common stock owned, each Vivid stockholder has the right to acquire another
share of Vivid common stock for a specified price if a third party attempts to
acquire Vivid without the approval of Vivid's board. Prior to the execution of
the merger agreement, Vivid amended its stockholder rights agreement to provide
that the execution of the merger agreement and PerkinElmer's acquisition of
Vivid common stock in connection with that agreement, and the related options
and proxies, would not trigger the stockholder rights agreement. The amendment
further provided that the rights agreement would terminate immediately prior to
the completion of the merger.
CUMULATIVE VOTING
PerkinElmer. Massachusetts law does not authorize or provide for
cumulative voting rights by stockholders in the election of directors (i.e.,
each stockholder casts as many votes for all or any of the directors as he has
shares of stock multiplied by the number of directors to be elected). Neither
the PerkinElmer charter nor the PerkinElmer bylaws provide for cumulative
voting.
Vivid. Under Delaware law, a corporation may provide in its charter for
cumulative voting. Neither the Vivid charter nor the Vivid bylaws provide for
cumulative voting.
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PROXIES
PerkinElmer. In accordance with Massachusetts law, the PerkinElmer bylaws
generally permit a stockholder's proxy to be valid for no more than six months.
Vivid. In accordance with Delaware law, the Vivid bylaws permit a proxy to
be valid for up to three years unless the proxy provides for a longer period.
APPROVAL OF BUSINESS COMBINATIONS AND ASSET SALES
PerkinElmer. Under Massachusetts law and the PerkinElmer charter and
bylaws, the affirmative vote of two-thirds of the shares of each class of stock
outstanding and entitled to vote, or which would be adversely affected by a
merger, consolidation or sale of all or substantially all of the assets of a
corporation, is generally necessary to approve any of these types of
transactions.
Vivid. Under Delaware law, the affirmative vote of only a majority of the
shares of stock outstanding and entitled to vote are necessary to approve a
merger or asset sale. Recent amendments to Delaware law permit a company to
merge with a direct or indirect wholly-owned subsidiary without stockholder
approval under certain circumstances so as to cause the corporation to become a
holding company.
Vivid's charter contains a provision that requires the affirmative vote of
the holders of two-thirds of its outstanding common stock to approve amendments
to the Vivid charter or to approve extraordinary transactions that are required
to be approved by stockholders under the Delaware General Corporation Law,
including mergers, sales of substantially all of Vivid's assets and dissolution.
If, however, these actions are approved by a majority of Vivid's continuing
directors, as defined below, then the affirmative vote of the holders of only a
majority of the outstanding common stock is required to approve the matter. The
term continuing director is defined to mean (1) any member of Vivid's board who
is unaffiliated with a related person and was a member of the board prior to the
time any person became a related person and (2) any successor to a continuing
director who is not affiliated with any related person and is recommended to
succeed a continuing director by a majority of the continuing directors then on
the board. A majority of the continuing directors can designate a new director
to be a continuing director, even though that person is affiliated with a
related person. Vivid's continuing directors approved the merger with
PerkinElmer.
Another provision included in Vivid's charter requires the board to
consider social, economic and other factors in evaluating whether certain types
of corporate transactions proposed by another party are in the best interests of
Vivid and its stockholders. These transactions include (1) the purchase or
acquisition through exchange or otherwise of any of Vivid's outstanding equity
securities, (2) the merger or consolidation of Vivid with another corporation
and (3) the purchase or other acquisition of all or substantially all of Vivid's
properties and assets.
ANTI-TAKEOVER LEGISLATION
PerkinElmer. Massachusetts law contains a three year moratorium on
business combinations between a corporation and interested stockholders, unless
certain conditions are met.
PerkinElmer has elected to opt out of the control share acquisitions
provision of the Massachusetts General Laws. PerkinElmer could, however, opt
into these control share acquisitions provisions at any time by amending its
bylaws. In general, the control share acquisitions provision of the
Massachusetts General Laws provides that any person, including his or her
affiliates, who acquires shares of a corporation that is subject to the control
share acquisitions statute and whose shares represent one-fifth or more,
one-third or more, or a majority or more of the voting power of the corporation
in the election of directors cannot exercise any voting power with respect to
those shares, or any shares acquired by the person within 90 days before or
after an acquisition of this nature, unless these voting rights are authorized
by the stockholders of the corporation.
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Vivid. Delaware law provides that certain business combinations with
interested stockholders of Delaware corporations are subject to a three year
moratorium unless specified conditions are met.
CLASSIFICATION OF DIRECTORS
PerkinElmer. Massachusetts law requires that, unless a corporation chooses
otherwise, its board of directors will be divided into classes, and that the
term of directors on a classified board cannot exceed five years. The
PerkinElmer bylaws provide for one class of directors, with each director to
serve until the first annual meeting following the annual meeting at which the
director was elected.
Vivid. Delaware law permits, but does not require, a board of directors to
be divided into classes with each class having a term of office longer than one
year. Vivid currently has three classes of directors, with each director to
serve until the third annual meeting following the annual meeting at which the
director was elected.
INSPECTION RIGHTS
PerkinElmer. Under Massachusetts law, a corporation's stockholders are
entitled to inspect and copy its charter, bylaws, records of stockholders
meetings, and stock and transfer records. These documents must be kept either at
the corporation's principal office, the transfer agent's office, or at the
office of the corporation's clerk or resident agent. If access to these
documents is refused, the corporation will be liable to the requesting
stockholder for any actual damages which result from such refusal. However, the
corporation is not obligated to produce such documents if the inspection is
being sought to secure a list of stockholders or other information to be sold or
used for a purpose unrelated to such person's interest as a stockholder.
Vivid. Delaware law entitles any stockholder of record of a corporation,
in person or by an agent, upon written demand under oath stating the purpose
thereof, to inspect during usual business hours, for any proper purpose, the
corporation's stock ledger, a list of its stockholders and its other books and
records, and to make copies or extracts therefrom. A proper purpose means a
purpose reasonably related to such person's interest as a stockholder.
ANNUAL MEETING OF STOCKHOLDERS
PerkinElmer. Under Massachusetts law, the notice of a corporation's annual
meeting must state the purpose of the meeting. The PerkinElmer bylaws allow the
board of directors or the chairman of the board to determine, in addition to any
purposes other than those required by law, the PerkinElmer charter or the
PerkinElmer bylaws, the matters to be addressed at the annual meeting.
Vivid. Under Delaware law, the purpose of the annual meeting need not be
included in the notice of the annual meeting. The Vivid bylaws provide that
directors shall be elected at the annual meeting, and any other business may be
transacted which is within the power of the stockholders and allowed by law.
SPECIAL MEETINGS OF STOCKHOLDERS
PerkinElmer. In accordance with Massachusetts law, the PerkinElmer bylaws
provide that special meetings of stockholders may be called by the president, by
the PerkinElmer board or upon written application of stockholders who hold at
least 40% of the capital stock of PerkinElmer entitled to vote at the proposed
meeting. Upon the written application of stockholders who hold at least 40% of
the capital stock of PerkinElmer entitled to vote, a special meeting must be
called by PerkinElmer's clerk.
Vivid. Delaware law allows special meetings of a corporation's
stockholders to be called by its board of directors or by any person so
authorized in the corporation's charter or bylaws. Delaware law provides that
the purpose of the special meeting must be included in the notice of the special
meeting. The Vivid bylaws provide that a special meeting of the stockholders may
be called only by the president or by the board of directors.
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NOTICE OF STOCKHOLDER MEETINGS
PerkinElmer. In accordance with Massachusetts law, the PerkinElmer bylaws
provide that notice of stockholder meetings be given at least seven days before
the meeting.
Vivid. In accordance with Delaware law, the Vivid bylaws require that
notice of any meeting of stockholders shall be sent to each stockholder at least
10 and not more than 60 days before the meeting.
ACTION BY CONSENT OF STOCKHOLDERS
PerkinElmer. The PerkinElmer bylaws provide that any action to be taken by
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action in writing.
Vivid. The Vivid bylaws provide that any action to be taken by the
stockholders may only be taken at a meeting and may not be taken by written
consent.
REMOVAL OF DIRECTORS
PerkinElmer. The PerkinElmer bylaws provide that any director may be
removed, with or without cause, by a two-thirds stockholder vote, except that
directors of a class elected by a particular class of stockholders may be
removed only by a two-thirds vote of such stockholders. In addition, the
PerkinElmer bylaws also permit the removal of a director with cause by a vote of
the majority of the directors then in office. The PerkinElmer bylaws also
provide that a director may be removed for cause by the directors or the
stockholders only after providing the director with reasonable notice and an
opportunity to be heard by the body proposing such removal.
Vivid. Delaware law provides that a director serving on a board which is
not classified may be removed with or without cause by a majority stockholder
vote. Vivid's charter provides that directors may only be removed with or
without cause by the affirmative vote of the holders at least 80% of the
combined voting power of the outstanding shares of Vivid's voting stock, voting
as a single class.
CHANGE IN NUMBER OF DIRECTORS
PerkinElmer. Massachusetts law provides that the number of directors shall
be set in a corporation's bylaws, but shall not be less than three. In
accordance with Massachusetts law, the PerkinElmer bylaws allow the stockholders
or a majority of the directors to increase the number of directors to a number
greater than three but in no event more than 13. PerkinElmer currently has ten
directors.
Vivid. Delaware law provides that the number of directors may be fixed in
a corporation's bylaws unless it is fixed in the corporation's charter, in which
case a change in the number of directors shall be made only by amendment to the
corporation's charter. Vivid's charter restricts the ability of stockholders to
enlarge Vivid's board. Changes in the number of directors may be effected by a
vote of a majority of the continuing directors or by the stockholders by vote of
at least 80% of the shares of Vivid's voting stock outstanding, voting as a
single class. Vivid currently has six directors.
INDEMNIFICATION AND LIMITATION OF LIABILITY
PerkinElmer. In accordance with Massachusetts law, the PerkinElmer bylaws
provide for indemnification of PerkinElmer's officers and directors for expenses
reasonably incurred in connection with claims, liabilities and expenses to which
such officer or director may be or become subject by reason of his or her being
or having been an officer or a director of the corporation or by reason of his
or her alleged acts or omissions as an officer or director of the corporation,
except that no indemnification shall be provided for any person if he or she has
been adjudicated not to have acted in good faith and in the reasonable belief
that his or her action was in the best interests of the corporation or if
indemnification under the circumstances is deemed to be against public policy.
Massachusetts law contains provisions similar to those Delaware law provisions
described below which allow for advancement of expenses, the purchase of
indemnify insurance, and the elimination or limitation of liability.
PerkinElmer's charter eliminates the
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personal liability of directors to PerkinElmer or to stockholders for monetary
damages for breach of fiduciary duty to the fullest extent permitted by
Massachusetts law.
Vivid. Vivid's charter eliminates the personal liability of directors to
Vivid or its stockholders for monetary damages for breach of fiduciary duty to
the full extent permitted by Delaware law. Vivid's charter and bylaws further
provide that Vivid may indemnify its officers and directors to the full extent
permitted by Delaware law. Delaware law authorizes a corporation to indemnify
directors, officers, employees and agents of the corporation if the party acted
in good faith in a manner he believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Delaware law further provides that indemnification shall be provided if the
party in question is successful on the merits or otherwise. Vivid has entered
into indemnification agreements with each of its directors. Generally, each
indemnification agreement attempts to provide the maximum protection permitted
by Delaware law with respect to indemnification of directors or officers.
The Securities and Exchange Commission has expressed its position that the
indemnification of directors, officers and controlling person against
liabilities arising under the Securities Act of 1933, as amended, is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
INTERESTED DIRECTOR TRANSACTIONS
PerkinElmer. The PerkinElmer bylaws provide that, absent fraud, no
contract or other transaction between PerkinElmer and any other entity or person
will be affected or invalidated by the fact that a director or officer of
PerkinElmer is directly or indirectly pecuniarily or otherwise interested in or
connected to, or is a party to, the contract or transaction, as long as the
director's or officer's interest in or connection to the transaction or contract
is disclosed to and known by the PerkinElmer board at the time it approves the
transaction or contract. Any such transaction or contract must be approved by a
majority of directors of PerkinElmer who are not interested in or connected to
the contract or transaction. Massachusetts law provides that directors who vote
for and officers who knowingly participate in loans to officers or directors are
jointly and severally liable to the corporation for any part of the loan which
is not repaid, unless a majority of the directors who are not direct or indirect
recipients of such loans or a majority of the stockholders have approved or
ratified the loan as one which in their judgment may reasonably be expected to
benefit the corporation.
Vivid. Delaware law provides that no transaction between a corporation and
a director or officer or any entity in which any of them have an interest is
void or voidable solely for this reason or solely because the director or
officer is present at or participates in the meeting of the board or committee
which authorized the contract or transaction. A transaction is also not void or
voidable solely because a director's votes are counted for such purpose if (1)
after full disclosure the transaction is approved by the disinterested directors
or by the stockholders or (2) the transaction is fair to the corporation at the
time it is approved.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
PerkinElmer. Massachusetts law and the PerkinElmer bylaws provide that,
unless otherwise filled by the stockholders, any vacancy in the board of
directors including a vacancy resulting from enlargement of the board be filled
by the directors.
Vivid. Delaware law provides that vacancies and newly created
directorships may be filled by a majority of directors then in office, unless
the charter or bylaws provide otherwise. If, at the time of filling any vacancy
or newly created directorship, the directors then in office constitute less than
a majority of the entire board as constituted immediately prior to any increase,
the Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least 10% of the total number of shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors at any time to fill a vacancy
not filled by the directors. Vivid's charter provides that any vacancy on the
Vivid
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board shall be filled only by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the board
of directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the vacancy occurred and until the director's successor shall be
elected and qualified.
DIVIDENDS AND REPURCHASES
PerkinElmer. Except with regard to a distribution of stock of the
corporation, Massachusetts law provides that the directors of a corporation
voting in favor of a distribution to stockholders will be jointly and severally
liable if the distribution (1) is made when the corporation is insolvent, (2)
renders the corporation insolvent or (3) violates the corporation's charter.
Stockholders to whom a corporation makes any distribution, except a distribution
of stock of the corporation, may be liable to the corporation for all or part of
such distribution if such distribution is made while the corporation is
insolvent or renders the corporation insolvent.
Vivid. Delaware law provides that the directors of a corporation will be
jointly and severally liable, to the full amount unlawfully paid, to the
corporation and its creditors in the event of a dissolution or insolvency if
they pay a dividend that is not out of the corporation's surplus or net profits
in the fiscal year the dividend is paid.
Vivid's charter contains a so-called "anti-greenmail" provision. The
provision is intended to discourage speculators who accumulate beneficial
ownership of a significant block of stock and then, under the threat of making a
tender offer or proxy contest or instigating some other corporate disruption,
succeed in extracting from the corporation a premium price to repurchase the
shares acquired by the speculator. This tactic has become known as greenmail.
The anti-greenmail provision prohibits Vivid from purchasing any shares of
common stock from a related person at a per share price in excess of the fair
market value at the time of the purchase, unless the purchase is approved by
two-thirds of the holders of the outstanding shares of common stock, excluding
any votes cast by the "related person". The term "related person" is defined in
general to mean any person, other than Mr. S. David Ellenbogen or Dr. Jay A.
Stein, who acquires more than 5% percent of Vivid's voting stock. Stockholder
approval is not required for purchases when the offer is made available on the
same terms to all holders of shares of common stock or when the purchases are
effected in the open market.
CLASSES OF STOCK
PerkinElmer. PerkinElmer's common stock is currently its only outstanding
class of stock, each share of which participates equally in dividends and
distributions upon dissolution of the corporation. Under Massachusetts law and
the PerkinElmer charter, PerkinElmer's directors may determine the preferences,
voting powers, qualifications, and special or relative rights or privileges of
any class of stock before the issuance of any share of that class.
Vivid. Delaware law also allows the directors of a Delaware corporation to
determine the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of a class of stock if the
certificate of corporation so provides. The Vivid charter permits the board of
directors to make such a designation for preferred stock. This preferred stock
may have dividend and distribution rights superior to those of the Vivid common
stock.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials for
PerkinElmer's 2000 Annual Meeting of Stockholders must be submitted to the clerk
of PerkinElmer in writing and received at the executive offices of PerkinElmer
by December 3, 1999. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to stockholder
proposals and must satisfy the notice procedures for stockholder proposals set
forth in the PerkinElmer bylaws.
Stockholders who wish to make a proposal at the 2000 Annual
Meeting -- other than one that will be included in PerkinElmer's proxy
materials -- should notify PerkinElmer no later than February 16, 2000. If
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a stockholder who wishes to present a proposal fails to notify PerkinElmer by
this date, the proxies that management solicits for the meeting will have
discretionary authority to vote on the stockholder's proposal if it is properly
brought before the meeting. If a stockholder makes a timely notification, the
proxies may still exercise discretionary voting authority under circumstances
consistent with the proxy rules of the Securities and Exchange Commission.
LEGAL MATTERS
The validity of the shares of PerkinElmer common stock to be issued in
connection with the merger will be passed upon for PerkinElmer by Hale and Dorr
LLP, Boston, Massachusetts. Certain legal matters with respect to the federal
income tax consequences of the merger will be passed upon for PerkinElmer by
Hale and Dorr LLP, Boston, Massachusetts, and for Vivid by Brown, Rudnick, Freed
& Gesmer, P.C., Boston, Massachusetts.
EXPERTS
The consolidated financial statements of PerkinElmer and the related
financial statement schedules, as of January 3, 1999 and for each of the fiscal
years in the three year period ended January 3, 1999, appearing in PerkinElmer's
Annual Report on Form 10-K for the year ended January 3, 1999 and incorporated
by reference in this proxy statement/prospectus and elsewhere in the
registration statement, the consolidated financial statements of Vivid as of
September 30, 1999 and for each of the three fiscal years then ended, included
in this proxy statement/prospectus and the consolidated financial statements of
ILC Technology, Inc. as of September 27, 1997 and for the fiscal year then
ended, included in PerkinElmer, Inc.'s Form 8-K/A filed on March 20, 1999, which
are incorporated herein by reference have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference or included herein in reliance upon
authority of said firm as experts in giving said reports.
The combined financial statements of the analytical instruments division of
The Perkin-Elmer Corporation as of June 30, 1998 and 1997 and for each of the
fiscal years then ended included in PerkinElmer, Inc.'s Form 8-K/A filed on
August 11, 1999, which are incorporated herein by reference and the consolidated
financial statements of Lumen Technologies, Inc. (formerly BEC Group, Inc.) as
of December 31, 1997 and for the fiscal year then ended, which are incorporated
in this proxy statement/prospectus by reference to PerkinElmer, Inc.'s Form
8-K/A filed on February 26, 1999, March 10, 1999 and March 30, 1999 have been
audited by PricewaterhouseCoopers LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein upon reliance upon authority of said firm as experts in giving
said reports.
WHERE YOU CAN FIND MORE INFORMATION
PerkinElmer files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information PerkinElmer files at the
Commission's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. PerkinElmer's Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the web site maintained by the Commission at
"http://www.sec.gov."
PerkinElmer filed with the Securities and Exchange Commission a
registration statement on Form S-4 under the Securities Act of 1933, as amended,
to register the PerkinElmer common stock issuable pursuant to the merger
agreement. This proxy statement/prospectus does not contain all the information
you can find in the registration statement or the exhibits and schedules to the
registration statement. For further information with respect to PerkinElmer,
Vivid and the PerkinElmer common stock, please refer to the registration
statement, including the exhibits and schedules. You may inspect and copy
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the registration statement, including the exhibits and schedules, as described
above. Statements contained in this proxy statement/prospectus about the
contents of any contract or other document are not necessarily complete, and we
refer you, in each case, to the copy of such contract or other document filed as
an exhibit to the registration statement.
The Securities and Exchange Commission allows PerkinElmer to "incorporate
by reference" information into this proxy statement/prospectus, which means that
PerkinElmer can disclose important information to you by referring you to
another document filed separately with the Commission. The information
incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information in
this proxy statement/prospectus. This proxy statement/ prospectus incorporates
by reference the documents set forth below that PerkinElmer has previously filed
with the Commission. These documents contain important information about
PerkinElmer and its finances.
<TABLE>
<CAPTION>
PERKINELMER SEC FILINGS (FILE NO. 1-5075) PERIOD
- ----------------------------------------- -----------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended January 3, 1999
Quarterly Reports on Form 10-Q and Form Quarters ended April 4, 1999, July 4,
10-Q/A 1999 and October 3, 1999
Current Reports on Form 8-K and Form Reports filed with the SEC on January 25,
8-K/A 1999, February 26, 1999, March 5, 1999,
March 10, 1999, March 15, 1999, March 30,
1999, May 6, 1999, May 7, 1999, June 14,
1999, July 28, 1999, July 30, 1999,
August 11, 1999, September 7, 1999,
September 17, 1999, November 5, 1999 and
November 23, 1999
Definitive Proxy Statements on Schedule Annual Meeting of Stockholders held on
14A April 27, 1999
Special Meeting of Stockholders held on
September 10, 1999
Registration Statements on Form 8-A Filed on May 3, 1965 and February 9, 1995
</TABLE>
PerkinElmer is also incorporating by reference additional documents that it
may file with the Securities and Exchange Commission between the date of this
proxy statement/prospectus and the date of the special meeting of Vivid
stockholders.
PerkinElmer has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to PerkinElmer, and Vivid
has supplied all information contained in this proxy statement/prospectus
relating to Vivid.
Documents incorporated by reference are available from PerkinElmer without
charge, excluding all exhibits unless PerkinElmer has specifically incorporated
by reference an exhibit in this proxy statement/prospectus. Stockholders may
obtain documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from PerkinElmer at the following
address:
PerkinElmer, Inc.
45 William Street
Wellesley, Massachusetts 02481
Attention: Diane J. Basile, Vice President
Investor Relations and Corporate Communications
Telephone: (781) 237-5100
If you would like to request documents from PerkinElmer, please do so by
January 6, 2000 to receive them before the Vivid special meeting.
89
<PAGE> 96
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the merger. We have not
authorized anyone to provide you with information that is different from what is
contained in this proxy statement/prospectus. This proxy statement/prospectus is
dated December [ ], 1999. You should not assume that the information contained
in this proxy statement/prospectus is accurate as of any date other than
December [ ], 1999, and neither the mailing of the proxy statement/prospectus
to Vivid stockholders nor the issuance of PerkinElmer common stock in the merger
shall create any implication to the contrary.
90
<PAGE> 97
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.................... F-2
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1998 AND
1999...................................................... F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
SEPTEMBER 30, 1997, 1998 AND 1999......................... F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE
YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999............. F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
SEPTEMBER 30, 1997, 1998 AND 1999......................... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-7
</TABLE>
F-1
<PAGE> 98
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vivid Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Vivid
Technologies, Inc. (a Delaware corporation) and subsidiaries as of September 30,
1998 and 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Vivid
Technologies, Inc. and subsidiaries as of September 30, 1998 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1999, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 3, 1999
F-2
<PAGE> 99
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $15,555,189 $11,624,386
Short-term investments.................................... 10,407,209 8,073,323
Accounts receivable....................................... 7,316,863 6,375,756
Inventories............................................... 7,874,036 9,824,895
Deferred tax asset........................................ 606,790 1,362,020
Other current assets...................................... 1,593,021 2,682,189
----------- -----------
Total current assets.............................. 43,353,108 39,942,569
----------- -----------
PROPERTY AND EQUIPMENT, AT COST:
Machinery and equipment................................... 2,546,476 2,684,590
Leasehold improvements.................................... 228,374 243,396
Furniture and fixtures.................................... 129,479 117,554
----------- -----------
2,904,329 3,045,540
Less -- Accumulated depreciation and amortization......... 1,488,893 1,899,802
----------- -----------
1,415,436 1,145,738
----------- -----------
LONG-TERM INVESTMENTS....................................... -- 1,083,618
OTHER ASSETS, NET........................................... 1,155,945 177,471
----------- -----------
$45,924,489 $42,349,396
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 846,457 $ 1,615,665
Accrued expenses.......................................... 2,766,268 3,466,492
Deferred revenue.......................................... 3,411,864 3,091,852
----------- -----------
Total current liabilities......................... 7,024,589 8,174,009
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value --
Authorized -- 1,000,000 shares
Issued -- none
Common stock, $.01 par value --
Authorized -- 30,000,000 shares
Issued -- 9,904,666 and 10,050,616 shares at September
30, 1998 and 1999, respectively....................... 99,047 100,506
Capital in excess of par value.............................. 26,745,142 26,997,430
Treasury stock, at cost -- 95,000 shares at September 30,
1999...................................................... -- (346,562)
Retained earnings........................................... 12,055,711 7,424,013
----------- -----------
Total stockholders' equity........................ 38,899,900 34,175,387
----------- -----------
$45,924,489 $42,349,396
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 100
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
-----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................................ $31,702,188 $38,718,041 $21,185,001
Cost of Revenues (includes approximately $988,000,
$1,014,000 and $384,000, respectively, of
royalties to Hologic; see Note 7)................. 13,202,925 16,360,872 13,392,507
----------- ----------- -----------
Gross profit...................................... 18,499,263 22,357,169 7,792,494
----------- ----------- -----------
Operating Expenses (includes approximately $112,000,
$138,000 and $258,000, respectively, of management
service expenses to Hologic; see Note 7):
Research and development.......................... 4,390,446 5,858,883 6,335,726
Selling and marketing............................. 3,556,006 4,334,823 3,729,547
General and administrative........................ 2,928,658 3,952,431 4,060,651
Litigation expenses............................... 427,000 220,000 --
Restructuring and asset writedown................. -- -- 1,207,686
----------- ----------- -----------
Total operating expenses.................. 11,302,110 14,366,137 15,333,610
----------- ----------- -----------
Income (Loss) from Operations....................... 7,197,153 7,991,032 (7,541,116)
Interest Income..................................... 812,926 1,270,759 1,044,246
Other Income (expense), net......................... 48,834 206,880 (66,351)
----------- ----------- -----------
Income (loss) before income taxes......... 8,058,913 9,468,671 (6,563,221)
Provision for (Benefit from) Income Taxes........... 2,193,335 2,838,389 (1,931,523)
----------- ----------- -----------
Net income (loss)......................... $ 5,865,578 $ 6,630,282 $(4,631,698)
=========== =========== ===========
Net Income (Loss) per Share:
Basic............................................. $ .78 $ .68 $ (.47)
=========== =========== ===========
Diluted........................................... $ .60 $ .65 $ (.47)
=========== =========== ===========
Weighted Average Number of Shares Outstanding:
Basic............................................. 7,547,964 9,684,975 9,911,282
=========== =========== ===========
Diluted........................................... 9,838,300 10,251,429 9,911,282
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 101
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
SERIES B SERIES D
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
--------------------- --------------------- ---------------------- CAPITAL IN
NUMBER $.01 NUMBER $.01 NUMBER $.01 EXCESS OF
OF SHARES PAR VALUE OF SHARES PAR VALUE OF SHARES PAR VALUE PAR VALUE
--------- --------- --------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1996.... 250,000 $ 2,500 254,585 $ 2,546 1,740,520 $ 17,405 $ 594,279
Exercise of stock options,
including tax benefit of
$659,194....................... -- -- -- -- 333,800 3,338 809,231
Exercise of stock purchase
warrants................... -- -- -- -- 76,514 765 32,195
Conversion of preferred stock
into common stock.......... (250,000) (2,500) (254,585) (2,546) 5,045,850 50,459 (45,413)
Sale of common stock, net of
issuance costs of
approximately $2,777,000... -- -- -- -- 2,300,000 23,000 24,800,493
Net income................... -- -- -- -- -- -- --
-------- ------- -------- ------- ---------- -------- -----------
Balance, September 30, 1997.... -- -- -- -- 9,496,684 94,967 26,190,785
Exercise of stock options,
including tax benefit of
$247,617................... -- -- -- -- 159,110 1,591 472,090
Exercise of stock purchase
warrants................... -- -- -- -- 248,872 2,489 82,267
Net income................... -- -- -- -- -- -- --
-------- ------- -------- ------- ---------- -------- -----------
Balance, September 30, 1998.... -- -- -- -- 9,904,666 99,047 26,745,142
Exercise of stock options,
including tax benefit of
$67,300.................... -- -- -- -- 100,450 1,004 104,868
Purchase of treasury stock... -- -- -- -- -- -- --
Issuance of restricted
stock...................... -- -- -- -- 45,500 455 147,420
Net loss..................... -- -- -- -- -- -- --
-------- ------- -------- ------- ---------- -------- -----------
Balance, September 30, 1999.... -- $ -- -- $ -- 10,050,616 $100,506 $26,997,430
======== ======= ======== ======= ========== ======== ===========
<CAPTION>
TREASURY STOCK
--------------------- RETAINED
NUMBER EARNINGS
OF SHARES COST (DEFICIT) TOTAL
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, September 30, 1996.... -- -- $ (440,149) $ 176,581
Exercise of stock options,
including tax benefit of
$659,194....................... -- -- -- 812,569
Exercise of stock purchase
warrants................... -- -- -- 32,960
Conversion of preferred stock
into common stock.......... -- -- -- --
Sale of common stock, net of
issuance costs of
approximately $2,777,000... -- -- -- 24,823,493
Net income................... -- -- 5,865,578 5,865,578
------ --------- ----------- -----------
Balance, September 30, 1997.... -- -- 5,425,429 31,711,181
Exercise of stock options,
including tax benefit of
$247,617................... -- -- -- 473,681
Exercise of stock purchase
warrants................... -- -- -- 84,756
Net income................... -- -- 6,630,282 6,630,282
------ --------- ----------- -----------
Balance, September 30, 1998.... -- -- 12,055,711 38,899,900
Exercise of stock options,
including tax benefit of
$67,300.................... -- -- -- 105,872
Purchase of treasury stock... 95,000 (346,562) -- (346,562)
Issuance of restricted
stock...................... -- -- -- 147,875
Net loss..................... -- -- (4,631,698) (4,631,698)
------ --------- ----------- -----------
Balance, September 30, 1999.... 95,000 $(346,562) $ 7,424,013 $34,175,387
====== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 102
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
-----------------------------------------
1997 1998 1999
------------ ------------ -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................... $ 5,865,578 $ 6,630,282 $(4,631,698)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating
activities --
Depreciation and amortization.................. 441,072 759,420 591,524
Write-down of assets related to
restructuring................................ -- -- 1,080,050
Changes in assets and liabilities --
Accounts receivable.......................... (5,773,041) 2,176,656 941,107
Inventories.................................. (1,453,438) (1,678,940) (1,950,859)
Deferred tax asset........................... (425,790) -- (755,230)
Other current assets......................... (297,827) (850,292) (1,128,057)
Accounts payable............................. 72,957 (724,740) 769,208
Accrued expenses............................. (1,014,483) 347,837 700,224
Deferred revenue............................. 713,703 1,656,076 (320,012)
------------ ------------ -----------
Net cash (used in) provided by operating
activities................................ (1,871,269) 8,316,299 (4,703,743)
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................ (533,034) (836,893) (359,219)
Purchases of investments.......................... (11,650,261) (12,384,948) (9,479,733)
Maturities of investments......................... 3,999,000 9,629,000 10,730,000
Increase (decrease) in other assets............... 109,620 (1,298,336) (25,293)
------------ ------------ -----------
Net cash (used in) provided by investing
activities................................ (8,074,675) (4,891,177) 865,755
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock............ 24,823,493 -- --
Proceeds from exercise of stock purchase
warrants....................................... 32,960 84,756 --
Redemption of Series A and Series C preferred
stock.......................................... (5,780,650) -- --
Proceeds from exercise of stock options (including
tax benefit)................................... 812,569 473,681 253,747
Purchase of treasury stock........................ -- -- (346,562)
Payments on capital lease obligations............. (32,522) -- --
------------ ------------ -----------
Net cash provided (used in) by financing
activities................................ 19,855,850 558,437 (92,815)
------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... 9,909,906 3,983,559 (3,930,803)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR........ 1,661,724 11,571,630 15,555,189
------------ ------------ -----------
CASH AND CASH EQUIVALENTS, END OF YEAR.............. $ 11,571,630 $ 15,555,189 $11,624,386
============ ============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for --
Interest....................................... $ 2,040 $ -- $ --
============ ============ ===========
Income taxes................................... $ 1,772,500 $ 2,325,033 $ 6,200
============ ============ ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of Series B and D preferred stock into
common stock................................... $ 5,045,850 $ -- $ --
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 103
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Vivid Technologies, Inc. (the Company) is a leading developer, manufacturer
and marketer of automated inspection systems that detect plastic and other
explosives in airline baggage.
On October 4, 1999, the Company entered into an agreement whereby the
Company would be acquired by PerkinElmer, Inc. (formerly known as EG&G, Inc.) a
global technology company that provides products and systems to the medical,
pharmaceutical, telecommunications, semiconductor, aerospace, photographic and
other markets. The transaction will take the form of a stock merger in which
stockholders of the Company will receive one share of PerkinElmer common stock
for each 6.2 shares of the Company's common stock. Based on PerkinElmer's stock
price on the date of the transaction, this transaction would be valued at
approximately $62.5 million, or $6.25 per share. The transaction is subject to
shareholder approval.
The accompanying consolidated financial statements reflect the application
of the accounting policies as described below.
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Vivid Technologies UK Ltd., Vivid Foreign
Sales Corporation and Vivid Securities Corporation. All material intercompany
transactions and balances have been eliminated in consolidation.
(B) REVENUE RECOGNITION
The Company recognizes product revenue upon shipment. The Company's product
sales are not conditioned upon satisfactory installation by the Company.
Installation is typically performed by the customer or a systems integrator of
the airport's baggage handling system. However, the Company has typically
assisted the systems integrator and accrues for estimated installation costs, in
addition to estimated warranty costs, at the time of shipment. The Company
recognizes revenue from the sale of extended warranty agreements ratably over
the extended warranty period.
During fiscal years 1997, 1998 and 1999, the Company recognized revenue of
approximately $821,000, $2,699,000 and $1,207,000, respectively, under two
separate research and development grants from an agency of the U.S. government
to pursue certain explosives detection research. The Company recognizes revenue
under these grants as services are rendered, provided that the government has
appropriated sufficient funds for the work. The Company retains rights to all
technological discoveries and products resulting from these efforts.
Deferred revenue represents amounts received from customers for products
and services in advance of revenue recognition.
(C) CASH AND CASH EQUIVALENTS AND INVESTMENTS
The Company accounts for investments in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. In accordance with SFAS No. 115,
investments that the Company has the positive intent and ability to hold to
maturity are reported at amortized cost, which approximates fair market value,
and are classified as held-to-maturity. The Company has deemed all of its
investments to be held-to-maturity, which total approximately $25,477,000 and
$17,879,000 at September 30, 1998 and September 30, 1999, respectively.
Cash equivalents are highly liquid investments with original maturities of
three months or less at the time of acquisition. As of September 30, 1998 and
1999, there was approximately $15,070,000 and $8,722,000, respectively, in cash
equivalents consisting of funds held in money market accounts, certificates
F-7
<PAGE> 104
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of deposit, municipal bonds and repurchase agreements with overnight maturities.
Short-term investments have maturities of greater than three months but less
than one year. Investments with maturities of greater than one year have been
classified as long-term investments. As of September 30, 1999, the Company had
long-term investments of approximately $1,084,000. As of September 30, 1998 the
Company had no long-term investments.
(D) CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit
Risk, requires disclosure of any significant off-balance-sheet and credit risk
concentrations. Financial instruments that subject the Company to credit risk
consist primarily of cash and cash equivalents, investments and trade accounts
receivable. The Company places its investments in several financial
institutions. The Company has not experienced any material losses on these
investments to date. The Company has not experienced any material losses related
to receivables from individual customers or groups of customers from any
geographic region or in the baggage security and inspection industry.
During fiscal 1997, the Company entered into forward foreign exchange
contracts to hedge certain receivables denominated in a foreign currency. The
purpose of this hedging activity was to protect the Company from the risk that
dollar cash flows from such receivables would be adversely affected by changes
in exchange rates. The Company does not engage in speculative hedging practices.
Gains and losses on forward foreign exchange commitments are deferred and
recognized in revenue in the same period as the hedged transactions. As of
September 30, 1998 and 1999, the Company had approximately $412,000 and $409,000
of receivables denominated in foreign currencies. In accordance with SFAS No.
105, the contracts were marked to market. The Company did not have any forward
foreign exchange contracts at September 30, 1998 or September 30, 1999.
The Company received greater than 10% of total revenues from the following
customers during the years ended September 30, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
CUSTOMER 1997 1998 1999
- -------- ----- ----- -----
<S> <C> <C> <C>
A 39% 42% 13%
B 19 12 *
C 27 * *
D * 16 *
H * * 16
I * * 11
J * * 16
</TABLE>
- ---------------
* Revenues derived from these customers were less than 10% of total revenues.
F-8
<PAGE> 105
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company had accounts receivable balances greater than 10% of total
accounts receivable from the following customers as of September 30, 1998 and
1999:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
CUSTOMER 1998 1999
- -------- ---- ----
<S> <C> <C>
A 26% *%
B * 11
D * 15
E 19 *
F 11 *
G 19 *
H * 13
J * 30
</TABLE>
- ---------------
* Accounts receivable balances from these customers were less than 10% of total
accounts receivable.
(E) DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist mainly of cash and cash
equivalents, investments, accounts receivable and accounts payable. The carrying
amounts of the Company's cash and cash equivalents, investments, accounts
receivable and accounts payable approximate fair value due to the short-term
nature of these instruments.
(F) TRANSLATION OF FOREIGN CURRENCIES
The accounts of the foreign subsidiary are translated in accordance with
SFAS No. 52, Foreign Currency Translation. In translating the accounts of the
foreign subsidiary into U.S. dollars, assets and liabilities are translated at
the rate of exchange in effect at year-end, while stockholders' equity is
translated at historical rates. Revenue and expense accounts are translated
using the weighted average exchange rate in effect during the year. Foreign
currency transaction gains or losses for Vivid Technologies UK Ltd. are included
in the accompanying consolidated statements of operations since the functional
currency for this subsidiary is the U.S. dollar.
The Company had sales of approximately $8,044,000, $6,804,000 and
$2,815,000 denominated in foreign currencies during 1997, 1998 and 1999,
respectively. The Company recognized a loss of approximately $47,000, a gain of
approximately $36,000 and a loss of approximately $92,000, related to such
foreign currency transactions in 1997, 1998 and 1999, respectively, which are
included in other income (loss) in the accompanying consolidated statements of
operations.
(G) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Raw materials............................... $4,061,775 $3,634,859
Work-in-process............................. 1,440,435 1,619,465
Finished goods.............................. 2,371,826 4,570,571
---------- ----------
$7,874,036 $9,824,895
========== ==========
</TABLE>
Finished goods and work-in-process inventories consist of materials, labor
and overhead.
F-9
<PAGE> 106
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(H) DEPRECIATION AND AMORTIZATION
The Company provides for depreciation and amortization by charges to
operations using the straight-line and declining-balance methods, which allocate
the cost of property and equipment over their estimated useful lives, as
follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSETS CLASSIFICATION USEFUL LIFE
- --------------------- -------------
<S> <C>
Machinery and equipment 5 years
Leasehold improvements Life of lease
Furniture and fixtures 7 years
</TABLE>
(I) OTHER ASSETS
During 1998, the Company entered into an exclusive technology license
agreement. Under the agreement, the Company paid $1,250,000 for the exclusive
right to manufacture, use or sell the licensed technology for a three-year
period, with a nonexclusive right for the remainder of the life of the patents.
The Company also has the option to extend the exclusive rights beyond three
years. Upon the ultimate commercialization of the technology, the Company will
be required to pay royalties on sales of products incorporating the licensed
technology, as defined. The license fee was included in other assets in the
accompanying consolidated balance sheets at September 30, 1998 and was being
amortized over a period of five years. At September 30, 1998, the Company had
recorded accumulated amortization of approximately $250,000 related to this
asset. During the second quarter of fiscal year 1999, the Company implemented a
restructuring plan and abandoned this technology. Accordingly, the net book
value of this license agreement was written off (see Note 2).
Other assets also consist of deposits and patent costs, which are being
amortized over 10 years using the straight-line method. The Company periodically
assesses the realizability of long-lived assets, including intangible assets
such as patent costs and license fees, in accordance with SFAS No. 121,
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be
Disposed Of. The Company has not recorded any impairment of its intangible
assets to date, other than the write-off described above and in Note 2.
(J) NET INCOME (LOSS) PER SHARE
The Company applies SFAS No. 128, Earnings per Share. This statement
established standards for computing and presenting earnings per share and
applies to entities with publicly traded common stock or potential common stock.
Basic earnings per share was determined by dividing net income (loss) by
the weighted average common shares outstanding during the period. Diluted
earnings per share was determined by dividing net income (loss) by diluted
weighted average shares outstanding. Diluted weighted average shares reflects
the dilutive effect, if any, of potential common stock. Potential common stock
includes common stock options and warrants to purchase common stock to the
extent their effect is dilutive. Basic net loss per share is the same as diluted
net loss per share for the year ended September 30, 1999 as the effects of the
potential common stock are antidilutive.
F-10
<PAGE> 107
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The calculations of basic and diluted weighted average shares outstanding
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------
1997 1998 1999
--------- ---------- ---------
<S> <C> <C> <C>
Basic weighted average shares outstanding........ 7,547,964 9,684,975 9,911,282
Weighted average potential common stock.......... 2,290,336 566,454 --
--------- ---------- ---------
Diluted weighted average shares outstanding...... 9,838,300 10,251,429 9,911,282
========= ========== =========
</TABLE>
Diluted weighted average shares outstanding do not include approximately
114,000, 503,000, and 1,266,000 shares of potential common stock for the years
ended September 30, 1997, 1998 and 1999, respectively, as their effect would be
antidilutive.
(K) MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The Company
is subject to risks and uncertainties, in particular, dependence on key
customers and international sales, rapid technological change, dependence on
government regulations and significant fluctuations and unpredictability of
operating results.
(L) RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Research and development costs have been charged to operations as incurred.
SFAS No. 86, Accounting for the Costs of Computer Software To Be Sold, Leased or
Otherwise Marketed, requires the capitalization of certain computer software
development costs incurred after technological feasibility is established. The
Company believes that once technological feasibility of a software product has
been established, the additional development costs incurred to bring the product
to a commercially acceptable level are not significant.
(M) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. SFAS No. 133, as amended by SFAS No. 137, is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. As the
Company does not currently engage in derivatives or hedging transactions, there
will be no current impact to the Company's results of operations, financial
position or cash flows upon the adoption of SFAS No. 133.
(N) RECLASSIFICATIONS
Certain reclassifications have been made to prior year financial statements
to conform with the current year presentation.
(2) RESTRUCTURING AND ASSET WRITE-DOWN
In the second quarter of fiscal 1999, the Company implemented a
restructuring plan that included the shutdown of a development facility and the
abandonment of certain technology (see Note 1(i)), resulting in a nonrecurring
charge of approximately $1.2 million. The restructuring included a $1.1 million
write-off of unamortized license fees and fixed assets related to an abandoned
technology, $76,000 of lease
F-11
<PAGE> 108
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
termination and certain other contractual termination costs and $52,000 of
severance costs for terminated research and development personnel.
The total cash impact of the restructuring amounted to approximately
$128,000, of which $116,000 has been paid as of September 30, 1999. As of
September 30, 1999, approximately $12,000 of accrued restructuring costs
remained. The accrued restructuring costs are expected to be paid by the end of
first quarter of fiscal 2000.
During the second quarter of fiscal 1999, the Company also implemented a
cost cutting plan to reduce operating costs. The cost cutting plan included a
10% workforce reduction, the cost of which has not been included in the
restructuring, described above. The costs associated with the workforce
reduction were paid by March 31, 1999 and are included in the accompanying
consolidated statements of operations in cost of revenues, research and
development, selling and marketing, and general and administrative expenses.
(3) INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, Accounting for
Income Taxes, the objective of which is to recognize the amount of current and
deferred income taxes at the date of the financial statements as a result of all
differences in the tax basis and financial statement carrying amount of assets
and liabilities, as measured by enacted tax laws.
The approximate income tax effect of each type of temporary difference and
carryforward is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1998 1999
-------- ----------
<S> <C> <C>
Research and development credit carryforwards........ $ 32,000 $ 220,930
Nondeductible accruals............................... 331,000 423,902
Nondeductible reserves............................... 223,000 387,008
State net operating loss carryforwards............... -- 150,502
Intangible assets.................................... -- 154,167
Other temporary differences.......................... 20,790 25,511
-------- ----------
Net deferred tax asset............................. $606,790 $1,362,020
======== ==========
</TABLE>
Under SFAS No. 109, Accounting for Income Taxes, the Company recognizes a
deferred tax asset for the future benefit of its temporary differences if it
concludes that it is more likely than not that the deferred tax asset will be
realized.
A reconciliation of the federal statutory rate to the Company's effective
tax rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------
1997 1998 1999
------ ------ -------
<S> <C> <C> <C>
Income tax provision (benefit) at federal statutory
rate.................................................. 34.0% 34.0% (34.0)%
Increase (decrease) in tax resulting from --
State tax provision, net of federal benefit......... 3.2 1.9 2.0
Foreign sales corporation benefit................... (5.0) (3.5) --
Reduction in valuation allowance.................... (1.2) -- --
Research and development tax credit utilized........ (3.8) (3.3) --
Other............................................... (0.2) 0.9 2.0
---- ---- -----
Effective tax rate............................... 27.0% 30.0% (30.0)%
==== ==== =====
</TABLE>
F-12
<PAGE> 109
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for (benefit from) income taxes in the accompanying
consolidated statements of operations consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Federal --
Current............................. $2,173,335 $2,767,389 $(1,241,293)
Deferred............................ (224,000) -- (447,304)
---------- ---------- -----------
1,949,335 2,767,389 (1,688,597)
---------- ---------- -----------
State --
Current............................. 271,000 71,000 65,000
Deferred............................ (27,000) -- (307,926)
---------- ---------- -----------
244,000 71,000 (242,926)
---------- ---------- -----------
$2,193,335 $2,838,389 $(1,931,523)
========== ========== ===========
</TABLE>
(4) LINE OF CREDIT
The Company had an unsecured demand line of credit with a bank for
$5,000,000 that expired in June 30, 1999. There were no amounts outstanding
under this line at September 30, 1998 or September 30, 1999. Subsequent to year
end, the Company secured a $3.0 million bank line of credit which expires in
February 2000. The line of credit bears interest at the bank's prime rate (8.25%
at September 30, 1999).
(5) STOCKHOLDERS' EQUITY
(A) PREFERRED STOCK
In December 1996, the Company's Board of Directors authorized the issuance
of up to 1,000,000 shares of undesignated $.01 par value preferred stock, the
rights and privileges of which are to be determined by the Company's Board of
Directors. There are no preferred shares outstanding as of September 30, 1998
and September 30, 1999.
(B) INITIAL PUBLIC OFFERING
During fiscal 1997, the Company completed its initial public offering of
2,300,000 shares of the Company's common stock at $12.00 per share. The Company
received net proceeds of approximately $24,823,000 after deducting the
underwriters' commission and issuance costs. The Company used approximately
$5,781,000 of the net proceeds to redeem all of its outstanding shares of
redeemable Series A and Series C preferred stock. In connection with the initial
public offering, all of the Company's Series B and Series D preferred stock was
converted into an aggregate of 5,045,850 shares of common stock.
(C) COMMON STOCK
The Company has authorized 30,000,000 shares of $.01 par value common
stock. The Company has reserved the following number of common shares as of
September 30, 1999:
<TABLE>
<S> <C>
Exercise of stock purchase warrants....................... 53,680
Exercise of stock options................................. 1,601,120
---------
1,654,800
=========
</TABLE>
F-13
<PAGE> 110
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(D) STOCK REPURCHASE PLAN
On January 5, 1999, the Company announced that its board of directors
authorized the repurchase of up to 1,000,000 shares of the Company's outstanding
common stock for an aggregate purchase price not to exceed $8 million. The
repurchases were to be made from time to time on the open market or in private
transactions determined by the Company's management and funded out of the
Company's working capital. During the year ended September 30, 1999, the Company
repurchased a total of 95,000 shares at cost for a total of $346,562, which are
included as treasury stock in the accompanying consolidated financial
statements.
(E) STOCK PLANS
1989 Combination Stock Option Plan
The Company's 1989 Combination Stock Option Plan (the 1989 Plan) provides
for the grant to key employees incentive stock options to purchase shares of the
Company's common stock at a price not less than fair market value as determined
by the Board of Directors, or nonqualified options at a price specified by the
Board of Directors. Under the 1989 Plan, the Company has reserved shares for the
granting of options to purchase up to 1,250,000 shares of the Company's common
stock.
The 1996 Equity Incentive Plan
In October 1996, the Company approved the 1996 Equity Incentive Plan (the
1996 Equity Plan) for which the Company reserved shares for the granting of
options to purchase up to 750,000 shares of the Company's common stock.
The 1996 Nonemployee Director Stock Option Plan
In October 1996, the Company approved the 1996 Nonemployee Director Stock
Option Plan (the Director Plan) for which the Company has reserved shares for
the granting of options to purchase up to 125,000 shares of the Company's common
stock.
The 1999 Equity Incentive Plan
In February 1999, Vivid approved the 1999 Equity Incentive Plan (the 1999
Equity Plan), for which Vivid has reserved shares for the granting of options to
purchase up to 300,000 shares of common stock.
Repricing
In October 1998, the Board of Directors authorized a Stock Option Exchange
Program (the Program). Under the terms of the Program all current employees
excluding executive officers subject to regulation 16(b) had the option to
request that the Company cancel their existing options and replace them with a
new option. Options for a total of 262,650 shares were surrendered under the
Program by employees and exchanged for new options at the new option exercise
price and vesting schedule. The new exercise price was equal to the fair market
value of the Company's common stock on October 13, 1998, or $4.44. These
repriced options are reflected as grants and cancellations in the stock activity
below.
F-14
<PAGE> 111
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 30, 1999, there were 394,120 options available for future
grants under all plans. A summary of stock option activity under all plans is as
follows:
<TABLE>
<CAPTION>
PRICE WEIGHTED AVERAGE
SHARES PER SHARE EXERCISE PRICE
--------- -------------- ----------------
<S> <C> <C> <C>
Outstanding, September 30, 1996.......... 856,900 $ .10 - $ 3.00 $ .78
Granted................................ 386,050 9.50 - 17.00 14.27
Exercised.............................. (333,800) .10 - 3.00 .46
Terminated............................. (20,450) .50 - 3.00 1.15
--------- -------------- ------
Outstanding, September 30, 1997.......... 888,700 .10 - 17.00 6.75
Granted................................ 225,950 .01 - 14.88 12.77
Exercised.............................. (159,110) .01 - 11.00 .60
Terminated............................. (148,890) .50 - 16.75 11.08
--------- -------------- ------
Outstanding, September 30, 1998.......... 806,650 .10 - 17.00 8.85
Granted................................ 908,700 2.25 - 6.50 4.18
Exercised.............................. (145,950) .10 - 4.44 1.34
Terminated............................. (357,400) 1.00 - 16.75 11.67
--------- -------------- ------
Outstanding, September 30, 1999.......... 1,212,000 $ .50 - $17.00 $ 5.46
========= ============== ======
Exercisable, September 30, 1997.......... 264,540 $ .10 - $ 9.50 $ .65
========= ============== ======
Exercisable, September 30, 1998.......... 276,580 $ .10 - $17.00 $ 4.33
========= ============== ======
Exercisable, September 30, 1999.......... 369,610 $ .50 - $17.00 $ 5.18
========= ============== ======
</TABLE>
During fiscal 1998 and 1999, the Company issued options to purchase 10,000
and 47,500 shares, respectively, of common stock to employees at a price below
fair market. All other options were issued at the fair market value at the grant
date. The Company recorded the difference between the grant price and fair
market value as compensation.
The range of exercise prices for options outstanding and options
exercisable at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
WEIGHTED OPTIONS OUTSTANDING OPTIONS EXERCISABLE
AVERAGE -------------------------- ------------------------
REMAINING WEIGHTED WEIGHTED
RANGE OF CONTRACTUAL LIFE AVERAGE AVERAGE
EXERCISE PRICE (IN YEARS) NUMBER EXERCISE PRICE NUMBER EXERCISE PRICE
- -------------- ---------------- --------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C>
$.50-$1.00 4.79 167,650 $0.76 135,450 $0.71
$2.25-$4.00 8.57 196,250 3.07 89,900 3.56
$4.31-$4.44 8.79 644,600 4.42 64,260 4.44
$5.06-$11.50 8.82 16,000 10.14 12,500 11.50
$13.88-$13.88 8.02 75,000 13.88 15,000 13.88
$16.25-$17.00 7.35 112,500 16.33 52,500 16.43
---- --------- ----- ------- -----
Total 8.02 1,212,000 $5.46 369,610 $5.18
==== ========= ===== ======= =====
</TABLE>
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. In October 1995, the FASB issued SFAS No. 123, Accounting for
Stock-Based Compensation, which established a fair-value-based method of
F-15
<PAGE> 112
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting for stock-based compensation plans. The Company has adopted the
disclosure-only alternative under SFAS No. 123 which requires disclosure of the
pro forma effects on net income and earnings per share as if SFAS No. 123 had
been adopted, as well as certain other information.
The Company has computed the pro forma disclosures required under SFAS No.
123 for all stock options and warrants granted to employees of the Company in
fiscal 1997, 1998 and 1999 using the Black-Scholes option pricing model
prescribed by SFAS No. 123. The assumptions used to calculate the SFAS No. 123
pro forma disclosure and the weighted average information for 1997, 1998 and
1999 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Risk-free interest rate..................................... 6.01% 5.52% 6.23%
Expected dividend yield..................................... -- -- --
Expected lives (in years)................................... 4.9 4.7 4.2
Expected volatility......................................... 52% 67% 80%
Weighted-average grant date fair value of options granted
during the year........................................... $7.16 $8.08 $2.61
</TABLE>
The pro forma effect of applying SFAS No. 123 for all options and granted
to employees of the Company in 1997, 1998 and 1999 would be as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
---------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Net income (loss) --
As reported................................... $5,865,578 $6,630,282 $(4,631,698)
Pro forma................................... 5,104,357 5,382,540 (6,361,223)
Net income (loss) per share --
Basic --
As reported.............................. $ .78 $ .68 $ (.47)
Pro forma................................ .68 .56 (.64)
Diluted --
As reported.............................. $ .60 $ .65 $ (.47)
Pro forma................................ .52 .53 (.64)
</TABLE>
The resulting pro forma compensation expense may not be representative of
the amount to be expected in future years, as the pro forma expense may vary
based on the number of options granted. The Black-Scholes option pricing model
was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. In addition, option pricing
models require the input of highly subjective assumptions, including expected
stock price volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options and because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
(F) STOCK PURCHASE WARRANTS
As of September 30, 1999, the Company had an outstanding warrant to
purchase 53,680 shares of common stock for $1.50 per share. On October 27, 1999,
the stock purchase warrant was exercised, resulting in a net issuance of 37,675
shares of common stock.
F-16
<PAGE> 113
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(G) SHAREHOLDER PURCHASE RIGHTS PLAN
In October 1998, the Company's Board of Directors adopted a Shareholder
Protection Rights Plan declaring a dividend of one right for each share of the
Company's common stock outstanding at the close of business on October 27, 1998.
The rights entitle the Company's shareholders to purchase one one-thousandth of
a share of a series of junior participating preferred stock of the Company at an
exercise price of $60.00, subject to adjustment. The rights will not be
exercisable until a subsequent distribution date which will occur if a person or
group acquires beneficial ownership of 15% or more of the Company's common stock
or announces a tender or exchange offer that would result in a group owning 15%
or more of the Company's common stock. Subject to certain limited exceptions, if
a person or group acquires beneficial ownership of 15% or more of the Company's
outstanding common stock, each holder of a right (other than the 15% holder
whose rights become void once such holder reaches the 15% threshold) will
thereafter have a right to purchase, upon payment of the purchase price of the
right, that number of shares of the Corporation's common stock, which at the
time of such transaction will have a market value equal to two times the
purchase price of the Right. In the event that, at any time after a person or
group acquires 15% or more of the Company' common stock, the Company is acquired
in a merger or other business combination transaction of 50% or more of its
consolidated assets or earning power are sold, each holder of a right will
thereafter have the right to purchase, upon payment of the purchase price of the
right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the purchase
price of the right. The Board of Directors of the Company may exchange the
rights (other than rights owned by such person or group which have become void),
in whole or in part, at an exchange ratio of one share of common stock per right
(subject to adjustment). At any time prior to the time any person or group
acquires 15% or more of the Company's common stock, the Board of Directors of
the Company may redeem the rights in whole, but not in part, at a price of
$0.001 per right. The rights will expire on October 13, 2008 unless earlier
redeemed or exchanged. In connection with the PerkinElmer acquisition, the
rights were not exercised.
(6) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
The Company has adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, in the fiscal year ended September 30, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. The Company's chief decision-maker, as defined
under SFAS No. 131, is a combination of the Chief Executive Officer and the
Chief Financial Officer. Based on the criteria established by SFAS No. 131, the
Company currently has one reportable operating segment, the results of which are
disclosed in the accompanying consolidated financial statements.
F-17
<PAGE> 114
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's revenues by geographic region is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
United Kingdom......................................... 44% 43% 40%
United States.......................................... -- 22 27
Greece................................................. -- -- 11
Scotland............................................... -- 5 4
Malaysia............................................... 27 2 3
Hong Kong.............................................. 19 -- --
France................................................. -- 6 --
China.................................................. -- 12 --
Other.................................................. 10 10 15
---- ---- ----
Total........................................ 100% 100% 100%
==== ==== ====
</TABLE>
Substantially all of the Company's assets are located in the United States.
(7) RELATED PARTY TRANSACTIONS
(A) MANAGEMENT SERVICES AGREEMENT
The Company has an agreement with Hologic, Inc. (Hologic), an affiliated
company, whereby Hologic provides management, administrative and support
services. The Company paid Hologic for all direct costs incurred, as well as a
portion of Hologic's overhead costs, as defined, representing a pro rata portion
of costs attributable to the Company. Expenses charged to operations under these
agreements were approximately $112,000, $138,000 and $258,000 in fiscal 1997,
1998, and 1999, respectively. Approximately $27,000 and $78,000 had not been
paid as of September 30, 1998 and September 30, 1999, respectively, under the
management services agreement.
(B) LICENSE AND TECHNOLOGY AGREEMENT
The Company has an agreement with Hologic whereby the Company has a
perpetual, exclusive, worldwide license to utilize certain of Hologic's
technology and patents for the purpose of developing the Company's x-ray
screening security systems for explosives, drugs, currency and other contraband
(the Exclusive License). In September 1996, this license was amended to grant
the Company a nonexclusive license to utilize these patents and technology for
certain new product development for other applications (the Nonexclusive
License). Royalty payments to Hologic under the Exclusive License are 5% of
revenues, as defined, on the first $50 million in sales; thereafter, payments
are 3% on revenues up to $200 million, with no royalty payments on aggregate
revenues in excess of $200 million. During 1997, the Company reduced its royalty
payments to 3% under the Exclusive License upon achievement of cumulative
revenues in excess of $50 million. Royalty payments under the Nonexclusive
License are 3% on sales up to $200 million, with no royalty payments on
aggregate revenues in excess of $200 million. The agreement terminates by mutual
agreement of the two parties or upon certain other defined circumstances. During
fiscal 1997, 1998 and 1999, the Company incurred royalty expenses under the
Exclusive License of approximately $988,000, $1,014,000 and $384,000,
respectively, of which approximately $504,000 and $237,000 had not been paid as
of September 30, 1998 and September 30, 1999, respectively. To date, the Company
has not incurred any royalty expenses under the Nonexclusive License. In
connection with the acquisition of the Company by PerkinElmer, PerkinElmer has
agreed to pay Hologic $2.0 million, plus royalties accrued through September 30,
1999, in exchange for termination of future royalties.
F-18
<PAGE> 115
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) PROFIT-SHARING 401(K) PLAN
The Company has a qualified profit-sharing plan covering substantially all
of its employees. Contributions to the plan are at the discretion of the
Company's Board of Directors. The Company has recorded approximately $74,000,
$133,000 and $33,000 as a provision for profit-sharing contribution for fiscal
1997 1998 and 1999, respectively.
(9) COMMITMENTS AND CONTINGENCIES
(A) OPERATING LEASES
The Company is renting its facilities under operating leases which expire
through June 2003. The Company's future minimum lease payments under all
operating leases as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ----------
<S> <C>
2000................................................... $ 710,000
2001................................................... 449,000
2002................................................... 265,000
2003................................................... 207,000
----------
$1,631,000
==========
</TABLE>
Rent expense charged to operations for fiscal 1997, 1998 and 1999 was
approximately $438,000, $525,000 and $574,000, respectively.
(B) PATENT INFRINGEMENT CLAIMS
Litigation expense in the accompanying statements of income represents
costs incurred related to certain patent infringement claims which had been
settled or dismissed as of September 30, 1998. From time to time, the Company is
party to various types of litigation. The Company believes it has meritorious
defenses to all claims, and in its opinion, all litigation currently pending or
threatened will not have a material effect on the Company's financial position
or results of operations.
(C) PATENT LICENSE AGREEMENT
During fiscal 1996, the Company entered into a patent license agreement for
the exclusive license of certain explosives detection technology. Under this
agreement, the Company is required to pay aggregate royalties of up to
$1,000,000 based on net sales, as defined. During fiscal 1997, 1998 and 1999,
the Company incurred approximately $97,000, $112,000 and $9,000 respectively, of
royalty expense related to this agreement.
(D) JOINT DEVELOPMENT AND ROYALTY AGREEMENT
During fiscal 1997, the Company entered into a joint development and
royalty agreement for the development of certain explosives detection
technology. Under the terms of the agreement, the Company is required to pay a
royalty of $3,000 per unit sold of the developed product, as defined. During
1998, the Company prepaid royalties in the amount of approximately $500,000,
which are being amortized as the royalties are incurred. At September 30, 1998
and 1999, approximately $414,000 and $186,000, respectively, of prepaid
royalties are included in other current assets in the accompanying consolidated
balance sheets. For the years ended September 30, 1998 and 1999, the Company
incurred $87,000 and $228,000, respectively, in royalty expenses. No royalty
expenses were incurred for the year ended September 30, 1997.
F-19
<PAGE> 116
VIVID TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) ACCRUED EXPENSES
Accrued expenses in the accompanying consolidated balance sheets consist of
the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Payroll and payroll-related......................... $ 907,959 $ 891,189
Accrued warranty.................................... 798,000 798,000
Accrued royalties................................... 537,782 236,842
Accrued legal....................................... 50,323 111,651
Accrued and deferred income taxes................... 392,640 788,679
Accrued contracts................................... -- 141,463
---------- ----------
Other accrued expenses.............................. 79,564 498,668
---------- ----------
$2,766,268 $3,466,492
========== ==========
</TABLE>
F-20
<PAGE> 117
ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
EG&G, INC.
VENICE ACQUISITION CORP.
AND
VIVID TECHNOLOGIES, INC.
OCTOBER 4, 1999
<PAGE> 118
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
THE MERGER.................................................. A-1
Section 1.01 Effective Time of the Merger................. A-1
Section 1.02 Closing...................................... A-1
Section 1.03 Effects of the Merger........................ A-1
Section 1.04 Directors and Officers....................... A-2
Section 1.05 Alternative Merger Structure................. A-2
ARTICLE II
CONVERSION OF SECURITIES.................................... A-2
Section 2.01 Conversion of Capital Stock.................. A-2
Section 2.02 Exchange of Certificates..................... A-3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER.................... A-5
Section 3.01 Organization of Seller....................... A-5
Section 3.02 Seller Capital Structure..................... A-6
Section 3.03 Authority; No Conflict; Required Filings and
Consents............................................... A-7
Section 3.04 SEC Filings; Financial Statements............ A-8
Section 3.05 No Undisclosed Liabilities................... A-8
Section 3.06 Absence of Certain Changes or Events......... A-9
Section 3.07 Taxes........................................ A-9
Section 3.08 Real Properties.............................. A-10
Section 3.09 Intellectual Property........................ A-10
Section 3.10 Agreements, Contracts and Commitments........ A-11
Section 3.11 Litigation................................... A-11
Section 3.12 Environmental Matters........................ A-11
Section 3.13 Employee Benefit Plans....................... A-12
Section 3.14 Compliance With Laws......................... A-13
Section 3.15 Permits...................................... A-13
Section 3.16 Registration Statement; Proxy
Statement/Prospectus................................... A-13
Section 3.17 Labor Matters................................ A-14
Section 3.18 Insurance.................................... A-14
Section 3.19 Government Contracts......................... A-14
Section 3.20 Year 2000.................................... A-14
Section 3.21 Cash Balance................................. A-15
Section 3.22 Suppliers.................................... A-15
Section 3.23 Opinion of Financial Advisor................. A-15
Section 3.24 Section 203 of the DGCL Not Applicable....... A-15
Section 3.25 Rights Agreement............................. A-15
Section 3.26 Hologic License.............................. A-15
Section 3.27 Gilardoni Dispute............................ A-15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB............. A-15
Section 4.01 Organization of Buyer and Sub................ A-15
</TABLE>
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<TABLE>
<S> <C>
Section 4.02 Capital Structure............................ A-16
Section 4.03 Authority; No Conflict; Required Filings and
Consents............................................... A-16
Section 4.04 SEC Filings; Financial Statements............ A-17
Section 4.05 Registration Statement; Proxy
Statement/Prospectus................................... A-17
Section 4.06 Operations of Sub............................ A-18
Section 4.07 No Undisclosed Liabilities................... A-18
Section 4.08 Absence of Certain Changes or Events......... A-18
ARTICLE V
CONDUCT OF BUSINESS......................................... A-18
Section 5.01 Covenants of Seller.......................... A-18
Section 5.02 Cooperation.................................. A-20
Section 5.03 Confidentiality.............................. A-20
ARTICLE VI
ADDITIONAL AGREEMENTS....................................... A-20
Section 6.01 No Solicitation.............................. A-20
Section 6.02 Proxy Statement/Prospectus; Registration
Statement.............................................. A-21
Section 6.03 Nasdaq Quotation............................. A-22
Section 6.04 Access to Information........................ A-22
Section 6.05 Stockholders Meeting......................... A-22
Section 6.06 Legal Conditions to Merger................... A-22
Section 6.07 Public Disclosure............................ A-24
Section 6.08 Tax-Free Reorganization...................... A-24
Section 6.09 Affiliate Agreements......................... A-24
Section 6.10 NYSE Listing................................. A-24
Section 6.11 Seller Stock Plans and Seller Warrants....... A-24
Section 6.12 Brokers or Finders........................... A-25
Section 6.12(A) Employment Matters........................ A-25
Section 6.13 Indemnification.............................. A-26
Section 6.14 Letter of Seller's Accountants............... A-26
Section 6.15 Notification of Certain Matters.............. A-27
Section 6.16 Environmental Audit.......................... A-27
ARTICLE VII
CONDITIONS TO MERGER........................................ A-27
Section 7.01 Conditions to Each Party's Obligation To
Effect the Merger...................................... A-27
Section 7.02 Additional Conditions to Obligations of Buyer
and Sub................................................ A-28
Section 7.03 Additional Conditions to Obligations of
Seller................................................. A-28
ARTICLE VIII
TERMINATION AND AMENDMENT................................... A-29
Section 8.01 Termination.................................. A-29
Section 8.02 Effect of Termination........................ A-30
Section 8.03 Fees and Expenses............................ A-30
Section 8.04 Amendment.................................... A-32
Section 8.05 Extension; Waiver............................ A-32
</TABLE>
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<TABLE>
<S> <C>
ARTICLE IX
MISCELLANEOUS............................................... A-32
Section 9.01 Nonsurvival of Representations, Warranties
and Agreements......................................... A-32
Section 9.02 Notices...................................... A-32
Section 9.03 Interpretation............................... A-33
Section 9.04 Counterparts................................. A-34
Section 9.05 Entire Agreement; No Third Party
Beneficiaries.......................................... A-34
Section 9.06 Governing Law and Venue...................... A-34
Section 9.07 Waiver of Jury Trial......................... A-34
Section 9.08 Assignment................................... A-34
Section 9.09 Severability................................. A-34
Section 9.10 Other Remedies; Specific Performance......... A-35
Section 9.11 Proposed Name Change......................... A-35
</TABLE>
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TABLES OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------------
<S> <C>
Acquisition
Proposal............ Section 6.01(a)
Affiliate............. Section 6.09
Affiliate Agreement... Section 6.09
Agreement............. Preamble
Alternative Merger.... Section 1.05
Alternative
Transaction......... Section 8.03(g)
Antitrust Laws........ Section 6.06(b)
Bankruptcy and Equity
Exception........... Section 3.03(a)
Buyer Common Stock.... Section 2.01(c)
Buyer Disclosure
Schedule............ Article IV
Buyer Material Adverse
Effect.............. Section 4.01
Buyer Preferred
Stock............... Section 4.02
Buyer SEC Reports..... Section 4.04(a)
Buyer Stock Plans..... Section 4.02(a)
Certificates.......... Section 2.02(b)
Closing............... Section 1.02
Closing Date.......... Section 1.02
Code.................. Preamble
Confidentiality
Agreement........... Section 5.03
Continuing Employee... Section 6.12(A)(a)
Constituent
Corporations........ Section 1.03
Daily Per Share
Price............... Section 2.01(c)
Exchange Ratio........ Section 2.01(c)
Effective Time........ Section 1.01
Environmental Law..... Section 3.12(b)
ERISA................. Section 3.13(a)
ERISA Affiliate....... Section 3.13(a)
Exchange Act.......... Section 3.03(c)
Exchange Agent........ Section 2.02(a)
Exchange Fund......... Section 2.02(a)
Governmental Entity... Section 3.03(c)
Hazardous Substance... Section 3.12(c)
Hologic License....... Section 3.26
HSR Act............... Section 3.03(c)
Indemnified Parties... Section 6.13(a)
IRS................... Section 3.07(b)
Leases................ Section 3.08
Market Value.......... Section 2.01(c)
</TABLE>
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----- ---------------------
<S> <C>
Maximum Premium....... Section 6.13(b)
Merger................ Preamble
NYSE.................. Section 2.01(c)
Order................. Section 6.06(b)
Outside Date.......... Section 8.01(b)
Plan.................. Section 6.12A(d)
Protection Policies... Section 3.09(c)
Proxy Statement....... Section 3.16
Registration
Statement........... Section 3.16
Rule 145.............. Section 6.09
SEC................... Section 3.03(c)
Second Request........ Section 6.06(b)
Securities Act........ Section 3.04(a)
Seller Balance
Sheet............... Section 3.04(b)
Seller Common Stock... Section 2.01(b)
Seller Disclosure
Schedule............ Article III
Seller Employee
Plans............... Section 3.13(a)
Seller Material
Adverse Effect...... Section 3.01
Seller Material
Contract............ Section 3.10
Seller Meeting........ Section 3.16
Seller Permits........ Section 3.15
Seller Preferred
Stock............... Section 3.02(a)
Seller Rights......... Section 3.02(b)
Seller Rights Plan.... Section 3.02(b)
Seller SEC Reports.... Section 3.04(a)
Seller Stock Option... Section 3.02(a)
Seller Stock Option
Agreement........... Preamble
Seller Stock Plans.... Section 3.02(a)
Seller Voting
Proposal............ Section 6.05(a)
Seller Warrants....... Section 3.02(a)
Stockholders
Agreements.......... Preamble
Subsidiary............ Section 3.01
Superior Proposal..... Section 6.01(a)(A)(1)
Surviving
Corporation......... Section 1.03
Tax................... Section 3.07(a)
Taxes................. Section 3.07(a)
Third Party........... Section 8.03(g)
Year 2000 Compliant... Section 3.20
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October 4,
1999, by and among EG&G, Inc., a Massachusetts corporation ("Buyer"), Venice
Acquisition Corp., a Delaware corporation and a direct, wholly-owned subsidiary
of Buyer ("Sub"), and Vivid Technologies, Inc., a Delaware corporation
("Seller").
WHEREAS, the Boards of Directors of Buyer and Seller deem it advisable and
in the best interests of each corporation and its respective stockholders that
Buyer and Seller combine in order to advance the long-term business interests of
Buyer and Seller;
WHEREAS, the combination of Buyer and Seller shall be effected by the terms
of this Agreement through a merger of Sub into Seller, as a result of which the
stockholders of Seller will become stockholders of Buyer (the "Merger");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Buyer's willingness to enter into this
Agreement, Seller has entered into a Stock Option Agreement dated as of the date
of this Agreement and attached hereto as Exhibit A (the "Seller Stock Option
Agreement"), pursuant to which Seller granted Buyer an option to purchase shares
of common stock of Seller under certain circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Buyer's willingness to enter into this
Agreement, the stockholders of Seller specified in Section 6.05(b) of this
Agreement have entered into Stockholder Agreements dated as of the date of this
Agreement in the form attached as Exhibit B (the "Stockholder Agreements"),
pursuant to which such stockholders granted Sub an option to purchase shares of
capital stock of Seller and agreed to give Sub a proxy to vote all of the shares
of capital stock of Seller that such stockholders own; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
Section 1.01 Effective Time of the Merger. Subject to the provisions of
this Agreement, a certificate of merger in such form as is required by the
relevant provisions of the Delaware General Corporation Law ("DGCL") (the
"Certificate of Merger") shall be duly executed and acknowledged by the
Surviving Corporation (as defined in Section 1.03) and thereafter delivered to
the Secretary of State of the State of Delaware for filing, as soon as
practicable on the Closing Date (as defined in Section'1.02). The Merger shall
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware (the "Effective Time") or at such later time
as is established by Buyer and Seller and set forth in the Certificate of
Merger.
Section 1.02 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., E.S.T., on a date to be specified by Buyer and Seller (the
"Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VII (other than
delivery of items to be delivered at Closing), at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts, unless another date, place or time
is agreed to in writing by Buyer and Seller.
Section 1.03 Effects of the Merger. At the Effective Time (i) the
separate existence of Sub shall cease and Sub shall be merged with and into
Seller (Sub and Seller are sometimes referred to below as the "Constituent
Corporations" and Seller following the Merger is sometimes referred to below as
the "Surviving Corporation"), (ii) the Certificate of Incorporation of Seller
shall be amended so that Article 4
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of such Certificate of Incorporation reads in its entirety as follows: "The
total number of shares of all classes of stock which the Corporation shall have
authority to issue is 1,000, all of which shall consist of Common Stock, $.01
par value per share," and, as so amended, such Certificate of Incorporation
shall be the Certificate of Incorporation of the Surviving Corporation, and
(iii) the Bylaws of the Surviving Corporation shall be amended to read as the
Bylaws of Sub as in effect immediately prior to the Effective Time. The Merger
shall have the effects set forth in Section 259 of the DGCL.
Section 1.04 Directors and Officers. The directors and officers of Sub
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation.
Section 1.05 Alternative Merger Structure. While it is currently
contemplated that the Merger shall be effected through the merger of Sub with
and into Seller, Buyer shall have the option, in its sole discretion, to cause
the Merger to be effected through an alternative transaction structure of Seller
merging with and into Buyer, with Buyer being the Surviving Corporation (the
"Alternative Merger"), in which the case the appropriate technical provisions of
this Agreement shall be deemed to be amended as necessary in order to effect the
Alternative Merger. If Buyer desires to effect the Alternative Merger, it shall
deliver a notice to Seller of its election to do so, which notice shall be
available for the inspection of any stockholder of Seller upon request during
normal business hours. As part of the Proxy Statement and in the manner required
by applicable law, Seller shall describe the provisions of this Section 1.05
such that approval of the Seller Voting Proposal shall entail approval of both
Merger and (if elected to be effected by Buyer) the Alternative Merger. In the
event an Alternative Merger is effected, (i) Seller shall not be deemed to be in
breach of any representation, warranty or covenant contained herein to the
extent any such representation, warranty or covenant would not have been
breached if the Merger had been consummated as contemplated by this Agreement
without giving effect to this Section 1.05 and (ii) the Alternative Merger shall
in no way reduce, impair or otherwise impact the indemnification of Seller's
directors and officers after the Closing as set forth in Section 6.13.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.01 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of Seller or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares
of common stock, $.01 par value per share, of Seller ("Seller Common
Stock") that are owned by Seller as treasury stock or by any wholly-owned
Subsidiary (as defined in Section 3.01) of Seller and any shares of Seller
Common Stock owned by Buyer, Sub or any other wholly-owned Subsidiary of
Buyer shall be canceled and retired and shall cease to exist and no stock
of Buyer or other consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Seller Common Stock. Subject to Section 2.02,
each issued and outstanding share of Seller Common Stock (other than shares
to be canceled in accordance with Section 2.01(b)), shall be converted into
the right to receive 0.1613 shares (the "Exchange Ratio") of Common Stock,
$1.00 par value per share, of Buyer ("Buyer Common Stock").
Notwithstanding the foregoing:
(i) In the event that the Market Value (as defined below) of the Buyer
Common Stock is greater than $46.49, then, if Buyer has notified
Seller of its election to terminate this Agreement pursuant to
Section 8.01(i) hereof, Seller shall have the option in its sole and
absolute discretion, but not the obligation, exercisable as provided
in Section 8.01(i), to
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adjust the Exchange Ratio to an amount equal to $7.50 divided by
the Market Value of the Buyer Common Stock, and Buyer shall be
obligated to accept such adjustment. In the event that the Market
Value of the Buyer Common Stock is greater than $46.49 and Buyer
does not elect to terminate this Agreement pursuant to Section
8.01(i), the Exchange Ratio shall be unchanged.
(ii) In the event that the Market Value of the Buyer Common Stock is
less than $30.99, then, if Seller has notified Buyer of its
election to terminate this Agreement pursuant to Section 8.01(h)
hereof, Buyer shall have the option in its sole and absolute
discretion, but not the obligation, exercisable as provided in
Section 8.01(h), to adjust the Exchange Ratio to an amount equal to
$5.00 divided by the Market Value of the Buyer Common Stock, and
Seller shall be obligated to accept such adjustment. In the event
that the Market Value of the Buyer Common Stock is less than $30.99
and Seller does not elect to terminate this Agreement pursuant to
Section 8.01(h), the Exchange Ratio shall be unchanged.
The "Market Value" of the Buyer Common Stock means the average of the Daily
Per Share Prices (as defined below) of the Buyer Common Stock for the five
consecutive trading days ending on the third trading day prior to the date of
the Seller Meeting (as defined in Section 3.16 hereof), so long as the Closing
Date occurs within five business days of the Seller Meeting or, if the Closing
Date is more than five business days after the Seller Meeting, the Closing Date.
The "Daily Per Share Price" for any trading day means the weighted average of
the per share selling prices of the Buyer Common Stock on the New York Stock
Exchange (the "NYSE"), as reported in the NYSE Composite Transactions, for that
day.
All such shares of Seller 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 the
shares of Buyer Common Stock and any cash in lieu of fractional shares of Buyer
Common Stock to be issued or paid in consideration therefor upon the surrender
of such certificate in accordance with Section 2.02, without interest.
(d) Adjustments to Exchange Ratio. The Exchange Ratio and each of the
target dollar values set forth in Sections 2.01(c)(i), 2.01(c)(ii), 8.01(h)
and 8.01(i) shall be equitably adjusted to reflect fully the effect of any
stock split, reverse split, reclassification, stock dividend (including any
dividend or distribution of securities convertible into Buyer Common Stock
or Seller Common Stock), reorganization, recapitalization or other like
change with respect to Buyer Common Stock or Seller Common Stock occurring
after the date hereof and prior to the Effective Time.
Section 2.02 Exchange of Certificates. The procedures for exchanging
outstanding shares of Seller Common Stock for Buyer Common Stock pursuant to the
Merger are as follows:
(a) Exchange Agent. As of the Effective Time, Buyer shall deposit
with a bank or trust company designated by Buyer (the "Exchange Agent"), in
trust for the benefit of the holders of shares of Seller Common Stock, for
exchange in accordance with this Section 2.02, through the Exchange Agent,
(i) certificates representing the shares of Buyer Common Stock (such shares
of Buyer Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund")
issuable pursuant to Section 2.01 in exchange for outstanding shares of
Seller Common Stock, (ii) cash in an amount sufficient to make payments
required pursuant to Section 2.02(e), and (iii) any dividends or
distributions to which holders of Certificates (as defined below) may be
entitled pursuant to Section 2.02(c).
(b) Exchange Procedures. Promptly after the Effective Time (but in
any event within five business days thereof), Buyer shall cause the
Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Seller Common Stock (the "Certificates") whose shares
were converted pursuant to Section 2.01 into the right to receive shares of
Buyer Common Stock (i) a letter of transmittal in customary form (which
shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall
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pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Buyer may
reasonably specify; provided, however, that such other provisions shall not
materially adversely effect the terms of the consideration to be received
by Seller's stockholders in the Merger) and (ii) instructions for effecting
the surrender of the Certificates in exchange for certificates representing
shares of Buyer Common Stock (plus cash in lieu of fractional shares, if
any, of Buyer Common Stock and any dividends or distributions as provided
below). Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Buyer,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor and Buyer
shall cause the Exchange Agent to promptly deliver to such holder a
certificate representing that number of whole shares of Buyer Common Stock
which such holder has the right to receive pursuant to the provisions of
this Article II plus cash in lieu of fractional shares pursuant to Section
2.02(e) and any dividends or distributions pursuant to Section 2.02(c), and
the Certificate so surrendered shall immediately be canceled. In the event
of a transfer of ownership of Seller Common Stock which is not registered
in the transfer records of Seller, a certificate representing the proper
number of shares of Buyer Common Stock plus cash in lieu of fractional
shares pursuant to Section 2.02(e) and any dividends or distributions
pursuant to Section 2.02(c) may be issued to a transferee if the
Certificate representing such Seller Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the certificate
representing shares of Buyer Common Stock plus cash in lieu of fractional
shares pursuant to Section 2.02(e) and any dividends or distributions
pursuant to Section 2.02(c) as contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Buyer Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Buyer Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to
subsection (e) below until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Buyer Common
Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional
share of Buyer Common Stock to which such holder is entitled pursuant to
subsection (e) below and the amount of dividends or other distributions
with a record date after the Effective Time previously paid with respect to
such whole shares of Buyer Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record
date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Buyer
Common Stock.
(d) No Further Ownership Rights in Seller Common Stock. All shares of
Buyer Common Stock issued upon the surrender for exchange of Certificates
in accordance with the terms hereof (including any cash or other
distributions paid pursuant to subsection (c) or (e) of this Section 2.02)
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Seller Common Stock, and from and after the
Effective Time there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Seller
Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Section 2.02.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Buyer Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any other rights of a stockholder
of
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<PAGE> 126
Buyer. Notwithstanding any other provision of this Agreement, each holder
of shares of Seller Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Buyer
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Buyer Common Stock
multiplied by the Market Value of the Buyer Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the stockholders of Seller for 180 days
after the Effective Time shall be delivered to Buyer, upon demand, and any
stockholders of Seller who have not previously complied with this Section
2.02 shall thereafter look only to Buyer for payment of their claim for
Buyer Common Stock, any cash in lieu of fractional shares of Buyer Common
Stock and any dividends or distributions with respect to Buyer Common
Stock.
(g) No Liability. To the extent permitted by applicable law, neither
Buyer nor Seller shall be liable to any holder of shares of Seller Common
Stock or Buyer Common Stock, as the case may be, for such shares (or
dividends or distributions with respect thereto) properly delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Withholding Rights. Each of Buyer and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Seller Common
Stock such amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the
Surviving Corporation or Buyer, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to
the holder of the shares of Seller Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or Buyer,
as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Buyer Common Stock and any
cash in lieu of fractional shares, and unpaid dividends and distributions
on shares of Buyer Common Stock deliverable in respect thereof pursuant to
this Agreement.
(j) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in
Section 6.09) of Seller shall not be exchanged until Buyer has received an
Affiliate Agreement (as defined in Section 6.09) from such Affiliate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer and Sub that the statements
contained in this Article III are true and correct, except as set forth herein
or in the disclosure schedule delivered by Seller to Buyer on or before the date
of this Agreement (the "Seller Disclosure Schedule"). The Seller Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article III and the disclosure in any
paragraph shall qualify other paragraphs in this Article III only to the extent
that it is reasonably apparent from a reading of such disclosure that it also
qualifies or applies to such other paragraphs.
Section 3.01 Organization of Seller. Each of Seller and its Subsidiaries
(as defined below) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power to own, lease and operate its property and to carry on
its
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business as now being conducted, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified would be reasonably likely to have a material adverse effect
on the business, properties, financial condition, results of operations or
prospects of Seller and its Subsidiaries, taken as a whole, or to have a
material adverse effect on the ability of Seller to consummate the transactions
contemplated by this Agreement (a "Seller Material Adverse Effect"); provided
however that (i) any adverse change, event or effect that is demonstrated to be
primarily caused by conditions affecting the United States economy generally or
the economy of any nation or region that is material to the business of Seller
and its Subsidiaries, taken as a whole, in which Seller or any of its
Subsidiaries conducts business shall not be taken into account in determining
whether there has been or would be reasonably likely to be a "Seller Material
Adverse Effect," (ii) any adverse change, event or effect that is demonstrated
to be primarily caused by conditions generally affecting the explosives and
contraband detection industry shall not be taken into account in determining
whether there has been or would be reasonably likely to be a "Seller Material
Adverse Effect," (iii) any adverse change, event or effect that is demonstrated
to be primarily caused by the announcement or pendency of the Merger shall not
be taken into account in determining whether there has been or would be
reasonably likely to be a "Seller Material Adverse Effect," (iv) subject to the
accuracy of Seller's representations in Section 3.27, any adverse change, event
or effect that is demonstrated to be primarily caused by the matters described
in Section 3.27 of the Seller Disclosure Schedule shall not be taken into
account in determining whether there has been or would be reasonably likely to
be a "Seller Material Adverse Effect" and (v) the failure of the Seller to
obtain certification by or additional funding from the United States Federal
Aviation Association of its Multiview Tomography (MVT) product shall not, in and
of itself, constitute a "Seller Material Adverse Effect." Except as set forth in
the Seller SEC Reports (as defined in Section 3.04) filed prior to the date
hereof, neither Seller nor any of its Subsidiaries directly or indirectly owns
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity, excluding securities in any publicly
traded company held for investment by Seller and comprising less than five
percent (5%) of the outstanding stock of such company. As used in this
Agreement, the word "Subsidiary" means, with respect to a party, any corporation
or other organization, whether incorporated or unincorporated, of which (i) such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries.
Section 3.02 Seller Capital Structure.
(a) The authorized capital stock of Seller consists of 30,000,000 shares of
Seller Common Stock and 1,000,000 shares of preferred stock, $.01 par value per
share ("Seller Preferred Stock"), of which 30,000 shares are designated Series A
Junior Participating Preferred Stock. As of the date of this Agreement, (i)
10,050,316 shares of Seller Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable, (ii) 95,000 shares of
Seller Common Stock were held in the treasury of Seller or by Subsidiaries of
Seller, and (iii) no shares of Seller Preferred Stock were issued and
outstanding. Section 3.02 of the Seller Disclosure Schedule shows the number of
shares of Seller Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date of this Agreement and the plans
under which such options were granted (collectively, the "Seller Stock Plans")
and sets forth a complete and accurate list of all holders of outstanding
options to purchase shares of Seller Common Stock (such outstanding options, the
"Seller Stock Options") under the Seller Stock Plans, indicating the number of
shares of Seller Common Stock subject to each Seller Stock Option, and the
exercise price, the date of grant and the expiration date thereof. Section 3.02
of the Seller Disclosure Schedule shows the number of shares of Seller Common
Stock reserved for future issuance pursuant to warrants or other outstanding
rights to purchase shares of Seller Common Stock outstanding as of the date of
this Agreement (such outstanding warrants or other rights, the "Seller
Warrants") and the agreement
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or other document under which such Seller Warrants were granted and sets forth a
complete and accurate list of all holders of Seller Warrants indicating the
number and type of shares of Seller Common Stock subject to each Seller Warrant,
and the exercise price, the date of grant and the expiration date thereof. All
shares of Seller Common Stock subject to issuance as specified above are duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be validly issued, fully
paid and nonassessable. There are no obligations, contingent or otherwise, of
Seller or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of Seller Common Stock or the capital stock of Seller or any of its
Subsidiaries or to provide funds to or make any material investment (in the form
of a loan, capital contribution or otherwise) in Seller or any Subsidiary of
Seller or any other entity other than guarantees of bank obligations of
Subsidiaries of Seller entered into in the ordinary course of business. All of
the outstanding shares of capital stock of each of Seller's Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and all such
shares (other than directors' qualifying shares in the case of foreign
Subsidiaries) are owned by Seller or another Subsidiary of Seller free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
Seller's voting rights, charges or other encumbrances of any nature.
(b) Except for the Seller Stock Plans, the Seller Warrants, the Seller
Stock Option Agreement and the rights (the "Seller Rights") issuable under the
Rights Agreement dated as of October 13, 1998 between Seller and American Stock
Transfer & Trust Company (the "Seller Rights Plan") and shares of capital stock
and other securities of Seller issuable pursuant to any of the foregoing, (i)
there are no equity securities of any class of Seller or any of its
Subsidiaries, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (ii) there are no
other options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which Seller or any of its Subsidiaries is a
party or by which it or any of its Subsidiaries is bound obligating Seller or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of Seller or any of its
Subsidiaries or obligating Seller or any of its Subsidiaries to grant, extend,
accelerate the vesting of, otherwise modify or amend or enter into any such
option, warrant, equity security, call, right, commitment or agreement. To the
knowledge of Seller, other than the Stockholder Agreements, there are no voting
trusts, proxies or other voting agreements or understandings with respect to the
shares of capital stock of Seller or any of its Subsidiaries.
Section 3.03 Authority; No Conflict; Required Filings and Consents.
(a) Seller has all requisite corporate power and authority to enter into
this Agreement and the Seller Stock Option Agreement and to consummate the
transactions contemplated by this Agreement and the Seller Stock Option
Agreement. The execution and delivery of this Agreement and the Seller Stock
Option Agreement and the consummation of the transactions contemplated by this
Agreement and the Seller Stock Option Agreement by Seller have been duly
authorized by all necessary corporate action on the part of Seller, subject only
to the approval of the Merger by Seller's stockholders under the DGCL. The Board
of Directors of Seller has not taken any action to accelerate any options
granted under the Seller Stock Plans and has approved the treatment of the
Seller Stock Options and Seller Warrants set forth in Section 6.11 of this
Agreement. Seller has delivered or concurrently with the execution of this
Agreement is delivering any required notice under the Seller Warrants. This
Agreement and the Seller Stock Option Agreement have been duly executed and
delivered by Seller and constitute the valid and binding obligations of Seller,
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles (the "Bankruptcy and Equity Exception").
(b) The execution and delivery of this Agreement and the Seller Stock
Option Agreement by Seller does not, and the consummation of the transactions
contemplated by this Agreement and the Seller Stock Option Agreement will not,
(i) conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Seller or the charter, bylaws, or
other organizational document of any Subsidiary of Seller, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms,
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conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which Seller or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) except as provided in clauses (i), (ii), (iii) and
(iv) in paragraph (c) below, conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Seller or any of its Subsidiaries or any of its or
their properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which are not, individually or in the aggregate, reasonably likely to have a
Seller Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required by or with respect to Seller or any of its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Seller Stock Option Agreement or the consummation of the transactions
contemplated hereby and thereby, except for (i) the filing of the pre-merger
notification report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, ("HSR Act"), (ii) the filing of the Certificate of Merger with
the Delaware Secretary of State, (iii) the filing of the Proxy Statement (as
defined in Section 3.16 below) with the Securities and Exchange Commission (the
"SEC") in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the laws of any foreign country and (v) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not be reasonably likely to have a Seller Material
Adverse Effect. The Seller stockholder vote required for the approval of the
Seller Voting Proposal (as defined below) is a majority of the outstanding
shares of Seller Common Stock on the record date for the Seller Meeting (as
defined below).
Section 3.04 SEC Filings; Financial Statements.
(a) Seller has filed and made available to Buyer all forms, reports and
documents required to be filed by Seller with the SEC since January 1, 1996. All
such required forms, reports and documents (including those that Seller may file
after the date hereof until the Closing) are referred to herein as the "Seller
SEC Reports." The Seller SEC Reports (i) were prepared in compliance in all
material respects with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, as the case may
be, and the rules and regulations of the SEC thereunder applicable to such
Seller SEC Reports, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such Seller SEC Reports or necessary in order to make the
statements in such Seller SEC Reports, in the light of the circumstances under
which they were made, not misleading. None of Seller's Subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes or schedules) contained in the Seller SEC Reports (i) complied
as to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, (ii) were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
the SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented in all
material respects the consolidated financial position of Seller and its
Subsidiaries as of the dates and the consolidated results of its operations and
cash flows for the periods indicated, consistent in all material respects with
the books and records of Seller and its Subsidiaries, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments and for the absence of complete footnotes which were not or
are not expected to be material in amount. The unaudited balance sheet of Seller
as of June 30, 1999 is referred to herein as the "Seller Balance Sheet."
Section 3.05 No Undisclosed Liabilities. Except as disclosed in the
Seller SEC Reports filed prior to the date hereof, and except for normal or
recurring liabilities incurred since June 30, 1999 in the ordinary course of
business consistent with past practices, Seller and its Subsidiaries do not have
any
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liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due, which individually or
in the aggregate are reasonably likely to have a Seller Material Adverse Effect.
Section 3.06 Absence of Certain Changes or Events. Except as disclosed in
the Seller SEC Reports filed prior to the date hereof, since the date of the
Seller Balance Sheet, Seller and its Subsidiaries, taken as a whole, have
conducted their businesses in all material respects in the ordinary course and
in a manner in all material respects consistent with past practice and, since
such date, there has not been (i) any change in the financial condition, results
of operations, business, properties or prospects of Seller and its Subsidiaries,
taken as a whole, that has had, or is reasonably likely to have, a Seller
Material Adverse Effect; (ii) any damage, destruction or loss (whether or not
covered by insurance) with respect to Seller or any of its Subsidiaries having a
Seller Material Adverse Effect; (iii) any material change by Seller in its
accounting methods not required pursuant to generally accepted accounting
principles, principles or practices to which Buyer has not previously consented
in writing; (iv) any revaluation by Seller of any of its assets having a Seller
Material Adverse Effect; or (v) any other action or event that would have
required the consent of Buyer pursuant to Section 5.01 of this Agreement had
such action or event occurred after the date of this Agreement.
Section 3.07 Taxes.
(a) Seller and each of its Subsidiaries has filed all Tax Returns (as
defined below) that it was required to file, and all such Tax Returns were
correct and complete except for any failure to file, error or omission that,
individually or in the aggregate, is not reasonably likely to have a Seller
Material Adverse Effect. Seller and each of its Subsidiaries has paid all Taxes
(as defined below) that are shown to be due on any such Tax Returns. All Taxes
that Seller or any of its Subsidiaries is or was required by law to withhold or
collect have been duly withheld or collected and, to the extent required, have
been paid to the proper Governmental Entity, except for any such Taxes with
respect to which the failure to withhold, collect or pay, individually or in the
aggregate, is not reasonably likely to have a Seller Material Adverse Effect.
For purposes of this Agreement, "Taxes" means all taxes, charges, fees, levies
or other similar assessments or liabilities, including without limitation
income, gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, services, transfer, withholding, employment,
payroll and franchise taxes imposed by the United States of America or any
state, local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof. For
purposes of this Agreement, "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) Seller has delivered to Buyer correct and complete copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by any of Seller or any of its Subsidiaries since
December 31, 1996. The federal income Tax Returns of Seller and each of its
Subsidiaries have never been audited by the Internal Revenue Service. Seller has
delivered or made available to Buyer correct and complete copies of all other
material Tax Returns of Seller and its Subsidiaries together with all related
examination reports and statements of deficiency for all periods from and after
December 31, 1996. No examination or audit of any Tax Return of Seller or any of
its Subsidiaries by any Governmental Entity is currently in progress or, to the
knowledge of Seller, threatened or contemplated. Neither Seller nor any of its
Subsidiaries has been informed in writing or, to Seller's knowledge, orally by
any jurisdiction that the jurisdiction believes that Seller or any of its
Subsidiaries was required to file any Tax Return that was not filed, except for
any Tax Return with respect to which the failure to file, individually or in the
aggregate, is not reasonably likely to have a Seller Material Adverse Effect.
(c) Neither Seller nor any of its Subsidiaries has waived any statute of
limitations with respect to Taxes or agreed to an extension of time with respect
to a Tax assessment or deficiency.
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(d) Neither Seller nor any of its Subsidiaries is a "consenting
corporation" within the meaning of Section 341(f) of the Code, and none of the
assets of Seller or its Subsidiaries are subject to an election under Section
341(f) of the Code.
(e) Neither Seller nor any of its Subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the
Code.
(f) Neither Seller nor any of its Subsidiaries has made any payment, is
obligated to make any payment, or is a party to any agreement that obligates it
to make any payment that will be an "excess parachute payment" under Section
280G of the Code.
(g) Neither Seller nor any of its Subsidiaries has any actual or potential
liability for any Taxes of any person (other than the Seller and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise.
(h) Neither Seller nor any of its Subsidiaries has undergone a change in
its method of accounting resulting in an adjustment to its taxable income
pursuant to Section 481(h) of the Code.
(i) Neither Seller nor any of its Subsidiaries is or has ever been a member
of a group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns, other than a group of which only
Seller and its Subsidiaries are or were members.
Section 3.08 Real Properties. Section 3.08 of the Seller Disclosure
Schedule sets forth a list of all real property leased by Seller or its
Subsidiaries (collectively "Leases") and the location of the premises. The
Seller has provided true and complete copies of all Leases to the Buyer. Seller
is not in default under any of the Leases, except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have a
Seller Material Adverse Effect. Seller does not and has never owned any real
property.
Section 3.09 Intellectual Property.
(a) To Seller's knowledge, Seller and its Subsidiaries own, or are licensed
or otherwise possess legally enforceable (subject to the Bankruptcy and Equity
Exception) rights to use, all patents, trademarks, trade names, domain names,
service marks and copyrights, any applications for and registrations of such
patents, trademarks, trade names, service marks and copyrights, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are used or necessary to conduct the business of
Seller and its Subsidiaries as currently conducted, the absence of which would,
individually or in the aggregate, be reasonably likely to have a Seller Material
Adverse Effect (the "Seller Intellectual Property Rights").
(b) The execution and delivery of this Agreement and consummation of the
Merger will not result in the breach of, or create on behalf of any third party
the right to terminate or modify, any license, sublicense or other agreement
relating to the Seller Intellectual Property Rights, or any license, sublicense
and other agreement as to which Seller or any of its Subsidiaries is a party and
pursuant to which Seller or any of its Subsidiaries is authorized to use any
third party patents, trademarks, copyrights or trade secrets ("Seller Third
Party Intellectual Property Rights"), including software that is used in the
manufacture of, incorporated in, or forms a part of any product or service sold
by Seller or any of its Subsidiaries or in the development stage, the breach,
termination or modification of which license, sublicense or other agreement,
individually or in the aggregate, would be reasonably likely to have a Seller
Material Adverse Effect.
(c) All patents, registered trademarks, service marks and copyrights which
are owned by Seller or any of its Subsidiaries and which are material to the
business of Seller and its Subsidiaries, taken as a whole, are valid and
subsisting. Seller's policies (the "Protection Policies") are to enter into
confidentiality agreements in favor of Seller which protect the proprietary
nature of the Seller Intellectual Property Rights that are proprietary with its
employees, consultants and independent contractors who have access to
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any such Seller Intellectual Property Rights and to require such employees,
consultants and independent contractors to maintain in confidence all trade
secrets and confidential information owned or used by Seller or any of its
Subsidiaries. Seller and its Subsidiaries have complied in all material respects
with the Protection Policies, and any failure to comply, individually or in the
aggregate, is not reasonably likely to have a Seller Material Adverse Effect. To
the knowledge of Seller, no other person or entity is infringing, violating or
misappropriating any of the Seller Intellectual Property Rights, except for
infringements, violations or misappropriations that are not, individually or in
the aggregate, reasonably likely to have a Seller Material Adverse Effect.
To the knowledge of Seller, none of the activities or business currently
conducted by the Seller or any of the Subsidiaries infringes, violates or
constitutes a misappropriation of, any patents, trademarks, trade names, service
marks and copyrights, any applications for and registrations of such patents,
trademarks, trade names, service marks and copyrights, and all processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
of any other person or entity, except for such infringements, violations and
misappropriations that, individually or in the aggregate, are not reasonably
likely to have a Seller Material Adverse Effect. Neither the Seller nor any of
its Subsidiaries has received any written complaint, claim or notice alleging
any such infringement, violation or misappropriation.
Section 3.10 Agreements, Contracts and Commitments.
(a) There are no contracts or agreements that are material contracts (as
defined in Item 601(b)(10) of Regulation S-K) with respect to Seller and its
Subsidiaries ("Seller Material Contracts"), other than those Seller Material
Contracts identified on the exhibit indices of the Seller's most recent annual
report on Form 10-K and the Seller SEC Reports filed thereafter and prior to the
date of this Agreement. Each Seller Material Contract has not expired by its
terms and is in full force and effect against the Seller and, to the knowledge
of the Seller, against the other party or parties thereto. Neither Seller nor
any of its Subsidiaries is in violation of or in default under (nor does there
exist any condition which, upon the passage of time or the giving of notice or
both, would cause such a violation of or default under) any lease, permit,
concession, franchise, license or other contract or agreement to which it is a
party or by which it or any of its properties or assets is bound, except for
violations or defaults that, individually or in the aggregate, have not resulted
in and are not reasonably likely to result in a Seller Material Adverse Effect.
(b) Section 3.10 of the Seller Disclosure Schedule sets forth a complete
list of each lease, permit, concession, franchise, license or other contract or
agreement to which Seller or any of its Subsidiaries is a party or bound (i)
with any Affiliate of Seller (other than any Subsidiary which is a direct or
indirect wholly-owned subsidiary of Seller), other than any agreements which are
or have been fully performed and under which neither Seller nor any Subsidiary
of Seller has any continuing rights, liability or obligation, or (ii) that
includes any non-competition or similar provision imposing any restrictions or
undertakings on Seller or any Subsidiary of Seller, other than any agreements
under which neither Seller nor any Subsidiary of Seller has any continuing
rights, liability or obligation or is subject to any restriction or undertaking.
Copies of all the agreements, contracts and arrangements set forth in Section
3.10 of the Seller Disclosure Schedule have heretofore been furnished to Buyer
and such copies are accurate and complete.
Section 3.11 Litigation. Except as described in the Seller SEC Reports
filed prior to the date hereof, there is no action, suit or proceeding, claim,
arbitration or, to the knowledge of Seller, investigation, against Seller or any
of its Subsidiaries pending or as to which Seller or any of its Subsidiaries has
received any written notice of assertion, which, if determined adversely,
individually or in the aggregate, is reasonably likely to have a Seller Material
Adverse Effect.
Section 3.12 Environmental Matters.
(a) Except as disclosed in the Seller SEC Reports filed prior to the date
hereof and except for such matters that, individually or in the aggregate, are
not reasonably likely to have a Seller Material Adverse
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Effect: (i) Seller and its Subsidiaries have complied with all applicable
Environmental Laws (as defined in Section 3.12(b)); (ii) the properties
currently owned or operated by Seller and its Subsidiaries (including soils,
groundwater, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances (as defined in Section 3.12(c)) caused by Seller
or, to the knowledge of Seller, by any third party; (iii) the properties
formerly owned or operated by Seller or any of its Subsidiaries were not during
the period of ownership or operation by Seller or any of its Subsidiaries
contaminated with Hazardous Substances by Seller or, to the knowledge of Seller,
by any third party; (iv) neither Seller nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination by them or, to
the knowledge of Seller, by any third party on the property of any third party;
(v) neither Seller nor any of its Subsidiaries have released any Hazardous
Substance to the environment in violation of any Environmental Law; (vi) neither
Seller nor any of its Subsidiaries has received any written notice, demand,
letter, claim or request for information alleging that Seller or any of its
Subsidiaries may be in violation of, liable under or have reporting or other
affirmative obligations relating to a specific incident or event under any
Environmental Law; (vii) neither Seller nor any of its Subsidiaries is the
subject of any order, decree, injunction or other arrangement with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party, in either case relating to liability under any Environmental Law or
relating to Hazardous Substances; and (viii) to Seller's knowledge, there are no
circumstances or conditions involving Seller or any of its Subsidiaries that
could reasonably be expected to result in any claims, liability, obligations,
investigations, costs or restrictions on the ownership, use or transfer of any
property of Seller or any of its Subsidiaries pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, regulation, order, decree, permit, authorization, opinion,
common law or agency requirement relating to: (A) the protection, investigation
or restoration of the environment, human health and safety, or natural
resources, (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance or (C) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property.
(c) As used herein, the term "Hazardous Substance" means any substance that
is: (A) listed, classified, regulated or which falls within the definition of a
"hazardous substance" or "hazardous material" pursuant to any Environmental Law;
(B) any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (C) any other substance which is the subject of
regulatory action by any Governmental Entity pursuant to any Environmental Law.
Section 3.13 Employee Benefit Plans.
(a) Seller has listed in Section 3.13 of the Seller Disclosure Schedule all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of Seller or any of its Subsidiaries or any trade or
business (whether or not incorporated) which is or was ever a member of a
controlled group of corporations or which is or was ever under common control
with Seller (an "ERISA Affiliate") within the meaning of Section 414 of the
Code, or any Subsidiary of Seller (together, the "Seller Employee Plans").
(b) With respect to each Seller Employee Plan, Seller has furnished to
Buyer, a true and correct copy of (i) the most recent annual report (Form 5500)
filed with the IRS, (ii) such Seller Employee Plan, (iii) each trust agreement
and group annuity contract, if any, relating to such Seller Employee Plan and
(iv) all reports, if any, regarding the satisfaction of the nondiscrimination
requirements of Sections 410(b), 401(k) and 401(m) of the Code for the last
three plan years.
(c) With respect to the Seller Employee Plans, no event has occurred, and
to the knowledge of Seller, there exists no condition or set of circumstances in
connection with which Seller or any of its
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Subsidiaries could be subject to any liability that is reasonably likely,
individually or in the aggregate, to have a Seller Material Adverse Effect under
ERISA, the Code or any other applicable law.
(d) With respect to the Seller Employee Plans, there are no funded benefit
obligations for which contributions have not been made or properly accrued and
there are no unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with generally accepted
accounting principles, on the financial statements of Seller, which obligations
are reasonably likely, individually or in the aggregate, to have a Seller
Material Adverse Effect.
(e) Neither Seller, any Subsidiary of the Seller nor any ERISA Affiliate
has (i) ever maintained a Seller Employee Benefit Plan which was ever subject to
Title IV of ERISA or Section 412 of the Code or (ii) ever been obligated to
contribute to a multiemployer plan (as defined in Section 4001(a)(3) of ERISA.
(f) Except as disclosed in Seller SEC Reports filed prior to the date of
this Agreement, and except as provided for in this Agreement, neither Seller nor
any of its Subsidiaries is a party to any oral or written (i) agreement with any
employee of Seller or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Seller of the nature contemplated by this Agreement,
(ii) agreement with any employee of Seller or any of its Subsidiaries providing
any term of employment or compensation guarantee extending for a period longer
than one year from the date hereof or for the payment of compensation in excess
of $100,000 per annum, or (iii) agreement or plan, including any stock option
plan, stock appreciation right plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
Section 3.14 Compliance With Laws. Seller and each of its Subsidiaries
has complied with, is not in violation of, and has not received any written
notice alleging any violation with respect to, any foreign, federal, state or
local statute, law or regulation (other than Environmental Laws) with respect to
the conduct of its business, or the ownership or operation of its properties or
assets, except for failures to comply or violations which, individually or in
the aggregate, have not had and are not reasonably likely to have a Seller
Material Adverse Effect.
Section 3.15 Permits. Seller and each of its Subsidiaries have all
permits, licenses and franchises from Governmental Entities required to conduct
their businesses as now being conducted (the "Seller Permits"), except for such
permits, licenses and franchises the absence of which, individually or in the
aggregate, have not resulted in, and are not reasonably likely to result in, a
Seller Material Adverse Effect. Seller and its Subsidiaries are in compliance
with the terms of the Seller Permits, except where the failure to so comply,
individually or in the aggregate, is not reasonably likely to have a Seller
Material Adverse Effect.
Section 3.16 Registration Statement; Proxy Statement/Prospectus. The
information to be supplied by Seller for inclusion in the registration statement
on Form S-4 pursuant to which shares of Buyer Common Stock issued in the Merger
will be registered under the Securities Act (the "Registration Statement"),
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information to be
supplied by Seller for inclusion in the proxy statement/prospectus (the "Proxy
Statement") to be sent to the stockholders of Seller in connection with the
meeting of Seller's stockholders to consider this Agreement and the Merger (the
"Seller Meeting") shall not, on the date the Proxy Statement is first mailed to
stockholders of Seller, at the time of the Seller Meeting and at the Effective
Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement not false or misleading; or omit
to state any material fact
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necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Seller Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Seller or any of its Affiliates, officers or directors should be discovered by
Seller which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, Seller shall promptly inform Buyer.
Section 3.17 Labor Matters. Neither Seller nor any of its Subsidiaries is
a party to or otherwise bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor organization.
Neither Seller nor any of its Subsidiaries is the subject of any proceeding to
which Seller or any Subsidiary has received written notice or is otherwise aware
asserting that Seller or any of its Subsidiaries has committed an unfair labor
practice or is seeking to compel it to bargain with any labor union or labor
organization that, individually or in the aggregate, is reasonably likely to
have a Seller Material Adverse Effect, nor is there pending or, to the knowledge
of Seller, threatened, any labor strike, dispute, walkout, work stoppage or
lockout involving Seller or any of its Subsidiaries that, individually or in the
aggregate, is reasonably likely to have a Seller Material Adverse Effect.
Section 3.18 Insurance. Section 3.18 of the Disclosure Schedule sets
forth a list (including the name of the insurer, the name of the policyholder,
the name of each insured, the periods of coverage and the scope of coverage) of
all policies of fire, theft, casualty, liability, burglary, fidelity, workers
compensation, business interruption, environmental, product liability, fidelity,
workers compensation, product warranty, automobile and other forms of insurance
of Seller and any of its Subsidiaries.
Section 3.19 Government Contracts. Neither Seller nor any of its
Subsidiaries is or has been suspended or debarred (within the meaning of 48
C.F.R. Ch. 1, Section 52 or any similar foreign law, statute or regulation) from
bidding on contracts or subcontracts with any Governmental Entity; to the
knowledge of Seller, no such suspension or debarment has been initiated or
threatened; and the consummation of the transactions contemplated by this
Agreement will not result in any such suspension or debarment that, individually
or in the aggregate, is reasonably likely to have a Seller Material Adverse
Effect (other than primarily by reason of the identity of Buyer). Neither Seller
nor any of its Subsidiaries has since January 1, 1993 been audited or
investigated or is now being audited or, to Seller's knowledge, investigated by
the U.S. Government Accounting Office, the U.S. Department of Defense or any of
its agencies, the Defense Contract Audit Agency, the U.S. Department of Justice,
the Inspector General of any U.S. Governmental Entity, any similar agencies or
instrumentalities of any foreign Governmental Entity, or any prime contractor
with a Governmental Entity nor, to Seller's knowledge, has any such audit or
investigation been threatened that is reasonably likely, individually or in the
aggregate, to have a Seller Material Adverse Effect. To Seller's knowledge,
there is no valid basis for (a) the suspension or debarment of Seller or any of
its Subsidiaries from bidding on contracts or subcontracts with any Governmental
Entity or (b) any claim pursuant to an audit or investigation by any of the
entities named in the foregoing sentence that is reasonably likely, individually
or in the aggregate, to have a Seller Material Adverse Effect. Neither Seller
nor any of its Subsidiaries has any agreements, contracts or commitments which
require it to obtain or maintain a security clearance with any Governmental
Entity.
Section 3.20 Year 2000. Section 3.20 of the Seller Disclosure Schedule
identifies each "year 2000" audit, report or investigation that has been
performed by or on behalf of Seller or any of its Subsidiaries with respect to
its business and operations. Except as set forth in such audits, reports and
investigations, Seller is not aware of any failure of Seller's or any
Subsidiary's computer hardware or software systems to be Year 2000 Compliant,
which failure, individually or in the aggregate, is reasonably likely to have a
Seller Material Adverse Effect. For purposes of this Agreement, "Year 2000
Compliant" means, with respect to each system referred to in the prior sentence
that is intended to perform date-related functions, that such system, when used
properly in accordance with its documentation, is capable of correctly
receiving, processing and providing date data on and between December 31, 1999
and January 1, 2000; provided that all applications, hardware and other systems
used in conjunction with such system correctly exchange date data with or
provide data to such system.
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Section 3.21 Cash Balance. As of September 30, 1999, Seller and its
Subsidiaries had a consolidated balance of cash, cash equivalents and marketable
securities of not less than $20,500,000.
Section 3.22 Suppliers. No material supplier of Seller or any of its
Subsidiaries has indicated to Seller or any of its Subsidiaries in writing or,
to the Seller's knowledge, orally that it will stop, or decrease the rate of,
supplying materials, products or services to them, which cessation or decrease
is reasonably likely, individually or in the aggregate, to have a Seller
Material Adverse Effect.
Section 3.23 Opinion of Financial Advisor. The financial advisor of
Seller, Needham & Company, Inc., has delivered to Seller an opinion dated on or
about the date of this Agreement to the effect, as of such date, that the
Exchange Ratio is fair to the holders of Seller Common Stock from a financial
point of view.
Section 3.24 Section 203 of the DGCL Not Applicable. The Board of
Directors of Seller has taken all actions so that the restrictions contained in
Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203) will not apply to the execution, delivery or performance of this
Agreement, the Seller Stock Option Agreement, the Stockholders Agreements or the
consummation of the Merger or the other transactions contemplated by this
Agreement.
Section 3.25 Rights Agreement. Immediately prior to the execution of this
Agreement, Seller has (a) duly entered into an appropriate amendment to the
Seller Rights Plan, which amendment has been provided to Buyer, and approved by
the Board of Directors of Seller and (b) taken all other action necessary or
appropriate so that (A) the entering into of this Agreement and the Seller Stock
Option Agreement by the Seller and the entering into of the Stockholder
Agreements by the Stockholders of the Seller specified in Section 6.05(b) of
this Agreement does not and will not result in the ability of any person to
exercise any Seller Rights under the Seller Rights Plan or enable or require the
Seller Rights issued thereunder to separate from the shares of Seller Common
Stock to which they are attached or to be triggered or become exercisable and
(B) the Final Expiration Date (as defined in the Seller Rights Plan) will occur
immediately prior to the Effective Time.
Section 3.26 Hologic License. Prior to or concurrently with the execution
of this Agreement, Seller has duly entered into a Termination Agreement with
respect to the License and Technology Agreement between Seller and Hologic, Inc.
(the "Hologic License"), a copy of which is attached as Exhibit C hereto, and
such Termination Agreement has been duly executed by Hologic, Inc. and is in
full force and effect.
Section 3.27 Gilardoni Dispute. The description of the current dispute
between the Seller and Gilardoni SpA set forth in Section 3.27 of the Seller
Disclosure Schedule is accurate and complete in all material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB
Buyer and Sub represent and warrant to Seller that the statements contained
in this Article IV are true and correct, except as set forth herein or in the
disclosure schedule delivered by Buyer to Seller on or before the date of this
Agreement (the "Buyer Disclosure Schedule"). The Buyer Disclosure Schedule shall
be arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article IV and the disclosure in any paragraph shall qualify
other paragraphs in this Article IV only to the extent that it is reasonably
apparent from a reading of such document that it also qualifies or applies to
such other paragraphs.
Section 4.01 Organization of Buyer and Sub. Each of Buyer and Sub and
Buyer's other Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, has
all requisite corporate power to own, lease and operate its property and to
carry on its business as now being conducted, and is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would be
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reasonably likely to have a material adverse effect on the business, properties,
financial condition, results of operations or prospects of Buyer and its
Subsidiaries, taken as a whole, or to have a material adverse effect on the
ability of Buyer to consummate the transactions contemplated by this Agreement
(a "Buyer Material Adverse Effect"); provided however that (i) any adverse
change, event or effect that is demonstrated to be primarily caused by
conditions affecting the United States economy generally or the economy of any
nation or region in which Buyer or any of its Subsidiaries conducts business
that is material to the business of Buyer and its Subsidiaries, taken as a
whole, shall not be taken into account in determining whether there has been or
would be a "Buyer Material Adverse Effect," (ii) any adverse change, event or
effect that is demonstrated to be primarily caused by conditions generally
affecting any of the life sciences, aerospace, health care, advanced lighting
systems or analytical instruments industries shall not be taken into account in
determining whether there has been or would be reasonably likely to be a "Buyer
Material Adverse Effect", and (iii) any adverse change, event or effect that is
demonstrated to be primarily caused by the announcement or pendency of the
Merger shall not be taken into account in determining whether there has been or
would be reasonably likely to be a "Buyer Material Adverse Effect."
Section 4.02 Capital Structure.
(a) As of the date of this Agreement, the authorized capital stock of Buyer
consists of (i) 100,000,000 shares of Common Stock, $1.00 par value ("Buyer
Common Stock") and (ii) 1,000,000 shares of Preferred Stock, $1.00 par value
("Buyer Preferred Stock"), of which 70,000 shares are designated Series C Junior
Participating Preferred Stock. As of September 29, 1999, there were issued and
outstanding 46,006,748 shares of Buyer Common Stock and no shares of Buyer
Preferred Stock. The Buyer Disclosure Schedule shows the number of shares of
Buyer Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of September 29, 1999, and the plans under which such
options were granted (collectively, the "Buyer Stock Plans"). No material change
in such capitalization has occurred between September 29, 1999 and the date of
this Agreement. All shares of Buyer Common Stock subject to issuance as
specified above are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
(b) The authorized capital stock of Sub consists of 1,000 shares of common
stock, $.01 par value, all of which shares are issued and outstanding and are
held beneficially and of record by Buyer. Such shares were validly issued and
are fully paid and nonassessable.
Section 4.03 Authority; No Conflict; Required Filings and Consents.
(a) Each of Buyer and Sub has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of each of Buyer and
Sub (including the approval of the Merger by Buyer as the sole stockholder of
Sub). This Agreement and has been duly executed and delivered by each of Buyer
and Sub and constitutes the valid and binding obligation of each of Buyer and
Sub, enforceable in accordance with its terms, subject to the Bankruptcy and
Equity Exception.
(b) The execution and delivery of this Agreement by each of Buyer and Sub
does not, and the consummation of the transactions contemplated by this
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Articles of Organization or Bylaws of Buyer or the
Certificate of Incorporation or Bylaws of Sub, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Buyer or any of its Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound, or (iii) except as
provided in clauses (i), (ii), (iii), (iv) and (v) in paragraph (c) below,
conflict with or violate any permit, concession, franchise,
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license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Buyer or any of its Subsidiaries or any of its or their properties
or assets, except in the case of (ii) and (iii) for any such conflicts,
violations, defaults, terminations, cancellations or accelerations which are
not, individually or in the aggregate, reasonably likely to have a Buyer
Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Buyer or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the pre-merger notification report under
the HSR Act, (ii) the filing of the Registration Statement with the SEC in
accordance with the Securities Act, (iii) the filing of the Certificate of
Merger with the Delaware Secretary of State, (iv) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities laws and the laws of any foreign
country, (v) the approval by the NYSE of the listing of the shares of Buyer
Common Stock to be issued in the transactions contemplated by this Agreement,
and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not be reasonably likely to
have a Buyer Material Adverse Effect.
Section 4.04 SEC Filings; Financial Statements.
(a) Buyer has filed all forms, reports and documents required to be filed
by Buyer with the SEC since January 1, 1996. All such required forms, reports
and documents (including those that Buyer may file after the date hereof until
the Closing) are referred to herein as the "Buyer SEC Reports." The Buyer SEC
Reports (i) were prepared in compliance in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Buyer SEC Reports, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such Buyer SEC Reports or necessary in order to make the statements
in such Buyer SEC Reports, in the light of the circumstances under which they
were made, not misleading. None of Buyer's Subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes or schedules) contained in the Buyer SEC Reports, (i) complied
as to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, (ii) were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
the SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented in all
material respects the consolidated financial position of Buyer and its
Subsidiaries as of the dates and the consolidated results of its operations and
cash flows for the periods indicated, consistent in all material respects with
the books and records of Seller and its Subsidiaries, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
Section 4.05 Registration Statement; Proxy Statement/Prospectus. The
information in the Registration Statement (except for information supplied by
Seller for inclusion in the Registration Statement, as to which Buyer makes no
representation and which shall not constitute part of a Buyer SEC Report for
purposes of this Agreement) shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information (except for information to be supplied by Seller for
inclusion in the Proxy Statement, as to which Buyer makes no representation) in
the Proxy Statement shall not, on the date the Proxy Statement is first mailed
to stockholders of Seller, at the time of the Seller Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or omit to state any material fact necessary in order to
make the statements made in the Proxy Statement not false or misleading; or omit
to state any material fact
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necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Seller Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Buyer or any of its Affiliates, officers or directors should be discovered by
Buyer which should be set forth in an amendment to the Registration Statement or
a supplement to the Proxy Statement, Buyer shall promptly inform Seller.
Section 4.06 Operations of Sub. Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
by this Agreement.
Section 4.07 No Undisclosed Liabilities. Except as disclosed in the Buyer
SEC Reports filed prior to the date hereof, and except for normal or recurring
liabilities incurred since June 30, 1999 in the ordinary course of business
consistent with past practices, as of the date of this Agreement Buyer and its
Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which individually or in the aggregate are reasonably likely to have
a Buyer Material Adverse Effect.
Section 4.08 Absence of Certain Changes or Events. Except as expressly
contemplated by this Agreement or as disclosed in the Buyer SEC Reports filed
prior to the date hereof, since June 30, 1999, there has not been any change in
the financial condition, results of operations, business, properties or
prospects of Buyer and its Subsidiaries, taken as a whole, that has had, or is
reasonably likely to have, a Buyer Material Adverse Effect.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.01 Covenants of Seller. Except as expressly contemplated
hereby, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Seller
agrees as to itself and its Subsidiaries (except to the extent that Buyer shall
otherwise consent in writing), to carry on its business in the ordinary course
in substantially the same manner as previously conducted, to pay its debts and
Taxes and perform other obligations when due in the ordinary course in
substantially the same manner as previously conducted, subject to good faith
disputes over such debts, Taxes or obligations, and, to the extent consistent
with such business, use commercially reasonable efforts consistent in all
material respects with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and key employees and to preserve its relationships with customers,
suppliers, distributors, and others having business dealings with it. Except as
expressly contemplated by this Agreement or set forth in the Seller Disclosure
Schedule, Seller shall not (and shall not permit any of its Subsidiaries to),
without the written consent of Buyer:
(a) Accelerate, amend or change the period of exercisability of any
Seller Warrant or any outstanding option or restricted stock granted under
any Seller Stock Plan or any other employee stock plan of Seller or
authorize cash payments in exchange for any Seller Warrant or any option
granted under any of such plans except as required by the terms of such
plans or any related agreements in effect as of the date of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to
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issue any such shares or other convertible securities, other than the
issuance of shares of Seller Common Stock pursuant to the exercise of the
Seller Warrants or options outstanding on the date of this Agreement under
the Seller Stock Plans;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise
acquire or agree to acquire any assets (other than inventory, supplies and
other items, in each case, in the ordinary course of business consistent in
all material respects with past practice);
(e) Sell, lease, license or otherwise dispose of any of its properties
or assets, except for sales of inventory or products, in each case, in the
ordinary course of business consistent in all material respects with past
practice;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, other than for normal
scheduled bonuses set forth in Section 5.01(f) of the Seller Disclosure
Schedule (it being understood that the Seller's normal scheduled salary
increase for January 1, 2000 shall be subject to the Buyer's prior written
approval), (ii) grant any severance or termination pay to, or enter into
any employment or severance agreements with, any employees or officers,
(iii) enter into any collective bargaining agreement, (iv) establish,
adopt, enter into or amend (except as may be required by law) any bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination or
severance or other plan, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees or (v) forgive any indebtedness of
any employee to the Seller or any of its Subsidiaries;
(g) Amend or propose to amend its charter or bylaws, except as
contemplated by this Agreement;
(h) Incur any indebtedness for borrowed money, make any loans to any
person or entity or guarantee any debt securities of others (other than as
a result of the endorsement of checks for collection and for advances for
employee reimbursable expenses, in each case in the ordinary course of
business consistent in all material respects with past practice);
(i) Initiate, compromise, or settle any material litigation or
arbitration proceeding;
(j) Modify, amend or terminate any contract that is material to Seller
and its Subsidiaries, taken as a whole (other than any immaterial
modification or amendment to a purchase order in the ordinary course of
business consistent with past practice), or waive, release or assign any
material rights or claims, including any write-off or other compromise of
any material accounts receivable of Seller or any of its Subsidiaries;
(k) Make or rescind any Tax election, settle or compromise any Tax
liability or amend any Tax return;
(l) Change its methods of accounting as in effect at June 30, 1999
except as required by generally accepted accounting principles;
(m) Make or commit to make any capital expenditures that exceed the
capital budget furnished by Seller to Buyer;
(n) Enter into any new license for any material intellectual property
rights to or from any third party;
(o) Revalue any of the significant assets of the Seller or any of its
Subsidiaries, including the writing down of inventory other than in the
ordinary course of business consistent in all material respects with past
practice;
(p) Close any facility or office;
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(q) Invest funds in debt securities or other instruments maturing more
than 90 days after the date of investment except as set forth in Section
5.01(q) of the Seller Disclosure Schedule;
(r) Adopt or implement any stockholder rights plan that could have the
effect of impeding or restricting the consummation of the transactions
contemplated hereby or modify, amend or terminate the Seller Rights Plan;
(s) Fail to pay accounts payable and other obligations in the ordinary
course of business in a manner consistent in all material respects with
past practice or accelerate the payment of any accounts receivable other
than in the ordinary course of business in a manner consistent in all
material respects with past practice;
(t) Modify, amend or terminate the Hologic License; or
(u) Take, or agree in writing or otherwise to take, any of the actions
described in paragraphs (a) through (t) above.
Section 5.02 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, Seller and each of its Subsidiaries
shall make its officers available to confer on a regular and frequent basis with
one or more representatives of the Buyer at reasonable times and upon reasonable
advance notice to report on the general status of ongoing operations and shall
promptly provide Buyer or its counsel with copies of all filings made by such
party with any Governmental Entity in connection with this Agreement, the Merger
and the transactions contemplated hereby and thereby.
Section 5.03 Confidentiality. The parties acknowledge that Buyer and
Seller have previously executed a Confidentiality Agreement, dated as of April
28, 1999 (the "Confidentiality Agreement"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms, except as
expressly modified herein.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, Seller
and its Subsidiaries shall not, directly or indirectly, through any officer,
director, employee, financial advisor, representative or agent (i) solicit,
initiate, or encourage any inquiries or proposals that constitute, or could
reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, tender offer, sale of substantial assets,
sale of shares of capital stock (excluding sales pursuant to existing Seller
Stock Plans or pursuant to the Seller Warrants) or similar transaction involving
Seller or any of its Subsidiaries, other than the transactions contemplated by
this Agreement (any of the foregoing inquiries or proposals being referred to in
this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any
Acquisition Proposal; provided, however, that, if Seller has not breached this
Section 6.01, nothing contained in this Agreement shall prevent Seller or its
Board of Directors, from:
(A) furnishing non-public information to, or entering into discussions
or negotiations with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity
or agreeing to (with the terms of any such agreement being subject to
termination of this Agreement in accordance with Article VIII) or
recommending an unsolicited bona fide written Acquisition Proposal to the
stockholders of Seller, if and only to the extent that
(1) the Board of Directors of Seller believes in good faith (after
consultation with its financial advisor) that such Acquisition Proposal
is reasonably capable of being completed on the terms proposed and
would, if consummated, result in a transaction more favorable than the
transaction contemplated by this Agreement (any such more favorable
Acquisition Proposal being
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referred to in this Agreement as a "Superior Proposal") and Seller's
Board of Directors determines in good faith after consultation with
outside legal counsel that such action is necessary for such Board of
Directors to comply with its fiduciary duties to stockholders under
applicable law,
(2) prior to furnishing such non-public information to, or entering
into discussions or negotiations with, such person or entity, such Board
of Directors receives from such person or entity an executed
confidentiality agreement with terms no more favorable to such party
than those contained in the Confidentiality Agreement, and
(3) prior to recommending a Superior Proposal, Seller shall provide
Buyer with at least five business days' prior notice of its proposal to
do so, during which time Buyer may make, and in such event Seller shall
consider, a counterproposal to such Superior Proposal, and, subject to
the fiduciary duties of Seller's Board of Directors, Seller shall itself
and shall cause its financial and legal advisors to negotiate on its
behalf with Buyer with respect to the terms and conditions of such
counterproposal for a reasonable period of time given the terms and
conditions of such counterproposal and such Superior Proposal; or
(B) complying with Rule 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
(b) Seller will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore of the nature
described in Section 6.01(a) and will use commercially reasonable efforts to
obtain the return of any confidential information furnished to any such parties.
(c) Seller shall notify Buyer promptly, but in any event no more than 24
hours, after receipt by Seller (or its advisors) of any Acquisition Proposal or
any request for non-public information in connection with an Acquisition
Proposal or for access to the properties, books or records of Seller by any
person or entity that informs Seller that it is considering making, or has made,
an Acquisition Proposal. Such notice shall be made in writing and shall indicate
in reasonable detail the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact. Seller shall continue to keep Buyer informed,
on a current basis, of all material developments with respect to the status of
any such discussions or negotiations and the terms being discussed or
negotiated.
(d) Nothing in this Section 6.01 shall (i) permit Seller to terminate this
Agreement (except as specifically provided in Section 8.01 hereof), (ii) permit
Seller to enter into any agreement with respect to an Acquisition Proposal
during the term of this Agreement (it being agreed that during the term of this
Agreement, Seller shall not enter into any agreement with any person that
provides for, or in any way facilitates, an Acquisition Proposal (other than a
confidentiality agreement of the type referred to in Section 6.01(a) above)) or
(iii) affect any other obligation of Seller under this Agreement.
Section 6.02 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practical after the execution of this Agreement, Buyer
and Seller shall prepare and Seller shall file with the SEC the Proxy Statement,
and Buyer shall prepare and file with the SEC the Registration Statement, in
which the Proxy Statement will be included as a prospectus, provided that Buyer
may delay the filing of the Registration Statement until approval of the Proxy
Statement by the SEC. Buyer and Seller shall use all reasonable efforts to cause
the Registration Statement to become effective as soon after such filing as
practicable. Each of Buyer and Seller will promptly respond to any comments of
the SEC and will use its respective commercially reasonable efforts to have the
Proxy Statement cleared by the SEC and the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filings
and Seller will cause the Proxy Statement and the prospectus contained within
the Registration Statement to be mailed to its stockholders at the earliest
practicable time after both the Proxy Statement is cleared by the SEC and the
Registration Statement is declared effective under the Securities Act. Each of
Buyer and Seller will notify the other promptly upon the receipt of any comments
from the SEC or its staff or any other government officials and of any request
by the SEC or its staff or any other government officials for amendments or
supplements to the Registration
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Statement, the Proxy Statement or any filing pursuant to Section 6.02(b) or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any filing pursuant to Section 6.02(b). Each of Buyer and Seller will
cause all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 6.02 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, the Registration
Statement or any filing pursuant to Section 6.02(b), Buyer or Seller, as the
case may be, will promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of Seller, such amendment or supplement.
(b) Buyer and Seller shall make all necessary filings with respect to the
Merger under the Securities Act, the Exchange Act, applicable state blue sky
laws and the rules and regulations thereunder.
Section 6.03 Nasdaq Quotation. Seller agrees to continue the quotation of
Seller Common Stock on the Nasdaq National Market during the term of this
Agreement.
Section 6.04 Access to Information. Upon reasonable notice, Seller shall
(and shall cause each of its Subsidiaries to) afford to Buyer's officers,
employees, accountants, counsel and other representatives, reasonable access,
during normal business hours during the period prior to the Effective Time, to
all its properties, books, contracts, commitments and records and, during such
period, Seller shall (and shall cause each of its Subsidiaries to) furnish
promptly to Buyer (a) a copy of each report, schedule, registration statement
and other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information concerning
its business, properties and personnel as Buyer may reasonably request. Unless
otherwise required by law, Buyer will and shall cause its officers, employees,
accountants, counsel and other representatives or persons who have access to
such information to hold any such information which is non-public in confidence
in accordance with the Confidentiality Agreement. No information or knowledge
obtained in any investigation pursuant to this Section 6.04 or otherwise shall
affect or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger.
Section 6.05 Stockholders Meeting.
(a) The Seller, acting through its Board of Directors, shall, subject to
and in accordance with applicable law and its Certificate of Incorporation and
Bylaws, promptly and duly call, give notice of, convene and hold as soon as
practicable following the date on which the Registration Statement becomes
effective the Seller Meeting for the purpose of voting to approve and adopt this
Agreement and the Merger (the "Seller Voting Proposal"). The Board of Directors
of the Seller shall (i) recommend approval and adoption of the Seller Voting
Proposal by the stockholders of the Seller and include in the Proxy Statement
such recommendation and (ii) take all reasonable and lawful action to solicit
and obtain such approval; provided, however, that in the context of an
Acquisition Proposal the Board of Directors of Seller may withdraw or modify
such recommendation if (but only if) (i) the Board of Directors of Seller has
received a Superior Proposal, (ii) such Board of Directors upon advice of its
outside legal counsel determines that it is required, in order to comply with
its fiduciary duties under applicable law, to recommend such Superior Proposal
to the stockholders of Seller and (iii) Seller has complied with the provisions
of Section 6.01.
(b) S. David Ellenbogen, Ellenbogen Family Irrevocable Trust of 1996, S.
David Ellenbogen 1996 Retained Annuity Trust, Jay A. Stein and Jay A. Stein 1996
Retained Annuity Trust have each executed and delivered a Stockholder Agreement
to Buyer and Sub concurrently with the signing of this Agreement.
Section 6.06 Legal Conditions to Merger.
(a) Subject to the terms hereof, Seller and Buyer shall use their
respective commercially reasonable efforts to (i) take, or cause to be taken,
all appropriate action, and do, or cause to be done, all things necessary and
proper under applicable law to consummate and make effective the transactions
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contemplated hereby as promptly as practicable, (ii) obtain from any
Governmental Entity or any other third party any consents, licenses, permits,
waivers, approvals, authorizations, or orders required to be obtained or made by
Seller or Buyer or any of their Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby including, without limitation, the Merger,
(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities laws, (B) the HSR Act and any related
governmental request thereunder, and (C) any other applicable law and (iv)
execute or deliver any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Seller and Buyer shall cooperate with each other in connection with
the making of all such filings, including providing or making available copies
of all such documents to the non-filing party and its advisors (or, in
connection with information relating to filings under the HSR Act, to the
advisors of the non-filing party) prior to filing and, if requested, consider in
good faith all reasonable additions, deletions or changes suggested in
connection therewith. Seller and Buyer shall use their respective commercially
reasonable efforts to furnish to each other all information required for any
application or other filing to be made by the other party pursuant to the rules
and regulations of any applicable law (including all information required to be
included in the Proxy Statement and the Registration Statement) in connection
with the transactions contemplated by this Agreement.
(b) Subject to the terms hereof, Buyer and Seller agree, and shall cause
each of their respective Subsidiaries, to cooperate and to use their respective
commercially reasonable efforts to obtain any government clearances or approvals
required for Closing under the HSR Act, the Sherman Act, as amended, the Clayton
Act, as amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign law or, regulation or decree designed to prohibit,
restrict or regulate actions for the purpose or effect of monopolization or
restraint of trade (collectively "Antitrust Laws"). From and after the
occurrence of a Second Request (as defined below), Seller shall, at Buyer's
request and subject to Buyer's obligation to bear expenses as set forth below,
cooperate in all reasonable respects with Buyer to respond to any government
requests for information under any Antitrust Law, and to contest and resist any
action, including any legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Order") that
restricts, prevents or prohibits the consummation of the Merger or any other
transactions contemplated by this Agreement under any Antitrust Law. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any Antitrust Law. Buyer shall be entitled to direct any
proceedings or negotiations with any Governmental Entity relating to any of the
foregoing, provided that it shall afford Seller a reasonable opportunity to
participate therein and shall consider in good faith any proposals made by
Seller in connection therewith. The Buyer shall have the right, directly and/or
through its counsel, to assume full control over coordinating the response to
any formal request for additional information or documentary material made by
the Federal Trade Commission or the Antitrust Division of the U.S. Department of
Justice pursuant to 16 C.F.R. 803.20 under the HSR Act ("Second Request") and
for developing and implementing any strategies to resolve any governmental
concerns; provided, however that, subject to the expense reimbursement
provisions set forth in the following sentence, Seller shall make, on its own
behalf, any submissions required to be made by Seller in connection with any
such Second Request. In the event that Buyer so elects to assume the control
over the response to such request, (i) Buyer shall bear all expenses relating to
such response and (ii) Buyer shall keep Seller informed, on a current basis, of
all material developments with respect to the status of such request at the
request of Seller. Notwithstanding anything to the contrary in this Section
6.06, neither Buyer nor any of its Subsidiaries shall be required to (i) divest
any of their respective businesses, product lines or assets, or to take or agree
to take any other action or agree to any limitation, that could reasonably be
expected to have a Buyer Material Adverse Effect or a material adverse effect on
Buyer, combined with Seller, after the Effective Time or (ii) take any action
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under this Section 6.06 if the United States Department of Justice or the United
States Federal Trade Commission authorizes its staff to seek a preliminary
injunction or restraining order to enjoin consummation of the Merger.
(c) Each of Seller and Buyer shall give (or shall cause their respective
Subsidiaries to give) any notices to third parties, and use, and cause their
respective Subsidiaries to use, their commercially reasonable efforts to obtain
any third party consents related to or required in connection with the Merger
that are (A) necessary to consummate the transactions contemplated hereby, (B)
disclosed or required to be disclosed in the Seller Disclosure Schedule or the
Buyer Disclosure Schedule, as the case may be, or (C) required to prevent a
Seller Material Adverse Effect or a Buyer Material Adverse Effect from occurring
prior to or after the Effective Time.
Section 6.07 Public Disclosure. Buyer and Seller shall use commercially
reasonable efforts to consult with each other before issuing any press release
or otherwise making any public statement with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement prior to using such efforts, except as may be required by law. The
initial press release relating to this Agreement shall be in a form that was
heretofore agreed by the parties.
Section 6.08 Tax-Free Reorganization. Buyer and Seller shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code. The parties hereto hereby adopt this
Agreement as a plan of reorganization.
Section 6.09 Affiliate Agreements. Upon the execution of this Agreement,
Seller will provide Buyer with a list of those persons who are, in Seller's
reasonable judgment, "affiliates" of Seller, within the meaning of Rule 145
(each such person who is an "affiliate" of Seller within the meaning of Rule 145
is referred to as an "Affiliate") promulgated under the Securities Act ("Rule
145"). Seller shall provide such information and documents as Buyer shall
reasonably request for purposes of reviewing such list and shall notify Buyer in
writing regarding any change in the identity of its Affiliates prior to the
Closing Date. Seller shall use its commercially reasonable efforts to deliver or
cause to be delivered to Buyer by October 15, 1999 (and in any case prior to the
mailing of the Proxy Statement) from each of its Affiliates, an executed
Affiliate Agreement, in substantially the form appended hereto as Exhibit D.
Buyer shall be entitled to place appropriate legends on the certificates
evidencing any Buyer Common Stock to be received by Rule 145 Affiliates of
Seller pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Buyer Common Stock (provided
that such legends or stop transfer instructions shall be removed, two years
after the Effective Date, upon the request of any stockholder that is not then
an Affiliate of Buyer).
Section 6.10 NYSE Listing. Buyer shall use best efforts to cause the
shares of Buyer Common Stock to be issued in the Merger to be listed on the
NYSE, subject to official notice of issuance, on or prior to the Closing Date.
Section 6.11 Seller Stock Plans and Seller Warrants.
(a) At the Effective Time, each outstanding Seller Stock Option under the
Seller Stock Plans, whether vested or unvested, shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Seller Stock Option, the same number of shares of Buyer Common Stock as the
holder of such Seller Stock Option would have been entitled to receive pursuant
to the Merger had such holder exercised such option in full immediately prior to
the Effective Time (rounded downward to the nearest whole number), at a price
per share (rounded upward to the nearest whole cent) equal to (y) the aggregate
exercise price for the shares of Seller Common Stock purchasable pursuant to
such Seller Stock Option immediately prior to the Effective Time divided by (z)
the number of full shares of Buyer Common Stock deemed purchasable pursuant to
such Seller Stock Option in accordance with the foregoing.
(b) As soon as practicable after the Effective Time, Buyer shall deliver to
the participants in Seller Stock Plans appropriate notice setting forth such
participants' rights pursuant thereto and the grants
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pursuant to Seller Stock Plans shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 6.11 after
giving effect to the Merger).
(c) Buyer shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Buyer Common Stock for delivery under the
Seller Stock Plans assumed in accordance with this Section 6.11. As soon as
practicable after the Effective Time, and in any event within 30 days
thereafter, Buyer shall file one or more registration statements on Form S-8 (or
any successor or other appropriate forms), or another appropriate form, with
respect to the shares of Buyer Common Stock subject to such options and shall
use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options remain
outstanding.
(d) The Board of Directors of Seller shall have approved, prior to the date
of this Agreement, and shall take, prior to or as of the Effective Time, all
necessary actions, if any, pursuant to and in accordance with the terms of the
Seller Stock Plans and the instruments evidencing the Seller Stock Options, to
provide for the conversion of the Seller Stock Options into options to acquire
Buyer Common Stock in accordance with this Section 6.11, and that no consent of
the holders of the Seller Stock Options is required in connection with such
conversion.
(e) At the Effective Time, each outstanding Seller Warrant shall be deemed
to constitute a warrant to acquire, on the same terms and conditions as were
applicable under such Seller Warrant, the same number of shares of Buyer Common
Stock as the holder of such Seller Warrant would have been entitled to receive
pursuant to the Merger (including with respect to the treatment of fractional
shares) had such holder exercised such warrant in full immediately prior to the
Effective Time, at a price per share (rounded upward to the nearest whole cent)
equal to (y) the aggregate exercise price for the shares of Seller Common Stock
purchasable pursuant to such Seller Warrant immediately prior to the Effective
Time divided by (z) the number of full shares of Buyer Common Stock deemed
purchasable pursuant to such Seller Warrant in accordance with the foregoing.
(f) The Board of Directors of Seller shall have approved, prior to the date
of this Agreement, and shall take, prior to or as of the Effective Time, all
necessary actions, pursuant to and in accordance with the terms of the Seller
Warrants, to provide for the conversion of the Seller Warrants into warrants to
acquire Buyer Common Stock in accordance with this Section 6.11, and that no
consent of the holders of any Seller Warrant is required in connection with such
conversion.
Section 6.12 Brokers or Finders. Each of Buyer and Seller represents, as
to itself, its Subsidiaries and its Affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement,
except Needham & Company, Inc., whose fees and expenses will be paid by Seller
in accordance with Seller's agreement with such firm (a copy of which has been
delivered by Seller to Buyer prior to the date of this Agreement).
Section 6.12(A) Employment Matters.
(a) For purposes of eligibility, vesting and, except with respect to any
pension benefit plan or retiree medical plan, calculation of benefits (except to
the extent crediting such service would result in the duplication of benefits)
under each of Buyer's employee benefit plans, programs and arrangements in which
an employee of Seller who is employed as of the Closing Date and who becomes an
employee of Buyer or the Surviving Corporation immediately following the Closing
(each a "Continuing Employee") participates, Buyer shall grant, or shall cause
the Surviving Corporation to grant, each Continuing Employee with credit for all
service with Seller to the extent permitted by law. Sub and Buyer will provide
as of the Closing that Sub will become a participating employer in the 401(k)
plan which Buyer sponsors for its employees and employees of participating
subsidiaries.
(b) Buyer shall provide, or shall cause the Surviving Corporation to
provide, to each Continuing Employee (and each Continuing Employee's
beneficiaries and dependents) immediate coverage under a health benefit plan
maintained by the Surviving Corporation or Buyer. Buyer shall waive, or cause
the
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Surviving Corporation to waive, any applicable preexisting condition exclusion
(to the extent such exclusion did not apply to a preexisting condition under
Seller's plan) under any such health benefit plan to the extent permitted by
law.
(c) It is expressly agreed that the provisions of this Section 6.12(A) are
not intended to be for the benefit of or otherwise enforceable by any third
person including, without limitation, any employee of Seller, or any collective
bargaining unit or employee organization.
(d) At least two business days prior to the Closing, the Board of Directors
of Seller will vote to terminate its Section 401(k) plan (the "Plan"). After the
Closing, Sub or Buyer will assume sole sponsorship of the Plan and will
authorize the distribution of assets to participants in accordance with Plan
provisions, ERISA and qualification requirements of the Code. Participants will
be permitted to make direct rollovers of their Plan balances (including loans)
to the 401(k) plan of Buyer in which they participate. However, no distribution
of assets will occur, except with respect to employees who discontinue
employment with Sub or Buyer, prior to the issuance by the Internal Revenue
Service of a ruling that the distribution of assets from the terminated Plan is
in accordance with Section 401(k)(10) of the Code, taking into account the fact
that participants of the Plan will immediately be eligible for participation in
a defined contribution plan of the Sub or Buyer. In the event that such a ruling
is not obtained, Sub or Buyer will either (i) maintain the Plan on a "frozen"
basis, or (ii) merge the Plan into a Code qualified employee retirement plan
sponsored by Sub or Buyer.
Section 6.13 Indemnification.
(a) From and after the Effective Time, Buyer agrees that it will, and will
cause the Surviving Corporation to, jointly and severally with the Surviving
Corporation, defend, indemnify and hold harmless each present and former
director and officer of Seller (the "Indemnified Parties"), against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time (including acts or
omissions of any such director or officer occurring prior to the Effective
Time), whether asserted or claimed prior to, at or after the Effective Time, to
the fullest extent that Seller would have been permitted under Delaware law and
its Certificate of Incorporation or Bylaws in effect on the date hereof to
indemnify an Indemnified Party (and, to the extent permitted in the Certificate
of Incorporation or Bylaws of Seller in effect on the date hereof, Buyer and the
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law, provided the Indemnified Party to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such Indemnified Party is not entitled to
indemnification).
(b) For a period of six years after the Effective Time, Buyer shall cause
the Surviving Corporation to maintain (to the extent available in the market) in
effect a directors' and officers' liability insurance policy covering those
persons who are currently covered by Seller's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered to Buyer) with
coverage in amount and scope at least as favorable to such persons as Seller's
existing coverage; provided, that in no event shall Buyer or the Surviving
Corporation be required to make annual premium payments to the extent such
premiums exceed an amount equal to 175% of the annual premium paid by Seller for
such coverage as of the date of this Agreement (the "Maximum Premium"); provided
further, that if such premiums exceed the Maximum Premium the Surviving
Corporation shall purchase insurance policies in such amounts and with such
coverage as reasonably can be purchased for the Maximum Premium.
(c) The provisions of this Section 6.13 are intended to be an addition to
the rights otherwise available to the current officers and directors of Seller
by law, charter, statute, bylaw or agreement, and shall operate for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
Section 6.14 Letter of Seller's Accountants. Seller shall use all
reasonable efforts to cause to be delivered to Buyer and Seller a letter of
Arthur Andersen LLP, Seller's independent auditors, dated a date
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within two business days before the date on which the Registration Statement
shall become effective and addressed to Buyer, in form reasonably satisfactory
to Buyer and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
Section 6.15 Notification of Certain Matters. The Buyer will give prompt
notice to Seller, and Seller will give prompt notice to Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) any representation or warranty of
such party contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time, or (b) any material failure of Buyer and Sub or Seller, as the case may
be, or of any officer, director, employee or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement. Notwithstanding the above, the delivery of any notice
pursuant to this section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice or the conditions to such
party's obligation to consummate the Merger. Seller and each of its Subsidiaries
will promptly provide Buyer with copies of all correspondence between Seller and
any Subsidiary, on the one hand, and the Federal Aviation Administration or BBA
plc, on the other hand, and will keep Buyer informed of all material discussions
with such entities.
Section 6.16 Environmental Audit. Buyer agrees that from and after the
date of this Agreement and prior to the Effective Time, it shall not initiate or
request a third party acting on its behalf to initiate a Phase I or II
environmental audit of the real property of Seller or any Subsidiary of Seller.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.01 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Seller Voting Proposal shall have been
approved and adopted at the Seller Meeting, at which a quorum is present, by the
affirmative vote of the holders of a majority of the shares of Seller Common
Stock outstanding on the record date for the Seller Meeting.
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filing provided for by Section
1.02, all authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity, the failure of which to file, obtain or occur is reasonably likely to
have a Buyer Material Adverse Effect or a Seller Material Adverse Effect shall
have been filed, been obtained or occurred.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(e) No Injunctions. No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any order, executive
order, stay, decree, judgment or injunction (each an "Order") or statute, rule
or regulation which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(f) NYSE. The shares of Buyer Common Stock to be issued in the Merger
shall have been approved for listing on the NYSE, subject only to official
notice of issuance.
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Section 7.02 Additional Conditions to Obligations of Buyer and Sub. The
obligations of Buyer and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Buyer and Sub:
(a) Representations and Warranties.
(i) The representations and warranties of Seller set forth in this
Agreement that are not qualified as to materiality or Seller Material
Adverse Effect shall be true and correct in all material respects as of
the date of this Agreement;
(ii) The representations and warranties of Seller set forth in this
Agreement that are qualified as to materiality or Seller Material
Adverse Effect shall be true and correct in all respects as of the date
of this Agreement;
(iii) The representations and warranties of Seller set forth in
this Agreement shall be true and correct as of the Closing Date (without
regard to any materiality, Seller Material Adverse Effect or knowledge
qualifications contained therein), except (A) for changes contemplated
by this Agreement, (B) to the extent such representations and warranties
speak as of an earlier date and (C) where the failures to be true and
correct (without regard to any materiality, Seller Material Adverse
Effect or knowledge qualifications contained therein), individually or
in the aggregate, have not had and are not reasonably likely to have a
Seller Material Adverse Effect; and
(iv) Buyer shall have received a certificate signed on behalf of
Seller by the chief executive officer and the chief financial officer of
Seller to the effect that each of the conditions specified in paragraphs
(i), (ii) and (iii) of this paragraph (a) is satisfied in all respects.
(b) Performance of Obligations of Seller. Seller shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date; and Buyer shall have
received a certificate signed on behalf of Seller by the chief executive
officer and the chief financial officer of Seller to such effect.
(c) Tax Opinion. Buyer shall have received a written opinion from
Hale and Dorr LLP, counsel to Buyer, to the effect that the Merger will be
treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code; provided that if Hale and Dorr
LLP does not render such opinion, this condition shall nonetheless be
deemed satisfied if Brown, Rudnick, Freed & Gesmer renders such opinion to
Buyer (it being agreed that Buyer and Seller shall each provide reasonable
cooperation, including making reasonable representations, to Brown,
Rudnick, Freed & Gesmer or Hale and Dorr LLP, as the case may be, to enable
them to render such opinion).
(d) Third Party Consents. The Seller shall have obtained (i) all
consents and approvals of third parties referred to in Section 7.02(d) of
the Seller Disclosure Schedule and (ii) any other consent or approval of
any third party (other than a Governmental Entity) the failure of which to
obtain, individually or in the aggregate, is reasonably likely to have a
Seller Material Adverse Effect.
Section 7.03 Additional Conditions to Obligations of Seller. The
obligation of Seller to effect the Merger is subject to the satisfaction of each
of the following conditions, any of which may be waived, in writing, exclusively
by Seller:
(a) Representations and Warranties.
(i) The representations and warranties of Buyer and Sub set forth
in this Agreement that are not qualified as to materiality or Seller
Material Adverse Effect shall be true and correct in all material
respects as of the date of this Agreement;
(ii) The representations and warranties of Buyer and Sub set forth
in this Agreement that are qualified as to materiality or Buyer Material
Adverse Effect shall be true and correct in all respects as of the date
of this Agreement;
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(iii) The representations and warranties of Buyer and Sub set forth
in this Agreement shall be true and correct as of the Closing Date
(without regard to any materiality, Buyer Material Adverse Effect or
knowledge qualifications contained therein), except (A) for changes
contemplated by this Agreement, (B) to the extent such representations
and warranties speak as of an earlier date and (C) where the failures to
be true and correct (without regard to any materiality, Buyer Material
Adverse Effect or knowledge qualifications contained therein),
individually or in the aggregate, have not had and are not reasonably
likely to have a Buyer Material Adverse Effect; and
(iv) Seller shall have received a certificate signed on behalf of
Buyer by the chief executive officer or the chief financial officer of
Buyer to the effect that each of the conditions specified in paragraphs
(i), (ii) and (iii) of this paragraph (a) is satisfied in all respects.
(b) Performance of Obligations of Buyer and Sub. Buyer and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
Seller shall have received a certificate signed on behalf of Buyer by the
chief executive officer or the chief financial officer of Buyer to such
effect.
(c) Tax Opinion. Seller shall have received the opinion of Brown,
Rudnick, Freed & Gesmer counsel to Seller, to the effect that the Merger
will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code; provided
that if Brown, Rudnick, Freed & Gesmer does not render such opinion, this
condition shall nonetheless be deemed satisfied if Hale and Dorr LLP
renders such opinion to Seller (it being agreed that Buyer and Seller shall
each provide reasonable cooperation, including making reasonable
representations, to Brown, Rudnick, Freed & Gesmer or Hale and Dorr LLP, as
the case may be, to enable them to render such opinion).
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 8.01(b) through 8.01(g),
by written notice by the terminating party to the other party), whether before
or after approval of the Merger by the stockholders of Seller:
(a) by mutual written consent of Buyer and Seller; or
(b) by either Buyer or Seller if the Merger shall not have been
consummated by April 30, 2000 (the "Outside Date") (provided that the right
to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the
Merger to occur on or before such date); or
(c) by either Buyer or Seller if a Governmental Entity of competent
jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having
the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger; or
(d) by either Buyer or Seller if at the Seller Meeting (including any
adjournment or postponement), the requisite vote of the stockholders of
Seller in favor of the Seller Voting Proposal shall not have been obtained
(provided that the right to terminate this Agreement under this Section
8.01(d) shall not be available to the Seller where the failure to obtain
Seller stockholder approval shall have been caused by the action or failure
to act of Seller in breach of this Agreement and shall not be available to
Buyer where such failure is caused by a breach of this Agreement by Buyer);
or
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(e) by Buyer, if: (i) the Board of Directors of Seller shall have
failed to recommend approval of the Seller Voting Proposal in the Proxy
Statement or shall have withdrawn or modified its recommendation of the
Seller Voting Proposal; (ii) after the receipt by Seller of an Acquisition
Proposal, Buyer requests in writing that the Board of Directors of Seller
reconfirm its recommendation of this Agreement or the Merger and the Board
of Directors of Seller fails to do so within five business days after its
receipt of Buyer's request or, in the case of an Acquisition Proposal that
is a tender or exchange offer, within 10 business days after its receipt of
Buyer's request; (iii) the Board of Directors of Seller shall have approved
or recommended to the stockholders of Seller an Alternative Transaction (as
defined in Section 8.03(g)); (iv) a tender offer or exchange offer for 20%
or more of the outstanding shares of Seller Common Stock is commenced
(other than by Buyer or an Affiliate of Buyer) and the Board of Directors
of Seller recommends that the stockholders of Seller tender their shares in
such tender or exchange offer or within 10 business days after such tender
offer or exchange offer fails to recommend against acceptance of such offer
or takes no position with respect to acceptance thereof; or (v) for any
reason Seller fails to call and hold the Seller Meeting by the Outside Date
(unless primarily due to acts or omissions of the SEC or of Buyer); or
(f) by either Buyer or Seller, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions
set forth in Section 7.02(a) or (b) (in the case of termination by Buyer)
or 7.03(a) or (b) (in the case of termination by Seller) not to be
satisfied, and (ii) shall not have been cured within 10 days following
receipt by the breaching party of written notice of such breach from the
other party;
(g) by Buyer, if: (i) Buyer has incurred (or incurred on behalf of
Seller) more than an aggregate of $500,000 in out-of-pocket expenses
seeking to obtain clearance or approval of the Merger and other
transactions contemplated hereby under applicable Antitrust Laws or (ii)
the Federal Trade Commission or the Antitrust Division of the U.S.
Department of Justice has made a Second Request, and HSR clearance has not
been received within 90 days of the date of such request;
(h) by Seller, if the Market Value of the Buyer Common Stock would be
less than $30.99 per share unless Buyer, within two days after receipt of
written notice by Seller of its intention to so terminate, shall have
elected in its sole discretion to adjust the Exchange Ratio pursuant to
Section 2.01(c)(ii) hereof; or
(i) by Buyer, if the Market Value of the Buyer Common Stock would be
greater than $46.49 per share unless Seller, within two days after receipt
of written notice by Buyer of its intention to so terminate, shall have
elected in its sole discretion to adjust the Exchange Ratio pursuant to
Section 2.01(c)(i) hereof.
Section 8.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Buyer, Seller,
Sub or their respective officers, directors, stockholders or Affiliates, except
as set forth in Sections 5.03, 6.12, 8.03 and Article IX; provided that any such
termination shall not relieve any party from liability for any willful breach of
this Agreement (which includes without limitation the making of any
representation or warranty by a party in this Agreement that the party knew was
not true and accurate when made) and the provisions of the Seller Stock Option
Agreement, Sections 5.03, 6.12, 8.03 and Article IX of this Agreement and the
Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
Section 8.03 Fees and Expenses.
(a) Except as set forth in this Section 8.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated (it being understood that the HSR filing fee shall be paid
100% by Buyer); provided however, that Seller and Buyer shall share equally all
fees and expenses, other than attorneys' fees, incurred with respect to the
printing and filing of the Proxy Statement (including any
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related preliminary materials) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto.
(b) Seller shall pay Buyer up to $500,000 (or $700,000 in the case of a
termination described in clause (ii) below) as reimbursement for reasonable
out-of-pocket expenses of Buyer actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, reasonable fees and expenses of Buyer's counsel, accountants and financial
advisors, but excluding any discretionary fees paid to such financial advisors),
upon the termination of this Agreement (i) by Buyer pursuant to (A) Section
8.01(d); (B) Section 8.01(e), (C) Section 8.01(b) as a result of the failure to
satisfy the condition set forth in Section 7.02(a)(i) or Section 7.02(a)(ii); or
(D) Section 8.01(f); or (ii) by Seller pursuant to Section 8.01(h). Buyer shall
promptly provide Seller with invoices or other reasonable evidence of such
expenses upon written request by Seller. In the event that Seller pays Buyer the
termination fee set forth in Section 8.03(c) in connection with the event giving
rise to Seller's obligation to reimburse Buyer for expenses pursuant to this
Section 8.03(b), such termination fee shall be deemed to satisfy Seller's
obligations pursuant this Section 8.03(b).
(c) Seller shall pay Buyer a termination fee of $2,500,000 upon the
earliest to occur of the following events:
(i) the termination of this Agreement by Buyer pursuant to Section
8.01(e); or
(ii) the termination of this Agreement by Buyer pursuant to Section
8.01(f) after a willful breach by Seller of this Agreement, if before such
termination or within 12 months thereafter Seller shall have entered into
an agreement to engage in or shall have engaged in an Alternative
Transaction; or
(iii) the termination of this Agreement by Buyer or Seller pursuant to
Section 8.01(d) as a result of the failure to receive the requisite vote
for approval of the Seller Voting Proposal by the stockholders of Seller at
the Seller Meeting if, at the time of such failure, there shall have been
announced (and not unconditionally withdrawn) an Alternative Transaction
relating to Seller and within 12 months Seller shall have entered into an
agreement to engage in or shall have engaged in an Alternative Transaction.
(d) Buyer shall pay Seller up to $500,000 (or $700,000 in the case of a
termination described in clause (ii) below) as reimbursement for reasonable
out-of-pocket expenses of Seller actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, reasonable fees and expenses of Seller's counsel, accountants and financial
advisors, but excluding any discretionary fees paid to such financial advisors),
upon the termination of this Agreement (i) by Seller pursuant to (A) Section
8.01(b) as a result of the failure to satisfy the condition set forth in Section
7.03(a)(i) or Section 7.03(a)(ii) or (B) Section 8.01(f); or (ii) by Buyer
pursuant to Section 8.01(i). Seller shall promptly provide Buyer with invoices
or other reasonable evidence of such expenses upon written request by Buyer.
(e) [Intentionally Omitted.]
(f) The expenses and fees, if applicable, payable pursuant to Section
8.03(b), 8.03(c) and 8.03(d) shall be paid within two business days after demand
therefor following the first to occur of the events giving rise to the payment
obligation described in Section 8.03(b), 8.03(c)(i), (ii) or (iii) or 8.03(d);
provided that in no event shall Buyer or Seller, as the case may be, be required
to pay the expenses and fees, if applicable, to the other, if, immediately prior
to the termination of this Agreement, the party to receive the expenses and
fees, if applicable, was in material breach of its obligations under this
Agreement. If one party fails to promptly pay to the other any expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Fleet Bank, N.A. plus five percent per annum, compounded
quarterly, from the date such expense reimbursement or fee was required to be
paid.
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(g) As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than Buyer
or its affiliates (a "Third Party"), acquires more than 20% of the outstanding
shares of Seller Common Stock pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving Seller pursuant
to which any Third Party acquires more than 20% of the outstanding shares of
Seller Common Stock or of the entity surviving such merger or business
combination, (iii) any other transaction pursuant to which any Third Party
acquires control of assets (including for this purpose the outstanding equity
securities of Subsidiaries of Seller, and the entity surviving any merger or
business combination including any of them) of Seller having a fair market value
equal to more than 20% of the fair market value of all the assets of Seller
immediately prior to such transaction, or (iv) any public announcement by a
Third Party of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
Section 8.04 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Seller, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.05 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, but shall expire with and be terminated and
extinguished upon the Effective Time, except for the agreements contained in
Articles I and II, Sections 6.11, 6.13 and Article IX, and the agreements of the
Affiliates delivered pursuant to Section 6.09. The Confidentiality Agreement
shall survive the execution and delivery of this Agreement.
Section 9.02 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered three business
days after it is sent by registered or certified mail, return receipt requested,
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postage prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service for next business day delivery, in each case to the
intended recipient as set forth below:
(a) if to Buyer or Sub, to
EG&G, Inc.
45 William Street
Wellesley, MA 02481
Attn: General Counsel
Telecopy: (781) 431-4115
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: David E. Redlick, Esq.
Telecopy: (617) 526-5000
(b) if to Seller, to
Vivid Technologies, Inc.
10 East Commerce Way
Woburn, MA 01801
Attn: Chief Executive Officer
Telecopy: (781) 939-3996
with a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attn: Lawrence Levy, Esq.
Telecopy: (617) 826-8201
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
Section 9.03 Interpretation. When a reference is made in this Agreement
to Articles or Sections, such reference shall be to an Article or Section of
this Agreement unless otherwise indicated. The table of contents, table of
defined terms and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to October 4, 1999. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be following by the words
"without limitation." References to "knowledge of Seller" or any similar
expression shall mean the actual knowledge of the individuals listed in Section
9.03 of the Seller Disclosure Schedule and shall be deemed to include any
information contained in any document in the possession or files of such
persons. References to "knowledge of Buyer" or any similar expression shall mean
the actual knowledge of the individuals listed in Section 9.03 of the Buyer
Disclosure Schedule and shall be deemed to include any information contained in
any document in the possession or files of such persons.
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Section 9.04 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.05 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.13 are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder; provided that the Confidentiality Agreement shall remain in
full force and effect until the Effective Time. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement,
neither Seller nor Buyer makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or any
of its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby, notwithstanding the delivery
or disclosure to the other or the other's representatives of any documentation
or other information with respect to any one or more of the foregoing.
Section 9.06 Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO
BE MADE IN, AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY
AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
TO BE PERFORMED WHOLLY IN SUCH STATE. The parties hereby (a) irrevocably submit
to the jurisdiction of the Chancery Court of the State of Delaware and the
federal courts of the United States of America located in the State of Delaware
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and the Seller Stock Option and in respect of the transactions
contemplated hereby and thereby and (b) waive, and agree not to assert, as a
defense in any action, suit or proceeding for the interpretation or enforcement
hereof, that it is not subject to such jurisdiction or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or the Seller Stock
Option may not be enforced in or by such courts, and the parties irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such courts. The parties hereby consent to and grant any such
court's jurisdiction over the person of such parties and over the subject matter
of such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 9.02, or in
such other manner as may be permitted by law, shall be valid and sufficient
service thereof.
Section 9.07 Waiver of Jury Trial. EACH OF BUYER, SUB AND SELLER HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE SELLER STOCK OPTION AGREEMENT OR THE ACTIONS
OF BUYER, SUB OR SELLER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF OR THEREOF.
Section 9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 9.09 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
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valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 9.10 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
Section 9.11 Proposed Name Change. Seller acknowledges that Buyer has
received approval from its stockholders of an amendment to Buyer's Articles of
Organization to change the name of Buyer to "PerkinElmer, Inc." and that the
proposed name change may be effective prior to the Effective Time.
[Remainder of page intentionally blank]
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IN WITNESS WHEREOF, Buyer, Sub and Seller have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
EG&G, INC.
By: /s/ ANGELO CASTELLANA
------------------------------------
Title: Senior Vice President
VENICE ACQUISITION CORP.
By: /s/ ANGELO CASTELLANA
------------------------------------
Title: Treasurer
VIVID TECHNOLOGIES, INC.
By: /s/ S. DAVID ELLENBOGEN
------------------------------------
Title: Chief Executive Officer
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ANNEX B
SELLER STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 4, 1999 (the "Agreement"),
between EG&G, INC. a Massachusetts corporation (the "Grantee"), and VIVID
TECHNOLOGIES, INC., a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and Venice Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Grantor ("Sub"), are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger (the "Merger")
of Sub with and into the Grantee;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase 2,000,012 shares of Common Stock, par value $.01 per share,
of the Grantor (the "Common Stock"), upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread.
(a) Contemporaneously herewith the Grantee, Sub and the Grantor are
entering into the Merger Agreement. Subject to the other terms and
conditions set forth herein, the Grantor hereby grants to the Grantee an
irrevocable option (the "Option") to purchase up to 2,000,012 shares of
Common Stock (the "Shares") at a cash purchase price equal to $6.25 per
Share (the "Purchase Price"). The Option may be exercised by the
Grantee, in whole or in part, at any time, or from time to time,
following the occurrence of one of the events set forth in Section 2(c)
hereof and prior to the termination of the Option in accordance with the
terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Stock Exercise
Notice") specifying a date (subject to the HSR Act (as defined below))
not later than 20 business days and not earlier than the next business
day following the date such notice is given for the closing of such
purchase. In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend,
stock split, split-up, recapitalization, merger or other change in the
corporate or capital structure of the Grantor, the number of Shares
subject to this Option and the purchase price per Share shall be
appropriately adjusted to restore to the Grantee its rights hereunder.
(c) If at any time the Option is then exercisable pursuant to the
terms of Section 1(a) hereof, the Grantee may elect, in lieu of
exercising the Option to purchase Shares provided in Section 1(a)
hereof, to send a written notice to the Grantor (the "Cash Exercise
Notice") specifying a date not later than 20 business days and not
earlier than 10 business days following the date such notice is given on
which date the Grantor shall pay to the Grantee an amount in cash equal
to the Spread (as hereinafter defined) multiplied by all or such portion
of the Shares subject to the Option as Grantee shall specify. As used
herein "Spread" shall mean the excess, if any, over the Purchase Price
of the higher of (x) if applicable, the highest price per share of
Common Stock (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by any person in an Alternative
Transaction (as defined in the Merger Agreement) (the "Alternative
Purchase Price") or (y) the closing price of the shares of Common Stock
on the Nasdaq National Market on the last trading day immediately prior
to the date of the Cash Exercise Notice (the "Closing Price"). If the
Alternative Purchase Price includes any property
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other than cash, the Alternative Purchase Price shall be the sum of (i)
the fixed cash amount, if any, included in the Alternative Purchase
Price plus (ii) the fair market value of such other property. If such
other property consists of securities with an existing public trading
market, the average of the closing prices (or the average of the closing
bid and asked prices if closing prices are unavailable) for such
securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice
shall be deemed to equal the fair market value of such property. If such
other property consists of something other than cash or securities with
an existing public trading market and, as of the payment date for the
Spread, agreement on the value of such other property has not been
reached, the Alternative Purchase Price shall be deemed to equal the
Closing Price. Upon exercise of its right to receive cash pursuant to
this Section 1(c), the obligations of the Grantor to deliver Shares
pursuant to Section 3 shall be terminated with respect to such number of
Shares for which the Grantee shall have elected to be paid the Spread.
2. Conditions to Delivery of Shares. The Grantor's obligation to
deliver Shares upon exercise of the Option or the Spread upon exercise of
the Grantor's rights under Section 1(c) above is subject only to the
conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United
States prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or
been terminated; and
(c) A proposal for an Alternative Transaction involving Grantor
shall have been made on or after the date of this Agreement and prior to
the date the Merger Agreement is terminated pursuant to the terms
thereof (the "Merger Termination Date") and one or more of the following
events shall have occurred on or after the date of the making of such
proposal: (1) the requisite vote of the stockholders of Grantor in favor
of the Seller Voting Proposal shall not have been obtained at the Seller
Meeting (as such terms are defined in the Merger Agreement) or any
adjournment or postponement thereof; (2) the Board of Directors of
Grantor shall have failed to recommend approval of the Seller Voting
Proposal in the Proxy Statement (as defined in the Merger Agreement) or
shall have withdrawn or modified its recommendation of the Merger
Agreement or the Merger; (3) the Board of Directors of Grantor shall
have approved or recommended to the stockholders of Grantor an
Alternative Transaction (as defined in the Merger Agreement); (4) a
tender offer or exchange offer for 20% or more of the outstanding shares
of Grantor Common Stock shall have been commenced (other than by Grantee
or an affiliate of Grantee) and the Board of Directors of Grantor shall
have recommended that the stockholders of Grantor tender their shares in
such tender or exchange offer or within 10 days after such tender offer
or exchange offer fails to recommend against acceptance of such offer or
takes no position with respect to acceptance thereof; or (5) for any
reason Grantor shall have failed to call and hold the Seller Meeting (as
defined in the Merger Agreement) by the Outside Date (as defined in the
Merger Agreement) (unless primarily due to acts or omissions of the
Securities and Exchange Commission or the Grantee).
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by
the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the
case may be, at 10:00 A.M., local time, at the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts, or, if the conditions set
forth in Section 2(a) or 2(b) have not then been satisfied, on the
second business day following the satisfaction of such conditions, or at
such other time and place as the parties hereto may agree (the "Closing
Date"). On the Closing Date, (i) in the event of a closing pursuant to
Section 1(b) hereof, the Grantor will deliver to the Grantee a
certificate or certificates, duly endorsed (or accompanied by duly
executed stock powers), representing the Shares in the
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denominations designated by the Grantee in its Stock Exercise Notice and
the Grantee will purchase such Shares from the Grantor at the price per
Share equal to the Purchase Price or (ii) in the event of a closing
pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee
cash in an amount determined pursuant to Section 1(c) hereof. Any
payment made by the Grantee to the Grantor, or by the Grantor to the
Grantee, pursuant to this Agreement shall be made by certified or
official bank check or by wire transfer of immediately available federal
funds to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act").
4. Representations and Warranties of the Grantor. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to enter into and perform this Agreement; (b) the execution and
delivery of this Agreement by the Grantor and the consummation by it of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Grantor and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantor and constitutes a
valid and binding obligation of the Grantor, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; (c) the Grantor has taken all necessary corporate action to
authorize and reserve the Shares issuable upon exercise of the Option and
the Shares, when issued and delivered by the Grantor upon exercise of the
Option, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights; (d) except as otherwise
required by the HSR Act, the execution and delivery of this Agreement by
the Grantor and the consummation by it of the transactions contemplated
hereby do not require the consent, waiver, approval or authorization of or
any filing with any person or public authority and will not violate, result
in a breach of or the acceleration of any obligation under, or constitute a
default under, any provision of any charter or by-law, indenture, mortgage,
lien, lease, agreement, contract, instrument, order, law, rule, regulation,
judgment, ordinance, decree or restriction by which the Grantor or any of
its subsidiaries or any of their respective properties or assets is bound;
and (e) no "fair price", "moratorium", "control share acquisition" or other
form of antitakeover statute or regulation (including, without limitation,
Section 203 of the Delaware General Corporation Law) is or shall be
applicable to the acquisition of Shares pursuant to this Agreement.
5. Representations and Warranties of the Grantee. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery
of this Agreement by the Grantee and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Grantee and this Agreement has been
duly executed and delivered by a duly authorized officer of the Grantee and
will constitute a valid and binding obligation of Grantee; and (b) the
Grantee is acquiring the Option and, if and when it exercises the Option,
will be acquiring the Shares issuable upon the exercise thereof for its own
account and not with a view to distribution or resale in any manner which
would be in violation of the Securities Act.
6. Listing of Shares; HSR Act Filings; Governmental Consents. Subject
to applicable law and the rules and regulations of the Nasdaq National
Market, the Grantor will promptly file an application to list the Shares on
the Nasdaq National Market and will use its best efforts to obtain approval
of such listing and to effect all necessary filings by the Grantor under
the HSR Act; provided, however, that if the Grantor is unable to effect
such listing on the Nasdaq National Market by the Closing Date, the Grantor
will nevertheless be obligated to deliver the Shares upon the Closing Date.
Each of the parties hereto will use its best efforts to obtain consents of
all third parties and governmental authorities, if any, necessary to the
consummation of the transactions contemplated.
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7. Registration Rights.
(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant
hereto, and such sale requires, in the opinion of counsel to the
Grantee, which opinion shall be reasonably satisfactory to the Grantor
and its counsel, registration of such Shares under the Securities Act,
the Grantor will cooperate with the Grantee and any underwriters in
registering such Shares for resale, including, without limitation,
promptly filing a registration statement that complies with the
requirements of applicable federal and state securities laws and
entering into an underwriting agreement with such underwriters upon such
terms and conditions as are customarily contained in underwriting
agreements with respect to secondary distributions; provided that the
Grantor shall not be required to have declared effective more than two
registration statements hereunder and shall be entitled to delay the
filing or effectiveness of any registration statement for up to 60 days
if the offering would, in the judgment of the Board of Directors of the
Grantor, require premature disclosure of any material corporate
development or otherwise interfere with or adversely affect any pending
or proposed offering of securities of the Grantor or any other material
transaction involving the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 7, the Grantor agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares covered
thereby in such numbers as the Grantee may from time to time reasonably
request and (ii) if any event shall occur as a result of which it
becomes necessary to amend or supplement any registration statement or
prospectus, to prepare and file under the applicable securities laws
such amendments and supplements as may be necessary, subject to the
following two paragraphs, to keep available for at least 180 consecutive
days a prospectus covering the Common Stock meeting the requirements of
such securities laws, and to furnish the Grantee such numbers of copies
of the registration statement and prospectus as amended or supplemented
as may reasonably be requested.
The Grantor may, by written notice to the Grantee, on one occasion
suspend a registration statement after effectiveness for up to 30 days
(the period of any such suspension being hereinafter referred to as a
"Suspension Period"), and require that the Grantee immediately cease
sales of shares pursuant to such registration statement, in the event
that the Grantor is engaged in any activity or transaction or
preparations or negotiations for any activity or transaction that the
Grantor desires to keep confidential for business reasons, if the Board
of Directors of the Grantor determines in good faith that the public
disclosure requirements imposed on the Grantor under the Securities Act
in connection with such registration statement would require disclosure
of such activity, transaction, preparations or negotiations.
To the extent the Grantor imposes a Suspension Period as a result
of such determination by the Grantor's Board of Directors, the Grantor
shall not impose an additional Suspension Period (and, if necessary, the
180-day period referred to above shall be extended), such that the
Grantee is entitled to a total of 30 consecutive days without a
Suspension Period. The Grantor agrees that no other holder of shares of
Common Stock seeking to resell such shares pursuant to a registration
statement will be permitted to sell shares of Common Stock pursuant to a
registration statement during a Suspension Period. If the Grantor
suspends the registration statement or requires the Grantee to cease
sales of shares, the Grantor shall, as promptly as practicable following
the termination of the circumstance which entitled the Grantor to do so,
take such actions as may be necessary to reinstate the effectiveness of
such registration statement and/or give written notice to the Grantee
authorizing it to resume sales pursuant to such registration statement.
The Grantor shall bear the cost of the registration, including, but
not limited to, all registration and filing fees, printing expenses, and
fees and disbursements of counsel and accountants for the Grantor,
except that the Grantee shall pay the fees and disbursements of its
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counsel, the underwriting fees and selling commissions applicable to the
shares of Common Stock sold by the Grantee. The Grantor shall indemnify
and hold harmless Grantee, its affiliates and its officers and directors
from and against any and all losses, claims, damages, liabilities and
expenses arising out of or based upon any statements contained in,
omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does
not apply to any loss, liability, claim, damage or expense to the extent
it arises out of (i) any untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Grantor
by the Grantee, its affiliates and its officers expressly for use in any
registration statement (or any amendment thereto) or any preliminary
prospectus filed pursuant to this paragraph (ii) any untrue statement or
omission contained in a preliminary prospectus that was corrected in a
final prospectus that was distributed to the Grantor prior to the
written confirmation of the sale and which the Grantor failed to
properly distribute. The Grantor shall also indemnify and hold harmless
each underwriter and each person who controls any underwriter within the
meaning of either the Securities Act or the Securities Exchange Act of
1934 against any and all losses, claims, damages, liabilities and
expenses arising out of or based upon any statements contained in,
omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does
not apply to any loss, liability, claim, damage or expense to the extent
it arises out of any untrue statement or omission made in reliance upon
and in conformity with written information furnished to the Grantor by
the underwriters and/or the Grantee expressly for use in any
registration statement (or any amendment thereto) or any preliminary
prospectus filed pursuant to this paragraph.
8. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as defined in Section 8(c)
below) exceed $2,500,000 and, if it otherwise would exceed such amount,
the Grantee, at its sole election, shall either (i) deliver to the
Grantor for cancellation Shares previously purchased by Grantee, (ii)
pay cash or other consideration to the Grantor, (iii) receive a smaller
termination fee under Section 8.03 of the Merger Agreement or (iv)
undertake any combination thereof, so that Grantee's Total Profit shall
not exceed $2,500,000 after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of Shares as would, as of the
date of the Stock Exercise Notice, result in a Notional Total Profit (as
defined in Section 8(c) below) of more than $2,500,000 and, if exercise
of the Option otherwise would exceed such amount, the Grantee, at its
discretion, may increase the Purchase Price for that number of Shares
set forth in the Stock Exercise Notice so that the Notional Total Profit
shall not exceed $2,500,000; provided, that nothing in this sentence
shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
received by Grantee pursuant to Section 8.03(b) of the Merger Agreement
and Section 1(c) hereof, and (ii) (x) the net cash amounts received by
Grantee pursuant to the sale of Shares (or any other securities into
which such Shares are converted or exchanged) to any unaffiliated party,
less (y) the Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of Shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of the Stock
Exercise Notice assuming that this Option were exercised on such date
for such number of Shares and assuming that such Shares, together with
all other Shares held by Grantee and its affiliates as of such date,
were sold for cash at the closing market price for the Common Stock as
of the close of business on the preceding trading day (less customary
brokerage commissions).
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9. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
10. Specific Performance. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
11. Notice. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered three business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service for next business day delivery, in each case to the
intended recipient as set forth below:
If to the Grantor:
Vivid Technologies, Inc.
10 East Commerce Way
Woburn, MA 01801
Attn: Chief Executive Officer
Telecopy: (781) 939-3996
With a copy to:
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attn: Lawrence Levy, Esq.
Telecopy: (617) 856-8201
If to the Grantee:
EG&G, Inc.
45 William Street
Wellesley, MA 02481
Attn: General Counsel
Telecopy: (781) 431-4115
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: David E. Redlick, Esq.
Telecopy: (617) 526-5000
Any party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but,
except as expressly provided in Section 19 hereof, no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the party for whom it is intended.
Any party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
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12. Parties in Interest. This Agreement shall inure to the benefit of
and be binding upon the parties named herein and their respective
successors and assigns; provided, however, that such successors in interest
or assigns shall agree to be bound by the provisions of this Agreement.
Nothing in this Agreement, express or implied, is intended to confer upon
any person other than the Grantor or the Grantee, or their successors or
assigns, any rights or remedies under or by reason of this Agreement.
13. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be
changed only by an agreement in writing signed by the party against whom
any waiver, change, amendment, modification or discharge may be sought.
14. Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written
consent of the other party hereto, except that the Grantee may assign its
rights and obligations hereunder to any of its direct or indirect
wholly-owned subsidiaries, but no such transfer shall relieve the Grantee
of its obligations hereunder if such transferee does not perform such
obligations.
15. Headings. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same
document.
17. Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO BE
MADE IN, AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED
BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS TO BE PERFORMED WHOLLY IN SUCH STATE. The parties hereby (a)
irrevocably submit to the jurisdiction of the Chancery Court of the State
of Delaware and the federal courts of the United States of America located
in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and in respect of the
transactions contemplated hereby and thereby and (b) waive, and agree not
to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof, that it is not subject to such
jurisdiction or that such action, suit or proceeding may not be brought or
is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement may not be enforced in or by such
courts, and the parties irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such courts. The
parties hereby consent to and grant any such court's jurisdiction over the
person of such parties and over the subject matter of such dispute and
agree that mailing of process or other papers in connection with any such
action or proceeding in the manner provided in Section 11, or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof.
18. Termination. The right to exercise the Option granted pursuant to
this Agreement shall terminate at the earlier of (a) the Effective Time (as
defined in the Merger Agreement), (b) the date on which Grantee realizes a
Total Profit of $2,500,000, (c) the date the Merger Agreement is validly
terminated (i) by the Grantor and the Grantee pursuant to Section 8.01(a)
thereof, (ii) by either the Grantor or the Grantee pursuant to Section
8.01(b) thereof (provided that the Grantor shall not have failed to fulfill
any obligation under the Merger Agreement that was a principal cause or
resulted in the failure of the Merger to occur), (iii) by either the
Grantor or the Grantee pursuant to Section 8.01(c) thereof if a
nonappealable final order, decree or ruling or other nonappealable final
action is taken by the Federal Trade Commission or the Antitrust Division
of the U.S. Department of Justice pursuant to the Antitrust Laws having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, (iv) by the Grantor pursuant to Section 8.01(f) thereof or by the
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Grantee pursuant to Section 8.01(f) thereof in the event that the breach
giving rise to the Grantee's right to terminate is not a willful breach by
the Grantor, (v) by the Grantor pursuant to Section 8.01(g) thereof, (vi)
by the Grantor pursuant to Section 8.10(h) thereof or (vii) by the Grantee
pursuant to Section 8.01(i) thereof and (d) 181 days after the Merger
Termination Date (the date referred to in clause (d) being hereinafter
referred to as the "Option Termination Date"); provided, that if the Option
cannot be exercised or the Shares cannot be delivered to Grantee upon such
exercise because the conditions set forth in Section 2(a) or Section 2(b)
hereof have not yet been satisfied, the Option Termination Date shall be
extended until thirty days after such impediment to exercise has been
removed; and provided, further, that, if at any time the Grantee seeks to
exercise the Option by delivery of a Stock Exercise Notice but is unable to
do so with respect to all of the Shares subject to the Option at the
Purchase Price because of the limitation on profit contained in Section
8(b) hereof, the Option Termination Date shall be extended for an
additional 180 days from the date of such Stock Exercise Notice (but in no
event shall the Option Termination Date be more than 360 days after the
Merger Termination Date).
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
19. Right of First Refusal. Subject to the provisions of paragraph
(e) below, the Grantee shall not sell or otherwise transfer ("transfer")
Shares representing more than 5% of the outstanding capital stock of the
Grantor in a single privately negotiated transaction (any such transfer
being hereinafter returned to a "Private Block Sale"), except by a transfer
which meets the following requirements:
(a) If the Grantee proposes to engage in a Private Block Sale, then
the Grantee shall first give written notice thereof (the "Transfer
Notice") to the Grantor. The Transfer Notice shall name the proposed
transferee and state the number of Shares that will be transferred (the
"Offered Shares"), the price per share and all other material terms and
conditions of the transfer. In addition, if the proposed transferee has
set a deadline by which the Grantee must agree to the Private Black Sale
(such time, the "Sale Deadline"), the Transfer Notice shall state such
deadline.
(b) For a period of beginning on the delivery of the Transfer
Notice and ending 48 hours following delivery of the Transfer Notice
(the "Notice Response Period"), the Grantor shall have the option to
purchase all (but not less than all) of the Offered Shares at the price
and upon the terms set forth in the Transfer Notice. In the event the
Grantor elects to purchase all of the Offered Shares, it shall give
irrevocable written notice of its election to the Grantee within the
Notice Response Period and the settlement of the sale of such Offered
Shares shall be made as provided below in paragraph (c).
(c) If the Grantor elects to acquire all of the Offered Shares, the
Grantor shall so notify the Grantee and settlement shall be made at the
principal office of the Grantor by wire transfer of immediately
available funds within two business days after the termination of the
Notice Response Period.
(d) If the Grantor does not elect to acquire all of the Offered
Shares or does not give timely notice during the Response Period, the
Grantee may, within the 90-day period following the expiration of the
Notice Response Period, transfer the Offered Shares to the proposed
transferee or any other purchaser, provided that the sale shall not be
on terms and conditions more favorable to the purchaser than those
contained in the Transfer Notice. Upon completion of such a transfer,
the transferred shares shall thereafter be released from all
restrictions under this Section.
(e) The following transactions shall be exempt from the provisions
(including without limitation the notice provisions) of this Section:
(1) The Grantee's bona fide pledge or mortgage of its shares
with a commercial lending institution;
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(2) The Grantee's transfer of any or all of its shares pursuant
to and in accordance with the terms of any merger, consolidation,
reclassification of shares or capital reorganization of the Grantee,
or pursuant to a sale of substantially all of the stock or assets of
the Grantee;
(3) The Grantee's transfer of any or all of its shares to its
stockholders on a pro rata basis;
(4) Any transfer pursuant to an effective registration statement
filed by the Grantor with the Securities and Exchange Commission or
Rule 144 effected on the Nasdaq National Market or another securities
exchange or otherwise in an open market transaction; and
(5) Any single transfer involving 5% or less of the outstanding
capital stock of the Grantor.
(f) The foregoing right of first refusal shall terminate upon
either of the following dates, whichever shall first occur:
(1) On the expiration of the Repurchase Option;
(2) Upon the sale of all or substantially all of the shares or
business of the Grantor, by merger, consolidation, sale of assets or
otherwise; or
(3) On the date on which Grantee holds Shares representing 5%
less of the outstanding capital stock of the Grantor.
(g) Notwithstanding the provisions of Section 11, the Transfer
Notice and all notices, requests, demands, claims and other
communications under this Section 19 shall be deemed duly delivered only
upon personal delivery or upon receipt of confirmation by telecopy with
a copy sent via reputable nationwide overnight courier service for next
day delivery, in each case to the intended recipient at the address set
forth in Section 11.
20. Option to Repurchase Shares.
(a) In the event (i) the Grantee has exercised all or any portion
of the Option in accordance with the terms of this Agreement and
acquired any Shares and (ii) the Grantor has not entered into a
proposal, plan or agreement with respect to an Alternative Transaction
on or before the first anniversary of the Merger Termination Date, then
during the Repurchase Option Exercise Period (as defined below), the
Grantor shall have the right and option (the "Repurchase Option") to
purchase from the Grantee all Shares then held by the Grantee at the
Repurchase Option Price (as defined below). The Repurchase Option
Exercise Period shall mean the 30-day period beginning on the first
business day following the first anniversary of the Merger Termination
Date. The Repurchase Option Price shall mean the greater of (i) $6.25
(subject to adjustment by reason of any stock split, reverse split,
reclassification, stock dividend, reorganization, recapitalization or
other similar change effecting the Common Stock occurring on or after
the date hereof) and (ii) the average of the Daily Per Share Prices (as
defined below) of the Common Stock for the 20 consecutive trading days
ending on the third trading day prior to the date that the Grantor
delivers written notice of exercise of the Repurchase Option pursuant to
paragraph (b) below. The "Daily Per Share Price" for any trading day
means the weighted average of the per share selling prices of the Common
Stock on the Nasdaq National Market for that day.
(b) The Grantor may exercise the Repurchase Option by delivering or
mailing to the Grantee during the Repurchase Option Exercise Period, a
written notice of exercise of the Repurchase Option. If the Repurchase
Option is not so exercised, by the giving of such a notice within the
Repurchase Option Exercise Period, the Repurchase Option shall
automatically expire and terminate effective upon the expiration of the
Repurchase Option Exercise Period.
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(c) On the tenth day following delivery to the Grantee of the
Grantor's notice of the exercise of the Repurchase Option pursuant to
paragraph (b) above (or if such tenth day is not a business day, then on
the next business day thereafter) (i) the Grantee shall tender to the
Grantor at its principal offices the certificate or certificates
representing the Shares then held by the Grantee, duly endorsed in blank
or with duly endorsed stock powers attached thereto, all in form
suitable for the transfer of such Shares to the Grantor and (ii) the
Grantor shall simultaneously with its receipt of such certificates, pay
to the Grantee the aggregate Repurchase Option Price for such Shares by
wire transfer of immediately available funds.
(d) Notwithstanding any provision in this Section 20, except as
provided in Section 19 above, the Grantee shall be under no obligation
to refrain from selling, transferring or otherwise disposing of any
Shares at any time.
21. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
22. Public Announcement. The Grantee will consult with the Grantor
and the Grantor will consult with the Grantee before issuing any press
release with respect to the initial announcement of this Agreement, the
Option or the transactions contemplated hereby and neither party shall
issue any such press release prior to such consultation except as may be
required by law or by obligations pursuant to any listing agreement with
any national securities exchange or by the National Association of
Securities Dealers, Inc.
23. Waiver of Jury Trial. EACH OF GRANTOR AND GRANTEE HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF GRANTOR OR GRANTEE IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
EG&G, Inc.
By: /s/ ANGELO CASTELLANA
------------------------------------
Title Senior Vice President
Vivid Technologies, Inc.
By: /s/ S. DAVID ELLENBOGEN
------------------------------------
Title: Chief Executive Officer
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ANNEX C
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement"), dated as of October 4, 1999,
is made by and among EG&G, Inc., a Massachusetts corporation (the "Buyer"),
Venice Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of the Buyer (the "Sub"), and the holders (the "Stockholders") of the shares of
Common Stock, $0.01 par value (the "Shares"), of Vivid Technologies, Inc., a
Delaware corporation (the "Company"), listed on Schedule A hereto.
WHEREAS, concurrently with the execution of this Agreement, each
Stockholder and American Stock Transfer & Trust Company, as custodian, are
entering into a Custody Agreement (the "Custody Agreement") providing for the
safekeeping of the Stockholder Shares (as defined below), together with a fully
executed stock power, in accordance with the provisions of this Agreement;
WHEREAS, concurrently herewith, the Buyer, the Sub and the Company are
entering into an Agreement and Plan of Merger (as it may be amended from time to
time in the future in accordance with its terms, the "Merger Agreement")
providing for the merger of the Sub with and into the Company (the "Merger"),
with the Company being the entity surviving the Merger and becoming a
wholly-owned subsidiary of the Buyer; and
WHEREAS, in order to induce the Buyer and the Sub to enter into the Merger
Agreement, the Buyer and the Sub have requested the Stockholders, and the
Stockholders have agreed, to enter into this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
STOCK OPTION
Section 1.1 Grant of Stock Option. Each Stockholder hereby grants to the
Sub an irrevocable option (the "Option") to purchase all Shares currently owned
by such Stockholder and any additional Shares hereafter acquired by such
Stockholder (such "Stockholder's Shares" and, collectively, the "Stockholder
Shares") at a purchase price of $6.25 per Stockholder Share, net to the Seller
in cash (as adjusted pursuant to Section 1.5, the "Purchase Price").
Section 1.2 Exercise of Option.
(a) The Option may be exercised by the Sub, in whole or in part, at any
time or from time to time after the date the Merger Agreement is terminated
pursuant to the terms thereof (the "Merger Termination Date") and prior to the
180th day after the Merger Termination Date. In the event the Sub wishes to
exercise the Option for all or some of the Stockholder Shares, the Sub shall
send a written notice (the "Exercise Notice") to the Stockholders specifying the
total number of Stockholder Shares it wishes to purchase pursuant to such
exercise (and the corresponding number of each such Stockholder's Shares) and
the place, the date (not less than two nor more than 20 business days from the
date of the Exercise Notice), and the time for the closing of such purchase,
provided that such date and time may be earlier than two days after the Exercise
Notice if reasonably practicable. Each closing of a purchase of Stockholder
Shares pursuant to this Section 1.2(a) (a "Closing") shall take place at the
place, on the date and at the time designated by the Sub in its Exercise Notice,
provided that if, at the date of the Closing herein provided for, the conditions
set forth in paragraphs (i) or (ii) of Section 1.4 shall not have been
satisfied, the Sub may postpone the Closing until a date within five business
days after such conditions are satisfied.
(b) The Sub shall not be under any obligation to deliver an Exercise Notice
and may allow the Option to terminate without purchasing any Stockholder Shares
hereunder; provided, however, that once the Sub has delivered to the
Stockholders an Exercise Notice, subject to the terms and conditions of this
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Agreement, the Sub shall be bound to effect the purchase as described in such
Exercise Notice unless there shall be a preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or order promulgated by any governmental authority,
prohibiting or otherwise restraining the purchase of the Stockholder Shares
pursuant to the Option.
Section 1.3 Closing. At each Closing, (a) each Stockholder shall deliver
to the Sub (in accordance with the Sub's instructions) a certificate or
certificates (the "Certificates") representing the number of such Stockholder's
Shares to be purchased at such Closing, duly endorsed or accompanied by stock
powers duly executed in blank with an appropriate signature guarantee and (b)
the Sub shall deliver to such Stockholder a certified or bank cashier's check or
checks payable to or upon the order of such Stockholder in an amount equal to
(i) the number of such Stockholder's Shares being purchased at such Closing
multiplied by (ii) the Purchase Price.
Section 1.4 Conditions. The obligation of each Stockholder to sell
Stockholder Shares at any Closing is subject to satisfaction of each of the
following conditions:
(i) All waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") applicable to such exercise of the
Option shall have expired or been terminated.
(ii) There shall be no preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, nor any
statute, rule, regulation or order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining such exercise
of the Option.
(iii) A proposal for an Alternative Transaction (as defined in the
Merger Agreement) involving the Company shall have been made on or after
the date of this Agreement and prior to the Merger Termination Date.
(iv) At the time the Exercise Notice is sent, the Company shall have
entered into a proposal, plan or agreement with respect to an Alternative
Transaction.
Section 1.5 Certain Adjustments.
(a) In the event of any change in the Company's capital stock by reason of
stock dividends, stock splits, mergers, consolidations, recapitalizations,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate of capital structure of the Company
which would have the effect of diluting or changing the Sub's rights hereunder,
the number and kind of shares or securities subject to the Option and the
Purchase Price per Stockholder Share (but not the total Purchase Price) shall be
appropriately and equitably adjusted so that the Sub shall receive upon exercise
of the Option the number and class of shares or other securities or property
that the Sub would have received in respect of the Stockholder Shares
purchasable upon exercise of the Option if the Option had been exercised
immediately prior to such event. Each Stockholder shall take such steps in
connection with such consolidation, merger, liquidation or other such action as
may be necessary to assure that the provisions hereof shall thereafter apply as
nearly as possible to any securities or property thereafter deliverable upon
exercise of the Option.
(b) In the event the value of the consideration per Share to be paid by the
Sub pursuant to the Merger is increased, the Purchase Price shall be similarly
increased and in the event any Closing hereunder shall have occurred, the Sub
shall promptly pay to each Stockholder the product of the amount of such
increase in the Purchase Price multiplied by the number of such Stockholder's
Shares as to which the Option has been exercised.
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ARTICLE II
VOTING AGREEMENT; IRREVOCABLE GRANT OF PROXY
Section 2.1 Voting Agreement. Each Stockholder hereby agrees to vote all
Shares that such Stockholder is entitled to vote to approve and adopt the Merger
Agreement, the Merger and all agreements related to the Merger and any actions
related thereto at any meeting of the stockholders of the Company, and at any
adjournment thereof (or by written consent in lieu of a meeting), at which such
Merger Agreement and other related agreements (or any amended version thereof),
or such other actions, are submitted for the consideration and vote of the
stockholders of the Company. Each Stockholder hereby agrees that it will not
vote (or give a written consent with respect to) any Shares in favor of the
approval of any (i) Acquisition Proposal by any person other than Buyer or its
affiliates, (ii) reorganization, recapitalization, liquidation or winding up of
the Company or any other extraordinary transaction involving the Company, (iii)
corporate action the consummation of which would frustrate the purposes, or
prevent or delay the consummation, of the transactions contemplated by the
Merger Agreement or (iv) other matter relating to, or in connection with, any of
the foregoing matters.
Section 2.2. Irrevocable Proxy. Each Stockholder hereby revokes any and
all previous proxies granted with respect to such Stockholder's Shares. Each
Stockholder hereby grants a proxy appointing the Sub as such Stockholder's
attorney-in-fact and proxy, with full power of substitution, for and in such
Stockholder's name, to vote, express consent or dissent, or otherwise to utilize
such voting power in such manner and upon such matters as the Sub or its proxy
or substitute shall, in the Sub's sole discretion, deem proper with respect to
such Stockholder's Shares. The proxy granted by each Stockholder pursuant to
this Section 2.2 is irrevocable and is granted in consideration of the Sub's
entering into this Agreement and the Merger Agreement and incurring certain
related fees and expenses. The proxy grant by each Stockholder shall be revoked
upon termination of this Agreement in accordance with its terms. At the Sub's
request, each Stockholder shall perform such further acts and execute such
further documents as may be required to vest in the Sub the sole power to vote
the Shares during the term of the proxy granted herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders severally represents and warrants to the Sub that:
Section 3.1 Valid Title. Such Stockholder is the sole, true, lawful
record and beneficial owner of such Stockholder's Shares with no restrictions on
such Stockholder's voting rights or rights of disposition pertaining thereto. At
any Closing, such Stockholder will convey good and valid title to such
Stockholder's Shares being purchased free and clear of any and all claims,
liens, charges, encumbrances and security interests. None of such Stockholder's
Shares is subject to any voting trust or other agreement or arrangement with
respect to the voting of such Shares.
Section 3.2 Non-Contravention. The execution, delivery and performance by
such Stockholder of this Agreement and the Custody Agreement and the
consummation of the transactions contemplated hereby and thereby (i) are within
such Stockholder's powers, have been duly authorized by all necessary action
(including any consultation, approval or other action by or with any other
person), (ii) require no action by or in respect of, or filing with, any
governmental body, agency, official or authority (except as required under the
HSR Act), and (iii) do not and will not contravene or constitute a default
under, or give rise to a right of termination, cancellation or acceleration of
any right or obligation of such Stockholder or to a loss of any benefit of such
Stockholder under, any statute, rule or regulation applicable to such
Stockholder (except that the pre-merger notification requirements of the HSR Act
may apply), or injunction, order, decree, or other instrument binding on such
Stockholder or result in the imposition of any lien on any asset of such
Stockholder.
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Section 3.3 Binding Effect. This Agreement and the Custody Agreement have
been duly executed and delivered by such Stockholder and are the valid and
binding agreements of such Stockholder, enforceable against such Stockholder in
accordance with their respective terms except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights generally. If this Agreement or the Custody Agreement is being executed
in a representative or fiduciary capacity, the person signing this Agreement or
the Custody Agreement, as the case may be, has full power and authority to enter
into and perform this Agreement or the Custody Agreement.
Section 3.4 Total Shares. The number of Shares set forth on Schedule A
hereto are the only Shares legally or beneficially owned by such Stockholder
and, except as set forth on Schedule A, such Stockholder owns no options to
purchase or rights to subscribe for or otherwise acquire any securities of the
Company and has no other interest in or voting rights with respect to any
securities of the Company.
Section 3.5 Finder's Fees. No investment banker, broker or finder is
entitled to a commission or fee from the Buyer, the Sub or the Company in
respect of this Agreement or the Custody Agreement based upon any arrangement or
agreement made by or on behalf of such Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SUB
The Sub represents and warrants to each of the Stockholders that the Sub
has all requisite corporate power and authority to enter into this Agreement and
to perform its obligations hereunder. The execution, delivery and performance by
the Sub of this Agreement and the consummation by the Sub of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Sub and no other corporate action on the part of the Sub is necessary to
authorize the execution, delivery or performance by the Sub of this Agreement
and the consummation by the Sub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Sub and is a valid and
binding agreement of the Sub, enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally.
ARTICLE V
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders hereby covenants and agrees that:
Section 5.1 No Proxies for or Encumbrances on Stockholder Shares. Except
as provided in this Agreement, such Stockholder shall not, during the term of
this Agreement, without the prior written consent of the Sub, directly or
indirectly, (i) grant any proxies or enter into any voting trust or other
agreement or arrangement with respect to the voting of any Shares or (ii) sell,
assign, transfer, encumber or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the direct or
indirect sale, assignment, transfer, encumbrance or other disposition of, any
Shares. Such Stockholder shall not seek or solicit any such sale, assignment,
transfer, encumbrance or other disposition or any such contract, option or other
arrangement or assignment or understanding and agrees to notify the Sub promptly
and to provide all details required by the Sub if such Stockholder shall be
approached or solicited, directly or indirectly, by any person with respect to
any of the foregoing.
Section 5.2 No Shop. Such Stockholder shall not directly or indirectly
(i) solicit, initiate or encourage (or authorize any person to solicit, initiate
or encourage) any inquiry, proposal or offer from any person to acquire the
business, property or capital stock of the Company or any direct or indirect
subsidiary thereof, or any acquisition of a substantial equity interest in, or a
substantial amount of the assets of, the Company or any direct or indirect
subsidiary thereof, whether by merger, purchase of assets, tender offer or other
transaction or (ii) participate in any discussion or negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or participate in,
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facilitate or encourage any effort or attempt by any other person to do or seek
any of the foregoing. Such Stockholder shall promptly advise Sub of the terms of
any communications it may receive relating to any of the foregoing.
Section 5.3 Conduct of Stockholders. Such Stockholder will not (i) take,
agree or commit to take any action that would make any representation and
warranty of such Stockholder hereunder inaccurate in any respect as of any time
prior to the termination of this Agreement or (ii) omit, or agree or commit to
omit, to take any action necessary to prevent any such representation or
warranty from being inaccurate in any respect at any such time.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
Section 6.2 Further Assurances. Except as otherwise provided in the
Merger Agreement, the Stockholders will each execute and deliver or cause to be
executed and delivered all further documents and instruments and use their
respective best efforts to secure such consents and take all such further action
as may be reasonably necessary in order to consummate the transactions
contemplated hereby or to enable the Sub and any assignee to exercise and enjoy
all benefits and rights of the Stockholders with respect to the Option and the
Stockholder Shares.
Section 6.3 Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations and
which may be required under any agreements, contracts, commitments, instruments,
understandings, arrangements or restrictions of any kind to which such party is
a party or by which such party is governed or bound, to consummate and make
effective the transactions contemplated by this Agreement.
Section 6.4 Specific Performance. The parties hereto agree that the Sub
may be irreparably damaged if for any reason any Stockholder failed to sell such
Stockholder's Shares (or other securities deliverable pursuant to Section 1.5)
upon exercise of the Option or to perform any of its other obligations under
this Agreement, and that the Sub would not have any adequate remedy at law for
money damages in such event. Accordingly, the Sub shall be entitled to specific
performance and injunctive and other equitable relief to enforce the performance
of this Agreement by each Stockholder. This provision is without prejudice to
any other rights that the Sub may have against any Stockholder for any failure
to perform its obligations under this Agreement.
Section 6.5 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service for next business day delivery, if to the
Buyer or the Sub, at its address set forth below its signature hereto; and if to
a Stockholder, to such Stockholder at his address set forth on Schedule A
hereto. Any party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
Section 6.6 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Stockholder Shares.
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Section 6.7 Amendments; Termination; Expiration. This Agreement may not
be modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. This Agreement
may be terminated by the Buyer and the Sub upon written notice to the
Stockholders. This Agreement and the Stockholder's obligations hereunder shall
expire on the first to occur of (a) the Effective Time, (b) 181 days after the
termination of the Merger Agreement in accordance with its terms, and (c) the
termination of the Seller Stock Option Agreement (as defined in the Merger
Agreement) pursuant to clause (c) of Section 18 thereof; provided, however, that
no such expiration shall relieve a Stockholder from such Stockholder's
obligation to deliver Shares to the Sub to the extent the Sub has delivered an
Exercise Notice prior to the 181st day after the termination of the Merger
Agreement in accordance with its terms but the Closing has not occurred prior to
such 181st day.
Section 6.8 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that Sub may assign its rights and
obligations to any affiliate of Sub and provided, further, that no Stockholder
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the Sub.
Section 6.9 Governing Law and Venue. THIS AGREEMENT SHALL BE DEEMED TO BE
MADE IN, AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS TO
BE PERFORMED WHOLLY IN SUCH STATE. The parties hereby (a) irrevocably submit to
the jurisdiction of the Chancery Court of the State of Delaware and the federal
courts of the United States of America located in the State of Delaware solely
in respect of the interpretation and enforcement of the provisions of this
Agreement and in respect of the transactions contemplated hereby and thereby and
(b) waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof, that it is not subject
to such jurisdiction or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement may not be enforced in or by such courts, and
the parties irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such courts. The parties hereby
consent to and grant any such court's jurisdiction over the person of such
parties and over the subject matter of such dispute and agree that mailing of
process or other papers in connection with any such action or proceeding in the
manner provided in Section 6.5, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
Section 6.10 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instruments.
Section 6.11 Buyer Guaranty. Buyer hereby unconditionally guarantees the
Sub's obligations under this Agreement and agrees to be liable for any breach of
this Agreement by the Sub.
Section 6.12 Headings. The headings and captions used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
Section 6.13 Obligations Separate; Stockholder Capacity. The obligations
of the Stockholders hereunder are several and not joint. Each Stockholder who is
an individual signs solely in his capacity as the record holder and beneficial
owner of, or the trustee of a trust whose beneficiaries are the beneficial
owners of, such Stockholder's Shares and nothing herein shall limit or affect
any actions taken by a Stockholder in his capacity as an officer or director of
the Company.
Section 6.14 Defined Terms. Capitalized terms used in this Agreement and
not otherwise defined shall have the meaning given to such terms in the Merger
Agreement.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BUYER:
EG&G, INC.
By: /s/ ANGELO CASTELLANA
------------------------------------
Title: Senior Vice President
Name: Angelo Castellana
Address: 45 William Street
Wellesley, MA 02481
Copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: David E. Redlick,
Esq.
SUB:
VENICE ACQUISITION CORP.
By: /s/ ANGELO CASTELLANA
------------------------------------
Title: Treasurer
Name: Angelo Castellana
Address: c/o EG&G, Inc.
45 William Street
Wellesley, MA 02481
STOCKHOLDERS:
/s/ S. DAVID ELLENBOGEN
--------------------------------------
S. David Ellenbogen
ELLENBOGEN FAMILY IRREVOCABLE
TRUST OF 1996
By: /s/ CHARLES T. O'NEILL, TRUSTEE
------------------------------------
Charles T. O'Neill, as Trustee
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S. DAVID ELLENBOGEN
1996 RETAINED ANNUITY TRUST
By: /s/ CHARLES T. O'NEILL, TRUSTEE
------------------------------------
Charles T. O'Neill, as Trustee
/s/ JAY A. STEIN
--------------------------------------
Jay A. Stein
JAY A. STEIN 1996 RETAINED ANNUITY
TRUST
By: /s/ CHARLES T. O'NEILL, TRUSTEE
------------------------------------
Charles T. O'Neill, as Trustee
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SCHEDULE A
<TABLE>
<CAPTION>
STOCKHOLDER NAME AND ADDRESS NUMBER OF SHARES
- ---------------------------- ----------------
<S> <C>
S. David Ellenbogen......................................... 164,884
Hologic, Inc.
35 Crosby Drive
Bedford, Massachusetts 01730
Ellenbogen Family Irrevocable Trust of 1996................. 237,500
c/o O'Neill & Neylon
950 Winter Street
Waltham, Massachusetts 02154
S. David Ellenbogen 1996 Retained Annuity Trust............. 210,616
c/o O'Neill & Neylon
950 Winter Street
Waltham, Massachusetts 02154
Jay A. Stein................................................ 565,114
Hologic, Inc.
35 Crosby Drive
Bedford, Massachusetts 01730
Jay A. Stein 1996 Retained Annuity Trust.................... 124,886
c/o O'Neill & Neylon
950 Winter Street
Waltham, Massachusetts 02154
</TABLE>
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ANNEX D
NEEDHAM & COMPANY, INC.
445 PARK AVENUE
NEW YORK, NEW YORK 10022
October 4, 1999
The Board of Directors
Vivid Technologies, Inc.
10E Commerce Way
Woburn, MA 01801
Gentlemen:
We understand that Vivid Technologies, Inc. ("Vivid"), EG&G Inc. ("EG&G"),
and a wholly-owned subsidiary of EG&G ("Merger Subsidiary"), propose to enter
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
Merger Subsidiary will be merged with and into Vivid and Vivid will become a
wholly-owned subsidiary of EG&G (the "Merger"). The terms of the Merger will be
set forth more fully in the Merger Agreement.
Pursuant to the proposed Merger Agreement, we understand that at the
Effective Time (as defined in the Merger Agreement), each outstanding share of
common stock, par value $0.01 per share, of Vivid (the "Vivid Common Stock")
will be converted into the right to receive 0.1613 shares (the "Exchange Ratio")
of common stock, par value $1.00 per share, of EG&G (the "EG&G Common Stock").
If the Market Value of the EG&G Common Stock (as defined below) is less than
$30.99, Vivid may elect to terminate the Merger Agreement and EG&G shall then
have the option to adjust the Exchange Ratio to an amount equal to $5.00 divided
by the Market Value of the EG&G Common Stock. If the Market Value of the EG&G
Common Stock is greater than $46.49, EG&G may elect to terminate the Merger
Agreement and Vivid shall then have the option to adjust the Exchange Ratio to
an amount equal to $7.50 divided by the Market Value of the EG&G Common Stock.
The Market Value of the EG&G Common Stock is defined in the Merger Agreement as
the average of the Daily Per Share Prices (as defined in the Merger Agreement)
of EG&G Common Stock for the five consecutive trading days ending on the third
trading day prior to the date of the Seller Meeting (as defined in the Merger
Agreement) or, if the Closing Date (as defined in the Merger Agreement) occurs
more than five business days after the Seller Meeting, the Closing Date.
You have asked us to advise you as to the fairness, from a financial point
of view, of the Exchange Ratio to the holders of Vivid Common Stock. Needham &
Company, Inc., as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other purposes. We have acted as a financial
advisor to Vivid in connection with the Merger and will receive a fee for
rendering this opinion and will receive a fee for such advisory services, a
substantial portion of which is contingent upon the consummation of the Merger.
In addition, Vivid has agreed to indemnify us for certain liabilities arising
from our role as financial advisor and out of the rendering of this opinion.
For purposes of this opinion we have, among other things: (i) reviewed a
draft of the Merger Agreement dated October 4, 1999, (ii) reviewed certain
publicly available information concerning Vivid and EG&G and certain other
relevant financial and operating data of Vivid made available from the internal
records of Vivid; (iii) held discussions with members of senior management of
Vivid and EG&G concerning their current and future business prospects and joint
prospects of the combined companies, including synergies that may be achieved
thereby; (iv) reviewed certain financial forecasts and projections prepared by
Wall Street equity research analysts; (v) compared certain publicly available
financial data of certain companies whose securities are traded in the public
markets and that we deemed relevant to
D-1
<PAGE> 179
similar data for Vivid; (vi) reviewed the financial terms of certain other
business combinations that we deemed generally relevant; (vii) reviewed the
premiums/discounts paid by acquirers in certain other business combinations that
we deemed generally relevant; (viii) performed an accretion/dilution analysis
and reviewed the impact of the Merger on EG&G projected operating results; (ix)
reviewed current and historical market closing prices and trading data for the
Vivid Common Stock and EG&G Common Stock; and (x) performed and/or considered
such other studies, analyses, inquiries and investigations as we deemed
appropriate.
In connection with our review and in arriving at our opinion, we have
assumed and relied on the accuracy and completeness of all of the financial and
other information publicly available or furnished to or otherwise reviewed by or
discussed with us for purposes of rendering this opinion and have neither
attempted to verify independently nor assumed responsibility for verifying any
of such information. In addition, we have assumed, with your consent (i) that
the Merger will be accounted for as a purchase for financial reporting purposes;
(ii) that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, (iii) any material
liabilities (contingent or otherwise, known or unknown) of Vivid and EG&G are
set forth in the consolidated financial statements of Vivid and EG&G
respectively; (iv) the terms set forth in the executed Merger Agreement will not
differ materially from the proposed terms provided to us in the draft Merger
Agreement dated October 4, 1999; (v) that all conditions to the closing of the
Merger will be satisfied without waiver; and (vi) the Merger would be
consummated on a timely basis in the manner contemplated in the Merger
Agreement. With respect to Vivid and EG&G's financial forecasts and information
relating to the joint prospects of the combined companies, we have assumed for
purposes of our opinion that such forecasts and information have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of Vivid and EG&G at the time of preparation, of
the future operating and financial performance of Vivid and EG&G and the
combined companies, and we have relied upon the estimates of the management of
Vivid of the synergies that may be achieved as a result of the proposed Merger.
We express no opinion with respect to such forecasts or information or the
assumptions on which they were based. We have not assumed any responsibility for
or made or obtained an independent evaluation, appraisal or physical inspection
of the assets or liabilities of Vivid and EG&G. Further, our opinion is based on
economic, monetary and market conditions as they exist and can be evaluated as
of the date hereof. Our opinion as expressed herein is limited to the fairness,
from a financial point of view, to the holders of Vivid Common Stock of the
Merger Consideration and does not address Vivid's underlying business decision
to engage in the Merger. Our opinion does not constitute a recommendation to any
stockholder of Vivid as to how such stockholder should vote on the proposed
Merger.
We are not expressing any opinion as to what the value of EG&G Common Stock
will be when issued pursuant to the Merger or the price at which EG&G Common
Stock will trade at any time.
In the ordinary course of our business, we may actively trade the equity
securities of Vivid and EG&G for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This letter and the opinion expressed herein are provided at the request
and for the information of the Board of Directors of Vivid and may not be quoted
or referred to or used for any other purpose without our prior written consent,
except that this letter may be disclosed in connection with any registration
statement or proxy statement used in connection with the Merger so long as this
letter is quoted in full in such registration statement or proxy statement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of Vivid Common Stock
from a financial point of view.
/s/ NEEDHAM & COMPANY, INC.
NEEDHAM & COMPANY, INC.
D-2
<PAGE> 180
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Section 67 of Chapter 156B of the General Laws of the Commonwealth of
Massachusetts, as amended (the "Massachusetts Business Corporation Law"), and
Article V, Section 9 of the Registrant's Bylaws, to which reference is hereby
made, contain provisions authorizing indemnification by the Registrant of
directors, officers, employees or agents against certain liabilities and
expenses, which they may incur as directors, officers, employees or agents of
the Registrant or of certain other entities. Section 67 of Chapter 156B of the
Massachusetts Business Corporation Law provides that the indemnification of
directors, officers, employees and agents of a corporation and persons who serve
at the corporation's request as directors, officers, employees and other agents
of another organization may be provided to whatever extent as shall be specified
by (i) the articles of organization of the corporation or (ii) a bylaw adopted
by the stockholders or (iii) a vote adopted by the holders of a majority of the
shares of stock entitled to vote on the election of directors. Unless otherwise
provided in the articles of organization or the bylaws, the indemnification of
any persons described above who are not directors of the corporation may be
provided by the corporation to the extent authorized by the directors. Such
indemnification may include payment by the corporation of expenses incurred in
defending a civil or criminal action or proceeding prior to the final
disposition of such action or proceeding, upon receipt of an undertaking by the
indemnified person to repay such payment if he shall be adjudicated to be not
entitled to indemnification under Section 67 of Chapter 156B of the
Massachusetts Business Corporation Law. Any indemnification may be provided
although the person to be indemnified is no longer an officer, director,
employee or agent of the corporation or of such other organization.
Indemnification may not be provided for any person with respect to any matter as
to which that person shall have been adjudicated in any proceeding to not have
acted in good faith in the reasonable belief that his action was in the best
interest of the corporation.
Section 65 of Chapter 156B of the Massachusetts Business Corporation Law
provides a limitation on the imposition of liability under other sections of the
Massachusetts Business Corporation Law. Under this Section, a director, officer
or incorporator of a corporation is to perform his duties in good faith and in a
manner he reasonably believes to be in the best interests of the corporation and
with such care as an ordinarily prudent person in a like position would use
under similar circumstances. Such director, officer or incorporator is entitled
to rely on information, opinions, reports or records, including financial
statements, books of accounts and other financial records, which are prepared by
or presented by or under the supervision of (i) one or more officers or
employees of the corporation whom the director, officer or incorporator
reasonably believes to be reliable and competent in the matters presented, or
(ii) counsel, public accountants or other persons as to matters that the
director, officer or incorporator reasonably believes to be within such a
person's professional expert competence, or (iii) in the case of a director, a
duly constituted committee of the board of directors upon which he does not
serve, as to matters within its delegated authority, which committee the
director reasonably believes to merit confidence. If a director, officer or
incorporator performs his duties in the manner that is set forth above, that
fact shall be an absolute defense to any claim asserted against him except as
expressly provided by statute.
Section 13 of Chapter 156B of the Massachusetts Business Corporation Law
provides that the articles of organization of a corporation may contain a
provision eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of a fiduciary
duty as a director notwithstanding any provision of law imposing such liability;
provided, however, that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Sections 61 or 62 of Chapter 156B of the Massachusetts Business
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Six of the Restated Articles of Organization
of the Registrant contains a provision consistent with Section 13 of Chapter
156B of the Massachusetts Business Corporation Law and provides that to the
fullest extent permitted by the Massachusetts Business Corporation Law, a
director of
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<PAGE> 181
the Registrant shall not be personally liable to the Registrant or its
stockholder for monetary damages for breach of fiduciary duty as a director,
notwithstanding any provision of law imposing such liability.
Section 9 of Article V of the Bylaws of the Registrant contains provisions
relating to the indemnification of directors and officers of the Registrant,
which are consistent with Section 67 of Chapter 156B of the Massachusetts
Business Corporation Law. This Section provides that no indemnification will be
provided to any person who was or is a director or officer with respect to any
matter as to which such person shall have been finally adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interest of the corporation; nor shall indemnification be
provided where the corporation is required or has undertaken to submit to a
court the question of whether or not indemnification by it is against public
policy and it has been finally determined that such indemnification is against
public policy; provided, however, that, prior to such final adjudication, the
corporation may compromise and settle any such claims and liabilities and pay
such expenses, if such settlement or payment, or both, appears, in the judgment
of a majority of those members of the board of directors who are not directly
involved in such matters, to be in the best interest of the corporation as
evidenced by a resolution to that effect adopted after receipt by the
corporation of a written opinion of counsel for the corporation that, based upon
the facts available to such counsel such person has not acted in a manner that
would prohibit indemnification.
Section 67 of Chapter 156B of the Massachusetts Business Corporation Law
also contains provisions authorizing a corporation to obtain insurance on behalf
of any director, officer, employee or agent of the corporation against
liabilities, whether or not the corporation would have the power to indemnify
against such liabilities. The Registrant maintains director and officer
liability and company reimbursement liability insurance. Subject to certain
deductibles, such insurance will pay up to $50,000,000 per year on claims or
errors and omissions against the Registrant's directors and officers and will
reimburse the Registrant for amounts paid to indemnify directors and officers
against the costs of such claims pursuant to the Registrant's Bylaws.
Pursuant to Section 6.13(b) of the merger agreement, the Registrant has
agreed, for a period of six years after the effective time of the merger to
maintain in effect (to the extent available in the market) a directors and
officers' liability insurance policy covering those persons currently covered by
Vivid's directors' and officers' liability insurance policy with coverage in
amount and scope at least as favorable to such persons as Vivid's existing
coverage with certain limitations. See "The Merger Agreement -- Director and
Officer Indemnification."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- -------
<C> <C> <S>
2.1* -- Agreement and Plan of Merger, dated as of October 4, 1999,
by and among the Registrant, Venice Acquisition Corp. and
Vivid Technologies, Inc. (attached as Annex A to the Proxy
Statement/Prospectus).
2.2* -- Stockholder Agreement, dated as of October 4, 1999, by and
among the Registrant, Venice Acquisition Corp. and the
stockholders listed on the signature pages thereto (attached
as Annex C to the Proxy Statement/Prospectus).
2.3* -- Stock Option Agreement, dated as of October 4, 1999, between
the Registrant and Vivid Technologies, Inc. (attached as
Annex B to the Proxy Statement/Prospectus).
4.1* -- Restated Articles of Organization of the Registrant
(incorporated by reference from the Registrant's Annual
Report on Form 10-K for the year ended January 3, 1999).
4.2* -- Articles of Amendment to Restated Articles of Organization
of the Registrant (filed with the Securities and Exchange
Commission on November 5, 1999 as Exhibit 3 to the
Registrant's Current Report on Form 8-K and incorporated
herein by reference).
</TABLE>
II-2
<PAGE> 182
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- -------
<C> <C> <S>
4.3* -- Bylaws of the Registrant (filed with the Securities and
Exchange Commission on March 24, 1998 as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K and incorporated
herein by reference).
4.4* -- Rights Agreement dated as of January 25, 1995 between the
Registrant and the First National Bank of Boston (filed with
the Securities and Exchange Commission on January 27, 1995
as Exhibit 4.1 to the Registrant's Current Report on Form
8-K and incorporated herein by reference).
4.5* -- Specimen Certificate of Common Stock, $1.00 par value per
share, of the Registrant (filed with the Securities and
Exchange Commission on November 5, 1999 as Exhibit 4 to the
Registrant's Current Report on Form 8-K and incorporated
herein by reference).
5.1* -- Opinion of Hale and Dorr LLP.
8.1 -- Opinion of Hale and Dorr LLP as to tax matters.
8.2 -- Opinion of Brown, Rudnick, Freed & Gesmer, P.C. as to tax
matters.
21.1* -- Subsidiaries of the Registrant (incorporated by reference
from the Registrant's Annual Report on Form 10-K for the
year ended January 3, 1999).
23.1* -- Consent of Hale and Dorr LLP (included in Exhibits 5.1 and
8.1).
23.2* -- Consent of Brown, Rudnick, Freed & Gesmer, P.C. (included in
Exhibit 8.2).
23.3* -- Consent of Arthur Andersen LLP, Boston, MA, auditors of the
Registrant.
23.4* -- Consent of Arthur Andersen LLP, San Jose, CA.
23.5* -- Consent of PricewaterhouseCoopers LLP.
23.6* -- Consent of Arthur Andersen LLP, auditors of Vivid
Technologies, Inc.
23.7* -- Consent of Needham & Company, Inc.
23.8* -- Consent of PricewaterhouseCoopers LLP.
24.1* -- Power of Attorney with respect to the Registrant (included
on Page II-5).
99.1* -- Form of proxy card of Vivid Technologies, Inc.
</TABLE>
- ---------------
* Previously filed or incorporated herein by reference.
(B) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable, and, therefore, have been omitted.
ITEM 22. UNDERTAKINGS.
(A) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "Securities Act"),
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (and where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act), that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(B) The Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
II-3
<PAGE> 183
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(C) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(D) The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the date
of responding to the request.
(E) The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction and Vivid Technologies, Inc.
that was not the subject of and included in the Registration Statement when it
became effective.
II-4
<PAGE> 184
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended the
Registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the Town
of Wellesley, Commonwealth of Massachusetts on the 3rd day of December, 1999.
PERKINELMER, INC.
By: /s/ GREGORY L. SUMME
------------------------------------
Gregory L. Summe
President, Chief Executive Officer
and Chairman
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GREGORY L. SUMME President, Chief Executive December 3, 1999
- --------------------------------------------------- Officer and Chairman of the
Gregory L. Summe Board of Directors
(Principal Executive
Officer)
* Senior Vice President and December 3, 1999
- --------------------------------------------------- Chief Financial Officer
Robert F. Friel (Principal Financial
Officer)
* Corporate Controller December 3, 1999
- --------------------------------------------------- (Principal Accounting
Gregory D. Perry Officer)
* Director December 3, 1999
- ---------------------------------------------------
Tamara J. Erickson
* Director December 3, 1999
- ---------------------------------------------------
Kent F. Hansen
* Director December 3, 1999
- ---------------------------------------------------
John F. Keane
</TABLE>
II-5
<PAGE> 185
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director December 3, 1999
- ---------------------------------------------------
Nicholas A. Lopardo
* Director December 3, 1999
- ---------------------------------------------------
Greta E. Marshall
* Director December 3, 1999
- ---------------------------------------------------
Michael C. Ruettgers
* Director December 3, 1999
- ---------------------------------------------------
Gabriel Schmergel
* Director December 3, 1999
- ---------------------------------------------------
John Larkin Thompson
* Director December 3, 1999
- ---------------------------------------------------
G. Robert Tod
*By: /s/ GREGORY L. SUMME
---------------------------------------------
Gregory L. Summe
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 186
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
- ------- -------
<C> <C> <S>
2.1* -- Agreement and Plan of Merger, dated as of October 4, 1999,
by and among the Registrant, Venice Acquisition Corp. and
Vivid Technologies, Inc. (attached as Annex A to the Proxy
Statement/Prospectus).
2.2* -- Stockholder Agreement, dated as of October 4, 1999, by and
among the Registrant, Venice Acquisition Corp. and the
stockholders listed on the signature pages thereto (attached
as Annex C to the Proxy Statement/Prospectus).
2.3* -- Stock Option Agreement, dated as of October 4, 1999, between
the Registrant and Vivid Technologies, Inc. (attached as
Annex B to the Proxy Statement/Prospectus).
4.1* -- Restated Articles of Organization of the Registrant
(incorporated by reference from the Registrant's Annual
Report on Form 10-K for the year ended January 3, 1999).
4.2* -- Articles of Amendment to Restated Articles of Organization
of the Registrant (filed with the Securities and Exchange
Commission on November 5, 1999 as Exhibit 3 to the
Registrant's Current Report on Form 8-K and incorporated
herein by reference).
4.3* -- Bylaws of the Registrant (filed with the Securities and
Exchange Commission on March 24, 1998 as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K and incorporated
herein by reference).
4.4* -- Rights Agreement dated as of January 25, 1995 between the
Registrant and the First National Bank of Boston (filed with
the Securities and Exchange Commission on January 27, 1995
as Exhibit 4.1 to the Registrant's Current Report on Form
8-K and incorporated herein by reference).
4.5* -- Specimen Certificate of Common Stock, $1.00 par value per
share, of the Registrant (filed with the Securities and
Exchange Commission on November 5, 1999 as Exhibit 4 to the
Registrant's Current Report on Form 8-K and incorporated
herein by reference).
5.1* -- Opinion of Hale and Dorr LLP.
8.1 -- Opinion of Hale and Dorr LLP as to tax matters.
8.2 -- Opinion of Brown, Rudnick, Freed & Gesmer, P.C. as to tax
matters.
21.1* -- Subsidiaries of the Registrant (incorporated by reference
from the Registrant's Annual Report on Form 10-K for the
year ended January 3, 1999).
23.1* -- Consent of Hale and Dorr LLP (included in Exhibits 5.1 and
8.1).
23.2* -- Consent of Brown, Rudnick, Freed & Gesmer, P.C. (included in
Exhibit 8.2).
23.3* -- Consent of Arthur Andersen LLP, Boston, MA, auditors of the
Registrant.
23.4* -- Consent of Arthur Andersen LLP, San Jose, CA.
23.5* -- Consent of PricewaterhouseCoopers LLP.
23.6* -- Consent of Arthur Andersen LLP, auditors of Vivid
Technologies, Inc.
23.7* -- Consent of Needham & Company, Inc.
23.8* -- Consent of PricewaterhouseCoopers LLP.
24.1* -- Power of Attorney with respect to the Registrant (included
on Page II-5).
99.1* -- Form of proxy card of Vivid Technologies, Inc.
</TABLE>
- ---------------
* Previously filed or incorporated herein by reference.
<PAGE> 1
Exhibit 8.1
HALE AND DORR LLP
COUNSELORS AT LAW
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
617-526-6000 * Fax 617-526-5000
December 2, 1999
PerkinElmer, Inc.
45 William Street
Wellesley, MA 02481
Re: Merger pursuant to Agreement and Plan of Merger among
Perkinelmer, Inc., Venice Acquisition Corp., and Vivid Technologies, Inc.
-------------------------------------------------------------------------
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of a
registration statement (the "Registration Statement") on Form S-4, which
includes the Proxy Statement and Prospectus relating to the Agreement and Plan
of Merger dated as of October 4, 1999 (the "Merger Agreement"), by and among
PerkinElmer, Inc. (formerly known as EG&G, Inc.), a Massachusetts corporation
("Parent"), Venice Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent ("Sub"), and Vivid Technologies, Inc., a Delaware
corporation ("Target"). Pursuant to the Merger Agreement, Sub will merge with
and into Target (the "Merger"). Except as otherwise provided, capitalized terms
not defined herein have the meanings set forth in the Merger Agreement and the
exhibits thereto or in the letters delivered to Hale and Dorr LLP by Parent and
Target containing certain representations of Parent and Target relevant to this
opinion (the "Representation Letters"). All section references, unless otherwise
indicated, are to the United States Internal Revenue Code of 1986, as amended
(the "Code").
In our capacity as counsel to Parent in the Merger, and for purposes of
rendering this opinion, we have examined and relied upon the Registration
Statement, the Merger Agreement and the exhibits thereto, the Representation
Letters, and such other documents as we considered relevant to our analysis. In
our examination of documents, we have assumed the authenticity of original
documents, the accuracy of copies, the genuineness of signatures, and the legal
capacity of signatories.
We have assumed that all parties to the Merger Agreement and to any other
documents examined by us have acted, and will act, in accordance with the terms
of such Merger Agreement and documents and that the Merger will be consummated
at
<PAGE> 2
PerkinElmer, Inc.
December 2, 1999
Page 2
the Effective Time pursuant to the terms and conditions set forth in the Merger
Agreement without the waiver or modification of any such terms and conditions.
Furthermore, we have assumed that all representations contained in the Merger
Agreement, as well as those representations contained in the Representation
Letters, are, and at the Effective Time will be, true and complete in all
material respects, and that any representation made in any of the documents
referred to herein "to the best of the knowledge and belief" (or similar
qualification) of any person or party is correct without such qualification. We
have also assumed that as to all matters for which a person or entity has
represented that such person or entity is not a party to, does not have, or is
not aware of, any plan, intention, understanding, or agreement, there is no such
plan, intention, understanding, or agreement. We have not attempted to verify
independently such representations, but in the course of our representation,
nothing has come to our attention that would cause us to question the accuracy
thereof.
The conclusions expressed herein represent our judgment as to the proper
treatment of certain aspects of the Merger under the income tax laws of the
United States based upon the Code, Treasury Regulations, case law, and rulings
and other pronouncements of the Internal Revenue Service (the "IRS") as in
effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed prior to the Effective Time, or at any
other time, or that such changes will not affect the conclusions expressed
herein. Nevertheless, we undertake no responsibility to advise you of any
developments after the Effective Time in the application or interpretation of
the income tax laws of the United States.
Our opinion represents our best judgment of how a court would decide if
presented with the issues addressed herein and is not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
This opinion addresses only the specific United States federal income tax
consequences of the Merger set forth below, and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use, or
other tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger).
On the basis of, and subject to, the foregoing, and in reliance upon the
representations and assumptions described above, we are of the following opinion
that the Merger will constitute a reorganization within the meaning of Section
368(a).
<PAGE> 3
PerkinElmer, Inc.
December 2, 1999
Page 3
In rendering this opinion, we have assumed that Brown, Rudnick, Freed &
Gesmer has delivered, and has not withdrawn, an opinion that is substantially
similar to this one. No opinion is expressed as to any federal income tax
consequence of the Merger except as specifically set forth herein, and this
opinion may not be relied upon except with respect to the consequences
specifically discussed herein.
This opinion is intended solely for the purpose of inclusion as an exhibit to
the Registration Statement. It may not be relied upon for any other purpose or
by any other person or entity other than the addressee hereof, and may not be
made available to any other person or entity without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name in the
Registration Statement in connection with references to this opinion and the tax
consequences of the Merger. In giving this consent, however, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ HALE AND DORR LLP
HALE AND DORR LLP
<PAGE> 1
Exhibit 8.2
[BROWN RUDNICK LETTERHEAD]
As of December 2, 1999
Vivid Technologies, Inc.
10E Commerce Way
Woburn, MA 01801
RE: ACQUISITION OF VIVID TECHNOLOGIES, INC. BY PERKINELMER, INC.
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of
a registration statement (the "Registration Statement") on Form S-4, which
includes the Proxy Statement/Prospectus relating to the Agreement and Plan of
Merger dated as of October 4, 1999, by and among PerkinElmer, Inc. ("Parent"), a
Massachusetts corporation , Venice Acquisition Corp. ("Subsidiary"), a Delaware
corporation and wholly-owned subsidiary of Parent, and Vivid Technologies, Inc.,
a Delaware corporation ("Company") relating to the acquisition of all of the
issued and outstanding stock of Company ("the Merger Plan"). Except as otherwise
provided, capitalized terms not defined herein have the meanings ascribed to
them in the Merger Plan and the exhibits thereto or in the letters delivered to
Brown, Rudnick, Freed & Gesmer by Parent and the Company containing certain
facts and representations of Parent and Company relevant to this opinion (the
"Representation Letters").
In rendering this opinion, we have reviewed and relied upon the Merger
Plan, the Registration Statement and the exhibits thereto, the Representation
Letters and such other documents as we have deemed necessary in rendering this
opinion. We have assumed the authenticity of original documents, the accuracy of
copies, that any party executing any document upon which we have relied has the
legal capacity to sign such document and that all signatures on such documents
are genuine.
We have assumed that all parties to the Merger Plan and to any other
documents examined by us have acted, and will act, in accordance with the terms
of such Merger Plan and documents and that the Merger will be completed at the
Effective Time pursuant to the terms and conditions set forth in the Merger Plan
without the waiver or modification of any such terms and conditions.
Furthermore, we have assumed that all representations contained in the Merger
Plan, as well as those representations contained in the Representation Letters,
are, and at the Effective Time will be, true and complete in all material
respects, and that any representation made in any of the documents referred to
herein "to the best of the knowledge and belief" (or similar qualification) of
any person or party is correct without such
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Vivid Technologies, Inc.
As of December 2, 1999
Page 2
qualification. Should there be any material inaccuracy in the representation
contained in the Merger Plan or in Representation Letters, the tax consequences
of the proposed transaction could be substantially and adversely different from
those set forth in this opinion letter. We have also assumed that as to all
matters for which a person or entity has represented that such person or entity
is not a party to, does not have, or is not aware of, any plan, intention,
understanding, or agreement, there is no such plan, intention, understanding, or
agreement. We have not attempted to verify independently such representations,
but in the course of our representation, nothing has come to our attention that
would cause us to question the accuracy thereof.
FACTS
Pursuant to the Merger Plan between Parent, Company and Subsidiary,
Subsidiary will merge into the Company under the applicable provisions of
Delaware law (the "Merger"), with the Company surviving the Merger. As a result
of the Merger, Company will become a wholly-owned subsidiary of Parent. Company
will assume no Subsidiary liabilities pursuant to the Merger Plan. No Subsidiary
stock will be used as consideration in the Merger. Each issued and outstanding
share of Company common stock ("Common Stock") issued and outstanding at the
Effective Time (as defined in the Merger Plan) of the Merger, will be converted
into the right to receive a number of shares of PerkinElmer common stock equal
to the Exchange Ratio (as defined in the Merger Plan) ("Parent Common Stock").
Parent will not issue fractional shares of its Common Stock; instead, each
Company stockholder who would otherwise be entitled to a fractional share of
Parent Common Stock will receive cash equal to the Market Value (as defined in
the Merger Plan) of such fractional share. No cash or other property will be
paid to any Company stockholder in respect of such stockholder's Capital Stock,
other than cash paid in lieu of fractional shares of Parent Common Stock.
Based solely on the facts and representations and assumptions described
above, it is our opinion that:
The Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended.
While our opinions and views expressed herein are based upon our best
interpretations of existing sources of law and express what we believe a court
would conclude if presented with these issues, no assurance can be given that
such interpretations would be followed if they became the subject of judicial or
administrative proceedings. Furthermore, our opinions are based on existing law.
No assurance can be given that legislative or administrative changes, or court
decisions, which may or may not be retroactive with respect to transactions
<PAGE> 3
Vivid Technologies, Inc.
As of December 2, 1999
Page 3
completed prior to the effective dates of such changes, will not significantly
affect the tax consequences to the parties. We assume no obligation to inform
you of such changes. Although we believe that all of the factual assumptions and
representations upon which we have relied are warranted, we can give no
assurance that the Internal Revenue Service would agree.
We express no opinion as to the tax treatment of any of the
transactions described above that are not specifically addressed in the
foregoing opinion. In particular, we express no opinion regarding any other
federal, state, local or foreign income, estate, gift, transfer, sales, use or
any other tax consequence of the Merger.
In rendering this opinion, we have assumed that Hale & Dorr LLP has
delivered, and has not withdrawn, an opinion that is substantially similar to
this one.
This opinion is intended solely for the purpose of inclusion as an
exhibit to the Registration Statement. It may not be relied upon by any other
person or entity, and may not be made available to any other person or entity,
without our prior written consent. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and further consent to the
use of our name in connection with the references to this opinion and the tax
consequences of the Merger. In giving this consent, however, we do not admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended.
Very truly yours,
BROWN, RUDNICK, FREED & GESMER
/s/ Brown, Rudnick, Freed & Gesmer, P.C.
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BROWN, RUDNICK, FREED & GESMER, P.C.
a partner
