<PAGE> 1
As filed with the Securities and Exchange Commission on November 21, 1996.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 12, 1996
MEDICAL IMAGING CENTERS OF AMERICA, INC.
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 0-12787 95-3643045
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
9444 FARNHAM STREET, SUITE 100
SAN DIEGO, CALIFORNIA 92123
(Address of Principal Executive Offices) (Zip Code)
(619) 560-0110
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Page of 1 of 4
Exhibit Index on Page 4
<PAGE> 2
This Current Report on Form 8-K is filed by MEDICAL IMAGING CENTERS OF
AMERICA, INC., a California corporation ("MICA"), in connection with the
matters described herein.
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
On November 12, 1996, MICA and US Diagnostic, Inc., a Delaware
corporation, fka U.S. Diagnostic Labs, Inc. ("USD"), consummated a merger (the
"Merger") whereby USD acquired control of MICA pursuant to an Agreement and
Plan of Merger, dated as of August 1, 1996 (the "Merger Agreement"), among USD,
MICA Acquiring Corporation, a California corporation and wholly-owned
subsidiary of USD ("Merger Sub"), and MICA. Under the Merger Agreement, Merger
Sub was merged with and into MICA, whereupon the separate existence of Merger
Sub ceased and MICA became a wholly owned subsidiary of USD. Consummation of
the Merger followed approval by the shareholders of MICA at a shareholder
meeting held on November 6, 1996.
In connection with the Merger, each outstanding share of MICA's common
stock, no par value ("MICA Common Stock"), has been converted into the right to
receive $11.75 in cash. Each option to purchase MICA Common Stock (each a "MICA
Option") has been cancelled and each holder of a MICA Option is entitled to a
cash payment equal to the product of the total number of shares subject to the
MICA Option and the excess of $11.75 over the exercise price per share of the
MICA Common Stock subject to the MICA Option. Each warrant to purchase MICA
Common Stock (each a "MICA Warrant") has been converted into the right to
receive a payment in cash (after the warrantholder's payment of the aggregate
exercise price for the shares of MICA Common Stock subject to the MICA Warrant)
equal to the product of $11.75 and the total number of shares of MICA Common
Stock subject to the MICA Warrant. Prior to the Merger, USD did not
beneficially own, directly or indirectly, any of MICA's voting securities apart
from any beneficial ownership interest it may have had as a result of entering
into the Merger Agreement.
Pursuant to the Merger Agreement, members of MICA's Board of Directors
will resign and be replaced by designees of USD. MICA does not anticipate that
any officers or directors of MICA will become officers or directors of USD or
the surviving entity.
The foregoing summary of the terms of the Merger Agreement and the Merger
does not purport to be complete and is qualified in its entirety by reference
to the full text of the Merger Agreement, a copy of which is attached hereto as
Exhibit 2.1 and incorporated herein by reference.
On November 12, 1996, MICA and USD issued a press release relating to the
Merger, a copy of which is attached hereto as Exhibit 99.1 and incorporated by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of August 1, 1996, among U.S.
Diagnostic Labs, Inc., a Delaware corporation, MICA Acquiring
Corporation, a California corporation, and Medical Imaging Centers
of America, Inc., a California corporation.
99.1 Press Release, dated November 12, 1996, issued by Medical Imaging
Centers of America, Inc. and U.S. Diagnostic, Inc.
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 12, 1996 Medical Imaging Centers of America, Inc.
By: /s/ Robert S. Muehlberg
-----------------------------------
Robert S. Muehlberg
President and Chief Executive Officer
3
<PAGE> 4
EXHIBIT INDEX
Exhibit No. Page
- ----------- ----
2.1 Press Release, dated November 12, 1996, issued by
Medical Imaging Centers of America, Inc. and
US Diagnostic, Inc.
99.1 Agreement and Plan of Merger, dated as of August 1,
1996, among U.S. Diagnostic Labs, Inc., a Delaware
corporation, MICA Acquiring Corporation, a California
corporation, and Medical Imaging Centers of America,
Inc., a California corporation.
4
<PAGE> 1
EXHIBIT 2.1
INVESTOR CONTACT: MEDIA CONTACT:
Joseph Scime Dina Silva
Director Investor Relations Rubenstein Media
(561) 832-0006 (212) 843-8057
Website: www.usdl.com
FOR IMMEDIATE RELEASE
US DIAGNOSTIC INC. COMPLETES MERGER WITH
MEDICAL IMAGING CENTERS OF AMERICA, INC.
Acquisition Adds 22 Diagnostic Imaging Centers And Sites
And 1 Radiation Oncology Center To Largest
Outpatient Diagnostic Imaging Services Provider In Nation
West Palm Beach, Florida, and San Diego, California, November 12, 1996 - US
Diagnostic Inc. (NASDAQ NMS:USDL) and Medical Imaging Centers of America, Inc.,
"MICA", (OTC Bulletin Board: MIGA) reported today that they have completed
their previously announced merger, with USDL paying $11.75 in cash for each
share of MICA common stock. MICA announced on November 6, 1996 that its
shareholders overwhelmingly approved the merger.
Robert S. Muehlberg, Chairman of the Board and Chief Executive Officer
of MICA, will continue to work closely with USDL management in a consulting
capacity.
According to Jeffrey Goffman, Chairman and Chief Executive Officer of
USDL, "We are pleased to have completed the merger with MICA after having gained
the recent approval of their shareholders. This acquisition will add 23
facilities to USDL's network of multi-modality outpatient diagnostic imaging
centers in several important markets and will allow us to continue to realize
our strategy of regional dominance in key states such as Florida and
California."
Joseph Paul, President of USDL, added that USDL is continuing
discussions to resolve the dispute with Raytel Medical Corporation concerning
MICA's Orlando facility. "We believe that the dispute will be resolved shortly.
The MICA/Raytel Orlando facility is not material to the overall profitability of
MICA." Raytel had filed suit alleging that MICA and USDL had violated certain
agreements with Raytel concerning the Orlando center. The court denied Raytel's
motion to enjoin the merger but placed certain restrictions on the operation of
this center pending the resolution of the dispute.
US Diagnostic Inc. is the leading provider of radiology services
focused on the acquisition, operation and management of multi-modality
diagnostic imaging centers and related medical facilities in the United
States. The company currently owns 106 diagnostic imaging facilities and
manages 19 other radiology facilities in 16 states and has announced plans to
acquire an additional 5 facilities.
<PAGE> 1
EXHIBIT 99.1
____________________________________
AGREEMENT AND PLAN OF MERGER
AMONG
US DIAGNOSTIC LABS, INC.
MICA ACQUIRING CORPORATION
AND
MEDICAL IMAGING CENTERS OF AMERICA, INC.
DATED AUGUST 1, 1996
____________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.5 Articles of Incorporation; By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.6 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . 3
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Common Stock of Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Cancellation of Treasury Stock and Parent-Owned Company Common Stock . . . . . . . . . . . . 3
(c) Conversion of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Shares of Dissenting Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Cancellation and Retirement of Company Common Stock . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) No Further Ownership Rights in Company Common Stock . . . . . . . . . . . . . . . . . . . . . 5
(d) Termination of Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Investment of Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.3 Treatment of Employee Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 7
SECTION 3.1 Representations and Warranties of the Company. . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Organization and Qualification; Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Articles of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Company Reports and Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . 10
(h) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(i) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<S> <C> <C>
(j) Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(k) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(l) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(m) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(n) Employee Benefit Company Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(o) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(p) Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(q) Certain Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(r) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(s) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(t) Rights Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(u) Scope of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.2 Representations and Warranties of Parent and Merger Sub . . . . . . . . . . . . . . . . . . 17
(a) Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Charter and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Authority Relative to Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) No Conflict; Required Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . 18
(f) Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Securities Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(k) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(l) Scope of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER COVENANTS . . . . . . . . . . . . 20
SECTION 4.1 Conduct of Business of the Company Pending the Merger . . . . . . . . . . . . . . . . . . . 20
SECTION 4.2 Conduct of Business of Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.3 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 4.4 Preparation of the Proxy Statement; Preparation of Hart-Scott Act Filing . . . . . . . . . 23
SECTION 4.5 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4.6 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.7 Employee Benefits Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 4.8 Directors' and Officers' Indemnification and Insurance . . . . . . . . . . . . . . . . . . 25
SECTION 4.9 Further Action; Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.10 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.11 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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<TABLE>
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ARTICLE V
CONDITIONS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.1 Conditions to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . . . . . . . . 27
(a) Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) No Injunctions or Restraints; Illegality; Litigation . . . . . . . . . . . . . . . . . . . . . . 28
(d) Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.2 Conditions to Obligations of Parent and Merger Sub . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Performance of Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Burdensome Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.3 Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) Performance of Obligations of Parent and Merger Sub . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.1 Non-Survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . 32
SECTION 7.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 7.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.5 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.6 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.7 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated August 1, 1996 (this
"Agreement"), among US DIAGNOSTIC LABS, INC., a Delaware corporation (the
"Parent"), MICA ACQUIRING CORPORATION, a California corporation and a direct
wholly owned subsidiary of Parent ("Merger Sub"), and MEDICAL IMAGING CENTERS
OF AMERICA, INC., a California corporation (the "Company").
WHEREAS, the Boards of Directors of the Company, Parent and
Merger Sub have approved, and deem it advisable and in the best interests of
their respective stockholders to consummate, the business combination
transaction provided for herein in which Merger Sub will merge with and into
the Company (the "Merger") with the Company being the surviving corporation in
the Merger;
WHEREAS, in furtherance of such acquisition, it is proposed
that all the issued and outstanding shares of Common Stock, no par value, of
Company ("Company Common Stock"; shares of Company Common Stock being
hereinafter collectively referred to as the "Common Stock") will be acquired in
connection with the Merger for $11.75 per share in cash upon the terms and
subject to the limitations and conditions of this Agreement;
WHEREAS, the Directors of the Company have unanimously
determined that the Merger is fair to, and in the best interests of, the
holders of Common Stock, approved the Merger and recommended the approval and
adoption of this Agreement by the shareholders of the Company; and
WHEREAS, also in furtherance of such acquisition, the Boards
of Directors of Parent, Merger Sub, and Company have each approved this
Agreement and the Merger in accordance with the California Corporations Code
("California Law") upon the terms and subject to the conditions set forth
herein;
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, mutual covenants and agreements herein
contained and intending to be legally bound hereby, Parent, Merger Sub and the
Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with California Law,
at the Effective Time (as defined in Section 1.3 below), Merger Sub shall be
merged with and into the Company. Upon the Effective Time, the separate
corporate existence of Merger Sub shall cease, and the
<PAGE> 6
2
Company shall continue as the surviving corporation of the Merger under the
laws of the State of California (the "Surviving Corporation") under the name
"MEDICAL IMAGING CENTERS OF AMERICA, INC."
SECTION 1.2 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 6.1, and subject to the satisfaction or waiver of the
conditions set forth in Article V, the closing of the Merger (the "Closing")
will take place as promptly as practicable (and in any event within five
business days) following satisfaction or waiver of the conditions set forth in
Article V, other than those conditions which by their terms are to be satisfied
at the Closing (the "Closing Date"), at the offices of Latham & Watkins, 701 B
Street, San Diego, California 92116, unless another date, time or place is
agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time of the Merger. As soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article V, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of California, in such form as required by, and executed
in accordance with the relevant provisions of, California Law (the date and
time of the filing of the Certificate of Merger with the Secretary of State of
the State of California (or such later time as is specified in the Certificate
of Merger) being the "Effective Time").
SECTION 1.4 Effects of the Merger. From and after the
Effective Time, the Merger shall have the effects set forth in the applicable
provisions of California Law.
SECTION 1.5 Articles of Incorporation; By-Laws. (a) At the
Effective Time, the Articles of Incorporation of the Surviving Corporation
shall be the Articles of Incorporation of Merger Sub, as in effect immediately
prior to the Effective Time.
(b) At the Effective Time, the By-Laws of the Surviving
Corporation shall be the By-Laws of the Merger Sub, as in effect immediately
prior to the Effective Time, until thereafter amended or repealed in accordance
with their terms and the Articles of Incorporation of the Surviving Corporation
and as provided by law.
SECTION 1.6 Directors and Officers. The Directors of Merger
Sub immediately prior to the Effective Time shall be the initial Directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and By-Laws of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed, as the case may be, and qualified.
<PAGE> 7
3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of the holders of
any shares of Common Stock, or any shares of capital stock of Merger Sub:
(a) Common Stock of Merger Sub. Each share of Common Stock,
par value $.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be exchanged for one share of validly issued,
fully paid and nonassessable Common Stock of the Surviving Corporation, which
shall be all of the issued and outstanding capital stock of the Surviving
Corporation as of the Effective Time.
(b) Cancellation of Treasury Stock and Parent-Owned Company
Common Stock. Each share of Company Common Stock that is owned by the Company
or by any subsidiary of the Company, and each share of Company Common Stock
that is owned by Parent, Merger Sub or any other subsidiary of Parent, shall
automatically be cancelled and retired and shall cease to exist, and no other
consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Except as otherwise
provided herein and subject to Section 2.1(d), each issued and outstanding
share of Company Common Stock (other than shares to be cancelled in accordance
with Section 2.1(b)) shall be converted into the right to receive cash from
Parent in an amount equal to $11.75, payable to the holder thereof, without
interest thereon (the "Merger Consideration" or the "Cash Price"). As used in
this Agreement, references to "dollars" and "$" are to the lawful currency of
the United States of America, unless otherwise indicated.
(d) Shares of Dissenting Holders. Notwithstanding anything
in this Agreement to the contrary but only to the extent required by California
Law, shares of Company Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by holders of Company Common
Stock who comply with all the provisions of law of the State of California
concerning the right of holders of Company Common Stock to dissent from the
Merger and require appraisal of their shares of Company Common Stock
("Dissenting Shareholders", with the shares of Company Common Stock held by such
Dissenting Shareholders to be referred to as the "Dissenting Shares") shall not
be converted into the right to receive the Merger Consideration but shall
become the right to receive such consideration as may be determined to be due
such Dissenting Shareholder pursuant to the law of the State of California;
provided, however, that (i) if any Dissenting Shareholder shall subsequently
deliver a written withdrawal of his or her demand for appraisal (with the
written approval of the Surviving Corporation, if such withdrawal is not
tendered within 60 days after the Effective Time), or (ii) if any Dissenting
Shareholder fails to establish and perfect his or her entitlement to appraisal
rights as provided by applicable law, or (iii) if within 120 days of the
Effective Time neither any Dissenting Shareholder nor the Surviving Corporation
has filed a petition demanding a determination of the value of all shares of
Company Common Stock outstanding
<PAGE> 8
4
at the Effective Time and held by Dissenting Shareholders in accordance with
applicable law, then such Dissenting Shareholder or Shareholders, as the case
may be, shall forfeit the right to appraisal of such shares and each of such
shares shall thereupon be deemed to have been converted into the right to
receive, as of the Effective Time, the Merger Consideration as contemplated by
Section 2.1, without interest. The Company shall give Parent and Merger Sub
(A) prompt notice of any written demands for appraisal, withdrawals of demands
for appraisal and any other related instruments received by the Company, and
(B) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal. The Company will not voluntarily make any payment with
respect to any demands for appraisal and will not, except with the prior
written consent of Parent, settle or offer to settle any demand.
(e) Cancellation and Retirement of Company Common Stock. As
of the Effective Time, all shares of Company Common Stock (in each case, other
than shares referred to in Section 2.1(b) and Dissenting Shares) issued and
outstanding immediately prior to the Effective Time, shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of Company
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration upon surrender of such certificate in
accordance with Section 2.2.
SECTION 2.2 Exchange of Certificates.
(a) Exchange Agent; Exchange Date. (i) Prior to the mailing
of the Company's Proxy Statement (as defined in Section 3.1(e)(ii)), Parent
shall appoint a bank or trust company located in the United States (which may
not be an affiliate of Parent) to act as exchange agent (the "Exchange Agent")
for the payment of the Merger Consideration. At or prior to the Effective
Time, Parent shall deposit with the Exchange Agent, for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with this
Article II, the Merger Consideration. Each person who, on or prior to the
Exchange Date (as defined in this Section 2.2) is a record holder of shares of
Company Common Stock will be entitled to receive the Merger Consideration as
contemplated by Section 2.1 upon surrender of such certificate in accordance
with this Section 2.2.
(ii) The Company shall prepare and mail the Proxy
Statement to the record holders of Company Common Stock as of the record date
for the Shareholders' Meeting (as defined in Section 4.3). The Company will
use its best efforts to make the Proxy Statement available to all persons who
become holders of Company Common Stock during the period between such record
date and the Exchange Date. For purposes of this Agreement, the "Exchange
Date" shall mean 5:00 p.m., New York City time on the business day next
preceding the date of the Shareholders' Meeting.
(b) Exchange Procedures. As soon as practicable after the
Effective Time, each holder of an outstanding certificate or certificates which
prior thereto represented shares of Company Common Stock shall, upon surrender
to the Exchange Agent of such certificate or certificates and acceptance
thereof by the Exchange Agent, be entitled to the amount of cash into which the
aggregate number of shares of Company Common Stock previously represented
<PAGE> 9
5
by such certificate or certificates surrendered shall have been converted
pursuant to this Agreement. The Exchange Agent shall accept such certificates
upon compliance with such reasonable terms and conditions as the Exchange Agent
may impose in order to effect an orderly exchange thereof in accordance with
normal exchange practices. After the Effective Time, there shall be no further
transfer on the records of the Company or its transfer agent of certificates
representing shares of Company Common Stock and if such certificates are
presented to the Company for transfer, they shall be cancelled against delivery
of cash as hereinabove provided. If any cash is to be remitted to a person
other than the registered holder of the certificate for Company Common Stock
surrendered for exchange, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and that the person
requesting such exchange shall pay to Parent or the Exchange Agent any transfer
or other taxes required by reason of the payment of cash to a person other than
the registered holder of the certificate surrendered, or establish to the
satisfaction of Parent or the Exchange Agent that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.2(b), each
certificate for shares of Company Common Stock shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by Section 2.1. No interest
will be paid or will accrue on any cash payable as Merger Consideration.
(c) No Further Ownership Rights in Company Common Stock. All
cash paid upon the surrender of certificates representing shares of Company
Common Stock in accordance with the terms of this Article II shall be deemed to
have been paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such certificates, subject,
however, to the Surviving Corporation's obligation, with respect to shares of
Company Common Stock outstanding immediately prior to the Effective Time, to
pay any dividends or make any other distributions with a record date prior to
the Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement
or prior to the date of this Agreement and which remain unpaid at the Effective
Time.
(d) Termination of Exchange Fund. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section 2.2
(the "Exchange Fund") which remains undistributed to the holders of the
certificates representing shares of Company Common Stock for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders
of shares of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent and only as general creditors
thereof for payment of their claim for cash.
(e) No Liability. None of Parent, Merger Sub, the Company or
the Exchange Agent shall be liable to any person in respect of any cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
shares of Company Common Stock shall not have been surrendered prior to five
years after the Effective Time (or immediately prior to such earlier date on
which any cash in respect of such certificate would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section
3.1(e)(ii)), any such cash shall, to
<PAGE> 10
6
the extent permitted by applicable law, become the property of Parent, free and
clear of all claims or interest of any person previously entitled thereto.
(f) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Parent.
SECTION 2.3 Treatment of Employee Options.
(a) Prior to the Effective Time, the Board of Directors of
the Company (or, if appropriate, any Committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time, of all the outstanding stock
options, stock appreciation rights, limited stock appreciation rights and
performance units (the "Options") heretofore granted under any stock option,
performance unit or similar plan of the Company (the "Stock Plans").
Immediately prior to the Effective Time, (i) each Option, whether or not then
vested or exercisable, shall no longer be exercisable but shall entitle each
holder thereof, in cancellation and settlement therefor, to payments in cash
(subject to any applicable withholding taxes, the "Cash Payment"), at the
Effective Time, equal to the product of (x) the total number of shares of Common
Stock subject or related to such Option, whether or not then vested or
exercisable, and (y) the excess of the Cash Price over the exercise price per
share of Common Stock subject or related to such Option, each such Cash Payment
to be paid to each holder of an outstanding Option at the Effective Time;
provided, however, that with respect to any person subject to Section 16 of the
Exchange Act (as defined below), any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act (as defined below), and (ii) each
share of Common Stock previously issued in the form of grants of restricted
stock or grants of contingent shares shall fully vest. As provided herein, the
Stock Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary (collectively with the Stock Plans, referred to as the
"Stock Incentive Plans") shall terminate as of the Effective Time and the
Company shall ensure that following the Effective Time no holder of an Option or
any participant in any Stock Incentive Plans shall have any right thereunder to
acquire capital stock of the Company, Parent or the Merger Sub, except as
provided in the proviso to clause (i) of this Section 2.3. The Company will
take all reasonable steps to ensure that, as of the Effective Time, none of the
Parent, the Company or any of their respective subsidiaries is or will be bound
by any Options, other options, warrants, rights or agreements which would
entitle any person, other than Parent or its affiliates, to own any capital
stock of the Company, Merger Sub or any of their respective subsidiaries or to
receive any payment in respect thereof. The Company will use its best efforts
to obtain all necessary consents and releases to ensure that after the Effective
Time, the only rights of the holders of Options to purchase shares of Company
Common Stock in respect of such Options will be to receive the Cash Payment in
cancellation and settlement thereof. Notwithstanding any other provision of this
Section 2.3 to the contrary, payment may be withheld with respect to any Option
until necessary consents and releases are obtained.
(b) All Stock Plans shall terminate as of the Effective
Time and the provisions in any other Company Plans (as defined in Section
3.1(n)) providing for the issuance, transfer or grant of any capital stock of
the Company or any interest in respect of any
<PAGE> 11
7
capital stock of the Company shall be amended as of the Effective Time to
provide no continuing rights to acquire, hold, transfer or grant any capital
stock of the Company or any interest in capital stock of the Company (other
than in respect of cash payments through the Merger), and the Company shall
ensure that following the Effective Time no holder of an Option or any
participant in any Stock Plans shall have any right thereunder to acquire any
capital stock of the Company, Parent or the Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company.
Except as set forth in the Disclosure Schedules ("Company Disclosure
Schedules"), the Company hereby represents and warrants to Parent and Merger
Sub as follows:
(a) Organization and Qualification; Subsidiaries. Each of
the Company and its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and any
necessary governmental approvals to own, lease and operate its properties and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power,
authority and governmental approvals could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect (as defined
below) on the Company. The Company and each of its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
When used with respect to the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any material adverse
change in or effect on (i) the business, results of operations or condition
(financial or other) of the Company and its subsidiaries taken as a whole or
(ii) the ability of the Company to consummate any of the transactions
contemplated hereby.
(b) Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of the Articles of
Incorporation and the By-Laws of the Company and the equivalent organizational
documents of each subsidiary of the Company as currently in effect. Neither
the Company nor any subsidiary thereof is in violation of any of the provisions
of its Articles of Incorporation or By-Laws or equivalent organizational
document.
(c) Capitalization. The authorized capital stock of the
Company consists of 30,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, no par value ("Company Preferred Stock"). As of
July 1, 1996 (A) 2,695,226 shares of Company
<PAGE> 12
8
Common Stock were issued and outstanding, all of which are validly issued,
fully paid and nonassessable and not subject to preemptive rights; (B) 445,593
shares of Company Common Stock were issuable pursuant to outstanding Options
and warrants; and (C) no more than 360,000 shares were available for issuance
under the Company's outstanding convertible subordinated debt. The number of
Options and warrants, by exercise price, outstanding on July 1, 1996, are set
forth in Schedule 3.1(c) of the Company Disclosure Schedule. As of the date of
this Agreement, no shares of Company Preferred Stock are issued and
outstanding. The authorized capital stock and issued and outstanding stock of
each subsidiary is set forth in Schedule 3.1(c) of the Company Disclosure
Schedule. Except as set forth in this Section 3.1(c) or Schedule 3.1(c) of the
Company Disclosure Schedule, as of the date of this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of, or other
equity interests in, the Company or any subsidiary of the Company obligating
the Company or any subsidiary of the Company to issue or sell any shares of
capital stock of, or other equity interests in, the Company or any subsidiary
of the Company. Between July 1, 1996 and the date of this Agreement, no shares
of Company Common Stock have been issued by the Company, except upon the
exercise of stock options described above. Except as set forth in Schedule
3.1(c) of the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any subsidiary to repurchase, redeem or otherwise
acquire any shares of Company Common Stock or any capital stock of, or any
equity interest in, any subsidiary. Except as described in Schedule 3.1(c) of
the Company Disclosure Schedule, each outstanding share of capital stock of, or
other equity interest in, each subsidiary of the Company is duly authorized,
validly issued, fully paid and nonassessable.
(d) Authority Relative to Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than the approval and adoption of the
Merger and this Agreement by the holders of a majority of the outstanding
shares of Company Common Stock). This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms. The only vote of the holders of any class or series of outstanding
securities of the Company required for approval of this Agreement and the
Merger is the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock.
(e) No Conflict; Required Filings and Consents. Except as
set forth on Schedule 3.1(e), and (i) other than in connection with or in
compliance with the specific provisions of (i) the California Law relating to
the filing of the Certificate of Merger and other appropriate merger documents,
if any, and the approval of the Merger by a majority of the shares of Common
Stock, (ii) the Exchange Act (as defined below), (iii) the "blue sky" laws of
various states, (iv) the Hart-Scott-Rodino Improvements Act of 1976, as amended
(the
<PAGE> 13
9
"Hart-Scott Act") relating to the filing of appropriate documents regarding the
Merger with the Antitrust Division of the Department of Justice and the Federal
Trade Commission (collectively, the "Antitrust Entities") and the approval of
the Merger by the Antitrust Entities, and (v) applicable local permit laws,
rules and regulations pertaining to the operation of the business of the
Company and its subsidiaries, the execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby will not: (A) violate any provision of the Articles of
Incorporation or By-Laws (or other organizational document) of the Company or
any of its subsidiaries; (B) violate any statute, ordinance, rule, regulation,
order or decree of any court or of any governmental or regulatory body, agency
or authority applicable to the Company or any of its subsidiaries or by which
any of their respective properties or assets may be bound; (C) require any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority; or (D) result in a
violation or breach of, conflict with, constitute (with or without due notice
or lapse of time or both) a default under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party, or by
which it or any of their respective properties or assets, except in the case of
clauses (A), (B) and (C) above for such filings, permits, consents, approvals
or violations, which would not have a Material Adverse Effect on the condition
of the Company and its subsidiaries, taken as a whole, or could be reasonably
likely to prevent or materially delay consummation of the transactions
contemplated by this Agreement and except as set forth in Schedule 3.1(e) of
the Company Disclosure Schedule.
(ii) The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby by the Company do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
United States federal, state or local court, administrative agency or
commission, or entity created by rule, regulation or order of any United States
federal, state or local commission or other governmental agency, authority or
instrumentality (a "Governmental Entity"), except for: (A) the filing with,
and approval by, the SEC of (1) a proxy statement relating to the Shareholders'
Meeting referred to in Section 4.3 (such proxy statement as amended or
supplemented from time to time, the "Proxy Statement") and (2) such other
filings under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and the
transactions contemplated hereby and the obtaining from the SEC of such orders
as may be required in connection therewith; (B) applicable filings under state
anti-takeover laws, if any; (C) the filing and recordation of the Certificate
of Merger as required by California Law; (D) applicable filings under the
Hart-Scott Act; and (E) such other consents, approvals and authorizations of
Governmental Entities as shall have been specified by the Company to Parent in
writing prior to the date of this Agreement.
(f) Compliance with Laws. Except as disclosed Schedule
3.1(f) of the Company Disclosure Schedule, the Company and its subsidiaries are
in compliance with all applicable laws, regulations, orders, judgments and
decrees except where the failure to so comply would
<PAGE> 14
10
not have a Material Adverse Effect on the Company and its subsidiaries taken as
a whole or could be reasonably likely to prevent or materially delay
consummation of the transactions contemplated by this Agreement. There is no
claim, action, proceeding or investigation pending or, to the best knowledge of
the Company, threatened against the Company or any subsidiary of the Company,
by, on behalf of or before any arbitrator or Governmental Entity which (i)
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company or (ii) seeks to and is reasonably
likely to significantly delay or prevent the consummation of the Merger. As of
the date of this Agreement, no investigation by any Governmental Entity with
respect to the Company or any of its subsidiaries is pending or, to the best
knowledge of the Company, threatened, other than, in each case, those the
outcome of which, individually or in the aggregate, will not have a Material
Adverse Effect on the Company.
(g) Company Reports and Financial Statements. (i) Since
December 31, 1995, the Company has filed all forms, reports and documents with
the Securities and Exchange Commission (the "Commission") required to be filed
by it pursuant to the federal securities laws and the Commission rules and
regulations thereunder (the "Commission Filings"), and all forms, reports and
documents filed with the Commission have complied in all material respects with
all applicable requirements of the federal securities laws and the Commission
rules and regulations promulgated thereunder. As of their respective dates,
the Commission Filings did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of the consolidated balance sheets included in
the Commission Filings were prepared in accordance with United States generally
accepted accounting principles (as in effect from time to time) applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto), and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the results of their operations and
their cash flows for the periods then ended (subject, in the case of any
unaudited financial statements, to normal year-end audit adjustments).
(ii) The Company will deliver to Parent as soon as
they become available true and complete copies of any report or statement
mailed by it to its shareholders generally or filed by it with the Commission
subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports and statements (excluding any information
therein provided by Parent or Merger Sub, as to which the Company makes no
representation) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading and will comply in all material respects with all
applicable requirements of the federal securities laws and the Commission rules
and regulations thereunder. The consolidated financial statements of the
Company to be included in such reports and statements (excluding any
information therein provided by Parent or Merger Sub, as to which the Company
makes no representation) will be prepared in accordance with generally accepted
accounting principles (as in effect from time to time) applied on a consistent
basis (except as may be indicated therein or in the notes or schedules
thereto), and will fairly present in all material respects the consolidated
financial position of
<PAGE> 15
11
the Company and its consolidated subsidiaries as of the dates thereof and the
results of their operations and their cash flows for the periods then ended
(subject, in the case of any unaudited financial statements, to normal year-end
audit adjustments).
(h) Information Supplied. None of the information included
in the Proxy Statement (other than information supplied by Parent or Merger Sub
for inclusion in the Proxy Statement) will, at the date it is first mailed to
the Company's shareholders or at the time of the Shareholders' Meeting, contain
any statement which, in the light of the circumstances under which such
statement is 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
therein not false or misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Shareholders' Meeting or any amendment or supplement thereto. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated thereunder,
except that no representation is made by the Company with respect to statements
made based on information supplied by Parent or Merger Sub for inclusion in the
Proxy Statement.
(i) Absence of Certain Changes or Events. Except as
otherwise disclosed in Schedule 3.1(i) of the Company Disclosure Schedule or as
otherwise contemplated by this Agreement, since March 31, 1996 and up to the
date of this Agreement, there has not been (i) any change, event or development
in or affecting the Company that constitutes or would reasonably be expected to
have either individually or in the aggregate a Material Adverse Effect on the
Company, (ii) any change by the Company in its accounting methods, principles
or practices, except as required by changes in generally accepted accounting
principles or as recommended by the Company's independent accountants and
consented to in writing by Parent (which consent shall not be unreasonably
withheld) prior to such change, (iii) any declaration, setting aside or payment
of any dividends or distributions in respect of any series of capital stock of
the Company, (iv) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including without limitation the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan or agreement or arrangement, or any
other increase in the compensation payable or to become payable to any present
or former directors, officers above the rank of Vice President of the Company
or any of its subsidiaries, except for increases in base compensation and
annual cash bonuses, in each case in the ordinary course of business and
consistent with past practice or (v) any other action which, if it had been
taken after the date hereof, would have required the consent of Parent under
Section 4.1 hereof.
(j) Absence of Litigation. Except as disclosed in Schedule
3.1(j) of the Disclosure Schedule, there are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any court, arbitrator
or other Governmental Entity, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
the Company or to delay or prevent the consummation of the transactions
contemplated hereby beyond December 31, 1996. Neither the Company nor any of
its subsidiaries nor any of their
<PAGE> 16
12
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which could reasonably be
expected to have, a Material Adverse Effect on the Company or which could
prevent or delay the consummation of the transactions contemplated hereby
beyond December 31, 1996.
(k) Liabilities. Except as otherwise contemplated by this
Agreement since March 31, 1996 and up to the date of this Agreement, neither
the Company nor any of its subsidiaries has incurred any material outstanding
claims, liabilities or indebtedness, contingent or otherwise, that would be
required to be disclosed in the Company's consolidated financial statements
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, other than liabilities incurred subsequent to March 31,
1996 in the ordinary course of business not involving borrowings by the
Company.
(l) Labor Matters. Neither the Company nor any of its
subsidiaries is a party to any collective bargaining agreement. Neither the
Company nor any of its subsidiaries has (i) had any employees strikes, work
stoppages, slowdowns or lockouts, (ii) received any requests for certifications
of bargaining units or any other requests for collective bargaining, or (iii)
become aware of any efforts to organize employees of the Company or any of its
subsidiaries into a collective bargaining unit.
(m) Environmental Matters. (i) For purposes of this
Agreement, the following terms shall have the following meanings: (A)
"Hazardous Substances" means a) those substances defined in or regulated under
the following federal statutes and their state counterparts, as each may be
amended from time to time, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act
and the Clean Air Act; b) petroleum and petroleum products, byproducts and
breakdown products including crude oil and any fractions thereof; c) natural
gas, synthetic gas, and any mixtures thereof; d) polychlorinated biphenyls; e)
any other chemicals, materials or substances defined or regulated as toxic or
hazardous or as a pollutant or contaminant or as a waste under any applicable
Environmental Law; and f) any substance with respect to which a federal, state
or local agency requires environmental investigation, monitoring, reporting or
remediation; and (B) "Environmental Laws" means any federal, state, foreign, or
local law, rule or regulation, now or hereafter in effect and as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, relating to pollution or
protection of the environment, health, safety or natural resources, including
without limitation, those relating to a) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances or b) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances.
(ii) Except as described in Schedule 3.1(m) of the Company
Disclosure Schedule or as would not individually or in the aggregate result in
or be likely to result in any fine tax, assessment, penalty, loss, cost,
damage, liability, expense or other payment related thereto in excess of
$20,000: (A) the Company and each subsidiary are and have been in
<PAGE> 17
13
compliance with all applicable Environmental Laws; (B) the Company and each
subsidiary have obtained all permits, approvals, identification numbers,
licenses or other authorizations required under any applicable Environmental
Laws ("Environmental Permits") and are and have been in compliance with their
requirements; (C) such Environmental Permits are transferable to the Surviving
Corporation pursuant to the Merger without the consent of any Governmental
Authority; (D) there are no underground or aboveground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Substances are being or have been treated, stored or disposed of on any owned
or leased real property or on any real property formerly owned, leased or
occupied by the Company or any subsidiary; (E) there is, to the best knowledge
of the Company, no asbestos or asbestos-containing material on any owned or
leased real property in violation of applicable Environmental Laws; (F) the
Company and the subsidiaries have not released, discharged or disposed of
Hazardous Substances on any real property owned or leased or on any real
property formerly owned or leased by the Company or any subsidiary and none of
such property is contaminated with any Hazardous Substances; (G) neither the
Company nor any of the subsidiaries is undertaking, and neither the Company nor
any of the subsidiaries has completed, any investigation or assessment or
remedial or response action relating to any such release, discharge or disposal
of or contamination with Hazardous Substances at any site, location or
operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law; and (H) there are no
pending or, to the knowledge of the Company, past or threatened actions, suits,
demands, demand letters, claims, liens, notices of non-compliance or violation,
notices of liability or potential liability, investigations, proceedings,
consent orders or consent agreements relating in any way to Environmental Laws,
any Environmental Permits or any Hazardous Substances against the Company or
any subsidiary or any of their property, and there are no circumstances that
can reasonably be expected to form the basis of any such Environmental Claim,
including without limitation with respect to any off-site disposal location
presently or formerly used by the Company or any of the subsidiaries or any of
their predecessors.
(iii) The Company and the subsidiaries have made available
to Parent copies of any environmental reports, studies or analyses in its
possession or under its control relating to owned or leased real property or
the operations of the Company or the subsidiaries.
(iv) Schedule 3.1(m) of the Company Disclosure Schedule
sets forth a list of all real property currently owned or owned within the last
three years by the Company or any of the subsidiaries.
(n) Employee Benefit Company Plans. (i) Schedule 3.1(n) of
the Company Disclosure Schedule lists (i) all employee benefit plans, programs
and arrangements maintained for the benefit of any current or former employee,
officer or Director of the Company or any subsidiary (the "Company Plans") and
(ii) all written contracts and agreements relating to employment and all
severance agreements with any of the directors, officers or employees of the
Company or any subsidiaries (other than, in each case, any such contract or
agreement that is terminable by the Company or any subsidiary at will without
penalty or other consequence of Material Adverse Effect). Schedule 3.1(n) of
the Company Disclosure Schedule sets forth the name of each officer or employee
of the Company or any subsidiary with an annual base
<PAGE> 18
14
compensation greater than $75,000 and the annual base compensation applicable
to each such officer or employee. The Company has made available to Parent a
copy of each Company Plan, each material document prepared in connection with
each Company Plan and each Company employment contract. None of the Company
Plans is a multiemployer plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Except as set forth in
Schedule 3.1(n) of the Company Disclosure Schedule, none of the Company Plans
promises or provides retiree medical or life insurance benefits to any person.
Each Company Plan intended to be qualified under Section 401(a) of the Internal
Revenue Code, as amended (the "Code") is so qualified. Each Company Plan has
been operated in all material respects in accordance with its terms and the
requirements of applicable law. The Company has not incurred any direct or
indirect material liability under, arising out of or by operation of Title IV
of ERISA in connection with the termination of, or withdrawal from, any Company
Plan or other retirement plan or arrangement and, as of the date hereof, no
fact exists or event has occurred that would reasonably be expected to give
rise to any such liability. Except as set forth in Schedule 3.1(n) of the
Company Disclosure Schedule, no Company Plan is or has been covered by Title IV
of ERISA or Section 412 of the Code. Except as set forth in Schedule 3.1(n) of
the Company Disclosure Schedule, the Company and the subsidiaries have complied
in all respects with all laws, rules and regulations pertaining to employment
practices including, without limitation, the Worker Adjustment Retraining
Notification Act, the wage hour laws, the Americans with Disabilities Act, and
the discrimination laws, and no fact or event exists that could give rise to
liability under such acts, laws, rules or regulations, except for such
occurrences, noncompliances and liabilities as would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(o) Tax Matters. Except as set forth in Schedule 3.1(o) of
the Company Disclosure Schedule, the Company and each of the subsidiaries have
(i) filed all federal, state, local and foreign tax returns required to be
filed by them prior to the date of this Agreement (taking into account
extensions), (ii) paid or accrued all taxes shown to be due on such returns and
paid all applicable ad valorem and value added taxes as are due and (iii) paid
or accrued all taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clause (i), (ii) or (iii) for any such
filings, payments or accruals which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as set forth
in Schedule 3.1(o) of the Company Disclosure Schedule, neither the Internal
Revenue Service nor any other federal, state, local or foreign taxing authority
has asserted any claim for taxes, or to the best knowledge of the Company, is
threatening to assert any claims for taxes, which claims, individually or in
the aggregate, could have a Material Adverse Effect on the Company. The
Company has open years for federal, state and foreign income tax returns only
as set forth in Schedule 3.1(o) of the Company Disclosure Schedule. The
Company and each subsidiary have withheld or collected and paid over to the
appropriate governmental authorities (or are properly holding for such payment)
all taxes required by law to be withheld or collected, except for amounts which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. There are no liens for taxes upon the assets of the Company or
any subsidiary (other than liens for taxes that are not yet due or that are
being contested in good faith by appropriate proceedings), except for liens
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
<PAGE> 19
15
(p) Tangible Property.
(i) The Company and the subsidiaries have good and
marketable title to all their tangible properties and assets, with only such
exceptions as, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. All of the assets of the Company and the
subsidiaries have been maintained and repaired for their continued operation
and are in good operating condition, reasonable wear and tear excepted, and
usable in the ordinary course of business.
(ii) Except as set forth in Schedule 3.1(p) of the Company
Disclosure Schedule, all of such property is free and clear of all liens,
except (A) such liens as are disclosed in Schedule 3.1(p) of the Company
Disclosure Schedule, (B) liens for taxes not yet due and payable, (C) liens of
landlords, vendors, warehousemen and mechanics, and (D) such imperfections of
title, easements and encumbrances, if any, as are not material in character,
amount or expense, or do not materially detract from the value or interfere
with the present use of the property subject thereto or affected thereby. To
the best knowledge of the Company, all properties utilized in the Company's
business (whether owned or leased) are in material compliance with all
applicable laws, statutes, rules and regulations (including, without
limitation, building, zoning and environmental laws) and all material
covenants, conditions, restrictions or easements affecting the property or its
use or occupancy, the failure to comply with which could reasonably be expected
to have a Material Adverse Effect, and, to the best knowledge of the Company,
no notices of any material violations thereof have been received.
(iii) Each of the leases under which the material
properties of the Company are leased is unmodified and in full force and effect
(in the form made available pursuant to Section 3.1(p) hereof), and, to the
best knowledge of the Company, there are no other agreements, written or oral,
between the Company and any third parties claiming an interest in the Company's
interest in the leased property or otherwise affecting its use and occupancy
thereof. Except as set forth in Schedule 3.1(p) of the Company Disclosure
Schedule, the Company is not in default under the leases and no material
defaults (whether or not subsequently cured) by the Company have been alleged
thereunder which in either case could be reasonably expected to have a Material
Adverse Effect. To the best of the Company's knowledge, each lessor named in
any of the leases is not in default thereunder, and no defaults (whether or not
subsequently cured) by such lessor have been alleged thereunder.
(q) Certain Contracts and Agreements. Schedule 3.1(q) of the
Company Disclosure Schedule lists (i) each contract which is required by its
terms or is currently expected to result in the payment or receipt by the
Company or any subsidiary of more than $100,000 and which is not terminable by
the Company or any subsidiary without the payment of any penalty or fine on not
more than three months' notice (a "Material Contract"), (ii) all material
agreements relating to joint ventures, partnerships and equity or debt
investments, (iii) all noncompete agreements with the Company or the
subsidiaries (whether as beneficiary or obligor), (iv) all agreements, notes,
bonds, indentures or other instruments governing indebtedness for borrowed
money, and any guarantee thereof or the pledge of any assets or other security
therefor, (v) all agreements with any affiliate (other than the Company or a
wholly owned subsidiary) of the Company or the subsidiaries to which the
Company or any
<PAGE> 20
16
subsidiary is a party, (vi) each agreement affording registration rights as to
any securities of the Company under the Securities Act of 1933, as amended
(the "Securities Act"), (vii) each category of personal property owned or
leased by the Company and each asset within any such category which has a book
value or current market value in excess of $100,000 or group of related such
items valued in excess of $500,000 or which is leased under an agreement
providing for annual lease payments in respect thereof in an amount in excess
of $100,000, (viii) each registration, certificate or application with respect
to the intellectual property and all licenses of intellectual property by the
Company from or to any third party and all other agreements to which the
Company is a party regarding intellectual property excluding, however those
relating to commercially available ("canned") software, (ix) each policy of
fire, liability, title, errors and omissions and other forms of insurance held
by the Company and of all claims in excess of $50,000 pending thereunder, (x)
each officer and director of the Company and subsidiaries which is a
corporation, (xi) each general partner or joint venture partner of any entity
in which the Company or any subsidiary is a general partner or joint venture
partner other than the Company, (xii) each agreement to which the Company or a
subsidiary is a party restricting or otherwise affecting voting or other rights
with respect to any securities of the Company or subsidiaries, including voting
trusts, voting agreements, irrevocable proxies, preemptive rights,
shareholders' agreements, redemption agreements and buy-sell agreements, (xiii)
each material agreement between the Company or any subsidiary and any hospital,
hospital management company, health maintenance organization or other managed
care payor, (xiv) each agreement between or among the Company or any
subsidiary, (xv) each management contract and contract with independent
contractors or consultants (or similar arrangements) including exclusive rights
or requiring payments in excess of $100,000 individually or $500,000 in the
aggregate to which the Company or any subsidiary is a party, which are not
cancelable without penalty or further payment upon 30 days' or less notice,
(xvi) each agreement of the Company or any of the subsidiaries not made in the
ordinary course of business that is to be performed on or after the date of
this Agreement; and (xvii) to the extent not listed pursuant to subsections (i)
through (xvi) of this Section 3.1(q), each exhibit the Company would be
required to file with the SEC in response to paragraphs 2, 3, 4, 9, 10, 13, 14,
16, 17, 19, 20, 21, 22, 25 and 28 of Item 601 of Regulation S-K promulgated
under the Securities Act. Each Material Contract is in full force and effect
and is enforceable against the parties thereto (other than the Company) in
accordance with its terms and no condition or state of facts exists that, with
notice or the passage of time, or both, would constitute a material default by
the Company or, to the knowledge of the Company, any third party under such
Material Contracts. The Company has duly complied in all material respects
with the provisions of each Material Contract to which it is a party.
(r) Insurance. The Company and subsidiaries have in full
force and effect the policies of fire, liability, title, errors and omissions
and other forms of insurance listed in Schedule 3.1(r) of the Company
Disclosure Schedule. Furthermore, (i) none of the Company and subsidiaries is
in default under any such policies which default could reasonably be expected
to have a Material Adverse Effect and there is no material inaccuracy in any
application for such policies, (ii) each of the Company and subsidiaries'
activities and operations have been conducted in a manner so as to conform in
all material respects to the applicable provisions of such policies, (iii) none
of the Company and subsidiaries has received
<PAGE> 21
17
a notice of cancellation or non-renewal with respect to any such policy, and
(iv) timely notice has been given of any and all claims under all such
policies.
(s) Transactions with Affiliates. Except as set forth in
Schedule 3.1(s) of the Company Disclosure Schedule, there are no contracts,
agreements, arrangements or understandings of any kind between any affiliate of
the Company, on the one hand, and the Company or any subsidiary of the Company,
on the other hand, other than any such contracts, agreements, arrangements and
understandings that either individually or in the aggregate are de minimis in
nature.
(t) Rights Agreements. The Company has no shareholder rights
plan or similar agreement in effect.
(u) Scope of Representations. Anything to the contrary in
this Section 3.1 notwithstanding, no representation or warranty made by the
Company in this Agreement shall be deemed to be untrue or incorrect at the date
hereof if the failure of such representation or warranty to be true and correct
as of such date (or as of any other specified date) does not have, individually
or in the aggregate, a Material Adverse Effect on the Company at the date
hereof.
SECTION 3.2 Representations and Warranties of Parent and
Merger Sub. Parent and Merger Sub, jointly and severally, hereby represent and
warrant to the Company as follows:
(a) Corporate Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, and each of Parent and
Merger Sub has the requisite corporate power and authority and any necessary
governmental authority to own, operate or lease its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Parent.
When used with respect to Parent or Merger Sub, the term
"Material Adverse Effect" means any material adverse change in or effect on (i)
the business, results of operations or condition (financial or other) of Parent
and its subsidiaries taken as a whole or (ii) the ability of Parent or Merger
Sub to consummate any of the transactions contemplated hereby.
(b) Charter and By-Laws. Parent has heretofore furnished to
the Company a complete and correct copy of the Certificate of Incorporation and
By-Laws of Parent as currently in effect and of the Articles of Incorporation
and By-Laws of Merger Sub as currently in effect. Neither Parent nor Merger
Sub is in violation of any of the provisions of its respective Certificate of
Incorporation or Articles of Incorporation (as the case may be) or By-Laws.
<PAGE> 22
18
(c) Capitalization. The authorized capital stock of Parent
consists of 50,000,000 shares of Common Stock, $.01 par value, and 5,000,000
shares of Preferred Stock, $.01 par value. As of the date of this Agreement,
no shares of Parent Preferred Stock are issued and outstanding.
(d) Authority Relative to Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Merger Sub and the consummation by each of
Parent and Merger Sub of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Parent
or Merger Sub, and no other corporate proceedings on the part of Parent or
Merger Sub are necessary to authorize this Agreement or to consummate such
transactions. This Agreement has been duly executed and delivered by each of
Parent and Merger Sub and, assuming due authorization, execution and delivery
by the Company, constitutes a legal, valid and binding obligation of each of
Parent and Merger Sub enforceable against them in accordance with its terms.
(e) No Conflict; Required Filings and Consents. (i) The
execution, delivery and performance of this Agreement by Parent and Merger Sub
do not and will not: (A) conflict with or violate the Certificate of
Incorporation or By-Laws of Parent or the Articles of Incorporation or By-Laws
of Merger Sub; (B) assuming that all consents, approvals and authorizations
contemplated by subsection (ii) below have been obtained and all filings
described in such subsection have been made, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Parent or Merger Sub
or by which either of them or their respective properties are bound or
affected; or (C) result in any breach or violation of or constitute a default
(or an event which with notice or lapse of time or both could become a default)
or result in the loss of a material benefit under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent or
Merger Sub pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Merger Sub is a party or by which Parent or Merger Sub or
any of their respective properties are bound or affected, except, in the case
of clauses (B) and (C), for any such conflicts, violations, breaches, defaults
or other occurrences which could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Parent.
(ii) The execution, delivery and performance of this
Agreement by Parent and Merger Sub and the consummation of the transactions
contemplated hereby by Parent and Merger Sub do not and will not require any
consent, approval, authorization or permit of, action by, filing with or
notification to, any United States federal, state or local Governmental Entity,
except for: (A) the filing and recordation of the Certificate of Merger as
required by California Law; (B) applicable filings under the Hart-Scott Act;
and (C) such other consents, approvals and authorizations of Governmental
Entities as shall have been specified by Parent to the Company in writing prior
to the date of this Agreement.
<PAGE> 23
19
(f) Compliance. (i) Parent and its subsidiaries hold, and
are in compliance with, all permits, licenses, exemptions, orders and approvals
of all Governmental Entities necessary for the operation of the businesses of
Parent and each subsidiary, except to the extent the failure to so hold or
comply will not, individually or in the aggregate, have a Material Adverse
Effect on Parent, and to the best knowledge of Parent there are no proceedings
pending, threatened or contemplated by any Governmental Entity seeking to
terminate, revoke or materially limit any such permit, license, exemption,
order or approval. Neither Parent nor any of its subsidiaries nor the conduct
of their business is in conflict with, or in default or violation of (i) any
law, rule, regulation, order, judgment or decree applicable to Parent or any of
its subsidiaries or by which its or any of their respective properties are
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which Parent or any
of its subsidiaries or its or any of their respective properties are bound or
affected, except for any such conflicts, defaults or violations which could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. As of the date of this Agreement, no
investigation by any Governmental Entity with respect to Parent is pending, or
to best knowledge of Parent, threatened, other than, in each case, those the
outcome of which, individually or in the aggregate, will not have a Material
Adverse Effect on Parent.
(g) Securities Documents. Parent has filed all required
documents with the SEC and all other federal and state securities regulatory
authorities (the "Securities Authorities") since October 20, 1994 (the "Parent
Securities Documents"). As of their respective dates, the Parent Securities
Documents complied in all material respects with the requirements of the
Securities Authorities and none of the Parent Securities Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(h) Information Supplied. None of the information supplied
or to be supplied by Parent or Merger Sub in writing or otherwise approved by
Parent for inclusion in the Proxy Statement will, at the date the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Shareholders' Meeting, contain any statement which, in the light of the
circumstances under which such statement is 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 therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Shareholders' Meeting or any amendment or
supplement thereto.
(i) Absence of Certain Changes or Events. Since March 31,
1996, there has not been any change, event or development in or affecting
Parent that constitutes or would reasonably be expected to have a Material
Adverse Effect on Parent or to delay or prevent the consummation of the
transactions contemplated hereby beyond December 31, 1996.
(j) Absence of Litigation. Since March 31, 1996, there are
no suits, claims, actions, proceedings or investigations pending or, to the
knowledge of Parent, threatened
<PAGE> 24
20
against Parent or any of its subsidiaries, or any properties or rights of
Parent or any of its subsidiaries, before any court, arbitrator or other
Governmental Entity, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
the Parent. Neither Parent nor any of its subsidiaries nor any of their
respective properties is or are subject to any order, writ, judgment,
injunction, decree, determination or award having, or which could reasonably be
expected to have, a Material Adverse Effect on the Parent or to delay or
prevent the consummation of the transactions contemplated hereby beyond
December 31, 1996.
(k) Financing. Parent has and will provide, or cause to
be provided to Merger Sub, the funds necessary to consummate the Merger and the
transactions contemplated thereby in accordance with the terms hereof and
thereof.
(l) Scope of Representations. Anything to the contrary in
this Section 3.2 notwithstanding, no representation or warranty made by Parent
in this Agreement shall be deemed to be untrue or incorrect at the date hereof
if the failure of such representation or warranty to be true and correct as of
such date (or as of any other specified date) does not have, individually or in
the aggregate, a Material Adverse Effect on Parent at the date hereof.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER COVENANTS
SECTION 4.1 Conduct of Business of the Company Pending the
Merger. The Company covenants and agrees that, during the period from the date
hereof to the Effective Time, except as otherwise required by the terms of this
Agreement or unless Parent shall otherwise agree in writing, the businesses of
the Company and its subsidiaries shall be conducted only in, and the Company
and its subsidiaries shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice and in compliance
with applicable laws; and the Company and its subsidiaries shall each use its
reasonable best efforts to preserve intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
their customers, suppliers and other persons with whom the Company or any of
its subsidiaries has significant business relations. By way of amplification
and not limitation of the foregoing, neither the Company nor any of its
subsidiaries shall, between the date of this Agreement and the Effective Time,
directly or indirectly do, or propose or commit to do, any of the following
without the prior written consent of Parent:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, (ii)
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 (iii)
purchase, redeem or otherwise acquire or agree to acquire any shares
of capital stock of the Company or
<PAGE> 25
21
any of its subsidiaries or any other securities convertible into
shares of capital stock or any rights, warrants or options to acquire
any such shares or convertible securities;
(b) authorize for issuance, issue, deliver, sell or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or otherwise encumber any shares of its
capital stock or the capital stock of any of its subsidiaries, any
other voting securities or any securities convertible into, or any
rights, warrants or options to acquire any such shares, voting
securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights),
other than (A) sales of capital stock of any wholly owned subsidiary
of the Company to the Company or another wholly owned subsidiary of
the Company, and (B) the issuance of shares of Company Common Stock
upon exercise of Options that were issued and outstanding on the date
of this Agreement;
(c) except to the extent required under existing Company
Plans as in effect on the date of this Agreement, (i) increase the
compensation or fringe benefits of any of its directors, officers or
employees, except for increases in compensation of employees and
officers of the Company or its subsidiaries in the ordinary course of
business in accordance with past practice, or (ii) grant any severance
or termination pay not currently required to be paid under existing
Company Plans, except on an individual basis in the ordinary course of
business and consistent with past practice, or (iii) establish, adopt,
enter into or amend or terminate any Company Plan or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees except as required by law or as
provided in this Agreement; provided that the provisions of this
Section 4.1 shall not prohibit the Company and its subsidiaries from
hiring personnel from time to time in the ordinary course of their
business, consistent with past practice;
(d) amend its Articles of Incorporation, By-Laws or other
comparable charter or organizational documents or alter through
merger, liquidation, reorganization, restructuring or in any other
fashion the corporate structure or ownership of the Company or any
subsidiary of the Company;
(e) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof, or (ii) any assets (not otherwise
subject to paragraph (h) below) other than in the ordinary course of
business consistent with past practice and in an aggregate amount not
to exceed $500,000 prior to the Effective Time;
(f) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of its properties or
assets other than in the ordinary course of business consistent with
past practice and in amounts that are not, individually or in the
aggregate, material to the Company and its subsidiaries taken as a
whole;
<PAGE> 26
22
(g) (i) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person (other than
guarantees by the Company in favor of any of its wholly owned
subsidiaries or by any of its subsidiaries in favor of the Company or
endorsements of negotiable instruments and similar guarantees in the
ordinary course of business consistent with past practice), or (ii)
make any loans, advances or capital contributions to, or investments
in, any other person, other than (A) to any direct or indirect wholly
owned subsidiary of the Company, or (B) loans to employees of the
Company and its subsidiaries not to exceed $100,000 in total
outstandings from the date hereof through November 19, 1996;
(h) except as set forth in Schedule 4.1(h) of the Company
Disclosure Schedule, expend, or commit to expend, funds for capital
expenditures other than in accordance with the Company's current
capital expenditure plans (which plans shall have been disclosed in
writing to Parent on or prior to the date of this Agreement);
(i) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation;
(j) recognize any labor union (unless legally required to do
so) or enter into any collective bargaining agreement;
(k) except as may be required as a result of a change in
generally accepted accounting principles or as recommended by the
Company's independent accountants and consented to in writing by
Parent (which consent shall not be unreasonably withheld) prior to
such change, change any of the accounting methods, practices or
principles used by the Company or any of its subsidiaries;
(l) enter into any new line of business or open any new
imaging facilities except substantially in accordance with the
Company's current business plan as disclosed to Parent in writing
prior to the date of this Agreement; or
(m) authorize any of, or commit or agree to take any of, the
foregoing actions or any action which would make any of the
representations or warranties of the Company contained in this
Agreement untrue and incorrect as of the date when made if such action
had then been taken.
SECTION 4.2 Conduct of Business of Merger Sub. Merger Sub
has not engaged, and during the period from the date of this Agreement to the
Effective Time, Merger Sub shall not engage, in any activities of any nature
except as provided in, or in connection with the transactions contemplated by,
this Agreement.
SECTION 4.3 Shareholders' Meeting. The Company will take all
action necessary in accordance with and subject to applicable law and its
Articles of Incorporation and By-Laws to convene a meeting of its shareholders
(the "Shareholders' Meeting") as soon as practicable after the date of this
Agreement to consider and vote upon the adoption and approval of this
Agreement. Subject to the next succeeding sentence, the Company, through
<PAGE> 27
23
its Board of Directors, shall recommend to its shareholders approval of the
foregoing matters, and such recommendation shall be included in the Proxy
Statement. The Board of Directors of the Company may fail to make such
recommendation, or withdraw, modify or change such recommendation, if and only
if the Board, as advised by counsel, determines that the making of such
recommendation, or the failure to so withdraw, modify or change such
recommendation, could be deemed to constitute a breach of its fiduciary duties
under applicable law.
SECTION 4.4 Preparation of the Proxy Statement; Preparation
of Hart-Scott Act Filing. (i) Promptly following the date of this Agreement,
the Company shall prepare and file with the SEC the Proxy Statement. Parent
shall review and approve the Proxy Statement before such filing. Each of the
Company and Parent shall use its reasonable best efforts to have the Proxy
Statement approved by the SEC as promptly as practicable after such filing.
The Company will use its reasonable best efforts to cause the Proxy Statement
to be mailed to the Company's shareholders as promptly as practicable after the
Proxy Statement is approved by the SEC. The information provided and to be
provided by Parent, Merger Sub and the Company, respectively, for use in the
Proxy Statement shall, at the time the Proxy Statement is approved by the SEC
and on the date of the Shareholders' Meeting referred to above, be true and
correct in all material respects and shall not omit to state any material fact
required to be stated therein or necessary in order to make such information
not misleading, and the Company, Parent and Merger Sub each agree to correct
any information provided by it for use in the Proxy Statement which shall have
become false or misleading.
(ii) Promptly following the date of this Agreement, the
Company and Parent shall prepare and file with the Anti-Trust Entities all
documents and forms required under the Hart-Scott Act. Each of the Company and
Parent shall use its reasonable best efforts to have the Merger reviewed and
approved by the Anti-Trust Entities as promptly as practicable after such
filing.
SECTION 4.5 Access to Information; Confidentiality. (a) From
the date hereof to the Effective Time, the Company (i) shall, and shall cause
its subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, auditors and other agents of Parent, reasonable access at
all reasonable times (during normal business hours so as not to unduly or
unreasonably interfere with the business of the Company and its subsidiaries)
to its senior officers, agents, properties, offices and other facilities and to
all books and records, and shall furnish Parent and such other persons with all
financial, operating and other data and information as Parent, through its
officers, may from time to time reasonably request, and (ii) shall make
available its senior officers and the senior officers of its subsidiaries, upon
reasonable prior notice and during normal business hours, to confer on a
regular basis with the appropriate officers of Parent regarding the ongoing
operations of the Company and its subsidiaries, the implementation of the
transactions contemplated hereby and other matters related hereto. No
investigation pursuant to this Section 4.5 shall affect any representations or
warranties of the parties herein or the conditions to the obligations of the
parties hereto.
<PAGE> 28
24
(b) Each of Parent and Merger Sub will hold information it
receives pursuant to Section 4.5(a)(i) which is nonpublic in confidence and
will not disclose such information to any third party without the written
consent of the Company.
SECTION 4.6 No Solicitation. The Company and its affiliates
shall not, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage the submission of any proposal or
offer from any person relating to any acquisition or purchase of all or any
material portion of the assets of, or any equity interest in, the Company (or
any subsidiary or division thereof) or any merger, consolidation, share
exchange, business combination or other similar transaction with the Company
(or any subsidiary or division thereof) or solicit, participate in or initiate
any negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to do or
seek any of the foregoing; provided, however, that nothing contained in this
Section 4.6 shall prohibit the Company from furnishing information to, or
entering into discussions or negotiations with, any person in connection with
an unsolicited written proposal to the Company by such person to acquire the
Company pursuant to a merger, consolidation, share exchange, business
combination or other similar transaction or to acquire all or substantially all
of the assets of the Company received by the Company after the date of the
Agreement ("Acquisition Proposal"), if, and only to the extent that, (a) the
Company's Board, as advised by counsel of the Company, determines in good faith
that such action is required in order for the Board not to breach its fiduciary
duties to shareholders imposed by law, and (b) prior to furnishing such
information to, or entering into discussions or negotiations with, such person,
the Company gives Parent as promptly as practicable prior written notice (which
shall include a summary of terms and identity of parties except to the extent
such would cause the Board of Directors of the Company to determine that such
disclosure would be a breach of its fiduciary duties to shareholders imposed by
law, as advised by counsel of the Company) of the Company's intention to
furnish such information or begin such discussions. The Company agrees not to
release any third party from or waive any provision of, any confidentiality or
standstill agreement to which the Company is a party.
SECTION 4.7 Employee Benefits Matters. (a) Parent agrees
that, during the period commencing at the Effective Time and ending on the
second anniversary thereof, the employees of the Company and its subsidiaries
will continue to be provided with employee benefit plans (other than stock
option or other plans involving the potential issuance of securities of the
Company or of Parent and incentive compensation or similar programs) which in
the aggregate are not materially less favorable to those currently provided by
the Company and its subsidiaries to such employees, to the extent permitted
under laws and regulations in force from time to time, provided that employees
covered by collective bargaining agreements need not be provided such benefits,
and provided, further, that Parent reserves the right to review all employee
benefits after the Effective Time and to make such changes as it deems
appropriate.
(b) Parent and Merger Sub will cause the Company (and,
after the Merger, the Surviving Corporation) to honor all employee benefit
obligations to current and former employees and directors under the Company's
employee benefit plans in existence on the date
<PAGE> 29
25
hereof and disclosed in Schedule 4.7(b) of the Company Disclosure Schedule and
all employment or severance agreements entered into by the Company or adopted
by the Board of Directors of the Company prior to the date hereof and disclosed
in Schedule 4.7(b); provided, however, that nothing shall prevent Merger Sub or
the Company (and, after the Merger, the Surviving Corporation) from taking any
action with respect to such plans, obligations or agreements or refraining from
taking any such action which is permitted or provided for under the terms
thereof.
(c) Employees of the Company (and, after the Merger, the
Surviving Corporation) shall be given credit for all actual service with the
Company and the subsidiaries under all employee benefit plans, programs and
policies of the Surviving Corporation in which they become participants for all
purposes thereunder, except to the extent that such crediting would produce
duplication of benefits.
SECTION 4.8 Directors' and Officers' Indemnification and
Insurance. (a) The Articles of Incorporation and the By-Laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Articles of Incorporation
and By-Laws on the date of this agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who on or prior to the Effective Time were directors, officers,
employees or agents of the Company, unless such modification is required by
law.
(b) The Surviving Corporation shall for the three year
period commencing on the Effective Time either (x) maintain in effect the
Company's current directors' and officers' liability insurance covering those
persons who are currently covered on the date of this Agreement by the
Company's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered to Parent) and/or by Indemnification Agreements
with the Company as set forth on Schedule 4.8(b) (the "Indemnified Parties");
provided, however, that in no event shall Parent be required to expend in any
one year an amount in excess of 125% of the annual premiums currently paid by
the Company for such insurance; and; provided, further, that if the annual
premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount; provided, further, that the
Surviving Corporation may substitute for such Company policies, policies with
at least the same coverage containing terms and conditions which are no less
advantageous and provided that said substitution does not result in any gaps or
lapses in coverage with respect to matters occurring prior to the Effective
Time or (y) cause the Parent's directors' and officers' liability insurance
then in effect to cover those persons who are covered on the date of this
Agreement by the Company's directors' and officers' liability insurance policy
with respect to those matters covered by the Company's directors' and officers'
liability policy.
(c) Parent and Merger Sub agree to indemnify and agree to
cause the Surviving Corporation to indemnify all Indemnified Parties to the
fullest extent permitted by applicable law with respect to all acts and
omissions arising out of such individuals' services as officers, directors,
employees or agents of the Company or any of its subsidiaries or as
<PAGE> 30
26
trustees or fiduciaries of any plan for the benefit of employees of the Company
or any of its subsidiaries, occurring prior to the Effective Time including,
without limitation, the transactions contemplated by this Agreement. Without
limitation of the foregoing, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation in
connection with any matter, including without limitation, the transactions
contemplated by this Agreement, occurring prior to, and including, the
Effective Time, Parent, from and after the Effective Time, will pay as incurred
such Indemnified Party's reasonable legal and other expenses (including the
cost of any investigation and preparation) incurred in connection therewith.
Subject to Section 4.8(d) below, Parent and Merger Sub shall pay all reasonable
expenses, including attorneys' fees, that may be incurred by any Indemnified
Party in enforcing this Section 4.8 or any action involving an Indemnified
Party resulting from the transactions contemplated by this Agreement. If the
indemnity provided for in this Section 4.8 is not available with respect to any
Indemnified Party, then the Surviving Corporation and the Indemnified Party
shall contribute to the amount payable in such proportion as is appropriate to
reflect relative faults and benefits.
(d) Any Indemnified Party wishing to claim
indemnification under paragraph (a) or (c) of this Section, upon learning of
any such claim, action, suit, proceeding or investigation, shall promptly
notify Parent thereof. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) Parent or the Surviving Corporation shall have the right, from and
after the Effective Time, to assume the defense thereof (with counsel engaged
by Parent or the Surviving Corporation to be reasonably acceptable to the
relevant Indemnified Party) and Parent shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, (ii) the Indemnified Parties will cooperate in the defense of
any such matter and (iii) Parent shall not be liable for any settlement
effected without its prior written consent; and provided further that Parent
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
SECTION 4.9 Further Action; Reasonable Best Efforts. Upon
the terms and subject to the conditions hereof, each of the parties hereto
shall use its reasonable best efforts to take, or cause to be taken, all
appropriate action, and to do or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including but not
limited to (i) cooperating in the preparation and filing of the Proxy
Statement, and any amendments to any thereof, and (ii) using its reasonable
best efforts to make all required regulatory filings and applications and to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities and parties to contracts
with the Company and its subsidiaries as are necessary for the consummation of
the transactions contemplated by this Agreement and to fulfill the conditions
to the Merger. To the extent practicable in the circumstances and subject to
applicable laws, each party shall provide the other with the opportunity to
review any information relating to the other party, or any of its subsidiaries,
which appears in any filing made with, or written materials submitted to, any
Governmental
<PAGE> 31
27
Entity in connection with obtaining the necessary regulatory approvals for the
consummation of the transactions contemplated by this Agreement. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall use their reasonable best efforts to take
all such necessary action.
SECTION 4.10 Notification of Certain Matters. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect,
and (ii) any failure of the Company, Parent or Merger Sub, as the case may be,
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 4.10 shall not limit
or otherwise affect the remedies available hereunder to the party receiving
such notice.
SECTION 4.11 Public Announcements. Each party shall consult
with the other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with its securities exchange or
quotation system.
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 Conditions to Obligation of Each Party to Effect
the Merger. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been
approved and adopted by the affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock entitled to vote thereon.
(b) Other Approvals. Other than the filing contemplated by
Section 1.3, all consents, approvals, authorizations or permits of, actions by,
or filings with or notifications to, and all expirations of waiting periods
imposed by, any Governmental Entity (all the foregoing, "Consents") which are
necessary for the consummation of the Merger (including, without limitation,
the filings and approvals required under the Hart-Scott Act and the Exchange
Act) other than immaterial Consents the failure to obtain which would have no
Material Adverse Effect on the consummation of the Merger or the business of
the Surviving Corporation, shall have been filed, occurred or been obtained
(all such permits, approvals, filings and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory
<PAGE> 32
28
Approvals"), all conditions, if any, to such Requisite Regulatory Approvals
shall have been satisfied and all such Requisite Regulatory Approvals shall be
in full force and effect.
(c) No Injunctions or Restraints; Illegality; Litigation. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding by any Governmental Entity seeking any of the foregoing be
pending. There shall not be any action taken, or any statute, rule, regulation
or order enacted, entered, enforced or deemed applicable to the Merger, which
makes the consummation of the Merger illegal. There shall not be any pending
litigation regarding the Merger which, if adversely determined, would have a
Material Adverse Effect on the Company.
(d) Proxy Statement. The Proxy Statement shall have been
filed with, and approved by, the SEC.
SECTION 5.2 Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are subject
to the satisfaction of the following conditions unless waived by Parent and
Merger Sub:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by the Chairman of the
Board and Chief Executive Officer of the Company and by the Chief Financial
Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed all obligations required to be performed by it under this
Agreement at or prior to the Closing Date with such exceptions as, either
individually or in the aggregate, do not have, and would not reasonably be
expected to have, a Material Adverse Effect on the Company, and Parent shall
have received a certificate signed on behalf of the Company by the Chairman of
the Board and Chief Executive Officer of the Company and by the Chief Financial
Officer of the Company to such effect.
(c) Burdensome Condition. There shall not be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, by any federal or state Governmental Entity
which, in connection with the grant of a Requisite Regulatory Approval, would
be reasonably likely to result in a Material Adverse Effect with respect to the
Surviving Corporation.
SECTION 5.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction
of the following unless waived by the Company:
<PAGE> 33
29
(a) Opinion of Financial Advisor. Upon the execution of
this Agreement by all parties hereto, the Company shall have received the
opinion of Batchelder & Partners, Inc., to the effect that, as of the date of
this Agreement, the consideration to be received in the Merger by Company's
shareholders is fair to Company's shareholders from a financial point of view.
(b) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by the Chief Executive Officer of Parent to such effect.
(c) Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, with
such exceptions as, either individually or in the aggregate, do not have, and
would not reasonably be expected to have, a Material Adverse Effect on Parent,
and the Company shall have received a certificate signed on behalf of Parent by
the Chief Financial Officer of Parent to such effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated
and the Merger contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval thereof by the shareholders of the
Company:
(a) by mutual written consent of Parent and the Company; or
(b) by Parent, (i) upon any breach of any representation,
warranty, covenant or agreement of the Company set forth in this Agreement
that, either individually or in the aggregate, would constitute grounds for
Parent to elect not to consummate the Merger pursuant to Section 5.2(a), (b) or
(c), if either (A) such breach cannot be cured prior to the Closing Date, or
(B) has not been cured within 30 days after the date on which written notice of
such breach is given by Parent to the Company, specifying in reasonable detail
the nature of such breach, or (ii) the Company has breached or failed to comply
in any material respect with any of its obligations under this Agreement which
breach shall not have been cured within 10 days following notice from Parent to
the Company of notice of such breach and the intent of Parent to terminate
pursuant to this provision.
(c) by the Company, if (i) any of the representations and
warranties of Parent or Merger Sub contained in this Agreement were untrue or
incorrect in any material respect when made or have since become, and at the
time of termination remain, incorrect in any material respect, (ii) the Company
does not timely receive the opinion required under Section 5.3(a), or (iii)
Parent or Merger Sub shall have breached or failed to comply in any material
<PAGE> 34
30
respect with any of their respective obligations under this Agreement which
breach shall not have been cured within ten days following notice from the
Company to Parent of such breach and Company's intent to terminate pursuant to
this provision.
(d) by either Parent or the Company, if any permanent
injunction or action by any Governmental Entity preventing the consummation of
the Merger shall have become final and nonappealable; provided that such right
of termination shall not be available to any party if such party shall have
failed to make reasonable efforts to prevent or contest the imposition of such
injunction or action and such failure materially contributed to such
imposition;
(e) by either Parent or the Company if (other than due to the
willful failure of the party seeking to terminate this Agreement to perform its
obligations hereunder which are required to be performed at or prior to the
Effective Time) the Merger shall not have been consummated on or prior to
November 19, 1996, unless extended in writing by Parent and the Company;
(f) by Parent or the Company, if the approval of the
shareholders of the Company of this Agreement and the Merger required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of shareholders or
at any adjournment thereof;
(g) by Parent, if (i) the Board of Directors of the Company
shall have withdrawn, modified or changed its approval or recommendation of
this Agreement or the Merger in any manner which is adverse to Parent or Merger
Sub, or shall have adopted a resolution to do the foregoing; or (ii) the Board
of Directors of the Company shall have approved or have recommended to the
shareholders of the Company any Business Combination Transaction (as defined in
Section 6.1(i) below) other than the Merger or shall have resolved to do the
foregoing; or (iii) a tender offer or exchange offer for 25% or more of the
outstanding shares of the Company Common Stock is commenced (other than by
Parent or any of its subsidiaries or affiliates), and the Board of Directors of
the Company recommends that the shareholders of the Company tender their shares
in such tender or exchange offer or otherwise fails to recommend that such
shareholders reject such tender offer or exchange offer within ten business
days of the commencement thereof; or
(h) by the Company prior to the Shareholders' Meeting, if the
Board of Directors of the Company (i) shall fail to make or shall withdraw or
modify its recommendation of this Agreement or the Merger and there shall exist
at such time a tender offer or exchange offer for not less than a majority of
the outstanding voting stock of the Company or a written, bona fide proposal by
a third party to acquire not less than a majority of the outstanding voting
stock of the Company pursuant to a merger, consolidation, share exchange,
business combination, tender or exchange offer or other similar transaction, in
either case at a price per share (whether payable in cash or securities) of
Company Common Stock that is higher than the Merger Consideration, or (ii)
recommends to the Company's shareholders approval or acceptance of any such
transaction, in each case if, and only to the extent that, the Board of
Directors of the Company, as advised by legal counsel, determines
<PAGE> 35
31
that failure to take such action could be deemed to constitute a breach of the
Board's fiduciary duties under applicable law.
(i) Fees and Expenses. The Company shall pay Merger Sub a
fee (an "Alternative Proposal Fee") of 3% of the total Merger Consideration,
which amount is inclusive of all of Merger Sub Expenses (as defined in Section
6.2(k) below) (i) within one business day following the termination of this
Agreement by Parent, if this Agreement is terminated pursuant to 6.1(b)(ii), or
(ii) within one business day following notice of the termination of this
Agreement, if this Agreement is terminated pursuant to Section 6.1(g) or (h).
As used herein, the term "Business Combination Transaction" shall mean any of
the following involving the Company: (1) any merger, consolidation, share
exchange, business combination or other similar transaction (other than the
Merger); (2) any sale, lease, exchange, transfer or other disposition (other
than a pledge or mortgage) of 20% or more of the assets of the Company in a
single transaction or series of related transactions; (3) the acquisition by a
person or entity or any "group" (as such term is defined under Section 13(d) of
the Exchange Act and the rules and regulations thereunder) of beneficial
ownership of 40% or more of the shares of Company Common Stock, whether by
tender offer, exchange offer or otherwise; or (4) the adoption by the Company
of a plan of liquidation or the declaration or payment of an extraordinary
dividend.
(j) Merger Sub shall be entitled to receive the Merger Sub
Expenses (but not the Alternative Proposal Fee) in immediately available funds
(not later than one business day after submission of statements therefor) in
the event that this Agreement is terminated by Parent pursuant to Section
6.1(b)(i).
(k) As used herein, "Merger Sub Expenses" means all
out-of-pocket expenses and fees up to $200,000 actually incurred by Merger Sub
or on their respective behalf in connection with the Merger prior to the
termination of this Agreement (including, without limitation, all fees and
expenses of counsel, financial advisors, accountants, banks or other entities
providing financing to Merger Sub (including financing, commitment and other
fees payable thereto), accountants, environmental and other experts and
consultants to Merger Sub and its affiliates, and all printing and advertising
expenses) and in connection with the negotiation, preparation, execution,
performance and termination of this Agreement, the structuring of the Merger,
any agreements relating thereto and any filings to be made in connection
therewith.
(l) Except as set forth in this Section 6.1, all costs
and expenses incurred in connection with this Agreement and the Merger shall be
paid by the party incurring such expenses, whether or not any Transaction is
consummated.
SECTION 6.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Section 4.5(b), Section 6.1 and Section 7.1;
provided, however, that nothing herein shall relieve any party from liability
for any willful and material breach hereof; provided further, however that the
recommendation
<PAGE> 36
32
of another transaction by the Company's Board of Directors in accordance with
Section 4.6 shall not constitute a willful and material breach of this
Agreement by the Company.
SECTION 6.3 Amendment. This Agreement may be amended by the
parties hereto by action taken by or on behalf of Parent and the respective
Boards of Directors of Merger Sub and the Company at any time prior to the
Effective Time; provided, however, that, after approval of the Merger by the
shareholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each share of Company
Common Stock shall be converted upon consummation of the Merger. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 6.4 Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 6.1, except that those set forth in Section 4.5(b), Section
4.7, Section 4.8, Section 6.1 and this Article VII shall survive termination
indefinitely (or to such earlier date as shall be specified by the terms of
such provisions).
SECTION 7.2 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
<PAGE> 37
33
if to Parent or Merger Sub:
US Diagnostic Labs, Inc.
777 South Flagler Drive
West Palm Beach, FL 33140
Attention: Jeffrey A. Goffman, Chairman
and Michael D. Karsch
Facsimile: (561) 833-8391
if to the Company:
Medical Imaging Centers of America, Inc.
9444 Farnham Street, Suite 100
San Diego, California 92123
Attention: Robert Muehlberg
Facsimile: (619) 560-4575
with a copy to:
Latham & Watkins
701 B Street, Suite 2100
San Diego, California 92101
Attention: Scott N. Wolfe, Esq.
Facsimile: (619) 696-7419
SECTION 7.3 Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned
person;
(b) "beneficial owner" with respect to any shares of Company
Common Stock means a person who shall be deemed to be the beneficial
owner of such shares of Company Common Stock (i) which such person or
any of its affiliates or associates beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or
associates (as such term is defined in Rule 12b-2 of the Exchange Act)
has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon
the exercise of consideration rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with
whom such person or any of its affiliates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares;
<PAGE> 38
34
(c) "business day" means any day other than a Saturday,
Sunday or other day on which commercial banks in San Diego, California
are required or permitted to be closed;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
(e) "knowledge" means knowledge after reasonable inquiry of,
in the case of the Company, any Executive Vice President or more
senior officer of the Company, and in the case of Parent, any
Executive Vice President or more senior officer of Parent.
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, Parent or any other person means any
corporation, partnership, joint venture or other legal entity of which
the Company, the Surviving Corporation, Parent or such other person,
as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to
vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 7.4 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
SECTION 7.5 Entire Agreement; Assignment. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement shall not be assigned by operation of
law or otherwise, except that Parent and Merger Sub may assign all or any of
their respective rights and obligations hereunder to any other direct
subsidiary or subsidiaries of Parent, provided that no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations.
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35
SECTION 7.6 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 7.7 Applicable Law. This Agreement and the legal
relations between the parties hereto shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
conflict of laws rules thereof. ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY COURT SITTING
IN THE CITY OF SAN DIEGO, CALIFORNIA.
SECTION 7.8 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 7.9 Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
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36
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have
caused this Agreement to be executed by their respective officers thereunto
duly authorized, all as of the date written above.
"Parent" US DIAGNOSTIC LABS, INC.
By /s/ Jeffrey Goffman
---------------------------------
Name: Jeffrey Goffman
Title: Chief Executive Officer
"Merger Sub" MICA ACQUIRING CORPORATION
By /s/ Jeffrey Goffman
---------------------------------
Name: Jeffrey Goffman
Title President
"Company" MEDICAL IMAGING CENTERS OF AMERICA, INC.
By /s/ Robert Muehlberg
---------------------------------
Name: Robert Muehlberg
Title: President
<PAGE> 41
APPENDIX
LIST OF SCHEDULES
ATTACHED TO ACQUISITION AGREEMENT AND PLAN OF MERGER
1. Schedule 3.1(c): Capitalization as of July 1, 1996
Authorized and Issued Capital Stock of
each of the Company's Subsidiaries
2. Schedule 3.1(e): Required Filings and Consents
3. Schedule 3.1(i): Absence of Certain Changes or Events
4. Schedule 3.1(i): Threatened or Pending Litigation
5. Schedule 3.1(m): Description of Real Property
6. Schedule 3.1(n): Employee Benefit Company Plans and Policies
Employment Contracts and Severance Agreements
7. Schedule 3.1(o): Tax Matters
8. Schedule 3.1(p): Tangible Property Subject to Liens; Certain
Leases
9. Schedule 3.1(q): Certain Contracts and Agreements
10. Schedule 3.1(r): Insurance Policies
11. Schedule 3.1(s): Transactions with Affiliates
12. Schedule 4.1(h): Current Capital Expenditure Plans
13. Schedule 4.7(b): Employee Benefit Matters
14. Schedule 4.8(b): Directors' and Officers' Indemnification and
Insurance
* * *
The disclosure schedules to the Acquisition Agreement and Plan of Merger are
omitted pursuant to Item 7(c) of Form 8-K, which incorporates by reference
Regulation S-K, Item 601.
