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
December 11, 1996
-----------------
(Date of Report)
November 26, 1996
-----------------
(Date of earliest event reported)
POLAROID CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
1-4085
------------------------
(Commission File Number)
04-1734655
---------------------------------
(IRS Employer Identification No.)
549 Technology Square, Cambridge, Massachusetts 02139
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 386-2000
-----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On October 30, 1996, Polaroid Corporation (the "Company") announced the
sale, which was completed on November 26, 1996, of its Helios medical
diagnostic imaging equipment product line to Sterling Dry Imaging Systems,
Inc. ("SDIS"), a new subsidiary of SDI Holding Corp. ("Sterling"). The
Company is also acquiring a minority investment in Sterling and SDIS.
Earlier in 1996, Sterling, through another subsidiary, acquired the
medical diagnostic imaging business of E.I. du Pont de Nemours, therefore
the Helios transaction constitutes a product line extension by Sterling.
In connection with the Helios sale, the Company received a cash payment of
$29.5 million and 10% of the Common Stock of SDIS. The Company retains
the Helios film product line and has entered into a long-term requirements
contract to manufacture and supply Helios medical diagnostic film
exclusively to SDIS. The Company and SDIS have also entered into a laser
diode supply agreement, a technology research and development agreement
and related arrangements intended to support SDIS in developing and
expanding the Helios medical diagnostic imaging equipment product line.
The Company has also agreed to a non-competition restriction. The Company
expects to record a pre-tax charge of $25.0 million in the fourth quarter
of 1996 for severance, inventory and fixed assets write offs and other
costs related to the Helios transaction.
As part of this transaction, the Company is investing $35.0 million ($20.0
million at closing and $15.0 million after one year) in SDIS 12.5 %
preferred stock (nonvoting). The SDIS preferred stock will begin to
accrue dividends, which may be in the form of further shares of such
preferred stock, when SDIS accumulates $15.0 million of tangible net worth
as determined on a GAAP basis. The SDIS preferred stock does not have a
scheduled redemption date. While the Company believes SDIS currently has
limited common equity, the ultimate value of SDIS stock will depend on its
future results.
Further, the Company is also purchasing 50,000 shares of Sterling
Convertible Preferred Stock (convertible into 50,000 shares of Sterling
Common Stock) at a cost of $150 per share. The Company has also been
granted the right to purchase a total of 25,000 shares of Sterling Common
Stock (which it intends to exercise) at a cost of $250 per share from
Sterling and Sterling stockholders.
The Company believes the potential value of these transactions will be
primarily reflected in its equity in Sterling and SDIS, which are
privately owned companies, rather than through the sale of Helios film
under the film supply contract.
-2-
<PAGE>
Item 5. Other Events
------------
In addition to the disposition of the assets of Helios, the Company
expects to record a pre-tax charge of approximately $15.0 million in the
fourth quarter of 1996 to write down parts and capital equipment under
development for a printer project and other costs. The Company has
shifted its strategy relating to the development of desktop printers
for the home and office market to emphasize alliances with leading
printer manufacturers. An example of this new approach was the Company's
announcement on September 5, 1996 of an alliance with Lexmark
International Inc. to pursue joint marketing and development of
color image printers and consumables for the home and office on
a worldwide basis.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
(b) Pro Forma Financial Information
------------------------------
The following unaudited pro forma condensed consolidated financial
information with respect to the disposition of the Company's Helios
medical diagnostic imaging equipment product line should be read in
conjunction with historical financial statements contained in the
Company's Fiscal 1995 Annual Report on Form 10-K; and the Quarterly
Report on Form 10-Q for the quarter ended September 29, 1996. The
following pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or
financial position that would have occurred had the disposition of the
Company's Helios medical diagnostic imaging equipment product line been
consummated in accordance with the assumptions set forth below, nor is
it necessarily indicative of future operating results or financial
position.
Basis of Presentation
---------------------
The unaudited pro forma condensed consolidated balance sheet presents
the Company's consolidated financial position assuming that the
disposition of the Helios medical diagnostic imaging equipment product
line occurred on September 29, 1996. The unaudited pro forma condensed
consolidated statements of earnings for the year ended December 31,
1995 and for the nine months ended September 29, 1996 present the
Company's consolidated results of operations assuming that the
disposition of the Company's Helios medical diagnostic imaging
equipment product line occurred as of January 1, 1995. The disposition
of the Company's Helios medical diagnostic imaging equipment product
line was completed on November 26, 1996. The unaudited pro forma
condensed consolidated statements of earnings do not include the effect
of the nonrecurring pre-tax charge of $25.0 million related to the
Helios transaction.
-3-
<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF SEPTEMBER 29, 1996
($ MILLIONS)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Assets
------
Cash and short-term investments $55.8 $2.0 (1)(2) $57.8
Receivables 504.7 1.0 (1) 505.7
Inventories 642.7 (36.7) (1)(3) 606.0
Prepaids and other 216.7 0.0 216.7
-------- ------ --------
Total current assets 1,419.9 (33.7) 1,386.2
Property, plant and equipment 666.0 (7.4) (3) 658.6
Deferred tax assets 113.0 10.0 (6) 123.0
Other assets 0.0 42.5 (2) 42.5
-------- ------ --------
Total assets $2,198.9 $11.4 $2,210.3
======== ====== ========
Liabilities and stockholders' equity
-----------------------------------
Short-term debt $125.6 $0.0 $125.6
Current portion of long-term debt 208.0 0.0 208.0
Payables and accruals 263.8 18.5 (2)(3) 282.3
Compensation and benefits 261.7 7.9 (3) 269.6
Federal, state and
foreign income taxes 43.8 0.0 43.8
-------- ------ --------
Total current liabilities 902.9 26.4 929.3
Long-term debt 339.9 0.0 339.9
Accrued postretirement benefits 249.9 0.0 249.9
Accrued postemployment benefits 41.7 0.0 41.7
Common stockholders' equity:
Common stock and paid-in capital 483.8 0.0 483.8
Retained earnings 1,453.1 (15.0) (3)(6) 1,438.1
Less: treasury stock 1,212.1 0.0 1,212.1
deferred compensation 60.3 0.0 60.3
-------- ------ --------
Total common
stockholders' equity 664.5 (15.0) 649.5
-------- ------ --------
Total liabilities and
stockholders' equity $2,198.9 $11.4 $2,210.3
======== ====== ========
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
-4-
<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
NINE MONTH PERIOD ENDED SEPTEMBER 29, 1996
($ MILLIONS EXCEPT PER SHARE)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net sales $1,611.8 ($14.8) (4) $1,597.0
Cost of goods sold 896.9 (19.0) (4) 877.9
Marketing, research, engineering
and administrative expenses 589.0 (18.6) (5) 570.4
Restructuring and other 110.0 0.0 110.0
-------- ------ --------
Profit from operations 15.9 22.8 38.7
Other income 26.4 0.0 26.4
Interest expense 35.6 0.0 35.6
-------- ------ --------
Earnings before income taxes 6.7 22.8 29.5
Income tax expense 4.7 9.1 (6) 13.8
-------- ------ --------
Earnings before
extraordinary item 2.0 13.7 15.7
Extraordinary item (54.5) 0.0 (54.5)
-------- ------ --------
Net loss ($52.5) $13.7 ($38.8)
======== ====== ========
Primary Earnings/ (loss) per common share:
Earnings before
extraordinary item $ .04 $ .34
Extraordinary item (1.20) (1.20)
-------- --------
Net loss (1.16) ( .86)
Fully diluted
loss per common share - -
Weighted average shares used for
primary net loss per
common share (in thousands) 45,545 45,545
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
-5-
<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
($ MILLIONS EXCEPT PER SHARE)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net sales $2,236.9 ($18.5) (4) $2,218.4
Cost of goods sold 1,298.6 (36.7) (4) 1,261.9
Marketing, research, engineering
and administrative expenses 849.1 (33.5) (5) 815.6
Restructuring and other 247.0 0.0 247.0
------- ------ --------
Loss from operations (157.8) 51.7 (106.1)
Other income 8.5 0.0 8.5
Interest expense 52.1 0.0 52.1
------- ------ --------
Loss before income taxes (201.4) 51.7 (149.7)
Income tax benefit (61.2) 20.7 (6) (40.5)
------- ------ --------
Net loss ($140.2) $31.0 ($109.2)
======= ====== ========
Net loss per common share:
primary ($3.09) ($2.41)
fully diluted - -
Weighted average shares used for
net loss per
common share (in thousands) 45,404 45,404
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
-6-
<PAGE>
Polaroid Corporation and Subsidiary Companies
Notes To Pro Forma Condensed Consolidated Financial Statements
(1) To record the sale of inventory valued at $30.5 million to SDIS.
(2) To record the Company's investment of $35.0 million in SDIS
preferred stock and $7.5 million in Sterling convertible
preferred stock.
(3) To record pre-tax charges of $25.0 million for severance,
inventory and fixed asset write-offs and other costs related to
the Helios transaction.
(4) To eliminate sales and cost of sales related to the Helios
transaction.
(5) To eliminate operating expenses related to the Helios
transaction.
(6) To record the tax effect of above adjustments, as appropriate,
at the Company's statutory tax rate.
(c) Exhibits
--------
Exhibit 2.1 Purchase and Sale Agreement Among Polaroid
Corporation, SDI Holding Corporation, Sterling
Diagnostic Imaging, Inc., and Sterling Dry Imaging
Systems, executed October 30, 1996.
Exhibit 2.2 Amendment No. 1 to Purchase and Sale Agreement
executed November 26, 1996.
-7-
<PAGE>
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.
POLAROID CORPORATION
By /s/ Thomas M. Lemberg
-------------------------------------
Name: Thomas M. Lemberg
Title: Sr. Vice President, General Counsel
and Corporate Secretary
Dated: December 11, 1996
-8-
PURCHASE AND SALE AGREEMENT
AMONG
POLAROID CORPORATION,
SDI HOLDING CORP.,
STERLING DIAGNOSTIC IMAGING, INC.
AND
STERLING DRY IMAGING SYSTEMS, INC.
=========================================================================
<PAGE>
TABLE OF CONTENTS
PURCHASE AND SALE AGREEMENT
ARTICLE 1 - DEFINITIONS....................................1
ARTICLE 2 - ASSETS.........................................8
2.01 Equipment Assets.....................................9
2.02 Film Assets..........................................9
ARTICLE 3 - PURCHASE PRICE, ADDITIONAL INVESTMENT
AND MISCELLANEOUS EXPENSES............................10
3.01 Assumption of Liabilities...........................10
3.02 Excluded Liabilities................................10
3.03 Purchase Price......................................10
3.04 Initial Inventory Value.............................11
3.05 Post-Closing Purchase Price Adjustment..............11
3.06 Additional Equity Investments.......................13
3.07 Sales, Use, Transfer and Similar Taxes and Charges..13
3.08 Purchase Price Adjustment...........................14
ARTICLE 4 - SELLER'S REPRESENTATIONS AND WARRANTIES ......15
4.01 Organization; Good Standing.........................15
4.02 No Conflict with Other Instruments or Agreements....15
4.03 Authorization; Binding Effect.......................15
4.04 Litigation and Investigations.......................16
4.05 Title to Property...................................16
4.06 Contracts and Other Agreements and Instruments......16
4.07 Compliance with Laws; Governmental Consents.........17
4.08 Brokers or Finders..................................17
4.09 Labor and Employment Matters........................17
4.10 Completeness of Certain Assets......................17
4.11 Maintenance.........................................17
4.12 Requested Financial Statements......................18
4.13 Securities Matters..................................18
4.14 Employee Benefits...................................19
4.15 Investment Company; Public Utility..................19
4.16 No Other Representations and Warranties.............19
-i-
<PAGE>
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BUYER,
STERLING AND PARENT....................................20
5.01 Representations and Warranties Regarding Buyer......20
5.02 Representations and Warranties Regarding Sterling...22
5.03 Representations and Warranties Regarding Parent.....24
5.04 No Other Representations and Warranties.............27
ARTICLE 6 - INDEMNITY BY BUYER, STERLING AND PARENT.......28
ARTICLE 7 - SELLER'S INDEMNITY............................28
ARTICLE 8 - INTERIM PERIOD................................29
8.01 Access..............................................29
8.02 Operate Assets in Ordinary Course...................29
8.03 No Material Change or Material
Commitments as to Assets.........................30
8.04 Efforts to Preserve Relationships and Organization..31
8.05 Publicity...........................................31
8.06 Work Diligently Towards Closing.....................31
8.07 Standstill..........................................31
8.08 Requested Financial Statements......................32
8.09 Risk of Loss........................................32
8.10 Notification........................................33
8.11 Waiver..............................................33
8.12 Other Agreements....................................33
ARTICLE 9 - EMPLOYEE BENEFIT MATTERS......................33
9.01 Offer of Employment.................................33
9.02 Service Under Buyer's Plans.........................34
9.03 Welfare Benefits....................................34
9.04 Pension Benefits....................................35
9.05 Workers' Compensation...............................35
9.06 Discharge of Employee Benefits Obligations..........36
9.07 Wage Reporting......................................36
9.08 Vacation............................................36
9.09 Severance...........................................36
9.10 Employee Rights.....................................37
-ii-
<PAGE>
ARTICLE 10 - CONSENTS.....................................37
10.01 Consents...........................................37
10.02 Efforts............................................37
ARTICLE 11 - CLOSING......................................37
11.01 Place and Date of Closing..........................37
11.02 Deliveries at Closing..............................38
11.03 Seller Deliveries At Closing.......................39
ARTICLE 12 - CONDITIONS TO CLOSING........................39
12.01 Seller.............................................39
12.02 Buyer, Sterling and Parent.........................40
ARTICLE 13 - POST CLOSING ................................42
13.01 Receivables........................................42
13.02 Records............................................43
13.03 Delivery of Transferred Employee Records...........43
13.04 Cooperation in Litigation..........................43
13.05 Non Competition....................................44
13.06 Buyer Debt.........................................45
13.07 Confidentiality....................................45
ARTICLE 14 - BULK SALES ACT...............................46
ARTICLE 15 - SURVIVAL, REMEDIES AND PROCEDURE
FOR INDEMNIFICATION..................................46
15.01 Period for Taking Action...........................46
15.02 Claims.............................................47
15.03 Limit..............................................47
15.04 Not a Release of Other Obligations.................47
15.05 Procedure..........................................48
ARTICLE 16 - RIGHT OF TERMINATION.........................48
16.01 Grounds for Termination............................48
16.02 Effects of Termination.............................48
ARTICLE 17 - MISCELLANEOUS................................49
17.01 Press Release......................................49
17.02 Fees...............................................49
17.03 Amendments.........................................49
-iii-
<PAGE>
17.04 Successors.........................................49
17.05 Non-Waiver of Remedy...............................50
17.06 Notices............................................51
17.07 Governing Law and Jurisdiction.....................52
17.08 Limitations on Damages.............................53
17.09 Schedules and Exhibits.............................53
17.10 Further Assurances.................................53
17.11 Entire Agreement...................................53
17.12 Modification and Severability......................53
17.13 Definition of Knowledge............................54
17.14 Headings...........................................54
17.15 Counterparts.......................................54
-iv-
<PAGE>
Schedules
---------
Schedule 1.29 Equipment Permits
Schedule 2.01(a) Equipment Machinery and Equipment
Schedule 2.01(b) Off-site Items
Schedule 2.01(d) Inventory
Schedule 2.01(e) Rights and Obligations
Schedule 2.02 Film Assets
Schedule 4.04 Litigation and Investigations
Schedule 4.05 Liens
Schedule 4.07(b) Compliance with Laws; Governmental Consents
Schedule 4.10 Completeness of Assets
Schedule 5.01(f)(i) Buyer's Proceedings
Schedule 5.02(d)(ii) Liens
Schedule 5.02(e)(i) Sterling's Proceedings
Schedule 5.02(e)(ii) Governmental Consents
Schedule 5.03(c)(i) Stockholders with Greater than 5% Ownership
Schedule 5.03(c)(ii) Outstanding Options
Schedule 5.03(f)(i) Parent's Proceedings
Schedule 12.02(j) Core Employees
Schedule 12.02(m) Contracts to be Reviewed by Buyer
Schedule 13.05 Permitted Competition
Exhibits
--------
Exhibit A Subscription Agreement
Exhibit B Intellectual Property Rights Agreement
Exhibit C Film Supply Agreement
Exhibit D Laser Diode Supply Agreement
Exhibit E Exclusive Sales Agency Agreement
Exhibit F Transitional Services Agreement
Exhibit G Technology, Research and Development Agreement
-v-
<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
---------------------------------
This Purchase and Sale Agreement dated October 30, 1996, is by and
among Polaroid Corporation, a Delaware corporation, with its principal
place of business at 549 Technology Square, Cambridge, Massachusetts 02139
("Seller"), SDI Holding Corp., a Delaware Corporation, with its principal
place of business at Glasgow Business Community, Building 600, Route 896,
Newark, Delaware 19702 ("Parent"), Sterling Diagnostic Imaging, Inc., a
wholly-owned subsidiary of Parent and a Delaware corporation, with its
principal place of business at Glasgow Business Community, Building 600,
Route 896, Newark, Delaware 19702 ("Sterling"), and Sterling Dry Imaging
Systems, Inc., a wholly-owned subsidiary of Sterling and a Delaware
corporation with its principal place of business at Glasgow Business
Community, Building 600, Route 896, Newark, Delaware 19702 ("Buyer").
W I T N E S S E T H, That:
- - - - - - - - - -
WHEREAS, Seller and its Subsidiaries own, operate and maintain
the Assets (as that term is defined in Section 1.05); and
WHEREAS, Buyer, Sterling and Parent desire that Buyer purchase
the Assets, and Seller desires to sell and to cause its Subsidiaries to
sell the Assets;
NOW, THEREFORE, subject to the terms, conditions, covenants and
provisions of this Agreement and in reliance on the representations,
warranties and covenants contained in this Agreement, Seller, Buyer,
Sterling, and Parent mutually covenant and agree as follows:
ARTICLE 1
DEFINITIONS
-----------
As used in this Agreement, the following terms have the following
meanings:
1.1 "Acts" has the meaning ascribed in Section 4.13 of this
Agreement.
1.2 "Actual Inventory Value" has the meaning ascribed in Section
3.05(c) of this Agreement.
<PAGE>
1.3 "Affiliate" means with respect to a specified entity, an entity
that directly, or indirectly through one or more intermediaries, Controls,
or is Controlled by, or is under common Control with the entity specified.
1.4 "Agreement" means this Purchase and Sale Agreement together with
all its Schedules and Exhibits.
1.5 "Assets" has the meaning ascribed in Article 2 of this Agreement.
1.6 "Assumed Liabilities" has the meaning ascribed in Section 3.01 of
this Agreement.
1.7 "Business of Parent" means the worldwide business of Parent and
its Subsidiaries involving the research, development, manufacture,
marketing, distribution, sale to customers and service and support of
products for use in medical diagnostic imaging modalities which consist of
radiography, computed tomography, magnetic resonance imaging, ultrasound,
nuclear medicine, cardiology, direct radiography, computed radiography,
positron emission tomography imaging, digital Radiography + Fluoroscopy,
digital subtraction angiography, digital image transmission, digital image
archive and digital image display. Such products include, but are not
limited to any of the following for use in such modalities:
- printers, media and associated supplies for the hard
copy output of digital images;
- silver halide coated films, light emitting fluorescent
screens, cassettes and accessories for the capture and
display of x-ray images;
- specialty films for cinematic recording, duplication,
subtraction, subtraction printing, video recording or
other similar applications;
- processing chemicals and processing equipment used in
conjunction with silver halide coated films; and
- electronic systems for the capture, manipulation,
display, communication and archive of digital images
and related information.
1.8 "Buyer" has the meaning ascribed in the first paragraph of this
Agreement.
1.9 "Buyer Common Stock" has the meaning ascribed in Section 3.03(a)
of this Agreement.
1.10 "Buyer Indemnified Parties" has the meaning ascribed in Article 7
of this Agreement.
-2-
<PAGE>
1.11 "Buyer Medical Plans" has the meaning ascribed in Section 9.03(c)
of this Agreement.
1.12 "Buyer's Pension Plan" has the meaning ascribed in Section
9.08(b) of this Agreement.
1.13 "Buyer Preferred Stock" has the meaning ascribed in Section
3.06(a) of this Agreement.
1.14 "Buyer Related Documents" has the meaning ascribed in Section
11.02(d) of this Agreement.
1.15 "Buyer's Statement" has the meaning ascribed in Section 3.05(a)
of this Agreement.
1.16 "Buyer Welfare Plans" has the meaning ascribed in Section 9.03(a)
of this Agreement.
1.17 "Closing" has the meaning ascribed in Section 11.01 of this
Agreement.
1.18 "Closing Date" means the date on which Closing occurs.
1.19 "Code" means the Internal Revenue Code of 1986, as amended, and
corresponding provisions of any subsequent federal revenue act.
1.20 "Confidential Material" has the meaning ascribed in Section
8.01(a) of this Agreement.
1.21 "Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and operating
policies of the entity in respect of which the determination is being
made, through the ownership of voting securities, contract, voting trust or
otherwise.
1.22 "Contracts" means the Equipment Contracts and the Film Contracts.
1.23 "Core Employees" has the meaning ascribed in Section 12.02(j) of
this Agreement.
1.24 "Employee List" has the meaning ascribed in Section 9.01 of this
Agreement.
1.25 "Equipment Assets" has the meaning ascribed in Section 2.01 of
this Agreement.
-3-
<PAGE>
1.26 "Equipment Contracts" has the meaning ascribed in Section 2.01 of
this Agreement.
1.27 "Equipment Intellectual Property Rights" has the meaning ascribed
in Intellectual Property Rights Agreement.
1.28 "Equipment Machinery and Equipment" has the meaning ascribed in
Section 2.01 of this Agreement.
1.29 "Equipment Permits" means all rights in and to product
registrations and approvals and other rights granted by Governmental
Authorities used primarily with respect to the Equipment Product Line and
listed on Schedule 1.29.
1.30 "Equipment Product Lines" means Seller's Laser Imagers product
lines and the services related thereto.
1.31 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.32 "Estimated Initial Inventory Value" has the meaning ascribed in
Section 3.04 of this Agreement.
1.33 "Exchange Act" has the meaning ascribed in Section 8.08 of this
Agreement.
1.34 "Excluded Assets" means all real, personal and intangible
property of Seller not included in the Assets, including, without
limitation, the Laser Diode Assets.
1.35 "Excluded Liabilities" has the meaning ascribed in Section 3.02
of this Agreement.
1.36 "Exclusive Sales Agency Agreement" has the meaning ascribed in
Section 11.02(d) of this Agreement.
1.37 "Facilities" shall mean the facilities of Seller and its
Subsidiaries that are used in or relating to the Assets, including, without
limitation, Seller's facility located in Newton, Massachusetts.
1.38 "Film Assets" has the meaning ascribed in Section 2.02 of this
Agreement.
1.39 "Film Contracts" has the meaning ascribed in Section 2.02 of this
Agreement.
-4-
<PAGE>
1.40 "Film Intellectual Property Rights" has the meaning ascribed in
the Intellectual Property Rights Agreement.
1.41 "Film Supply Agreement" has the meaning ascribed in Section
11.02(d) of this Agreement.
1.42 "GAAP" means United States generally accepted accounting
principles.
1.43 "Governmental Authorities" has the meaning ascribed in Section
4.04 of this Agreement.
1.44 "H-S-R Filing" means a filing required by a Governmental
Authority under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
1.45 "Indemnified Party" has the meaning ascribed in Section 15.05 of
this Agreement.
1.46 "Indemnifier's Basket" has the meaning ascribed in Section 15.02
of this Agreement.
1.47 "Indemnifying Party" has the meaning ascribed in Section 15.05 of
this Agreement.
1.48 "Initial Inventory Value" has the meaning ascribed in
Section 3.04 of this Agreement.
1.49 "Intellectual Property Rights" means the Equipment Intellectual
Property Rights and the Film Intellectual Property Rights.
1.50 "Intellectual Property Rights Agreement" has the meaning ascribed
in Section 11.02(d) of this Agreement.
1.51 "Inventory" has the meaning ascribed in Section 2.01 of this
Agreement.
1.52 "Inventory Value" means the book value of the Inventory
determined in accordance with GAAP and Seller's standard costing basis.
1.53 "Laser Diode Assets" means any and all assets of Seller and
Seller's Affiliates that are used exclusively in the manufacture of the
laser diode component of Laser Imagers.
1.54 "Laser Diode Supply Agreement" has the meaning ascribed in
Section 11.02(d) of this Agreement.
-5-
<PAGE>
1.55 "Laser Films" means films manufactured and sold by Seller that
are intended for exposure by lasers and used for medical diagnostic imaging
applications.
1.56 "Laser Imagers" means devices manufactured and sold by Seller
containing lasers that are intended for exposure of Laser Films and that
contain software customized for producing an exposed piece of Laser Films,
including, without limitation, Seller's Helios 810 laser imager system,
Helios 1417 laser imager system and all accessories and peripherals related
thereto.
1.57 "Liens" has the meaning ascribed in Section 4.05 of this
Agreement.
1.58 "Losses" has the meaning ascribed in Article 6 of this Agreement.
1.59 "Material" means having an actual or potential economic impact of
at least $50,000.
1.60 "Option Acquisition Agreement" has the meaning ascribed in
Section 3.06(d) of this Agreement.
1.61 "Option Stock" has the meaning ascribed in Section 4.13 of this
Agreement.
1.62 "Parent" has the meaning ascribed in the first paragraph of this
Agreement.
1.63 "Parent Common Stock" has the meaning ascribed in Section 3.06(c)
of this Agreement.
1.64 "Parent Preferred Stock" has the meaning ascribed in Section
3.06(b) of this Agreement.
1.65 "Parent Stockholder Options" has the meaning ascribed in Section
3.06(d) of this Agreement.
1.66 "Party" means either Seller, Buyer, Sterling or Parent.
1.67 "Parties" means Seller, Buyer, Sterling and Parent.
1.68 "Person" means any individual, corporation, limited liability
company, limited or general partnership, joint venture, association, joint-
stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
-6-
<PAGE>
1.69 "Preliminary Statement" has the meaning ascribed in Section
3.05(a) of this Agreement.
1.70 "Proceedings" has the meaning ascribed in Section 4.04 of this
Agreement.
1.71 "Purchase Price" has the meaning ascribed in Section 3.03(a) of
this Agreement.
1.72 "Receivables" means the trade accounts receivable arising from
the Equipment Product Lines or the sale of Laser Films and includes
receivables from the sale of equipment with extended terms.
1.73 "Related Documents" means the Buyer Related Documents and the
Seller Related Documents.
1.74 "Requested Financial Statements" has the meaning ascribed in
Section 8.08 of this Agreement.
1.75 "SEC" has the meaning ascribed in Section 8.08 of this Agreement.
1.76 "Securities" has the meaning ascribed in Section 4.13 of this
Agreement.
1.77 "Seller" has the meaning ascribed in the first paragraph of this
Agreement.
1.78 "Seller Indemnified Parties" has the meaning ascribed in Article
6 of this Agreement.
1.79 "Seller Pension Plans" has the meaning ascribed in Section
9.08(a) of this Agreement.
1.80 "Seller Qualified Plans" has the meaning ascribed in Section
4.14(b) of this Agreement.
1.81 "Seller Related Documents" has the meaning ascribed in Section
11.03(c) of this Agreement.
1.82 "Seller Welfare Plans" has the meaning ascribed in Section
9.03(a) of this Agreement.
1.83 "Sterling" has the meaning ascribed in the first paragraph of
this Agreement.
1.84 "Subscription Agreement" has the meaning ascribed in Section
3.06(a) of this Agreement.
-7-
<PAGE>
1.85 "Subsidiary" of any Person means any corporation, limited
liability company, limited and general partnership, association, joint-
stock company or business trust ("Corporation") of which at the time of the
determination such Person, directly and/or indirectly, through one or more
other Persons, owns more than 50% of the voting stock of or equity interest
in such Corporation.
1.86 "Taxes" means all income, gross receipts, profits, franchise,
sales, use, occupation, property, ad valorem, capital, wealth,
environmental, employment, severance, production, excise, stamp, transfer,
workers' compensation, social security, withholding or similar taxes, motor
vehicle registration fees, customs or import duties and all other taxes or
governmental fees or charges of any nature whatsoever and however
denominated, including estimated payments or deposits thereof, imposed by
any Governmental Authorities, together with any interest, additions or
penalties with respect thereto.
1.87 "Technology, Research and Development Agreement" has the meaning
ascribed in Section 11.02(d) of this Agreement.
1.88 "Termination Date" has the meaning ascribed in Section 16.01(b)
of this Agreement.
1.89 "Third Party Claim" has the meaning ascribed in Section 15.05 in
this Agreement.
1.90 "Transfer Charges" has the meaning ascribed in Section 3.07 of
this Agreement.
1.91 "Transferred Employees" has the meaning ascribed in Section 9.01
of the Agreement.
1.92 "Transitional Services Agreement" has the meaning ascribed in
Section 11.02(d) of this Agreement.
1.93 All dollar amounts set forth herein are expressed in
United States currency.
ARTICLE 2
ASSETS
------
Upon the terms and subject to the conditions contained in this
Agreement, Seller agrees to grant, sell, convey, assign, transfer and
deliver or, if applicable, cause its Subsidiaries to grant, sell, convey,
assign, transfer and deliver unto Buyer, and Buyer agrees to purchase,
accept and take delivery of, unless otherwise expressly set forth herein,
the following assets, unless otherwise indicated herein (hereinafter
collectively referred to as the "Assets"):
-8-
<PAGE>
2.01 Equipment Assets. The assets, other than Laser Diode Assets,
used primarily with respect to the Equipment Product Lines (hereinafter
collectively referred to as the "Equipment Assets") including (a) the
manufacturing equipment, manufacturing procedures, drawings and designs,
bills of materials, tools, laboratory equipment, research items, computer
hardware and other related equipment (the "Equipment Machinery and
Equipment") described in Schedule 2.01(a) attached hereto, (b) except for
the items disclosed in Schedule 2.01(d), which shall be considered
Inventory, finished equipment, spare parts, service parts, and supplies
(other than Inventory) at customer locations or in the possession of sales
and service personnel to which Seller has retained title, wherever located,
as set forth on Schedule 2.01(b), (c) except those not assignable under
applicable law, the Equipment Permits, (d) the inventories of raw
materials, feedstocks, stores, work in process, finished goods, spare
parts, service parts, supplies and packaging materials held for use or
generated with respect to the Equipment Product Lines, wherever located,
including, without limitation, that set forth as Schedule 2.01(d) (the
"Inventory"), (e) all rights and obligations under sales orders and
contracts, purchase orders and contracts, distribution agreements, customer
agreements, supply agreements, service agreements, development agreements,
consulting agreements and other contracts or agreements (other than those
relating to Equipment Intellectual Property Rights) described in Schedule
2.01(e), and all rights under express or implied representations and
warranties from providers of goods or services with respect to the
Equipment Product Lines (the "Contracts"), and (f) the rights delineated in
the Intellectual Property Rights Agreement regarding the Equipment
Intellectual Property Rights.
2.02 Film Assets. The following assets (hereinafter collectively
referred to as the "Film Assets"): (a) all rights and obligations under
sales orders and contracts, distribution agreements, marketing related
consulting agreements and customer agreements (other than those relating to
Film Intellectual Property Rights) described in Schedule 2.02, (the "Film
Contracts") and (b) the rights delineated in the Intellectual Property
Rights Agreement related to the Film Intellectual Property Rights.
-9-
<PAGE>
ARTICLE 3
PURCHASE PRICE, ADDITIONAL INVESTMENT AND MISCELLANEOUS EXPENSES
- -----------------------------------------------------------------
Subject to the terms and conditions of this Agreement, in
consideration of the sale, conveyance, assignment, transfer and delivery by
Seller and its Subsidiaries, of the Assets to Buyer, Buyer, Sterling,
Parent and Seller agree as follows:
3.1 Assumption of Liabilities. Except as provided in Section 3.02,
Buyer shall assume and agree to pay, discharge and perform when due all
obligations (whether known or unknown, fixed or contingent) to the extent
(but only to the extent) that they relate to events or conditions arising
after the Closing under the Contracts assigned by Seller or its
Subsidiaries to Buyer in accordance with this Agreement (the "Assumed
Liabilities"), including, but not limited to, (i) obligations to sell
products and equipment under such Contracts, (ii) warranty obligations
under such Contracts with respect to goods sold or services rendered under
such Contracts, and (iii) obligations to service equipment purchased or
leased from Buyer after the Closing Date, unless a Contract is terminated
by the other party thereto due to an improper assignment by Seller;
provided that, upon receipt of an invoice from Buyer, Seller shall promptly
reimburse Buyer or its Affiliates for all costs and expenses incurred by
Buyer or Buyer's Affiliates in performing the obligations set forth in
subsections (ii) and (iii) above with respect to Laser Imagers and Laser
Film sold by Seller prior to the Closing Date.
3.2 Excluded Liabilities. Except for the Assumed Liabilities, neither
Buyer, Sterling nor Parent shall assume or be responsible for any
liabilities or obligations (whether known or unknown, fixed or contingent)
of Seller or of any of its Subsidiaries, or of any prior owner or operator
of any of the Assets, the Equipment Product Lines or any other assets or
properties owned, operated or maintained by Seller or any of its
Subsidiaries (such liabilities and obligations being sometimes referred to
herein as the "Excluded Liabilities").
3.3 Purchase Price.
(a) The aggregate purchase price (the "Purchase Price") for the
Assets (and for the covenant not to compete provided in Section 13.05) and
for all other rights and obligations contemplated hereunder shall be the
aggregate of the following and shall be subject to adjustment as provided
in Section 3.08: (i) 111 shares of common stock, $.01 par value, of Buyer
(the "Buyer Common Stock"), (ii) cash in the amount of the Inventory Value,
as finally determined as provided in Section 3.05 of this Agreement, and
(iii) the assumption of the Assumed Liabilities.
-10-
<PAGE>
(b) At Closing, subject to pre-closing adjustment as provided in
Section 3.08, Buyer shall deliver to Seller the Buyer Common Stock and cash
in the amount of the Estimated Initial Inventory Value.
(c) On or prior to the Closing Date, the Parties shall agree on
a schedule to allocate the Purchase Price among the various categories of
Assets and other rights to be transferred to or otherwise acquired by Buyer
pursuant to this Agreement. Such allocation shall be used by the Parties in
reporting the transactions contemplated by this Agreement for all tax
purposes. No Party shall take any position on any of its tax returns that
is inconsistent with such allocation and each Party shall file U.S.
Internal Revenue Service Form 8594, and equivalent forms in other
countries, if necessary, in a manner consistent with this allocation.
3.4 Initial Inventory Value. The Parties have agreed that the
initial Inventory Value as of September 30, 1996, is $31,000,000 (the
"Initial Inventory Value"). The Initial Inventory Value multiplied by 95%
is $29,450,000, and such amount shall be referred to herein as the
"Estimated Initial Inventory Value ".
3.5 Post-Closing Purchase Price Adjustment.
(a) Within 120 days after the Closing Date, Seller shall
prepare, with the assistance of Buyer's employees, and deliver a statement
(the "Preliminary Statement"), as of the Closing Date, updating the Initial
Inventory Value so that it reflects the Inventory Value as of the Closing
Date based only on a roll forward basis from September 30, 1996, with no
changes other than to update the Initial Inventory Value from September 30,
1996, using the identical principles, procedures, estimates, judgments,
pricing and other practices used in determining the Initial Inventory Value
as of September 30, 1996. Subject to the limitations of Section 3.05(e),
if Buyer has any objections to the Preliminary Statement, Buyer must
deliver to Seller within 30 days after delivery of the Preliminary
Statement (but such delivery shall not be required earlier than 90 days
after Closing) a detailed statement describing such objections thereto (the
"Buyer's Statement"). If a Buyer's Statement is not delivered to Seller
within such time period, the determination of the Inventory Value set forth
in the Preliminary Statement will be final, binding, and non-appealable by
the Parties. The Parties will negotiate in good faith to resolve any such
objections, but if they do not reach a final resolution within 30 days
after Seller has received the Buyer's Statement, such matter shall be
resolved as provided in Section 3.05(b). Buyer's representatives shall be
entitled to observe all physical inventories that are conducted in
connection with and/or inspect all work papers, calculations and documents
related to Seller's updating of the Initial Inventory Value, and to
inspect all work papers, schedules and other supporting materials relating
to, the preparation of the Preliminary Statement.
-11-
<PAGE>
(b) In the event any objections to the Preliminary Statement are
not resolved by Seller and Buyer within the 30 day period following
delivery of the Buyer's Statement pursuant to Section 3.05(a), such
unresolved objections shall be submitted for resolution to an
internationally recognized independent certified public accountant located
in Boston, Massachusetts, or New York, New York, selected by the mutual
agreement of Seller and Buyer within 20 days after the end of such 30 day
period. If Seller and Buyer are unable to mutually agree upon an
internationally recognized certified public accountant within such 20 day
period, then Seller and Buyer shall each select an internationally
recognized certified public accountant and within five days of their
selection those two accountants shall select a third internationally
recognized certified public accountant located in Boston, Massachusetts, or
New York, New York, which third accountant shall arbitrate the claim in
question. In such event, each of Seller and Buyer must select its
accountant within 10 days after the end of the 20 day period described
above, and if any Party shall fail to select an accountant within such 10
day period, the accountant selected by the other such Party shall select
another internationally recognized certified public accountant, and such
two accountants shall select the third accountant, all within 20 days after
the end of such 10 day period. The accountant arbitrating a dispute (as
the sole arbitrator) shall be required to submit its decision to Seller and
Buyer within 30 days of appointment, which decision shall be final and
binding on the Parties and shall constitute an arbitral award that is
final, binding and unappealable and upon which a judgment may be entered by
any court having jurisdiction thereof. The reasonable fees of the
accountant that settles the claim in question and any accountant selected
by an accountant selected by a Party when the other Party has failed to
select an accountant shall be borne by either or both Seller and Buyer in
inverse proportion to the degree of success of such Party by virtue of said
decision as determined by the accountant settling the claim. The
reasonable fees of any other accountant selected by a particular Party
shall be borne by such Party.
(c) The Inventory Value, as finally determined in accordance
with Sections 3.05(a) or 3.05(b) is referred to herein as the "Actual
Inventory Value."
(d) If the Actual Inventory Value is:
(i) less than the Estimated Initial Inventory Value, Seller
shall deliver to Buyer, within three (3) business days after the date
on which the Actual Inventory Value is finally determined pursuant to
Sections 3.05(a) and 3.05(b), in immediately available funds, the
amount of such deficiency, together with interest thereon from the
Closing Date through the date of payment, computed at the prime rate
as announced by Bankers Trust Company as of the Closing Date;
(ii) greater than the Estimated Initial Inventory Value,
Buyer shall deliver to Seller, within three business days after the
date on which the Actual Inventory Value is finally determined
pursuant to Sections 3.05(a) and 3.05(b), in immediately available
funds, the amount of such excess, together with interest thereon from
the Closing Date through the date of payment, computed at the prime
rate announced by Bankers Trust Company as of the Closing Date.
-12-
<PAGE>
(e) Notwithstanding anything in this Agreement to the
contrary, Buyer objections with respect to the Preliminary Statement shall
be limited to objections regarding the updating of the Initial Inventory
Value.
3.6 Additional Equity Investments. Contemporaneously with the
Closing, Seller shall also:
(a) Purchase 20,000 shares of preferred stock of Buyer (the
"Buyer Preferred Stock"), $20,000,000 aggregate liquidation value, for
$20,000,000 in cash, having the terms set forth in and pursuant to a
Subscription Agreement substantially in the form attached hereto as Exhibit
A (the "Subscription Agreement"), under which Seller shall also commit to
purchase an additional 15,000 shares of Buyer Preferred Stock, $15,000,000
liquidation value, for $15,000,000 in cash on the first anniversary of the
Closing Date;
(b) Purchase 50,000 shares of preferred stock, Series B, of
Parent, convertible into 50,000 shares of common stock of Parent, having
the terms set forth in and pursuant to the Subscription Agreement for $150
per share in cash (the "Parent Preferred Stock");
(c) Purchase one share of common stock of Parent for $100
in cash, pursuant to the Subscription Agreement (the "Parent Common
Stock"); and
(d) Enter into Option Acquisition Agreements in a form
mutually agreeable to the parties thereto (the "Option Acquisition
Agreements") with certain stockholders of Parent pursuant to which such
stockholders will agree to deliver or cause to be delivered to Seller
options (the "Parent Stockholder Options") to purchase 25,000 shares of
common stock of Parent for the cash purchase price of $250 per share, on
the terms and conditions set forth in the Option Acquisition Agreements.
3.7 Sales, Use, Transfer and Similar Taxes and Charges. Seller
shall bear and pay all sales, use or stamp taxes and any transfer, transfer
gain, documentation, gross receipts, custom duties, value added,
withholding tax, recording, filing and registration fees and other taxes
and charges, as well as all interest and penalties thereon payable upon or
with respect to the sale or transfer of the Assets by Seller to Buyer
pursuant to this Agreement (collectively the "Transfer Charges").
Notwithstanding the foregoing, Buyer or Buyer's Affiliates shall be
required to pay all Transfer Charges for which a refund, recoupment or
credit is available to Buyer or Buyer's Affiliates, and Buyer or Buyer's
Affiliates, as the case may be, shall be entitled to obtain and keep such
refund, recoupment or credit; provided, however, that Seller shall
reimburse Buyer for any Transfer Charges paid by Buyer or its Affiliates
for which a refund, recoupment or credit is available but which is not
recovered or recouped by Buyer or Buyer's Affiliates, as the case may be,
within twelve (12) months of the Closing Date. If Buyer thereafter
receives a refund, recoupment or credit of all or any portion of any
Transfer Charge for which Seller has reimbursed Buyer, Buyer shall
reimburse Seller in an amount equal to such refund, recoupment or credit.
Subject to the foregoing sentence, to the extent any applicable law or
regulation imposes upon a Party the obligation to pay Transfer Charges to
be borne by a Party pursuant to the preceding sentences and such Transfer
Charges are paid by such other Party, the Party responsible for such
Transfer Charges pursuant to the two preceding sentences shall promptly
reimburse such paying Party therefor upon receipt of such paying Party's
invoice for the amount of such payments.
-13-
<PAGE>
3.8 Purchase Price Adjustment. In the event there shall be an
inaccuracy in any of the representations or warranties of Seller or a
breach by Seller of one or more covenants to be performed by Seller prior
to Closing, which inaccuracy or breach is Material and such inaccuracy or
breach does not constitute a failure of the conditions to Buyer's
obligation to close as set forth in Section 12.02(a), or there shall be a
Material loss or damage to any of the Assets as a result of fire or other
casualty and Seller does not elect to restore such Assets as provided in
Section 8.09, the Parties shall use all reasonable efforts to agree prior
to Closing to a downward adjustment to the Purchase Price in an amount
equal to the decline in value of any of the Assets resulting from such
inaccuracy, breach, loss or damage. In this regard, the decline in value
shall be on a dollar-for-dollar basis for balance sheet items and, with
respect to other items affecting value, shall be as mutually agreed by the
Parties. If the Parties are unable to agree on the amount of the Purchase
Price adjustment prior to Closing, and all of the conditions to the
obligations of the Parties to close have been satisfied or waived, the
Parties shall proceed to close the transaction contemplated hereby and the
disagreement regarding the amount of the Purchase Price adjustment shall be
resolved in accordance with the dispute resolution procedure described in
Section 3.05(b), with the 30-day period referred to in the first sentence
thereof beginning on the Closing Date. Once such disagreement is resolved,
Seller shall then pay to Buyer the amount of such adjustment, if any, with
interest at the rate provided in Section 3.05(d)(i) from the Closing Date
through the date of payment. Notwithstanding anything herein to the
contrary, no downward adjustment in the Purchase Price shall be made under
this Section 3.08 to the extent that the amount thereof is subject to
adjustment under the Inventory evaluation procedures elsewhere in this
Article 3.
-14-
<PAGE>
ARTICLE 4
SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller represents and warrants to Buyer, Sterling and Parent that as
of the date of this Agreement and the Closing Date:
4.1 Organization; Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to own,
operate and maintain the Assets as now being owned and operated. Seller
has full corporate power and authority to execute and deliver this
Agreement and each of the Seller Related Documents and to perform its
obligations hereunder and thereunder. Seller is duly qualified or licensed
to transact business in all of the jurisdictions in which such
qualification or licensing is required, except where the failure to be so
qualified or licensed would not be Material.
4.2 No Conflict with Other Instruments or Agreements. The
execution, delivery and performance of this Agreement by Seller, the
execution, delivery and performance of each of the Seller Related
Documents by Seller and the consummation of the transactions contemplated
by this Agreement and each of the Seller Related Documents by Seller will
not:
(a) violate any provision of the Certificate of
Incorporation, Bylaws or similar constitutional documents of Seller or any
law, regulation, ordinance, statute, rule, order, judgment, writ, ruling,
award, edict or decree of any Governmental Authority by which Seller or any
of the Assets may be bound or otherwise affected; or
(b) conflict with, result in a breach of the terms and
conditions of or violation of, or result in the imposition of any Lien on
or with respect to any of the Assets as a result of the provisions of, or
cause a default or termination under, any mortgage, indenture, loan
agreement, lease, commitment, agreement or other instrument to which Seller
or any of its Affiliates is a party or by which it or any of the Assets may
be bound or affected.
4.3 Authorization; Binding Effect. Seller has full power and
authority to perform the provisions of this Agreement and each of the other
Seller Related Documents, and this Agreement constitutes, and the Seller
Related Documents, when executed and delivered by Seller pursuant to the
terms hereof, will constitute, the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding at law or in equity).
-15-
<PAGE>
4.4 Litigation and Investigations. Except as may be disclosed in
Schedule 4.04 or in the Intellectual Property Rights Agreement, there is no
litigation, action, investigation, administrative or judicial complaint,
notice of violation, grievance, demand, controversy, audit, claim or
proceeding (collectively referred to as "Proceedings") by or before any
court, arbitration panel, governmental or quasi-governmental agency,
tribunal, department, commission, board, bureau, agency or instrumentality
of the United States, any foreign jurisdiction, any state, province or
political subdivision thereof or other Person or body acting in an
arbitration, regulatory or judicial capacity (collectively referred to as
"Governmental Authorities") or brought or made by any third party
(including employees, former employees, their dependents and beneficiaries
and any party representing any of them) pending or, to Seller's knowledge,
threatened against Seller or any of Seller's Subsidiaries as a result of
their ownership, use, maintenance or operation of any of the Assets or
contesting the rights of Seller or any of its Subsidiaries in and to any of
the Assets, or relating to the limitation or revocation (or the expiration)
of any Equipment Permits, or against the Seller 401(k) Plan or the Seller
Pension Plans or any fiduciaries thereof in their capacities as such for
any reason whatsoever and neither Seller nor any of its Subsidiaries has
received any notice from any Person or Governmental Authority threatening
to institute same. The ownership, use, maintenance and operation of the
Assets and the Seller 401(k) Plan and the Seller Pension Plans are not
subject to any injunction, order, judgment, writ or decree.
4.5 Title to Property. Seller has good, clear and marketable title
to the Assets, free and clear of any and all liens, charges, pledges, filed
or unfiled liens related to Taxes, mortgages, security interests, deeds of
trust, leases, licenses, burdens, restrictions and other encumbrances
(collectively, the "Liens") except for statutory Liens of lessors,
carriers, warehousemen, mechanics, materialmen and other Liens imposed by
law for sums not yet delinquent and other Liens described in Schedule 4.05,
or, as to the Intellectual Property Rights, as described in the
Intellectual Property Rights Agreement. None of the Assets are leased from
a third party, and, except to the extent not Material, no third party has
any option or right of first refusal to purchase all or any part of the
Assets.
4.6 Contracts and Other Agreements and Instruments. True and
correct copies of the Contracts and the Equipment Permits have been made
available to Buyer for review, at Seller's present repositories for the
same. No other party to or grantor of any Contract or Equipment Permit has
given written notice to Seller that it considers Seller to be in breach
thereof. Neither Seller nor any other party thereto or grantor thereof is
in default under, in breach of or in violation of (and no condition exists
that, with notice or lapse of time or both, would constitute such a
default, breach or violation) any Contract or Equipment Permit.
-16-
<PAGE>
4.7 Compliance with Laws; Governmental Consents.
(a) Seller has obtained and maintained all permits required
by any applicable law, rule or regulation or Governmental Authorities or
necessary or appropriate for Seller to own, occupy, operate and/or
maintain the Assets as being, owned, operated, maintained and used on the
date of this Agreement, the absence of which would be Material.
(b) Except for an H-S-R Filing and except as set forth in
Schedule 4.07(b), no consent, authorization, or approval of, or exemption
by, or filing with, any Governmental Authorities or self-regulatory body or
authority or any non-governmental third party is required in connection
with the execution, delivery and performance by Seller of this Agreement or
of any of the Seller Related Documents, or the taking by Seller of any
action herein or therein contemplated.
4.8 Brokers or Finders. Seller has not incurred an obligation or
liability, contingent or otherwise, for broker's or finder's fees with
respect to the matters provided for in this Agreement and for which Buyer
or any of its Affiliates will be responsible.
4.9 Labor and Employment Matters. With respect to the employees of
Seller associated with any of the Assets, Seller has not entered into any
collective bargaining agreements or other contracts with a labor union,
contingent or otherwise, such employees are not subject to any collective
bargaining agreements or other contracts with a labor union, contingent or
otherwise, nor are any such employees, in their capacities as employees,
represented by any labor union. With respect to employees of Seller
associated with any of the Assets, Seller has not experienced a work
stoppage, organizational effect or other Material labor disturbance within
the past three years. To the best knowledge of Seller, there are no
organizational efforts currently being made or threatened by or on behalf
of any labor union with respect to any of the employees of Seller
associated with any of the Assets.
4.10 Completeness of Certain Assets. Except as set forth in
Schedule 4.10, the Assets being transferred to, or the rights to which are
being granted or made available to, Buyer pursuant hereto include all
assets primarily used by Seller or any of its Affiliates in the operation
of the Equipment Product Lines.
4.11 Maintenance. The Assets currently in use have been properly
maintained in accordance with normal industry practice and are in operating
condition and repair (subject to normal wear and tear) such that they are
capable of being used without present need for repair, replacement or
modification or the addition of equipment, except in the ordinary course of
business.
-17-
<PAGE>
4.12 Requested Financial Statements. The Requested Financial
Statements will be prepared in accordance with GAAP consistently applied
and will be complete and correct and will fairly present, in all material
respects (to the extent covered thereby), the revenues, expenses, cash
flows, assets, liabilities and other matters required to be set forth
therein for the periods indicated. Buyer will not make any change in the
Requested Financial Statements without the prior consent of Seller, which
shall not be unreasonably withheld.
4.13 Securities Matters.
(a) Seller acknowledges that the Buyer Preferred Stock, the
Parent Preferred Stock, the Parent Common Stock, the Parent Stockholder
Options, the Buyer Common Stock and the common stock of Parent transferred
to Seller upon exercise of the Parent Stockholder Options (the "Option
Stock") have not been registered under the Securities Act of 1933, as
amended and applicable state securities laws (collectively the "Acts") in
reliance on available exemptions from the registration requirements
thereof. The Buyer Preferred Stock, the Parent Preferred Stock, the Parent
Common Stock, the Parent Stockholder Options, the Buyer Common Stock and
the Option Stock are sometimes collectively referred to herein as the
"Securities."
(b) Seller has had access to and an opportunity to inspect
all relevant information relating to Buyer, Parent and Sterling sufficient
to enable Seller to evaluate the merits and risks of its acquisition of the
Securities. Seller also has had the opportunity to ask questions and
receive answers respecting, and to obtain such additional information as
Seller has desired regarding, the business, financial condition and affairs
of Buyer, Parent and Sterling.
(c) Seller has such knowledge and experience in financial
and business matters that Seller is capable of evaluating the merits and
risks of its acquisition of the Securities.
(d) Seller's acquisition of the Securities is and the
acquisition by Seller of the Option Stock upon exercise of the Parent
Stockholder Options will be, for Seller's own account for investment
purposes, and without a view to, or for offer or sale on behalf of Buyer,
Sterling or Parent or any of the existing stockholders of Parent in
connection with, the distribution thereof or any portion thereof. Seller
is not participating and does not have a participation in any such
distribution or the underwriting of any such distribution.
(e) Seller understands that the Securities must be held for
an indefinite period of time unless subsequently registered under the Acts
or exemptions from the registration requirements thereof are available.
-18-
<PAGE>
(f) Seller has been advised by Buyer and Parent that (i)
Rule 144 under the Securities Act at present is not applicable to the
Securities and (ii) registration under the Acts or exemptions from the
registration requirements thereof will be required for any subsequent sale
or other distribution of the Securities.
4.14 Employee Benefits. There are no liabilities, breaches,
violations or defaults under any plan, arrangement or contract sponsored or
maintained by Seller or any of its Subsidiaries under which any Transferred
Employee is entitled to any benefit that would subject Buyer, Sterling,
Parent or their respective employee benefit plans or any fiduciaries
thereof to any taxes, penalties or other liabilities.
4.15 Investment Company; Public Utility. Neither Seller nor any of
Seller's Subsidiaries is an "investment company" or a company "controlled"
by an investment company (as defined in the Investment Company Act of 1940,
as amended) or a "holding company" or a "public utility" (as defined in the
Public Utility Holding Company Act of 1935, as amended).
4.16 No Other Representations and Warranties. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT OR THE RELATED AGREEMENTS, NEITHER
SELLER NOR ANY AGENT OR REPRESENTATIVE OF SELLER HAS MADE, AND SELLER IS
NOT LIABLE FOR OR BOUND IN ANY MANNER BY, ANY WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY EXPRESS OR IMPLIED WARRANTIES,
GUARANTEES, PROMISES, STATEMENTS, INDUCEMENTS, REPRESENTATIONS, OR
INFORMATION PERTAINING TO THE ASSETS OR ANY PART THEREOF, AND WITHOUT
LIMITING THE FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR
THE RELATED AGREEMENTS, SELLER IS NOT LIABLE FOR OR BOUND BY (AND NONE OF
BUYER, STERLING OR PARENT HAS RELIED UPON) ANY VERBAL OR WRITTEN
STATEMENTS, REPRESENTATIONS, OR ANY OTHER INFORMATION RESPECTING ANY
PORTION OF THE ASSETS FURNISHED BY SELLER OR ANY EMPLOYEE, AGENT OR OTHER
PERSON REPRESENTING OR PURPORTEDLY REPRESENTING SELLER. BUYER ACKNOWLEDGES
THAT THE OPERATION OF THE ASSETS IN THE PAST HAS PRODUCED LOSSES AND THAT
NO REPRESENTATION IS MADE BY SELLER AS TO THE FUTURE SUCCESS OR
PROFITABILITY OF THE ASSETS OR THE PRODUCTS PRODUCED THEREBY.
-19-
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER, STERLING AND PARENT
------------------------------------------------------------
5.1 Representations and Warranties Regarding Buyer. Buyer,
Sterling and Parent jointly and severally represent and warrant to Seller
that as of the date of this Agreement and the Closing Date:
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power and authority to execute and deliver this Agreement and
each of the Buyer Related Documents to which it is a party and to perform
its obligations hereunder and thereunder. Buyer is duly qualified or
licensed to transact business in all of the jurisdictions in which such
qualification or licensing is required, except where the failure to be so
qualified or licensed would not be Material.
(b) Buyer has full power and authority to perform the
provisions of this Agreement and each of the other Buyer Related Documents
to which it is a party, and this Agreement constitutes, and the Buyer
Related Documents, when executed and delivered by Buyer pursuant to the
terms hereof, will constitute, the legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding at law or in equity).
(c) (i) The entire authorized capital stock of Buyer
consists of 54,500 shares, of which 2,000 shares are common stock, $0.01
par value per share, and 52,500 shares are preferred stock, par value $0.01
per share, of which, prior to giving effect to the issuance of the Buyer
Preferred Stock, 1,000 shares of common stock and none of the shares of
preferred stock are validly issued and outstanding, fully paid and non-
assessable and the authorized capital stock of Buyer may be increased to
reflect additional shares of preferred stock, par value $.01 per share, up
to 10,000 additional shares, for issuance to Parent or Sterling.
(ii) Except as set forth herein, there are no outstanding
subscriptions, options, convertible securities, warrants, calls or rights
of any kind granted or issued by Buyer to purchase or otherwise acquire any
security of or equity interest in Buyer.
(d) (i) As of the Closing Date, Buyer shall have the
corporate power and authority to issue, sell and deliver the Buyer
Preferred Stock and the Buyer Common Stock.
-20-
<PAGE>
(ii) As of the Closing Date, the issuance, sale and
delivery of the Buyer Preferred Stock and the Buyer Common Stock will have
been duly authorized by all requisite corporate action on the part of
Buyer, will not require the approval of its stockholders and will not
violate any provision of the Certificate of Incorporation, Bylaws or
similar constitutional documents of Buyer or any law, regulation,
ordinance, statute, rule, order, judgment, writ, ruling, award, edict or
decree of any Governmental Authority by which Buyer may be bound or
otherwise affected or conflict with, result in a breach of the terms and
conditions of or violation of, or result in the imposition of any Lien on
or with respect to its business as a result of the provisions of, or cause
a default or termination under, any mortgage, indenture, loan agreement,
lease, commitment, agreement or other instrument to which Buyer is a party
or by which it or any of its business may be bound or affected.
(iii) As of the Closing Date, the issuance, sale and
delivery of the Buyer Preferred Stock and the Buyer Common Stock will not
be subject to any preemptive right of stockholders of Buyer or to any right
of first refusal or other right in favor of any Person that has not been
waived. There are no preemptive rights with respect to the issuance by
Buyer of the Buyer Common Stock.
(iv) Upon receipt of payment thereof from Seller, the Buyer
Preferred Stock and the Buyer Common Stock, when issued, will be duly
authorized, validly issued, fully paid and nonassessable and will not be
subject to any Lien, encumbrance or charge of any kind created by, through
or under Buyer.
(v) Subject to the accuracy of the representations and
warranties of Seller hereunder, and except for the HSR Filing and the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, no registration or filing with, or
consent or approval of or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the
valid execution, delivery and performance of the Buyer Preferred Stock or
the Buyer Common Stock.
(e) The execution, delivery and performance of this
Agreement by Buyer, the execution, delivery and performance of each of the
Buyer Related Documents by Buyer to which it is a party and the
consummation of the transactions contemplated by this Agreement and each of
the Buyer Related Documents to which it is a party by Buyer will not:
(i) violate any provision of the Certificate of
Incorporation, Bylaws or similar constitutional documents of Buyer or any
law, regulation, ordinance, statute, rule, order, judgment, writ, ruling,
award, edict or decree of any Governmental Authority by which Buyer may be
bound or otherwise affected; or
-21-
<PAGE>
(ii) conflict with, result in a breach of the terms and
conditions of or violation of, or result in the imposition of any Lien on
or with respect to its business as a result of the provisions of, or cause
a default or termination under, any mortgage, indenture, loan agreement,
lease, commitment, agreement or other instrument to which Buyer or any of
its Affiliates is a party or by which it or any of its business may be
bound or affected.
(f) (i) Except as set forth in Schedule 5.01(f)(i), there
are no Proceedings pending or, to the best knowledge of Buyer, Sterling and
Parent, threatened against or affecting Buyer, at law or in equity, or
before or by any Governmental Authorities having jurisdiction over Buyer or
brought by any third party that might reasonably be expected, individually
or in the aggregate, to affect Materially the business, financial condition
or results of operation of the Buyer.
(ii) Except for an H-S-R Filing, no consent, authorization, or
approval of, or exemption by, or filing with, any Governmental Authorities
or self-regulatory body or authority or any non-governmental third party,
the absence of which would be Material, is required in connection with the
execution, delivery and performance by Buyer of this Agreement or of any of
the Buyer Related Documents to which it is a party or the taking of any
action herein or therein contemplated.
(g) Buyer has not incurred any obligation or liability,
contingent or otherwise, for broker's or finder's fees with respect to the
matters provided for in this Agreement for which Seller will be
responsible.
(h) Buyer is not an "investment company" or a company
"controlled" by an investment company (as defined in the Investment Company
Act of 1940, as amended) or a "holding company" or a "public utility" (as
defined in the Public Utility Holding Company Act of 1935, as amended).
5.2 Representations and Warranties Regarding Sterling. Sterling
and Parent jointly and severally represent and warrant to Seller that as of
the date of this Agreement and the Closing Date:
(a) Sterling is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has full corporate power and authority to execute and deliver this
Agreement and each of the Buyer Related Documents to which it is a party
and to perform its obligations hereunder and thereunder. Sterling is duly
qualified or licensed to transact business in all of the jurisdictions in
which such qualification or licensing is required, except where the failure
to be so qualified or licensed would not be Material.
-22-
<PAGE>
(b) Sterling has full power and authority to perform the
provisions of this Agreement and each of the other Buyer Related Documents
to which it is a party, and this Agreement constitutes, and the Buyer
Related Documents, when executed and delivered by Sterling pursuant to the
terms hereof, will constitute, the legal, valid and binding obligations of
Sterling, enforceable against Sterling in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding at law or in equity).
(c) (i) The entire authorized capital stock of Sterling
consists of 11,000 shares, of which 10,000 shares are common stock, $0.01
par value per share, and 1,000 shares are preferred stock, par value $0.01
per share, of which 1,000 shares of common stock and none of the shares of
preferred stock are validly issued and outstanding, fully paid and non-
assessable.
(ii) Sterling has acquired the 1,000 shares of common stock
of Buyer solely in consideration of services rendered, and not for any cash
or property, and as of Closing, such shares may be transferred to Parent.
(d) The execution, delivery and performance of this
Agreement by Sterling, the execution, delivery and performance of each of
the Buyer Related Documents by Sterling to which it is a party and the
consummation of the transactions contemplated by this Agreement and each of
the Buyer Related Documents to which it is a party by Sterling will not:
(i) violate any provision of the Certificate of
Incorporation, Bylaws or similar constitutional documents of Sterling or
any law, regulation, ordinance, statute, rule, order, judgment, writ,
ruling, award, edict or decree of any Governmental Authority by which
Sterling may be bound or otherwise affected; or
(ii) except as set forth on Schedule 5.02(d)(ii), conflict
with, result in a breach of the terms and conditions of or violation of, or
result in the imposition of any Lien on or with respect to its business as
a result of the provisions of, or cause a default or termination under, any
mortgage, indenture, loan agreement, lease, commitment, agreement or other
instrument to which Sterling or any of its Affiliates is a party or by
which it or any of its business may be bound or affected.
(e) (i) Except as set forth in Schedule 5.02(e)(i), there
are no Proceedings pending or, to the best knowledge of Sterling and
Parent, threatened against or affecting Sterling, at law or in equity, or
before or by any Governmental Authorities having jurisdiction over Sterling
or brought by any third party that might reasonably be expected,
individually or in the aggregate, to affect Materially the business,
financial condition or results of operation of Sterling.
-23-
<PAGE>
(ii) Except for an H-S-R Filing and except as set forth in
Schedule 5.02(e)(ii), no consent, authorization, or approval of, or
exemption by, or filing with, any Governmental Authorities or self-
regulatory body or authority or any non-governmental third party, the
absence of which would be Material, is required in connection with the
execution, delivery and performance by Sterling of this Agreement or of any
of the Buyer Related Documents to which it is a party or the taking of any
action herein or therein contemplated.
(f) Sterling has not incurred any obligation or liability,
contingent or otherwise, for broker's or finder's fees with respect to the
matters provided for in this Agreement for which Seller will be
responsible.
(g) Neither Sterling nor any of its Subsidiaries is an
"investment company" or a company "controlled" by an investment company (as
defined in the Investment Company Act of 1940, as amended) or a "holding
company" or a "public utility" (as defined in the Public Utility Holding
Company Act of 1935, as amended).
5.3 Representations and Warranties Regarding Parent. Parent and
Sterling jointly and severally represent and warrant to Seller that as of
the date of this Agreement and the Closing Date:
(a) Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has full corporate power and authority to execute and deliver this
Agreement and each of the Buyer Related Documents to which it is a party
and to perform its obligations hereunder and thereunder. Parent is duly
qualified or licensed to transact business in all of the jurisdictions in
which such qualification or licensing is required, except where the failure
to be so qualified or licensed would not be Material.
(b) Parent has full power and authority to perform the
provisions of this Agreement and each of the other Buyer Related Documents
to which it is a party, and this Agreement constitutes, and the Buyer
Related Documents, when executed and delivered by Parent pursuant to the
terms hereof, will constitute, the legal, valid and binding obligations of
Parent, enforceable against Parent in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
applied in a proceeding at law or in equity).
-24-
<PAGE>
(c) (i) The entire authorized capital stock of Parent consists
of 3,750,000 shares, of which 750,000 shares are common stock, $0.01 par
value per share, and 3,000,000 shares are preferred stock, par value $0.01
per share, of which, prior to giving effect to the issuance of the Parent
Preferred Stock, the conversion thereof and the issuance of the Parent
Common Stock, 400,000 shares of common stock and 2,000,000 shares of
preferred stock, Series A, are validly issued and outstanding, fully paid
and non-assessable, and 116,945 shares of Parent common stock are reserved
for issuance pursuant to Parent's stock option plan and an outstanding
warrant issued by Parent and at Closing an additional 4,000 shares of
common stock may be outstanding and the number of shares of Parent common
stock subject to options may be reduced by such 4,000 shares. On the
Closing Date, after giving effect to the issuance of the Parent Common
Stock and the Parent Preferred Stock, such stock, assuming conversion of
the Parent Preferred Stock to common stock of Parent, will represent at
least 9.5% of the outstanding common stock of Parent as of the Closing
Date, on a fully diluted basis (including by giving effect to the exercise
of all options, warrants or other rights to purchase stock from Parent
outstanding as of the Closing Date). Set forth on Schedule 5.03(c)(i) is a
list of those Persons who owned of record more than 5% of the outstanding
common stock of Parent as of October 1, 1996.
(ii) Except as set forth in Schedule 5.03(c)(ii), there are
no outstanding subscriptions, options, convertible securities, warrants,
calls or rights of any kind granted or issued by Parent to purchase or
otherwise acquire any security of or equity interest in Parent.
(d) (i) As of the Closing Date, Parent shall have the
corporate power and authority to issue, sell and deliver the Parent
Preferred Stock and the Parent Common Stock.
(ii) As of the Closing Date, the issuance, sale and
delivery of the Parent Preferred Stock and the Parent Common Stock, will
have been duly authorized by all requisite corporate action on the part of
Parent, will not require the approval of its stockholders and will not
violate any provision of violate any provision of the Certificate of
Incorporation, Bylaws or similar constitutional documents of Parent or any
law, regulation, ordinance, statute, rule, order, judgment, writ, ruling,
award, edict or decree of any Governmental Authority by which Parent may be
bound or otherwise affected or conflict with, result in a breach of the
terms and conditions of or violation of, or result in the imposition of any
Lien on or with respect to its business as a result of the provisions of,
or cause a default or termination under, any mortgage, indenture, loan
agreement, lease, commitment, agreement or other instrument to which Parent
is a party or by which it or any of its business may be bound or affected.
(iii) As of the Closing Date, the issuance, sale and
delivery of the Parent Preferred Stock and the Parent Common Stock will not
be subject to any preemptive right of stockholders of Parent or to any
right of first refusal or other right in favor of any Person that has not
been waived.
-25-
<PAGE>
(iv) The Parent Preferred Stock and the Parent Common Stock,
when issued, will be duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any Lien, encumbrance or charge of
any kind created by, through or under Parent.
(v) Subject to the accuracy of the representations and
warranties of Seller hereunder, and except for the HSR Filing and the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, no registration or filing with, or
consent or approval of or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the
valid issuance, sale and delivery of the Parent Preferred Stock and the
Parent Common Stock by Parent as provided in the Subscription Agreement or
the transfer of the Option Stock to Seller pursuant to the Parent
Stockholder Options granted pursuant to the Option Acquisition Agreement.
(e) The execution, delivery and performance of this
Agreement by Parent, the execution, delivery and performance of each of
the Buyer Related Documents by Parent to which it is a party and the
consummation of the transactions contemplated by this Agreement and each of
the Buyer Related Documents to which it is a party by Parent and the
execution, delivery and performance of the Option Acquisition Agreement by
the Parties thereto other than Seller, the granting of Parent Stockholder
Options to Seller pursuant thereto and the exercise by Seller of the Parent
Stockholder Options pursuant to the terms thereof, will not:
(i) violate any provision of the Certificate of
Incorporation, Bylaws or similar constitutional documents of Parent or any
law, regulation, ordinance, statute, rule, order, judgment, writ, ruling,
award, edict or decree of any Governmental Authority by which Parent may be
bound or otherwise affected; or
(ii) conflict with, result in a breach of the terms and
conditions of or violation of, or result in the imposition of any Lien on
or with respect to its business as a result of the provisions of, or cause
a default or termination under, any mortgage, indenture, loan agreement,
lease, commitment, agreement or other instrument to which Parent or any of
its Affiliates is a party or by which it or any of its business may be
bound or affected.
(f) (i) Except as set forth in Schedule 5.03(f)(i), there
are no Proceedings pending or, to the best knowledge of Sterling and
Parent, threatened against or affecting Parent, at law or in equity, or
before or by any Governmental Authorities having jurisdiction over Parent
or brought by any third party that might reasonably be expected,
individually or in the aggregate, to affect Materially the business,
financial condition or results of operation of Parent.
-26-
<PAGE>
(ii) Except for an H-S-R Filing, no consent, authorization, or
approval of, or exemption by, or filing with, any Governmental Authorities
or self-regulatory body or authority or any non-governmental third party,
the absence of which would be Material, is required in connection with the
execution, delivery and performance by Parent of this Agreement or of any
of the Buyer Related Documents to which it is a party or the taking of any
action herein or therein contemplated.
(g) Parent has not incurred any obligation or liability,
contingent or otherwise, for broker's or finder's fees with respect to the
matters provided for in this Agreement for which Seller will be
responsible.
(h) Neither Parent nor any of its Subsidiaries is an
"investment company" or a company "controlled" by an investment company (as
defined in the Investment Company Act of 1940, as amended) or a "holding
company" or a "public utility" (as defined in the Public Utility Holding
Company Act of 1935, as amended).
5.4 No Other Representations and Warranties. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER BUYER, STERLING, PARENT NOR
ANY AGENT OR REPRESENTATIVE OF BUYER, STERLING OR PARENT HAS MADE, AND
BUYER, STERLING AND PARENT ARE NOT LIABLE FOR OR BOUND IN ANY MANNER BY,
ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTEES, PROMISES, STATEMENTS,
INDUCEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREIN, AND WITHOUT LIMITING THE
FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER, STERLING
AND PARENT ARE NOT LIABLE FOR OR BOUND BY (AND SELLER HAS NOT RELIED UPON)
ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS, OR ANY OTHER INFORMATION
RESPECTING ANY PORTION OF THIS AGREEMENT FURNISHED BY BUYER, STERLING AND
PARENT OR ANY EMPLOYEE, AGENT OR OTHER PERSON REPRESENTING OR PURPORTEDLY
REPRESENTING BUYER, STERLING OR PARENT.
-27-
<PAGE>
ARTICLE 6
INDEMNITY BY BUYER, STERLING AND PARENT
---------------------------------------
Buyer, Sterling and Parent shall jointly and severally indemnify, save
and hold Seller together with its officers, directors, employees,
consultants, representatives and agents and all of their respective heirs,
legal representatives, successors and assigns (collectively, the "Seller
Indemnified Parties") harmless from and against and in respect of all
claims, damages, judgments, penalties, costs, losses, expenses (including,
without limitation, reasonable attorneys' fees), fines, assessments, Taxes,
debts, liabilities and obligations of any nature whatsoever (collectively,
the "Losses") arising from, out of or in any manner connected with or based
on:
(a) the Assumed Liabilities assumed by Buyer as required by Section
3.01 hereunder;
(b) except for Excluded Liabilities, Buyer's ownership, use,
operation or maintenance of any of the Assets on or after the Closing Date;
and
(c) subject to the limitations of Article 15, any inaccuracy in any of
the representations or warranties of Buyer, Sterling or Parent contained in
this Agreement or any of the Buyer Related Documents or the breach of any
covenant or nonfulfillment of any agreement on the part of Buyer, Sterling
or Parent under this Agreement or any of the Buyer Related Documents.
ARTICLE 7
SELLER'S INDEMNITY
------------------
Seller shall indemnify, save and hold harmless Buyer, Sterling and
Parent and their respective secured bank lenders together with all of their
respective officers, directors, employees, consultants, representatives and
agents and all of their respective heirs, legal representatives, successors
and assigns (collectively, the "Buyer Indemnified Parties") from and
against and in respect of all Losses incurred by any of them to the extent
they arise from, out of or in any manner connected with or based on:
(a) any liabilities, claims, losses, damages, or expenses,
direct or contingent, known or unknown, of Seller or any of its Affiliates,
including, without limitation, the Excluded Liabilities;
(b) the Excluded Assets;
-28-
<PAGE>
(c) Seller's obligations pursuant to Article 14 of this
Agreement;
(d) any act, omission, event, circumstance, occurrence or
condition occurring or existing on or prior to the Closing Date and
involving or relating to any of the Assets or Seller's related operations;
or
(e) subject to the limitations of Article 15, any
inaccuracy in any of the representations and warranties of Seller
contained in this Agreement or any of the Seller Related Documents or the
breach of any covenant or nonfulfillment of any agreement on the part of
Seller under this Agreement, or any of the Seller Related Documents.
ARTICLE 8
INTERIM PERIOD
--------------
Seller, Buyer, Sterling and Parent covenant and agree that between the
date of this Agreement and the Closing Date:
8.1 Access.
(a) Seller shall provide or cause to be provided to Buyer,
Sterling and Parent and their respective lenders, underwriters, placement
agents and their respective legal counsel, accountants, engineers,
regulatory and environmental consultants and other representatives
reasonable access during normal business hours to Seller's and its
Affiliates personnel with knowledge of the Equipment Product Lines or any
of the Assets, to the Facilities and to the books, records, Contracts,
Equipment Permits, commitments and other data related to the operation of
the Equipment Product Lines and the ownership, operation or use of any of
the Assets.
(b) Buyer shall provide or cause to be provided to Seller
and its legal counsel and accountants reasonable access during normal
business hours to Buyer's, Sterling's and Parent's personnel with knowledge
of the Business of Parent.
8.2Operate Assets in Ordinary Course. Except as otherwise provided in this
Agreement, or otherwise consented to or requested by Buyer in writing,
Seller and its Subsidiaries shall operate the Assets solely in the ordinary
course of business. Specifically, Seller and its Subsidiaries shall, prior
to the Closing Date, prosecute and maintain the Intellectual Property
Rights as set forth in the Intellectual Property Rights Agreement.
-29-
<PAGE>
8.3 No Material Change or Material Commitments as to Assets.
Seller agrees that without the prior written consent or at the written
request of Buyer, Seller or its Subsidiaries shall not:
(a) demolish, remove, alter, enlarge or dispose of the
Material Assets;
(b) make any Material change in the operation of any of the
Assets;
(c) mortgage, pledge, or subject to any Lien any of the
Assets, or suffered any of the same to be imposed;
(d) except for transactions that are not Material in the
aggregate, sell, assign, convey, transfer, scrap or otherwise dispose of
any of the Assets, except for the sale of finished Inventories in the
ordinary course of business, or make any offer or otherwise negotiate with
respect to or enter into any agreement or other arrangement providing for
any such disposition;
(e) increase the salary or wage rates or form or amount of
compensation of any of the employees of Seller associated with the
Equipment Product Lines or any of the Assets, except increases in the
ordinary course of business, or, with the exception of those employees
previously disclosed to Buyer, pay any bonus or unusual compensation to any
of Seller's agents or employees or make any agreements with respect
thereto, except in accordance with Seller's general employment practices or
policies;
(f) except for transactions that are not Material in the
aggregate, enter into any transaction in connection with or with respect to
the ownership, operation, maintenance or use of any of the Assets except in
the ordinary course of business;
(g) fail to maintain its books of account respecting the
Equipment Product Lines or the sale and distribution of Laser Films in the
usual, regular and ordinary manner in accordance with GAAP consistently
applied;
(h) except in the ordinary course of business, amend,
cancel or terminate (nor permit to be canceled or terminated) any Contract
or Equipment Permit (except for Contracts involving the payment to or by
Seller of $25,000 or less);
(i) enter into any transaction or operate any of the Assets
in a manner that would cause any of the representations and warranties of
Seller contained in this Agreement to be or become untrue in any Material
respect;
-30-
<PAGE>
(j) enter into or assume any contract, agreement,
obligation, lease, license, or commitment with respect to the Equipment
Product Lines or any of the Assets not in the ordinary course of business;
(k) make any change in any of its accounting methods or
practices with respect to any of the Assets;
(l) fail to operate any of the Assets in compliance with all
applicable laws, ordinances, rules and regulations of any Governmental
Authorities;
(m) fail to keep in force all insurance policies related to
any of the Assets;
(n) fail to maintain and preserve goodwill associated with
the Equipment Product Lines or any of the Assets, use its reasonable
efforts to retain employees associated with the Equipment Product Lines or
any of the Assets, preserve relationships with customers, suppliers and
others having business relations with Seller regarding the Equipment
Product Lines or any of the Assets; or
(o) agree to become subject to any consents, approvals,
authorizations, filings or regulations required for execution, delivery and
performance by Seller of this Agreement and the other Seller Related
Documents.
8.4 Efforts to Preserve Relationships and Organization. Except as
otherwise provided herein, or consented to or requested by Buyer in
writing, Seller and its Subsidiaries shall use their reasonable efforts to
preserve intact its business organizations relating to the Assets, and to
preserve its relationships with Material suppliers with respect to the
Assets and Material customers of the Equipment Product Lines and Laser
Films.
8.5 Publicity. Except as provided in Section 15.01, prior to
Closing, any press releases by Parent, Sterling, Buyer or Seller that
pertain to this Agreement or the transaction contemplated hereunder shall
be reviewed and approved in writing by all Parties prior to release. Such
approval shall not be unreasonably withheld.
8.6 Work Diligently Towards Closing. The Parties shall each use
all reasonable efforts to work diligently, including obtaining all
necessary governmental approvals and filings, towards completing the
transaction contemplated by this Agreement on the scheduled Closing Date.
8.7 Standstill. Seller shall not directly or indirectly solicit,
initiate or encourage the initiation of inquiries or proposals from, or
participate in any negotiations with, any Person or entity, other than
Buyer, Parent and Sterling and their representatives, concerning, or commit
to or consummate, directly or indirectly, through merger, reorganization,
sale of stock, or otherwise, the disposition of any Asset, other than the
sale of Inventory in the ordinary course of business.
-31-
<PAGE>
8.8 Requested Financial Statements. Buyer and Seller anticipate
that neither Buyer nor Parent will be legally required to include financial
information of the Seller in any future filing with the Securities and
Exchange Commission ("SEC") which Buyer or Parent may make. Nevertheless,
at the request of Buyer, Seller, at its expense, shall (i) no later than
60 days from the date of Buyer's request deliver to Buyer, Sterling and
Parent audited and or unaudited historical financial statements and
operating information and summary financial information (including
schedules and footnotes) related to the Equipment Product Lines, the sale
by Seller of Laser Films and the Assets to the extent (but only to the
extent) necessary to enable Buyer, Seller or Parent to comply with the
federal and state requirements relating to the public issuance of
securities and for reporting requirements under any applicable laws,
including, without limitation, the Securities Exchange Act of 1934, as
amended, of the United States (the "Exchange Act"), and (ii) use its best
efforts to deliver to Buyer, Sterling and Parent no later than 60 days from
the date of Buyer's request, any opinions, certificates, reports and
consents relating to any of the foregoing, to the extent (but only to the
extent) necessary, in the opinion of Buyer, Sterling or Parent, to enable
Buyer, Sterling or Parent to comply with any requirements of applicable
federal or state requirements relating to the public issuance of securities
or reporting requirements under any applicable laws (collectively, the
"Requested Financial Statements"). Upon request of Buyer, Seller shall
also provide to Buyer, Sterling and Parent such other information regarding
the Equipment Product Lines, the marketing and sale by Seller of Laser
Films and the Assets as may reasonably be requested by Buyer, Sterling or
Parent.
8.9 Risk of Loss. Prior to the Closing and the delivery of
possession of the Assets to Buyer in accordance with this Agreement, all
risk of loss to any of the Assets (whether by casualty or otherwise) shall
be borne by Seller. In the event that any Material loss or damage to any
of the Assets shall occur prior to the Closing Date as a result of fire or
other casualty, Seller shall give Buyer immediate written notice of such
loss or damage. If, prior to Closing and the delivery of possession of
the Assets to Buyer in accordance with this Agreement, there is a Material
casualty loss or casualty damage to any of the Assets, Seller shall have
the right to (a) restore such Assets to the condition immediately prior to
the loss or damage and the Closing shall be adjourned for a reasonable
period to allow Seller to effect the necessary repair or reconstruction or
(b) invoke the provisions of Section 3.08 of this Agreement, which also may
be invoked by Buyer. Seller covenants, if Seller elects to restore, to
proceed diligently with all repairs hereunder in a workmanlike manner.
Notwithstanding the foregoing, if in order to effect the repairs as
aforesaid, the Closing Date would have to be extended by more than 120
days, as reasonably estimated by Buyer, Buyer shall have the right to
terminate this Agreement by written notice to Seller.
-32-
<PAGE>
8.10 Notification. Seller shall notify Buyer, Sterling and Parent
immediately after becoming aware of (i) the occurrence of any circumstance
that would make any representation, warranty or statement of Seller
contained herein, in light of the circumstances in which it was made,
misleading in any material respect or (ii) the failure by Seller to satisfy
any covenant in this Agreement. Buyer, Sterling and/or Parent, as the case
may be, shall notify Seller immediately after becoming aware of (i) the
occurrence of any circumstances that would make any representation,
warranty or statement of Buyer, Sterling and/or Parent, as the case may be,
contained herein, in light of the circumstances in which it was made,
misleading in any material respect or (ii) the failure by Buyer, Sterling
and/or Parent to satisfy any covenant in this Agreement.
8.11 Waiver. At any time prior to the Closing, either Seller,
Buyer, Sterling or Parent, as the case may be, may extend the time for the
performance of any of the obligations or other acts of Seller, Buyer,
Sterling or Parent, respectively. Any agreement by the Parties to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such Parties by duly authorized officers.
8.12 Other Agreements. It is agreed and understood that, prior to
Closing, the Parties will, if necessary, draft separate agreements
governing the transfer by Seller and its Subsidiaries to Buyer and its
Affiliates of certain Assets located in specific countries.
ARTICLE 9
EMPLOYEE BENEFIT MATTERS
------------------------
9.1 Offer of Employment. Seller has provided to Buyer as of the
date hereof a list of employees of Seller associated with the Equipment
Product Lines or any of the Assets setting forth the status of such
employees and their compensation, who will be full-time, active employees
on the Closing Date, including those on temporary leave for jury duty,
family and short-term medical leave, vacation or annual two-week military
duty. Buyer shall provide to Seller at least 10 days prior to the Closing
Date a list of such employees to whom Buyer or its Affiliates will offer
employment (the "Employee List"). Seller shall use all reasonable efforts
(which does not include the increase in any benefits under any employee
benefit program, plan or arrangement) to cause such employees to accept
Buyer's or its Affiliates' offers of employment. Reasonable efforts for
the purpose of this Article shall mean communicating the benefits to such
employees and the benefits set forth in this Article to encourage their
employment with the Buyer. Reasonable efforts shall neither preclude the
Seller from retaining those employees who do not accept employment offers
from the Buyer; nor require the Seller to provide any payment or benefit
which is not set forth in this Agreement. Prior to any employee's
acceptance or rejection of an offer of employment from the Buyer, Seller
shall not provide any incentive for any employee to remain in the
employment of the Seller. Those employees who accept such offers of
employment and become employees of the Buyer or its Affiliates prior to
February 14, 1997 shall be referred to herein as "Transferred Employees".
Employees listed on the Employee List who as of the Closing Date are on
short term medical leave shall not be deemed Transferred Employees if they
do not report for work within six (6) months of the commencement of such
leave and shall remain the responsibility of Seller.
-33-
<PAGE>
9.2 Service Under Buyer's Plans. Except as otherwise provided in
this Article 9, Transferred Employees shall not be credited for their
service with Seller for purposes of participation, eligibility and vesting
under the benefit plans and programs provided by Buyer or its Affiliates.
9.3 Welfare Benefits.
(a) On the date a Transferred Employee becomes an employee
of the Buyer or its Affiliates as set forth in Section 9.01, (i) the
Transferred Employee and his or her dependents that participate in any
other "employee welfare benefit plan" (as defined by Section 3(1) of
ERISA) that is maintained by Seller (collectively, the "Seller Welfare
Plans") shall cease to do so and (ii) except as otherwise provided in
Sections 9.03(c), 9.08 and 9.09, such Transferred Employee and dependents
shall commence participation in any "employee welfare benefit plan" (as
defined by Section 3(1) of ERISA) maintained by Buyer or its Affiliates for
individuals employed by Buyer or its Affiliates (collectively, the "Buyer
Welfare Plans") upon the satisfaction of any eligibility requirements as
set forth in the Buyer Welfare Plan.
(b) The Seller Welfare Plans shall not be liable for
payment of claims incurred by eligible Transferred Employees, except as
otherwise provided by this Section 9. The Seller Welfare Plans shall be
liable for the payment of benefits to eligible Transferred Employees and
their eligible dependents for expenses incurred under the Seller Welfare
Plans prior to the date the Transferred Employees become employees of the
Buyer or its Affiliates.
(c) The Buyer Welfare Plan or Plans that provide medical,
health and dental care benefits to Transferred Employees (collectively, the
"Buyer Medical Plans") shall waive any coverage waiting period, pre-
existing condition and actively-at-work requirements, and shall provide
that any expenses incurred by a Transferred Employee (and his or her
dependents) prior to the date the Transferred Employee becomes an employee
of the Buyer or its Affiliates during the calendar year in which the
Transferred Employees becomes an employee of the Buyer or its Affiliates
shall be taken into account for purposes of satisfying the applicable
deductible, coinsurance and maximum out-of-pocket provisions, and
applicable annual and/or lifetime maximum benefit limitation of the Buyer
Medical Plans. The Buyer Medical Plans shall require employee
contributions at a rate that does not exceed the rate in effect for other
individuals employed by Buyer.
-34-
<PAGE>
(d) The Buyer Welfare Plans shall be liable for the payment
of claims of eligible Transferred Employees and their eligible dependents
for expenses incurred under the Buyer Welfare Plans on or after the date
the Transferred Employee becomes an employee of the Buyer or its
Affiliates, notwithstanding the fact that any such expense may be related
to another expense that was paid or is eligible for payment under the terms
of any of the Seller Welfare Plans or was related to any treatment for any
condition diagnosed or existing prior to the Closing Date.
(e) The post-retirement welfare benefits for Transferred
Employees who retire under the Seller Welfare Plans (as such plans exist
when a Transferred Employee is eligible to receive post-retirement benefits
under such Seller Welfare Plans and recognizing that the Seller Welfare
Plans for post-retirement benefits may be amended, modified or terminated)
and are eligible for such retirement benefits shall be the sole
responsibility of Seller upon Transferred Employees' retirement from Buyer,
and Seller shall allow all such Transferred Employees to elect to receive
the post retirement welfare benefits from Seller after retirement from the
Buyer. The Transferred Employees who can elect post-retirement welfare
benefits from Seller shall not make any premium payments to Seller while
employed by Buyer to continue to maintain the right to elect post-
retirement benefits under any Seller Welfare Plan. Buyer shall provide
primary medical and dental coverage to Transferred Employees while they are
actively employed by Buyer. No service of a Transferred Employee with the
Buyer shall be recognized under the Seller Welfare Plans.
9.4 Pension Benefits. On the date a Transferred Employee becomes
an employee of Buyer or its Affiliates as set forth in Section 9.01, (i)
the Transferred Employee that participates in any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) that is maintained by Seller
(collectively, "Seller Pension Plans") shall cease to do so and (ii) such
Transferred Employee shall commence participation in any "employee pension
benefit plan" of Buyer or its Affiliates for individuals employed by Buyer
of its Affiliates (collectively, "Buyer Pension Plans") upon the
satisfaction of any eligibility requirements set forth in the Buyer Pension
Plans.
9.5 Workers' Compensation. With respect to Transferred Employees,
Seller shall assume and be responsible for all liabilities in connection
with all occurrences prior to the date the Transferred Employee becomes an
employee of the Buyer or its Affiliates under workers' compensation laws.
Buyer or its Affiliates shall assume and be responsible for all liabilities
in connection with all occurrences on or after the date the Transferred
Employee becomes an employee of the Buyer or its Affiliates by Transferred
Employees under workers' compensation laws.
-35-
<PAGE>
9.6 Discharge of Employee Benefits Obligations.
(a) Except for liabilities and claims to be assumed by
Buyer under this Article 9, Seller shall discharge all liabilities to and
claims of Transferred Employees or employees of Seller arising out of their
employment with Seller including, but not limited to, claims arising out of
any employee benefit plan maintained by Seller or for retiree medical
benefits promised, provided or subsidized by Seller after the Closing Date
(as such employee benefit plans of the Seller exist when claims are to be
paid by Seller and recognizing that such employee benefit plans of the
Seller may be amended, modified or terminated).
(b) Except for liabilities assumed by Seller under this
Article 9, Buyer or its Affiliates shall discharge all liabilities to and
claims of Transferred Employees or employees of Buyer or its Affiliates
arising out of their employment with Buyer or its Affiliates including, but
not limited to, any claims arising out of any employee benefit plan
maintained by Buyer or its Affiliates.
9.7 Wage Reporting. Buyer and Seller will follow the "standard"
IRS procedure (as outlined in Section 4 of Revenue Procedure 84-77, 1984-2
C.B. 753) with regards to reporting of wages on form W-2 and disposition of
forms W-4 and W-5. Under the standard procedure, the predecessor performs
all reporting duties for wages and other compensation it pays. The
successor reports only its own payments of wages and other compensation.
Also, Transferred Employees must provide the successor employer with new
forms W-4 and W-5 for the current year. Both the predecessor and successor
must provide the employees with form W-2 by January 31 of the next year.
However, if requested by the employee, the predecessor must furnish the
form W-2 within 30 days of the request or within 30 days after the final
payment of wages, whichever is later. Additionally, the predecessor must
retain on file all the forms W-4 and W-5 provided by its former employees.
9.8 Vacation. Seller shall discharge its liability to any
Transferred Employee for vacation accrued through the date a Transferred
Employee's employment with the Seller terminates. With respect to a
Transferred Employee, Buyer or its Affiliates shall credit all service
recognized under Seller's vacation policy through a Transferred Employee's
last day of employment with Seller in the calculation of the amount of
vacation a Transferred Employee has accrued under Buyer's or its
Affiliate's vacation policy.
9.9 Severance. Seller shall discharge its liability to any
Transferred Employee for severance benefits accrued through the date a
Transferred Employee's employment with the Seller terminates. With respect
to a Transferred Employee, Buyer or its Affiliates shall credit all service
recognized under Seller's severance policy through a Transferred Employee's
last day of employment with Seller in the calculation of the amount of
severance benefit a Transferred Employee has accrued under Buyer's or its
Affiliate's severance policy or program.
-36-
<PAGE>
9.10 Employee Rights. Nothing contained herein (a) shall confer
upon any former, current or future employee of Seller or its Subsidiaries
or Buyer or its Affiliates or any legal representative or beneficiary
thereof any rights or remedies, including, without limitation, any right to
employment or continued employment of any nature, for any specified period,
or (b) shall cause the employment status of any former, present or future
employee of Buyer or its Affiliates to be other than terminable at will.
ARTICLE 10
CONSENTS
--------
10.1 Consents. The sale contemplated by this Agreement is
conditional upon receipt prior to Closing of the approvals, consents,
authorizations and waivers from Governmental Authorities and third parties
that are required to consummate the sale contemplated by this Agreement,
including, without limitation, an H-S-R Filing.
10.2 Efforts. Each Party shall use its reasonable efforts to obtain
all authorizations, consents, orders and approvals of, and to give all
notices to and make all filings with, all Governmental Authorities and
other third parties that may be or become necessary for its execution and
delivery of, and the performance of its obligations pursuant to this
Agreement and other Related Documents, including, without limitation, the
transfer the Assets to Buyer as contemplated by the Agreement, and each
Party will cooperate fully with the other Parties in promptly seeking to
obtain all such authorizations, consents, orders and approvals, giving such
notices, and making such filings. The Parties acknowledge that time shall
be of the essence in this Agreement and agree not to take any action that
will have the effect of unreasonably delaying, impairing or impeding the
receipt of any required authorizations, consents, orders or approvals.
ARTICLE 11
CLOSING
-------
11.1 Place and Date of Closing. The closing of the transaction
contemplated by this Agreement (the "Closing") shall take place at the
offices of Bracewell and Patterson, L.L.P., in Houston, Texas at 10:00 am
local time on November 25, 1996, or on the fifth business day following the
fulfillment of the conditions stated in Article 12 of this Agreement,
whichever shall later occur.
-37-
<PAGE>
11.2 Deliveries at Closing. At the Closing, Buyer, Sterling or
Parent shall:
(a) Deliver to Seller the cash in the amount of the
Estimated Initial Inventory Value, a certificate representing the Buyer
Common Stock, a certificate representing the Buyer Preferred Stock to be
issued to Seller on the Closing Date pursuant to the Subscription Agreement
and certificates representing the Parent Preferred Stock and the Parent
Common Stock to be issued to Seller on the Closing Date pursuant to the
Subscription Agreement.
(b) Deliver to Seller a certificate of duly authorized
officers of Buyer, Sterling and Parent confirming the accuracy on the
Closing Date of the representations and warranties of Buyer, Sterling and
Parent contained herein and in the Buyer Related Documents and the
performance of the covenants contained herein.
(c) Deliver to Seller a legal opinion of legal counsel to
Buyer, Sterling and Parent, in form reasonably satisfactory to Seller's
legal counsel.
(d) If a Party thereto, execute and deliver the
Subscription Agreement, the Intellectual Property Rights Agreement and the
associated licenses described therein, substantially in the form attached
hereto as Exhibit B (the "Intellectual Property Rights Agreement"), an
Exclusive Film Supply Agreement substantially in the form attached hereto
as Exhibit C (the "Film Supply Agreement"), a Laser Diode Supply Agreement
substantially in the form attached hereto as Exhibit D (the "Laser Diode
Supply Agreement"), an Exclusive Sales Agency Agreement in a form that is
substantially in the form attached hereto as Exhibit E (the "Exclusive
Sales Agency Agreement"), a Transitional Services Agreement substantially
in the form attached hereto as Exhibit F regarding transitional services to
be provided by Seller to Buyer and the removal and relocation of the Assets
(the "Transitional Services Agreement"), and a Technology, Research and
Development Agreement substantially in the form attached hereto as Exhibit
G (the "Technology, Research and Development Agreement") and any other
agreements contemplated in this Agreement and executed in connection with
this Agreement or the transactions contemplated hereby (the documents
specified in this Section 11.02(d) being collectively referred to as the
"Buyer Related Documents").
(e) Cause to be executed and delivered to Seller by the
parties thereto other than Seller the Option Acquisition Agreement.
-38-
<PAGE>
11.3 Seller Deliveries At Closing. At the Closing, Seller shall:
(a) Deliver to Buyer, Sterling and Parent a certificate of
a duly authorized officer of Seller confirming the accuracy on the Closing
Date of the representations and warranties of Seller contained herein and
in the Seller Related Documents and the performance of the covenants
contained herein.
(b) Deliver to Buyer, Sterling and Parent a legal opinion
of Seller's legal counsel in form reasonably satisfactory to Buyer's legal
counsel.
(c) Execute or cause to be executed and deliver such
assignments, bills of sale, endorsements, notices, consents, assurances and
such other instruments of conveyance and transfer as counsel for Buyer
shall reasonably request and as shall be effective to vest in Buyer good
and marketable title to all of the Assets including, without limitation, a
Bill of Sale in a form mutually agreeable to the Parties, the Intellectual
Property Rights Agreement and associated assignments and licenses described
therein, the Subscription Agreement, the Film Supply Agreement, the Laser
Diode Supply Agreement, the Transitional Services Agreement, the
Technology, Research and Development Agreement, the Option Acquisition
Agreement and any other agreements contemplated in this Agreement and
executed in connection with this Agreement or the transactions contemplated
hereby (the documents specified in this Section 11.03(c) being collectively
referred to as the "Seller Related Documents"). Simultaneously with the
delivery of such Bill of Sale, Seller shall take all such steps as may be
necessary to put Buyer in actual and exclusive possession and control of
the Assets.
ARTICLE 12
CONDITIONS TO CLOSING
---------------------
12.1 Seller. The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject, at the option of
Seller, to the satisfaction or waiver of the following conditions:
(a) All representations and warranties of Buyer, Sterling
and Parent contained in this Agreement and in the Buyer Related Documents
shall be true and correct and all covenants contained in this Agreement
(the breach of which, singly or in the aggregate, would be material) to be
performed by Buyer, Sterling or Parent prior to Closing shall have been
substantially performed;
-39-
<PAGE>
(b) As of the Closing, no order, writ, injunction, or
decree shall have been entered and be in effect that restrains, enjoins or
invalidates, or otherwise materially adversely affects the transactions
contemplated by this Agreement and no action, suit or other proceeding
shall be pending or threatened that has a reasonable likelihood of
resulting in any such order, writ, injunction or decree;
(c) Seller shall have received certified corporate
resolutions in form and substance reasonably satisfactory to Seller, of the
Board of Directors of Buyer, Sterling and Parent authorizing the execution
and delivery of this Agreement and the Buyer Related Documents and the
consummation of the transactions contemplated herein and therein;
(d) Seller shall have received, in form and substance
reasonably satisfactory to Seller, evidence of the existence and good
standing of Buyer, Sterling and Parent under the laws of Delaware;
(e) Seller shall have received the deliveries required
under Section 11.02;
(f) All consents and approvals of Governmental Authorities
required under Article 10 shall have been obtained; and
(g) Seller shall be reasonably satisfied with Buyer's
Certificate of Designation with respect to the Buyer Preferred Stock.
12.2 Buyer, Sterling and Parent. The obligations of Buyer, Sterling
and Parent to consummate the transactions contemplated by this Agreement
are subject, at the option of Buyer, Sterling and Parent to the
satisfaction or waiver of the following conditions:
(a) All representations and warranties of Seller contained
in this Agreement and the Seller Related Documents shall be true and
correct and all covenants contained in this Agreement (the breach of which,
singly or in the aggregate, would be material) to be performed by Seller
prior to Closing shall have been substantially performed;
(b) As of the Closing, no order, writ, injunction or decree
shall have been entered and be in effect that restrains, enjoins or
invalidates, or otherwise materially adversely affects the transactions
contemplated by this Agreement, and no action, suit or other proceeding
shall be pending or threatened that has a reasonable likelihood of
resulting in any such order, writ, injunction or decree;
-40-
<PAGE>
(c) Buyer shall have received certified corporate or other
enabling resolutions, in form and substance reasonably satisfactory to
Buyer and its counsel, of the Board of Directors of Seller, authorizing
Seller to execute and deliver this Agreement and the Seller Related
Documents and to consummate the transactions contemplated herein and
therein;
(d) Buyer shall have received copies of all consents and
approvals of all Governmental Authorities or third parties, whether
required contractually or by applicable law or otherwise, necessary for the
execution, delivery and performance of this Agreement and the Seller
Related Documents by Seller and the continued operation of the Equipment
Product Lines and the transfer, ownership, operation and use of the Assets;
(e) Buyer shall have received such releases, assignments,
termination statements, consents, approvals or other documents or
instruments required, in the reasonable judgment of Buyer, to release and
terminate any Liens against any of the Assets;
(f) All documents and instruments to be executed or
delivered to Buyer, Sterling or Parent pursuant to Section 11.03 shall have
been so executed or delivered;
(g) Buyer shall have, through the exercise of its
commercially reasonable efforts, arranged for the provision of its working
capital needs on terms commercially reasonably acceptable for a like-
situated entity;
(h) The arrangements with respect to Buyer's use of the P-
97 technology shall be satisfactory to Buyer in its sole discretion;
(i) If and to the extent Buyer is to retain any obligations
under that certain Sales/Distribution/Services Agreement dated March 16,
1992, between Seller and Picker International, Inc, as amended, Buyer shall
be satisfied with the arrangements negotiated among Seller, Buyer and
Picker International, Inc., regarding the assignment and modification
thereof;
(j) (i) The Seller's employees set forth on Schedule
12.02(j) or Seller's employees with skill sets equivalent to those
employees set forth on Schedule 12.02(j) and acceptable to Buyer
(collectively, the "Core Employees") shall have agreed to become employees
of Buyer, Sterling or one of Sterling's Subsidiaries on the Closing Date or
on a date that is designated by Buyer and that is within 60 days following
the Closing Date or, (ii) to the extent any Core Employee does not agree to
become an employee of Buyer, Sterling or one of Sterling's Subsidiaries,
Seller shall have agreed to provide transitional services to fulfill such
Core Employee's functions on terms that are satisfactory to the Parties;
and
-41-
<PAGE>
(k) The Parties shall be reasonably satisfied with respect
to all documents and arrangements relating to the transfer of any Assets
and the employment of any employees located outside the United States;
(l) Within five (5) business days after the date of this
Agreement, Buyer shall provide Seller a written list of certain
distribution agreements to which Seller or one of its Subsidiaries is a
Party. Prior to Closing, all distribution agreements set forth on such
list shall have been amended by Seller, if necessary, to be non-exclusive
or alternatively, at Buyer's sole option, any exclusive agreements that
cannot be amended by Seller will be retained by Seller, not assigned to
Buyer and deleted from Schedule 2.01(e) of this Agreement;
(m) Within five (5) business days after the receipt from
Seller of the agreements listed in Schedule 12.02(m) of this Agreement,
Buyer shall be reasonably satisfied that such agreements shall have terms
and conditions similar to agreements, if any, previously reviewed by
Buyer.
(n) Within five (5) business days after the receipt from
Seller of completed versions of Schedules 2.01(a) and 2.01(d) of this
Agreement, Buyer shall be reasonably satisfied that the assets listed on
such schedules are the assets that constitute the assets used primarily
with respect to the Equipment Product Lines and the Inventory; and
(o) Within five (5) business days after the receipt from
Seller of completed versions of Schedules 1.29, 2.01(e), 2.02 and 4.07(b)
of this Agreement, Buyer shall be reasonably satisfied with the form of the
disclosures set forth thereon.
ARTICLE 13
POST CLOSING
------------
Seller, Buyer, Sterling and Parent agree that after the Closing Date:
13.1 Receivables. In the event a payment is made to Buyer, Sterling
or Parent on any Receivables retained by Seller, Buyer, Sterling or Parent,
as the case may be, shall promptly forward to Seller the amount thereof.
Buyer shall apply each customer payment received by Buyer to the reduction
of such customer's outstanding balance by first applying such payments to
the oldest outstanding invoice, unless the customer directs otherwise,
unless such invoice is the subject of a good faith dispute, in which case
such payments will be applied to the oldest invoice that is not the subject
of such a dispute. Payments that the customer has directed to be applied
to a specific invoice shall be applied to such invoice.
-42-
<PAGE>
13.2 Records. Upon the request of Buyer made within three years
after the Closing Date, Seller shall promptly provide Buyer copies of (i)
all records, books, files, ledgers, documents and correspondence,
confidential and otherwise, in whatever form and wherever located, relating
to the Equipment Product Lines, including, without limitation, all data
and information relating to historical sales transactions, market
information, sales aids, customer and supplier lists, capital expenditure
plans and studies, maintenance and repair reports, accounting, health and
safety records, financial records, plans and designs for capital and cost
reduction projects and manufacturing, maintenance and quality control
records, and (ii) all records, books, files, ledgers, documents and
correspondence, confidential and otherwise, in whatever form and wherever
located, relating to the Film Assets, including, without limitation, market
information, all data and information relating to historical sales
transactions, sales aids, and customer lists.
13.3 Delivery of Transferred Employee Records. Seller shall deliver
to Buyer all personnel records, including medical files required to be
maintained by Seller pursuant to its records retention policy and which
Seller is authorized to transfer, on the Transferred Employees who consent
to such delivery in the event such consent is necessary under applicable
law, as evidenced by a consent form delivered to Seller in form reasonably
satisfactory to Seller.
13.4 Cooperation in Litigation. After Closing, the Parties shall
reasonably cooperate in the defense or prosecution of any litigation or
proceeding instituted against or by any Party pertaining to any of the
Assets or the Equipment Product Lines, excluding, however, any litigation
between any of the Parties (including their Affiliates). Such cooperation
shall include, but not be limited to, conferring with the attorneys or
experts of any of the Parties during normal business hours at mutually
convenient times and making available to any other Party's attorneys
documents or copies of documents specific to any of the Assets or the
Equipment Product Lines, and such cooperation shall include giving
testimony voluntarily. Such cooperation shall not require the cooperating
Party to be joined as a party in any such litigation. Each Party further
agrees that it shall not voluntarily disclose to any third party, without
the other Parties' consent, any information or documents received by it
heretofore or hereafter from any other Party's attorneys in connection with
the defense or prosecution of any litigation or proceedings. The
requesting Party(ies) shall pay the out-of-pocket expenses of the
cooperating Party and those expenses of the cooperating Party's employees
and agents reasonably incurred in connection with providing such
cooperation but shall not be responsible for paying any fees or for
reimbursing the cooperating Party for the salaries or costs of fringe
benefits or other similar expenses of the cooperating Party's employees and
agents in connection with time spent providing such cooperation to the
requesting Party(ies).
-43-
<PAGE>
13.5 Non Competition.
(a) Except as provided in this Section 13.05, for six years
after the Closing Date neither Seller nor any of its Subsidiaries shall,
directly or indirectly, through equity ownership, contract or otherwise,
engage in any business that competes in any part of the world with the
Business of Parent; provided, however, that neither the foregoing
prohibition nor anything else in this Agreement to the contrary shall
prevent the Seller or any of its Subsidiaries from, (i) manufacturing,
marketing or selling any products or services that are manufactured,
marketed, sold or provided by Seller or any of its Subsidiaries for their
own behalf immediately after the Closing (the "Existing Products") or from
manufacturing, marketing or selling any enhancements or improvements of any
Existing Products that are developed after the Closing Date, (ii)
acquiring (by merger or otherwise) securities or assets of a business if
the gross revenue of such acquired business that is attributable to a
business that competes in any part of the world with the Business of Parent
constitutes less than 10% of the total gross revenues of such acquired
business (or if greater than 10%, such portion over 10% is disposed of by
Seller within six (6) months after such acquisition), (iii) engaging
anywhere in the world in the activities listed on Schedule 13.05, or (iv)
manufacturing, marketing or selling any product resulting from a technology
with respect to which Buyer has waived its rights pursuant to the
Technology, Research and Development Agreement.
(b) The Parties acknowledge and agree that the restrictions
contained in this Section 13.05 are fair and reasonable and necessary to
accomplish the full transfer of the technology and other intangible assets
contemplated hereby and the licensing to Buyer of exclusive rights to
technology and other Intellectual Property Rights. If, at the time of
enforcement of any provision of this Section 13.05, a court or other
tribunal shall hold that the restrictions therein are unreasonable or
unenforceable under circumstances then existing, the Parties agree that the
maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
(c) The Parties agree that in the event of any breach by
Seller or any of its Subsidiaries of any of the provisions of this Section
13.05, money damages would be inadequate and Buyer, Sterling and Parent
would have no adequate remedy at law. Accordingly, notwithstanding
anything to the contrary contained in this Agreement, the Parties agree
that Buyer, Sterling and Parent, or any of them, shall have the right, in
addition to any other rights and the obligations under this Section 13.05,
to seek an adequate remedy for such breach, not only by an action for
damages but also by an action or actions for specific performance,
injunction and/or other equitable relief in order to enforce or prevent any
violations (whether anticipatory, continuing or future) of the provisions
of this Section 13.05.
-44-
<PAGE>
13.6 Buyer Debt. After the Closing and for so long as Seller owns
any equity interest in the Buyer, Buyer shall not incur any debt for
borrowed money other than (i) pursuant to an working capital line of credit
in an amount up to $30,000,000, which shall contain reasonable and
customary terms and conditions, shall be secured by Buyer's accounts
receivable and inventory, shall provide for borrowings, repayments and
reborrowings from time to time as required in connection with the operation
of Buyer's business, shall be limited in amount to customary percentages of
account receivables and inventory securing such line of credit and shall be
provided by a financial institution or an Affiliate of Buyer, (ii) other
loans or credit facilities to be provided by Affiliates of Buyer in the
discretion of such Affiliates and Buyer, which shall be repaid on a pari
passu basis with cash payments on the Buyer Preferred Stock and (iii) other
loans and credit facilities satisfactory to Buyer and Seller. To the
extent Buyer's working capital needs exceed $30,000,000, the Parties agree
to meet and discuss in good faith possible modifications to the foregoing
limitations.
13.7 Confidentiality.
(a) In addition to any obligations of confidentiality
pursuant to other agreements between the Parties or Affiliates of the
Parties, without the prior written consent of the other Party, each Party
shall hold in confidence and not disclose to any third party (i) any
confidential information received by it from the other Party, and (ii) the
specific terms, conditions and information contained in this Agreement and
any of the Related Documents (collectively, "Confidential Material").
(b) Each Party agrees that it shall only use the
Confidential Material for the purposes of carrying out the transactions
contemplated by this Agreement and the Related Documents.
(c) For the purposes of this Agreement, Confidential
Material shall not include information:
(i) that is or becomes part of the public domain or is
otherwise generally available to the public other than through breach of
this Agreement or the Related Documents or through the fault of the
receiving Party;
(ii) that is or becomes available to the other Party, from
an unaffiliated source, which source has no obligation of secrecy to either
Party;
(iii) that is disclosed (a) in any SEC filing; or (b) that
is required to be disclosed by law or governmental regulation or order or
upon the advice of counsel, provided that the Party disclosing such
information shall give the other parties to this Agreement reasonable
advance notice of such disclosure; or
-45-
<PAGE>
(iv) that the Parties mutually agree in writing to
disclose.
(d) The foregoing obligation of confidentiality shall be
effective from the date of this Agreement and continuing for a period of
six (6) years following the termination of the last to terminate of this
Agreement or the Related Documents.
(e) The Parties agree that in the event of any breach by
either Party of any of the provisions of this Section 8.01, money damages
would be inadequate and that the non-breaching Party would have no adequate
remedy at law. Accordingly, notwithstanding anything to the contrary
contained in this Agreement, the Parties agree that the Parties shall have
the right, in addition to any other rights and the obligations under this
Section 8.01, to seek an adequate remedy for such breach, not only by an
action for damages but also by an action or actions for specific
performance, injunction and/or other equitable relief in order to enforce
or prevent any violations (whether anticipatory, continuing or future) of
the provisions of this Section 8.01.
ARTICLE 14
BULK SALES ACT
--------------
Buyer, Sterling and Parent hereby waive compliance by Seller with the
requirements of any and all laws relating to bulk sales and transfers; and
as consideration for such waiver by Buyer, Sterling and Parent, Seller
agrees to indemnify the Buyer Indemnified Parties pursuant to Article 7 for
any Losses to the Buyer Indemnified Parties resulting from any claim by any
creditors of Seller under any such law.
ARTICLE 15
SURVIVAL, REMEDIES AND PROCEDURE FOR INDEMNIFICATION
----------------------------------------------------
15.1 Period for Taking Action.
(a) Except as provided in this Section 15.01(a), the
representations and warranties of the Parties contained herein and of the
Parties in the Related Documents shall survive the Closing for so long as
claims for breach thereof may be made under applicable statutes of
limitations. Notwithstanding anything in this Section 15.01(a) to the
contrary, (i) claims against Seller for breach of any of its
representations and warranties in Article 4 other than those in Sections
4.03, 4.05 and 4.13 must be made within two years after the Closing Date,
claims against Seller for breach of any of its representations and
warranties in Section 4.13 must be made within three years after the
Closing Date and claims against Seller for breach of any of its
representations and warranties in Sections 4.03 and 4.05 may be made at
any time, and (ii) claims against Buyer, Sterling or Parent for breach of
any of their respective representations and warranties in Article 5 other
than those in Sections 5.01(b) and (d)(i), 5.02(b) and 5.03(b) and (d)(i)
must be made within two years after the Closing Date and claims against
Buyer, Sterling or Parent for breach of any of their representations and
warranties in 5.01(b) and (d)(i), 5.02(b) and 5.03(b) and (d)(i) may be
made at any time. The foregoing limitations shall not apply to any
representations or warranties contained in any of the Related Documents.
-46-
<PAGE>
(b) Any ongoing claims, actions or demands commenced prior
to expiration of the claim period set forth in Section 15.01(a) for breach
of representation or warranty may be pursued to conclusion and such
representation or warranty shall not expire with respect to such claims
even if final disposition of such matter occurs after the claim period has
elapsed.
15.2 Claims. Subject to the limitations set forth in Section 15.03,
the indemnification by an indemnifying Party under Articles 6 or 7 for
breach of a representation or warranty shall be limited to such Losses that
exceed $25,000 on an individual claim for indemnification, and exceed
$250,000 in the aggregate for all claims made for indemnification by the
indemnified Party (the "Indemnifier's Basket"). If the Losses for breaches
of representations or warranties claimed exceed the $250,000 Indemnifier's
Basket, the indemnified Party shall be entitled to recover all the Losses
within the Indemnifier's Basket. These limitations shall not apply to
indemnification claims that are not claims for breach of a representation
or warranty.
15.3 Limit. Buyer, Sterling and Parent shall not be required to
indemnify the Seller Indemnified Parties for breach of a representation or
warranty pursuant to Article 6 and Seller shall not be required to
indemnify the Buyer Indemnified Parties for breach of a representation or
warranty pursuant to Article 7 for Losses which exceed $10,000,000, in the
aggregate, provided that such limitation shall not apply to Losses arising
from breaches of Seller's covenants in Section 13.05, Seller's
indemnification obligations pursuant to Article 14, Excluded Liabilities,
Assumed Liabilities or other indemnification claims that are not claims for
breach of representation or warranty.
15.4 Not a Release of Other Obligations. Notwithstanding the
limitations in this Article 15, such limits are not intended to terminate
or in any way modify or reduce the obligation of Seller to be responsible
for the payment of all of and performance of all of its obligations
relating to Excluded Liabilities or arising under Seller Related Documents
and the obligations of Buyer, Sterling and Parent to be responsible for the
payment of all of and performance of all of their obligations relating to
Assumed Liabilities or arising under the Buyer Related Documents.
-47-
<PAGE>
15.5 Procedure. The Person or entity claiming indemnification
hereunder (the "Indemnified Party") shall give prompt written notice to the
Party against which indemnification is claimed (the "Indemnifying Party")
of each claim for indemnification hereunder specifying that indemnification
is sought pursuant to this Agreement, the amount (to the extent known), and
the nature of and event giving rise to the claim. In the event such
indemnification claim is the result of a claim by a third party (a "Third
Party Claim"), the Indemnifying Party shall have the right to control, at
the expense of the Indemnifying Party, the defense of any such matter or
its settlement, or the Indemnifying Party may authorize the Indemnified
Party to take over the defense of such matter for the account of and at the
risk of the Indemnifying Party so long as such defense is expeditious.
Failure to give timely notice of a matter which may give rise to an
indemnification claim shall not affect the rights of the Indemnified Party
to collect such claim from the Indemnifying Party except to the extent such
failure to so notify materially adversely affects the Indemnifying Party's
ability to defend the Third Party Claim giving rise to such indemnification
claim. No Indemnifying Party, in the defense of any Third Party Claim,
shall, except with the consent of the Indemnified Party, which consent
shall not be unreasonably withheld or delayed, consent to entry of any
judgment or enter into any settlement of such Third Party Claim.
ARTICLE 16
RIGHT OF TERMINATION
--------------------
16.1 Grounds for Termination. Notwithstanding any other provision
of this Agreement to the contrary, this Agreement may be terminated and
abandoned:
(a) at any time prior to the Closing by Buyer, Parent,
Sterling and Seller in a written agreement executed by Buyer Parent,
Sterling and Seller;
(b) by either (1) Buyer, Parent or Sterling, or (2)
Seller, pursuant to written notice to the other Parties, if the Closing
shall not have occurred by 11:59 p.m. (Wilmington, Delaware time) on
December 15, 1996 (the "Termination Date"), or such other date as the
Parties shall have agreed in writing to be the Termination Date.
16.2 Effects of Termination. If this Agreement is terminated as
permitted by Section 16.01, such termination shall be without liability to
any Party hereto, except that if this Agreement is terminated pursuant to
Section 16.01 (b) due to a breach of this Agreement by a Party, such Party
shall remain liable for any and all damages arising from such breach.
-48-
<PAGE>
ARTICLE 17
MISCELLANEOUS
-------------
17.1 Press Release. Buyer, Sterling, Parent and Seller shall each
be at liberty to issue a press release or public announcement following
execution and delivery of this Agreement with respect to the transactions
contemplated by this Agreement with the prior written consent of the other
Parties, such consent not to be unreasonably withheld, and the Parties
shall consult each other in advance on the form and content of such
releases or announcements. Notwithstanding the foregoing, a Party may
issue a press release or public announcement with respect to the
transactions contemplated hereby without the prior written consent of the
other Parties to the extent required by applicable law and shall give the
other Parties notice thereof and an opportunity to comment thereon.
17.2 Fees. Except as otherwise specifically provided herein, the
Parties shall pay their own expenses including attorney's fees, incident to
the preparation and performance of this Agreement and the Related
Documents, whether or not the transactions contemplated herein or therein
are consummated.
17.3 Amendments. This Agreement shall not be amended or modified
except in writing, signed by the Parties.
17.4Successors. No Party shall assign, convey, transfer or otherwise
dispose of all or any portion of its rights and obligations under this
Agreement or any other document or instrument executed and delivered in
connection herewith without the prior written consent of the other Parties,
which consent shall not be unreasonably withheld; provided, however, that
at and after the Closing Date, Buyer, Sterling or Parent may assign,
convey, transfer or otherwise dispose (subject to the performance
obligations of Buyer, Sterling or Parent, as the case may be) of all or any
portion of their respective interests in, or their respective rights and
obligations under, this Agreement and such other documents and instruments
to any financial institution (acting on its own behalf or as agent for one
or more financial institutions) financing or refinancing the transactions
contemplated hereby or otherwise extending credit to Buyer or any of its
Affiliates; and provided further, that upon the foreclosure, sale in lieu
of foreclosure, deed in lieu of foreclosure, or deed of the Assets or a
substantial portion thereof by or to any such financial institution, any of
its Affiliates, or any other Person, the representations, warranties and
covenants of Seller contained herein and in such other documents and
instruments shall inure to the benefit of and shall be enforceable by such
financial institution, Affiliate or other Person (subject to the due
-49-
<PAGE>
performance of all obligations of Buyer, Sterling or Parent, as the case
may be) and subject to any defense, estoppel, waiver, setoff or claim which
Seller may have with respect to Buyer, Sterling or Parent (arising before
or after such assignment or foreclosure)). Any assignment, conveyance,
transfer or other disposition made or attempted in violation of this
Section 17.04 shall be void and of no effect. Notwithstanding an
assignment by Buyer, Parent or Sterling of all or any portion of their
respective interests in, or their respective rights and obligations under,
this Agreement to any financial institution or in connection with a
foreclosure, sale in lieu of foreclosure, deed in lieu of foreclosure, or
deed of the Assets or a substantial portion thereof by or to any such
financial institution, Seller shall be entitled to look to Buyer, Sterling
or Parent, as the case may be, for all purposes hereunder until such time,
and this Agreement and the other Related Agreements can be amended,
modified or waived by agreement among the Parties (without the concurrence
of the assignee) unless and until, Seller has received a written notice of
default from the assignee of such interests, rights and obligations.
Notwithstanding anything in this Agreement to the contrary, (i) Buyer,
Sterling or Parent may assign their respective rights and obligations under
this Agreement to (a) Parent or any of its Subsidiaries except Direct
Radiography Corp., or (b) to any person who acquires substantially all the
assets of Parent, Sterling or Buyer, and (ii) Seller may assign its rights
or obligations under this Agreement to any Person who acquires
substantially all the assets of Seller related to the Products covered in
the Film Supply Agreement.
Notwithstanding any provision in this Section 17.04 to the
contrary, Seller shall remain liable for and with respect to all
obligations of Seller hereunder after any assignment by Seller or any
permitted assign of all or any portion of Seller's interest in this
Agreement or such other documents and instruments or its rights and
obligations hereunder or thereunder, and Buyer, Sterling and Parent shall
remain liable for and with respect to all obligations of Buyer, Sterling
and Parent hereunder after any assignment by Buyer, Sterling or Parent or
any permitted assign of all or any portion of its interest in this
Agreement or such other documents and instruments or its rights and
obligations hereunder or thereunder.
Except as set forth in this Section 17.04, and except to the
extent that the Buyer Indemnified Parties and the Seller Indemnified
Parties shall be entitled to the benefits of the indemnities set forth
herein, no Person not a party to this Agreement shall have any rights under
this Agreement as a third-party beneficiary or otherwise.
17.5 Non-Waiver of Remedy. The failure of any Party to insist, in
any one or more instances, upon the strict performance of any of the terms,
conditions or covenants of this Agreement shall not be construed as a
waiver or relinquishment for the future of such term, condition or
covenant. A receipt by Seller, Buyer, Sterling or Parent of any money with
knowledge of the breach of any term, condition or covenant of this
Agreement, shall not be deemed a waiver of such breach, and no waiver,
change, modification or discharge by any Party hereto of any provision in
this Agreement shall be deemed to have been made or shall be effective
unless expressed in writing and signed by all Parties. In addition to the
other remedies provided in this Agreement, the Parties shall be entitled to
the restraint by injunction of the violation, or attempted or threatened
violation of any of the terms, conditions or covenants of this Agreement,
or to a decree compelling performance of any of such term, condition or
covenant.
-50-
<PAGE>
17.6 Notices. All notices, consents, requests and approvals, any
notice of change in address for the purpose of this Agreement, and other
communications provided for or required herein, shall be deemed validly
given, made or served, if in writing, and delivered (a) on the day given if
served personally, (b) two days following if sent by telecopy to the
facsimile number indicated below with a confirmatory notice by delivery to
a nationally-recognized express delivery service with instructions and
payment for overnight delivery to the address set forth below; or (c) three
days following if sent by U.S. Certified Mail, postage prepaid:
If to Seller, addressed to:
Polaroid Corporation
549 Technology Square
Cambridge, Massachusetts 02139
Attention: General Counsel
Facsimile Number: 617-386-6441
And if to Buyer, Sterling or Parent
addressed to:
Sterling Diagnostic Imaging, Inc.
Glasgow Business Community
Building 600, Mailbox 620, P. O. Box 6101
Newark, Delaware 19714-6101
Attention: Chief Operating Officer
Facsimile Number: (302) 451-0588
-51-
<PAGE>
or delivered to:
Sterling Diagnostic Imaging, Inc.
Glasgow Business Community
Building 600, Room 116
Routes 896 and 40
Glasgow, Delaware 19702
Attention: Chief Operating Officer
With a Copy to:
Sterling Dry Imaging Systems, Inc.
Glasgow Business Community
Building 600, Mailbox 620, P. O. Box 6101
Newark, Delaware 19714-6101
Attention: General Counsel
Facsimile Number: (302) 451-9598
17.7 Governing Law and Jurisdiction. The validity, interpretation
and performance of this Agreement and any dispute connected herewith shall
be governed by and construed according to the laws of the United States of
America and the State of Delaware, without regard to principles of
conflicts of law. IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER RELATED DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY AND BY THE OTHER RELATED DOCUMENTS, EACH
PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND THE COURTS OF THE
STATE OF DELAWARE, AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION, OR PROCEEDING
BROUGHT IN ANY SUCH COURT OR THAT ANY SUCH COURT IS AN INCONVENIENT FORUM.
EACH PARTY FURTHER AGREES THAT ANY SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH DELAWARE SUIT, ACTION, OR PROCEEDING MAY BE EFFECTIVELY
SERVED UPON IT BY THE DELIVERY THEREOF TO SUCH PARTY IN THE SAME MANNER AS
PROVIDED IN THIS AGREEMENT FOR THE GIVING OF NOTICE TO SUCH PARTY, AND SUCH
SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS SHALL BE DEEMED EFFECTIVELY
SERVED AT THE TIME AT WHICH NOTICE THEREOF WOULD BE DEEMED GIVEN UNDER THIS
AGREEMENT. IN ADDITION, EACH PARTY AGREES NOT TO BRING ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY JURISDICTION EXCEPT DELAWARE AND, THEREFORE,
EACH PARTY AGREES THAT IF ANY SUCH SUIT, ACTION, OR PROCEEDING SHALL BE
BROUGHT IN ANY SUCH OTHER JURISDICTION, IT SHALL BE SUBJECT TO DISMISSAL
FOR HAVING BEEN BROUGHT IN AN INAPPROPRIATE JURISDICTION CONTRARY TO THE
PROVISIONS OF THIS SECTION, WHICH ARE IRREVOCABLE.
-52-
<PAGE>
17.8 Limitations on Damages. NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL ANY PARTY BE LIABLE FOR
SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF THE
OTHER PARTIES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS
PROFITS, BUSINESS INTERRUPTION OR ANY OTHER LOSS), WHETHER OR NOT CAUSED BY
OR RESULTING FROM THE ACTIONS OF SUCH PARTY, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
17.9 Schedules and Exhibits. All Schedules and Exhibits referred
to herein are hereby incorporated in this Agreement by reference.
17.10 Further Assurances. Each Party hereto shall, at any time and
from time to time after the date hereof, upon the reasonable request by the
other Parties hereto and without further consideration, execute and deliver
such instruments of transfer or other documents and take such further
action as may be reasonably required to perfect any undertaking or
consummate or implement the transactions contemplated by this Agreement.
17.11 Entire Agreement. This Agreement and the Related Documents
constitute the full understanding of the Parties, a complete allocation of
risks between them and a complete and exclusive statement of the terms and
conditions of their agreement relating to the subject matter hereof and
thereof and supersedes any and all prior agreements, whether written or
oral, that may exist between the Parties with respect thereto. Except as
otherwise specifically provided in this Agreement or in the Related
Documents, no conditions, usage of trade, course of dealing or performance,
understanding or agreement purporting to modify, vary, explain or
supplement the terms or conditions of this Agreement, shall be binding
unless made in accordance with Section 17.03 of this Agreement.
17.12 Modification and Severability. If a court of competent
jurisdiction declares that any provision of this Agreement is illegal,
invalid or unenforceable, then such provision shall be modified
automatically to the extent necessary to make such provision fully
enforceable. If such court does not modify any such provision as
contemplated herein, but instead declares it to be wholly illegal, invalid
or unenforceable, then such provision shall be severed from this Agreement,
and such declaration shall in no way affect the legality, validity and
enforceability of the other provisions of this Agreement to which such
declaration does not relate. In this event, this Agreement shall be
construed as if it did not contain the particular provision held to be
illegal, invalid or unenforceable, the rights and obligations of the
parties hereto shall be construed and enforced accordingly, and this
Agreement otherwise shall remain in full force and effect.
-53-
<PAGE>
17.13 Definition of Knowledge. Where any statement in this Agreement
made by any Party is qualified by any reference to "knowledge" of such
Party, such qualification means that such Party has made due inquiry and
investigation into the subject matter of the representation or statement
being made and, if applicable, into the business, affairs and operations of
any applicable entity, and such Party has no reason to believe that the
representations and statements so qualified are untrue.
17.14 Headings. The various headings used in this Agreement are for
convenience only and are not to be used in interpreting the text of the
Article in which they appear or to which they relate.
17.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same instrument.
-54-
<PAGE>
The Parties hereto have caused this Agreement to be executed
as of the date and year first above written.
POLAROID CORPORATION
By: /s/ William J. O'Neill, Jr.
---------------------------------
Name: William J. O'Neill, Jr.
--------------------------------
Title: Executive Vice President and
Chief Executive Officer
-------------------------------
STERLING DIAGNOSTIC IMAGING, INC.
By: /s/ G. Rodney Wolford
----------------------------------
Name: G. Rodney Wolford
--------------------------------
Title: President and CEO
-------------------------------
SDI HOLDING CORP.
By: /s/ G. Rodney Wolford
----------------------------------
Name: G. Rodney Wolford
--------------------------------
Title: President and CEO
-------------------------------
STERLING DRY IMAGING SYSTEMS, INC.
By: /s/ G. Rodney Wolford
----------------------------------
Name: G. Rodney Wolford
--------------------------------
Title: President and CEO
-------------------------------
-55-
<PAGE>
List Of Omitted Schedules And Exhibits
To Purchase And Sale Agreement
Dated October 30, 1996,
Among Polaroid Corporation, SDI Holding Corp.,
Sterling Diagnostic Imaging, Inc. And Sterling Dry Imaging Systems, Inc.
1. Schedules required under the Purchase and Sale Agreement upon
completion of the sales transaction on November 26, 1996.
Schedule 1.29(a) U.S. Equipment Permits
Schedule 1.29(b) International Equipment Permits
Schedule 2.01(a) U.S. Equipment Machinery and Equipment
Schedule 2.01(b) U.S. Off-site Items
Schedule 2.01(d) U.S. Inventory
Schedule 2.01(e) U.S. Rights and Obligations
Schedule 2.02 Film Assets
Schedule 2.03(a) International Equipment Machinery
and Equipment
Schedule 2.03(b) International Off-site Items
Schedule 2.03(d) International Inventory
Schedule 2.03(e) International Rights and Obligations
Schedule 4.04 Litigation and Investigations
Schedule 4.05 Liens
Schedule 4.07(b) Compliance with Laws; Governmental Consents
Schedule 4.10 Completeness of Assets
Schedule 5.01(f)(i) Buyer's Proceedings
Schedule 5.02(d)(ii) Liens
Schedule 5.02(e)(i) Sterling's Proceedings
Schedule 5.02(e)(ii) Governmental Consents
Schedule 5.03(c)(i) Stockholders with Greater than 5% Ownership
Schedule 5.03(c)(ii) Outstanding Options
Schedule 5.03(f)(i) Parent's Proceedings
Schedule 12.02(j) Core Employees
Schedule 12.02(m) Contracts to be Reviewed by Buyer
Schedule 13.05 Permitted Competition
2. Exhibits to the Purchase and Sale Agreement upon completion
of the sales transaction on November 26, 1996.
Exhibit A Subscription Agreement
Exhibit B Intellectual Property Rights Agreement
Exhibit C Film Supply Agreement
Exhibit D Laser Diode Supply Agreement
Exhibit E Exclusive Sales Agency Agreement
Exhibit F Transitional Services Agreement
Exhibit G Technology, Research and Development Agreement
The Registrant hereby agrees to furnish supplementally a copy of any
of the foregoing to the Commission upon request in accordance
with Item 601(b)(2) of Regulation S-K
-56-
AMENDMENT NO. 1 TO PURCHASE AND SALE AGREEMENT
This Amendment No. 1 to Purchase and Sale Agreement (the "Amendment")
dated November 26, 1996, is by and among Polaroid Corporation, a Delaware
corporation, with its principal place of business at 549 Technology Square,
Cambridge, Massachusetts 02139 ("Seller"), SDI Holding Corp., a Delaware
corporation, with its principal place of business at Glasgow Business
Community, Building 600, Route 896, Newark, Delaware 19702 ("Parent"),
Sterling Diagnostic Imaging, Inc., a wholly-owned subsidiary of Parent and
a Delaware corporation, with its principal place of business at Glasgow
Business Community, Building 600, Route 896, Newark, Delaware 19702
("Sterling"), and Sterling Dry Imaging Systems, Inc., a wholly-owned
subsidiary of Sterling and a Delaware corporation with its principal place
of business at Glasgow Business Community, Building 600, Route 896, Newark,
Delaware 19702 ("Buyer").
W I T N E S S E T H, That:
- - - - - - - - - -
WHEREAS, Buyer, Seller, Parent and Sterling entered into a Purchase
and Sale Agreement dated October 30, 1996 (the "Agreement"), pursuant to
which Seller has agreed to sell certain of its assets to Buyer and Buyer
has agreed to purchase certain assets of Seller (the "Acquisition"); and
WHEREAS, Seller, Buyer, Parent and Sterling desire to amend, modify
and supplement the Agreement with respect to various other matters set
forth herein;
NOW, THEREFORE, subject to the terms, conditions, covenants and
provisions of this Agreement and in reliance on the representations,
warranties and covenants contained in this Agreement, Seller, Buyer,
Sterling and Parent mutually covenant and agree as follows:
1. Definitions.
(a) All capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to such terms in the
Agreement.
(b) Article 1 of the Agreement is hereby amended by deleting Sections
1.22, 1.38, 1.51 and 1.52 in their entirety and replaced in their entirety
with the following:
1.22 "Contracts" means the U.S. Contracts, the
International Equipment Contracts and the International Film
Contracts.
1.38 "Film Assets" means the U.S. Film Assets and the
International Film Assets.
1.51 "Inventory" means the U.S. Inventory and the International
Inventory.
1.52 "Inventory Value" means the book value of the U.S.
Inventory determined in accordance with GAAP and Seller's
standard costing basis.
<PAGE>
(c) Article 1 of the Agreement is hereby amended by deleting Sections
1.25, 1.26, 1.29 and 1.39 in their entirety therefrom:
(d) Article 1 of the Agreement is hereby further amended by adding
the following definitions thereto. Seller, Buyer, Sterling and Parent
intend that such definitions shall be placed in the appropriate
alphabetical order within Article 1, that Article 1 shall be renumbered
accordingly and that all cross-references to definitions within Article 1
shall be automatically changed.
"International Assets" means the International Equipment
Assets and the International Film Assets.
"International Equipment Assets" has the meaning ascribed in
Section 2.03 of this Agreement.
"International Equipment Contracts" has the meaning ascribed
in Section 2.03 of this Agreement.
"International Equipment Machinery and Equipment" has the
meaning ascribed in Section 2.03 of this Agreement.
"International Equipment Permits" means all rights in and to
product registrations and approvals and other rights granted by
Non-United States Governmental Authorities used primarily with
respect to the Equipment Product Line and listed on Schedule
1.29(b).
"International Film Assets" has the meaning ascribed in
Section 2.04 of this Agreement.
"International Film Contracts" has the meaning ascribed in
Section 2.04 of this Agreement.
"International Inventory" has the meaning ascribed in
Section 2.03 of this Agreement.
"U.S. Assets" means the U.S. Equipment Assets and the U.S.
Film Assets.
"U.S. Contracts" means the U.S. Film Contracts and the U.S.
Equipment Contracts.
"U.S. Equipment Assets" has the meaning ascribed in Section
2.01 of this Agreement.
-2-
<PAGE>
"U.S. Equipment Contracts" has the meaning ascribed in
Section 2.01 of this Agreement.
"U.S. Equipment Machinery and Equipment" has the meaning
ascribed in Section 2.01 of this Agreement.
"U.S. Equipment Permits" means all rights in and to product
registrations and approvals and other rights granted by United State
Federal and State Governmental Authorities used primarily with respect to
the Equipment Product Line and listed on Schedule 1.29(a).
"U.S. Film Assets" has the meaning ascribed in Section 2.02
of this Agreement.
"U.S. Film Contracts" has the meaning ascribed in Section
2.02 of this Agreement.
"U.S. Inventory" has the meaning ascribed in Section 2.01 of
this Agreement.
2. Assets.
The parties to this Amendment desire to amend Article 2 of the
Agreement to provide for the transfer of certain of the Assets from
Subsidiaries of Seller to Subsidiaries of Sterling. In connection
therewith, Article 2 of the Agreement is hereby deleted in its entirety and
replaced in its entirety with the following:
ARTICLE 2
ASSETS
------
Upon the terms and subject to the conditions contained in
this Agreement, Seller agrees to grant, sell, convey, assign,
transfer and deliver or, if applicable, cause its Subsidiaries to
grant, sell, convey, assign, transfer and deliver unto Buyer or
Subsidiaries of Sterling, as the case may be, and Buyer agrees to
purchase, accept and take delivery of, or, if applicable, cause
certain of Sterling's Subsidiaries to purchase, accept and take
delivery of, unless otherwise expressly set forth herein, the
following assets, unless otherwise indicated herein (hereinafter
collectively referred to as the "Assets"):
-3-
<PAGE>
2.1 United States Equipment Assets. The assets owned by
Seller, other than Laser Diode Assets, used primarily with
respect to the Equipment Product Lines (hereinafter collectively
referred to as the "U.S. Equipment Assets") including (a) the
manufacturing equipment, manufacturing procedures, drawings and
designs, bills of materials, tools, laboratory equipment,
research items, computer hardware and other related equipment
(the "U. S. Equipment Machinery and Equipment") described in
Schedule 2.01(a) attached hereto, (b) except for the items
disclosed in Schedule 2.01(d), which shall be considered U.S.
Inventory, finished equipment, spare parts, service parts, and
supplies (other than U.S. Inventory) at customer locations or in
the possession of sales and service personnel to which Seller has
retained title, wherever located, as set forth on Schedule
2.01(b), (c) except those not assignable under applicable law,
the U. S. Equipment Permits, (d) the inventories of raw
materials, feedstocks, stores, work in process, finished goods,
spare parts, service parts, supplies and packaging materials held
for use or generated with respect to the Equipment Product Lines,
wherever located, including, without limitation, that set forth
as Schedule 2.01(d) (the "U. S. Inventory"), (e) all rights and
obligations under sales orders and contracts, purchase orders and
contracts, distribution agreements, customer agreements, supply
agreements, service agreements, development agreements,
consulting agreements and other contracts or agreements (other
than those relating to Equipment Intellectual Property Rights)
described in Schedule 2.01(e), and all rights under express or
implied representations and warranties from providers of goods or
services with respect to the Equipment Product Lines (the "U. S.
Equipment Contracts"), and (f) the rights delineated in the
Intellectual Property Rights Agreement regarding the Equipment
Intellectual Property Rights.
2.2 United States Film Assets. The following assets owned
by Seller (hereinafter collectively referred to as the "U. S.
Film Assets"): (a) all rights and obligations under sales orders
and contracts, distribution agreements, marketing related
consulting agreements and customer agreements (other than those
relating to Film Intellectual Property Rights) described in
Schedule 2.02, (the "U. S. Film Contracts") and (b) the rights
delineated in the Intellectual Property Rights Agreement related
to the Film Intellectual Property Rights.
2.3 International Equipment Assets. The assets owned by a
Subsidiary of Seller and used primarily with respect to the
Equipment Product Lines (hereinafter collectively referred to as
the "International Equipment Assets") including (a) the
manufacturing equipment, manufacturing procedures, drawings and
designs, bills of materials, tools, laboratory equipment,
research items, computer hardware and other related equipment
(the "International Equipment Machinery and Equipment") described
in Schedule 2.03(a) attached hereto, (b) except for the items
disclosed in Schedule 2.03(d), which shall be considered
Inventory, finished equipment, spare parts, service parts, and
supplies (other than Inventory) at customer locations or in the
possession of sales and service personnel to which any Subsidiary
of Seller has retained title, wherever located, as set forth on
Schedule 2.03(b), (c) except those not assignable under
applicable law, the International Equipment Permits, (d) the
inventories of raw materials, feedstocks, stores, work in
process, finished goods, spare parts, service parts, supplies and
packaging materials held for use or generated with respect to the
Equipment Product Lines, including, without limitation, that set
forth as Schedule 2.03(d) (the "International Inventory"),
(e) all rights and obligations under sales orders and contracts,
purchase orders and contracts, distribution agreements, customer
agreements, supply agreements, service agreements, development
agreements, consulting agreements and other contracts or
agreements (other than those relating to Equipment Intellectual
Property Rights) described in Schedule 2.03(e), and all rights
under express or implied representations and warranties from
providers of goods or services with respect to the Equipment
Product Lines (the "International Equipment Contracts").
-4-
<PAGE>
2.4 International Film Assets. The following assets owned
by a Subsidiary of Seller (hereinafter collectively referred to
as the "International Film Assets"): all rights and obligations
under sales orders and contracts, distribution agreements,
marketing related consulting agreements and customer agreements
(other than those relating to Film Intellectual Property Rights)
described in Schedule 2.04, (the "International Film Contracts").
3. Purchase Price.
The parties to this Amendment desire to amend Sections 3.01, 3.04,
3.07 and 3.08 of the Agreement to provide for the transfer of certain of
the Assets from Subsidiaries of Seller to Subsidiaries of Sterling. In
connection therewith, Sections 3.01, 3.04, 3.07 and 3.08 are hereby deleted
in their entirety and are hereby replaced in their entirety with the
following:
3.1 Assumption of Liabilities. Except as provided in Section
3.02, Buyer shall assume and agree to pay, discharge and perform
when due all obligations (whether known or unknown, fixed or
contingent) to the extent (but only to the extent) that they relate
to events or conditions arising after the Closing under the U.S.
Contracts assigned by Seller to Buyer in accordance with this
Agreement (the "Assumed Liabilities"), including, but not limited
to, (i) obligations to sell products and equipment under such U. S.
Contracts, (ii) warranty obligations under such U.S. Contracts with
respect to goods sold or services rendered under such U. S.
Contracts, and (iii) obligations to service equipment purchased or
leased from Buyer after the Closing Date, unless a U. S. Contract
is terminated by the other party thereto due to an improper
assignment by Seller or its Subsidiaries; provided that, upon
receipt of an invoice from Buyer, Seller or its Subsidiaries shall
promptly reimburse Buyer or its Affiliates (a) for all costs and
expenses incurred by Buyer or Buyer's Affiliates in performing the
obligations set forth in subsection (ii) above with respect to
Laser Imagers and Laser Film sold by Seller prior to the Closing
Date, and (b) in an amount equal to the pro rata revenues received
by Seller for the performance by Buyer or its Affiliates of
equipment service on equipment purchased or leased from Seller or
its Subsidiaries prior to the Closing Date.
-5-
<PAGE>
3.04 Initial Inventory Value. The Parties have agreed that
the initial Inventory Value as of September 30, 1996, is
$29,209,875 (the "Initial Inventory Value"). The Initial Inventory
Value multiplied by 95% is $27,749,382, and such amount shall be
referred to herein as the "Estimated Initial Inventory Value."
3.07 Sales, Use, Transfer and Similar Taxes and Charges.
Seller shall bear and pay all sales, use or stamp taxes and any
transfer, transfer gain, documentation, gross receipts, custom
duties, value added, withholding tax, recording, filing and
registration fees and other taxes and charges, as well as all
interest and penalties thereon payable upon or with respect to the
sale or transfer of the U. S. Assets by Seller to Buyer pursuant to
this Agreement (collectively the "Transfer Charges").
Notwithstanding the foregoing, Buyer shall be required to pay all
Transfer Charges for which a refund, recoupment or credit is
available to Buyer, and Buyer shall be entitled to obtain and keep
such refund, recoupment or credit; provided, however, that Seller
shall reimburse Buyer for any Transfer Charges paid by Buyer for
which a refund, recoupment or credit is available but which is not
recovered or recouped by Buyer within twelve (12) months of the
Closing Date. If Buyer thereafter receives a refund, recoupment or
credit of all or any portion of any Transfer Charge for which
Seller has reimbursed Buyer, Buyer shall reimburse Seller in an
amount equal to such refund, recoupment or credit. Subject to the
foregoing sentence, to the extent any applicable law or regulation
imposes upon a Party the obligation to pay Transfer Charges to be
borne by a Party pursuant to the preceding sentences and such
Transfer Charges are paid by such other Party, the Party
responsible for such Transfer Charges pursuant to the two preceding
sentences shall promptly reimburse such paying Party therefor upon
receipt of such paying Party's invoice for the amount of such
payments.
3.08 Purchase Price Adjustment. In the event there shall be
an inaccuracy in any of the representations or warranties of Seller
or a breach by Seller of one or more covenants to be performed by
Seller prior to Closing or an inaccuracy in any of the
representations or warranties of any Subsidiary of Seller or a
breach by a Subsidiary of Seller of one or more covenants to be
performed by such Subsidiary herein or in any documents executed by
such Subsidiary in connection with the transactions contemplated
hereby, which inaccuracy or breach is Material and such inaccuracy
or breach does not constitute a failure of the conditions to
Buyer's or its Subsidiaries' obligations to close as set forth in
Section 12.02(a), or there shall be a Material loss or damage to
any of the Assets as a result of fire or other casualty and Seller
does not elect to restore such Assets as provided in Section 8.09,
the Parties shall use all reasonable efforts to agree prior to
Closing to a downward adjustment to the Purchase Price in an amount
equal to the decline in value of any of the Assets resulting from
such inaccuracy, breach, loss or damage. In this regard, the
decline in value shall be on a dollar-for-dollar basis for balance
sheet items and, with respect to other items affecting value, shall
be as mutually agreed by the Parties. If the Parties are unable to
agree on the amount of the Purchase Price adjustment prior to
Closing, and all of the conditions to the obligations of the
Parties to close have been satisfied or waived, the Parties shall
proceed to close the transaction contemplated hereby and the
disagreement regarding the amount of the Purchase Price adjustment
shall be resolved in accordance with the dispute resolution
procedure described in Section 3.05(b), with the 30-day period
referred to in the first sentence thereof beginning on the Closing
Date. Once such disagreement is resolved, Seller, or its
Subsidiary, as the case may be, shall then pay to Buyer, or its
Subsidiary, as the case may be, the amount of such adjustment, if
any, with interest at the rate provided in Section 3.05(d)(i) from
the Closing Date through the date of payment. Notwithstanding
anything herein to the contrary, no downward adjustment in the
Purchase Price shall be made under this Section 3.08 to the extent
that the amount thereof is subject to adjustment under the
Inventory evaluation procedures elsewhere in this Article 3.
-6-
<PAGE>
4. Tax Allocation.
The parties to this Amendment desire to amend Section 3.03(c) of the
Agreement to delete the concept of an agreed allocation of the Purchase
Price among the various categories of Assets and other rights to be
transferred pursuant to or otherwise acquired by Buyer pursuant to the
Agreement. In connection therewith, Paragraph (c) of Section 3.03 is hereby
deleted in its entirety and is hereby replaced in its entirety with the
following:
(c) Buyer and Seller each intend that the transaction
contemplated by this Agreement constitutes a taxable sale of the
Assets by the Seller and a purchase of the Assets by the Buyer, and
Buyer and Seller shall report such transaction on all of their
income tax returns in a manner consistent with such intention.
Buyer and Seller shall each separately bear any risks associated
with the income tax characterization of such transaction.
5. Seller's Representations and Warranties.
The parties to this Amendment desire to amend Article 4 of the Agreement
to include Subsidiaries of Seller within the representations and warranties
of Seller. In connection therewith, Article 4 is hereby deleted in its
entirety and is hereby replaced in its entirety with the following:
ARTICLE 4
SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller represents and warrants to Buyer, Sterling and Parent
that as of the date of this Agreement and the Closing Date:
-7-
<PAGE>
4.01 Organization; Good Standing. Seller and its Subsidiaries
are corporations duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of
incorporation and each of them has full corporate power and
authority to own, operate and maintain the Assets as now being
owned and operated by it. Seller has full corporate power and
authority to execute and deliver this Agreement and each of the
Seller Related Documents and to perform its obligations hereunder
and thereunder. Seller and its Subsidiaries have full corporate
power and authority to execute the other agreements contemplated in
this Agreement to which any of them is a party and to perform their
respective obligations thereunder. Seller is duly qualified or
licensed to transact business in all of the jurisdictions in which
such qualification or licensing is required, except where the
failure to be so qualified or licensed would not be Material.
4.02 No Conflict with Other Instruments or Agreements. The
execution, delivery and performance of this Agreement by Seller,
the execution, delivery and performance of each of the Seller
Related Documents by Seller and the execution, delivery and
performance of any other agreements contemplated in this Agreement
by Seller or any of its Subsidiaries and the consummation of the
transactions contemplated by this Agreement, the Seller Related
Documents and such other agreements by Seller or any of its
Subsidiaries, as applicable, will not:
(a) violate any provision of the Certificate of
Incorporation, Bylaws or similar constitutional documents of Seller
or any of its Subsidiaries or any law, regulation, ordinance,
statute, rule, order, judgment, writ, ruling, award, edict or
decree of any Governmental Authority by which Seller or any of its
Subsidiaries or any of the Assets may be bound or otherwise
affected; or
(b) conflict with, result in a breach of the terms and
conditions of or violation of, or result in the imposition of any
Lien on or with respect to any of the Assets as a result of the
provisions of, or cause a default or termination under, any
mortgage, indenture, loan agreement, lease, commitment, agreement
or other instrument to which Seller or any of its Subsidiaries is a
party or by which it or any of the Assets may be bound or affected.
4.03 Authorization; Binding Effect. Seller has full power and
authority to perform the provisions of this Agreement and the
Seller Related Documents. Seller and its Subsidiaries have full
power and authority to perform the provisions of any other
agreement contemplated in this Agreement to which any of them is a
party, and this Agreement constitutes, and the Seller Related
Documents and such other agreements when executed and delivered by
Seller or its Subsidiaries, as the case may be, pursuant to the
terms hereof, will constitute, the legal, valid and binding
obligations of Seller or its Subsidiaries, as the case may be,
enforceable against Seller or its Subsidiaries, as the case may be,
in accordance with their respective terms, except as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding at law or in
equity).
-8-
<PAGE>
4.04 Litigation and Investigations. Except as may be
disclosed in Schedule 4.04 or in the Intellectual Property Rights
Agreement, there is no litigation, action, investigation,
administrative or judicial complaint, notice of violation,
grievance, demand, controversy, audit, claim or proceeding
(collectively referred to as "Proceedings") by or before any court,
arbitration panel, governmental or quasi-governmental agency,
tribunal, department, commission, board, bureau, agency or
instrumentality of the United States, any foreign jurisdiction, any
state, province or political subdivision thereof or other Person or
body acting in an arbitration, regulatory or judicial capacity
(collectively referred to as "Governmental Authorities") or brought
or made by any third party (including employees, former employees,
their dependents and beneficiaries and any party representing any
of them) pending or, to the knowledge of Seller or its
Subsidiaries, threatened against Seller or any of Seller's
Subsidiaries as a result of their ownership, use, maintenance or
operation of any of the Assets or contesting the rights of Seller
or any of its Subsidiaries in and to any of the Assets, or relating
to the limitation or revocation (or the expiration) of any
Equipment Permits, or against the Seller 401(k) Plan or the Seller
Pension Plans or any fiduciaries thereof in their capacities as
such for any reason whatsoever and neither Seller nor any of its
Subsidiaries has received any notice from any Person or
Governmental Authority threatening to institute same. The
ownership, use, maintenance and operation of the Assets and the
Seller 401(k) Plan and the Seller Pension Plans are not subject to
any injunction, order, judgment, writ or decree.
4.05 Title to Property. Seller or one of its Subsidiaries, as
the case may be, has good, clear and marketable title to each of
the Assets, free and clear of any and all liens, charges, pledges,
filed or unfiled liens related to Taxes, mortgages, security
interests, deeds of trust, leases, licenses, burdens, restrictions
and other encumbrances (collectively, the "Liens") except for
statutory Liens of lessors, carriers, warehousemen, mechanics,
materialmen and other Liens imposed by law for sums not yet
delinquent and other Liens described in Schedule 4.05, or, as to
the Intellectual Property Rights, as described in the Intellectual
Property Rights Agreement. None of the Assets are leased from a
third party, and, except to the extent not Material, no third party
has any option or right of first refusal to purchase all or any
part of the Assets.
-9-
<PAGE>
4.06 Contracts and Other Agreements and Instruments. True and
correct copies of the Contracts and the Equipment Permits have been
made available to Buyer for review, at Seller's or Seller's
Subsidiaries' present repositories for the same. No other party to
or grantor of any Contract or Equipment Permit has given written
notice to Seller or any of its Subsidiaries that it considers
Seller or any of its Subsidiaries to be in breach thereof. Neither
Seller nor any of its Subsidiaries nor any other party thereto or
grantor thereof is in default under, in breach of or in violation
of (and no condition exists that, with notice or lapse of time or
both, would constitute such a default, breach or violation) any
Contract or Equipment Permit.
4.07 Compliance with Laws; Governmental Consents.
(a) Seller and its Subsidiaries have obtained and
maintained all permits required by any applicable law, rule or
regulation or Governmental Authorities or necessary or appropriate
for Seller or its Subsidiaries to own, occupy, operate and/or
maintain the Assets as being, owned, operated, maintained and used
on the date of this Agreement and the Closing Date, the absence of
which would be Material.
(b) Except for an H-S-R Filing and except as set forth
in Schedule 4.07(b), no consent, authorization, or approval of, or
exemption by, or filing with, any Governmental Authorities or self-
regulatory body or authority or any non-governmental third party is
required in connection with the execution, delivery and performance
by Seller of this Agreement or of any of the Seller Related
Documents, or by Seller or any of its Subsidiaries of any agreement
contemplated in this Agreement or the taking by Seller or any of
its Subsidiaries of any action herein or therein contemplated.
4.08 Brokers or Finders. Neither Seller nor any of its
Subsidiaries has incurred an obligation or liability, contingent or
otherwise, for broker's or finder's fees with respect to the
matters provided for in this Agreement or any agreement
contemplated in this Agreement and for which Buyer or any of its
Affiliates will be responsible.
4.09 Labor and Employment Matters. With respect to the
employees of Seller and its Subsidiaries associated with any of the
Assets, neither Seller nor any of its Subsidiaries has entered into
any collective bargaining agreements or other contracts with a
labor union, contingent or otherwise, such employees are not
subject to any collective bargaining agreements or other contracts
with a labor union, contingent or otherwise, nor are any such
employees, in their capacities as employees, represented by any
labor union. With respect to employees of Seller and it
Subsidiaries associated with any of the Assets, neither Seller nor
any of its Subsidiaries has experienced a work stoppage,
organizational effort or other Material labor disturbance within
the past three years. To the best knowledge of Seller or any of
its Subsidiaries, there are no organizational efforts currently
being made or threatened by or on behalf of any labor union with
respect to any of the employees of Seller or any of its
Subsidiaries associated with any of the Assets.
-10-
<PAGE>
4.10 Completeness of Certain Assets. Except as set forth in
Schedule 4.10, the Assets being transferred to, or the rights to
which are being granted or made available to, Buyer or its
Subsidiaries pursuant hereto or to any agreement contemplated in
this Agreement include all assets primarily used by Seller or any
of its Subsidiaries in the operation of the Equipment Product
Lines.
4.11 Maintenance. The Assets currently in use have been
properly maintained in accordance with normal industry practice and
are in operating condition and repair (subject to normal wear and
tear) such that they are capable of being used without present need
for repair, replacement or modification or the addition of
equipment, except in the ordinary course of business.
4.12 Requested Financial Statements. The Requested Financial
Statements will be prepared in accordance with GAAP consistently
applied and will be complete and correct and will fairly present,
in all material respects (to the extent covered thereby), the
revenues, expenses, cash flows, assets, liabilities and other
matters required to be set forth therein for the periods indicated.
Buyer will not make any change in the Requested Financial
Statements without the prior consent of Seller, which shall not be
unreasonably withheld.
4.13 Securities Matters.
(a) Seller acknowledges that the Buyer Preferred Stock,
the Parent Preferred Stock, the Parent Common Stock, the Parent
Stockholder Options, the Buyer Common Stock and the common stock of
Parent transferred to Seller upon exercise of the Parent
Stockholder Options (the "Option Stock") have not been registered
under the Securities Act of 1933, as amended and applicable state
securities laws (collectively the "Acts") in reliance on available
exemptions from the registration requirements thereof. The Buyer
Preferred Stock, the Parent Preferred Stock, the Parent Common
Stock, the Parent Stockholder Options, the Buyer Common Stock and
the Option Stock are sometimes collectively referred to herein as
the "Securities."
-11-
<PAGE>
(b) Seller has had access to and an opportunity to
inspect all relevant information relating to Buyer, Parent and
Sterling sufficient to enable Seller to evaluate the merits and
risks of its acquisition of the Securities. Seller also has had
the opportunity to ask questions and receive answers respecting,
and to obtain such additional information as Seller has desired
regarding, the business, financial condition and affairs of Buyer,
Parent and Sterling.
(c) Seller has such knowledge and experience in
financial and business matters that Seller is capable of evaluating
the merits and risks of its acquisition of the Securities.
(d) Seller's acquisition of the Securities is and the
acquisition by Seller of the Option Stock upon exercise of the
Parent Stockholder Options will be, for Seller's own account for
investment purposes, and without a view to, or for offer or sale on
behalf of Buyer, Sterling or Parent or any of the existing
stockholders of Parent in connection with, the distribution thereof
or any portion thereof. Seller is not participating and does not
have a participation in any such distribution or the underwriting
of any such distribution.
(e) Seller understands that the Securities must be held
for an indefinite period of time unless subsequently registered
under the Acts or exemptions from the registration requirements
thereof are available.
(f) Seller has been advised by Buyer and Parent that (i)
Rule 144 under the Securities Act at present is not applicable to
the Securities and (ii) registration under the Acts or exemptions
from the registration requirements thereof will be required for any
subsequent sale or other distribution of the Securities.
4.14 Employee Benefits. There are no liabilities, breaches,
violations or defaults under any plan, arrangement or contract
sponsored or maintained by Seller or any of its Subsidiaries under
which any Transferred Employee is entitled to any benefit that
would subject Buyer, Sterling, Parent or their respective
Subsidiaries or their respective employee benefit plans or any
fiduciaries thereof to any taxes, penalties or other liabilities.
4.15 Investment Company; Public Utility. Neither Seller nor
any of its Subsidiaries is an "investment company" or a company
"controlled" by an investment company (as defined in the Investment
Company Act of 1940, as amended) or a "holding company" or a
"public utility" (as defined in the Public Utility Holding Company
Act of 1935, as amended).
-12-
<PAGE>
4.16 No Other Representations and Warranties. EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SELLER RELATED
DOCUMENTS OR ANY OTHER AGREEMENTS CONTEMPLATED IN THIS AGREEMENT,
NEITHER SELLER NOR ANY SUBSIDIARY OF SELLER NOR ANY AGENT OR
REPRESENTATIVE OF SELLER OR ANY SUBSIDIARY OF SELLER HAS MADE, AND
NEITHER SELLER NOR ANY SUBSIDIARY OF SELLER IS LIABLE FOR OR BOUND
IN ANY MANNER BY, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE, OR ANY EXPRESS OR IMPLIED WARRANTIES,
GUARANTEES, PROMISES, STATEMENTS, INDUCEMENTS, REPRESENTATIONS, OR
INFORMATION PERTAINING TO THE ASSETS OR ANY PART THEREOF, AND
WITHOUT LIMITING THE FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, THE SELLER RELATED DOCUMENTS OR ANY OTHER
AGREEMENTS CONTEMPLATED IN THIS AGREEMENT, NEITHER SELLER NOR ANY
SUBSIDIARY OF SELLER IS LIABLE FOR OR BOUND BY (AND NONE OF BUYER,
STERLING OR PARENT HAS RELIED UPON) ANY VERBAL OR WRITTEN
STATEMENTS, REPRESENTATIONS, OR ANY OTHER INFORMATION RESPECTING
ANY PORTION OF THE ASSETS FURNISHED BY SELLER OR ANY SUBSIDIARY OF
SELLER OR ANY EMPLOYEE, AGENT OR OTHER PERSON REPRESENTING OR
PURPORTEDLY REPRESENTING SELLER OR ANY SUBSIDIARY OF SELLER. BUYER
ACKNOWLEDGES THAT THE OPERATION OF THE ASSETS IN THE PAST HAS
PRODUCED LOSSES AND THAT NO REPRESENTATION IS MADE BY SELLER OR ANY
SUBSIDIARY OF SELLER AS TO THE FUTURE SUCCESS OR PROFITABILITY OF
THE ASSETS OR THE PRODUCTS PRODUCED THEREBY.
6. Authorized Shares of Buyer.
The parties to this Amendment desire to amend Section 5.01(c)(i)of the
Agreement to delete the language regarding the possibility of increasing the
number of authorized shares of capital stock of Buyer. In connection
therewith, Paragraph (c)(i) of Section 5.01 is hereby deleted in its
entirety and is hereby replaced in its entirety with the following:
(c)(i) The entire authorized capital stock of Buyer
consists of 54,500 shares, of which 2,000 shares are common stock,
$0.01 par value per share, and 52,500 shares are preferred stock,
par value $0.01 per share, of which, prior to giving effect to the
issuance of the Buyer Common Stock and the Buyer Preferred Stock,
1,000 shares of common stock and none of the shares of preferred
stock are validly issued and outstanding, fully paid and non-
assessable.
7. Representations and Warranties of Sterling.
The parties to this Amendment desire to amend Sections 5.02 and 5.04 of
the Agreement to include Subsidiaries of Sterling in the representations and
warranties of Sterling and Parent. In connection therewith, Sections 5.02
and 5.04 are hereby deleted in their entirety and are hereby replaced in
their entirety with the following:
-13-
<PAGE>
5.02 Representations and Warranties Regarding Sterling.
Sterling and Parent jointly and severally represent and warrant to
Seller that as of the date of this Agreement and the Closing Date:
(a) Sterling and its Subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of
the jurisdictions of their incorporation and each of them has full
corporate power and authority to execute and deliver this
Agreement, each of the Buyer Related Documents and each other
agreement contemplated in this Agreement to which they are a party
and to perform their respective obligations hereunder and
thereunder. Sterling is duly qualified or licensed to transact
business in all of the jurisdictions in which such qualification or
licensing is required, except where the failure to be so qualified
or licensed would not be Material.
(b) Sterling and its Subsidiaries have full power and
authority to perform the provisions of this Agreement, the Buyer
Related Documents and each other document contemplated in this
Agreement to which they are a party, and this Agreement
constitutes, and the Buyer Related Documents and the other
documents contemplated in this Agreement, when executed and
delivered by Sterling or its Subsidiaries, as the case may be,
pursuant to the terms hereof, will constitute, the legal, valid and
binding obligations of Sterling or its Subsidiaries, as the case
may be, enforceable against Sterling or its Subsidiaries, as the
case may be, in accordance with their respective terms, except as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general
principles of equity (whether applied in a proceeding at law or in
equity).
(c) (i) The entire authorized capital stock of Sterling
consists of 11,000 shares, of which 10,000 shares are common stock,
$0.01 par value per share, and 1,000 shares are preferred stock,
par value $0.01 per share, of which 1,000 shares of common stock
and none of the shares of preferred stock are validly issued and
outstanding, fully paid and non-assessable.
(ii) Sterling has acquired the 1,000 shares of
common stock of Buyer solely in consideration of services rendered,
and not for any cash or property, and as of Closing, such shares
may be transferred to Parent.
(d) The execution, delivery and performance of this
Agreement by Sterling, the execution, delivery and performance of
each of the Buyer Related Documents by Sterling to which it is a
party and the execution, delivery and performance of any other
agreements contemplated in this Agreement by Sterling or any of its
Subsidiaries and the consummation of the transactions contemplated
by this Agreement, each of the Buyer Related Documents to which
Sterling is a party and any other agreements contemplated by this
Agreement will not:
-14-
<PAGE>
(i) violate any provision of the Certificate of
Incorporation, Bylaws or similar constitutional documents of
Sterling or any of its Subsidiaries or any law, regulation,
ordinance, statute, rule, order, judgment, writ, ruling, award,
edict or decree of any Governmental Authority by which Sterling or
any of its Subsidiaries may be bound or otherwise affected; or
(ii) except as set forth on Schedule 5.02(d)(ii),
conflict with, result in a breach of the terms and conditions of or
violation of, or result in the imposition of any Lien on or with
respect to the business of Sterling or any of its Subsidiaries as a
result of the provisions of, or cause a default or termination
under, any mortgage, indenture, loan agreement, lease, commitment,
agreement or other instrument to which Sterling or any of its
Subsidiaries is a party or by which it or any of its business may
be bound or affected.
(e) (i) Except as set forth in Schedule 5.02(e)(i),
there are no Proceedings pending or, to the best knowledge of
Sterling, the Subsidiaries of Sterling, and Parent, threatened
against or affecting Sterling or any of its Subsidiaries, at law or
in equity, or before or by any Governmental Authorities having
jurisdiction over Sterling or any of its Subsidiaries or brought by
any third party that might reasonably be expected, individually or
in the aggregate, to affect Materially the business, financial
condition or results of operation of Sterling or any of its
Subsidiaries.
(ii) Except for an H-S-R Filing and except as set
forth in Schedule 5.02(e)(ii), no consent, authorization, or
approval of, or exemption by, or filing with, any Governmental
Authorities or self-regulatory body or authority or any non-
governmental third party, the absence of which would be Material,
is required in connection with the execution, delivery and
performance by Sterling of this Agreement or of any of the Buyer
Related Documents to which it is a party or in connection with the
execution, delivery and performance of any agreements contemplated
in this Agreement by Sterling or any Subsidiary of Sterling or the
taking of any action herein or therein contemplated.
(f) Neither Sterling nor any of its Subsidiaries has
incurred any obligation or liability, contingent or otherwise, for
broker's or finder's fees with respect to the matters provided for
in this Agreement or any agreement contemplated in this Agreement
for which Seller will be responsible.
-15-
<PAGE>
(g) Neither Sterling nor any of its Subsidiaries is an
"investment company" or a company "controlled" by an investment
company (as defined in the Investment Company Act of 1940, as
amended) or a "holding company" or a "public utility" (as defined
in the Public Utility Holding Company Act of 1935, as amended).
5.04 No Other Representations and Warranties. EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE BUYER RELATED
DOCUMENTS OR ANY OTHER AGREEMENTS CONTEMPLATED IN THIS AGREEMENT,
NEITHER BUYER, STERLING, PARENT NOR ANY SUBSIDIARY OF STERLING NOR
ANY AGENT OR REPRESENTATIVE OF BUYER, STERLING, PARENT OR ANY
SUBSIDIARY OF STERLING HAS MADE, AND BUYER, STERLING AND PARENT
ARE NOT LIABLE FOR OR BOUND IN ANY MANNER BY, ANY EXPRESS OR
IMPLIED WARRANTIES, GUARANTEES, PROMISES, STATEMENTS, INDUCEMENTS,
REPRESENTATIONS, OR INFORMATION PERTAINING TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREIN, AND WITHOUT LIMITING THE
FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER,
STERLING AND PARENT ARE NOT LIABLE FOR OR BOUND BY (AND SELLER HAS
NOT RELIED UPON) ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS,
OR ANY OTHER INFORMATION RESPECTING ANY PORTION OF THIS AGREEMENT
FURNISHED BY BUYER, STERLING, PARENT OR ANY SUBSIDIARY OF STERLING
OR ANY EMPLOYEE, AGENT OR OTHER PERSON REPRESENTING OR PURPORTEDLY
REPRESENTING BUYER, STERLING OR PARENT.
8. Indemnity of Buyer, Sterling and Parent.
The parties to this Amendment desire to amend Article 6 of the Agreement
to provide for indemnification by Buyer, Sterling and Parent of breaches by
Subsidiaries of Sterling. In connection therewith, Article 6 of the
Agreement is hereby deleted in its entirety and replaced in its entirety
with the following:
-16-
<PAGE>
ARTICLE 6
INDEMNITY BY BUYER, STERLING AND PARENT
---------------------------------------
Buyer, Sterling and Parent shall jointly and severally indemnify, save
and hold Seller and its Subsidiaries together with their respective
officers, directors, employees, consultants, representatives and agents and
all of their respective heirs, legal representatives, successors and assigns
(collectively, the "Seller Indemnified Parties") harmless from and against
and in respect of all claims, damages, judgments, penalties, costs, losses,
expenses (including, without limitation, reasonable attorneys' fees), fines,
assessments, Taxes, debts, liabilities and obligations of any nature
whatsoever (collectively, the "Losses") arising from, out of or in any
manner connected with or based on:
(a) the Assumed Liabilities assumed by Buyer as required by
Section 3.01 hereunder or the liabilities assumed by any Subsidiary
of Sterling under any agreement contemplated by this Agreement;
(b) except for Excluded Liabilities, Buyer's or any
Subsidiary of Sterling's ownership, use, operation or maintenance
of any of the Assets on or after the Closing Date;
(c) subject to the limitations of Article 15, any inaccuracy
in any of the representations or warranties of Buyer, Sterling or
Parent contained in this Agreement or any of the Buyer Related
Documents or the breach of any covenant or nonfulfillment of any
agreement on the part of Buyer, Sterling or Parent under this
Agreement or any of the Buyer Related Documents; and
(d) subject to the limitations of Article 15, any inaccuracy
in any of the representations or warranties of Subsidiaries of
Sterling contained in any agreement relating to the transfer of the
International Assets to Sterling's Subsidiaries or the breach of
any covenant or nonfulfillment of any agreement on the part of any
of Sterling's Subsidiaries under such agreements.
9. Indemnity of Seller.
The parties to this Amendment desire to amend Article 7 of the Agreement
to provide for indemnification by Seller of breaches by its Subsidiaries.
In connection therewith, Article 7 of the Agreement is hereby deleted in its
entirety and replaced in its entirety with the following:
-17-
<PAGE>
ARTICLE 7
SELLER'S INDEMNITY
------------------
Seller shall indemnify, save and hold harmless Buyer, Sterling and
Parent and their respective Subsidiaries and their respective secured bank
lenders together with all of their respective officers, directors,
employees, consultants, representatives and agents and all of their
respective heirs, legal representatives, successors and assigns
(collectively, the "Buyer Indemnified Parties") from and against and in
respect of all Losses incurred by any of them to the extent they arise from,
out of or in any manner connected with or based on:
(a) any liabilities, claims, losses, damages, or
expenses, direct or contingent, known or unknown, of Seller or any
of its Affiliates, including, without limitation, the Excluded
Liabilities;
(b) the Excluded Assets;
(c) Seller's obligations pursuant to Article 14 of this
Agreement;
(d) any act, omission, event, circumstance, occurrence
or condition occurring or existing on or prior to the Closing Date
and involving or relating to any of the Assets or Seller's or any
of its Subsidiaries' related operations;
(e) subject to the limitations of Article 15, any
inaccuracy in any of the representations and warranties of Seller
contained in this Agreement or any of the Seller Related Documents
or the breach of any covenant or nonfulfillment of any agreement on
the part of Seller under this Agreement, or any of the Seller
Related Documents;
(f) subject to the limitations of Article 15, any
inaccuracy in any of the representations and warranties of any
Subsidiary of Seller contained in any agreement relating to the
transfer of the International Assets from a Subsidiary of Seller to
a Subsidiary of Parent or the breach of any covenant or
nonfulfillment of any agreement on the part of any Subsidiary of
Seller under any of such agreements; and
(g) liabilities in connection with non-transferring
employees.
-18-
<PAGE>
10. Employee Benefit Matters.
The parties to this Amendment desire to amend Sections 9.01, 9.02, 9.04,
9.06, 9.08 and 9.09 of the Agreement to provide for the transfer of
employees of Subsidiaries of Seller to Buyer or Subsidiaries of Sterling.
In connection therewith, Sections 9.01, 9.02, 9.04, 9.06, 9.08 and 9.09 are
hereby deleted in their entirety and are hereby replaced in their entirety
with the following:
9.01 Offer of Employment. Seller has provided to
Buyer as of the date hereof a list of employees of Seller
and its Subsidiaries associated with the Equipment
Product Lines or any of the Assets setting forth the
status of such employees and their compensation, who will
be full-time, active employees on the Closing Date,
including those on temporary leave for jury duty, family
and short-term medical leave, vacation or annual two-week
military duty. Buyer shall provide to Seller at least 10
days prior to the Closing Date a list of such employees
to whom Buyer or its Affiliates or Subsidiaries of
Sterling will offer employment (the "Employee List").
Seller shall use all reasonable efforts and shall cause
its Subsidiaries to use all reasonable efforts (which
does not include the increase in any benefits under any
employee benefit program, plan or arrangement) to cause
such employees to accept Buyer's or its Affiliates' or
Subsidiaries of Sterling's offers of employment.
Reasonable efforts for the purpose of this Article shall
mean communicating the benefits to such employees and the
benefits set forth in this Article to encourage their
employment with Buyer, its Affiliates or Subsidiaries of
Sterling. Reasonable efforts shall neither preclude the
Seller or its Subsidiaries from retaining those employees
who do not accept employment offers from the Buyer; nor
require the Seller or its Subsidiaries to provide any
payment or benefit which is not set forth in this
Agreement. Prior to any employee's acceptance or
rejection of an offer of employment from the Buyer,
Seller or its Subsidiaries shall not provide any
incentive for any employee to remain in the employment of
the Seller or its Subsidiaries. Those employees who
accept such offers of employment and become employees of
the Buyer or its Affiliates prior to February 14, 1997
shall be referred to herein as "Transferred Employees".
Employees listed on the Employee List who as of the
Closing Date are on short term medical leave shall not be
deemed Transferred Employees if they do not report for
work within six (6) months of the commencement of such
leave and shall remain the responsibility of Seller or
its Subsidiaries.
-19-
<PAGE>
9.02 Service Under Buyer's Plans. Except as
otherwise provided in this Article 9, Transferred
Employees shall not be credited for their service with
Seller or its Subsidiaries for purposes of participation,
eligibility and vesting under the benefit plans and
programs provided by Buyer or its Affiliates.
9.04 Pension Benefits. On the date a Transferred
Employee becomes an employee of Buyer or any of its
Affiliates as set forth in Section 9.01, (i) the
Transferred Employee that participates in any "employee
pension benefit plan" (as defined in Section 3(2) of
ERISA) that is maintained by Seller or its Subsidiaries
(collectively, "Seller Pension Plans") shall cease to do
so and (ii) such Transferred Employee shall commence
participation in any "employee pension benefit plan" of
Buyer or its Affiliates for individuals employed by Buyer
of its Affiliates (collectively, "Buyer Pension Plans")
upon the satisfaction of any eligibility requirements set
forth in the Buyer Pension Plans.
9.06 Discharge of Employee Benefits Obligations.
(a) Except for liabilities and claims to be
assumed by Buyer under this Article 9, Seller shall
discharge all liabilities to and claims of Transferred
Employees or employees of Seller arising out of their
employment with Seller or its Subsidiaries including, but
not limited to, claims arising out of any employee
benefit plan maintained by Seller or its Subsidiaries or
for retiree medical benefits promised, provided or
subsidized by Seller after the Closing Date (as such
employee benefit plans of Seller or its Subsidiaries
exist when claims are to be paid by Seller or its
Subsidiaries and recognizing that such employee benefit
plans of Seller or its Subsidiaries may be amended,
modified or terminated).
(b) Except for liabilities assumed by Seller
or its Subsidiaries under this Article 9, Buyer or its
Affiliates shall discharge all liabilities to and claims
of Transferred Employees or employees of Buyer or its
Affiliates arising out of their employment with Buyer or
its Affiliates including, but not limited to, any claims
arising out of any employee benefit plan maintained by
Buyer or its Affiliates.
9.08 Vacation. Seller or its Subsidiaries shall
discharge its liability to any Transferred Employee for
vacation accrued through the date a Transferred
Employee's employment with the Seller or its Subsidiaries
terminates. With respect to a Transferred Employee,
Buyer or its Affiliates shall credit all service
recognized under Seller's or its Subsidiaries' vacation
policy through a Transferred Employee's last day of
employment with Seller or its Subsidiaries in the
calculation of the amount of vacation a Transferred
Employee has accrued under Buyer's or its Affiliate's
vacation policy.
-20-
<PAGE>
9.09 Severance. Seller shall discharge its
liability to any Transferred Employee for severance
benefits accrued through the date a Transferred
Employee's employment with the Seller or its Subsidiaries
terminates. With respect to a Transferred Employee,
Buyer or its Affiliates shall credit all service
recognized under Seller's or its Subsidiaries' severance
policy through a Transferred Employee's last day of
employment with Seller or its Subsidiaries in the
calculation of the amount of severance benefit a
Transferred Employee has accrued under Buyer's or its
Affiliate's severance policy or program.
11. The parties to this Amendment desire to amend Paragraph (a) of Section
9.03 of the Agreement to provide for the transfer of employees of
Subsidiaries of Seller to Buyer or Subsidiaries of Sterling. In connection
therewith, Paragraph (a) of Section 9.03 is hereby deleted in its entirety
and is hereby replaced in its entirety with the following:
(a) On the date a Transferred Employee becomes
an employee of the Buyer or any of its Affiliates as set
forth in Section 9.01, (i) the Transferred Employee and
his or her dependents that participate in any other
"employee welfare benefit plan" (as defined by Section
3(1) of ERISA) that is maintained by Seller or its
Subsidiaries (collectively, the "Seller Welfare Plans")
shall cease to do so and (ii) except as otherwise
provided in Sections 9.03(c), 9.08 and 9.09, such
Transferred Employee and dependents shall commence
participation in any "employee welfare benefit plan" (as
defined by Section 3(1) of ERISA) maintained by Buyer or
its Affiliates for individuals employed by Buyer or its
Affiliates (collectively, the "Buyer Welfare Plans") upon
the satisfaction of any eligibility requirements as set
forth in the Buyer Welfare Plan.
-21-
<PAGE>
12. Deliveries at Closing.
The parties to this Amendment desire to amend Section 11.02 of the
Agreement. In connection therewith, Section 11.02 is hereby amended by
adding Subsection (f) thereto:
(f) execute and deliver all agreements necessary or advisable
to transfer the International Assets from Seller's Subsidiaries to
Sterling, Buyer or Sterling's Subsidiaries, as the case may be.
13. Seller Deliveries at Closing.
The parties to this Amendment desire to amend Section 11.03 of the
Agreement. In connection therewith, Section 12.03 is hereby amended by
adding Subsection (d) thereto:
(d) execute and deliver all agreements necessary or advisable
to transfer the International Assets from Seller's Subsidiaries to
Sterling, Buyer or Sterling's Subsidiaries, as the case may be.
14. Conditions to Closing.
The parties to this Amendment desire to amend Section 12.02 (k) of the
Agreement. In connection therewith, Section 12.02(k) is hereby deleted in
its entirety and is hereby replaced in its entirety with the following:
(k) The Parties shall be reasonably satisfied with
respect to all documents and arrangements relating to the transfer
of any International Assets and the employment by Sterling's
Subsidiaries of any employees of Seller's Subsidiaries located
outside the United States;
15. Buyer Debt.
The parties to this Amendment desire to amend Section 13.06 of the
Agreement to provide for an increase in Buyer's debt limitations. In
connection therewith, Section 13.06 is hereby deleted in its entirety and is
hereby replaced in its entirety with the following:
-22-
<PAGE>
13.06Buyer Debt. After the Closing and for so long as Seller
owns any equity interest in the Buyer, Buyer shall not incur any
debt for borrowed money other than (i) pursuant to a working
capital line of credit in an amount up to $40,000,000, which shall
contain reasonable and customary terms and conditions, may be
secured by Buyer's accounts receivable and inventory, shall provide
for borrowings, repayments and reborrowings from time to time as
required in connection with the operation of Buyer's business and
shall be provided by a financial institution or an Affiliate of
Buyer, (ii) other loans or credit facilities to be provided by
Affiliates of Buyer in the discretion of such Affiliates and Buyer,
which shall be repaid on a pari passu basis with cash payments on
the Buyer Preferred Stock and (iii) other loans and credit
facilities satisfactory to Buyer and Seller. To the extent Buyer's
working capital needs exceed $70,000,000, the Parties agree to meet
and discuss in good faith possible modifications to the foregoing
limitations.
16. Confidentiality.
The parties to this Amendment desire to amend Section 13.07 of the
Agreement to provide for the protection of Confidential Material by the
Parties and Affiliates and Subsidiaries of the Parties. In connection
therewith, Section 13.07 is hereby deleted in its entirety and is hereby
replaced in its entirety with the following:
13.07 Confidentiality.
(a) In addition to any obligations of confidentiality
pursuant to other agreements between the Parties or their
Affiliates, without the prior written consent of the other Party,
each Party shall and shall cause its Subsidiaries to hold in
confidence and not disclose to any third party (i) any confidential
information received by it from the other Party or its
Subsidiaries, and (ii) the specific terms, conditions and
information contained in this Agreement, any of the Related
Documents and any other documents contemplated in this Agreement
(collectively, "Confidential Material").
(b) Each Party agrees that it shall and shall cause its
Subsidiaries to use the Confidential Material only for the purposes
of carrying out the transactions contemplated by this Agreement,
the Related Documents and any other documents contemplated in this
Agreement.
(c) For the purposes of this Agreement, Confidential Material
shall not include information:
(i) that is or becomes part of the public domain or is
otherwise generally available to the public other than through
breach of this Agreement, the Related Documents or any documents
contemplated in this Agreement or through the fault of the
receiving Party or its Subsidiaries;
(ii) that is or becomes available to another Party or
its Subsidiaries, from an unaffiliated source, which source has no
obligation of secrecy to the Parties or their Subsidiaries;
-23-
<PAGE>
(iii) that is disclosed (a) in any SEC filing; or (b)
that is required to be disclosed by law or governmental regulation
or order or upon the advice of counsel, provided that the Party or
its Subsidiary disclosing such information shall give the other
Parties to this Agreement reasonable advance notice of such
disclosure; or
(iv) that the Parties mutually agree in writing to disclose.
(d) The foregoing obligation of confidentiality shall be
effective from the date of this Agreement and continuing for a
period of six (6) years following the termination of the last to
terminate of this Agreement or the Related Documents.
(e) The Parties agree that in the event of any breach by any
Party or any Party's Subsidiaries of any of the provisions of this
Section 8.01, money damages would be inadequate and that the non-
breaching Party would have no adequate remedy at law. Accordingly,
notwithstanding anything to the contrary contained in this
Agreement, the Parties agree that the Parties shall have the right,
in addition to any other rights and the obligations under this
Section 8.01, to seek an adequate remedy for such breach, not only
by an action for damages but also by an action or actions for
specific performance, injunction and/or other equitable relief in
order to enforce or prevent any violations (whether anticipatory,
continuing or future) of the provisions of this Section 8.01.
17. Entire Agreement.
The parties to this Amendment desire to amend Section 17.11 of the
Agreement to provide for the inclusion of the Subsidiaries of the Parties.
In connection therewith, Section 17.11 is hereby deleted in its entirety and
is hereby replaced in its entirety with the following:
17.11Entire Agreement. This Agreement, the Related Documents
and all other agreements contemplated in this Agreement constitute
the full understanding of the Parties, a complete allocation of
risks between the Parties and a complete and exclusive statement of
the terms and conditions of their agreement relating to the subject
matter hereof and thereof and supersedes any and all prior
agreements, whether written or oral, that may exist between the
Parties with respect thereto. Except as otherwise specifically
provided in this Agreement, in the Related Documents or in any
other agreements contemplated in this Agreement, no conditions,
usage of trade, course of dealing or performance, understanding or
agreement purporting to modify, vary, explain or supplement the
terms or conditions of this Agreement shall be binding unless made
in accordance with Section 17.03 of this Agreement.
-24-
<PAGE>
18. Revised Schedules.
In connection with each of the foregoing amendments, Schedules 2.01(a),
2.01(b), 2.01(d) and 2.01(e) are hereby deleted in their entirety and
replaced in their entirety with corresponding Schedules attached to this
Amendment as Exhibit A, Schedule 1.29 is hereby deleted in its entirety and
Schedules 1.29(a) and 1.29(b), 2.03(a), 2.03(b), 2.03(d) and 2.03(e) are
hereby added to the Agreement.
19. Miscellaneous.
The provisions of Article 17 (other than Section 17.11 of the Agreement
which is amended above) of the Agreement shall control in this Amendment and
are hereby incorporated into this Amendment in their entirety except that
the word "Agreement" as used in Article 17 shall be construed to mean the
Agreement as amended by this Amendment where appropriate.
-25-
<PAGE>
The Parties hereto have caused this Amendment to be executed as of
the date and year first above written.
POLAROID CORPORATION
By: /s/ William J. O'Neill, Jr.
---------------------------------
Name: William J. O'Neill, Jr.
--------------------------------
Title: Executive Vice President and
Chief Executive Officer
--------------------------------
STERLING DIAGNOSTIC IMAGING, INC.
By: /s/ Patrick D. de Maynadier
----------------------------------
Name: Patrick D. de Maynadier
--------------------------------
Title: Senior Vice President
-------------------------------
SDI HOLDING CORP.
By: /s/ Patrick D. de Maynadier
----------------------------------
Name: Patrick D. de Maynadier
--------------------------------
Title: Senior Vice President
-------------------------------
STERLING DRY IMAGING SYSTEMS, INC.
By: /s/ Patrick D. de Maynadier
----------------------------------
Name: Patrick D. de Maynadier
--------------------------------
Title: Senior Vice President
-------------------------------
-26-
