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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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NEW IMAGE INDUSTRIES, INC.
(NAME OF SUBJECT COMPANY)
NEW IMAGE INDUSTRIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
645639 10 5
(CUSIP NUMBER OF CLASS OF SECURITIES)
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DEWEY F. EDMUNDS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NEW IMAGE INDUSTRIES, INC.
2283 COSMOS COURT
CARLSBAD, CALIFORNIA 92002
(619) 930-9900
(NAME AND ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
EDMUND M. KAUFMAN, ESQ.
IRELL & MANELLA LLP
333 SOUTH HOPE STREET, SUITE 3300
LOS ANGELES, CALIFORNIA 90071
(213) 620-1555
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is New Image Industries, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 2283 Cosmos Court, Carlsbad, California 92009. The title of
the class of equity securities to which this statement relates is the common
stock, par value $.001 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by DENTSPLY International Inc., a
Delaware corporation ("Parent"), and Image Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Parent (the "Purchaser"), disclosed
in a Tender Offer Statement on Schedule 14D-1, dated January 31, 1997 (the
"Schedule 14D-1"), to purchase all outstanding Shares at $2.00 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated January 31, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 27, 1997 (the "Merger Agreement"), among Parent, the Purchaser and
the Company. The Merger Agreement provides, among other things, that as soon as
practicable after the consummation of the Offer and satisfaction or waiver of
certain conditions, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company as the surviving corporation (the "Surviving
Corporation"). A copy of the Merger Agreement is attached hereto as Exhibit 1
and incorporated herein by reference.
Based on the information in the Schedule 14D-1, the principal executive
offices of each of Parent and the Purchaser are located at 570 West College
Avenue, York, Pennsylvania 17405-0872.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and its executive officers, directors or
affiliates is described in the attached Schedule I or set forth below.
TREATMENT OF STOCK OPTIONS AND WARRANTS IN THE OFFER
Pursuant to the terms of the employment agreements between the Company and
Dewey F. Edmunds, the President and Chief Executive Officer of the Company, Paul
Devereaux, the Vice President, Marketing of the Company, Mike Lytle, the Vice
President, Sales of the Company, and Harold R. Orr, the Chief Financial Officer
of the Company, all options to purchase Shares ("Stock Options") granted to such
officers will become immediately exercisable upon the closing of a sale of all
or substantially all of the assets of the Company, or the acquisition of the
Company by another entity by means of a consolidation or merger (other than a
consolidation or merger in which the holders of voting securities of the Company
immediately before the consolidation or merger own immediately after the
consolidation or merger voting securities of the surviving or acquiring
corporation, or of a parent entity of such surviving or acquiring corporation,
possessing more than 50% of the voting power of the surviving or acquiring
corporation or parent entity). In addition, by resolution adopted on December
20, 1996, the Board of Directors of the Company (the "Board") determined that
all outstanding Stock Options and warrants to purchase Shares ("Warrants") will
become immediately exercisable upon (a) the acquisition by any person, entity or
"group" (as such term is defined under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of (i) registered or beneficial ownership of more
than a majority of the outstanding voting securities of the Company or (ii) all
or substantially all of the assets of the Company, or (b) the election or
appointment to the Board of individuals who constitute a majority of the members
of the Board and whose nomination, election or appointment to such positions was
not approved by the current members of the Board (a "Change in Control"). A
Change in
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Control will occur upon the successful completion of the Offer, and, as a
result, all Stock Options and Warrants will become immediately exercisable at
such time. The treatment of outstanding Stock Options and Warrants in the Offer
is discussed below under the heading "Agreements with Parent and the
Purchaser -- The Merger Agreement -- Conversion of Shares; Stock Options and
Warrants."
CANCELLATION AND REISSUANCE OF STOCK OPTIONS
On November 6, 1996, the Board approved the following cancellations of
Stock Options and reissuances of Stock Options or Warrants. Each reissued Stock
Option and Warrant has an exercise price of $1.5625, the closing price of the
Shares on November 6, 1996, which, in each case, is less than the exercise price
of the corresponding cancelled Stock Option, and certain reissued Stock Options
have shorter vesting schedules than the corresponding cancelled Stock Options.
Stock Options to purchase 45,000 Shares and 35,000 Shares granted to Robert
S. Colman, the Chairman of the Board, and Harold J. Meyers, a director of the
Company, respectively, were cancelled and Warrants to purchase an equal number
of Shares for which the cancelled Stock Options could have been exercised were
issued. Such Warrants will become exercisable 181 days after the date of
issuance, and will become immediately exercisable upon the successful completion
of the Offer, and expire ten years from the issuance date.
Stock Options to purchase 2,500 Shares granted to Robert S. Colman, Stock
Options to purchase 12,500 Shares granted to Harold J. Meyers and Stock Options
to purchase 19,500 Shares granted to each of Kenneth B. Sawyer, Richard P.
Greenthal and Ralph M. Richart, M.D., each of whom is a director of the Company,
were cancelled and Stock Options to purchase an equal number of Shares for which
the cancelled Stock Options could have been exercised were issued. Such reissued
Stock Options vested one-third on the issuance date and will vest one-third on
each of the second and third anniversaries of such date, and will become
immediately exercisable upon the successful completion of the Offer, and expire
ten years from the issuance date.
Stock Options to purchase an aggregate of 573,083 Shares granted to current
officers and employees of the Company (including Stock Options granted to
executive officers of the Company as follows: Dewey F. Edmunds, 200,000; Mark W.
Stevens, 57,186; David H. Cooper, 20,000; Paul Devereaux, 28,909; Mike Lytle,
38,344; and Harold R. Orr, 30,000) were cancelled and Stock Options to purchase
an equal number of Shares for which the cancelled Stock Options could have been
exercised were issued. The vesting schedule for such reissued Stock Options is
the scheduled vesting date for their corresponding cancelled Stock Options, and
such reissued Stock Options will become immediately exercisable upon the
successful completion of the Offer and will expire on the scheduled expiration
date for their corresponding cancelled Stock Options.
INDEMNIFICATION
Section 145 of the Delaware General Corporation Law (the "DGCL") allows a
Delaware corporation to indemnify its current and former directors, officers,
employees or agents under certain circumstances against certain liabilities and
expenses incurred by them by reason of their serving in such capacities if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to criminal
actions and proceedings, had no reasonable cause to believe their conduct was
unlawful.
The Company's Certificate of Incorporation and Bylaws provide, among other
things, that the Company will indemnify each of its officers and directors
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
an action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
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In addition, the Merger Agreement contains provisions relating to
indemnification of officers and directors of the Company and the provision of
directors' and officers' liability insurance. See "Agreements with Parent and
the Purchaser -- The Merger Agreement -- Directors' and Officers' Insurance
Coverage."
AGREEMENTS WITH PARENT AND THE PURCHASER
The Merger Agreement
The following summary of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the Merger
Agreement, a copy of which is filed as Exhibit 1 hereto and incorporated herein
by reference.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer for any and all Shares at a price of $2.00 per Share (the "Offer
Price") net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions of the Offer. The Merger Agreement also provides that
Parent and the Purchaser may not, without the written consent of the Company,
decrease the price per Share, or change the form of consideration payable, in
the Offer, decrease the number of Shares sought in the Offer, change the
conditions to the Offer, impose additional conditions to the Offer or amend any
material term of the Offer in a manner adverse to the holders of the Shares.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with the DGCL, at the effective
time of the Merger (the "Effective Time"), the Purchaser will be merged with and
into the Company, the separate corporate existence of the Purchaser (except as
may be continued by operation of law) will cease and the Company will continue
as the Surviving Corporation following the Merger. Parent may elect at any time
prior to the Merger to merge the Company with and into the Purchaser, in which
event the parties have agreed to execute an appropriate amendment to the Merger
Agreement to reflect the foregoing. Pursuant to the Merger Agreement, the
Certificate of Incorporation and Bylaws of the Purchaser at the Effective Time
will be the Certificate of Incorporation and Bylaws of the Surviving Corporation
until amended as provided therein and under the DGCL. Also pursuant to the
Merger Agreement, the directors and officers of the Purchaser at the Effective
Time will, from and after the Effective Time, be the directors and officers of
the Surviving Corporation until their successors will have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
Conversion of Shares; Stock Options and Warrants. At the Effective Time,
each then outstanding Share (other than Shares held in the treasury of the
Company or owned by Parent or any direct or indirect subsidiary of Parent
(including the Purchaser) or by stockholders who are entitled to and who
properly exercise appraisal rights under the DGCL) will be converted into the
right to receive $2.00 in cash, without interest thereon, upon the terms and
subject to the conditions of the Offer. At the Effective Time, each Stock Option
and each Warrant, whether or not then exercisable in accordance with its terms,
will be converted into the right to receive, upon the surrender of the agreement
evidencing such Stock Option or Warrant and the delivery of an acknowledgment in
accordance with the terms of the Merger Agreement, an amount in cash (net of
applicable withholding) equal to the excess, if any, of the Offer Price over the
exercise price per Share subject to such Stock Option or Warrant, as the case
may be, multiplied by the number of Shares previously subject to such Stock
Option (assuming full vesting of all Stock Options) or Warrant.
Board Representation. The Merger Agreement provides that, upon the
acceptance for payment of, and payment for, any Shares by the Purchaser pursuant
to the Offer which, when taken together with any Shares which Parent
beneficially owns (as such term is defined under the Exchange Act), represent at
least a majority of the then outstanding Shares, the Purchaser will be entitled
at such time to designate the directors on the Board, and the Company will, at
such time, obtain resignations of all then-serving directors and, prior to such
resignations, cause the Purchaser's designees to be elected to, and to
constitute all of, the Board. Pursuant to the Merger Agreement, the Company
agreed to cooperate in permitting the exercise by the Purchaser of its rights
set forth in this paragraph, including, without limitation, (x) cooperating in
satisfying the requirements of Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and (y) amending, prior to the expiration date of the
Offer, any provisions of the Bylaws or any agreement by
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which the Company is bound that could delay or hinder the ability of the
Purchaser or Parent to elect its designees to a majority of the directorships
constituting the Board. The Merger Agreement provides that the Company will not
take any action to delay or hinder such election.
Directors' and Officers' Insurance Coverage. The Merger Agreement provides
that, for six years after the earlier of (i) the date on which the designees of
the Purchaser have been elected to the Board pursuant to the provisions set
forth in the preceding paragraph and constitute all of the members thereof and
(ii) the Effective Time, Parent and the Surviving Corporation will indemnify,
defend and hold harmless the present officers, directors, employees and agents
of the Company and its subsidiaries (each, an "Indemnified Party") against all
losses, claims, damages, liabilities, fees and expenses (including reasonable
fees and disbursements of counsel) and judgments, fines, losses, claims,
liabilities and amounts paid in settlement (provided that any such settlement is
effected with the prior written consent of Parent or the Surviving Corporation
(which consent will not be unreasonably withheld)) arising out of actions or
omissions occurring at or prior to the Effective Time (including without
limitation matters arising out of or pertaining to the transactions contemplated
by the Merger Agreement) to the full extent permitted by the DGCL or the
Company's Certificate of Incorporation or Bylaws as in effect on January 27,
1997, including provisions therein relating to the advancement of expenses
incurred in the defense of any action or suit; provided, however, that in the
event any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect of any such claim or claims will continue
until disposition of the claim to which such rights are applicable.
The Merger Agreement also provides that, for two years after the Effective
Time, Parent and the Surviving Corporation will (i) maintain the current
policies of officers' and directors' liability insurance in respect of acts or
omissions (including without limitation matters arising out of or pertaining to
the transactions contemplated by the Merger Agreement) occurring at or prior to
the Effective Time covering each person who was an officer or director of the
Company on January 27, 1997 and who was then covered by the Company's officers'
and directors' liability insurance policy or (ii) substitute policies providing
substantially similar coverage containing terms and conditions that, taken
together, are not materially less advantageous, and provided that such
substitution does not result in gaps or lapses in coverage.
The Merger Agreement further provides that Parent and the Surviving
Corporation will pay all expenses (including attorneys' fees) that may be
incurred by any Indemnified Party or person having rights to coverage pursuant
to the provisions set forth under this caption (collectively, "Covered Persons")
in enforcing the obligations of Parent and the Surviving Corporation provided
for therein, provided that no such expenses will be payable if such Indemnified
Party or person is found, in or as a result of such enforcement action, not to
have the rights to coverage claimed by such Indemnified Party or person. The
parties to the Merger Agreement acknowledged and agreed therein that the remedy
at law for any breach of the obligations under the provisions set forth under
this caption is and will be insufficient and inadequate and that the Covered
Persons, in addition to any remedies at law, will be entitled to equitable
relief. Pursuant to the Merger Agreement, without limiting any remedies Covered
Persons may otherwise have thereunder or under applicable law, in the event of
nonperformance of any obligation under this caption, the Covered Persons will
have, in addition to any other rights at law or equity, the right to specific
performance.
The Merger Agreement additionally provides that the rights set forth under
this caption are contingent upon, and will survive, the consummation of the
Offer, are intended to benefit the Company, the Surviving Corporation and each
Covered Person, will be binding on all successors and assigns of Parent and the
Surviving Corporation and will be enforceable by each Covered Person, each of
whom is a third party beneficiary of these provisions.
Benefit Plans and Certain Contracts. Pursuant to the Merger Agreement,
Parent agreed to cause the Surviving Corporation to pay all amounts due and
payable under the terms of all written employment contracts, agreements, plans,
policies and written commitments of the Company and its subsidiaries with or
with respect to its current employees, officers and directors as such contracts,
agreements, plans, policies and written commitments are described in the
disclosure schedule to the Merger Agreement as in effect on January 27, 1997.
Also pursuant to the Merger Agreement, for at least two years following the
Effective Time, each employee of the Company and its subsidiaries (while such
person remains an employee of the Company
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and its subsidiaries) will be entitled to participate in all benefit plans
maintained or sponsored by the Company or in benefit plans providing
substantially similar benefits. The Merger Agreement also provides that, upon or
prior to the consummation of the Offer, Parent and the Company will enter into
an employment agreement with Dewey F. Edmunds (the "Employment Agreement"). See
"Employment Agreement."
Stockholder Meeting. The Merger Agreement provides that if the approval of
the Merger by the Company's stockholders (the "Company Stockholder Approval") is
required by law, the Company will, at Parent's request, as soon as practicable
in accordance with applicable law following acceptance for payment of and
payment for Shares, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders' Meeting") for the purpose of obtaining such
Company Stockholder Approval. The Merger Agreement also provides that the
Company will, through the Board, subject to the provisions described below in
the second paragraph under "Exclusive Dealing," recommend to its stockholders
that such Company Stockholder Approval be given. The Merger Agreement further
provides that, notwithstanding the foregoing, if Parent, the Purchaser or any
other subsidiary of Parent acquires at least 90% of the outstanding Shares, the
parties will, at the request of Parent, take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Stockholders' Meeting in accordance with
Section 253 of the DGCL. Pursuant to the Merger Agreement, without limiting the
generality of the foregoing, the Company agreed that its obligations pursuant to
the first sentence of this paragraph will not be affected by (i) the
commencement, public proposal, public disclosure or communication to the Company
of any Acquisition Proposal (as defined below) that is not a Superior
Acquisition Proposal (as defined below) or (ii) the withdrawal or modification
by the Board of its approval or recommendation of the Offer, the Merger
Agreement or the Merger. Also pursuant to the Merger Agreement, Parent agreed to
cause all Shares purchased pursuant to the Offer and all other Shares owned by
the Purchaser or any other subsidiary of Parent to be voted in favor of the
Company Stockholder Approval.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of each party to effect the Merger is subject to the fulfillment or
waiver at or prior to the Effective Time of the following conditions: (a) if
required by the DGCL, the Company Stockholder Approval will have been obtained
by the requisite vote of the stockholders of the Company; (b) no statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary
injunction or other order or legal restraint or prohibition preventing the
consummation of the Merger will have been issued by any federal, state or local
government or any court, administrative or regulatory agency, domestic or
foreign (a "Governmental Entity"); and (c) all authorizations, consents, orders
or approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any Governmental Entity necessary for the consummation of
the Merger and the transactions contemplated by the Merger Agreement will have
been filed, occurred or been obtained and will be in effect at the Effective
Time. The obligation of the Company to effect the Merger is also subject to the
condition that each of Parent and the Purchaser will have made and consummated
the Offer, each in accordance with its terms.
Representations and Warranties. In the Merger Agreement, the Company made
customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization and qualification, its
capitalization, its authority relative to the Merger Agreement, filings made by
the Company with the Securities and Exchange Commission (the "Commission"), the
absence of undisclosed liabilities, the absence of certain changes or events,
litigation, the absence of changes in benefit plans, compliance with the
Employee Retirement Income Security Act of 1974, as amended, payment of taxes,
the absence of "excess parachute payments" within the meaning of Section
280G(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"),
information supplied to Parent and the Purchaser, compliance with applicable
laws, the applicability of state takeover statutes, brokers, contracts, title to
properties, labor matters, insurance, intellectual property matters, the absence
of certain payments, certain suppliers and customers and certain regulatory
matters.
Also in the Merger Agreement, Parent made representations and warranties to
the Company with respect to, among other things, its organization and
qualification, its authority relative to the Merger Agreement, the availability
of funds to consummate the Offer and the Merger, ownership of Company
securities, information supplied, capitalization of the Purchaser and Parent's
prior engagement of Cleary Gull Reiland & McDevitt Inc. ("Cleary Gull").
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Conduct of Business by the Company Pending the Merger. The Merger Agreement
provides that, prior to the Effective Time, unless expressly contemplated by the
Merger Agreement or as may be agreed to in writing by Parent: (a) the business
of the Company and its subsidiaries will be conducted only in the ordinary
course and consistent with past practice; (b) the Company will not, and will not
permit any of its subsidiaries to: (i) sell or pledge or agree to sell or pledge
any stock owned by it in any of its subsidiaries; (ii) amend its Certificate of
Incorporation or Bylaws; or (iii) split, combine or reclassify any shares of its
outstanding capital stock or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property or redeem or otherwise acquire
any shares of its capital stock; (c) the Company will not, and will cause each
of its subsidiaries not to: (1) authorize for issuance, issue or sell any
additional shares of, or rights of any kind to acquire any shares of, its
capital stock of any class (whether through the issuance or granting of stock
options, warrants, convertible securities, commitments, subscriptions, rights to
purchase or otherwise), except for unissued Shares reserved for issuance upon
the exercise of Stock Options or Warrants outstanding on the date of the Merger
Agreement in accordance with their then existing terms; (2) acquire, dispose of,
transfer, lease, license, mortgage, pledge or encumber any material assets; (3)
incur, assume or prepay any indebtedness for borrowed money or any other
material liabilities, except accounts payable incurred in the ordinary course of
business consistent with past practice, or issue or sell any debt securities or
warrants or rights to acquire debt securities of the Company or any of its
subsidiaries; (4) assume, endorse (other than in the ordinary course of business
consistent with past practices), guarantee or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the material
obligations of any other person; (5) make any loans, advances or capital
contributions to, or investments in, any other person or otherwise enter into
any material contract other than in the ordinary course of business and
consistent with past practices; (6) make any loans to employees, other than
travel advances in the ordinary course of business; (7) fail to maintain
adequate insurance consistent with past practices for its business and
properties; (8) undertake, make or commit to undertake or make any capital
expenditures in an amount greater than $10,000 per individual capital
expenditure and no more than $25,000 per month in the aggregate (on a combined
basis for the Company and its subsidiaries); or (9) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing; (d)
the Company will use its reasonable best efforts consistent with past practice
to preserve intact the business organization of the Company and its
subsidiaries, keep available the services of its and their present officers and
employees, and preserve its existing relationships with customers, suppliers and
others with which it and its respective subsidiaries have business dealings; (e)
the Company will not, and will cause its subsidiaries not to: (I) enter into any
new agreements or amend or modify any existing agreements with any of its
respective officers, directors or employees or with any "disqualified
individuals" (as defined in Section 280G(c) of the Code), (II) grant any
increases in the compensation of its respective directors, officers and
employees or any "disqualified individuals" (as defined in Section 280G(c) of
the Code) other than (A) pursuant to written agreements in effect at the date of
the Merger Agreement, or (B) increases in the ordinary course of business and
consistent with past practice to persons who are not directors or corporate
officers of or "disqualified individuals" with respect to the Company or any of
its subsidiaries, (III) enter into, adopt, amend or terminate, or grant any new
benefit not presently provided for under, any employee benefit plan or
arrangement, except as required by law or to maintain the tax qualified status
of the plan; provided, however, that the Company or its subsidiaries may
terminate, to the extent permitted by applicable law, any benefit or any
employee benefit plan or arrangement, or (IV) take any action with respect to
the grant of any severance or termination pay other than in the ordinary course
of business and consistent with past practice and pursuant to policies in effect
on the date of the Merger Agreement; (f) the Company will not, and will not
permit any of its subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets (other than equipment, inventory and supplies in the
ordinary course of business); (g) the Company will not, and will not permit any
of its subsidiaries to, sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any of its
material assets; (h) the Company will take all actions reasonably necessary so
that the conditions to the Offer that require actions to be performed by the
Company are satisfied on a timely basis, except as contemplated by the Merger
Agreement; (i) unless the Company receives a Superior Acquisition Proposal, the
Company will not call any meeting of its stockholders to be held prior to March
25, 1997 other than as required by the Merger Agreement; (j) the Company will
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not, and will not permit any of its subsidiaries to, make any tax election or
settle (except to settle reserved amounts for less than the amount so reserved)
or compromise any income tax liability; (k) the Company and each of its
subsidiaries will make timely payments, in accordance with the terms applicable
thereto, of all currently due liabilities for borrowed money; (l) the Company
will not, and will not permit any of its subsidiaries to, pay, discharge, settle
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities reflected or
reserved against in the most recent consolidated financial statements (or the
notes thereto) of the Company included in its filings with the Commission; (m)
the Company will not, and will not permit any of its subsidiaries to, modify,
amend or terminate any material contract, lease of real property or of a
material amount of assets, or agreement relating to indebtedness or the
extension of credit, or waive, release or assign any rights or claims
thereunder; and (n) the Company will maintain in full force and effect its
current policies of directors' and officers' liability insurance covering all
persons who are presently covered by such policies.
Actions by Parent and the Purchaser Pending the Merger. The Merger
Agreement provides that none of the provisions contained in the preceding
paragraph will prohibit Parent or the Purchaser (or any of their respective
subsidiaries), during the period between the payment for Shares pursuant to the
Offer and the Effective Time, from taking or causing to be taken any action with
respect to the business of the Company and its subsidiaries that Parent or the
Purchaser (or any of their respective subsidiaries) would legally be permitted
to take or cause to be taken with respect to a majority owned subsidiary of
Parent or the Purchaser (or any of their respective subsidiaries), provided that
Parent will not take any action in violation of the terms of the Merger
Agreement that would cause Parent's obligations to effect the Merger under the
Merger Agreement to not be satisfied and provided further that any such action
taken by or at the direction of Parent or the Purchaser (or any of their
respective subsidiaries) will not cause a breach by the Company of any of the
provisions of the preceding paragraph.
Exclusive Dealing. The Merger Agreement provides that neither the Company
nor any of its subsidiaries, officers, directors, or the directors and officers
of its subsidiaries, nor any of its other affiliates (each, an "Affiliate")
will, and the Company will cause its and its respective Affiliates' employees,
agents and representatives (including, without limitation, any investment
banking, legal or accounting firm retained by the Company or any of its
Affiliates and any individual member or employee of the foregoing) (each, an
"Agent") not to: (i) initiate, solicit or seek, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders or any of them)
with respect to a merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase of
all or a substantial portion of the assets or any equity securities of, the
Company or any of its subsidiaries, except for the transactions contemplated by
the Merger Agreement (any such proposal or offer being hereinafter referred to
as an "Acquisition Proposal"); or (ii) engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal; or (iii) otherwise cooperate in
any effort or attempt to make, implement or accept an Acquisition Proposal;
provided, however, that the Company may, if it receives an Acquisition Proposal
which was not directly or indirectly initiated, solicited or otherwise sought by
the Company or by any of its Affiliates or its or their respective Agents, and
which is a Superior Acquisition Proposal, respond to such Superior Acquisition
Proposal by engaging in negotiations with respect thereto and providing
nonpublic information concerning the Company to the person making such Superior
Acquisition Proposal, provided that such person has entered into a written
confidentiality agreement on terms no more favorable to such person than the
Mutual Confidential Non-Disclosure Agreement, dated October 8, 1996, between the
Company and Parent (the "Confidentiality Agreement") and provided further that
the Company has received a written opinion of its outside counsel that such
response is required in order to satisfy the fiduciary duties imposed under
applicable law on the Board. The Company agreed in the Merger Agreement to take
the necessary steps to inform the individuals and entities referred to in the
first sentence this paragraph of the obligations undertaken in this paragraph.
The Merger Agreement provides that, unless it has theretofore been
terminated pursuant to the provisions described below in clause (f) under
"Termination," neither the Board nor any committee thereof
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will (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or the Purchaser, the approval or recommendation by the Board
or any such committee of the Offer, the Merger Agreement or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal or (iii) enter into any agreement with respect to any Acquisition
Proposal. The Merger Agreement provides that, notwithstanding the foregoing, in
the event the Board receives an Acquisition Proposal that constitutes a Superior
Acquisition Proposal, the Board may (subject to the limitations contained under
this caption) withdraw or modify its approval or recommendation of the Offer,
the Merger Agreement or the Merger, approve or recommend any such Superior
Acquisition Proposal, enter into an agreement with respect to any such Superior
Acquisition Proposal or terminate the Merger Agreement, in each case at any time
after 48 hours following Parent's receipt of written notice advising Parent that
the Board has received a Superior Acquisition Proposal, specifying the material
terms and conditions of such Superior Acquisition Proposal and identifying the
person making such Superior Acquisition Proposal. For purposes of the Merger
Agreement, a "Superior Acquisition Proposal" means an Acquisition Proposal
received by the Company without violation of the provisions contained in the
preceding paragraph, having terms which the Board determines, in the exercise of
its fiduciary duties, after consultation with outside counsel, and upon the
written opinion of its outside financial advisor, to be more favorable to the
Company's stockholders from a financial point of view than the Offer and the
Merger.
The Merger Agreement further provides that, in addition to the obligations
of the Company set forth in the preceding paragraph, the Company will promptly
advise Parent orally and in writing of any request for nonpublic information
relating to the Company or by any person that, to the Company's knowledge, may
be considering making, or has made, an Acquisition Proposal or the receipt of
any Acquisition Proposal, or any inquiry with respect to any Acquisition
Proposal, the material terms and conditions of such request, Acquisition
Proposal or inquiry, and the identity of the person making any such request,
Acquisition Proposal or inquiry. The Company agreed in the Merger Agreement to
keep Parent fully informed of the status and details of any such request,
Acquisition Proposal or inquiry.
Fees and Expenses. Except as provided below, the Merger Agreement provides
that, whether or not the Offer and/or the Merger are consummated, each of the
Company and Parent will separately bear its own expenses, including the fees and
disbursements of counsel, investment bankers and accountants, incurred in
connection with the Offer, the Merger, the Merger Agreement and the transactions
contemplated thereby.
The Merger Agreement also provides that if the Company or any Affiliate or
Agent of the Company fails to fulfill its obligations described above under
"Exclusive Dealing," or enters into an agreement which contemplates the sale of
all or any material portion of the assets of, or any equity interest in, the
Company to a third party, or the parties to the Stockholder Agreements (as
defined below) or any of them enters into an agreement which contemplates such a
transaction, then, in any such case, the Company will promptly reimburse Parent
for all of its out-of-pocket expenses incurred in connection with the Offer, the
Merger, the Merger Agreement, the Stockholder Agreements or any transactions
contemplated by the Merger Agreement or the Stockholder Agreements.
Termination. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether prior to or after any approval by the stockholders
of the Company:
(a) by mutual written consent of the Boards of Directors of Parent and
the Company;
(b) by Parent, if (i) neither Parent nor any subsidiary of Parent has
accepted for payment any Shares pursuant to the Offer by the sixtieth day
following commencement of the Offer and such failure is not in breach of
the Offer or the Merger Agreement, or (ii) Parent has properly terminated
the Offer in accordance with its terms; provided that Parent may not
terminate the Merger Agreement pursuant to this provision if (A) the
failure of Parent or the Purchaser to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the circumstances
described in clause (i), or (B) in the case of clause (ii), Parent or the
Purchaser has not exercised such right by the close of business on or
before the fifth business day following the termination of the Offer in
accordance with its terms;
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(c) by Parent and the Purchaser prior to the purchase of Shares
pursuant to the Offer, if there has been any material breach of a material
obligation of the Company under the Merger Agreement and such breach has
not been remedied within five days after receipt by the Company of notice
in writing from Parent or the Purchaser specifying such breach and
requesting that it be remedied;
(d) by the Company prior to the purchase of Shares pursuant to the
Offer, if there has been any material breach of a material obligation of
Parent or the Purchaser under the Merger Agreement and such breach has not
been remedied within five days after receipt by Parent or the Purchaser, as
the case may be, of notice in writing from the Company specifying such
breach and requesting that it be remedied;
(e) by the Company, if (i) the Offer has not been commenced on or
before the fifth business day after the announcement to the public of the
execution of the Merger Agreement, (ii) the Offer is terminated without the
purchase of any Shares and such termination is in breach of the Offer or
the Merger Agreement, or (iii) Parent or the Purchaser has failed to pay or
to cause another entity to pay for Shares duly and properly tendered in the
Offer within 10 business days following expiration of the Offer, provided
that the Company may not terminate the Merger Agreement pursuant to this
provision if the failure of the Company to fulfill any obligation under the
Merger Agreement has been the cause of, or resulted in, the circumstances
described in clauses (i), (ii) or (iii) above;
(f) by the Company or by Parent and the Purchaser prior to the
purchase of Shares pursuant to the Offer, if a Superior Acquisition
Proposal is received and the Board, pursuant to the provisions described
above in the second paragraph under "Exclusive Dealing," withdraws or
modifies its recommendation of the Offer or recommends to the stockholders
of the Company that such stockholders tender their Shares into, or vote in
favor of, such Superior Acquisition Proposal, provided that such
termination will not affect the Company's obligations described above in
the second paragraph under the caption "Fees and Expenses"; or
(g) by the Company or by Parent and the Purchaser if there is any law
or regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining
Parent, the Purchaser or the Company from consummating the Merger is
entered and such judgment, injunction, order or decree becomes final and
nonappealable.
The Merger Agreement provides that in the event of termination thereof
prior to the purchase of Shares pursuant to the Offer as provided above, the
Merger Agreement will forthwith become void and of no effect, and there will be
no liability on the part of Parent, the Purchaser or the Company, except that
the provisions described above under "Fees and Expenses" and certain other
provisions of the Merger Agreement will survive any such termination, and (b)
nothing in the Merger Agreement will relieve any party from liability for any
willful or grossly negligent breach of any representation or warranty or any
breach prior to such termination of any covenant or agreement contained therein.
Entire Agreement. The Merger Agreement provides that the Merger Agreement
(including the Appendix thereto and the documents and instruments referred to
therein) constitutes the entire agreement and supersedes all other prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter thereof, provided, however, that (i)
the "standstill" provisions of the Letter of Intent (as defined and described
below), (ii) the Credit Agreement (as defined and described below), (iii) the
Subordination Agreement (as defined and described below) and (iv) the
Confidentiality Agreement will remain in effect in accordance with their terms.
Amendment. The Merger Agreement provides that it may not be amended except
by an instrument in writing signed on behalf of each of the parties, and
provided that any amendment effected after obtaining the Company Stockholder
Approval may be subject to further approval of the Company's stockholders if
required by the DGCL.
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Stockholder Agreements
The following summary of the Stockholder Agreements does not purport to be
complete and is qualified in its entirety by reference to the Stockholder
Agreements, copies of which are filed as Exhibits 2 through 14 and incorporated
herein by reference.
Tender of Shares. In connection with the execution of the Merger Agreement,
Parent and the Purchaser entered into a separate agreement (the "Stockholder
Agreements") with each of Dewey F. Edmunds, Robert S. Colman, Kenneth B. Sawyer,
Richard P. Greenthal, Harold J. Meyers, Ralph M. Richart, M.D., Mark W. Stevens,
David H. Cooper, Paul Devereaux, Debra L. Jackson, Mike Lytle and Harold R. Orr,
each of whom is a director and/or executive officer of the Company and an owner
of Shares, Stock Options and/or Warrants, and The William W. Stevens and Virda
J. Stevens Trust, an owner of Shares and Warrants (collectively, the
"Stockholder Parties"). The Stockholder Parties currently own a total of 537,795
Shares, representing approximately 9.8% of the outstanding Shares as of January
27, 1997. Pursuant to the respective Stockholder Agreements, each Stockholder
Party agreed to validly tender (or cause the record owner of such Shares to
validly tender), and not to withdraw, pursuant to and in accordance with the
terms of the Offer, the number of Shares owned beneficially by such Stockholder
Party and any Shares acquired by such Stockholder Party in any capacity after
the date of the respective Stockholder Agreement. Each Stockholder Party also
agreed in the respective Stockholder Agreement that if such party holds Stock
Options and/or Warrants, such party will, if requested by the Company, consent
to the cancellation and conversion of such party's Stock Options and/or Warrants
in accordance with the terms of the Merger Agreement and will execute all
appropriate documentation in connection with such cancellation and conversion.
Provisions Concerning Shares. Pursuant to the respective Stockholder
Agreements, each Stockholder Party agreed that at any meeting of the Company's
stockholders or in connection with any written consent of the Company's
stockholders, such Stockholder Party will vote (or cause to be voted) the Shares
(if any) then held of record or beneficially owned by such party (i) in favor of
the Merger, the execution and delivery by the Company of the Merger Agreement
and the approval of the terms thereof and each of the other actions contemplated
by the Merger Agreement and such Stockholder Agreement and any actions required
in furtherance thereof and (ii) against any Acquisition Proposal and against any
action or agreement that would impede, frustrate, prevent or nullify such
Stockholder Agreement or result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or that would result in any of the conditions to the
Offer or to the Merger not being fulfilled. The Stockholder Agreements also
provide that, notwithstanding anything therein to the contrary, each Stockholder
Party, in his or her capacity as a director or officer of the Company, as the
case may be, and in accordance with the Merger Agreement, may exercise his or
her fiduciary duties with respect to the Company. In the respective Stockholder
Agreements, each Stockholder Party also agreed, among other things, not to
transfer such party's Shares and not to, in such party's capacity as a
stockholder of the Company, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or group
(other than Parent or any of its affiliates or representatives) concerning any
Acquisition Proposal.
Employment Agreement
The following summary of the Employment Agreement does not purport to be
complete and is qualified in its entirety by reference to the Employment
Agreement, the form of which is filed as Exhibit 15 and incorporated herein by
reference.
Pursuant to the Merger Agreement, upon or prior to the consummation of the
Offer, Parent and the Company will enter into the Employment Agreement with Mr.
Edmunds. The Employment Agreement provides that Mr. Edmunds will serve as Vice
President and General Manager of the Company or any entity (including a division
of Parent) that succeeds to all or any substantial part of the business and
operations of the Company for a term commencing on the date upon which the
Purchaser purchases Shares pursuant to the Offer and ending on February 28,
1999, unless sooner terminated as described below.
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Pursuant to the Employment Agreement, Mr. Edmunds will (i) receive an
annual base salary of not less than $180,000, or such larger amount as may from
time to time be fixed by Parent, (ii) be entitled to bonus compensation that is
comparable (in the manner in which it is determined and with respect to the time
of payment) to that of Parent's domestic executive employees who perform duties
and have responsibilities comparable to those of Mr. Edmunds, (iii) be entitled
to participate in all plans and other benefits made available by Parent
generally to its domestic executive employees who perform duties and have
responsibilities comparable to those of Mr. Edmunds and (iv) be eligible to
participate in Parent's 1993 Stock Option Plan. Parent's management will
recommend to the Compensation Committee of Parent's Board of Directors that Mr.
Edmunds be granted options under such plan in an amount that is determined in a
manner comparable to the manner in which option grants are determined for
Parent's domestic executive employees who perform duties and have
responsibilities comparable to those of Mr. Edmunds.
Mr. Edmunds may terminate the Employment Agreement after the occurrence of
certain events specified therein (any such event, "Good Reason"). In addition,
the Company may terminate the Employment Agreement if Mr. Edmunds suffers a
"Disability" or for "Cause" (as each such term is defined in the Employment
Agreement). If the Employment Agreement is terminated by Mr. Edmunds for Good
Reason or by the Company for certain reasons specified in the Employment
Agreement, the Company will continue to pay compensation and provide benefits to
Mr. Edmunds for a period beginning on the date of the termination notice and
ending on the later of the second anniversary of such date or February 28, 1999.
In addition, if at any time after a "Change in Control" (as defined in the
Employment Agreement), Mr. Edmunds terminates his employment for Good Reason, or
Parent or the Company terminates Mr. Edmunds, then in lieu of the periodic
payments specified in the preceding sentence, Mr. Edmunds will receive, at his
election, within five business days of such termination, the present value of
such periodic payments.
The Confidentiality Agreement
On October 8, 1996, the Company and Parent entered into the Confidentiality
Agreement pursuant to which the Company and Parent agreed to exchange certain
information, to treat such information as confidential and to use such
information solely in connection with the evaluation of a possible business
relationship between them. The foregoing summary of the Confidentiality
Agreement does not purport to be complete and is qualified in its entirety by
reference to the text of the Confidentiality Agreement, a copy of which is filed
as Exhibit 16 hereto and incorporated herein by reference.
The Letter of Intent
On December 24, 1996, the Company and Parent entered into a letter
agreement (the "Letter of Intent"), which contained, among other things, a
non-binding agreement of Parent to acquire the Company by means of either (i) a
tender offer to be made by a wholly owned subsidiary of Parent for all of the
issued and outstanding Shares, subject to certain conditions, for a price of
$2.00 per Share in cash, and, following the completion thereof, the merger of
such subsidiary with and into the Company pursuant to which each outstanding
Share then owned by such subsidiary will be exchanged for $2.00 per share in
cash, and each Stock Option, Warrant and other right to acquire a Share will be
exchanged for $2.00 less the exercise price of such Stock Option, Warrant or
right; or (ii) an all-cash merger of such subsidiary with and into the Company
for the price set forth in clause (i). Consummation of such transaction was
subject to various conditions, including Parent's satisfactory completion of a
due diligence review of the Company.
The Letter of Intent also contained a "standstill" provision, which,
subject to certain provisos, precludes Parent from, among other things,
acquiring Shares without the Company's consent until December 24, 1997. In
addition, the Letter of Intent contained an exclusive dealing provision, which
precludes the Company from initiating, soliciting, seeking or negotiating
certain acquisition proposals with, or providing confidential information to,
third parties.
The foregoing summary of the Letter of Intent does not purport to be
complete and is qualified in its entirety by reference to the text of the Letter
of Intent, a copy of which is filed as Exhibit 17 hereto and incorporated herein
by reference.
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The Credit Agreement
The Company, Insight Imaging Systems, Inc., a California corporation and
wholly owned subsidiary of the Company ("Insight" and, together with the
Company, "Borrower"), and Parent entered into a credit agreement, dated as of
December 24, 1996 (the "Credit Agreement"), pursuant to which, among other
things, Parent agreed to make available to Borrower a line of credit (the
"Line") of up to an aggregate principal amount of $3 million outstanding at any
time (the "Maximum Available Credit") to pay necessary and reasonable operating
expenses or, in Parent's sole and absolute discretion, for any other purpose
related to the operations of Borrower.
Upon execution and delivery of the Credit Agreement, Parent made an advance
to Borrower under the Line (an "Advance") of $2.5 million. As of the date of
this Schedule 14D-9, $500,000 of additional borrowing capacity is available to
Borrower under the Credit Agreement.
Also pursuant to the Credit Agreement, Borrower granted to Parent a
security interest in and lien on the Collateral (as defined in the Credit
Agreement), which includes, without limitation, all of Borrower's rights, title
and interest in and to all of its personal property, rights, interests and
privileges. In connection therewith, Borrower and Parent entered into certain
security agreements. All of Borrower's indebtedness under the Credit Agreement
is subordinated to Borrower's indebtedness owed to its bank lender to the extent
provided in the Subordination Agreement (as defined and described below).
Pursuant to the Credit Agreement, at any time and from time to time during
the term of the Credit Agreement and until the Termination Date (as defined
below), Borrower may request an Advance, and Parent will make such Advance upon
the terms and subject to the conditions of the Credit Agreement. Each
outstanding Advance is, and each future Advance will be, evidenced by a note
(the "Note"). Advances bear interest on the unpaid principal balance outstanding
at any time at the floating interest rate of 4% per annum in excess of the prime
rate of interest set forth in Money Rates Section of The Wall Street Journal
rounded up to the nearest one-eighth (the "Line Interest Rate") or such lesser
rate permitted by applicable law if the Line Interest Rate would violate
applicable law. Except as otherwise provided in the Credit Agreement, Borrower
is obligated to pay in full all unpaid principal on the Line and all interest
accrued but unpaid thereon on March 25, 1997.
The Credit Agreement will terminate pursuant to its terms on the date (the
"Termination Date") on which (a) there is an Event of Default (as defined below)
upon which Parent forthwith declares all principal and interest on the Note to
be immediately due and payable or on which all principal and interest is
immediately due and payable without any declaration by Parent or (b) the date of
the earliest to occur of (i) the termination of the Letter of Intent other than
by means of the execution and delivery of a definitive merger agreement as
contemplated therein, (ii) the termination of such definitive merger agreement
other than by means of the consummation of the transactions contemplated therein
or (iii) March 25, 1997.
The Credit Agreement provides that the occurrence of any one or more of the
following events will constitute an "Event of Default" under the Credit
Agreement and the Note: (a) Borrower fails to pay as and when due any principal
or interest under the Credit Agreement or under the Note, or uses the proceeds
of Advances in violation of the terms thereof; (b) Borrower fails to observe or
perform any obligation or any covenant to be observed or performed by it under
the Credit Agreement or under the Note or in any other agreement between Parent
and Borrower; (c) Borrower defaults after December 24, 1996 in the payment or
performance of any material obligation or material indebtedness to another
person whether then existing or thereafter incurred, including, without
limitation, any event of default as defined in the Coast Agreement (as defined
below) that is not then subject to Coast's (as defined below) forbearance under
the terms of the Forbearance Letter (as defined below); (d) any material
statement, certificate, report, representation or warranty made or furnished by
Borrower in the Credit Agreement or in compliance with the provisions thereof
prove to have been false or misleading in any material respect at the time when
made, deemed made or furnished; (e)(i) any money judgment, writ or warrant of
attachment or similar process involving an amount in excess of $50,000 is
entered or filed against Borrower or any of its assets or properties and remains
undischarged for a period of 30 days, or (ii) any judgment or order of any court
or administrative agency awarding damages under the federal securities laws or
in any action seeking reimbursement, indemnification
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or contributions with respect to payment of any such claim; (f) Borrower (A)
applies for or consents to the appointment of a receiver, trustee or liquidator
of itself or of its property, (B) is unable, or admits in writing inability, to
pay its debts as they mature, (C) makes a general assignment for the benefit of
creditors, (D) is adjudicated bankrupt or insolvent, (E) files a voluntary
petition in bankruptcy, or a petition or answer seeking reorganization or an
arrangement with creditors to take advantage of any insolvency law, or an answer
admitting the material allegations of a bankruptcy, reorganization or insolvency
petition filed against it, (F) takes corporate action for the purpose of
effecting any of the foregoing or (G) has an order for relief entered against it
in any proceeding under the United States Bankruptcy Code; (g) an order,
judgment or decree is entered, with the application, approval or consent of
Borrower, by any court of competent jurisdiction, approving a petition seeking
reorganization of Borrower or appointing a receiver, trustee or liquidator of
Borrower or of all or a substantial part of its assets, and such order, judgment
or decrees continues unstayed and in effect for any period of 30 consecutive
days, (h) if (1) subject to a proviso, any person or group within the meaning of
Section 13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder other than Parent acquires beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the
Company (or other securities convertible into such securities) representing 20%
of the combined voting power of all securities of the Company entitled to vote
in the election of director, or (2) a majority of the Board ceases for any
reason to consist of (x) individuals who on December 10, 1996 were serving as
directors of the Company and (y) individuals who subsequently become members of
the Board if such individuals' nomination for election or election to the Board
is recommended or approved by a majority of the Board; (i) the Credit Agreement
ceases for any reason to be in full force and effect or is declared to be null
and void or unenforceable in whole or in part; (j) there occurs any material
adverse change in the business, properties, operations or condition (financial
or otherwise) of Borrower; (k) other than Permitted Liens or Liens (as both such
terms defined in the Credit Agreement) in favor of Parent or Liens otherwise
consented to in writing by Parent, any Lien or series of Liens is imposed
against Borrower or any of the Collateral whether by operation of law or by
consent, except where the result of such Lien does not have a material adverse
effect on the properties, operations, profits or condition (financial or
otherwise) of Borrower; or (l) Borrower ceases to conduct its business
substantially as it was conducted as of December 24, 1996, or changes the nature
of its business.
The foregoing summary of the Credit Agreement does not purport to be
complete and is qualified in its entirety by reference to the text of the Credit
Agreement, a copy of which is filed as Exhibit 18 hereto and incorporated herein
by reference.
The Subordination Agreement
Concurrently with the execution of the Credit Agreement, Parent, Borrower
and Coast Business Credit, a division of Southern Pacific Thrift & Loan
Association ("Coast"), entered into a Subordination and Intercreditor Agreement,
dated as of December 24, 1996 (the "Subordination Agreement"), pursuant to which
Parent and Borrower agreed, among other things, that the indebtedness of
Borrower to Parent under the Credit Agreement and the Note is subordinated, and
the payment thereof deferred if and when required pursuant to the terms thereof,
to any and all rights, claims, demands, indebtedness, action or causes of action
of any nature whatsoever that Coast might have against Borrower with respect to
Borrower's indebtedness to Coast pursuant to (a) the Amended and Restated Loan
Agreement, dated May 22, 1996, between Coast and Borrower (the "Coast
Agreement") and (b) the loan documents assigned to Coast by Mercury Partners LLC
on December 24, 1996 (the "Mercury Agreement").
The foregoing summary of the Subordination Agreement does not purport to be
complete and is qualified in its entirety by reference to the complete text of
the Subordination Agreement, a copy of which is filed as Exhibit 19 hereto and
incorporated herein by reference.
The Forbearance Letter
Coast executed and delivered to Parent and Borrower a letter, dated as of
December 24, 1996 (the "Forbearance Letter"), in which Coast agreed to forbear
from exercising any of its default rights and remedies in connection with the
violation of any and all covenants of which Borrower may have been in breach as
of the
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date of the Forbearance Letter under the Coast Agreement and the Mercury
Agreement, and any and all covenants under the Coast Agreement and the Mercury
Agreement that might occur subsequent to the date of the Forbearance Letter
through the earlier of March 25, 1997 or the date on which the Letter of Intent
terminates other than by execution of a definitive merger agreement as
contemplated therein.
The foregoing summary of the Forbearance Letter does not purport to be
complete and is qualified in its entirety by reference to the text of the
Forbearance Letter, a copy of which is filed as Exhibit 20 hereto and
incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board has determined that the Offer and the Merger are fair to and in
the best interests of the Company and its stockholders, has unanimously approved
the Merger Agreement and the transactions contemplated thereby and unanimously
recommends that all holders of Shares tender their Shares pursuant to the Offer.
(B) BACKGROUND; REASONS FOR THE RECOMMENDATION.
The Company has experienced severe financial difficulties that raised
substantial doubts about its ability to continue as a going concern. The Company
sustained net losses of $11,171,000, $11,850,000 and $2,215,000 in fiscal 1996,
1995 and 1994, respectively. For the fiscal quarter ended September 30, 1996,
the Company sustained a net loss of $1,327,000.
In addition, the Company has experienced severe constraints on its
liquidity. At September 30, 1996, the Company had minimal cash reserves, a
consolidated net working capital deficiency of $3,392,000 and a deficit in
stockholders' equity of $2,061,000. The Company had also borrowed substantially
all of the amount available under its existing line of credit pursuant to the
Coast Agreement.
Management has explored several alternatives that it believed would return
the Company to profitability. In fiscal 1995, the Company undertook a plan of
restructuring (the "Restructuring"), which included management personnel
changes, product consolidation and the relocation and consolidation of the
Company's operations from facilities in Canoga Park, California and San Juan
Capistrano, California to one facility in Carlsbad, California. In May 1996, the
Company acquired Insight, a private company located in San Carlos, California,
in a stock-for-stock merger (the "Insight Acquisition"). Insight was engaged in
the business of designing, manufacturing and marketing a family of intraoral
video cameras for the dental industry. Management believed that the Insight
Acquisition would enable the Company to enhance its market position with respect
to intraoral cameras for dental operatory use and would decrease the Company and
Insight's total costs by consolidating their operating facilities and selling,
general and administrative expenses.
In connection with the Insight Acquisition, the Company assumed all of
Insight's liabilities. In entering into the Insight Acquisition, Management
recognized that the Company would require significant financing to discharge
such liabilities as well as to complete the integration of Insight and the
Company's other restructuring plans. At the time of the Insight Acquisition,
Insight was severely undercapitalized and was itself in need of working capital.
The cost of restructuring and integrating Insight's operations with the
Company's, which was expected to result in substantial future savings, was
estimated at $962,000. These costs included charges related to personnel
termination and costs associated with discontinuing Insight's facilities and
operations, and inventory write-down for product integration. At the time of the
Insight Acquisition, Management believed that the financing required to cover
its restructuring costs and current liabilities and obligations would be
available to the Company. This proved not to be the case on any economically
feasible basis.
During the period immediately preceding the Insight Acquisition and
continuing thereafter, Management actively sought sources of equity financing
and was successful in negotiating with Coast to increase its available credit
limit from $2.5 million to $4 million. Management also endeavored to obtain
extensions on
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invoice payment terms from certain vendors and to obtain agreements from vendors
that they would continue to ship needed product components to the Company
without interruption.
However, the Company was unable to obtain sufficient infusions of equity or
debt capital either in a timely manner or on acceptable terms. Further, despite
the negotiated increase in the Company's credit limit, its borrowings were
limited by the amount of its inventory, accounts receivable and other assets.
The Company is delinquent on certain payments to its vendors under the terms of
applicable vendor invoices and has suffered delays or interruptions in the
receipt of needed components. While demand for the Company's products is
typically strongest in the fiscal quarter ending December 31 of each year, the
Company's liquidity constraints and consequent delays in receipt of components
have prevented it from capitalizing on such demand in the quarter just ended,
despite reasonably strong customer orders. In addition, the Company lacked
sufficient funds to complete its product development and marketing initiatives,
fully achieve the efficiencies and reduced cost structure envisioned in the
Restructuring or integrate the management, manufacturing and marketing
activities of Insight and the Company in order to realize anticipated synergies
and efficiencies. Because of its financial difficulties, The Nasdaq Stock Market
informed the Company in September 1996 that the Company no longer met certain
continuing listing criteria of The Nasdaq Stock Market; and, on December 5,
1996, The Nasdaq Stock Market ceased listing the Shares. The Shares are
currently traded on the Over-the-Counter Bulletin Board.
Throughout 1996, Management reviewed the strategic options available to the
Company to ameliorate its financial difficulties in order to maintain or
increase stockholder value. Management conducted an extensive review of the
Company's financial condition (including its cash position) and prospects, the
status of the Company's product development, marketing initiatives and the
integration of Insight and the potential for realizations of values therefrom
and the changing dental marketplace and health care environment. In addition,
Management reviewed the impact on the Company and the possible value of the
Shares attributable to different strategic alternatives, including the
implementation of a new restructuring plan to further reduce the Company's
costs, certain bankruptcy and other restructuring options, certain alliances and
business combinations with other companies and finally the possible sale of the
Company.
In September 1996, Management determined to approach a number of entities
that might be interested in engaging in a strategic alliance, business
combination or acquisition transaction with the Company. At the same time, the
Company continued to develop a plan with respect to actions that it could
undertake in the event that a satisfactory result from such efforts was not
achieved.
Parent was one of the parties approached by executives of the Company
regarding a possible acquisition of the Company. The Company and Parent had
previously considered an acquisition by Parent of the Company in July 1994, at
which time discussions had led to the execution of a letter of intent. Under
that letter of intent, subject to certain conditions, including Parent's
completion of a satisfactory due diligence investigation of the Company and the
negotiation and execution of definitive agreements, Parent agreed to acquire the
Company for a price of $16 3/8 per share in a cash transaction (the "Previous
Proposal"). No definitive agreements were executed in connection with the
Previous Proposal. In September 1994, Parent terminated the letter of intent
relating to the Previous Proposal because issues identified in its due diligence
investigation of the Company could not be resolved to Parent's satisfaction.
Although the Company and Parent discussed the possibility of negotiating a
transaction at a significantly lower price, the parties could not reach
agreement, and all discussions with respect to the Previous Proposal terminated
in September 1994.
On September 30, 1996, executives of the Company and Parent met to discuss
the Company's financial condition and business, and to explore whether Parent
was willing to consider an acquisition of the Company. On October 6, 1996, the
parties met again and entered into the Confidentiality Agreement prior to
Parent's review of certain confidential information concerning the Company.
In November 1996, executives of the Company and Parent met again and
discussed the deteriorating financial condition of the Company. Among other
matters, the parties discussed the fact that the Company was in default under
certain covenants of the Coast Agreement and the subordinated credit agreement
between the Company and Mercury, and that the Company did not have sufficient
cash to meet its current obligations. At that time, Parent informed the Company
that it was not interested in effecting the proposed
16
<PAGE> 17
transaction for stock in Parent and that Parent would be prepared to consider
acquiring the Company, subject to certain conditions, at a purchase price of
$2.00 per share in cash. On November 29, 1996, the Shares closed at a price of
$1.25 per Share. Parent also indicated that it would be prepared, subject to
reaching agreement with Coast and Mercury, to make funds available to the
Company, prior to the consummation of the transaction, for working capital
purposes.
At a special meeting held on December 10, 1996, the Board reviewed and
discussed the proposed acquisition of the Company by Parent and various drafts
of legal documents relating to such transaction (including the Credit Agreement
and the agreements contemplated thereby). The Board also reviewed and discussed
another acquisition proposal received by the Company and the Company's
restructuring alternatives. The Board, after reviewing such matters with its
legal advisor, unanimously determined to authorize the continuation of
negotiations with Parent and the execution of a letter of intent and credit
agreement with Parent pursuant to certain guidelines discussed at the meeting.
On December 20, 1996, the Board held a special meeting to consider the
status of the proposed acquisition of the Company by Parent. After a discussion
among Board members and their legal advisor, the Board by unanimous vote of all
directors present approved the Credit Agreement and the Subordination Agreement
and the transactions contemplated thereby.
During the next several days, discussions were held among the Company,
Parent and their respective advisors and representatives on a range of issues
and the terms and conditions of a letter of intent in connection with the
proposed acquisition of the Company by Parent and the credit arrangements
relating thereto.
On December 24, 1996, the Company and Parent entered into the Letter of
Intent. Also on December 24, 1996, the Company, Insight and Parent entered into
the Credit Agreement and the Company, Insight, Parent and Coast entered into the
Subordination Agreement. Upon the execution and delivery of the Credit
Agreement, Parent made an Advance to the Company and Insight under the Line of
$2.5 million; no further Advances have been made since such date. Also on the
same date, Coast purchased from Mercury the indebtedness owed to Mercury by the
Company, and Coast delivered the Forbearance Letter to the Company and Parent.
See "Agreements with Parent and the Purchaser -- The Credit Agreement," "-- The
Subordination Agreement" and "-- The Forbearance Letter."
Throughout the remainder of December 1996 and in early January 1997, Parent
and its advisors and representatives reviewed financial and other information
provided by the Company subject to the terms of the Confidentiality Agreement.
In addition, the Company and its advisors and representatives proceeded with
negotiating definitive agreements based on the Letter of Intent. On January 20,
1997, Cleary Gull was engaged to render a fairness opinion to the Company.
On January 20, 1997, the Board held a special meeting to discuss the
proposed transaction. At that meeting, representatives of Cleary Gull gave a
presentation analyzing the proposed transaction and delivered its oral opinion
(which it subsequently confirmed in writing) that as of the date thereof the
$2.00 per Share consideration to be received by the holders of Shares is fair to
such holders from a financial point of view. The Company's legal counsel
summarized for the Board the legal aspects of the proposed transaction. On
January 27, 1997, the Board, by action by unanimous written consent, determined
that the Offer and the Merger are fair to and in the best interests of the
Company and its stockholders, approved the Merger Agreement and the transactions
contemplated thereby, recommended that all holders of Shares tender such Shares
pursuant to the Offer and determined to recommend that stockholders of the
Company vote in favor of approval and adoption of the Merger Agreement if such
approval is required by the DGCL upon completion of the Offer.
The Merger Agreement and the Stockholder Agreements were executed and
delivered by each party thereto on January 27, 1997 and the Company and Parent
publicly announced the transaction on January 28, 1997.
On January 31, 1997, Parent commenced the Offer.
17
<PAGE> 18
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders of Shares tender such Shares pursuant to the
Offer, the Board considered a number of factors, including:
(a) presentations by Management regarding the financial condition,
results of operations, business and prospects of the Company, including the
status of the Company's product development and marketing initiatives and
integration of Insight and the impact of the constraints on the Company's
liquidity;
(b) that the Company is severely undercapitalized and has attempted to
raise adequate debt and/or equity capital, but has been unable to do so in
a timely manner and on terms that would not adversely affect stockholder
value;
(c) that The Nasdaq Stock Market ceased listing the Shares, which
adversely affected the ability of investors to dispose, and obtain accurate
quotations as to the market value, of their Shares and the ability or
willingness of broker-dealers to make a market in the Shares;
(d) that, since September 1994, the Share price was on a downward
spiral from a high of about $15.25 per Share to a low of about $0.55 per
Share in December 1996;
(e) the opinion of Cleary Gull to the effect that as of the date of
such opinion the $2.00 per Share consideration to be received by holders of
the Shares in the Offer and the Merger is fair to such holders from a
financial point of view. A copy of the opinion of Cleary Gull is attached
hereto and filed as Exhibit 23, and is incorporated herein by reference.
STOCKHOLDERS ARE URGED TO READ THE OPINION OF CLEARY GULL IN ITS ENTIRETY;
(f) that the Merger Agreement contains no material restraints that
would prevent any third party from making an acquisition proposal and is
structured to permit the Company, in the exercise of its fiduciary duties,
to engage in negotiations concerning, provide information to or have
discussions with any third party satisfying the conditions described above
in Item 3 under "Agreements with Parent and the Purchaser -- The Merger
Agreement -- Exclusive Dealing"; and
(g) the ability of Parent to consummate the Offer and the Merger
without conditioning the Offer on obtaining any specific financing.
The Board did not assign relative weights to the factors set forth above or
determine that any factor was of particular importance. Rather, the Board viewed
its position and recommendations as based on the totality of the information
presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company entered into a letter agreement with Cleary Gull, dated January
20, 1997 (the "Cleary Gull Agreement"), pursuant to which Cleary Gull agreed to
render a written fairness opinion to the Company in connection with a potential
transaction with Parent. Pursuant to the Cleary Gull Agreement, the Company
agreed to pay Cleary Gull a fee of $50,000, $25,000 of which was payable on the
delivery of the written fairness opinion and $25,000 of which is payable on
February 28, 1997. The Company also agreed to reimburse Cleary Gull for its
reasonable out-of-pocket expenses up to a limit of $15,000 and to indemnify
Cleary Gull against certain liabilities whether or not the transaction is
completed.
From time to time, Cleary Gull has provided certain financial and/or
investment banking services to Parent unrelated to the Previous Proposal, and
has received fees for the rendering of such services. In addition, Cleary Gull
provided financial advisory services to Parent in connection with the Previous
Proposal. Based on representations made by Parent in the Merger Agreement, since
January 1, 1995, Cleary Gull has not been engaged by, has not provided any
investment banking or other financial advisory services to and has not been paid
for the provision of any such services by Parent, the Purchaser or any of their
subsidiaries or affiliates. However, Cleary Gull may have, since January 1,
1995, made a market in and traded, and may in the future make a market in and
trade, securities of the Company and Parent in the ordinary course of its
business for its
18
<PAGE> 19
own account and the account of customers and, accordingly, may at any time hold
a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to holders of Shares on the Company's
behalf concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transaction in the Shares has been effected during the past 60 days
by the Company, or to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, each executive officer,
director and affiliate of the Company currently intends to tender all Shares
over which he or she has dispositive power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Items 3(b) or 4(b) above, the Company is not
engaged in any negotiation in response to the Offer that relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth in Items 3(b) or 4(b) above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's stockholders.
19
<PAGE> 20
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1. Agreement and Plan of Merger, dated as of January 27, 1997, by and among
DENTSPLY International Inc., Image Acquisition Corp. and New Image Industries,
Inc.
Exhibit 2. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Robert S. Colman
Exhibit 3. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and David H. Cooper
Exhibit 4. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Paul Devereaux
Exhibit 5. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Dewey F. Edmunds
Exhibit 6. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Richard P. Greenthal
Exhibit 7. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Debra L. Jackson
Exhibit 8. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Mike Lytle
Exhibit 9. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Harold J. Meyers
Exhibit 10. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Harold R. Orr
Exhibit 11. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Ralph M. Richart, M.D.
Exhibit 12. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Kenneth P. Sawyer
Exhibit 13. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and Mark W. Stevens
Exhibit 14. Stockholder Agreement, dated as of January 27, 1997, by and among DENTSPLY
International Inc., Image Acquisition Corp. and The William W. Stevens and Virda
J. Stevens Trust
Exhibit 15. Form of Employment Agreement among New Image Industries, Inc., DENTSPLY
International Inc. and Dewey F. Edmunds.
Exhibit 16. Mutual Confidential Non-Disclosure Agreement, dated October 8, 1996, between New
Image Industries, Inc. and DENTSPLY International Inc.
Exhibit 17. Letter Agreement, dated December 24, 1996, between DENTSPLY International Inc.
and New Image Industries, Inc.
Exhibit 18. Credit Agreement, dated as of December 24, 1996, among New Image Industries,
Inc., Insight Imaging Systems, Inc. and DENTSPLY International Inc.
Exhibit 19. Subordination and Intercreditor Agreement, dated as of December 24, 1996, among
New Image Industries, Inc., Insight Imaging Systems, Inc. and Coast Business
Credit
Exhibit 20. Letter Agreement dated as of December 24, 1996, among Coast Business Credit,
DENTSPLY International Inc., New Image Industries, Inc. and Insight Imaging
Systems, Inc.
Exhibit 21. Press Release issued jointly by New Image Industries, Inc. and DENTSPLY
International Inc., dated January 28, 1997
Exhibit 22. Letter to Stockholders of New Image Industries, Inc., dated January 31, 1997*
Exhibit 23. Opinion of Cleary Gull Reiland & McDevitt Inc., dated January 20, 1997*
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
20
<PAGE> 21
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 31, 1997 NEW IMAGE INDUSTRIES, INC.
By: /s/ HAROLD R. ORR
------------------------------------
Harold R. Orr
Chief Financial Officer
21
<PAGE> 22
SCHEDULE I
NEW IMAGE INDUSTRIES, INC.
2283 COSMOS COURT
CARLSBAD, CALIFORNIA 92009
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about January 31, 1997 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of New Image Industries, Inc., a Delaware corporation (the
"Company"), to the holders of shares of common stock, par value $.001 per share,
of the Company (the "Shares"). You are receiving this Information Statement in
connection with the possible election of the Purchaser Designees (as defined
below) to all of the seats on the Board of Directors of the Company (the
"Board").
The Company, DENTSPLY International Inc., a Delaware corporation
("Parent"), and Image Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Parent (the "Purchaser"), entered into an Agreement and Plan of
Merger, dated as of January 27, 1997 (the "Merger Agreement"), pursuant to which
(i) Parent will cause the Purchaser to commence a tender offer (the "Offer") for
all outstanding Shares at the price of $2.00 per Share, net to the seller in
cash, without interest, and (ii) the Purchaser will be merged with and into the
Company (the "Merger"). As a result of the Offer and the Merger, the Company
will become a wholly owned subsidiary of Parent.
The Merger Agreement requires the Company to take such action to cause the
Purchaser Designees to be elected to the Board under the circumstances described
therein. See "Right to Designate Directors; Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on January
31, 1997. The Offer is scheduled to expire at 12:00 midnight, New York City
time, on Monday, March 3, 1997, unless the Offer is extended.
The information contained in this Information Statement concerning Parent,
the Purchaser and the Purchaser Designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
Upon the successful completion of the Offer, the Purchaser will own at
least a majority of the then-outstanding Shares. Pursuant to the Merger
Agreement, such ownership will entitle the Purchaser at such time to designate
all of the directors on the Board (the "Purchaser Designees"). The Company
agreed in the Merger Agreement that at such time it will obtain resignations of
all then-serving directors of the Company and, prior to such resignations, cause
the Purchaser Designees to be elected to, and to constitute all of, the Board.
Each Purchaser Designee will serve as a director until such director's successor
is elected and qualified or until such director's earlier resignation or
removal.
I-1
<PAGE> 23
The Purchaser has determined that John C. Miles II, J. Patrick Clark,
Thomas L. Whiting and Edward D. Yates will be the Purchaser Designees. Set forth
below are the ages as of January 27, 1997 and certain other information
regarding each Purchaser Designee. The principal business address of each
Purchaser Designee is c/o DENTSPLY International Inc., 570 West College Avenue,
York, Pennsylvania 17405-0872. Each Purchaser Designee is a citizen of the
United States and no Purchaser Designee owns any Shares.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND FIVE-YEAR EMPLOYMENT HISTORY
- ----------------------------------- --------------------------------------------------------
<S> <C>
John C. Miles II................... Mr. Miles, 54, has served as Chief Executive Officer of
Parent since January 1, 1996, Vice Chairman of the Board
of Directors of Parent since December 11, 1996 and a
director of Parent since the merger (the "Dentsply
Merger") of Dentsply International Inc. ("Old Dentsply")
and GENDEX Corporation, which occurred on June 11, 1993.
Mr. Miles is also the President and a director of the
Purchaser. From the Dentsply Merger until December 31,
1995, Mr. Miles served as President and Chief Operating
Officer of Parent. From January 1990 until the Dentsply
Merger, Mr. Miles served as President and Chief
Operating Officer and a director of Old Dentsply.
J. Patrick Clark................... Mr. Clark, 55, has been Vice President, Secretary and
General Counsel of Parent since the Dentsply Merger. Mr.
Clark is also a Vice President and Secretary of the
Purchaser. From 1986 until the Dentsply Merger, Mr.
Clark served as General Counsel and Secretary of Old
Dentsply.
Thomas L. Whiting.................. Mr. Whiting, 54, has served as Senior Vice President,
Pacific Rim, Latin America, Gendex and Tulsa Dental, of
Parent since 1995. Mr. Whiting is also a director of the
Purchaser. From the Dentsply Merger until such time, Mr.
Whiting was Vice President and General Manager of
Parent's L.D. Caulk Division, and prior thereto served
in the same capacity with Old Dentsply since joining Old
Dentsply in 1987.
Edward D. Yates.................... Mr. Yates, 54, has been Senior Vice President and Chief
Financial Officer of Parent since the Dentsply Merger
and prior thereto served in a similar capacity with Old
Dentsply commencing in March 1991. Mr. Yates is a
Certified Public Accountant. He is also Senior Vice
President, Chief Financial Officer and a director of the
Purchaser.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share is entitled to one vote per Share on each matter
properly brought before an annual or special meeting of stockholders of the
Company. As of January 27, 1997, there were 5,479,911 Shares outstanding.
DIRECTORS OF THE COMPANY
The Board currently consists of Robert S. Colman, Dewey F. Edmunds, Richard
P. Greenthal, Harold J. Meyers, Ralph M. Richart, M.D., Kenneth B. Sawyer and
Mark W. Stevens and there are currently no vacancies on the Board. There are no
family relationships among any of the directors or executive officers of the
Company. As indicated above, all of the current directors will resign effective
immediately following the purchase of at least a majority of the
then-outstanding Shares by the Purchaser pursuant to the Offer and will be
replaced by the Purchaser Designees.
I-2
<PAGE> 24
EXECUTIVE OFFICERS OF THE COMPANY
The names of the current executive officers of the Company, their ages as
of January 27, 1997 and certain other information about them are set forth
below. The Bylaws of the Company provide that officers of the Company will be
chosen annually by the Board and serve at the pleasure of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ----------------------- --- -------------------------------------
<S> <C> <C>
Dewey F. Edmunds 54 President and Chief Executive Officer
Mark W. Stevens 41 Senior Vice President, Business
Development and International Sales
David H. Cooper 62 Vice President and Chief Technical
Officer
Paul Devereaux 34 Vice President, Marketing
Debra L. Jackson 40 Vice President, Operations and
Technical Services
Mike Lytle 34 Vice President, Sales
Harold R. Orr 48 Chief Financial Officer
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
GENERAL
Decisions regarding the Company executive compensation are made by the
Compensation Committee of the Board, which, throughout fiscal 1996, consisted of
Mr. Greenthal and Dr. Richart, each of whom is a "non-employee director" of the
Company as such term is defined in Rule 16b-3 adopted under the Exchange Act.
CERTAIN TRANSACTIONS WITH RELATED PARTIES
In March 1995, the Company retained Colman Furlong & Co., a firm that
provides investment banking and financial advisory services ("Colman Furlong"),
in connection with the Restructuring, which engagement expired on June 30, 1996.
Robert S. Colman, the Chairman of the Board, is a partner of Colman Furlong, and
Kenneth B. Sawyer, a director of the Company, is a former principal of Colman
Furlong. In consideration of the services rendered by Colman Furlong, the
Company issued Warrants to purchase 350,000 Shares to Colman Furlong with an
exercise price equal to the fair market value of the Shares on the date of
issuance, 137,500 and 112,500 of which were subsequently allocated to Messrs.
Colman and Sawyer, respectively. The Company also paid Colman Furlong $184,000
and $156,000 in fiscal 1996 and 1995, respectively, for financial consulting
services rendered. In addition, the Company paid Colman Furlong $150,000 in
fiscal 1996 for financial services provided by Colman Furlong in connection with
the Insight Acquisition.
The disclosure set forth under Item 3(b) of the Schedule 14D-9 is
incorporated by reference herein.
COMMITTEES OF THE BOARD; ATTENDANCE AT BOARD MEETINGS
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee is responsible for recommending to the Board of
Directors the engagement of the Company's independent auditors, reviewing and
approving the services performed by such independent auditors and reviewing and
evaluating the Company's accounting policies and internal accounting controls.
The current members of the Audit Committee are Messrs. Meyers and Greenthal. The
Audit Committee met six times during fiscal 1996.
The Compensation Committee reviews and approves the compensation of
officers and key employees, including the granting of Stock Options under the
Company's various stock incentive plans. The current members of the Compensation
Committee are Mr. Greenthal and Dr. Richart. The Compensation Committee met once
during fiscal 1996.
I-3
<PAGE> 25
The Board held a total of ten meetings during the Company's 1996 fiscal
year. Each director attended at least 75% of such meetings of the Board and the
total number of meetings held by all committees of the Board on which he served.
Parent has informed the Company that the Purchaser Designees have not yet
determined whether, or if, any committees of the Board will continue after the
present Board members are replaced. Board meetings will be held consistent with
the past practice of Parent with respect to its subsidiaries.
COMPENSATION OF DIRECTORS
Directors do not receive cash compensation for their services. The
Company's 1993 Director Incentive Plan provides that each director who is not
engaged by the Company as either an employee or a consultant will receive Stock
Options to purchase 7,000 Shares when he or she initially joins the Board and
Stock Options to purchase 12,500 Shares on the date of each subsequent Annual
Meeting of Stockholders during his or her term as director. All such Stock
Options will become immediately exercisable upon the successful completion of
the Offer.
Parent has informed the Company that no compensation will be paid to the
Purchaser Designees to act as directors of the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The following tables and descriptive materials set forth separately, for
the fiscal years indicated, each component of compensation paid or awarded to,
or earned by, the Chief Executive Officer of the Company and each of the three
other most highly compensated officers who served as executive officers during
fiscal 1996 and whose annual salary and bonus for fiscal 1996 exceeded $100,000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation earned by the Named
Executive Officers during fiscal 1994, 1995 and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR $ $ $ # $
- ------------------------ ---- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Dewey F. Edmunds(1) 1996 $180,000 -- $ 66,262(2) -- --
Chief Executive 1995 16,500 -- -- -- --
Officer & President
Mark W. Stevens(3) 1996 127,500 $14,357 -- 40,000 --
Senior Vice President, 1995 114,000 14,000 -- -- --
Business Development 1994 81,850 8,512 -- -- --
and International
Sales
Doug Golay (4) 1996 109,917 -- 53,424(2) 15,000 13,243(5)
Former Vice President, 1995 193,172(6) -- 8,750(7) 50,000 --
Software Development 1994 156,000 -- -- -- --
David H. Cooper(8) 1996 135,000 -- 98,565(2) -- --
Vice President and 1995 15,057 -- -- 20,000 --
Chief Technical
Officer
</TABLE>
I-4
<PAGE> 26
- ---------------
(1) Mr. Edmunds joined the Company during its 1995 fiscal year.
(2) Consists of relocation reimbursement.
(3) Mr. Stevens joined the Company during its 1996 fiscal year upon consummation
of the Insight Acquisition. Amounts include compensation paid or awarded to,
or earned by, Mr. Stevens as an executive officer of Insight.
(4) Mr. Golay's employment with the Company terminated on February 1, 1996.
(5) Consists of amounts paid with respect to a consulting arrangement subsequent
to the termination of Mr. Golay's employment with the Company.
(6) Includes $18,172 annual salary paid in lieu of vacation.
(7) Consists of automobile allowance.
(8) Mr. Cooper joined the Company during its 1995 fiscal year.
Upon the successful completion of the Offer, the Purchaser Designees will
constitute all of the Board. Parent has informed the Company that, thereafter,
subject to the provisions of applicable employment agreements, the compensation
of executive officers of the Company will be determined in the sole discretion
of Parent.
STOCK OPTION GRANTS IN FISCAL 1996
The following table summarizes grants of Stock Options to the Named
Executive Officers for the fiscal year ended June 30, 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS/SARS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM
OPTIONS/SARS FISCAL BASE PRICE EXPIRATION --------------------
NAME GRANTED (#) YEAR(2) ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- ------------ ------------ ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Mark W. Stevens...... 40,000(4) 8.4% 3.625 5/16/01 n/a(3) n/a(3)
Doug Golay........... 15,000(5) 3.1% 2.25 4/30/96 -- --
</TABLE>
- ---------------
(1) No Stock Options were granted to either Mr. Edmunds or Mr. Cooper in fiscal
1996.
(2) Stock Options covering an aggregate of 476,256 Shares were granted to
eligible optionees during the fiscal year ended June 30, 1996. This includes
Stock Options to purchase 102,756 Shares that were issued to former
employees of Insight upon conversion of existing options to purchase shares
of Insight common stock.
(3) The Company believes that such calculations would not be meaningful since,
if the Offer is successfully completed, such Stock Options will be cancelled
and converted as provided in the Merger Agreement.
(4) These Stock Options vest as follows: 10,000 on May 31, 1997; 13,000 on May
31, 1998; and 17,000 on May 31, 1999. Does not include fully vested Stock
Options to purchase 17,187 Shares at $3.61 per Share that were issued upon
conversion of existing options to purchase shares of Insight Common Stock.
On November 6, 1996, all such Stock Options were cancelled and Stock Options
to purchase an equal number of shares for which such cancelled Stock Options
could have been exercised were issued with an exercise price of $1.5625 per
Share. All Stock Options will become immediately exercisable upon the
successful completion of the Offer.
(5) These Stock Options expired unexercised 90 days after Mr. Golay's
termination as an employee of the Company.
I-5
<PAGE> 27
STOCK OPTION EXERCISES
The following table summarizes the number and value of Stock Options
exercised during fiscal 1996, as well as the number and value of unexercised
Stock Options as of June 30, 1996 held by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(#) UNEXERCISABLE(#)(1)
- ------------------------------------- ----------- ----------- -------------------- -------------------
<S> <C> <C> <C> <C>
Dewey F. Edmunds..................... -- -- 60,000/140,000 0/0
Mark W. Stevens...................... -- -- 17,186/40,000 0/0
Doug Golay........................... 20,000 $90,000 30,000/0 0/0
David H. Cooper...................... -- -- 20,000/0 0/0
</TABLE>
- ---------------
(1) Based on the difference between the last reported sale price of the Shares
on the NASDAQ Stock Market on June 30, 1996 of $3.00 and the exercise price.
Based upon the Offer Price of $2.00 per Share and the exercise price of
reissued Stock Options of $1.5625, the total value of the unexercised
in-the-money Stock Options, all of which will become immediately exercisable
upon the successful completion of the Offer, is $87,500, $25,019 and $8,750
for Messrs. Edmunds, Stevens and Cooper, respectively. Mr. Golay's Stock
Options expired unexercised 90 days after his termination as an employee of
the Company.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT
Employment Arrangements with Mr. Edmunds. Mr. Edmunds has entered into an
employment agreement with the Company, dated May 30, 1995, providing for at will
employment with the Company, which may be terminated by Mr. Edmunds or the
Company at any time and for any reason, with or without cause and with or
without notice. Pursuant to such agreement, Mr. Edmunds receives an annual
salary $180,000 and was granted Stock Options to purchase 200,000 Shares at the
closing price of the Shares on the date of grant, 30,000 of which vested
immediately and 30,000, 60,000 and 80,000 of which vested or were to vest on the
first, second and third anniversaries of the commencement of Mr. Edmunds
employment with the Company, respectively, and all of which will vest
immediately upon the occurrence of certain change in control transactions. All
such Stock Options will become immediately exercisable upon the successful
completion of the Offer.
Pursuant to the Merger Agreement, upon or prior to the consummation of the
Offer, Parent, the Purchaser and Mr. Edmunds will enter into the Employment
Agreement. See "Agreements with Parent and the Purchaser -- Employment
Agreement" in Item 3 of the Schedule 14D-9.
Employment Arrangements with Mr. Stevens. In connection with the Image
Acquisition, Mr. Stevens entered into an employment agreement with the Company,
dated as of May 17, 1996, the term of which will end on June 30, 1997. Pursuant
to such agreement, Mr. Stevens receives an annual salary of $130,000 and an
aggregate bonus of $45,167, $10,000 of which was or is payable on each of June
15, 1996, September 15, 1996, December 15, 1996 and March 15, 1997 and $5,167 of
which is payable on June 15, 1997. Also pursuant to such agreement, Mr. Stevens
was granted Stock Options to purchase 40,000 Shares at the closing price of the
Shares on the day prior to the date of closing of the Insight Acquisition;
10,000, 13,000 and 17,000 of such Stock Options were to vest on May 31, 1997,
1998 and 1999, respectively. All such Stock Options will become immediately
exercisable upon the successful completion of the Offer. If such agreement is
terminated by the Company prior to completion of the term thereof for any other
reason other than for "cause" (as defined in such agreement), Mr. Stevens will
be entitled to all compensation due him for the remainder of the term of such
agreement in accordance with the time of payment set forth therein.
I-6
<PAGE> 28
Employment Arrangements with Mr. Cooper. Mr. Cooper has entered into an
employment agreement with the Company, dated as of May 30, 1995, the term of
which commenced on May 23, 1995 and ended on May 23, 1996. Upon the termination
of such agreement, Mr. Cooper's employment by the Company is at will, and may be
terminated by Mr. Cooper or the Company at any time and for any reason, with or
without cause and with or without notice. Pursuant to such agreement, Mr. Cooper
receives an annual salary of $135,000 and was granted Stock Options to purchase
20,000 Shares at an exercise price equal to the closing market price of the
Shares on the date of grant, all of which vested on May 30, 1996.
The Company and Mr. Cooper have also entered into a Patent and Technical
Information License Agreement, dated January 24, 1997, pursuant to which Mr.
Cooper granted to the Company an exclusive license to use certain patents (the
"Patents") and technical information relating to an intra-oral video camera (the
"Licensed Product") to make, have made, use, sell, offer for sale and market the
Licensed Product in the dental field. In connection therewith, the Company
agreed to pay to Mr. Cooper a royalty of $70 for each camera system that
includes the Licensed Product (and for each Licensed Product sold separately and
not part of a camera system), when sold by the Company or any sublicensee. The
term of such agreement will end at the earlier of 25 years or upon the
expiration of the last expiring Patent.
Consulting Agreement with Mr. Golay. Mr. Golay has entered into a
consulting agreement with the Company, which was effective from February 1, 1996
until June 28, 1996. Pursuant to such agreement, Mr. Golay agreed to provide
certain services to the Company relating to software development, and the
Company agreed to pay Mr. Golay an aggregate of $27,656.72.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION FOR FISCAL YEAR 1996
GENERAL
The Compensation Committee (the "Committee") of the Board of Directors of
New Image Industries, Inc. (the "Company") is responsible for establishing and
administering the Company's policies that govern executive compensation and
benefit practices. The Committee evaluates the performance of the Company's
executive officers, including the Named Executive Officers listed above in the
summary compensation table, and determines their cash compensation levels,
equity incentives and related benefits, all subject to Board approval. The
Committee is also responsible for the administration of the Company's stock
option and other stock-based and equity-based plans. The Committee met once
during the fiscal year ended June 30, 1996.
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are designed to attract and
retain the talented executives believed to be necessary to maximize stockholder
value. In so doing, the Committee attempts to provide levels of compensation
that integrate cash compensation and incentive plans with the Company's
strategic goals. The Committee believes this effectively serves to align the
interests of executive management with the long-term interests of the
stockholders, thereby motivating Company executives to achieve the strategic
business goals of the Company.
With regard to the Company's performance, the measures used for determining
appropriate levels of compensation for executive officers include the Company's
overall performance, ability to meet strategic goals within the current economic
climate and industry environment, expansion by acquisition or otherwise, profit
retention and profitability, all of which the Committee believes combine to
enhance stockholder value.
The Committee believes that the components of executive compensation should
include base salary, stock option grants and other benefits, and should be
linked to individual and Company performance.
BASE SALARY
Total executive compensation from salary and incentives is currently within
a range believed to be competitive for similarly situated executives within
other middle-market companies of similar size and stage
I-7
<PAGE> 29
of development. While the Committee considers cash bonuses to be an effective
tool for compensating management, the Company's performance during fiscal 1996
did not, in the Committee's view, merit any cash bonuses.
The Committee considers Company management proposals concerning salary
adjustments for executive officers and then makes recommendations to the entire
Board of Directors for its approval. The annual base salary of $180,000 for Mr.
Edmunds, the Company's Chief Executive Officer, was established under the terms
of an employment agreement entered into in May 1995 with the approval of the
Board of Directors.
In determining base salaries for executives for fiscal 1996, the Committee
considered the Company's earnings, growth in revenues, individual performance
and achievement, areas of responsibilities, position, tenure and internal
comparability.
STOCK OPTION GRANTS
The Committee believes that stock options are an important element in
executive compensation. The Committee believes that the total number of options
outstanding does not result in undue dilution of stockholders' equity, as the
level of equity incentives provided has enabled the Company to attract and
retain executives who could earn comparably greater salaries at similarly
situated companies.
Although no options were canceled or reissued during fiscal 1996, certain
options were cancelled and options and warrants were issued with lower exercise
prices in each of fiscal 1995 and 1997. Options have in the past been a
significant factor in inducing individuals to enter into and remain in the
service of the Company. The grant of options helps ensure that management's
interests remain closely aligned with those of the Company's stockholders.
Although lowering the exercise prices of the outstanding options may have a
potential dilutive effect, the Committee believes that the prior, higher
exercise prices of options may act as a disincentive to the officers of the
Company. The Committee believes that the cancellation and reissuance of options
will encourage holders of options to exercise their options and acquire shares
of the Company's common stock, since the exercise prices for the reissued
options will equal the market price of the Company's common stock on the date of
reissuance. In this way, the Committee hopes to foster increased ownership of
the Company's common stock by the Company's officers, and help continue to align
the interests of management with those of the stockholders.
Richard P. Greenthal
Ralph M. Richard, M.D.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities ("10% Stockholders") to file reports of
ownership and changes in ownership with the Commission. Executive officers,
directors and 10% Stockholders are required to furnish the Company with copies
of all Section 16(a) forms they file. As a result of a reporting compliance
program, based solely upon its review of the copies of forms received by the
Company and written representations from executive officers and directors, the
Company believes that, during
I-8
<PAGE> 30
fiscal 1996, all Section 16(a) filing requirements applicable to the Company's
officers, directors and 10% Stockholders were complied with, except for the
following filings, which were not made on a timely basis:
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF TRANSACTIONS NOT
EXECUTIVE OFFICER OR DIRECTOR LATE REPORTS REPORTED TIMELY
---------------------------------------------- ------------ ----------------
<S> <C> <C>
Robert S. Colman.............................. 3 3
David H. Cooper............................... 1 1
Paul Devereaux................................ 1 1
Richard P. Greenthal.......................... 2 2
Debra L. Jackson.............................. 1 1
Mike Lytle.................................... 1 1
Harold J. Meyer............................... 2 2
Harold R. Orr................................. 1 1
Ralph M. Richart, M.D......................... 2 2
Kenneth B. Sawyer............................. 3 3
</TABLE>
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of the Shares with the cumulative
return of the NASDAQ Stock Market Index (U.S. Companies) and the Index for
NASDAQ Surgical, Medical and Dental Instruments and Supplies for the period
commencing June 28, 1991 and ending June 28, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CSRP Total Returns Index for: 06/28/91 06/30/92 06/30/93 06/30/94 06/30/95 06/28/96
- ----------------------------- -------- -------- -------- -------- -------- --------
New Image Industries, Inc. 100.0 289.5 842.1 421.1 163.2 126.3
Nasdaq Stock Market (US Companies) 100.0 120.1 151.1 152.5 203.6 261.4
NASDAQ Stocks (SIC 3840-3849 US Companies) 100.0 105.6 100.0 88.5 128.3 158.4
</TABLE>
I-9
<PAGE> 31
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table sets forth those persons or groups who are known to the
Company to be beneficial owners of more than 5% of the outstanding Shares as of
January 27, 1997. The following information is based on reports on Schedules 13D
or 13G filed with the Commission or other reliable information.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE
BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------------------------------------- -------------------- ----------
<S> <C> <C>
The William W. Stevens and Virda J. Stevens Trust 453,623(2) 8.2
3055 Triad Drive
Livermore, California 94550-9559
Weghsteen & Co. 383,950 7.0
Oyde Burg, 6
800 Brugge
Belgium
Kennedy Capital Management, Inc. 324,400 5.9
425 N. New Ballas Road, Suite 181
St. Louis, Missouri 63141-6821
</TABLE>
- ---------------
(1) The nature of beneficial ownership for shares shown in this column is sole
voting and investment power unless otherwise indicated herein, subject to
community property laws where applicable.
(2) Includes 41,524 Shares with respect to which The William W. Stevens and
Virda J. Stevens Trust (the "Stevens Trust") has the right to acquire
beneficial ownership by virtue of currently exercisable Warrants or Warrants
exercisable within 60 days of January 27, 1997. Mark W. Stevens, a director
and executive officer of the Company, is the son of Mr. and Mrs. Stevens.
Does not reflect the effects, if any, on beneficial ownership as a result of
the obligations of the Stevens Trust pursuant to its Stockholder Agreement
to tender and vote its Shares in connection with the Offer and the Merger.
I-10
<PAGE> 32
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
Set forth below are the number of Shares beneficially owned by each current
director of the Company, each Named Executive Officer and by all directors and
executive officers as a group as of January 27, 1997, and the percentage that
such Shares bear to the total number of Shares outstanding as of such date. This
information does not reflect the effects, if any, on beneficial ownership as a
result of the obligations of the Stockholder Parties pursuant to their
respective Stockholder Agreements to tender and vote their Shares in connection
with the Offer and the Merger. See "Agreements with Parent and the
Purchaser -- Stockholder Agreements" in Item 3 of the Schedule 14D-9.
<TABLE>
<CAPTION>
AMOUNTS OF
SHARES
BENEFICIALLY PERCENTAGE
NAME AND INDIVIDUAL OR GROUP OWNED(1) OF CLASS
-------------------------------------------------- ---------------- ----------
<S> <C> <C>
Dewey F. Edmunds.................................. 67,500(2) 1.2
Mark W. Stevens................................... 24,386(3) *
David H. Cooper................................... 22,000(4) *
Robert S. Colman.................................. 247,333(5) 4.4
Richard P. Greenthal.............................. 6,499(6) *
Harold J. Meyers.................................. 4,166(7) *
Ralph M. Richart, M.D............................. 6,499(8) *
Kenneth B. Sawyer................................. 123,199(9) 2.2
Doug Golay(10).................................... -- --
All executive officers and directors as a group
(12 persons).................................... 524,835(11) 8.9
</TABLE>
- ---------------
* Less than 1%.
(1) The information contained in this table is based upon information furnished
to the Company by the persons named above or obtained from records of the
Company. The nature of beneficial ownership for Shares shown in this column
is sole voting and investment power unless otherwise indicated herein,
subject to community property laws where applicable.
(2) Includes 60,000 Shares with respect to which Mr. Edmunds has the right to
acquire beneficial ownership by virtue of currently exercisable Stock
Options or Stock Options exercisable within 60 days of January 27, 1997.
Upon the successful completion of the Offer, Stock Options to purchase
200,000 Shares will become immediately exercisable.
(3) Includes 17,186 Shares with respect to which Mr. Stevens has the right to
acquire beneficial ownership by virtue of currently exercisable Stock
Options or Stock Options exercisable within 60 days of January 27, 1997.
Upon the successful completion of the Offer, Stock Options to purchase
46,000 Shares will become immediately exercisable. Also includes 7,200
Shares owned by Mr. Stevens' wife, as to which Shares Mr. Stevens disclaims
beneficial ownership.
(4) Includes 20,000 Shares with respect to which Mr. Cooper has the right to
acquire beneficial ownership by virtue of currently exercisable Stock
Options or Stock Options exercisable within 60 days of January 27, 1997.
Upon the successful completion of the Offer, Stock Options to purchase
21,500 Shares will become immediately exercisable.
(5) Includes 833 Shares and 137,500 Shares with respect to which Mr. Colman has
the right to acquire beneficial ownership by virtue of currently
exercisable Stock Options or Warrants, respectively, or Stock Options or
Warrants, as the case may be, exercisable within 60 days of January 27,
1997. Upon the successful completion of the Offer, Stock Options and
Warrant to purchase 1,667 Shares and 45,000 Shares, respectively, will
become immediately exercisable. Also includes 4,000 Shares held by a trust,
as to which Shares Mr. Colman disclaims beneficial ownership.
(6) Includes 6,499 Shares with respect to which Mr. Greenthal has the right to
acquire beneficial ownership by virtue of currently exercisable Stock
Options or Stock Options exercisable within 60 days of
I-11
<PAGE> 33
January 27, 1997. Upon the successful completion of the Offer, Stock
Options to purchase 13,001 Shares will become immediately exercisable.
(7) Includes 4,166 Shares with respect to which Mr. Meyers has the right to
acquire beneficial ownership by virtue of currently exercisable Stock
Options or Stock Options exercisable within 60 days of January 27, 1997.
Upon the successful completion of the Offer, Stock Options and Warrants to
purchase 8,334 Shares and 35,000 Shares, respectively, will become
immediately exercisable.
(8) Includes 6,499 Shares with respect to which Dr. Richart has the right to
acquire beneficial ownership by virtue of currently exercisable Stock
Options or Stock Options exercisable within 60 days of January 27, 1997.
Upon the successful completion of the Offer, Stock Options to purchase
13,001 Shares will become immediately exercisable.
(9) Includes 6,499 Shares and 112,500 Shares with respect to which Mr. Sawyer
has the right to acquire beneficial ownership by virtue of currently
exercisable Stock Options or Warrants, respectively, or Stock Options or
Warrants, as the case may be, exercisable within 60 days of January 27,
1997. Upon the successful completion of the Offer, Stock Options to
purchase 13,001 Shares will become immediately exercisable.
(10) Although Mr. Golay was a Named Executive Officer in fiscal 1996, he is not
currently an executive officer or director of the Company.
(11) Includes 141,935 Shares and 250,000 Shares with respect to which all
executive officers and directors as a group have the right to acquire
beneficial ownership by virtue of currently exercisable Stock Options or
Warrants, respectively, or Stock Options or Warrants, as the case may be,
exercisable within 60 days of January 27, 1997. Upon the successful
completion of the Offer, Stock Options and Warrants to purchase 442,504
Shares and 80,000 Shares, respectively, will become immediately
exercisable.
I-12
<PAGE> 34
SCHEDULE II
CLEARY GULL REILAND & McDEVITT INC.
100 East Wisconsin Avenue
Milwaukee, WI 53202
414-291-4500
January 20, 1997
Board of Directors
New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders (the "Stockholders") of shares of common stock, par value
$0.001 per share ("New Image Common Stock"), of New Image Industries, Inc.
("New Image") of the consideration to be received by the Stockholders pursuant
to the terms of the draft Agreement and Plan of Merger dated as of January 14,
1997 (the "Merger Agreement") by and among DENTSPLY International Inc.
("DENTSPLY"), Image Acquisition, Inc., a wholly owned, direct subsidiary of
DENTSPLY ("Subsidiary") and New Image. Pursuant to the Merger Agreement,
Subsidiary will offer to purchase all of the outstanding New Image Common Stock
in a tender offer (the "Tender Offer") and, following completion of the Tender
Offer, the Subsidiary will be merged (the "Merger") with and into New Image and
New Image will become a wholly owned subsidiary of DENTSPLY. The Tender Offer
and the Merger are collectively referred to herein as the "Acquisition".
Under the Merger Agreement, Subsidiary will offer to purchase all of the issued
and outstanding shares of New Image Common Stock in the Tender Offer for $2.00
per share in cash (the "Offer Consideration"). Upon consummation of the
Merger, any shares of New Image Common Stock not acquired in the Tender Offer
will be converted into the right to receive the Offer Consideration in the
Merger.
In arriving at our opinion, we have reviewed, among other things, the Merger
Agreement and certain business and financial information relating to New Image,
including certain financial projections, estimates and analyses provided to us
by New Image and certain business and financial information relating to
DENTSPLY. We have also reviewed and discussed the businesses and prospects of
New Image and its subsidiaries with representatives of New Image's management.
In arriving at our opinion, we have considered (a) certain financial and stock
market data relating to New Image and in certain cases have compared that
information to similar data for other publicly held companies in businesses
considered to be generally comparable to New Image, (b) certain publicly
available information concerning the nature and terms of certain transactions
<PAGE> 35
New Image Industries, Inc.
January 20, 1997
Page 2
that Cleary Gull believed to be relevant on a comparative basis including the
acquisition of Insight Imaging Systems, Inc. by New Image effective May 17,
1996, (c) an unleveraged after-tax discounted cash flow analysis of New Image,
(d) the financial impact of the Acquisition on DENTSPLY's future earnings per
share, (e) a comparison of the purchase price premium to be paid for the New
Image Common Stock based on the Offer Consideration to certain other
similar-sized acquisitions, (f) a historical review of New Image's stock market
price, (g) the trading history of New Image, (h) a liquidation analysis of New
Image, (i) the financial and other conditions of New Image at the time of the
acceptance by New Image of DENTSPLY's offer, (j) the results of New Image's
efforts during FY96 and FY97 to arrange equity financing, (k) the results of
New Image's efforts to find a buyer and (l) such other information, financial
studies and analyses and financial, economic and market criteria as we deemed
relevant and appropriate.
In connection with our review, we have not independently verified any of the
foregoing information and have relied on its being complete and accurate in all
material respects. We have not made an independent evaluation or appraisal of
any assets or liabilities (contingent or otherwise) of New Image or any of
their respective subsidiaries, nor have we been furnished with any such
evaluation or appraisal that has not been publicly disclosed. With respect to
the financial plans, estimates and analyses provided to us by New Image, we
have assumed, with your permission, that all such information was reasonably
prepared on bases reflecting the best currently available estimates and
judgments of management of New Image as to future financial performance and was
based upon the historical performance of New Image and certain estimates and
assumptions which were reasonable at the time made. Our opinion is based on
economic, monetary and market conditions existing on the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Offer Consideration to be received by the Stockholders in the
Tender Offer and the subsequent Merger pursuant to the Merger Agreement is
fair, from a financial point of view, to the Stockholders.
We are acting as financial advisor to the Board of Directors of New Image in
this transaction and will receive a fee for our services, payable at the
mailing of the Offer to Purchase, the related Letter of Transmittal and other
materials. Our fee is not contingent upon the approval and consummation of the
Acquisition. In addition, New Image has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. New Image has
also agreed to reimburse Cleary Gull for its reasonable and properly documented
expenses up to $15,000. Cleary Gull has not been engaged previously by New
Image to render financial advisory or investment banking services. However,
Cleary Gull has in the past provided and may in the future provide financial
<PAGE> 36
New Image Industries, Inc.
January 20, 1997
Page 3
advisory and/or investment banking services to DENTSPLY and related entities.
The Board of Directors of New Image recognizes that in June 1994 Cleary Gull
was retained by DENTSPLY to explore a possible business combination with New
Image. Cleary Gull's engagement by DENTSPLY ended in September 1994 when
DENTSPLY and New Image were unable to agree on the terms of a business
combination. Since September 1994 and except for certain trading activities
relating to DENTSPLY common stock and options, Cleary Gull has not rendered any
financial advisory or investment banking services to DENTSPLY. Cleary Gull
provides research coverage on DENTSPLY and currently rates DENTSPLY a #1-Buy,
Cleary Gull's highest rating. In addition, in the ordinary course of business,
we may trade securities of New Image and DENTSPLY for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
This opinion is for the use and benefit of the Board of Directors of New Image
and is rendered to the Board of Directors of New Image in connection with its
consideration of the Acquisition. We are not making any recommendation
regarding whether or not it is advisable for Stockholders to tender their
shares of New Image Common Stock in the Tender Offer. We have not been
requested to opine as to, and our opinion does not in any manner address, New
Image's underlying business decision to proceed with or effect the Acquisition.
Very truly yours,
/s/ Cleary Gull Reiland & McDevitt Inc.
CLEARY GULL REILAND & McDEVITT INC.
<PAGE> 1
EXHIBIT 1
Execution Copy
============================
AGREEMENT AND PLAN OF MERGER
dated as of January 27, 1997
by and among
DENTSPLY INTERNATIONAL INC.,
IMAGE ACQUISITION CORP.
and
NEW IMAGE INDUSTRIES, INC.
============================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 -- THE OFFER.................................................................2
1.1 The Offer............................................................2
1.2 Parent Action; Tender Offer Documents................................2
1.3 Company Action.......................................................3
ARTICLE 2 -- THE MERGER................................................................4
2.1 The Merger...........................................................4
2.2 Effective Time.......................................................4
2.3 Closing..............................................................5
2.4 Effects of the Merger................................................5
2.5 Certificate of Incorporation; By-Laws................................5
2.6 Directors and Officers of the Surviving Corporation..................5
2.7 Taking of Necessary Action; Further Action...........................5
2.8 Conversion of Securities.............................................5
2.9 Exchange of Certificates.............................................6
2.10 Transfer of Shares After Effective Date..............................7
2.11 Company Stock Options................................................7
2.12 Company Warrants.....................................................8
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................8
3.1 Organization and Qualification.......................................9
3.2 Certificate of Incorporation and By-Laws.............................9
3.3 Subsidiaries.........................................................9
3.4 Capitalization.......................................................9
3.5 Authority Relative to this Agreement................................10
3.6 Commission Filings..................................................11
3.7 No Undisclosed Liabilities..........................................12
3.8 Absence of Certain Changes or Events................................12
3.9 Litigation..........................................................13
3.10 Absence of Changes in Benefit Plans.................................13
3.11 ERISA Compliance....................................................13
3.12 Taxes...............................................................15
3.13 Information Supplied................................................16
3.14 Compliance with Applicable Laws.....................................16
3.15 State Takeover Statutes.............................................18
3.16 Brokers; Schedule of Fees and Expenses..............................18
3.17 Contracts; Debt Instruments.........................................18
3.18 Title to Properties.................................................19
3.19 Labor Matters.......................................................20
3.20 Insurance...........................................................20
</TABLE>
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<TABLE>
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3.21 Intellectual Property Matters.......................................20
3.22 Payments............................................................21
3.23 Suppliers and Customers.............................................21
3.24 Regulatory Matters..................................................22
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF PARENT.................................22
4.1 Organization and Qualification......................................22
4.2 Authority Relative to this Agreement................................22
4.3 Financing...........................................................23
4.4 Ownership of Company Securities.....................................23
4.5 Information Supplied................................................23
4.6 Capitalization......................................................23
4.7 Financial Advisor...................................................23
ARTICLE 5 -- CONDUCT OF BUSINESS PENDING THE MERGER...................................24
5.1 Conduct of Business by the Company Pending the Merger...............24
5.2 Actions by Parent and Merger Sub Pending the Merger.................26
ARTICLE 6 -- ADDITIONAL AGREEMENTS....................................................26
6.1 Stockholder Approval; Preparation of Proxy Statement................26
6.2 Stock Options and Warrants..........................................27
6.3 Expenses............................................................27
6.4 Other Actions.......................................................28
6.5 Exclusive Dealing...................................................28
6.6 Notification of Certain Matters.....................................29
6.7 Access to Information...............................................30
6.8 Antitrust Laws......................................................30
6.9 Public Announcements................................................30
6.10 Directors...........................................................30
6.11 Directors' and Officers' Insurance Coverage.........................31
6.12 Benefit Plans and Certain Contracts.................................32
ARTICLE 7 -- CONDITIONS...............................................................32
7.1 Conditions to Obligation of each Party to Effect the Merger.........32
7.2 Additional Conditions to Obligation of the Company..................33
ARTICLE 8 -- TERMINATION, AMENDMENT AND WAIVER........................................33
8.1 Termination.........................................................33
8.2 Effect of Termination...............................................34
8.3 Amendment...........................................................34
8.4 Extension; Waiver...................................................34
</TABLE>
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ARTICLE 9 -- GENERAL PROVISIONS.......................................................35
9.1 Survival of Representations, Warranties and Agreements..............35
9.2 Notices.............................................................35
9.3 Interpretation......................................................36
9.4 Entire Agreement; No Third Party Beneficiaries......................36
9.5 Assignment..........................................................36
9.6 Governing Law.......................................................36
9.7 Counterparts........................................................36
9.8 Specific Performance................................................37
Appendix -- Conditions to the Offer............................................A-1
</TABLE>
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<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
January 27, 1997, is by and among DENTSPLY International Inc., a Delaware
corporation ("Parent"), Image Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of Parent ("Merger Sub"), and New Image Industries,
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have approved the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Merger Sub to make a tender offer (as it may be amended from time to time as
permitted under Section 1.1 of this Agreement, the "Offer") to purchase all the
issued and outstanding shares of Common Stock, par value $.001 per share, of
the Company (the "Company Common Stock," the outstanding shares of Company
Common Stock being hereinafter referred to as the "Shares"), at a purchase
price of $2.00 per share (the "Offer Price"), net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in this Agreement; and the Board of Directors of the Company has adopted
resolutions approving the Offer and the Merger (as defined below), recommending
that the Company's stockholders accept the Offer;
WHEREAS, each of the respective Boards of Directors of Parent, Merger
Sub and the Company has approved the Offer and the merger of Merger Sub with
and into the Company (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of Company Common Stock, other than shares owned directly or indirectly
by Parent or the Company and "Dissenting Shares" (as defined in Section
2.8(d)), will be converted into the right to receive the Offer Price;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent, Merger Sub and each
executive officer (as defined in Rule 3b-7 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) and director of the
Company who, in each case, owns Shares or options or warrants to acquire shares
of the Company Common Stock and The William W. Stevens and Virda J. Stevens
Trust, a stockholder of the Company (collectively, the "Stockholder Parties"),
are entering into separate stockholder agreements (the "Stockholder
Agreements"), pursuant to which each such Stockholder Party is agreeing to
tender all Shares owned by such person in the Offer, upon the terms and subject
to the conditions set forth in such Stockholder Party's respective Stockholder
Agreement; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger;
<PAGE> 6
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, intending to be legally bound hereby, Parent,
Merger Sub and the Company hereby agree as follows:
ARTICLE 1 -- THE OFFER
1.1 The Offer.
(a) Subject to the conditions set forth in the Appendix
hereto, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of the
execution of this Agreement, Merger Sub shall, and Parent shall cause Merger
Sub to, commence (within the meaning of Rule 14d-2 under the Exchange Act),
the Offer for any and all Shares at a price of $2.00 per share net to the
seller in cash, without interest thereon, and, subject to the conditions set
forth in the Appendix, consummate the Offer in accordance with its terms. The
Offer shall be made by means of an Offer to Purchase having the conditions set
forth in the Appendix (any of which may be waived by Merger Sub or Parent in
its sole discretion). The obligations of Merger Sub to commence the Offer and
to accept for payment and to pay for any Shares validly tendered on or prior to
the expiration of the Offer and not withdrawn shall be subject only to the
conditions set forth in the Appendix.
(b) Parent will not, and will cause Merger Sub not to,
without the prior written consent of the Company (which consent may be withheld
for any reason), decrease the price per Share, or change the form of
consideration payable, in the Offer, decrease the number of Shares sought in
the Offer, change the conditions to the Offer from those contained in the
Appendix hereto, impose additional conditions to the Offer, or amend any
material term of the Offer in a manner adverse to the holders of the Shares.
Subject to the terms and conditions of the Offer and this Agreement, Merger Sub
shall, and Parent shall cause Merger Sub to, accept for payment, and pay for,
all Shares validly tendered and not withdrawn pursuant to the Offer that Merger
Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer
as soon as practicable after the expiration of the Offer.
1.2 Parent Action; Tender Offer Documents. As soon as
practicable but not later than the date of commencement of the Offer, Parent
shall file or cause to be filed with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1").
The Schedule 14D-1 filed with the SEC, which shall contain the Offer to
Purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents included therein pursuant to which the Offer
will be made, together with any supplement or amendment thereto, are hereafter
referred to as the "Offer Documents") shall comply as to form in all material
respects with the applicable provisions of the Exchange Act and the rules and
regulations promulgated thereunder, and shall not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing representation shall not apply with respect to the accuracy
of information furnished in
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<PAGE> 7
writing by the Company specifically for inclusion in the Offer Documents or
which is taken, after consultation with the Company, from reports filed by the
Company under the Exchange Act (provided that such information has not been
superseded by information contained in reports filed by the Company under the
Exchange Act subsequent thereto), which accuracy shall be the sole
responsibility of the Company. Parent, Merger Sub and the Company each agrees
promptly to correct any information provided by it for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect, and Parent and Merger Sub further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the Offer Documents as so corrected to be disseminated to holders of
Shares, in each case as and to the extent required by applicable Federal
securities laws. The Company and its counsel shall be given reasonable
opportunity to review the Offer Documents prior to their filing with the SEC.
Parent and Merger Sub agree to provide the Company and its counsel in writing
any comments Parent, Merger Sub or its counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after receipt of such
comments.
1.3 Company Action.
(a) The Company hereby approves of and consents to the
Offer and represents that the Board of Directors of the Company, at a meeting
duly called and held, duly and unanimously adopted resolutions approving this
Agreement, the Offer and the Merger, determining that the terms of the Offer
and the Merger are fair, from a financial point of view, to, and in the best
interests of, the Company's stockholders and recommending that the Company's
stockholders approve and adopt this Agreement, and that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer,
provided, however, that any such recommendation may be amended, withdrawn or
modified in accordance with the provisions of Section 6.5(b). The Company
represents that its Board of Directors has received the opinion of Cleary Gull
Reiland & McDevitt Inc. ("Cleary Gull") to the effect that the proposed
consideration to be received by the holders of Shares pursuant to the Offer and
the Merger is fair to such holders from a financial point of view, and a
complete and correct signed copy of such opinion has been delivered by the
Company to Parent. The Company understands that, concurrently with the
execution of this Agreement, each of the Company's directors and officers
intends to execute a Stockholder Agreement with Parent and/or Merger Sub and
intends to tender all Shares owned by such person pursuant to the Offer. The
Company hereby approves of and consents to the execution by each Stockholder
Party of such Stockholder Party's Stockholder Agreement and the consummation of
the transactions contemplated thereby, including the tender of such Shares, and
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously adopted resolutions approving the execution of
the Stockholder Agreements and the consummation of the transactions
contemplated thereby.
(b) On the date the Offer Documents are filed with the
SEC, the Company shall file with the SEC and mail to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which shall reflect the recommendations described in Section 1.3(a). The
Company agrees that the Schedule 14D-9, including all amendments and
supplements thereto, shall comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
promulgated thereunder, and shall not contain any
3
<PAGE> 8
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the foregoing representation shall not apply with
respect to the accuracy of information furnished in writing by Parent
specifically for inclusion in the Schedule 14D-9 or taken from reports, after
consultation with the Company, filed by Parent under the Exchange Act (provided
that such information has not been superseded by information contained in
reports filed by Parent under the Exchange Act subsequent thereto). The
Company, Parent and Merger Sub each agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
amended or supplemented to be filed with the SEC and disseminated to the
Company's shareholders, in each case as and to the extent required by
applicable Federal securities laws. Parent and Merger Sub and their counsel
shall be given reasonable opportunity to review the Schedule 14D-9 prior to its
filing with the SEC. The Company agrees to provide Parent and its counsel in
writing any comments the Company or its counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after receipt of such
comments.
(c) The Company will promptly furnish Parent or cause
Parent to be furnished with mailing labels containing the names and addresses
of the record holders of Shares as of a recent date and of those persons
becoming record holders subsequent to such date, together with copies of all
lists of stockholders, security position listings and computer files and all
other information in the Company's possession or control regarding the
beneficial owners of Shares, and shall furnish Parent with such additional
information and assistance as Parent may reasonably request to communicate the
Offer to the stockholders of the Company.
ARTICLE 2 -- THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the "Effective Time" (as defined in Section 2.2 hereof), Merger Sub
shall be merged with and into the Company in the Merger, the separate existence
of Merger Sub (except as may be continued by operation of law) shall cease, and
the Company shall continue as the surviving corporation following the Merger
(the "Surviving Corporation"). Notwithstanding the foregoing, Parent may elect
at any time prior to the Merger to merge the Company with and into Merger Sub,
instead of merging Merger Sub with and into the Company, in which event the
parties agree to execute an appropriate amendment to this Agreement to reflect
the foregoing.
2.2 Effective Time. Upon the terms and subject to the conditions
hereof, the parties hereto will file a Certificate of Merger with the Secretary
of State of the State of Delaware, in such form as may be required by, and
executed in accordance with, the DGCL. The Merger shall become effective at
such time as such document is so filed or at such time as is set forth in the
Certificate of Merger, if different, which time is hereinafter referred to as
the "Effective Time."
4
<PAGE> 9
2.3 Closing. The closing of the Merger shall take place at the
offices of Morgan, Lewis & Bockius LLP, One Oxford Centre, Pittsburgh, PA 15219
at 10:00 a.m., Eastern Time, on a date (the "Closing Date") to be specified by
the parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Article 7.
2.4 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL and this Agreement.
2.5 Certificate of Incorporation; By-Laws. The Certificate of
Incorporation and By-Laws of Merger Sub at the Effective Time shall be the
Certificate of Incorporation and By-Laws of the Surviving Corporation until
amended as provided therein and under the DGCL.
2.6 Directors and Officers of the Surviving Corporation. The
directors and officers of Merger Sub at the Effective Time shall, from and
after the Effective Time, be the directors and officers of the Surviving
Corporation until their successors shall have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
2.7 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full rights and title to and possession of all assets, properties, rights,
privileges, immunities and franchises of either the Company or Merger Sub, the
officers and directors of each such corporation are fully authorized in the
name of such corporation or otherwise to take, and shall take, all such lawful
and necessary action.
2.8 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holder of any of the securities of the Company or Merger Sub:
(a) Subject to Section 2.8(d) hereof, each Share issued
and outstanding immediately prior to the Effective Time (other than Shares to
be canceled pursuant to Section 2.8(b) hereof), shall be canceled and
extinguished and be converted into and represent the right to receive $2.00 in
cash, without interest (the "Merger Consideration"). All such Shares, by
virtue of the Merger and without any action on the part of the holders thereof,
shall no longer be outstanding and shall be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such Shares
shall thereafter cease to have any rights with respect thereto, except the
right to receive the Merger Consideration for such Shares upon the surrender of
such certificate in accordance with Section 2.9.
(b) Each Share issued and outstanding immediately prior
to the Effective Time and held in the treasury of the Company or owned by
Parent or any direct or indirect subsidiary of Parent (including Merger Sub)
shall be canceled and retired and no payment shall be made with respect
thereto.
5
<PAGE> 10
(c) Each share of Common Stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(d) Notwithstanding anything in this Agreement to the
contrary, any issued and outstanding Shares held by a person (a "Dissenting
Stockholder") who objects to the Merger and complies with all the provisions of
the DGCL concerning the right of holders of Shares to dissent from the Merger
and require appraisal of their Shares ("Dissenting Shares") shall not be
converted as described in Section 2.8(a) but shall become the right to receive
such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the laws of the State of Delaware. If, after the
Effective Time, such Dissenting Stockholder withdraws his demand for appraisal
or fails to perfect or otherwise loses his right of appraisal, in any case
pursuant to the DGCL, his Shares shall be deemed to be converted as of the
Effective Time into the right to receive the Merger Consideration. The Company
shall give Parent (i) prompt notice of any demands for appraisal of Shares
received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such
demands.
2.9 Exchange of Certificates.
(a) Prior to the Effective Time, Parent shall select a
bank or trust company to act as paying agent (the "Paying Agent") for the
payment of the Merger Consideration upon surrender of certificates representing
Shares.
(b) Parent shall, or shall cause the Surviving
Corporation to, provide to the Paying Agent on a timely basis, as and when
needed after the Effective Time, funds necessary to pay for the Shares as part
of the Merger pursuant to Section 2.8.
(c) As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") whose Shares were converted
into the right to receive the Merger Consideration pursuant to Section 2.8, (i)
a letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Paying Agent and shall be in a form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash into which
the Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 2.8, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer
6
<PAGE> 11
records of the Company, payment may be made to a person other than the person
in whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required
by reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.9, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the Shares theretofore represented
by such Certificate shall have been converted pursuant to Section 2.8. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate. In the event any Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
payment of the Merger Consideration in respect of shares represented by such
Certificate, require the owner of such lost, stolen or destroyed Certificate to
make an affidavit of that fact containing such indemnification provisions as
Parent may deem appropriate, including, without limitation, the posting of a
bond in such amount as Parent may reasonably direct as indemnity against any
claim that may be made against it, the Surviving Corporation or the Paying
Agent with respect to such Certificate.
(d) All cash paid upon the surrender of Certificates in
accordance with the terms of this Article 2 shall be deemed to have been paid
in full satisfaction of all rights pertaining to the Shares theretofore
represented by such Certificates, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
Shares which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for any reason, they shall be canceled and
exchanged as provided in this Article 2.
(e) None of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to
seven years after the Effective Time (or immediately prior to such earlier date
on which any payment pursuant to this Article 2 would otherwise escheat to or
become the property of any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity")), the cash
payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interests of any person previously entitled thereto.
2.10 Transfer of Shares After Effective Date. No transfers of
Shares shall be made on the stock transfer books of the Surviving Corporation
at or after the Effective Time.
2.11 Company Stock Options. As of the Effective Time, each option
(a "Stock Option") to purchase Shares under the Company's 1989 Stock Incentive
Plan (the "1989 Plan"), 1992 Stock Incentive Plan (the "1992 Plan"), 1992
Director Incentive Plan (the "1992 Director Plan"), 1993 Stock Incentive Plan
(the "1993 Plan"), 1993 Director Incentive Plan (the "1993 Director Plan"), the
Insight Imaging Systems, Inc. 1994 Stock Option Plan (the "Insight Plan") and
the 1995 Stock
7
<PAGE> 12
Incentive Plan (the "1995 Plan" and together with the 1989 Plan, the 1992 Plan,
the 1992 Director Plan, the 1993 Plan, the 1993 Director Plan and the Insight
Plan, the "Stock Option Plans," true, complete and correct copies of which have
heretofore been furnished to Parent), whether or not then exercisable in
accordance with its terms, shall be converted into the right to receive, upon
the surrender of the agreement evidencing such Stock Option to the Paying Agent
in accordance with the provisions of Section 2.9 applicable to Certificates and
upon the delivery to the Paying Agent of the "Stock Option Acknowledgment"
referred to below, an amount in cash (net of applicable withholding) equal to
the excess, if any, of the Merger Consideration over the exercise price per
Share subject to such Stock Option (each, an "Option Share") multiplied by the
number of Option Shares previously subject to such Stock Option (assuming full
vesting of all Stock Options). Each holder of a Stock Option who surrenders
the agreement evidencing such Stock Option to the Paying Agent shall execute a
written acknowledgment, in form satisfactory to Parent (the "Stock Option
Acknowledgment"), that such holder's receipt of cash in exchange for such Stock
Option shall be in full settlement of such Stock Option and that such holder
understands that such Stock Option shall, as of the Effective Time, represent
only the right to receive cash in accordance with this Section 2.11 and shall
otherwise be canceled. Regardless of the number of Stock Options (if any) so
surrendered, all Stock Options shall be canceled at the Effective Time and
shall thereafter represent only the right to receive the amount of cash payable
under this Section 2.11 upon compliance with the terms hereof.
2.12 Company Warrants. As of the Effective Time, each warrant to
purchase Shares (a "Warrant"), whether or not then exercisable in accordance
with its terms, shall be converted into the right to receive, upon the
surrender of the agreement evidencing such Warrant to the Paying Agent in
accordance with the provisions of Section 2.9 applicable to Certificates and
upon the delivery to the Paying Agent of the "Warrant Acknowledgment" referred
to below, an amount in cash (net of applicable withholding) equal to the
excess, if any, of the Merger Consideration over the exercise price per share
of the Common Stock of the Company subject to such Warrant (each, a "Warrant
Share") multiplied by the number of Warrant Shares previously subject to such
Warrant. Each holder of a Warrant who surrenders the agreement evidencing such
Warrant to the Paying Agent shall execute a written acknowledgment, in form
satisfactory to Parent (the "Warrant Acknowledgment"), that such holder's
receipt of cash in exchange for such Warrant shall be in full settlement of
such Warrant and that such holder understands that such Warrant shall, as of
the Effective Time, represent only the right to receive cash in accordance with
this Section 2.12 and shall otherwise be canceled. Regardless of the number of
Warrants, if any, so surrendered, all Warrants shall be canceled at the
Effective Time and shall thereafter represent only the right to receive the
amount of cash payable under this Section 2.12 upon compliance with the terms
hereof.
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a schedule attached to this Agreement (the
"Company Disclosure Schedule") which identifies with particularity an exception
to a representation and warranty in this Agreement, the Company represents and
warrants to Parent and Merger Sub as set forth below. A disclosure with
respect to a particular representation and warranty shall be deemed to apply to
any other representations and warranties to which it relates.
8
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3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to carry on its
business as it is now being conducted and as it is proposed to be conducted.
The Company is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not have a
"Material Adverse Effect" on the Company. As used in this Agreement, the term
"Material Adverse Effect" shall mean a material adverse effect upon the
business, financial condition, results of operations, properties, assets or
liabilities of the party affected thereby that is, or could reasonably be
expected to be, materially adverse to such party and its subsidiaries, taken as
a whole.
3.2 Certificate of Incorporation and By-Laws. The Certificate of
Incorporation and By-Laws of the Company in the forms attached to the Company
Disclosure Schedule are the Certificate of Incorporation and By-Laws of the
Company as in effect on the date of this Agreement.
3.3 Subsidiaries. The Company Disclosure Schedule lists each
subsidiary of the Company (each a "Subsidiary" and collectively the
"Subsidiaries"). Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power to carry on its business as
it is now being conducted. Each Subsidiary is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect on the Company. All of the
outstanding shares of capital stock of each of the Subsidiaries are validly
issued, fully paid and nonassessable and are owned by the Company or by a
wholly owned Subsidiary of the Company, free and clear of all liens, pledges,
claims, charges, encumbrances and security interests of any kind or nature
whatsoever ("Liens"), and there are no proxies outstanding with respect to such
shares. Except for the capital stock of its Subsidiaries, the Company does not
own, directly or indirectly, any capital stock or other ownership interest in
any other corporation, partnership, joint venture or other business association
or entity.
3.4 Capitalization. The authorized capital stock of the Company
consists of 10,000,000 Shares and 1,000,000 shares of preferred stock, par
value $.001 per share (the "Preferred Stock"). As of the date hereof:
(a) 5,479,911 Shares are outstanding;
(b) no shares of Company Common Stock are held in the
treasury of the Company or any of its Subsidiaries;
(c) (i) 58,450 shares of Company Common Stock are
reserved for issuance pursuant to the 1989 Plan, (ii) 261,000 shares of Company
Common Stock are reserved for issuance pursuant to the 1992 Plan, (iii) no
shares of Company Common Stock are reserved for issuance pursuant to the 1992
Director Plan, (iv) 480,000 shares of Company Common Stock are reserved for
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issuance pursuant to the 1993 Plan, (v) 255,000 shares of Company Common Stock
are reserved for issuance pursuant to the 1993 Director Plan (vi) 500,000
shares of Company Common Stock are reserved for issuance pursuant to the 1995
Stock Incentive Plan and (vii) 102,756 shares of Company Common Stock are
reserved for issuance pursuant to the Insight Plan and (viii) 565,284 shares of
Company Common Stock are reserved for issuance upon exercise of Warrants.
(d) Stock Options to purchase no more than 1,177,083
shares of Company Common Stock are outstanding pursuant to the Stock Option
Plans of which 263,644 Stock Options are held by persons other than Stockholder
Parties and are exercisable at a price less than $2.00;
(e) Warrants to purchase 565,284 shares of Company
Common Stock are outstanding of which no Warrants are held by persons other
than Stockholder Parties and are exercisable at a price less than $2.00;
(f) no shares of Preferred Stock are outstanding.
The Company Disclosure Schedule contains a true and complete listing of (i) all
Stock Options, the holder of each Stock Option, the number of Stock Options
held by each such holder and the exercise prices of all such Stock Options, and
(ii) all Warrants, the holders of each Warrant, the number of Warrants held by
each such holder and the exercise prices of all such Warrants.
All outstanding shares of capital stock of the Company are, and all
shares which may be issued upon the exercise of Stock Options or Warrants will,
when issued in accordance with the terms thereof against payment to the Company
of the consideration therefor specified in the applicable agreements, be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company may vote. Except as set forth above, as of the date of this
Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its Subsidiaries is a party, or by which any of
them is bound, obligating the Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding contractual obligations (x) of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or (y) of the
Company to vote or to dispose of any shares of the capital stock of any of its
Subsidiaries.
3.5 Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the
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Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the transactions contemplated hereby,
except for any required approval of the Merger by the Company's stockholders as
set forth in Section 6.1. This Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally.
Neither the Company nor any Subsidiary is subject to or obligated under any
provision of (a) its respective Certificate of Incorporation or By-Laws,
(b) any contract, (c) any license, franchise or permit, or (d) any law,
regulation, order, judgment or decree, which would be breached, violated or
defaulted (with or without due notice or lapse of time or both) or in respect
of which a right of termination or acceleration or a loss of a material benefit
or any encumbrance on any of its assets would be created or suffered by its
execution and performance of this Agreement, except (as to clauses (b), (c) or
(d) above) where such breach, violation, default, right of termination or
acceleration, loss or encumbrance, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. The consummation of the Offer
and the Merger by the Company will not require the consent or approval of, or a
registration or filing with, any person or Governmental Entity, other than
(w) approval of the holders of Shares if required by applicable law or the
Company's Certificate of Incorporation or Bylaws, (x) applicable requirements,
if any, of the Exchange Act, state "blue sky" or takeover laws and the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
(y) filing and recordation of appropriate merger documents as required by the
DGCL and (z) where failure to obtain such consents or approvals or to make such
registration or filing would not have, individually or in the aggregate, a
Material Adverse Effect on the Company or prevent or materially delay the
Company from performing its obligations under this Agreement.
3.6 Commission Filings. The Company has filed all required
reports, schedules, forms, statements and other documents with the SEC since
June 30, 1993. The Company has heretofore delivered to Parent its (a) Annual
Reports on Form 10-K for each fiscal year of the Company beginning with the
fiscal year ended June 30, 1993, as filed with the SEC, (b) Quarterly Reports
on Form 10-Q for each fiscal quarter of the Company beginning with the fiscal
quarter ended September 30, 1993, as filed with the SEC, (c) proxy statements
relating to the Company's meetings of stockholders (whether annual or special)
during each fiscal year beginning with the fiscal year 1993 and (d) all other
reports filed by the Company with the SEC since June 30, 1993 (collectively,
the "SEC Documents"). As of their respective dates, the SEC Documents complied
as to form in all material respects with the requirements of the Exchange Act
and the rules and regulations of the SEC promulgated thereunder and applicable
to such SEC Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein , in light of the
circumstances under which they were made, not misleading, except for such
statements, if any, as have been modified by subsequent filings prior to the
date hereof and furnished to Parent. The financial statements of the Company
included in the SEC Documents comply with applicable accounting requirements
and the rules of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be specifically indicated therein or in the notes thereto,
except for such statements, if any, as have been modified by subsequent filings
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<PAGE> 16
prior to the date hereof and furnished to Parent or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC) during the periods
involved and fairly present the consolidated financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations, changes in stockholders' equity and statements of
cash flows (or changes in financial position prior to the approval of FASB 95)
for the periods then ended, subject, in the case of the unaudited consolidated
interim financial statements, to normal year-end adjustments and any other
adjustments described therein.
3.7 No Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries has any liabilities, obligations or commitments of any nature
(whether absolute, accrued, contingent or otherwise), matured or unmatured
(herein "Liabilities"), except (a) Liabilities which are adequately reflected
or reserved against in the financial statements of the Company for the quarter
ended September 30, 1996, (b) Liabilities which have been incurred in the
ordinary course of business and consistent with past practice since September
30, 1996 which individually or in the aggregate would not have a Material
Adverse Effect on the Company and (c) Liabilities under this Agreement and fees
and expenses related thereto.
3.8 Absence of Certain Changes or Events. Except as heretofore
disclosed in the SEC Documents, since the date of the most recently audited
financial statements included in the SEC Documents, the Company has conducted
its business only in the ordinary course, and there has not been:
(a) any event, act, occurrence or omission to act or
occur having or which, insofar as reasonably can be foreseen, may have, a
Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any of the Company's capital stock;
(c) any split, combination or reclassification of any of
its capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock;
(d) (i) any granting by the Company or any of its
Subsidiaries to any executive officer of the Company or any of its Subsidiaries
of any increase in compensation, except as required under employment agreements
in effect as of the date of the most recent audited financial statements
included in the SEC Documents, (ii) any granting by the Company or any of its
Subsidiaries to any such executive officer of any increase in severance or
termination pay, except as required under any employment, severance or
termination agreement in effect as of the date of the most recent audited
financial statements included in the SEC Documents (true, complete and correct
copies of all of which agreements have heretofore been furnished to Parent),
(iii) any entry by the Company or any of its Subsidiaries into any employment,
severance or termination agreement with any such executive officer, or (iv) any
grant, whether or not to an employee of the Company or any of its Subsidiaries,
of any Stock Option or other option, warrant or right to purchase or otherwise
acquire any shares
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of capital stock of the Company or any of its Subsidiaries (other than grants
included within subsections (d) and (e) of Section 3.4);
(e) any damage, destruction or loss, whether or not
covered by insurance, that has or could, insofar as reasonably can be foreseen,
have, a Material Adverse Effect on the Company; or
(f) any change in accounting methods or principles by
the Company.
3.9 Litigation. Except as disclosed in the SEC Documents, as of
the date of this Agreement, there is no suit, action or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries that individually or in the aggregate could reasonably be expected
to (a) have a Material Adverse Effect on the Company, (b) materially impair the
ability of the Company to perform its obligations under this Agreement or (c)
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against the Company or any of its
Subsidiaries having, or which is reasonably likely to have, any effect referred
to in the foregoing clauses (a), (b) or (c) above.
3.10 Absence of Changes in Benefit Plans. Except as disclosed in
the SEC Documents, since the date of the most recent audited financial
statements included in the SEC Documents, there has not been any adoption or
amendment in any material respect by the Company or any of its Subsidiaries of
any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding (whether or not legally
binding) providing benefits to any current or former employee, officer or
director of the Company or any of its Subsidiaries; true, complete and correct
copies of all of such plans, arrangements and understandings have heretofore
been furnished to Parent. Except as disclosed in the SEC Documents, there are
no employment, consulting, severance, termination or indemnification
agreements, arrangements or understandings in effect (other than employment and
consulting agreements which are terminable at will without liability to the
Company) between the Company or any of its Subsidiaries and any current or
former employee, officer or director of the Company or any of its Subsidiaries.
3.11 ERISA Compliance.
(a) The Company Disclosure Schedule contains a list of
each "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as a "Pension Plan"), each "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA) and each stock option,
stock purchase, deferred compensation plan or arrangement and each other
employee fringe benefit plan (as defined in Section 6039D(d) of the Internal
Revenue Code of 1986, as amended (the "Code")) maintained, contributed to or
required to be maintained or contributed to by the Company, any of its
Subsidiaries or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code,
(each, a "Commonly Controlled Entity"), for the benefit of any
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current or former employees, officers, directors or independent contractors of
the Company or any of its Subsidiaries (collectively, "Benefit Plans"). The
Company has delivered to Parent true, complete and correct copies of (i) each
Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof), (ii) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Benefit Plan (if any such report
was required), (iii) the most recent summary plan description for each Benefit
Plan for which such summary plan description is required and (iv) each
currently effective trust agreement and insurance or group annuity contract
relating to any Benefit Plan.
(b) To the knowledge of the Company, there has been no
failure to administer any Benefit Plan in all material respects in accordance
with its terms, and no failure of the Company, its Subsidiaries or any Benefit
Plan to comply in all material respects with ERISA or the Code.
(c) All Pension Plans intended to be qualified under
Section 401(a) of the Code have been the subject of determination letters from
the Internal Revenue Service to the effect that such Pension Plans are
qualified and exempt from federal income taxes under Sections 401(a) and
501(a), respectively, of the Code and no such determination letter has been
revoked nor, to the knowledge of the Company, has revocation been threatened,
nor has any such Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would
adversely affect its qualification or materially increase its costs.
(d) No Pension Plan that the Company or any of its
Subsidiaries maintains, or to which the Company or any of its Subsidiaries is
obligated to contribute, other than any Pension Plan that is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA; collectively,
the "Multiemployer Pension Plans"), had, as of the respective last annual
valuation date for each such Pension Plan, an "unfunded benefit liability" (as
such term is defined in Section 4001(a)(18) of ERISA), based on actuarial
assumptions which have been furnished to Parent, and neither the Company nor
any of its Subsidiaries is aware of any facts or circumstances that would
materially change the funded status of any such Benefit Plans. None of the
Pension Plans has an "accumulated funding deficiency" (as such term is defined
in Section 302 of ERISA or Section 412 of the Code), and there has been no
application for a waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Benefit Plan that is a Pension Plan.
(e) None of the Company, any of its Subsidiaries, any
officer of the Company or any of its Subsidiaries or any of the Benefit Plans
which are subject to ERISA, including the Pension Plans, any trusts created
thereunder or any trustee or administrator thereof, has engaged in a nonexempt
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) or any other breach of fiduciary responsibility that
could subject the Company, any of its Subsidiaries or any officer of the
Company or any of its Subsidiaries to tax or penalty under ERISA, the Code or
other applicable law that has not been corrected or that individually or in the
aggregate would have a Material Adverse Effect on the Company (determined
assuming that the tax under Section 4975(b) of the Code is imposed with respect
to such prohibited transaction). Any taxes or penalties arising from
prohibited transactions referred to in this Section 3.11(e) that have been
corrected have been paid in full. Neither any of such Benefit Plans nor any of
such trusts that
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are subject to Title IV of ERISA has been terminated, nor has there been any
"reportable event" (as that term is defined in Section 4043 of ERISA) with
respect thereto, during the last three years.
(f) Neither the Company nor any Commonly Controlled
Entity has suffered or otherwise caused a "complete withdrawal" or a "partial
withdrawal" (as such terms are defined in Section 4203 and Section 4205,
respectively, of ERISA) with respect to any of the Multiemployer Pension Plans
that could lead to the imposition of any withdrawal liability under Section
4201 of ERISA; and no action has been taken that alone or with the passage of
time could result in either a partial or complete withdrawal by any Commonly
Controlled Entity in respect of any such plan.
(g) With respect to any Benefit Plan that is an employee
welfare benefit plan, (i) no such Benefit Plan is funded through a "welfare
benefit fund," as such term is defined in Section 419(e) of the Code, (ii) each
such Benefit Plan that is a "group health plan," as such term is defined in
Section 5000(b)(1) of the Code, complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code and (iii) each such
Benefit Plan (including any such Plan covering retirees or other former
employees) may be amended or terminated without material liability to the
Company or any of its Subsidiaries on or at any time after the consummation of
the Offer, after giving any notice required by ERISA or the Code.
(h) No Commonly Controlled Entity has incurred any
material liability to a Pension Plan (other than for contributions not yet
due).
3.12 Taxes.
(a) Each of the Company and each of its Subsidiaries has
filed all material tax returns and reports required to be filed by it
("Returns"). All such Returns are complete and correct in all material
respects. Each of the Company and each of its Subsidiaries has paid (or the
Company has paid on its behalf or made provision for) all material taxes
required to be paid by it, and the most recent financial statements contained
in the SEC Documents properly reflect in accordance with generally accepted
accounting principles all material taxes payable by the Company and its
Subsidiaries for all taxable periods and portions thereof through the date of
such financial statements.
(b) No material deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its Subsidiaries
that have not been fully paid or are not properly reflected in accordance with
generally accepted accounting principles in the most recent financial
statements contained in the SEC Documents, other than those taxes being
contested in good faith, and no requests for waivers of the time to assess any
such taxes are pending. The Company has not agreed with any tax authority to
extend the time to assess any such taxes. The Company has not entered into any
closing agreement with respect to any taxable year.
(c) The Company Disclosure Schedule sets forth (i) the
taxable years of the Company or any of its Subsidiaries as to which the
respective statutes of limitations with respect to federal income taxes have
not yet expired, and (ii) those taxable years and taxes as to which the Company
has agreed to extend the applicable statute of limitations.
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(d) None of the Company or any of its Subsidiaries has,
and none of them has ever had, a permanent establishment in any non-U.S.
country, as defined in any applicable tax treaty or convention between the
United States and such non-U.S. country, or any presence in a non-U.S. country
with which the United States does not have a tax treaty or convention that
could subject the Company or any Subsidiary to the tax laws of such non-U.S.
country.
(e) As used in this Agreement, "taxes" shall include all
federal, state, local and foreign income, property, sales, excise and other
taxes, tariffs or duties of any nature whatsoever.
(f) The Company is not a party to any agreements that
could reasonably be expected to result in any payments that would be
characterized as "excess parachute payments" (as such term is defined in
Section 280G(b)(1) of the Code.
3.13 Information Supplied. None of the information supplied or to
be supplied by the Company in writing specifically for inclusion in, and none
of the information specifically to be incorporated by reference in, (a) the
Offer Documents, (b) the Schedule 14D-9, (c) the information statement to be
filed by the Company in connection with the Offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the "Information Statement"), if any, or
(d) any proxy statement (the "Proxy Statement") relating to the "Stockholders
Meeting" (as defined in Section 6.1(a)), will, in the case of the Offer
Documents, the Schedule 14D-9 and the Information Statement, at the respective
times that the Offer Documents, the Schedule 14D-9 and the Information
Statement are filed with the SEC or first published, sent or given to the
Company's stockholders, or, in the case of the Proxy Statement, at the time the
Proxy Statement is first mailed to the Company's stockholders or at the time of
the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Schedule 14D- 9, the Information Statement
and the Proxy Statement will comply in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect
to statements made or incorporated by reference therein based on information
supplied in writing by Parent or Merger Sub specifically for inclusion or
incorporation by reference therein.
3.14 Compliance with Applicable Laws.
(a) Each of the Company and each of its Subsidiaries has
in effect all material federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits and rights ("Permits") necessary for it to own, lease or
operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under any such Permit, except for
the lack of Permits and for defaults under Permits which lack or default
individually or in the aggregate would not have a Material Adverse Effect on
the Company.
(b) Except as disclosed in the SEC Documents, to the
knowledge of the Company, the businesses of the Company and its Subsidiaries
are not being conducted in violation of any law,
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ordinance or regulation of any Governmental Entity, except for violations that
would not have a Material Adverse Effect on the Company. As of the date of
this Agreement, no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to Company's
knowledge, threatened, nor has any Governmental Entity communicated to the
Company an intention to conduct any such investigation or review.
(c) Except as disclosed in the SEC Documents, each of
the Company and its Subsidiaries is, and has been, and each of the Company's
former Subsidiaries, while Subsidiaries of the Company, was, in material
compliance with all applicable "Environmental Laws" (as defined below), except
for noncompliance that would not have a Material Adverse Effect on the
Company). The term "Environmental Laws" means any federal, state or local
statute, code, ordinance, rule, regulation, policy, guideline, permit, consent,
approval, license, judgment, order, writ, decree, directive or injunction now
in effect, including the requirement to register underground storage tanks,
relating to: (i) "Releases" (as defined below) or threatened Releases of
"Hazardous Material" (as defined below) into the environment, including into
ambient air, soil, sediments, land surface or subsurface, buildings or
facilities, surface water, groundwater, publicly-owned treatment works, septic
systems or land; or (ii) the generation, treatment, storage, disposal, use,
handling, manufacturing, transportation or shipment of Hazardous Material.
(d) During the period of ownership or operation by the
Company and its current and former Subsidiaries of any of their respective
current or previously owned or leased properties, the Company has no knowledge
of any Releases of Hazardous Material in, on, under or affecting such properties
that would trigger reporting or cleanup obligations on the part of the Company
or its Subsidiaries under applicable environmental laws, and none of the Company
or its current and former Subsidiaries has disposed of any Hazardous Material or
any other substance in a manner that could reasonably be anticipated to lead to
a Release in, on or affecting such properties. To the Company's knowledge,
prior to the period of ownership or operation by the Company and its current and
former Subsidiaries of any of their respective current or previously owned or
leased properties, no Hazardous Material was generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped or
disposed of from, such current or previously owned properties, and the Company
has no knowledge of any Releases of Hazardous Material in, on, under or
affecting any such property that would trigger reporting or cleanup obligations
on the part of the Company or its Subsidiaries under applicable environmental
laws. The term "Release" has the meaning set forth in 42 U.S.C. Section
9601(22). The term "Hazardous Material" means (i) hazardous materials,
pollutants, contaminants, constituents, medical or infectious wastes, hazardous
wastes and hazardous substances as those terms are defined in the following
statutes and their implementing regulations: the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, 42 U.S.C. Section 9601 et seq.,
the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq. and the Clean Air Act, 42 U.S.C.
Section 7401 et seq., (ii) petroleum, including crude oil and any fractions
thereof, (iii) natural gas, synthetic gas and any mixtures thereof, (iv)
asbestos and/or asbestos-containing material, (v) radon and (vi) PCBs, or
materials or fluids containing PCBs.
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3.15 State Takeover Statutes. The Board of Directors of the
Company has approved the Offer, the Merger, this Agreement and the
Stockholder Agreements, and such approval is sufficient to render inapplicable
to the Offer, the Merger, this Agreement and the Stockholder Agreements and the
transactions contemplated by this Agreement and the Stockholder Agreements the
provisions of Section 203 of the DGCL. No other state takeover statute or
similar statute or regulation applies or purports to apply to the Offer, the
Merger, this Agreement, the Stockholder Agreements or any of the transactions
contemplated by this Agreement or the Stockholder Agreements.
3.16 Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Cleary Gull
Reiland & McDevitt ("Cleary Gull"), the fees and expenses of which will be paid
by the Company and a signed copy of the Company's engagement letter with which
has been delivered to Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. A good faith estimate of the fees and expenses
incurred and to be incurred by the Company in connection with this Agreement
and the transactions contemplated by this Agreement (including the fees of the
Company's legal counsel) is set forth in the Company Disclosure Schedule. No
valid claim exists against the Company or the Surviving Corporation or, based
on any action by the Company or any Subsidiary, against Parent or Merger Sub
for payment of any "topping," "break-up" or "bust-up" fee or any similar
compensation or payment arrangement as a result of the transactions
contemplated hereby, including the Offer and the Merger.
3.17 Contracts; Debt Instruments.
(a) Except as disclosed in the SEC Documents, there is
no contract or agreement, written or oral that is material to the business,
condition (financial or otherwise), properties, assets, results of operations
of the Company or its Subsidiaries (a "Material Contract"); true, complete and
correct copies of all such Material Contracts, or written summaries of oral
agreements, have heretofore been furnished to Parent. For the purposes hereof,
"Material Contracts" shall mean (i) all contracts that are considered to be
"material" within the meaning of Item 601(b)(10) of Regulation S-K promulgated
under the Securities Act of 1933, as amended, and the Exchange Act and (ii) all
other agreements (whether or not material within the meaning of Regulation S-K)
that (A) limit the ability of the Company to engage or compete in any business,
whether or not such business is currently conducted by the Company, (B)
obligate the Company or the other party or parties thereto to pay an amount in
excess of $50,000 at one time or over a period of time, (C) provide for the
employment of any individual by the Company or any of its Subsidiaries, (D)
provide for the distribution of the Company's products, (E) provide for the
license by or from the Company of any patents, copyrights, trademarks or other
intellectual property, or (F) provide for the settlement or compromise of any
litigation. All such Material Contracts are in full force and effect, and, to
the Company's knowledge, the parties thereto other than the Company and its
Subsidiaries have complied and are complying with all of their obligations and
are not in default under (nor, to the Company's knowledge, does there exist any
condition which upon the passage of time or the giving of notice would
reasonably be expected to cause such a violation of or default under) any of
such Material Contracts. Neither the Company nor any of its Subsidiaries is in
violation of or in default under (nor
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does there exist any condition which upon the passage of time or the giving of
notice would reasonably be expected to cause such a violation of or default
under) any loan or credit agreement, note, bond, mortgage, indenture, lease,
permit, concession, franchise, license or any other contract, agreement,
arrangement or understanding to which it is a party or by which it or any of
its properties or assets is bound, except where such violation or default would
not have a Material Adverse Effect on the Company.
(b) Set forth on the Company Disclosure Schedule is (i)
a list of all loan or credit agreements, notes, bonds, mortgages, indentures
and other agreements and instruments (other than accounts payable) pursuant to
which any indebtedness of the Company or any of its Subsidiaries is outstanding
or may be incurred and (ii) the respective principal amounts currently
outstanding thereunder. For purposes of this Agreement, "indebtedness" shall
mean, with respect to any person, without duplication, (A) all obligations of
such person for borrowed money, or with respect to deposits or advances of any
kind to such person, (B) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (C) all obligations of such person
upon which interest charges are customarily paid, (D) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (E) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding
obligations of such person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such person's business), (F)
all capitalized lease obligations of such person, (G) all obligations of others
secured by any lien on property or assets owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, (H) all
obligations of such person under interest rate or currency hedging transactions
(valued at the termination value thereof), (I) all letters of credit issued for
the account of such person and (J) all guarantees and arrangements having the
economic effect of a guarantee of such person of any indebtedness of any other
person.
3.18 Title to Properties.
(a) Each of the Company and each of its Subsidiaries has
good and marketable title to, or valid leasehold interests in, all its
properties and assets, free and clear of all Liens, other than (i)
materialmen's, mechanics', carriers', workers', repairmen's and other similar
Liens arising or incurred in the ordinary course of business, or statutory
landlords' Liens under leases to which the Company is a party, with respect to
which the underlying obligation is not in default, (ii) the statutory rights of
third parties with respect to inventory or work in progress under orders or
contracts entered into by the Company in the ordinary course of business, (iii)
Liens that are immaterial in amount and do not materially impair the present
or contemplated use of the properties or assets subject thereto or affected
thereby, or otherwise materially impair present or contemplated business
operations in which such properties are used, (iv) as reflected in the
financial statements included in the Company's Form 10-Q for the fiscal quarter
ended September 30, 1996, (v) Liens for taxes not yet delinquent, and (vi)
claims consisting of leases with respect to which the underlying obligation is
not in default.
(b) Each of the Company and each of its Subsidiaries has
complied in all material respects with the terms of all leases of which it is a
party and under which it is in occupancy, all such leases are in full force and
effect and, to the Company's knowledge, the parties thereto other than the
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Company and its Subsidiaries have complied and are complying with all of their
obligations and are not in default under (nor does there exist any condition
which upon the passage of time or the giving of notice would reasonably be
expected to cause such a violation of or default under) any of such leases.
Each of the Company and each of its Subsidiaries enjoys peaceful and
undisturbed possession under all such leases.
3.19 Labor Matters. There are no collective bargaining or other
labor union agreements to which the Company or any of its Subsidiaries is a
party or by which any of them is bound. Neither the Company nor any of its
Subsidiaries has encountered any labor union organizing activity, or had any
actual or, to the Company's knowledge, threatened employee strikes, work
stoppages, slowdowns or lockouts.
3.20 Insurance. As of the date hereof, the Company and each of
its Subsidiaries are covered under insurance policies and programs which
provide coverage to the Company against such losses and risks and in such
amounts as are adequate and customary in the businesses in which they are
engaged; true, complete and correct copies of all such policies and programs
have heretofore been furnished to Parent. All material policies of insurance
and fidelity or surety bonds insuring the Company or any of its Subsidiaries or
their respective businesses, assets, employees, officers and directors are in
full force and effect. Except as otherwise disclosed pursuant to Section 3.9,
as of the date hereof, there are no material claims by the Company or any
Subsidiary under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights clause.
All necessary notifications of claims have been made to insurance carriers.
3.21 Intellectual Property Matters.
(a) The Company owns or has the right to use, free and
clear of all Liens, charges, claims and restrictions, all know-how, processes,
patents, trade secrets, trademarks, service marks, trade names, copyrights,
licenses, proprietary rights and other intellectual property rights materially
necessary to its business as now conducted or contemplated (the "Company
Intellectual Property Rights"). Any license agreement by which any Company
Intellectual Property Right is licensed by the Company from a third party has
heretofore been furnished to Parent.
(b) To the Company's knowledge it is not infringing upon
or otherwise acting adversely to any actual or claimed know-how, process,
patent, trade secret, trademark, service mark, trade name, copyright, license,
information, proprietary right or other right of any person. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as now conducted or currently proposed to be conducted
by the Company, would violate any know-how, process, patent, trade secret,
trademark, service mark, trade name, copyright, license, or other proprietary
right of any person, and, to the Company's knowledge, there is no basis for any
such allegation.
(c) To the Company's knowledge, there is no actual or
threatened infringement or adverse use of the Company's Intellectual Property
Rights. There are no outstanding options, licenses or agreements of any kind
relating to any Company Intellectual Property Rights in favor of
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any third party (other than license agreements on the Company's standard form
entered into in the ordinary course of business).
(d) To the Company's knowledge, neither the execution
nor delivery of this Agreement, nor the carrying on of the Company's business
by the employees of the Company, nor the conduct of the Company's business as
now conducted or under development, will conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under or a
violation of, any fiduciary duty or any contract, covenant or instrument under
which any of such employees is now obligated. To the Company's knowledge, it
is not, nor will it be necessary to, utilize any inventions of any of the
Company's employees made prior to their employment by the Company.
(e) No present or former employee of the Company or its
Subsidiaries and no other person owns or has any proprietary, financial or
other interest, direct or indirect, in whole or in part, in any Company
Intellectual Property Rights. The Company Disclosure Schedule lists all
confidentiality or non-disclosure agreements to which the Company or its
Subsidiaries or any of its or their employees is a party, other than customary
agreements on the Company's standard form with employees who are not officers
or directors.
3.22 Payments. Neither the Company nor any of its Subsidiaries
has paid or delivered any fee, commission or other sum of money or item of
property to any finder, agent, government official or other party, in the
United States or any other country, which is related to the business or
operations of the Company or any of its Subsidiaries, which the Company knows
or has reason to believe to have been illegal under any federal, state or local
laws of the United States or any other country having jurisdiction; and to the
Company's knowledge, neither the Company nor any of its Subsidiaries has
participated in any illegal boycotts or other similar practices affecting any
of its actual or potential customers. To the Company's knowledge, the Company
and its Subsidiaries are in compliance in all material respects with the
Foreign Corrupt Practices Act.
3.23 Suppliers and Customers. There are no material agreements
which commit the Company or any of its Subsidiaries to sell products or
purchase materials or components at fixed prices or prices determined by an
established formula, other than purchase orders on the Company's standard form
for normal commercial quantities entered into in the ordinary course. Except
as disclosed in the SEC Documents, no customer accounted for more than five
percent of the Company's or any of its Subsidiaries sales in either of the past
two fiscal years (any such customer being a "Material Customer") and no
supplier material to the business of the Company and its Subsidiaries, taken as
a whole, or Material Customer has terminated its relationship with the Company
or any of its Subsidiaries or has during the past fiscal year materially
decreased or delayed, or, to the Company's knowledge, threatened to materially
decrease or delay its services or supplies to the Company or any of its
Subsidiaries or decrease its usage of the Company's or any of its Subsidiaries'
products or services. None of the Company or any of its Subsidiaries is aware
of any facts or events which may reasonably be expected to form the basis for
such a decrease or delay. Set forth on the Company Disclosure Schedule is a
complete and accurate list of:
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(a) each supplier where purchases exceeded $74,000 for
the six months ended December 31, 1996;
(b) each customer to whom sales exceeded $42,000 for the
six months ended December 31, 1996 and the aggregate sales with respect to each
such customer; and
(c) each supplier who constitutes a single source of
supply to the Company or any of its Subsidiaries where purchases exceeded
$25,000 for the last fiscal year.
3.24 Regulatory Matters.
(a) None of the Company or any of its Subsidiaries sells
any products for which a premarket approval of or 510(k) notification to the
U.S. Food and Drug Administration ("FDA") or any other federal, state, local,
non-U.S. or other governmental authority is required, or for which applications
for premarket approval or premarket notification have been filed or granted,
and there are no products sold by the Company or any of its Subsidiaries which
are, and none of the Company or any of its Subsidiaries is, otherwise subject
to the jurisdiction of the FDA or any similar state, local, non-U.S. or other
governmental authority.
(b) To the Company's knowledge, there exists no set of
facts which would cause the Company or any of its Subsidiaries to recall any
product from the market or to restrict the marketing of any product or to
terminate or suspend testing of any product.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
4.1 Organization and Qualification. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power
to carry on its business as now conducted and as proposed to be conducted.
4.2 Authority Relative to this Agreement. Each of Parent and
Merger Sub has the requisite corporate power and authority to enter into this
Agreement and to carry out its respective obligations hereunder. The execution
and delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby have been duly
authorized by the respective Boards of Directors of Parent and Merger Sub and
by Parent as the sole stockholder of Merger Sub, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and Merger Sub and constitutes a valid
and binding obligation of each such company, enforceable against such company
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally. Neither Parent nor
Merger
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Sub is subject to or obligated under any provision of (a) its respective
Certificate of Incorporation or Bylaws, (b) any contract, (c) any license,
franchise or permit or (d) any law, regulation, order, judgment or decree,
which would be breached, or violated or defaulted (with or without due notice
or lapse of time or both) or in respect of which a right of termination or
acceleration or a loss of a material benefit or any encumbrance on any of its
assets would be created by its execution and performance of this Agreement,
except (as to (b), (c) or (d) above) where such breach, violation or right
would not, individually or in the aggregate have a Material Adverse Effect on
Parent or prevent or materially delay Parent or Merger Sub from performing its
obligations under this Agreement. The consummation of the Offer and the Merger
by Parent and Merger Sub will not require the consent or approval of any party
other than (x) applicable requirements, if any, of the Exchange Act, state
"blue sky" or takeover laws and the HSR Act, (y) filing and recordation of
appropriate merger documents as required by the DGCL and (z) where failure to
obtain such consents or approvals would not, individually or in the aggregate,
have a Material Adverse Effect on Parent or prevent or materially delay Parent
or Merger Sub from performing its obligations under this Agreement.
4.3 Financing. Parent has, or has the borrowing facilities to
obtain, all funds necessary for the payment of the aggregate purchase price of
the Shares in the Offer and the Merger and any and all amounts which may become
payable under Sections 2.11 and 2.12 hereof and to pay all of its related fees
and expenses pursuant to the Offer and the Merger.
4.4 Ownership of Company Securities. Parent is not now, and has
not during the three- year period ending on the date hereof been, the direct or
indirect owner of 15% or more of the outstanding voting securities of the
Company (for purposes of this representation, Parent shall not be deemed to own
any Shares by virtue of the execution of the Stockholder Agreements).
4.5 Information Supplied. None of the information supplied or to
be supplied by Parent or Merger Sub specifically for inclusion in, and none of
the information specifically to be incorporated by reference in, (a) the Offer
Documents, (b) the Schedule 14D-9, (c) the Information Statement, if any, or
(d) any Proxy Statement will, in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times that the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's stockholders, or, in the
case of the Proxy Statement, at the time the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
4.6 Capitalization. The authorized capital stock of Merger Sub
consists of 1,000 shares of common stock. As of the date hereof, there are 100
shares of common stock of Merger Sub outstanding. All outstanding shares of
capital stock of Merger Sub are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
4.7 Financial Advisor. Since January 1, 1995, Cleary Gull has
not been engaged by, has not provided any investment banking or other financial
advisory services to, and has not been paid
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for the provision of any such services by, Parent, Merger Sub or any of their
subsidiaries or affiliates; provided, however, Cleary Gull may have, since
January 1, 1995, made a market in and traded, and may in the future make a
market in and trade, securities of Parent in the ordinary course of its
business for its own account and the account of its customers. This
representation and warranty is intended to benefit the Company and each member
of its Board of Directors each of whom shall be a third party beneficiary of
this Section 4.7.
ARTICLE 5 -- CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, from the date hereof until the Effective
Time, unless expressly contemplated by this Agreement or as may be agreed to in
writing by Parent:
(a) The businesses of the Company and its Subsidiaries
shall be conducted only in the ordinary course of business and consistent with
past practice;
(b) the Company shall not, and shall not permit any of
its Subsidiaries to: (i) sell or pledge or agree to sell or pledge any stock
owned by it in any of its Subsidiaries; (ii) amend its Certificate of
Incorporation or By-Laws; or (iii) split, combine or reclassify any shares of
its outstanding capital stock or declare, set aside or pay any dividend or
other distribution payable in cash, stock or property or redeem or otherwise
acquire any shares of its capital stock;
(c) the Company shall not, and shall cause each of its
Subsidiaries not to: (i) authorize for issuance, issue or sell any additional
shares of, or rights of any kind to acquire any shares of, its capital stock of
any class (whether through the issuance or granting of stock options, warrants,
convertible securities, commitments, subscriptions, rights to purchase or
otherwise), except for unissued Shares reserved for issuance upon the exercise
of Stock Options or Warrants outstanding on the date hereof in accordance with
their existing terms; (ii) acquire, dispose of, transfer, lease, license,
mortgage, pledge or encumber any material assets; (iii) incur, assume or prepay
any indebtedness for borrowed money or any other material liabilities, except
accounts payable incurred in the ordinary course of business consistent with
past practice, or issue or sell any debt securities or warrants or rights to
acquire debt securities of the Company or any of its Subsidiaries; (iv) assume,
endorse (other than in the ordinary course of business consistent with past
practices), guarantee or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the material obligations of any other
person; (v) make any loans, advances or capital contributions to, or
investments in, any other person or otherwise enter into any Material Contract
other than in the ordinary course of business and consistent with past
practices; (vi) make any loans to employees, other than travel advances in the
ordinary course of business; (vii) fail to maintain adequate insurance
consistent with past practices for its business and properties;
(viii) undertake, make or commit to undertake or make any capital expenditures
in an amount greater than $10,000 per individual capital expenditure and no
more than $25,000 per month in the aggregate (on a combined basis for the
Company and the Subsidiaries); or (ix) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
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(d) the Company shall use its reasonable best efforts
consistent with past practice to preserve intact the business organization of
the Company and its Subsidiaries, keep available the services of its and their
present officers and employees, and preserve its existing relationships with
customers, suppliers and others with which it and its respective Subsidiaries
have business dealings;
(e) the Company shall not, and shall cause its
Subsidiaries not to, (i) enter into any new agreements or amend or modify any
existing agreements with any of its respective officers, directors or employees
or with any "disqualified individuals" (as defined in Section 280G(c) of the
Code), (ii) grant any increases in the compensation of its respective
directors, officers and employees or any "disqualified individuals" (as defined
in Section 280G(c) of the Code) other than (A) pursuant to written agreements
in effect at the date hereof, true, complete and correct copies of all of which
have previously been furnished to Parent by the Company, or (B) increases in
the ordinary course of business and consistent with past practice to persons
who are not directors or corporate officers of or "disqualified individuals"
with respect to the Company or any Subsidiary, (iii) enter into, adopt, amend
or terminate, or grant any new benefit not presently provided for under, any
employee benefit plan or arrangement, except as required by law or to maintain
the tax qualified status of the plan; provided, however, that the Company or
its subsidiaries may terminate to the extent permitted by applicable law any
benefit or any employee benefit plan or arrangement or (iv) take any action
with respect to the grant of any severance or termination pay other than in the
ordinary course of business and consistent with past practice and pursuant to
policies in effect on the date of this Agreement;
(f) the Company shall not, and shall not permit any
Subsidiary to, acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (other than equipment, inventory and supplies in the ordinary course of
business);
(g) the Company shall not, and shall not permit any of
its Subsidiaries to, sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of its
material assets;
(h) the Company shall take all actions reasonably
necessary so that the conditions set forth in the Appendix which require
actions to be performed by the Company are satisfied on a timely basis, except
as contemplated by this Agreement;
(i) unless the Company receives a "Superior Acquisition
Proposal" (as defined in Section 6.5(b) hereof), the Company will not call any
meeting of its stockholders to be held prior to March 25, 1997 other than as
required by this Agreement;
(j) the Company shall not, and shall not permit any
Subsidiary to, make any tax election or settle (except to settle reserved
amounts for an amount equal to or less than the amount so reserved) or
compromise any income tax liability;
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(k) the Company and each Subsidiary shall make timely
payments, in accordance with the terms applicable thereto, of all currently due
liabilities for borrowed money;
(l) the Company shall not, and shall not permit any
Subsidiary to, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in the most
recent consolidated financial statements (or the notes thereto) of the Company
included in the SEC Documents;
(m) the Company shall not, and shall not permit any
Subsidiary to, modify, amend or terminate any Material Contract, lease of real
property or of a material amount of assets, or agreement relating to
indebtedness or the extension of credit, or waive, release or assign any rights
or claims thereunder; and
(n) the Company shall maintain in full force and effect
its current policies of directors' and officers' liability insurance covering
all persons who are presently covered by such policies.
5.2 Actions by Parent and Merger Sub Pending the Merger. None of
the provisions contained in Section 5.1 of this Agreement shall prohibit Parent
or Merger Sub (or any of their respective subsidiaries), during the period
between the payment for Shares pursuant to the Offer and the Effective Time,
from taking or causing to be taken any action with respect to the business of
the Company and its Subsidiaries that Parent or Merger Sub (or any of their
respective subsidiaries) would legally be permitted to take or cause to be
taken with respect to a majority owned subsidiary of Parent or Merger Sub (or
any of their respective subsidiaries), provided that Parent shall not take any
action in violation of the terms of this Agreement that would cause Parent's
obligations to effect the Merger hereunder to not be satisfied and provided
further that any such action taken by or at the direction of Parent or Merger
Sub (or any of their respective subsidiaries) shall not cause a breach by the
Company of any of the provisions of Section 5.1 of this Agreement.
ARTICLE 6 -- ADDITIONAL AGREEMENTS
6.1 Stockholder Approval; Preparation of Proxy Statement.
(a) If the approval of the Merger by the Company's
Stockholders (the "Company Stockholder Approval") is required by law, the
Company will, at Parent's request, as soon as practicable in accordance with
applicable law following acceptance for payment of and payment for shares of
Company Common Stock, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Stockholders' Meeting") for the purpose of obtaining
such Company Stockholder Approval. The Company will, through its Board of
Directors, subject to Section 6.5(b) hereof, recommend to its stockholders that
such Company Stockholder Approval be given. Notwithstanding the foregoing, if
Parent, Merger Sub or any other subsidiary of Parent shall acquire at least 90%
of
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the outstanding Shares, the parties shall, at the request of Parent, take all
necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a Stockholders'
Meeting in accordance with Section 253 of the DGCL. Without limiting the
generality of the foregoing, the Company agrees that its obligations pursuant
to the first sentence of this Section 6.1(a) shall not be affected by (i) the
commencement, public proposal, public disclosure or communication to the
Company of any "Acquisition Proposal" (as defined in Section 6.5(a)) that is
not a "Superior Acquisition Proposal" (as defined in Section 6.5(b)) or (ii)
the withdrawal or modification by the Board of Directors of the Company of its
approval or recommendation of the Offer, this Agreement or the Merger.
(b) If the Company Stockholder Approval is required by law,
the Company will, at Parent's request, as soon as practicable following
acceptance for payment of and payment for shares of Company Common Stock,
prepare and file a preliminary Proxy Statement (or, if applicable, an
information statement in lieu of proxy statement pursuant to Rule 14C under the
Exchange Act, with all references herein to the Proxy Statement being deemed to
refer to such information statement, to the extent applicable) with the SEC and
will use its best efforts to respond to any comments of the SEC or its staff
and to cause the definitive Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments
to the satisfaction of the SEC staff. The Company will notify Parent promptly
of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and will supply Parent with true, complete and
correct copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. If at any time prior to the
Stockholders' Meeting there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Company will promptly
prepare and mail to its stockholders such an amendment or supplement. The
Company will not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects, it being understood that Parent
may not reasonably object to the inclusion of information deemed necessary by
the Company, upon the written advice of its outside counsel, in order to comply
with the Exchange Act and the rules and regulations promulgated thereunder.
(c) Parent agrees to cause all Shares purchased pursuant to
the Offer and all other Shares owned by Merger Sub or any other subsidiary of
Parent to be voted in favor of the Company Stockholder Approval.
6.2 Stock Options and Warrants . Within five business days after
the commencement of the Offer, the Company will notify in writing each holder
of a Stock Option under the Stock Option Plans and each holder of a Warrant of
the effect of the Merger on the rights of the option holder and warrant holder
as described in Section 2.11 and Section 2.12, respectively.
6.3 Expenses.
(a) Except as provided in Section 6.3(b) below, whether or
not the Offer and/or the Merger are consummated, each of the Company and Parent
will separately bear its own expenses,
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including the fees and disbursements of counsel, investment bankers and
accountants, incurred in connection with the Offer, the Merger, this Agreement
and the transactions contemplated hereby.
(b) If the Company or any Affiliate or Agent (as defined
in Section 6.5) of the Company shall fail to fulfill its obligations under
Section 6.5, or shall enter into an agreement which contemplates the sale of
all or any material portion of the assets of, or any equity interest in, the
Company to a third party, or the parties to the Stockholder Agreements or any
of them shall enter into an agreement which contemplates such a transaction,
then, in any such case, the Company shall promptly reimburse Parent for all of
its out-of-pocket expenses incurred in connection with the Offer, the Merger,
this Agreement, the Stockholder Agreements or any transactions contemplated by
this Agreement or the Stockholder Agreements.
6.4 Other Actions. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by the Offer and this
Agreement, including (a) consummation of the Offer and payment for the Shares
duly and properly tendered therein, (b) filing the Certificate of Merger
referred to in Section 2.2, (c) removing any legal impediment to the
consummation or effectiveness of such transactions and (d) obtaining all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by governmental authorities,
subject to the appropriate vote of stockholders of the Company required to so
vote as described in Section 6.1(a).
6.5 Exclusive Dealing.
(a) Neither the Company nor any of its Subsidiaries,
officers, directors, or the directors and officers of its Subsidiaries, nor any
of its other affiliates (each, an "Affiliate") shall, and the Company shall
cause its and its respective Affiliates' employees, agents and representatives
(including, without limitation, any investment banking, legal or accounting
firm retained by the Company or any of its Affiliates and any individual member
or employee of the foregoing) (each, an "Agent") not to: (i) initiate, solicit
or seek, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to its stockholders or any of them) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase of all or a substantial portion of the
assets or any equity securities of, the Company or any of its Subsidiaries,
except for the transactions contemplated by this Agreement (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"); or (ii)
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal; or (iii) otherwise cooperate in any effort or attempt to make,
implement or accept an Acquisition Proposal; provided, however, that the
Company may, if it receives an Acquisition Proposal which was not directly or
indirectly initiated, solicited or otherwise sought by the Company or by any of
its Affiliates or its or their respective Agents, and which is a Superior
Acquisition Proposal (as defined below), respond to such Superior Acquisition
Proposal by engaging
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in negotiations with respect thereto and providing nonpublic information
concerning the Company to the person making such Superior Acquisition Proposal,
provided that such person has entered into a written confidentiality agreement
on terms no more favorable to such person than the Mutual Confidential
Non-Disclosure Agreement, dated October 8, 1996, between the Company and
Parent, is to Parent, and provided further that the Company has received a
written opinion of its outside counsel that such response is required in order
to satisfy the fiduciary duties imposed under applicable law on its Board of
Directors. The Company shall take the necessary steps to inform the
individuals and entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.5(a).
(b) Unless this Agreement has theretofore been
terminated pursuant to Section 8.1(f) hereof, neither the Board of Directors of
the Company nor any committee thereof shall (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Parent or Merger Sub, the
approval or recommendation by such Board of Directors or any such committee of
the Offer, this Agreement or the Merger, (ii) approve or recommend, or propose
to approve or recommend, any Acquisition Proposal, or (iii) enter into any
agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, in the event the Board of Directors of the Company receives an
Acquisition Proposal that constitutes a "Superior Acquisition Proposal" (as
defined below), the Board of Directors may (subject to the limitations
contained in this Section) withdraw or modify its approval or recommendation of
the Offer, this Agreement or the Merger, approve or recommend any such Superior
Acquisition Proposal, enter into an agreement with respect to any such Superior
Acquisition Proposal or terminate this Agreement, in each case at any time
after 48 hours following Parent's receipt of written notice (a "Notice of
Superior Acquisition Proposal") advising Parent that the Board of Directors has
received a Superior Acquisition Proposal, specifying the material terms and
conditions of such Superior Acquisition Proposal and identifying the person
making such Superior Acquisition Proposal. For purposes of this Agreement, a
"Superior Acquisition Proposal" means an Acquisition Proposal received by the
Company without violation of the provisions of Section 6.5(a), having terms
which the Board of Directors of the Company determines, in the exercise of its
fiduciary duties, after consultation with outside counsel, and upon the written
opinion of its outside financial advisor to be more favorable to the Company's
stockholders from a financial point of view than the Offer and the Merger.
(c) In addition to the obligations of the Company set
forth in paragraph (b) of this Section 6.5, the Company shall promptly advise
Parent orally and in writing of any request for nonpublic information relating
to the Company or by any person that, to the Company's knowledge, may be
considering making, or has made, an Acquisition Proposal, or the receipt of any
Acquisition Proposal, or any inquiry with respect to any Acquisition Proposal,
the material terms and conditions of such request, Acquisition Proposal or
inquiry, and the identity of the person making any such Acquisition Proposal or
inquiry. The Company will keep Parent fully informed of the status and details
of any such request, Acquisition Proposal or inquiry.
6.6 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or failure to occur, of any event, which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof
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<PAGE> 34
to the Effective Time, and (b) any material failure of the Company or Parent,
as the case may be, or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
6.7 Access to Information. The Company shall, and shall cause
its Subsidiaries, officers, directors, employees and agents to, upon reasonable
notice, afford the officers, employees, agents and representatives of Parent
complete access at all reasonable times, from the date hereof to the Effective
Time, to its officers, employees, agents, properties, books and records, and
shall furnish Parent all financial, operating and other data and information as
Parent, through its officers, employees, agents or representatives, may
reasonably request.
6.8 Antitrust Laws. As promptly as practicable, the Company,
Parent and Merger Sub shall make all filings and submissions under the HSR Act
as may be reasonably required to be made in connection with this Agreement and
the transactions contemplated hereby. Subject to Section 6.7 hereof, the
Company will furnish to Parent and Merger Sub, and Parent and Merger Sub will
furnish to the Company, such information and assistance as the other may
reasonably request in connection with the preparation of any such filings or
submissions. Subject to Section 6.7 hereof and to the preservation of
attorney-client privilege and work-product doctrine, the Company will provide
Parent and Merger Sub, and Parent and Merger Sub will provide the Company, with
true, complete and correct copies of all correspondence, filings and
communications (or memoranda setting forth the substance thereof) between such
party or any of its representatives, on the one hand, and any governmental
agency or authority or members of their respective staffs, on the other hand,
with respect to this Agreement and the transactions contemplated hereby;
provided, however, that Parent and Merger Sub shall not be required to provide
the Company with copies of confidential documents or information included in
Parent's filings and submissions under the HSR Act.
6.9 Public Announcements. Upon execution of this Agreement, an
appropriate public announcement of the transactions contemplated hereby, the
form and substance of which shall have been agreed to by Parent and the
Company, shall be made; provided, that no such announcement shall be made
unless and until it shall comply with Rule 14d-2 under the Exchange Act. So
long as this Agreement is in effect and subject to Section 6.5(b), neither
Parent nor the Company shall make any other press release or other written
public statement concerning the transactions contemplated by this Agreement,
including the Offer and the Merger, without the approval of the other party
hereto; provided, however, that either Parent or the Company may, without such
approval, make such press releases or other written public statements as are
required by law, and shall consult with the other party with respect to the
form and substance of such statements.
6.10 Directors. The Company will comply with the requirements of
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, so
that, upon the acceptance for payment of, and payment for, any Shares by Merger
Sub pursuant to the Offer which, when taken together with any Shares which
Parent beneficially owns (as such term is defined under the Exchange Act),
represent at least a majority of the then outstanding Shares, Merger Sub shall
be entitled at such time to designate the directors on the Board of Directors
of the Company, and the Company shall, at such time, obtain resignations of
all then-serving Directors and, prior to such resignations, cause Merger
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<PAGE> 35
Sub's designees to be elected to, and to constitute all of, the Board of
Directors of the Company. The Company agrees to cooperate in permitting the
exercise by Merger Sub of its rights under this Section 6.10, including,
without limitation, (x) cooperating in satisfying the requirements of
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
(y) amending, prior to the expiration date of the Offer, any provisions of the
By-Laws or any agreement by which the Company is bound that could delay or
hinder the ability of Merger Sub or Parent to elect its designees to a majority
of the directorships constituting the Board of Directors of the Company. The
Company will not take any action to delay or hinder such election.
6.11 Directors' and Officers' Insurance Coverage.
(a) For six years after the earlier of (i) the date on
which the designees of Merger Sub have been elected to the Board of Directors
of the Company pursuant to Section 6.10 hereof and constitute all the members
thereof and (ii) the Effective Time, Parent and the Surviving Corporation shall
indemnify, defend and hold harmless the present officers, directors, employees
and agents of the Company and its Subsidiaries (each an "Indemnified Party")
against all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel) and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the prior written consent of Parent or the
Surviving Corporation, which consent shall not be unreasonably withheld))
arising out of actions or omissions occurring at or prior to the Effective Time
(including without limitation matters arising out of or pertaining to the
transactions contemplated by this Agreement) to the full extent permitted by
the DGCL or the Company's certificate of incorporation or bylaws as in effect
at the date hereof, including provisions therein relating to the advancement of
expenses incurred in the defense of any action or suit; provided, however, that
in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until disposition of the claim to which such rights are
applicable.
(b) For two years after the Effective Time, Parent and
the Surviving Corporation will (i) maintain the current policies of officers'
and directors' liability insurance in respect of acts or omissions (including
without limitation matters arising out of or pertaining to the transactions
contemplated by this Agreement) occurring at or prior to the Effective Time
covering each person who is an officer or director of the Company on the date
hereof and who is currently covered by the Company's officers' and directors'
liability insurance policy, or (ii) substitute policies providing substantially
similar coverage containing terms and conditions that, taken together, are not
materially less advantageous, and provided that such substitution does not
result in gaps or lapses in coverage.
(c) Parent and the Surviving Corporation shall pay all
expenses (including attorneys' fees) that may be incurred by any Indemnified
Party or person having rights to coverage pursuant to this Section 6.11
(collectively, "Covered Persons") in enforcing the obligations of Parent and
the Surviving Corporation provided for in this Section 6.11, provided that no
such expenses shall be payable if such Indemnified Party or person is found, in
or as a result of such enforcement action, not to have the rights to coverage
claimed by such Indemnified Party or person. The parties hereto acknowledge
and agree that the remedy at law for any breach of the obligations under this
Section
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6.11 is and will be insufficient and inadequate and that the Covered Persons,
in addition to any remedies at law, shall be entitled to equitable relief.
Without limiting any remedies Covered Persons may otherwise have hereunder or
under applicable law, in the event of nonperformance of any obligation under
this Section 6.11, the Covered Persons shall have, in addition to any other
rights at law or equity, the right to specific performance.
(d) The rights under this Section 6.11 are contingent
upon, and shall survive, the consummation of the Offer, are intended to benefit
the Company, the Surviving Corporation and each Covered Person, shall be
binding on all successors and assigns of Parent and the Surviving Corporation
and shall be enforceable by each Covered Person, each of whom shall be a third
party beneficiary of this Section 6.11.
6.12 Benefit Plans and Certain Contracts.
(a) Parent hereby agrees to cause the Surviving
Corporation to pay, in accordance with their terms as in effect on the date
hereof, all amounts due and payable under the terms of all written employment
contracts, agreements, plans, policies and written commitments of the Company
and its Subsidiaries with or with respect to its current employees, officers
and directors as such contracts, agreements, plans, policies and written
commitments are described in the Company Disclosure Schedule. For at least two
years following the Effective Time, each employee of the Company and its
Subsidiaries (while such person remains an employee of the Company and its
Subsidiaries) shall be entitled to participate in all Benefit Plans maintained
or sponsored by the Company or in benefit plans providing substantially similar
benefits.
(b) Upon or prior to the consummation of the Offer,
Parent and the Company shall enter into an employment agreement with Dewey F.
Edmunds (the "Employment Agreement").
(c) Nothing contained in this Agreement (other than as
specifically provided in the Employment Agreement), including, without
limitation, this Section 6.12, shall confer on any person not a party to this
Agreement, or constitute or be evidence of any agreement or understanding,
express or implied, that any person has a right to be employed as an employee
of or consultant to Parent or the Surviving Corporation for any period of time
or at any specific rate of compensation, or that any employee or other person
shall have a right to participate in any benefit plans maintained by Parent, or
to receive any equity or options to acquire equity in the Company or Parent.
ARTICLE 7 -- CONDITIONS
7.1 Conditions to Obligation of each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) If required by the DGCL, the Company Stockholder
Approval shall have been obtained by the requisite vote of the stockholders of
the Company;
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(b) No statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary injunction or permanent
injunction or other order or legal restraint or prohibition preventing the
consummation of the Merger shall have been issued by any Governmental Entity
and shall remain in effect; and
(c) All authorizations, consents, orders or approvals
of, or declarations or filings with, or expiration of waiting periods imposed
by, any Governmental Entity necessary for the consummation of the Merger and
the transactions contemplated by this Agreement shall have been filed, occurred
or been obtained and shall be in effect at the Effective Time.
7.2 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the condition
that each of Parent and Merger Sub shall have made the Offer in accordance with
its terms as contemplated by Section 1.1 hereof and shall have consummated the
Offer in accordance with its terms.
ARTICLE 8 -- TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether prior to or after any approval by the
stockholders of the Company:
(a) by mutual written consent of the Boards of Directors
of Parent and the Company;
(b) by Parent if (i) neither Parent nor any subsidiary
of Parent shall have accepted for payment any Shares pursuant to the Offer by
the sixtieth day following commencement of the Offer and such failure is not in
breach of the Offer or this Agreement, or (ii) Parent has properly terminated
the Offer in accordance with its terms; provided that Parent may not terminate
this Agreement pursuant to this Section 8.1(b) if (A) the failure of Parent or
Merger Sub to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the circumstances described in clause (i), or (B) in the
case of clause (ii), Parent or Merger Sub has not exercised such right by the
close of business on or before the fifth business day following the termination
of the Offer in accordance with its terms;
(c) by Parent and Merger Sub prior to the purchase of
Shares pursuant to the Offer if there shall have been any material breach of a
material obligation of the Company hereunder and such breach shall not have
been remedied within five days after receipt by the Company of notice in
writing from Parent or Merger Sub specifying such breach and requesting that it
be remedied;
(d) by the Company prior to the purchase of Shares
pursuant to the Offer, if there shall have been any material breach of a
material obligation of Parent or Merger Sub hereunder and such breach shall
have not been remedied within five days after receipt by Parent or Merger Sub,
as the case may be, of notice in writing from the Company specifying such
breach and requesting that it be remedied;
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(e) by the Company, if (i) the Offer shall not have been
commenced on or before the fifth business day after the announcement to the
public of the execution of this Agreement, (ii) the Offer is terminated without
the purchase of any Shares and such termination is in breach of the Offer or
this Agreement, or (iii) Parent or Merger Sub has failed to pay or to cause
another entity to pay for Shares duly and properly tendered in the Offer within
10 business days following expiration of the Offer, provided that the Company
may not terminate this Agreement pursuant to this Section 8.1(e) if the failure
of the Company to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the circumstances described in clauses (i), (ii) or
(iii) hereof;
(f) by the Company or by Parent and Merger Sub prior to
the purchase of Shares pursuant to the Offer, if a Superior Acquisition
Proposal is received and the Board of Directors of the Company, pursuant to
Section 6.5(b), withdraws or modifies its recommendation of the Offer or
recommends to the stockholders of the Company that such stockholders tender
their Shares into, or vote in favor of, such Superior Acquisition Proposal,
provided that termination pursuant to this Section 8.1(f) shall not affect the
Company's obligations under Section 6.3 hereof; or
(g) by the Company or by Parent and Merger Sub if there
shall be any law or regulation that make consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree enjoining
Parent, Merger Sub or the Company from consummating the Merger is entered and
such judgment, injunction, order or decree shall become final and
nonappealable.
8.2 Effect of Termination. In the event of termination of this
Agreement prior to the purchase of Shares as provided in Section 8.1, this
Agreement shall forthwith become void and of no effect, and there shall be no
liability on the part of Parent, Merger Sub or the Company, except that (a) the
provisions of Section 6.3, this Section 8.2 and Article 9 hereof shall survive
any such termination, and (b) nothing herein will relieve any party from
liability for any willful or grossly negligent breach of any representation or
warranty or any breach prior to such termination of any covenant or agreement
contained herein. Except as set forth herein, the provisions of this Section
8.2 shall constitute the exclusive remedy of the parties in the event of
termination of this Agreement prior to the purchase of Shares.
8.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties, and provided
that any amendment effected after obtaining the Company Stockholder Approval
may be subject to further approval of the Company's stockholders if required by
the DGCL.
8.4 Extension; Waiver. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (b) waive compliance
with any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid if set forth in an instrument in writing signed on
behalf of such party by a duly
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authorized officer. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver
of those rights.
ARTICLE 9 -- GENERAL PROVISIONS
9.1 Survival of Representations, Warranties and Agreements. No
representations or warranties contained herein shall survive beyond
consummation of the Offer, and no agreements contained herein shall survive
beyond the Effective Time except that the agreements contained in Article II
and Sections 6.11 and 6.12 hereof shall survive beyond the Effective Time.
9.2 Notices. All notices and other communications hereunder
shall be given by telephone and immediately confirmed in writing and shall be
deemed given if delivered personally or mailed by registered or certified mail
(return receipt requested) or overnight courier to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
P.O. Box 872
York, PA 17405
Attention: J. Patrick Clark
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd floor
Pittsburgh, PA 15219
Attention: Marlee S. Myers
(b) if to the Company:
New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, California 92009
Attention: Dewey F. Edmunds
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With a copy to:
Irell & Manella LLP
333 South Hope St., Suite 3300
Los Angeles, California 90071-3042
Attention: Edmund M. Kaufman, Esq.
9.3 Interpretation. When a reference is made in this Agreement
to subsidiaries of Parent or the Company, the word "subsidiaries" or
"Subsidiaries" means any corporation more than fifty percent (50%) of whose
outstanding voting securities are directly or indirectly owned by Parent or the
Company, as the case may be. All references in this Agreement to the Company
conducting business in the ordinary course or in a manner consistent with past
practice shall be considered in light of the Company's financial condition
prior to and as of the date indicated in the applicable reference. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
9.4 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the Appendix hereto and the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof, provided, however, that
(i) Paragraph 5 of the letter of intent dated December 24, 1996 between the
Company and Parent, (ii) the Credit Agreement, dated as of December 24, 1996,
by and among Parent, the Company and Insight Imaging Systems, Inc., (iii) the
Subordination and Intercreditor Agreement, dated December 24, 1996, by and
among Coast Business Credit, a division of Southern Pacific Thrift & Loan
Association, Parent, the Company and Insight Imaging Systems, Inc. and (iv) the
Mutual Confidential Non-Disclosure Agreement, dated October 8, 1996, between
Parent and the Company, shall remain in effect in accordance with their terms.
Except as provided in Section 4.7 and 6.11, there are no third party
beneficiaries of this Agreement and nothing in this Agreement, express or
implied, is intended to or shall confer upon any person other than the parties
hereto and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities.
9.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by operation of law or
otherwise, provided that Parent or Merger Sub may assign its rights and
obligations hereunder to a direct or indirect subsidiary of Parent, but no such
assignment shall relieve Parent or Merger Sub, as the case may be, of its
obligations hereunder. Subject to the foregoing sentence, this Agreement will
be binding upon, and inure to the benefit of, the parties and their respective
successors and assigns.
9.6 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware, without giving effect to the conflicts of law principles
thereof.
9.7 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
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9.8 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
[SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ EDWARD D. YATES
---------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ EDWARD D. YATES
---------------------------
Edward D. Yates
Senior Vice President
NEW IMAGE INDUSTRIES, INC.
By: /s/ DEWEY F. EDMUNDS
---------------------------
Name: Dewey F. Edmunds
Title: Chief Executive Officer
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APPENDIX
CONDITIONS TO THE OFFER
1. Notwithstanding any other term of the Offer or this
Agreement, Parent or Merger Sub shall not be required to accept for payment or
to pay for any Shares tendered pursuant to the Offer, and may terminate or,
subject to Section 1.1 of this Agreement, amend the Offer and may postpone the
acceptance for payment of Shares pursuant thereto, unless (a) there shall have
been validly tendered and not withdrawn prior to the expiration of the Offer
such number of Shares that would constitute fifty-five percent (55%) of the
outstanding Shares as of the date of the commencement of the Offer (the
"Minimum Tender Condition"), and (b) any waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall have expired
or been terminated (the "HSR Condition"), provided, however, that prior to
March 25, 1997, Parent shall not terminate the Offer by reason of the
nonsatisfaction of the HSR Condition and, if the HSR Condition is the only
condition that is not satisfied upon the expiration of the Offer, Parent shall
cause the Offer to be extended to March 24, 1997.
2. Furthermore, notwithstanding any other term of the Offer or
this Agreement, Parent or Merger Sub shall not be required to accept for
payment or to pay for any Shares tendered pursuant to the Offer, and may
terminate or, subject to Section 1.1 of this Agreement, amend the Offer and may
postpone the acceptance for payment of Shares pursuant thereto if, at any time
on or after the date of this Agreement and before the acceptance of such Shares
for payment or the payment therefor, any of the following conditions exists:
(a) any statute, rule, regulation or order shall be
proposed, enacted, entered or deemed applicable to the Offer or the Merger
(i) making the purchase of, or payment for, some or all of the Shares pursuant
to the Offer or the Agreement illegal, or resulting in a material delay in the
ability of Parent to accept for payment or pay for some or all of the Shares,
or to consummate the Offer or Merger or seeking to obtain from the Company,
Parent or Merger Sub any damages that would have a Material Adverse Effect on
the Company or Parent, (ii) imposing material limitations on the ability of
Parent or Merger Sub effectively to acquire or hold or to exercise full rights
of ownership of the Shares acquired by it, including the right to vote the
Shares purchased by it on all matters properly presented to the stockholders of
the Company, (iii) which would require Parent or any direct or indirect
subsidiary of Parent to dispose of or hold separate any of the Shares or all or
any material portion of the assets or business of the Company and the
Subsidiaries, or (iv) prohibit or limit the ability of Parent or any direct or
indirect subsidiary of Parent to own, control or operate the Company or any of
its Subsidiaries or all or any material portion of the businesses, operations
or assets of the Company and its Subsidiaries, where such prohibition or
limitation would have a Material Adverse Effect on the Company;
(b) any governmental or regulatory action or proceeding
by or before any Governmental Entity shall be instituted or pending, or any
action or proceeding by any other person, domestic or foreign, shall be
instituted or pending, which would reasonably be expected to result in any of
the consequences referred to in clauses (i) through (iv) of paragraph
2(a) above; or
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(c) the Company shall not have complied with its
agreements and covenants in the Agreement, or any of its representations and
warranties in the Agreement, when made or at and as of any time thereafter, are
inaccurate or incomplete, except (i) where such failure so to comply or such
inaccuracy or incompleteness would not reasonably be expected to have a
Material Adverse Effect on the Company, (ii) for changes specifically permitted
by this Agreement or (iii) those representations and warranties that address
matters only as of a particular day must be accurate and complete as of such
date; or
(d) there shall have an occurred an event of default set
forth in that certain Amended and Restated Loan and Security Agreement, dated
May 22, 1996, among the Company and Insight Imaging Systems, Inc. ("Insight")
and Coast Business Credit, a division of Southern Pacific Thrift & Loan
Association ("Coast"), as to which event of default Coast has not given a
written waiver or is not required to forbear under the terms of that certain
letter agreement, dated December 24, 1996, among Coast, the Company, Insight
and Parent; or
(e) the Company shall commence a case under any chapter
of Title XI of the United States Code or any similar law or regulation; or a
petition under any chapter of Title XI of the United States Code or any similar
law or regulation is filed against the Company which is not dismissed within
five business days; or the Company shall apply for or consent to the
appointment of a receiver, trustee or liquidator of itself or of its property;
or the Company shall make a general assignment for the benefit of creditors; or
an order, judgment or decree shall be entered, without the application,
approval or consent of the Company by any court of competent jurisdiction,
approving a petition seeking a reorganization of the Company or appointing a
receiver, trustee or liquidator of the Company or of all or a substantial part
of its assets, and such order, judgment or decree shall continue unstayed for a
period of five business days; or the Company shall take corporate action for
the purpose of effecting any of the foregoing; or
(f) there shall have occurred (i) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (ii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, (iii) any limitation by any governmental authority on the extension of
credit by banks or other financial institutions, or (iv) in the case of any of
the foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof; or
(g) the Agreement shall have been terminated in
accordance with its terms;
which, in Parent's sole discretion, in any such case regardless of the
circumstances giving rise to any such conditions, makes it inadvisable to
proceed with such acceptance for payment or payment or makes it advisable to
terminate or amend the Offer.
3. The foregoing conditions are for the sole benefit of Parent
and Merger Sub and may be asserted by Parent and Merger Sub regardless of the
circumstances giving rise to any such conditions or may be waived by Parent or
Merger Sub in whole or in part, at any time and from time to time in their sole
discretion. The failure by Parent or Merger Sub at any time to exercise any of
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<PAGE> 45
the foregoing rights shall not be deemed a waiver of any such right and each
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by Parent or Merger Sub concerning any
events described in the above conditions shall be final and binding on all
parties.
A-3
<PAGE> 1
EXHIBIT 2
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Robert S. Colman
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Robert S. Colman (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Robert S.Colman
54 Lower Crescent
Sausalito, CA 94965
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
-----------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
-----------------------------
Edward D. Yates
Senior Vice President
Robert S. Colman
/s/ Robert S. Colman
--------------------------------
Robert S. Colman*
* in his individual capacity and as
Trustee of the following trusts:
Robert S. Colman Trust u/a dated 3/13/85
E. W. Colman Trust FBO Robert S. Colman
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Robert S. Colman common stock 105,000 Robert S. Colman
Trust u/a 3/13/85
4,000 E. W. Colman Trust
FBO Robert S.
Colman
-------
reissued 11/6/96 @ 1/9/16
stock options 2,500
warrants 45,000
exercise price greater than $2.00
warrants 137,500
<PAGE> 1
EXHIBIT 3
- -------------------------------------------------------------------------------
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
David H. Cooper
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and David H. Cooper (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
David H. Cooper
c/o New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
-----------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
-----------------------------
Edward D. Yates
Senior Vice President
David H. Cooper
/s/ David H. Cooper
--------------------------------
David H. Cooper
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
David H. Cooper 20,000 options vested
21,500 options vest on change of control
2,000 shares held in an IRA
<PAGE> 1
EXHIBIT 4
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Paul Devereaux
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Paul Devereaux (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Paul Devereaux
c/o New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Paul Devereaux
/s/ Paul Devereaux
---------------------------------
Paul Devereaux
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Paul Devereaux 3909 options vested
25,000 options vest on change of control
<PAGE> 1
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Dewey F. Edmunds
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Dewey F. Edmunds (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Dewey F. Edmunds, President
1318 Rancho Encinitas
Encinitas, CA 92024
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Dewey F. Edmunds
/s/ Dewey F. Edmunds
---------------------------------
Dewey F. Edmunds
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Dewey F. Edmunds 1. As of January 22, 1997, 67,500 shares
are benefically owned.
2. Upon a change of control, an
additional 200,000 shares will become
benefically owned.
<PAGE> 1
EXHIBIT 6
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Richard P. Greenthal
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Richard P. Greenthal (the "Stockholder"). Except as otherwise
defined herein, capitalized terms shall have the respective meanings given to
them in the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Richard P. Greenthal
1122 La Altura Blvd.
Beverly Hills, CA 90210
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Richard P. Greenthal
/s/ Richard P. Greenthal
---------------------------------
Richard P. Greenthal
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Richard P. Greenthal 6,499 vested options
13,001 options that will vest upon a
change of control.
<PAGE> 1
EXHIBIT 7
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Debra L. Jackson
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Debra L. Jackson (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Debra L. Jackson
c/o New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Debra L. Jackson
/s/ Debra L. Jackson
---------------------------------
Debra L. Jackson
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Debra L. Jackson 0 options vested
26,000 options vest on change of control
<PAGE> 1
EXHIBIT 8
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Mike Lytle
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Mike Lytle (the "Stockholder"). Except as otherwise defined herein,
capitalized terms shall have the respective meanings given to them in the
Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Mike Lytle
c/o New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Mike Lytle
/s/ Mike Lytle
---------------------------------
Mike Lytle
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Mike Lytle 8,344 options vested
30,000 options vest on change of control
<PAGE> 1
EXHIBIT 9
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Harold J. Meyers
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Harold J. Meyers (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Harold J. Meyers
270 S. Canyon View Drive
Los Angeles, CA 90014
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Harold J. Meyers
/s/ Harold J. Meyers
---------------------------------
Harold J. Meyers
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Harold J. Meyers 4,166 vested options
8,334 options that will vest upon a
change of control.
35,000 warrants
<PAGE> 1
EXHIBIT 10
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Harold R. Orr
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Harold R. Orr (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Harold R. Orr
c/o New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Harold R. Orr
/s/ Harold R. Orr
---------------------------------
Harold R. Orr
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Harold R. Orr 3,000 owned
8,000 options vested
45,000 options vesting on change of
control
<PAGE> 1
EXHIBIT 11
- -------------------------------------------------------------------------------
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Ralph M. Richart, M.D.
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Ralph M. Richart, M.D. (the "Stockholder"). Except as otherwise
defined herein, capitalized terms shall have the respective meanings given to
them in the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Ralph M. Richart, M.D.
350 Shore Drive
Oakdale, NY 11769
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Ralph M. Richart, M.D.
/s/ Ralph M. Richart, M.D.
---------------------------------
Ralph M. Richart, M.D.
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Ralph M. Richart, M.D. 6,499 vested options
13,001 options that will vest upon a
change of control.
<PAGE> 1
EXHIBIT 12
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Kenneth B. Sawyer
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Kenneth B. Sawyer (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Kenneth B. Sawyer
1009 Lombard Street
San Francisco, CA 94109
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Kenneth B. Sawyer
/s/ Kenneth B. Sawyer
---------------------------------
Kenneth B. Sawyer
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Kenneth B. Sawyer 4,200 shares of common stock
6,499 vested options
13,001 options that will vest upon a
change of control.
112,500 warrants
<PAGE> 1
EXHIBIT 13
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
Mark W. Stevens
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and Mark W. Stevens (the "Stockholder"). Except as otherwise defined
herein, capitalized terms shall have the respective meanings given to them in
the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
3
<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
4
<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5
<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
6
<PAGE> 7
(b) if to the Stockholder:
Mark W. Stevens
2946 Crystal Ridge Road
Encinitas, CA 92024
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
7
<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
Mark W. Stevens
/s/ Mark W. Stevens
---------------------------------
Mark W. Stevens
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
Mark W. Stevens 63,187 shares
<PAGE> 1
EXHIBIT 14
---------------------------------------------------------
STOCKHOLDER AGREEMENT
dated as of January 27, 1997
by and among
DENTSPLY International Inc.
Image Acquisition Corp.
and
The William W. Stevens and Virda J. Stevens Trust
-------------------------------------------------------
<PAGE> 2
STOCKHOLDER AGREEMENT
AGREEMENT, dated as of January 27, 1997 by and among DENTSPLY
International Inc. a Delaware corporation ("Parent"), Image Acquisition Corp, a
Delaware corporation and a wholly owned subsidiary of Parent (the "Merger
Sub"), and The William W. Stevens and Virda J. Stevens Trust (the
"Stockholder"). Except as otherwise defined herein, capitalized terms shall
have the respective meanings given to them in the Merger Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent, the Merger Sub and New Image Industries, Inc., a Delaware corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company (the
"Merger"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement for
Parent and Merger Sub to enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1 -- DEFINITIONS
1.1 For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" as within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Company Common Stock" shall mean the Common Stock, $.001 par
value, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
2
<PAGE> 3
ARTICLE 2 -- TENDER OF SHARES
2.1 In order to induce Parent and Merger Sub to enter into the Merger
Agreement, the Stockholder hereby agrees to validly tender (or cause the record
owner of such shares to validly tender), and not to withdraw, pursuant to and
in accordance with the terms of the Offer, the number of shares of Company
Common Stock set forth opposite such Stockholder's name on Schedule I hereto
and any shares of Company Common Stock acquired by such Stockholder in any
capacity after the date hereof and prior to the termination of this Agreement
whether upon the exercise of Stock Options, subject to Section 2.11 of the
Merger Agreement, or Warrants, subject to Section 2.12 of the Merger Agreement,
or by means of purchase, dividend, distribution or otherwise (such shares being
referred to hereinafter collectively as the "Shares"), all of which are and
will be Beneficially Owned by such Stockholder. The Stockholder hereby
acknowledges and agrees that the obligation of Parent and Merger Sub to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
2.2 The transfer by the Stockholder of the Shares to Merger Sub in the
Offer shall pass to, and unconditionally vest in, Merger Sub good and valid
title to the Shares, free and clear of all Liens.
2.3 The Stockholder hereby permits Parent and Merger Sub to publish and
disclose in the Offer Documents and, if approval or advisement of the Company's
stockholders is required under applicable law, the Proxy Statement or
Information Statement (including all documents and schedules filed with the
SEC) its identity and ownership of the Company Common Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
ARTICLE 3 -- ADDITIONAL AGREEMENTS
3.1 Voting Agreement. The Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Acquisition
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex A to the Merger Agreement or set forth in Article
VI of the Merger Agreement not being fulfilled. Notwithstanding anything in
this Agreement to the contrary, the Stockholder, in his capacity as a director
and/or officer of the
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<PAGE> 4
Company, as the case may be, and in accordance with the Merger Agreement, may
exercise his fiduciary duties with respect to the Company.
3.2 No Inconsistent Arrangements. The Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement,
it shall not (i) transfer (which term shall include, without limitation, any
sale, gift, pledge or other disposition), or consent to any transfer of, any or
all of such Stockholder's Shares, Stock Options or Warrants or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares, Stock
Options or Warrants or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
Stock Options or Warrants, (iv) deposit such Shares, Stock Options or Warrants
into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares, Stock Options or Warrants, or (v) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby or by the Merger
Agreement.
3.3 No Solicitation. The Stockholder hereby agrees, in its or his capacity
as a stockholder of the Company, that neither the Stockholder nor any of its
affiliates shall (and such Stockholder shall use its best efforts to cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Acquisition Proposal. The Stockholder will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. The
Stockholder will immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry such Stockholder, in its or his capacity as
a stockholder of the Company, receives (and will disclose any written materials
received by such Stockholder, in its or his capacity as a stockholder of the
Company, in connection with such proposal, discussion, negotiation or inquiry)
and the identity of the party making such proposal or inquiry which it may
receive in respect of any such transaction.
3.4 Stock Options and Warrants. If the Stockholder holds Stock Options
and/or Warrants to acquire shares of Company Common Stock, he shall, if
requested by the Company, consent to the cancellation and conversion of his
Company Options and/or Warrants in accordance with the terms of the Merger
Agreement and shall execute all appropriate documentation in connection with
such cancellation and conversion.
3.5 Best Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Merger Agreement. Each party shall promptly consult
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<PAGE> 5
with the other and provide any necessary information and material with respect
to all filings made by such party with any Governmental Entity in connection
with this Agreement and the Merger Agreement and the transactions contemplated
hereby and thereby.
3.6 Waiver of Appraisal Rights. The Stockholder hereby waives any rights
of appraisal or rights to dissent from the Merger that it or he may have.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. The Shares, as of the date hereof, constitute
all of the Shares Beneficially Owned by such Stockholder. With respect to the
Shares, the Stockholder has sole voting power and sole dispositive power, sole
power of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws and the
terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of the Stockholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Stockholder will not violate any other agreement to which
such Stockholder is a party including, without limitation, any voting
agreement, proxy arrangement, pledge agreement, shareholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered
by the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation
by such Stockholder of the transactions contemplated hereby.
(c) No Liens. Except as permitted by this Agreement, the Shares and
the certificates representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee or custodian for
the benefit of such Stockholder, free and clear of all Liens, proxies, voting
trusts or agreements, understandings or arrangements or any other rights
whatsoever.
(d) No Finder's Fees. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
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<PAGE> 6
(e) Reliance by Parent. The Stockholder understands and acknowledges
that Parent is entering into, and causing Merger Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of this
Agreement.
ARTICLE 5 -- STOP TRANSFER
The Stockholder shall not request that the Company register the transfer
(book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all
of the Shares may be changed or exchanged.
ARTICLE 6 -- TERMINATION
The covenants and agreements set forth herein shall terminate upon the
termination of the Merger Agreement in accordance with its terms.
ARTICLE 7 -- MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) or overnight courier to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention:
With a copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219-1417
Attention: Marlee S. Myers, Esquire
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<PAGE> 7
(b) if to the Stockholder:
The William W. Stevens and Virda J. Stevens Trust
c/o New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
With a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Derrick Boston
7.2 Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. There are no third party beneficiaries of
this Agreement and nothing in this Agreement, express or implied, is intended
to or shall confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities.
7.3 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by operation of law or otherwise,
provided that Parent or Merger Sub may assign its rights and obligations
hereunder to a direct or indirect subsidiary of Parent, but no such assignment
shall relieve Parent or Merger Sub, as the case may be, of its obligations
hereunder. Subject to the foregoing sentence, this Agreement will be binding
upon, and inure to the benefit of, the parties and their respective successors
and assigns.
7.4 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Delaware, without giving effect to the conflicts of law principles thereof.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts which together shall constitute a single agreement.
7.6 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
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<PAGE> 8
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunder duly authorized.
DENTSPLY INTERNATIONAL INC.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
IMAGE ACQUISITION CORP.
By: /s/ Edward D. Yates
------------------------------
Edward D. Yates
Senior Vice President
The Williams W. Stevens and
Virda J. Stevens Trust
By: /s/ The Williams W. Stevens and Virda
--------------------------------------
J. Stevens Trust
--------------------------------------
For The William W. Stevens
and Virda J. Stevens Trust
<PAGE> 9
SCHEDULE I
NAME OF STOCKHOLDER SHARES BENEFICIALLY OWNED
The William W. Stevens and 412,095 owned
Virda J. Stevens Trust
41,524 warrants
<PAGE> 1
EXHIBIT 15
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the ____ day of ____________, 1997, by and among New Image Industries, Inc., a
Delaware corporation ("New Image"), DENTSPLY International Inc., a Delaware
corporation ("DENTSPLY") and Dewey F. Edmunds (the "Employee"), an individual.
W I T N E S S E T H:
WHEREAS, DENTSPLY and New Image are parties to an Agreement and Plan
of Merger, dated as of January __, 1997 (the "Merger Agreement") , which
contemplates the merger of Image Acquisition Corp., a wholly owned subsidiary
of DENTSPLY ("Merger Sub") with and into New Image pursuant to which New Image,
as the surviving corporation, will become a wholly owned subsidiary of DENTSPLY
(the "Merger");
WHEREAS, the Employee presently serves as an employee of New Image
pursuant to that certain letter agreement, dated May 22, 1995, between Employee
and New Image (the "Current Employment Agreement");
WHEREAS DENTSPLY and New Image desire that the Employee continue as an
employee of New Image following the Effective Date (as defined below) on the
terms and conditions contained in this Agreement and the Employee wishes to
continue in the employ of New Image following the Effective Date on the terms
and conditions contained in this Agreement;
WHEREAS, the parties hereto desire that the Current Employment
Agreement shall terminate and be superseded by this Agreement as of the
Effective Date;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, DENTSPLY, New Image and the Employee, each
intending to be legally bound hereby, agree as follows:
1. EMPLOYMENT. New Image shall, and DENTSPLY shall cause New
Image to, employ the Employee as an employee of New Image, and the Employee
hereby accepts employment with New Image, for
<PAGE> 2
the Term (as defined in Section 3 hereof) and upon the terms and conditions
contained in this Agreement.
2. POSITION AND DUTIES.
(a) During the Term, Employee shall serve as Vice President
and General Manager of New Image or any entity (including a division of
DENTSPLY) that succeeds to all or any substantial part of the business and
operations of New Image. Employee shall be responsible for the day-to-day
management and operations of New Image or any such successor entity and shall
report to the Senior Vice President, Pacific Rim, Latin America, Gendex and
Tulsa Dental of DENTSPLY. Employee's services shall be performed at New Image's
or its successor's principal place of business, which shall be Carlsbad,
California.
(b) Employee shall at all times devote his full business time
and efforts to the performance of his duties and to promote the best interests
of the Company and its Affiliates (as defined below).
3. TERM. The term of Employee's employment pursuant to this Agreement
commences on the Effective Date and ends on February 28, 1999 (the "Term"),
unless sooner terminated as hereinafter provided. For purposes of this
Agreement, the term "Effective Date" shall mean the date upon which Merger Sub
purchases shares of New Image's common stock pursuant to the Offer (as defined
in the Merger Agreement). Upon expiration of the Term, Employee shall become an
at-will employee of New Image.
4. COMPENSATION.
(a) For all of the services rendered by the Employee to New
Image pursuant to this Agreement, Employee shall be entitled to receive the
following monetary compensation:
i) New Image shall pay Employee an annual base
salary of not less than $180,000, or such larger amount as may from time to
time be fixed by DENTSPLY (the "Base Salary"), payable in approximately equal
installments (not less frequently than monthly) in accordance with New Image's
regular payroll practices in effect from time to time. The Base Salary may be
increased from time to time by action of DENTSPLY.
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<PAGE> 3
ii) Employee shall be entitled to bonus
compensation that is comparable (in the manner in which it is determined and
with respect to the timing of payment) to that of DENTSPLY's domestic executive
employees who perform duties and have responsibilities comparable to those of
Employee.
(b) Throughout the Term, Employee shall be entitled to
participate in all plans and other benefits made available by DENTSPLY
generally to its domestic executive employees who perform duties and have
responsibilities comparable to those of Employee, including (without
limitation) benefits under any pension, profit sharing, employee stock
ownership, stock option, bonus, performance stock appreciation right,
management incentive, vacation (of not less than three (3) weeks each year),
disability, annuity or insurance plans or programs. Employee's service to New
Image prior to the Effective Date shall be credited toward the service
requirements, if any, of such plans or programs. Any payments to be made to
Employee under the provisions of section 6 or 7 of this Agreement shall not be
diminished by any payments made or to be made to Employee or his designees
pursuant to any such plan, nor shall any payments to be made to Employee or his
designees pursuant to any such plan be diminished by any payment made or to be
made to Employee under the provisions of section 6 or 7.
(c) Employee shall be eligible to participate in DENTSPLY's
1993 Stock Option Plan. Following the Effective Date, DENTSPLY management will
recommend to the Compensation Committee of the DENTSPLY Board of Directors that
Employee be granted options under such plan in an amount that is determined in
a manner comparable to the manner in which option grants are determined for
DENTSPLY's domestic executive employees who perform duties and have
responsibilities comparable to those of Employee.
5. DISCHARGE.
(a) Employee may terminate this Agreement upon thirty (30)
days' prior written notice delivered to New Image within thirty (30) days after
the occurrence of one or more of the following events:
i) failure by DENTSPLY or New Image to maintain
the duties, status and responsibilities of the Employee
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<PAGE> 4
substantially consistent with those of Employee's position following the
Effective Date; or
ii) a reduction in Employee's then current Base
Salary, other than any reduction implemented as part of a formal austerity
program approved by the Board of Directors of DENTSPLY and applicable to all
continuing employees of DENTSPLY and New Image, provided such reduction does
not reduce Employee's salary by a percentage greater than the average reduction
in the compensation of all employees who continue as employees of DENTSPLY and
New Image during such austerity program; or
iii) the failure of DENTSPLY to maintain and to
continue Employee's participation in DENTSPLY's benefit plans as in effect from
time to time on a basis substantially equivalent to the participation and
benefits of employees of DENTSPLY similarly situated to the Employee; or
iv) a change in the location where Employee is
required to perform his services hereunder to any location that is greater than
20 miles from the current location without Employee's prior consent; or
v) any substantial and uncorrected breach of
the Agreement by either DENTSPLY or New Image.
(b) This Agreement shall terminate as of the date of
Employee's death.
(c) New Image may terminate the Employee's employment for
Disability by giving the Employee thirty (30) days' prior written notice. For
all purposes under this Agreement, "Disability" shall mean that the Employee,
at the time notice is given, has been unable to substantially perform his
duties under this Agreement for a period of not less than six (6) months as the
result of his incapacity due to physical or mental illness, despite reasonable
accommodation by New Image. In the event that the Employee resumes the
performance of substantially all of his duties hereunder before the termination
of his employment under this section becomes effective, the notice of
termination shall automatically be deemed to have been revoked.
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<PAGE> 5
6. PAYMENT UPON DISCHARGE.
(a) Upon termination of Employee's employment for whatever
reason, Employee shall be entitled to receive the compensation accrued and
unpaid as of the date of his termination. If (i) Employee at the time of
termination is eligible to receive bonus compensation or is otherwise
participating in an incentive or bonus plan maintained by DENTSPLY or New Image
and (ii) a bonus or other form of incentive payment becomes payable with
respect to the year in which termination of Employee's employment occurred,
Employee shall be entitled to receive a pro-rata share of such bonus
compensation or other incentive or bonus award based upon the number of days he
is employed during the year up to the date of his termination. Such pro-rata
amount shall be calculated in the usual way and paid at the usual time.
(b) If Employee's employment terminates upon the death
of Employee, New Image shall continue payment of (i) his then current Base
Salary for a period equal to the longer of the remainder of the Term or 12
months from the termination date, and (ii) his pro-rata share of any incentive
or bonus payments due for the period prior to the termination date. Such
payments shall be made (x) in the case of death, to Employee's designated
beneficiary or, if no beneficiary has been effectively designated, then to
Employee's estate, and (y) in the case of Disability, to Employee.
(c) If Employee's employment is terminated by the Employee
under section 5(a) or by New Image for any reason other than for "Cause" (as
defined below) or Employee's death, New Image shall continue to pay compensation
and provide benefits to the Employee as provided in this section 6(c) for a
period (the "Termination Period") beginning on the date of the termination
notice and ending on the later of the second anniversary of such date or
February 28, 1999, as follows:
i) Compensation shall be paid to the Employee
at the rate of Base Salary in effect immediately before the termination;
ii) Bonus and incentive compensation shall be
paid to the Employee in accordance with plans in which the
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<PAGE> 6
Employee participated at the termination date, using the same formula and
calculations as if termination had not occurred;
iii) Employee shall receive the benefits that
would have been accrued by the Employee during the Termination Period under any
pension, profit sharing, employee stock ownership plan ("ESOP") or similar
retirement plan or plans of DENTSPLY or New Image in which the Employee
participated immediately before the termination (or, if not available, in lieu
thereof Employee shall be compensated for such benefits), based on service the
Employee would have had during the Termination Period and on the compensation
(including, if applicable, bonus and incentive compensation) as determined
under subsections (i) and (ii) above;
iv) Employee shall receive continued coverage
during the Termination Period under all employee disability, annuity, insurance
or other employee welfare benefit plans, programs or arrangements of DENTSPLY
or New Image in which Employee participated immediately before the notice of
termination, plus all improvements subsequent thereto (or, if not available, in
lieu thereof Employee shall be compensated for such coverage).
Except as provided in section 7, payment of compensation under subsection
6(c)(i) above shall be made at the same time as payments of compensation under
section 4(a), and payments of other benefits under subsection 6(c)(ii) and
(iii) shall be paid at the same time and to the same person as compensation or
benefits would have been paid under the plan, program or arrangement to which
they relate (after taking into account any election made by the Employee with
respect to payments under such plan, program or arrangement).
(d) In no event will New Image or DENTSPLY be obligated to continue
Employee's compensation and other benefits under this Agreement if Employee's
employment is terminated because of gross negligence or significant willful
misconduct (i.e., conviction of misappropriation of corporate assets or heinous
criminal offense) (any of the foregoing, "Cause").
(e) In no event shall the Employee be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee under any of the
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<PAGE> 7
provisions of this Agreement and such amounts shall not be reduced whether or
not the Employee obtains other employment.
7. CHANGE OF CONTROL. If at any time during the Term after a Change of
Control (as defined below), Employee's employment is terminated by the Employee
pursuant to section 5(a), or DENTSPLY or New Image terminates or gives written
notice of termination to the Employee, then in lieu of the periodic payment of
the amounts specified in subsections 6(c)(i), (ii) and (iii) (except as may be
otherwise prohibited by law or by said plans), DENTSPLY and New Image, at the
written election of Employee, shall pay to Employee within five (5) business
days of such termination or notice of termination the present value of the
amounts specified in subsection 6(c)(i), (ii) and (iii), discounted at the
greater rate of interest then payable by Bank of America on any federally
insured savings account into which Employee could deposit such amount and make
immediate withdrawals therefrom without penalty, and shall provide for the
remainder of the Termination Period, if any, the benefit coverage required by
subsection 6(c)(iv).
8. PRIOR AGREEMENTS. The Employee represents to New Image that:
(a) there are no restrictions, agreements or understandings whatsoever to which
the Employee is a party or by which he is bound which would prevent or make
unlawful his execution of this Agreement or his employment hereunder; (b) his
execution of this Agreement and his employment hereunder do not constitute a
breach of any contract, agreement or understanding, oral or written, to which
he is a party or by which he is bound; (c) he is free and able to execute this
Agreement and to enter into employment hereunder on the terms and subject to
the conditions hereof; and (d) Employee acknowledges that this Agreement
terminates and supersedes the Current Employment Agreement (except that the
provisions therein relating to the immediate vesting of options upon a Change
of Control shall continue in full force and effect in accordance with the terms
thereof subject to Section 2.11 of the Merger Agreement).
9. CONFIDENTIAL INFORMATION: INVENTION ASSIGNMENT.
(a) The Employee shall not, directly or indirectly, at any
time during the term of his employment hereunder or thereafter and without
regard to when or for what reason, if any, such employment shall terminate, use
or permit the use of
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<PAGE> 8
any trade secret or other confidential, proprietary or other information of, or
relating to, DENTSPLY, New Image or any other subsidiary or affiliate of
DENTSPLY, and shall not divulge any such trade secret or information to any
person, firm or corporation whatsoever, except as may be necessary in the
performance of his duties of employment or as may be required by law or a final
determination of any court of competent jurisdiction from which no appeal can
be taken.
(b) All inventions, discoveries, designs, developments,
ideas, computer programs and reports that are made or conceived of by the
Employee in the course of his employment hereunder, whether or not patentable
or copyrightable, shall be disclosed to New Image by the Employee and shall be
and remain the sole property of New Image. The Employee hereby transfers and
assigns all right, title, copyright and interest in such works to New Image and
will, from time to time, give New Image all reasonable assistance, execute all
papers and do all things that may reasonably be required to protect and
preserve the rights of New Image in such works.
(c) The Employee represents that, in the course of performing
services hereunder, he will not breach any agreement he may have with others
with respect to confidential information, and will not bring to New Image or
use in any way materials or documents obtained from others under an agreement
of or with any restriction as to confidentiality.
10. DEFINITIONS. Any capitalized terms used in this Agreement
and not defined in this Agreement shall be given the meanings assigned to them
in the Merger Agreement. Unless otherwise provided, the following terms shall
have the following respective meanings:
(a) "Affiliate" when used with reference to any person or
entity means any other person or entity directly or indirectly controlling,
controlled by or under common control with the referenced person or entity. For
purposes of this definition, "control" means ownership of or power to vote 50%
or more of the voting stock, venture interests or other comparable
participation interests in the applicable entity.
(b) "Change of Control" means any event by which (x) an
Acquiring Person attains such status, or (y) Continuing
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<PAGE> 9
Directors cease to comprise a majority of the members of the Board of Directors
of DENTSPLY (the "Board"). For purposes of this definition:
i) An "Acquiring Person" means any person or
group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder as in effect
on the date of this Agreement (the "Exchange Act") who or which, together with
all affiliates and associates (as defined in Rule 12B-2 under the Exchange Act)
becomes, by way of any transaction, the beneficial owner of shares DENTSPLY,
having more than 50% of the total number of votes that may be cause for the
election of directors of DENTSPLY; provided that an Affiliate of DENTSPLY shall
not constitute an Acquiring Person; and
ii) "Continuing Director" means any member of
the Board, while such person is a member of the Board, who is not an Acquiring
Person, or an Affiliate or associate of an Acquiring Person or a representative
of an Acquiring Person or of any such Affiliate or associate and who (A) was a
member of the Board prior to the date of this Agreement, or(B) subsequently
becomes a member of the Board and whose nomination for election or election to
the Board is recommended or approved by resolution of a majority of the
Continuing Directors or who is included as a nominee in a proxy statement of
DENTSPLY distributed when a majority of the Board consists of Continuing
Directors.
11. MISCELLANEOUS.
(a) INDULGENCES, ETC. Any failure or delay on the part of any
party to exercise any right, remedy, power or privilege under this Agreement
will not operate as a waiver thereof, nor will any single or partial exercise
of any right, remedy, power or privilege preclude any other or further exercise
of the same or of any other right, remedy, power or privilege, nor will any
waiver of any right, remedy, power or privilege with respect to any occurrence
be construed as a waiver of that right, remedy, power or privilege with respect
to any other occurrence.
(b) NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement
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<PAGE> 10
must be in writing and will be deemed to have been duly given, made and
received only when delivered (personally, by facsimile transmission or by
courier service such as Federal Express, or by other messenger) or when
deposited in the United States mails, registered or certified mail, postage
prepaid, return receipt requested, addressed as set forth below:
i) If to the Employee:
Dewey F. Edmunds
1318 Rancho Encinitas
Encinitas, CA 92024
ii) If to New Image:
2283 Cosmos Court
Carlsbad, CA 92009
Attention: Chief Executive Officer
with a copy given in the manner prescribed
above to:
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
Attention: Secretary
and:
Morgan, Lewis & Bockius LLP
One Oxford Centre
Pittsburgh, PA 15219
Attention: Marlee S. Myers, Esquire
Any party may alter the address to which
communications or copies are to be sent by giving notice of any change of
address to the other party in conformity with the provisions of this paragraph
for the giving of notice.
(c) BINDING NATURE OF AGREEMENT; ASSIGNMENT. This
Agreement shall be binding upon and inure to the benefit of New
-10-
<PAGE> 11
Image and DENTSPLY and its successors and assigns and shall be binding upon the
Employee, his heirs and legal representatives. New Image may assign this
Agreement at any time to any subsidiary or parent of New Image, provided that
such assignee assumes all of the obligations of New Image hereunder; the
Employee may not assign this Agreement.
(d) EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which will be deemed to be an original
and all of which will together constitute one and the same instrument.
(e) PROVISIONS SEPARABLE. The provisions of this Agreement
are independent of and separable from each other, and no provision will be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part.
(f) ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter of
this Agreement, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
with respect to the subject matter of this Agreement, provided that the Current
Employment Agreement shall not be superseded by this Agreement and shall
continue in full force and effect until the occurrence of the Effective Date.
The express terms of this Agreement control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
(g) SECTION HEADINGS. The section headings in this
Agreement are for convenience only; they form no part of this Agreement and
will not affect its interpretation.
(h) GENDER, ETC. Words used herein, regardless of the number
and gender specifically used, will be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context indicates is appropriate.
-11-
<PAGE> 12
(i) GOVERNING LAW. This Agreement shall be construed
and interpreted in accordance with and governed by the laws of the State of
California, other than the conflict of laws
provisions of such laws.
(j) SURVIVAL. The provisions of Sections 8, 9, and 11 shall
survive the termination of this Agreement to the extent necessary to effectuate
the respective purposes of such provisions.
[SIGNATURES ON NEXT PAGE)
-12-
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
New Image Industries, Inc.
By: _____________________________________
Name:
Title:
DENTSPLY International Inc.
By: _____________________________________
Name:
Title:
EMPLOYEE:
_________________________________________
Dewey P. Edmunds
-13-
<PAGE> 1
EXHIBIT 16
MUTUAL CONFIDENTIAL NON-DISCLOSURE AGREEMENT
This Mutual Confidential Non-Disclosure Agreement (hereinafter referred
to as the "Agreement") is made this 8th day of October 1996, by and between New
Image Industries, Inc. a Delaware corporation, and the other party to this
agreement identified in the signature block below (each hereinafter referred to
individually as "Party" or collectively as "Parties").
WHEREAS, the Parties are engaged in discussions in contemplation of a
possible business relationship; and
WHEREAS, the Parties recognize that they may be required to disclose
confidential information in such business discussions:
NOW THEREFORE, in consideration of the above and the mutual covenants
contained herein, the Parties hereto, intending to be legally bound, hereby
agreed as follows:
1. For the purpose of this Agreement, "Confidential Information"
shall include any information and data of a confidential nature, including but
not limited to proprietary, developmental, technical, marketing, sales,
operating, performance, costs, know-how, business and process information,
computer programming techniques, and all record bearing media continuing or
disclosing such information and techniques which is disclosed pursuant to this
Agreement.
2. The Parties agree that disclosure and receipt of Confidential
Information with one another is for the purposes set forth herein and for no
other purpose and that only those employees of each Party having a need-to-know
shall be privy to said Confidential Information and shall abide by the
obligations of this Agreement.
3. All Confidential Information exchanges between the Parties
pursuant to this Agreement:
(a) shall, if in written physical form, be marked "Confidential"
or similarly legended by the disclosing Party before being turned over to the
receiving Party;
(b) shall, if disclosed orally, be reduced in writing and sent to
the non-disclosing party within (10) working days of said disclosing;
(c) shall not be copied or distributed disclosed, or disseminated
in any way or form by the receiving Party to anyone except its own employees,
who have a reasonable need to know Confidential information;
<PAGE> 2
(d) shall be treated by the receiving Party with the same degree of
care to avoid disclosure to any third Party as is used with respect to the
receiving Party's own information of like importance which is to be kept
confidential;
(e) shall not be used by the receiving Party for its own purposes
of any other purpose except the purpose set forth above, except as otherwise
expressly stated herein, without the express written permission of the
disclosing Party; and
(f) shall remain the property of and be returned to the disclosing
Party (along with all copies thereof) within thirty (30) days of receipt by the
receiving Party of a written request from the disclosing Party setting forth the
Confidential Information to be returned, or shall be destroyed and confirmed by
a certificate attesting the same.
4. The obligation of Paragraph 3 shall not apply however to any
information which:
(a) is already in the public domain or becomes available to the
public through no breach of this Agreement by the receiving Party.
(b) was, as between disclosing Party and receiving Party lawfully
in the receiving Party's possession prior to receipt from the disclosing Party;
(c) is received independently from a third Party free from any
obligation to keep said information confidential;
(d) is subsequently independently developed by the receiving party;
or
(e) is disclosed pursuant to government regulation or court order.
5. Unless otherwise mutually agreed in writing, the receiving
party's obligations hereunder with respect to each item of Confidential
Information shall terminate three (3) years from the date of receipt by the
receiving Party or at such earlier time when such Confidential Information
enters the public domain pursuant to Section 4(a) above.
6. Either party shall have the right to refuse to accept any
information under this Agreement and nothing herein shall obligate either Party
to disclose any particular information to the other party.
7. The parties hereto shall not be obligated to compensate each
other for exchanging any information under this Agreement and agree that no
warranties of any kind are given with respect to Confidential Information
disclosed under this Agreement as well as any use thereof, except as otherwise
expressly provided herein.
<PAGE> 3
8. Neither Party shall have any obligation to enter into any
further agreement with the other except as it, in its sole judgment, may deem
advisable. It is understood that no patent, copyright, trademark or other
proprietary right or license is granted by this Agreement. The disclosure of
Confidential information and material which may accompany the disclosure shall
not result in any obligation to grant the receiving Party rights therein.
9. The Parties hereto acknowledge that this Agreement is executed
and delivered in the State of California, and agree that the laws of the State
of California shall govern the interpretations and enforcement, and that any
legal action arising out of or in conjunction with this Agreement or any breech
thereof shall be brought and prosecuted in an appropriate court of competent
jurisdiction within the State of California.
10. This Agreement represents the entire understanding and
agreement of the Parties and supersedes all prior communications, agreements
and understandings relating to the subject matter hereof. The provisions of
this Agreement may not be modified, amended, nor waived, except by a written
instrument duly executed by both Parties.
IN WITNESS HEREOF, the Parties hereto, intending to be legally bound,
have caused this Agreement to be executed by their duly authorized
representative as of the date first above written.
Accept on Behalf of: Accepted on Behalf of:
DENTSPLY INTERNATIONAL, INC. NEW IMAGE INDUSTRIES, INC.
/s/ M.D. HANSON /s/ DEWEY F. EDMUNDS
- ------------------------------ ------------------------------
Name: M.D. Hanson Name: Dewey F. Edmunds
Title: V.P. Corporate Planning Title: President
Date: October 8, 1996 Date: October 8, 1996
<PAGE> 1
EXHIBIT 17
DENTSPLY International Inc.
570 College Avenue
P.O. Box 872
York, PA 17405
December 24, 1996
Mr. Dewey Edmunds, President
New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
Gentlemen:
This will confirm our discussions with respect to the proposed acquisition of
New Image Industries, Inc., a Delaware corporation ("New Image"), by DENTSPLY
International Inc., a Delaware corporation ("Dentsply").
1. Structure and Price. Subject to the conditions set forth below, the
transaction will be accomplished by means of either (i) a tender offer (the
"Tender Offer") to be made by a wholly-owned subsidiary of Dentsply (the
"Acquisition Subsidiary") for all of the issued and outstanding shares of
Common Stock of New Image (the "New Image Common Stock"), conditioned on the
tender of at least 51% of such shares, for a price of $2.00 per share in cash
(the "Offer Consideration"), and, following completion of the Tender Offer, the
merger of Acquisition Subsidiary with and into New Image pursuant to which each
share of the outstanding Common Stock of New Image then owned by Acquisition
Subsidiary will be exchanged for the Offer Consideration, and each option,
warrant and other right to acquire a share of the Common Stock of New Image
will be exchanged for the Offer Consideration less the exercise price of such
option, warrant or right; or (ii) an all-cash merger of Acquisition Subsidiary
with and into New Image for the price set forth above.
2. Certain Fundamental Conditions. Consummation of the proposed acquisition or
the proposed tender will be subject to the following fundamental conditions:
(i) There are on the date hereof and there will be, at all
times between the date hereof and the closing, no more than
5,479,908 outstanding shares of New Image Common Stock (plus
any shares issued upon the exercise of options or other
rights outstanding on the date hereof as set forth below),
and no outstanding shares or rights to acquire any other
class of New Image capital stock, and outstanding stock
options,
<PAGE> 2
New Image Industries, Inc.
Page 2
December 24, 1996
warrants and other rights to acquire no more than 2,045,201
shares of New Image Common Stock, and no more than 950,000 of
such options, warrants and rights having an exercise price of
less than $2.00, and the average of the exercise prices of
such 950,000 options, warrants and other rights being not
less than approximately $1 9/16;
(ii) due diligence review, to Dentsply's sole satisfaction,
by Dentsply and its legal and financial advisors, of the
business, assets, operations and liabilities of New Image,
including, without limitation, environmental conditions and
contingencies, pending or threatened patent and other
litigation matters, accounting matters, employee benefits and
other contingent liabilities;
(iii) negotiation and execution of definitive documentation
mutually acceptable in form and substance;
(iv) approval of such documentation by the Boards of
Directors of Dentsply and New Image;
(v) negotiation and execution of a Stockholder Agreement
between Dentsply and each of the directors and officers of
New Image who collectively own approximately 13.8% of the
outstanding New Image Common Stock and options (each, a
"Stockholder"), pursuant to which, among other things, such
Stockholder will agree to tender his or her shares of New
Image Common Stock in the Tender Offer or, if the acquisition
is accomplished by means of a merger without a Tender Offer
to vote such shares in favor of such merger, as the case may
be, and, pending consummation of the proposed acquisition,
not to sell or otherwise transfer shares of New Image Common
Stock owned of record or beneficially by him or her;
(vi) receipt of all approvals, consents or waivers from third
parties, the absence of which would, in Dentsply's reasonable
judgment, be reasonably likely to be materially adverse to
New Image or to the transactions contemplated by this letter;
(vii) receipt of all material regulatory and governmental
approvals and compliance with all applicable regulatory or
governmental requirements;
<PAGE> 3
New Image Industries, Inc.
Page 3
December 24, 1996
(viii) the business and operations of New Image are conducted
in the ordinary course between the date hereof and the
closing date; (ix) if the proposed acquisition is
accomplished by means of a Tender Offer, tender of no fewer
than the number of shares representing at least 51% of the
issued and outstanding shares of New Image Common Stock;
(x) there having been no dividends or other distributions
paid with respect to the New Image Common Stock, and no
increases in compensation, bonuses, loans or other payments
outside the ordinary course made to any officers, directors
or management employees of New Image, and no consulting,
brokers', finders' or investment banking or advisory fees
paid to any director or any person affiliated with New Image
or affiliated with any of its directors, officers or
management employees;
(xi) negotiation and execution of an employment agreement
with Dewey F. Edmunds, mutually acceptable in form and
substance;
(xii) the definitive documentation referred to in clause
(iii) above shall include covenants from Dentsply to continue
complying with the agreements covered by Paragraph 5 hereof
for the time period set forth therein; and
(xiii) the conditions set forth in subparagraphs (ii), (iii)
and (v) of this Paragraph 2 will be satisfied or waived at
the time the parties enter into definitive documentation.
3. Negotiation in Good Faith. Dentsply and New Image will negotiate in good
faith to execute definitive documentation evidencing the proposed transaction
as promptly as practicable and will cooperate fully with each other in
preparing all such documentation, obtaining all necessary approvals, consents
or waivers from third parties and taking reasonable steps to comply with all
governmental and regulatory requirements.
4. Regulatory Filings. Dentsply and New Image will cooperate in making as
promptly as practicable after the date hereof all filings and seeking all
approvals which may be determined to be necessary in connection with the
transactions contemplated hereby, including, without limitation, filings under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
5. Standstill. In the event that the proposed acquisition is not consummated,
Dentsply hereby agrees that, for a period of one year from the date of this
Agreement, unless New Image shall (i)
<PAGE> 4
New Image Industries, Inc.
Page 4
December 24, 1996
otherwise agree in writing, (ii) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or of its property, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent, (v) file a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization or an arrangement with creditors to take
advantage of any insolvency law, or an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition filed
against it, (vi) take corporate action for the purpose of effecting any of the
foregoing, (vii) have an order for relief entered against it in any proceeding
under the United States Bankruptcy Code, (viii) have an order, judgment or
decree entered, without the application, approval or consent of New Image, by
any court of competent jurisdiction, approving a petition seeking
reorganization of New Image or appointing a receiver, trustee or liquidator of
New Image or of all or a substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect for a period of 60
consecutive days, or (ix) solicit Acquisition Proposals (as defined in
Paragraph 7 hereof), neither Dentsply nor any of its affiliates (as such term
is defined under the Securities Exchange Act of 1934, as amended (the "1934
Act")) will in any manner, directly or indirectly, (a) effect or seek, offer or
propose (whether publicly otherwise) to effect, offer or participate in (A) any
acquisition of any securities (or beneficial ownership thereof) or assets of
New Image or any of its subsidiaries; (B) any tender or exchange offer, merger
or other business combination involving New Image or any of its subsidiaries;
(C) any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to New Image or any of its subsidiaries;
or (D) any "solicitation" of "proxies" (as such terms are used in the proxy
rules of the Securities and Exchange Commission) or consents to vote any voting
securities of New Image; (b) form, join or in any way participate in a "group"
(as defined under the 1934 Act) formed to accomplish any of the foregoing; (c)
otherwise act, alone or in concert with others, to seek to control the
management or Board of Directors of New Image; (d) take any action which might
force New Image to make a public announcement regarding any of the types of
matters set forth in (a) above; or (e) enter into any discussions or
arrangements with any third party with respect to any of the foregoing.
Dentsply also agrees during such period not to request New Image (or its
directors, officers, employees or agents), directly or indirectly, to amend or
waive any provision of this paragraph (including this sentence).
6. Information. During the period from the date hereof and until the earlier of
the expiration of this letter as provided in Paragraph 11 below or its prior
termination, Dentsply shall be provided full opportunity to examine the
financial records and reports of New Image in connection with its due diligence
investigation (including, without limitation, the work papers of independent
certified public accountants, the financial statements for the fiscal year
ended June 30, 1996 and financial projections for fiscal year 1997), leases,
properties, books of account, corporate records, legal opinions and
litigation-related documents and other materials and information of any kind
relating to the business, assets, operations and liabilities of New Image, and
the officers and
<PAGE> 5
New Image Industries, Inc.
Page 5
December 24, 1996
employees of New Image shall cooperate with such examination. All information
delivered pursuant to this letter shall be subject to the Confidentiality
Agreement of even date herewith executed by the parties.
7. Exclusive Dealing. From the date hereof and until the earlier of the
expiration of this letter as provided in Paragraph 11 below or its prior
termination, New Image agrees that neither it nor any of its subsidiaries,
officers, directors, or the directors and officers of its subsidiaries, nor any
of its other affiliates (each, an "Affiliate") shall, and New Image shall cause
its and its respective subsidiaries' and Affiliates' employees, agents and
representatives (including, without limitation, any investment banking, legal
or accounting firm retained by New Image or any of its subsidiaries or
Affiliates and any individual member or employee of the foregoing) (each, an
"Agent") not to (a) initiate, solicit or seek, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders or any of them)
with respect to a merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving, or any purchase of
all or a substantial portion of the assets or any equity securities of, it or
any of its subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal"), or (b) engage in any negotiations concerning,
or provide any confidential information or data to, or have any discussions
with, any person relating to an Acquisition Proposal, or (c) otherwise
cooperate in any effort or attempt to make, implement or accept an Acquisition
Proposal; provided, however, that New Image may, if it receives an Acquisition
Proposal which was not directly or indirectly initiated, solicited or otherwise
sought by New Image or by any of the individuals or entities referred to in the
first sentence of this Paragraph 7, and which in the written opinion of its
outside financial advisor, is superior from a financial point of view to the
transactions contemplated by this letter (a "Superior Acquisition Proposal"),
respond to such Superior Acquisition Proposal, if New Image has received a
written opinion of its outside counsel that such response is required in order
to satisfy the fiduciary duties imposed under applicable law on its Board of
Directors. New Image shall immediately cease and cause to be terminated any
existing activities, including discussions or negotiations with any parties,
conducted heretofore with respect to any of the foregoing and shall take the
necessary steps to inform the individuals and entities referred to in the first
sentence hereof of the obligations undertaken in this Paragraph 7. If New Image
or any of its Affiliates or Agents has provided any person (other than
Dentsply) with any confidential information or data relating to an Acquisition
Proposal, it shall request the immediate return thereof. New Image shall notify
Dentsply immediately if any inquiries, proposals or offers related to an
Acquisition Proposal are received by, any confidential information or data is
requested from, or any negotiations or discussions related to an Acquisition
Proposal are sought to be initiated or continued with, it or any individual or
entity referred to in the first sentence of this Paragraph 7, and of the terms
and other details of any such Acquisition Proposal or request.
<PAGE> 6
New Image Industries, Inc.
Page 6
December 24, 1996
8. Expenses. Except as provided below, each of New Image and Dentsply will
separately bear its own expenses, including the fees and disbursements of
counsel, investment bankers and accountants, incurred in connection with this
letter of intent and the transactions contemplated hereby. If New Image or any
Affiliate or Agent of New Image shall fail to fulfill the obligations under
Paragraph 7 above, and shall sell, or enter into an agreement which
contemplates the sale of, all or any material portion of the assets or equity
interests in, New Image to a third party, or the Stockholders or any of them
shall enter into an agreement which contemplates such a transaction, then, in
any such case, New Image shall immediately pay to Dentsply an amount equal to
the out-of-pocket expenses incurred by Dentsply in connection with the
transaction contemplated hereby.
9. Publicity. Upon the execution of this letter of intent, an appropriate
public announcement of the proposed transaction, the form and substance of
which shall have been agreed to by Dentsply and New Image, shall be made.
Neither party shall make any other press release or other written public
statement concerning the matters covered by this letter without the approval of
the other party hereto; provided, however, that either party may, without such
approval, make such press releases or other written public statements required
by law, and shall consult with the other party with respect to the form and
substance of such statements.
10. Non-Binding Nature. Other than Paragraphs 5, 6, 7, 8, 9, 10 and 11 hereof,
this letter does not constitute a binding agreement of the parties hereto. It
is understood that, promptly hereafter, the parties will strive to negotiate
and execute definitive and binding documentation which will contain such terms,
provisions, representations, warranties, covenants and conditions of each
party, in addition to those set forth herein, (including an agreement by
Dentsply to provide directors' and officers' insurance coverage for the current
directors and officers of New Image with coverage limits similar to those
currently in effect for the six-year period commencing on the closing of the
transactions contemplated hereby) as are appropriate and customary in
transactions of this nature and mutually satisfactory to Dentsply and New Image
and their respective counsel.
11. Termination. This letter shall terminate on March 25, 1997, or, if earlier,
on the occurrence of: (i) an event of default set forth in that certain Amended
and Restated Loan and Security Agreement, dated May 22, 1996 (the "Loan
Agreement"), between New Image and Coast Business Credit, a division of
Southern Pacific Thrift & Loan Association ("Coast"), as to which event of
default Coast has not given a written waiver or is not required to forbear
under the terms of a letter agreement of even date herewith between Dentsply
and Coast; (ii) the failure by New Image or any of its Affiliates or Agents to
comply with the obligations set forth in Paragraph 7 hereof; or (iii) the date
on which New Image shall (a) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or of its property, (b) make a
general assignment for the benefit of creditors, (c) be adjudicated a bankrupt
or insolvent, (d) file a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization or an arrangement with creditors to
<PAGE> 7
New Image Industries, Inc.
Page 7
December 24, 1996
take advantage of any insolvency law, or an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition filed
against it, (e) take corporate action for the purpose of effecting any of the
foregoing, or (f) have an order for relief entered against it in any proceeding
under the United States Bankruptcy Code; (iv) the date on which an order,
judgment or decree shall be entered, without the application, approval or
consent of New Image by any court of competent jurisdiction, approving a
petition seeking reorganization of New Image or appointing a receiver, trustee
or liquidator of New Image or of all or a substantial part of its assets, and
such order, judgment or decree shall continue unstayed and in effect for any
period of 30 consecutive days; or (v) the date on which Dentsply informs New
Image in writing that it is terminating this letter of intent because it is not
satisfied with its due diligence review of New Image.
12. Governing Law; Amendment. This letter shall be governed by the laws of the
State of Delaware applicable to contracts made therein, without giving effect
to the conflict of law provisions thereof. This letter of intent may be
amended, modified, or extended only by a written agreement signed by both of
the parties hereto.
<PAGE> 8
New Image Industries, Inc.
Page 8
December 24, 1996
This letter is submitted in duplicate and has been executed by Dentsply. If the
foregoing properly sets forth our understanding, please so indicate by signing
both copies of this letter in the space provided, then retain one executed copy
for your files and return the second copy to us.
Very truly yours,
DENTSPLY International Inc.
By: /s/ Edward Yates
---------------------------
Senior Vice President
Accepted and agreed to this 24th
day of December, 1996.
New Image Industries, Inc.
By: /s/ Dewey F. Edmunds
---------------------------
President and CEO
<PAGE> 1
EXHIBIT 18
SUBJECT TO THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT EXECUTED
BY AND AMONG COAST BUSINESS CREDIT, DENTSPLY INTERNATIONAL INC., AND
NEW IMAGE INDUSTRIES, INC. AND INSIGHT IMAGING SYSTEMS, INC.,
DATED AS OF DECEMBER 24, 1996
=======================================
CREDIT AGREEMENT
DATED AS OF DECEMBER 24, 1996
BETWEEN
NEW IMAGE INDUSTRIES, INC.
AND
INSIGHT IMAGING SYSTEMS, INC.
AS BORROWER,
AND
DENTSPLY INTERNATIONAL INC.
AS LENDER
=======================================
<PAGE> 2
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 24, 1996 (the "Agreement"), is
made by and between New Image Industries, Inc., a Delaware corporation, and
Insight Imaging Systems, Inc., a California corporation (together, "Borrower"),
and DENTSPLY International Inc., a Delaware corporation, as Lender ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrower have executed a letter of intent, dated
December 24, 1996, with respect to the acquisition of Borrower by Lender (the
"Letter of Intent");
WHEREAS, Borrower has requested that Lender make available to Borrower a
line of credit of up to an aggregate principal amount of $3,000,000 (the
"Line") and, as a condition precedent to Lender extending such credit, Borrower
has agreed to grant a security interest in favor of Lender in all of its right,
title and interest in, to and under the Collateral as described herein;
WHEREAS, concurrently herewith, Lender is entering into a Subordination
and Intercreditor Agreement with Coast Business Credit, a Division of Southern
Pacific Trust & Loan Association; and
WHEREAS, subject to the terms and conditions set forth herein, Lender
agrees to make the Line available to Borrower;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE 1 - DEFINITIONS
The following words and terms are used in this Agreement and have the
meanings ascribed to them in this Article 1 or at the locations in the
Agreement indicated below:
"1934 Act" is defined in Article 7.1(h).
"Advance" means any advance to Borrower by Lender under the Line.
"Affiliate" means and refers to, as applied to any Person, any other
Person directly or indirectly controlling, or through one or more Persons
controlled by, controlling or under common control with that Person (whether
through ownership of voting securities, by contract or otherwise).
<PAGE> 3
"Agreement" is defined in the introduction to this Agreement.
"Bankruptcy Code" means Title 11 of the United States Code as now or
hereafter in effect, or any successor statute.
"Borrower" is defined in the introduction to this Agreement.
"Borrower Intellectual Property Rights" is defined in Article 5.14.
"Business" means design, manufacture, distribution and sale of intraoral
cameras and computer imaging systems exclusively to the dental marketplace.
"Business Day" means any day other than a Saturday, Sunday or day on which
banking institutions in the Commonwealth of Pennsylvania are authorized by law
or regulation to close.
"Coast" means Coast Business Credit, a Division of Southern Pacific Thrift
& Loan Association.
"Coast Agreement" means that certain Amended and Restated Loan and
Security Agreement, dated as of May 22, 1996, between Coast and Borrower.
"Collateral" means all personal property, rights, interests and privileges
of Borrower including, but not limited to, all accounts, inventory, chattel
paper, contracts, contract rights, documents, equipment, fixtures, general
intangibles, Borrower Intellectual Property Rights (including, but not limited
to, patents, copyrights, trademarks, service marks and applications therefor
and trade secrets and confidential information), goods, instruments, stock
rights, pledged deposits, insurance policies, cash, bank accounts, all customer
lists, credit files, computer files, programs, printouts and other computer
materials and records related to the foregoing, wherever located, whether now
existing or hereafter created or arising, in which Borrower now has or
hereafter acquire any right or interest, and the proceeds, insurance proceeds
and products thereof and documents of title evidencing or issued with respect
thereto, all accessories, substitutions, additions and replacements thereto and
thereof, together with all Liens and security instruments and agreements and
guarantees securing or relating to any of the foregoing, and all rights and
interests of Borrower as a seller of goods or services and rights to returned
or repossessed goods.
"Collection Date" means the date on which Borrower has satisfied and paid
all its Obligations to Lender hereunder and under the Note and Lender is under
no obligation to make Advances hereunder.
"Effective Date" means December 24, 1996.
"Environmental Laws" is defined in Article 5.12.
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"Event of Default" is defined in Article 7.
"Financing Statements" means any and all financing statements, amendments
or continuation statements required or appropriate to perfect and keep
perfected any security interest created hereby pursuant to the Uniform
Commercial Code.
"Forbearance Letter" means the letter agreement of even date herewith by
and among Coast, Borrower and Lender.
"Funding Date" means the date on which an Advance is made.
"Funding Request" is defined in Section 2.3(b).
"GAAP" means generally accepted accounting principles as set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board as in effect on the Effective Date or
in such other statements by such other Person as may be approved by a
significant segment of the accounting profession, which are applicable to the
circumstances as of the date of determination and which are applied on a
consistent basis.
"Governmental Entity" means any federal, state or local government or any
court, administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign.
"Hazardous Material" is defined in Article 5.14(b).
"Indebtedness" is defined in Article 5.8(b).
"Initial Advance" is defined in Article 2.3.
"Lender" is defined in the introduction to this Agreement.
"Letter of Intent" is defined in the recitals to this Agreement.
"Lien" means any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, title retention agreement in, of or on any Person's Properties in
favor of any other Person.
"Line" means the line of credit made available by Lender to Borrower up to
an aggregate principal amount of $3,000,000.
"Line Interest Rate" is defined in Article 2.2.
"Maximum Available Credit" means three million dollars ($3,000,000) of
principal
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outstanding at any time.
"Mercury Partners" means Mercury Partners, LLC, a California limited
liability company.
"Note" is defined in Article 2.3(c).
"Obligations" means the obligation of Borrower to pay the principal and
interest on the Advances in accordance with the terms hereof and the terms of
the Note and to satisfy all other liabilities to Lender hereunder and under the
Note and under any other document, agreement, instrument or certificate,
whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, due or to become due, including any extensions, or renewals thereof
and substitutions therefor.
"Permits" is defined in Article 5.14.
"Permitted Liens" means the items listed on Schedule 5.5 hereto.
"Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture, court
or government or political subdivision or agency thereof.
"Prime Rate" means the prime rate of interest set forth in the Money Rates
Section of the New York edition of the Wall Street Journal, rounded up to the
nearest one-eighth.
"Property" means any interest in any kind of personal property or asset,
whether tangible or intangible.
"Release" is defined in Article 5.14(c).
"SEC Filings" means any and all reports filed made by Borrower with the
Securities and Exchange Commission under the 1934 Act since January 1, 1995.
"Term" means the period commencing on the Effective Date and ending on the
Termination Date.
"Termination Date" means the date on which (i) there is an Event of
Default upon which Lender forthwith declares all principal and interest on the
Note to be immediately due and payable or on which all principal and interest
is immediately due and payable without any declaration by Lender, or (ii) the
date on which a Termination Event occurs.
"Termination Event" means the earliest to occur of (i) the termination of
the Letter of Intent other than by means of the execution and delivery of a
definitive merger agreement as contemplated therein, (ii) the termination of
such definitive merger agreement other than by means
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of the consummation of the transactions contemplated therein or (iii) March 25,
1997.
"Uniform Commercial Code" means the Uniform Commercial Code as adopted in
any state having jurisdiction over the Collateral.
"Unmatured Event of Default" means and refers to any event, act or
occurrence which with the passage of time or giving of notice or both would
become an Event of Default.
ARTICLE 2 - LINE OF CREDIT
2.1 Line of Credit Established. Subject to the terms and conditions
hereof, and in reliance on the representations and warranties and covenants
herein, and provided that no Event of Default has occurred and is continuing
(not including any Event of Default which has been waived or is otherwise
subject to a forbearance agreement), commencing on the Effective Date and
expiring on the Termination Date, Lender hereby agrees, from time to time
during the Term, to extend one or more Advances, the aggregate of which at any
one time shall not exceed the Maximum Available Credit. From and after the
Termination Date, Lender shall have no obligation to make Advances.
2.2 Line Interest Rate. Advances shall bear interest on the unpaid
principal balance outstanding at any time from the Funding Date of each such
Advance to maturity (or repayment) at the floating interest rate of four
percent (4%) per annum in excess of the Prime Rate (the "Line Interest Rate")
or such lesser rate permitted by applicable law, if the Line Interest Rate
would violate applicable law. The Line Interest rate shall be changed
automatically on and as of the effective date of each change in the Prime Rate.
Interest shall be calculated on the basis of a 360-day year, but charged for
the actual number of days elapsed.
2.3 Funding Requests.
(a) Upon execution and delivery of this Agreement, subject to the
conditions set forth in Article 4.1, Lender will make an Advance (the "Initial
Advance") to Borrower in the amount of $2,500,000 to pay necessary and
reasonable operating expenses required to keep it operating as a going concern
through the Termination Date.
(b) At any time and from time to time during the Term until the
Termination Date, Borrower may request one or more Advances by submitting to
Lender a completed and executed Funding Request in the form attached hereto as
Schedule 2.3(b) ("Funding Request") no later than 11:00 a.m., Eastern Time, one
(1) day prior to the proposed Funding Date. Each Funding Request shall specify
(i) the proposed Funding Date (which shall be a Business Day), (ii) the amount
of the proposed Advance, and (iii) a detailed schedule of Borrower's proposed
use of the Advance. Subject to the provisions of Section 2 hereof and Lender's
approval of the Funding
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Request, Lender shall make the Advance requested on the proposed Funding Date
in accordance with Borrower's Funding Requests.
(c) Lender agrees that it shall approve the Advance set forth in a
Funding Request if the Advance requested thereby is to be used to pay necessary
and reasonable operating expenses of the Business required to keep it operating
as a going concern through the Termination Date including, without limitation,
accounts payable which are due as of the date of such request. Lender shall not
be required to, but in its sole and absolute discretion may, advance funds to
be used by Borrower for any other purpose related to the operation of the
Business. The Initial Advance and each subsequent Advance shall be evidenced
by the Note in the form attached hereto as Schedule 2.3(c). No third party is
intended to be a beneficiary of this provision (or of any other provision of
this Agreement).
2.4 Maximum Available Credit. The aggregate amount of principal which
Borrower may have outstanding under the Line at any time shall not exceed the
Maximum Available Credit. Borrower agrees, without notice or demand,
immediately to repay, any principal balance of the Line in excess of the
Maximum Available Credit.
2.5 Principal and Interest Payments.
(a) Interest shall accrue on the principal balance outstanding under
the Line at the Line Interest Rate. All unpaid principal on the Line and all
interest accrued but unpaid thereon shall be paid in full by Borrower on March
25, 1997 (or as otherwise provided herein or in the Note). Prior to the
Termination Date, accrued interest shall be calculated monthly and capitalized,
and constitute outstanding principal but such capitalized interest shall not be
considered principal for purposes of determining the Maximum Available Credit.
(b) Without in any way limiting Lender's rights and remedies hereunder
and under the Note in the case of Events of Default, any principal payments on
the Line not paid when due and, to the extent permitted by applicable law, any
interest payment on the Line not paid when due, and any other amount due to
Lender under this Agreement not paid when due, shall thereafter bear interest
payable upon demand at a rate which is three percent (3%) per annum in excess
of the applicable Line Interest Rate.
(c) Borrower may prepay the Advances, in whole or in part from time to
time, without penalty.
ARTICLE 3 - SECURITY
3.1 Grant of Security Interests. To secure the prompt and complete payment
when due of all of its Obligations and the performance by Borrower of all of
the covenants and obligations to be performed by it pursuant to this Agreement,
Borrower hereby assigns and pledges to Lender
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and grants to Lender a security interest in and lien on all of Borrower's
right, title and interest in and to all of the Collateral, wherever located,
whether now owned or existing or hereafter arising or acquired.
3.2 Continuing Liability of Borrower. The security interests described
above are granted as security only and shall not subject Lender, or transfer or
in way affect or modify, any obligation or liability of Borrower with respect
to, any of the Collateral or any transaction in connection therewith. Lender
shall not be required or obligated in any manner to make any inquiry as to the
nature or sufficiency of any payment received by it or the sufficiency of any
performance by any party under any such obligation, or to make any payment or
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amount thereunder to which any such Person
may be entitled at any time.
3.3 Filings; Further Assurances. Borrower will, from time to time, at its
expense and in such manner and form as Lender may reasonably require, execute,
deliver, file and record Financing Statements and any other statements,
continuation statement, specific assignment or other instrument or document and
take any other action that may be necessary or desirable, to create, preserve,
perfect or validate the security interests created hereunder or to enable
Lender to exercise and enforce its rights hereunder with respect to any of the
Collateral.
3.4 Power of Attorney. Borrower hereby authorizes Lender, and gives Lender
its irrevocable power of attorney (which authorization is coupled with an
interest), in the name of Borrower or otherwise, to execute, deliver, file and
record any financing statement, continuation statement, specific assignment or
other paper and to take any other action that Lender in its sole discretion may
deem necessary or appropriate to further perfect the security interests created
hereby. Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement where permitted by applicable law.
3.5 Place of Business; Change of Name. As of the Effective Date, the chief
executive office of the Borrower and its chief place of business, the locations
of the Collateral and the location where it maintains all records relating to
the Collateral are listed on Schedule 3.5 hereto. Borrower will not (x) change
its principal place of business or chief executive office from the location
listed on such Schedule, (y) change its name, identity or corporate structure
or (z) change the location of the Collateral or its records relating to the
Collateral from those specified on Schedule 3.5 hereto, unless in any such
event Borrower shall have given Lender at least sixty (60) days' (or such
shorter period to which Lender may consent in writing) prior written notice
thereof and shall have taken all action necessary or reasonably requested
(including without limitation appropriate opinions of counsel) by Lender to
amend its existing financing statements and continuation statements so that
they are not misleading and to file additional financing statements in all
applicable jurisdictions to perfect the security interests of Lender in all of
the Collateral.
3.6 Maintenance of Collateral. If Borrower fails to do so, Lender may, at
its option,
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pay and discharge taxes, liens, security interests and other encumbrances
pertaining to the Collateral (except Permitted Liens), and may pay for the
maintenance and preservation of the Collateral to prevent a material
deterioration from its present condition and for insurance thereon in order to
keep the Collateral in salable condition. Borrower agrees to reimburse Lender
promptly after notice thereof for any payment so made.
ARTICLE 4 - CONDITIONS OF ADVANCES
The performance by Lender of its obligations hereunder are subject to the
following conditions precedent:
4.1 Closing. On the Effective Date Borrower shall deliver or cause to be
delivered to Lender, in form and substance satisfactory to Lender and its
counsel, in addition to this Agreement, the following documents and instruments
and the following conditions shall have been satisfied:
(a) Coast shall have purchased the Senior Subordinated Secured
Promissory Note, dated May 24, 1996, payable to Mercury Partners in the amount
of $500,000 and Mercury shall have assigned to Coast its rights under the
Trademark Security Agreement and Patent Security Agreement each dated May 24,
1996.
(b) Borrower shall have delivered to Lender a copy of the resolutions
of Borrower's Board of Directors, certified as of the Effective Date by the
Secretary of Borrower, with respect to the authorization, execution, delivery
and performance of this Agreement by Borrower;
(c) Borrower shall have delivered to Lender a certificate dated as of
the Effective Date as to the incumbency and signature of the President of
Borrower and/or any other authorized officer signing this Agreement or
authorized to execute and deliver the Note on behalf of Borrower;
(d) Borrower shall have executed and delivered the Note to Lender;
(e) Borrower shall have delivered to Lender appropriate Financing
Statements covering the Collateral, duly executed by Borrower for each
jurisdiction as Lender shall have specified, and security agreements and such
other documents and statements, duly executed by Borrower, as may be required
to perfect a security interest in the Collateral;
(f) Borrower shall have fulfilled and complied in all respects with
each and every obligation, covenant, term and condition of this Agreement which
are then required to be fulfilled and complied with by it;
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(g) Counsel to Borrower shall have delivered to Lender an opinion in
form and substance satisfactory to Lender;
(h) Borrower shall have delivered to Lender a certificate of good
standing from its state of incorporation and every jurisdiction in which
Borrower is required to be qualified as a foreign corporation to transact
business;
(i) The Forbearance Letter in form and substance satisfactory to
Lender shall have been executed and delivered to Lender.
4.2 Advances. The agreement of Lender to make any Advances after the
Effective Date hereunder is subject to satisfaction of the following conditions
precedent:
(a) Lender shall have timely received a Funding Request as required
under Article 2.3 hereof;
(b) Borrower shall have delivered to Lender a certificate, dated as of
the date of the Advance, of the President and Chief Financial Officer of
Borrower certifying compliance with all covenants and agreements herein then
required to be or to have been complied with by it, the absence of any Event of
Default which has occurred and is continuing (not including any Event of
Default which has been waived or is otherwise subject to a forbearance
agreement) and the truth of all representations and warranties herein with the
same effect as though made on and as of such date, except to the extent such
representations and warranties specifically relate to an earlier date; and
(d) There shall have been no material adverse change in the business,
financial condition, results or operations of Borrower since the Effective Date
and the Borrower shall have delivered to Lender a certificate to such effect,
dated the date of the Advance, executed on behalf of Borrower by its President
and Chief Financial Officer.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BORROWER
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which reasonably identifies an
exception to a representation and warranty in this Agreement and which is
delivered by Borrower to Lender prior to the execution of this Agreement (the
"Borrower Disclosure Schedule"), Borrower represents and warrants to Lender as
of the Effective Date and the date of each Advance:
5.1 Due Incorporation and Good Standing. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Borrower is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of its business requires it to be so qualified or where the ownership
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of its properties or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not materially
adversely affect the Business or the enforceability of this Agreement or the
Note or the ability of Borrower to perform its Obligations hereunder.
5.2 Due Authorization and No Conflict. The execution, delivery and
performance by Borrower of this Agreement and the transactions contemplated
hereby, including the Note and security interests contemplated hereunder, are
within Borrower's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene Borrower's certificate of incorporation or
by-laws, any law, rule or regulation applicable to Borrower, any contractual
restriction contained in any indenture, loan or credit agreement, lease,
mortgage, security agreement, bond, note, or other agreement or instrument
binding on or affecting Borrower or its property or any order, writ, judgment,
award, injunction or decree binding on or affecting Borrower or its property.
This Agreement has been duly executed and delivered on behalf of Borrower.
5.3 Government and Other Consents. Except for (i) the filing of Financing
Statements required to perfect the security interests granted hereunder, or
(ii) the consent of Coast, which consent has been obtained, no authorization,
consent, approval or other action by, and no registration, qualification,
designation, declaration, notice to or filing with, any governmental authority
or other Person is or will be necessary in connection with the execution and
delivery of this Agreement or any of the other documents contemplated hereby,
the consummation of the transactions herein contemplated, or performance of or
compliance with the terms and conditions hereof, to ensure the legality,
validity or enforceability hereof.
5.4 Enforceability. This Agreement has been validly executed and delivered
by Borrower and constitutes the legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws relating to or affecting
creditors' rights generally and by equitable principles.
5.5 Priority of Liens. Other than Permitted Liens listed on Schedule 5.5
hereto, Borrower owns the Collateral free and clear of all Liens subject to the
rights and interests granted Lender herein, and upon perfection of Lender's
security interest in the Collateral, Lender will have a security interest in
and lien on the Collateral superior in right of preference to all other Liens
other than Permitted Liens.
5.6 Financial Statements. The Financial Statements of Borrower contained
in the SEC Filings are true, complete and correct in all material respects,
have been prepared in accordance with GAAP, consistently applied, and present
fairly the financial condition of Borrower as of said dates and the results of
Borrower's operations for the periods then ended.
5.7 No Litigation. Other than as disclosed in the SEC Filings, there are
no actions, suits or proceedings at law or in equity or by or before any
governmental authority now pending or, to the knowledge of Borrower, threatened
against or affecting Borrower or any property or
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rights of Borrower which purport to challenge the legality, validity or
enforceability of this Agreement or which may materially impair the ability of
Borrower to carry on business substantially as now being conducted or which may
materially and adversely affect the condition (financial or otherwise),
operations or properties of Borrower.
5.8 Contracts; Indebtedness.
(a) True, complete and correct copies of all material contracts and
agreements of Borrower have heretofore been furnished or made available to
Lender. Other than as set forth in Schedule 5.8(a), all such material contracts
and agreements are in full force and effect and enforceable in accordance with
their respective terms, and, to Borrower's knowledge, the parties thereto other
than Borrower have complied, and are complying, with all of their material
obligations and are not in material violation or default under (nor does there
exist any condition which upon the passage of time or the giving of notice
would cause such a material violation of or default under) any of such material
contracts or agreements. Other than as set forth in Schedule 5.8(a), Borrower
is not in violation of or in default under (nor does there exist any condition
which upon the passage of time or the giving of notice would cause such a
violation of or default under) any material contract to which it is a party or
by which it or any of its properties or assets is bound. For purposes of this
Agreement, "material contract" means any material contract, whether or not made
within the ordinary course of business, within the meaning of Item 601 (10) of
Regulation S-K under the Securities Act of 1933, as amended, or which is
described in the SEC Filings.
(b) True, complete and correct copies of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any Indebtedness of Borrower is outstanding or
may be incurred have heretofore been furnished to or made available to Lender.
"Indebtedness" shall mean, with respect to any person, without duplication, (a)
all obligations of such person for borrowed money, or with respect to deposits
or advances of any kind to such person, (b) all obligations of such person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person upon which interest charges are customarily paid,
(d) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (e) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
such person's business), (f) all capitalized lease obligations of such person,
(g) all obligations of others secured by any lien on property or assets owned
or acquired by such person, whether or not the obligations secured thereby have
been assumed, (h) all obligations of such person under interest rate or
currency hedging transactions (valued at the termination value thereof), (i)
all letters of credit issued for the account of such person and (j) all
guarantees and arrangements having the economic effect of a guarantee of such
person of any indebtedness of any other person.
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5.9 Accuracy of Information. All certificates, reports, financial
statements and similar writings furnished by or on behalf of Borrower to Lender
at any time pursuant to any requirement of, or in response to any written
request of Lender or its agents under, this Agreement or any transaction
contemplated hereby, have been, and all such certificates, reports, financial
statements and similar writings hereafter furnished by Borrower to Lender will
be, true, complete and accurate in every respect material to the transactions
contemplated hereby on the date as of which any such certificate, report,
financial statement or similar writing was or will be delivered, and taken as a
whole, as of such date of delivery, such materials shall not omit to state any
material facts or any facts necessary to make the statements contained therein
not materially misleading.
5.10 Margin Regulations. Borrower is not engaged, principally or as one of
its important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" (as each of the quoted terms
is defined or used in Regulation G, T, U or X). No part of the proceeds of any
of the Advances will be used for so purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation G, T, U or X.
5.11 Taxes. Other than as disclosed in Schedule 5.11, Borrower has filed
or caused to be filed all federal, state and local tax returns which are
required to be filed by it, and has paid or caused to be paid all taxes shown
to be due and payable on such returns or on any assessments received by it,
other than any taxes or assessments, the validity of which are being contested
in good faith by appropriate proceedings and with respect to which the Borrower
has set aside adequate reserves on its books in accordance with GAAP.
5.12 ERISA. Other than as disclosed in Schedule 5.12, Borrower does not
currently maintain or contribute to, nor has it ever maintained or contributed
to, any "employee benefit plan," as such term is defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with
respect to which the Company is required to file Internal Revenue Service Form
5500, and the Company does not currently contribute to, nor has it ever
contributed to, any "multiemployer plan," as that term is defined in Section 3
of ERISA.
5.13 Compliance with Applicable Laws.
(a) Borrower has in effect all federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Permits") necessary for it to own,
lease or operate its properties and assets and to carry on its business as now
conducted, and there has occurred no material default under any such Permit.
Borrower is in material compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity.
(b) Borrower is, and has been, in material compliance with all
applicable "Environmental Laws". The term "Environmental Laws" means any
federal, state or local statute, code, ordinance, rule, regulation, policy,
guideline, permit, consent, approval, license, judgment,
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order, writ, decree, directive, injunction or other authorization, including
the requirement to register underground storage tanks, relating to: (i)
"Releases" (as defined below) or threatened Releases of "Hazardous Material"
(as defined below) into the environment, including into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities, surface water,
groundwater, publicly-owned treatment works, septic systems or land; or (ii)
the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Material.
(c) During the period of ownership or operation by Borrower of any of
its current or previously owned or leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties or
any surrounding site, and Borrower has not disposed of any Hazardous Material
or any other substance in a manner that could reasonably be anticipated to lead
to a Release. To the best of the Borrower's knowledge, prior to the period of
ownership or operation by Borrower of any of its current or previously owned or
leased properties, no Hazardous Material was generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped or
disposed of from, such current or previously owned properties, and there were
no Releases of Hazardous Material in, on, under or affecting any such property
or any surrounding site. The term "Release" has the meaning set forth in 42
U.S.C. Section 9601(22). The term "Hazardous Material" means (i) hazardous
materials, pollutants, contaminants, constituents, medical or infectious
wastes, hazardous wastes and hazardous substances as those terms are defined in
the following statutes and their implementing regulations: the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section
9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq. and the Clean Air Act,
42 U.S.C. Section 7401 et seq., (ii) petroleum, including crude oil and any
fractions thereof, (iii) natural gas, synthetic gas and any mixtures thereof,
(iv) asbestos and/or asbestos-containing material, (v) radon and (vi) PCBs, or
materials or fluids containing PCBs.
5.14 Intellectual Property Matters. Except as set forth in Schedule 5.14
or in the SEC Filings, (i) Borrower owns or has the right to use, free and
clear of all Liens, charges, claims and restrictions, all know-how, processes,
patents, patent applications, trade secrets, confidential information,
trademarks and service marks (and registrations and applications therefor),
trade names, copyrights (and registrations and applications therefor),
licenses, proprietary rights and other rights and information materially
necessary to its business as heretofore or now conducted or under development
(the "Borrower Intellectual Property Rights"), (ii) there is no litigation,
threatened or pending, related to the Borrower Intellectual Property Rights,
and (iii) the Borrower Intellectual Property have been properly maintained and
are valid and subsisting. Borrower is not infringing upon or otherwise acting
adversely to any actual or claimed know-how, process, patent, trade secret,
trademark, service mark, trade name, copyright, information, proprietary right
or other right of any person. There are no outstanding options, licenses or
agreements of any kind relating to any Borrower Intellectual Property Rights in
favor of any third party (other than license agreements on Borrower's standard
form entered into in the ordinary course of business).
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Borrower has not received any communications alleging that Borrower has
violated or, by conducting its business as now conducted or currently proposed
to be conducted by Borrower, would violate any patent, trade secret, trademark,
service mark, trade name, copyright, license, information, proprietary right or
other right of any other person or entity, and, to the best of Borrower's
knowledge, there is no basis for any such allegation. Borrower has taken
reasonable steps to protect its trade secrets and confidential information.
Other than as set forth in the SEC Filings, there is no actual or threatened
infringement or adverse use of Borrower's rights to or in any material
know-how, processes, trade secrets, trademarks, service marks, trade names,
copyrights, licenses, information, proprietary rights or other material rights
of Borrower. To the best of Borrower's knowledge, neither the execution nor
delivery of this Agreement, nor the carrying on of Borrower's business as now
conducted or under development by Borrower, will conflict with or result in a
material breach of the terms, conditions or provisions of, or constitute a
material default under or a material violation of, any fiduciary duty or any
contract, covenant or instrument under which any of Borrower's employees is now
obligated.
ARTICLE 6 - COVENANTS OF BORROWER
6.1 Affirmative Covenants. From the Effective Date until the Collection
Date, Borrower will, unless Lender shall otherwise consent in writing:
(a) Use of Proceeds. Use the proceeds of the Advances (i) as to the
Initial Advance, to pay necessary and reasonable operating expenses required to
keep it operating as a going concern through the Termination Date, and (ii) as
to any subsequent Advance, only for the purposes set forth in the applicable
Funding Request. Borrower shall deposit the proceeds of the Initial Advance and
any subsequent Advance at the bank, and in the account, set forth on Schedule
6.1(a) (the "Borrower Bank Account"). Borrower shall maintain the proceeds of
the Initial Advance and any subsequent Advance in the Borrower Bank Account
until such time as such proceeds are utilized in accordance with the purposes
set forth herein or in the applicable Funding Request, as the case may be.
(b) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties.
(c) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the nature of its business
requires it to be so qualified or where the ownership of its properties or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not materially adversely affect the
enforceability of this Agreement and any Note, the business, properties,
operations, profits or condition (financial or otherwise) of Borrower or the
ability of Borrower to perform its obligations hereunder.
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<PAGE> 16
(d) Keeping of Records and Books of Account. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing accounts receivable in the event of the
destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all accounts receivable (including, without limitation, records
adequate to permit the daily identification of all collections of and
adjustments to each account).
(e) Location of Records. Keep its chief place of business and chief
executive office, and the offices where it keeps the records, at the address of
Borrower referred to in Schedule 3.5 hereto and notify lender 60 days in
advance prior to a change of Borrower's principal executive office or in the
location of any Collateral.
(f) Accounts. Collect its accounts and sell its inventory only in the
ordinary course of business.
(g) Maintenance of Properties. Maintain its inventory, equipment, real
estate and other properties, whether owned or leased, in good condition and
repair (normal wear and tear excepted), and will pay and discharge or cause to
be paid and discharged, when due, the cost of repairs to or maintenance of the
same.
(h) Insurance. Insure and keep insured with reputable insurance
companies so much of its properties as presently maintained by Borrower.
(i) Taxes. File or cause to be filed all federal, state and local tax
returns which are required to be filed by it. Borrower shall pay or cause to be
paid all taxes shown to be due and payable on such returns or on any
assessments received by it, other than any taxes or assessments, the validity
of which are being contested in good faith by appropriate proceedings and with
respect to which Borrower shall have set aside adequate reserves on its books
in accordance with GAAP and which proceedings could not reasonably be expected
to have a material adverse effect on the ability of the Borrower to perform its
obligations hereunder.
(j) Reporting Requirements of Borrower. From the Effective Date until
the Collection Date, will furnish to Lender:
(i) as soon as available and in any event within 30 days after the
end of each fiscal quarter of Borrower, balance sheets of Borrower as of the
end of such quarter, and (to the extent available) statements of income and
retained earnings of Borrower for the period commencing at the end of the
previous fiscal quarter and ending with the end of such quarter, certified by
the chief financial officer, chief accounting officer or treasurer of Borrower;
(ii) as soon as possible and in any event within five Business Days
after the occurrence of each Event of Default or Unmatured Event of Default,
the statement of the chief financial officer, chief accounting officer or
treasurer of Borrower setting forth details of such
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<PAGE> 17
Event of Default or Unmatured Event of Default and the action which the
Borrower proposes to make with respect thereto;
(iii) promptly from time to time, such other information,
documents, records or reports respecting the accounts or the conditions or
operations, financial or otherwise, of Borrower as Lender may from time to time
reasonably request in order to protect the interests of Lender under or as
contemplated by this Agreement.
(k) Performance of Obligations. Perform, pay and discharge, as and
when due, all of Borrower's obligations (both monetary and non-monetary) (i)
under this Agreement; and (ii) under any agreement that encumbers any part of
the Collateral if (as to ii) the failure to do so could result in a material
adverse effect on the properties, operations, profits or condition (financial
or otherwise) of Borrower.
(l) Material Adverse Changes. Immediately notify Lender of (i) the
occurrence or likely occurrence of any event which causes or could reasonably
be expected to cause (A) a material adverse effect on the properties,
operations, prospects, profits or condition (financial or otherwise) of
Borrower; (B) any representation, warranty made by Borrower hereunder to be
untrue, incomplete or misleading in any material respect; or (C) the occurrence
of any other Event of Default or Unmatured Event of Default hereunder or of any
other development, financial or otherwise, which might reasonably be expected
to materially adversely affect its Business, properties or affairs or the
ability of Borrower to repay the Obligations; (ii) the institution of, or the
issuance of any order, judgment, decree or other process in, any litigation,
investigation, prosecution, proceeding or other action by any governmental
authority or other Person against Borrower or related to the Business and that
does, or could reasonably be expected to, have a material adverse effect on the
properties, operations, profits or condition (financial or otherwise) of
Borrower; (iii) any material casualty to any property of Borrower, whether or
not insured; and (iv) any change of Borrower's directors.
(m) Business. Maintain the general character of Borrower's Business in
which it is engaged as of the Effective Date.
(n) Patents. As soon as practicable following the execution of this
Agreement, shall pay the maintenance fees with respect to, and take all other
necessary action to revive, U.S. Patent No.5,124,797. Borrower shall take all
necessary action to maintain the effectiveness of all patents owned by Borrower
or used or to be used in the Business.
(o) Indemnification. Borrower hereby indemnifies and agrees to
protect, defend and hold harmless Lender and Lender's directors, officers,
employees, agents, attorneys and shareholders from and against any and all
losses, damages, expenses or liabilities of any kind or nature from any suits,
claims, or demands, including counsel fees incurred in evaluating or defending
any such claim, suffered by any of them and caused by, relating to, arising out
of, resulting from, or in any way connected with this Agreement or the Note and
any transaction
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<PAGE> 18
contemplated therein. If Borrower shall have knowledge of any claim or
liability hereby indemnified against, it shall promptly give written notice
thereof to Lender. Lender shall promptly give Borrower written notice of all
suits or actions instituted against Lender, and Borrower shall timely proceed
to defend any such suit or action. Lender shall also have the right, at the
expense of Borrower, to participate in, or at Lender's election, assume the
defense or prosecution of such suit, action or proceeding, and in the latter
event Borrower may employ counsel and participate therein. Lender shall have
the right to adjust, settle, or compromise any claim, suit, or judgment. The
right of Lender to indemnification under this Agreement shall extend to any
money paid by Lender in settlement or compromise of any such claims, suits, and
judgments in good faith. THIS COVENANT SHALL SURVIVE PAYMENT OF THE OBLIGATIONS
AND THE TERMINATION OR SATISFACTION OF THIS AGREEMENT.
6.2 Negative Covenants. From the Effective Date until the Collection Date,
Borrower will not, without the written consent of Lender:
(a) Debts, Liens and Encumbrances. Create, assume or permit to exist
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
any of the Collateral, or any of its other properties or assets, whether now
owned or hereafter acquired other than (i) security interests with respect to
money borrowed from Lender; and (ii) Permitted Liens.
(b) Transfer of Collateral. Other than with respect to Permitted
Liens, transfers between the entities constituting Borrower and sales of assets
in the ordinary course of business, sell, enter into an agreement of sale for,
convey, lease, assign, transfer, pledge, grant a security interest, mortgage or
lien in, or otherwise dispose of the Collateral or its assets.
(c) Stock, Merger, Consolidation, Etc. Sell any shares of any class of
its capital stock to any Person other than Lender or consolidate with or merge
into or with any Person other than Lender, or purchase or otherwise acquire all
or substantially all of the assets or capital stock, or other ownership
interest of, any Person or sell, transfer, lease or otherwise dispose of all or
substantially all of its assets to any Person other than Lender, or enter into
any agreement or make any public announcement with respect to any of the
foregoing, except for the conveyances of a security interest in favor of Lender
as expressly permitted under the terms of this Agreement.
(d) Change in Corporate Name. Make any change to its corporate name or
use any trade name, fictitious names, assumed names or "doing business as"
names.
(e) Guarantees. Other than cross-guarantees between the entities
constituting Borrower, guarantee, endorse or otherwise be or become
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of Lender as provided for
under this Agreement.
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<PAGE> 19
(f) Limitation on Transactions with Affiliates. Other than
transactions between the entities constituting Borrower or transactions at
arms' length in the ordinary course of business, enter into, or be a party to,
any transaction with any Affiliate.
(g) Charter and By-Laws. Amend or otherwise modify its certificate of
incorporation or by-laws in any manner.
(h) Limitation on Investments. Other than investments between the
entities constituting Borrower, make or suffer to exist any loans or advances
to, or extend any credit to, or make any investments (by way of transfer of
property, contributions to capital, purchase of stock or securities or
evidences of indebtedness, acquisition of the business or assets, or otherwise)
in, any Affiliate or any other Person.
(i) Capital Expenditures. Expend, or be committed to expend, in excess
of $50,000 in the acquisition of fixed assets from the Effective Date until the
Collection Date.
(j) Licenses and Government Approvals. Fail to maintain in full force
and effect or fail to be in material compliance with (or permit its officers,
directors or shareholders to fail to maintain or fail to be in material
compliance with) any permit or license necessary or desirable in connection
with Borrower or the Business.
(k) Ordinary Course. Alter or amend any material provision of, or
terminate or permit termination of any agreement integral or necessary to the
Business, or in any manner conduct the Business other than in ordinary course.
(l) Indebtedness. Incur, create, assume, or permit to exist any
indebtedness except (i) the indebtedness under this Agreement and the Note,
(ii) the indebtedness existing on the dates shown on Schedule 6.2 hereto and
(iii) as between the entities constituting Borrower.
ARTICLE 7 - DEFAULT
7.1 Events of Default. The occurrence of any one or more of the following
events, conditions or state of affairs shall constitute an Event of Default
hereunder and under the Note:
(a) Borrower shall fail to pay as and when due any principal or
interest hereunder or under the Note, or use the proceeds of the Advances in
violation of Article 6.1(a);
(b) Borrower shall fail to observe or perform any Obligation or any
covenant to be observed or performed by it hereunder or under the Note or in
any other agreement between Lender and Borrower;
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<PAGE> 20
(c) Borrower shall default after the date hereof in the payment or
performance of any material obligation or material Indebtedness to another
Person whether now existing or hereafter incurred including, without
limitation, any event of default as defined in the Coast Agreement which is not
then subject to Coast's forbearance under the terms of the Forbearance Letter;
(d) Any material statement, certificate, report, representation or
warranty made or furnished by Borrower in this Agreement or in compliance with
the provisions hereof shall prove to have been false or misleading in any
material respect at the time when made, deemed made or furnished;
(e) (i) Any money judgment, writ or warrant of attachment or similar
process involving an amount in excess of U.S. $50,000 shall be entered or filed
against Borrower or any of its assets or properties and shall remain
undischarged for a period of 30 days, or (ii) any judgment or order of any
court or administrative agency awarding damages under the federal securities
laws or in any action seeking reimbursement, indemnification or contribution
with respect to payment of any such claim;
(f) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or of its property, (ii) be unable,
or admit in writing inability, to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent, (v) file a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization or an arrangement with creditors to take
advantage of any insolvency law, or an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition filed
against it, (vi) take corporate action for the purpose of effecting any of the
foregoing, or (vii) have an order for relief entered against it in any
proceeding under the United States Bankruptcy Code;
(g) An order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee or liquidator of Borrower or of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 30 consecutive days;
(h) If (i) any person or group within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
rules and regulations promulgated thereunder other than Lender shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the 1934
Act), directly or indirectly, of securities of the Company (or other securities
convertible into such securities) representing twenty percent (20%) of the
combined voting power of all securities of the Company entitled to vote in the
election of directors (hereinafter called a "Controlling Person"); or (ii) a
majority of the Board of Directors of the Company shall cease for any reason to
consist of (A) individuals who on December 10, 1996 were serving as directors of
the Company and (B) individuals who subsequently become members of the Board if
such individuals' nomination for election or election to the Board is
recommended or approved by a majority of the
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<PAGE> 21
Board of Directors of the Company. For purposes of clause (i) above, a person
or group shall not be a Controlling Person if such person or group holds voting
power in good faith and not for the purpose of circumventing this Section
7.1(h) as an agent, bank, broker, nominee, trustee, or holder of revocable
proxies given in response to a solicitation pursuant to the 1934 Act, for one
or more beneficial owners who do not individually, or, if they are a group
acting in concert, as a group have the voting power specified in clause (i);
(i) This Agreement shall cease for any reason to be in full force and
effect or shall be declared to be null and void or unenforceable in whole or in
part;
(j) There shall occur any material adverse change in the business,
properties, operations or condition (financial or otherwise) of Borrower;
(k) Other than Permitted Liens or Liens in favor of Lender or Liens
otherwise consented to in writing by Lender, imposition of any Lien or series
of Liens against Borrower or any of the Collateral whether by operation of law
or by consent except where the result of such Lien does not have a material
adverse effect on the properties, operations, profits or condition (financial
or otherwise) of Borrower; or
(l) Borrower shall cease to conduct its Business substantially as it
is conducted as of the Effective Date, or Borrower shall change the nature of
its Business.
7.2 Remedies on Default. Upon the occurrence of an Event of Default:
(a) In addition to the rights specifically granted hereunder or now or
hereafter existing in equity, at law, by virtue of statute or otherwise (each
of which rights may be exercised at any time and from time to time), Lender may
at its election forthwith declare all principal and interest to be immediately
due and payable, without protest, demand or other notice (which are hereby
expressly waived by Borrower). Upon the occurrence of an Event of Default
specified in Article 7.1(f) or (g) above, all obligations, including all
principal and interest, shall be immediately due and payable without any
declaration by Lender.
(b) Lender shall have all the rights of a secured creditor under the
Uniform Commercial Code.
(c) Borrower will pay, as part of the Obligations secured hereunder,
Lender's administrative fees and all other amounts (including but not limited
to Lender's attorneys' and other professional fees) paid by Lender: (i) for
taxes, levies and insurance on, or maintenance of, the Collateral; and (ii) in
taking possession of, disposing of, or preserving such Collateral.
(d) Borrower hereby designates and appoints Lender and its designees
or agents as attorneys-in-fact of Borrower upon the occurrence and continuation
of an Event of Default, irrevocably and with power of substitution, with
authority to sign Borrower's name on any
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<PAGE> 22
Financing Statements relating to the Collateral; to endorse the name of
Borrower on any notes, acceptances, checks, drafts, money orders or other
evidence of payment or proceeds of the Collateral that come into Lender's
possession; to sign the name of Borrower on any invoices, documents, drafts
against and notices to account debtors of Borrower, assignments and request for
verification of accounts; to execute proofs of claim and loss; to execute any
endorsements, assignments or other instruments of conveyance or transfer; and
to do any and all acts and things necessary or advisable in the sole discretion
of Lender to carry out and enforce this Agreement. All acts of said attorney or
designee are hereby ratified and approved and said attorney or designee shall
not be liable for any acts of commission or omission, nor for any error of
judgment or mistake of fact or law. This power of attorney being coupled with
an interest is irrevocable while any of the Obligations shall remain unpaid or
Lender has any obligation or ability to make Advances hereunder.
(e) Any cash proceeds of sale, lease or other disposition of
Collateral upon an Event of Default shall be applied in the following order:
(i) to Lender's costs; (ii) to the payment of interest due pursuant to this
Agreement or the Note; (iii) to the payment of principal due pursuant to this
Agreement or the Note; and (iv) any surplus then remaining to Borrower or
whomever may be lawfully entitled thereto.
(f) The remedies provided herein or in the Note or otherwise available
to Lender at law or in equity shall be cumulative and concurrent, and may be
pursued singly, successively or together at the sole discretion of Lender, and
may be exercised as often as occasion therefor shall occur; and the failure to
exercise any such right or remedy shall in no event be construed as a waiver or
release of the same.
ARTICLE 8 - MISCELLANEOUS
8.1 Amendments, Etc. No amendment to or waiver of any provision of this
Agreement nor consent to any departure by Borrower, shall in any event be
effective unless (a) the same shall be in writing and signed by Lender and
Borrower (with respect to an amendment) or Lender (with respect to a waiver or
consent by it) or Borrower (with respect to a waiver or consent by it), as the
case may be, and such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. This Agreement contains
a final and complete integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute the entire
agreement (together with the Schedules hereto) among the parties hereto with
respect to the subject matter hereof, superseding all prior oral or written
understandings.
8.2 Notices, Etc. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
communication by facsimile copy) and mailed, return receipt requested,
transmitted or delivered, as to each party hereto, at its address or facsimile
number set forth under its name on the signature pages hereof or at such other
address
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as shall be designated by such party in a written notice to the other parties.
All such notices and communications shall be effective, upon receipt, or in the
case of delivery by mail, five days after being deposited in the mails, or, in
the case of notice by facsimile copy, when verbal communication of receipt is
obtained.
8.3 Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and permitted assigns (which successors of Borrower shall include a trustee in
bankruptcy). Borrower may not assign any of its rights and obligations
hereunder or any interest herein without the prior written consent of Lender.
Lender may assign at any time its rights and obligations hereunder and
interests herein to any other Person without the consent of Borrower. Borrower
hereby consents to the foregoing and agrees to cooperate with any such Person
electing to exercise Lender's rights under this Agreement. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until such
time as the Collection Date shall occur; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty or
covenant made by the Borrower pursuant to Article 5 and Article 6 shall be
continuing and shall survive until all Obligations are satisfied in full.
8.4 GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT AND THE NOTE SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH
OF PENNSYLVANIA WITHOUT REGARD TO CONFLICT OF LAWS. BORROWER HEREBY AGREES TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA
FOR THE COUNTY OF YORK AND THE UNITED STATES DISTRICT COURT OF THE MIDDLE
DISTRICT OF PENNSYLVANIA AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED
MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE
SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. BORROWER
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN BORROWER AND LENDER
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE
FOREGOING CONSENT TO JURISDICTION, LENDER HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS ARTICLE 8.4 SHALL AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF LENDER TO
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BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS
OF ANY OTHER JURISDICTION.
8.5 Execution in Counterparts; Severability. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
8.6 Joint and Several Liability. Each entity constituting Borrower hereby
unconditionally and absolutely guarantees to and for the Lender the due
performance, including without limitation the prompt payment when due or within
any applicable grace period, whether at stated maturity, by acceleration or
otherwise and at all times thereafter, of any and all Obligations of Borrower
owed to the Lender irrespective of (a) any lack of enforceability of any
Obligation, (b) any change of the time, manner, place of payment, or any other
term of any Obligation, (c) any exchange, release or non-perfection of any
collateral securing payment of any Obligation, (d) any law, regulation or order
of any jurisdiction affecting the genuineness, validity, or rights of the
Lender with respect to the Obligations or any instruments evidencing any of the
Obligations, or (e) any other circumstance which might otherwise constitute a
defense to or discharge of an entity constituting Borrower. Each entity
constituting Borrower agrees that its obligations hereunder are irrevocable;
that a separate action or actions may be brought and prosecuted against it
regardless of whether the other entity constituting Borrower is joined in any
such action or actions; and that it waives the benefit of any statute of
limitations affecting its liabilities hereunder or the enforcement hereof.
Each entity constituting Borrower agrees that its obligations as a
guarantor shall not be impaired, modified, changed, released, or limited in any
manner whatsoever by any impairment, modification, change, release or
limitation of the liability of the other's estate in bankruptcy, resulting from
the operation of any present or future provision of the bankruptcy laws or
other similar statute, or from the decision of any court in a bankruptcy
proceeding.
This is a continuing guarantee and shall remain in full force and effect
and be binding upon each entity constituting Borrower, their respective
successors and assigns until payment in full of all of the Obligations and no
partial payment hereunder shall entitle either of them, by subrogation or
otherwise, to any payment by the other out of its property.
Each entity constituting Borrower hereby waives all notices of any
character whatsoever with respect to this guarantee and the Obligations,
including but not limited to notice of the acceptance hereof and reliance
hereon, of the present existence or future incurring of any Obligations, of the
amounts, terms and conditions thereof, and of any defaults thereon and further
waives the defenses of diligence, presentment for payment, protest, demand or
extensions of time for payment. Each entity constituting Borrower hereby
consents to the taking of, or failure to take, from time to time
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<PAGE> 25
without notice to it, any such action of any nature whatsoever with respect to
the Obligations and with respect to any rights against any person or persons or
in any property, including but not limited to any renewals, extensions,
modifications, postponements, compromises, settlements, substitutions, refusals
or failures to exercise or enforce, indulgences, waivers, surrenders, exchanges
and releases, and each such entity will remain fully liable hereon
notwithstanding any of the foregoing. Each entity constituting Borrower hereby
waives the benefit of all laws now or hereafter in effect in any way limiting
or restricting the liability of such entity hereunder, including without
limitation (a) all defenses whatsoever to such entity's liability hereunder
except the defense of payment made on account of the Obligations to the Lender
and such entity's liability hereunder; and (b) all right to stay of execution
and exemption of property in any action to enforce the liability of such entity
hereunder; and (c) all rights accorded such entity under any other statutory
provisions of any other applicable jurisdiction affecting the rights of the
Lender to enforce the obligations of such guarantee under this guarantee.
Each entity constituting Borrower hereby consents and agrees that without
further notice to or assent from it, the time of payment of any or all of the
Obligations may be changed, any other term or condition relating to any or all
of the Obligations may be changed, the other entity constituting Borrower may
be discharged from any or all of the Obligations, any composition or settlement
relating thereto may be consummated and accepted, and that such entity will
remain bound upon this guarantee notwithstanding any or all of the foregoing.
No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by the Lender of any right, power or
remedy preclude any other further exercise thereof or the exercise of any other
right, power or remedy. The rights and remedies provided herein shall be in
addition to and not exclusive of any rights or remedies provided at law or in
equity.
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IN WITNESS WHEREOF, the parties below have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
New Image Industries, Inc.
By: /s/ Hal Orr
--------------------------------
Title: Chief Financial Officer
Address: 2283 Cosmos Court
Carlsbad, California 92009
Telephone:
Facsimile:
Insight Imaging Systems, Inc.
By: /s/ Hal Orr
--------------------------------
Title: Chief Financial Officer
Address: 2283 Cosmos Court
Carlsbad, California 92009
Telephone:
Facsimile:
DENTSPLY International Inc.
By: /s/ Edward D. Yates
--------------------------------
Title: Senior Vice President
Address: 570 West College Avenue
York, Pennsylvania 17405
Telephone:
Facsimile:
<PAGE> 27
SCHEDULE 2.3(b)
FORM OF FUNDING REQUEST
BY
NEW IMAGE INDUSTRIES, INC. AND INSIGHT IMAGING SYSTEMS, INC.
_________________, 199_
DENTSPLY International Inc.
570 West College Avenue
York, PA 17405
This Funding Request is provided to DENTSPLY International Inc. to evidence the
desire of New Image Industries, Inc. and Insight Imaging Systems, Inc. to
borrow funds under the Credit Agreement, dated as of December 24, 1996, by and
between Borrower and Lender (the "Agreement"). All capitalized terms not
defined herein shall have the same meaning ascribed to such terms in the
Agreement.
Please transfer the amount of $_____ to [account] on [date].
The Advance shall be used only for the specific purposes and in the particular
amounts as set forth on Exhibit A hereto.
Borrower hereby certifies that no Event of Default or Unmatured Event of
Default under the Agreement or the Note has occurred and is continuing (other
than events of default which have been waived or which are the subject of a
forbearance agreement).
New Image Industries, Inc. Insight Imaging Systems, Inc.
By:____________________ By:_____________________
Name: Name:
Title: Title:
<PAGE> 28
SCHEDULE 2.3(c)
FORM OF NOTE
SUBJECT TO THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT EXECUTED
BY AND AMONG COAST BUSINESS CREDIT, DENTSPLY INTERNATIONAL INC., AND
NEW IMAGE INDUSTRIES, INC. AND INSIGHT IMAGING SYSTEMS, INC.,
DATED AS OF DECEMBER 24, 1996
U.S. $3,000,000 December 24, 1996
FOR VALUE RECEIVED, New Image Industries, Inc., a Delaware corporation, and
Insight Imaging Systems, Inc., a California corporation, with a principal place
of business at 2283 Cosmos Court, Carlsbad, California 92009 (collectively, the
"Maker"), hereby, promise to pay, jointly and severally, to the order of
DENTSPLY International Inc. (the "Payee") the principal sum of $3,000,000 or
such lesser amount as shall have been advanced and remain outstanding under the
terms of the Agreement defined below (the "Principal Sum"), together with
interest from the date of this Note on the unpaid balance of Principal Sum at
the floating interest rate of four percent (4%) per annum in excess of the
prime rate (the "Prime Rate") of interest set forth in the Money Rates Section
of the New York edition of the Wall Street Journal, rounded up to the nearest
one-eighth (the "Line Interest Rate") or such lesser rate permitted by
applicable law, if the Line Interest Rate would violate applicable law, as
follows:
1. Incorporation of the Credit Agreement. The Payee and the Maker are parties
to that certain Credit Agreement (the "Agreement") dated as of December 24,
1996. The terms and conditions of the Agreement are hereby incorporated in
this Note by reference and the Payee and the Maker are entitled to all rights
and benefits of the Agreement.
2. Payment of Principal and Interest. Subject to Section 6 hereof, the
Principal Sum shall be payable in full, together with any and all accrued
interest and unpaid interest thereon, on March 25, 1997. Interest shall accrue
on the principal balance of the Note from time to time at the Line Interest
Rate or such lesser rate permitted by applicable law, if the Line Interest Rate
would violate applicable law. All sums payable hereunder shall be payable in
lawful money of the United States and shall be applied first to accrued and
unpaid interest and then in payment of the Principal Sum. The Line Interest
Rate shall be changed automatically on and as of the effective date of each
change in the Prime Rate. Interest shall be calculated on the basis of a
360-day year, but charged for the actual number of days elapsed. Without in any
way limiting Lender's rights and remedies hereunder and under the Note in the
case of Events of Default, any principal payments on the Note not paid when due
and, to the extent permitted by applicable law, any interest payment on the
Note not paid when due, shall thereafter bear interest payable upon demand at a
rate which is three percent (3%) per annum in excess of the applicable Line
Interest Rate.
<PAGE> 29
3. Place of Payment. The Principal Sum together with and all accrued and unpaid
interest thereon shall be payable Payee's principal executive offices at 570
West College Avenue, York, PA 17405, or at such other place as Payee, from time
to time, may designate in writing.
4. Prepayment. Maker shall have the right to prepay, without notice and without
prepayment penalty or premium, at any time, the entire unpaid balance of the
Principal Sum or any part thereof. Each prepayment of the Principal Sum shall
be accompanied by accrued interest on the unpaid balance of the Principal Sum.
5. Presentment. Maker hereby waives diligence, demand, presentment for payment,
protest and notice of protest, notice of acceleration, and all other notices or
demands of any kind except as expressly provided herein.
6. Default and Termination Event. Upon the occurrence of any Event of Default
or upon the occurrence of a Termination Event (as such terms are defined in the
Agreement) prior to March 25, 1997, Payee may at its election, in addition to
any other rights it may have under the Agreement or hereunder, forthwith
declare all principal and interest to be immediately due and payable, without
protest, demand or other notice (which are hereby expressly waived by Maker).
7. Costs and Expenses. In addition to all other sums payable under this Note,
Maker also agrees to pay to Payee, on demand, all reasonable costs and expenses
(including attorneys' fees and legal expenses) incurred by Payee in the
enforcement of Maker's obligations under this Note.
8. Severability. If any provision of this Note is held to be invalid or
unenforceable by a court of competent jurisdiction, the other provisions of
this Note shall remain in full force and effect and shall be construed
liberally in favor of Payee in order to effectuate the purposes and intent of
this Note.
9. Governing Law. This instrument shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, excluding its
conflicts of laws rules. MAKER HEREBY AGREES TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA FOR THE COUNTY OF YORK AND THE
UNITED STATES DISTRICT COURT OF THE MIDDLE DISTRICT OF PENNSYLVANIA AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE
ADDRESS SET FORTH ON THE SIGNATURE PAGE OF THE AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN
DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID.
10. Successors and Assigns. The provisions of this Note shall be binding upon
and inure to the benefit of Maker and Payee and their respective heirs,
executors or administrators and assigns. Maker may not assign any of its rights
and obligations hereunder and interests herein to any other person without the
consent of Payee. Payee may assign at any time its rights and obligations
hereunder and interests herein to any other person without the consent of
Maker. Maker hereby
<PAGE> 30
consents to the foregoing and agrees to cooperate with any such person electing
to exercise Payee's rights hereunder.
IN WITNESS WHEREOF, the Maker has executed this Note as of the date first
above written.
New Image Industries, Inc.
By:_______________________
Name:
Title:
Insight Imaging Systems, Inc.
By:________________________
Name:
Title:
<PAGE> 1
EXHIBIT 19
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT, dated as of December 24,
1996 (the "Agreement"), is entered into by and among COAST BUSINESS CREDIT, a
Division of Southern Pacific Thrift & Loan Association ("Coast"), DENTSPLY
INTERNATIONAL INC. ("Creditor"), and NEW IMAGE INDUSTRIES, INC., and INSIGHT
IMAGING SYSTEMS, INC. (together, "Debtor"), with respect to the Amended and
Restated Loan Agreement, dated May 22, 1996, between Coast and Debtor (the
"Coast Agreement"), and the Credit Agreement, of even date herewith, by and
between Creditor and Debtor (the "Credit Agreement") .
WHEREAS, Creditor and Debtor desire to enter into the Credit Agreement,
pursuant to which, upon the terms and subject to the conditions contained
therein, Creditor will make available to Debtor a line of credit up to an
aggregate principal amount of $3,000,000;
WHEREAS, subject to the execution and delivery of this Agreement, Coast,
to whom Debtor is indebted pursuant to the Coast Loan Documents (as hereinafter
defined), will consent to the execution and delivery by Debtor of the Credit
Agreement;
WHEREAS, by a letter of even date herewith (the "Forbearance Letter"),
Coast has agreed to forbear, through March 25, 1997 or such earlier date as set
forth in the Forbearance Letter (the "Forbearance Period"), from exercising any
of its default rights and remedies in connection with the violation of any and
all covenants of which Debtor is in breach as of the date hereof and any and
all covenants contained in the Coast Agreement and the Mercury Agreement which
may occur subsequent to the date hereof through the Forbearance Period, but not
including any default arising from failure to pay principal and interest due
and payable after the date hereof (other than any payment which may be or
become due as a result of a default of Debtor to comply with the Solvency
Covenant (as defined in the Forbearance Letter) or any non-payment covenant);
NOW, THEREFORE, in consideration of Coast's agreement to continue to
advance credit to Debtor under the Coast Agreement, the execution by Creditor
of the Credit Agreement and Coast's execution of the Forbearance Letter, Coast,
Creditor and Debtor, intending to be legally bound hereby, hereby agree as
follows:
1. In addition to the other words and terms defined herein, the following
words and terms used in this Agreement have the meanings ascribed to them in
this Section 1:
"Blockage Period" means the period commencing on the date of
Creditor's receipt of notice from Coast that a Triggering Event has occurred,
and expiring on the date which is the earliest to occur of (i) 120 days
thereafter, (ii) when the Triggering Event is no longer continuing or has been
waived in writing by Coast, and (iii) the termination of this Agreement in
accordance with Section 7 hereof; provided that Blockage Periods shall not
exceed a total of 120 days in the aggregate in any
1
<PAGE> 2
eight (8) month period.
"Coast Collateral" means the "Collateral" as defined in the Coast
Agreement.
"Coast Indebtedness" means any and all presently existing or hereafter
arising indebtedness, claims, debts, liabilities, and obligations of Debtor now
or hereafter owing to Coast pursuant to the Coast Loan Documents or the Mercury
Agreement, whether direct or indirect, whether contingent or of any other
nature, character, or description (including all interest accruing after
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor, whether or not such
interest is an allowable claim in any such proceeding).
"Coast Loan Documents" means, collectively, the Coast Agreement and
any and all other documents, instruments and agreements executed in connection
therewith.
"Creditor Agreements" means the agreements, instruments and documents
executed by and between Creditor and Debtor which are described on Exhibit A
hereto, and any and all present or future security agreements, deeds of trust
or other agreements, instruments and documents entered into by and between
Debtor and Creditor securing the same or encumbering any of Debtor's assets or
properties.
"Creditor Indebtedness" means the indebtedness of Debtor that, at any
time and from time to time following the execution of the Creditor Agreements,
may be owed by Debtor to Creditor pursuant to and/or evidenced by the Creditor
Agreements, not to exceed an aggregate principal amount of $3,000,000 plus
interest.
"Creditor Line Interest Rate" means the rate of four percent (4%) in
excess of the prime rate of interest set forth in the Money Rates Section of
the New York edition of the Wall Street Journal, rounded up to the nearest
one-eighth, or such lesser rate permitted by applicable law, if such rate would
violate applicable law.
"Letter of Intent" means the letter of intent, of even date herewith,
by and between New Image Industries, Inc. ("New Image") and Creditor with
respect to the acquisition of New Image by Creditor.
"Mercury Agreement" means the loan documents assigned to Coast by
Mercury on the date hereof.
"Triggering Event" means an event of default under the Coast Agreement
which has not been waived or which is not then subject to Coast's forbearance
under the terms of the Forbearance Letter.
2
<PAGE> 3
2. Creditor (as to (a) only) and Debtor (as to (a) and (b)) represent to
Coast that:
a. Creditor and Debtor are parties to the Credit Agreement pursuant to
which, upon the terms and subject to the conditions therein, Creditor
will make available to Debtor a line of credit up to the aggregate
principal amount of $3,000,000.
b. Debtor agrees, and Creditor consents and acknowledges, that the face of
any and all Creditor Agreements shall be permanently and conspicuously
marked with the following legend: "Subject to that certain
Subordination and Intercreditor Agreement executed by and among Coast
Business Credit, Dentsply International Inc., and New Image Industries,
Inc. and Insight Imaging Systems, Inc., dated as of December 24, 1996"
and, after being so marked, copies of said agreements and instruments
shall be promptly delivered to Coast. Creditor shall mark all of its
books and records in such manner as to indicate that the payment and
enforcement of the Creditor Indebtedness and the Creditor Agreements
are subject to the terms of this Agreement.
3. Creditor and Debtor agree with Coast that:
a. The Creditor Indebtedness shall be and hereby is subordinated to the
extent provided herein, and the payment therefor shall be deferred if
and when required pursuant to the terms hereof, to any and all rights,
claims, demands, indebtedness, action or causes of action of any nature
whatsoever that Coast may now have, or hereafter may have against
Debtor with respect to the Coast Indebtedness.
b. No scheduled payment of interest or principal shall be made prior to
the expiration of the Forbearance Period. In addition, upon the
commencement of a Blockage Period, (i) Creditor's right to receive any
and all payments of interest and principal on the Creditor Indebtedness
shall immediately cease, notwithstanding the terms of the Creditor
Indebtedness, for a period commencing on the first day of such Blockage
Period and continuing for the duration of such Blockage Period and (ii)
Coast shall have no obligation to make loans to Debtor under the Coast
Loan Documents from and after the commencement of such Blockage Period.
c. The Creditor Indebtedness may be secured by security interests and
liens in and upon the following assets of Debtor: such of the Coast
Collateral which is described in the Creditor Agreements, provided,
however, as set forth below, such security interests and liens in and
upon the Coast Priority Collateral (as hereinafter defined) shall be at
all times junior and subordinate to all security interests and liens of
Coast in and upon the Coast Priority Collateral.
As between Coast and Creditor, and notwithstanding the terms or time of
granting or perfection of any security interest or lien, the time of
filing or recording of any financing statements, assignments, or any
other documents, instruments, or
3
<PAGE> 4
agreements under the Uniform Commercial Code or any other applicable
law, Coast shall have a first priority security interest in and lien
upon the Coast Collateral (the "Coast Priority Collateral"). The lien
and security interest priority provided herein shall not be altered or
otherwise affected by any amendment, modification, supplement,
extension, renewal, restatement, or refinancing of any of the Creditor
Indebtedness or of any of the Coast Indebtedness, nor by any action or
inaction which Coast or Creditor may take or fail to take in respect of
any of the respective collateral.
d. If a Triggering Event has occurred and a Blockage Period has commenced,
Creditor agrees that it will not commence, prosecute or participate in
any administrative, legal or equitable action against Debtor or any of
the Coast Collateral or any other assets of the Debtor, or in any
administrative, legal, or equitable action that might adversely affect
Debtor or its interests, without Coast's prior written consent, which
consent may be withheld in Coast's sole discretion for any reason,
until the sooner to occur of (i) if a Triggering Event has occurred,
the first day after the expiration of the Blockage Period with respect
thereto, so long as on such date Coast has not yet commenced
enforcement of its rights and remedies with respect to the Coast
Priority Collateral; provided that if Coast has commenced enforcement
of its rights or remedies, Creditor may enforce its rights and remedies
at the end of the Blockage Period other than foreclosing on or
collecting any of the Coast Priority Collateral, and (ii) the date that
the Coast Loan Documents have been terminated and all of the Coast
Indebtedness has been paid in full; provided, however, Creditor shall
have the right (subject and subordinate to the Coast Loan Documents) to
file a claim in any voluntary or involuntary bankruptcy or insolvency
action or proceeding of Debtor.
e. Creditor shall give Coast a copy of any notice(s) of any default or
event of default under the Creditor Agreements or of any actions which
Creditor intends to take with respect thereto, concurrently with the
giving of such notice(s) to Debtor. Coast shall give Creditor a copy of
any notice(s) of any default or event of default under the Coast Loan
Documents or of any actions which Coast intends to take with respect
thereto, concurrently with the giving of such notice(s) to Debtor;
provided that the failure of Creditor or Coast to give such notice
shall not create any liability of such party to the other or affect
either party's rights under this Agreement.
4. If Creditor, in violation of this Agreement, shall commence, prosecute
or participate in any suit, action or proceeding against Debtor whenever
prohibited by the terms hereof, Debtor may interpose as a defense or dilatory
plea the making of this Agreement and Coast may intervene and interpose such
defense or plea in Coast's name or in the name of Debtor. If Creditor shall
attempt to enforce any of the Creditor Agreements whenever prohibited by the
terms hereof, Coast or Debtor may by virtue of this Agreement restrain the
enforcement thereof in Coast's name or in the name of Debtor. If Creditor shall
obtain any assets of Debtor or the proceeds thereof whenever prohibited by the
terms hereof as a result of any administrative, legal, or equitable action, or
otherwise, Creditor agrees to forthwith pay, deliver, and assign to Coast any
such assets or proceeds for application upon
4
<PAGE> 5
the Coast Indebtedness.
5. Except for scheduled payments of interest and principal as and to the
extent permitted by the terms of Section 3.b of this Agreement, Debtor agrees
with Coast that it will not, without Coast's prior written consent (which may
be withheld for any reason), pay to Creditor any sum on account of the Creditor
Indebtedness provided that notwithstanding the foregoing, Debtor may, following
the date on which the Letter of Intent is terminated, make principal
prepayments to Creditor so long as (i) no Blockage Period is then in effect,
(ii) no Event of Default has occurred and is continuing (under the criteria set
forth in Section 1 hereof under "Triggering Event") and (iii) Debtor has excess
borrowing availability pursuant to the borrowing formulas in the Coast
Agreement of not less than $100,000 both during the ten days prior to the
contemplated payment and on the date of payment after taking into account the
proposed payment.
6. Coast may grant extensions of the time of payment or performance of the
Coast Indebtedness and make compromises and settlements with Debtor and all
other persons with respect to the Coast Indebtedness, and release all or any
portion of the Coast Priority Collateral (subject to an obligation to use its
best efforts to realize the maximum proceeds from the disposition thereof), all
without the consent of Debtor or Creditor and all without affecting the
agreements of Creditor or Debtor hereunder.
7. Coast hereby consents to the Creditor Indebtedness subject to the terms
and conditions of this Agreement.
8. Coast agrees that the subordinations and relative priority agreements
set forth above are expressly conditioned upon the non-voidability and
perfection of the security interest to which another security interest is
subordinated and if the security interest to which another interest is
subordinated is not perfected or is voidable for any reason, then the
subordination provided for herein shall not be effective as to the particular
collateral; provided, however, that Creditor agrees that it shall not take any
action to void or attempt to void a security interest granted in favor of
Coast; provided further, however, notwithstanding anything to the contrary
contained herein, nothing shall prevent Creditor from serving on any creditors'
committee or filing a claim, or otherwise participating, in any voluntary or
involuntary bankruptcy or insolvency action or proceeding of Debtor.
9. If, at any time hereafter, Coast shall, in Coast's own judgment,
determine to discontinue the extension of credit to Debtor in accordance with
the terms of the Coast Loan Documents, Coast may do so. This Agreement shall
continue in full force and effect until the Coast Loan Documents have been
terminated and all of the Coast Indebtedness has been paid in full. Creditor
and Debtor agree that, if at any time all or any part of any payment previously
applied by Coast to the Coast Indebtedness is or must be returned by Coast, or
recovered from Coast for any reason (including the order of any bankruptcy
court), this Agreement shall automatically be reinstated to the same effect as
if the prior application had not been made, and, in addition, Debtor hereby
agrees to indemnify Coast against, and to save and hold Coast harmless from any
required return by
5
<PAGE> 6
Coast or recovery from Coast, of any of such payments because of its being
deemed preferential under applicable bankruptcy, receivership or insolvency
laws, or for any other reason.
10. This Agreement shall be binding upon the successors and assigns of
Creditor and Debtor, and shall inure to the benefit of the successors and
assigns of Coast.
11. All notices, demands, requests, consents, approvals, declarations or
other communications from one party hereto to another relating to this
Agreement shall be in writing and shall be delivered either in person, with
receipt acknowledged, or by regular, registered, or certified United States
mail, postage prepaid, or by facsimile, addressed as follows:
If to Coast at:
Coast Business Credit
12121 Wilshire Boulevard, Suite 1111
Los Angeles, CA 90025
Attn: Manager
Facsimile: 310-826-2864
If to Creditor at:
Dentsply International Inc.
570 West College Avenue
York, PA 17405
Attn: Patrick Clark, Esq.
Facsimile: 717-843-6357
If to Debtor at:
New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, California 92009
Attn: President
Facsimile: 619-930-9999
or at such other address as may be substituted by notice given as herein
provided. Giving or any notice required hereunder may be waived in writing by
the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly received on the date on which personally delivered, with
receipt acknowledged, or actually received via facsimile transmission, or three
(3) days after the same shall have been deposited in the United States mail.
12. The validity of this Agreement, its construction, interpretation and
enforcement, and
6
<PAGE> 7
the rights of the parties hereunder, shall be determined under, governed by,
and construed in accordance with the internal laws of the State of California
without regard to principles of conflicts of laws.
13. This Agreement may be executed in one or more counterparts and by
different parties on separate counterparts, each of which when so executed and
delivered shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.
14. Should any provision, clause or condition of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement.
15. This Agreement and such other agreements, documents and instruments as
may be executed in connection herewith shall be construed as the entire and
complete agreement among the parties hereto and shall supersede all prior
negotiations, all of which are merged and integrated herein.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
("Creditor")
DENTSPLY INTERNATIONAL INC.
By /s/ Edward D. Yates
Title: Senior Vice President
("Debtor")
NEW IMAGE INDUSTRIES, INC.
By /s/ Hal Orr
Title: Chief Financial Officer
INSIGHT IMAGING SYSTEMS, INC.
By /s/ Hal Orr
Title: Chief Financial Officer
("Coast")
COAST BUSINESS CREDIT, a division of
Southern Pacific Thrift & Loan Association
By /s/ John M. James
Title: Vice President
8
<PAGE> 9
EXHIBIT A TO SUBORDINATION AND INTERCREDITOR AGREEMENT
o Credit Agreement, dated as of December 24, 1996, by and between New Image
Industries, Inc. and Insight Imaging Systems, Inc. and Dentsply
International Inc. (the "Credit Agreement").
o Any and all other indebtedness and liabilities arising from or relating to
the Credit Agreement including, without limitation, the Notes (as defined in
the Credit Agreement).
<PAGE> 1
EXHIBIT 20
DENTSPLY International Inc.
Re: New Image
---------
Gentlemen:
Reference is made to that certain Amended and Restated Loan and Security
Agreement dated May 22, 1996, as amended ("Loan Agreement") among Coast
Business Credit, a division of Southern Pacific Thrift & Loan Association
("Coast") on the one hand and New Image Industries, Inc. and Insight Imaging
Systems, Inc. (New Image Industries, Inc. and Insight Imaging Systems, Inc. is
hereinafter collectively referred to as, "Borrower") on the other hand.
Borrower is in violation of its covenant under the Loan Agreement to be and
continue to be solvent ("Solvency Covenant"). Coast has waived compliance by
Borrower with the Solvency Covenant through January 1, 1997.
Borrower has advised Coast that it proposes to enter into a letter of
intent with DENTSPLY International Inc. (the "Letter of Intent") with respect
to the acquisition of Borrower by a wholly-owned subsidiary of DENTSPLY
International Inc. ("DENTSPLY"). That Letter of Intent provides, among other
things, for DENTSPLY to loan to Borrower not less than $2,500,000 and not more
than $3,000,000 pending the negotiation and possible execution and closing of a
definitive merger agreement as contemplated in the Letter of Intent. In turn,
DENTSPLY requires a security interest in the assets of Borrower, junior only to
the security interest of Coast. In order for Borrower to provide the security
interest to DENTSPLY, Borrower has requested Coast to purchase the claim of
Mercury Partners, LLC ("Mercury") in the principal amount of $500,000. Borrower
confirms that the claim of Mercury Partners, LLC in the principal amount of
$500,000 is due and owing without offset, counterclaim, defense or offset.
In consideration of the above, including without limitation, the agreement
of DENTSPLY to loan not less than $2,500,000 to Borrower, Coast hereby agrees
to forbear from exercising any of its default rights and remedies in connection
with the violation of the Solvency Covenant and the violation of any and all
other covenants of which Borrower may be in breach as of the date hereof
whether contained in the Loan Agreement or in the loan documents assigned to
Coast by Mercury (the "Mercury Agreement"), and any and all other covenants,
whether contained in the Loan Agreement or in the Mercury Agreement documents
assigned to Coast by Mercury, which may occur subsequent to the date hereof
through the earlier of March 25, 1997 or (b) the date on which the Letter of
Intent terminates other than by execution of a definitive merger agreement as
contemplated therein ("Forbearance Period"). If for any reason the Letter of
Intent terminates, DENTSPLY agrees to give Coast prompt written notice of such
termination. Notwithstanding the foregoing, Coast is not forbearing from any
default arising from the failure of Borrower to make any required payment to
Coast of principal or interest due and payable after the date hereof (other
than a payment which may be or become due and payable as a result of a default
of Borrower to comply with the Solvency Covenant or any other non-payment
covenant). Nothing
<PAGE> 2
herein shall affect the right of Coast to exercise any and all default rights
and remedies after the expiration of the Forbearance Period.
DENTSPLY confirms that in the event of a closing of a definitive merger
agreement as set forth in the Letter of Intent, DENTSPLY will cause the claim
of Coast against Borrower (including the claim of Mercury purchased by Coast)
to be paid in full, unless Coast shall agree otherwise in writing.
Coast acknowledges that concurrent with the execution of the Letter of
Intent, Borrower and DENTSPLY will enter into a credit agreement which will
provide for, among other things, the granting of a security interest in favor
of DENTSPLY junior to the security interest of Coast. Coast hereby consents to
the execution by Borrower of the credit agreement and the performance of its
obligations thereunder.
The obligations of Coast under this letter agreement are conditioned upon
the concurrent execution of a Subordination and Intercreditor Agreement among
DENTSPLY, Borrower and Coast in form and substance satisfactory to Coast and
confirmation that $2,500,000 will be loaned forthwith by DENTSPLY to Borrower.
Very truly yours,
Coast Business Credit
By: /s/ JOHN M. JAIMES
-------------------------
Its: Vice President
AGREED:
DENTSPLY INTERNATIONAL INC.
By: /s/ EDWARD D. YATES
------------------------
Its: Senior Vice President
New Image Industries, Inc.
By: /s/ HAL ORR
------------------------
Its: Chief Financial Officer
Insight Imaging Systems, Inc.
By: /s/ HAL ORR
------------------------
Its: Chief Financial Officer
<PAGE> 1
EXHIBIT 21
DENTSPLY DENTSPLY International
570 West College Avenue
P.O. Box 872
York, PA 17405-0872
(717) 845-7511
Fax (717) 848-3739
News
For further FOR IMMEDIATE RELEASE
information
contact
Edward D. Yates
Senior Vice President and
Chief Financial Officer
(717) 849-4243
DENTSPLY INTERNATIONAL INC. AND NEW IMAGE INDUSTRIES
SIGN MERGER AGREEMENT
York, Pa, -- (Business Wire) -- January 28, 1997. DENTSPLY International Inc.
(Nasdaq- XRAY) and New Image Industries, Inc. today announced that they have
entered into a definitive merger agreement under which DENTSPLY will commence a
cash tender offer for all of the outstanding shares of New Image at a price of
$2.00 per share. New Image, based in Carlsbad, California, designs, develops,
manufactures and distributes intra-oral cameras and computer imaging systems
and related software exclusively to the dental market. New Image's products
include the AcuCam, MultiCam, AcuCam Concept III, Plug N' Play, and Multilink
Video Operatory Network intra-oral camera systems as well as the dental
operatory software programs, Capture-It and Chart-It.
The terms and conditions of DENTSPLY's cash tender offer will be set forth in
the offering documents expected to be filed by February 3, 1997 with the
Securities and Exchange Commission. Conditions to DENTSPLY's purchase of shares
in the offer include the tender of at least 55% of all shares of New Image that
are outstanding as of the commencement of the offer, and expiration of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.
Under the merger agreement, which has been approved by the boards of directors
of each company, a newly created subsidiary of DENTSPLY will be merged into New
Image following completion of the tender offer and New Image will become a
wholly owned subsidiary of DENTSPLY. DENTSPLY has also entered into agreements
with certain stockholders of New Image, including its directors and senior
executive officers, and the William W. Stevens and Virda J. Stevens Trust, who
own in the aggregate 10% of New Image's shares outstanding, whereby each has
agreed to tender his or her shares in the offer. The net cash cost to DENTSPLY
of purchasing the outstanding equity of New Image (excluding transaction costs)
is expected to be approximately $11.4 million.
<PAGE> 2
Commenting on the transaction, John Miles, DENTSPLY's Vice Chairman and Chief
Executive Officer, said, "We are pleased to have signed a merger agreement with
New Image. We believe that New Image's intra-oral cameras and computer imaging
systems for the dental market will fit very well with our product lines." Dewey
Edmunds, Chief Executive Officer of New Image, commented, "We are excited about
becoming a part of DENTSPLY. We believe that this transaction is in the best
interest of all parties associated with New Image and DENTSPLY can provide the
resources and international distribution capabilities that will enable New
Image to grow."
DENTSPLY designs, develops, manufactures and markets a broad range of products
for the dental market. The company believes that it is the world's leading
manufacturer and distributor of artificial teeth, endodontic instruments and
materials, impression materials, prophylaxis paste, dental sealants, ultrasonic
scrapers, and crown and bridge materials; the leading United States
manufacturer and distributor of dental x-ray equipment, dental handpieces,
dental x-ray film holders and film mounts; and a leading United States
distributor of dental cutting instruments and dental implants.
The company distributes its dental products in over 100 countries under some of
the most well-established brand names in the industry. DENTSPLY is committed to
the development of innovative, high quality, cost-effective new products for
the dental market.
<PAGE> 1
EXHIBIT 22
[NEW IMAGE LOGO]
2283 COSMOS COURT CARLSBAD, CALIFORNIA 92009
PHONE (619) 930 9900 FAX (619) 930 9999
January 31, 1997
Dear Fellow Stockholder:
I am pleased to inform you that, on January 27, 1997, New Image Industries,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the
"Agreement") with DENTSPLY International Inc. ("DENTSPLY") and Image Acquisition
Corp., a wholly owned subsidiary of DENTSPLY (the "Purchaser"), pursuant to
which the Purchaser has commenced a tender offer to purchase all of the
outstanding shares of the Company's common stock for $2.00 per share in cash
(the "Offer"). Under the Agreement, the Offer will be followed by a merger (the
"Merger") in which the remaining shares of common stock will be converted into
the right to receive $2.00 per share in cash.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND
UNANIMOUSLY RECOMMENDS THAT ALL HOLDERS OF SHARES OF THE COMPANY'S COMMON STOCK
TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at their decision, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9,
which is being filed today with the Securities and Exchange Commission. Among
other things, the Board of Directors retained Cleary Gull Reiland & McDevitt
Inc. to render a fairness opinion to the Company and considered such opinion
that, as of the date thereof, the consideration to be received by the holders of
the Company's common stock in the Offer and the Merger is fair to such holders
from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, enclosed
is the Offer to Purchase, dated January 31, 1997, of DENTSPLY, together with
related materials including a Letter of Transmittal to be used for tendering
your shares. These documents set forth the terms and conditions of the Offer and
the Merger and provide instructions as to how to tender your shares. I urge you
to read the enclosed material carefully.
Sincerely,
/s/ Dewey F. Edmunds
-------------------------------------
Dewey F. Edmunds
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 23
SCHEDULE II
CLEARY GULL REILAND & McDEVITT INC.
100 East Wisconsin Avenue
Milwaukee, WI 53202
414-291-4500
January 20, 1997
Board of Directors
New Image Industries, Inc.
2283 Cosmos Court
Carlsbad, CA 92009
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders (the "Stockholders") of shares of common stock, par value
$0.001 per share ("New Image Common Stock"), of New Image Industries, Inc.
("New Image") of the consideration to be received by the Stockholders pursuant
to the terms of the draft Agreement and Plan of Merger dated as of January 14,
1997 (the "Merger Agreement") by and among DENTSPLY International Inc.
("DENTSPLY"), Image Acquisition, Inc., a wholly owned, direct subsidiary of
DENTSPLY ("Subsidiary") and New Image. Pursuant to the Merger Agreement,
Subsidiary will offer to purchase all of the outstanding New Image Common Stock
in a tender offer (the "Tender Offer") and, following completion of the Tender
Offer, the Subsidiary will be merged (the "Merger") with and into New Image and
New Image will become a wholly owned subsidiary of DENTSPLY. The Tender Offer
and the Merger are collectively referred to herein as the "Acquisition".
Under the Merger Agreement, Subsidiary will offer to purchase all of the issued
and outstanding shares of New Image Common Stock in the Tender Offer for $2.00
per share in cash (the "Offer Consideration"). Upon consummation of the
Merger, any shares of New Image Common Stock not acquired in the Tender Offer
will be converted into the right to receive the Offer Consideration in the
Merger.
In arriving at our opinion, we have reviewed, among other things, the Merger
Agreement and certain business and financial information relating to New Image,
including certain financial projections, estimates and analyses provided to us
by New Image and certain business and financial information relating to
DENTSPLY. We have also reviewed and discussed the businesses and prospects of
New Image and its subsidiaries with representatives of New Image's management.
In arriving at our opinion, we have considered (a) certain financial and stock
market data relating to New Image and in certain cases have compared that
information to similar data for other publicly held companies in businesses
considered to be generally comparable to New Image, (b) certain publicly
available information concerning the nature and terms of certain transactions
<PAGE> 2
New Image Industries, Inc.
January 20, 1997
Page 2
that Cleary Gull believed to be relevant on a comparative basis including the
acquisition of Insight Imaging Systems, Inc. by New Image effective May 17,
1996, (c) an unleveraged after-tax discounted cash flow analysis of New Image,
(d) the financial impact of the Acquisition on DENTSPLY's future earnings per
share, (e) a comparison of the purchase price premium to be paid for the New
Image Common Stock based on the Offer Consideration to certain other
similar-sized acquisitions, (f) a historical review of New Image's stock market
price, (g) the trading history of New Image, (h) a liquidation analysis of New
Image, (i) the financial and other conditions of New Image at the time of the
acceptance by New Image of DENTSPLY's offer, (j) the results of New Image's
efforts during FY96 and FY97 to arrange equity financing, (k) the results of
New Image's efforts to find a buyer and (l) such other information, financial
studies and analyses and financial, economic and market criteria as we deemed
relevant and appropriate.
In connection with our review, we have not independently verified any of the
foregoing information and have relied on its being complete and accurate in all
material respects. We have not made an independent evaluation or appraisal of
any assets or liabilities (contingent or otherwise) of New Image or any of
their respective subsidiaries, nor have we been furnished with any such
evaluation or appraisal that has not been publicly disclosed. With respect to
the financial plans, estimates and analyses provided to us by New Image, we
have assumed, with your permission, that all such information was reasonably
prepared on bases reflecting the best currently available estimates and
judgments of management of New Image as to future financial performance and was
based upon the historical performance of New Image and certain estimates and
assumptions which were reasonable at the time made. Our opinion is based on
economic, monetary and market conditions existing on the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Offer Consideration to be received by the Stockholders in the
Tender Offer and the subsequent Merger pursuant to the Merger Agreement is
fair, from a financial point of view, to the Stockholders.
We are acting as financial advisor to the Board of Directors of New Image in
this transaction and will receive a fee for our services, payable at the
mailing of the Offer to Purchase, the related Letter of Transmittal and other
materials. Our fee is not contingent upon the approval and consummation of the
Acquisition. In addition, New Image has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. New Image has
also agreed to reimburse Cleary Gull for its reasonable and properly documented
expenses up to $15,000. Cleary Gull has not been engaged previously by New
Image to render financial advisory or investment banking services. However,
Cleary Gull has in the past provided and may in the future provide financial
<PAGE> 3
New Image Industries, Inc.
January 20, 1997
Page 3
advisory and/or investment banking services to DENTSPLY and related entities.
The Board of Directors of New Image recognizes that in June 1994 Cleary Gull
was retained by DENTSPLY to explore a possible business combination with New
Image. Cleary Gull's engagement by DENTSPLY ended in September 1994 when
DENTSPLY and New Image were unable to agree on the terms of a business
combination. Since September 1994 and except for certain trading activities
relating to DENTSPLY common stock and options, Cleary Gull has not rendered any
financial advisory or investment banking services to DENTSPLY. Cleary Gull
provides research coverage on DENTSPLY and currently rates DENTSPLY a #1-Buy,
Cleary Gull's highest rating. In addition, in the ordinary course of business,
we may trade securities of New Image and DENTSPLY for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
This opinion is for the use and benefit of the Board of Directors of New Image
and is rendered to the Board of Directors of New Image in connection with its
consideration of the Acquisition. We are not making any recommendation
regarding whether or not it is advisable for Stockholders to tender their
shares of New Image Common Stock in the Tender Offer. We have not been
requested to opine as to, and our opinion does not in any manner address, New
Image's underlying business decision to proceed with or effect the Acquisition.
Very truly yours,
/s/ Cleary Gull Reiland & McDevitt Inc.
CLEARY GULL REILAND & McDEVITT INC.
