<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 8, 1996
--------------
Bio-Dental Technologies Corporation
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(Exact name of registrant as specified in its charter)
California
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(State or other jurisdiction of incorporation)
1-10771 84-1104386
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Commission File Number (IRS Employer Identification No.)
11291 Sunrise Park Drive, Rancho Cordova, California 95742
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(Address of principal executive offices)
Registrant's telephone number, including area code (916) 638-8147
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None
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Merger Agreement with Zila, Inc.
On August 8, 1996, Bio-Dental Technologies Corporation ("Registrant") signed a
Merger Agreement with Zila, Inc. ("Zila"). The execution of the Merger
Agreement was pursuant to a letter of intent the Registrant signed on May 31,
1996 to merge the Registrant into Zila. The transaction involves the exchange
of Zila stock for all of Registrant's outstanding stock. Upon the consummation
of the merger, the Registrant will become a wholly owned subsidiary of Zila.
Zila's acquisition of the Registrant is subject to a number of conditions,
including the ability to account for the transaction as a pooling-of-interests,
and the approval of Registrant's shareholders.
The terms of the merger call for Zila to exchange between 0.75 and 0.825 shares
of its stock for each of Registrant's approximately 6.4 million shares, with
the actual rate to be based upon the average closing bid prices of Zila's stock
during the ten (10) day "calculation period" ending on the trading day that is
five trading days prior to the closing date. In no event, however, will Zila
issue less than $4.95 worth of its stock for each share of the Registrant's
stock.
If Zila's stock averages between $6 and $7.75 during the calculation period,
then the exchange rate will be 0.825:1. If Zila's stock averages over $8.52,
then the exchange rate shall be 0.75:1. If Zila's stock averages between $7.75
and $8.25 during the calculation period, then Zila will issue that fractional
number of shares necessary to provide each Registrant share with $6.39 worth of
Zila stock. If Zila's stock averages below $6.00 during the calculation period,
then Zila shall issue that number of shares necessary to provide $4.95 per share
of value for each Registrant share. The table below illustrates the above
information:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. ZILA SHARE PRICE $5.00 $6.00 $7.00 $7.75 $8.00 $8.25 $8.52 $9.00 $10.00 $11.00 $12.00
2. # SHARES ZILA FOR BDTC 0.99 0.825 0.825 0.825 .80 0.77 0.75 0.75 0.75 0.75 0.75
3. BDTC SHAREHOLDER GETS $4.95 $4.95 $5.78 $6.39 $6.39 $6.39 $6.39 $6.75 $7.50 $8.25 $9.00
</TABLE>
Note
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1. If Zila share price during valuation period averages these amounts.
2. BDTC shareholders receive these # shares of Zila for each BDTC share owned.
3. Equates to this dollar value for each BDTC share exchanged.
Zila, headquartered in Phoenix, Arizona, markets a line of non-prescription
oral health care products, and is introducing what the Registrant believes to
be the first oral cancer diagnostic, OraTest(TM). OraTest(TM) is a patented,
inexpensive, diagnostic adjunct used to examine patients at high risk of oral
cancer -- those 40 and over who use tobacco or drink heavily. FDA approval to
market OraTest(TM) in the U.S. is pending. The Registrant will become the
exclusive distributor of OraTest(TM) in the U.S. when regulatory approval is
granted.
It is currently contemplated that management for both companies will remain in
place, and the Registrant does not believe that any material personnel changes
will occur as a result of this merger. Zila will continue to run their
existing operations out of Phoenix and the Registrant will continue to run its
operations out of its existing facilities.
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It is anticipated that the merger will be consummated during the third quarter
of the current fiscal year, pending approval by the shareholders of the
Registrant. Until that time, the Registrant will continue its normal business
operations.
Item 7. Financial Statements and Exhibits
The following document is attached to this Form 8-K as an exhibit:
Merger Agreement among Bio-Dental Technologies Corporation, Zila, Inc. and
Zila Merger Corporation dated August 8, 1996 relating to the proposed merger
between the Registrant and Zila.
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INDEX
10.39 Merger Agreement among Bio-Dental Technologies Corporation, Zila, Inc.
and Zila Merger Corporation dated August 8, 1996 relating to the
proposed merger between the Registrant and Zila.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Bio-Dental Technologies Corporation
-----------------------------------
(Registrant)
Date 08/23/96 /s/ Curtis M. Rocca III
-----------------------------------
(Signature)
Curtis M. Rocca III, President
<PAGE> 1
EXHIBIT 10.39
MERGER AGREEMENT
among
ZILA, INC.
BIO-DENTAL TECHNOLOGIES CORPORATION
and
ZILA MERGER CORPORATION
Dated August 8, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 Page
THE MERGER ----
<S> <C>
1.1 The Merger............................................................. 1
1.2 Effect of the Merger................................................... 2
1.3 Consummation of the Merger............................................. 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers........... 3
1.5 Conversion of Securities............................................... 3
1.6 Closing of Company Transfer Books...................................... 5
1.7 Exchange of Certificates............................................... 5
1.8 Dissenting Shares...................................................... 7
1.9 Tax Consequences....................................................... 8
1.10 Accounting Treatment................................................... 8
1.11 Taking of Necessary Action; Further Action............................. 8
1.12 Employee Stock Options................................................. 9
1.13 Warrants............................................................... 11
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE MERGER SUB
2.1 Organization and Qualification......................................... 12
2.2 Authority Relative to This Agreement................................... 12
2.3 Capital Structure...................................................... 13
2.4 SEC Filings; Financial Statements...................................... 14
2.5 Valid Issuance......................................................... 15
2.6 Accuracy of Information................................................ 15
2.7 Title to Properties.................................................... 15
2.8 Accounts Receivable.................................................... 16
2.9 Employment Matters..................................................... 16
2.10 Affiliate Transactions................................................. 16
2.11 Compliance with Laws; Permits; Certain Operations...................... 17
2.12 Non-Contravention; Consents............................................ 18
2.13 Brokerage.............................................................. 19
2.14 No Material Adverse Changes............................................ 19
2.15 Legal Proceedings...................................................... 19
2.16 Board Approval......................................................... 19
2.17 Pooling of Interests................................................... 19
2.18 OraTest................................................................ 20
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Qualification......................................... 21
</TABLE>
i
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<TABLE>
Page
----
<S> <C>
3.2 Authority Relative to this Agreement................................ 22
3.3 Capitalization...................................................... 23
3.4 Commission Filings.................................................. 25
3.5 Financial Statements................................................ 26
3.6 Subsidiaries........................................................ 27
3.7 Absence of Undisclosed Liabilities.................................. 28
3.8 No Material Adverse Changes......................................... 28
3.9 Absence of Certain Developments..................................... 29
3.10 Title to Properties................................................. 32
3.11 Accounts Receivable................................................. 34
3.12 Inventories......................................................... 34
3.13 Tax Matters......................................................... 34
3.14 Contracts and Commitments........................................... 37
3.15 Proprietary Rights.................................................. 39
3.16 Litigation.......................................................... 40
3.17 Brokerage........................................................... 41
3.18 Employment Matters.................................................. 41
3.19 Employee Benefit Plans.............................................. 42
3.20 Insurance........................................................... 44
3.21 Affiliate Transactions.............................................. 45
3.22 Suppliers........................................................... 45
3.23 Officers and Directors; Bank Accounts............................... 46
3.24 Compliance with Laws; Permits; Certain Operations................... 46
3.25 Disclosure.......................................................... 47
3.26 Non-Contravention; Consents......................................... 47
3.27 Stockholder Vote Required........................................... 49
3.28 Board Approval...................................................... 49
3.29 Pooling of Interests................................................ 49
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business Pending the Merger.............................. 50
4.2 Notification; Updates to Disclosure Schedule........................ 54
4.3 Company Shareholder Approval........................................ 55
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement.......................................... 56
5.2 Action of Shareholders.............................................. 60
5.3 Accountant Comfort Letters.......................................... 60
5.4 Expenses............................................................ 63
5.5 Additional Agreements............................................... 63
5.6 No Negotiations, etc................................................ 64
5.7 Notification of Certain Matters..................................... 64
5.8 Access to Information; Confidentiality.............................. 65
</TABLE>
ii
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<TABLE>
Page
----
<S> <C>
5.9 Shareholder Claims.................................................... 65
5.10 Consents.............................................................. 65
5.11 State Securities Law Compliance....................................... 66
5.12 Notification; Updates to Disclosure Letter............................ 66
5.13 Pooling of Interests.................................................. 67
5.14 Affiliate Agreements.................................................. 67
5.15 Commercially Reasonable Efforts....................................... 67
5.16 Tax Matters........................................................... 68
5.17 Key Employee Options.................................................. 68
5.18 Board of Directors.................................................... 69
ARTICLE 6
CONDITIONS
6.1 Conditions to Obligations of Each Party To Effect the Merger.......... 69
6.2 Additional Conditions to Obligation of the Company.................... 74
6.3 Additional Conditions to Obligations of Parent and the Merger Sub..... 76
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination........................................................... 80
7.2 Termination Procedures................................................ 82
7.3 Effect of Termination................................................. 82
7.4 Breakup Fee........................................................... 83
ARTICLE 8
GENERAL PROVISIONS
8.1 Amendment............................................................. 85
8.2 Waiver................................................................ 85
8.3 Public Statements..................................................... 86
8.4 Notices............................................................... 86
8.5 Interpretation........................................................ 87
8.6 Severability.......................................................... 87
8.7 Miscellaneous......................................................... 87
8.8 Non-survival of Representations and Warranties........................ 88
</TABLE>
Exhibit 1 Form of Amended Articles of Incorporation
Exhibit 2 Form of Amended Bylaws
Exhibit 3 Form of Affiliate Agreement (Company)
Exhibit 4 Form of Affiliate Agreement (Parent)
Exhibit 5 Affiliated Persons
Exhibit 6 Form of Representation Certificate (Parent)
Exhibit 7 Form of Representation Certificate (Company)
Exhibit 8 Form of Shareholder's Representation Certificate
iii
<PAGE> 5
MERGER AGREEMENT
MERGER AGREEMENT dated August 8, 1996 (this "Agreement"), by and among
Zila, Inc., a Delaware corporation ("Parent"), Zila Merger Corporation, a
Delaware corporation wholly owned directly by Parent (the "Merger Sub"), and
Bio-Dental Technologies Corporation, a California corporation (the "Company").
RECITALS
I. Parent and the Company are parties to a letter of intent dated May
22, 1996 (the "Letter of Intent"), which contemplates the merger described in
Article 1 (the "Merger").
II. The respective boards of directors of the Merger Sub and the
Company have determined that it is advisable to consummate the Merger, as a
result of which all of the outstanding common stock, $.01 par value per share,
of the Company ("Company Common Stock") will be converted into shares of the
common stock, $.001 par value per share, of Parent ("Parent Common Stock") and
the Company will be wholly owned directly or indirectly by Parent; all on the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
THE MERGER
The respective boards of directors of Parent, the Merger Sub and the
Company have, by resolutions duly adopted, approved the following provisions of
this Article 1 as the plan of merger required by the laws of the states of
Delaware and California in connection with the Merger:
1.1 The Merger. At the Effective Time (as defined in Section 1.3), in
accordance with this Agreement and applicable law, the Merger Sub shall be
merged with and into the Company, the separate existence of the Merger Sub
(except as may be continued by operation
<PAGE> 6
of law) shall cease, and the Company shall continue as the surviving corporation
under the name "Zila Dental Technologies Corporation" as provided in the Amended
Articles of Incorporation of the Company pursuant to Section 1.4 of this
Agreement. The Company, in its capacity as the corporation surviving the Merger,
sometimes is referred to herein as the "Surviving Corporation."
1.2 Effect of the Merger. The Surviving Corporation shall possess all
the rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of the Merger Sub and the Company (collectively, the
"Constituent Corporations"); and all property, real, personal, and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to each of the Constituent Corporations, shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the Surviving Corporation shall be responsible and liable for all
liabilities and obligations of each of the Constituent Corporations.
1.3 Consummation of the Merger. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Squire, Sanders & Dempsey, 40 North Central Avenue, Phoenix, Arizona 85004 at
10:00 a.m. on a date to be mutually agreed upon by Parent and the Company, which
date shall be no later than the third business day after the Company
Shareholders Meeting (as hereinafter defined) (the "Scheduled Closing Time").
The date on which the Closing actually takes place is referred to in this
Agreement as the "Closing Date". On the Closing Date, the parties hereto will
cause articles of merger relating to the Merger to be delivered to the
Secretaries of State of the states of Delaware and California in such form as
required by, and executed in accordance with, the relevant provisions of
applicable law. The Merger shall be effective at such time as such articles
2
<PAGE> 7
of merger are duly filed with and accepted by the Secretaries of State of the
states of Delaware and California in accordance with applicable law (the
"Effective Time").
1.4 Articles of Incorporation and Bylaws; Directors and Officers. The
Articles of Incorporation and Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation (except that
such Articles of Incorporation shall be amended as set forth in Exhibit 1
attached hereto) and Bylaws (except that such Bylaws shall be amended as set
forth in Exhibit 2 attached hereto) of the Surviving Corporation immediately
after the Effective Time and shall thereafter continue to be its Articles of
Incorporation and Bylaws until amended as provided therein and under the
applicable law. The directors of the Merger Sub holding office immediately prior
to the Effective Time shall be the directors of the Surviving Corporation
immediately after the Effective Time. The officers of the Company holding office
immediately prior to the Effective Time shall be the officers (holding the same
offices as they held with the Company) of the Surviving Corporation immediately
after the Effective Time.
1.5 Conversion of Securities. Subject to Sections 1.7(b) and 1.8, at
the Effective Time, by virtue of the Merger and without any action on the part
of the Merger Sub, the Company or the holder of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be
canceled pursuant to Section 1.5(b)) shall automatically be canceled
and extinguished and be converted into and become a right to receive
0.825 shares of Parent Common Stock; provided, however, that if the
average closing bid price for Parent Common Stock as reported by the
Nasdaq Small-Cap Market during the ten trading days ending on the
trading day that is five trading days prior to the
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Closing Date (the "Calculation Period") is less than $6.00 per share,
each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall automatically be canceled and
extinguished and be converted into and become a right to receive a
number of shares of Parent Common Stock that is equivalent in value to
$4.95 as calculated based on the average closing bid price for Parent
Common Stock as reported by the Nasdaq Small-Cap Market during the
Calculation Period; provided further, however, that if the average
closing bid price for Parent Common Stock as reported by the Nasdaq
Small-Cap Market during the Calculation Period is greater than $7.75
per share, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall automatically be canceled
and extinguished and be converted into and become a right to receive
the greater of (i) 0.75 shares of Parent Common Stock or (ii) a number
of shares of Parent Common Stock that is equivalent in value to $6.39
as calculated based on the average closing bid price for Parent Common
Stock as reported by the Nasdaq Small-Cap Market during the Calculation
Period.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and held in the treasury of the
Company or owned by Parent or the Merger Sub shall automatically be
canceled and extinguished and no payment shall be made with respect
thereto.
(c) Each share of Merger Sub Common Stock, par value $.001 per
share, issued and outstanding immediately prior to the Effective Time
shall automatically be converted into and become one validly issued,
fully paid and
4
<PAGE> 9
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(d) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are subject to
a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with
the Company, then the shares of Parent Common Stock issued in exchange
for such shares of Company Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends.
1.6 Closing of Company Transfer Books. At the Effective Time, holders
of certificates representing shares of Company Common Stock that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed and no transfer of shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time shall thereafter be
made. If, after the Effective Time, valid certificates previously representing
such shares are presented to the Surviving Corporation or the Disbursing Agent
(as defined in Section 1.7), they shall be exchanged as provided in Section 1.7.
1.7 Exchange of Certificates.
(a) After the Effective Time, a disbursing agent to be
designated by Parent (which may not be Parent or a subsidiary of
Parent) shall act as disbursing agent (the "Disbursing Agent") in
effecting the exchange of Parent Common Stock for certificates which,
immediately prior to the Effective Time, represented shares of Company
Common Stock. As soon as practicable after the Effective Time, the
Disbursing Agent shall mail
5
<PAGE> 10
a transmittal form to each holder of certificates theretofore
representing such shares advising such holder of the procedure for
surrendering such certificates to the Disbursing Agent. If a
certificate for Parent Common Stock issued pursuant to Section 1.5(a)
is to be issued in the name of a person other than the person in whose
name the certificates for shares surrendered for exchange are
registered, it shall be a condition of the exchange that the person
requesting such exchange shall pay to the Disbursing Agent any transfer
or other taxes required by reason of the issuance of such certificate
in the name of a person other than the registered owner of the
certificates surrendered, or shall establish to the satisfaction of the
Disbursing Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Disbursing Agent nor any
party hereto shall be liable to a holder of certificates theretofore
representing shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat
or similar law. Upon the surrender and exchange of a certificate
theretofore representing shares of Company Common Stock, the holder
shall be issued a certificate representing the number of shares of
Parent Common Stock to which such person is entitled pursuant to
Section 1.5(a) and the certificate theretofore representing shares of
Company Common Stock shall forthwith be canceled. Until so surrendered
and exchanged, each Certificate theretofore representing shares of
Company Common Stock shall represent solely the right to receive the
Parent Common Stock into which the shares it theretofore represented
shall have been converted pursuant to Section 1.5(a), and the Surviving
Corporation shall not be required to pay the holder thereof the Parent
Common Stock to which such holder otherwise would be entitled; provided
that procedures allowing for payment against lost or destroyed
certificates against receipt of customary and appropriate
certifications and indemnities shall be provided.
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<PAGE> 11
(b) No fractional shares of Parent Common Stock shall be
issued in connection with the Merger, and no certificates for any such
fractional shares shall be issued. In lieu of such fractional shares,
any fractional share interest in Parent Common Stock which a holder of
Company Common Stock would otherwise be entitled to receive in the
Merger (after aggregating all fractional shares of Parent Common Stock
that would otherwise be issuable to such holder) shall be rounded up to
the nearest whole share if such fraction is 0.5 or greater and shall be
rounded down to the nearest whole share if such fraction is less than
0.5.
1.8 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of Company Common Stock that, as of the Effective
Time, are or may become "dissenting shares" within the meaning of
Section 1300(b) of the California General Corporation Law (the
"California Law") shall not be converted into or represent the right to
receive Parent Common Stock in accordance with Section 1.5, and the
holder or holders of such shares shall be entitled only to such rights
as may be granted to such holder or holders in Chapter 13 of the
California Law; provided, however, that if the status of any such
shares as "dissenting shares" shall not be perfected, or if any such
shares shall lose their status as "dissenting shares," then, as of the
later of the Effective Time or the time of the failure to perfect such
status or the loss of such status, such shares shall automatically be
converted into and shall represent only the right to receive (upon the
surrender of the certificate or certificates representing such shares)
Parent Common Stock in accordance with Section 1.5.
(b) The Company shall give Parent (i) prompt notice of any
written demand received by the Company prior to the Effective Time to
require the Company to purchase
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shares of capital stock of the Company pursuant to Chapter 13 of the
California Law and of any other demand, notice or instrument delivered
to the Company prior to the Effective Time pursuant to the California
Law, and (ii) the opportunity to participate in all negotiations and
proceedings with respect to any such demand, notice or instrument. The
Company shall not make any payment or settlement offer prior to the
Effective Time with respect to any such demand unless Parent shall have
consented in writing to such payment or settlement offer.
1.9 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"). The parties to this
Agreement hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.10 Accounting Treatment. For accounting purposes, the Merger is
intended to be treated as a "pooling of interests."
1.11 Taking of Necessary Action; Further Action. Parent and the Merger
Sub, on the one hand, and the Company, on the other hand, shall use all
reasonable efforts to take all such action (including without limitation action
to cause the satisfaction of the conditions of the other to effect the Merger)
as may be necessary or appropriate in order to effectuate the Merger as promptly
as possible. 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 and Parent with full possession of all the rights,
privileges, immunities and franchises of the Constituent Corporations, the
officers and directors of the Surviving Corporation and Parent are fully
authorized in the name of the Constituent Corporations or otherwise to take, and
shall take, all such action.
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<PAGE> 13
1.12 Employee Stock Options.
(a) At the Effective Time, each option that is then
outstanding under the Company's 1992 Stock Option Plan, as amended in
1995 (the "Stock Plan"), whether vested or unvested (a "Company
Option"), shall be assumed by Parent in accordance with the terms (as
in effect on the date hereof) of the Stock Plan and the stock option
agreement, if any, by which such Company Option is evidenced. All
rights with respect to Company Common Stock under outstanding Company
Options shall thereupon be converted, subject to the provisions hereof,
into rights with respect to Parent Common Stock. From and after the
Effective Time, (i) each Company Option assumed by Parent
(collectively, the "Assumed Options") may be exercised solely for
shares of Parent Common Stock, (ii) the number of shares of Parent
Common Stock subject to each such Assumed Option shall be equal to the
number of shares of Parent Common Stock which the holder of such
Assumed Option would have received pursuant to section 1.5 in exchange
for the shares of Company Common Stock subject to such Assumed Option
if such Assumed Option had been exercised immediately prior to the
Effective Time, (iii) the per share exercise price for the Parent
Common Stock issuable upon exercise of each such Assumed Option shall
be determined by dividing the exercise price per share of Company
Common Stock subject to such Assumed Option, as in effect immediately
prior to the Effective Time, by a fraction the numerator of which is
the number of shares of Parent Common Stock subject to such Assumed
Option immediately after the Effective Time and the denominator of
which is the number of shares of Company Common Stock subject to such
Assumed Option immediately prior to the Effective Time, and rounding
the resulting exercise price up to the nearest whole cent, and (iv) all
restrictions on the exercise of each such Assumed Option shall continue
in full force and effect and the
9
<PAGE> 14
term, exercisability, vesting schedule, status as an incentive or
nonqualified option, and other provisions of such Company Option shall
otherwise remain unchanged; provided, however, that each such Assumed
Option shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction
effected by Parent after the Effective Time. The Company and Parent
shall take all action that may be necessary (under the Stock Plan and
otherwise) to effectuate the provisions of this Section 1.12.
(b) Parent will use its best efforts to cause the Parent
Common Stock issuable upon exercise of the Assumed Options to be
registered under the Securities Act of 1933, as amended (the
"Securities Act"), on Form S-8 promulgated by the Securities and
Exchange Commission (the "SEC") and to be registered or qualified (or
to have established that an exemption from such registration or
qualification is available) under the "blue sky" laws of all states in
which the holders of Company Options reside, within 30 business days
after the Effective Time, and Parent shall use its best efforts to
maintain the effectiveness of such registration statement or
registration statements for so long as such Assumed Options remain
outstanding. With respect to any Company employee or director who
subsequent to the Merger will be subject to the reporting requirements
under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") with respect to the securities of Parent
beneficially owned by such person, Parent shall administer the Assumed
Options in a manner that complies with the disinterested administration
requirements of Rule 16b-3 promulgated by the SEC under the Exchange
Act. At or prior to the Effective Time, Parent will reserve a
sufficient number of shares of Parent Common Stock for issuance upon
exercise of the Assumed Options.
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<PAGE> 15
1.13 Warrants. At the Effective Time, each warrant to purchase shares
of Company Common Stock that is then outstanding (the "Company Warrants") shall
be assumed by Parent in accordance with the terms (as in effect on the date
hereof) of the agreement or instrument by which such Company Warrant is
evidenced. All rights with respect to Company Common Stock under outstanding
Company Warrants shall thereupon be converted, subject to the provisions hereof,
into rights with respect to Parent Common Stock. From and after the Effective
Time, (i) each Company Warrant assumed by Parent (collectively, the "Assumed
Warrants") may be exercised solely for shares of Parent Common Stock, (ii) the
number of shares of Parent Common Stock subject to each such Assumed Warrant
shall be equal to the number of shares of Parent Common Stock which the holder
of such Assumed Warrant would have received pursuant to Section 1.5 in exchange
for the shares of Company Common Stock subject to such Assumed Warrant if such
Assumed Warrant had been exercised immediately prior to the Effective Time,
(iii) the per share exercise price for the Parent Common Stock issuable upon
exercise of each such Assumed Warrant shall be determined by dividing the
exercise price per share of Company Common Stock subject to such Assumed
Warrant, as in effect immediately prior to the Effective Time, by a fraction the
numerator of which is the number of shares of Parent Common Stock subject to
such Assumed Warrant immediately after the Effective Time and the denominator of
which is the number of shares of Company Common Stock subject to such Assumed
Warrant immediately prior to the Effective Time, and rounding the resulting
exercise price up to the nearest whole cent, and (iv) all restrictions on the
exercise of each such Assumed Warrant shall continue in full force and effect
and the term, exercisability, limitations, and other provisions of such Company
Warrant shall otherwise remain unchanged; provided, however, that each such
Assumed Warrant shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, reverse stock split, stock
dividend,
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recapitalization or other similar transaction effected by Parent after the
Effective Time. The Company and Parent shall take all action that may be
necessary (under the agreements and instruments evidencing the Assumed Warrants
and otherwise) to effectuate the provisions of this Section 1.13.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE MERGER SUB
Parent and the Merger Sub hereby represent and warrant to the Company
that, except as otherwise disclosed in Parent's Annual Report on Form 10-K for
the fiscal year ended July 31, 1995 (the "Parent's Latest 10-K") or Parent's
Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1996 (the
"Parent's Latest 10-Q"):
2.1 Organization and Qualification. Each of Parent and the Merger Sub
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 now conducted.
2.2 Authority Relative to This Agreement. Each of Parent and the Merger
Sub has the requisite corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder. The execution and delivery of this
Agreement by Parent and the Merger Sub and the consummation by Parent and the
Merger Sub of the transactions contemplated hereby have been duly authorized by
Parent and by the Board of Directors and sole shareholder of the Merger Sub, and
no other corporate proceedings on the part of Parent or the Merger Sub are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by Parent and the Merger Sub and constitutes a
valid and binding obligation of each, enforceable in accordance with its terms.
Neither Parent nor the Merger Sub is subject to, or obligated under, any
provision of (a) its Certificate of Incorporation, Articles
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of Incorporation or Bylaws, (b) any agreement, arrangement or understanding, (c)
any license, franchise or permit or (d) subject to compliance with the statutes
referred to in the next sentence, any law, regulation, order, judgment or
decree, which would be breached, or violated, or in respect of which a right of
termination or acceleration or any encumbrance on any of its or any of its
subsidiaries' assets would be created, by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, other than any such breaches or violations which will not,
individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Parent and its subsidiaries,
taken as a whole. Other than authorizations, consents and approvals of or
filings or registrations with the SEC, the Federal Trade Commission, the United
States Department of Justice and other applicable federal and state governmental
authorities, no authorization, consent or approval of, or filing with, any
public body, court or authority is necessary on the part of Parent or the Merger
Sub for the consummation by Parent and the Merger Sub of the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals and filings as to which the failure to obtain or make would not,
individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Parent and its subsidiaries,
taken as a whole.
2.3 Capital Structure. The authorized capital stock of Parent consists
of 50,000,000 shares of Parent Common Stock and 2,500,000 shares of preferred
stock, $.001 per value. At the close of business on July 24, 1996, 25,772,144
shares of Parent Common Stock were issued and outstanding, no shares of Parent
Common Stock were held by Parent in its treasury and 42,546 shares of Parent
Common Stock were held by a wholly-owned subsidiary of Parent. As of the date
hereof, no shares of Parent's preferred stock, $.001 per value, were issued and
outstanding. All outstanding shares of Parent Common Stock are validly issued,
fully paid and
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nonassessable and not subject to preemptive rights contained in Parent's charter
documents or in any contract or agreement to which Parent is a party. All
outstanding shares of the capital stock of each of Parent's subsidiaries are
validly issued, fully paid and nonassessable and are owned by Parent or one of
its subsidiaries free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances.
2.4 SEC Filings; Financial Statements.
(a) Parent has delivered to the Company accurate and complete
copies (excluding copies of exhibits) of each report, registration statement (on
a form other than Form S-8) and definitive proxy statement filed by Parent with
the SEC between July 1, 1995 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act (as the case may be); and (ii) none of the Parent SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) the audited financial statements and unaudited interim
financial statements of Parent included (or incorporated by reference) in the
Parent SEC Documents have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), are accurate and complete in
all material respects and fairly present the consolidated financial position of
Parent as of the dates thereof and the consolidated results of Parent's
operations and the changes in Parent's consolidated financial position for the
periods then ended, in the case of the unaudited interim financial statements
subject to year-end audit adjustments which will not,
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individually or in the aggregate, be material in magnitude. Such unaudited
interim financial statements reflect all adjustments necessary to present a fair
statement of the results for the interim periods presented.
2.5 Valid Issuance. Subject to Section 1.5(d), the Parent Common Stock
to be issued in the Merger will be, when issued in accordance with the
provisions of this Agreement, validly issued, fully paid and nonassessable.
2.6 Accuracy of Information. None of the information supplied or to be
supplied by Parent or Merger Sub for inclusion or incorporation by reference in
the Form S-4 (as hereinafter defined) and the Prospectus/Proxy Statement (as
hereinafter defined) will, at the time the S-4 is declared effective or at the
date the Prospectus/Proxy Statement is mailed, 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 therein (in light of the circumstances under
which they are made) not misleading.
2.7 Title to Properties.
(a) Parent or one of Parent's subsidiaries owns good and
marketable title to each of the tangible properties and tangible assets
reflected on the balance sheet included in Parent's Latest 10-Q or
acquired since the date thereof, free and clear of all material liens
and encumbrances, except for (A) liens for current taxes not yet due
and payable, (B) liens or mortgages described in Parent's Latest 10-Q,
(C) the properties subject to the leases described in Parent's Latest
10-Q, (D) liens securing indebtedness described in Parent's Latest 10-Q
and (E) assets disposed of since the date of the balance sheet included
in Parent's Latest 10-Q in the ordinary course of business.
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(b) All of the buildings, machinery, equipment and other
tangible assets necessary for the conduct of Parent's and its
subsidiaries' businesses are in good condition and repair (except where
the failure to be in such condition and repair, either individually or
in the aggregate, would not have a material adverse effect on Parent or
any subsidiary of Parent and except for ordinary wear and tear), and
are usable in the ordinary course of business. Parent and its
subsidiaries own, or lease under valid leases which afford peaceful and
undisturbed possession of the subject matter of the lease, all
buildings, machinery, equipment and other tangible assets necessary for
the conduct of their businesses.
2.8 Accounts Receivable. Parent's and its subsidiaries' notes and
accounts receivable recorded on the balance sheet included in Parent's Latest
10-Q and those arising since the date thereof are valid receivables (subject to
a reasonable allowance for doubtful accounts as set forth in Parent's Latest
10-Q) arising from bona fide transactions entered into in the ordinary course of
business and are current and collectible in full in accordance with their terms,
subject to no valid counterclaims or setoffs.
2.9 Employment Matters. To the best knowledge of Parent, (i) no key
executive employee of Parent or any subsidiary of Parent, and no group of
Parent's or any subsidiary's employees, has any plans to terminate his or its
employment, (ii) Parent and the subsidiaries have complied with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the payment of social
security and other taxes, and (iii) Parent and its subsidiaries have no material
labor relations problems pending and their labor relations are satisfactory.
2.10 Affiliate Transactions. Except as set forth in Parent's Latest
10-K or Parent's Latest 10-Q, no officer or director of Parent or any subsidiary
of Parent or any member of the
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immediate family of any such officer or director, or any entity in which any of
such persons owns any beneficial interest (other than a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 5% of the stock of which is beneficially
owned by any of such persons) (collectively "Insiders"), (a) has any material
agreement with Parent or any subsidiary of Parent (other than normal employment
arrangements) or any material interest in any property, real, personal or mixed,
tangible or intangible, used in or pertaining to the business of Parent or any
subsidiary of Parent, or (b) has been indebted to Parent in amounts in excess of
$60,000 in the aggregate at any time (other than for purchases subject to usual
trade terms, for ordinary travel and expense payments and for other transactions
in the ordinary course of business). For purposes of the preceding sentence, the
members of the immediate family of an officer or director shall consist of the
spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and
daughters-in-law, and brothers- and sisters-in-law of such officer or director.
2.11 Compliance with Laws; Permits; Certain Operations. Parent, each of
Parent's subsidiaries and their respective officers, directors, agents and
employees have complied in all material respects, and currently are in
compliance in all material respects, with all applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof which
affect the businesses or any owned or leased properties of Parent and its
subsidiaries and to which Parent or any of its subsidiaries may be subject, and
no claims have been filed against Parent or any of its subsidiaries alleging a
material violation of any such law or regulation. Parent and its Subsidiaries
hold all material permits, licenses, certificates and other authorizations of
foreign, federal, state and local governmental agencies required for the conduct
of their businesses. Parent has not received any notice or other communication
from any governmental authority regarding any actual or possible violation of,
or failure to comply with,
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any legal requirement, except where failure to comply with such legal
requirement has not had and could not reasonably be expected to have a material
adverse effect on Parent.
2.12 Non-Contravention; Consents. Neither the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of Parent's or Merger Sub's certificate of
incorporation or bylaws, or (ii) any resolution adopted by Parent's or
Merger Sub's stockholders or board of directors or committee of such
board of directors;
(b) contravene, conflict with or result in a violation of the
terms or requirements of, or give any governmental authority the right
to revoke, withdraw, suspend, cancel, terminate or modify, any material
governmental authorization that is held by Parent or Merger Sub or that
otherwise relates to Parent's business or to any of the assets owned or
used by Parent;
(c) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any material
contract of Parent or Merger Sub, or give any Person the right to (i)
declare a default or exercise any remedy under any such material
contract, (ii) accelerate the maturity or performance of any such
material contract, or (iii) cancel, terminate or modify any such
material contract; or
(d) result in the imposition or creation of any lien or other
encumbrance upon or with respect to any asset owned or used by Parent
or Merger Sub (except for minor liens and encumbrances that will not,
in any case or in the aggregate, materially detract
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from the value of the assets subject thereto or materially impair the
operations of Parent or Merger Sub).
2.13 Brokerage. There are no claims for investment banking fees,
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Parent, Merger Sub or any other subsidiary of
Parent.
2.14 No Material Adverse Changes. Since April 30, 1996, there has been
no material adverse change, and no event has occurred that will or that would
reasonably be expected to result in a material adverse change, in the
consolidated assets, financial condition, operating results, customer, employee,
supplier or franchise relations, business condition or prospects, or financing
arrangements of Parent.
2.15 Legal Proceedings. There are no actions, suits, claims,
proceedings, orders or other investigations pending or threatened against Parent
that challenges or may have the effect or preventing, delaying, making illegal
or otherwise interfering with the Merger or any other transactions contemplated
by this Agreement or that could reasonably be expected to have a material
adverse effect on the business, properties, assets, condition (financial or
otherwise) or business prospects of Parent.
2.16 Board Approval. The board of directors of Parent has unanimously
(i) approved this Agreement and the Merger and (ii) determined that the Merger
is in the best interests of the stockholders of Parent and is on terms that are
fair to Parent.
2.17 Pooling of Interests. Parent is not aware of any event, condition,
fact or circumstance that to its knowledge could prevent the Merger from being
accounted for as a "pooling of interests" transaction for accounting purposes.
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2.18 OraTest. Based on information within the actual knowledge of any
Responsible Officer (as defined in Section 7.3) of Parent as of the date hereof:
(a) Parent believes all patents that have been issued relating
to Parent's oral cancer diagnostic known as OraTest (collectively, the
"OraTest Patents") are valid and enforceable;
(b) Parent is not aware of any products or processes for the
detection of cancerous oral lesions which are currently available on
the market or in development and which would compete with OraTest;
(c) Parent is not aware of any material adverse findings
regarding the OraTest Patents, the status of FDA approval of OraTest or
the marketability of OraTest that led to the decision of The Procter
and Gamble Company to terminate its agreement with Parent to market and
distribute OraTest;
(d) Parent believes that upon receipt of FDA approval, OraTest
will be able to be marketed as a diagnostic adjunct in patients with
oral lesions suspected or known to be malignant, to help in detection
of all sites of oral cancer, definition of borders of cancerous lesions
and selection of sites to be biopsied;
(e) Parent is not aware of any factor which could reasonably
be expected to cause the FDA to deny Parent's application for approval
of OraTest;
(f) Parent is not aware of any communications from the FDA
indicating that the FDA will deny Parent's application for approval of
OraTest;
(g) Parent's best good-faith estimate of the timing of receipt
of FDA approval of OraTest, assuming the FDA grants such approval, is
during the first calendar quarter of 1997; and
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(h) Parent's written estimates of the market potential and
estimated sales volume of OraTest which have been provided to the
Company are Parent's best good-faith estimates thereof and are based on
assumptions which Parent believes to be reasonable.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Merger Sub
that, except as otherwise disclosed in the Company's Annual Report on Form
10-KSB for the fiscal year ended March 31, 1996 (the "Company's Latest 10-K"):
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
California, and has the requisite corporate and other power and authority
(including all licenses, permits and authorizations) to own and operate its
properties and to carry on its business as now conducted and presently proposed
to be conducted and to perform its obligations under all contracts, instruments,
notes or other binding commitments to which it is or may become a party or by
which it or its assets is or may become bound. The copies of the Company's
Articles of Incorporation and Bylaws which have been furnished by the Company to
Parent prior to the date of this Agreement reflect all amendments made thereto
through the date hereof and are correct and complete. The Company is qualified
to do business and is in good standing as a foreign corporation in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be qualified. Except as set forth under the caption "Other Names"
in a letter delivered to Parent by the Company simultaneously with the execution
and delivery of this Agreement (the "Disclosure Letter"), the Company has not
conducted any business under or
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otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the name "Bio-Dental
Technologies Corporation."
3.2 Authority Relative to this Agreement. The Company has the requisite
corporate and other power and authority to enter into and perform this Agreement
and to carry out its obligations hereunder (it being understood that the
Company's obligations hereunder to effect the Merger is subject to the approval
of its shareholders as set forth in Section 3.27). 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 Company and, except for the approval of its shareholders as set
forth in Section 3.27, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement and such transactions. This Agreement
has been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms.
Neither the Company nor any of its Subsidiaries (as defined in Section 3.6(b))
is subject to, or obligated under, any provision of (a) its Certificate of
Incorporation, Articles of Incorporation or Bylaws, (b) any agreement,
arrangement or understanding, (c) any license, franchise or permit or (d)
subject to compliance with any of the statutes referred to in the next sentence,
any law, regulation, order, judgment or decree, which would be breached or
violated, or in respect of which a right of termination or acceleration or any
encumbrance on any of its or any of its Subsidiaries' assets would be created,
by its execution, delivery and performance of this Agreement and the
consummation by it of the transactions contemplated hereby, and the Company has
not taken any action that is inconsistent in any material respect with any
resolution adopted by the Company's shareholders, its board of directors or any
committee of its board of directors. The books of account, stock records, minute
books and other records of the Company are accurate, up-to-date and complete in
all
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material respects and have been maintained in accordance with prudent business
practices. Other than in connection with or in compliance with the provisions of
the California Law, the Exchange Act and the Hart-Scott-Rodino Antitrust
Improvements Act of 1978, as amended (the "Hart-Scott Act"), no authorization,
consent or approval of, or filing with, any public body, court or authority is
necessary on the part of the Company for the consummation by the Company of the
transactions contemplated by this Agreement.
3.3 Capitalization.
(a) The authorized equity capitalization of the Company
consists of 50,000,000 shares of Company Common Stock, 6,427,134 shares
of which are issued and outstanding as of the date hereof, and
1,000,000 shares of preferred stock, par value $.01 per share, none of
which shares are issued and outstanding as of the date hereof. All of
the issued and outstanding shares of Company Common Stock are validly
issued, fully paid and nonassessable. The Company's capital structure
as of the date hereof is disclosed to Parent under the caption
"Capitalization" in the Disclosure Letter.
(b) The Company has reserved 1,000,000 shares of Company
Common Stock for issuance under the Stock Plan, of which vested and
unvested options to purchase 665,391 shares are outstanding as of the
date of this Agreement. The Disclosure Letter, under the caption
"Company Options," accurately sets forth, with respect to each Company
Option that is outstanding as of the date of this Agreement: (i) the
name of the holder of such Company Option; (ii) the total number of
shares of Company Common Stock that are subject to such Company Option
and the number of shares of Company Common Stock with respect to which
such Company Option is immediately exercisable; (iii) the date on which
such Company Option was granted and the term of such Company Option;
(iv) the vesting schedule for such Company Option; (v) the exercise
price per
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share of Company Common Stock purchasable under such Company Option;
and (vi) whether such Company Option has been designated an "incentive
stock option" as defined in Section 422 of the Code. The Disclosure
Letter, under the caption "Company Warrants," accurately sets forth,
with respect to each Company Warrant that is outstanding as of the date
of this Agreement: (i) the name of the holder of such Company Warrant;
(ii) the total number of shares of Company Common Stock that are
subject to such Company Warrant; (iii) the date on which such Company
Warrant was granted and the expiration date of such Company Warrant;
(iv) the exercise price per share of Company Common Stock subject to
such Company Warrant; and (v) a description of any registration or
other rights granted to the holder of such Company Warrant.
(c) Except as specifically referred to in Sections 3.3(a) and
(b) above, or as set forth in the Disclosure Letter, there is no: (i)
outstanding subscription, option, call, warrant or right (whether or
not currently exercisable) to acquire any shares of the capital stock
or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or
exchangeable for any shares of the capital stock or other securities of
the Company; (iii) contract or agreement under which the Company is or
may become obligated to sell or otherwise issue any shares or its
capital stock or any other securities; or (iv) condition or
circumstance that may give rise to or provide a basis for the assertion
of a claim by any person or entity to the effect that such person or
entity is entitled to acquire or receive any shares of capital stock or
other securities of the Company.
(d) All outstanding shares of Company Common Stock and all
outstanding Company Options and Company Warrants have been issued and
granted in compliance
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<PAGE> 29
with (i) all applicable securities laws and other applicable laws and
regulations, and (ii) all requirements set forth in applicable
contracts and agreements.
(e) Except as set forth in the Disclosure Letter under the
caption "Acquisition of Shares," the Company has never repurchased,
redeemed or otherwise reacquired shares of capital stock or other
securities of the Company. All securities so reacquired by the Company
were reacquired in compliance with (i) the applicable provisions of the
California Law and all other applicable laws and regulations, and (ii)
all requirements set forth in applicable restricted stock purchase
agreements and other applicable contracts and agreements.
(f) Except as set forth in the Disclosure Letter under the
caption "Registration Rights," the Company is not under any obligation
to register under the Securities Act any of its presently outstanding
securities or any securities that may be subsequently issued, and no
person or entity holds any right to participate in new issuances of
securities by the Company.
(g) Except as set forth in the Disclosure Letter under the
caption "Agreements Relating to Company Common Stock," the Company is
not a party to or obligated under any agreement, arrangement or
understanding, contingent or otherwise, (i) involving the repurchase or
redemption of any amount of Company Common Stock, (ii) requiring the
Company to issue any amount of Company Common Stock to any person at
any time, or (iii) contemplating the issuance at any time of shares of
Company Common Stock or other consideration to any person as a
guarantee by the Company of a minimum market price for Company Common
Stock.
3.4 Commission Filings. The Company has heretofore delivered to Parent
copies of the Company's (a) Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1996,
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(b) Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
1995, (c) proxy statement relating to the Company's 1995 annual meeting of
shareholders, and (d) all other reports, registrations statements and other
documents filed by the Company with the SEC since January 1, 1993, in each case
as filed with the SEC (collectively, the "SEC Filings"), and the Company has
heretofore made available to Parent all other reports, registration statements
and other documents filed by the Company with the SEC under the Exchange Act or
the Securities Act since the Company's inception. Since June 30, 1992, the
Company has timely filed all reports, registration statements and other
documents required to be filed with the SEC under the rules and regulations of
the SEC, and all such reports, registration statements and other documents
complied as to form with the requirements of the Securities Act or the Exchange
Act, as the case may be. As of their respective dates, the reports, statements
and other documents referred to in the immediately preceding sentence did not
contain any untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.5 Financial Statements. The audited financial statements and
unaudited interim financial statements of the Company and its Subsidiaries
included (or incorporated by reference) in the SEC Filings have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto), are accurate and complete in all material respects and fairly present
the consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and the consolidated results of their operations and the
changes in their consolidated financial position for the periods then ended, in
the case of the unaudited interim financial statements subject to year-end audit
adjustments which will not, individually or in the aggregate, be material
26
<PAGE> 31
in magnitude. Such unaudited interim financial statements reflect all
adjustments necessary to present a fair statement of the results for the interim
periods presented.
3.6 Subsidiaries.
(a) Except as set forth under the caption "Subsidiaries" in
the Disclosure Letter, the Company does not own, beneficially or
otherwise, any stock or other equity interest, partnership interest,
joint venture interest, or any other security issued by any other
corporation, organization or entity, and the Company has not agreed and
is not obligated to make any future investment in or capital
contribution to any such corporation, organization or entity. Except as
set forth under the caption "Subsidiaries" in the Disclosure Letter,
the Company owns all of the outstanding capital stock of each
Subsidiary, free and clear of all liens, charges and encumbrances, and
there are no subscription rights, warrants, options, conversion rights
or agreements of any kind outstanding to purchase or otherwise acquire
any shares of capital stock of any Subsidiary or any securities or
obligations of any kind convertible into or exchangeable for any such
shares of capital stock. 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 and
other power and authority (including all authorizations, licenses and
permits) necessary to own and operate its properties and to carry on
its business as now conducted and presently proposed to be conducted.
The copies of the charter documents and bylaws of each Subsidiary which
have been furnished by the Company to Parent prior to the date of this
Agreement reflect all amendments made thereto through the date hereof
and are correct and complete. Each Subsidiary is qualified to do
business as a foreign corporation
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and is in good standing in all jurisdictions in which the nature of its
business or its ownership of property requires it to be qualified.
(b) For purposes of this Agreement, the term "Subsidiary"
means any corporation of which securities having a majority of the
ordinary voting power in electing directors are, at the time of
determination, owned by the Company directly or through another
Subsidiary.
3.7 Absence of Undisclosed Liabilities. Neither the Company nor any
Subsidiary has any obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due and
regardless of when asserted) arising out of transactions heretofore entered
into, or any action or inaction, or any state of facts existing, including taxes
with respect to or based upon transactions or events heretofore occurring,
except (a) obligations under contracts or commitments described in the
Disclosure Letter under the caption "Contracts," or under contracts and
commitments which are not required to be disclosed thereunder (but not
liabilities for breaches thereof), (b) liabilities reflected on the balance
sheet included in the Company's Latest 10-K, (c) liabilities which have arisen
after the date of the balance sheet included in the Company's Latest 10-K in the
ordinary course of business (none of which is a material uninsured liability for
breach of contract, breach of warranty, tort, infringement, claim or lawsuit),
and (d) liabilities otherwise disclosed in the Disclosure Letter.
3.8 No Material Adverse Changes. Except as set forth under the caption
"Adverse Changes" in the Disclosure Letter, since March 31, 1996, there has been
no material adverse change, and no event has occurred that will or that would
reasonably be expected to result in a material adverse change, in the
consolidated assets, financial condition, operating results, customer, employee,
supplier or franchise relations, business condition or prospects, or financing
arrangements of the Company and its Subsidiaries, taken as a whole.
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3.9 Absence of Certain Developments. Except as set forth under the
caption "Developments" in the Disclosure Letter, since March 31, 1996, the
Company has not and, since the date of acquisition by the Company, each
Subsidiary has not:
(a) redeemed or purchased, directly or indirectly, any shares
of its capital stock, or declared, accrued, set aside or paid any
dividends or distributions with respect to any shares of its capital
stock;
(b) other than upon the exercise of outstanding warrants or
options, issued or sold any of its equity securities, securities
convertible into or exchangeable for its equity securities, warrants,
options or other rights to acquire its equity securities, or its bonds
or other securities;
(c) borrowed any amount or incurred, guaranteed or become
subject to any material liability, except current liabilities incurred
in the ordinary course of business;
(d) discharged or satisfied any material lien or encumbrance
or paid any material liability, other than current liabilities paid in
the ordinary course of business;
(e) mortgaged, pledged or subjected to, or otherwise permitted
to become subject to, any lien, charge or other encumbrance, any of the
assets of the Company or any Subsidiary with a fair market value in
excess of $50,000, except liens for current property taxes not yet due
and payable and liens securing indebtedness of the Company under that
certain Second Amended and Restated Credit Agreement dated October 31,
1995, as amended by that certain Modification Agreement effective March
31, 1996, by and among the Company, certain Subsidiaries of the Company
and The Bank of California, relating to a
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$3,000,000 line of credit established for the Company at The Bank of
California (the "Company Credit Facility");
(f) sold, assigned or transferred (including without
limitation transfers to any employees, shareholders or affiliates of
the Company or any Subsidiary) any tangible assets, except for fair
value in the ordinary course of business, or canceled any debts or
claims;
(g) sold, assigned or transferred (including without
limitation transfers to any employees, shareholders or affiliates of
the Company or any Subsidiary) any patents, trademarks, trade names,
copyrights, trade secrets or other intangible assets, except for fair
value in the ordinary course of business, or disclosed any proprietary
confidential information to any person other than Parent or the Merger
Sub;
(h) suffered any extraordinary loss or waived any rights of
material value, whether or not in the ordinary course of business or
consistent with past practice;
(i) taken any other action or entered into any other
transaction other than in the ordinary course of business and in
accordance with past custom and practice, or entered into any
transaction with any Insider (as defined in Section 3.21);
(j) suffered any material theft, damage, destruction or loss
of or to, or any material interruption in the use of, any property or
properties owned or used by it, whether or not covered by insurance;
(k) made or granted any bonus or any wage, salary or
compensation increase, or made or granted any increase in any employee
benefit plan or
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arrangement, or amended or terminated any existing employee benefit
plan or arrangement or adopted any new employee benefit plan or
arrangement, with respect to any director, officer or consultant of the
Company or, except in the ordinary course of the Company's business and
consistent with the Company's historical compensation practices, any
other employee or group of employees;
(l) amended or waived any of its rights under, or permitted
the acceleration of vesting under, (i) any provision of its Stock Plan
or (ii) any provision of any agreement evidencing any outstanding
Company Option or Company Warrant;
(m) made any capital expenditures or commitments therefor
(other than any such expenditures or commitments made in the ordinary
course of business for leasehold improvements at, or the furnishing or
equipping of, the facilities operated by the Company as of the date of
this Agreement) that aggregate in excess of $60,000;
(n) made any loans or advances to, or guarantees for the
benefit of, any persons that aggregate in excess of $50,000;
(o) effected or been a party to any acquisition transaction,
recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(p) formed any subsidiary or acquired any equity interest or
other interest in any other entity;
(q) written off as uncollectible, or established any reserve
with respect to, any account receivable or other indebtedness in excess
of a total of $50,000;
(r) changed any of its methods of accounting or accounting
practices in any material respect;
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(s) made any tax election;
(t) commenced or settled any legal proceeding;
(u) waived or agreed to waive any applicable statute of
limitations or any similar statutory or judicial doctrine benefiting
the Company or any Subsidiary;
(v) entered into any material transaction or taken any other
material action outside the ordinary course of business or inconsistent
with its past practices; or
(w) made charitable contributions or pledges which in the
aggregate exceed $10,000.
3.10 Title to Properties.
(a) The Company or one of the Subsidiaries owns good and
marketable title to each the tangible properties and tangible assets
reflected on the balance sheet included in the Company's Latest 10-K or
acquired since the date thereof, free and clear of all liens and
encumbrances, except for (A) liens for current taxes not yet due and
payable, (B) liens set forth under the caption "Real Estate" in the
Disclosure Letter, (C) the properties subject to the leases set forth
under the caption "Leases" in the Disclosure Letter, (D) liens securing
indebtedness of the Company under the Company Credit Facility and (E)
assets disposed of since the date of the balance sheet included in the
Company's Latest 10-K in the ordinary course of business.
(b) (i) the real estate described under the caption "Real
Estate" in the Disclosure Letter and the demised leases described under
the caption "Leases" in the Disclosure Letter constitutes all of the
real estate used or occupied by the Company and the Subsidiaries (the
"Real Estate") and (ii) the Real Estate has access, sufficient for the
conduct of the Company's and the Subsidiaries'
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<PAGE> 37
businesses as now conducted or as presently proposed to be conducted,
to public roads and to all utilities, including electricity, sanitary
and storm sewer, potable water, natural gas and other utilities, used
in the operations of the Company and the Subsidiaries.
(c) The leases described under the caption "Leases" in the
Disclosure Letter are in full force and effect, and the Company or one
of the Subsidiaries, as the case may be, has a valid and existing
leasehold interest under each such lease for the term set forth
therein. The Company has delivered to Parent complete and accurate
copies of each of the leases described under such caption and none of
such leases has been modified in any respect, except to the extent that
such modifications are disclosed by the copies delivered to Parent.
Neither the Company nor any Subsidiary is in default, and no
circumstances exist which could result in such default, under any of
such leases; nor, to the knowledge of the Company or any Subsidiary, is
any other party to any of such leases in default.
(d) All of the buildings, machinery, equipment and other
tangible assets necessary for the conduct of the Company's and the
Subsidiaries' businesses are in good condition and repair (except where
the failure to be in such condition and repair, either individually or
in the aggregate, would not have a material adverse effect on the
Company or any Subsidiary and except for ordinary wear and tear), and
are usable in the ordinary course of business. The Company and the
Subsidiaries own, or lease under valid leases which afford peaceful and
undisturbed possession of the subject matter of the lease, all
buildings,
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machinery, equipment and other tangible assets necessary for the
conduct of their businesses.
(e) Neither the Company nor any of the Subsidiaries is in
violation of any applicable zoning ordinance or other law, regulation
or requirement relating to the operation of any properties used in the
operation of its business, including without limitation applicable
environmental protection and occupational health and safety laws and
regulations, and neither the Company nor any Subsidiary has received
any notice of any such violation, or of the existence of any
condemnation proceeding with respect to any properties owned or leased
by the Company or any Subsidiary.
3.11 Accounts Receivable. The Company's and the Subsidiaries' notes and
accounts receivable recorded on the balance sheet included in the Company's
Latest 10-K and those arising since the date thereof are valid receivables
(subject to a reasonable allowance for doubtful accounts as set forth in the
Company's Latest 10-K) arising from bona fide transactions entered into in the
ordinary course of business and are current and collectible in full in
accordance with their terms, subject to no valid counterclaims or setoffs.
3.12 Inventories. Except as set forth under the caption "Inventory" in
the Disclosure Letter, the inventories of the Company and the Subsidiaries
recorded on the balance sheet included in the Company's Latest 10-K, and the
inventory created or purchased since the date thereof, consists of a quantity
and quality usable and salable in the ordinary course of business, is not
slow-moving as determined in accordance with past practices, obsolete or
damaged, is merchantable and fit for its particular use, and is not defective.
3.13 Tax Matters. Except as set forth under the caption "Tax Matters"
in the Disclosure Letter,
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<PAGE> 39
(a) the Company and the Subsidiaries have timely filed all
returns that are required to be filed by them with respect to any
taxes, and all such returns have been accurately and completely
prepared in compliance with all applicable legal requirements and are
true, correct, and complete; all taxes due and payable by the Company
and the Subsidiaries have been paid; the Company's and the
Subsidiaries' provisions for taxes on the balance sheet included in the
Company's Latest 10-K are sufficient for all accrued and unpaid taxes
as of the date of such balance sheet; the Company and the Subsidiaries
have paid all taxes due and payable by them or which they are obligated
to withhold from amounts owing to any employee, creditor, or third
party; neither the Company nor any Subsidiary has waived any statute of
limitations in respect of taxes relating to any of their businesses or
agreed to any extension of time with respect to a tax assessment or
deficiency relating to any of their businesses; the assessment of any
additional taxes relating to their businesses for periods for which
returns have been filed is not expected, and no audit of the Company or
any Subsidiary is ongoing, threatened, or anticipated; and there are no
unresolved questions or claims concerning the tax liability of the
Company or any Subsidiary;
(b) All material elections with respect to taxes of the
Company and any Subsidiary are set forth in the "Tax Matters" section
of the Disclosure Letter; neither the Company nor any Subsidiary (i)
has consented at any time under Section 341(f) of the Code to have the
provisions of Section 341(f) apply to any disposition of assets of the
Company or any Subsidiary, (ii) has agreed, or is required, to make any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise that will affect the liability of the
Company or any Subsidiary for taxes, (iii) has made an election, or is
required, to treat any asset of the Company or any Subsidiary as owned
by another
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person pursuant to the provisions of Section 168(f) of the Code or as
tax-exempt bond financed property or tax-exempt use property within the
meaning of Section 168 of the Code, or (iv) has made any of the
foregoing elections or consents or is required to apply any of the
foregoing rules under any comparable state, county, local, or foreign
tax provision.
(c) Neither the Company nor any Subsidiary is or has ever been
an includible corporation in an affiliated group of corporations,
within the meaning of Section 1504 of the Code, other than in the
affiliated group of which the Company is the common parent corporation;
(d) Neither the Company nor any Subsidiary is now or has ever
been a party to any tax-sharing agreements or similar arrangements;
(e) Neither the Company nor any Subsidiary has made or become
obligated to make, or will, as a result of any event connected with the
Merger contemplated herein, make or become obligated to make, any
"excess parachute payment," as defined in Section 280G of the Code
(without regard to subsection (b)(4) thereof);
(f) There are no liens for taxes (other than for current taxes
that are not yet due and payable or are being contested in good faith)
upon the assets of the Company or any Subsidiary;
(g) All joint ventures, partnerships, or other arrangements or
contracts to which the Company or any Subsidiary is a party and that
could be treated as a partnership for federal income tax purposes are
set forth under the caption "Tax Matters" in the Disclosure Letter;
(h) There are no outstanding balances of deferred gain or loss
accounts related to deferred intercompany transactions or outstanding
intercompany items related to intercompany transactions (as each such
term is defined in Treas. Reg. Section 1.1502-13, as
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<PAGE> 41
such regulation is or was applicable to the Company and the
Subsidiaries in each relevant taxable period) between the Company and
any Subsidiary or between any Subsidiaries; and
(i) There exists no excess loss account (as such item is
defined in Treas. Reg. Section 1.1502-19) with respect to the stock of
the Company or any Subsidiary.
For purposes of this Agreement, the terms "tax" and "taxes" shall include
income, gross receipts, excise, real and personal property, sales, franchise,
employment, and other taxes imposed by any federal, foreign, state, county,
municipal, local, or other governmental agency, including interest and penalties
relating to taxes and assessments in the nature of taxes.
3.14 Contracts and Commitments.
(a) Except as set forth under the caption "Contracts" in the
Disclosure Letter, neither the Company nor any Subsidiary is a party to
any: (i) collective bargaining agreement or contract with any labor
union; (ii) bonus, pension, profit sharing, retirement, or other form
of deferred compensation plan; (iii) hospitalization insurance or
similar plan or practice, whether formal or informal; (iv) contract for
the employment of any officer, individual employee, or other person on
a full-time or consulting basis or relative to severance pay for any
such person; (v) agreement or indenture relating to the borrowing of
money in excess of $100,000 or to mortgaging, pledging or otherwise
placing a lien on any of the assets of the Company or any Subsidiary,
other than agreements entered into by the Company and certain
Subsidiaries in connection with the Company Credit Facility; (vi)
guaranty of any obligation for borrowed money or otherwise, other than
endorsements made for collection; (vii) lease or agreement under which
it
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<PAGE> 42
is lessor of, or permits any third party to hold or operate, any
property, real or personal, for an annual rental in excess of $100,000;
(viii) contract or group of related contracts with the same party for
the purchase of products or services, under which the undelivered
balance of such products and services has a purchase price in excess of
$50,000; (ix) contract or group of related contracts with the same
party for the sale of products or services under which the undelivered
balance of such products or services has a sales price in excess of
$50,000; (x) other contract or group of related contracts with the same
party continuing over a period of more than six months from the date or
dates thereof, either not terminable by it on 30 days' or less notice
without penalty or involving more than $50,000; (xi) contract which
prohibits either the Company or any Subsidiary from freely engaging in
business anywhere in the world; (xii) contract relating to the
distribution of the Company's or any Subsidiary's products; (xiii)
franchise agreement; (xiv) contract, agreement or understanding with
any shareholder who beneficially owns 5% or more of the Company Common
Stock or with any officer, director or employee (other than for
employment on customary terms); (xv) license agreement or agreement
providing for the payment or receipt of royalties or other compensation
by the Company or any Subsidiary in connection with the proprietary
rights listed under the caption "Proprietary Rights" in the Disclosure
Letter; or (xvi) other agreement material to the Company's or any
Subsidiary's business or not entered into in the ordinary course of
business.
(b) Except as specifically disclosed under the caption
"Contracts" in the Disclosure Letter, (i) no contract or commitment
required to be disclosed under such caption has been breached or
canceled by the other party; (ii) since
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<PAGE> 43
the date of the balance sheet included in the Company's Latest 10-K, no
customer or supplier has indicated that it will stop or decrease the
rate of business done with the Company or any Subsidiary, except for
changes in the ordinary course of the Company's and the Subsidiaries'
businesses; (iii) the Company and the Subsidiaries have performed all
obligations required to be performed by them in connection with the
contracts or commitments required to be disclosed under such caption
and are not in receipt of any claim of default under any contract or
commitment required to be disclosed under such caption; (iv) neither
the Company nor any Subsidiary has any present expectation or intention
of not fully performing any obligation pursuant to any contract or
commitment or commitment set forth under such caption; and (v) neither
the Company nor any Subsidiary has any knowledge of any breach or
anticipated breach by any other party to any contract or commitment set
forth under such caption.
(c) Prior to the date of this Agreement, Parent has been
supplied with a true and correct copy of each written contract or
commitment, and a written description of each oral contract or
commitment, referred to under the caption "Contracts" in the Disclosure
Letter, together with all amendments, waivers or other changes thereto.
3.15 Proprietary Rights. Except as set forth under the caption
"Proprietary Rights" in the Disclosure Letter, there are no patents, patent
applications, trademarks, service marks, trade names, corporate names,
copyrights, trade secrets or other proprietary rights owned by the Company or
any Subsidiary or necessary to the conduct of the Company's or any Subsidiary's
businesses as now conducted. The Company or a Subsidiary owns and possesses all
rights, titles and interest, or a valid license, in and to the proprietary
rights set forth under such caption. The
39
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Disclosure Letter describes under such caption all proprietary rights which have
been licensed to third parties and all proprietary rights which are licensed
from third parties by the Company or any Subsidiary. The Company and the
Subsidiaries have taken all necessary action to protect the proprietary rights
set forth under such caption. Neither the Company nor any Subsidiary has
received any notice of, nor is it aware of any facts which indicate a likelihood
of, any infringement, misappropriation, or conflict from any third party with
respect to the proprietary rights which are listed under such caption; neither
the Company nor any Subsidiary has infringed, misappropriated or otherwise
conflicted with any proprietary rights of any third parties, nor is it aware of
any infringement, misappropriation or conflict which will occur in the continued
operation of the Company or any Subsidiary; and no claim by any third party
contesting the validity of any proprietary rights listed under such caption has
been made, is currently outstanding, or to the best knowledge of the Company or
any Subsidiary is threatened.
3.16 Litigation. Except as set forth under the caption "Litigation" in
the Disclosure Letter, there are no actions, suits, claims, proceedings, orders
or investigations pending or threatened against the Company or any Subsidiary or
otherwise affecting any of their respective properties or assets, or that
challenges or may have the effect of preventing, delaying, making illegal or
otherwise interfering with the Merger or any other transactions contemplated by
this Agreement, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or that could reasonably be expected to
have a material adverse effect on the business, properties, assets, condition
(financial or otherwise) or business prospects of the Company and there is no
basis known to the Company or any Subsidiary for any of the foregoing. There is
no order, writ, injunction, judgment or decree:
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(a) to which the Company or any Subsidiary or any of the
assets owned or used by the Company or any Subsidiary is subject, or
(b) to which any officer or employee of the Company or any
Subsidiary is subject that prohibits such officer or employee from
engaging in or continuing any conduct, activity or practice relating to
the Company's or any Subsidiary's business. Except as set forth under
such caption, neither the Company nor any Subsidiary has received any
opinion or legal advice to the effect that the Company or any
Subsidiary is exposed from a legal standpoint to any liability or
disadvantage which may be material to it or its prospects.
3.17 Brokerage. There are no claims for investment banking fees,
brokerage commissions, finders' fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company or any Subsidiary. The Company
currently intends, however, to enter into an agreement or arrangement with a
qualified investment banking or financial advisory firm regarding the study of
and the rendering of an opinion with respect to the fairness of the Merger;
provided, that the Company hereby acknowledges and agrees that the terms and
conditions of any such agreement or arrangement (including, without limitation,
fees and expenses to be paid by the Company in connection therewith) shall be
reasonably acceptable to Parent.
3.18 Employment Matters. To the best knowledge of the Company and the
Subsidiaries, (i) no key executive employee of the Company or any Subsidiary,
and no group of the Company's or any subsidiary's employees, has any plans to
terminate his or its employment, (ii) the Company and the Subsidiaries have
complied with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes, and (iii) the Company
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and the Subsidiaries have no material labor relations problems pending and their
labor relations are satisfactory.
3.19 Employee Benefit Plans.
With respect to the employee benefits provided to employees and former
employees of the Company and the Subsidiaries:
(a) The Company and the Subsidiaries currently
maintain only the employee pension benefit plans, as defined
in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), as are listed under the caption
"Employee Benefits" in the Disclosure Letter.
(b) The Company and the Subsidiaries currently
maintain only the employee welfare benefit plans, as defined
in Section 3(1) of ERISA (including but not limited to, life
insurance, medical, hospitalization, holiday, vacation,
disability dental and vision plans) as are listed under the
caption "Employee Benefits" in the Disclosure Letter (the
"Welfare Plans").
(c) The Company and the Subsidiaries currently
maintain, or have entered into, only the compensation programs
and/or employment arrangements, (including but not limited to,
incentive compensation, bonus, severance, sick pay, salary
continuation, deferred compensation, supplemental executive
compensation plans, and employment and consulting agreements)
as are listed under the caption "Employee Benefits" in the
Disclosure Letter (the "Compensation Programs").
(d) The Company and the Subsidiaries do not
contribute, and have not contributed within the last five
years, to any multiemployer plan, as defined by Section 3(37)
of ERISA.
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(e) Each Pension Plan and Welfare Plan is in
compliance with ERISA; each Pension Plan which is intended to
be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified
or a request for such determination has been timely filed with
the Internal Revenue Service (and to Company's knowledge
nothing has occurred between the date of the last such
determination and the Closing Date to cause the Internal
Revenue Service to revoke such determination).
(f) Any Pension Plan or any Welfare Plan designed to
satisfy the requirements of Section 125, Section 401, Section
401(k), Section 409, Section 501(c)(9), Section 4975(e)(7),
and/or Section 4980B of the Code, satisfies such section.
(g) No accumulated funding deficiency, as defined in
Section 302(a)(2) of ERISA, exists (whether or not waived)
with respect to any Pension Plan as of the date hereof.
(h) All amounts required to be paid by the Company
and or any Subsidiary with respect to each Pension Plan,
Welfare Plan and Compensation Program on or before the Closing
Date have been paid.
(i) None of the Pension Plans or the Company or any
party in interest or disqualified person has engaged in any
non-exempt "prohibited transactions" as defined in Section 406
of ERISA or Section 4975 of the Code.
(j) Except as disclosed under the caption "Employee
Benefits" in the Disclosure Letter, no Pension Plan or Welfare
Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to
current or former employees beyond their retirement or other
termination of
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service other than (i) coverage mandated by applicable law,
(ii) retirement benefits under a Pension Plan, (iii) death
benefits under a Welfare Plan, (iv) deferred compensation
accrued on the books of the Company or a Subsidiary, or (v)
benefits the full cost of which is borne by the current or
former employee (or his or her beneficiary).
(k) No "leased employee," as that term is defined in
Section 414(n) of the Code, performs services for the Company
or any Subsidiary.
(l) No liability has been, or is expected by the
Company or any Subsidiary to be, incurred by the Company or a
Subsidiary under Section 4062 of ERISA with respect to any
Pension Plan.
(m) No reportable event within the meaning of Title
IV of ERISA has occurred with respect to any Pension Plan.
(n) The Company has furnished Parent with correct and
complete copies of each Pension Plan, Welfare Plan, and
Compensation Program, together with any trust agreements,
summary plan descriptions, employee informational material,
financial statements relating thereto and participant
listings.
3.20 Insurance. The Disclosure Letter, under the caption "Insurance,"
lists and briefly describes (including name of insurer, agent, coverage and
expiration date) each insurance policy maintained by, at the expense of or for
the benefit of the Company or any of the Subsidiaries with respect to its
properties and assets and describes any material claims made thereunder. All of
such insurance policies are in full force and effect and neither the Company nor
any Subsidiary is in default with respect to its obligations under any of such
insurance policies. Except as set forth in the Disclosure Letter under the
caption "Insurance," the Company is the sole beneficiary of each such policy.
The insurance coverage of the Company and the
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Subsidiaries is customary for corporations of similar size engaged in similar
lines of businesses. The Company has not received any notice or other
communication regarding any actual or possible (a) cancellation or invalidation
of any insurance policy, (b) refusal of any coverage or rejection of any claim
under any insurance policy or (c) material adjustment in the amount of premiums
payable with respect to any insurance policy.
3.21 Affiliate Transactions. Except as set forth under the caption
"Affiliate Transactions" in the Disclosure Letter, no officer or director of the
Company or any Subsidiary or any member of the immediate family of any such
officer or director, or any entity in which any of such persons owns any
beneficial interest (other than a publicly-held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than 5% of the stock of which is beneficially owned by any of such persons)
(collectively "Insiders"), (a) has any agreement with the Company or any
Subsidiary (other than normal employment arrangements) or any interest in any
property, real, personal or mixed, tangible or intangible, used in or pertaining
to the business of the Company or any Subsidiary, (b) has been indebted to the
Company in amounts in excess of $10,000 in the aggregate at any time, (c) has at
any time competed, directly or indirectly, with the Company, or (d) has any
claim or right against the Company (other than rights under Company Options and
rights to receive compensation for services performed as an employee of the
Company). For purposes of the preceding sentence, the members of the immediate
family of an officer or director shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of such officer or director.
3.22 Suppliers. The Disclosure Letter, under the caption "Suppliers,"
lists the 10 largest suppliers of the Company and the Subsidiaries (on a
consolidated basis) for the 1996
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fiscal year and sets forth opposite the name of each such supplier the total
amount of purchases from such supplier by the Company and the Subsidiaries
during the 1996 fiscal year.
3.23 Officers and Directors; Bank Accounts. The Disclosure Letter,
under the caption "Officers and Directors," lists all officers and directors of
the Company and the Subsidiaries and, under the caption "Bank Accounts," lists
all of the Company's and the Subsidiaries' accounts at any bank or other
financial institution (designating each authorized signer).
3.24 Compliance with Laws; Permits; Certain Operations. The Company,
each of the Subsidiaries and their respective officers, directors, agents and
employees have complied in all respects, and currently are in compliance in all
respects, with all applicable laws and regulations of foreign, federal, state
and local governments and all agencies thereof which affect the businesses or
any owned or leased properties of the Company and the Subsidiaries and to which
the Company or any of the Subsidiaries may be subject, and no claims have been
filed against the Company or any of the Subsidiaries alleging a violation of any
such law or regulation, except as set forth in the Disclosure Letter under the
caption "Compliance." Neither the Company nor any Subsidiary has given or agreed
to give any money, gift or similar benefit (other than incidental gifts of
articles of nominal value, gifts and prizes awarded pursuant to promotional
programs approved by the Company's management and non-extraordinary
entertainment expenditures) to any actual or potential customer, supplier,
governmental employee or any other person in a position to assist or hinder the
Company or any of the Subsidiaries in connection with any actual or proposed
transaction. The Company and the Subsidiaries hold all of the permits, licenses,
certificates and other authorizations of foreign, federal, state and local
governmental agencies required for the conduct of their businesses. Without
limiting the generality of the foregoing, neither the Company nor any Subsidiary
has violated, or received a notice or charge asserting any violation of, the
Occupational Safety and Health Act of 1970
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or any other state or federal acts or laws (including rules and regulations
thereunder) regulating or otherwise affecting employee health and safety or the
environment.
3.25 Disclosure.
(a) Neither this Agreement nor any other agreement or
instrument executed in connection with the transactions contemplated
hereby nor any of the attachments or exhibits hereto nor the Disclosure
Letter contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not
misleading, and there is no fact which has not been disclosed in
writing to Parent of which any officer or director of the Company or
any Subsidiary is aware which materially affects adversely or could
reasonably be anticipated to materially affect adversely the business,
including operating results, assets, customer relations, employee
relations and business prospects, of the Company and the Subsidiaries,
taken as a whole.
(b) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Form S-4 and
the Prospectus/Proxy Statement will, at the time the S-4 is declared
effective, at the date the Prospectus/Proxy Statement is mailed to the
shareholders of the Company or at the time of the Company Shareholders
Meeting, 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 therein (in light of the circumstances under which
they are made) not misleading.
3.26 Non-Contravention; Consents. Except as set forth under the caption
"Consents" in the Disclosure Letter, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the
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Merger or any of the other transactions contemplated by this Agreement, will
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
any of the provisions of the Company's or any Subsidiary's Articles of
Incorporation or Bylaws, or (ii) any resolution adopted by the
Company's or any Subsidiary's shareholders, the Company's or any
Subsidiary's board of directors or any committee of such board of
directors;
(b) contravene, conflict with or result in a violation of, or
give any governmental authority or other person or entity the right to
challenge any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any legal requirement
or any order, writ, injunction, judgment or decree to which the Company
or any Subsidiary, or any of the assets owned or used by the Company or
any Subsidiary, is subject;
(c) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any governmental authority the
right to revoke, withdraw, suspend, cancel, terminate or modify, any
governmental permit or authorization that is held by the Company or any
Subsidiary or that otherwise relates to the Company's business or to
any of the assets owned or used by the Company or any Subsidiary;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any contract
or agreement to which the Company or any Subsidiary is a party, or give
any person or entity the right to (i) declare a default or exercise any
remedy under any such contract or agreement, (ii) accelerate the
maturity or performance of any such contract or agreement, or (iii)
cancel, terminate or modify any such contract or agreement; or
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(e) result in the imposition or creation of any lien or other
encumbrance upon or with respect to any asset owned or used by the
Company or any Subsidiary (except for minor liens that will not, in any
case or in the aggregate, materially detract from the value of the
assets subject thereto or materially impair the operations of the
Company).
Except as set forth under the caption "Consents" in the Disclosure Letter, the
Company is not and will not be required to make any filing with or give any
notice to, or to obtain any consent from, any person or entity in connection
with (x) the execution, delivery or performance of this Agreement or any of the
other agreements referred to in this Agreement, or (y) the consummation of the
Merger or any of the other transactions contemplated by this Agreement.
3.27 Stockholder Vote Required. The affirmative vote of a majority of
the votes entitled to be cast by holders of the outstanding shares of Company
Common Stock (voting as a class) are the only votes of the holders of any class
or series of the Company's capital stock necessary to approve this Agreement and
the Merger under California Law.
3.28 Board Approval. The board of directors of the Company has (i)
approved the Merger and the execution of this Agreement, (ii) determined that
the Merger is in the best interests of the shareholders of the Company and is on
terms that are fair to such shareholders, and (iii) recommended that holders of
Company Common Stock vote in favor of this Agreement and the Merger.
3.29 Pooling of Interests. The Company is not aware of any event,
condition, fact or circumstance that to its knowledge could prevent the Merger
from being accounted for as a "pooling of interests" transaction for accounting
purposes.
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ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business Pending the Merger. The Company covenants and
agrees that, prior to the Effective Time, unless Parent shall otherwise consent
in writing (which consent shall not be unreasonably withheld) or as otherwise
expressly contemplated or permitted by this Agreement:
(a) The businesses of the Company and the Subsidiaries shall
be conducted only in, and the Company shall not take any action except
in, the ordinary course, on an arms'-length basis and in accordance in
all material respects with all applicable laws, rules and regulations
and past custom and practice; and the Company and the Subsidiaries
shall maintain their facilities in good condition and repair and in
accordance with the Company's policies and procedures relating thereto
as in effect prior to the execution of this Agreement;
(b) The Company shall not, directly or indirectly, do or
permit to occur any of the following: (i) issue, sell, pledge, dispose
of or encumber (or permit any of the Subsidiaries to issue, sell,
pledge, dispose of or encumber) (A) any additional shares of, or any
options, warrants, conversion privileges or rights of any kind to
acquire any shares of, any of its capital stock, except for issuances
upon the exercise of options or warrants outstanding on the date
hereof, or (B) any of its assets, except for fair value in the ordinary
course of business; (ii) amend or propose to amend its Articles of
Incorporation, Certificate of Incorporation or Bylaws; (iii) split,
combine or reclassify any outstanding shares of Company Common Stock or
other securities of the Company, or declare, set aside or pay any
dividend of other distribution payable in cash, stock, property
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or otherwise with respect to shares of Company Common Stock or other
securities of the Company; (iv) redeem, purchase or acquire or offer to
acquire any shares of Company Common Stock or other securities of the
Company; (v) acquire (by merger, exchange, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material assets
thereof; (vi) incur or guarantee any indebtedness for borrowed money or
issue any debt securities except the borrowing of working capital in
the ordinary course of business and consistent with past practice or
(vii) enter into or propose to enter into, or modify or propose to
modify, any agreement, arrangement or understanding with respect to any
of the matters set forth in this Section 4.1(b);
(c) The Company shall not (and shall not permit any Subsidiary
to), directly or indirectly, (i) enter into or modify any contract,
agreement or understanding with Curtis M. Rocca III, Terry E. Bane or
Timothy J. Purdy; (ii) enter into or modify any employment, severance
or similar agreements or arrangements with, or grant any bonuses,
salary increases, severance or termination pay to, any officers or
directors or consultants; (iii) make any capital expenditures,
including any capitalizable lease obligations, other than expenditures
necessary to maintain existing assets in good repair and other capital
expenditures in amounts not exceeding $50,000 in the aggregate; or (iv)
in the case of employees who are not officers or directors or
consultants, grant or take any action with respect to the granting of
any salary increases, severance or termination pay or increases in
other benefits, other than grants or such actions as are in the
ordinary course of the Company's business and are consistent with
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the Company's historic compensation practices, or grant or take any
actions with respect to the granting of any bonuses;
(d) The Company shall not (and shall not permit any Subsidiary
to) adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, trust, fund or group arrangement for the benefit
or welfare of any employees or any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund or arrangements for
the benefit or welfare of any director;
(e) The Company shall use its best efforts to cause its and
the Subsidiaries' current insurance (or reinsurance) policies not to be
canceled or terminated or reduced in coverage amount or any of the
coverage thereunder to lapse, unless simultaneously with such
termination, cancellation, reduction in coverage amount or lapse,
replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated, reduced or lapsed policies for
substantially similar premiums are in full force and effect;
(f) The Company and each Subsidiary (i) shall use its best
efforts to preserve intact its business organization and good will,
keep available the services of its officers and employees as a group
and maintain satisfactory relationships with suppliers, distributors,
customers and others having business relationships with it; (ii) shall
confer at Parent's request (but in no event less frequently than
weekly) with representatives of Parent to report on operational matters
and the general status of ongoing operations; (iii) shall not take any
action which would render, or which reasonably may be expected to
render, any representation or
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warranty made by it in this Agreement or in any other agreement or
instrument executed in connection with the transactions contemplated
hereby untrue at, or at any time prior to, the Effective Time; (iv)
shall notify Parent of any emergency or other change in the normal
course of its business or in the operation of its properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would be
material, individually or in the aggregate, to the business, operations
or financial condition of the Company and the Subsidiaries or to the
Company's, Parent's or the Merger Sub's ability to consummate the
transactions contemplated by this Agreement; and (v) shall notify
Parent if the Company shall discover that any representation or
warranty made by it in this Agreement was when made, or has
subsequently become, untrue;
(g) Neither the Company nor any Subsidiary shall change any of
its methods of accounting or accounting practices in any material
respect, and neither the Company nor any Subsidiary shall make any tax
election;
(h) Neither the Company nor any Subsidiary will waive or agree
to waive any applicable statute of limitations or any similar statutory
or judicial doctrine benefiting the Company or any Subsidiary;
(i) Neither the Company nor any Subsidiary shall commence or
settle any material legal action or proceeding, provided, that the
Company may settle any legal actions or proceedings which were pending
as of the date of the Company's Latest 10-K so long as the
consideration paid or agreed to be paid by the Company in connection
with such settlements does not exceed $10,000 in any
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individual case or $50,000 in the aggregate for all such settlements
(in the case of cash settlements) or cause the number of shares of
Company Common Stock issued and outstanding, after taking into account
any shares issued or canceled in connection with such settlement, to
exceed the number of shares of Company Common Stock issued and
outstanding on the date of this Agreement;
(j) The Company shall cause its officers to report at Parent's
request (but in no event less frequently than weekly) to Parent
concerning the status of the Company's business; and
(k) Subject to the fiduciary obligations of its directors as
advised by counsel, the Company shall not, except as required by law,
call any meeting of its shareholders other than the meeting
contemplated in Section 5.2.
4.2 Notification; Updates to Disclosure Schedule.
(a) During the period subsequent to the execution of this
agreement and prior to the Effective Time (the "Pre-Closing Period"),
the Company shall promptly notify Parent in writing of:
(i) the discovery by the Company of any event,
condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or
constitutes an inaccuracy in or breach of any representation
or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance
that occurs, arises or exists after the date of this Agreement
and that would cause or constitute an inaccuracy in or breach
of any representation or warranty made by the Company in this
Agreement if (A) such representation or warranty had been made
as of the time of the occurrence, existence or discovery of
such event, condition, fact or
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circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to
the date of this Agreement;
(iii) any breach of any covenant or obligation
of the Company;
and
(iv) any event, condition, fact or circumstance
that would make the timely satisfaction of any of the
conditions set forth in Sections 6.1, 6.2 or 6.3 impossible or
unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.2(a) requires any change
in the Disclosure Letter, or if any such event, condition, fact or
circumstance would require such a change assuming the Disclosure Letter
were dated as of the date of the occurrence, existence or discovery of
such event, condition, fact or circumstance, then the Company shall
promptly deliver to Parent an update to the Disclosure Letter
specifying such change. No such update shall be deemed to supplement or
amend the Disclosure Letter for the purpose of (i) determining the
accuracy of any of the representations and warranties made by the
Company in this Agreement, or (ii) determining whether any of the
conditions set forth in Sections 6.1, 6.2 or 6.3 has been satisfied.
4.3 Company Shareholder Approval.
(a) The Company will call a meeting of its shareholders (the
"Company Shareholder Meeting"), to be held after the Form S-4 shall
have been declared effective by the SEC, to submit this Agreement, the
Merger and related matters for the consideration and approval of the
Company's shareholders. Subject to the fiduciary obligations of the
Company's directors, the Form S-4 will include a statement to the
effect that the Company's board of directors has recommended that the
Company's
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shareholders vote in favor of the Merger. The Company Shareholder
Meeting will be called, held and conducted, and any proxies will be
solicited, in compliance with applicable law. The Company shall, if and
to the extent requested by Parent, subject to the fiduciary obligations
of the directors of the Company as advised by counsel, use its best
efforts to solicit from shareholders of the Company proxies in favor of
such adoption and approval and shall take all other action necessary
or, in the opinion of Parent, helpful to secure a vote of shareholders
in favor of the Merger. At the Company Shareholder Meeting, the Company
shall cause to be voted all shares of Company Common Stock with respect
to which proxies in the form distributed by the Company shall have been
given in favor of the Merger.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement.
(a) The Parent Common Stock to be issued in the Merger shall
be registered under the Securities Act on the Form S-4. As promptly as
practicable after the date of this Agreement, Parent and the Company
shall prepare, and Parent shall file with the SEC, a Form S-4
registration statement (the "Form S-4"), together with the
Prospectus/Proxy Statement to be included therein (the
"Prospectus/Proxy Statement") and any other documents required by the
Securities Act or the Exchange Act in connection with the Merger. Each
of Parent and the Company shall use its best efforts to respond
promptly to any comments of the SEC on the Form S-4 and to have the
Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Parent shall also take any action
required to be taken under any applicable state securities or blue sky
laws and regulations of the NASD to the extent applicable in
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connection with the issuance of the Parent Common Stock pursuant to the
Merger and upon exercise of the Assumed Options and the Company
Warrants after the Effective Time. Parent shall take shall take any
reasonable action required to provide for the listing of Parent Common
Stock on the Nasdaq National Market prior to or contemporaneously with
the Effective Time. The Company shall promptly furnish to Parent all
information concerning the Company and the Company's shareholders as
may reasonably be required in connection with any action contemplated
by this Section 5.1. Each of Parent and the Company will notify the
other 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 Form S-4 or the Prospectus/Proxy Statement or for
additional information and will supply the other with copies of all
correspondence with the SEC or its staff with respect to the Form S-4
or the Prospectus/Proxy Statement. Whenever any event occurs which
should be set forth in an amendment or supplement to the Form S-4 or
the Prospectus/Proxy Statement, Parent or the Company, as the case may
be, shall promptly inform the other of such occurrence and cooperate in
filing with the SEC or its staff, and/or mailing to stockholders of
Parent and shareholders of the Company, such amendment or supplement.
(b) The Company will mail to its shareholders in a timely
manner, for the purpose of considering and voting upon the Merger at
the Company Shareholder Meeting, the Prospectus/Proxy Statement that is
contained in the Form S-4 at the time that it is declared effective or
as subsequently amended or supplemented. The Company will promptly
provide to Parent all information relating to its business or
operations necessary for inclusion in the Prospectus/Proxy Statement to
satisfy all requirements of applicable state and federal securities
laws. None of the information relating to the
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Company or its officers and directors contained in any document,
certificate or other writing furnished or to be furnished by the
Company and included in (i) the Prospectus/Proxy Statement at the time
the Proxy Statement is mailed or at the time of the Company Shareholder
Meeting to vote on the Merger or at the Effective Time, as then amended
or supplemented, or (ii) the Form S-4 at the time the Form S-4 becomes
effective or at the Effective Time, as then amended or supplemented,
will contain any untrue statement of a material fact or will omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were provided, not misleading or necessary to correct any
statement that has become false or misleading in any earlier
communication with respect to the solicitation of proxies for the
Company's shareholder meeting.
(c) Parent will prepare and file the Prospectus/Proxy
Statement with the SEC as promptly as practicable, and use its best
reasonable efforts to cause the Form S-4 to become effective as soon
after such filing as practicable. In this regard, Parent will advise
the Company promptly of any comments, whether oral or written, received
from the SEC with respect to the Form S-4 and will also advise the
Company promptly as to the time at which the Form S-4 becomes effective
and of the issuance by the SEC of any stop order suspending the
effectiveness of the Form S-4 or the institution of any proceedings for
such purpose and will use its reasonable best efforts to prevent the
issuance of any stop order and to obtain as soon as possible the
lifting thereof if issued. Until the Effective Time, Parent will advise
the Company promptly of any requirement of the SEC for any amendment or
supplement of the Form S-4 or for additional information, and will not
at any time file any amendment of or supplement to the prospectus
contained therein, or to the prospectus filled pursuant to Rule 424(b)
of the
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Securities Act (the "Prospectus"), that shall not have been previously
submitted to the Company a reasonable time prior to the proposed filing
thereof or to which the Company shall reasonably object or that is not
in compliance in all material respects with the Securities Act and the
rules and regulations issued by the SEC thereunder. None of the
information relating to Parent (or, to the best knowledge of Parent,
any other person, contained in any document, certificate or other
writing furnished or to be furnished by Parent) included in (i) the
Prospectus/Proxy Statement at the time the Prospectus/Proxy Statement
is mailed or at the Effective Time, as then amended or supplemented, or
(ii) the Form S-4 at the time the Form S-4 becomes effective or at the
Effective Time, as then amended or supplemented, will contain any
untrue statement of a material fact or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were provided,
not misleading or necessary to correct any statement that has become
false or misleading in any earlier communication with respect to the
solicitation of proxies for the Company's shareholder meeting. From and
after the date the Form S-4 becomes effective and until the Effective
Time, if any event known to Parent occurs as a result of which the
Prospectus would include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or if it is necessary at any
time to amend the Form S-4 or the Prospectus to comply with the
Securities Act, Parent will promptly notify the Company and will
prepare an amended or supplemented Form S-4 or Prospectus, which will
correct such statement or omission, and will use its reasonable best
efforts to cause any such amendment to become effective as promptly as
possible. The Prospectus/Proxy Statement as it relates to Parent will
comply as to the form in all material respects with
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the requirements of the Exchange Act and the rules and regulations
thereunder in effect at the time the Prospectus/Proxy Statement is
mailed.
5.2 Action of Shareholders. The Company shall take all action necessary
in accordance with the California Law and its Articles of Incorporation and
Bylaws to convene the Company Shareholder Meeting as promptly as practicable to
consider and vote upon this Agreement (including, without limitation, the plan
of merger contained herein) and the Merger.
5.3 Accountant Comfort Letters.
(a) Prior to the date of this Agreement, the Company has
delivered to Parent a letter from Grant Thornton LLP addressed to the
Company and Parent and dated a date not more than one day (excluding
Saturdays, Sundays and holidays) before the date of this Agreement,
confirming that they are independent accountants within the meaning of
the Exchange Act and the applicable published rules and regulations
thereunder and stating to the effect that in their opinion the audited
financial statements and financial statement schedules included in the
Company's Latest 10-K and reported on by them comply as to form in all
material respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations.
(b) In addition, prior to the date (the "Mailing Date") the
Proxy Statement is mailed to the shareholders of the Company, the
Company shall deliver to Parent a letter from Grant Thornton LLP
addressed to the Company and Parent and dated a date not more than one
day (excluding Saturdays, Sundays and holidays) before the Mailing
Date, confirming that they are independent accountants within the
meaning of the Exchange Act and the applicable published rules and
regulations thereunder and stating to the effect that:
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(i) in their opinion the audited financial
statements and financial statement schedules included in the
Prospectus/Proxy Statement and reported on by them comply as
to form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations;
(ii) on the basis of a reading of the amounts
included in the Prospectus/Proxy Statement in response to Item
301 of Regulation S-K and of the latest unaudited consolidated
financial statements made available by the Company and the
Subsidiaries and the latest unaudited financial statements
included in the Prospectus/Proxy Statement relating to the
Company and the Subsidiaries; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the shareholders, directors and executive
committees of the Company and the Subsidiaries; and inquiries
of certain officials of the Company and the Subsidiaries who
have responsibility for financial and accounting matters of
the Company and the Subsidiaries as to transactions and events
subsequent to the date of the latest unaudited financial
statements included in the Prospectus/Proxy
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Statement relating to the Company and the Subsidiaries,
nothing came to their attention which would cause them to
believe that:
(A) the unaudited financial statements
included in the Prospectus/Proxy Statement of the
Company and the Subsidiaries do not comply as to form
in all material respects with applicable accounting
requirements of the Exchange Act and with the
published rules and regulations of the SEC with
respect to proxy statements; or that said unaudited
financial statements are not fairly presented in
conformity with generally accepted accounting
principles applied on a basis substantially
consistent with that of the audited financial
statements included in the Prospectus/Proxy Statement
and reported on by them; or
(B) with respect to the period subsequent to
the date of the latest unaudited financial statements
included in the Prospectus/Proxy Statement relating
to the Company and the Subsidiaries, there were any
changes, at a specified date not more than five days
(excluding Saturdays, Sundays and holidays) prior to
the date of the letter, in the long-term debt of the
Company and the Subsidiaries or capital stock of the
Company or any decreases in the cash and cash
equivalents, marketable securities or shareholders'
equity of the Company and the Subsidiaries as
compared with the amounts shown on the unaudited
consolidated balance sheet included in the
Prospectus/Proxy Statement, or for the period from
the date of the latest unaudited financial statements
included in the Prospectus/Proxy Statement relating
to the Company and the Subsidiaries, to such
specified date there were any decreases, as compared
with the
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corresponding period in the preceding year, in income
(loss) before extraordinary items, or in total or per
share amounts of net income (loss), of the Company
and the Subsidiaries, except in all instances for
changes or decreases set forth in such letter, in
which case the letter shall be accompanied by an
explanation by the Company as to the significance
thereof; and
(iii) they have performed certain other
specified procedures as a result of which they determined that
certain information of an accounting, financial or statistical
nature (which is limited to accounting, financial or
statistical information derived from the general accounting
records of the Company and the Subsidiaries) set forth in the
Prospectus/Proxy Statement as reasonably designated by Parent,
insofar as it relates to the Company and the Subsidiaries,
agrees with the accounting records of the Company and the
Subsidiaries, excluding any legal interpretation.
5.4 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid in accordance
with the provisions of paragraph 11 of the Letter of Intent.
5.5 Additional Agreements. 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 this Agreement,
including using reasonable efforts to obtain all necessary waivers, consents and
approvals and
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to effect all necessary registrations and filings, including, but not limited
to, any required filings under the Hart-Scott Act and submissions of information
requested by governmental authorities.
5.6 No Negotiations, etc. The Company shall not (nor shall it permit
any of the Subsidiaries to), directly or indirectly, through any officer,
director, agent or otherwise, solicit, initiate or encourage submission of any
inquiry, proposal or offer from any person or entity (including any of its or
their officers or employees) other than Parent relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or purchase
of all or a material portion of the assets of, or any equity interest in, the
Company or any Subsidiary or other similar transaction or business combination
involving the Company or any Subsidiary, or, unless the Company's Board of
Directors receives a written opinion from the Company's outside counsel stating
that there would be a material risk of liability on the part of the members of
the Company's Board of Directors to the Company's shareholders for failure to do
so, participate in any discussions or negotiations regarding, or furnish to any
other person any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by, or consider, entertain or accept any proposal or offer from, any
other person or entity to do or seek any of the foregoing. The Company shall
promptly notify Parent and the Merger Sub if any such proposal or offer, or any
inquiry from or contact with any person with respect thereto, is made and shall
promptly provide Parent with such information regarding such proposal, offer,
inquiry or contact as Parent may request.
5.7 Notification of Certain Matters. Each party shall give prompt
notice to each other party of (a) the occurrence or failure to occur of any
event, conditions, fact or circumstance which occurrence or failure would be
likely to cause any representation or warranty on its part contained in this
Agreement to be untrue or inaccurate at, or at any time prior to, the Effective
Time, and (b) any material failure of such party, or any officer, director,
shareholder, employee
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or agent thereof, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder.
5.8 Access to Information; Confidentiality. Parent and its attorneys,
accountants, consultants and representatives shall continue to have access to
the books and records of the Company and such other information pertaining to
the business and assets of the Company as Parent shall reasonably request, and
the Company and its attorneys, accountants, consultants and representatives
shall continue to have access to the books and records of Parent and such other
information pertaining to the business and assets of Parent as the Company shall
reasonably request, and each of Parent and the Company shall provide the other
with reasonable access to its officers and other personnel, as provided in
paragraph 8 of the Letter of Intent. The terms of paragraph 10 of the Letter of
Intent shall apply, in the event of a termination of this Agreement, to
information obtained as a result of such access and assistance.
5.9 Shareholder Claims. The Company shall not settle or compromise any
claim brought by any present, former or purported holder or owner of any
securities of the Company in connection with the Merger without the prior
written consent of Parent.
5.10 Consents. As promptly as practicable after the execution of this
Agreement, each party to this Agreement (a) shall make all filings (if any) and
give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
consents (if any) required to be obtained (pursuant to any applicable law,
regulation, contract or agreement, or otherwise) by such party in connection
with the Merger and the other transactions contemplated by this Agreement.
Parent shall (upon request) promptly deliver to the Company a copy of each such
filing made, each such notice given and each such consent obtained by Parent or
Merger Sub during the period subsequent to the date hereof and prior to
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the Effective Time; and the Company shall (upon request) promptly deliver to
Parent a copy of each such filing made, each such notice given and each such
consent obtained by the Company during the period subsequent to the date hereof
and prior to the Effective Time.
5.11 State Securities Law Compliance. Parent shall use commercially
reasonable efforts to (a) qualify, prior to the Effective Time, the Parent
Common Stock to be issued pursuant to the Merger under state "blue sky" laws of
every jurisdiction of the United States in which (i) any registered shareholder
of the Company has an address on the records of the Company as of the date of
this agreement, and (ii) an exemption from the qualification requirements under
such laws is unavailable with respect to the issuance of Parent Common Stock in
the Merger, and (b) qualify, prior to the Effective Time, the Assumed Options
and Assumed Warrants under the state "blue sky" laws of every jurisdiction of
the United States in which (i) the records of the Company, as of the date of
this Agreement, indicate that a holder of such Assumed Options or Assumed
Warrants resides, and (ii) an exemption from the qualification requirements
under such laws is unavailable.
5.12 Notification; Updates to Disclosure Letter. During the Pre-Closing
Period, Parent shall promptly notify the Company in writing of:
(i) the discovery by Parent of any event,
condition, fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or
constituted an inaccuracy in or breach of any representation
or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance
that occurs, arises or exists after the date of this Agreement
and that would cause or constitute an inaccuracy in or breach
of any representation or warranty made by Parent in this
Agreement if (A) such representation or warranty had been made
as of the time
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of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition,
fact or circumstance had occurred, arisen or existed on or
prior to the date of this agreement;
(iii) any breach of any covenant or obligation
of Parent; and
(iv) any event, condition, fact or circumstance
that would make the timely satisfaction of any of the
conditions set forth in Sections 6.1, 6.2 or 6.3 impossible or
unlikely.
5.13 Pooling of Interests. During the Pre-Closing Period, no party to
this Agreement shall take any action that could reasonably be expected to have
an adverse effect on the ability of Parent to account for the Merger as a
"pooling of interests."
5.14 Affiliate Agreements. The Company shall use all commercially
reasonable efforts to cause each Company-Affiliated Person identified on Exhibit
5 (and any other Person that Parent notifies the Company may reasonably be
deemed to be an "Affiliate" of the Company for purposes of the Securities Act),
to execute and deliver to Parent, as promptly as practicable after the execution
of this Agreement, an Affiliate Agreement in the form of Exhibit 3. Parent shall
use all commercially reasonable efforts to cause each Parent-Affiliated Person
listed on Exhibit 5 and each other Person that could reasonably be deemed to be
an "Affiliate" of Parent for purposes of the Securities Act to execute and
deliver to Parent, as promptly as practical after execution of this Agreement,
an Affiliate Agreement in the form of Exhibit 4.
5.15 Commercially Reasonable Efforts. During the Pre-Closing Period,
(a) the Company shall use all commercially reasonable efforts to cause the
conditions set forth in Sections 6.1 and 6.3 to be satisfied on a timely basis,
and (b) Parent and Merger Sub shall each use all commercially reasonable efforts
to cause the conditions set forth in Section 6.1 and 6.2 to be satisfied on a
timely basis.
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5.16 Tax Matters. Prior to the Closing, (a) Parent and the Company
shall execute and deliver to Squire, Sanders & Dempsey Representation
Certificates in substantially the forms of Exhibits 6 and 7 (which shall be used
in connection with the legal opinion contemplated by Section 6.1(s)), and (b)
each of the Company-Affiliated Persons listed on Exhibit 5 shall execute and
deliver to Squire, Sanders & Dempsey a Shareholders' Representation Certificate
in the form of Exhibit 8.
5.17 Key Employee Options. On the Closing Date, subject to the
conditions and on the terms set forth below, certain key officers and employees
of the Company shall be awarded options (the "Key Employee Options") pursuant to
Parent's Stock Option Awards Plan to purchase the number of shares of Parent
Common Stock specified opposite each such person's name below:
<TABLE>
<CAPTION>
Name # of Shares
---- -----------
<S> <C>
Curtis M. Rocca III 80,000
Timothy J. Purdy 40,000
Terry E. Bane 40,000
Maxine Holland 32,000
Michael Conroy 16,000
Rob Hickman 16,000
Bryan Shields 16,000
Dave Taylor 16,000
Cindy Alvey 16,000
Bill Baker 16,000
Brian Smith 16,000
Joel Kozikowski 16,000
</TABLE>
The Key Employee Options shall vest on the date that is one year after the
Closing Date (subject to the grantee remaining employed by Parent or a
subsidiary of Parent for such one-year period) and shall be exercisable at any
time thereafter for a period of nine years. The exercise price for all Key
Employee Options shall be the last reported sale price for Parent Common Stock
as
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reported by the Nasdaq Small-Cap Market on the Closing Date. The Key Employee
Options shall be subject to and governed by the terms and provisions of Parent's
Stock Option Awards Plan, as from time to time amended and in effect. The Parent
Common Stock to be issued upon the exercise of Key Employee Options will be
registered under the Securities Act on Form S-8 promulgated by the SEC.
5.18 Board of Directors. Contemporaneously with the consummation of the
Merger, two persons designated by the Company (the "Company Nominees") shall be
appointed to Parent's board of directors to serve until the first annual meeting
of shareholders of Parent to occur following consummation of the Merger. Parent
agrees, except to the extent Parent shall have a reasonable significant
objection at such time, to nominate and support the Company Nominees for
election to Parent's board of directors at the first annual meeting of
shareholders of Parent to occur following consummation of the Merger. If the
seat on Parent's board of directors held by either of the Company Nominees shall
become vacant for any reason during the period commencing with appointment of
the Company Nominees to Parent's board of directors upon consummation of the
Merger and ending on the date of the second annual meeting of shareholders of
Parent to occur following consummation of the Merger, Parent agrees, except to
the extent Parent shall have a reasonable significant objection at such time, to
appoint to Parent's board of directors to serve the remaining term of such
Company Nominee a person designated by the other Company Nominee.
ARTICLE 6
CONDITIONS
6.1 Conditions to Obligations of Each Party To Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
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(a) this Agreement (including without limitation the plan of
merger contained herein) and the Merger shall have been approved and
adopted by the vote of the shareholders of the Company described in
Section 3.27;
(b) any waiting period (and any extension thereof) applicable
to the consummation of the Merger under the Hart-Scott Act shall have
expired or been terminated;
(c) the Form S-4 shall have been declared effective by the SEC
and no order or other declaration suspending the effectiveness of the
S-4 shall have been issued or promulgated;
(d) the Prospectus/Proxy Statement shall not contain an untrue
statement of a material fact and shall not omit any statement required
to be contained therein or necessary to make any statement contained
therein, in the light in which made, not misleading;
(e) there shall have been no law, statute, rule or regulation,
domestic or foreign, enacted or promulgated which would make
consummation of the Merger illegal;
(f) no injunction or other order entered by a United States
(state or federal) court of competent jurisdiction shall have been
issued and remain in effect which would prohibit consummation of the
Merger;
(g) there shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make
illegal, or to delay or otherwise directly or indirectly to restrain or
prohibit, the consummation of the Merger, or seeking to obtain material
damages in connection with the Merger, (ii) seeking
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to prohibit direct or indirect ownership or operation by Parent of all
or a material portion of the business or assets of the Company and the
Subsidiaries or of Parent and its subsidiaries, or to compel Parent or
any of its subsidiaries or the Company or any of the Subsidiaries to
dispose of or to hold separately all or a material portion of the
business or assets of Parent and its subsidiaries or of the Company and
the Subsidiaries, as a result of the Merger, (iii) seeking to impose or
confirm limitations on the ability of Parent effectively to exercise
directly or indirectly full rights of ownership of any shares of
Company Common Stock on all matters properly presented to the Company's
shareholders, (iv) seeking to require direct or indirect divestiture by
Parent of any shares of Company Common Stock or any shares of the
Surviving Corporation to be issued in the Merger, (v) seeking or
causing any material diminution in the direct or indirect benefits
expected to be derived by Parent a result of the transactions
contemplated by this Agreement, (vi) invalidating or rendering
unenforceable any material provision of this Agreement (including
without limitation any of the exhibits or attachments hereto) or the
Letter of Intent, (vii) which otherwise might materially adversely
affect the Company and the Subsidiaries or Parent and its subsidiaries,
or (viii) otherwise relating to the Letter of Intent or the Merger;
(h) there shall not be any action taken, or any injunction
issued, or any order, statute, rule or regulation proposed, enacted,
promulgated, issued or deemed applicable to the Merger by any federal,
state or foreign court, government or governmental authority or agency,
other than the application of the waiting period provisions of the
Hart-Scott Act to the Merger, which may, directly or indirectly, result
in any of the consequences referred to in (g) above;
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(i) during the period prior to the Effective Time, no party to
this Agreement shall take any action that could reasonably be expected
to have an adverse effect on the ability of Parent to account for the
Merger as a "pooling of interests;"
(j) there shall not have occurred (i) any general suspension
of, or limitation on prices for, trading in securities on the Nasdaq
Small-Cap Market or the Nasdaq National Market, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States or any limitation by United States authorities on the
extension of credit by lending institutions, (iii) a commencement of
war, armed hostilities or other international or national calamity
directly or indirectly involving the United States, (iv) any limitation
by any governmental authority on, or any other event which, in the sole
judgment of Parent, might affect the extension of credit by banks or
other lending institutions in the United States, or (v) in the case of
any of the foregoing existing at the date hereof, a material
acceleration or worsening thereof;
(k) the Company and the Subsidiaries shall have obtained each
consent and approval necessary in order that the Merger and the
transactions contemplated herein not constitute a breach or violation
of, or result in a right of termination or acceleration or any
encumbrance on any of the Company's or the Subsidiaries' assets
pursuant to the provisions of, any agreement, arrangement or
understanding or any license, franchise or permit;
(l) prior to the Closing, Parent and the Company shall execute
and deliver to Squire, Sanders & Dempsey Representation Certificates in
substantially the forms of Exhibits 6 and 7 (which will be used in
connection with the legal
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opinion contemplated by Section 6.1(s)), and each of the
Company-Affiliated Persons listed on Exhibit 5 shall execute and
deliver to Squire, Sanders & Dempsey a Shareholder's Representation
Certificate in the form of Exhibit 8;
(m) Parent and the Company shall have received Affiliate
Agreements, in the form of Exhibit 3, executed by the
Company-Affiliated Persons identified on Exhibit 5 and by any other
person who Parent notifies the Company may be deemed to be an
"Affiliate" of the Company for purposes of the Securities Act
(collectively, the "Designated Persons"), and Affiliate Agreements, in
the form of Exhibit 4, executed by the Parent-Affiliated Persons
identified on Exhibit 5;
(n) there shall have been no damage, destruction or loss of or
to any property or properties owned or used by the Company or any of
the Subsidiaries, whether or not covered by insurance, which in the
aggregate has a material adverse effect on the Company and the
Subsidiaries, taken as a whole;
(o) the principal terms of this Agreement and the Merger shall
have been approved and adopted by the Company's shareholders in
accordance with all applicable laws and regulations and the Company's
Articles of Incorporation and By-Laws;
(p) no party hereto shall have terminated this Agreement as
permitted herein;
(q) the United States Food and Drug Administration shall not
have issued a formal denial of Parent's application for approval of
OraTest;
(r) Parent and the Company shall have received a letter from
Grant Thornton LLP, dated as of the Closing Date, confirming that such
firm is not aware of any fact or circumstance which could reasonably be
interpreted as
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rendering the Merger ineligible for the "pooling-of-interests" method
of accounting in accordance with generally accepted accounting
principles, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC; and
(s) Parent, the Company and the shareholders of the Company
shall have received a legal opinion of Squire, Sanders & Dempsey, dated
the Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, such counsel may rely upon
the tax Representation Certificates and Shareholder's Certificates
referred to in Section 6.1(l)).
6.2 Additional Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is also subject to the following conditions:
(a) the representations and warranties of Parent and the
Merger Sub set forth in Article 2 shall be true and correct in all
material respects as of the Effective Time as if made at and as of the
Effective Time, and each of Parent and the Merger Sub shall in all
material respects have performed each obligation and agreement and
complied with each covenant to be performed and complied with by it
hereunder at or prior to the Effective Time;
(b) Parent shall have furnished to the Company a certificate
in which Parent shall certify that Parent has no reason to believe that
the conditions set forth in Section 6.2(a) have not been fulfilled;
(c) Parent shall have furnished to the Company (i) a copy of
the text of the resolutions by which the corporate action on the part
of Parent and the Merger Sub necessary to approve this Agreement and
the Merger were taken, (iii)
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certificates executed on behalf of Parent and the Merger Sub by their
respective corporate secretaries or one of their respective assistant
corporate secretaries certifying to the Company, in each case, that
such copy is a true, correct and complete copy of such resolutions and
that such resolutions were duly adopted and have not been amended or
rescinded, and (iii) an incumbency certificate executed on behalf of
Parent and the Merger Sub by their respective corporate secretaries or
one of their respective assistant corporate secretaries certifying, in
each case, the signature and office of each officer executing this
Agreement or any other agreement, certificate or other instrument
executed pursuant hereto;
(d) the Company shall have received a letter addressed to the
Company from Squire, Sanders & Dempsey, based on customary reliance and
subject to customary qualifications, to the effect that:
(i) Parent is a corporation validly existing
and in good standing under the laws of the State of Delaware.
(ii) Merger Sub is a corporation validly
existing and in good standing under the laws of the State of
Delaware.
(iii) Parent has the corporate power to
consummate the transactions on its part contemplated by this
Agreement. Parent has duly taken all requisite corporate
action to authorize this Agreement; and this Agreement has
been duly executed and delivered by Parent and constitutes the
valid and binding obligation of Parent.
(iv) The Merger Sub has the corporate power to
consummate the transactions on its part contemplated by this
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Agreement. The Merger Sub has duly taken all requisite
corporate action to authorize this Agreement and the articles
of merger contemplated in Section 1.3; and this Agreement and
such articles of merger have been duly executed and delivered
by the Merger Sub and constitute valid and binding obligations
of the Merger Sub; and
(e) a letter from a qualified investment banking or financial
advisory firm confirming the fairness to the Company's shareholders
from a financial point of view of the consideration to be paid in the
Merger (the form of which letter shall have been received by the
Company for inclusion in the Prospectus/Proxy Statement prior to the
filing of the Prospectus/Proxy Statement with the SEC) shall have been
delivered to the Company's Board of Directors prior to the Mailing Date
and shall not have been subsequently withdrawn or amended.
6.3 Additional Conditions to Obligations of Parent and the Merger Sub.
The obligations of Parent and the Merger Sub to effect the Merger are also
subject to the following conditions:
(a) the representations and warranties of the Company in this
Agreement shall be true and correct in all material respects as of the
Effective Time as if made at and as of the Effective Time, and the
Company shall in all material respects have performed each obligation
and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Time;
(b) the Company shall have furnished to Parent a certificate
in which Curtis M. Rocca III, Terry E. Bane and Timothy J. Purdy shall
certify that an
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appropriate inquiry has been made of the executive officers and
employees of the Company and the Subsidiaries having principal
responsibilities for the matters as to which representations and
warranties have been made by the Company in this Agreement and for the
performance of the covenants of the Company set forth in this
Agreement, and after completion of such inquiry, neither the Company
nor any of the Subsidiaries nor any of the individuals executing such
certificate has any reason to believe that the conditions set forth in
Section 6.3(a) have not been fulfilled;
(c) the Company shall have furnished to Parent (i) a copy of
the text of the resolutions by which the board of Directors and
shareholders of the Company approved this Agreement (including, without
limitation, the plan of merger contained herein) and the Merger; (ii) a
certificate executed on behalf of the Company by its corporate
secretary certifying to Parent that such copy is a true, correct and
complete copy of such resolutions and that such resolutions were duly
adopted and have not been amended or rescinded; and (iii) an incumbency
certificate executed on behalf of the Company by its corporate
secretary certifying the signature and office of each officer executing
this Agreement or any other agreement, certificate or other instrument
executed pursuant hereto;
(d) Parent shall have received a letter addressed to Parent
from The Law Offices of Craig K. Powell, based on customary reliance
and subject to customary qualifications, to the effect that:
(i) The Company is a corporation validly
existing and in good standing under the laws of the State of
California.
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(ii) The authorized capital of the Company
consists of shares of capital stock, designated "Common
Stock," having a par value of $.01 per share, of which the
number of shares indicated in such letter are outstanding, all
of which were duly and validly issued and are fully paid and
non-assessable, and 1,000,000 shares of capital stock,
designated "Preferred Stock," having a par value of $.01 per
share, of which no shares are outstanding.
(iii) Each of the Subsidiaries is a
corporation validly existing and in good standing under the
laws of its jurisdiction of incorporation.
(iv) The Company owns all of the outstanding
capital stock of each of the Subsidiaries, free and clear of
any lien, claim or encumbrance.
(v) The Company has the corporate power to
consummate the transactions on its part contemplated by this
Agreement; the Company has duly taken all requisite corporate
action to authorize this Agreement and the articles of merger
contemplated in Section 1.3; and this Agreement and such
articles of merger have been duly executed and delivered by
the Company and constitute valid and binding obligations of
the Company.
(vi) No actions are required to be taken in
order to make the Merger effective which have not been taken
on or prior to the delivery of such letter except the delivery
of the
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articles of merger contemplated in Section 1.3 to the
Secretary of State of the State of California, and the filing
thereof by the Secretary of State of the State of California,
in accordance with Chapter 11 of the California Law;
(e) Parent shall have received a letter from Grant Thornton
LLP dated the date of the Effective Time bringing down to a date not
more than three days (excluding Saturdays, Sundays and holidays) prior
thereto the information specified in Section 5.3(b);
(f) Parent shall not have discovered any fact or circumstance
existing as of the date of this Agreement which has not been publicly
disclosed by the Company as of the date of this Agreement regarding the
business, assets, properties, condition (financial or otherwise),
results of operations or prospects of the Company and the Subsidiaries
which is, individually or in the aggregate with other such facts and
circumstances, materially adverse to the Company and the Subsidiaries
taken as a whole, or to the value of the shares of Company Common
Stock;
(g) Parent shall have received a letter from Deloitte & Touche
LLP, dated as of the Closing Date, confirming that Parent may account
for the Merger as a "pooling-of-interests" in accordance with generally
accepted accounting principles, Accounting Principles Board Opinion No.
16 and all published rules, regulations and policies of the SEC;
(h) the Company shall not have received written objections to
the Merger pursuant to Chapter 13 of the California Act covering more
than 5% of
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the shares of Company Common Stock outstanding immediately prior to the
Effective Time;
(i) the Company shall have modified the Stock Plan to permit
the Company Options to be assumed by Parent as contemplated by Section
1.12 of this Agreement; and
(j) Curtis M. Rocca III shall have entered into employment
arrangements with Parent in form and substance mutually acceptable to
Parent and such person.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. Subject to Section 7.4, this Agreement may be
terminated prior to the Effective Time:
(a) by Parent if there has been a material breach by the
Company or any of the Designated Persons of any covenant or agreement
of the Company or any of the Designated Persons set forth in this
Agreement or in any other agreement or instrument delivered to Parent,
which breach has not been cured within 30 days of the date on which
written notice of such breach was first given to the Company or which
is not capable of being cured by the Scheduled Closing Time;
(b) by the Company if there has been a material breach by
Parent of any covenant or agreement of Parent in this Agreement, which
breach has not been cured within 30 days of the date on which written
notice of such breach was first given to Parent or which is not capable
of being cured by the Scheduled Closing Time;
(c) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6.1 or 6.3 by the
Scheduled Closing Time has become
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impossible (other than as a result of any failure on the part of Parent
or Merger Sub to comply with or perform any covenant or obligation of
Parent or Merger Sub set forth in this Agreement);
(d) by the Company if the Company reasonably determines that
the timely satisfaction of any condition set forth in Section 6.1 or
6.2 by the Scheduled Closing Time has become impossible (other than as
a result of any failure on the part of the Company or any of the
Designated Persons to comply with or perform any covenant or obligation
set forth in this Agreement or in any other agreement or instrument
delivered to Parent);
(e) by Parent at or after the Scheduled Closing Time if any
condition set forth in Section 6.1 or 6.3 has not been satisfied by the
Scheduled Closing Time (other than as a result of any failure on the
part of Parent or Merger Sub to comply with or perform any covenant or
obligation of Parent or Merger Sub set forth in this Agreement); or
(f) by the Company at or after the Scheduled Closing Time if
any condition set forth in Section 6.1 or 6.2 has not been satisfied by
the Scheduled Closing Time (other than as a result of any failure on
the part of the Company or any of the Designated Persons to comply with
or perform any covenant or obligation set forth in this Agreement or in
any other agreement or instrument delivered to Parent);
(g) by Parent if the Closing has not taken place on or before
the Final Date (other than as a result of any failure on the part of
Parent to comply with or perform any covenant or obligation of Parent
set forth in this Agreement);
(h) by the Company if the Closing has not taken place on or
before the Final Date (other than as a failure on the part of the
Company or any of the Designated
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Persons to comply with or perform any covenant or obligation set forth
in this Agreement or in any other agreement or instrument delivered to
Parent);
(i) by the mutual consent of Parent and the Company.
As used herein, the Final Date shall be March 15, 1997, except that if
a temporary, preliminary or permanent injunction or other order by any Federal
or state court that would prohibit or otherwise restrain consummation of the
Merger shall have been issued and shall remain in effect on March 15, 1997, and
such injunction shall not have become final and nonappealable, either party, by
giving the other written notice thereof on or prior to March 15, 1997, may
extend the time for consummation of the Merger up to and including the earlier
of the date such injunction shall become final and nonappealable or May 15,
1997, so long as such party shall, at its own expense, use its best efforts to
have such injunction dissolved.
7.2 Termination Procedures. If Parent wishes to terminate this
Agreement pursuant to Section 7.1(a), Section 7.1(c), Section 7.1(e) or Section
7.1(g), Parent shall deliver to the Company a written notice stating that Parent
is terminating this Agreement and setting forth a brief description of the basis
on which Parent is terminating this Agreement. If the Company wishes to
terminate this Agreement pursuant to Section 7.1(b), Section 7.1(d), Section
7.1(f) or Section 7.1(h), the Company shall deliver to Parent a written notice
stating that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
7.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 7.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company nor Parent shall be
relieved of any obligation or liability arising from any prior breach by such
party of any provision of this Agreement or of any obligation or liability
arising pursuant to Section 7.4. If this Agreement is terminated pursuant to
Section 7.1
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as a result of the inaccuracy of any representation or warranty of Parent or the
Merger Sub set forth in Article 2 or the inaccuracy of any representation or
warranty of the Company set forth in Article 3, the party making such inaccurate
representation or warranty shall be subject to liability for the termination of
this Agreement as a result thereof only if and to the extent that any
Responsible Officer (as defined below) of such party had actual knowledge of
such inaccuracy. For purposes hereof, "Responsible Officer" of any party shall
mean the chairman of the board of directors, the chief executive officer, the
chief operating officer, the chief financial officer, any executive vice
president, the treasurer or the secretary of such party.
7.4 Breakup Fee.
(a) If the Company terminates this Agreement pursuant to
Section 7.1(d), 7.1(f) or 7.1(h) by reason of the fact that any of the
Closing conditions contained in Section 6.2(a) have not been met, or by
reason of the failure of the Closing condition contained in Section
6.1(k) under circumstances in which the acts of Parent or any of its
affiliates, not consented to in writing by the Company, were done with
the knowledge or reasonable expectation that they could reasonably be
expected to cause and in fact did cause the failure of such condition;
and in the circumstances of such termination, all of the Closing
conditions contained in Section 6.2 would have otherwise been met,
Parent shall pay to the Company within fifteen (15) business days after
such termination in cash the greater of (i) the amount of the Company's
documented out-of-pocket expenses incurred through the date of
termination in connection with this Agreement and the transactions
contemplated hereby (as evidenced by written notice accompanied by such
documentation and delivered to Parent by the Company within ten (10)
business days of such termination), and (ii) $100,000.
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(b) If Parent terminates this Agreement pursuant to Section
7.1(c), 7.1(e) or 7.1(g) by reason of the fact that any of the Closing
conditions in Sections 6.1(k) or (l) or 6.3(a) have not been met, or
the failure of the Closing condition contained in Section 6.3(h) under
any of the following circumstances: (i) the Company has materially
breached any covenant contained in Section 4.3 or the covenant in
Section 5.15(a) as it pertains to the condition in Section 6.1(o), (ii)
the Company's Board of Directors has withdrawn its recommendation to
the Company's shareholders to approve the Merger, or (iii) any Person
has publicly announced a proposed acquisition transaction with the
Company as the party to be acquired conditioned upon abandonment of the
Merger or the failure of the Company's shareholders to approve the
Merger; or by reason of the failure of the Closing condition contained
in Section 6.3(g) under circumstances in which the acts of the Company
or any of its affiliates, not consented to in writing by Parent, were
done with the knowledge that they could reasonably be expected to cause
and did in fact cause the failure of such condition; and in the
circumstances of such termination, all of the Closing conditions
contained in Section 6.3 (except the condition contained in Section
6.3(j)) would have otherwise been met, the Company shall pay to Parent
within fifteen (15) business days after such termination in cash the
greater of (i) the amount of Parent's documented out-of-pocket expenses
incurred through the date of termination in connection with this
Agreement and the transactions contemplated hereby (as evidenced by
written notice accompanied by such documentation and delivered to the
Company by Parent within ten (10) business days of such termination),
and (ii) $100,000.
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ARTICLE 8
GENERAL PROVISIONS
8.1 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto; provided, however, that, after approval of
the Merger by the shareholders of the Company, no amendment may be made which
changes the amount into which each share of Company Common Stock will be
converted in the Merger or effects any change which would materially and
adversely affect the shareholders of the Company without the further approval of
the shareholders of the Company.
8.2 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 agreement
of any other party or with any conditions to its own obligations, in each case
only to the extent such obligations, agreements and conditions are intended for
its benefit. No failure on the part of any party hereto to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party hereto in exercising any power, right, privilege or remedy under this
agreement, shall operate as a waiver of such power, right, privilege or remedy,
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or future exercise thereof or of any other power,
right, privilege or remedy. No party hereto shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party, and any such waiver shall not be applicable
or have any effect except in the specific instance in which it was given.
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8.3 Public Statements. Except as required by applicable law, no party
shall make any public announcement or statement with respect to the Merger, this
Agreement or any related transaction without the approval of the other parties,
which approval will not be unreasonably withheld. Moreover, each party agrees to
consult with the other parties prior to issuing any such public announcement or
statement.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by telex, by
telecopier, or by registered or certified mail (postage prepaid and return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by it by like notice):
If to Parent or
the Merger Sub: Zila, Inc.
5227 N. 7th Street
Phoenix, Arizona 85014
Telecopy: (602) 234-2264
Attn: Joseph Hines
With a copy to: Squire, Sanders & Dempsey
40 N. Central Avenue
Phoenix, Arizona 85004
Telecopy: (602) 253-8129
Attn: Christopher D. Johnson
If to the Company: Bio-Dental Technologies Corporation
11291 Sunrise Park Drive
Rancho Cordova, California 95742
Telecopy: (916) 638-0116
Attn: Curtis M. Rocca III
With a copy to: The Law Offices of Craig K. Powell
4678 Cabana Way
Sacramento, California 95822
Telecopy: (916) 454-1180
Attn: Craig K. Powell
All such notices and other communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the
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mail, postage prepaid, if delivered by mail; when answered back, if telexed; and
when receipt acknowledged, if telecopied.
8.5 Interpretation. When a reference is made in this Agreement to
subsidiaries of Parent, the word "subsidiary" means any "majority-owned
subsidiary" (as defined in Rule 12b-2 under the Exchange Act) of Parent;
provided, however, that the Company shall in no event and at no time be
considered a subsidiary of Parent for purposes of this Agreement. 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. References to
Sections and Articles refer to sections and articles of this Agreement unless
otherwise stated. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," and words of like import, unless the context requires
otherwise, refer to this Agreement (including the exhibits and attachments
hereto). As used in this Agreement, the masculine, feminine and neuter genders
shall be deemed to include the others if the context requires.
8.6 Severability. If term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
8.7 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with respect to the subject matter hereof; (b) is not
intended to confer upon any other person any rights or remedies hereunder; (c)
shall not be assigned by operation of law or otherwise, except that Parent and
the
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Merger Sub may assign all or any portion of their rights under this Agreement to
any wholly owned subsidiary, but no such assignment shall relieve Parent and the
Merger Sub of their obligations hereunder, and except that this Agreement may be
assigned by operation of law to any corporation with or into which Parent may be
merged; and (d) shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the State of Arizona, without
giving effect to the principles of conflict of laws thereof; provided, however,
that the Letter of Intent shall remain in full force and effect notwithstanding
the execution and delivery of this Agreement and nothing in this Agreement shall
supersede any of the provisions of the Letter of Intent. This Agreement may be
executed in two or more counterparts which together shall constitute a single
agreement.
8.8 Non-survival of Representations and Warranties. The representations
and warranties of the parties set forth herein shall terminate as of the
Effective Time.
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MERGER AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, Parent, the Merger Sub and the Company have caused
this Agreement to be executed on the date first written above by their
respective officers thereunder duly authorized.
ZILA, INC.
By ___________________________________
Its ____________________________
ZILA MERGER CORPORATION
By ___________________________________
Its ____________________________
BIO-DENTAL TECHNOLOGIES CORPORATION
By ___________________________________
Its ____________________________
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EXHIBIT 1
RESTATED CERTIFICATE OF INCORPORATION
OF
ZILA DENTAL TECHNOLOGIES CORPORATION
1. The name of this Corporation is: ZILA DENTAL TECHNOLOGIES
CORPORATION.
2. The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code (the "Code").
3. The name and address in the State of California of the Corporation's
agent for service of process is:
Name: Curtis M. Rocca III
Address: 11291 Sunrise Park Drive
Rancho Cordova, California 95741-1081
4. The maximum number of shares which the Corporation shall have the
authority to issue is:
(a) 50,000,000 (fifty million) shares of Common Stock having a
par value of $.01 per share; and
(b) 1,000,000 (one million) shares of Preferred Stock having a
par value of $.01 per share.
The Board of Directors of the Corporation is authorized to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any share of Preferred Stock.
5. The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
6. The Corporation may, by action of its board of directors or
shareholders, authorize, by bylaw amendment, agreement or otherwise, the
indemnification of agents, as defined in Section 317 of the Code, in excess of
that expressly permitted by Section 317 of the Code for agents of the
Corporation for breach of duty to the Corporation and its shareholders;
provided, however, that such an amendment or agreement may not provide for
indemnification of any agent for acts or omissions or transactions from which a
director may not be relieved of liability as set forth in the exception to
Section 204(a)(10) of the Code or as to circumstances under which indemnity is
expressly prohibited by Section 317 of the Code.
<PAGE> 95
EXHIBIT 2
RESTATED BYLAWS
OF
ZILA DENTAL TECHNOLOGIES CORPORATION
ARTICLE I
OFFICES
1. Registered Office.
The registered office of the Corporation required by the California
General Corporation Law to be maintained in California may be, but need not be,
identical with the Corporation's principal office, and the address of the
registered office may be changed from time to time by the Board of Directors.
2. Other Offices.
The Corporation may also have offices at such other places both within
and without the State of California as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
1. Annual Meeting.
The annual meeting of the stockholders shall be held on such date as
the Board of Directors shall determine, for the purpose of electing Directors
and for the transaction of such other business as may properly come before the
meeting. If the election of Directors is not held on the day designated by the
Board of Directors for any annual meeting of the stockholders, or any
adjournment thereof, the Directors shall cause the election to be held at a
special meeting of the stockholders as soon thereafter as convenient.
2. Special Meetings.
Special meetings of the stockholders may be called for any purpose or
purposes at any time by the Board of Directors, Chairman of the Board or the
President, and shall be called by the Chairman of the Board or the President at
the request of the holders of not less than one-tenth (1/10) of all outstanding
stock of the Corporation entitled to vote at such meeting, or
<PAGE> 96
otherwise as provided by the California General Corporation Law and Section 12
of Article III of these Bylaws. Such request shall state the purpose or purposes
of the proposed meeting.
3. Place of Meetings.
Annual and special meetings of the stockholders shall be held at the
principal office of the Corporation, unless otherwise specified in the notice
calling any such meeting, or in the event of a waiver of notice of such meeting,
in such waiver of notice.
4. Notice of Meeting.
Written notice stating the place, date and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered to each stockholder of record entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. Notice may be delivered either personally or by first
class, certified or registered mail, by an officer of the Corporation at the
direction of the person or persons calling the meeting. If mailed, notice shall
be deemed to be delivered when mailed to the stockholders at his or her address
as it appears on the stock transfer books of the Corporation. Notice need not be
given of an adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken, provided that such adjournment is for
less than thirty (30) days and further provided that a new record date is not
fixed for the adjourned meeting, in either of which events, written notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at such meeting. At any adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. A written
waiver of notice, whether given before or after the meeting to which it relates,
shall be equivalent to the giving of notice of such meeting to the stockholder
or stockholders signing such waiver. Attendance of a stockholder at a meeting
shall constitute a waiver of notice of such meeting, except when the stockholder
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
5. Fixing Date for Determination of Stockholders Record.
In order that the Corporation may determine the stockholders entitled
to notice of and to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any other change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix in advance a record date, which shall not be more than sixty
(60) nor less than ten (10) days prior to the date of such meeting or such
action, as the case may be. If the Board has not fixed a record date for
determining the stockholders entitled to notice of and to vote at a meeting of
stockholders, the record date shall be at close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. If
the Board has not fixed a record date for
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determining the stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board is necessary, the
record date shall be the day on which the first written consent is expressed by
any stockholder. If the Board has not fixed a record date for determining
stockholders for any other purpose, the record date shall be at the close of
business on the day on which the Board adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
6. Record of Stockholders.
The Secretary or other officer having charge of the stock transfer
books of the Corporation shall make, or cause to be made, at least ten (10) days
before every meeting of stockholders, a complete record of the stockholders
entitled to vote at a meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
7. Quorum and Manner of Acting.
At any meeting of the stockholders, the presence, in person or by
proxy, of the holders of a majority of the outstanding stock entitled to vote
shall constitute a quorum. All shares represented and entitled to vote on any
single subject matter which may be brought before the meeting shall be counted
for quorum purposes. Only those shares entitled to vote on a particular subject
matter shall be counted for the purpose of voting on that subject matter.
Business may be conducted once a quorum is present and may continue to be
conducted until adjournment sine die, notwithstanding the withdrawal or
temporary absence of stockholders leaving less than a quorum. Except as
otherwise provided in the California General Corporation Law, the affirmative
vote of the holders of a majority of the shares of stock then represented at the
meeting and entitled to vote thereat shall be the act of the stockholders;
provided, however, that if the shares of stock so represented are less than the
number required to constitute a quorum, the affirmative vote must be such as
would constitute a majority if a quorum were present, except that the
affirmative vote of the holders of a majority of the shares of stock then
present is sufficient in all cases to adjourn a meeting.
8. Voting of Shares of Stock.
Each stockholder shall be entitled to one vote or corresponding
fraction thereof for each share of stock or fraction thereof standing in his,
her or its name on the books of the
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Corporation on the record date. A stockholder may vote either in person or by
proxy executed in writing by the stockholder or by his, her or its duly
authorized attorney in fact, but no such proxy shall be voted or acted upon
after three (3) years from the date of its execution unless the proxy provides
for a longer period. Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of any
corporation to vote stock, including but not limited to its own stock, when held
by it in a fiduciary capacity. Shares of stock standing in the name of another
corporation may be voted by such officer, agent or proxy as the bylaws of such
other corporation may prescribe or, in the absence of such provision, as the
board of directors of such other corporation may determine. Unless demanded by a
stockholder present in person or by proxy at any meeting of the stockholders and
entitled to vote thereat, or unless so directed by the chairman of the meeting,
the vote thereat on any question need not be by ballot. If such demand or
direction is made, a vote by ballot shall be taken, and each ballot shall be
signed by the stockholder voting, or by his or her proxy, and shall state the
number of shares voted.
9. Organization.
At each meeting of the stockholders, the Chairman of the Board, or, if
he or she is absent therefrom, the President, or, if he or she is absent
therefrom, another officer of the Corporation chosen as chairman of such meeting
by stockholders holding a majority of the shares present in person or by proxy
and entitled to vote thereat, or, if all the officers of the Corporation are
absent therefrom, a stockholder of record so chosen, shall act as chairman of
the meeting and preside thereat. The Secretary, or, if he or she is absent from
the meeting or is required pursuant to the provisions of this Section 9 to act
as chairman of such meeting, the person (who shall be an Assistant Secretary, if
any and if present) whom the chairman of the meeting shall appoint shall act as
secretary of the meeting and keep the minutes thereof.
10. Order of Business.
The order of business at each meeting of the stockholders shall be
determined by the chairman of such meeting, but the order of business may be
changed by the vote of stockholders holding a majority of the shares present in
person or by proxy at such meeting and entitled to vote thereat.
11. Voting.
At all meetings of stockholders, each stockholder entitled to vote
thereat shall have the right to vote, in person or by proxy, and shall have, for
each share of stock registered in his, her or its name, the number of votes
provided by the Certificate of Incorporation in respect of stock of such class.
Stockholders shall not have cumulative voting rights with respect to the
election of Directors.
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12. Action By Stockholders Without a Meeting.
Any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting, without notice and without a vote,
if a consent in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the number of votes that would
have been necessary to authorize such action at a meeting at which all shares
entitled to vote were present and voted. Prompt notice of the taking of any such
action shall be given to any such stockholders entitled to vote who have not so
consented in writing.
ARTICLE III
BOARD OF DIRECTORS
1. General Powers.
The business and affairs of the Corporation shall be managed by the
Board of Directors.
2. Number, Term of Office and Qualifications.
Subject to the requirements of the California General Corporation Law,
the number of members of the Board of Directors shall not be less than five (5)
nor more than nine (9), with the exact number to be fixed from time to time by
the Board of Directors. Notwithstanding the foregoing, the Board of Directors
may, by amendment to these Bylaws pursuant to the terms hereof, decrease the
number of members of the Board of Directors to less than the minimum stated
above or increase the number of members of the Board of Directors to more than
the maximum stated above. Each Director shall hold office until his or her
successor is duly elected or until his or her earlier death or resignation or
removal in the manner hereinafter provided.
Directors need not be stockholders.
3. Place of Meeting.
The Board of Directors may hold its meetings at such place or places as
it may from time to time by resolution determine or as shall be designated in
any notices or waivers of notice thereof. Any such meeting, whether regular or
special, may be held by conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting in such manner shall constitute presence in
person at such meeting.
4. Annual Meetings.
As soon as practicable after each annual election of Directors and on
the same day, the Board of Directors shall meet for the purpose of organization
and the transaction of other business at the place where regular meetings of the
Board of Directors are held, and no notice of such meeting shall be necessary in
order to legally hold the meeting, provided that a quorum
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is present. If such meeting is not held as provided above, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for a special meeting of the Board of Directors, or in the
event of waiver of notice as specified in the written waiver of notice.
5. Regular Meetings.
Regular meetings of the Board of Directors may be held without notice
at such times as the Board of Directors shall from time to time by resolution
determine.
6. Special Meetings; Notice.
Special meetings of the Board of Directors shall be held whenever
called by the Chairman of the Board or a majority of the Directors at the time
in office. Notice shall be given, in the manner hereinafter provided, of each
such special meeting, which notice shall state the time and place of such
meeting, but need not state the purposes thereof. Except as otherwise provided
in Section 7 of this Article III, notice of each such meeting shall be mailed to
each Director, addressed to him or her at his or her residence or usual place of
business, at least two (2) days before the day on which such meeting is to be
held, or shall be sent addressed to him or her at such place by telegraph,
cable, wireless or other form of recorded communication or delivered personally
or by telephone not later than the day before the day on which such meeting is
to be held. A written waiver of notice, whether given before or after the
meeting to which it relates, shall be equivalent to the giving of notice of such
meeting to the Director or Directors signing such waiver. Attendance of a
Director at a special meeting of the Board of Directors shall constitute a
waiver of notice of such meeting, except when he or she attends the meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
7. Quorum and Manner of Acting.
A majority of the whole Board of Directors shall be present in person
at any meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting, and except as otherwise specified in
these Bylaws, and except also as otherwise expressly provided by the California
General Corporation Law, the vote of a majority of the Directors present at any
such meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum from any such meeting, a majority of the
Directors present thereat may adjourn such meeting from time to time to another
time or place, without notice other than announcement at the meeting, until a
quorum shall be present thereat. The Directors shall act only as a Board and the
individual Directors shall have no power as such.
8. Organization.
At each meeting of the Board of Directors, the Chairman of the Board of
Directors, or, if he or she is absent therefrom, the President, or if he or she
is absent therefrom, a Director
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chosen by a majority of the Directors present thereat, shall act as chairman of
such meeting and preside thereat. The Secretary, or if he or she is absent, the
person (who shall be an Assistant Secretary, if any and if present) whom the
chairman of such meeting shall appoint, shall act as Secretary of such meeting
and keep the minutes thereof.
9. Action by Directors Without a Meeting.
Any action required or permitted to be taken at a meeting of the Board
of Directors may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, is signed by
all Directors and such consent is filed with the minutes of the proceedings of
the Board of Directors.
10. Resignations.
Any Director may resign at any time by giving written notice of his or
her resignation to the Corporation. Any such resignation shall take effect at
the time specified therein, or, if the time when it shall become effective is
not specified therein, it shall take effect immediately upon its receipt by the
Chairman of the Board, the President or the Secretary; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
11. Removal of Directors.
Directors may be removed, with or without cause, as provided from time
to time by the California General Corporation Law as then in effect.
12. Vacancies.
Vacancies and newly created directorships resulting from any increase
in the authorized number of Directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director. If
at any time, by reason of death or resignation or other cause, the Corporation
has no Directors in office, then any officer or any stockholder or an executor,
administrator, trustee or guardian of a stockholder, may call a special meeting
of stockholders for the purpose of filling vacancies in the Board of Directors.
If one or more Directors shall resign from the Board of Directors, effective at
a future date, a majority of the Directors then in office, including those who
have so resigned, shall have the power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as provided in this
section in the filling of other vacancies.
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13. Compensation.
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no Director shall receive any compensation for his or her services
as a Director. The Board of Directors may at any time and from time to time by
resolution provide that the Directors shall be paid a fixed sum for attendance
at each meeting of the Board of Directors or a stated salary as Director. In
addition, the Board of Directors may at any time and from time to time by
resolution provide that Directors shall be paid their actual expenses, if any,
of attendance at each meeting of the Board of Directors. Nothing in this section
shall be construed as precluding any Director from serving the Corporation in
any other capacity and receiving compensation therefor, but the Board of
Directors may by resolution provide that any Director receiving compensation for
his or her services to the Corporation in any other capacity shall not receive
additional compensation for his or her services as a Director.
ARTICLE IV
OFFICERS
1. Number.
The Corporation shall have the following officers: a Chairman of the
Board (who shall be a Director), a President, a Vice President, a Secretary and
a Treasurer. At the discretion of the Board of Directors, the Corporation may
also have additional Vice Presidents, one or more Assistant Vice Presidents, one
or more Assistant Secretaries and one or more Assistant Treasurers. Any two or
more offices may be held by the same person.
2. Election and Term of Office.
The officers of the Corporation shall be elected annually by the Board
of Directors. Each such officer shall hold office until his or her successor is
duly elected or until his or her earlier death or resignation or removal in the
manner hereinafter provided.
3. Agents.
In addition to the officers mentioned in Section 1 of this Article IV,
the Board of Directors may appoint such agents as the Board of Directors may
deem necessary or advisable, each of which agents shall have such authority and
perform such duties as are provided in these Bylaws or as the Board of Directors
may from time to time determine. The Board of Directors may delegate to any
officer or to any committee the power to appoint or remove any such agents.
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4. Removal.
Any officer may be removed, with or without cause, at any time by
resolution adopted by a majority of the whole Board of Directors.
5. Resignations.
Any officer may resign at any time by giving written notice of his or
her resignation to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Any such resignation shall take effect at the times
specified therein, or, if the time when it shall become effective is not
specified therein, it shall take effect immediately upon its receipt by the
Board of Directors, the Chairman of the Board, the President or the Secretary;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
6. Vacancies.
A vacancy in any office due to death, resignation, removal,
disqualification or any other cause may be filled for the unexpired portion of
the term thereof by the Board of Directors.
7. Chairman of the Board.
The Chairman of the Board shall be the chief executive officer of the
Corporation and shall have, subject to the control of the Board, general and
active supervision and direction over the business and affairs of the
Corporation and over its several officers. The Chairman of the Board shall: (a)
preside at all meetings of the stockholders and at all meetings of the Board;
(b) make a report of the state of the business of the Corporation at each annual
meeting of the stockholders; (c) see that all orders and resolutions of the
Board are carried into effect; (d) sign, with the Secretary or an Assistant
Secretary, certificates for stock of the Corporation; (e) have the right to
sign, execute and deliver in the name of the Corporation all deeds, mortgages,
bonds, contracts or other instruments authorized by the Board, except in cases
where the signing, execution or delivery thereof is expressly delegated by the
Board or by these Bylaws to some other officer or agent of the Corporation or
where any of them are required by law otherwise to be signed, executed or
delivered; and (f) have the right to cause the corporate seal, if any, to be
affixed to any instrument which requires it. In general, the Chairman of the
Board shall perform all duties incident to the office of the Chairman of the
Board and such other duties as from time to time may be assigned to him or her
by the Board.
8. President.
The President shall have, subject to the control of the Board and the
Chairman of the Board, general and active supervision and direction over the
business and affairs of the Corporation and over its several officers. At the
request of the Chairman of the Board, or in case of his or her absence or
inability to act, the President shall perform the duties of the Chairman of the
Board and, when so acting, shall have all the powers of, and be subject to all
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the restrictions upon, the Chairman of the Board. He may sign, with the
Secretary or an Assistant Secretary, certificates for stock of the Corporation.
He may sign, execute and deliver in the name of the Corporation all deeds,
mortgages, bonds, contracts or other instruments authorized by the Board, except
in cases where the signing, execution or delivery thereof is expressly delegated
by the Board or by these Bylaws to some other officer or agent of the
Corporation or where any of them are required by law otherwise to be signed,
executed or delivered, and he may cause the corporate seal, if any, to be
affixed to any instrument which requires it. In general, the President shall
perform all duties incident to the office of the President and such other duties
as from time to time may be assigned to him or her by the Board or the Chairman
of the Board.
9. Vice President.
The Vice President and any additional Vice Presidents shall have such
powers and perform such duties as the Chairman of the Board, the President or
the Board of Directors may from time to time prescribe and shall perform such
other duties as may be prescribed by these Bylaws. At the request of the
President, or in case of his or her absence or inability to act, the Vice
President shall perform the duties of the President and, when so acting, shall
have all the powers of, and be subject to all the restrictions upon, the
President.
10. Secretary.
The Secretary shall: (a) record all the proceedings of the meetings of
the stockholders, the Board of Directors and the Executive Committee, if any, in
one or more books kept for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c) be
the custodian of all contracts, deeds, documents, all other indicia of title to
properties owned by the Corporation and of its other corporate records (except
accounting records) and of the corporate seal, if any, and affix such seal to
all documents the execution of which on behalf of the Corporation under its seal
is duly authorized; (d) sign, with the Chairman of the Board, the President, the
Executive Vice President or a Vice President, certificates for stock of the
Corporation; (e) have charge, directly or through the transfer clerk or transfer
clerks, transfer agent or transfer agents and registrar or registrars appointed
as provided in Section 3 of Article VII of these Bylaws, of the issue, transfer
and registration of certificates for stock of the Corporation and of the records
thereof, such records to be kept in such manner as to show at any time the
amount of the stock of the Corporation issued and outstanding, the manner in
which and the time when such stock was paid for, the names, alphabetically
arranged, and the addresses of the holders of record thereof, the number of
shares held by each, and the time when each became a holder of record; (f) upon
request, exhibit or cause to be exhibited at all reasonable times to any
Director such records of the issue, transfer and registration of the
certificates for stock of the Corporation; (g) see that the books, reports,
statements, certificates and all other documents and records required by law are
properly kept and filed; and (h) see that the duties prescribed by Section 6 of
Article II of these Bylaws are performed. In general, the Secretary shall
perform all duties incident to the office of Secretary
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and such other duties as from time to time may be assigned to him or her by the
Chairman of the Board, the President or the Board of Directors.
11. Treasurer.
If required by the Board of Directors, the Treasurer shall give a bond
for the faithful discharge of his or her duties in such sum and with such surety
or sureties as the Board of Directors shall determine. The Treasurer shall: (a)
have charge and custody of, and be responsible for, all funds, securities, notes
and valuable effects of the Corporation; (b) receive and give receipt for moneys
due and payable to the Corporation from any sources whatsoever; (c) deposit all
such moneys to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board or the President shall direct in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws; (d) cause such funds to be
disbursed by checks or drafts on the authorized depositories of the Corporation
signed as provided in Article VI of these Bylaws; (e) be responsible for the
accuracy of the amounts of, and cause to be preserved proper vouchers for, all
moneys so disbursed; (f) have the right to require from time to time reports or
statements giving such information as he or she may desire with respect to any
and all financial transactions of the Corporation from the officers or agents
transacting the same; (g) render to the Chairman of the Board, the President or
the Board, whenever they, respectively, shall request him or her so to do, an
account of the financial condition of the Corporation and of all his or her
transactions as Treasurer; and (h) upon request, exhibit or cause to be
exhibited at all reasonable times the cash books and other records to the
Chairman of the Board, the President or any of the Directors of the Corporation.
In general, the Treasurer shall perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the Chairman of the Board, the President or the Board of Directors.
12. Assistant Officers.
Any persons elected as assistant officers shall assist in the
performance of the duties of the designated office and such other duties as
shall be assigned to them by any Vice President, the Secretary or the Treasurer,
as the case may be, or by the Board of Directors, the Chairman of the Board, or
the President.
ARTICLE V
COMMITTEES
1. Executive Committee; How Constituted and Powers.
The Board of Directors, by resolution adopted by a majority of the
whole Board of Directors, may designate one or more of the Directors then in
office, who shall include the Chairman of the Board, to constitute an Executive
Committee, which shall have and may exercise between meetings of the Board of
Directors all the delegable powers of the Board of
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Directors to the extent not expressly prohibited by the California General
Corporation Law or by resolution of the Board of Directors. The Board may
designate one or more Directors as alternate members of the Committee who may
replace any absent or disqualified member at any meeting of the Committee. Each
member of the Executive Committee shall continue to be a member thereof only
during the pleasure of a majority of the whole Board of Directors.
2. Executive Committee; Organization.
The Chairman of the Board shall act as chairman at all meetings of the
Executive Committee and the Secretary shall act as secretary thereof. In case of
the absence from any meeting of the Chairman of the Board or the Secretary, the
Committee may appoint a chairman or secretary, as the case may be, of the
meeting.
3. Executive Committee; Meetings.
Regular meetings of the Executive Committee may be held without notice
on such days and at such places as shall be fixed by resolution adopted by a
majority of the Committee and communicated to all its members. Special meetings
of the Committee shall be held whenever called by the Chairman of the Board or a
majority of the members thereof then in office. Notice of each special meeting
of the Committee shall be given in the manner provided in Section 6 of Article
III of these Bylaws for special meetings of the Board of Directors. Notice of
any such meeting of the Executive Committee, however, need not be given to any
member of the Committee if waived by him or her in writing or by telegraph,
cable, wireless or other form of recorded communication either before or after
the meeting, or if he or she is present at such meetings, except when he or she
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Subject to the
provisions of this Article V, the Committee, by resolution adopted by a majority
of the whole Committee, shall fix its own rules of procedure and it shall keep a
record of its proceedings and report them to the board at the next regular
meeting thereof after such proceedings have been taken. All such proceedings
shall be subject to revision or alteration by the Board of Directors; provided,
however, that third parties shall not be prejudiced by any such revision or
alteration.
4. Executive Committee; Quorum and Manner of Acting.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business, and, except as specified in Section 3 of this Article
V, the act of a majority of those present at a meeting thereof at which a quorum
is present shall be the act of the Committee. The members of the Committee shall
act only as a committee, and the individual members shall have no power as such.
5. Other Committees.
The Board of Directors, by resolution adopted by a majority of the
whole Board, may constitute other committees, which shall in each case consist
of one or more of the Directors
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and, at the discretion of the Board of Directors, such officers who are not
Directors. The Board of Directors may designate one or more Directors or
officers who are not Directors as alternate members of any committee who may
replace any absent or disqualified member at any meeting of the committee. Each
such committee shall have and may exercise such powers as the Board of Directors
may determine and specify in the respective resolutions appointing them;
provided, however, that (a) unless all of the members of any committee shall be
Directors, such committee shall not have authority to exercise any of the powers
of the Board of Directors in the management of the business and affairs of the
Corporation, and (b) if any committee shall have the power to determine the
amounts of the respective fixed salaries of the officers of the Corporation or
any of them, such committee shall consist of not less than three (3) members and
none of its members shall have any vote in the determination of the amount that
shall be paid to him or her as a fixed salary. A majority of all the members of
any such committee may fix its rules of procedure, determine its action and fix
the time and place of its meetings and specify what notice thereof, if any,
shall be given, unless the Board of Directors shall otherwise by resolution
provide.
6. Resignations.
Any member of the Executive Committee or any other committee may resign
therefrom at any time by giving written notice of his or her resignation to the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein, or if the time when it shall
become effective is not specified therein, it shall take effect immediately upon
its receipt by the Chairman of the Board, the President or the Secretary; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
7. Vacancies.
Any vacancy in the Executive Committee or any other committee shall be
filled by the vote of a majority of the whole Board of Directors.
8. Compensation.
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no member of the Executive Committee or any other committee shall
receive any compensation for his or her services as a committee member. The
Board of Directors may at any time and from time to time by resolution provide
that committee members shall be paid a fixed sum for attendance at each
committee meeting or a stated salary as a committee member. In addition, the
Board of Directors may at any time and from time to time by resolution provide
that such committee members shall be paid their actual expenses, if any, of
attendance at each committee meeting. Nothing in this section shall be construed
as precluding any committee member from serving the Corporation in any other
capacity and receiving compensation therefor, but the Board of Directors may by
resolution provide that any committee member receiving compensation for
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his or her services to the Corporation in any other capacity shall not receive
additional compensation for his or her services as a committee member.
9. Dissolution of Committees; Removal of Committee Members.
The Board of Directors, by resolution adopted by a majority of the
whole Board, may, with or without cause, dissolve the Executive Committee or any
other committee, and, with or without cause, remove any member thereof.
ARTICLE VI
MISCELLANEOUS
1. Execution of Contracts.
Except as otherwise required by law or by these Bylaws, any contract or
other instrument may be executed and delivered in the name of the Corporation
and on its behalf by the Chairman of the Board, the President, or any Vice
President. In addition, the Board of Directors may authorize any other officer
of officers or agent or agents to execute and deliver any contract or other
instrument in the name of the Corporation and on its behalf, and such authority
may be general or confined to specific instances as the Board of Directors may
by resolution determine.
2. Attestation.
Any Vice President, the Secretary, or any Assistant Secretary may
attest the execution of any instrument or document by the Chairman of the Board,
the President, or any other duly authorized officer or agent of the Corporation
and may affix the corporate seal, if any, in witness thereof, but neither such
attestation nor the affixing of a corporate seal shall be requisite to the
validity of any such document or instrument.
3. Checks, Drafts.
All checks, drafts, orders for the payment of money, bills of lading,
warehouse receipts, obligations, bills of exchange and insurance certificates
shall be signed or endorsed (except endorsements for collection for the account
of the Corporation or for deposit to its credit, which shall be governed by the
provisions of Section 5 of this Article VI) by such officer or officers or agent
or agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
4. Deposits.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board of Directors, or the President shall direct
in general or special accounts at such banks,
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trust companies, savings and loan associations, or other depositories as the
Board of Directors may select or as may be selected by any officer or officers
or agent or agents of the Corporation to whom power in that respect has been
delegated by the Board of Directors. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation may be endorsed, assigned and delivered by any officer or agent of
the Corporation. The Board of Directors may make such special rules and
regulations with respect to such accounts, not inconsistent with the provisions
of these Bylaws, as it may deem expedient.
5. Proxies in Respect of Stock or Other Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board of
Directors, the Chairman of the Board of Directors, the President, or any Vice
President may exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock or other
securities in any other corporation, including without limitation the right to
vote or consent with respect to such stock or other securities.
6. Fiscal Year.
The fiscal year of the Corporation shall begin on August 1 of each year
and shall end on the following July 31.
ARTICLE VII
STOCK
1. Certificates.
Every holder of stock in the Corporation shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman of the
Board of Directors, the President, or a Vice President and by the Secretary or
an Assistant Secretary. The signatures of such officers upon such certificate
may be facsimiles if the certificate is signed, manually or by facsimile
signature, by a transfer agent or registered by a registrar, other than the
Corporation itself or one of its employees. If any officer who has signed or
whose facsimile signature has been placed upon a certificate has ceased for any
reason to be such officer prior to issuance of the certificate, the certificate
may be issued with the same effect as if that person were such officer at the
date of issue. All certificates for stock of the Corporation shall be
consecutively numbered, shall state the number of shares represented thereby and
shall otherwise be in such form as shall be determined by the Board of
Directors, subject to such requirements as are imposed by the California General
Corporation Law. The names and addresses of the persons to whom the shares
represented by certificates are issued shall be entered on the stock transfer
books of the Corporation, together with the number of shares and the date of
issue, and in the case of cancellation, the date of cancellation. Certificates
surrendered to the Corporation for transfer shall be canceled, and no new
certificate shall be issued in exchange for such shares
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until the original certificate has been canceled; except that in the case of a
lost, stolen, destroyed or mutilated certificate, a new certificate may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
2. Transfer of Stock.
Transfers of shares of stock of the Corporation shall be made only on
the stock transfer books of the Corporation by the holder of record thereof or
by his or her legal representative or attorney in fact, who shall furnish proper
evidence of authority to transfer to the Secretary, or a transfer clerk or a
transfer agent, and upon surrender of the certificate or certificates for such
shares properly endorsed and payment of all taxes thereon. The person in whose
name shares of stock stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
3. Regulations.
The Board of Directors may make such rules and regulations as it may
deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for stock of the Corporation. The
Board of Directors may appoint, or authorize any officer or officers or any
committee to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares of stock in the manner
and upon the terms and conditions provided in the California General Corporation
Law.
ARTICLE IX
SEAL
A corporate seal shall not be requisite to the validity of any
instrument executed by or on behalf of the Corporation. Nevertheless, if in any
instance a corporate seal is used, the same shall be in the form of a circle and
shall bear the full name of the Corporation and the year and state of
incorporation, or words and figures of similar import.
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ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. General.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. Derivative Actions.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such court having jurisdiction shall deem proper.
3. Indemnification in Certain Cases.
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in
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Sections 1 and 2 of this Article X, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
4. Procedure.
Any indemnification under Sections 1 and 2 of this Article X (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in such Sections 1 and 2. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
5. Advances for Expenses.
Expenses incurred by a director, officer, employee, or agent of the
Corporation in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall be ultimately
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article X.
6. Rights Not-Exclusive.
The indemnification and advancement of expenses provided by or granted
pursuant to, the other Sections of this Article X shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
7. Insurance.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article X.
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8. Definition of Corporation.
For the purposes of this Article X, references to "the Corporation"
include, in addition to the resulting corporation, all constituent corporations
(including any constituent of a constituent) absorbed in consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees and agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article X with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
9. Other Definitions.
For purposes of this Article X, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
10. Continuation of Rights.
The indemnification and advancement of expenses provided by, or granted
pursuant to this Article X shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person. No amendment to or repeal of
this Article X shall apply to or have any effect on, the rights of any director,
officer, employee or agent under this Article X which rights come into existence
by virtue of acts or omissions of such director, officer, employee or agent
occurring prior to such amendment or repeal.
ARTICLE XI
AMENDMENTS
These Bylaws may be repealed, altered or amended by the affirmative
vote of the holders of a majority of the stock issued and outstanding and
entitled to vote at any meeting of Stockholders or by resolution duly adopted by
the affirmative vote of not less than a majority of the Directors in office at
any annual or regular meeting of the Board of Directors or at any special
meeting of the Board of Directors if notice of the proposed repeal, alteration
or amendment be contained in the notice of such special meeting, and new Bylaws
may be adopted, at any time only by the Board of Directors.
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EXHIBIT 3
FORM OF COMPANY AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is being executed
and delivered by __________________ ("Affiliate") as of ________, 1996 in favor
of and for the benefit of ZILA, INC., a Delaware corporation ("Parent").
RECITALS
A. Affiliate is a shareholder [and an officer and director] of
Bio-Dental Technologies Corporation, a California corporation (the "Company").
B. Parent, Zila Merger Corporation, a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), and the Company have entered
into a Merger Agreement dated as of August __, 1996 (the "Merger Agreement")
providing for the merger of Merger Sub with and into the Company (the "Merger").
The Merger Agreement contemplates that, upon consummation of the Merger, all
outstanding shares of capital stock of the Company ("Company Common Stock") will
be converted into the right to receive shares of common stock of Parent ("Parent
Common Stock") pursuant to a formula set forth in the Merger Agreement. It is
accordingly contemplated that Affiliate will receive shares of Parent Common
Stock in the Merger.
C. It is a condition of the Merger Agreement that Affiliate
execute this Agreement.
D. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings given to them in the Merger Agreement.
AGREEMENT
1. ACCOUNTING TREATMENT. Affiliate understands and agrees that
it is intended that the Merger will be treated as a "pooling of interests" in
accordance with generally accepted accounting principles and the applicable
General Rules and Regulations published by the Securities and Exchange
Commission (the "SEC"). Affiliate further understands that Affiliate may be
deemed to be an "affiliate" of the Company: (a) for purposes of application of
the pooling-of-interests requirements and (b) within the meaning of Rule 145
("Rule 145") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), although nothing contained herein should be construed as an
admission of either such conclusion. Accordingly, the shares of Company Common
Stock held, and Parent Common Stock to be held, by Affiliate may only be
disposed of in conformity with the limitations described herein.
2. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS.
Affiliate has been informed that the treatment of the Merger as a pooling of
interests for financial accounting purposes is dependent upon the accuracy of
Affiliate's representations and warranties set forth herein, and upon
Affiliate's compliance with Affiliate's covenants set forth herein. Affiliate
understands that the representations, warranties and
<PAGE> 115
covenants of Affiliate set forth herein will be relied upon by Parent, the
Company and their respective counsel and accounting firms.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF AFFILIATE.
Affiliate represents, warrants and covenants as follows:
(A) AUTHORITY. Affiliate has full power and authority
to execute this Agreement, to make the representations, warranties and covenants
herein contained and to perform Affiliate's obligations hereunder.
(B) SHARE OWNERSHIP. Exhibit A attached hereto
accurately sets forth all shares of Company Common Stock owned by Affiliate,
including all Company Common Stock as to which Affiliate has sole or shared
voting or investment power and all rights, options and warrants to acquire
Company Common Stock owned or held by Affiliate.
(C) RULE 145. Affiliate will not sell, transfer,
exchange, pledge or otherwise dispose of, or make any offer or agreement
relating to any of the foregoing with respect to, any shares of Parent Common
Stock that Affiliate may acquire upon conversion of Company Common Stock in the
Merger, or any securities that may be paid as a dividend or otherwise
distributed thereon or with respect thereto or issued or delivered in exchange
or substitution therefor (all such shares and other securities of Parent being
herein sometimes collectively referred to as "Restricted Securities"), or any
option, right or other interest with respect to any Restricted Securities,
unless:
(i) such transaction is permitted pursuant to
Rule 145(c) and 145(d) under the Securities Act;
(ii) counsel representing Affiliate, which
counsel is reasonably satisfactory to Parent, shall have advised Parent in a
written opinion letter reasonably satisfactory to Parent and Parent's legal
counsel, and upon which Parent and its legal counsel may rely, that no
registration under the Securities Act would be required in connection with the
proposed sale, transfer or other disposition;
(iii) a registration statement under the
Securities Act covering the Parent Common Stock proposed to be sold, transferred
or otherwise disposed of, describing the manner and terms of the proposed sale,
transfer or other disposition, and containing a current prospectus, shall have
been filed with the SEC and made effective under the Securities Act; or
(iv) an authorized representative of the SEC
shall have rendered written advice to Affiliate (sought by Affiliate or counsel
to Affiliate, with a copy thereof and all other related communications delivered
to Parent) to the effect that the SEC would take no action, or that the staff of
the SEC would not recommend that the SEC take any action, with respect to the
proposed disposition if consummated.
(D) POOLING OF INTERESTS. Notwithstanding any other
provision of this Agreement to the contrary, Affiliate will not sell, transfer,
exchange, pledge or otherwise dispose of, or in any other way reduce Affiliate's
risk of ownership or investment in, or make
<PAGE> 116
any offer or agreement relating to any of the foregoing with respect to, any
Company Common Stock or any rights, options or warrants to purchase Company
Common Stock, or any Restricted Securities or other securities of Parent:
(i) during the thirty-day period immediately
preceding the Closing Date of the Merger; and
(ii) until such time after the Effective Time
of the Merger as Parent has publicly released a report including the combined
financial results of Parent and the Company for a period of at least thirty days
of combined operations of Parent and the Company within the meaning of
Accounting Series Release No. 130, as amended, of the SEC. Nothing in this
paragraph will be deemed to prohibit charitable contributions of such securities
without consideration to transferees who agree to all of the restrictions in
this Agreement.
4. LIMITED RESALES. Affiliate understands that, in addition to
the restrictions imposed under Section 3 of this Agreement, the provisions of
Rule 145 limit Affiliate's public resales of Restricted Securities, in the
manner set forth in subsections (a), (b) and (c) below:
(a) Unless and until the restriction "cut-off"
provisions of Rule 145(d)(2) or Rule 145(d)(3) set forth below become available,
public resales of Restricted Securities may only be made by Affiliate in
compliance with the requirements of Rule 145(d)(1). Rule 145(d)(1) permits such
resales only: (i) while Parent meets the public information requirements of Rule
144(c); (ii) in brokers' transactions or in transactions with a market maker;
and (iii) where the aggregate number of Restricted Securities sold at any time
together with all sales of restricted Parent Common Stock sold for Affiliate's
account during the preceding three-month period does not exceed the greater of
(A) 1% of the Parent Common Stock outstanding or (B) the average weekly volume
of trading in Parent Common Stock on all national securities exchanges, or
reported through the automated quotation system of a registered securities
association, during the four calendar weeks preceding the date of receipt of the
order to execute the sale.
(b) Affiliate may make unrestricted resales of
Restricted Securities pursuant to Rule 145(d)(2) if: (i) Affiliate has
beneficially owned (within the meaning of Rule 144(d) under the Securities Act)
the Restricted Securities for at least two years after the Effective Time of the
Merger; (ii) Affiliate is not an affiliate of Parent; and (iii) Parent meets the
public information requirements of Rule 144(c).
(c) Affiliate may make unrestricted resales of
Restricted Securities pursuant to Rule 145(d)(3) if Affiliate has beneficially
owned (within the meaning of Rule 144(d) under the Securities Act) the
Restricted Securities for at least three years and is not, and has not been for
at least three months, an affiliate of Parent.
(d) Parent acknowledges that the provisions of
Section 3(c) of this Agreement will be satisfied as to any sale by the
undersigned of the Restricted Securities pursuant to Rule 145(d), by a broker's
letter and a letter from the undersigned with respect to that sale stating that
each of the above-described requirements of Rule 145(d)(1) has been met or is
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3); provided, however,
that Parent
<PAGE> 117
has no reasonable basis to believe such sales were not made in compliance with
such provisions of Rule 145(d).
5. LEGENDS AND STOP TRANSFER. Affiliate also understands and
agrees that stop transfer instructions will be given to Parent's transfer agent
with respect to certificates evidencing the Restricted Securities and that there
will be placed on the certificates evidencing the Restricted Securities legends
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE OFFERED, SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE OTHER CONDITIONS
SPECIFIED IN THAT CERTAIN AFFILIATE AGREEMENT DATED AS OF
______, 1996 AMONG PARENT, THE COMPANY AND AFFILIATE, A COPY
OF WHICH AFFILIATE AGREEMENT MAY BE INSPECTED BY THE HOLDER OF
THIS CERTIFICATE AT THE OFFICES OF PARENT. PARENT WILL
FURNISH, WITHOUT CHARGE, A COPY THEREOF TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST THEREFOR."
After release of the report described in Section 3(d)(iii) hereof, certificates
evidencing Restricted Securities may be surrendered for cancellation and
reissuance with a legend referring only to the applicability of Rule 145(d)
restrictions.
6. AGREEMENT TO VOTE SHARES. At every meeting of the
shareholders of the Company called with respect to the Merger, and at any
adjournment thereof, and in every written consent solicited with respect to the
Merger, Affiliate shall vote all Company Common Stock owned or controlled by the
undersigned in favor of approval of the Merger and any matters that could
reasonably be expected to facilitate the Merger.
7. NOTICES. All notices and other communications pursuant to
this Agreement shall be in writing and shall be deemed given if delivered
personally, sent by confirmed facsimile, sent by nationally recognized overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties as follows (or at such other address for a party
as shall be specified by like notice):
IF TO PARENT: Zila, Inc.
5227 North 7th Street
Phoenix, Arizona 85014
Attn: Joseph Hines
Facsimile No.: (602) 234-2264
<PAGE> 118
With a copy to: Squire, Sanders & Dempsey
40 North Central Avenue
Phoenix, Arizona 85004
Attn: Christopher D. Johnson
Facsimile No: (602) 253-8129
IF TO At the address or facsimile set forth
AFFILIATE: beneath Affiliate's signature below.
B. SPECIFIC PERFORMANCE. Affiliate agrees that
irreparable damages would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms, or were
otherwise breached. It is, accordingly, agreed that Parent shall be entitled to
injunctive relief to prevent breaches of the provisions of this Agreement, and
to enforce specifically the terms and provisions hereof, in addition to any
other remedy to which Parent may be entitled at law or in equity.
9. TERMINATION. This Agreement shall be terminated and shall
be or no further force and effect if the Merger Agreement is validly terminated
in accordance with its terms without the Merger having occurred. The
representations, warranties, covenants and other provisions contained in this
Agreement shall survive the Merger.
10. SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any person, entity or set
of circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons, entities or circumstances other than
those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall continue to
be valid and enforceable to the fullest extent permitted by law.
11. GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Arizona, excluding that body of law pertaining to conflicts of laws.
12. WAIVER. No failure on the part of Parent to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of Parent in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of Parent, and any such waiver shall not be applicable or
have any effect except in the specific instance in which it is given.
13. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
<PAGE> 119
14. FURTHER ASSURANCES. Affiliate shall execute and/or cause
to be delivered to Parent such instruments and other documents and shall take
such other actions as Parent may reasonably request to effectuate the intent and
purposes of this Agreement.
16. AMENDMENTS. This Agreement may not be amended, modified,
altered, or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Parent and Affiliate.
17. BINDING NATURE. This Agreement will be binding upon
Affiliate and Affiliate's representatives, executors, administrators, estate,
heirs, successors and assigns, and shall inure to the benefit of Parent and its
successors and assigns.
18. ATTORNEYS' FEES AND EXPENSES. If any legal action or other
legal proceeding relating to the enforcement of any provision of this Agreement
is brought against Affiliate, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
<PAGE> 120
IN WITNESS WHEREOF, Affiliate has caused this Agreement to be
duly executed on the day and year first above written.
[AFFILIATE]
Signature:
-----------------------------------
Print Name:
-----------------------------------
Title:
-----------------------------------
[if applicable]
Address:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Attention:
-----------------------------------
Facsimile No.:
-----------------------------------
<PAGE> 121
EXHIBIT A
Shares of Company Common Stock Beneficially Owned by Affiliate:
----------------------------------------------------------------------
Options to purchase shares of Company Common Stock:
----------------------------------------------------------------------
Warrants to purchase shares of Company Common Stock:
----------------------------------------------------------------------
<PAGE> 122
EXHIBIT 4
FORM OF PARENT AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is being executed
and delivered by __________________________ ("Affiliate") as of ________, 1996
in favor of and for the benefit of ZILA, INC., a Delaware corporation
("Parent").
RECITALS
A. Affiliate is a stockholder [and an officer and director] of
Parent.
B. Parent, Zila Merger Corporation, a Delaware corporation and
a wholly owned subsidiary of Parent ("Merger Sub"), and Bio-Dental Technologies
Corporation, a California corporation (the "Company"), have entered into a
Merger Agreement dated as of August __, 1996 (the "Merger Agreement") providing
for the merger of Merger Sub with and into the Company (the "Merger"). The
Merger Agreement contemplates that, upon consummation of the Merger, all
outstanding shares of capital stock of the Company will be converted into the
right to receive shares of common stock of Parent ("Parent Common Stock").
C. It is a condition of the Merger Agreement that Affiliate
execute this Agreement.
D. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings given to them in the Merger Agreement.
AGREEMENT
1. ACCOUNTING TREATMENT. Affiliate understands and agrees that
it is intended that the Merger will be treated as a "pooling of interests" in
accordance with generally accepted accounting principles and the applicable
General Rules and Regulations published by the Securities and Exchange
Commission (the "SEC"). Affiliate further understands that Affiliate may be
deemed to be an "affiliate" of Parent for purposes of application of the
pooling-of-interests requirements, although nothing contained herein should be
construed as an admission of either such conclusion. Accordingly, the shares of
Parent Common Stock that Affiliate holds, may only be disposed of in conformity
with the limitations described herein.
2. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS.
Affiliate has been informed that the treatment of the Merger as a pooling of
interests for financial accounting purposes is dependent upon the accuracy of
Affiliate's representations and warranties set forth herein, and upon
Affiliate's compliance with Affiliate's covenants set forth herein. Affiliate
understands that the representations, warranties and covenants of Affiliate set
forth herein will be relied upon by Parent, the Company and their respective
counsel and accounting firms.
<PAGE> 123
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
AFFILIATE. Affiliate represents, warrants and covenants as follows:
(A) AUTHORITY. Affiliate has full power and authority
to execute this Agreement, to make the representations, warranties and covenants
herein contained and to perform Affiliate's obligations hereunder.
(B) SHARE OWNERSHIP. Exhibit A attached hereto
accurately sets forth all shares of Parent Common Stock owned by Affiliate,
including all Parent Common Stock as to which Affiliate has sole or shared
voting or investment power and all rights, options and warrants to acquire
Parent Common Stock owned or held by Affiliate (collectively, the "Parent
Securities").
(C) POOLING OF INTERESTS. Notwithstanding any other
provision of this Agreement to the contrary, Affiliate will not sell, transfer,
exchange, pledge or otherwise dispose of, or in any other way reduce Affiliate's
risk of ownership or investment in, or make any offer or agreement relating to
any of the foregoing with respect to, any Parent Securities:
(i) during the thirty day period immediately
preceding the Closing Date of the Merger; and
(ii) until such time after the Effective Time
of the Merger as Parent has publicly released a report including the combined
financial results of Parent and the Company for a period of at least thirty days
of combined operations of Parent and the Company within the meaning of
Accounting Series Release No. 130, as amended, of the SEC. Nothing in this
paragraph will be deemed to prohibit charitable contributions of such securities
without consideration to transferees who agree to all of the restrictions in
this Agreement.
4. STOP TRANSFER. Affiliate also understands and agrees that
stop transfer instructions will be given to Parent's transfer agent with respect
to certificates evidencing the Parent Securities. After release of the report
described in Section 3(c)(ii) hereof, such stop transfer instructions will be
promptly removed.
5. NOTICES. All notices and other communications pursuant to
this Agreement shall be in writing and shall be deemed given if delivered
personally, sent by confirmed facsimile, sent by nationally recognized overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties as follows (or at such other address for a party
as shall be specified by like notice):
IF TO PARENT: Zila, Inc.
5227 North 7th Street
Phoenix, Arizona 85014
Attn: Joseph Hines
Facsimile No.: (602) 234-2264
<PAGE> 124
With a copy to: Squire, Sanders & Dempsey
40 North Central Avenue
Phoenix, Arizona 85004
Attn: Christopher D. Johnson
Facsimile No: (602) 253-8129
IF TO At the address or facsimile set forth
AFFILIATE: beneath Affiliate's signature below.
6. SPECIFIC PERFORMANCE. Affiliate agrees that irreparable
damages would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms, or were otherwise
breached. It is, accordingly, agreed that Parent shall be entitled to injunctive
relief to prevent breaches of the provisions of this Agreement, and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which Parent may be entitled at law or in equity.
7. TERMINATION. This Agreement shall be terminated and shall
be of no further force and effect if the Merger Agreement is validly terminated
in accordance with its terms without the Merger having occurred. The
representations, warranties, covenants and other provisions contained in this
Agreement shall survive the Merger.
8. SEVERABILITY. In the event that any provision of this
Agreement, or the application of any such provision to any person, entity or set
of circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to persons, entities or circumstances other than
those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall continue to
be valid and enforceable to the fullest extent permitted by law.
9. GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Arizona, excluding that body of law pertaining to conflicts of laws.
10. WAIVER. No failure on the part of Parent to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of Parent in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Parent shall not be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of Parent; and any such waiver shall not be applicable or
have any effect except in the specific instance in which it is given.
11. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
<PAGE> 125
12. FURTHER ASSURANCES. Affiliate shall execute and/or cause
to be delivered to Parent such instruments and other documents and shall take
such other actions as Parent may reasonably request to effectuate the intent and
purposes of this Agreement.
13. ENTIRE AGREEMENT. This Agreement, the Merger Agreement and
the other agreements referred to in the Merger Agreement set forth the entire
understanding of Affiliate and Parent relating to the subject matter hereof and
thereof and supersede all prior agreements and understandings between Affiliate
and Parent relating to the subject matter hereof and thereof.
14. AMENDMENTS. This Agreement may not be amended, modified,
altered, or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Parent and Affiliate.
15. BINDING NATURE. This Agreement will be binding upon
Affiliate and Affiliate's representatives, executors, administrators, estate,
heirs, successors and assigns, and shall inure to the benefit of Parent and its
successors and assigns.
16. ATTORNEYS' FEES AND EXPENSES. If any legal action or other
legal proceeding relating to the enforcement of any provision of this Agreement
is brought against Affiliate, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
<PAGE> 126
IN WITNESS WHEREOF, Affiliate has caused this Agreement to be
duly executed on the day and year first above written.
[AFFILIATE]
Signature:
------------------------------------
Print Name:
------------------------------------
Title:
------------------------------------
[if applicable]
Address:
------------------------------------
------------------------------------
------------------------------------
Attention:
------------------------------------
Facsimile No.:
------------------------------------
<PAGE> 127
EXHIBIT A
Shares of Parent Common Stock Beneficially Owned by Affiliate:
------------------------------------------------------------------------
Options to purchase shares of Parent Common Stock:
------------------------------------------------------------------------
Warrants to purchase shares of Parent Common Stock:
------------------------------------------------------------------------
<PAGE> 128
EXHIBIT 5
PERSONS TO EXECUTE AFFILIATE AGREEMENTS
COMPANY-AFFILIATED PERSONS
Curtis M. Rocca III
G. Barton Mahan
Timothy J. Purdy
Joseph J. Battle, D.D.S.
B. Mason Flemming, Jr.
James H. Ellis
Maxine Holland
Douglas L. Ayer
Terry E. Bane
PARENT-AFFILIATED PERSONS
Joseph Hines
Clarence J. Baudhuin
Edwin Pomerantz
Janice L. Backus
Rocco J. Anselmo
James E. Tinnell, M.D.
Carl Schroeder
H. Ray Cox
Patrick M. Lonegran
Michael S. Lesser
<PAGE> 129
EXHIBIT 6
REPRESENTATION CERTIFICATE
OF
ZILA, INC.
AND
ZILA MERGER CORPORATION
ZILA, INC., a Delaware corporation ("Parent"), and ZILA MERGER
CORPORATION, a Delaware corporation ("Merger Sub") that is a wholly owned
subsidiary of Parent, each make the following representations to Squire, Sanders
& Dempsey for use in rendering its opinion concerning certain of the federal
income tax consequences of the merger of Merger Sub with and into BIO-DENTAL
TECHNOLOGIES CORPORATION, a California corporation (the "Company") (the
"Merger"), in exchange for Parent stock. Parent and Merger Sub each acknowledge
and agree that each of the following representations constitutes a material
representation to be relied upon by Squire, Sanders & Dempsey in rendering its
opinion, and that any material inaccuracy in any of the following
representations may nullify all or some of the conclusions stated in such
opinion.
The specific representations made are as follows:
1. Except for payments made to dissenting shareholders in accordance with
applicable law, the only consideration received by Company shareholders
in the Merger will be voting common stock of Parent. The fair market
value of the Parent stock received by each Company shareholder will be
approximately equal to the fair market value of the Company stock
surrendered in the Merger.
2. To the best of the knowledge of the management of Parent and Merger
Sub, there is no plan or intention by the shareholders of the Company
to sell, exchange, or otherwise dispose of a number of shares of Parent
stock received in the Merger that would reduce the Company
shareholders' ownership of Parent stock to a number of shares having a
value, as of the date of the Merger, of less than 50 percent of the
value of all of the
<PAGE> 130
formerly outstanding stock of the Company as of the same date. For
purposes of this representation, shares of Company stock exchanged for
cash or other property or surrendered by dissenters will be treated as
outstanding Company stock on the date of the Merger. Moreover, shares
of Company stock and shares of Parent stock held by Company
shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger will be considered in making this
representation.
3. Following the Merger, the Company will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair
market value of Merger Sub's net assets and at least 70 percent of the
fair market value of Merger Sub's gross assets held immediately prior
to the Merger. For purposes of this representation, amounts paid by the
Company or Merger Sub to dissenters, amounts paid by the Company or
Merger Sub to shareholders who receive cash or other property, amounts
used by the Company or Merger Sub to pay reorganization expenses, and
all redemptions and distributions (except for regular, normal
dividends) made by the Company will be included as assets of the
Company or Merger Sub, respectively, immediately prior to the Merger.
4. Prior to the Merger, Parent will be in control of Merger Sub, as
"control" is defined in section 368(c) of the Internal Revenue Code of
1986, as amended (the "Code").
5. The Company has no plan or intention to issue additional shares of its
stock that would result in Parent losing control of the Company, as
"control" is defined in section 368(c) of the Code.
6. Parent has no plan or intention to reacquire any of its stock issued in
the Merger.
7. Parent has no plan or intention to liquidate the Company; to merge the
Company with or into another corporation; to sell or otherwise dispose
of the stock of the Company except for transfers of stock to
corporations controlled by Parent, as "control" is defined in section
368(c) of the Code; or to cause the Company to sell or otherwise
dispose of any of its assets or of any of the assets acquired from
Merger Sub, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by the
Company, as "control" is defined in section 368(c) of the Code.
8. Any liabilities of Merger Sub assumed by the Company and any
liabilities to which the transferred assets of Merger Sub are subject
were incurred by Merger Sub in the ordinary course of its business.
9. Following the Merger, the Company will continue its historic business
or use a significant portion of its historic business assets in a
business.
2
<PAGE> 131
10. Parent and Merger Sub will pay their respective expenses, if any,
incurred in connection with the Merger and will not pay any such
expenses on behalf of the Company or its shareholders.
11. There is no intercorporate indebtedness existing between Parent and the
Company or between Merger Sub and the Company that was issued,
acquired, or will be settled at a discount.
12. In the Merger, shares of Company stock representing control of the
Company, as "control" is defined in section 368(c) of the Code, will be
exchanged solely for voting stock of Parent. No shares of Company stock
will be redeemed or otherwise exchanged for cash or other property
originating with or supplied by Parent, nor will Parent reimburse the
Company directly or indirectly for any cash or other property paid to
shareholders of the Company in redemption of their stock or otherwise.
Further, no liabilities of the Company or the Company's shareholders
will be assumed by Parent, nor will any of the Company stock be subject
to any liabilities.
13. The Company will pay its dissenting shareholders the value of their
stock out of its own funds. No funds will be supplied for that purpose,
directly or indirectly, by Parent or by Merger Sub, nor will Parent or
Merger Sub directly or indirectly reimburse the Company for any
payments to dissenters.
14. None of the compensation received by any shareholder-employees of the
Company will be separate consideration for or allocable to any of their
Company stock; none of the shares of Parent stock received by any such
shareholder-employee will be separate consideration for or allocable to
any employment agreement; and the compensation paid to any such
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to third parties for similar services
bargained for at arm's length.
15. At the time of the Merger, the Company will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in the Company that,
if exercised or converted, would affect Parent's acquisition or
retention of control of the Company, as "control" is defined in section
368(c) of the Code.
16. Parent does not own, nor has it owned during the past five years, any
shares of the stock of the Company.
17. No two parties to the Merger are investment companies as defined in
sections 368(a)(2)(F)(iii) and (iv) of the Code.
3
<PAGE> 132
18. On the date of the Merger, the fair market value of the assets of the
Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
19. Merger Sub is a newly formed Delaware corporation created for the
purpose of effecting the Merger.
IN WITNESS WHEREOF, Parent and Merger Sub, each acting by an authorized
officer and with full corporate authority, have executed and delivered this
representation certificate to Squire, Sanders & Dempsey as of the date written
below.
ZILA, INC.
By:
-----------------------------------------
Title:
-----------------------------------------
Date:
-----------------------------------------
ZILA MERGER CORPORATION
By:
-----------------------------------------
Title:
-----------------------------------------
Date:
-----------------------------------------
4
<PAGE> 133
EXHIBIT 7
REPRESENTATION CERTIFICATE
OF
BIO-DENTAL TECHNOLOGIES CORPORATION
BIO-DENTAL TECHNOLOGIES CORPORATION, a California corporation (the
"Company"), makes the following representations to Squire, Sanders & Dempsey for
use in rendering its opinion concerning certain of the federal income tax
consequences of the merger of ZILA MERGER CORPORATION, a Delaware corporation
("Merger Sub") that is a wholly owned subsidiary of ZILA, INC. ("Parent"), with
and into the Company (the "Merger"), in exchange for stock of Parent. The
Company acknowledges and agrees that each of the following representations
constitutes a material representation to be relied upon by Squire, Sanders &
Dempsey in rendering its opinion, and that any material inaccuracy in any of the
following representations may nullify all or some of the conclusions stated in
such opinion.
The specific representations made are as follows:
1. Except for payments made to dissenting shareholders in accordance with
applicable law, the only consideration received by Company shareholders
in the Merger will be voting common stock of Parent. The fair market
value of the Parent stock received by each Company shareholder will be
approximately equal to the fair market value of the Company stock
surrendered in the Merger.
2. There is no plan or intention by the shareholders of the Company who
own five percent or more of the Company stock, and, to the best of the
knowledge of the management of the Company, there is no plan or
intention on the part of the remaining shareholders of the Company to
sell, exchange, or otherwise dispose of a number of shares of Parent
stock received in the Merger that would reduce the Company
shareholders' ownership of Parent stock to a number of shares having a
value, as of the date of the Merger, of less than 50 percent of the
value of all of the formerly outstanding stock of the Company as of the
same date. For purposes of this representation, shares of Company stock
exchanged for cash or other property or surrendered by dissenters will
be treated as outstanding Company stock on the date of the Merger.
Moreover, shares of Company stock and shares of Parent stock held by
Company shareholders and otherwise sold,
<PAGE> 134
redeemed, or disposed of prior or subsequent to the Merger will be
considered in making this representation.
3. Following the Merger, the Company will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets and at least 90 percent of the fair
market value of Merger Sub's net assets and at least 70 percent of the
fair market value of Merger Sub's gross assets held immediately prior
to the Merger. For purposes of this representation, amounts paid by the
Company or Merger Sub to dissenters, amounts paid by the Company or
Merger Sub to shareholders who receive cash or other property, amounts
used by the Company or Merger Sub to pay reorganization expenses, and
all redemptions and distributions (except for regular, normal
dividends) made by the Company will be included as assets of the
Company or Merger Sub, respectively, immediately prior to the Merger.
4. The Company has no plan or intention to issue additional shares of its
stock that would result in Parent losing control of the Company, as
"control" is defined in section 368(c) of the Internal Revenue Code of
1986, as amended (the "Code").
5. Following the Merger, the Company will continue its historic business
or use a significant portion of its historic business assets in a
business.
6. The Company and the shareholders of the Company will pay their
respective expenses, if any, incurred in connection with the Merger,
and neither Parent, Merger Sub, nor the Company will pay any such
expenses for Company shareholders.
7. The Company will pay its dissenting shareholders the value of their
stock out of the Company's own funds. No funds will be supplied for
that purpose, directly or indirectly, by the Parent or Merger Sub, nor
will Parent or Merger Sub directly or indirectly reimburse the Company
for any payments to dissenters.
8. There is no intercorporate indebtedness existing between Parent and the
Company or between Merger Sub and the Company that was issued,
acquired, or will be settled at a discount.
9. In the Merger, shares of Company stock representing control of the
Company, as "control" is defined in section 368(c) of the Code, will be
exchanged solely for voting stock of Parent. No shares of Company stock
will be redeemed by the Company or otherwise exchanged for cash or
other property originating with or supplied by Parent, nor will Parent
reimburse the Company directly or indirectly for any cash or other
property paid to shareholders of the Company in redemption of their
stock or otherwise. Further, no liabilities of the Company or the
Company's shareholders will be assumed by Parent, nor will any of the
Company stock be subject to any liabilities.
10. At the time of the Merger, the Company will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in the Company that,
if exercised or converted, would affect Parent's
2
<PAGE> 135
acquisition or retention of control of the Company, as "control" is
defined in section 368(c) of the Code.
11. None of the compensation received by any shareholder-employees of the
Comapny will be separate consideration for or allocable to any of their
Company stock; none of the shares of Parent stock received by any such
shareholder-employee will be separate consideration for or allocable to
any employment agreement; and the compensation paid to any such
shareholder-employee will be for services actually rendered and will be
commensurate with amounts paid to third parties for similar services
bargained for at arm's length.
12. To the best of the knowledge of the management of the Company, Parent
does not own, nor has it owned during the past five years, any shares
of the stock of the Company.
13. No two parties to the Merger are investment companies as defined in
sections 368(a)(2)(F)(iii) and (iv) of the Code.
14. On the date of the Merger, the fair market value of the assets of the
Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
15. The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of section 368(a)(3)(A) of the Code.
IN WITNESS WHEREOF, the Company, acting by an authorized officer and
with full corporate authority, has executed and delivered this representation
certificate to Squire, Sanders & Dempsey as of the date written below.
BIO-DENTAL TECHNOLOGIES CORPORATION
By
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Title:
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Date:
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3
<PAGE> 136
EXHIBIT 8
SHAREHOLDER'S REPRESENTATION CERTIFICATE
I understand that Squire, Sanders & Dempsey has been asked to render
its opinion as to certain of the federal income tax consequences of a proposed
transaction (the "Merger") between ZILA MERGER CORPORATION, a Delaware
corporation ("Merger Sub") that is a wholly owned subsidiary of ZILA, INC., a
Delaware corporation ("Parent"), and BIO-DENTAL TECHNOLOGIES CORPORATION, a
California corporation (the "Company"). The terms of the Merger are set forth in
the Merger Agreement dated as of August __, 1996.
In connection with Squire, Sanders & Dempsey's undertaking to render
such opinion, I have been asked, as a shareholder of the Company, to furnish the
following representations of fact upon which Squire, Sanders & Dempsey may rely
for that purpose.
1. I have no plan or intention to sell, exchange, or otherwise dispose of
any shares of the Parent received by me in connection with the Merger;
however, this representation is not intended as a promise that I will
not sell such shares at some point in the future.
2. I will pay my expenses, if any, incurred in connection with the Merger
and I will not be reimbursed for any such expenses by either Parent,
Merger Sub, or the Company.
Date: _________________________________________
[Name]
