SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): May 3, 1996
Palomar Medical Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-22340 04-3128178
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(state or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
66 Cherry Hill Drive, Beverly, Massachusetts 01915
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 508-921-9300
Item 2: Other Events.
On May 3, 1996, Palomar Medical Technologies, Inc., a Delaware corporation (the
"Company"), through its wholly-owned subsidiary, TTI Acquisition Corp., an
Arizona corporation ("Sub"), acquired all of the assets and business of Tissue
Technologies, Inc., also an Arizona corporation ("TTI"), through a reverse
triangular merger (the "Merger"). TTI manufactures and sells a patented and
FDA-approved carbon dioxide laser system for skin resurfacing that will augment
Palomar's family of proprietary laser systems for medical, dermatological and
cosmetic treatments. Pursuant to the Merger, the Company issued an aggregate of
3,200,000 shares of its common stock, $.01 par value per share, to the
stockholders of TTI (the "Palomar Shares"). The Merger is intended to be
accounted for as a pooling of interests. In connection with the Merger, the
Company has agreed to register the Palomar Shares.
Item 7: Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
All required unaudited financial statements will be filed by
amendment within sixty (60) days of the date on which this report is filed.
(b) Pro Forma Financial Statements.
All required pro forma financial statements will be filed by
amendment within sixty (60) days of the date on which this report is filed.
(c) Exhibits.
The following Exhibits are attached hereto:
2.1 Agreement and Plan of Reorganization dated March 9, 1996
by and among the Company, Sub, TTI and Mario Barton
("Barton"), the principal shareholder of TTI (the "Merger
Agreement").
2.2 Amendment to the Merger Agreement dated April 29, 1996 by
and among the Company, Sub, TTI and Barton.
2.3 Letter from the Company to TTI waiving the Company's
right to receive indemnification under Section 6 of the
Merger Agreement in certain circumstances.
2.4 Plan of Merger dated May 3, 1996 by and among the
Company, Sub and TTI.
2.5 List of exhibits and schedules omitted from the Merger
Agreement.
The Company hereby undertakes and agrees to furnish copies of
the exhibits and schedules set forth in exhibit 2.5 above to the Commission upon
its request.
[The remainder of this page intentionally left blank]
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.
PALOMAR MEDICAL
TECHNOLOGIES, INC.
5-16-96 By: /s/ Steve Georgiev
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Date Steve Georgiev, Chairman
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into as of March 9, 1996, by and among PALOMAR MEDICAL TECHNOLOGIES, INC., a
Delaware corporation ("Palomar"), TTI ACQUISITION CORP., an Arizona corporation
and a wholly-owned subsidiary of Palomar ("Sub"), TISSUE TECHNOLOGIES, INC., an
Arizona corporation ("TTI"), and Mario Barton, an individual (the
"Stockholder").
RECITALS
A. The parties desire that Palomar acquire TTI in a "statutory
merger" pursuant to which Sub will be merged with and into TTI (the "Merger"),
with TTI being the surviving corporation of the Merger (the "Surviving
Corporation") on the terms and conditions set forth herein and in a Plan of
Merger in substantially the form attached hereto as Exhibit A (the "Plan of
Merger").
B. As a result of the Merger, TTI shall become a wholly-owned
subsidiary of Palomar and the shareholders of TTI shall become shareholders of
Palomar.
C. The Merger is intended to be treated as: (i) a tax-free
reorganization pursuant to the provisions of Section 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"); and
(ii) a "pooling of interests" for financial reporting purposes.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. PLAN OF REORGANIZATION
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, Sub will be merged with and into TTI in a statutory merger pursuant
to the Plan of Merger and in accordance with applicable provisions of Arizona
law as follows:
(a) CONVERSION OF SUB SHARES. At the effective time of the
Merger, as specified in the Plan of Merger (the "Effective Time"), each share of
Common Stock of Sub issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one fully paid and non-assessable
share of Common Stock of the Surviving Corporation.
(b) CONVERSION OF TTI SHARES. At the Effective Time, each
share of the common stock, without par value, of TTI ("TTI Common Stock") issued
and outstanding immediately prior to the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, shall be converted
into the right to receive that number of shares of the common stock, $.01 par
value per share, of Palomar ("Palomar Common Stock") which equals $20,000,000
divided by the lesser of (1) $6.25 or (2) the average closing "ask" price for
Palomar Common Stock for the ten (10) trading days immediately prior to the
Closing (as defined in Section 7.1 below), as quoted on the NASDAQ (the
"Conversion Price") divided by
the total number of shares of TTI Common Stock outstanding immediately before
the Effective Time.
(c) ADJUSTMENT FOR STOCK SPLITS. The Conversion Price shall be
appropriately adjusted for any stock split or combination of Palomar Common
Stock, any reclassification or recapitalization of Palomar Common Stock, or any
dividend on Palomar Common Stock payable in securities of Palomar, with a record
date on or after the date hereof and on or before the Effective Time.
1.2 FRACTIONAL SHARES. No fractional shares of Palomar Common
Stock shall be issued in connection with the Merger. In lieu thereof, each TTI
shareholder who would otherwise be entitled to receive a fraction of a share of
Palomar Common Stock will receive from Palomar, promptly after the Effective
Time, an amount of cash equal to the Conversion Price multiplied by the fraction
of a share of Palomar Common Stock to which such shareholder would otherwise be
entitled.
1.3 EFFECTS OF THE MERGER. At the Effective Time: (a) the
separate existence of Sub will cease, and Sub will be merged with and into TTI,
and TTI will be the surviving corporation, pursuant to the terms of the Plan of
Merger; (b) the Articles of Incorporation and Bylaws of TTI will continue
unchanged as the Articles of Incorporation and Bylaws of the Surviving
Corporation, (c) each share of Sub Common Stock outstanding immediately prior to
the Effective Time will be converted into one share of Common Stock of the
Surviving Corporation; (d) each share of TTI Common Stock outstanding
immediately prior to the Effective Time will be converted into shares of Palomar
Common Stock in accordance with Section 1.1(b) hereof; and (e) the Merger will,
from and after the Effective Time, have all of the effects provided by
applicable law.
1.4 FURTHER ASSURANCES. TTI, Sub and Palomar hereby agree that
they will cause to be executed and filed and will record any document or
documents prescribed by the laws of the State of Arizona or any other state and
that they will cause to be performed all necessary or desirable acts within the
State of Arizona and elsewhere to effectuate the Merger provided for herein,
including, without limitation, execution, filing and delivery of any further
deeds, assignments or assurances necessary or desirable to vest, perfect or
confirm in the Surviving Corporation title to all property and rights of Sub and
TTI.
1.5 TAX FREE REORGANIZATION. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Code, and the parties agree not to take any position inconsistent with this
intention. The Palomar Common Stock issued in the Merger shall be issued solely
in exchange for the TTI Common Stock pursuant to this Agreement, and no
transaction other than the Merger represents, provides for or is intended to be,
an adjustment to the consideration paid for the TTI Common Stock.
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1.6 POOLING OF INTERESTS. The parties intend that the Merger
be treated as a "pooling of interests" for accounting purposes.
2. REPRESENTATIONS AND WARRANTIES OF TTI.
TTI hereby represents and warrants that, except as set forth on the TTI
Schedule of Exceptions attached hereto as Schedule 2:
2.1 ORGANIZATION AND GOOD STANDING. TTI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona, has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as proposed to be
conducted, and is qualified as a foreign corporation in New Mexico. TTI does not
own or lease real property, have employees or conduct intrastate business, nor
is it required to be qualified to do business, in any jurisdictions other than
New Mexico.
2.2 POWER, AUTHORIZATION AND VALIDITY.
(a) TTI has the corporate right, power and authority to enter
into and perform its obligations under this Agreement, and all agreements to
which it is or will be a party that are required to be executed pursuant to this
Agreement, including, without limitation, the Plan of Merger (the "TTI Ancillary
Agreements"). The execution, delivery and performance of this Agreement and the
TTI Ancillary Agreements has been duly and validly approved and authorized by
the Board of Directors of TTI and will be duly and validly approved by the
unanimous vote of the shareholders of TTI prior to the Effective Time.
(b) No filing, authorization or approval, governmental or
otherwise, is necessary to enable TTI to enter into, and to perform its
obligations under, this Agreement and the TTI Ancillary Agreements, except for:
(a) the filing of Articles of Merger and the Plan of Merger with the Arizona
Secretary of State and the filing of appropriate documents with the relevant
authorities in New Mexico; (b) such filings and permits as may be required to
comply with federal and state securities laws; and (c) the approval of this
Agreement and the Plan of Merger by the TTI shareholders.
(c) This Agreement and the TTI Ancillary Agreements are, or
when executed by TTI will be, valid and binding obligations of TTI enforceable
in accordance with their respective terms, except as to the effect, if any, of:
(a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally; (b) rules of law governing specific performance, injunctive
relief and other equitable remedies; and (c) the enforceability of provisions
requiring indemnification in connection with the offering, issuance or sale of
securities.
2.3 CAPITALIZATION. The authorized, issued and outstanding
capital stock of TTI is set forth on Schedule 2.3. All issued and outstanding
shares of TTI Common Stock are owned beneficially and of record by the persons
set forth on Schedule 2.3 and have been duly
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authorized and validly issued, are fully paid and nonassessable, are not subject
to any right of rescission, and have been offered, issued, sold and delivered in
compliance with all registration or qualification requirements (or applicable
exemptions therefrom) of applicable federal and state securities laws. Except as
set forth on Schedule 2.3, there are no options, warrants, conversion privileges
or preemptive or other rights or agreements outstanding to purchase or otherwise
acquire any of TTI's authorized but unissued capital stock ("Derivative
Securities") or any agreements to issue Derivative Securities, and there is no
liability for dividends accrued but unpaid. Prior to the Effective Time, each of
the Derivative Securities shall have been exercised for or converted into TTI
Common Stock and the shares of TTI Common Stock issued upon such exercise or
conversion shall have been duly authorized and validly issued, shall be fully
paid and nonassessable, shall not be subject to any right of rescission, and
shall have been offered, issued, sold and delivered in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of applicable federal and state securities laws. There are no voting agreements,
rights of first refusal or other restrictions (other than normal restrictions on
transfer under applicable federal and state securities laws) applicable to any
of TTI's outstanding securities.
2.4 SUBSIDIARIES. TTI has no subsidiaries nor any equity
interest, direct or indirect, in any corporation, partnership, joint venture or
other business entity. TTI is autonomous and has not been a subsidiary or
division of another corporation within two years of the date hereof for the
purposes of Accounting Principles Board Opinion Number 16.
2.5 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution
nor delivery of this Agreement or any TTI Ancillary Agreement, nor the
consummation of the transactions contemplated hereby or thereby, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of: (a) any provision of the
Articles of Incorporation or Bylaws of TTI, as currently in effect; (b) in any
material respect, any material instrument or contract to which TTI is a party or
by which TTI is bound; or (c) any federal, state, local or foreign judgment,
writ, decree, order, statute, rule or regulation applicable to TTI or its assets
or properties. The consummation of the Merger will not require the consent of
any third party and will not have a material adverse effect upon any rights,
licenses, franchises, leases or agreements of TTI pursuant to the terms of those
agreements.
2.6 LITIGATION. There is no action, proceeding, claim or
investigation pending against TTI before any court or administrative agency,
and, to the best of the knowledge of TTI, no such action, proceeding claim or
investigation has been threatened. There is no basis for any shareholder or
former shareholder of TTI, or any other person, firm, corporation or entity, to
assert a claim against TTI, Sub or Palomar based upon: (a) ownership or rights
to ownership of any shares of TTI Common Stock; or (b) any rights as or to
become a TTI shareholder, between TTI and any of its shareholders or former
shareholders in their capacity as such.
2.7 TTI FINANCIAL STATEMENTS. Attached hereto as Schedule 2.7
are copies of TTI's unaudited balance sheets as of December 31, 1995 and the
related unaudited statements of income, shareholders' equity and changes in cash
flow for the years then ended (collectively,
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"TTI Financial Statements"). The TTI Financial Statements: (a) have been
prepared in accordance with generally accepted accounting principles ("GAAP")
except that the unaudited statements do not contain notes, and (b) fairly
present the financial condition of TTI at the respective dates therein indicated
and the results of operations for the respective periods therein specified. TTI
has no material debt, liability or obligations of any nature, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, that is not
reflected, reserved against or disclosed in the Balance Sheet as of December 31,
1995 (the "Financial Statement Date"), except for (i) those that are not
required to be reported in accordance with generally accepted accounting
principles and are disclosed by TTI in writing to Palomar to the extent required
pursuant to Section 4.1 hereof and (ii) those that may have been incurred after
the Financial Statement Date in the ordinary course of TTI's business,
consistent with past practice.
2.8 TAXES. TTI has filed all federal, state, local and foreign
tax and information returns required to be filed, has paid all taxes required to
be paid in respect of all periods for which returns have been filed, has
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the periods subsequent to the periods covered by the most recent
applicable tax returns, has made all necessary estimated tax payments, and has
no liability for taxes in excess of the amount so paid or accruals or reserves
so established in the applicable TTI Financial Statements. True, correct and
complete copies of all such tax and information returns have been provided or
made available by TTI to Palomar. TTI is not delinquent in the payment of any
tax or the filing of any tax returns, and no deficiencies for any tax have been
threatened, claimed, proposed or assessed which have not been settled or paid
nor is TTI aware of any basis for such. No tax return of TTI has ever been
audited by the Internal Revenue Service or any state taxing agency or authority.
For the purpose of this Section, the terms "tax" and "taxes" include all
federal, excise, state, local and foreign income, gains, franchise, property,
sales, use, employment, license, payroll, occupation, according, value added or
transfer taxes, governmental charges, fees, levies or assessments (whether
payable directly or by withholding), and, with respect to such taxes, any
estimated tax, interest and penalties or additions to tax and interest on such
penalties and additions to tax. TTI will not, as a result of the Merger, become
liable for any income tax not adequately reserved against on the TTI Financial
Statements. TTI has not filed a consent pursuant to Section 341(f) of the Code.
2.9 TITLE TO PROPERTIES. TTI has good and marketable title to
all of its assets as shown on its balance sheet as of the Financial Statement
Date included in the TTI Financial Statement, free and clear of all liens,
charges, encumbrances (other than for taxes not yet due and payable). The
machinery and equipment included in such properties are in all material respects
in good condition and repair, normal wear and tear excepted, and all leases,
real or personal property to which TTI is a party are fully effective and afford
TTI, as the case may be, peaceful and undisturbed possession of the subject
matter of the lease. TTI is not in violation of any zoning, building, safety,
environmental ordinance, regulation or requirement or other law or regulation
applicable to the operation of its owned or leased properties (the violation of
which would have a material adverse effect on its business), and TTI has not
received any notice of such violation with which it has not complied or had
waived.
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2.10 ABSENCE OF CERTAIN CHANGES. Since the Financial Statement
Date, except as contemplated by this transaction or disclosed on Schedule 2.10,
TTI:
(a) has operated its business in the normal, usual and
customary manner in the ordinary and regular course of business;
(b) has not sold or otherwise disposed of any of its
properties or assets, other than inventory sold in the ordinary course of
business;
(c) except in each case in the ordinary course of business,
(i) has not amended or terminated any outstanding
lease, contract or agreement,
(ii) has not incurred any obligations or liabilities
(fixed, contingent or other), and
(iii) has not entered any commitments;
(d) has not made any transactions outside the ordinary course
of business in its inventory or any additions to its property or any purchases
of machinery or equipment, except for normal maintenance and replacements;
(e) has not discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent) other than current
liabilities or obligations under contracts then existing or thereafter entered
into in the ordinary course of business, and commitments under leases existing
on that date or incurred since that date in the ordinary course of business;
(f) has not mortgaged, pledged or subjected to lien or any
other encumbrances, any of its assets, tangible or intangible;
(g) has not sold or transferred any tangible asset or
cancelled any debts or claims except in each case in the ordinary course of
business;
(h) has not sold, assigned, licensed or transferred any
patents, trademarks, trade names, trade secrets, copyrights or other intangible
assets;
(i) has not increased the compensation payable or to become
payable to any of its officers, employees, or agents;
(j) has not suffered any material damage, destruction or loss
(whether or not covered by insurance) or any acquisition or taking of property
by any governmental authority;
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(k) has not waived any rights which individually or in the
aggregate exceed $10,000;
(l) has not experienced any organized work stoppage or
industrial action;
(m) has not declared, set aside, or paid any cash or stock
dividend or other distribution in respect of its capital stock, or redeemed or
otherwise acquired any of its capital stock;
(n) has not issued or sold any shares of its capital stock of
any class, or any other of its securities, or issued or created any warrants;
obligations, subscriptions, options, convertible securities or other commitments
to issue capital stock;
(o) has not split or combined its outstanding shares of
capital stock or entered into any recapitalization or reclassification affecting
the number of outstanding shares of its capital stock or affecting any other of
its securities;
(p) has not merged, consolidated with or reorganized with or
acquired any other entity;
(q) has not entered into any other transaction or transactions
which individually or in the aggregate are material to TTI;
(r) has not entered into any agreement to do any of the
foregoing; or
(s) has not entered into any other transaction or transactions
which individually or in the aggregate are material to TTI, other than in the
ordinary course of business.
2.11 AGREEMENTS AND COMMITMENTS. Schedule 2.11 sets forth a
true, correct and complete list of TTI's Material Contracts (as defined below).
Except as set forth in Schedule 2.11 attached hereto, or as listed in Schedule
2.12, Schedule 2.15(c) or Schedule 2.15(f), TTI is not a party or subject to any
material, oral or written agreement, obligation or commitment which is described
below ("Material Contracts").
(a) Contract, commitment, letter contract, quotation, purchase
order, bid or proposal providing for, or with a reasonable possibility of
resulting in, payments by or to TTI in an aggregate amount of (i) $10,000 or
more in the ordinary course of business; or (ii) $5,000 or more not in the
ordinary course of business.
(b) License agreement as licensor or licensee providing for,
or with a reasonable possibility of resulting in, payment by or to TTI in an
aggregate amount of: (i) $10,000 or more in the ordinary course of business; or
(ii) any amount if not in the ordinary course of business (including all
licenses to TTI, but excluding licenses where TTI is a licensee
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of standard non-exclusive software licenses granted to end user customers by
third parties in the ordinary course of business).
(c) Agreement by TTI to encumber, transfer or sell rights in
or with respect to any Intellectual Property (as defined in Section 2.12
hereof).
(d) Agreement for the sale or lease of real or personal
property involving more than $10,000 per year.
(e) Dealer, distributor, sales representative, original
equipment manufacturer, value added remarketer or other agreement for the
distribution of TTI's products.
(f) Franchise agreement or financing statement.
(g) Stock redemption or purchase agreement.
(h) Joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons.
(i) Instrument evidencing indebtedness for borrowed money by
way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, except for trade indebtedness and
advances to employees incurred in the ordinary course of business, and except as
disclosed in the TTI Financial Statements dated as of, or for the period ending,
on the Financial Statement Date.
(j) Contract containing covenants purporting to limit TTI's
freedom to compete in any line of business in any geographic area.
(k) Warranty, indemnity or guaranty agreements.
All agreements, obligations and commitments listed in Schedule 2.11,
Schedule 2.12, Schedule 2.15(c) or Schedule 2.15(f) (the "Material Contracts")
are valid and in full force and effect in all material respects and a true and
complete copy of each has been delivered to Palomar's counsel. TTI is not, and
to the best knowledge of TTI, no other party is, in breach or default in any
material respect under the terms of any such agreement, obligation or
commitment, which breach or default may reasonably be expected to have a
material adverse effect on TTI. TTI is not a party to any contract or
arrangement which it reasonably expects will have a material adverse effect on
its business or prospects. TTI has no material liability for renegotiation of
government contracts or subcontracts, if any. Each Material Contract can be
performed without a loss to TTI or Sub.
2.1 INTELLECTUAL PROPERTY. TTI owns all right, title and
interest in, or has the right to use, free and clear of all security interests,
liens and encumbrances, all patents, trademarks, trade dress, designs, service
marks, trade names, mask works, copyrights, trade secrets, know-
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how, technology and other intellectual property and proprietary rights,
including, without limitation, all patent, trademark and copyright registrations
and applications for the registration thereof, necessary to the conduct of its
business as presently conducted and as proposed to be conducted including,
without limitation, the trademark "Tru-Pulse" and all items listed in Schedule
2.12 ("Intellectual Property"). All Intellectual Property created by or for TTI
was created solely by full-time, regular employees of TTI within the scope of
their employment and TTI has obtained from each employee an executed agreement
pursuant to which the employee assigned to TTI (and to the extent such
assignment could not be made at the time of execution of the agreement, agreed
to assign to TTI) all of the employee's right, title and interest in and to any
of the Intellectual Property and agreed to maintain in confidence any trade
secrets or confidential information of TTI. TTI has taken measures which it
believes are reasonable to protect all Intellectual Property and are at least
consistent with industry practice, and TTI is not aware of any infringement of
such Intellectual Property by any third party. Schedule 2.12 attached hereto is
a true and complete list of all Intellectual Property owned or licensed by TTI
and such schedule distinguishes Intellectual Property owned by TTI from
Intellectual Property licensed by TTI. No material loss, cancellation,
termination or expiration of any copyright or trademark registration or patent
nor any opposition to any registration or application for registration is
foreseeable by TTI except as set forth on Schedule 2.12. TTI represents that it
has timely paid all maintenance fees for all patents and trademark and copyright
registrations listed on Schedule 2.12 and that no patents or copyright or
trademark registrations listed on Schedule 2.12 have expired for failure to pay
maintenance fees. TTI is not using any trademarks, tradenames, trade dress or
service marks in commerce other than those listed on Schedule 2.12. Copies of
all forms of non-disclosure or confidentiality agreements utilized to protect
such Intellectual Property have been provided or made available to Palomar. The
business of TTI as presently conducted and as proposed to be conducted by TTI
does not and, to the best knowledge of TTI, will not cause TTI to infringe or
violate any of the patents, trademarks, trade dress, designs, service marks,
trade names, mask works, copyrights, trade secrets, know-how, technology and
other intellectual property and proprietary rights (including without limitation
moral and personal rights), of any other person, and TTI has not received any
claim or notice of infringement or potential infringement of such rights of any
other person which could be expected to have a material adverse effect on TTI's
business.
2.13 COMPLIANCE WITH LAWS. TTI has complied with all
applicable laws, ordinances, regulations and rules, and all orders, writs
injunctions, awards, judgments and decrees, applicable to TTI or to its assets,
properties and business (the violation of which would have a material adverse
effect upon TTI), including, without limitation: (a) all applicable federal and
state securities laws and regulations; (b) all applicable federal, state and
local laws, ordinances and regulations, and all orders, writs, injunctions,
awards, judgments and decrees, pertaining to (i) the sale, licensing, leasing,
ownership or management of TTI's owned, leased or licensed real or personal
property, products and technical data, (ii) employment and employment practices,
terms and conditions of employment, and wages and hours, and (iii) safety,
health, fire prevention, environmental protection (including toxic waste
disposal and related matters described in Section 2.21 hereof), building
standards, zoning and other similar matters; and (c) the Export Administration
Act and regulations promulgated thereunder and all other laws,
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regulations, rules, orders, writs, injunctions, judgments and decrees applicable
to the export or re-export of controlled commodities or technical data
controlled under the Export Administration Act. TTI has received all material
permits and approvals from, and have made all material filings with, third
parties, including government agencies and authorities, that are necessary in
connection with its present business.
2.14 CERTAIN TRANSACTIONS AND AGREEMENTS. None of the officers
or directors of TTI, nor any member of any officer's or director's immediate
family, has any direct or indirect ownership interest in any firm or corporation
that competes with TTI (except with respect to any interest that is not a
material portion of the assets of such person and is less than one percent of
the stock of any corporation whose stock is publicly traded). None of such
officers or directors, or any member of any officer's or director's immediate
family, is or has been directly or indirectly interested in any contract or
informal arrangement with TTI, within the last three years, except for
compensation for services as an officer, director or employee of TTI. None of
such officers or directors or family members has any interest in any property,
real or personal, tangible or intangible, including but not limited to
Intellectual Property, used in the business of TTI, except for the normal rights
of a shareholder.
2.15 EMPLOYEES.
(a) Schedule 2.15(a) contains a list of all employment
contracts currently in effect that are not terminable at will without cost to
TTI (other than agreements with the sole purpose of providing for the
confidentiality of proprietary information or assignment of inventions). All
officers, employees and consultants of TTI having access to proprietary
information of TTI have executed and delivered to TTI an agreement regarding the
protection of such proprietary information and the assignment of inventions to
TTI.
(b) TTI has: (i) never been and is not now subject to a union
organizing effort; (ii) is not subject to any collective bargaining agreement
with respect to any of its employees; (iii) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization; and (iv) has no material current labor dispute. TTI has
good labor relations, and has no knowledge of any facts indicating that the
consummation of the transactions contemplated hereby will have a material
adverse effect on such labor relations, and has no knowledge that any of its key
employees intends to leave its employ.
(c) Schedule 2.15(c) contains a list of all pension,
retirement, disability, medical, dental or other health plans, life insurance or
other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by TTI (the "Employee Plans"), including, without limitation, all
"employee benefit plans" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Each of the Employee Plans,
and its operation and administration, is, in all material respects, in
compliance with all applicable federal, state, local and other
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governmental laws and ordinances, orders, rules and regulations, including the
requirements of ERISA and the Code. All such Employee Plans that are "employee
pension benefit plans" (as defined in Section 3(2) of ERISA) have received
favorable determination letters that such plans satisfy the qualification
requirements of the Tax Equity and Fiscal Responsibility Act of 1982, the
Deficit Reduction Act of 1984 and the Retirement Equity Act of 1984. In
addition, TTI has not been a participant in any "prohibited transaction," within
the meaning of Section 406 of ERISA, with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA) which TTI sponsors as
employer or in which TTI participates as employer, which was not otherwise
exempt pursuant to Section 408 of ERISA (including any individual exemption
granted under Section 408(a) of ERISA), or which could result in an excise tax
under the Code. The group health plans, as defined in Section 498(g) of the
Code, that benefit employees of TTI are in compliance with the continuation
coverage requirements of Subsection 4980B(g) of the Code. There are no
outstanding violations of Section 4090B of the Code with respect to any Employee
Plan, covered employees or qualified beneficiaries.
(d) To the best knowledge of TTI, no employee of TTI is in
material violation of: (a) any term of any employment contract, patent
disclosure agreement or noncompetition agreement; or (b) any other contract or
agreement, or any restrictive covenant, relating to the right of any such
employee to be employed by TTI or to use trade secrets or proprietary
information of others. To the best knowledge of TTI, the employment of any
employee of TTI does not subject TTI to any liability to any third party.
(e) TTI is not a party to any: (a) agreement with any
executive officer or other key employee of TTI (i) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving TTI in the nature of any of the transactions
contemplated by this Agreement and the TTI Ancillary Agreements, (ii) providing
any term of employment or compensation guarantee, or (iii) providing severance
benefits or other benefits after the termination of employment of such employee
regardless of the reason for such termination of employment, or (b) agreement or
plan, including, without limitation, any stock option plan, stock appreciation
rights plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of benefits of which will be calculated on the basis
of any of the transactions by this Agreement and the TTI Ancillary Agreements.
TTI is not obligated to make any excess parachute payment, as defined in Section
280G(b)(1) of the Code, nor will any excess parachute payment be deemed to have
occurred as a result of or arising out of the Merger.
(f) A list of ongoing employees, officers and technical,
engineering and development consultants of TTI and their current compensation is
forth on Schedule 2.15(f) attached hereto.
(g) All contributions due from TTI with respect to any of the
Employee Plans have been made or accrued on TTI's financial statements, and no
further contributions will be due or will have accrued thereunder as of the
Closing Date.
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2.16 CORPORATE DOCUMENTS. TTI has made available to Palomar
for examination all material documents and information of TTI, including,
without limitation, the documents and agreements referenced in the Schedules to
this Agreement and the following: (a) copies of TTI's Articles of Incorporation,
Bylaws as currently in effect; (b) TTI's Minute Book containing all records of
all proceedings, consents, actions and meeting of TTI's board of directors and
shareholders; (c) TTI's stock ledger and journal reflecting all stock issuances
and transfers; and (d) all permits, orders and consents issued by any regulatory
agency with respect to TTI, or any securities of TTI, and all applications for
such permits, orders and consents.
2.17 NO BROKERS. TTI is not obligated for the payment of fees
or expenses of any investment banker, broker or finder in connection with the
origin, negotiations or execution of this Agreement or the TTI Ancillary
Agreements or in connection with any transaction contemplated hereby or thereby.
2.18 DISCLOSURE. Neither this Agreement, its exhibits and
schedules, nor any of the certificates or documents to be delivered by TTI to
Palomar under this Agreement, taken together, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
2.19 BOOKS AND RECORDS.
(a) The books, records and accounts of TTI: (a) are in all
material respects true, complete and correct; (b) have been maintained in
accordance with good business practices on a basis consistent with prior years;
(c) are stated in reasonable detail and accurately and fairly reflect the
transactions and dispositions of the assets of TTI; and (d) accurately and
fairly reflect the basis for the TTI Financial Statements.
(b) TTI has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary (1) to permit
preparation of financial statements in conformity with generally accepted
accounting principles or any other criteria applicable to such statements and
(2) to maintain accountability for assets; and (iii) the amount recorded for
assets on the books and records of TTI is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
2.20 INSURANCE. TTI maintains the insurance policies listed on
Schedule 2.20. The insurance policies listed and described briefly on Schedule
2.20 constitute all of the policies in force and effect in respect of the
business, properties and assets, including, without limitation, insurance on
personnel, of TTI. TTI is not in default under any such policy. The insurance
policies so listed and identified are sufficient in nature, scope and amounts to
insure adequately (and, in any event, in amounts sufficient to prevent TTI from
becoming a co-insurer within the
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terms of such policies) the business, properties and assets of TTI. TTI has not
been refused insurance by any insurance carrier to which it has applied for
insurance.
2.21 ENVIRONMENTAL MATTERS.
(a) TTI does not own any real property. During the period that
TTI has leased its properties, there have been no disposals, releases or
threatened releases of Hazardous Materials (as defined below) from or any
presence thereof on such properties which reasonably could have a material
adverse effect upon the business or financial statements of TTI. TTI has no
knowledge of any presence, disposals, releases or threatened releases of
Hazardous Materials on or from any of such properties. For purposes of this
Agreement, the terms "disposal," "release," and "threatened release" shall have
the definitions assigned thereto by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S. @9601 et seq., as amended
("CERCLA"). For the purposes of this Section 2.21, "Hazardous Materials" shall
mean any hazardous or toxic substance, material or waste which is or becomes
prior to the Closing Date regulated under, or defined as a "hazardous
substance," "pollutant," "contaminant," "toxic chemical," "hazardous material,"
"toxic substance" or "hazardous chemical" under: (i) CERCLA; (ii) the Emergency
Planning and Community Right-to-Know Act, 42 U.S. Section 11001 et seq.; (iii)
the Hazardous Materials Transportation Act, 49 U.S. Section 1801, et seq.; (iv)
the Toxic Substances Control Act, 15 U.S. Section 2601 et seq.; (v) the
Occupational Safety and Health Act of 1970, 29 U.S. Section 651 et seq.; (vi)
regulations promulgated under any of the above statutes; or (vii) any applicable
state or local statute, ordinance, rule or regulation that has a scope or
purpose similar to those identified above.
(b) None of the properties leased by TTI are known by TTI to
be in material violation of any federal, state or local law, ordinance,
regulation or order relating to industrial hygiene or to the environmental
conditions in such properties, including, but not limited to, soil and ground
water condition.
(c) During the time that TTI has leased its properties, TTI
has not, nor to its best knowledge, has any third party used, generated,
manufactured or stored in such properties or transported to or from such
properties any material amount of Hazardous Materials.
(d) During the Period that TTI has leased its properties, to
the best knowledge of TTI, no Hazardous Materials have been transported from
such properties to any site or facility now listed or proposed for listing on
the National Priorities List, at 40 C.R.F. Part 300, or any list with a similar
scope or purpose published by any state authority.
2.22 GOVERNMENT CONTRACTS. Schedule 2.22 sets forth a true,
correct and complete list of all contracts between TTI and any Government
Contract Party (as defined below). All representations, certifications and
disclosures made by TTI to any Government Contract Party were in all respects
current, complete and accurate at the time they were made, and TTI has no
knowledge of acts, omissions or non-compliance with regard to any applicable
public contracting statute, regulation, or contract requirement (whether express
or incorporated by reference)
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relating to any of TTI's contracts with any Government Contract Party that has
led to or reasonably could lead to, either before or after the Closing Date: (i)
any material claim or dispute involving TTI and/or Palomar and any Government
Contract Party; or (ii) any suspension, debarment or contract termination, or
proceeding related thereto which could be reasonably expected to have a material
adverse effect on TTI. TTI represents and warrants that it has no knowledge of,
and has no reason to know of, any acts or omissions relating to the licensing or
selling to any Government Contract Party, or marking, of any of TTI technical
data or computer software, that has led to or reasonably could lead to, either
before or after the Closing Date, any material cloud on any of TTI's rights in
and to its technical data or computer software, and that all of TTI's
development of technical data and computer software was developed exclusively at
private expense. For purposes of this Section 2.22, the term "Government
Contract Party" means any independent or executive agency, division,
subdivision, audit group, or procuring office of the federal government,
including any prime contractor of the federal government and any higher level
subcontractor of a prime contractor of the federal government, and including any
employees or agents thereof, in each case acting in such capacity.
3. REPRESENTATIONS AND WARRANTIES OF PALOMAR AND SUB.
Palomar and Sub hereby jointly and severally represent and warrant,
that, except as set forth on the Palomar Schedule of Exceptions attached hereto
as Schedule 3:
3.1 ORGANIZATION AND GOOD STANDING. Palomar and Sub are
corporations duly organized, validly existing and in good standing under the
laws of the States of Delaware and Arizona, respectively, and each has the
corporate power and authority to own, operate and lease its properties and to
carry on its business as now conducted and as proposed to be conducted. Neither
Palomar nor Sub now owns or leases real property, has employees or conducts
business, nor is required to be qualified to do business in any jurisdiction
other than Delaware and Massachusetts in the case of Palomar and Arizona in the
case of Sub.
3.2 POWER, AUTHORIZATION AND VALIDITY.
(a) Each of Palomar and Sub has the corporate right, power,
legal capacity and authority to enter into and perform its respective
obligations under this Agreement, and all agreements to which Palomar or Sub is
or will be a party that are required to be executed pursuant to this Agreement,
including, without limitation, the Plan of Merger (the "Palomar Ancillary
Agreements"). The execution, delivery and performance of this Agreement and the
Palomar Ancillary Agreements has been duly and validly approved and authorized
by each of Palomar's and Sub's Board of Directors and Palomar, as sole
shareholder of Sub. The approval of the shareholders of Palomar is not required
for such actions.
(b) No filing, authorization or approval, governmental or
otherwise, is necessary to enable Palomar or Sub to enter into or perform its
obligations under this Agreement and the Palomar Ancillary Agreements, except
for: (a) the filing of the Articles of Merger and
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Plan of Merger with the Arizona Secretary of State; and (b) such filings and
permits as may be required to comply with federal and state securities laws.
(c) This Agreement and the Palomar Ancillary Agreements are,
or when executed by Palomar and Sub will be, valid and binding obligations of
Palomar and Sub, enforceable in accordance with their respective terms, except
as to the effect, if any, of: (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally; (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies; and (iii)
the enforceability of provisions requiring indemnification in connection with
the offering, issuance or sale of securities.
3.3 CAPITALIZATION. The authorized capital stock of Sub
consist of 1,000 shares of Common Stock, $.01 par value per share, all of which
are issued, outstanding and owned beneficially and of record by Palomar. The
authorized capital stock of Palomar consists of 40,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock. $.01 par value per share
("Preferred Stock"). Schedule 3.3 sets forth the capitalization of Palomar as of
February 16, 1996. All issued and outstanding shares of Palomar Common Stock and
Preferred Stock have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any right of rescission, and have been
offered, issued, sold and delivered by Palomar or Sub in compliance with all
registration or qualification requirements (or applicable exemptions therefrom)
of applicable federal and state securities laws.
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS. Palomar has made
available to TTI a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Palomar with the Securities
Exchange Commission (the "Commission") since December 20, 1994 (as such
documents have since the time of their filing been amended, the "Palomar SEC
Documents"), which are all the documents (other than preliminary material) that
Palomar was required to file with the Commission since such date. As of their
respective dates, the Palomar SEC Documents and any forms, reports and other
documents filed by Palomar after the date of this Agreement complied or will
comply in all material respects with the requirements of the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act of 1934, as amended
(the "Exchange Act"), as the case may be, and the rules and regulations of the
Commission thereunder applicable to such Palomar SEC Documents or such other
forms, reports or other documents, and none of the Palomar SEC Documents
contained, or will contain at the time they are filed, any untrue statement of a
material fact or omitted, or will omit at the time they are filed, 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. The financial statements of Palomar included in the Palomar SEC
Documents comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-Q of the Commission) and fairly present (subject, in the case of the
unaudited statements, to normal, recurring audit adjustments, which were not
individually or in
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the aggregate material) in all material respects the financial position of
Palomar as at the dates thereof and the results of its operations and cash flows
for the periods then ended.
3.5 ABSENCE OF CERTAIN CHANGES. Since the date of the most
recent Palomar SEC Document, except as contemplated by this transaction or as
disclosed on Schedule 3.5, there has not been with respect to Palomar or Sub any
material adverse change in the business, results of operations or creditors of
Palomar or Sub.
3.6 NO BROKERS. Palomar is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in connection with
the origin, negotiation or execution of this Agreement or the Palomar Ancillary
Agreements, or in connection with any transaction contemplated hereby or
thereby.
3.7 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution
nor delivery of this Agreement or any Palomar Ancillary Agreement, nor the
consummation of the transactions contemplated hereby or thereby, will conflict
with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of: (a) any provision of the
Certificate of Incorporation or Bylaws of Palomar or Sub, as currently in
effect; (b) in any material respect, any material instrument or contract to
which Palomar or Sub is a party or by which Palomar or Sub is bound or which
Palomar or Sub will become a party to or be bound by prior to the Closing; or
(c) any federal, state, local or foreign judgment, writ, decree, order, statute,
rule or regulation applicable to Palomar or Sub or their assets or properties.
4. TTI AND STOCKHOLDER PRECLOSING COVENANTS.
During the period from the date of this Agreement until the Effective
Time, each of TTI and the Stockholder covenants and agrees as follows:
4.1 ADVICE OF CHANGES. TTI shall promptly advise Palomar in
writing: (a) of any event occurring subsequent to the date of this Agreement
that would render any representation or warranty of TTI contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect; and (b) of any material adverse
change in TTI's business, results of operations or financial condition. TTI
shall deliver to Palomar within 15 days after the end of each monthly accounting
period ending after the date of this Agreement and before the Closing Date, an
unaudited balance sheet and statement of operations, which financial statements
shall be prepared in the ordinary course of business, in accordance with the
corporation's books and records and generally accepted accounting principles and
shall fairly present the financial position of the corporation as of their
respective dates and the results of the corporation's operations for the periods
then ended.
4.2 MAINTENANCE OF BUSINESS. TTI shall use best efforts to
carry on and preserve its goodwill, its business and its relationships with
customers, suppliers, employees and others in substantially the same manner as
it has prior to the date hereof. If TTI becomes aware of a material
deterioration in the relationship with any customer, supplier or key employee,
it will
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promptly bring such information to the attention of Palomar in writing
(provided, however, that TTI shall not be required to disclose to Palomar
confidential information of a third party so long as TTI informs Palomar in
writing that it is unable to provide such information in a specific case and the
reason therefor, and provides such information to Palomar's counsel, on an
"attorney-only basis,") if requested by Palomar and, if requested by Palomar,
will exert all reasonable efforts to restore the relationship.
4.3 CONDUCT OF BUSINESS. TTI from the date hereof to the
Closing Date.
(a) will operate its business in the normal, usual and
customary manner in the ordinary and regular course of business;
(b) will not sell or otherwise dispose of any of its
properties or assets, other than inventory of finished goods sold in the
ordinary course of business;
(c) except in each case in the ordinary course of business,
(i) will not amend or terminate any outstanding lease,
contract or agreement,
(ii) will not incur any obligations or liabilities
(fixed, contingent or other), and
(iii) will not enter into any commitments;
(d) will not make any unusual transactions in its inventory or
any additions to its property or any purchases of machinery or equipment, except
for normal maintenance and replacements;
(e) will not discharge or satisfy any lien or encumbrance or
pay any obligation or liability (absolute or contingent) other than current
liabilities or obligations under contracts now existing or hereafter entered
into in the ordinary course of business, and commitments under leases now
existing;
(f) will not mortgage, pledge or subject to lien or any other
encumbrances, any of its assets, tangible or intangible unless such mortgage,
pledge, lien or encumbrance is discharged before the Closing;
(g) will not sell or transfer any tangible asset or cancel any
debts or claims except in each case in the ordinary course of business;
(h) will not sell, assign, license or transfer any patents,
trademarks, trade names, trade secrets, copyrights or other intangible assets;
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(i) will not increase the compensation payable or to become
payable to any of its officers, employees, or agents;
(j) will not suffer any material damage, destruction or loss
(whether or not covered by insurance) or any acquisition or taking of property
by any governmental authority;
(k) will not waive any rights of substantial value;
(l) will not declare, set aside, or pay any cash or stock
dividend or other distribution in respect of its capital stock, or redeem or
otherwise acquire any of its capital stock;
(m) will not issue or sell any shares of its capital stock of
any class, or any other of its securities, or issue or create any warrants;
obligations, subscriptions, options, convertible securities or other commitments
to issued capital stock;
(n) will not split or combine its outstanding shares of
capital stock or enter into any recapitalization or reclassification affecting
the number of outstanding shares of its capital stock or affecting any other of
its securities;
(o) will not merge, consolidate with or reorganize with or
acquire any other entity;
(p) will not enter into any other transaction or transactions
which individually or in the aggregate are material to TTI; or
(q) will not enter into any agreement to do any of the
foregoing.
4.4 SHAREHOLDER APPROVAL. TTI shall solicit the written
consent of its shareholders for the purpose of approving this Agreement, the
Plan of Merger, the Merger and all other matters necessary to consummate the
transactions contemplated in this Agreement. In connection with such
solicitation of written consent, TTI will recommend such approval to its
shareholders. The Stockholder shall use his best efforts to assist in obtaining
shareholder approval, including, without limitation, voting in favor of, or
consenting to, the Merger and related transactions.
4.5 REGULATORY APPROVALS. TTI shall execute and file, or join
in the execution and filing, of any application or other document that may be
necessary or desirable to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign which may be reasonably
required, or which Palomar may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement. TTI will use
all reasonable efforts to obtain all such authorizations, approvals and
consents.
4.6 NECESSARY CONSENTS. TTI shall use all reasonable efforts
to obtain such written consents and take such other actions as may be necessary
or appropriate for TTI, in addition to
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those set forth in Section 4.5, to allow the consummation of the transactions
contemplated hereby and to allow the Surviving Corporation to carry on TTI's
business after the Closing.
4.7 LITIGATION. TTI shall notify Palomar in writing promptly
after learning of any actions, suits, proceedings or investigations by or before
any court, board or governmental agency, initiated by or against TTI, or known
by TTI to be threatened against it.
4.8 NO OTHER NEGOTIATIONS. From the date hereof until the
termination of this Agreement (provided such termination is not in breach of
this Agreement) or consummation of the Merger, TTI shall not, and shall not
authorize or permit any officer, director, employee or affiliate of TTI, or any
other person, on its behalf to, directly or indirectly, solicit or encourage any
offer from any party or encourage any offer from any party or consider any
inquiry or proposal received from any party other than Palomar, concerning the
possible disposition of all or any material portion of TTI's business, assets or
capital stock by merger, sale or any other means. TTI shall promptly notify
Palomar orally and in writing of any such offer, inquiry or proposal.
4.9 ACCESS TO INFORMATION. Until the Closing, TTI will allow
Palomar and its agents full and complete access to the files, books, records and
offices of TTI, including, without limitation, any and all information relating
to TTI's taxes, commitments, contracts, leases, licenses, and real, personal and
intangible property and financial condition. TTI will cause its accountants to
cooperate with Palomar and its agents in making available all financial
information reasonably requested, including without limitation the right to
examine all working papers pertaining to all financial statements prepared or
audited by such accountants. Notwithstanding the foregoing, TTI shall not be
required to provide Palomar with access to competitive information, and may
provide that such information shall only be available to Palomar's outside
accountants or legal counsel.
4.10 SATISFACTION OF CONDITIONS PRECEDENT. TTI shall use all
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 9, and TTI will use all reasonable
efforts to cause the transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part to effect the transactions contemplated hereby.
4.11 DISSENTER'S NOTICE. TTI shall send notice of the approval
of the Merger by the TTI shareholders to each TTI shareholder entitled to
dissent, which notice shall comply with the dissenter's rights provisions of the
Arizona Corporations Code.
5. PALOMAR PRECLOSING COVENANTS.
During the period from the date of this Agreement until the Effective
Time, each of Palomar and Sub covenants and agrees as follows:
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5.1 ADVICE OF CHANGES. Each of Palomar and Sub shall promptly
advise TTI in writing: (a) of any event occurring subsequent to the date of this
Agreement that would render any representation or warranty of Palomar or Sub
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect; and (b) of any
material adverse change in Palomar's or Sub's business, results of operations or
financial condition. Palomar or Sub shall deliver to TTI copies of any filings
made with the Securities and Exchange Commission including, without limitation,
any reports filed on Form 10-KSB, Form 10-QSB or Form 8-K.
5.2 MAINTENANCE OF BUSINESS. Palomar shall use best efforts to
carry on and preserve its goodwill, its business and its relationships with
customers, suppliers, employees and others in substantially the same manner as
it has prior to the date hereof. If Palomar becomes aware of a material
deterioration in the relationship with any customer, supplier or key employee,
it will promptly bring such information to the attention of TTI in writing
(provided, however, that Palomar shall not be required to disclose to TTI
confidential information of a third party so long as Palomar informs TTI in
writing that it is unable to provide such information in a specific case and the
reason therefor, and provides such information to TTI's counsel, on an
"attorney-only basis," if requested by TTI) and, if requested by TTI, will exert
all reasonable efforts to restore the relationship.
5.3 CONDUCT OF BUSINESS. Palomar will continue to conduct its
business and maintain its business relationships in the ordinary and usual
course.
5.4 SATISFACTION OF CONDITIONS PRECEDENT. Palomar and Sub
shall use all reasonable efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Section 8 and Palomar and Sub shall
use all reasonable efforts to cause the transactions contemplated by this
Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part to effect the transactions
contemplated hereby.
5.5 REGULATORY APPROVALS. Palomar and Sub shall execute and
file, or join in the execution and filing, of any application or other document
that may be necessary to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which TTI may reasonably request, in connection with the
consummation of the transactions contemplated by this Agreement, including
without limitation, applicable state securities laws. Palomar and Sub shall use
all reasonable efforts to obtain all such authorizations, approvals and
consents.
5.6 NECESSARY CONSENTS. Palomar and Sub shall use all
reasonable efforts to obtain such written consents and take such other actions
as may be necessary or appropriate for Palomar and Sub, in addition to those set
forth in Section 5.5, to allow the consummation of the transactions contemplated
hereby and to allow the Surviving Corporation to carry on TTI's business after
the Closing.
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5.7 REGISTRATION AND DISCLOSURE STATEMENTS. Promptly,
following the date hereof but in any event no later than twenty (20) business
days thereafter, Palomar shall file with the Commission a registration statement
on Form S-3 (or such other form as shall be available to register the resale of
the Palomar Common Stock being issued in the Merger) providing for the resale by
the shareholders of TTI of a number of shares of Palomar Common Stock equal to
$11,500,000 divided by the Conversion Price (the "Initial Registration
Statement"). Palomar shall use its best efforts, subject to receipt of necessary
information from the shareholders of TTI, to cause the Initial Registration
Statement to become effective prior to the Closing. Palomar shall provide to TTI
as many copies of the Commission filings as TTI shall reasonably request to be
used by TTI in connection with its solicitation of written consents or proxies
of the TTI shareholders approving the Merger.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION.
(a) TTI and the Stockholder (collectively, the "Selling
Parties") hereby agree to indemnify, defend and hold Palomar and Sub
(collectively, the "Purchasing Parties") harmless from and against the amount of
any actual (or potential in the case of any litigation or claims by any person
not a party to this Agreement) damage, loss, cost or expense (including
reasonable attorneys' fees and settlement costs) ("Loss") to Purchasing Parties
occasioned or caused by, resulting from or arising out of:
(i) any failure by TTI or Stockholder to perform,
abide by or fulfill any of the agreements, covenants or obligations set forth in
or entered into in connection with this Agreement to be so performed or
fulfilled by TTI or Stockholder; and/or
(ii) any inaccuracy in or breach of any of the
representations or warranties set forth in this Agreement, or any certificate or
Schedule or other writing furnished to Palomar or Sub pursuant hereto.
(b) TTI's obligation to indemnify the Purchasing Parties as
set forth in Section 6.1(a) shall apply prior to the Effective Time and the
Stockholder's obligation to indemnify the Purchasing Parties as set forth in
Section 6.1(a) shall apply after the Effective Time.
(c) Palomar hereby agrees to defend and hold TTI and its
shareholders harmless from and against the amount of any actual Loss occasioned
or caused by, resulting from or arising out of:
(i) any failure by Palomar or Sub to perform, abide
by or fulfill any of the agreements, covenants or obligations set forth in or
entered into in connection with this Agreement to be so performed or fulfilled
by Palomar or Sub; and/or
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(ii) any inaccuracy in or breach of any of the
representations or warranties set forth in this Agreement, or any certificate or
Schedule or other writing furnished to TTI pursuant hereto.
The amount of any Loss shall be the amount of cash reimbursement or
set-off that, when received by the indemnified party incurring such loss, shall
place such indemnified party in the same financial position it or they would
have been in if such Loss had not occurred.
6.2 NOTICE OF CLAIM. The party or parties claiming
indemnification under Section 6.1 above (the "Indemnified Parties") shall give
prompt written notice to the party or parties from whom indemnification is
sought (the "Indemnifying Parties") of any claim (actual or threatened) or other
event which in the judgment of the Indemnified Parties might result or has
resulted in a Loss by the Indemnified Parties hereunder, and the Indemnifying
Parties shall have the right to assume the defense of such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Parties, who shall conduct the defense of such claim (actual, threatened or
asserted) or litigation, shall be reasonably satisfactory to the Indemnified
Parties and the Indemnified Parties may participate in such defense at their
expense, and provided, further, that the omission by the Indemnified Parties to
give notice as provided herein shall not relieve the Indemnifying Parties of
their obligations hereunder except to the extent that the omission results in a
failure of actual notice to the Indemnifying Parties and the Indemnifying
Parties are damaged solely as a result of the failure to give notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to the entry of any
judgment or decree or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
Indemnified Parties of a release from all liability in respect to such claim or
litigation, and no Indemnifying Party shall have liability with respect to any
payment made by an Indemnified Party in connection with the settlement,
satisfaction or compromise of any claim unless the Indemnifying Parties shall
have approved thereof in advance in writing. If the Indemnified Parties shall
not have received notice that the Indemnifying Parties shall assume the defense
of such claim within twenty (20) days after the notice is sent to the
Indemnifying Parties of the existence of such claim, the Indemnified Parties
shall be free to proceed with the defense of such claim. Each such notice shall
be accompanied (or followed as promptly as is reasonably practicable after the
amount of such Loss becomes determinable) by a certificate signed by the
Indemnified Party (the holders of a majority of the shares of TTI or their
designated representative or the President of Palomar or Sub, as the case may
be) and setting forth in reasonable detail the calculation of the amount of such
Loss in accordance with the provisions hereof, and accompanied by copies of all
relevant documents and records. The omission to give such notice or provide such
certificate by the Indemnified Parties shall not relieve Indemnifying Parties of
their obligation under this Section except to the extent such omission results
in a failure of actual notice to the Indemnifying Parties and Indemnifying
Parties are damaged solely by such failure to give notice. No Loss shall be
considered to have occurred with respect to any payment made by any Indemnified
Parties in settlement, satisfaction or compromise of any claim unless the
Indemnifying Parties shall have approved thereof in advance and in writing.
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6.3 SET-OFF OR REIMBURSEMENT. Purchasing Parties shall have
the right to set-off against the delivery of any shares of Common Stock (valued
at $6.25 per share), required to be delivered under this Agreement, the amount
of all Losses incurred by Purchasing Parties (or, if such amounts have
theretofore been paid, then to receive prompt return of a number of shares of
Common Stock equal to the amount of the Loss divided by $6.25). Purchasing
Parties shall deliver to Selling Parties a written notice explaining the nature
and amount of each such set-off or required reimbursement as promptly as is
reasonably practicable after Purchasing Parties shall have determined to make
such set-off or to require such reimbursement. Purchasing Parties may make such
set-offs or require such reimbursements in any order they choose.
6.4 LIMITATION ON INDEMNITY. In seeking indemnification for
Losses under this Section 6, the liability of the Stockholder shall be limited
to, and the Purchasing Parties shall exercise their remedies at any time after
the Effective Time solely with respect to the Palomar Common Stock (or an amount
equal to the proceeds therefrom in the event the Stockholder shall have sold his
shares of Palomar Common Stock) received by the Stockholder pursuant to this
Agreement up to that number of shares that would have a fair market value of
(or, if the Stockholder shall have sold his shares of Palomar Common Stock, an
amount equal to) $1,500,000. The indemnification by the Stockholder shall not
apply (i) unless the Losses arose from an inaccuracy in or breach of any of the
representations or warranties set forth in this Agreement, or any certificate or
Schedule or other writing furnished to Palomar or Sub pursuant hereto, of which
the Stockholder was aware at the date of this Agreement, at the date of the
making of the representation or warranty if subsequent to this Agreement, or as
of the Closing, and (ii) unless and until the aggregate Losses for which one or
more Purchasing Parties is entitled under this Section 6 exceeds $100,000, in
which event the indemnification shall cover all losses in excess of $100,000.
The indemnification set forth in this Section 6 shall expire and be of no
further force and effect upon the termination of the representations,
warranties, indemnities and covenants as set forth in Section 11.1.
7. CLOSING MATTERS.
7.1 THE CLOSING. Subject to termination of this Agreement as
provided in Section 10 below, the closing of the transactions provided for
herein (the "Closing") will take place at the offices of Foley, Hoag & Eliot at
10:00 a.m., Boston, Massachusetts Time on or before March 23, 1996 or, at
Palomar's option, at any time within thirty (30) days thereafter, or if all
conditions to closing have not been satisfied or waived at such other place,
time and date as Palomar and TTI may mutually select (the "Closing Date"). Prior
to or concurrently with the Closing, the Articles of Merger and Plan of Merger
will be filed in the office of the Secretary of State of Arizona.
7.2 EXCHANGE OF CERTIFICATES.
(a) As of the Effective Time: (i) shares of TTI Common Stock that are
outstanding immediately prior thereto shall, by virtue of the Merger and without
further action, cease to exist and shall be converted into the right to receive
from Palomar the number of shares
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of Palomar Common Stock determined as set forth in Section 1.1; and (ii) each
share of Common Stock of Sub will be converted into a share of Common Stock of
TTI.
(b) At the Closing, the TTI shareholders shall surrender the
certificate(s) for their shares of TTI Common Stock (the "TTI Certificates"),
duly endorsed as requested by Palomar, to Palomar for cancellation. Promptly
after receipt of such TTI Certificates, Palomar shall issue and deliver to the
TTI shareholders certificates for the number of shares of Palomar Common Stock
determined as set forth in Section 1.1.
(c) All Palomar Common Stock delivered upon the surrender of TTI
Certificates in accordance with the terms hereof (and any cash paid for
fractional shares) shall be deemed to have been delivered in full satisfaction
of all rights pertaining to such TTI Common Stock. After the Effective Time,
there will be no further registration of transfers on the stock transfer books
of TTI or its transfer agent of the TTI Common Stock owned by the TTI
shareholders immediately before the Effective Time.
8. CONDITIONS TO OBLIGATIONS OF TTI.
TTI's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by TTI, but only in a writing signed by TTI):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Palomar and Sub set forth in Section 3 shall
be true and accurate in every material respect on and as of the Closing with the
same force and effect as if they had been made at the Closing.
8.2 COVENANTS. Palomar and Sub shall have performed and
complied in all material respects with all of their respective covenants
contained in Section 5 on or before the Closing.
8.3 ABSENCE OF ADVERSE BUSINESS CHANGE. There shall not have
been any material adverse change in the business or financial condition of
Palomar or Sub.
8.4 PALOMAR COMPLIANCE CERTIFICATE. TTI shall have received a
certificate signed by the President or Chief Executive Officer of Palomar
certifying that the conditions set forth in Section 5 have been fulfilled.
8.5 COMPLIANCE WITH LAW. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
8.6 GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the
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parties and the actions herein proposed to be taken, including but not limited
to requirements under applicable federal and state securities laws.
8.7 REGISTRATION. The Initial Registration Statement shall be
declared effective on or before the Closing Date. When the Initial Registration
Statement becomes effective, it shall comply in all material respects with the
provisions of the Securities Act and the published rules and regulations
thereunder.
8.8 DOCUMENTS. TTI shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably deemed
necessary by their legal counsel to consummate the transactions contemplated
hereby.
8.9 SHAREHOLDER AND BOARD APPROVAL. The principal terms of
this Agreement, the Plan of Merger and the Merger shall have been approved and
adopted by the holders of not less than 95% of the shares of TTI's Common Stock
in accordance with applicable law and TTI's Articles of Incorporation and
Bylaws.
8.10 NO LITIGATION. No litigation or proceeding shall be
threatened or pending which could be reasonably expected to have a material
adverse effect on the present or future operations of financial condition of
Palomar.
8.11 PLAN OF MERGER. Sub shall have executed and delivered the
Plan of Merger.
8.12 OPINION OF COUNSEL TO PALOMAR. TTI shall have received
from Foley, Hoag & Eliot, counsel to Palomar, an opinion regarding the matters
set forth in Sections 3.1, 3.2 and 3.7 hereof, in form and substance reasonably
satisfactory to it.
8.13 CONSULTING AND EMPLOYMENT AGREEMENTS. Palomar shall have
executed and delivered consulting and employment agreements for each of the
Stockholder, Steven Osman and Jack Barlow, as the case may be.
9. CONDITIONS TO OBLIGATIONS OF PALOMAR.
The obligations of Palomar and Sub hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Palomar and Sub, but only
in a writing signed by Palomar and Sub):
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of TTI set forth in Section 2 shall be true and
accurate in every material aspect on and as of the Closing with the same force
and effect as if they had been made at the Closing.
9.2 COVENANTS. TTI shall have performed and complied in all
material respects with all of its covenants contained in Section 4 on or before
the Closing.
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9.3 ABSENCE OF ADVERSE BUSINESS CHANGE. There shall not have
been any material adverse change in the employees, business or financial
condition of TTI.
9.4 TTI COMPLIANCE CERTIFICATE. Palomar shall have received a
certificate signed by the President of TTI certifying that the conditions set
forth in Section 4 have been fulfilled.
9.5 COMPLIANCE WITH LAW. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
9.6 GOVERNMENT CONSENTS. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other action, as may be required to consummate the Merger, by
any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to requirements under
applicable federal and state securities laws.
9.7 REGISTRATION. The Initial Registration Statement shall be
declared effective on or before the Closing Date. When the Initial Registration
Statement becomes effective, it shall comply in all material respects with the
provisions of the Securities Act and the published rules and regulations
thereunder.
9.8 DOCUMENTS. Palomar shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by Palomar's legal counsel to provide for the continuation in
full force and effect of any and all material contracts and leases of TTI and to
consummate the transactions contemplated hereby.
9.9 NO LITIGATION. No litigation or proceeding shall be
threatened or pending which could be reasonably expected to have a material
adverse effect on the present or future operations or financial condition of
TTI.
9.10 REQUISITE APPROVALS. The principal terms of this
Agreement, the Plan of Merger and the Merger shall have been approved and
adopted by the Board of Directors of Palomar, by Palomar as sole shareholder of
Sub and by the holders of not less than 95% of the shares of TTI's Common Stock
in accordance with applicable law and TTI's Articles of Incorporation and
Bylaws.
9.11 PLAN OF MERGER. TTI shall have executed and delivered the
Plan of Merger.
9.12 OPINION OF COUNSEL TO TTI. Palomar shall have received
from Wilson Ryan & Campilongo, an opinion regarding the matters set forth in
Sections 2.1, 2.2, 2.3, 2.5, 2.6 and 2.13 hereof, in form and substance
satisfactory to it.
9.13 STOCK SUBSCRIPTION AGREEMENTS. Each stockholder of TTI
shall have signed and delivered to Palomar a Stock Subscription Agreement, which
agreement will include without
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limitation usual and customary representations concerning the stockholder's
status as an "accredited investor" and the stockholder's investment intent, in
form and substance satisfactory to Palomar.
9.14 CONSULTING AND EMPLOYMENT AGREEMENTS. Each of the
Stockholder, Steven Osman and Jack Barlow shall have executed and delivered to
Palomar consulting or employment agreements, as the case may be.
9.15 POOLING. The Merger shall be accounted for as a pooling
of interests under applicable Commission and AICPA standards and TTI shall have
delivered to Palomar a certificate or other written assurance from TTI's
certified public accountant in form and content reasonably satisfactory to
Palomar's accountant that TTI is a poolable entity.
9.16 DILIGENCE. Palomar shall have completed due diligence
review of the legal and business affairs of TTI, with results reasonably
satisfactory to Palomar.
9.17 PALOMAR TRADING PRICE. The average closing "ask" price
for Palomar Common Stock for the ten (10) trading days immediately prior to the
Closing, as quoted on the NASDAQ, shall not be less than $5.00.
9.18 CONVERSION OR EXERCISE OF DERIVATIVE SECURITIES. Each of
the Derivative Securities of TTI shall have been exercised for or converted into
shares of TTI Common Stock.
9.19 CERTIFICATE FROM TTI'S LICENSOR. TTI shall deliver to
Palomar a certificate signed by the President of TTI's licensor, Pulse Systems,
Inc. ("Licensor"), certifying that (i) Licensor has diligently prosecuted and
maintained the patents and patent applications relating to the technology
licensed to TTI under the terms of that certain License Agreement between
Licensor and TTI dated March 2, 1995 (the "License Agreement") and will continue
to do so, and (ii) Licensor continues to have the right to grant the license
granted to TTI under the terms of the License Agreement.
10. TERMINATION OF AGREEMENT.
10.1 TERMINATION.
(a) This Agreement may be terminated at any time prior to the
Closing by the mutual written consent of each of the parties hereto.
(b) Either party may terminate this Agreement if the Merger is
not consummated by May 15, 1996, provided, however, that such termination shall
not release any party hereto from any liability they might have on account of
the breach of any of their obligations under this Agreement (including, without
limitation, their obligations to use all reasonable effort to cause the
transactions contemplated by this Agreement to be consummated).
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(c) If there is a material adverse change in the business, or
financial condition, of Palomar or TTI, the other party may, at its option,
terminate this Agreement.
10.2 NOTICE. Any termination of this Agreement under this
Section 10 will be effective upon the delivery of written notice by the
terminating party to the other party hereto.
10.3 CERTAIN CONTINUING OBLIGATIONS. Following any termination
of this Agreement pursuant to this Section 10, the parties hereto will continue
to perform their respective obligations under Section 12.17 but will not be
required to continue to perform their other covenants under this Agreement.
11. SURVIVAL OF REPRESENTATIONS; POST CLOSING COVENANTS.
11.1 SURVIVAL OF REPRESENTATIONS. Unless otherwise specified
herein, the respective representations, warranties and covenants of TTI, Palomar
and Sub contained in this Agreement shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of the parties to
this Agreement, until the date that is the earlier of: (i) the termination of
this Agreement in accordance with its terms; or (ii) eighteen months after the
Closing Date, upon which date (the "Release Date") such representations,
warranties, covenants and indemnities will expire (except for covenants that by
their terms survive for a longer period).
11.2 LEASE AND PATIENT FINANCING. Palomar and TTI agree and
covenant that subsequent to the Closing, TTI may honor the commitment made by
TTI to its joint venture partner, National Technology Leasing, Inc. ("NTL")
regarding the establishment of a lease-to-own program for equipment and patient
financing for various medical procedures. Palomar will allow NTL to serve as the
exclusive provider of the aforementioned services for TTI, but both parties
agree to discuss the possibility of either a merger or joint venture between the
existing Palomar product financing entity and NTL. If there is an agreement to
provide a modification to the ownership and marketing structure of the financing
entities, such will be the subject of a separate agreement.
11.3 ADDITIONAL REGISTRATION STATEMENTS. Palomar shall file
registration statements with respect to the resale by the shareholders of TTI of
a number of shares of Palomar Common Stock equal to $8,500,000 divided by the
Conversion Price (the "Remaining Shares") and use its best efforts, subject to
receipt of necessary information from the shareholders of TTI, to cause such
registration statements to become effective on the following schedule, a
registration statement covering resale of 25% of the Remaining Shares to be
effective nine months after the Closing and three additional registration
statements each covering the resale of 25% of the Remaining Shares to become
effective one at the end of each ninety (90) day period following the nine month
registration statement.
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12. MISCELLANEOUS.
12.1 GOVERNING LAW. The internal laws of the State of Delaware
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of terms, and the interpretation and enforcement of
the rights and duties of the parties hereto.
12.2 ASSIGNMENT. Neither party hereto may assign any of its
rights or obligations hereunder without the prior written consent of the other
party hereto. This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
12.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
12.4 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument.
12.5 OTHER REMEDIES. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
12.6 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
12.7 NO WAIVER. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
12.8 EXPENSES. Each party will bear its respective expenses
and fees of its own accountants, attorneys, investment bankers, brokers, finders
and other professionals incurred with respect to this Agreement and the
transactions contemplated hereby. If the Merger is consummated, TTI will pay (or
reserve for payment) at or immediately before the Closing all accounting and
attorneys' fees and expenses incurred by TTI in connection with the Merger.
12.9 ATTORNEYS' FEES. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party shall be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including, without
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limitation, costs, expenses and fees on any appeal). The prevailing party will
be entitled to recover its costs of suit, regardless of whether such suit
proceeds to final judgment.
12.10 NOTICES. Any notice or other communication required or
permitted to be given under this Agreement shall be in writing, and shall be
delivered personally or sent by certified or registered mail, return receipt
requested, or by a nationally recognized express courier service, postage or
other fees prepaid, and will be deemed given upon actual delivery or, if mailed
by registered or certified mail, three business days after deposit in the mails,
or, if sent by courier service, one business day after delivery to the courier
service, addressed as follows:
(a) If to Palomar or Sub:
PALOMAR MEDICAL TECHNOLOGIES, INC.
66 Cherry Hill Drive
Beverly, MA 01915
Attention: Steven Georgiev
with a copy to:
FOLEY, HOAG & ELIOT
One Post Office Square
Boston, MA 02109
Attention: David Broadwin, Esq.
(b) If to TTI:
TISSUE TECHNOLOGIES, INC.
4601 McLeod Road N.E.
Alburquerque, NM 87109
Attention: Mario Barton
with a copy to:
WILSON, RYAN & CAMPILONGO
115 Sansome Street, Suite 400
San Francisco, CA 94104
Attention: Christopher B. Tigno, Esq.
or to such other address as a party may have furnished to the other parties by
written notice given in accordance with this Section 12.10.
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12.11 CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties hereto and their attorneys, and the
language hereof will not be construed for or against either party. A reference
to a section or an exhibit will mean a section or exhibit to this Agreement,
unless otherwise explicitly set forth. The titles and headings herein are for
reference purposes only and will not in any manner limit the construction of
this Agreement which will be considered as a whole.
12.12 NO JOINT VENTURE. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
any of the parties hereto. No party is by virtue of this Agreement authorized as
an agent, employee or legal representative of any other party. No party shall
have the power to control the activities and operations of any other and their
status is, and at all times continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other. No party shall hold itself out as having any authority or
relationship in contravention of this Section.
12.13 FURTHER ASSURANCES. Each party agrees to cooperate fully
with each other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions described
herein and contemplated hereby and to carry into effect the intents and purposes
of this Agreement.
12.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions
of this Agreement are intended, nor shall be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, stockholder, partner or employee of any party
hereto or any other person or entity unless specifically provided otherwise
herein, and, except as so provided, all provisions hereof will be personal
solely between the parties to this Agreement.
12.15 PUBLIC ANNOUNCEMENT. TTI will not issue any press
release or make any other public disclosure regarding the matters set forth
herein without the prior express written approval of Palomar, which approval
shall not be unreasonably withheld. Palomar may issue such press releases, and
make such other disclosures regarding the Merger, as it determines are required
under applicable securities laws or NASD rules after reasonable consultation,
where possible, with TTI. Palomar and TTI will take all reasonable precautions
to prevent any trading in the securities of Palomar by officers, directors,
employees and agents of Palomar or TTI, as the case may be: (a) having knowledge
of any material information regarding Palomar or TTI provided hereunder until
the information in question has been publicly disclosed; or (b) to the extent
that such trading would adversely affect the treatment of the Merger as a
"pooling of interests" for accounting purposes.
12.16 INTEGRATION. This Agreement, together with all Schedules
and Exhibits, constitutes the entire agreement among the parties relating to the
subject matter hereof and supersedes all prior agreements or understandings of
the parties relating thereto, including without limitation a Memorandum of
Understanding dated February 9, 1996.
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12.17 CONFIDENTIALITY. The parties hereto agree that all
information, whether written or oral, concerning the other party, its customers,
personnel, products, financial performance or business, disclosed to the other
party or its representatives in the course of meetings, conversations,
negotiations or due diligence investigations in connection with the transactions
contemplated by this Agreement that is marked or identified as "confidential" or
which might permit the disclosing party to obtain a competitive advantage over
those who do not have access thereto ("Confidential Information"), and the
specific financial terms and conditions of this Agreement, shall be held in
confidence by the receiving party and not used by the receiving party or its
representatives, except as contemplated by this Agreement. Each party shall
exercise the same standard of care to protect any Confidential Information of
the other party disclosed under this Section 12.17 as it uses to protect its own
confidential information. Confidential Information does not include information
which (a) is or becomes a part of the public domain through no act or omission
of the receiving party, (b) was in the receiving party's lawful possession prior
to the disclosure and had not been obtained by the receiving party either
directly or indirectly from the disclosing party or unlawfully from any third
party, (c) is lawfully disclosed to the receiving party by a third party without
restriction on disclosure; or (d) is independently developed by the receiving
party.
12.18 OBSERVER RIGHTS. For so long as the Stockholder is
obligated to indemnify Palomar in accordance with Section 6 of this Agreement,
the Stockholder shall be permitted to attend each meeting of the Board of
Directors of Palomar and to participate in all discussions during such meeting.
Palomar shall send to the Stockholder notice of the time and place of each such
meeting in the same manner and at the same time as it shall send such notice to
its directors. In the event that the Stockholder can not attend any meeting of
the Board of Directors that he is permitted to attend pursuant to this Section
12.18, the Stockholder may designate a person to attend in his place, provided
that the attendance of such person is approved in advance by the Chairman of the
Board of Palomar, in his sole discretion.
12.19 ARBITRATION. In the event the parties hereto are unable
to resolve any dispute with respect to claims arising hereunder within 30 days
of written notice of such dispute by one party to the others, such dispute shall
be settled by compulsory and binding arbitration by a panel of three arbitrators
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction. The parties agree that such
arbitration shall be held in Boston, Massachusetts.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PALOMAR MEDICAL
TECHNOLOGIES, INC.
By: /s/ Steve N. Georgiev
-------------------------------
Name: Steve N. Georgiev
Title: Chairman
TTI ACQUISITION CORP.
By: /s/ Steve N. Georgiev
-------------------------------
Name: Steve N. Georgiev
Title: President
TISSUE TECHNOLOGIES, INC.
By: /s/ Mario Barton
-------------------------------
Name: Mario Barton
Title: President
/s/ Mario Barton
-------------------------------
Mario Barton
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AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this
"Amendment") made this 29th day of April, 1996, by and among PALOMAR MEDICAL
TECHNOLOGIES, INC., a Delaware corporation ("Palomar"), TTI ACQUISITION CORP.,
an Arizona corporation and a wholly-owned subsidiary of Palomar ("Sub"), TISSUE
TECHNOLOGIES, INC., an Arizona corporation ("TTI"), and Mario Barton, an
individual (the "Stockholder"),
WITNESSETH THAT:
WHEREAS the parties hereto wish to amend the Agreement and Plan of
Reorganization by and among Palomar, Sub, TTI and Stockholder dated as of March
9, 1996 (the "Merger Agreement") to require Palomar to file with the Securities
and Exchange Commission a registration statement providing for the resale by the
shareholders of TTI of all of the shares of the common stock, $.01 par value per
share, of Palomar ("Palomar Common Stock") issued to the shareholders of TTI in
connection with the Merger prior to the Closing (the "Registration Statement");
and
WHEREAS the parties wish to amend the Merger Agreement to permit the
Closing to take place prior to the Registration Statement being declared
effective;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Clause (b) of Section 3.2(b) of the Merger Agreement shall be amended to be
and read in its entirety as follows:
"such filings and permits as may be required to comply with federal and
state securities laws and Palomar's registration requirements hereunder."
2. Section 5.7 of the Merger Agreement shall be amended to be and read in its
entirety as follows:
"5.7 REGISTRATION AND DISCLOSURE STATEMENTS. On or before the Closing
Date, Palomar shall file with the Commission a registration statement on Form
S-3 (or such other form as shall be available to register the resale of the
Palomar Common Stock being issued in the Merger) providing for the resale by the
shareholders of TTI of all of the shares of Palomar Common Stock delivered to
them at the Closing (the "Registration Statement"). Palomar shall use its best
efforts, subject to receipt of necessary information from the shareholders of
TTI, to cause the Registration Statement to become effective as soon as possible
following the Closing."
3. The first sentence of each of Sections 8.7 and 9.7 of the Merger Agreement
shall be amended to be and read in its entirety as follows:
"The Registration Statement shall have been filed on or before the
Closing Date."
4. Section 11.3 of the Merger Agreement shall be deleted in its entirety.
5. All capitalized terms used but not defined herein shall have the meaning set
forth in the Merger Agreement. All of the other terms and conditions of the
Merger Agreement shall remain in full force and effect as of the date hereof.
6. This Amendment shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware, without regard to its principles of
conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PALOMAR MEDICAL TISSUE TECHNOLOGIES, INC.
TECHNOLOGIES, INC.
By: /s/ Steven Georgiev By: /s/ Mario Barton
-------------------------------- ----------------------------
Name: Steven Georgiev Name: Mario Barton
Title: Chairman Title: President
TTI ACQUISITION CORP.
By: /s/ Steven Georgiev /s/ Mario Barton
-------------------------------- ----------------------------
Name: Steven Georgiev Mario Barton
Title: President
April 23, 1996
Mario Barton
Tissue Technologies, Inc.
4601 McLeod Road N.E.
Albuquerque, NM 87109
Re: Palomar/Tissue Merger -- Waiver of Indemnification
Dear Mario:
In order to insure that the merger of Palomar Medical Technologies,
Inc.'s ("Palomar's") wholly-owned subsidiary TTI Acquisition Corp. ("Sub") with
and into Tissue Technologies, Inc. ("TTI") pursuant to the Agreement and Plan of
Reorganization among Palomar, TTI, Sub and you (the "Stockholder"), dated March
9, 1996 (the "Merger Agreement"), is treated for accounting purposes as a
pooling of interests, Palomar hereby waives its right to receive indemnification
from TTI or Stockholder in accordance with Section 6 of the Merger Agreement to
the extent that Palomar's auditors shall determine that any such indemnification
shall be inconsistent with the treatment of the transaction as a pooling of
interests.
Sincerely,
/s/ Steve Georgiev
Steve Georgiev,
Chief Executive Officer
PLAN OF MERGER
PLAN OF MERGER dated this 3rd day of May, 1996 (the "Plan of Merger")
by and among PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware corporation
("Palomar"), TTI ACQUISITION CORP., an Arizona corporation and a wholly-owned
subsidiary of Palomar ("Sub"), and TISSUE TECHNOLOGIES, INC., an Arizona
corporation ("TTI");
W I T N E S S E T H T H A T:
WHEREAS, the parties hereto desire to enter into an agreement providing
for the merger of Sub into TTI; and
WHEREAS, the authorized capital stock of Sub consists of 1,000 shares
of Common Stock, $.01 par value per share, all of which are issued, outstanding
and owned beneficially and of record by Palomar.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties do hereby covenant and
agree as follows:
A. The Merger. At the Effective Time of the Merger (as such term is
defined below), in accordance with the provisions of applicable law and the
terms of this Plan of Merger, Sub will be merged with and into TTI with TTI
surviving the Merger as the surviving corporation.
B. Effective Time of the Merger. The Merger shall not become effective
until, subject to the terms and conditions of this Plan of Merger, 5:00 o'clock
p.m. Rocky Mountain Time on the day on which this Plan of Merger is filed with
the Arizona Corporation Commission of the State of Arizona and when the
following actions shall have in all respects been completed:
1. This Plan of Merger shall have been approved and adopted by
the Board of Directors of Palomar, by Palomar as sole shareholder of Sub and by
the holders of not less than 95% of the shares of TTI's Common Stock in
accordance with applicable law and TTI's Articles of Incorporation and By-laws;
and
2. Articles of Merger (which shall be satisfactory in form to
counsel for each of the parties) or certified copies of this Plan of Merger
shall have been executed and verified and filed in the office of the Arizona
Corporation Commission of the State of Arizona.
The date and time when the Merger shall become effective as set forth in this
Paragraph B is referred to as "Effective Time of the Merger".
C. Certificates of Incorporation, By-laws, Directors and Officers.
1. The Articles of Incorporation of TTI as in effect
immediately prior to the Effective Time of the Merger shall be the Articles of
Incorporation of TTI from and after the Effective Time of the Merger until
further amended in accordance with the laws of the State of Arizona.
2. The By-laws of TTI as in effect immediately prior to the
Effective Time of the Merger shall be the By-laws of TTI from and after the
Effective Time of the Merger until further amended in accordance with the laws
of the State of Arizona, the Articles of Incorporation and the By-laws of TTI.
3. The directors and officers of TTI from and after the
Effective Time of the Merger shall be as set forth below, and each shall hold
his respective office or offices from and after the Effective Time of the Merger
until his successor shall have been elected and qualified or as otherwise
provided in the By-laws of TTI.
Directors
Mario Barton
Steven Georgiev
Joseph E. Levangie
Steve Osman
Michael Smotrich
Officers
Steve Osman President
Joseph P. Caruso Treasurer
David A. Broadwin Secretary
Joseph P. Caruso Assistant Secretary
D. Manner and Basis of Converting Securities.
1. At the Effective Time of the Merger of Sub with and into
TTI:
a. each share of the common stock, $.01 par value per
share, of Sub ("Sub Common Stock"), issued and outstanding immediately prior to
the Effective Time of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and become one fully
paid and non-assessable share of common stock, no par value per share, of TTI
("TTI Common Stock");
b. each share of TTI Common Stock issued and
outstanding immediately prior to the Effective Time of the Merger, by virtue of
the Merger and without
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any action on the part of the holder thereof, shall be converted into the right
to receive 1.232577 shares of the common stock, $.01 par value per share, of
Palomar ("Palomar Common Stock"); and
c. each share of TTI Common Stock held in the
treasury of TTI prior to the Effective Time of the Merger shall be cancelled.
2. From and after the Effective Time of the Merger, the
holders of certificates representing shares of Sub Common Stock and TTI Common
Stock outstanding prior to the Effective Time of the Merger shall cease to have
any rights with respect to such certificates.
E. Surrender and Exchange of Certificates Representing TTI Common Stock
of the Company. On or prior to the day of the Effective Time of the Merger, the
shareholders of TTI shall surrender the certificate(s) for their shares of TTI
Common Stock (the "TTI Certificates"), duly endorsed as requested by Palomar, to
Palomar for cancellation. As soon as practicable after the Effective Time of the
Merger, Palomar shall issue to the persons or entities in whose names the TTI
Certificates shall have been registered the appropriate number of shares of
Palomar Common Stock.
F. Certain Effects of the Merger. The separate existence and the
corporate organization of Sub shall cease at the Effective Time of the Merger
except insofar as it may be continued by law, and thereupon Sub and TTI shall be
a single corporation, hereinafter referred to as the "Surviving Corporation". At
the Effective Time of the Merger, the Surviving Corporation shall have all the
rights, privileges, immunities and powers and shall be subject to all the duties
and liabilities of a corporation organized under chapter 1 of Title 10 of the
Arizona General Corporation Law; and the Surviving Corporation shall thereupon
and thereafter possess all the rights, privileges, immunities and franchises, of
a public as well as of a private nature, of each of Sub and TTI; 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 Sub and TTI, shall be
taken and deemed to be transferred to and vested in the Surviving Corporation
without further act or deed; and the title to any real estate, or any interest
therein, vested in Sub or TTI shall not revert or be in any way impaired by
reason of the Merger; and the Surviving Corporation shall thenceforth be
responsible and liable for all the liabilities and obligations of each of Sub
and TTI; and any claim existing or action or proceeding pending by or against
Sub or TTI may be prosecuted as if such Merger had not taken place, or such
Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of Sub or TTI shall be impaired by the
Merger.
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IN WITNESS WHEREOF, each of Palomar, Sub and TTI has caused this Plan
of Merger to be executed as of the date first written above.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Steve Georgiev
--------------------------
TTI ACQUISITION CORP.
By: /s/ Steve Georgiev
--------------------------
TISSUE TECHNOLOGIES, INC.
By: /s/ Mario Barton
--------------------------
EXHIBIT 2.5
LIST OF EXHIBITS AND SCHEDULES
Exhibit A: Plan of Merger (see Exhibit 2.4)
Schedule 2.0: TTI Schedule of Exceptions
Schedule 2.1: Foreign Qualifications
Schedule 2.3: TTI Capitalization
Schedule 2.7: TTI Financial Statements
Schedule 2.10: Absence of Certain Changes
Schedule 2.11: Agreements and Commitments
Schedule 2.12: Intellectual Property
Schedule 2.13: Compliance with Laws
Schedule 2.15(a): List of Employment Contracts Not Terminable at Will
Schedule 2.15(c): Employee Benefit Plans
Schedule 2.15(f): List of Employees/Consultants and Compensation
Schedule 2.19: List of Insurance Policies
Schedule 2.21: Hazardous Material Exceptions
Schedule 2.22: Government Contracts
Schedule 3.0: Palomar Schedule of Exceptions
Schedule 3.3: Palomar Capitalization as of 2/16/96
Schedule 3.5: Absence of Certain Changes
