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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 27, 1996
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General Scanning Inc.
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(Exact Name of Registrant as Specified in its Charter)
Massachusetts
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(State or Other Jurisdiction of Incorporation)
0-26646 04-2445884
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(Commission File Number) (I.R.S. Employer Identification No.)
500 Arsenal Street, Watertown, Massachusetts 02172
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(Address of Principal Executive Offices) (Zip Code)
(617) 924-1010
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets.
------------------------------------
On August 27, 1996 (the "Effective Date"), General Scanning
Inc. (the "Company") completed its acquisition of View
Engineering, Inc. ("VEI") pursuant to an Agreement and Plan of
Merger, dated as of June 7, 1996 (the "Merger Agreement"), among
the Company, GSI Acquisition Sub, Inc., a wholly-owned
subsidiary of the Company (the "Merger Subsidiary"), and VEI.
Pursuant to the Merger Agreement, the Merger Subsidiary was
merged with and into VEI (the "Merger") on the Effective Date,
whereupon VEI became a wholly-owned subsidiary of the Company.
At that time, each outstanding share of capital stock (the "VEI
Stock") of VEI (other than shares of VEI Stock for which demands
for appraisal under California General Corporation Law were duly
and timely delivered and shares of VEI Stock held in VEI's
treasury) was converted into the right to receive 0.2481 of a
share of Common Stock of the Company (the "Conversion Ratio").
Based upon the capitalization of the Company as of the
Effective Date, the 1,437,060 shares of Common Stock of the
Company issued to the holders of VEI Stock represent
approximately 12% of the outstanding shares of Common Stock of
the Company. On August 26, 1996, the last reported sale price
per share of the Common Stock of the Company on the Nasdaq
National Market was $15.50.
The Company, VEI and representatives of VEI stockholders
have entered into an Escrow Agreement providing, among other
things, that an aggregate of 214,047 of the Common Stock of the
Company received by VEI stockholders in the Merger will be held
in escrow to reimburse the Company in connection with breaches
of representations, warranties or covenants made by VEI in the
Merger Agreement. On the Effective Date, the parties agreed to
certain adjustments which are reflected in the shares issued as
stated above. As a result of the adjustments, immediately
following the Closing, an aggregate of 67,098 shares of Common
Stock of the Company remained in escrow.
Prior to the Merger, VEI was in the business of designing,
manufacturing and marketing laser systems used for inspection in
semiconductor and electronics manufacturing and for general
purpose metrology. The Company currently intends to continue
VEI's business substantially in the manner conducted by VEI
immediately prior to the Merger.
The issuance of shares of Common Stock of the Company in
connection with the Merger was approved by the Board of
Directors of the Company, and the Merger Agreement and the
Merger were approved by the Board of Directors and the
stockholders of VEI. The terms of the Merger Agreement and the
Merger were determined on the basis of arm's-length
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negotiations. Prior to the execution of the Merger Agreement,
neither the Company nor any of its affiliates, nor any director
or officer of the Company or any associate of any such director
or officer, had any material relationship with VEI.
The foregoing description of the Merger Agreement does not
purport to be complete and is qualified in its entirety by
reference to the full text of the Merger Agreement which is
filed as Exhibit 2 to this Current Report on Form 8-K and
incorporated herein by reference.
Item 7. Financial Statement and Exhibits.
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(a) Financial Statements of Businesses Acquired:
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Not filed herewith; to be filed by amendment. Pursuant to
Item 7(a)(4) of Form 8-K, the Registrant hereby indicates that
the filing of such financial information is impractical and
undertakes to file such information as soon as it is available
on a Form 8-K/A Amendment to this report and in any event by
November 11, 1996.
(b) Pro Forma Financial Information:
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Not filed herewith; to be filed by amendment. Pursuant to
Item 7(a)(4) of Form 8-K, the Registrant hereby indicates that
the filing of such financial information is impractical and
undertakes to file such information as soon as it is available
on a Form 8-K/A Amendment to this report and in any event by
November 11, 1996.
(c) Exhibits:
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See Exhibit Index attached hereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: September 6, 1996 GENERAL SCANNING INC.
(Registrant)
/s/ Charles D. Winston
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By: Charles D. Winston
President, Chief Executive
Officer and Director
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<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
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2 Agreement and Plan of Merger, dated
as of June 7, 1996, among the
Company, the Merger Subsidiary and VEI (For a list
of omitted exhibits and schedules, see the table of
contents to the Merger Agreement. The Registrant
will furnish a copy of any omitted exhibit or
schedule to the Commission upon request.
99.1 Press Release issued August 28, 1996
<PAGE>
Exhibit 2
AGREEMENT AND PLAN OF MERGER
AMONG
GENERAL SCANNING INC., GSI ACQUISITION SUB, INC.
AND
VIEW ENGINEERING, INC.
June 7, 1996
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TABLE OF CONTENTS
Page
ARTICLE I - THE MERGER
1.1 The Merger..................................... 1
1.2 The Closing.................................... 1
1.3 Actions at the Closing......................... 2
1.4 Additional Action.............................. 2
1.5 Conversion of Shares........................... 2
1.6 Dissenting Shares.............................. 5
1.7 Exchange of Shares............................. 5
1.8 Dividends...................................... 7
1.9 Fractional Shares.............................. 7
1.10 Escrow......................................... 8
1.11 Options and Warrants........................... 8
1.12 Articles of Incorporation...................... 11
1.13 By-laws........................................ 11
1.14 Directors and Officers......................... 11
1.15 No Further Rights.............................. 11
1.16 Closing of Transfer Books...................... 11
1.17 Tax-Free Reorganization; Pooling of Interests;
Exempt Transactions.......................... 11
1.18 Stockholders Agreements........................ 12
1.19 Post Closing Adjustments....................... 12
1.20 Inventory...................................... 14
1.21 Indemnification Representatives................ 15
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
2.1 Organization, Qualification and
Corporate Power.............................. 17
2.2 Capitalization................................. 18
2.3 Authorization of Transaction................... 19
2.4 Noncontravention............................... 19
2.5 Subsidiaries................................... 20
2.6 Financial Statements........................... 20
2.7 Absence of Certain Changes..................... 21
2.8 Undisclosed Liabilities........................ 21
2.9 Tax Matters.................................... 21
2.10 Assets......................................... 22
2.11 Owned Real Property............................ 23
2.12 Intellectual Property.......................... 24
2.13 Real Property Leases........................... 26
2.14 Contracts...................................... 27
2.15 Powers of Attorney............................. 28
2.16 Insurance...................................... 28
2.17 Litigation..................................... 29
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2.18 Employees...................................... 29
2.19 Employee Benefits.............................. 30
2.20 Environmental Matters.......................... 32
2.21 Legal Compliance............................... 33
2.22 Permits........................................ 34
2.23 Certain Business Relationships With
Affiliates................................... 34
2.24 Brokers' Fees.................................. 34
2.25 Books and Records.............................. 34
2.26 Pooling........................................ 35
2.27 Company Action................................. 35
2.28 Inventory...................................... 35
2.29 Accounts Receivable............................ 35
2.30 Product Warranty............................... 35
2.31 Disclosure..................................... 36
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
THE BUYER AND THE TRANSITORY SUBSIDIARY
3.1 Organization................................... 36
3.2 Capitalization................................. 36
3.3 Authorization of Transaction................... 37
3.4 Noncontravention............................... 37
3.5 Reports and Financial Statements............... 38
3.6 Absence of Material Adverse Changes............ 38
3.7 Pooling........................................ 38
3.8 Brokers' Fees.................................. 39
3.9 Disclosure..................................... 39
ARTICLE IV - COVENANTS
4.1 Best Efforts................................... 39
4.2 Notices and Consents........................... 39
4.3 Exemption from Registration or Securities Act
Registration; Preparation of Notice of
Meeting and Proxy Statement or Information
Statement.................................... 40
4.4 Hart-Scott-Rodino Act.......................... 42
4.5 Operation of Business.......................... 42
4.6 Full Access.................................... 45
4.7 Notice of Breaches............................. 45
4.8 Exclusivity.................................... 45
4.9 Stockholders Agreements........................ 46
4.10 Agreements from Certain Affiliates of the
Company...................................... 46
4.11 Listing of Merger Shares....................... 46
4.12 Monthly Financial Statements................... 46
4.13 Indemnification Agreements..................... 46
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ARTICLE V - CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations......... 47
5.2 Conditions to Obligations of the Buyer
and the Transitory Subsidiary................ 48
5.3 Conditions to Obligations of the Company....... 50
ARTICLE VI - INDEMNIFICATION
6.1 Indemnification................................ 51
6.2 Method of Asserting Claims..................... 52
6.3 Survival....................................... 54
6.4 Limitations.................................... 54
ARTICLE VII - TERMINATION
7.1 Termination of Agreement....................... 55
7.1A Termination by Buyer........................... 56
7.2 Effect of Termination.......................... 56
ARTICLE VIII - DEFINITIONS
ARTICLE IX - MISCELLANEOUS
9.1 Press Releases and Announcements............... 58
9.2 No Third Party Beneficiaries................... 59
9.3 Entire Agreement............................... 59
9.4 Succession and Assignment...................... 59
9.5 Counterparts................................... 59
9.6 Headings....................................... 59
9.7 Notices........................................ 59
9.8 Governing Law.................................. 61
9.9 Amendments and Waivers......................... 61
9.10 Severability................................... 61
9.11 Expenses....................................... 61
9.12 Specific Performance........................... 62
9.13 Construction................................... 62
9.14 Incorporation of Exhibits and Schedules........ 62
Exhibit A - Escrow Agreement
Exhibit B - Articles of Incorporation of Surviving Corporation
Exhibit C - [Intentionally Omitted]
Exhibit D - Persons to Sign Stockholders Agreement
Exhibit E - Stockholders Agreement
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Exhibit F - Affiliates Agreement
Exhibit G - Form of Company Officers' Certificate
Exhibit H - Opinion of Counsel to the Company
Exhibit I - Employment and Non-Competition Agreement
Exhibit J - Form of Buyer and Transitory Subsidiary Officers'
Certificate
Exhibit K - Opinion of Counsel to the Buyer
Schedule 1.11 - Fully Diluted Basis Methodology
Schedule 1.19 - Backlog Methodology
Schedule 1.20 - Inventory Methodology
Disclosure Schedule
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<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of June 7, 1996 by and among General
Scanning Inc., a Massachusetts corporation (the "Buyer"), GSI
Acquisition Sub, Inc., a California corporation and a wholly-owned
subsidiary of the Buyer (the "Transitory Subsidiary"), and View
Engineering, Inc., a California corporation (the "Company"). The Buyer,
the Transitory Subsidiary and the Company are referred to collectively
herein as the "Parties."
This Agreement contemplates a tax-free merger of the
Transitory Subsidiary into the Company and is intended to be
accounted for as a pooling of interests pursuant to Opinion No. 16
of the Accounting Principles Board. In such merger, the
stockholders of the Company will receive capital stock of the
Buyer in exchange for their capital stock of the Company.
Now, therefore, in consideration of the representations,
warranties and covenants herein contained, the Parties agree as
follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and
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conditions of this Agreement, the Transitory Subsidiary shall
merge with and into the Company (with such merger referred to
herein as the "Merger") at the Effective Time (as defined below).
From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company
shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). The "Effective Time" shall be the time
at which the Company and the Transitory Subsidiary file the
certificate of merger prepared and executed in accordance with the
relevant provisions of the California Corporations Code (the
"Certificate of Merger") with the Secretary of State of the State
of California. The Merger shall have the effects set forth in
Section 1107 of the California Corporations Code.
1.2 The Closing. The closing of the transactions
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contemplated by this Agreement (the "Closing") shall take place at
the offices of Hale and Dorr, 60 State Street in Boston,
Massachusetts, or such other location as the Parties may agree,
commencing at 10:00 a.m. local time on July 31, 1996, or, if all
of the conditions to the obligations of the Parties to consummate
the transactions contemplated hereby have not been satisfied or
waived by such date, on such mutually agreeable later date as soon
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as practicable after the satisfaction or waiver of all conditions
to the obligations of the Parties to consummate the transactions
contemplated hereby (the "Closing Date").
1.3 Actions at the Closing. At the Closing, (a) the Company
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shall deliver to the Buyer and the Transitory Subsidiary the
various certificates, instruments and documents referred to in
Section 5.2, (b) the Buyer and the Transitory Subsidiary shall
deliver to the Company the various certificates, instruments and
documents referred to in Section 5.3, (c) the Company and the
Transitory Subsidiary shall file with the Secretary of State of
the State of California the Certificate of Merger, (d) the Buyer
shall deliver certificates for the Initial Shares (as defined
below) to American Stock Transfer and Trust Company as exchange
agent (the "Exchange Agent") in accordance with Section 1.7,
(e) each holder of an Option (as defined in Section 1.11(a)
below), other than holders of Unvested 1994 Options (as described
on Section 1.11(b)) that shall not have previously exercised all
Options in full shall deliver to the Buyer the written instrument
contemplated by Section 1.11(a) below surrendering such Options,
and (f) the Buyer, the Indemnification Representatives (as defined
therein) and the Escrow Agent (as defined therein) shall execute
and deliver the Escrow Agreement substantially in the form
attached hereto as Exhibit A (the "Escrow Agreement") and the
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Buyer shall deliver to the Escrow Agent a certificate for the
Escrow Shares (as defined in Section 1.5(c) below) being placed in
escrow on the Closing Date pursuant to Section 1.10.
1.4 Additional Action. The Surviving Corporation may, at
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any time after the Effective Time, take any action, including
executing and delivering any document, in the name and on behalf
of either the Company or the Transitory Subsidiary, in order to
consummate the transactions contemplated by this Agreement.
1.5 Conversion of Shares.
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(a) Preferred Stock and Class B Common Stock. Immediately
prior to the Effective Time, (i) each issued and outstanding share
of Convertible Preferred Stock of the Company ("Preferred Stock")
shall be converted into such number of shares of Class A Common
Stock of the Company ("Class A Common Stock") as provided in
Section 6 of the Company's Articles of Incorporation as in effect
on the date hereof and (ii) each issued and outstanding share of
Class B Common Stock of the Company ("Class B Common Stock") shall
be converted into one share of Class A Common Stock. The Class A
Common Stock, Preferred Stock and Class B Common Stock are
collectively referred to herein as "Company Shares."
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(b) Dividends on Preferred Stock. Pursuant to the Articles
of Incorporation of the Company, upon the conversion of the
Preferred Stock into Class A Common Stock, the holders thereof
shall be entitled to receive the full amount of accrued and unpaid
dividends thereon (the "Preferred Dividend"). The Articles of
Incorporation of the Company provide that the Preferred Dividend
may be paid in cash or in Class A Common Stock; however, for
purposes of this Agreement, the Preferred Dividend shall be paid
only in shares of Class A Common Stock, and the Company covenants
that it will pay the Preferred Dividend only in shares of Class A
Common Stock.
(c) Distribution of Merger Consideration. At the Effective
Time, by virtue of the Merger and without any action on the part
of any Party or the holder of any of the following securities: All
of the issued and outstanding shares of Class A Common Stock of
the Company and all of the outstanding Options (as such term is
defined in Section 1.11(a)), including any dividends or other
distributions due or accrued on such shares, shall be converted
into and represent the right to receive (subject to the provisions
of Section 1.10 and Section 1.11) an aggregate of 1,600,000 shares
of common stock, $.01 par value per share, of the Buyer ("Buyer
Common Stock") less the Expense Shares (as defined in
subparagraph (d) below) (the foregoing number of shares being
subject to appropriate adjustment in the event of any stock
dividend, stock split, contribution or other similar
recapitalization event affecting such shares, the "Merger
Consideration"). The Merger Consideration shall be distributed to
the stockholders of record of Company Shares issued and
outstanding as of the Effective Time (the "Company Stockholders")
as follows:
(i) The Company Stockholders collectively shall
receive (subject to the provisions of Section 1.10) such number of
shares of Buyer Common Stock as is equal to the Merger
Consideration less (a) the number of Exchanged Option Shares (as
such term is defined in Section 1.11(b)) and (b) the number of
shares of Buyer Common Stock issued to the holders of Swapped-Out
Option Shares pursuant to Section 1.11(a) (such remainder being
referred to as the "Class A Merger Consideration");
(ii) For purposes of determining the pro rata
allocation of the Class A Merger Consideration to each holder of
Class A Common Stock, the numerator shall be the number of shares
of Class A Common Stock held by such Company Stockholder and the
denominator shall be the aggregate number of shares of Class A
Common Stock issued and outstanding at the Effective Time,
including shares of Class A Common Stock issued in satisfaction of
the Preferred Dividend;
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(iii) The pro rata allocation of the Merger
Consideration to each holder of Swapped-Out Option Shares shall be
made in accordance with the terms set forth in Section 1.11(a);
and
(iv) The Company Stockholders shall be entitled to
receive, in accordance with Section 1.7, such number of shares of
Buyer Common Stock into which their shares of Class A Common Stock
were converted pursuant to this Section 1.5(c) as is equal to the
Class A Merger Consideration less the Class A Escrow Shares. For
the purposes hereof, the Class A Escrow Shares shall mean the
number of shares of Buyer Common Stock as is equal to $3,000,000
divided by the GSI Average Share Price (as defined in Section 1.9)
less the Option Escrow Shares (as defined in Section 1.11(a)).
The Class A Escrow Shares and the Option Escrow Shares are
collectively referred to herein as the "Escrow Shares." The
shares of Buyer Common Stock which the Company Stockholders shall
be entitled to receive at the Effective Time, together with the
shares of Buyer Common Stock issuable upon the exercise of Options
pursuant to Section 1.11(a) (less the Option Escrow Shares), are
hereinafter collectively referred to as the "Initial Shares." The
Escrow Shares shall be deposited in escrow pursuant to
Section 1.10 and shall be held and disposed of in accordance with
the terms of the Escrow Agreement. The Initial Shares and the
Escrow Shares shall together be referred to herein as the "Merger
Shares." Additional shares of Buyer Common Stock issued upon
exercise of Options after the Effective Time that are deposited
into escrow pursuant to the terms of the Escrow Agreement shall
constitute a portion of the Escrow Shares.
(d) Pre-Closing Adjustment. The 1,600,000 shares of Buyer
Common Stock shall be reduced by such number of shares of Buyer
Common Stock as is equal to the dollar amount, if any, by which
the Transaction Invoices exceed an aggregate of $450,000 divided
by the GSI Average Share Price (such number of shares of Buyer
Common Stock, the "Expense Shares").
(e) Treasury Shares. Each Company Share held in the
Company's treasury immediately prior to the Effective Time and
each Company Share owned beneficially by the Buyer or the
Transitory Subsidiary shall be cancelled and retired without
payment of any consideration therefor.
(f) Shares of Transitory Subsidiary. Each share of common
stock, $.01 par value per share, of the Transitory Subsidiary
issued and outstanding immediately prior to the Effective Time
shall be converted into and thereafter evidence one share of
common stock, $.01 par value per share, of the Surviving
Corporation.
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1.6 Dissenting Shares.
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(a) For purposes of this Agreement, "Dissenting Shares"
means Company Shares held as of the Effective Time by a Company
Stockholder who has not voted such Company Shares in favor of the
adoption of this Agreement and the Merger and with respect to
which appraisal shall have been duly demanded and perfected in
accordance with Section 1301 the California Corporations Code and
not effectively withdrawn or forfeited prior to the Effective
Time. Dissenting Shares shall not be converted into or represent
the right to receive Merger Shares, unless such Company
Stockholder shall have forfeited his right to appraisal under the
California Corporations Code or withdrawn, with the consent of the
Company, his demand for appraisal. If such Company Stockholder
has so forfeited or withdrawn his right to appraisal of Dissenting
Shares, then (i) as of the occurrence of such event, such holder's
Dissenting Shares shall cease to be Dissenting Shares and shall be
converted into and represent the right to receive the Merger
Shares issuable in respect of such Company Shares pursuant to
Section 1.5(c), and (ii) promptly following the occurrence of such
event, the Buyer shall deliver to the Exchange Agent a certificate
representing the Initial Shares to which such holder is entitled
pursuant to Section 1.5(c) and shall have delivered to the Escrow
Agent the portion of the Escrow Shares to which such holder is
entitled pursuant to Section 1.5(c).
(b) The Company shall give the Buyer (i) prompt notice of
any written demands for appraisal of any Company Shares,
withdrawals of such demands, and any other instruments that relate
to such demands received by the Company and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands
for appraisal under the California Corporations Code. The Company
shall not, except with the prior written consent of the Buyer,
make any payment with respect to any demands for appraisal of
Company Shares or offer to settle or settle any such demands.
1.7 Exchange of Shares
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(a) Prior to the Effective Time, the Buyer shall appoint the
Exchange Agent to effect the exchange for the Initial Shares of
certificates that, immediately prior to the Effective Time,
represented Company Shares converted into Merger Shares pursuant
to Section 1.5 (including any Company Shares referred to in the
last sentence of Section 1.6(a)) ("Certificates"). On the Closing
Date, the Buyer shall deliver to the Exchange Agent, in trust for
the benefit of holders of Certificates, a stock certificate
(issued in the name of the Exchange Agent or its nominee)
representing the Initial Shares, as described in Section 1.5(c).
As soon as practicable after the Effective Time, the Buyer shall
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cause the Exchange Agent to send a notice and a transmittal form
to each holder of a Certificate advising such holder of the
effectiveness of the Merger and the procedure for surrendering to
the Exchange Agent such Certificate in exchange for the Initial
Shares issuable pursuant to Section 1.5(c). Each holder of a
Certificate, upon proper surrender thereof to the Exchange Agent
in accordance with the instructions in such notice, shall be
entitled to receive in exchange therefor (subject to any taxes
required to be withheld) the Initial Shares issuable pursuant to
Section 1.5(c). Until properly surrendered, each such Certificate
shall be deemed for all purposes to evidence only the right to
receive the Initial Shares issuable pursuant to Section 1.5(c).
Holders of Certificates shall not be entitled to receive
certificates for the Initial Shares to which they would otherwise
be entitled until such Certificates are properly surrendered.
(b) If any Initial Shares are to be issued in the name of a
person other than the person in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a
condition to the issuance of such Initial Shares that (i) the
Certificate so surrendered shall be transferable, and shall be
properly assigned, endorsed or accompanied by appropriate stock
powers, (ii) such transfer shall otherwise be proper and (iii) the
person requesting such transfer shall pay to the Exchange Agent
any transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid.
Notwithstanding the foregoing, neither the Exchange Agent nor any
Party shall be liable to a holder of Company Shares for any
Initial Shares issuable to such holder pursuant to Section 1.5(c)
that are delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws. Notwithstanding the
provisions of this Section 1.7, Affiliates (as such term is
defined in Section 2.14) of the Company shall not have their
Certificates in a name other than the name in which the
Certificates surrendered in exchange therefor is registered.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or
destroyed, the Buyer shall issue in exchange for such lost, stolen
or destroyed Certificate the Initial Shares issuable in exchange
therefor pursuant to Section 1.5(c). The Board of Directors of
the Buyer may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to give the Buyer indemnity against any
claim that may be made against the Buyer with respect to the
Certificate alleged to have been lost, stolen or destroyed.
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(d) Promptly following the date which is six months after
the Closing Date, the Exchange Agent shall return to the Buyer all
Initial Shares in its possession, and the Exchange Agent's duties
shall terminate. Thereafter, each holder of a Certificate may
surrender such Certificate to the Buyer and, subject to applicable
abandoned property, escheat and similar laws, receive in exchange
therefor the Initial Shares issuable with respect thereto pursuant
to Section 1.5(c).
(e) Unless the S-4 Alternative (as defined in
Section 4.3(b)) is chosen, the shares of Buyer Common Stock issued
in connection with the Merger will be issued in a transaction
exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act") by reason of Section 3(a)(10)
thereof (the "3(a)(10) Alternative"), and, as such, will not be
deemed "restricted securities" within the meaning of Rule 144
promulgated thereunder and resale of such shares will not be
subject to any restrictions other than as set forth under Rule 145
of the Securities Act or will be otherwise transferred pursuant to
an effective registration statement under the Securities Act or an
exemption from the registration requirements of the Securities
Act.
1.8 Dividends. No dividends or other distributions that are
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payable to the holders of record of Buyer Common Stock as of a
date on or after the Closing Date shall be paid to former Company
Stockholders entitled by reason of the Merger to receive Initial
Shares until such holders surrender their Certificates in
accordance with Section 1.7. Upon such surrender, the Buyer shall
pay or deliver to the persons in whose name the certificates
representing such Initial Shares are issued any dividends or other
distributions that are payable to the holders of record of Buyer
Common Stock as of a date on or after the Closing Date and which
were paid or delivered between the Effective Time and the time of
such surrender; provided that no such person shall be entitled to
receive any interest on such dividends or other distributions.
1.9 Fractional Shares. No certificates or script
-----------------
representing fractional Initial Shares shall be issued to former
Company Stockholders upon the surrender for exchange of
Certificates, and such former Company Stockholders shall not be
entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Buyer with
respect to any fractional Initial Shares that would otherwise be
issued to such former Company Stockholders. In lieu of any
fractional Initial Shares that would otherwise be issued, each
former Company Stockholder that would have been entitled to
receive a fractional Initial Share shall, upon proper surrender of
such person's Certificates, receive a cash payment equal to the
GSI Average Share Price (as defined below), multiplied by the
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fraction of a share that such Company Stockholder would otherwise
be entitled to receive. For purposes of this Agreement, "GSI
Average Share Price" shall equal the average closing price of the
Buyer Common Stock on The Nasdaq National Market over the 20
trading days ending five days prior to the Closing Date.
1.10 Escrow.
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(a) On the Closing Date, the Buyer shall deliver to the
Escrow Agent a certificate (issued in the name of the Escrow Agent
or its nominee) representing the Escrow Shares, as described in
Section 1.5(c), for the purpose of securing the indemnification
obligations of the Company Stockholders and the holders of Options
set forth in this Agreement. From and after the Closing Date,
upon the exercise of Options exchanged pursuant to Section 1.11(b)
the Buyer shall have delivered to the Escrow Agent (to the extent
the escrow provided for herein has not expired) a certificate or
certificates (issued in the name of the Escrow Agent or its
nominee) representing such number of shares of Buyer Common Stock
as is equal to (x) the number of GSI Option Shares subject to such
exercise less (y) such number of shares of Buyer Common Stock as
is equal to (1) the aggregate exercise price therefor divided by
(2) the GSI Average Share Price, multiplied by (z) the percentage
obtained by dividing $3,000,000 by the result obtained from
multiplying the GSI Average Share Price by the Merger
Consideration (such percentage being referred to herein as the
"Escrow Percentage"). The Escrow Shares shall be held by the
Escrow Agent under the Escrow Agreement pursuant to the terms
thereof. The Escrow Shares shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or
other judicial process of any creditor of any party, and shall be
held and disbursed solely for the purposes, and in accordance with
the terms, of the Escrow Agreement.
(b) The adoption of this Agreement and the approval of the
Merger by the Company Stockholders shall constitute approval of
the Escrow Agreement and of all of the arrangements relating
thereto, including without limitation the placement of the Escrow
Shares in escrow and the appointment of the Indemnification
Representatives.
1.11 Options and Warrants.
--------------------
(a) Prior to the Effective Time, the Company shall take all
action necessary so that (i) all outstanding options, warrants and
other rights to acquire Company Shares (collectively, "Options")
are either exercised in full, converted or exchanged into a right
to receive shares of Buyer Common Stock immediately prior to the
Effective Time or, in the case of options granted under the
Company's 1994 Stock Option Plan that are not vested immediately
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prior to the Effective Time, assumed by the Buyer as provided in
Section 1.11(b) below and (ii) there shall be no Options
outstanding immediately prior to the Effective Time; provided,
--------
that holders of Options (other than holders of Options granted
pursuant to the Company's 1994 Stock Option Plan that are not
vested immediately prior to the Effective Time, which shall be
exchanged pursuant to Section 1.11(b) below) may, instead of
exercising such Options prior to the Effective Time, elect, by
signing and delivering to the Company and the Buyer prior to the
Effective Time, a written instrument in a form satisfactory to the
Buyer, to receive upon the Effective Time, in full consideration
for the surrender of such Options, the Merger Consideration that
would have otherwise been received by such holder if he or she had
exercised such Options prior to the Effective Time (which amount
shall equal the dollar amount of the Merger Consideration per
Company Share calculated on a Fully Diluted Basis (as defined
below) as of the Effective Time less the per share exercise price
of such Options if such Options had been exercised prior to the
Effective Time multiplied by the number of Options held by such
holder divided by the GSI Average Share Price and shall be payable
in accordance with the provisions of Section 1.5 and Section 1.10
of this Agreement). Any holder of Options that elects to exercise
his or her Options prior to the Effective Time as contemplated by
this Section 1.11 shall be considered a "Company Stockholder" for
purposes of this Agreement. The aggregate number of shares of
Class A Common Stock subject to Options as to which such election
is made are referred to herein as "Swapped-Out Option Shares."
The term "Fully Diluted Basis" as used in this Agreement includes
all Company Shares, all Swapped-Out Option Shares (less the number
of Swapped-Out Option Shares assumed to be required to pay the
exercise price of such Swapped-Out Option Shares) and all Unvested
1994 Options (less the number of Unvested 1994 Options assumed to
be required to pay the exercise price of such Unvested 1994
Options), calculated in accordance with the example set forth on
Schedule 1.11 attached hereto. There shall be placed in escrow
-------------
pursuant to the Escrow Agreement such number of shares of Buyer
Common Stock as is equal to the Escrow Percentage multiplied by
the aggregate number of shares of Buyer Common Stock to be issued
in exchange for the Swapped-Out Option Shares (the "Option Escrow
Shares").
(b) As of the Effective Time, all options to purchase shares
of Class A Common Stock issued by the Company pursuant to its 1994
Stock Option Plan that are not vested (the "Unvested 1994
Options") shall be assumed by the Buyer. Immediately after the
Effective Time, each Unvested 1994 Option outstanding immediately
prior to the Effective Time shall be deemed to constitute an
option to acquire, on substantially the same terms and conditions
as were applicable under such Unvested 1994 Option at the
Effective Time, such number of shares of Buyer Common Stock as is
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equal to the number of shares of Class A Common Stock subject to
the unexercised portion of such Unvested 1994 Option multiplied by
the Merger Consideration per Company Share calculated on a Fully
Diluted Basis as of the Effective Time (with any fraction
resulting from such multiplication to be rounded up or down to the
nearest whole number or, in the case of .5, to the nearest odd
number) (the "GSI Option Shares"). The exercise price per share
of each such assumed Unvested 1994 Option shall be equal to the
exercise price of such option immediately prior to the Effective
Time divided by the Merger Consideration per Company Share
calculated on a Fully Diluted Basis as of the Effective Time (with
any fraction resulting from such multiplication to be rounded up
or down to the nearest whole number or, in the case of .5, to the
nearest odd number). The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986 (as amended, the "Code"), if
applicable, and all of the other terms of the Options shall
otherwise remain unchanged. As soon as practicable after the
Effective Time, the Buyer or the Surviving Corporation shall
deliver to the holders of Unvested 1994 Options appropriate
notices setting forth such holders' rights pursuant to such
Unvested 1994 Options, as amended by this Section 1.11, and the
agreements evidencing such Unvested 1994 Options shall continue in
effect on the same terms and conditions (subject to the amendments
provided for in this Section 1.11 and such notice). The Buyer
shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Buyer Common Stock for delivery
upon exercise of the Unvested 1994 Options assumed in accordance
with this Section 1.11. As soon as practicable after the
Effective Time, the Buyer shall file a Registration Statement on
Form S-8 (or any successor form) under the Securities Act with
respect to all of the GSI Option Shares that may be issued
pursuant to the Unvested 1994 Options and shall use its best
efforts to maintain the effectiveness of such Registration
Statement for so long as such Options remain outstanding. For
purposes of this Agreement, the term "Exchanged Option Shares"
shall mean the number of shares of Buyer Common Stock as is equal
to (x) the number of GSI Option Shares less (y) such number of
shares of Buyer Common Stock as is equal to the aggregate exercise
price of the Unvested 1994 Options divided by the GSI Average
Share Price.
(c) The Company shall obtain, prior to the Closing, the
consent from each holder of an Option (other than the holders of
Unvested 1994 Options) to the exercise in full, exchange or
surrender of such Option pursuant to this Section 1.11. The
Company shall also obtain an agreement of the holder of each
Option to be bound by the terms of the Escrow Agreement and the
indemnification provisions set forth in Article VI of this
Agreement.
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(d) The Company shall terminate all stock option plans and
other stock or equity-related plans of the Company (the "Stock
Plans") immediately prior to the Effective Time. The Buyer shall
not assume any Stock Plan of the Company.
1.12 Articles of Incorporation. The Articles of
-------------------------
Incorporation of the Surviving Corporation shall be amended as of
the Effective Time so as to read in its entirety in the form
attached hereto as Exhibit B.
------- -
1.13 By-laws. The By-laws of the Surviving Corporation shall
-------
be the same as the By-laws of the Transitory Subsidiary
immediately prior to the Effective Time, except that the name of
the corporation set forth therein shall be changed to the name of
the Company.
1.14 Directors and Officers. The directors of the Transitory
----------------------
Subsidiary shall become the directors of the Surviving Corporation
as of the Effective Time. The officers of the Company shall
remain as officers of the Surviving Corporation after the
Effective Time, retaining their respective positions.
1.15 No Further Rights. From and after the Effective Time,
-----------------
no Company Shares shall be deemed to be outstanding, and holders
of Certificates shall cease to have any rights with respect
thereto, except as provided herein or by law.
1.16 Closing of Transfer Books. At the Effective Time, the
-------------------------
stock transfer books of the Company shall be closed and no
transfer of Company Shares shall thereafter be made. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent, they shall be cancelled and
exchanged for Initial Shares in accordance with Section 1.5(c),
subject to Section 1.10 and to applicable law in the case of
Dissenting Shares.
1.17 Tax-Free Reorganization; Pooling of Interests; Exempt
-----------------------------------------------------
Transaction. The Merger is intended to be a reorganization within
-----------
the meaning of Section 368(a) of the Code, and to be accounted for
as a pooling of interests pursuant to Opinion No. 16 of the
Accounting Principles Board. It is intended that the Buyer Common
Stock to be issued in the Merger will be issued in a transaction
(i) exempt from registration under the Securities Act by reason of
Section 3(a)(10) thereof if the Buyer and the Company proceed with
the Merger pursuant to the 3(a)(10) Alternative or (ii) registered
under the Securities Act pursuant to a Registration Statement on
Form S-4 (the "Form S-4") if the Buyer and the Company proceed
with the Merger pursuant to the S-4 Alternative.
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<PAGE>
1.18 Stockholders Agreements. On or before June 12, 1996,
-----------------------
the Stockholders Agreements, as provided in Section 4.9 hereof,
shall have been duly executed and delivered to the Buyer.
1.19 Post Closing Adjustments.
------------------------
(a) Not later than the earlier of (i) July 31, 1996, or
(ii) the Closing Date, the Indemnification Representatives shall
prepare and deliver to the Buyer a balance sheet as of June 30,
1996 and statements of operations and cash flows of the Company
for the year and quarter ending June 30, 1996 (collectively, the
"June 30 Financial Statements"). The June 30 Financial Statements
shall be prepared in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied by
the Company (and applying consistent accounting estimates and
methodologies) and shall be certified by the Indemnification
Representatives. The June 30 Financial Statements shall include
Company year end adjustments recorded in the quarter to which the
adjustments relate or, if not so identifiable, spread pro rata by
quarter.
(b) The June 30 Financial Statements delivered pursuant to
paragraph (a) above shall be accompanied by all relevant backup
materials and schedules, in detail reasonably acceptable to the
Buyer. The June 30 Financial Statements shall be accompanied by a
statement setting forth the earnings before interest and taxes for
the Company for the fiscal quarter ended June 30, 1996, as
described below ("EBIT"), and the Company's Backlog Excluding
Shinkawa (as defined below) as of June 30, 1996. For purposes of
this Section 1.19, EBIT shall consist of the net income of the
Company for the relevant period determined in accordance with GAAP
consistently applied by the Company (and applying consistent
accounting estimates and methodologies), subject to the following
adjustments:
(i) there shall be added back to net income any
deductions for interest or provision for income taxes; and
(ii) there shall be added back to net income any
deductions for expenses described in Section 9.11 or 5.2(k)
hereof.
(iii) net income shall be adjusted to reverse any
inventory adjustments recorded in preparing the June 30 Financial
Statements if such inventory adjustments were calculated using
accounting principles, accounting methods or accounting estimates
which are different than those accounting principles, accouting
methods or accounting estimates used in preparing the Financial
Statements for the quarter ended March 24, 1996.
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<PAGE>
For purposes of this Section 1.19, "Backlog Excluding
Shinkawa" shall consist of the Company's total backlog prepared
using the methodology set forth on Schedule 1.19 less the amount
of backlog relating to Shinkawa Ltd. The June 30 Financial
Statements shall be accompanied by a statement setting forth the
calculations showing the basis for the determination of such sum.
(c) In the event that the Buyer disputes the June 30
Financial Statements or the calculation of the EBIT or Backlog
Excluding Shinkawa, the Buyer shall notify the Indemnification
Representatives in writing (the "Dispute Notice") of the amount,
nature and basis of such dispute, within thirty (30) calendar days
after delivery of the June 30 Financial Statements. In the event
of such a dispute, the Buyer and the Indemnification
Representatives shall first use their diligent good faith efforts
to resolve such dispute among themselves. If the parties are
unable to resolve the dispute within thirty (30) calendar days
after delivery of the Dispute Notice, the dispute shall be
submitted to Coopers & Lybrand LLP ("Coopers") for resolution.
Coopers shall be required to resolve the dispute within 30 days
after submission. The determination of Coopers as to the
resolution of any dispute shall be binding and conclusive upon all
Parties hereto. All determinations pursuant to this paragraph (c)
shall be in writing and shall be delivered to the Buyer and the
Indemnification Representatives.
(d) The fees and expenses of Coopers in connection with the
resolution of disputes pursuant to paragraph (c) above shall be
shared equally by the Company Stockholders and the Buyer.
(e) Immediately upon the expiration of the thirty (30)-day
period for giving the Dispute Notice, if no Dispute Notice is
given, or immediately upon the resolution of disputes, if any,
pursuant to paragraph (c) above, the parties shall make the post-
closing adjustment as follows. If the EBIT of the Company for the
fiscal quarter ended June 30, 1996 less 50% of the amount by which
the Company's Backlog Excluding Shinkawa is less than $2,000,000,
is less than zero (the amount by which it is less than zero being
referred to herein as the "Shortfall"), the Buyer shall be
entitled to receive back from the Company Stockholders such number
of shares of Buyer Common Stock as is equal to the amount of the
Shortfall multiplied by 10 and then divided by the GSI Average
Share Price; provided, however, that such amount, when added to
all other claims allowed pursuant to Article VI, shall not exceed
$2,000,000. The Buyer shall receive such shares pursuant to the
provisions of the Escrow Agreement and, if applicable, the
provisions of Article VI.
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<PAGE>
(f) Any award made pursuant to this Section 1.19 may be
entered in and enforced by any court having jurisdiction therefor
and the parties hereby consent and commit themselves to the
jurisdiction of the United States District Court for the Central
District of California and the courts of the State of California
solely for purposes of the enforcement of any such award.
1.20 Inventory.
---------
(a) The June 30 Financial Statements will reflect the value
of the Company's inventory as of June 30, 1996 (the "Inventory
Balance") computed in accordance with GAAP consistently applied by
the Company (and applying consistent accounting estimates and
methodologies). Not later than August 31, 1996, the Buyer shall
compute the Inventory Balance in accordance with GAAP using the
methodology set forth in Schedule 1.20 (the "Inventory
Methodology") (as computed, the "Restated Inventory Balance").
Within thirty (30) calendar days after receiving such Restated
Inventory Balance, Arthur Andersen LLP ("Andersen") will deliver a
certificate to the Indemnification Representatives setting forth
the Restated Inventory Balance and the calculations showing the
basis for the determination of such amount.
(b) In the event that the Indemnification Representatives
dispute the Restated Inventory Balance, the Indemnification
Representatives shall notify the Buyer in writing (the "Inventory
Dispute Notice") of the amount, nature and basis of the dispute
within thirty (30) calendar days after delivery of the certificate
by Andersen. In the event of such a dispute, the Buyer and the
Indemnification Representatives shall first use their diligent
good faith efforts to resolve such dispute among themselves. If
the parties are unable to resolve the dispute among themselves
within thirty (30) calendar days after delivery of the Inventory
Dispute Notice, the dispute shall be submitted to Coopers for
resolution. Coopers shall be required to resolve the dispute
within thirty (30) days after submission using the Inventory
Methodology. The determination of Coopers as to the resolution of
any dispute shall be binding and conclusive upon all parties
hereto. All determinations pursuant to this paragraph (b) shall
be in writing and shall be delivered to the Buyer and to the
Indemnification Representatives.
(c) Immediately after the expiration of the thirty (30) day
period for giving the Inventory Dispute Notice, if no Inventory
Dispute Notice is given, or immediately upon the resolution of
disputes, if any, pursuant to paragraph (b) above, the parties
shall make a post-closing adjustment as follows: The Buyer shall
be entitled to receive from the Company Stockholders such number
of shares of Buyer Common Stock as is equal to (i) fifty percent
(50%) of the difference between the Restated Inventory Balance and
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<PAGE>
the value of the Company's inventory as set forth on the Inventory
Balance as of June 30, 1996 plus (ii) fifty percent (50%) of any
inventory adjustments recorded in preparing the June 30 Financial
Statements, if such inventory adjustments were calculated using
accounting principles, accounting methods or accounting estimates
which are different than those accounting principles, accounting
methods and accounting estimates used in preparing the Financial
Statements for the quarter ended March 24, 1996 (provided that any
inventory adjustment pursuant to Section 2.28 of the Disclosure
Schedule shall be taken into account in making such calculations
and any inventory adjustment since the Most Recent Balance Sheet
shall be taken into account only once in making such calculation)
(collectively, the "Inventory Adjustment") divided by the GSI
Average Share Price; provided, however, that the Inventory
-----------------
Adjustment shall not exceed $1,000,000. The Buyer shall receive
such shares pursuant to the provision to the Escrow Agreement and,
if applicable, the provisions of Article VI.
(d) The fees and expenses of Coopers in connection with the
resolution of disputes pursuant to paragraph (b) above shall be
shared equally by the Company Stockholders and the Buyer.
1.21 Indemnification Representatives.
-------------------------------
(a) In order to efficiently administer the transactions
contemplated hereby, including (i) the determination of the EBIT
and Backlog Excluding Shinkawa and the Inventory Adjustment,
(ii) the defense and/or settlement of any claims for which the
Company Stockholders may be required to indemnify the Buyer or the
Company pursuant to Article VI hereof and (iii) entering into the
Escrow Agreement, the Company Stockholders hereby agree to the
appointment of the Indemnification Representatives.
(b) The Company Stockholders hereby authorize the
Indemnification Representatives (i) to enter into the Escrow
Agreement, (ii) to make all decisions relating to the
determination of the EBIT and Backlog Excluding Shinkawa and the
Inventory Adjustment and to deliver shares of Buyer Common Stock
with respect thereto, (iii) to take all action necessary in
connection with the waiver of any condition to the obligations of
the Company Stockholders to consummate the transactions
contemplated under the Escrow Agreement, or the defense and/or
settlement of any claims for which the Company Stockholders may be
required to indemnify the Buyer or the Company pursuant to
Article VI hereof, (iv) to give and receive all notices given by
and to the Company Stockholders under this Agreement and the
Escrow Agreement and (v) to take any and all additional action as
is contemplated to be taken by or on behalf of the Company
Stockholders by the terms of this Agreement.
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<PAGE>
(c) All decisions and actions by the Indemnification
Representatives, including, without limitation, any agreement
between the Indemnification Representatives and the Buyer relating
to the determination of the EBIT and Backlog Excluding Shinkawa,
and the defense or settlement of any claims for which the Company
Stockholders may be required to indemnify the Buyer or the Company
pursuant to Article VI hereof, shall be binding upon all of the
Company Stockholders and no Company Stockholder shall have the
right to object, dissent, protest or otherwise contest the same.
(d) By their approval of this Agreement, the Company
Stockholders agree that:
(i) the Buyer shall be able to rely conclusively on
the instructions and decisions of the Indemnification
Representatives as to the determination of the EBIT and Backlog
Excluding Shinkawa and the Inventory Adjustment, the settlement of
any claims for indemnification by the Buyer or the Company
pursuant to Article VI hereof, or any other actions taken by the
Indemnification Representatives hereunder, and no party hereunder
shall have any cause of action against the Buyer in reliance upon
the instructions or decisions of the Indemnification
Representatives;
(ii) all actions, decisions and instructions of the
Indemnification Representatives shall be conclusive and binding
upon all of the Company Stockholders and no Company Stockholder
shall have any cause of action against the Indemnification
Representatives for any action taken, decision made or instruction
given by the Indemnification Representatives under this Agreement,
except for fraud or willful breach of this Agreement or the Escrow
Agreement by the Indemnification Representatives;
(iii) the provisions of this Section 1.21 are
independent and severable, are irrevocable and coupled with an
interest and shall be enforceable notwithstanding any rights or
remedies that any Company Stockholder may have in connection with
the transactions contemplated by this Agreement and the Escrow
Agreement;
(iv) remedies available at law for any breach of the
provisions of this Section 1.21 are inadequate; therefore, the
Buyer and the Company shall be entitled to temporary and permanent
injunctive relief without the necessity of proving damages if
either the Buyer or the Company brings an action to enforce the
provisions of this Section 1.21;
(v) the provisions of this Section 1.21 shall be
binding upon the executors, heirs, legal representatives and
successors of each Company Stockholder, and any references in this
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Agreement to a Company Stockholder or the Company Stockholders
shall mean and include the successors to the Company Stockholders'
rights hereunder, whether pursuant to testamentary disposition,
the laws of descent and distribution or otherwise; and
(vi) All out-of-pocket expenses incurred by the
Indemnification Representatives shall be paid by the Company
Stockholders in proportion to their ownership of Company Shares
immediately prior to the Effective Time.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a document referring specifically to
the representations and warranties in this Agreement which
reasonably identifies the basis for an exception to a
representation and warranty in this Agreement and which is
delivered by the Company to the Buyer and approved by the Buyer
prior to the execution of this Agreement (the "Disclosure
Schedule"), the Company represents and warrants to the Buyer that
the statements contained in this Article II are true and correct
(for purposes of this Article II, the term "Company" shall be
deemed to include, as appropriate in the context, the Company's
former subsidiaries Synthetic Vision Systems, Inc., a Michigan
corporation, and View Engineering International, Inc., a
California corporation). The Disclosure Schedule shall be
initialed by the Company and shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in
this Article II.
2.1 Organization, Qualification and Corporate Power. The
-----------------------------------------------
Company is a corporation duly organized, validly existing and in
corporate and tax good standing under the laws of the State of
California. Section 2.1 of the Disclosure Schedule sets forth a
complete and accurate list of each jurisdiction where the Company
is qualified to conduct business. The Company is duly qualified
to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its
businesses or the ownership or leasing of its properties requires
such qualification except where the failure to so qualify would
not have a material adverse effect on the business, properties,
assets, financial condition or results of operations of the
Company (a "Material Adverse Effect"). The Company has all
requisite corporate power and authority to carry on the businesses
in which it is engaged and to own and use the properties owned and
used by it. The Company has furnished to the Buyer true and
complete copies of its Articles of Incorporation and By-laws, each
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as amended and as in effect on the date hereof. The Company is
not in default under or in violation of any provision of its
Articles of Incorporation or By-laws.
2.2 Capitalization. The authorized capital stock of the
--------------
Company consists of (i) 360,000 shares of Preferred Stock, of
which 360,000 shares are issued and outstanding and no shares are
held in the treasury of the Company, which will be converted into
an aggregate of 373,995 shares of Class A Common Stock as
calculated on the date hereof (subject to further adjustment
pursuant to the Company's articles of incorporation prior to the
Effective Time), (ii) 11,000,000 shares of Class A Common Stock of
which 3,291,728 shares are issued and outstanding and no shares
are held in the treasury of the Company, and (iii) 2,750,000
shares of Class B Common Stock of which 621,618 shares are issued
and outstanding and no shares are held in the treasury of the
Company, which will be converted into an aggregate of 621,618
shares of Class A Common Stock prior to the Effective Time.
Section 2.2 of the Disclosure Schedule sets forth a complete and
accurate list of (i) all stockholders of the Company, indicating
the type and number of Company Shares held by each stockholder,
and their respective addresses, (ii) all holders of Options,
indicating the type and number of Company Shares subject to each
Option, the name of the plan, date of the warrant agreement or
other document evidencing such Option, the vesting schedule and
the exercise price thereof, and the restrictions on the
disposition of the shares of Company capital stock issuable upon
the exercise thereof and (iii) all of the Stock Plans. All of the
issued and outstanding Company Shares are, and all Company Shares
that may be issued upon exercise of Options prior to the Effective
Time will be, duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. There are no
outstanding or authorized options, warrants, rights, calls,
convertible instruments, agreements or commitments to which the
Company is a party or which are binding upon the Company providing
for the issuance, disposition or acquisition of any of its capital
stock, other than the Preferred Stock and the Options listed in
Section 2.2 of the Disclosure Schedule, which Options will be
exercised in full, converted or exchanged into a right to receive
shares of Buyer Common Stock prior to the Effective Time or, in
the case of the Unvested 1994 Options, assumed by the Buyer upon
the Effective Time. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the
Company. Except as set forth in Section 2.2 of the Disclosure
Schedule, there are no agreements, voting trusts, proxies, or
understandings with respect to the voting, or registration under
the Securities Act, of any Company Shares. Except as set forth in
Section 2.2 of the Disclosure Schedule, there are no accrued or
declared dividends with respect to the Company Shares that have
not been paid. All of the issued and outstanding Company Shares
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were issued in compliance with applicable federal and state
securities laws, except (with respect to state securities laws)
when failure to so comply would not have a Material Adverse
Effect.
2.3 Authorization of Transaction. The Company has all
----------------------------
requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement and, subject to the adoption of
this Agreement and the approval of the Merger by (a) a requisite
majority of the votes represented by all classes of the
outstanding Company Shares entitled to vote on this Agreement and
the Merger voting as a single class (with the Preferred Stock and
Class B Common Stock voting on an "as converted" basis) and (b)
the holders of a majority of the outstanding shares of Preferred
Stock voting as a separate class (collectively, the "Requisite
Stockholder Approval"), the performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally or by general equitable
principles.
2.4 Noncontravention. Subject to compliance with the
----------------
applicable requirements of the Securities Act and any applicable
state securities laws, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "Hart-Scott-Rodino Act")
and the filing of the Certificate of Merger as required by the
California Corporations Code, and except as set forth in Section
2.4 of the Disclosure Schedule, neither the execution and delivery
of this Agreement by the Company, nor the consummation by the
Company of the transactions contemplated hereby, will (a) conflict
with or violate any provision of the Articles of Incorporation or
By-laws of the Company, (b) require on the part of the Company any
filing with, or any permit, authorization, consent or approval of,
any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency
(a "Governmental Entity"), (c) conflict with, result in a breach
of, constitute (with or without due notice or lapse of time or
both) a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease,
sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest (as defined below) or other
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arrangement to which the Company is a party or by which the
Company is bound or to which any of its assets is subject, except
for such defaults, accelerations, rights, notices, consents or
waivers, for which the existence, exercise or failure to give or
obtain would not cause a Material Adverse Effect (d) result in the
imposition of any Security Interest upon any assets of the Company
or (e) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Company or any of its material
properties or assets. For purposes of this Agreement, "Security
Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien (whether arising by contract or
by operation of law), other than (i) mechanic's, materialmen's,
and similar liens, (ii) liens arising under worker's compensation,
unemployment insurance, social security, retirement, and similar
legislation, (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, and (iv) liens for ad valorem real
or personal property taxes or assessments not yet due, in each
case arising in the ordinary course of business consistent with
past custom and practice (including with respect to frequency and
amount) ("Ordinary Course of Business") of the Company and not
material to the Company.
2.5 Subsidiaries. The Company does not have the power,
------------
directly or indirectly, to vote or direct the voting of sufficient
securities to elect the majority or the directors of any
corporation. Except as set forth in Section 2.5 of the Disclosure
Schedule, the Company does not control directly or indirectly or
have any direct or indirect equity participation in any
corporation, partnership, trust, or other business association.
2.6 Financial Statements. The Company has provided to the
--------------------
Buyer (i) the audited consolidated balance sheets and statements
of income, changes in stockholders' equity and cash flows for each
of the last three fiscal years for the Company and (ii) the
unaudited consolidated balance sheet and statements of income,
changes in stockholders' equity and cash flows as of and for the
quarter ended as of March 24, 1996 (the "Most Recent Fiscal
Quarter End"). Such financial statements (collectively, the
"Financial Statements") have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered
thereby, fairly present the financial condition, results of
operations and cash flows of the Company as of the respective
dates thereof and for the periods referred to therein and are
consistent with the books and records of the Company, provided,
--------
however, that the Financial Statements referred to in clause (ii)
-------
above are subject to normal recurring year-end adjustments (which
will not be material) and do not include footnotes.
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<PAGE>
2.7 Absence of Certain Changes. Except as set forth in
--------------------------
Section 2.7 of the Disclosure Schedule, since the Most Recent
Fiscal Quarter End (a) there has not been any material adverse
change in the assets, business, financial condition or results of
operations of the Company, nor has there occurred any event or
development which could reasonably be foreseen by the Company to
result in such a material adverse change in the future, and
(b) except as set forth in Section 2.7 of the Disclosure Schedule,
the Company has not taken any of the actions set forth in
paragraphs (a) through (o) of Section 4.5.
2.8 Undisclosed Liabilities. Except as set forth in
-----------------------
Section 2.8 of the Disclosure Schedule, the Company has no
liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated and whether due or
to become due), except for (a) liabilities accrued or reserved
against the March 24, 1996 unaudited consolidated balance sheet of
the Company (the "Most Recent Balance Sheet"), (b) liabilities
which have arisen since the Most Recent Fiscal Quarter End in the
Ordinary Course of Business and which are similar in nature and
amount to the liabilities which arose during the comparable period
of time in the immediately preceding fiscal period and
(c) contractual liabilities incurred in the Ordinary Course of
Business which are not required by GAAP to be reflected on a
balance sheet and which are not in the aggregate material.
2.9 Tax Matters.
-----------
(a) The Company has filed all Tax Returns (as defined below)
that it was required to file and all such Tax Returns were correct
and complete in all material respects. The Company has paid all
Taxes (as defined below) that are shown to be due on any such Tax
Returns. The unpaid Taxes of the Company for tax periods through
the date of the Most Recent Balance Sheet do not exceed the
accruals and reserves for Taxes set forth on the Most Recent
Balance Sheet. The Company has no actual or potential liability
for any Tax obligation of any taxpayer (including without
limitation any affiliated group of corporations or other entities
that included the Company during a prior period) other than the
Company. All material Taxes that the Company is or was required
by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper
Governmental Entity. For purposes of this Agreement, "Taxes"
means all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real
property, personal property, sales, use, transfer, withholding,
employment, payroll and franchise taxes imposed by the United
States of America or any state, local or foreign government, or
any agency thereof, or other political subdivision of the United
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<PAGE>
States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or
incurred in connection with any tax or any contest or dispute
thereof. For purposes of this Agreement, "Tax Returns" means all
reports, returns, declarations, statements or other information
required to be supplied to a taxing authority in connection with
Taxes.
(b) The Company has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed
to by any of the Company since June 30, 1993. No examination or
audit of any Tax Returns of the Company by any Governmental Entity
of which the Company has received notice is currently in progress
or, to the best knowledge of the Company, threatened or
contemplated. The Company has not waived any statute of
limitations with respect to taxes or agreed to an extension of
time with respect to a tax assessment or deficiency.
(c) The Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code and none of the assets of
the Company are subject to an election under Section 341(f) of the
Code. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in
Section 897(c)(l)(A)(ii) of the Code. The Company is not a party
to any Tax allocation or sharing agreement.
(d) The Company is not and has not ever been a member of an
"affiliated group" of corporations (within the meaning of
Section 1504 of the Code), other than a group of which only the
Company was a member. The Company has not made an election under
Treasury Reg. Section 1.1502-20(g). The Company is not and has
not been required to make a basis reduction pursuant to Treasury
Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b).
2.10 Assets. The Company owns or leases all tangible assets
------
necessary for the conduct of its businesses as presently conducted
and as presently proposed to be conducted. Each such material
tangible asset is free from material defects, has been maintained
in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear) and is
suitable for the purposes for which it presently is used. Except
as set forth in Section 2.10 of the Disclosure Schedule, no asset
of the Company (tangible or intangible) is subject to any Security
Interest. Section 2.10 of the Disclosure Schedule sets forth a
description of the nature and type of any such Security Interest.
-22-
<PAGE>
2.11 Owned Real Property. Section 2.11 of the Disclosure
-------------------
Schedule lists and describes briefly all real property that the
Company owns in fee. With respect to each parcel of such real
property except as set forth in Section 2.11 of the Disclosure
Schedule:
(a) the Company is the owner of the parcel described in
Chicago Title Insurance Company Policy No. 579751 (the "Title
Policy") a true and correct copy of which is included in Schedule
2.11 of the Disclosure Schedule, and except as set forth on
Section 2.11 of the Disclosure Schedule, to the knowledge of the
Company, title to said parcel is subject only to the matters
disclosed in the Title Policy;
(b) there are no (i) pending or, to the best knowledge of
the Company, threatened condemnation proceedings relating to such
parcel, or (ii) pending or, to the best knowledge of the Company,
threatened litigation, or administrative actions relating to such
parcel to which the Company is a party;
(c) the buildings and improvements may be used as of right, or
as permitted, pre-existing non-conforming uses, under applicable
zoning and land use laws for the current use and occupance of such
parcel, and, to the knowledge of the Company after due inquiry,
such buildings and improvements are located within the boundary
lines of the described parcels of land, are not in violation of
current setback requirements, zoning laws and ordinances (or
constitute permitted, pre-existing, non-confirming structures as
to the same), and do not encroach on any easement which may burden
the land as to which encroachment removal of the improvements
could be required; and, to the knowledge of the Company after due
inquiry, such parcel is not located within any flood plain or
subject to any similar type restriction for which any permits or
licenses necessary to the use thereof have not been obtained;
(d) there are no leases, subleases, licenses or agreements,
written or oral, granting to any party or parties (other than the
Company, and those tenants under leases disclosed in Section 2.11
of the Disclosure Schedule) the right of use or occupancy of any
portion of such parcel;
(e) there are no outstanding options or rights of first
refusal to purchase such parcel, or any portion thereof or
interest therein;
(f) all facilities located on such parcel are supplied with
utilities and other services necessary for the operation of such
facilities as they are currently operated, including gas,
electricity, water, telephone, sanitary sewer and storm sewer, all
of which services are in accordance with all applicable laws,
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<PAGE>
ordinances, rules and regulations and are provided via public
roads or via permanent, irrevocable, appurtenant easements
benefiting such parcel;
(g) the Company has not received notice of, and to the
Company's actual knowledge, there is no proposed or pending
proceeding to change or redefine the zoning classification of all
or any portion of the parcels;
(h) to the Company's actual knowledge, the improvements
constructed on the parcels are in good condition and proper order,
free of roof leaks, insect infestation, and material construction
defects, and all mechanical and utility systems servicing such
improvements are in good condition and proper working order, free
of material defects;
(i) there are no major defects in the structure, roof, or
building systems affecting the improvements on each parcel; and
(j) each parcel is a legally subdivided unit which does not
rely on any facilities (other than the facilities of public
utility and water companies) located on any other property (i) to
fulfill any zoning, building code, or other municipal or
governmental requirement, (ii) for the furnishing of any essential
building systems or utilities, including, but not limited to
electric, plumbing, mechanical, heating, ventilating, and air
conditioning systems, or (iii) to fulfill the requirements of any
lease. No building or other improvement not included in the
parcels relies on any part of the parcels to fulfill any zoning,
building code, or other municipal or governmental requirement or
for structural support or the furnishing of any essential building
systems or utilities. Each of the parcels is assessed by local
property assessors as a tax parcel or parcels separate from all
other tax parcels. There are no party walls shared by the
improvements.
2.12 Intellectual Property.
---------------------
(a) Except as set forth in Section 2.12 of the Disclosure
Schedule, the Company owns, or is licensed or otherwise possesses
legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications for such
patents, trademarks, trade names, service marks and copyrights,
trade secrets, schematics, technology, knowhow, computer software
programs or applications and tangible or intangible proprietary
information or material (collectively, "Intellectual Property")
that are used to conduct its business as currently conducted. The
Company has taken reasonable measures to protect the proprietary
nature of each item of Intellectual Property, and to maintain in
confidence all trade secrets and confidential information that it
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<PAGE>
owns or uses. Section 2.12 of the Disclosure Schedule lists
(i) all patents and patent applications and all trademarks,
registered copyrights, trade names and service marks which are
used in the business of the Company, including the jurisdictions
in which each such Intellectual Property right has been issued or
registered or in which any such application for such issuance or
registration has been filed, (ii) all material written licenses,
sublicenses and other agreements to which the Company is a party
and pursuant to which any person is authorized to use any
Intellectual Property rights, and (iii) all material written
licenses, sublicenses and other agreements as to which the Company
is a party and pursuant to which the Company is authorized to use
any third party patents, trademarks, service marks, trade secrets
or copyrights, including software ("Third Party Intellectual
Property Rights") which are used in the business of the Company or
which form a part of any product or service of the Company. The
Company has delivered, or shall deliver prior to June 17, 1996, to
the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, sublicenses and agreements
as amended to date. The Company is not a party to any oral
license, sublicense or agreement which, if reduced to written
form, would be required to be listed in Section 2.12 of the
Disclosure Schedule under the terms of this Section 2.12(a).
(b) Except as set forth in Section 2.12 of the Disclosure
Schedule, with respect to each item of Intellectual Property that
the Company owns: (i) subject to such rights as have been granted
by the Company under license agreements entered into in the
Ordinary Course of Business, the Company possesses all right,
title and interest in and to such item; and (ii) such item is not
subject to any outstanding judgment, order, decree, stipulation or
injunction. Except as set forth in Section 2.12 of the Disclosure
Schedule, with respect to each item of Third Party Intellectual
Property Rights: (i) the license, sublicense or other agreement
covering such item is legal, valid, binding, enforceable against
the Company and, to the best knowledge of the Company, against
each other party thereto (subject to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of
creditors' rights generally, and to general equitable principles)
and in full force and effect; (ii) such license, sublicense or
other agreement will continue to be legal, valid, binding,
enforceable (subject to bankruptcy, insolvency, moratorium and
other similar laws affecting the enforcement of creditors' rights
generally, and to general equitable principles) and in full force
and effect immediately following the Closing in accordance with
the terms thereof as in effect prior to the Closing; (iii) the
Company, and to the best knowledge of the Company, each other
party to such license, sublicense or other agreement, is not in
breach or default, and, to the Company's knowledge after due
inquiry, no event has occurred which with notice or lapse of time
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<PAGE>
would constitute a breach or default or permit termination,
modification or acceleration thereunder; (iv) to the Company's
knowledge after due inquiry, the underlying item of Intellectual
Property is not subject to any outstanding judgment, order,
decree, stipulation or injunction; and (v) no license or other fee
is payable by the Company upon any transfer or assignment of such
license, sublicense or other agreement.
(c) Except as set forth in Section 2.12 of the Disclosure
Schedule, the Company (i) has not been named in any suit, action
or proceeding which involves a claim of infringement or
misappropriation of any Intellectual Property right of any third
party or (ii) has not received any written notice alleging any
such claim of infringement or misappropriation. The Company has
made available to the Buyer correct and complete copies of all
such suits, actions or proceedings or written notices. Except as
set forth in Section 2.12 of the Disclosure Schedule, to the best
knowledge of the Company, the manufacturing, marketing, licensing
or sale of the products or performance of the service offerings of
the Company do not currently infringe, and have not within the six
years prior to the date of this Agreement infringed, any
Intellectual Property right of any third party; and to the best
knowledge of the Company, the Intellectual Property rights of the
Company are not being infringed by activities, products or
services of any third party.
(d) To the Company's knowledge, after due inquiry, the
Company has taken no action which could reasonably be expected to
foreclose alternate courses (e.g., invalidation, unenforceability,
antitrust or claims for legal fees) in the existing patent
litigation between the Company and Robotic Visions Systems, Inc.
2.13 Real Property Leases. Section 2.13 of the Disclosure
--------------------
Schedule lists and describes briefly all real property leased or
subleased to the Company. The Company has delivered to the Buyer
correct and complete copies of the leases and subleases (as
amended to date) listed in Section 2.13 of the Disclosure
Schedule. Except as set forth in Section 2.13 of the Disclosure
Schedule, with respect to each lease and sublease listed in
Section 2.13 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding,
enforceable against the Company, and to the best knowledge of the
Company, against each other party thereto (subject to bankruptcy,
insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally, and to general
equitable principles) and in full force and effect and will
continue to be so following the Closing in accordance with the
terms thereof as in effect prior to the Closing;
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<PAGE>
(b) neither the Company nor, to the Company's best
knowledge, any other party to the lease or sublease is in breach
or default, and to the Company's best knowledge no event has
occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or
acceleration thereunder;
(c) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease; and
(d) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the
leasehold or subleasehold.
2.14 Contracts. Section 2.14 of the Disclosure Schedule
---------
lists the following written arrangements (including without
limitation written agreements) to which the Company is a party:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third
parties providing for lease payments in excess of $25,000 per
annum;
(b) any written arrangement (or group of related written
arrangements) for the licensing or distribution of software,
products or other personal property or for the furnishing or
receipt of services (i) which calls for performance over a period
of more than one year, (ii) which involves more than the sum of
$25,000, or (iii) in which the Company has granted rights to
license, sublicense or copy, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating
to any products or territory or has agreed to purchase a minimum
quantity of goods or services or has agreed to purchase goods or
services exclusively from a certain party or has entered into a
conditional sale of goods;
(c) any written arrangement establishing a partnership or
joint venture;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or
guaranteed (or has the right to create, incur, assume, or
guarantee) indebtedness (including capitalized lease obligations)
involving more than $25,000 or under which it has imposed (or may
impose) a Security Interest on any of its assets, tangible or
intangible;
(e) any written arrangement concerning confidentiality or
noncompetition;
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<PAGE>
(f) any written arrangement involving any of the Company
Stockholders or their affiliates, as defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") ("Affiliates");
(g) any written arrangement under which the consequences of
a default or termination could have a Material Adverse Effect; and
(h) any other written arrangement (or group of related
written arrangements) either involving more than $50,000 or which
is material and not entered into in the Ordinary Course of
Business.
The Company has delivered to the Buyer a correct and complete
copy of each written arrangement (as amended to date) listed in
Section 2.14 of the Disclosure Schedule. With respect to each
written arrangement so listed: (i) the written arrangement is
legal, valid, binding and enforceable against the Company, and to
the best knowledge of the Company, against each other party
thereto (subject to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights
generally, and to general equitable principles) and in full force
and effect; (ii) the written arrangement will continue to be
legal, valid, binding and enforceable against the Company, and to
the best knowledge of the Company, against each other party
thereto (subject to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights
generally, and to general equitable principles) and in full force
and effect immediately following the Closing in accordance with
the terms thereof as in effect prior to the Closing; and
(iii) neither the Company, nor to the best knowledge of the
Company, any other party is in breach or default, and, to the
Company's best knowledge, no event has occurred which with notice
or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration, under the written
arrangement. The Company is not a party to any oral contract,
agreement or other arrangement which, if reduced to written form,
would be required to be listed in Section 2.14 of the Disclosure
Schedule under the terms of this Section 2.14.
2.15 Powers of Attorney. There are no outstanding powers of
------------------
attorney executed on behalf of the Company.
2.16 Insurance. Section 2.16 of the Disclosure Schedule
---------
lists each insurance policy (including fire, theft, casualty,
general liability, workers compensation, business interruption,
environmental, product liability and automobile insurance policies
and bond and surety arrangements) to which the Company is a party,
a named insured, or otherwise the beneficiary of coverage at any
time within the past year. Each such policy is enforceable
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<PAGE>
against the Company, and to the best knowledge of the Company,
against each other party thereto (subject to bankruptcy,
insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally, and to general
equitable principles) and in full force and effect and will
continue to be enforceable against the Company, and to the best
knowledge of the Company, against each other party thereto
(subject to bankruptcy, insolvency, moratorium and other similar
laws affecting the enforcement of creditors' rights generally, and
to general equitable principles) and in full force and effect
following the Closing.
The Company is not in breach or default (including with
respect to the payment of premiums or the giving of notices) under
such policy, and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration, under such policy; and
the Company has not received any notice from the insurer
disclaiming coverage or reserving rights with respect to a
particular claim or such policy in general. The Company has not
incurred any material loss, damage, expense or liability covered
by any such insurance policy for which it has not properly
asserted a claim under such policy. After due inquiry, the
Company believes it is covered by insurance in scope and amount
customary and reasonable for the businesses in which it is
engaged.
2.17 Litigation. Section 2.17 of the Disclosure Schedule
----------
identifies, and contains a brief description of, (a) any
unsatisfied judgement, order, decree, stipulation or injunction
binding on the Company and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental
Entity or before any arbitrator to which the Company is a party
or, to the best knowledge of the Company, is threatened to be made
a party. Other than as set forth in Section 2.17 of the
Disclosure Schedule, none of the complaints, actions, suits,
proceedings, hearings, and investigations set forth in
Section 2.17 of the Disclosure Schedule, if determined adversely
to the Company, could have a Material Adverse Effect.
2.18 Employees. Section 2.18 of the Disclosure Schedule
---------
contains a list of all employees of the Company, along with the
position and the annual rate of compensation of each such person.
Except as set forth in Section 2.18 of the Disclosure Schedule,
each such employee has entered into a confidentiality/assignment
of inventions agreement with the Company, the form of which has
previously been delivered to the Buyer. To the best knowledge of
the Company, no key employee or group of employees has any plans
to terminate employment with the Company. The Company is not a
party to or bound by any collective bargaining agreement, nor has
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<PAGE>
it experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company
has no knowledge of any organizational effort made or threatened,
either currently or within the past two years, by or on behalf of
any labor union with respect to employees of the Company.
2.19 Employee Benefits.
-----------------
(a) Section 2.19(a) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans (as
defined below) maintained, or contributed to, by the Company or
any ERISA Affiliate (as defined below). For purposes of this
Agreement, "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), any
"employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and any other written or oral plan, agreement, arrangement
or practice involving direct or indirect compensation, including
without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate"
means any entity which is a member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code), (ii) a
group of trades or businesses under common control (as defined in
Section 414(c) of the Code), or (iii) an affiliated service group
(as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes the
Company. Complete and accurate copies of (i) all Employee Benefit
Plans which have been reduced to writing, (ii) written summaries
of all unwritten Employee Benefit Plans, (iii) all related trust
agreements, insurance contracts and summary plan descriptions, and
(iv) all annual reports filed on IRS Form 5500, 5500C or 5500R for
the last two plan years for each Employee Benefit Plan, have been
delivered to the Buyer. Each Employee Benefit Plan has been
administered in all material respects in accordance with its terms
and each of the Company and the ERISA Affiliates has met its
obligations with respect to such Employee Benefit Plan and has
made all required contributions thereto for the period to time
covered by the applicable statute of limitations. The Company and
all Employee Benefit Plans are in compliance in all material
respects with the currently applicable provisions of ERISA and the
Code and the regulations thereunder.
(b) To the best knowledge of the Company, there are no
investigations by any Governmental Entity, termination proceedings
or other claims (except claims for benefits payable in the normal
operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders), suits or
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<PAGE>
proceedings against or involving any Employee Benefit Plan or
asserting any rights or claims to benefits under any Employee
Benefit Plan that could give rise to any material liability.
(c) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received
determination letters from the Internal Revenue Service to the
effect that such Employee Benefit Plans are qualified and the
plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of
the Code, no such determination letter has been revoked and, to
the best knowledge of the Company, revocation has not been
threatened. No amendment of such Employee Benefit Plan has been
adopted since the date of its most recent determination letter or
application therefor and no act or omission has occurred that
would adversely affect its qualification or increase its cost.
(d) Neither the Company nor any ERISA Affiliate has ever
maintained an Employee Benefit Plan subject to Section 412 of the
Code or Title IV of ERISA.
(e) At no time has the Company or any ERISA Affiliate been
obligated to contribute to any "multi-employer plan" (as defined
in Section 4001(a)(3) of ERISA).
(f) Except as set forth in Section 2.19(f) of the Disclosure
Schedule, there are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to
any employee of the Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage
and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code
and insurance conversion privileges under state law.
(g) No act or omission has occurred and no condition exists
with respect to any Employee Benefit Plan maintained by the
Company or any ERISA Affiliate that would subject the Company or
any ERISA Affiliate to any fine, penalty, tax or liability of any
kind imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated with,
or related to a "voluntary employee's beneficiary association"
within the meaning of Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or
agreement, summary plan description or other written communication
distributed generally to employees by its terms prohibits the
Company from amending or terminating any such Employee Benefit
Plan.
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<PAGE>
(j) Section 2.19(j) of the Disclosure Schedule discloses
each: (i) oral or written agreement or arrangement with any
director, executive officer or other key employee of the Company
(A) the benefits of which are contingent, or the terms of which
are altered, upon the occurrence of a transaction involving the
Company of the nature of any of the transactions contemplated by
this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such
director, executive officer or key employee; (ii) agreement, plan
or arrangement under which any person may receive payments from
the Company that may be subject to the tax imposed by Section 4999
of the Code or included in the determination of such person's
"parachute payment" under Section 280G of the Code; and
(iii) agreement or plan binding the Company, including without
limitation any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit
plan, or any Employee Benefit Plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
2.20 Environmental Matters.
---------------------
(a) The Company has complied in all material respects with
all applicable Environmental Laws (as defined below). There is no
pending or, to the best knowledge of the Company, threatened civil
or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any
Environmental Law involving the Company. For purposes of this
Agreement, "Environmental Law" means any federal, state or local
law, statute, rule or regulation or the common law relating to the
environment or occupational health and safety, including without
limitation any statute, regulation or order pertaining to
(i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous
waste; (ii) air, water and noise pollution; (iii) groundwater and
soil contamination; (iv) the release or threatened release into
the environment of industrial, toxic or hazardous substances, or
solid or hazardous waste, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wild life, marine
sanctuaries and wetlands, including without limitation all
endangered and threatened species; (vi) storage tanks, vessels and
containers; (vii) underground and other storage tanks or vessels,
abandoned, disposed or discarded barrels, containers and other
closed receptacles; (viii) health and safety of employees and
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other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or
handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or
solid or hazardous waste. As used above, the terms "release" and
"environment" shall have the meaning set forth in the federal
Comprehensive Environmental Compensation, Liability and Response
Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at
any parcel of real property or any facility when owned, operated
or controlled by the Company. The Company is not aware of any
other releases of Materials of Environmental Concern that could
reasonably be expected to have an impact on the real property or
facilities owned, operated or controlled by the Company. For
purposes of this Agreement, "Materials of Environmental Concern"
means any chemicals, pollutants or contaminants, hazardous
substances (as such term is defined under CERCLA), solid wastes
and hazardous wastes (as such terms are defined under the federal
Resources Conservation and Recovery Act), toxic materials, oil or
petroleum and petroleum products, or any other material subject to
regulation under any Environmental Law.
(c) Set forth in Section 2.20(c) of the Disclosure Schedule
is a list of all environmental reports, investigations and audits
relating to premises currently or previously owned or operated by
the Company (whether conducted by or on behalf of the Company or a
third party, and whether done at the initiative of the Company or
directed by a Governmental Entity or other third party) which were
issued or conducted during the past five years and which the
Company has possession of or access to. Complete and accurate
copies of each such report, or the results of each such
investigation or audit, have been provided to the Buyer.
(d) Set forth in Section 2.20(d) of the Disclosure Schedule
is a list of all of the solid and hazardous waste transporters and
treatment, storage and disposal facilities that have been utilized
by the Company. The Company is not aware of any material
environmental liability of any such transporter or facility.
2.21 Legal Compliance. The Company and the conduct and
----------------
operations of its businesses are in compliance with each law
(including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity,
which (a) affects or relates to this Agreement or the transactions
contemplated hereby or (b) is applicable to the Company or
business, except in either case for any violation of or default
under a law which reasonably may be expected not to have a
Material Adverse Effect.
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2.22 Permits. Section 2.22 of the Disclosure Schedule sets
-------
forth a list of all material permits, licenses, registrations,
certificates, orders or approvals from any Governmental Entity
(including without limitation those issued or required under
applicable export laws or regulations) ("Permits") issued to or
held by the Company. Such listed Permits are the only Permits
that are required for the Company to conduct its businesses as
presently conducted or as proposed to be conducted, except for
those the absence of which would not have any Material Adverse
Effect. Each such Permit is in full force and effect and, to the
best of the knowledge of the Company, no suspension or
cancellation of such Permit is threatened and there is no basis
for believing that such Permit will not be renewable upon
expiration. Except as set forth in Section 2.22 of the Disclosure
Schedule, each such Permit will continue in full force and effect
following the Closing.
2.23 Certain Business Relationships With Affiliates. Except
----------------------------------------------
as set forth in Section 2.23 of the Disclosure Schedule, no
Affiliate of the Company (a) owns any property or right, tangible
or intangible, which is used in the business of the Company,
(b) to the best knowledge of the Company after due inquiry, has
any claim or cause of action against the Company, (c) is a party
to any contract or other arrangement, written or verbal, with the
Company, or (d) owes any money to the Company. Section 2.23 of
the Disclosure Schedule describes any transactions or
relationships between the Company and any Affiliate thereof which
are reflected in the statements of operations of the Company
included in the Financial Statements.
2.24 Brokers' Fees. Except as disclosed in Section 2.24 of
-------------
the Disclosure Schedule, the Company has no liability or
obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this
Agreement.
2.25 Books and Records. The minute books and other similar
-----------------
records of the Company contain true and complete records of all
actions taken at any meetings of the Company's stockholders, Board
of Directors or any committee thereof and of all written consents
executed in lieu of the holding of any such meeting, except for
those occurring after April 10, 1996, which will be completed
prior to the Closing. No resolutions or votes have been adopted
or approved by the Board of Directors of the Company since
April 10, 1996, to and including the date of this Agreement,
whether at a meeting or by written consent, except as disclosed in
Section 2.25 of the Disclosure Schedule. Except as disclosed in
Section 2.25 of the Disclosure Schedule, the books and records of
the Company have been maintained in accordance with good business
and bookkeeping practices.
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2.26 Pooling. Neither the Company nor any of its Affiliates
-------
has through the date of this Agreement taken or agreed to take any
action that would prevent the Company and the Buyer from
accounting for the business combination to be effected by the
Merger as a "pooling of interests" in conformity with GAAP.
2.27 Company Action. The Board of Directors of the Company,
--------------
at a meeting duly called and held, has by the unanimous vote of
all directors (i) determined that the Merger is fair and in the
best interests of the Company and its stockholders, (ii) adopted
this Agreement in accordance with the provisions of the California
Corporations Code, and (iii) directed that this Agreement and the
Merger be submitted to the Company Stockholders for their adoption
and approval and resolved to recommend that Company Stockholders
vote in favor of the adoption of this Agreement and the approval
of the Merger.
2.28 Inventory. Except as set forth in Section 2.28 of the
---------
Disclosure Schedule, all inventory of the Company, whether or not
reflected on the Most Recent Balance Sheet, consists of a quality
and quantity usable and saleable in the Ordinary Course of
Business and does not include excessive quantities of inventory
given the present circumstances of the Company, except for
obsolete items, excess items and items of below-standard quality,
all of which have been written-off or written-down to net
realizable value on the Most Recent Balance Sheet, in accordance
with generally accepted accounting principles consistently applied
by the Company. All inventories not written-off have been priced
at the lower of cost or market on a first-in, first-out basis in
accordance with generally accepted accounting principles
consistently applied by the Company.
2.29 Accounts Receivable. Except as set forth in
-------------------
Section 2.29 of the Disclosure Schedule, all accounts receivable
of the Company reflected on the Most Recent Balance Sheet
represent valid claims, enforceable against the account debtor,
subject to no setoffs or counterclaims beyond the reserves
established therefor. All accounts receivable reflected in the
financial or accounting records of the Company that have arisen
since the Most Recent Fiscal Quarter End represent valid claims,
enforceable against the account debtor, subject to no setoffs or
counterclaims. Section 2.29 of the Disclosure Schedule sets forth
a true and correct aging of the accounts receivable of the Company
as of May 7, 1996.
2.30 Product Warranty. Except as set forth in Section 2.30
----------------
of the Disclosure Schedule, no product manufactured, sold, leased,
licensed or delivered by the Company is subject to any guaranty,
warranty, right of return or other indemnity beyond the applicable
standard terms and conditions of sale or lease, which are set
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forth in Section 2.30 of the Disclosure Schedule. Section 2.30 of
the Disclosure Schedule sets forth the Company's policy with
respect to the booking of warranty reserves.
2.31 Disclosure. No representation or warranty by the
----------
Company contained in this Agreement, and no statement contained in
the Disclosure Schedule or any other certificate or instrument
delivered or to be delivered to the Buyer or any of its agents or
Affiliates by or on behalf of the Company pursuant to this
Agreement, and no other written statement or information furnished
by or on behalf of the Company for use in connection with
soliciting approval of the Merger by the Company Stockholders or
in the Notice of Hearing before the California Commissioner of
Corporations contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein
not misleading. The Company has disclosed to the Buyer all
material information known to the Company which relates to the
Company; provided, however, that such representation does not
extend to general economic or market conditions or applicable
legislation or regulations affecting generally the business or
industry in which the Company operates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary, jointly and
severally, represent and warrant to the Company as follows:
3.1 Organization. Each of the Buyer and the Transitory
------------
Subsidiary is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation.
3.2 Capitalization. The authorized capital stock of the
--------------
Buyer consists of (a) 15,000,000 shares of Buyer Common Stock, of
which 10,385,600 shares were issued and outstanding, 1,096,270
shares were reserved for issuance upon outstanding options and
warrants and 365,995 shares were held in the treasury of the Buyer
as of June 5, 1996 and (b) 1,000,000 shares of preferred stock of
which no shares were issued and outstanding on June 5, 1996. If
the 3(a)(10) Alternative is chosen, the Buyer Common Shares to be
issued in the Merger will be issued in a transaction exempt from
registration under the Securities Act, by reason of
Section 3(a)(10) thereof and will not be more restricted for
non-affiliates of either the Buyer or the Company than if the
Buyer Common Shares to be issued in the Merger were registered
under the Securities Act pursuant to a registration statement on
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<PAGE>
Form S-4, and with respect to Affiliates of the Company, not more
restrictive than pursuant to the provisions of Rule 145(d),
excluding any holding period requirement, under the Securities
Act. All of the issued and outstanding shares of Buyer Common
Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All of the
Merger Shares will be, when issued in accordance with this
Agreement, duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights.
3.3 Authorization of Transaction. Each of the Buyer and the
----------------------------
Transitory Subsidiary has all requisite power and authority to
execute and deliver this Agreement and (in the case of the Buyer)
the Escrow Agreement and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement and (in
the case of the Buyer) the Escrow Agreement by the Buyer and the
Transitory Subsidiary, the performance of this Agreement and (in
the case of the Buyer) the Escrow Agreement and the consummation
of the transactions contemplated hereby and thereby by the Buyer
and the Transitory Subsidiary have been duly and validly
authorized by all necessary corporate action on the part of the
Buyer and Transitory Subsidiary. No vote of the Buyer's
stockholders is required for the approval of this Agreement and
the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the
Buyer and the Transitory Subsidiary and constitutes a valid and
binding obligation of the Buyer and the Transitory Subsidiary,
enforceable against them in accordance with its terms.
3.4 Noncontravention. Subject to compliance with the
----------------
applicable requirements of the Securities Act and any applicable
state securities laws, the Exchange Act, the Hart-Scott-Rodino Act
and the filing of the Certificate of Merger as required by the
California Corporations Code, neither the execution and delivery
of this Agreement or (in the case of the Buyer) the Escrow
Agreement by the Buyer or the Transitory Subsidiary, nor the
consummation by the Buyer or the Transitory Subsidiary of the
transactions contemplated hereby or thereby, will (a) conflict
with or violate any provision of the charter or By-laws of the
Buyer or the Transitory Subsidiary, (b) require on the part of the
Buyer or the Transitory Subsidiary any filing with, or permit,
authorization, consent or approval of, any Governmental Entity,
(c) conflict with, result in a breach of, constitute (with or
without due notice or lapse of time or both) a default under,
result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice,
consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage
for borrowed money, instrument of indebtedness, Security Interest
or other arrangement to which the Buyer or Transitory Subsidiary
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<PAGE>
is a party or by which either is bound or to which any of their
assets are subject, or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Buyer or the
Transitory Subsidiary or any of their properties or assets.
3.5 Reports and Financial Statements. The Buyer has
--------------------------------
previously furnished to the Company complete and accurate copies,
as amended or supplemented, of its (a) Prospectus dated September
21, 1995, (b) Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1995, (c) Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, (d) Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996, each as
filed with the Securities and Exchange Commission (the "SEC"), and
(e) all other reports filed by the Buyer under Section 13 of the
Exchange Act with the SEC since December 31, 1995 (such reports
are collectively referred to herein as the "Buyer Reports"). The
Buyer Reports constitute all of the documents required to be filed
by the Buyer under the Exchange Act with the SEC since
September 21, 1995. As of their respective dates, the Buyer
Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
audited financial statements and unaudited interim financial
statements of the Buyer included in the Buyer Reports (i) comply
as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto, (ii) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered
thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as
permitted by Form 10-Q under the Exchange Act), (iii) fairly
present the consolidated financial condition, results of
operations and cash flows of the Buyer as of the respective dates
thereof and for the periods referred to therein, and (iv) are
consistent with the books and records of the Buyer.
3.6 Absence of Material Adverse Changes. Since March 31,
-----------------------------------
1996, there has not been any material adverse change in the
assets, business, financial condition or results of operations of
the Buyer, nor has there occurred any event or development which
could reasonably be foreseen by the Buyer to result in such a
material adverse change in the future.
3.7 Pooling. Neither the Buyer nor any of its Affiliates
-------
has taken or agreed to take any action that would prevent the
Company and the Buyer from accounting for the business combination
to be effected by the Merger as a "pooling of interests" in
conformity with GAAP.
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<PAGE>
3.8 Brokers' Fees. Neither the Buyer nor the Transitory
-------------
Subsidiary has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement, except that Needham &
Company LLC served as financial advisor to the Buyer with respect
to the transactions contemplated by this Agreement and its fees
and expenses will be paid by the Buyer.
3.9 Disclosure. No representation or warranty by the Buyer
----------
contained in this Agreement, and no statement contained in any
other certificate or instrument delivered or to be delivered to
the Company or any of its agents or Affiliates by or on behalf of
the Buyer pursuant to this Agreement, and no other written
statement or information furnished by or on behalf of the Buyer
for use in connection with soliciting approval of the Merger by
the Company Stockholders or in the Notice of Hearing before the
California Commissioner of Corporations, contains or will contain
any untrue statement of a material fact or omit or will omit to
state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE IV
COVENANTS
4.1 Best Efforts. Each of the Parties shall use its best
------------
efforts, to the extent commercially reasonable, to take all
actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement,
including to seek auditors reports on financial statements and to
seek consents from Ernst & Young LLP to include the Company's
historical financial information in any required governmental
filing; provided, however, that notwithstanding anything in this
Agreement to the contrary, the Buyer shall not be required to sell
or dispose of or hold separately (through a trust or otherwise)
any assets or businesses of the Buyer or its Affiliates.
4.2 Notices and Consents. The Company shall use its best
--------------------
efforts to obtain, at its expense, all such waivers, permits,
consents, approvals or other authorizations from third parties and
Governmental Entities, and to effect all such registrations,
filings and notices with or to third parties and Governmental
Entities, as may be required by or with respect to the Company in
connection with the transactions contemplated by this Agreement
(including without limitation those listed in Section 2.4 or
Section 2.22 of the Disclosure Schedule).
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<PAGE>
4.3 Exemption from Registration or Securities Act
---------------------------------------------
Registration; Preparation of Notice of Meeting and Proxy Statement
------------------------------------------------------------------
or Information Statement.
------------------------
(a) The Buyer and the Company shall prepare an Application
for Qualification of Securities by Permit under Section 25121 of
the California Corporate Securities Law of 1968, as amended, and
all related documents, including a related notice of hearing and
the proxy or information statement or other disclosure material to
be supplied to the holders of Company shares in connection with
the Merger (collectively, the "Hearing Documents"). The Buyer and
the Company will file the Hearing Documents as promptly as
practical with the California Department of Corporations and
request a hearing on the fairness of the Merger pursuant to
Section 25142 of the California Corporate Securities Law (the
"Fairness Hearing"). The Buyer and the Company will thereafter
use their best efforts to obtain a finding of fairness and the
issuance of the required Permit by the California Department of
Corporations.
(b) However, notwithstanding the foregoing, if the Buyer and
the Company determine that the 3(a)(10) Alternative is unavailable
or undesirable for any reason, then, as promptly as practicable
after such determination, the Company and the Buyer shall prepare,
and the Buyer shall file with the SEC, a Form S-4 which shall
include the Company's preliminary proxy materials relating to the
approval of the Merger and the transactions contemplated hereby by
the stockholders of the Company as a prospectus relating to the
offer and sale of the shares of Buyer Common Stock (the "S-4
Alternative") which complies in form with applicable SEC
requirements and the Company shall use all reasonable efforts to
cause the Form S-4 to become effective as soon after the receipt
of final comments from the SEC thereon as practicable. Such proxy
statement/prospectus shall include the recommendation of the Board
of Directors of the Company in favor of the Merger. The Company
shall furnish to the Buyer all information concerning the Company
and the holders of capital stock of the Company as may be
reasonably requested in connection with any action contemplated by
this Section 4.3(b).
(c) As soon as practicable after the execution of this
Agreement, the Company, in consultation with the Buyer, shall
prepare (a) a Notice of Meeting and Proxy Statement or (b)
Information Statement (as applicable, the "Statement") for the
stockholders of the Company to approve this Agreement, and the
transactions contemplated hereby. The Statement and other Hearing
Documents shall constitute a disclosure document for the offer and
sale of the shares of Buyer Common Stock to be received by the
holders of Company Shares in the Merger. The Company shall use
commercially reasonable efforts, with the cooperation of the
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Buyer, to cause such Statement to be distributed to the Company's
stockholders promptly following the Hearing and issuance of the
Permit as provided in 4.3(a) above. The Buyer and the Company
shall each use commercially reasonable efforts to cause the
Statement to comply with applicable federal and state securities
laws requirements. Each of the Buyer and the Company agrees to
provide promptly to the other such information concerning its
business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Statement, or in any
amendments or supplements thereto, and to cause its counsel and
auditors to cooperate with the other's counsel and auditors in the
preparation of the Statement. The Company will promptly advise
the Buyer, and the Buyer will promptly advise the Company, in
writing if at any time prior to the Effective Time either the
Company or the Buyer shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the
Statement in order to make the statements contained or
incorporated by reference therein not misleading or to comply with
applicable law. The Statement shall contain the recommendation of
the Board of Directors of the Company that the Company
stockholders approve the Merger and this Agreement and the
conclusion of the Board of Directors that the terms and conditions
of the Merger are fair and reasonable to the stockholders of the
Company. The Company shall otherwise use its best efforts to
obtain Requisite Stockholder Approval. Anything to the contrary
contained herein notwithstanding, the Company shall not include in
the Statement any information with respect to the Buyer or its
affiliates or associates, the form and content of which
information shall not have been approved by the Buyer prior to
such inclusion.
(d) Unless an Information Statement and an Action By Written
Consent of the Stockholders is used, the Company shall promptly
after the date hereof take all action necessary in accordance with
the California Corporations Code and its Articles of Incorporation
and Bylaws to convene a stockholders' meeting (the "Company
Special Meeting"). If the 3(a)(10) Alternative is used, such
Company Special Meeting will follow the Hearing and issuance of
the Permit or after effectiveness of the Form S-4 if applicable.
The Company shall consult with the Buyer as to the date of the
Meeting and/or the Action by Written Consent in lieu of a meeting
and shall not postpone or adjourn (other than for the absence of a
quorum) the Company Special Meeting without the consent of the
Buyer. Following the Hearing and issuance of the Permit, the
Company shall use its best efforts to solicit from stockholders of
the Company proxies or actions by written consent in favor of the
Merger and shall take all other action necessary or advisable to
secure the vote or consent of stockholders required by California
law to effect the Merger.
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(e) The Company, acting through its Board of Directors,
shall include in the Prospectus/Proxy Statement the recommendation
of its Board of Directors that the Company Stockholders vote in
favor of the adoption of this Agreement and the approval of the
Merger, and shall otherwise use its best efforts to obtain the
Requisite Stockholder Approval.
(f) If the 3(a)(10) Alternative is not chosen and the
Company and the Buyer proceed with the S-4 Alternative, none of
the information supplied or to be supplied by or on behalf of the
Company for inclusion in the Form S-4 to be filed with the SEC by
the Buyer in connection with the issuance of the Buyer Common
Stock in or as a result of the Merger, including the proxy
statement, will, at the date such information is supplied and, as
thereafter amended or supplemented, at the time of the Company
Special Meeting, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they
are made, not misleading or, as thereafter amended or
supplemented, will, in the case of the Form S-4, at the time the
Form S-4 becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
4.4 Hart-Scott-Rodino Act. Each of the Parties shall
---------------------
promptly file any Notification and Report Forms and related
material that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, shall use
its best efforts to obtain an early termination of the applicable
waiting period, and shall make any further filings or information
submissions pursuant thereto that may be necessary, proper or
advisable.
4.5 Operation of Business. Except as contemplated by this
---------------------
Agreement, during the period from the date of this Agreement to
the Effective Time, the Company shall conduct its operations in
the Ordinary Course of Business and in compliance with all
applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its
current business organization, keep its physical assets in good
working condition, keep available the services of its current
officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it
to the end that its goodwill and ongoing business shall not be
impaired in any material respect. Without limiting the generality
of the foregoing, prior to the Effective Time, the Company shall
not, without the written consent of the Buyer:
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(a) issue, sell, deliver or agree or commit to issue, sell
or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or
otherwise) or authorize the issuance, sale or delivery of, or
redeem or repurchase, any stock of any class or series or any
other securities or any rights, warrants or options to acquire any
such stock or other securities (except pursuant to the conversion
or exercise of convertible securities or Options outstanding on
the date hereof), or amend any of the terms of any such
convertible securities or Options, except for the grant of options
to purchase up to 10,000 shares, in the aggregate, of the
Company's Class A Common Stock under the Company's 1994 Stock
Option Plan, in the normal course of business consistent with past
practice;
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock;
(c) create, incur or assume any debt not currently
outstanding (including obligations in respect of capital leases)
other than debt incurred under existing bank credit facilities in
a manner consistent with past practice and in the usual and
customary course of business, assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person
or entity; or make any loans, advances or capital contributions
to, or investments in, any other person or entity;
(d) enter into, adopt or amend any Employee Benefit Plan or
any employment or severance agreement or arrangement of the type
described in Section 2.19(j) or (except for normal increases in
the Ordinary Course of Business) increase in any manner the
compensation or fringe benefits of, or materially modify the
employment terms of, its directors, officers or employees,
generally or individually, or pay any benefit not required by the
terms in effect on the date hereof of any existing Employee
Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any assets
or property (including without limitation any shares or other
equity interests in or securities of any corporation, partnership,
association or other business organization or division thereof),
other than purchases and sales of assets in the Ordinary Course of
Business;
(f) amend its Articles of Incorporation or By-laws;
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<PAGE>
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a
generally applicable change in GAAP;
(h) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of
Business;
(i) mortgage or pledge any of its property or assets or
subject any such assets to any Security Interest;
(j) sell, assign, transfer or license any Intellectual
Property, other than in the Ordinary Course of Business, or
acquire directly or enter into a license to acquire any
Intellectual Property;
(k) dispose of, add to, adjust or otherwise make changes to
inventory other than in a manner consistent with past practices
and in the usual and customary course of business;
(l) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or
waive any rights under, any material contract or agreement;
(m) make or commit to make any capital expenditure in excess
of $25,000 per item;
(n) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to
take action would result in (i) any of the representations and
warranties of the Company set forth in this Agreement becoming
untrue or (ii) any of the conditions to the Merger set forth in
Article V not being satisfied;
(o) take any action that would jeopardize the treatment of
the Merger as a "pooling of interests" for accounting purposes; or
(p) agree in writing or otherwise to take any of the
foregoing actions.
In addition, during the period from the date of this
Agreement to the Effective Time, to the extent permitted by law,
the Company shall provide the Buyer with a copy of all proposed
written responses, offers or filings or a summary of all proposed
oral responses or offers relating to the Company's litigation with
Robotic Vision Systems, Inc. at least three business days prior to
the date the Company proposes to deliver such response, offer or
filing to any third party.
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4.6 Full Access. The Company shall permit representatives
-----------
of the Buyer to have full access (at all reasonable times, and in
a manner so as not to interfere with the normal business
operations of the Company) to all premises, properties, financial
and accounting records and workpapers, contracts, technical data,
other records and documents, and personnel, of or pertaining to
the Company. Without limiting the foregoing, the Buyer shall have
full access to the employees, independent accountants, lawyers,
customers, lenders and key suppliers of the Company.
4.7 Notice of Breaches. The Company shall promptly deliver
------------------
to the Buyer written notice of any event or development that would
(a) render any statement, representation or warranty of the
Company in this Agreement (including the Disclosure Schedule)
inaccurate or incomplete in any material respect, or
(b) constitute or result in a breach by the Company of, or a
failure by the Company to comply with, any agreement or covenant
in this Agreement applicable to such party. The Buyer or the
Transitory Subsidiary shall promptly deliver to the Company
written notice of any event or development that would (i) render
any statement, representation or warranty of the Buyer or the
Transitory Subsidiary in this Agreement inaccurate or incomplete
in any material respect, or (ii) constitute or result in a breach
by the Buyer or the Transitory Subsidiary of, or a failure by the
Buyer or the Transitory Subsidiary to comply with, any agreement
or covenant in this Agreement applicable to such party. No such
disclosure shall be deemed to avoid or cure any such
misrepresentation or breach.
4.8 Exclusivity. Until the earlier of the Effective Time or
-----------
the termination of this Agreement in accordance with its terms,
the Company shall not, and the Company shall use its best efforts
to cause its Affiliates and each of its officers, directors,
employees, representatives and agents not to, directly or
indirectly, (a) encourage, solicit, respond to any solicitation or
inquiry, initiate, engage or participate in any discussions or
negotiations with any person or entity (other than the Buyer)
concerning any merger, consolidation, sale of material assets,
tender offer, recapitalization, accumulation of Company Shares,
proxy solicitation or other business combination involving the
Company or any division of the Company or (b) provide any
non-public information concerning the business, properties or
assets of the Company to any person or entity (other than the
Buyer). The Company shall immediately notify the Buyer of, and
shall disclose to the Buyer all details of, any inquiries,
discussions or negotiations of the nature described in the first
sentence of this Section 4.8.
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4.9 Stockholders Agreements. Each of the parties listed on
-----------------------
Exhibit D has (or will have on or prior to June 12, 1996) agreed
------- -
in writing to vote, subject to the Fairness Hearing, all Company
Shares held beneficially or of record for approval of the Merger
pursuant to Stockholders Agreements substantially in the form
attached hereto as Exhibit E (the "Stockholders Agreements"). The
------- -
Stockholders Agreements have been duly created and delivered to
the Buyer.
4.10 Agreements from Certain Affiliates of the Company.
-------------------------------------------------
Concurrently with the execution of this Agreement, the Company
shall deliver to the Buyer a list of all persons or entities who
are at such time Affiliates of the Company (the "Company
Affiliates"). In order to help ensure that the Merger will be
accounted for as a "pooling of interests", that the issuance of
Merger Shares will comply with the Securities Act and that the
Merger will be treated as a tax-free reorganization, the Company
shall cause each Company Affiliate to execute and deliver to the
Buyer, within 15 days of the date of this Agreement, an Affiliate
Agreement substantially in the form attached hereto as Exhibit F
------- -
(the "Affiliate Agreement").
4.11 Listing of Merger Shares. The Buyer shall use its best
------------------------
efforts to list the Merger Shares on The Nasdaq National Market.
4.12 Monthly Financial Statements. Within 15 business days
----------------------------
after the end of each month prior to the Closing, the Company
shall furnish to the Buyer an unaudited income statement for such
month and a balance sheet as of the end of such month, prepared on
a basis consistent with the unaudited Financial Statements. Such
financial statements shall present fairly the financial condition
and results of operations of the Company on a consolidated basis
as of the dates thereof and for the periods covered thereby, and
shall be consistent with the books and records of the Company,
provided, however, that such Financial Statements will be subject
to normal recurring year-end adjustments (which will not be
material) and do not need to include footnotes.
4.13 Indemnification Agreements. (a) The Buyer shall not,
--------------------------
until the earlier of (i) the issuance of the Buyer's audited
financial statements for the year ending December 31, 1996 or
(ii) the first anniversary of the Closing Date, take any action to
alter or impair any exculpatory or indemnification provisions now
existing (x) in any of the Indemnification Agreements set forth on
Schedule 4.13 of the Disclosure Schedule or (y) in the Articles of
Incorporation or by-laws of the Company for the benefit of any
individual who served as a director or officer or other agent of
the Company at any time prior to the Effective Time (all of such
persons being collectively referred to as "Indemnified Parties")
except for any changes which may be required to conform with
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changes in applicable law and any changes which do not affect the
application of such provisions to acts or omissions of any
Indemnified Parties prior to the Effective Time.
(b) This Section 4.13 (i) shall survive the consummation of
the Merger at the Effective Time, (ii) is intended to benefit the
Company, the Surviving Corporation and the Indemnified Parties and
their respective heirs, executors, administrators, representatives
and successors, and (iii) is in addition to, and not in
substitution for, any other rights to indemnification or
contribution that any such Indemnified Party may have by contract
or otherwise. In the event that, after the Effective Time, the
Buyer or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its assets to any
person, then, and in each such case, proper provision shall be
made so that the successors, assigns and transferees of the Buyer
and the Surviving Corporation, as applicable, assume the
respective obligations of the Buyer and the Surviving Corporation
set forth in this Section 4.13.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of each Party to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received the
Requisite Stockholder Approval;
(b) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
(c) the California Commissioner of Corporations shall have
rendered its order of fairness if the 3(a)(10) Alternative is
chosen, or if the 3(a)(10) Alternative is not chosen by the Buyer,
then the SEC shall have declared the Form S-4 effective in
accordance with the provisions of the Securities Act, and no stop
order suspending the effectiveness of the Form S-4 shall have been
issued by the SEC and remain in effect;
(d) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger or limiting or
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restricting the Buyer's conduct or operation of the business of
the Buyer or the Surviving Corporation after the Merger shall have
been issued and remain in effect, nor shall any proceeding brought
by any Governmental Entity, seeking any of the foregoing, be in
effect; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the
Merger illegal;
(e) the Buyer shall have received all permits and other
authorizations required under applicable state securities laws for
the issuance of the Merger Shares; and
(f) the Buyer and the Company shall each have received the
written opinion of their respective counsel to the effect that the
Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code
(in rendering such opinions counsel may rely upon representations
and certificates of the Buyer, the Transitory Subsidiary, Company
Stockholders and the Company).
5.2 Conditions to Obligations of the Buyer and the
----------------------------------------------
Transitory Subsidiary. The obligation of each of the Buyer and
---------------------
the Transitory Subsidiary to consummate the Merger is subject to
the satisfaction of the following additional conditions:
(a) the number of Dissenting Shares shall not exceed 5% of
the number of outstanding Company Shares as of the Effective Time;
(b) the Company shall have obtained all of the waivers,
permits, consents, approvals or other authorizations, and effected
all of the registrations, filings and notices, referred to in
Section 4.2, except for any which if not obtained or effected
would not have a Material Adverse Effect or affect the ability of
the Parties to consummate the transactions contemplated by this
Agreement;
(c) the representations and warranties of the Company set
forth in Article II shall be true and correct when made on the
date hereof and shall be true and correct in all material respects
as of the Effective Time as if made as of the Effective Time
(including without limitation the representations and warranties
set forth in Sections 2.2, 2.8, 2.28, 2.29 and 2.30), except for
(1) representations and warranties made as of a specific date,
which shall be true and correct as of such date, and (2)
representations and warranties made in Section 2.7 with respect to
the Company's financial operating results between the Most Recent
Fiscal Quarter End and the Effective Time; provided, however, that
the foregoing exception in subclause (2) shall not apply to any
event, occurrence, fact or circumstance that is not in the usual
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and customary course of business and consistent with the Company's
past practice and that causes any such representation or warranty
of the Company set forth in Article II not to be true and correct
in all material respects when made or as if made as of the
Effective Time; provided further, that no action, claim or
-------- -------
proceeding brought by Robotic Vision Systems, Inc. against any of
the Parties arising solely out of the Mutual Non-Disclosure
Agreement dated February 13, 1995 between Robotic Vision Systems,
Inc. and the Buyer shall affect the obligations of the Parties to
consummate the Merger;
(d) the Company shall have performed or complied with in all
material respects its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to
the Effective Time;
(e) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate substantially in the form
attached as Exhibit G to the effect that each of the conditions
------- -
specified in clauses (a) and (c) of Section 5.1 and clauses (a)
through (d) of this Section 5.2 is satisfied in all respects;
(f) the Buyer and the Transitory Subsidiary shall have
received from Paul, Hastings, Janofsky & Walker, counsel to the
Company, an opinion substantially in the form set forth as
Exhibit H attached hereto, addressed to the Buyer and the
------- -
Transitory Subsidiary and dated as of the Closing Date;
(g) the Buyer shall have received a letter from Arthur
Andersen LLP, auditors for the Buyer, in a form reasonably
satisfactory to the Buyer, confirming as of the Effective Time
their letter as of the date of this Agreement to the effect that
the Buyer may treat the Merger as a "pooling of interests" for
accounting purposes (in order to issue such a letter Arthur
Andersen LLP will need to receive a letter from Ernst & Young LLP
addressed to the Company confirming as of the Effective Time their
letter as of the date of this Agreement confirming the
appropriateness of pooling of interests accounting for the Merger
under Accounting Principles Board Opinion 16 if closed and
consummated in accordance with this Agreement);
(h) the Buyer and the Transitory Subsidiary shall have
received the resignations, effective as of the Effective Time, of
each director of the Company;
(i) the Buyer shall have received executed employment and
noncompetition agreements from each of the individuals set forth
in Section 5.2 of the Disclosure Schedule in substantially the
form of Exhibit I attached hereto;
------- -
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<PAGE>
(j) the Buyer, the Company, the Escrow Agent and the
Indemnification Representatives shall have entered into the Escrow
Agreement;
(k) the Buyer shall have received, from all advisors,
consultants, accountants, lawyers, investment bankers, brokers,
agents and other such professionals, final invoices for fees,
services, expenses and other amounts to be paid by the Company in
connection with the sale of the Company contemplated hereby (such
final invoices, together with all invoices previously rendered in
connection with this transaction, the "Transaction Invoices");
(l) each holder of Options (other than Unvested 1994
Options) shall have exercised such Option in full and delivered to
the Company an acknowledgment of such exercise in full or have
delivered to the Company a written instrument providing for the
exercise in full, conversion or exchange of such Option into a
right to receive shares of Buyer Common Stock prior to the Closing
as contemplated by Section 1.11(a) and each holder of Options
shall have agreed in writing to be bound by the provisions of the
Escrow Agreement and the indemnification provisions set forth in
Article VI of this Agreement prior to the Closing; and
(m) all actions to be taken by the Company in connection
with the consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby shall be
reasonably satisfactory in form and substance to the Buyer and the
Transitory Subsidiary.
5.3 Conditions to Obligations of the Company. The obliga-
----------------------------------------
tion of the Company to consummate the Merger is subject to the
satisfaction of the following additional conditions:
(a) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in Article III shall be true and
correct when made on the date hereof and shall be true and correct
in all material respects as of the Effective Time as if made as of
the Effective Time, except for representations and warranties made
as of a specific date, which shall be true and correct as of such
date; provided, that no action, claim or proceeding brought by
--------
Robotic Vision Systems, Inc. against any of the Parties arising
solely out of the Mutual Non-Disclosure Agreement dated
February 13, 1995 between Robotic Vision Systems, Inc. and the
Buyer shall affect the obligations of the Parties to consummate
the Merger;
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<PAGE>
(b) each of the Buyer and the Transitory Subsidiary shall
have performed or complied with in all material respects its
agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Effective Time;
(c) each of the Buyer and the Transitory Subsidiary shall
have delivered to the Company a certificate in the form attached
as Exhibit J to the effect that each of the conditions specified
------- -
in clauses (c), (d) and (e) of Section 5.1 and clauses (a) and (b)
of this Section 5.3 is satisfied in all respects;
(d) the Company shall have received from Hale and Dorr,
counsel to the Buyer and the Transitory Subsidiary, an opinion
substantially in the form set forth as Exhibit K attached hereto,
------- -
addressed to the Company and dated as of the Closing Date;
(e) the Merger Shares shall have been authorized for listing
on The Nasdaq National Market upon official notice of issuance;
and
(f) all actions to be taken by the Buyer and the Transitory
Subsidiary in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments
and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and
substance to the Company.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification. Subject to the limitations set forth
---------------
herein, the Company Stockholders (including the holders of
Options), jointly and severally, shall indemnify the Surviving
Corporation and the Buyer (the "Indemnified Persons") in respect
of, and hold the Indemnified Persons harmless against, any and all
debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or
unknown, or due or to become due or otherwise), monetary damages,
fines, fees, penalties, interest obligations, deficiencies, losses
and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, fees
and expenses of attorneys, accountants, financial advisors and
other experts, and other expenses of litigation) incurred or
suffered by the Indemnified Persons or any Affiliate thereof
("Damages"):
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(a) resulting from, relating to or constituting any
misrepresentation, breach of warranty or failure to perform any
covenant or agreement contained in this Agreement or in the
Certificate delivered pursuant to Section 5.2(e);
(b) resulting from any failure of any Company Stockholders
to have good, valid and marketable title to the issued and
outstanding Company Shares held by such Company Stockholders, free
and clear of all liens, claims, pledges, options, adverse claims
or charges of any nature whatsoever;
(c) resulting from any claim by a stockholder or former
stockholder of the Company, or any other person, firm, corporation
or entity, seeking to assert, or based upon: (i) ownership or
rights to ownership of any shares of stock of the Company;
(ii) any rights of a stockholder (other than the right to receive
the Merger Shares pursuant to this Agreement or appraisal rights
under the applicable provisions of the California Corporations
Code, including any option, preemptive rights or rights to notice
or to vote; or (iii) any rights under the Articles of
Incorporation or By-laws of the Company.
6.2 Method of Asserting Claims.
--------------------------
(a) Except as otherwise expressly provided in this
Agreement, all claims for indemnification by an Indemnified Person
pursuant to this Article VI shall be made in accordance with the
provisions of the Escrow Agreement.
(b) If a third party asserts that an Indemnified Person is
liable to such third party for a monetary or other obligation
which may constitute or result in Damages for which such
Indemnified Person may be entitled to indemnification pursuant to
this Article VI, and such Indemnified Person reasonably determines
that it has a valid business reason to fulfill such obligation,
then (i) such Indemnified Person shall be entitled to satisfy such
obligation, without prior notice to or consent from the
Indemnification Representatives, (ii) such Indemnified Person may
make a claim for indemnification pursuant to this Article VI in
accordance with the provisions of the Escrow Agreement, and
(iii) such Indemnified Person shall be reimbursed, in accordance
with the provisions of the Escrow Agreement, for any such Damages
for which it is entitled to indemnification pursuant to this
Article VI (subject to the right of the Indemnification
Representatives to dispute the Indemnified Person's entitlement to
indemnification under the terms of this Article VI or the Escrow
Agreement).
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<PAGE>
(c) The Indemnified Person shall give prompt written
notification to the Indemnification Representatives of the
commencement of any action, suit or proceeding relating to a third
party claim for which indemnification pursuant to this Article VI
may be sought; provided, however, that no delay on the part of the
Indemnified Person in notifying the Indemnification
Representatives shall relieve the Company Stockholders and holders
of Options of any liability or obligation hereunder except to the
extent of any damage or liability caused by or arising out of such
failure. Within 20 days after delivery of such notification, the
Indemnification Representatives may, upon written notice thereof
to the Indemnified Person, assume control of the defense of such
action, suit or proceeding with counsel reasonably satisfactory to
the Indemnified Person, provided the Indemnification
Representatives acknowledge in writing to the Indemnified Person
that any damages, fines, costs or other liabilities that may be
assessed against the Indemnified Person in connection with such
action, suit or proceeding constitute Damages for which the
Indemnified Person shall be entitled to indemnification pursuant
to this Article VI and subject to the limitations set forth
herein. If the Indemnification Representatives do not so assume
control of such defense, the Indemnified Person shall control such
defense. The party not controlling such defense may participate
therein at its own expense; provided that if the Indemnification
Representatives assume control of such defense and the Indemnified
Person reasonably concludes that the indemnifying parties and the
Indemnified Person have conflicting interests or different
defenses available with respect to such action, suit or
proceeding, the reasonable fees and expenses of counsel to the
Indemnified Person shall be considered "Damages" for purposes of
this Agreement. The party controlling such defense shall keep the
other party advised of the status of such action, suit or
proceeding and the defense thereof and shall consider in good
faith recommendations made by the other party with respect
thereto. The Indemnified Person shall not agree to any settlement
of such action, suit or proceeding without the prior written
consent of the Indemnification Representatives, which shall not be
unreasonably withheld. The Indemnification Representatives shall
not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnified Person, which
shall not be unreasonably withheld.
(d) If on or before the Termination Date (as defined in
Section 6.3), the Company's premises at 1651 and 1720 North
Voyager Avenue, Simi Valley, California are sold for an amount
greater than its book value (as set forth on the June 30 Financial
Statements) less all taxes, fees, expenses, commissions and
disbursements relating to such sale (such net amount, the "Net
Profit"), or the Company enters into a binding contract to sell
such premises on or before the Termination Date and such sale is
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closed within 90 days of the Termination Date, then after the
completion of such sale, claims for Damages for which the
Indemnified Persons shall be entitled to indemnification under
this Article VI shall be first offset by the Net Profit before the
Indemnified Persons receive Escrow Shares in consideration of such
claims. Notwithstanding the foregoing, the provisions of this
Section 6.2(d) shall not apply to claims relating to a breach by
the Company or the Company Stockholders of, or failure to comply
with, the provisions of Section 1.19, Section 1.20 or Section
9.11 of this Agreement, for which the Indemnified Persons shall be
entitled to realize 100% of such claims without offset by reason
of the Net Profit.
6.3 Survival. The representations and warranties of the
--------
Company set forth in this Agreement and the indemnification
obligations set forth in this Article VI shall survive the Closing
and the consummation of the transactions contemplated hereby and
continue until the earlier of (i) the issuance of the Buyer's
audited financial statements for the year ending December 31, 1996
or (ii) the first anniversary of the Closing Date (such date, the
"Termination Date") and, in any case, shall not be affected by any
examination made for or on behalf of the Buyer or the knowledge of
any of the Buyer's officers, directors, stockholders, employees or
agents. If a notice is given in accordance with the Escrow
Agreement before expiration of such period, then (notwithstanding
the expiration of such time period) the representation or warranty
applicable to such claim and the related indemnification
obligation in this Article VI shall survive until, but only for
purposes of, the resolution of such claim.
6.4 Limitations. Notwithstanding anything to the contrary
-----------
herein, except as expressly set forth in this Section 6.4 and
Section 9.11, (a) the aggregate liability of the Company
Stockholders for Damages under this Article VI, plus any amount
due pursuant to Section 1.19 hereof, shall not exceed $2,000,000
and (b) the Company Stockholders shall not be liable under this
Article VI until the aggregate Damages exceed $200,000 (at which
point they shall become liable for the aggregate Damages (from the
first dollar of Damages) and not just amounts in excess of
$200,000). The limitations set forth in the foregoing sentence
shall not apply to up to $1,000,000 received by the Indemnified
Persons pursuant to Section 1.20 hereof. Except with respect to
claims based on fraud, the rights of the Indemnified Persons under
this Article VI shall be the exclusive remedy of the Indemnified
Persons with respect to claims resulting from or relating to
Sections 1.19 and 1.20 hereof and to any misrepresentation, breach
of warranty or failure to perform any covenant or agreement of the
Company contained in this Agreement (provided that nothing
contained in this Agreement shall limit or restrict any right or
remedy the Buyer or the Surviving Corporation may have under any
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Environmental Law). No Company Stockholder shall have any right
of contribution against the Company with respect to any breach by
the Company of any of its representations, warranties, covenants
or agreements.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. The Parties may terminate
------------------------
this Agreement prior to the Effective Time (whether before or
after Requisite Stockholder Approval) as provided below:
(a) the Parties may terminate this Agreement by mutual
written consent;
(b) the Buyer may terminate this Agreement if it is not then
in breach by giving written notice to the Company in the event the
Company is in breach, and the Company may terminate this Agreement
if it is not then in breach by giving written notice to the Buyer
and the Transitory Subsidiary in the event the Buyer or the
Transitory Subsidiary is in breach, of any material
representation, warranty or covenant contained in this Agreement,
and such breach is not remedied within 10 days of delivery of
written notice thereof;
(c) any Party may terminate this Agreement by giving written
notice to the other Parties at any time after the Company
Stockholders have voted on whether to approve this Agreement and
the Merger in the event this Agreement and the Merger failed to
receive the Requisite Stockholder Approval;
(d) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or
before September 30, 1996 by reason of the failure of any
condition precedent under Section 5.1 or 5.2 hereof (unless the
failure results primarily from a breach by the Buyer or the
Transitory Subsidiary of any representation, warranty or covenant
contained in this Agreement), unless the S-4 Alternative is chosen
and the Buyer Common Shares are registered under the Securities
Act on Form S-4, in which event such date shall be November 30,
1996; or
(e) the Company may terminate this Agreement by giving
written notice to the Buyer and the Transitory Subsidiary if the
Closing shall not have occurred on or before September 30, 1996 by
reason of the failure of any condition precedent under Section 5.1
or 5.3 hereof (unless the failure results primarily from a breach
by the Company of any representation, warranty or covenant
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contained in this Agreement), unless the S-4 Alternative is chosen
and the Buyer Common Shares are registered under the Securities
Act on Form S-4, in which event such date shall be November 30,
1996.
7.1A Termination By Buyer. The Buyer may terminate this
--------------------
Agreement on or before:
(a) 5:00 p.m., Boston time, on June 17, 1996 in the event
the Buyer has not received an opinion or opinions from the law
firm of Brooks & Kushman, as patent counsel to the Company,
regarding U.S. Patent Nos. 4,529,316, 4,925,308 and 5,465,152; or
(b) 5:00 p.m., Boston time, on the second business day
following receipt of the opinion or opinions referenced in
subparagraph (a) above in the event any one or more of such
opinions (i) is not in the same form, thoroughness and
completeness as the opinion dated March 31, 1995 issued by Brooks
& Kushman regarding U.S. Patent No. 4,238,147 or (ii) does not
contain a conclusion as strongly favorable to the Company, and
similar to that stated, as the March 31, 1995 opinion noted above.
In the event the Buyer receives the last of such opinions from
Brooks & Kushman after 5:00 p.m., Boston time on any given day,
such opinion shall be deemed to have been received by the Buyer on
the next succeeding business day.
7.2 Effect of Termination. If any Party terminates this
---------------------
Agreement pursuant to Section 7.1 or 7.1A, all obligations of the
Parties hereunder shall terminate without any liability of any
Party to any other Party (except for any liability of any Party
for breaches of this Agreement).
ARTICLE VIII
DEFINITIONS
For purposes of this Agreement, each of the following
defined terms is defined in the Section of this Agreement
indicated below.
Defined Term Section
------------ -------
3(a)(10) Alternative 1.7(e)
Affiliates 2.14(f)
Affiliate Agreement 4.10
Andersen 1.20(a)
Backlog Excluding Shinkawa 1.19
Buyer Introduction
Buyer Common Stock 1.5(c)
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Buyer Reports 3.5
CERCLA 2.20(a)
Certificate of Merger 1.1
Certificates 1.7(a)
Class A Common Stock 1.5(c)
Class B Common Stock 1.5(c)
Closing 1.2
Closing Date 1.2
Code 1.11(b)
Company Introduction
Company Affiliate 4.10
Company Shares 1.5(c)
Company Special Meeting 4.3(d)
Company Stockholders 1.5(c)
Conversion Ratio 1.5(c)
Coopers 1.19(c)
Damages 6.1
Disclosure Schedule Article II
Dissenting Shares 1.6(a)
EBIT 1.19
Effective Time 1.1
Employee Benefit Plan 2.19(a)
Environmental Law 2.20(a)
ERISA 2.19(a)
ERISA Affiliate 2.19(a)
Escrow Agreement 1.3
Escrow Agent 1.3
Escrow Percentage 1.10(a)
Escrow Shares 1.5(c)
Exchange Act 2.14(f)
Exchange Agent 1.3
Exchanged Option Shares 1.11(b)
Expense Shares 1.5(c)
Fairness Hearing 4.3(a)
Fully Diluted Basis 1.11(a)
Financial Statements 2.6
Form S-4 1.17
GAAP 1.19
Governmental Entity 2.4
GSI Average Share Price 1.9
GSI Option Shares 1.11(b)
Hart-Scott-Rodino Act 2.4
Indemnification Representatives 1.3
Indemnified Parties 4.13
Indemnified Persons 6.1
Initial Shares 1.5(c)
Intellectual Property 2.12(a)
Intended Uses 2.11(a)
Inventory Adjustment 1.20
Inventory Balance 1.20
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Inventory Methodology 1.20
June 30 Financial Statement 1.19
Material Adverse Effect 2.1
Materials of Environmental Concern 2.20(b)
Merger 1.1
Merger Consideration 1.5(c)
Merger Shares 1.5(c)
Most Recent Balance Sheet 2.8
Most Recent Fiscal Quarter End 2.6
Net Profit 6.2
Options 1.11(a)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.22
Preferred Dividend 1.5
Preferred Stock 1.5
Requisite Stockholder Approval 2.3
Restated Inventory Balance 1.20
S-4 Alternative 4.3(b)
SEC 3.5
Securities Act 1.7(e)
Security Interest 2.4
Statement 4.3(c)
Stockholders Agreements 4.9
Stock Plans 1.11(d)
Surviving Corporation 1.1
Swapped-Out Option Shares 1.11(a)
Taxes 2.9(a)
Tax Returns 2.9(a)
Termination Date 6.3
Third Party Intellectual Property Rights 2.12(a)
Transaction Invoices 5.2(k)
Transitory Subsidiary Introduction
Unvested 1994 Options 1.11(b)
ARTICLE IX
MISCELLANEOUS
9.1 Press Releases and Announcements. No Party shall issue
--------------------------------
any press release or public disclosure relating to the subject
matter of this Agreement without the prior written approval of the
other Parties; provided, however, that any Party may make any
-------- -------
public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing Party shall advise the
other Parties and provide them with a copy of the proposed
disclosure prior to making the disclosure).
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<PAGE>
9.2 No Third Party Beneficiaries. This Agreement shall not
----------------------------
confer any rights or remedies upon any person other than the
Parties and their respective successors and permitted assigns;
provided, however, that the provisions in Article I concerning
-------- -------
issuance of the Merger Shares are intended for the benefit of the
Company Stockholders and the provisions of Section 4.13 are
intended, and shall be, for the benefit of the Indemnified
Parties.
9.3 Entire Agreement. This Agreement (including the
----------------
documents referred to herein) constitutes the entire agreement
among the Parties and supersedes any prior understandings,
agreements, or representations by or among the Parties, written or
oral, with respect to the subject matter hereof, including without
limitation that certain letter agreement dated April 10, 1996
between the Buyer and the Seller, other than the Confidentiality
Agreement between the Company and the Buyer dated December 19,
1995 which remains in full force and effect.
9.4 Succession and Assignment. This Agreement shall be
-------------------------
binding upon and inure to the benefit of the Parties named herein
and their respective successors and permitted assigns. No Party
may assign either this Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of the
other Parties; provided that the Transitory Subsidiary may assign
its rights, interests and obligations hereunder to an Affiliate of
the Buyer.
9.5 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same
instrument.
9.6 Headings. The section headings contained in this
--------
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims and
-------
other communications hereunder shall be in writing. Any notice,
request, demand, claim, or other communication hereunder shall be
deemed duly delivered two business days after it is sent by
registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, or upon receipt if sent by
telecopy with confirmation of transmission (if received during
normal business hours or, if after normal business hours, on the
next business day), in each case to the intended recipient as set
forth below:
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<PAGE>
If to the Company: Copy to:
----------------- -------
View Engineering, Inc. Paul, Hastings,
1650 N. Voyager Avenue Janofsky & Walker
Simi Valley, CA 93063 Twenty-Third Floor
Telecopy: (805) 578-5296 555 South Flower Street
Los Angeles, CA 90071
Telecopy: (213) 627-0705
Attn: President and Attn: Robert A. Miller,
Chief Executive Jr., Esq.
Officer
If to the Buyer: Copy to:
--------------- -------
General Scanning Inc. Hale and Dorr
500 Arsenal Street 60 State Street
Watertown, MA 02172 Boston, MA 02109
Attn: President and Attn: Philip P. Rossetti, Esq.
Chief Executive
Officer
If to the Transitory
--------------------
Subsidiary: Copy to:
---------- -------
GSI Acquisition Sub, Inc. Hale and Dorr
c/o General Scanning Inc. 60 State Street
500 Arsenal Street Boston, MA 02109
Watertown, MA 02172 Telecopy: (617) 526-5000
Telecopy: (617) 924-7327
Attn: President and Attn: Philip P. Rossetti, Esq.
Chief Executive
Officer
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the party
for whom it is intended (except with respect to telecopy
transmissions noted above). Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
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<PAGE>
9.8 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws (and not the law of
conflicts) of the State of California.
9.9 Amendments and Waivers. The Parties may mutually amend
----------------------
any provision of this Agreement at any time prior to the Effective
Time; provided, however, that any amendment effected subsequent to
-------- -------
the Requisite Stockholder Approval shall be subject to the
restrictions contained in the California Corporations Code. No
amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by all of the Parties. No
waiver by any Party of any default, misrepresentation, or breach
of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
9.10 Severability. Any term or provision of this Agreement
------------
that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of
the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of
a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforce-
able and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
9.11 Expenses. Except as set forth in the Escrow Agreement,
--------
each of the Parties shall bear its own costs and expenses
(including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby; provided,
however, that if the Merger is consummated, the Company shall not
-------
incur more than an aggregate of $450,000 in investment banking,
legal, accounting and other fees and expenses in connection with
the Merger and any discussions or negotiations since April 10,
1996 with third parties relating to the sale of the Company or its
business, and any fees and expenses incurred by the Company in
excess of such amount (whether or not such fees and expenses have
been paid prior to the Closing) which are not recovered by the
Buyer in the form of the Expense Shares which are returned by the
Buyer pursuant to Section 1.5(d) shall be recovered by the Buyer,
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<PAGE>
at its sole option, from the Company Stockholders or pursuant to
the Escrow Agreement without regard to the provisions of the first
sentence of Section 6.4 of this Agreement.
9.12 Specific Performance. Each of the Parties acknowledges
--------------------
and agrees that one or more of the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement
are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees
that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms
and provisions hereof in any action instituted in any court of the
United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which
it may be entitled, at law or in equity.
9.13 Construction. The language used in this Agreement shall
------------
be deemed to be the language chosen by the Parties hereto to
express their mutual intent, and no rule of strict construction
shall be applied against any Party.
9.14 Incorporation of Exhibits and Schedules. The Exhibits
---------------------------------------
and Schedules identified in this Agreement are incorporated herein
by reference and made a part hereof.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
GENERAL SCANNING INC.
By: /s/ Charles D. Winston
---------------------------------
Title: President and Chief Executive
Officer
GSI ACQUISITION SUB, INC.
By: /s/ Charles D. Winston
---------------------------------
Title: President and Chief Executive
Officer
VIEW ENGINEERING, INC.
By: /s/ Thomas R. Swain
---------------------------------
Title: President and Chief Executive
Officer
The undersigned, being the duly elected Secretary or
Assistant Secretary of the Transitory Subsidiary, hereby certifies
that this Agreement has been adopted by a majority of the votes
represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ Victor H. Woolley
------------------------------------
Chief Financial Officer and
Secretary
The undersigned, being the duly elected Secretary of the
Company, hereby certifies that this Agreement has been adopted by
the Requisite Stockholder Approval.
/s/ Joanne Felis
------------------------------------
Secretary
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<PAGE>
Exhibit 99.1
------------
NEWS RELEASE
------------
Contact: Fran Crecco
General Scanning Inc.
617-924-1010 Ext. 205
GENERAL SCANNING ANNOUNCES COMPLETION OF ACQUISITION
OF VIEW ENGINEERING
WATERTOWN, MA, August 28, 1996 -- General Scanning Inc.
(Nasdaq: GSCN) today announced the completion of its acquisition
of View Engineering, Inc., Simi Valley, California. The
transaction was accomplished through the merger of View and a
wholly-owned subsidiary of General Scanning and will be recorded
as a pooling of interests for accounting purposes.
The merger, which was announced on April 16, 1996, was consummated
by the exchange of approximately 0.25 shares of Common Stock of
General Scanning for each outstanding share of View capital stock.
General Scanning issued approximately 1.4 million shares of Common
Stock (after giving effect to certain adjustments at the closing)
in exchange for all of the outstanding shares of capital stock,
accrued preferred dividends and the net value of all vested
warrants and options. In addition, General Scanning has reserved
approximately 10,000 additional shares of its Common Stock for
issuance to the holders of unvested View stock options. After the
merger, approximately 11.8 million shares of General Scanning
Common Stock will be outstanding.
View Engineering, headquartered in Simi Valley, California, was a
privately-held company founded in 1977. View designs,
manufactures and markets laser systems used for inspection in
semiconductor and electronics manufacturing and for general
purpose metrology. Current applications include: automatic
semiconductor package measurement of QFPs (quad flat package),
TSOPs (thin small outline package) and BGAs (ball grid arrays);
and in-process inspection of solder paste and component placement
on SMT (surface mount technology) printed circuits. BGA devices
and SMT circuits are gaining increasing acceptance in the
electronics industry. View's inspection and metrology systems
employ non-contact 3-D image processing.
General Scanning Inc., headquartered in Watertown, Massachusetts,
develops and manufactures a broad line of laser systems for a wide
range of applications in the semiconductor, electronics, aircraft
and medical industries. In addition, the Company produces a line
of laser subsystems and components which are used in the Company's
own systems as well as sold to other manufacturers of laser
systems. General Scanning also designs and manufactures under ISO
9001 certification a line of thermal printers for leading medical
instrument companies.
<PAGE>
Both companies' core technology is based upon high accuracy laser
systems. General Scanning's technology is high speed
micropositioning and power control of lasers used to perform high-
precision work, frequently at micron scale. View's laser image
processing technology serves applications requiring precision
inspection, measurement and process control.
