Stock Purchase, Reorganization and Joint Venture Agreement - CTI Group Inc., CTI PET Systems Inc., Terry D. Douglass, Ronald Nutt, Michael C. Crabtree, J. Kelly Milam and Siemens Gammasonics Inc.
STOCK PURCHASE, REORGANIZATION AND JOINT VENTURE AGREEMENT
AMONG
CTI GROUP, INC.,
CTI PET SYSTEMS, INC.,
Dr. Terry D. Douglass,
Dr. Ronald Nutt,
Michael C. Crabtree,
J. Kelly Milam,
and
SIEMENS GAMMASONICS, INC.
<PAGE>
INDEX
1. Certain Definitions
1.1 Affiliate.............................. 1
1.2 Assets................................. 1
1.3 Beneficial Ownership................... 2
1.4 CPS Business........................... 2
1.5 CTI Common Stock....................... 2
1.6 Cyclotron Common Stock................. 2
1.7 Damages................................ 2
1.8 Encumbrance............................ 2
1.9 Exchange Act........................... 2
1.10 Financial Statements................... 2
1.11 Force Majeure.......................... 3
1.12 Governmental Body...................... 3
1.13 Group Common Stock..................... 3
1.14 Non-Siemens Group Shareholders......... 3
1.15 Options to Acquire Group Common Stock.. 3
1.16 Person................................. 3
1.17 Phelps Agreement....................... 3
1.18 SEC.................................... 3
1.19 Securities Act......................... 3
1.20 Taxes.................................. 3
2. Sale and Purchase of Group Shares................................. 4
3. Formation and Capitalization of CTI
3.1 Incorporation.......................... 4
3.2 Exchange of Certain Group Shares for CTI
Shares............................ 4
3.3 Acquisition of CTI Shares by Group..... 4
3.4 Options to Acquire Group Shares........ 4
3.5 Distribution of CTI Common Stock by
Group............................. 5
3.6 Shareholdings After Closing............ 5
4. Closing
4.1 Management's Deliverables.............. 5
4.2 Group's Deliverables................... 6
4.3 CPS's Deliverables..................... 6
4.4 Siemens' Deliverables.................. 6
4.5 Conditions to Siemens' Obligations at
Closing................................ 7
4.6 Conditions to Obligations of Group, CPS
and Management at Closing....... 9
4.7 Post-Closing Events.................... 10
-i-
<PAGE>
5. Representations and Warranties of Group
5.1 Organization and Good Standing......... 10
5.2 Capitalization......................... 10
5.3 Corporate Authority.................... 11
5.4 Compliance with Laws; Governmental
Authorities....................... 11
5.5 Financial Statements................... 11
5.6 Tax Matters............................ 12
5.7 Absence of Undisclosed or Contingent
Liabilities....................... 12
5.8 Absence of Certain Changes and Events.. 12
5.9 Title to Properties; Absence of Liens
and Encumbrances.................. 13
5.10 Patents, Trademarks and Know-How....... 13
5.11 Litigation............................. 13
5.12 Contracts.............................. 14
5.13 Officers and Employees................. 14
5.14 Full Disclosure........................ 14
5.15 Fully Paid Nonassessable Common Stock.. 14
5.16 Continuation of Business............... 14
5.17 No Brokerage Fees...................... 15
5.18 Insurance.............................. 15
5.19 Energy Supplies, Raw Materials and
Components........................ 15
5.20 FDA Matters; No Recalls................ 15
5.21 Employee Benefit Plans................. 15
5.22 Consents............................... 15
5.23 Accounts Receivable.................... 16
5.24 Inventory.............................. 16
5.25 Books and Records...................... 16
5.26 Labor Relations........................ 16
5.27 Environmental Compliance............... 17
5.28 Employee Occupational Hazard and Other
Claims............................ 17
5.29 Condition of Facilities/Sites and No
Reportable Incidents.............. 17
6. Representations and Warranties of Management
6.1 Compliance with Laws; Governmental
Authorities....................... 17
6.2 Absence of Undisclosed or Contingent
Liabilities....................... 17
6.3 Absence of Certain Changes and Events.. 18
6.4 Litigation............................. 18
6.5 Officers and Employees................. 19
6.6 FDA Matters; No Recall................. 19
6.7 Environmental Compliance............... 19
6.8 Employee Occupational Hazard and Other
Claims............................ 19
6.9 Condition of Facilities/Sites and No
Reportable Incidents.............. 19
7. Relationship of the Parties....................................... 20
8. Representations and Warranties of Siemens
8.1 Organization and Good Standing......... 20
8.2 Corporate Authority.................... 20
8.3 No Brokerage Fees...................... 21
8.4 Intent................................. 21
8.5 Receipt of Information................. 21
8.6 Consents............................... 21
-ii-
<PAGE>
9. Covenants of Group
9.1 Financial Statements................... 21
10. Covenants of CPS
10.1 FDA Approval........................... 22
10.2 Components............................. 22
11. Covenants of Management
11.1 Voting................................. 22
11.2 Management of CPS...................... 22
11.3 Non-Competition........................ 22
11.4 Non-Competition by CTI................. 23
11.5 Conduct of Business.................... 23
12. Covenants of Siemens
12.1 Future Capitalization of CTI........... 23
12.2 Non-Competition........................ 24
12.3 Amendment of Stockholders' Agreement... 24
13. Management of Group
13.1 Election of Directors.................. 24
13.2 Voting Policy.......................... 24
13.3 Research and Development............... 24
13.4 Officers of Group...................... 24
13.5 Stockholder Votes...................... 25
13.6 Material Board Decisions............... 25
13.7 Resolution of Impasse.................. 26
13.8 CTI Board.............................. 26
13.9 Additional Capital..................... 27
13.10 Intercompany Transfers................. 27
13.11 Business Plan.......................... 27
13.12 Distribution Agreement................. 27
14. Additional Purchase and Sale Rights
14.1 Siemens' Additional Purchase Rights.... 28
14.2 CTI's Additional Sale Rights........... 28
14.3 Purchase and Sale in Event of Default.. 29
15. Stock Transfer Restriction and Right of First Refusal............. 30
16. Sale of CTI Common Stock by Management............................ 31
17. Specific Performance ....................................... 31
18. Dispute Resolution ....................................... 31
19. Product Liability ....................................... 32
20. Pension and Employee Benefit Matters.............................. 32
-iii-
<PAGE>
21. Termination of this Agreement
21.1 Termination............................ 32
21.2 Effect of Termination.................. 33
22. Miscellaneous
22.1 Expenses............................... 33
22.2 Successors; Assignment................. 33
22.3 Entire Agreement; Amendment............ 33
22.4 Survival of Representations, Warranties
and Covenants; Indemnification.... 33
22.5 Notices................................ 35
22.6 Applicable Law......................... 35
22.7 Counterparts; Headings................. 35
22.8 Confidential Information............... 36
22.9 Publicity.............................. 37
22.10 Invalidity............................. 37
22.11 Waiver................................. 37
-iv-
<PAGE>
LIST OF EXHIBITS
Exhibit No. Description
----------- -----------
1.2 Assets of CPS and Group
3.1 Charter of CTI, Inc.
3.3(a) CTI Administrative Personnel
3.3(b) Amendment of Phelps Agreement
3.4 Basis of Exchange of Options
3.6 CTI Shareholder Agreement
4.1(a) Stock Purchase Agreement
4.1(c) Opinion of Counsel to Management
4.2(b) Option Exchange Agreement
4.2(c) Opinion of Counsel to Group
4.4(d) Opinion of Counsel to Siemens
4.5(i)(2) List of Consultants' Agreements Assignments
4.5(i)(3) Background Rights to be Assigned by CCS to CPS
4.5(i)(6) Amendment to Phelps Consulting Agreement
4.5(j) Amendment of OEM Exclusive Distribution
Rights Agreement
4.5(m)(1) Technical Service Agreement
4.5(m)(2) Administrative Service Agreement
5.1(a) CTI Group, Inc. Charter and Bylaws
5.1(b) CPS Charter and Bylaws
5.2(a) List of Shareholders of CTI Group, Inc.
5.2(b) Exceptions to CTI Representations Regarding
Capitalization of Group and CPS
5.3 Exceptions to CTI Representations Regarding
Corporation Authority of Group and CPS
5.4 Exceptions to CTI Representations Regarding
Compliance
5.8 Exceptions to CTI Representations Regarding
Absence of Changes
5.9 Exceptions to CTI Representations Regarding
Title
5.10 Group and CPS Patents, Trademarks and Know-how
5.12 Group and CPS Contracts
5.20 Exceptions to CTI Representations Regarding
FDA Matters
5.21 Group and CPS Benefit Plans and Arrangements
5.29 Material Documents Regarding Nuclear and
Environment Incidents
8.1 Certificate of Incorporation and Bylaws of
Siemens Gammasonics, Inc.
11.2 Management Function Descriptions and
Employment Contracts
12.3 Amendment of Stock Purchase and
Stockholders' Agreement
13.4(b) Officers of Group
13.4(c) Responsibilities of CFO
13.4(d) Officers Positions Subject to Siemens
Designation
13.10 Transfer Prices
13.11 CPS Five-Year Business Plan
14.1 Siemens Minima Plus 20% Plan
-v-
<PAGE>
STOCK PURCHASE, REORGANIZATION AND JOINT VENTURE AGREEMENT
This STOCK PURCHASE, REORGANIZATION AND JOINT VENTURE AGREEMENT (this
"Agreement") is made and entered into as of the 9th day of December, 1987, by
and among CTI GROUP, INC., a Tennessee corporation with its principal office in
Knoxville, Tennessee (hereinafter referred to as "Group"), CTI PET SYSTEMS,
INC., a Tennessee corporation with its principal office in Knoxville, Tennessee
(hereinafter referred to as "CPS"), DR. TERRY D. DOUGLASS, DR. RONALD NUTT,
MICHAEL C. CRABTREE and J. KELLY MILAM (hereinafter referred to collectively as
"Management" and individually as "Management Person"), and SIEMENS GAMMASONICS,
INC., a Delaware corporation with its principal office in Des Plaines, Illinois
(hereinafter referred to as "Siemens").
WITNESSETH:
WHEREAS, CPS is engaged in the CPS Business (as hereinafter defined)
and is a wholly-owned subsidiary of Group; and
WHEREAS, Siemens wishes to purchase and acquire, and the Non-Siemens
Group Shareholders (as hereinafter defined) are willing to sell, sufficient
Group Common Stock to Siemens so that Siemens (and its Affiliate Siemens Capital
Corporation) holds 49.9% of total outstanding Group Common Stock and thereafter
to operate Group as a joint venture company upon the terms and conditions set
forth herein; and
WHEREAS, it is the intention and desire of the parties hereto to
provide for certain rights and obligations pertaining to Siemens' purchase of
Group Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual terms,
covenants and conditions set forth herein, the parties agree as follows:
1. CERTAIN DEFINITIONS. The following terms whenever used in this
Agreement, shall have the meanings ascribed below. Other terms defined
in the body of this Agreement shall have the meanings assigned therein.
1.1 "Affiliate" shall mean, with respect to a specified Person, a Person
that directly, or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the
specified Person, but shall not include any Person less than fifty
percent (50%) of the ordinary voting power of which is not directly or
indirectly held by the specified Person and its other Affiliates unless
such specified Person and its other Affiliates control a majority of
the board of directors or other governing body thereof.
1.2 "Assets" shall mean the assets, properties and business of Group and
CPS, whether tangible or intangible, wherever located, including,
without limitation, all real estate and improvements thereon,
buildings, storage facilities, loading and transshipment facilities,
manufacturing and other production equipment, furniture, fixtures,
trucks, automobiles and other vehicles normally used in connection
therewith (either on or off the premises), instruments, research and
development equipment, data processing equipment, communications
equipment, construction in process, leasehold improvements, the
<PAGE>
contracts (as defined below), all sales and promotional literature,
files and data, intellectual property rights, processes, formulations,
know-how, trade secrets and business as a going concern and good will.
"Assets" includes without limitation all items listed in Exhibit 1.2
attached hereto.
1.3 "Beneficial Ownership" or any derivative or variant thereof shall have
the meaning ascribed to it in Rule 13d-3 promulgated under the Exchange
Act.
1.4 "CPS Business" shall mean the business conducted by CPS in developing,
acquiring, manufacturing, assembling, selling and distributing the
following products:
(a) Cyclotrons and RDS products (as described in Exhibit 4.5(j)
hereto) for primary use in clinical positron emission
tomography systems, including gamma-emitter capability with
maximum energy of 20 MeV (or such higher levels as may be or
in the future become desirable in the positron emission
tomography business);
(b) Probes for the detection of positron emitters;
(c) Other generator systems producing positron emitters, including
infusion pumps;
(d) Planar cameras dedicated for coincidence detection of positron
emitters; and
(e) Ring tomographs (emission computerized axial tomograph image
devices) and other positron image devices.
1.5 "CTI Common Stock" shall mean the shares of voting common stock of CTI,
Inc., a Tennessee corporation, par value $.01 per share. Where
appropriate, all references to CTI Common Stock shall be deemed to
include all subscription rights, options or warrants to purchase CTI
Common Stock, all securities convertible into, or exchangeable for,
such CTI Common Stock and all securities entitled to vote in the same
manner and under the same circumstances as such CTI Common Stock.
1.6 "Cyclotron Common Stock" shall mean the shares of no par value voting
common stock of CTI Cyclotron Systems, Inc., a California corporation.
Where appropriate, all references to Cyclotron Common Stock shall be
deemed to include all subscription rights, options or warrants to
purchase Cyclotron Common Stock, all securities convertible into, or
exchangeable for, such Cyclotron Common Stock and all securities
entitled to vote in the same manner and under the same circumstances as
such Cyclotron Common Stock.
1.7 "Damages" shall mean any loss, liability, damages (excluding indirect,
consequential and incidental damages) and expense (including, without
limitation, costs of investigation and defense and reasonable
attorneys' fees).
1.8 "Encumbrance" shall mean any security interest, mortgage, lien, pledge,
charge or restriction of any kind with respect to any property,
including, without limitation, any material restriction on the use,
voting, transfer, receipt of income or other exercise of any attributes
of ownership of such property.
1.9 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.10 "Financial Statements" shall have the meaning set forth in Section 5.5
below.
-2-
<PAGE>
1.11 "Force Majeure" shall mean any unforeseen event or condition, not
existing as of the date of this Agreement and not reasonably within the
control of the affected party or any of its Affiliates, which prevents,
in whole or in part, the performance by the party of its material
obligations hereunder, including, without limiting the generality of
the foregoing, acts of state or governmental action, riots, war, acts
of terrorism, sabotage, strikes, lockouts, prolonged shortage of energy
supplies, fire, flood, hurricanes, earthquakes, lightning and
explosion.
1.12 "Governmental Body" shall mean any United States or foreign national,
state, municipal or other local government or multinational body
(including, without limitation, the European Economic Community), any
subdivision, agency, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing,
marketing, importing or other governmental or quasi-governmental
authority.
1.13 "Group Common Stock" shall mean the shares of voting common stock of
Group, par value $.01 per share. Where appropriate, all references to
Group Common Stock shall be deemed to include all subscription rights,
options or warrants to purchase Group Common Stock, all securities
convertible into, or exchangeable for, such Group Common Stock and all
securities entitled to vote in the same manner and under the same
circumstances as such Group Common Stock.
1.14 "Non-Siemens Group Shareholders" shall mean all of the shareholders of
Group other than Siemens Capital Corporation.
1.15 "Options to Acquire Group Common Stock" shall mean options to acquire
shares of Group Common Stock granted to employees of CPS (formerly
named Computer Technology and Imaging, Inc.) and Group pursuant to the
Incentive Stock Option Plans and Optional Bonus Plans for Key Employees
of those corporations.
1.16 "Person" shall mean an individual, a corporation, a partnership, an
association, a joint company, a joint venture, an unincorporated
organization, a trust or other entity, including, without limitation,
any employee pension, profit sharing and other benefit plans and
trusts.
1.17 "Phelps Agreement" shall mean the License Agreement between Dr. Michael
E. Phelps and CPS dated January 1, 1985, regarding know-how (as defined
therein) for the production of emission computerized axial tomograph
systems. The rights of Phelps under the said License Agreement were
assigned by Phelps to Group pursuant to that certain Stock Purchase and
Technology Transfer Agreement between them dated April 7, 1987.
1.18 "SEC" shall mean the Securities and Exchange Commission.
1.19 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.20 "Taxes" shall include all taxes, charges, levies, fees, interest,
penalties, additions to tax or other assessments including, but not
limited to, income, excise, property, sales, use, payroll, value added
and franchise taxes and customs duties, imposed by any Governmental
Body and any payments with respect thereto required under any tax
sharing agreement.
-3-
<PAGE>
2. SALE AND PURCHASE OF GROUP SHARES. On the terms and subject to the
conditions of this Agreement, and in reliance upon the representations,
warranties, covenants and agreements herein set forth, Management shall
cause the Non-Siemens Group Shareholders to sell to Siemens, and
Siemens hereby agrees to purchase from the Non-Siemens Group
Shareholders a sufficient number of the shares of Group Common Stock
issued and outstanding as of the Closing (as hereinafter defined) to
give Siemens, when combined with the shares of Group Common Stock held
by Siemens' Affiliate Siemens Capital Corporation forty-nine and
nine-tenths percent (49.9%) of the then issued and outstanding Group
Common Stock, for an aggregate purchase price of $30 million (the
"Purchase Price") plus interest thereon from the date hereof to the
Closing Date at a rate equal to the one-month certificate of deposit
rate published in the Wall Street Journal on the date hereof.
3. FORMATION AND CAPITALIZATION OF CTI.
3.1 Incorporation. Prior to or contemporaneously with the Closing (as
defined hereinbelow), Management shall cause to be formed a Tennessee
corporation to be called CTI, Inc. ("CTI"). The authorized
capitalization of CTI shall consist of ten million (10,000,000) shares
of voting common stock having a par value of one cent ($.01) per share.
The charter and bylaws of CTI shall be substantially in the form of
Exhibit 3.1 attached hereto.
3.2 Exchange of Certain Group Shares for CTI Shares. At the Closing,
Management shall cause the Non-Siemens Group Shareholders to exchange
all of their remaining Group Common Stock, after the purchase and sale
provided for in Section 2 above, for CTI Common Stock, on the basis of
one share of CTI Common Stock for each share of Group Common Stock.
3.3 Acquisition of CTI Shares by Group. At the Closing, Group shall
transfer, assign and set over to CTI all of its Cyclotron Common Stock
and its right to payment pursuant to Section 3(a)(iii) of the Phelps
Agreement in exchange for seven and seventy-one-hundredths percent
(7.71%) of the CTI Common Stock under the terms of an agreement in
substantially the same form as the Stock Purchase and Stockholders'
Agreement among Computer Technology and Imaging, Inc., Dr. Terry Dean
Douglass, Dr. Ronald Nutt, Michael Callann Crabtree, James Kelly Milam
and Siemens Capital Corporation, dated April 22, 1985, under which
agreement Group may transfer CTI Common Stock to Siemens with the
rights under the agreement applying to Siemens and Group thereafter.
Prior to or simultaneously with the Closing, Group will use its best
efforts to cause the transfer of the personnel listed on Exhibit 3.3(a)
to CTI. In connection with such assignments, Section 3(a)(iii) of the
Phelps Agreement and the rights and duties of Group and CTI shall be
amended to provide for a two percent (2%) Management and Technology Fee
on CPS sales (net of returns and allowances) of ECAT and RDS systems
payable through December 31, 1994 (excluding (a) any sales to CTI or
its Affiliates and (b) any sales of services, parts or accessories) to
CTI in lieu of the two and five-tenths percent (2.5%) payment presently
being made by CPS to Group for ECAT scanner sales by CPS, as set forth
on Exhibit 3.3(b) hereto.
3.4 Options to Acquire Group Shares. Upon the Closing, the formation of CTI
and the exchange by the Non-Siemens Group Shareholders of Group Common
Stock for CTI Common Stock, all of the outstanding Options to Acquire
Group Common Stock shall be
-4-
<PAGE>
exchanged for options to acquire CTI Common Stock on the basis set
forth on Exhibit 3.4 hereto.
3.5 Distribution of CTI Common Stock by Group. Upon the Closing and the
acquisition of CTI Common Stock by Group provided for in Section 3.3
above, Group shall distribute all of its CTI Common Stock to its
shareholders on a pro rata basis. The CTI Common Stock distributed to
CTI as part thereof shall be cancelled by CTI.
3.6 Shareholdings After Closing. After the Closing, as a result of the
transactions described hereinabove, the issued and outstanding shares
of Group and CTI shall be held as follows:
Percentage
Shareholder of Outstanding Shares
----------- ---------------------
Group CTI 50.1%
Siemens 49.9%
CTI Non-Siemens 96%
Siemens 4%
Neither Siemens nor any other shareholder of CTI other than Siemens
shall have any special rights with respect to the purchase, sale or
registration of their CTI Common Stock except as expressly set forth in
this Agreement, the Charter of CTI, the stock purchase and
shareholders' agreement referenced in Section 3.3 between Siemens and
CTI or an agreement or agreements entered into hereafter. Each CTI
Shareholder, including Management but excluding Group and Siemens,
shall execute and deliver to CTI a Shareholder Agreement in
substantially the form of Exhibit 3.6 hereto.
4. CLOSING. The closing of the sale and purchase of shares of the Group
Common Stock described herein (the "Closing") shall take place at the
offices of Siemens Capital Corporation, 767 Fifth Avenue, New York, New
York 10153 on January 5, 1988 or on a date thereafter (the "Closing
Date") to be agreed to by the parties to occur within ten (10) days
after the parties obtain the required approvals of the United States
Department of Justice and Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act and the Bundeskartellamt
of the Federal Republic of Germany, which approvals the parties agree
to pursue promptly and diligently.
4.1 Management's Deliverables. At the Closing, Management shall deliver to
Siemens:
(a) Stock purchase agreements with the Non-Siemens Group
Shareholders, in substantially the form attached hereto as
Exhibit 4.1(a) providing for the sale to Siemens of Group
Common Stock as provided in Section 2 above.
(b) Certificates evidencing the Group Common Stock being sold and
purchased hereunder.
(c) The written opinion of counsel to Management in substantially
the form set forth in Exhibit 4.1(c) attached hereto.
(d) The representations and warranties of Management made
hereunder shall be true in all material respects as of the
Closing; Management shall have performed and
-5-
<PAGE>
complied in all respects with all of their undertakings and
agreements required by this Agreement to be performed and
complied with by Management prior to the Closing; and Siemens
shall have been furnished with certificates of Management,
dated the Closing Date, certifying to that effect.
4.2 Group's Deliverables. At the Closing, Group shall deliver to Siemens:
(a) A certified copy of resolutions duly adopted by the Board of
Directors of Group approving the execution, delivery and
performance of this Agreement and the issuance and delivery of
the Group Common Stock being sold hereunder and of all other
corporate action necessary or proper to enable Group to comply
with the terms hereof.
(b) Agreements by the holders of all of the outstanding Options to
Acquire Group Common Stock to exchange such Options for
options to acquire CTI Common Stock on the basis set forth on
Exhibit 4.2(b) hereto.
(c) The written opinion of Baker, Worthington, Crossley,
Stansberry & Woolf, counsel to Group, in substantially the
form set forth in Exhibit 4.2(c) hereto.
(d) The representations and warranties of Group made hereunder
shall be true in all material respects as of the Closing;
Group shall have performed and complied in all respects with
all of their undertakings and agreements required by this
Agreement to be performed and complied with by Group prior to
the Closing; and Siemens shall have been furnished with
certificates of Group, dated the Closing Date, certifying to
that effect.
4.3 CPS's Deliverables. At the Closing, CPS shall deliver to Siemens the
amendment of the OEM Exclusive Distribution Rights Agreement between
CPS and Siemens referred to in Section 13.12 hereof.
4.4 Siemens' Deliverables. At the Closing, Siemens shall deliver to CPS,
Group or Management, as appropriate:
(a) The aggregate purchase price for the Group Common Stock being
purchased and sold hereunder, of thirty million dollars
($30,000,000), plus interest thereon as provided in Section 2,
paid by wire transfer or cashier's or certified check.
(b) A certified copy of resolutions duly adopted by Siemens' Board
of Directors approving the execution, delivery and performance
of this Agreement and of all other corporate action necessary
or proper to enable Siemens to comply with the terms hereof.
(c) The amendment of the OEM Exclusive Distribution Rights
Agreement between CPS and Siemens referred to in Section 13.12
hereof.
(d) The written opinion of Walter G. Gans, counsel to Siemens, in
substantially the form set forth in Exhibit 4.4(d) hereto.
(e) The amendment of the Stock Purchase and Stockholders'
Agreement referred to in Section 12.3 hereof.
-6-
<PAGE>
4.5 Conditions to Siemens' Obligations at Closing.
(a) The Group Common Stock. The legality of the sale of the Group
Common Stock to be sold at the Closing and the validity and
form of the certificate(s) representing such shares, all other
instruments relating to the sale and delivery of such Group
Common Stock and all corporate and other proceedings taken on
or prior to the Closing by CTI, Group, CPS and Management, in
connection with the performance of this Agreement, shall be
satisfactory to Siemens and its counsel, and Siemens and its
counsel shall have received from CTI, Group, CPS and
Management copies of all such documents or other evidence as
Siemens or said counsel may reasonably request in order to
establish the effective consummation of such transactions and
the taking of all corporate and governmental proceedings in
connection therewith, in form (as to certification and
otherwise) and substance satisfactory to Siemens and said
counsel.
(b) All Representations True. All representations and warranties
of Management and CTI contained in this Agreement shall be
true and correct on and as of the Closing Date.
(c) Action by Boards of Directors. Except as provided in this
Agreement, the Charters and the Bylaws of Group and CPS as in
effect on the date of this Agreement shall not have been
further amended, modified or supplemented in any respect; no
resolution shall have been adopted by the shareholders or the
Boards of Directors of Group or CPS which would have any
material effect upon the rights of Siemens; and Group and CPS
shall have delivered to Siemens such certificates of public
officials as Siemens and its counsel shall reasonably require
to confirm the fulfillment of this condition.
(d) Performance. CTI, Group, CPS and Management shall have
performed and complied with all agreements and conditions
contained in this Agreement required to be performed or
complied with on their parts prior to or on the Closing and
shall not be in default in the performance or observance of
any of the terms, covenants or conditions of this Agreement.
(e) Proceedings. All corporate and other proceedings to be taken
by CTI, Group, CPS and Management in connection with the
transactions contemplated by this Agreement, and all documents
incidental thereto shall be satisfactory in form and substance
to Siemens and its counsel; and Siemens and its counsel shall
have received all such counterpart originals or certified or
other copies of all documents as Siemens and its counsel may
reasonably request in connection with said transactions and
all proceedings taken in connection therewith.
(f) Financial Statements. Siemens shall have received audited
financial statements of CPS dated as of December 31, 1986, and
unaudited financial statements of Group and CPS as of dates
after December 31, 1986 through the Closing Date, that are
produced in the ordinary course of business on a consistent
basis, but not less than once per quarter (but, with respect
to Group, after April 7, 1987 only); all certified by the
chief financial officers of Group and CPS, respectively. There
shall have been no material adverse change in the financial
condition or the business of CPS since December 31, 1986, or
Group since April 7, 1987.
-7-
<PAGE>
(g) Officers' Certificates. Siemens shall have received Officers'
Certificates executed by officers of CPS and Group, dated the
Closing Date and satisfactory in form and substance to Siemens
and its counsel, confirming the representations and warranties
made by CPS and Group hereunder.
(h) Board Approval. As of the Closing, Management and the Boards
of Directors of CTI, CPS and Group shall have duly authorized
the execution, delivery and performance of this Agreement.
(i) Intellectual Property Matters.
(1) CPS Assets in CCS. Siemens shall have received a copy
of an assignment from CTI Cyclotron Systems, Inc.
("CCS") to CPS in form reasonably satisfactory to
Siemens of design and technology for the RDS 112,
dated at or prior to the Closing Date.
(2) Consulting Agreements. CPS and CCS shall use best
efforts to obtain assignment agreements executed by
consultants to CTI and CPS and third parties,
including those listed on Exhibit 4.5(1)(2) attached
hereto, dated at or prior to the Closing Date and
satisfactory in form and substance to Siemens and its
counsel, assigning the results, including
intellectual property rights developed pursuant to
consulting, development and technology transfer
agreements or arrangements with CPS or CCS, as the
case may be, to CPS or CCS, respectively, and Siemens
shall be provided copies of such assignment
agreements.
(3) Patent and Know-How License. Siemens shall have
received a patent and know-how license from CCS to
CPS with respect to the background rights of CCS used
or useful by CPS in the CPS Business, including those
identified more specifically in Exhibit 4.5(i)(3)
attached hereto, dated at or prior to the Closing
Date and satisfactory in form and substance to
Siemens and its counsel.
(4) Software Licenses. Siemens shall have received copies
of properly executed licenses and/or sublicenses from
CPS' suppliers, including that from Gould, Inc.,
necessary for CPS to copy, distribute and/or transfer
all software and firmware contained in CPS's PET
scanners and RDS 112 products (including all such
software and firmware which has been modified and/or
embedded within the written code for such products),
dated at or prior to the Closing Date and
satisfactory in form and substance to Siemens and its
counsel, or proof satisfactory to Siemens that such
licenses or sublicenses are not necessary to the
continued operation of the CPS Business.
(5) Phelps Assignment. Group shall have received a Final
Assignment and Bill of Sale transferring the RDS
Know-how and Consulting Results under consulting
agreements to Group executed by Michael E. Phelps
dated at or prior to the Closing Date and
satisfactory in form and substance to Siemens and its
counsel. "RDS Know-how" shall mean any and all
documents, models and design and technical
information, data,
-8-
<PAGE>
drawings, plans, flow charts, specifications,
formulations and reports and, in addition, all other
general and specific knowledge, experience,
techniques and information, whether in written form
or not, necessary for the manufacture, assembly,
sale, application and operation of RDS systems,
excluding any such know-how with respect to which
Phelps does not have rights or ownership or control
or the right to grant a license. "Consulting Results"
shall mean all ideas, inventions, improvements,
know-how, creations, materials, works, writings,
reports, publications and information collected,
assembled, conceived, suggested, originated,
developed, constructed, rendered or provided by
Phelps under such consulting agreements, including
the intellectual property rights therein.
(6) Phelps Consulting Agreement. Siemens shall have
received a properly executed amendment to the
Consulting Agreement between Michael E. Phelps and
Group, dated April 7, 1987, dated at or prior to the
Closing Date in substantially the same form as that
attached hereto as Exhibit 4.5(i)(6).
(j) Distribution Agreement Amendment. Siemens shall have received
a properly executed Amendment to the OEM Exclusive
Distribution Rights Agreement among Computer Technology and
Imaging, Inc., Siemens, Dr. Terry Dean Douglass, Dr. Ronald
Nutt, Michael Callann Crabtree and James Kelly Milam dated as
of May 20, 1986, dated at or prior to the Closing Date, in
substantially the same form as that attached hereto as Exhibit
4.5(j).
(k) Employment Agreements. Siemens shall have received copies of
properly executed employment agreements with each of the
Management Persons, in substantially the same form as that
attached hereto as Exhibit 11.2, dated at or prior to the
Closing Date.
(l) CTI Warranties. Management shall have caused CTI to execute
and Siemens shall have received certified copies of
resolutions of the Board of Directors of CTI undertaking to
assume (1) the representations and warranties contained in
Section 5 hereof and (2) the expenses referenced at Section
22.1 hereof, dated at or prior to the Closing Date, in form
and substance reasonably satisfactory to counsel for Siemens.
(m) Service Agreements. Siemens shall have received a properly
executed Technical Service Agreement among CTI, CTI Cyclotron
Systems, Inc., CPS and Siemens, and a properly executed
Administrative Service Agreement between CTI and CPS, both
dated at or prior to the Closing Date, in substantially the
form as that attached hereto as Exhibits 4.5(m)(1) and
4.5(m)(2).
4.6 Conditions to the Obligations of Group, CPS, Management and the
Non-Siemens Shareholders at Closing.
(a) All Representations True. The representations and warranties
made by Siemens contained in this Agreement shall be true on
and as of the Closing Date.
-9-
<PAGE>
(b) Performance. Siemens shall have performed and complied with
all agreements, obligations and conditions required by this
Agreement to be performed by it.
(c) Proceedings. All corporate and other proceedings of Siemens
required by law and otherwise in connection with the
performance of this Agreement, and all documents incident
thereto, shall have been performed or executed.
(d) Board Approval. As of the closing, the Board of Directors of
Siemens shall have duly authorized the execution, delivery and
performance of this Agreement and the purchase of the Group
Common Stock being sold hereunder.
4.7 Post-Closing Events. Management agrees to vote and to cause CTI at the
Closing to enter into an agreement to vote in favor of a merger of
Group and CPS at such time as Siemens deems it appropriate. Upon the
occurrence of such merger, this Agreement shall continue in full force
and effect and all agreements, covenants and other obligations of Group
hereunder shall be agreements, covenants and obligations of CPS.
5. REPRESENTATIONS AND WARRANTIES OF CTI. Management hereby covenants and
agrees that it will cause CTI at the Closing to enter into an agreement
representing and warranting to Siemens as follows:
5.1 Organization and Good Standing of Group and CPS. Group is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Tennessee, and has all requisite corporate power and
authority to carry on its business as it is now being conducted and to
own the properties and assets it now owns. Copies of Group's Charter
and all amendments thereto effected prior to the date hereof and the
Bylaws of Group as amended to the date hereof, both certified to be
correct by the Secretary of Group, are attached hereto as Exhibit
5.1(a) and are complete and correct as at the date hereof. CPS is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Tennessee, and has all requisite corporate
power and authority to carry on its business as it is now being
conducted and to own the properties and assets it now owns. Copies of
CPS's Charter and all Amendments thereto effected prior to the date
hereof and the Bylaws of CPS as amended to the date hereof, both
certified to be correct by the Secretary of CPS, are attached hereto as
Exhibit 5.1(b) and are complete and correct as at the date hereof.
5.2 Capitalization, Title to Group and CPS Common Stock. The authorized
capital stock of Group consists of ten million (10,000,000) shares of
Group Common Stock having a par value of One Cent ($.01) per share, of
which as of October 1, 1987, six million six hundred fifty-nine
thousand nine hundred ninety (6,659,990) shares were issued and
outstanding. Attached hereto as Exhibit 5.2(a) is a list of the
shareholders of Group and the number of shares held by each as of the
date hereof. To the knowledge of CTI and according to the stock record
of Group, each Non-Siemens Group Shareholder is the true and lawful
owner of the amount of Group Common Stock set forth opposite his name
in Exhibit 5.2(a), free of any Encumbrances and has the legal right,
power and authority to sell such Group Common Stock to Siemens. Except
as set forth in Exhibit 5.2(b) hereto, Group has no obligation to issue
any additional shares of Group Common Stock or any other form of
capital stock of Group or any securities convertible into or
exchangeable for, or giving any person the right to acquire from Group
and shares of Group Common Stock or any other form of capital stock of
Group. There are no outstanding rights, options, warrants, calls,
commitments, contracts or agreements for the purchase from or
-10-
<PAGE>
sale by Group of any shares of its capital stock, except as set forth
in this Section 5.2 and in Exhibit 5.2(b). The authorized capital stock
of CPS consists of ten million (10,000,000) shares of common stock
having a par value of One Cent ($.01) per share, of which as of October
1, 1987 one million four hundred eighty-three thousand fifty-eight
(1,483,058) shares were issued and outstanding, all of which are held
by Group. CPS has no obligation to issue any additional shares of its
common stock or any other form of capital stock of CPS or any
securities convertible into or exchangeable for, or giving any person
the right to acquire from CPS any shares of CPS common stock or any
other form of capital stock of CPS. There are no outstanding rights,
options, warrants, calls, commitments, contracts or agreements for the
purchase from or sale by CPS of any shares of its capital stock.
5.3 Corporate Authority. The Board of Directors of Group and CPS have duly
authorized the execution, delivery and performance of this Agreement
and have duly authorized the transfer and delivery of the Group Common
Stock being sold by the Non-Siemens Group Shareholders hereunder and
pursuant to the individual Stock Purchase Agreement as referred to in
Section 4.1(a); no other corporate proceedings on the part of Group or
CPS are necessary to authorize this Agreement and the issuance and
delivery of the Group Common Stock being sold hereunder. Except as set
forth in Exhibit 5.3 hereto, neither the execution, delivery or
performance of this Agreement nor the issuance and delivery of the
Group Common Stock being sold hereunder, nor compliance with, nor
fulfillment of, the terms and provisions of this Agreement does or will
(a) violate or conflict with, or result in, any breach of any of the
terms, conditions or provisions of, or constitute a default (or an
event which with notice or lapse of time, or both, would become a
default) under the Charter or Bylaws of either Group or CPS, or any
agreement, indenture, lease, mortgage or other instrument to which
either it is a party or by which it is bound, (b) require any
affirmative approval, consent, authorization or other order or action
of any court, governmental authority or regulatory body or of any
creditor of either Group or CPS, (c) result in any material violation
of any provision of any law, rule, regulation or any court order,
judgment, writ, injunction, decree or arbitration award or
determination, or (d) give any party with rights under any such
instrument, agreement, mortgage, judgment, order, award, decree or
other restriction the right to terminate, modify or otherwise change
the rights or obligations of either Group or CPS. Each of Group and CPS
has full power and authority to do and perform all acts and things
required to be done by it under this Agreement. This Agreement, when
duly executed and delivered by Group or CPS, as the case may be,
constitutes a legal, valid, binding and enforceable agreement of Group
or CPS, respectively.
5.4 Compliance with Laws; Governmental Authorities. Except as set forth in
Exhibit 5.4 attached hereto, each of Group and CPS has complied in all
material respects with any and all applicable statutes, orders, rules
and regulations promulgated by governmental authorities relating in any
material respect to the financial conditions, business, operations or
prospects of Group and CPS and neither Group nor CPS has received any
notice of alleged violation of any such statute, order, rule or
regulation. Except as set forth in Exhibit 5.4 hereto, neither Group
nor CPS is required to submit any notice, report or other filing with
any governmental authority in connection with the execution, delivery
or performance by it of this Agreement or the issuance and delivery of
the Group Common Stock being sold hereunder.
5.5 Financial Statements. Group has delivered and disclosed to Siemens
audited consolidated financial statements dated December 31, 1986 and
unaudited consolidated
-11-
<PAGE>
financial statements for the quarters ended March 31, 1987 for CPS,
together with unaudited consolidated financial statements for the
quarters ended June 30, 1987 and September 30, 1987 for each of Group
and CPS (hereinafter referred to as the "Group Financial Statements"
and the "CPS Financial Statements", respectively, and collectively
hereinafter referred to as the "Financial Statements"). Such Financial
Statements (a) are true, correct and complete, (b) fairly present the
financial condition, assets and liabilities of Group and CPS, as the
case may be, and their subsidiaries as of such date and the results of
its operations for such periods, (c) have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis and (d) are certified by the Chief Financial Officer of Group and
CPS, respectively.
5.6 Tax Matters. Each of Group and CPS has duly filed all United States,
Tennessee and California returns with respect to Taxes which it has
been and is by law required to file. The provisions made for taxes on
the Financial Statements as of September 30, 1987, are sufficient for
the payment of all federal, state, county, local and foreign taxes of
Group and CPS accrued and unpaid at that date, whether or not disputed.
Neither Group nor CPS is aware of any additional taxes, interest or
penalties alleged to be due or owing.
5.7 Absence of Undisclosed or Contingent Liabilities. Except as and to the
extent reflected or reserved against in the Financial Statements,
neither Group nor CPS had at September 30, 1987, any material
liabilities or obligations, secured or unsecured (whether accrued,
absolute, contingent or otherwise), of a nature customarily reflected
in a corporate balance sheet, or the notes thereto, prepared in
accordance with generally accepted accounting principles consistently
applied. Since such date neither Group nor CPS has incurred any
material liabilities or obligations other than in the ordinary course
of business.
5.8 Absence of Certain Changes and Events. Except as set forth in Exhibit
5.8 hereto, since December 31, 1986, each of CPS, and since April 7,
1987, Group has conducted its business in the ordinary and usual
course, and there has not been (i) any material adverse change in the
business, financial condition or results of operations of either Group
or CPS; (ii) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the properties, liabilities,
prospects or business of either Group or CPS, including any damage or
destruction of property by fire or other casualty, whether or not
covered by insurance, (iii) any increase in the compensation payable or
to become payable by either Group or CPS to any of its officers or
employees or any increase in any bonus, insurance, pension or other
employee benefit plan, payment or arrangement made by either Group or
CPS for or with any such officers or employees, except for increases in
the ordinary course of business, (iv) any labor dispute, other than
routine matters; which will have an effect on the business, financial
condition or results of operations of either Group or CPS, (v) any
commitment or transaction (including, without limiting the generality
of the foregoing, any borrowing or capital expenditure) entered into by
either Group or CPS, other than in the ordinary and usual course of
business, (vi) any change in the accounting principles, procedures,
methods or practices of either Group or CPS, (vii) any removal or grant
of permission to remove from any building, facility or real property
controlled by either Group or CPS, any machinery, equipment, fixture,
vehicles, or other personal property or parts thereof, except in the
ordinary course of business as conducted by either Group on April 7,
1987 or CPS on December 31, 1986, (viii) any change in credit policy of
either Group or CPS as to sales of inventories or collection of
receivables, (ix) any entry into any transaction of merger or
consolidation, except as may be contemplated hereby, (x) any deferral
of scheduled maintenance or repair of the Assets,
-12-
<PAGE>
(xi) any change in standard written warranties with regard to products
of either Group or CPS, or (xii) any other event or condition of any
character materially and adversely affecting the business, financial
condition or results of operations of either Group or CPS.
5.9 Title to Properties; Absence of Liens and Encumbrances. Group and CPS
have good and marketable title to all of its material Assets free and
clear of Encumbrances that would adversely affect their availability
for their intended use by Group and CPS except (a) as set forth in
Exhibit 5.9 hereto; and (b) liens for current taxes not yet due and
payable, which liens do not involve any danger of the sale, forfeiture
or loss of any material amount of the Assets and do not interfere with
the business of CPS as it was conducted at December 31, 1986, or Group
as it was conducted at April 7, 1987. The Assets include all assets,
tangible and intangible, real and personal (i) in which Group or CPS
has ownership, leasehold, license or other rights on the date hereof,
and (ii) which have been or are used in the conduct of the business of
Group or CPS. All of the property, plant and equipment included in the
Assets is in normal working order, except for ordinary wear and tear,
retirements in the ordinary course of business, normal maintenance and
repair, and breakdowns that do not affect the operation of any facility
included in the Assets for more than a temporary period. The machinery
and equipment included in the Assets are sufficient for the conduct of
the business of Group and CPS in the manner in which it is being
conducted as of this date, and as of December 31, 1986 as to CPS, and
April 7, 1987, as to Group.
5.10 Patents, Trademarks and Know-how. All trademarks, trademark
applications, trade names, copyrights, inventions, patents (including
all reissues, division, continuations, and extensions thereof), patent
applications, patent disclosures docketed, and any other statutory
rights, used by Group or CPS are listed in Exhibit 5.10. Except as
specifically set forth and described in Exhibit 5.10, the intellectual
property rights listed therein are owned outright by Group or CPS,
together with all processes, formulations, know-how and trade secrets
used in its business, free and clear of all liens and encumbrances and
no royalties are required to be paid to anyone under or with respect to
any of them. Except as set forth in Exhibit 5.10, CTI has no knowledge
of and has not received any notice of conflict with the asserted rights
of others with respect to any intellectual property right used in, or
useful to, the business of Group or CPS. Neither Group nor CPS has
licensed anyone to use any patents, know-how or other proprietary
rights of Group or CPS and, except as set forth in Exhibit 5.10, CTI
has no knowledge of the infringing use by anyone of any such patents,
know-how or other proprietary rights or the infringement by Group or
CPS of any patents, know-how, or any other proprietary rights owned by
any other person.
5.11 Litigation. There are no unsatisfied judgments, injunctions,
stipulations, awards, orders or decrees against either Group or CPS
with respect to any of the Assets or the business of Group or CPS.
There is no action, lawsuit, claim, proceeding, arbitration or
investigation pending as to which Group or CPS has received actual
notice or, to the knowledge of CTI, threatened against or relating to
Group or CPS, their properties or businesses which, if decided
adversely against Group or CPS, as the case may be, would have a
materially adverse effect upon the financial condition of Group or CPS,
respectively. CTI has no knowledge that either of Group or CPS is in
default with respect to any order, writ, injunction or decree of any
court or any Governmental Body, affecting or relating to Group or CPS.
To the best of CTI's knowledge, there is no basis for any such
litigation, arbitration, other proceedings or investigations or for
claims alleging or claiming violations with respect to the operations
of Group and CPS of laws (including
-13-
<PAGE>
the common law) relating to U.S. or foreign antitrust, trade
regulation, unfair competition, the infringement of patents,
copyrights, trademarks, trade names or other intellectual property
rights, the pollution of air, water or land, environmental, labor,
safety, hazardous materials or conditions, pension, employee benefits
or rights, breach of contract, torts (including product liability),
breach of warranties (whether express or implied), discrimination,
Taxes, technology or currency export or import controls, or the Foreign
Corrupt Practices Act, where any such litigation, arbitration, other
proceeding, investigation or claim may involve or result in Damages
exceeding U.S. $50,000 or restrictions under equity or law in the
operation of the business of Group or CPS in the manner in which the
business of Group or CPS has been operated to date.
5.12 Contracts. Exhibit 5.12 hereto contains a list of each contract,
agreement or understanding, whether written or oral (including any and
all amendments thereto), to which Group or CPS is a party and which is
material to the continued use of Assets, or the conduct of the business
or financial condition of Group or CPS and all contracts and agreements
entered into outside the ordinary course of business (collectively, the
"Contracts"). True and correct copies of Contracts have been made
available to Siemens. Each of Group and CPS has substantially complied
with all the material provisions of the Contracts and is not in
material default under any of the terms thereof. "Material" for
purposes of this Section 5.12 shall mean contracts, agreements or
understanding involving $50,000 or more.
5.13 Officers and Employees. So far as CTI is aware, no officer or employee
of Group or CPS is obligated under any contract or other agreement or
is subject to any judgment, decree or order of any court or
administrative agency which would conflict with (a) his obligation to
use his best efforts to promote the interests of Group or CPS, as the
case may be, (b) the conduct of the business of Group or CPS, as the
case may be, as presently conducted, or (c) the carrying on by an
officer or employee of the business of Group or CPS, as the case may
be, as an officer or employee.
5.14 Full Disclosure. The representations and warranties by CTI hereunder or
any written statement or certificate furnished to Siemens by CTI
pursuant hereto do not or does not and will not at the Closing 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
representation or warranty herein or any written statement or
certificate furnished to Siemens by CTI pursuant hereto, in light of
the circumstances in which it is or they are made, not misleading. CTI
has not failed to disclose any information nor misstated any
information with respect to the business, assets, operation or
financial condition of Group or CPS of which CTI had knowledge at the
time and which would have reasonably been material to Siemens in
connection with the purchase of the Group Common Stock or the
transactions contemplated hereby.
5.15 Fully Paid Nonassessable Common Stock. The Group Common Stock being
sold by the Non-Siemens Group Shareholders as contemplated by this
Agreement has been duly and validly issued, and is fully paid and
nonassessable.
5.16 Continuation of Business. Neither Group nor CPS has any knowledge of
any factors or conditions which preclude Group or CPS from the
continuation of its present business operations.
-14-
<PAGE>
5.17 No Brokerage Fees. No person acting on CTI's, Group's, CPS's,
Management's or the Non-Siemens Group Shareholders' behalf has any
claim for a brokerage commission, finder's fee or other like payment in
connection with this Agreement or the transactions contemplated hereby.
5.18 Insurance. Group maintains insurance on a basis deemed by Group to be
adequate for its purposes and shall continue such insurance or
comparable insurance.
5.19 Energy Supplies, Raw Materials and Components. Neither Group nor CPS
has received any notice by any corporation or organization supplying
natural gas, coal, oil or electrical power to it or raw materials or
components used in the business and operations of Group or CPS, that
supplies of such energy source, raw materials or components will become
unavailable to the extent reasonably required for continued conduct of
the business of Group or CPS.
5.20 FDA Matters; No Recalls. To the best of CTI's knowledge and except as
set forth at Exhibit 5.20 attached hereto, the manufacturing operations
of each of Group and CPS are conducted in accordance with Good
Manufacturing Practices, as defined by the Federal Food and Drug
Administration (the "FDA"), and are duly registered with the FDA; the
products and labeling of each of Group and CPS have received all
necessary approvals from the FDA and other regulatory authorities to
permit the marketing of these products in the United States; the
products of each of Group and CPS are not subject to any recall or
retrofit action and neither Group nor CPS knows of any basis for any
such recall or retrofit action; and each of Group and CPS fully
complies in all material respects with applicable record keeping and
reporting obligations prescribed by the FDA including, without
limitation, incident reporting under the Medical Device Reporting
Regulations.
5.21 Employee Benefit Plans. Exhibit 5.21 lists all benefit plans and
benefit arrangements available to employees of each of Group and CPS
(the "Benefit Plans and Arrangements"). To the best of CTI's knowledge,
each Benefit Plan and Arrangement has been maintained and administered
in all material respects in accordance with applicable law, and that
the assets of each funded Benefit Plan or Arrangement is sufficient to
cover the liabilities determined therefor on an actuarial basis, the
latest of which determinations has been delivered by Management to
Siemens. For purposes of this Section, the term "Benefit Plans" shall
mean each and all "employee benefit plans" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or contributed to by Seller and covering
employees of Group and CPS, including (a) any such plans that are
"employee welfare benefit plans" as defined in Section 3(1) of ERISA
and (b) any such plans that are "employee pension benefit plans" as
defined in Section 3(2) of ERISA; and the term "Benefit Arrangements"
shall mean life and health insurance, hospitalization, savings,
holiday, vacation, severance pay, sick pay, sick leave, disability,
tuition refund, service award, company car, scholarship, relocation,
patent awards and other contracts (other than employment, consultancy
or severance contracts), policies or practices of Group and CPS
providing employee or executive benefits to employees of Group and CPS,
other than the Benefit Plans.
5.22 Consents. Except for filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and with the
Bundeskartellamt in the Federal Republic of Germany, no consent,
approval or authorization of, or exemption by, or filing with, any
governmental or regulatory authority is required in connection with the
-15-
<PAGE>
execution, delivery and performance by CTI, Group, CPS or Management of
this Agreement or the taking of any other action contemplated hereby,
excluding, however, consents, approvals, authorizations, exemptions and
filings, if any, which Siemens is required to obtain or make.
5.23 Accounts Receivable. All accounts receivable reflected in the Financial
Statements and those accruing since the date of the most recent
Financial Statements represent bona fide transactions in the ordinary
course of business which represent actual sales and require no further
act on the part of Group or CPS to make such accounts receivable
payable by the account debtors. CTI has no reason to believe that such
accounts receivable, net of established reserves, are not collectible
in the ordinary course of business in the book amounts thereof as shown
on the Financial Statements.
5.24 Inventory. The inventories represented in the audited Financial
Statement consist of inventories purchased for resale, raw materials
and supplies, work in process and finished goods. The inventories are
accounted for at December 31, 1986 as to CPS, and at April 7, 1987 as
to Group, in accordance with U.S. GAAP, and are accounted for net of
reserves established in accordance with U.S. GAAP. The inventories
shown on the audited Financial Statement, or thereafter acquired by
Group and CPS, consist of items, net of reserves, are consistent with
reasonable quality standards and in amounts and mix consistent with
past practices of Group and CPS; the values at which such inventories
are carried on the audited Financial Statement reflect the normal
inventory valuation policy of Group and CPS; the present inventories of
Group and CPS are not excessive; and the value of all items not in
saleable condition or of obsolete material or of materials of below
standard quality have been written down to realizable market value or
adequate reserves have been provided therefor consistent with U.S.
GAAP.
5.25 Books and Records. The minute books and stock record books of Group and
CPS are true, complete and correct in all material respects. Such
minute books reflect accurately in all material respects all material
actions approved or taken by their governing boards, any committees
thereof and their stockholders in their capacities as such. All such
minute books and stock record books have been made available to Siemens
or its representatives. True, complete and correct copies of the
certificate of incorporation and by-laws or other constituent documents
of Group and CPS have been delivered to Siemens.
5.26 Labor Relations. The labor relations between Group and CPS, on the one
hand, and their respective employees, on the other hand, are peaceful.
Neither Group nor CPS is a party to, and the employees of neither Group
nor CPS are covered by, any collective bargaining or other labor union
contract. Neither Group nor CPS has breached or otherwise failed to
comply in any material way with any provisions of any such agreement or
contract and there are no material grievances outstanding against Group
or CPS thereunder. CTI has not received notice of any unfair labor
practice complaints or age, sex, racial or other discrimination
complaints pending against Group or CPS before the National Labor
Relations Board, the Equal Employment Opportunities Commission, any
other Governmental Body or any court or arbitrators. Within the past 24
months, there have been no activities or proceedings known to CTI of
any labor union (or representatives thereof) to organize any
unorganized employees of Group or CPS or any strikes, slowdowns, work
stoppages, lockouts or threats thereof known to CTI by or with respect
to employees employed by Group or CPS.
-16-
<PAGE>
5.27 Environmental Compliance. Each of Group and CPS (1) has complied in all
material respects with environmental laws and regulations, whether
federal, state or local, whether domestic or foreign; and (2) has not
made statements in any documents material to such matters submitted to
Governmental Bodies containing untrue statements of material fact or
omitting any statement of material fact necessary to make the
statements therein not misleading.
5.28 Employee Occupational Hazard and Other Claims. Neither Group nor CPS
has received any written claim or, to the knowledge of CTI, threat,
other than workers' compensation claims, by any of its present or past
employees for Damages arising out of alleged occupational hazards,
unsafe conditions of employment or other similar claims related to the
work environment.
5.29 Condition of Facilities/Sites and No Reportable Incidents. The
Knoxville, Tennessee plant site included in the Assets contains no
condition which may result in recovery in excess of $50,000 by any
Person of remedial or removal cost, natural resource damages or other
cost, expenses or damages arising from any injury to public health,
safety or the environment relating to such plant site, including any
recovery under public nuisance liability or the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.
9601 et seq. (1982), as amended by the Superfund Amendments and
Reauthorization Act of 1986, H.R. 2005, 99th Cong. 2d. Sess., 132 Cong.
Rec. 9031 (enacted October 17, 1986); the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq. (1983) (Supp. 1986),
as amended by the Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. ss. 6926 (g) (Supp. 1986); the Federal Water Pollution Control
Act, 33 U.S.C. ss. 1257 et seq. (1982); the Safe Drinking Water Act, as
amended, 42 U.S.C. ss. 300 et seq. (1982); the Clean Air Act, 42 U.S.C.
ss. 7901 et seq. (1982); or any similar statute applicable in the
State of Tennessee. Neither Group nor CPS has ever had an incident with
respect to nuclear regulatory or other environmental matters which was
required to be reported to a Governmental Body and which was not so
reported; Exhibit 5.29 contains a list of all material documents
submitted or received by Group or CPS with respect to such incidents.
6. REPRESENTATIONS AND WARRANTIES OF MANAGEMENT. Management represents and
warrants as follows:
6.1 Compliance with Laws; Governmental Authorities. Except as set forth in
Exhibit 5.4 hereto, to the knowledge of Management, each of Group and
CPS has complied in all material respects with any and all applicable
statutes, orders, rules and regulations promulgated by governmental
authorities relating in any material respect to the financial
conditions, business, operations or prospects of Group and CPS and
neither Group nor CPS has received any notice of alleged violation of
any such statute, order, rule or regulation. To the knowledge of
Management and, except as set forth in Exhibit 5.4 hereto, neither
Group nor CPS is required to submit any notice, report or other filing
with any governmental authority in connection with the execution,
delivery or performance by it of this Agreement or the issuance and
delivery of the Group Common Stock being sold hereunder.
6.2 Absence of Undisclosed or Contingent Liabilities. To the knowledge of
Management and except as and to the extent reflected or reserved
against in the Financial Statements, neither Group nor CPS had at
September 30, 1987, any material liabilities or obligations, secured or
unsecured (whether accrued, absolute, contingent or otherwise), of a
nature
-17-
<PAGE>
customarily reflected in a corporate balance sheet, or the notes
thereto, prepared in accordance with generally accepted accounting
principles consistently applied. Since such date neither Group nor CPS
has incurred any material liabilities or obligations other than in the
ordinary course of business.
6.3 Absence of Certain Changes and Events. Except as set forth in Exhibit
5.8 hereto, since December 31, 1986, each of CPS, and since April 7,
1987, Group has conducted its business in the ordinary and usual
course, and there has not been (i) any material adverse change in the
business, financial condition or results of operations of either Group
or CPS; (ii) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the properties, liabilities,
prospects or business of either Group or CPS, including any damage or
destruction of property by fire or other casualty, whether or not
covered by insurance, (iii) any increase in the compensation payable or
to become payable by either Group or CPS to any of its officers or
employees or any increase in any bonus, insurance, pension or other
employee benefit plan, payment or arrangement made by either Group or
CPS for or with any such officers or employees, except for increases in
the ordinary course of business, (iv) any labor dispute, other than
routine matters; which will have an effect on the business, financial
condition or results of operations of either Group or CPS, (v) any
commitment or transaction (including, without limiting the generality
of the foregoing, any borrowing or capital expenditure) entered into by
either Group or CPS, other than in the ordinary and usual course of
business, (vi) any change in the accounting principles, procedures,
methods or practices of either Group or CPS, (vii) any removal or grant
of permission to remove from any building, facility or real property
controlled by either Group or CPS, any machinery, equipment, fixture,
vehicles, or other personal property or parts thereof, except in the
ordinary course of business as conducted by either Group on April 7,
1987 or CPS on December 31, 1986, (viii) any change in credit policy of
either Group or CPS as to sales of inventories or collection of
receivables, (ix) any entry into any transaction of merger or
consolidation, except as may be contemplated hereby, (x) any deferral
of scheduled maintenance or repair of the Assets, (xi) any change in
standard written warranties with regard to products of either Group or
CPS, or (xii) any other event or condition of any character materially
and adversely affecting the business, financial condition or results of
operations of either Group or CPS.
6.4 Litigation. There are no unsatisfied judgments, injunctions,
stipulations, awards, orders or decrees against either Group or CPS
with respect to any of the Assets or the business of Group or CPS.
There is no action, lawsuit, claim, proceeding, arbitration or
investigation pending as to which Group or CPS has received actual
notice or, to the knowledge of Management, threatened against or
relating to Group or CPS, their properties or businesses which, if
decided adversely against Group or CPS, as the case may be, would have
a materially adverse effect upon the financial condition of Group or
CPS, respectively. To the knowledge of Management, neither of Group or
CPS is in default with respect to any order, writ, injunction or decree
of any court or any Governmental Body, affecting or relating to Group
or CPS. To the knowledge of Management, there is no basis for any such
litigation, arbitration, other proceedings or investigations or for
claims alleging or claiming violations with respect to the operations
of Group and CPS of laws (including the common law) relating to U.S. or
foreign antitrust, trade regulation, unfair competition, the
infringement of patents, copyrights, trademarks or trade names or other
intellectual property rights, the pollution of air, water or land,
environmental, labor, safety, hazardous materials or conditions,
pension, employee benefits or rights, breach of contract, torts
(including product liability), breach of warranties (whether express or
implied), discrimination, Taxes, technology or currency
-18-
<PAGE>
export or import controls, or the Foreign Corrupt Practices Act, where
any such litigation, arbitration, other proceeding, investigation or
claim may involve or result in Damages exceeding U.S. $50,000 or
restrictions under equity or law in the operation of the business of
Group or CPS in the manner in which the business of Group or CPS has
been operated to date.
6.5 Officers and Employees. To the knowledge of Management, no officer or
employee of Group or CPS is obligated under any contract or other
agreement or is subject to any judgment, decree or order of any court
or administrative agency which would conflict with (a) his obligation
to use his best efforts to promote the interests of Group or CPS, as
the case may be, (b) the conduct of the business of Group or CPS, as
the case may be, as presently conducted, or (c) the carrying on by an
officer or employee of the business of Group or CPS, as the case may
be, as an officer or employee.
6.6 FDA Matters; No Recalls. To the knowledge of Management, the
manufacturing operations of each of Group and CPS are conducted in
accordance with Good Manufacturing Practices, as defined by the Federal
Food and Drug Administration (the "FDA"), and are duly registered with
the FDA; the products and labeling of the Division have received all
necessary approvals from the FDA and other regulatory authorities to
permit the marketing of these products in the United States; the
products of each of Group and CPS are not subject to any recall or
retrofit action and neither Group nor CPS knows of any basis for any
such recall or retrofit action; and each of Group and CPS fully
complies in all material respects with applicable record keeping and
reporting obligations prescribed by the FDA including, without
limitation, incident reporting under the Medical Device Reporting
Regulations.
6.7 Environmental Compliance. To the knowledge of Management, each of Group
and CPS (1) has complied in all material respects with environmental
laws and regulations, whether federal, state or local, whether domestic
or foreign; and (2) has not made statements in any documents material
to such matters submitted to Governmental Bodies containing untrue
statements of material fact or omitting any statement of material fact
necessary to make the statements therein not misleading.
6.8 Employee Occupational Hazard and Other Claims. To the knowledge of
Management, neither Group nor CPS has received any written claim or
threat, other than workers' compensation claims, by any of its present
or past employees for Damages arising out of alleged occupational
hazards, unsafe conditions of employment or other similar claims
related to the work environment.
6.9 Condition of Facilities/Sites and No Reportable Incidents. To the
knowledge of Management, the Knoxville, Tennessee plant site included
in the Assets contains no condition hereof which may result in recovery
in excess of $50,000 by any Person of remedial or removal cost, natural
resource damages or other cost, expenses or damages arising from any
injury to public health, safety or the environment relating to such
plant site, including any recovery under public nuisance liability or
the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. ss. 9601 et seq. (1982), as amended by the Superfund
Amendments and Reauthorization Act of 1986, H.R. 2005, 99th Cong. 2d.
Sess., 132 Cong. Rec. 9031 (enacted October 17, 1986); the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq (1983)
(Supp. 1986), as amended by the Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. ss. 6926(g) (Supp. 1986); the Federal Water Pollution
Control Act, 33 U.S.C. ss. 1257 et
-19-
<PAGE>
seq. (1982); the Safe Drinking Water Act, as amended, 42 U.S.C. ss. 300
et seq. (1982); the Clean Air Act, 42 U.S.C. ss. 7901 et seq. (1982);
or any similar statute applicable in the State of Tennessee. To the
knowledge of Management neither Group nor CPS has ever had an incident
with respect to nuclear regulatory or other environmental matters which
was required to be reported to a Governmental Body and which was not so
reported; and further, to the knowledge of Management Exhibit 5.29
contains a list of all material documents submitted or received by
Group or CPS with respect to such incidents.
7. RELATIONSHIP OF THE PARTIES. Siemens and CTI intend by their ownership
of Group Common Stock to pursue the business and operations of Group
and CPS through a joint venture company. They do not, however, intend
to create a partnership for such purpose, or for any other purposes.
Siemens and CTI acknowledge and agree that both intend to pursue
business opportunities in related and non-related areas and that
neither owes a duty to the other to offer to or allow the other to
participate in or otherwise be a part of such business opportunities,
or to refrain from competing with each other or with Group or CPS,
except as specifically provided herein.
8. REPRESENTATIONS AND WARRANTIES OF SIEMENS. Siemens represents and
warrants to CTI, CPS, Group and Management as follows:
8.1 Organization and Good Standing. Siemens is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and has full corporate power and authority to carry
on its business as it is now being conducted and to own the properties
and assets it now owns. Copies of Siemens' Certificate of Incorporation
as amended and restated through and including the date hereof and of
Siemens' Bylaws as amended to the date hereof, both certified to be
correct by Siemens' Secretary, are attached hereto as Exhibit 8.1 and
are complete and correct as at the date hereof.
8.2 Corporate Authority. As of the Closing, the Board of Directors of
Siemens will have duly authorized the execution, delivery and
performance of this Agreement and the purchase of the Group Common
Stock being sold hereunder. No other corporate proceedings on the part
of Siemens will be necessary to authorize this Agreement and the
purchase of the Group Common Stock being sold by the Non-Siemens Group
Shareholders as contemplated by this Agreement. Neither the execution,
the performance of this Agreement, the purchase of the Group Common
Stock being sold hereunder, nor compliance with or fulfillment of the
terms and provisions of this Agreement does or will (a) violate or
conflict with, or result in, any breach of any of the terms, conditions
or provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would become a default) under the
Certificate of Incorporation or Bylaws of Siemens or any agreement,
indenture, lease, mortgage or other instrument to which it is a party
or by which it is bound, (b) require any affirmative approval, consent,
authorization or other order or action of any court, governmental
authority or regulatory body or of any creditor of Siemens, (c) result
in any material violation of any provision of any law, rule, regulation
or any, court order, judgment, writ, injunction, decree or arbitration
award or determination, or (d) give any party with rights under any
such instrument, agreement, mortgage, judgment, order, award, decree or
other restriction the right to terminate, modify or otherwise change
the rights or obligations of Siemens. Siemens has full power and
authority to do and perform all acts and things required to be done by
it under this Agreement.
-20-
<PAGE>
8.3 No Brokerage Fees. No person acting on behalf of Siemens has any claim
for a brokerage commission, finder's fee or other like payment in
connection with this Agreement or the purchase of the Group Common
Stock being sold by the Non-Siemens Group Shareholders as contemplated
by this Agreement.
8.4 Intent. Siemens is acquiring the Group Common Stock being sold by the
Non-Siemens Group Shareholders and the CTI Common Stock as contemplated
by this Agreement, and, upon exercise of its options and rights
hereunder, will be acquiring additional securities, for its own account
and not with a view to the distribution or resale thereof. Siemens
understands that there is no present market in such securities or in
any other securities of Group and CTI; that no assurance can be given
that any such market will develop; and that Group has no present intent
to register its securities under the Securities Act or the Exchange
Act.
8.5 Receipt of Information. Siemens represents and warrants that by reason
of its relationship with Group, including but not limited to its
involvement in developing Group business plans, its representation on
the Group Board of Directors and through other information made
available to it, Siemens has been given access to all information,
including but not limited to financial, product, market and operational
information, that it has requested.
8.6 Consents. Except for filings under the HSR Act and with the
Bundeskartellamt in the Federal Republic of Germany, no consent,
approval or authorization of, or exemption by, or filing with, any
governmental or regulatory authority is required in connection with the
execution, delivery and performance by Siemens of this Agreement or the
taking of any other action contemplated hereby, excluding, however,
consents, approvals, authorizations, exemptions and filings, if any,
which CTI, Group, CPS or Management is required to obtain or make.
9. COVENANTS OF GROUP.
9.1 Financial Statements. As long as Siemens or its transferee Affiliate,
if any (herein "Stockholder"), continues to hold any of the Group
Common Stock, Group shall:
(a) Furnish Stockholder within thirty (30) days after the end of
each quarter of each fiscal year of Group a balance sheet of
Group as at the end of such period, and a statement of income,
expense and net earnings of Group for the period from the
beginning of the fiscal year to the date of such statement,
prepared in accordance with generally accepted accounting
principles applied on a consistent basis and in reasonable
detail. Each such balance sheet and statement shall set forth
in comparative form in corresponding figures as at the end of
and for the corresponding period one (1) year prior thereto,
and each shall be certified as true, complete and correct
(subject to adjustment upon year-end audit) by the chief
financial officer of Group.
(b) Furnish Stockholder as soon as practicable, but in any event
within one hundred twenty (120) days after the end of each
fiscal year, a copy of Group's annual audited financial
statements, which shall include among other things a balance
sheet as at the end of such fiscal year and a statement of
income, expense and net earnings for such year in reasonable
detail, which balance sheet and statement
-21-
<PAGE>
shall set forth in each case in comparative form the
corresponding figures for the previous year and shall be
certified by Group's independent public accountants; and
(c) Deliver to Stockholder such financial statements, reports and
other information as Siemens shall reasonably request.
In the event Group owns subsidiaries with respect to which it
files consolidated tax returns, the financial statements
referred to in Sections 9.1(a) and 9.1(b) above may be
prepared on a consolidated basis with such subsidiaries.
(d) Group will permit representatives of Siemens, at Siemens'
expense, to visit and inspect any of the properties of Group
or its subsidiaries and to discuss the affairs, finances and
accounts of Group and its subsidiaries with their respective
officers, at such reasonable times and with such reasonable
frequency as Siemens may request.
10. COVENANTS OF CPS.
10.1 FDA Approval. CPS agrees to pursue diligently all necessary United
States Food and Drug Administration and other administrative approvals
for the CPS Business.
10.2 Components. CPS will use its best efforts (within economic and
functional parameters) to use the same components and systems solutions
(i.e., conceptual designs) as Siemens uses within its medical
technology business.
11. COVENANTS OF MANAGEMENT.
11.1 Voting. Each Management Person agrees to vote his shares of Group
Common Stock prior to the Closing, and thereafter his shares of CTI
Common Stock, and to vote as a director of Group, CTI and CPS in a
manner consistent with the terms of this Agreement.
11.2 Management of CPS. Each Management Person agrees to manage CPS (in
management positions described in Exhibit 11.2 hereto) for a period of
five (5) years from the Closing Date, pursuant to the terms of the
Administrative Service Agreement in substantially the form attached
hereto as Exhibit 4.5(m)(1) and employment contracts with CTI in
substantially the form attached hereto as part of Exhibit 11.2. In
managing CPS, each Management Person is and shall remain at all times
(unless terminated by CTI) an employee of CTI and is not an employee of
CPS or its subsidiaries. Such Management Person shall not be entitled
to and are not qualified under any employee benefit plans, including
but not limited to pension, health and insurance plans, provided by CPS
for its employees.
11.3 Non-Competition. Until the expiration of three (3) years after the date
of termination of his employment by CTI for any reason, each Management
Person shall not participate in any business competitive with the CPS
Business, as defined in Section 1.4 hereinabove, whether for its own
account or as a partner, joint venturer, agent, stockholder of a
corporation (other than a beneficial owner of less than one percent
(1%) of the outstanding voting stock thereof), directly or indirectly,
or otherwise, except for such peripheral and OEM equipment as may be
mutually agreed by the parties hereto, such
-22-
<PAGE>
agreement not to be unreasonably withheld. The activities of CTI
contemplated in Section 12.1 shall not be deemed to violate this
Section 11.3.
11.4 Non-Competition by CTI. At or prior to the Closing, Management shall
cause CTI to undertake that, until the expiration of three (3) years
after the date of the sale by CTI of twenty-five percent (25%) or more
of its direct or indirect equity ownership in CPS, CTI and its
Affiliates shall not participate in any business competitive with the
CPS Business, as defined in Section 1.4 herein above, whether for its
own account or as a partner, joint venturer, agent, stockholder of a
corporation (other than a beneficial owner of less than one percent
(1%) of the outstanding voting stock thereof), directly or indirectly,
or otherwise, except for such peripheral and OEM equipment as may be
mutually agreed by the parties hereto, such agreement not to be
unreasonably withheld. The activities of CTI contemplated in Section
12.1 shall not be deemed to violate this Section 11.4.
11.5 Conduct of Business. Prior to the Closing, and except as otherwise
contemplated by this Agreement or consented to or approved by Siemens
in writing, Management covenants and agrees that:
(a) Business in Ordinary Course. Management shall cause each of
Group and CPS to operate its business diligently and in good
faith only in the ordinary and usual course in accordance with
Management's past practices, which shall include the
maintenance of all insurance policies covering Group and CPS.
(b) No Change in Accounting Practices. Except as may be consented
to by Siemens in writing or as required by U.S. GAAP,
Management shall not cause Group or CPS to make any changes in
accounting practices or in the method of recording sales
including, without limiting the foregoing, the accounting
methods used by Group and CPS in the recognition of income.
(c) Capital Stock. Management shall cause Group and CPS not to
issue or sell any Group Common Stock or CPS Common Stock,
respectively, except for any sale of Group Common Stock
pursuant to the exercise of existing stock options.
(d) No Redemption or Distributions. Management shall not allow
Group or CPS directly or indirectly to redeem, purchase or
otherwise acquire any of the Group Common Stock or the CPS
Common Stock, or make any distributions or pay any dividends
to the stockholders of Group or CPS.
12. COVENANTS OF SIEMENS.
12.1 Future Capitalization of CTI. Siemens acknowledges that it is
Management's intention that CTI expand into new businesses peripheral
to Group. The businesses which Management intends to cause CTI to
develop include F-18 Distribution Centers, Positron Emission Tomography
("PET") Diagnostic Centers, PET Detector Systems, PET Chemistry Systems
and other related businesses, which businesses shall not be competitive
with the CPS Business. The parties acknowledge that CTI will likely
require new capital to develop these businesses, and that the
shareholders of CTI may require further liquidity in the future.
Siemens agrees that it will not oppose future CTI capitalization
efforts.
-23-
<PAGE>
12.2 Non-Competition. Until the expiration of three (3) years after the date
of the sale by Siemens of twenty-five percent (25%) or more of its
direct or indirect equity ownership in CPS, Siemens and its Affiliates
shall not participate in any business competitive with the CPS
Business, as defined in Section 1.4 hereinabove, whether for its own
account or as a partner, joint venturer, agent, stockholder of a
corporation (other than a beneficial owner of less than one percent
(1%) of the outstanding voting stock thereof), directly or indirectly,
or otherwise, except for such peripheral and OEM equipment as may be
mutually agreed by the parties hereto, such agreement not to be
unreasonably withheld.
12.3 Amendment of Stockholders' Agreement. Siemens shall prior to or
simultaneously with the Closing cause its affiliate, Siemens Capital
Corporation ("SCC"), to enter into the Amendment of the Stock Purchase
and Stockholders' Agreement dated April 22, 1985 among CPS, Management
and SCC attached hereto as Exhibit 12.3.
13. MANAGEMENT OF GROUP. For so long as Siemens and any Affiliate of
Siemens, in the aggregate, are the beneficial owners of at least
forty-nine percent (49%) of the issued and outstanding Group Common
Stock, and CTI and any affiliates of CTI, in the aggregate, are the
beneficial owners of at least fifty and one-tenth (50.1%) of the issued
and outstanding Group Common Stock:
13.1 Election of Directors. Siemens and CTI shall have equal representation
on the Board of Directors of Group. Initially, from and after the
Closing Date, the Board of Directors of Group shall be comprised of six
(6) directors, three (3) designated by Siemens and three (3) designated
by CTI. Upon any change in the ownership of Group Common Stock,
representation on the Board of Directors of Group shall be proportional
to each stockholder's stock ownership, rounded to the nearest whole
number.
13.2 Voting Policy. The Board of Directors of Group shall vote in such a way
as to maximize the growth potential of Group and CPS.
13.3 Research and Development. Total combined research and development
expenses of Group and CPS shall be specified at a level of
approximately ten to twelve percent (10% to 12%) of sales volume of CPS
(net sales to Siemens) as set forth in the annual business plan
approved by the Board of Directors of Group and CPS.
13.4 Officers of Group.
(a) If the Chairman of the Board of Directors of Group is a
representative of CTI, then the President of Group shall be a
representative of Siemens and, similarly, if the Chairman of
the Board of Directors of Group is a representative of
Siemens, then the President of Group shall be a representative
of CTI.
(b) Initially, upon the Closing, the officers of Group shall be as
reflected on Exhibit 13.4(b) hereto.
(c) Siemens shall have the right to designate the Controller/Vice
President, Finance and Chief Financial Officer of Group and
CPS; the Controller/Vice President, Finance and Chief
Financial Officer shall be the chief financial officer of
Group and CPS and shall have the duties set forth on Exhibit
13.4(c) hereto.
-24-
<PAGE>
(d) After five (5) years from the Closing Date, Siemens shall have
the right to designate persons to fill two (2) management
positions in CPS, in addition to the Controller/Vice
President, Finance and Chief Financial Officer. Unless
mutually agreed otherwise, the management positions to which
this section applies shall be those positions listed in
Exhibit 13.4(d) attached hereto.
(e) Siemens shall have the right to assign up to six (6) people to
become employees of CPS, e.g., in the service, research and
development and marketing departments of CPS, and Group and
CPS agree that such persons will be hired by CPS and
integrated into CPS's operations, as such positions become
available through attrition of existing employees, or as new
positions are established through growth. Siemens may
designate such persons at any time, regardless of the
availability of openings for them, but at its own expense if
no such openings are available. Office space for Siemens
personnel who have not become CPS employees will be at
Siemens' expense, on a pro rata facility cost basis.
13.5 Stockholder Votes. To the maximum extent permitted by applicable law,
all matters which would otherwise require action by the stockholders of
Group shall be submitted to the Board of Directors of Group for action.
All actions to be taken by vote of the stockholders of Group (except
for those delegated to the Board of Directors pursuant to the preceding
sentence) shall be made by two-thirds (2/3) majority vote of the
stockholders, unless a greater majority is required by law, in which
case the greater majority shall be required.
13.6 Material Board Decisions. The following matters, among others, shall be
submitted to the Board of Directors of Group, which shall take action
on them by majority vote of the entire Board of Directors:
(a) New product development calling for the expenditure of more
than Two Hundred Fifty Thousand Dollars ($250,000) per year.
(b) All single expenditures, or related expenditures in the
aggregate, exceeding Two Hundred Fifty Thousand Dollars
($250,000) each.
(c) Election of officers of Group and determination of
compensation and benefits for officers.
(d) The offering or registration under state or federal securities
laws, of any shares of Group Common Stock or any other
securities of Group.
(e) Amendments of the Charter or bylaws of Group.
(f) The incurrence of indebtedness for borrowed funds in excess of
the maximum amount thereof set forth in the most recent annual
budget approved by the Board of Directors of Group, or which
would cause the debt/equity ratio of Group to exceed that
established in such budget.
(g) The incurrence of any guaranty obligations.
(h) The sale, lease, pledge or other disposition of more than ten
percent (10%) of the real estate, plant and equipment of
Group.
-25-
<PAGE>
(i) The acquisition of any assets of or equity interest in, or the
making of loans to, any entity or person except in the
ordinary course of Group's business, or as specifically
authorized in the most recent annual budget approved by the
Board of Directors of Group.
(j) Adoption and revision of corporate plans, including short,
medium and long-range business plans, annual budgets, annual
operation plans, five-year business plans, research and
development budgets, and the like.
(k) Conclusion, termination or amendment of agreements with others
respecting patents, know-how and other proprietary rights.
(l) Declaration of dividends or other distributions of profits.
(m) Any other decisions or actions not in the ordinary course of
Group's business or which materially affect Group or its
assets.
13.7 Resolution of Impasse. An "Event of Impasse" shall be deemed to have
occurred if and when any of the following shall have occurred:
(a) The most recent annual budget approved by the Board of
Directors of Group shall have less than three (3) months
remaining before its expiration, a new five-year business plan
has not been approved during the most recent year and has not
been extended until a new annual budget or five-year plan has
been approved, and either Siemens or CTI shall have given to
the other written notice that an Event of Impasse has
occurred; or
(b) CTI or Siemens proposes in good faith and in the exercise of
reasonable business judgment a Material Board Decision (as
defined hereinabove) on two (2) consecutive occasions after
the issue had been placed on the agenda for the second board
meeting and the proposal is rejected in bad faith on each such
occasion.
If and when an Event of Impasse has occurred, the Board of Directors
shall promptly appoint an Impasse Committee of three members. One
member shall be selected by CTI, one by Siemens, and the third by the
first two members; in the event that the members selected by CTI and
Siemens cannot mutually agree upon a third member, such member shall be
selected by counsel for CTI and Siemens. It shall be the responsibility
of the Impasse Committee to arrive unanimously at a resolution of the
Event of Impasse. The resolution recommended by the Impasse Committee
shall be binding on the parties hereto (1) unless it is rejected by a
majority of the members of the Board of Directors of Group, in which
event the Board will then either (A) resolve the impasse, (B) appoint
another Impasse Committee (provided, however, that no more than two (2)
Impasse Committees may be appointed for any given Event of Impasse), or
(c) recommend that CTI or Siemens buy out the other's Group Common
Stock interest on mutually agreeable terms, and (2) provided that a
recommendation by the Impasse Committee of a buyout by either Group or
Siemens of the other shall not be binding on the parties.
13.8 CTI Board. For so long as CTI and any of its Affiliates, in the
aggregate, and Siemens and any of its Affiliates, in the aggregate,
each holds more than twenty percent (20%) of
-26-
<PAGE>
the outstanding Group Common Stock, Siemens shall be entitled to
designate one of the Siemens designee board members of Group for
election to the Board of Directors of CTI, and Management agrees to
vote its shares of CTI for the election of such designee.
13.9 Additional Capital. In the event that additional capital investment is
needed by Group in accordance with a business plan approved by its
Board of Directors, then CTI and Siemens will each contribute such
capital in proportion to their ownership of Group Common Stock, unless
another option, e.g., borrowing, is mutually agreed by CTI and Siemens.
If either is unable or refuses to make such capital contribution, then
Group shall issue sufficient shares of Group Common Stock at fair
market value, determined in the manner provided in Sections 14.1 and
14.2 hereof to raise the necessary capital. The other Group shareholder
which has contributed its share of the necessary capital shall have a
right of first refusal to purchase such shares.
13.10 Intercompany Transfers. The parties acknowledge that it is the
intention of Management that CTI develop businesses involving products
and services related to the CPS Business, either directly itself, or
through subsidiaries or other Affiliates. Siemens and CPS understand
and agree that CTI and its Affiliates may use CPS products for the
establishment of its own distribution centers for positron-emitting
radioisotopes and compounds, for its own PET diagnostic centers, and
for the other purposes contemplated in Section 12.1. The parties
further agree that with respect to the development of Qualified
Distribution Centers, CTI or its Affiliates may purchase RDS
(radioisotope distribution systems) products, including any
improvements and advances thereto, directly from CPS on the same terms
and conditions on which Siemens purchases from CPS pursuant to the OEM
Exclusive Distribution Rights Agreement among CPS, Management and
Siemens, at prices equal to the transfer prices set forth on Exhibit
13.10 hereto. For purposes of this Section, a "Qualified Distribution
Center" shall be a location owned by CTI or its Affiliates, for which
CTI can demonstrate a commitment, expressed in writing, by at least one
unrelated third party, for the purchase of positron-emitting
radioisotopes and compounds from such Distribution Center. CPS
products, including RDS products, not purchased for Qualified
Distribution Centers shall be purchased from Siemens or its Affiliates
at prices to be negotiated on a case by case basis. For centers which
they own and operate, CTI or its Affiliates may purchase ECAT systems
directly from Siemens and its Affiliates at prices to be negotiated on
a case by case basis. All CPS products sold pursuant to this Section
13.10 shall not be resold by CTI in competition with CPS, Siemens or
customers of Siemens or its Affiliates.
13.11 Business Plan. Attached hereto as Exhibit 13.11 is a copy of the
current five-year business plan for CPS which states the expected
sales, expenses and investment levels for CPS, including proportions of
debt and equity, together with an expectation range. Exhibit 13.11 is
for reference only, and has not been approved by CTI and Siemens. As
soon as practicable following the Closing, an initial annual business
plan shall be developed and adopted for Group and CPS.
13.12 Distribution Agreement. At the Closing, CPS, Management and Siemens
will enter into and execute an amendment of the May 20, 1986 OEM
Exclusive Distribution Rights Agreement among them to add thereto
additional products of CPS. The form of the amendment shall be
substantially as set forth in Exhibit 4.5(j) hereto.
-27-
<PAGE>
14. ADDITIONAL PURCHASE AND SALE RIGHTS.
14.1 Siemens' Additional Purchase Rights. Siemens shall have the right from
and after the Closing Date to purchase from CTI additional shares of
Group Common Stock up to the number of shares of Group Common Stock
required to bring Siemens' ownership of Group Common Stock to eighty
percent (80%) of the then issued and outstanding capital stock of Group
at such time (or thereafter) as any of the following events shall
occur:
(a) A change in control of CTI incident to which Management does
not continue to hold, in the aggregate, more shares of CTI
Common Stock than any other single shareholder other than
Siemens or any of its Affiliates, unless the prior written
consent of Siemens is obtained, which consent shall not be
unreasonably withheld; or
(b) From and after five (5) Years from the date hereof, at such
time as the dollar sales volume of CTI's business, other than
the CPS Business, is greater than the dollar sales volume of
CPS; or
(c) From and after seven (7) years from the date hereof,
provided, however, (1) Siemens' additional purchase right described in
this Section 14.1 shall be contingent upon CPS having exceeded the
number of aggregate units required to be sold from the date hereof to
the date of exercise of such purchase right as specified in the
"Siemens minima plus 20% plan" attached hereto as Exhibit 14.1 in the
year immediately preceding its election to exercise its purchase right,
(2) CTI shall have a one-time right to defer the exercise of such right
by Siemens for a period of one year after the initial notice of
exercise, i.e., upon Siemens' initial notice of its intent to exercise
its right to purchase additional shares of Group Common Stock
hereunder, CTI shall have the right to decline to sell such shares to
Siemens, and Siemens may not again undertake to exercise such right to
purchase additional shares of Group Common Stock for one year after the
initial notice of exercise which was so declined, and (3) Siemens'
additional purchase right described in this Section 14.1 shall be
contingent on approval from the Bundeskartellamt office in the Federal
Republic of Germany, which approval shall be sought in good faith by
Siemens. The price to be paid for the Group Common Stock pursuant to
such purchase right shall be a price to be negotiated by Siemens and
CTI, provided, however, that in the event that they cannot agree upon a
price within sixty (60) days from the date of effective notice of
exercise, the price shall be determined by the following appraisal
procedure: Each party shall obtain a valuation of the Group Common
Stock by an independent professional experienced in the valuation of
closely-held corporations similar to Group. If the valuations thus
obtained are within twenty percent (20%) of each other, the price to be
paid for the Group Common Stock to be purchased from CTI by Siemens
shall be the average of the two valuations. If the difference between
the valuations is more than twenty percent (20%), the two parties
making those valuations shall select a third independent professional
experienced in the valuation of closely-held corporations similar to
Group to make a valuation, and the price to be paid for the Group
Common Stock to be purchased by Siemens from CTI shall be the average
of the two of the three valuations which are the closest to each other.
14.2 CTI's Additional Rights. CTI shall have the right from and after the
Closing to require Siemens to purchase from CTI additional shares of
Group Common Stock up to the number of shares of Group Common Stock
required to bring Siemens' ownership of
-28-
<PAGE>
Group Common Stock to eighty percent (80%) of the then issued and
outstanding capital stock of Group at such time (or thereafter) as any
of the following events shall occur:
(a) A change in control of CTI incident to which Management does
not continue to hold, in the aggregate, more shares of CTI
Common Stock than any other single Shareholder other than
Siemens or any of its Affiliates, unless the prior written
consent of Siemens is obtained, which consent shall not be
unreasonably withheld; or
(b) From and after five (5) years from the date hereof, at such
time as the dollar sales volume of CTI's business, other than
the CPS Business, is greater than the dollar sales volume of
CPS; or
(c) From and after seven (7) years from the date hereof,
provided, however, (1) CTI's additional sale right described in this
Section 14.2 shall be contingent upon CPS having exceeded the number of
aggregate units required to be sold from the date hereof to the date of
exercise of such sale right as specified in the "Siemens minima plus
20% plan" attached hereto as Exhibit 14.1 in the year immediately
preceding its election to exercise its sale right, (2) Siemens shall
have a one-time right to defer the exercise of such sale right for a
period of one year after the initial notice of exercise, i.e., upon
CTI's initial notice of its intent to exercise its right to require
Siemens to purchase additional shares of Group Common Stock, Siemens
shall have the right to decline to purchase such shares, and CTI may
not again undertake to exercise such right to require Siemens to
purchase additional shares of Group Common Stock for one year after the
initial notice of exercise which was so declined, and (3) CTI's
additional purchase right described in this Section 14.2 shall be
contingent on approval from the Bundeskartellamt office in the Federal
Republic of Germany, which approval shall be sought in good faith by
Siemens. The price to be paid for the Group Common Stock pursuant to
such purchase right shall be a price to be negotiated by Siemens and
CTI, provided, however, that in the event they cannot agree upon a
price within sixty (60) days from the date of effective notice of
exercise, the price shall be determined by the following appraisal
procedure: Each party shall obtain a valuation of the Group Common
Stock by an independent experienced in the valuation of closely-held
corporations similar to Group. If the valuations thus obtained are
within twenty percent (20%) of each other, the price to be paid for the
Group Common Stock to be purchased by Siemens from CTI shall be the
average of the two valuations. If the difference between the valuations
is more than twenty percent (20%), the two parties making those
valuations shall select a third independent professional experienced in
the valuation of closely-held corporations similar to Group to make a
valuation, and the price to be paid for the Group Common Stock to be
purchased by Siemens from CTI shall be the average of the two of the
three valuations which are the closest to each other.
14.3 Purchase and Sale in Event of Default. For purposes of this Section
14.3, an "Event of Default" shall be deemed to have occurred if and
when any of the following shall have occurred, and shall not have been
cured within thirty (30) days after written notice thereof given to the
defaulting party by the non-defaulting party:
(a) Any representation or warranty herein made by Siemens on the
one hand or CTI, Group, CPS or Management on the other proves
to have been false in any material respect when made;
-29-
<PAGE>
(b) CTI or Siemens (or any Affiliate of Siemens holding Group
shares) files a bankruptcy petition, makes a general
assignment for the benefit of creditors or has an involuntary
bankruptcy petition filed against it; or
(c) CTI or Siemens is unwilling or unable to provide additional
capital to Group in accordance with a previously approved plan
or previously approved commitment to do so.
Upon the occurrence of an Event of Default as defined hereinabove, the
non-defaulting shareholder of Group shall have the right to (A) name
its designees to any or all management positions of Group without
liability to any displaced person under any management or employment
contract, and (B) name an additional representative to the Board of
Directors of Group. The non-defaulting party will immediately be
relieved of any contractual requirements in any management or
employment contracts and may administer a sale of additional Group
Common Stock to provide previously committed funds, such sales to occur
at fair market value in accordance with the procedure set forth at
Sections 14.1 and 14.2 above. The non-defaulting shareholder shall have
the right to purchase such additional Group Common Stock at its fair
market value for sixty (60) days after determination of the price of
the shares.
15. STOCK TRANSFER RESTRICTION AND RIGHT OF FIRST REFUSAL. The provisions
of this Section 15 shall apply at and after the Closing. Neither CTI
nor Siemens may transfer its Group Common Stock for a period of five
(5) years from the Closing Date; provided, however, that Siemens or CTI
may during such time transfer such stock to any Affiliate of Siemens or
CTI, so long as such transfer does not violate any applicable
securities laws, subject to the provisions of Section 22.2 below. After
five (5) years from the Closing Date, if CTI or Siemens contemplates a
sale of its Group Common Stock, it shall notify the other stockholder,
and they shall attempt to agree upon a price pursuant to which the
other stockholder may purchase the Group Common Stock of the selling
stockholder. If they cannot agree upon a price, then the selling
stockholder's Group Common Stock shall be subject to a right of first
refusal in favor of the other stockholder, as provided hereinbelow,
which right of first refusal shall survive after any transfer to a
third party. If Siemens or CTI or any of their permitted transferees
(the "Selling Stockholder") desires to sell any of its Group Common
Stock to any party other than (A) an Affiliate of Siemens or CTI, (B)
any general or limited partnership in which Siemens or CTI, or an
Affiliate of Siemens or CTI, is a partner, or (C) any Management
Person, then:
15.1 The Selling Stockholder shall give notice to the other stockholder of
any transactions covered by this Section 15. The notice shall include
(A) the name, address and principal business activity of the
prospective purchaser; (B) the number of shares of stock proposed to be
sold; (C) the manner in which the sale is proposed to be made
(including the proposed closing date); and (D) the price at which, or
other consideration for which, and the material terms upon which, such
sale is proposed to be made, and stating that such proposed sale is, to
the best of the Selling Stockholder's knowledge, bona fide.
15.2 During the thirty (30) day period commencing on the date the other
stockholder receives the Selling Stockholder's notice, the other
stockholder shall have the right to acquire all but not less than all
of the shares of Group Common Stock proposed to be sold by the Selling
Stockholder in such transaction. Such right shall be exercised, if at
all, by an
-30-
<PAGE>
irrevocable notice of exercise given by the other stockholder and
received by the Selling Stockholder prior to the expiration of such
period, accompanied by a statement that the other stockholder shall pay
the Selling Stockholder in accordance with the terms provided for in
the proposed transaction.
15.3 If the other stockholder exercises its rights under this Section 15,
the Selling Stockholder shall deliver certificates duly endorsed for
transfer representing the shares of Group Common Stock purchased by the
other stockholder in accordance with the terms specified in such notice
against receipt of payment therefor.
15.4 The closing shall occur on the date specified in the Selling
Stockholder's notice.
15.5 If the conditions prescribed in this Section 15 have been met in
connection with the proposed sale of Group Common Stock by the Selling
Stockholder and the other stockholder has not elected to exercise its
right of first refusal hereunder, then the Selling Stockholder shall be
free to effect such sale for a period of one hundred eighty (180) days
following the date of the notice given under Section 15.1 hereof, but
only to the person or persons specified in such notice and at the price
(or for the consideration) and on substantially the same terms
specified therein, and if such sale does not occur within such 180 day
period, Group Common Stock proposed to be sold will continue to be
subject to this Agreement to the same extent as if such notice had not
been given.
16. SALE OF CTI COMMON STOCK BY MANAGEMENT. So long as Siemens owns one
percent (1%) or more of the issued and outstanding CTI Common Stock,
and provided that at such time there has been no public offering of CTI
Common Stock, if at any time any Management Person wishes to sell any
of his CTI Common Stock, he shall first notify both Siemens and CTI of
his intention to do so, to enable them to offer competitive bids for
his CTI Common Stock, provided, however, that this Section 16 shall not
be construed as a right of first refusal or a requirement that the
Management Person sell his shares to Siemens or CTI.
17. SPECIFIC PERFORMANCE. The parties recognize that, because of the nature
of the subject matter of this Agreement, it would be impracticable and
extremely difficult to determine actual damages in the event of a
breach of this Agreement. Accordingly, if any party commits a breach,
or threatens to commit a breach, of any of the provisions of Sections
2, 3, 4, 9, 10, 11, 12, 13, 14, 15 or 16 the other parties shall have
the right to seek and receive a temporary restraining order, injunction
or other equitable remedy, including, without limitation, the right to
have the provisions of this Agreement specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that
any such breach or threatened breach will cause irreparable injury and
that money damages will not provide an adequate remedy.
18. DISPUTE RESOLUTION. Except with respect to resolution of events of
impasse, for which a separate procedure is set forth at Section 13.7
above, the parties agree to resolve amicably and in good faith any
disputes arising from the interpretation of any provisions of this
Agreement. In the event of any disagreement among the parties
concerning any provision hereof upon the request of any party the
matter shall be immediately referred to the managements of Siemens and
CTI. If within a period of 30 days after reference of the matter to
them the respective managements are unable to agree upon a resolution,
any party may within 30 days after the aforesaid 30-day period elect to
utilize a non-binding resolution procedure whereby each party presents
its case at a hearing held in Chicago,
-31-
<PAGE>
Illinois or Knoxville, Tennessee, on an alternating basis, with the
first hearing to be held in Chicago, Illinois, before a panel
consisting of the Chief Executive Officer of each of Siemens and CTI
and a mutually acceptable neutral advisor, who shall be selected from
the Center for Public Resources' Judicial Panel. Prior to the hearing,
the parties and the neutral advisor shall agree on a set of ground
rules for the hearing. At the conclusion of the hearing, the Chief
Executive Officers of each of Siemens and CTI shall meet and attempt to
resolve the matter. If the matter cannot be resolved at such meeting,
the neutral advisor may be called upon to render his opinion as to how
the matter would be resolved had the matter been on trial in a court of
law. After the opinion is received, the executives shall meet again and
try to resolve the matter. If the matter cannot be resolved at such
meeting, any party may give to the other party notice of its intention
to litigate. No litigation may be commenced concerning the matter in
dispute until 60 days have elapsed from the sending of the notice to
litigate; provided, however, that such litigation may be commenced
prior to such date if the applicable statute of limitations would run
prior thereto. The parties shall bear their respective costs incurred
in connection with this procedure, including the fees and expenses of
the neutral advisor. Only after the foregoing procedure has been
exhausted shall either party resort to litigation as the final
adjudication of the dispute.
19. PRODUCT LIABILITY. Management shall cause CTI at the Closing to enter
into an agreement to hold Siemens harmless against any and all product
liability, including but not limited to, personal injuries and property
damages, recovered by any claimant relating to products manufactured or
sold by Group or CPS before the Closing Date, including but not limited
to products in the inventories of Group and CPS at the Closing Date,
plus any attorney's fees incurred by Siemens in connection with such a
claim, provided that CTI shall not be responsible for liability on such
products in the event that the damages or injuries which resulted in
such liabilities shall be the result of alterations, repairs or service
on products, shipment or installation of the products or other action
relating to such products by or on behalf of Siemens after the Closing
Date. The responsibility of CTI under this Section shall extend to
products which Group or CPS did not manufacture but which were sold by
or on behalf of Group or CPS prior to the Closing Date.
20. PENSION AND EMPLOYEE BENEFIT MATTERS. Group, CPS and Siemens shall
comply with the provisions of the benefits plans listed on Exhibit 5.21
attached hereto and all the laws applicable thereto.
21. TERMINATION OF THIS AGREEMENT.
21.1 Termination. This Agreement may be terminated before the Closing occurs
only as follows:
(a) By written agreement of the parties at any time;
(b) By Siemens, by notice to other parties at any time, if
satisfaction of one or more of the conditions specified in
Section 4.5 is or becomes impossible;
(c) By Group or Management, by notice to Siemens at any time, if
satisfaction of one or more of the conditions specified in
Section 4.6 is or becomes impossible; or
(d) By any of the parties by notice to the others at any time
after March 15, 1988.
-32-
<PAGE>
21.2 Effect of Termination. In the event that this Agreement is terminated
pursuant to Section 21.1, such termination shall be without any
liability or further obligation of any party to another and the
obligations and agreements in this Agreement shall terminate and have
no further effect, except for liabilities and obligations (a) under
Sections 22.1 and 22.8 hereof, which shall survive such termination, or
(b) based on any intentional failure to perform or comply with any
covenant or agreement herein or for any intentional misrepresentation
or breach of any warranty herein which causes Damages, and such
termination shall not constitute a waiver of any claim with respect
thereto.
22. MISCELLANEOUS.
22.1 Expenses. Except as otherwise provided herein, Management shall cause
CTI to pay, on the one hand, and Siemens shall pay, on the other hand,
the expenses incurred in connection with this Agreement and the
transactions contemplated hereby by CTI, Group, CPS, the Non-Siemens
Group Shareholders and Management, in the first case, and Siemens, in
the second case. The payment of all transfer taxes and documentary
taxes (other than those imposed by jurisdictions outside the United
States) which may be imposed upon each transaction shall be paid by CTI
at each closing with respect to the securities transferred in
proportion to their interest in the securities transferred.
22.2 Successors; Assignment. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the successors of the
parties hereto. Except as otherwise provided herein, this Agreement
shall not be assignable. Each of Siemens and CTI shall have the right
to transfer all or any of the Group Common Stock owned by it to any
Affiliate of Siemens or CTI, respectively; provided, however, that such
Affiliate of Siemens or CTI, as the case may be, shall agree in advance
in writing to be bound by all the terms of this Agreement. In such
case, the Affiliate of Siemens shall be entitled to enforce as against
CTI, Group, CPS and Management all of the terms and conditions of this
Agreement to the same extent as this Agreement could be enforced by
Siemens, but Siemens shall remain bound by the terms of this Agreement,
and the Affiliate of CTI shall be entitled to enforce as against
Siemens all of the terms and conditions of this Agreement to the same
extent as this Agreement could be enforced by CTI or Management, but
CTI and Management shall remain bound by the terms of this Agreement.
22.3 Entire Agreement; Amendment. This Agreement and the exhibits hereto set
forth the entire understanding between the parties with respect to
their respective subject matters. They may not be modified, amended,
altered or supplemented and no provision may be waived except by a
written agreement signed by the parties thereto which shall be
authorized by all necessary corporate action of each party.
22.4 Survival of Representations, Warranties and Covenants; Indemnification.
(a) All representations, warranties, covenants and agreements made
herein shall survive the execution and delivery of this
Agreement and the purchase and sale of the Group Common Stock
provided for hereunder.
(b) If the Closing occurs, each of CTI and Management, on the one
hand, and Siemens, on the other hand, shall indemnify and hold
the others and Group harmless from and against all Damages
arising from or in connection with:
-33-
<PAGE>
(1) any misrepresentation or breach of any warranty made
by it herein or in any Exhibit delivered by it at the
Closing pursuant hereto or attached hereto;
(2) any breach or non-fulfillment of any covenant or
agreement required to be performed by it hereunder or
thereunder; and
(3) any and all actions, suits, investigations,
proceedings, demands, assessments, judgments, costs
and legal and other expenses incidental to any of the
foregoing;
provided, however, that CTI and Management shall each be
obligated to indemnify and hold harmless Siemens in connection
with their own respective misrepresentations, breach or
non-fulfillment only; it is not intended that CTI or
Management be responsible for the other's misrepresentations,
breach or non-fulfillment. Notwithstanding anything to the
contrary herein, none of CTI, Management or Siemens shall be
required so to indemnify and hold harmless with respect to the
first U.S. $50,000 in Damages in the aggregate for which it is
liable under this section. In determining the amount of
Damages for purposes of this Section, (y) notwithstanding
anything to the contrary herein, neither Siemens nor
Management or the Non-Siemens Group Shareholders shall have
any liability for indemnification hereunder with respect to
any claim resulting from the events described in this section
of which the indemnifying party is unaware unless a notice of
claim, in reasonable detail, with respect thereto shall have
been given to the indemnifying party with sufficient
promptness after the indemnified party becomes aware of the
relevant facts pertaining to such claim that the indemnifying
party's ability to minimize or eliminate such Damages has not
been materially adversely affected by delay; and (z) no
Damages shall be deemed sustained to the extent that such
Damages are covered by insurance for the benefit of the
indemnified party.
(c) Procedure -- Each indemnified party shall give notice to the
indemnifying party of any claim hereunder with reasonable
promptness after obtaining knowledge thereof, including,
without limitation, any third party claim against the
indemnified party or Group which might give rise to a claim
against the indemnifying party hereunder, stating the nature
and basis of such claim and the amount thereof, in reasonable
detail, to the extent then known by the indemnified party. The
indemnified party shall keep the indemnifying party fully
informed, use all reasonable efforts to defend such claim or
litigation and present any defense reasonably suggested by the
indemnifying party or its counsel. The indemnifying party
shall have the right to participate in such third-party claim
or litigation by counsel and accountants, at its own expense,
and, upon notice to the indemnified party, to assume, at its
own expense, the defense or prosecution thereof, as the case
may be, with counsel approved by the indemnified party (which
approval shall not be unreasonably withheld). If the
indemnifying party assumes such defense or prosecution, it
shall have no liability for any legal or other expenses
subsequently incurred by the indemnified party in connection
with such proceeding other than the reasonable costs of
investigation and cooperation with the indemnifying party in
such defense or prosecution, but it shall thereafter indemnify
and hold the other, the other's Affiliates and Group
-34-
<PAGE>
harmless from all Damages with respect to such claim or
litigation. The indemnified party shall not make, or offer to
make, any settlement of any claim or litigation which might
give rise to a right of indemnification from the indemnifying
party, without the consent of such indemnifying party, which
consent shall not be unreasonably withheld.
22.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by
personal delivery, cable, telegram or telex, or by mail (registered or
certified mail, postage prepaid, return receipt requested) to the
respective parties as follows:
If to Group: CTI Group, Inc.
810 Innovation Drive
Knoxville, Tennessee 37932
Attention: Terry D. Douglass
with a copy to:
Dennis R. McClane, Esq.
Baker, Worthington, Crossley, Stansberry & Woolf
530 Gay Street, S.W.
P.O. Box 1792
Knoxville, Tennessee 37901
If to Siemens, to: Siemens Gammasonics, Inc.
2000 Nuclear Drive
Des Plaines, Illinois 60818
Attention: President
with a copy to:
General Counsel
Siemens Capital Corporation
767 Fifth Avenue
New York, New York 10153
or to such other address as either party may have furnished to the
other in writing in accordance herewith.
22.6 Applicable Law. This Agreement shall be governed by and construed in
accordance with the substantive law of the State of Tennessee.
22.7 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement. The headings
contained in this Agreement are solely for the convenience of the
parties, and are not intended to and do not limit, construe or modify
any of the terms and conditions hereof.
-35-
<PAGE>
22.8 Confidential Information.
(a) Subject to (b) below, whether or not the Closing occurs, (1)
CTI and Management shall, and shall cause Group and CPS to
keep confidential and not disclose to any Person (other than,
with appropriate undertakings of confidentiality, its
employees, attorneys, accountants and other advisers) or use
(except in connection with the transactions contemplated
hereby) all confidential information relating to the Siemens
Businesses, and (2) Siemens shall, and shall cause its
Affiliates to, keep confidential and not disclose to any
Person (other than, with appropriate undertakings of
confidentiality, its employees, attorneys, accountants and
other advisers) or use (except in connection with the
transactions contemplated hereby) all confidential information
relating to the Group Businesses, in either case obtained by
them from the other pursuant to or in preparation for this
Agreement.
(b) Section 22.8(a) shall not be violated by disclosure pursuant
to court order or as otherwise required by law or in
connection with a Governmental Body investigation, provided
that the CTI, Management or Siemens, as the case may be, gives
the other notice of such required disclosure of the other's
confidential information and cooperates as such other may
reasonably request in contesting such required disclosure. The
obligations imposed by Section 22.8(a) shall not apply, or
shall cease to apply, to any such confidential information
when, and to the extent that, such confidential information:
(1) Was known (on a non-confidential basis) to the party
(or any Affiliate thereof) receiving the confidential
information at the time of such receipt; or
(2) Was, or becomes through no breach of such recipient's
obligations hereunder, known to the public either
before or after such receipt; or
(3) Becomes known (on a non-confidential basis) to the
recipient (or any Affiliate thereof) from sources
other than the party providing such confidential
information under circumstances not involving any
breach of any confidentiality obligation between such
source and the party providing such confidential
information; or
(4) Is independently developed by the recipient (or any
Affiliate thereof).
(c) If the transactions contemplated by this Agreement are not
consummated, (1) upon the request of Siemens, Management
shall, and shall cause Group and any Affiliates of Group to,
return promptly any written materials that they have received
from Siemens, its Affiliates or their representatives in
connection with this Agreement or the transactions
contemplated hereby, together with any copies of such
materials made by them, and (2) upon the request of
Management, Siemens shall, and shall cause its Affiliates to,
return promptly any written materials that they have received
from Siemens, the Siemens Affiliates or their representatives
in connection with this Agreement or the transactions
contemplated hereby, together with any copies of such
materials made by them. Management and Siemens shall, and
shall cause their respective Affiliates to, use their best
efforts to cause their respective Affiliates, employees,
attorneys,
-36-
<PAGE>
accountants and advisers to whom information is disclosed
pursuant to this Section 22.8(c) to comply with its
provisions.
(d) For purposes of this Section 22.8 only, the terms "Siemens
Businesses" and "Group Businesses" shall mean all business
activities of Siemens and its Affiliates and all business
activities of Group and its Affiliates, respectively, and the
business of CPS in each case.
22.9 Publicity. The parties agree that no publicity, release or other public
announcement concerning the transactions contemplated by this Agreement
shall be issued by any party without the advance approval of both the
form and substance of the same by the other parties and their counsel,
which approval, in the case of any publicity, release or other public
announcement required by applicable law, shall not be. unreasonably
withheld or delayed.
22.10 Invalidity. If any one or more of the provisions or any part thereof
contained in this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the remaining provisions or parts
thereof of this Agreement and this Agreement shall be construed in such
a way and to the extent permitted by law to give effect to the intent
of such provision or part thereof.
22.11 Waiver. The failure of any party to exercise any of its rights
hereunder or to enforce any of the terms or conditions of this
Agreement on any occasion shall not constitute or be deemed a waiver of
that party's rights thereafter to exercise any rights hereunder or to
enforce each and every term and condition of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ATTEST: CTI GROUP, INC.
/s/ Michael C. Crabtree By: /s/ Terry D. Douglass
------------------------------------- ---------------------------------
Title: Vice President Terry D. Douglass
President
ATTEST: CTI PET SYSTEMS, INC.
/s/ Michael C. Crabtree By: /s/ Terry D. Douglass
------------------------------------- ---------------------------------
Title: Vice President Title: President
Witness:
/s/ Mary Lou Marks /s/ Terry D. Douglass
------------------------------------- ---------------------------------
Dr. Terry D. Douglass
Witness:
/s/ Mary Lou Marks /s/ Ronald Nutt
------------------------------------- ---------------------------------
Dr. Ronald Nutt
-37-
<PAGE>
Witness:
/s/ Mary Lou Marks /s/ Michael C. Crabtree
------------------------------------- ---------------------------------
Michael C. Crabtree
Witness:
/s/ Mary Lou Marks /s/ J. Kelly Milam
------------------------------------- ---------------------------------
J. Kelly Milam
ATTEST: SIEMENS GAMMASONICS, INC.
By:
------------------------------------- ---------------------------------
Title: Title:
------------------------------- ------------------------------
-38-