-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SRFpSyWBa0uaqtcMWdIZLKaqFZyGjfCgpUeAYe7MPTJu4ExH7dbZppjdPwyOSXB8 lC4z7xS46ji24FyhiAqXiA== 0000891618-97-003552.txt : 19970822 0000891618-97-003552.hdr.sgml : 19970822 ACCESSION NUMBER: 0000891618-97-003552 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970821 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADAC LABORATORIES CENTRAL INDEX KEY: 0000313798 STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844] IRS NUMBER: 941725806 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34091 FILM NUMBER: 97667711 BUSINESS ADDRESS: STREET 1: 540 ALDER DR CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 4083219100 MAIL ADDRESS: STREET 1: 540 ALDER DR CITY: MILPITAS STATE: CA ZIP: 95035 S-3 1 FORM S-3 1 As filed with the Securities and Exchange Commission on August 21, 1997. Registration No. 33- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ADAC LABORATORIES ----------------- (Exact name of registrant as specified in its charter) California ------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) 94-1725806 ------------------------------------ (I.R.S. Employer Identification No.) 540 Alder Drive Milpitas, California 95035 (408) 321-9100 ----------------------------------------------------------------- (Address, including zip code and telephone number, including area code, of Registrant's principal executive offices) KAREN L. MASTERSON VICE PRESIDENT AND GENERAL COUNSEL ADAC LABORATORIES 540 ALDER DRIVE MILPITAS, CALIFORNIA 95035 (408) 321-9100 (Name, address, including zip code, and telephone number, including area code, of agent for service) Approximate date of commencement of proposed sale to the public: ---------------------------------------------------------------- From time to time after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 2 CALCULATION OF REGISTRATION FEE
============================================================================================== Title of Each Proposed Proposed Class of Maximum Maximum Securities to Amount to be Offering Price Aggregate Amount of be Registered Registered Per Share (1) Offering Price(1) Registration Fee - ------------- ------------- -------------- ----------------- ---------------- Common Stock 307,658 (1) $17.94 $5,519,384.52 $1,672.54 ==============================================================================================
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based on the average of the high and low prices of the Common Stock on the Nasdaq National Market on August 18, 1997. 3 307,658 SHARES [ADAC LABORATORIES LOGO] COMMON STOCK --------------- This Prospectus relates to the public offering, which is not being underwritten, of up to 307,658 shares of Common Stock, no par value per share (the "Shares"), of ADAC Laboratories ("ADAC" or the "Company"), which may be offered from time to time by certain shareholders of the Company or by pledgees, donees, transferees or other successors in interest that receive such Shares as a gift, partnership distribution or other non-sale related transfer (the "Selling Shareholders"). The Company will not receive any of the proceeds from the sale of the Shares offered hereby. Of the 307,658 Shares offered hereby, 187,658 of the Shares were originally issued by the Company in connection with the Company's acquisition of Photon Diagnostic Technologies, Inc., a Florida corporation ("Photon"), and Cortet, Inc., a Florida corporation ("Cortet"), and 120,000 of the Shares are issuable upon exercise of certain warrants granted Bain & Company, Inc. ("Bain") in connection with Bain's rendering of certain consulting services to the Company. In the Photon and Cortet acquisitions, the Shares were issued pursuant to the exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), provided by Section 4(2) of the Securities Act and Rule 505 of Regulation D promulgated under the Securities Act, respectively. The Warrants granted Bain were issued pursuant to the exemption provided by Section 4(2) of the Securities Act. The Shares are being registered by the Company pursuant to the Agreement and Plan of Reorganization dated as of February 3, 1997 by and among ADAC, J.D. Technical Services, Inc., a wholly owned subsidiary of ADAC, Photon and Sergio F. Cabrera, the sole shareholder of Photon, and the Agreement and Plan of Reorganization dated as of March 31, 1997 by and among ADAC, ADAC Acquisition Corp., a wholly owned subsidiary of ADAC, Cortet, and the designated shareholders of Cortet, and at the request of Bain. The Shares may be offered by the Selling Shareholders from time to time in transactions in the over-the-counter market at prices prevailing therein, in negotiated transactions at such prices as may be agreed upon, or in a combination of such methods of sale. See "Plan of Distribution." The price at which any of the Shares may be sold, and the commissions, if any, paid in connection with any such sale are unknown and may vary from transaction to transaction. The Company's Common Stock is traded on the Nasdaq National Market under the symbol "ADAC". On August 18, 1997, the closing price for the Common Stock was $18.125. -------------- SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY. -------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR 1 4 ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------- The Company has agreed to pay certain expenses in connection with the offering of the Shares, estimated at approximately $6,000. The Selling Shareholders and any broker-dealers or agents that participate with the Selling Shareholders in the distribution of the Shares may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by them and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. No person is authorized in connection with the offering made hereby to give any information or to make any representation other than as contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Company, any Selling Shareholder or by any other person. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any security other than the Shares, nor does it constitute an offer to or solicitation of any person in any jurisdiction in which such offer or solicitation cannot lawfully be made. Neither the delivery of this Prospectus nor any sale made hereunder shall under any circumstances create any implication that the information contained herein is correct as of any time subsequent to the date hereof. -------------- The date of this Prospectus is , 1997. ------- 2 5 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements, information statements, and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy and information statements and other information concerning the Company can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; as well as the Regional Offices of the Commission at Seven World Trade Center, Suite 1300, New York, New York, 10048 and Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661. Copies of any such material can be obtained from the Public Reference Section of the Commission, Washington, D.C., 20549, at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of the site is http:\\www.sec.gov. The Common Stock of the Company is listed on the Nasdaq National Market and such reports, proxy and information statements and other information concerning the Company may be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. This Prospectus constitutes a part of a Registration Statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") filed by the Company with the Commission under the Securities Act. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to the Company and the Shares of Common Stock offered hereby, reference is hereby made to the Registration Statement. The Registration Statement may be inspected at the public reference facilities maintained by the Commission at the addresses set forth in the preceding paragraph. Statements contained herein concerning any document filed as an exhibit are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents filed with the Commission by the Company are incorporated in the Prospectus by reference: (a) The Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1996. (b) The Company's Quarterly Reports on From 10-Q for the quarters ended December 29, 1996, March 30, 1997, and June 29, 1997. (c) The Company's Proxy Statement for its Annual Meeting of Shareholders held on May 15, 1997. (d) The description of the Company's Common Stock contained in its Registration Statement on Form 8-A, filed with the Commission under the Exchange Act, including any amendments or reports filed for the purpose of updating such description. Furthermore, all documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Common Stock shall be deemed to be incorporated into this Prospectus to the extent required, and to be a part of this Prospectus from the date of filing of such reports and documents. 3 6 Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statements. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the request of any such person, a copy of any or all of the documents described above, other than exhibits to such documents which are not specifically incorporated by reference herein. Requests should be directed to Investor Relations at the principal executive offices of the Company, 540 Alder Drive, Milpitas, California, 95035, telephone (408) 321-9100. THE COMPANY ADAC Laboratories ("ADAC" or "the Company") designs, develops, manufactures, sells and services medical imaging and health care information systems used in hospitals and clinics worldwide. The Company's products include systems for nuclear medicine, laboratory, radiology, cardiology and oncology. In October 1996, ADAC was awarded the Malcolm Baldrige National Quality Award in the large manufacturing category by the United States Department of Commerce in recognition of its performance management system and its achievements in quality and business performance. ADAC is the first healthcare manufacturer ever to receive this award. ADAC was incorporated in California on October 14, 1970. Its principal offices are located at 540 Alder Drive, Milpitas, California, 95035. Its telephone number at that location is (408) 321-9100. RISK FACTORS The Shares offered hereby involve certain risks. The business considerations and other information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1996 and the Company's Quarterly Reports on Form 10-Q for the quarters ended December 29, 1996, March 30, 1997 and June 29, 1997 are incorporated by reference herein. See "Incorporation of Certain Documents by Reference." Such business considerations and other information should be carefully considered before purchasing the Shares. USE OF PROCEEDS All proceeds will be for the account of Selling Shareholders. See "Selling Shareholders" and "Plan of Distribution." The Company will not receive any of the proceeds from the sale of the Shares. SELLING SHAREHOLDERS The following table sets forth as of August 18, 1997 with respect to each Selling Shareholder (i) the number of Shares of Common Stock beneficially owned by each Selling Shareholder and (ii) the number of Shares of Common Stock to be owned after the offering (assuming all Shares are sold in this offering). Except as indicated, none of the Selling Shareholders has held any position or had a material relationship with the Company or any of its affiliates within the past three years other than as a result of ownership of the Company's Common Stock. 4 7
NUMBER OF SHARES NUMBER OF SHARES TO BE OWNED NAME OF SELLING BENEFICIALLY NUMBER OF SHARES AFTER SHAREHOLDER OWNED OFFERED HEREBY OFFERING - ----------- ----- -------------- -------- Sergio F. Cabrera(1) 28,571 28,571 -- Robert M. Hill(2)(3) 47,632 47,632 -- John P. Patten(2)(3) 47,632 47,632 -- Frank C. Westervelt(2)(3) 14,607 14,607 -- Alexander Nikoloff(2)(3) 12,701 12,701 -- Lewis B. Lobel(2)(3) 9,526 9,526 -- Robert J. Joicy(2)(3) 6,350 6,350 -- Robert Redmond(2) 7,938 7,938 -- Tim Perly-Robertson(2) 7,938 7,938 -- Douglas Bowdoin(2) 4,763 4,763 -- Bain & Company, Inc.(4) 144,000 120,000 24,000 Total 331,658 307,658 --
- --------------- (1)Sole shareholder of Photon who received an aggregate of 57,143 Shares in connection with the Company's acquisition of Photon. Of such Shares, 28,572 were registered pursuant to a Registration Statement on From S-3 declared effective by the Commission on March 19, 1997. Mr. Cabrera is an employee in the Company's multi-vendor service business. (2)Former shareholder of Cortet who received the Shares set forth above in connection with the Company's acquisition of Cortet. (3)Messrs. Hill, Patten, Westervelt, Nikoloff, Lobel and Joicy are employees in the Company's healthcare information systems business. (4)Over the past three years, the Company has from time to time retained Bain to provide consulting services in exchange for the payment of consulting fees and the issuance of the warrants. On August 11, 1994, July 17, 1995 and May 6, 1997, the Company granted Bain warrants to purchase 60,000, 60,000 and 24,000 Shares at exercise prices of $6.50, $11.875 and $22.625, respectively. All of the warrants, except 4,000 Shares under the May 6, 1997 warrant, are fully vested. Subject to the terms of the May 6, 1997 warrant, these 4,000 Shares will vest in full on September 6, 1997. PLAN OF DISTRIBUTION The Shares covered by this Prospectus may be offered and sold from time to time by the Selling Shareholders. The Selling Shareholders will act independently of the Company in making decisions with respect to the timing, manner and size of each sale. The Selling Shareholders may sell the Shares being offered hereby on the Nasdaq National Market, or otherwise, at prices and under terms then prevailing or at prices related to the then current market price or at negotiated prices. The Shares may be sold through one or more of the following means of distribution: (a) a block trade in which the broker-dealer so engaged will attempt to sell Shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this Prospectus; (c) an over-the-counter distribution in accordance with the rules of the Nasdaq National Market; (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers; and (e) in privately negotiated transactions. To the extent required, this Prospectus may be amended and supplemented from time to time to describe a specific plan of distribution. In connection with distributions of the Shares or otherwise, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of the Company's Common Stock in the course of hedging the positions they assume with Selling Shareholders. The Selling Shareholders may also sell the Company's Common Stock short and redeliver the shares to close out such short positions. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealer or other financial institution of Shares offered hereby, which Shares such broker-dealer or other financial institution may resell pursuant to this Prospectus (as supplemented or amended to reflect such transaction). The Selling Shareholders may also pledge Shares to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution may effect sales of the pledged 5 8 Shares pursuant to this Prospectus (as supplemented or amended to reflect such transaction). In addition, any Shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this Prospectus. In effecting sales, brokers, dealers or agents engaged by the Selling Shareholders may arrange for other brokers or dealers to participate. Brokers, dealers or agents may receive commissions, discounts or concessions from the Selling Shareholders in amounts to be negotiated prior to the sale. Such brokers or dealers and any other participating brokers or dealers may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales, and any such commissions, discounts or concessions may be deemed to be underwriting discounts or commissions under the Securities Act. The Company will pay certain expenses incident to the offering and sale of the Shares to the public, except for any commissions and discounts of underwriters, dealers or agents and any transfer taxes. In order to comply with the securities laws of certain states, if applicable, the Shares must be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the Shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. The Company has advised the Selling Shareholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of Shares in the market and to the activities of the Selling Shareholders and their affiliates. In addition, the Company will make copies of this Prospectus available to the Selling Shareholders and has informed them of the need for delivery of copies of this Prospectus to purchasers at or prior to the time of any sale of the Shares offered hereby. The Selling Shareholders may indemnify any broker-dealer that participates in transactions involving the sale of the Shares against certain liabilities, including liabilities arising under the Securities Act. At the time a particular offer of Shares is made, if required, a Prospectus Supplement will be distributed that will set forth the number of Shares being offered and the terms of the offering, including the name of any underwriter, dealer or agent, the purchase price paid by any underwriter, any discount, commission and other item constituting compensation, any discount, commission or concession allowed or reallowed or paid to any dealer, and the proposed selling price to the public. The Company has agreed with certain of the Selling Shareholders to keep the Registration Statement of which this Prospectus constitutes a part effective for up to one year following May 22, 1997, the closing date of the acquisition of Cortet (which period may be shortened or extended under certain circumstances). The Company intends to de-register any of the Shares not sold by the Selling Shareholders at the end of such one year period; however, it is anticipated that at such time certain of the unsold Shares may be freely tradable subject to compliance with Rule 144 of the Securities Act. LEGAL MATTERS Certain legal matters in respect of the Shares offered hereby will be passed upon for the Company by Karen L. Masterson, Vice President and General Counsel of ADAC, 540 Alder Drive, Milpitas, CA 95035. EXPERTS The consolidated financial statements and related financial statement schedules of ADAC Laboratories and Subsidiaries, included in the Report on Form 10-K of the Company for the fiscal year ended September 29, 1996 referred to above, have been audited by Coopers & Lybrand L.L.P., independent accountants, as set forth in their report dated November 4, 1996, and are incorporated herein by reference in reliance upon the report of such firm, given upon their authority as experts in accounting and auditing. 6 9 PART II INFORMATION NOT REQUIRED IN PROSPECTUS 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table shows all expenses of the issuance and distribution of the securities offered hereby, other than underwriting discounts and commissions: SEC REGISTRATION FEE........................ $1,672.54 NASDAQ NATIONAL MARKET LISTING FEE ......... 2,400.00 ACCOUNTING FEES AND EXPENSES ............... 2,000.00 MISCELLANEOUS EXPENSES ..................... 0.00 TOTAL .............................. $6,072.54
All amounts listed above, except for the registration fees, are estimates. 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 317 of the California General Corporation Law permits indemnification of directors, officers and controlling persons of a corporation under certain conditions and subject to certain limitations. Article VII of the Registrant's Articles of Incorporation authorizes the Registrant to indemnify its officers and directors in accordance with the General Corporation Law. Pursuant to Article VI of the Company's Bylaws and the terms of indemnification agreements between the Company and each of its directors and executive officers, the Company has agreed to indemnify and advance expenses to its agents and to such directors and executive officers, respectively, to the fullest extent permitted by law. Indemnification also may be granted pursuant to bylaw provisions that may be adopted in the future, or pursuant to a vote of shareholders or directors. 16. EXHIBITS (a) Exhibits: 2.1 Agreement and Plan of Reorganization dated as of February 3, 1997 by and among the Company, J.D. Technical Services, Inc., Photon Diagnostic Technologies, Inc. and Sergio F. Cabrera 2.2 Agreement and Plan of Reorganization dated as of March 31, 1997 by and among the Company, ADAC Acquisition Corp., Cortet, Inc. and the Designated Shareholders of Cortet (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, File No. 0-9428) 4.1 Warrants to Purchase Common Stock granted August 11, 1994 and July 17, 1995 to Bain & Company, Inc. 5.1 Opinion of General Counsel of ADAC 23.1 Consent of Coopers & Lybrand L.L.P. II-1 10 23.2 Consent of General Counsel of ADAC (included in Exhibit 5.1 hereto) 24.1 Power of Attorney (included on page II-3 of this Registration Statement) 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represents a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Milpitas, California on the date set forth below. Date: August 5, 1997 ADAC LABORATORIES (Registrant) By: /s/ David L.Lowe ------------------------------------- David L. Lowe, Chief Executive Officer (Principal Executive Officer) KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David L. Lowe and P. Andre Simone and each of them acting individually, as such person's true and lawful attorneys-in-fact and agents, each with full power of substitution, for such person, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitutes, may do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE CAPACITIES DATE - --------- ---------- ---- /s/ David L. Lowe Chairman of the Board, Chief August 5, 1997 - -------------------- Executive Officer and Director David L. Lowe (Principal Executive Officer) /s/ P. Andre Simone Vice President, Chief Financial August 5, 1997 - -------------------- Officer, and Treasurer (Principal P. Andre Simone Financial and Accounting Officer) /s/ Stanley D. Czerwinski Director August 5, 1997 - -------------------- Stanley D. Czerwinski /s/ R. Andrew Eckert President, Chief Operating Officer August 5, 1997 - -------------------- and Director R. Andrew Eckert II-3 12 SIGNATURE CAPACITIES DATE - --------- ---------- ---- /s/ Graham O. King Director August 5, 1997 - -------------------- Graham O. King /s/ F. David Rollo Director August 5, 1997 - -------------------- F. David Rollo /s/ Edmund H. Shea, Jr. Director August 5, 1997 - -------------------- Edmund H. Shea, Jr. II-4 13 EXHIBIT INDEX EXHIBIT NAME PAGE NO. 2.1 Agreement and Plan of Reorganization dated as of February 3, 1997 by and among the Company, J.D. Technical Services, Inc., Photon Diagnostic Technologies, Inc. and Sergio F. Cabrera 2.2 Agreement and Plan of Reorganization dated as of March 31, 1997 by and among the Company, ADAC Acquisition Corp., Cortet, Inc. and the Designated Shareholders of Cortet (incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, File No. 0-9428) 4.1 Warrants to Purchase Common Stock granted August 11, 1994 and July 17, 1995 to Bain & Company, Inc. 5.1 Opinion of General Counsel of ADAC 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of General Counsel of ADAC (included in Exhibit 5.1 hereto) 24.1 Power of Attorney (included on page II-3 of this Registration Statement) II-5 EX-2.1 2 AGREEMENT AND PLAN OF REORGANIZATION DATED 2/3/97 1 EXHIBIT 2.1 AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and entered into as of February 3, 1997, by and among: ADAC LABORATORIES, a California corporation ("ADAC"); J.D. TECHNICAL SERVICES, INC., a Delaware corporation ("Sub"); PHOTON DIAGNOSTIC TECHNOLOGIES, INC., a Florida corporation (the "Company"); and SERGIO F. CABRERA ("Shareholder"). RECITALS A. ADAC, Sub and the Company intend to effect a merger of the Company into Sub in accordance with this Agreement and the laws of the States of Delaware and Florida (the "Merger"). Upon consummation of the Merger, the Company will cease to exist. B. It is intended that the Merger qualify as a tax-free reorganization within the meaning of [Section 368(a)]of the Internal Revenue Code of 1986, as amended (the "Code"). For accounting purposes, it is intended that the Merger be treated as a "pooling of interests." AGREEMENT ADAC, Sub, the Company and the Shareholder agree as follows: 1 DESCRIPTION OF TRANSACTION 1.1 MERGER OF THE COMPANY INTO SUB. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), the Company shall be merged into Sub and the separate existence of the Company shall cease. Sub will be the surviving corporation in the Merger (the "Surviving Corporation"). 1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in this Agreement, in the applicable provisions of the Delaware General Corporation Law (the "DGCL") and in the applicable provisions of the Florida Business Corporation Act (the "FBCA"). 1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of ADAC on the date as of which each of the conditions set forth in Articles 5 and 6 has been fulfilled or waived or on such other date as may be jointly designated by ADAC and the Company (the "Closing Date"). As soon as practicable after the Closing, a properly executed certificate of merger conforming to the requirements of the DGCL shall be filed with the Delaware Secretary of State and a plan and articles of merger conforming to the requirements of the FBCA shall be filed with the Florida Secretary of State. The Merger shall become effective at the time said certificate of merger is filed 1 2 with the Delaware Secretary of State and said plan and articles of merger are filed with the Florida Secretary of State (the "Effective Time"). The Company, Sub and ADAC shall use their best efforts to properly file such documents no later than the end of the business day following the Closing Date. 1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Upon the filing of the Certificate of Merger with the Delaware Secretary of State, the name of the Surviving Corporation shall be changed to ADAC Medical Technologies, Inc. The Bylaws of Sub, as in effect immediately prior to the Effective Time, shall become the Bylaws of the Surviving Corporation at the Effective Time. The directors and officers of the Surviving Corporation immediately prior to the Effective Time shall be the directors and officers of Sub immediately after the Effective Time. 1.5 CONVERSION OF SHARES. (a) At the Effective Time, by virtue of the Merger (and without any action on the part of any shareholder of the Company): (i) any shares of the capital stock, $.01 par value, of the Company ("Company Stock") then held by the Company or any subsidiary of the Company (or held in the Company's treasury) shall be canceled; and (ii) except as provided in clause (i) above and subject to Section 1.5(b), all shares of Company Stock then outstanding shall be converted into the right to receive in the aggregate that number of shares of the common stock of ADAC ("ADAC Common Stock") equal to (x) $1,500,000, divided by (y) the average of the closing sales price of a share of ADAC Common Stock as reported on the Nasdaq Stock Market for each of the five trading days immediately preceding the Closing Date (the "Closing Price"). (b) The shares of ADAC Common Stock into which each outstanding share of Company Stock is to be converted pursuant to Section 1.5(a)(ii) (as such fraction may be adjusted in accordance with this Section 1.5(b)) is referred to as the "Exchange Ratio." If, between the date of this Agreement and the Effective Time, the outstanding shares of Company Stock or ADAC Common Stock are changed into a different number or class of shares by reason of any stock dividend, subdivision, reclassification, recapitalization, split-up, combination or similar transaction, the Exchange Ratio shall be appropriately adjusted. 1.6 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time, holders of certificates representing shares of Company Stock shall cease to have any rights as shareholders of the Company, and the stock transfer books of the Company shall be closed with respect to all shares of Company Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of Company Stock shall thereafter be made on such stock transfer books. If, after the Effective Time, a valid certificate previously representing any of such shares of Company Stock (a "Company Stock Certificate") is presented to ADAC, such Company Stock Certificate shall be canceled and exchanged as provided in Section 1.7. 2 3 1.7 EXCHANGE OF CERTIFICATES. (a) As soon as practicable after the Effective Time, ADAC will mail to the holders of Company Stock Certificates (i) a letter of transmittal in customary form and containing such provisions as ADAC may reasonably require and (ii) instructions for use in effecting the surrender of Company Stock Certificates in exchange for certificates representing ADAC Common Stock. Upon surrender of a Company Stock Certificate to ADAC for exchange, together with a duly executed letter of transmittal and such other documents as may be reasonably required by ADAC, the holder of such Company Stock Certificate shall be entitled to receive in exchange therefor a certificate representing the number of whole shares of ADAC Common Stock that such holder has the right to receive pursuant to the provisions of this Article 1 (after withholding the Holdback Common Stock (as defined in Section 8.1)), and the Company Stock Certificate so surrendered shall be canceled. Until surrendered as contemplated by this Section 1.7, each Company Stock Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive upon such surrender a certificate representing shares of ADAC Common Stock (and cash in lieu of any fractional share of ADAC Common Stock) as contemplated by this Article 1. (b) No dividends or other distributions declared or made with respect to ADAC Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Company Stock Certificate with respect to the shares of ADAC Common Stock represented thereby, and no cash payment in lieu of any fractional share shall be paid to any such holder, until such holder surrenders such Company Stock Certificate in accordance with this Section 1.7 (at which time such holder shall be entitled to receive all such dividends and distributions and such cash payment, all without interest thereon). (c) No certificates or scrip for fractional shares of ADAC Common Stock shall be issued, but in lieu thereof each holder of shares of Company Stock who would otherwise be entitled to receive a certificate or scrip for a fraction of a share of ADAC Common Stock shall receive from ADAC a cash amount equal to the market value of one share of ADAC Common Stock (based on the Closing Price) multiplied by the fraction of a share of ADAC Common Stock to which such holder would otherwise be entitled. (d) ADAC shall not be liable to any holder or former holder of shares of Company Stock with respect to any shares (or dividends or distributions with respect thereto) or cash amounts issuable pursuant to this Article 1 which is delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. 1.8 TAX CONSEQUENCES. For federal income tax purposes, the Merger is intended to constitute a tax-free reorganization within the meaning of Section 368 of the Code. The parties to this Agreement hereby adopt this Agreement as a "plan of reorganization" within the meaning of the applicable United States Treasury Regulations. Neither the Company nor ADAC shall take a position inconsistent with this Section 1.8 on any tax return. 3 4 1.9 ACCOUNTING CONSEQUENCES. For accounting purposes, the Merger is intended to be treated as a "pooling of interests." Neither the Company nor ADAC shall take any action prior to the Effective Time that could reasonably be expected to prevent the Merger from being accounted for as a "pooling of interests." 1.10 FURTHER ACTION. If at any time after the Effective Time any further action is determined by ADAC to be necessary or desirable to carry out the purposes of this Agreement or to vest ADAC as the Surviving Corporation with the full right, title and possession of and to all assets, property, rights, privileges, immunities, powers and franchises of the Company, the officers and directors of ADAC shall be fully authorized (in the name of the Company and otherwise) to take such action. 1.11 TRANSFER OF PHOTON MOBILE BUSINESS ASSETS. At or prior to the Closing Date, the Company shall transfer all of products, assets and liabilities relating to the Photon Mobile business, as set forth in the Disclosure Schedule (collectively, the "Mobile Business"), to an affiliate of Shareholder, TransPhoton Corporation ("TPC"). Such transfer shall be without representation or warranty, expressed or implied, by the Company and shall be received on an "AS IS" basis. At the time of such transfer, Shareholder represents and warrants that (i) the assets constituting the Mobile Business shall constitute less than 10% of the gross assets and net assets of the Company prior to such transfer, both in terms of historical cost and fair market value, (ii) the sales generated or associated with the Mobile Business during the prior twelve (12) months shall constitute less than 10% of the gross sales of all of the products and services sold by the Company during such period, and (iii) the sales generated or associated with the Mobile Business during the prior twelve (12) months shall have generated less than 10% of the gross operating profits of the Company derived from the sale of all of its products and services during such period. Shareholder represents and warrants that the transfer of the assets constituting the Mobile Business are non-operating assets which are not an integral part of the business of the Company to be acquired by the Surviving Corporation pursuant to the Merger. 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the disclosure schedule delivered to ADAC on the date of this Agreement and signed by the President of the Company (the "Disclosure Schedule"), the Company and Shareholder represent and warrant to ADAC as follows: 2.1 ORGANIZATION; SUBSIDIARIES; CAPITALIZATION. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. The Company has all necessary power and authority under applicable corporate law and its organizational documents to own or lease its properties and to carry on its business as presently conducted. As of the date of this Agreement, the Disclosure Schedule sets forth a list of all of the Company's "affiliates" or their "associates" (as 4 5 such terms are defined in the rules and regulations of the Securities and Exchange Commission (the "SEC")). As of the date of this Agreement, the Company does not own or hold, directly or indirectly, any debt or equity securities of, or has any other interest in, any corporation, partnership, joint venture or other entity, and the Company has not entered into any agreement to acquire any such interest. (b) Each of the Company and its affiliates is qualified to do business as a foreign corporation, partnership or limited liability company, as the case may be, and is in good standing, under the laws of all jurisdictions where the nature of its business requires such qualification and where the failure to so qualify would have a material adverse effect, a list of which jurisdictions is set forth in the Disclosure Schedule. For purposes of this Agreement, material adverse effect, as it applies to the Company, means a material adverse effect on the business, operations, results, financial condition or assets of the Company other than as a result of (i) general economic or industry conditions, or (ii) the performance by the Company of its obligations, or the exercise by ADAC of its rights under this Agreement. (c) As of the date of this Agreement, the authorized capital stock of the Company consists of: one thousand two hundred fifty shares of Company Stock, 250 shares of which constitute Class A Stock and the remainder of which constitutes Class B Stock, of which, as of the date hereof, 100 shares were issued and outstanding. All the issued and outstanding shares of Company Stock are validly issued, fully paid and nonassessable and free of preemptive rights and were issued in compliance with state and federal securities laws. Except as set forth above, as of the date of this Agreement, (i) there are no shares of capital stock of the Company authorized, issued or outstanding, (ii) there are no outstanding subscriptions, options, warrants, stock appreciation right plans, calls, rights, convertible securities, stockholder rights plans (or similar plans commonly referred to as "poison pills") or other agreements or commitments of any character relating to issued or unissued capital stock or other securities of the Company or any of its subsidiaries, or obligating the Company or any other party to issue, transfer or sell any shares of the capital stock or other securities of the Company or any of its subsidiaries, and (iii) there are no other outstanding securities convertible into, exchangeable for or evidencing the right to subscribe for any shares of the capital stock or other securities of the Company or any of its subsidiaries or any successor corporation or controlling person of such successor corporation. All outstanding securities of the Company are held by Shareholder as set forth in the Disclosure Schedule. (d) Neither the Company nor any of its affiliates owns any ADAC Common Stock. (e) A certified copy of the Articles of Incorporation, as amended to date, of the Company, a complete and accurate copy of the Bylaws of the Company, as amended to date, and a good standing certificate from the State of Florida of a recent date have been delivered to ADAC. 2.2 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES. (a) The Company's unaudited interim financial statements as of January 17, 1997 and for the period then ended (the "Unaudited Financial Statements") were prepared in 5 6 accordance with the books and records of the Company using accounting principles applied on a consistent basis throughout the period involved and fairly present the financial position of the Company as of the date thereof and the results of its operations and cash flows for the period indicated. (b) The Company has no Liabilities, except for (i) Liabilities that are disclosed in the Unaudited Financial Statements, or (ii) Liabilities that were incurred after January 17, 1997 in the ordinary course of business and which do not exceed $5,000 in the aggregate. As used herein, "Liabilities" shall mean any liability or obligation of any kind or nature, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due). The Company has no Liabilities to any officer, director, shareholder, affiliate or associate. (c) The Disclosure Schedule sets forth as of January 17, 1997 and will set forth as of the Closing Date a true and correct list of the Company's inventory and accounts receivable. All such inventory is in good and saleable condition, and all such accounts receivable are current and collectible. 2.3 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 17, 1997, there has not been (a) any change, or any development or combination of changes or developments that has had or would reasonably be expected to have a material adverse effect on the Company, (b) any damage, destruction or loss, whether or not covered by insurance, that has had or would reasonably be expected to have a material adverse effect on the Company or (c) any transaction, commitment, dispute or other event or condition (financial or otherwise) of any character (whether or not in the ordinary course of business) which would be prohibited by Section 4.2(b) if it were to occur or be effected between the date of this Agreement and the Effective Time. 2.4 TAX MATTERS (a) The Company is now, and at all times since its incorporation has been, a valid S Corporation under the Code. The Company has filed, within the time (including any extensions of applicable due dates) and in the manner prescribed by law, all returns, declaration, reports, estimates, information returns, statements and reports ("Returns"), required to be filed under federal, state, local or any foreign laws by the Company. (b) The Company has, within the time (including any extensions of applicable due dates) and in the manner prescribed by law, reported, withheld and paid all Taxes (as defined below) required to be reported, withheld and/or paid by the Company. (c) The Company has accrued on its books an amount sufficient to cover all Taxes that will become due and payable by the Company for the period ending on the Closing Date. (d) The Company has not filed (and will not file prior to the Closing Date) any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the 6 7 Code apply to any disposition of any subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by Company. (e) To the Company's knowledge, the Transactions (as defined in Section 2.14) will not result in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code, and there is no agreement, plan or arrangement covering any employee or independent contractor of the Company that would give rise to any payment that would not be deductible pursuant to Section 280G of the Code. (f) No outstanding debt obligation of Company is "corporate acquisition indebtedness" within the meaning of Section 279(b) of the Code. (g) For purposes of this Agreement, "Taxes" shall mean all taxes, charges, fees, levies, or other assessments of whatever kind or nature, including, without limitation, all net income, gross income, gross receipts, sales, use, value-added, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, estimated, severance, stamp, net worth, environmental, occupancy or property taxes, customs duties, fees, assessments or charges of any kind whatsoever (together with any interest and any penalties, additions to tax or additional amounts) imposed by any taxing authority (domestic or foreign) upon or payable by the Company or any of its subsidiaries. 2.5 CONTRACTS. (a) As of the date of this Agreement, except as set forth in the Disclosure Schedule, the Company is not a party to, or bound by, any undischarged written or oral: (i) contract for the employment for any period of time whatsoever, or restricting the employment, of any employee; (ii) consulting agreement, except for those that both (A) do not call for payment in an annual amount in excess of $5,000 in the aggregate and (B) were entered into in the ordinary course of business; (iii) contract or agreement restricting in any manner the Company's right to compete with any other person or restricting the Company's or any of its affiliates' listed on Schedule 2.1(a) right to sell to or purchase from any other person; (iv) contract or other instrument that (A) provides for the receipt or expenditure of cash or other consideration in excess of $5,000, except sales and purchase orders accepted in the ordinary course of business, (B) was entered into outside the ordinary course of business, (C) is material and has an original term of more than one year and cannot be terminated by the Company without penalty with 30 days notice or less, (D) relates to the license of any patent, copyright, trade secret or other proprietary right to or from the Company, (E) includes provisions restricting or, in any material respect, affecting the development, manufacture or distribution of the 7 8 Company's intellectual property, products or services, (F) provides for indemnification by the Company with respect to infringement of proprietary rights, or (G) is otherwise material; or (v) debt instrument or evidence of indebtedness or any guarantee, loan agreement or transaction, including with any affiliate of the Company. All material contracts, leases, subleases and other instruments, whether or not of the types referred to in this Section 2.5(a), to which the Company or any of its affiliates is a party or by which the Company or any of its affiliates is bound (collectively "Company Contracts") are in full force and effect and are binding upon the Company and, to the Company's knowledge, are binding on the other parties thereto, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws, both state and federal, affecting the enforcement of creditors' rights or remedies in general from time to time in effect and the exercise by courts of equity powers. No material default by the Company has occurred under any of the Company Contracts and, to the Company's knowledge, (A) no material default by any of the other contracting parties has occurred under any of the Company Contracts and (B) no event has occurred which with the giving of notice or the lapse of time, or both, would constitute a material default by the Company or any of its subsidiaries or any of the other contracting parties. (b) The Company possesses all material licenses, permits, and governmental approvals and authorizations which are required in order to operate its business as presently conducted and the Company is in compliance in all material respects with all such licenses, permits, approvals and authorizations. (c) The Disclosure Schedule sets forth a list of all claims made or, to the Company's knowledge, threatened against the Company under each Company Contract presently or heretofore in effect (including claims for back charges, rebates, price reductions, breaches of product or service warranties or for product or service liability for products manufactured or sold). 2.6 INTELLECTUAL PROPERTY. The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, information and other proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted, without any infringement of the rights of others. The Disclosure Schedule sets forth all domestic and foreign patents and patent applications, registered trademarks, material common law trademarks, service marks, trade names, symbols and logos used, controlled or owned by the Company, and the rights of the Company with respect to each. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of "off the shelf" or standard products. The Company is not violating or infringing, and has not at any time during the last five years, violated or infringed or received any communications alleging that the Company has violated or infringed or, by conducting its business as proposed, would violate or infringe any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. The Company 8 9 is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to the Company or that would conflict with the Company's business as proposed to be conducted in any material respect. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as proposed to be conducted, will, to the Company's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any employee is now obligated. The Company does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by the Company, except for inventions, trade secrets or proprietary information that have been validly assigned to the Company. 2.7 EMPLOYEES. (a) The Disclosure Schedule sets forth a complete and accurate list of each bonus, deferred compensation, incentive compensation, stock purchase, stock option, severance or termination pay, hospitalization or other medical, life or other insurance, supplemental unemployment benefits, profit-sharing, flexible benefit, dependent care, educational assistance, pre-Tax premium, pension, or retirement plan, program, agreement or arrangement (collectively, the "Company Employee Plans"), sponsored, maintained or contributed to or required to be contributed to by the Company or any of its affiliates for the benefit of any employee of the Company or any of its affiliates ("Employee"). (b) The Company has no plan or commitment, whether legally binding or not, to create any additional Company Employee Plan, or any plan or commitment to modify or change any existing Company Employee Plan, other than changes to comply with applicable law, that would affect any Employee. (c) No Company Employee Plan provides death, medical or health benefits (whether or not insured) with respect to current or former Employees after any such Employee's retirement or other termination of service (other than (i) benefit coverage mandated by applicable law, including, without limitation, coverage provided pursuant to Section 4980B of the Code and (ii) deferred compensation benefits accrued as liabilities on the books of Company). (d) With respect to each of the Company Employee Plans constituting a group health plan within the meaning of Section 5000(b)(1) of the Code, the provisions of Section 4980B of the Code have been complied with in all material respects. (e) There are no Company Employee Plans intended to be qualified under Section 401(a) of the Code. (f) There is no pending or, to the knowledge of the Company, threatened Proceeding (as defined in Section 2.9) against the Company or any of its affiliates or any current or former director, major stockholder, officer or supervisory employee of the Company or any of its 9 10 affiliates, alleging wrongful termination, racial, religious, sexual or age discrimination, improper post-termination conduct, or breach of contract or covenant of employment, nor has any third party made any claim against the Company with respect to the foregoing, nor, to the Company's knowledge, is there any basis for such a claim or Proceeding. (g) All individuals who are performing or have performed services for the Company and are or were classified as "independent contractors" for tax purposes qualify for such classification. (h) Neither the Company nor Shareholder has received any communication indicating that any Employee or independent contractor of the Company intends to terminate his employment or independent contracting relationship either now or following the Effective Time. To the Company's knowledge, no Employee, nor any consultant with whom the Company has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, the Company or any of its affiliates because of the nature of the business conducted by them; and to the Company's knowledge the continued employment of such Employees, and the performance of the Company's and its affiliates' contracts with their respective independent contractors, will not result in any such violation. The Company has not received any notice alleging that any such violation has occurred. No Employee has been granted the right to continued employment by his or her employer or to any compensation following termination of employment. (i) The Disclosure Schedule sets forth a complete list of all Employees and all persons performing services as independent contractors for the Company or any of its affiliates as of the date hereof. The Company has paid all sums due and owing such persons for all periods ending on or prior to the Closing Date or has made an appropriate reserve therefor in the Unaudited Financial Statements. 2.8 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each former and current employee, officer and independent contractor of the Company has executed a Proprietary Information and Inventions Agreement substantially in the form included in the Disclosure Schedule. 2.9 LITIGATION AND CLAIMS; COMPLIANCE WITH LAW. (a) There is no examination, review, investigation, arbitration, suit, litigation or other proceeding (a "Proceeding") pending or threatened by or before any court or Governmental Authority (as defined in Section 2.15) in which the Company is a party or otherwise involved or to which any of the business or assets of the Company is subject, nor has any third party made any claim against the Company which could result in any such Proceeding nor, to the Company's knowledge, is there any basis for any such claim or Proceeding. 10 11 (b) The Company is not a party to any decree, order or arbitration award (or agreement entered into in any Proceeding) with respect to its properties, assets, personnel or business activities. (c) The Company is not and has not at any time since January 1, 1994 been in violation of, or delinquent in respect to, any decree, order or arbitration award or law, statute or regulation of, or agreement with, or any material license or material permit from, any Governmental Authority to which any of its properties, assets, personnel or business activities are subject or to which any of them is subject, including laws, rules and regulations relating to the environment, occupational health and safety, employee benefits, wages, workplace safety, equal employment opportunity and race, religious, sex and age discrimination. (d) There are no actions pending or, to the knowledge of the Company, threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company's employees, their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. 2.10 PROPERTIES. (a) Schedule 2.10 sets forth a complete list of all property, tangible or intangible, leased by the Company (the "Leases"). The Company has previously delivered to ADAC complete and accurate copies of all such Leases. Each of the Leases is valid, binding and enforceable in accordance with its terms, and is in full force and effect. The Company is not in default under any Lease, nor to the Company's knowledge is any other party thereto in default thereunder, and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a default by the Company. (b) Schedule 2.10 sets forth a complete list of all property, tangible and intangible, owned by the Company (the "Company Properties"). The Company Properties are owned by the Company outright, in each case free and clear of any lien, pledge, hypothecation, mortgage, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, trust, transfer restriction or any other restriction or limitation whatsoever (the "Liens"), except for Liens disclosed in the Financial Statements and notes thereto. Each of the Company Properties are in good operating condition, subject to continued repair and replacement in accordance with past practice. The Company Properties include all of the assets used in or required for the operation of the Company's business. (c) The Company has fire and casualty insurance policies, with extended coverage (subject to reasonable deductibles), sufficient to allow them to replace any of their properties that might be damaged or destroyed, and have liability insurance reasonably adequate to protect them and their financial condition against the risks involved in the business conducted by them. The Disclosure Schedule sets forth all such policies. The Company has not taken any action, or failed to take any action, which might invalidate any of such policies in whole or in part. 11 12 (d) The Company owns no real property. 2.11 FULL DISCLOSURE. This Agreement, the Disclosure Schedule and all other documents delivered by the Company to ADAC or its attorneys or agents in connection herewith or in connection with the transactions contemplated hereby, do not contain any untrue statement of a material fact nor, to the Company's knowledge, omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. 2.12 TRANSACTIONS WITH AFFILIATES. Except for compensation of employees, every transaction between Company and any of its "affiliates" or their "associates" (as such terms are defined in the rules and regulations of the SEC) which is currently in effect or was consummated since January 1, 1992, and which involves more than $5,000 is set forth in the Disclosure Schedule. 2.13 FINANCIAL ADVISOR. The Company represents and warrants that, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger or any of the other Transactions based upon arrangements made by or on behalf of the Company or any of the Shareholders. 2.14 ENFORCEABILITY. The Company has the corporate power and authority to execute, deliver and perform each of the Transactional Agreements (as defined below) to which it is or will become a party. The execution and delivery of said Transactional Agreements have been duly and validly authorized by the unanimous vote of the Board of Directors of the Company and approved by the unanimous vote or written consent of the shareholders of the Company, and no other corporate proceedings on the part of the Company are necessary for the Company to authorize any of the Transactional Agreements, and no such proceedings are necessary to enable the Company to perform or consummate any of the Transactions. Said Transactional Agreements (a) have been (or will be) duly executed and delivered by duly authorized officers of the Company and (b) constitute (or, when executed by the Company, will constitute) legal, valid and binding obligations of the Company enforceable against it in accordance with their terms. For purposes of this Agreement, (i) "Transactional Agreements" means this Agreement and each of the other agreements and documents referred to in Sections 5.10, 5.11, 5.12, 5.15 and 5.16; and (ii) "Transactions" means (A) the execution, delivery and performance of the respective Transactional Agreements and (B) each of the transactions contemplated by or otherwise referred to in any of the Transactional Agreements (including the Merger). 2.15 GOVERNMENTAL CONSENTS; NO CONFLICTS. Except as set forth in the Disclosure Schedule, there is no requirement applicable to the Company to make any filing with, or to obtain any permit, authorization, consent or approval of, any federal, state, local or foreign governmental or regulatory agency, department, commission or other authority (a "Governmental Authority") as a condition to the lawful consummation of any of the Transactions. The Company does not know of any reason why any required permit, authorization, consent or approval will not be obtained. Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of any of the Transactions will (a) conflict with, violate or result in any breach of any provision of the Certificate of Incorporation or Bylaws (or comparable charter documents) of the Company, (b) result in a default (or with notice or lapse of time or both would result in a default) 12 13 under, or impair the rights of the Company or alter the rights or obligations of any third party under, or require the Company to make any material payment or become subject to any liability to any third party under, or give rise to any right of termination, amendment, cancellation, acceleration, repurchase, put or call under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license agreement, lease or other contract, instrument or obligation to which the Company is a party or by which the Company or any of its affiliates or any of their assets may be bound, (c) result in the creation of any liens, charges or encumbrances on any of the assets of the Company or (d) conflict with or violate any law, statute, rule, regulation, judgment, order, writ, injunction, decree or arbitration award applicable to the Company or any of its assets. 3 REPRESENTATIONS AND WARRANTIES OF ADAC AND SUB ADAC and Sub represent and warrant to the Company and Shareholder as follows: 3.1 SEC FILINGS; FINANCIAL STATEMENTS. (a) ADAC has delivered to the Company accurate and complete copies (excluding copies of exhibits) of each report, registration statement (on a form other than Form S-8) and definitive proxy statement filed by ADAC with the SEC between January 1, 1996 and the date of this Agreement (the "ADAC SEC Documents"). As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) each of the ADAC SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the ADAC SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The consolidated financial statements contained in the ADAC SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered, except as may be indicated in the notes to such financial statements and (in the case of unaudited statements) as permitted by Form 10-Q of the SEC, and except that unaudited financial statements may not contain footnotes and are subject to year-end audit adjustments; and (iii) fairly present the consolidated financial position of ADAC and its subsidiaries as of the respective dates thereof and the consolidated results of operations of ADAC and its subsidiaries for the periods covered thereby. 3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Subject to the requisite approval by the ADAC Board of Directors, each of ADAC and Sub has the corporate power and authority to perform its obligations under this Agreement. No vote of ADAC's stockholders is needed to approve the Merger. This Agreement constitutes the legal, valid and binding obligation of each of ADAC and Sub, enforceable against it in accordance with its terms. 13 14 3.3 VALID ISSUANCE. The ADAC Common Stock to be issued in the Merger will, when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable. 3.4 FINANCIAL ADVISOR. ADAC represents and warrants that, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger or any of the other Transactions based upon arrangements made by or on behalf of ADAC. 4 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS 4.1 INFORMATION AND ACCESS. (a) During the period from the date of this Agreement through the Effective Time: (i) the Company shall afford, and shall cause the independent auditors, counsel and other advisors and representatives (collectively, "Representatives") of the Company to afford, to ADAC and to ADAC's Representatives, reasonable access to the properties, books, records (including filed Tax Returns, Tax Returns in preparation and the audit work papers and other records of the independent auditors of the Company) and personnel of the Company in order that ADAC and ADAC's Representatives may have a full opportunity to make such investigation as ADAC reasonably desires to make of the Company; (ii) the Company shall permit ADAC and ADAC's Representatives to make such reasonable inspections of the Company and its operations as ADAC may reasonably require from time to time; and (iii) the Company shall furnish ADAC and ADAC's Representatives with, and shall cause the Company's Representatives to furnish ADAC with, such financial and operating data and other information with respect to the business and properties of the Company as ADAC or its counsel may reasonably request from time to time. (b) Without limiting the generality of Section 4.1(a), during the period from the date of this Agreement through the Closing Date, the Company shall promptly provide ADAC with copies of: (i) all material operating and financial reports prepared by the Company for its senior management, including copies of the unaudited monthly balance sheets of the Company and the related unaudited monthly statements of operations, changes in financial position 14 15 and changes in shareholders' equity (with copies of such monthly financial statements to be delivered to ADAC no later than the 20th day after the last day of the month to which they relate); (ii) any written materials or written communications sent by the Company to its shareholders generally in connection with their status as such; and (iii) any notice, report or other document filed with or sent to any Governmental Authority in connection with any of the Transactions. (c) No investigation by ADAC or any of its Representatives pursuant to this Section 4.1 shall limit or otherwise affect any representations or warranties of the Company or any condition to any obligation of ADAC. 4.2 CONDUCT OF BUSINESS OF THE COMPANY. (a) Except as provided in Section 4.2(b), during the period from the date of this Agreement through the Effective Time, (i) the Company shall conduct its business in the ordinary and usual course consistent with past practice and (ii) the Company shall use its best efforts to maintain and preserve intact its business organization, to keep available the services of its officers and employees and to maintain satisfactory relations with lessors, suppliers, contractors, distributors, customers and others having business relationships with the Company. (b) During the period from the date of this Agreement through the Effective Time, the Company shall not do, and shall not permit any of its subsidiaries to do, any of the following, without ADAC's prior written consent: (i) declare, set aside or pay any dividend or make any other distribution in respect of any capital stock; (ii) repurchase, redeem or otherwise acquire any capital stock of the Company; (iii) issue, deliver, pledge, encumber, sell or transfer, or authorize or propose the issuance, delivery, pledge, encumbrance, sale or transfer of, any shares of capital stock of the Company or any securities convertible into, or rights, warrants or options to acquire, any such shares of capital stock or other convertible securities, or make any change in its equity capitalization or to the terms of any option, warrant or other equity security of the Company that is currently outstanding; (iv) amend the Certificate of Incorporation, Bylaws or other organizational or charter documents of the Company or adopt any stock purchase rights plan (or "poison pill"); (v) acquire any asset, except in the ordinary course of business consistent with past practice; 15 16 (vi) sell, lease, pledge or otherwise dispose of or encumber any of its assets, except in the ordinary course of business consistent with past practice; (vii) incur any indebtedness for borrowed money, or issue or sell any debt securities or guarantee, endorse or otherwise become responsible for any obligation of any other person; (viii) adopt or amend any Company Employee Plan, employment agreement, severance agreement, special pay arrangement with respect to termination of employment or other similar arrangement or agreement with any director, officer or employee of the Company, or enter into or amend any severance or termination arrangement; (ix) change any compensation payable or to become payable to any of its officers or employees; or (x) authorize or propose any of the foregoing, or enter into any contract, agreement, commitment or arrangement contemplating any of the foregoing. 4.3 NEGOTIATION WITH OTHERS. (a) Until the Closing Date, the Company shall not, and it shall not authorize or permit any of its officers, directors or employees, directly or indirectly, to (i) solicit, initiate or knowingly encourage or induce the making of any Acquisition Proposal, (ii) furnish information regarding the Company or any of its subsidiaries in connection with an Acquisition Proposal or potential Acquisition Proposal, (iii) negotiate or engage in discussions with any third party with respect to any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter of intent, contract or other instrument related directly or indirectly to any Acquisition Proposal or contracts with advisors or consultants. "Acquisition Proposal" shall mean any proposal (other than any proposal by ADAC) regarding (i) any merger, consolidation, share exchange, business combination or other similar transaction or series of related transactions involving the Company; (ii) any sale, lease, exchange, transfer or other disposition of the assets of the Company or any subsidiary of the Company constituting more than 10% of the consolidated assets of the Company or accounting for more than 10% of the consolidated revenues of the Company in any one transaction or in a series of related transactions; and (iii) any offer to purchase, tender offer, exchange offer or any similar transaction or series of related transactions made by any person involving more than 10% of the outstanding shares of the capital stock of the Company. (b) Until the Closing Date, each Shareholder shall not, directly or indirectly, (i) solicit, initiate or knowingly encourage or induce the making of any Acquisition Proposal, (ii) furnish information regarding the Company or any of its subsidiaries in connection with an Acquisition Proposal or potential Acquisition Proposal, (iii) negotiate or engage in discussions with any third party with respect to any Acquisition Proposal, (iv) approve, endorse or recommend any 16 17 Acquisition Proposal or (v) enter into any letter of intent, contract or other instrument related directly or indirectly to any Acquisition Proposal or contracts with advisors or consultants. (c) The Company or, as applicable, Shareholder, shall promptly advise ADAC orally and in writing of the receipt of any Acquisition Proposal or any inquiry relating to an Acquisition Proposal prior to the Effective Time. (d) The Company shall immediately cease and cause to be terminated any discussions or negotiations with any parties existing as of the date of this Agreement and that relate to any Acquisition Proposal, and the Company shall immediately demand the return of all financial and other information furnished to such parties. 4.4 REGISTRATION STATEMENTS. No later than March 31, 1997, ADAC shall prepare and cause to be filed with the SEC a Registration Statement on Form S-3 to register 50% of the ADAC Common Stock to be issued in connection with the Merger, and no later than December 13, 1997, ADAC shall prepare and cause to be filed with the SEC a Registration Statement on Form S-3 to register the remaining 50% of the ADAC Common Stock to be issued in connection with the Merger. ADAC shall use its best efforts to cause such registration statements to become effective as soon as practicable after the filing thereof. Notwithstanding the foregoing, if at any time after March 31, 1997 (i) the fair market value of ADAC Common Stock, determined by reference to the closing price of such stock on the Nasdaq Stock Market, drops below $15.00, or (ii) Sub give Shareholder notice of the termination of Shareholder's consulting agreement with Sub pursuant to Section 7(d) thereof, Shareholder shall have the right to demand that ADAC register, as soon as practicable, on Form S-3 the remaining unregistered shares of ADAC Common Stock held by Shareholder. Shareholder may exercise such demand right by giving written notice to ADAC no later than ten business days following the date of the occurrence of such event. 4.5 REGULATORY APPROVALS. (a) The Company and ADAC shall use all reasonable efforts to file as soon as practicable after the date of this Agreement all notices, reports and other documents required by law to be filed with any Governmental Authority with respect to the Merger and the other Transactions and to submit promptly any additional information requested by any such Governmental Authority. (b) The Company and ADAC shall (i) give each other prompt notice of the commencement of any Proceeding by or before any court or Governmental Authority with respect to the Merger or any of the other Transactions, (ii) keep each other informed as to the status of any such Proceeding and (iii) except as may be prohibited by any Governmental Authority or by any law or court order or decree, permit the other party to be present at each meeting or conference relating to any such Proceeding and to have access to and be consulted in connection with any document filed or provided to any Governmental Authority in connection with any such Proceeding. 4.6 ADDITIONAL AGREEMENTS. The Company and Shareholder agree to use their best efforts to take, or cause to be taken, all actions necessary to consummate the Merger and make 17 18 effective the other Transactions. Without limiting the generality of the foregoing, the Company shall use all commercially reasonable efforts to (i) obtain the consent and approval of each Governmental Authority, lessor or other person whose consent or approval is required (by virtue of any contractual provision or legal requirement or otherwise) in order to permit the consummation of the Merger or any of the other Transactions or in order to enable ADAC as the Surviving Corporation to conduct its business in the manner in which such business is currently being conducted or is proposed to be conducted, (ii) effect all registrations and filings necessary to consummate the Merger and (iii) lift any restraint, injunction or other legal bar to the Merger. 4.7 DISCLOSURE. Except as otherwise required by law, no announcement shall be made regarding this Agreement or the Merger (a) by either the Company or Shareholder without the prior written consent of ADAC or (b) by ADAC without the prior written consent of the Company, which consents shall not be unreasonably withheld. 4.8 CONSULTING AGREEMENT. Shareholder shall execute and deliver to ADAC, on or prior to the Closing Date, a Consulting Agreement in the form attached hereto as Exhibit A. 4.9 AFFILIATE AND INVESTMENT REPRESENTATION AGREEMENT. Shareholder shall execute and deliver to ADAC, on or prior to the Closing Date, an Affiliate and Investment Representation Agreement in the form attached hereto as Exhibit B. 4.10 CONTINUITY OF INTEREST CERTIFICATE. Shareholder shall execute and deliver to ADAC a Continuity of Interest Certificate in the form attached hereto as Exhibit C. 4.11 TAX CERTIFICATES. The Company shall deliver to ADAC's counsel a tax certificate substantially in the form attached hereto as Exhibit D (the "Company Tax Certificate"). ADAC shall deliver to the Company's counsel a tax certificate substantially in the form attached hereto as Exhibit E (the "ADAC Tax Certificate"). 4.12 TAX RETURNS. The Company shall timely file all federal and state income tax returns for taxable periods ending on or prior to the Effective Time and has paid or will pay all Taxes attributable to such periods. Such returns will be prepared and filed in accordance with applicable law and in a manner consistent with past practices and shall be subject to review and approval by ADAC. After the Effective Time, ADAC and Shareholder will make available to the other, as reasonably requested, all information, records or documents relating to liability for Taxes for all periods prior to or including the Effective Time and will preserve such information, records or documents until the expiration of any applicable statutes of limitations. 18 19 5 CONDITIONS PRECEDENT TO OBLIGATIONS OF ADAC The obligations of ADAC to effect the Merger and to otherwise consummate the transactions contemplated hereby are subject to the fulfillment at or prior to the Closing of each of the following conditions: 5.1 REPRESENTATIONS AND WARRANTIES ACCURATE. (a) The representations and warranties of the Company contained in this Agreement shall have been accurate in all respects as of the date of this Agreement. (b) The representations and warranties of the Company contained in this Agreement shall be accurate in all respects as of the Closing Date as if made on and as of the Closing Date. 5.2 COMPLIANCE WITH COVENANTS. The Company and the Shareholder shall have complied with and performed in all material respects each covenant contained in this Agreement that is required to be performed by the Company and the Shareholder, respectively, on or prior to the Closing Date. 5.3 NO MATERIAL ADVERSE EFFECT. Since the date of this Agreement, there shall not have been any material adverse effect on the Company and there shall not have occurred any change or development, or any combination of changes or developments, that would reasonably be expected to have a material adverse effect on the Company. 5.4 CERTIFICATE. The Company shall have delivered to ADAC a certificate of the Chief Executive Officer of the Company evidencing compliance with the conditions set forth in Sections 5.1, 5.2 and 5.3. 5.5 PRE-ACQUISITION REVIEW. ADAC shall have completed its pre-acquisition review of the Company and its business and shall be satisfied, in its sole discretion, with the results of such review. 5.6 GOVERNMENTAL CONSENTS AND APPROVALS. ADAC and the Company shall have received all approvals, licenses, consents, assignments and authorizations of Governmental Authorities as may be required to permit the performance by ADAC and the Company of their respective obligations under this Agreement and the consummation of the Merger and the other Transactions. 5.7 CONSENT OF LENDERS. ADAC and the Company shall have received any applicable consents of lenders. 19 20 5.8 BOARD OF DIRECTORS APPROVAL. The Board of Directors of ADAC shall have approved this Agreement, the Merger and the Related Transactions. 5.9 EXEMPT TRANSACTION. The issuance of the ADAC Common Stock in connection with the Merger shall be exempt from the registration requirements of the Securities Act of 1933, as amended. 5.10 CONSULTING AGREEMENT. Shareholder shall have executed and delivered to ADAC a Consulting Agreement in the form of Exhibit A. 5.11 AFFILIATE AND INVESTMENT REPRESENTATION AGREEMENT. Shareholder shall have executed and delivered to ADAC an Affiliate and Investment Representation Agreement in the form of Exhibit B. 5.12 NONDISCLOSURE AND INVENTIONS AGREEMENT. Each Employee and independent contractor of the Company requested by ADAC shall have executed and delivered to ADAC a Nondisclosure and Inventions Agreement in the form of Exhibit F. 5.13 ABSENCE OF RESTRAINT. No order to restrain, enjoin or otherwise prevent the consummation of the Merger or any of the other Transactions shall have been entered by any court or Governmental Authority. 5.14 NO LITIGATION. There shall not be pending or threatened any Proceeding which, in the reasonable opinion of ADAC, could have a material adverse effect on the Company, ADAC or the Surviving Corporation. 5.15 CONTINUITY OF INTEREST CERTIFICATE. Shareholder shall have executed and delivered to ADAC a Continuity of Interest Certificate in the form of Exhibit C. 5.16 LEGAL OPINION. ADAC shall have received an opinion of counsel to the Company, dated the Closing Date, in substantially the form set forth on Exhibit G. 5.17 LEASE. ADAC and Shareholder shall have executed and delivered a sublease on terms and conditions satisfactory to the parties for the leasehold at 14350-48-46 SW 142 Avenue, Miami, Florida 33186, the prime lease shall have been renewed for one year, amended to the satisfaction of ADAC and assigned by PDT to Shareholder, and the Company shall have been released from the guarantee provided to secure payments made under the lease. 5.18 MOBILE UNIT GUARANTEE. The Company shall have been released from all guarantees to repurchase any mobile units. 5.19 TRANSITION AGREEMENT. Sub and TPC shall have entered into an agreement in the form of Exhibit H hereto regarding the purchase of cameras by TPC from Sub and certain other matters. 20 21 6 CONDITIONS PRECEDENT TO THE COMPANY'S AND SHAREHOLDER'S OBLIGATIONS The obligations of the Company and the Shareholder to effect the Merger and otherwise consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or prior to the Closing, of the following conditions: 6.1 REPRESENTATIONS AND WARRANTIES ACCURATE. (a) The representations and warranties of ADAC contained in this Agreement shall have been accurate in all material respects as of the date of this Agreement. (b) The representations and warranties of ADAC contained in this Agreement shall be accurate in all respects as of the Closing Date as if made on and as of the Closing Date. 6.2 COMPLIANCE WITH COVENANTS. ADAC shall have complied with and performed in all material respects each covenant contained in this Agreement that is required to be performed by ADAC on or prior to the Closing Date. 6.3 CERTIFICATE. ADAC shall have delivered to the Company a certificate of an executive officer of ADAC evidencing compliance with the conditions set forth in Sections 6.1 and 6.2. 6.4 LEGAL OPINION. The Company shall have received an opinion of counsel to ADAC, dated the Closing Date, substantially to the effect of Exhibit H. 6.5 ABSENCE OF RESTRAINT. No order to restrain, enjoin or otherwise prevent the consummation of the Merger or any of the other Transactions shall have been entered by any court or Governmental Authority. 6.6 CONSULTING AGREEMENT. ADAC shall have executed and delivered to Shareholder a Consulting Agreement in the form of Exhibit A. 6.7 SBA LOAN. Sub or ADAC shall have assumed the SBA loan held by the Company, and the SBA shall have released the lien it holds on Shareholder's home with respect thereto. 6.8 TRANSITION AGREEMENT. Sub and TPC shall have entered into an agreement in the form of Exhibit I regarding the purchase of cameras by TPC from Sub and certain other matters. 21 22 7 TERMINATION OF AGREEMENT 7.1 TERMINATION. (a) This Agreement may be terminated prior to the Effective Time: (i) by mutual written consent of the respective Boards of Directors of ADAC and the Company; (ii) by either ADAC or the Company if the Merger shall not have been consummated by March 31, 1997 (unless the failure to consummate the Merger is attributable to a failure on the part of the party seeking to terminate this Agreement to perform any material obligation required to be performed by such party at or prior to the Effective Time); (iii) by either ADAC or the Company if a court of competent jurisdiction or Governmental Authority shall have issued a final and nonappealable order, decree or ruling, or shall have taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger; (b) This Agreement may be terminated prior to the Closing Date: (i) by ADAC if any of the Company's representations and warranties contained in this Agreement shall be or shall have become materially inaccurate as of the date of this Agreement, or if any of the Company's covenants contained in this Agreement shall have been breached in any material respect; provided, however, that if an inaccuracy in the Company's representations and warranties or a breach of a covenant by the Company is curable by the Company, the Company shall have ten days to cure such breach; or (ii) by the Company if any of ADAC's representations and warranties contained in this Agreement shall be or shall have become materially inaccurate as of the date of this Agreement, or if any of ADAC's covenants contained in this Agreement shall have been breached in any material respect; provided, however, that if an inaccuracy in ADAC's representations and warranties or a breach of a covenant by ADAC is curable by ADAC, ADAC shall have ten days to cure such breach. 7.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement as provided in Section 7.1, this Agreement shall be of no further force or effect; provided, however, that (i) Section 4.3, this Section 7.2, Section 7.3 and Section 10.10 shall survive the termination of this Agreement and shall remain in full force and effect and (ii) the termination of this Agreement shall not relieve any party from any liability for any breach of this Agreement. 22 23 7.3 FEES AND EXPENSES. Each of ADAC and the Company shall bear its own expenses in connection with the preparation, negotiation, execution and performance of this Agreement, the Merger and the Transactions. 8 HOLDBACK 8.1 HOLDBACK AMOUNT. On the Closing Date, ADAC shall withhold ten percent (10%) of the ADAC Common Stock being delivered pursuant to Section 1.5(a)(ii) (the "Holdback Common Stock") and Shareholder shall deliver to ADAC endorsed stock powers (the "Stock Powers") in blank for the Holdback Common Stock. ADAC shall hold the Holdback Common Stock until the date specified in Section 8.7 (the "Holdback Period"). 8.2 VOTING OF SHARES. During the Holdback Period, the record owners of the shares of Holdback Common Stock shall be entitled to exercise all voting rights with respect to such shares of Holdback Common Stock. Any cash, securities or other property distributable (whether by way of dividend, stock split or otherwise) in respect of or in exchange for any shares of Holdback Common Stock held by ADAC shall not be distributed to the record owner of such shares, but rather shall be held by ADAC. At the time any shares of Holdback Common Stock are released by ADAC, any cash, securities or other property previously distributed in respect of or in exchange for such shares shall be released by ADAC to such person. 8.3 TRANSFERABILITY; FRACTIONAL SHARES. The interests of the record owners in the Holdback Common Stock shall not be assignable or transferable, other than by operation of law. No transfer of any of such interests by operation of law shall be recognized or given effect until ADAC shall have received written notice of such transfer. No fractional shares of Holdback Common Stock shall be retained in or released pursuant to this Article 8. In connection with any release of shares of the Holdback Common Stock, ADAC shall be permitted to "round down" or to follow such other rounding procedures as ADAC reasonably determines to be appropriate in order to avoid retaining any fractional share and in order to avoid releasing any fractional share. 8.4 CLAIM NOTICE. If ADAC determines in good faith that (i) there has been a possible breach by the Company of any representation, warranty, covenant or other provision set forth in this Agreement or the certificate issued pursuant to Section 5.3, (ii) there is a reasonable likelihood that any of the matters disclosed in Section ____ of the Disclosure Schedule may result in any liability, loss, cost or expense to ADAC, (iii) Sub has become liable for any Taxes attributable to the period ending on or prior to the Closing Date, (iv) Shareholder has failed to repay by April 30, 1997 any Liabilities outstanding as of the Closing Date of Shareholder or any Shareholder affiliate or associate to the Company, including the approximately $70,000 owed the Company by the Mobile Business, or (v) there is any Proceeding relating to any inaccuracy, breach, failure, liability or alleged liability, or damages of the type referred to in the preceding clauses, and if ADAC wishes to make a claim against the Holdback Common Stock with respect to such possible breach, then 23 24 ADAC may deliver to Shareholder a certificate signed by one or more of its officers (a "Claim Notice") setting forth the claim and the amount of the claim (the "Claim Amount"). 8.5 RESPONSE NOTICE. Within thirty (30) days after the delivery of a Claim Notice to Shareholder, Shareholder shall deliver to ADAC a written notice (the "Response Notice") containing: (a) instructions to the effect that shares of Holdback Common Stock having a Stipulated Value (as defined below) equal to the entire Claim Amount set forth in such Claim Notice are to be released to ADAC; or (b) instructions to the effect that shares of Holdback Common Stock having a Stipulated Value equal to a specified portion (but not the entire amount) of the Claim Amount set forth in such Claim Notice are to be released to ADAC, together with a statement that the remaining portion of such Claim Amount is being disputed; or (c) a statement that the entire Claim Amount set forth in such Claim Notice is being disputed. If no Response Notice is received by ADAC from Shareholder within thirty (30) days after the delivery of a Claim Notice to Shareholder, then Shareholder shall be deemed to have given instructions that shares of Holdback Common Stock having a Stipulated Value equal to the entire Claim Amount set forth in such Claim Notice are to be released to ADAC. 8.6 RELEASE OF SHARES TO ADAC. (a) If Shareholder gives (or is deemed to have given) instructions that shares of Holdback Common Stock having a Stipulated Value equal to the entire Claim Amount set forth in a Claim Notice are to be released to ADAC, then ADAC shall be authorized to use the Stock Powers to transfer to ADAC shares of Holdback Common Stock having a Stipulated Value equal to such Claim Amount. (b) If a Response Notice delivered by Shareholder in response to a Claim Notice contains instructions to the effect that shares of Holdback Common Stock having a Stipulated Value equal to a specified portion (but not the entire amount) of the Claim Amount set forth in such Claim Notice are to be released to ADAC, then (i) ADAC shall be authorized to use the Stock Powers to transfer to ADAC shares of Holdback Common Stock having a Stipulated Value equal to such specified portion of such Claim Amount, and (ii) the procedures set forth in Section 8.6(c) shall be followed with respect to the remaining portion of such Claim Amount. (c) If a Response Notice delivered by Shareholder in response to a Claim Notice contains a statement that all or a portion of the Claim Amount set forth in such Claim Notice is being disputed (such Claim Amount or the disputed portion thereof being referred to as the "Disputed Amount"), then, notwithstanding anything contained in Section 8.7, ADAC shall continue to hold (in addition to any other shares of Holdback Common Stock permitted to be 24 25 retained, whether in connection with any other dispute, or otherwise) shares of Holdback Common Stock having a Stipulated Value equal to One Hundred Twenty-Five percent (125%) of the Disputed Amount. Such shares of Holdback Common Stock shall continue to be held until such time as (i) ADAC or Shareholder execute a settlement agreement containing instructions regarding the release of such shares, or (ii) ADAC receives a copy of a court order containing instructions to ADAC regarding the release of such shares. ADAC shall thereupon release such shares of Holdback Common Stock in accordance with the instructions set forth in such settlement agreement or court order. (The parties acknowledge that it is appropriate to retain more than One Hundred percent (100%) of the Claim Amount in recognition of the fact that ADAC may have underestimated the aggregate amount of the actual and potential damages arising from a particular breach.) For purposes of this Article 8, the "Stipulated Value" of each of the shares of Holdback Common Stock held shall be deemed to be equal to the Closing Price. (d) Any release of Holdback Common Stock to ADAC shall be an adjustment in and reduction of the consideration due the Shareholder as set forth in Section 1.5(a)(ii). 8.7 RELEASE OF SHARES TO SHAREHOLDER. On the date which is Three Hundred Sixty-Five (365) days after the Closing Date, ADAC shall release to Shareholder all shares of Holdback Common Stock then held by ADAC, except for any shares of Holdback Common Stock that are to be retained by ADAC pursuant to Section 8.6(c). 8.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Company and Shareholder in this Agreement and the other agreements and instruments delivered by them pursuant hereto shall survive the Closing and shall expire on the earlier of the date that is the date of the auditor's report for the first audit of ADAC as of a date after the Closing Date or the date that is one year following the Closing Date (the "Expiration Date"); provided however that if at any time prior to the Expiration Date, ADAC deliver to Shareholder a Claim Notice then the claim asserted in such notice shall survive the Expiration Date until such time as such claim is fully and finally resolved. All representations and warranties of ADAC and Sub shall terminate and expire as of the Effective Time, and any liability of ADAC and Sub with respect to such representations and warranties shall thereupon cease. 9 MISCELLANEOUS 9.1 NON-COMPETE. Shareholder hereby agrees that during the period commencing upon the Closing Date and ending two years after the Closing Date, without the prior written consent of ADAC, such Shareholder shall not, within any state in the United States, either as an individual or as an employee, agent, consultant, advisor, independent contractor, general partner, officer, director, shareholder or investor of any person: (i) participate or engage in the design, development, manufacture, production, marketing, sale or servicing of any product, or the provision of any service, that directly or indirectly competes with any product or service designed, developed, manufactured, produced, marketed, sold or provided by the Company prior to the Effective Time or 25 26 by ADAC prior to or after the Effective Time; (ii) solicit or attempt to solicit any person who at the time of such inducement is an employee of ADAC to perform work or services for any other person; or (iii) permit the name of such Shareholder to be used in connection with any competitive business. 9.2 AMENDMENT. This Agreement may be amended with the approval of the respective Boards of Directors of the Company and ADAC at any time; provided, however, that no amendment shall be made which would have a material adverse effect on the Shareholder without the further approval of such Shareholder. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 9.3 WAIVER. (a) No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. (b) No party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given. 9.4 SEVERABILITY. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void, or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business an other purposes of such void or unenforceable provision. 9.5 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Agreement and the other agreements referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument, and shall be governed in all respects by the laws of the State of California as applied to contracts entered into and to be performed entirely within California. 9.6 ASSIGNABILITY. This Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit of, the parties hereto and their respective successors; provided, however, that this Agreement may not be assigned by any party without the prior written consent of 26 27 the other parties, and any attempted assignment without such consent shall be void and of no effect. Nothing in this Agreement, express or implied, is intended to or shall confer upon any third person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 9.7 NOTICES. All notices and other communications pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied, sent by nationally-recognized, overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): If to ADAC, to: ADAC Laboratories 540 Alder Drive Milpitas, California 95035 Attention: Ken Bayer with a copy to Karen L. Masterson If to the Company, to: Photon Diagnostic Technologies, Inc. 143505 S.W. 142nd Avenue Miami, FL 33186 Attention: Sergio F. Cabrera with a copy to: Ralph Rocheteau & Associates c/o Techniport 5757 NW 11th Street, Suite 160 Miami, FL 33126 All such notices and other communications shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of a telecopy, when the party receiving such telecopy shall have confirmed receipt of the communication, (c) in the case of delivery by nationally-recognized, overnight courier, on the Business Day following dispatch and (d) in the case of mailing, on the fifth Business Day following such mailing. 9.8 COOPERATION. Each of the Company and ADAC agrees to cooperate fully with the other and to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by the other to evidence or reflect the Transactions and to carry out the intent and purposes of this Agreement. 9.9 CONFIDENTIALITY. The parties hereby agree that all information about the other's business obtained by them pursuant to this Agreement or the letter agreement dated October 28, 1996, shall be deemed confidential and shall not be disclosed to any other party except as contemplated hereby and such information will not be used for any purpose except evaluating the desirability of the Merger. The foregoing shall not apply however to information (i) known to a party prior to such disclosure to such party, (ii) information that become generally available to the 27 28 public or to a party without confidentiality restrictions after the date hereof, and (iii) required to be disclosed by law or court order. 9.10 CERTAIN TERMS. As used in this Agreement: (a) the word "person" refers to any (i) individual, (ii) corporation, partnership, company or other entity, or (iii) Governmental Authority; and (b) the words "include" and "including," and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words "without limitation." 9.11 TITLES. The titles and captions of the Articles and Sections of this Agreement are included for convenience of reference only and shall have no effect on the construction or meaning of this Agreement. 9.12 ARTICLES, SECTIONS AND EXHIBITS. Except as otherwise indicated, all references in this Agreement to "Articles," "Sections" and "Exhibits" are intended to refer to Articles and Sections of this Agreement and Exhibits to this Agreement. IN WITNESS WHEREOF, the parties hereby have executed this Agreement and Plan of Reorganization as of the date first above written. "ADAC" ADAC LABORATORIES, a California corporation By: ---------------------------------- ---------------------------------- [Print name and title] THE "SUB" J.D. TECHNICAL SERVICES, INC. a Delaware corporation By: ---------------------------------- ---------------------------------- [Print name and title] 28 29 THE "COMPANY" PHOTON DIAGNOSTIC TECHNOLOGIES, INC., a Florida corporation By: ---------------------------------- ---------------------------------- [Print name and title] THE "SHAREHOLDER" ---------------------------------- Sergio F. Cabrera 29 EX-4.1 3 WARRANTS TO PURCHASE COMMON STOCK 1 Exhibit 4.1 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. Void after July 1, 1999 ADAC LABORATORIES WARRANT TO PURCHASE SHARES OF COMMON STOCK THIS CERTIFIES THAT, for value received, Bain & Company, Inc. is entitled to subscribe for and purchase shares of the fully paid and non assessable Common Stock, $.01 par value, of ADAC LABORATORIES, subject to the provisions and upon the terms and conditions hereinafter set forth. 1. Definitions For the purposes of this Warrant, the following terms shall have the following meanings: (a) Act. "Act" means the Securities Act of 1933, as amended. (b) Common Stock. "Common Stock" means the fully paid and nonassessable Common Stock, $.01 par value, of the Company. (c) Company. "Company" means ADAC Laboratories, a California corporation. (d) Date of Agreement. "Date of Agreement" means July 1, 1994. (e) Date of Grant. "Date of Grant" means August 11, 1994. (f) Shares. "Shares" means up to 60,000 shares of Common Stock, which amount is subject to adjustment pursuant to Section 5 hereof. (g) Value at Exercise. "Value at Exercise" means the weighted (by trading volume) average closing market price of the Company's Common Stock on the NASDAQ (or, if the Common Stock should cease to be traded thereon, on such other exchange or public trading market on which the Common Stock may then become traded) over the twenty (20) trading days immediately preceding the date which is two trading days prior to the date this Warrant is surrendered. 1 2 (h) Warrant. "Warrant" means this Warrant which entitles Bain & Company, Inc., subject to the provisions and upon the terms and conditions set forth herein, to purchase shares of Common Stock. (i) Warrant Price. "Warrant Price" means initially a price of $6.50 (six dollars, fifty cents) per share of Common Stock, which price is subject to adjustment pursuant to Section 5 hereof. 2. Conditions to Exercise. (a) Vesting. Subject to subsection 2(b) below, the purchase right represented by this Warrant shall be exercisable, cumulatively, as to the number of Shares subject to the Warrant shown below at any time during the term of this Warrant.
NUMBER OF SHARES CUMULATIVE NUMBER VESTING DATE BECOMING EXERCISABLE OF SHARES EXERCISABLE ------------ -------------------- --------------------- August 11, 1994 3,100 3,100 September 1, 1994 7,700 10,800 October 1, 1994 7,700 18,500 November 1, 1994 7,700 26,200 December 1, 1994 7,700 33,900 January 1, 1995 7,700 41,600 February 1, 1995 7,700 49,300 March 1, 1995 3,100(7,700) - See 2(c) 52,400/57,000 April 1, 1995 3,000 55,400/60,000
(b) Continued Consulting. In the event that Bain & Company, Inc. shall cease to serve as a consultant of the Company for any reason, the Warrant shall be exercisable only as to those shares which had vested (as noted in subsection 2(a) by the date that the Company gives Bain & Company, Inc. notice of its termination as a consultant to the Company or the date that Bain & Company, Inc. gives the Company notice that it is ceasing to serve as a consultant to the Company, whichever is earlier. The vesting of this Warrant is earned by Bain & Company, Inc.'s continued service as a consultant. This Warrant does not constitute an express or implied promise of a continued consulting relationship for the vesting period or any other period. If Bain & Company, Inc. temporarily ceases to serve as Consultant to the Company, then the vesting shall end as of the date services cease and shall resume when services are re-engaged, but in no event later than the expiration date of the Warrant. 2 3 (c) Vested shares for March will total 3,100 unless the resource level of September through February, 1995, is maintained for an additional month in which case 7,700 shares will vest. Resource level will be jointly agreed upon by Bain & Company and ADAC Laboratories. 3. Method of Exercise; Payment; Issuance of New Warrant The holder hereof shall have the option to exercise this Warrant pursuant to the method set out in either Section 3(a) or 3(b) below. (a) Standard Method. This Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant at the principal office of the Company and by the payment to the Company, in cash or by certified or cashier's check, of an amount equal to the then applicable Warrant Price per share multiplied by the number of shares then being purchased. (b) Net Issuance Method. This Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant at the principal office of the Company. Upon such surrender, the holder of this Warrant is entitled to receive such number of fully paid and non assessable shares of the Company's Common stock as equals the product of (x) and (y) below, where (x) equals the quotient of (i) the Value at Exercise less the then applicable Warrant Price divided by (ii) the Value at Exercise and (y) equals the number of Shares for which this Warrant is being exercised. If the result of the foregoing calculation results in a number equal to or less than zero, no shares shall be delivered upon surrender of this Warrant. (c) Issuance of New Warrant. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of Common Stock issuable upon such exercise shall be delivered to the holder hereof within a reasonable time and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof within such reasonable time. The holder hereof shall pay all transfer taxes, if any, arising from the exercise of this Warrant, and shall pay to the Company amounts necessary to satisfy any applicable federal, state and local withholding requirements. 4. Stock Fully Paid; Reservation of Shares All shares of Common Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and non assessable. During the period within which the rights represented by this Warrant may be exercised, the Company will, at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 3 4 5. Adjustment of Purchase Price and Number of Shares. The number of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the Warrant Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (b) In the case of any reclassification or similar change of outstanding shares of Common Stock, or in case of any consolidation of the Company with or merger of the Company into another corporation (other than a merger whose sole purpose is to change the state of incorporation of the Company or a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock), or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the holder hereof shall have the right thereafter without payment of additional consideration, upon exercise of its rights hereunder, to receive the kind and amount of shares of stock and other securities and property that the holder hereof would have received, upon such reclassification, change, consolidation, merger, sale or conveyance, with respect to the number of shares of Common Stock issuable upon such exercise, if such exercise had occurred immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Alternatively, the Board of Directors of the Company may, in its sole discretion, provide a 30-day period immediately prior to such event in which the holder shall have the right to exercise the Warrant in whole or in part without regard to limitations on vesting. It shall be a condition of the effectiveness of any such transaction that one of the foregoing provisions of the benefit of this Warrant shall be lawfully and adequately provided for. (c) Stock Dividends. If the Company at any time while this Warrant is outstanding and unexpired shall pay a dividend with respect to Common Stock payable in Common Stock, then the Warrant Price shall be adjusted, from and after the date of determination of stockholders entitled to receive such dividend, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend. 4 5 (d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter. 6. Notice of Adjustments. Whenever any Warrant Price shall be adjusted pursuant to Section 5 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Warrant. 7. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Value at Exercise then in effect. 8. Compliance with Securities Act; Non-transferability of Warrant; Disposition of Shares of Common Stock. (a) Compliance with Securities Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Act. Upon exercise of this Warrant, the holder hereof shall if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the shares of Common Stock so issued are being acquired for investment and not with a view toward distribution or resale, that the holder is an "accredited investor", as that term is defined in Section 2(15) of the Act, and that the holder has received such information concerning the Company and has had an opportunity to make inquiry as to the Company so as to allow the holder to make an informed investment decision to exercise this Warrant. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY AND WITHOUT AN EFFECTIVE REGISTRATION 5 6 STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION." (b) Transferability of Warrant. This Warrant may not be sold, transferred or assigned without the prior written consent of the Company and, if required, any governmental authority. (c) Disposition of Shares of Common Stock. With respect to any offer, sale or other disposition of any shares of Common stock acquired pursuant to the exercise of this Warrant prior to registration of such shares, the holder hereof and each subsequent holder of this Warrant agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state law than in effect) of such shares of Common Stock and indicating whether or not under the Act certificates for such shares of Common Stock to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to insure compliance with the Act. Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company shall notify such holder that such holder may sell or otherwise dispose of such shares of Common Stock in accordance with the terms of the notice delivered to the Company. If the opinion of counsel for the holder is not reasonably satisfactory to the Company, the Company shall promptly notify the holder. Notwithstanding the foregoing paragraph, such shares of Common Stock may be offered, sold or otherwise disposed of in accordance with Rule 144 under the Act, provided that the Company shall have been furnished with such information as the Company may request to provide a reasonable assurance that the provisions of Rule 144 have been satisfied. Each certificate representing the shares of Common Stock thus transferred (except a transfer pursuant to Rule 144) shall bear a legend as to the applicable restrictions on transferability in order to insure compliance with the Act, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to insure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 9. No Rights of Stockholders. No holder of this Warrant shall be entitled to vote or receive dividends or be deemed the holder of Common Stock, nor shall anything contained herein be construed to confer 6 7 upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise. 10. Expiration of Warrant. This Warrant shall expire and shall no longer be exercisable upon the occurrence of 5:00 p.m., Pacific Standard Time, on July 1, 1999. ADAC LABORATORIES By: ------------------------------------------- Robert A. Starr Assistant Corporate Secretary Date of Grant: August 11, 1994 7 8 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAW. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. Void after July 17, 2000 ADAC LABORATORIES WARRANT TO PURCHASE SHARES OF COMMON STOCK THIS CERTIFIES THAT, for value received, Bain & Company, Inc. is entitled to subscribe for and purchase shares of the fully paid and non assessable Common Stock, $.01 par value per share, of ADAC LABORATORIES, subject to the provisions and upon the terms and conditions hereinafter set forth. 1. Definitions For the purposes of this Warrant, the following terms shall have the following meanings: (a) Act. "Act" means the Securities Act of 1933, as amended. (b) Common Stock. "Common Stock" means the fully paid and nonassessable Common Stock, $.01 par value, of the Company. (c) Company. "Company" means ADAC Laboratories, a California corporation. (d) Date of Agreement. "Date of Agreement" means July 17, 1995. (e) Date of Grant. "Date of Grant" means July 17, 1995. (f) Shares. Shares means up to 60,000 shares of Common Stock, which amount is subject to adjustment pursuant to Section 5 hereof. (g) Value at Exercise. "Value at Exercise" means the closing market price of the Company's Common Stock on the Nasdaq Stock Market (or, if the Common Stock should cease to be traded thereon, on such other exchange or public trading market on which the Common Stock may then become traded) on the date this Warrant is surrendered. 1 9 (h) Warrant. "Warrant" means this Warrant which entitles Bain & Company, Inc., subject to the provisions and upon the terms and conditions set forth herein, to purchase shares of Common Stock. (i) Warrant Price. "Warrant Price" means initially a price of $11.875 per share of Common Stock, which price is subject to adjustment pursuant to Section 5 hereof. 2. Conditions to Exercise. (a) Vesting. Subject to subsection 2(b) below, the purchase right represented by this Warrant shall be exercisable, cumulatively, as to the number of Shares subject to the Warrant shown below at any time during the term of this Warrant.
NUMBER OF SHARES CUMULATIVE NUMBER VESTING DATE BECOMING EXERCISABLE OF SHARES EXERCISABLE ------------ -------------------- --------------------- August 17, 1995 6,000 6,000 September 17, 1995 6,000 12,000 October 17, 1995 6,000 18,000 November 17, 1995 6,000 24,000 December 17, 1995 6,000 30,000 January 17, 1996 6,000 36,000 February 17, 1996 6,000 42,000 March 17, 1996 6,000 48,000 April 17, 1996 6,000 54,000 May 17, 1996 6,000 60,000
(b) Continued Consulting. In the event that Bain & Company, Inc. shall cease to serve as a consultant of the Company for any reason, the Warrant shall be exercisable only as to those shares which had vested (as noted in subsection 2(a) by the date that the Company gives Bain & Company, Inc. notice of its termination as a consultant to the Company or the date that Bain & Company, Inc. gives the Company notice that it is ceasing to serve as a consultant to the Company, whichever is earlier. The vesting of this Warrant is earned by Bain & Company, Inc.'s continued service as a consultant. This Warrant does not constitute an express or implied promise of a continued consulting relationship for the vesting period or any other period. If Bain & Company, Inc. temporarily ceases to serve as Consultant to the Company, then the vesting shall end as of the date services cease and shall resume when services are re-engaged, but in no event later than the expiration date of the warrant. 2 10 3. Method of Exercise; Payment; Issuance of New Warrant The holder hereof shall have the option to exercise this Warrant pursuant to the method set out in either Section 3(a) or 3(b) below. (a) Standard Method. This Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant at the principal office of the Company and by the payment to the Company, in cash or by check acceptable to the Company, of an amount equal to the then applicable Warrant Price per share multiplied by the number of shares then being purchased. (b) Net Issuance Method. This Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant at the principal office of the Company. Upon such surrender, the holder of this Warrant is entitled to receive such number of fully paid and non assessable shares of the Company's Common stock as equals the product of (x) and (y) below, where (x) equals the quotient of (i) the Value at Exercise less the then applicable Warrant Price divided by (ii) the Value at Exercise and (y) equals the number of Shares for which this Warrant is being exercised. If the result of the foregoing calculation results in a number equal to or less than zero, no shares shall be delivered upon surrender of this Warrant. (c) Issuance of New Warrant. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of Common Stock issuable upon such exercise shall be delivered to the holder hereof within a reasonable time and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof within such reasonable time. The holder hereof shall pay all transfer taxes, if any, arising from the exercise of this Warrant, and shall pay to the Company amounts necessary to satisfy any applicable federal, state and local withholding requirements. 4. Stock Fully Paid; Reservation of Shares All shares of Common Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and non assessable. During the period within which the rights represented by this Warrant may be exercised, the Company will, at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 5. Adjustment of Purchase Price and Number of Share. The securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: 3 11 (a) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its Common Stock, the Warrant Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (b) In the case of any reclassification or similar change of outstanding shares of Common Stock, or in case of any consolidation of the Company with or merger of the Company into another corporation (other than a merger whose sole purpose is to change the state of incorporation of the Company or a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of outstanding shares of Common Stock), or in case of any sale or conveyance to another corporation of the property of the Company as and entirety or substantially as an entirety, the holder hereof shall have the right thereafter without payment of additional consideration, upon exercise of its rights hereunder, to receive the kind and amount of shares of stock and other securities and property that the holder hereof would have received, upon such reclassification, change, consolidation, merger, sale of conveyance. Alternatively, the Board of Directors of the Company may, in its sole discretion, provide a 30-day period immediately prior to such event in which the holder shall have the right to exercise the Warrant in whole or in part without regard to limitations on vesting. It shall be a condition of the effectiveness of any such transaction that one of the foregoing provisions of the benefit of this Warrant shall be lawfully and adequately provided for. (c) Stock Dividends. If the Company at any time while this Warrant is outstanding and unexpired shall pay a dividend with respect to Common Stock payable in Common Stock, then the Warrant Price shall be adjusted, from and after the date of determination of stockholders entitled to receive such dividend, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend. (d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter. 4 12 6. Notice of Adjustments. Whenever any Warrant Price shall be adjusted pursuant to Section 5 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Warrant. 7. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Value at Exercise then in effect. 8. Compliance with Securities Act; Non-transferability of Warrant; Disposition of Shares of Common Stock. (a)Compliance with Securities Act. The holder of this Warrant, by acceptance hereof, acknowledges and agrees that this Warrant has not been and the shares of Common Stock to be issued upon exercise hereof may not be registered under the Act and this Warrant is being and the Common Stock may be issued to holder under one or more exemptions from registration provided by the Act and the rules and regulations promulgated thereunder and that the Company is relying on the truth and accuracy of holder's representations and warranties contained herein in doing so without registering the same under the Act. Holder represents and warrants that (i) this Warrant and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment, and not with a view to distribution or resale, (ii) holder has such knowledge and experience in financial and business matters as to be capable of evaluating the risks of this Warrant and any investment in the Common Stock upon exercise of this Warrant, (iii) holder has received such information concerning the Company and has had an opportunity to make inquiry as to the Company so as to allow the holder to make an informed investment decision to exercise this Warrant, (iv) holder is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Act, and (v) holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Act. Upon exercise of this Warrant, holder shall, if requested by the Company, confirm in writing to the Company, the truth and accuracy of the foregoing representations and warranties with respect to holder's investment in the Common Stock. Holder acknowledges and agrees that this Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: 5 13 "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED." (b) Transferability of Warrant. This Warrant may not be sold, transferred or assigned without the prior written consent of the Company and, if required, any governmental authority. (c) Disposition of Shares of Common Stock. With respect to any offer, sale or other disposition of any shares of Common stock acquired pursuant to the exercise of this Warrant prior to registration of such shares, the holder hereof and each subsequent holder of this Warrant agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, if requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state law than in effect) of such shares of Common Stock and indicating whether or not under the Act certificates for such shares of Common Stock to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to insure compliance with the Act. Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company shall notify such holder that such holder may sell or otherwise dispose of such shares of Common Stock in accordance with the terms of the notice delivered to the Company., If the opinion of counsel for the holder is not reasonably satisfactory to the Company, the Company shall promptly notify the holder. Notwithstanding the foregoing paragraph, such shares of Common Stock may be offered, sold or otherwise disposed of in accordance with Rule 144 under the Act, provided that the Company shall have been furnished with such information as the Company may request to provide a reasonable assurance that the provisions of Rule 144 have been satisfied. Each certificate representing the shares of Common Stock thus transferred (except a transfer pursuant to Rule 144) shall bear a legend as to the applicable restrictions on transferability in order to insure compliance with the Act, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to insure compliance with the Act. The Company may issue stop transfer instructions to its transfer agent in connections with such restrictions. 6 14 9. No Rights of Stockholders. No holder of this Warrant shall be entitled to vote or receive dividends or be deemed the holder of Common Stock, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise. 10. Expiration of Warrant. This Warrant shall expire and shall no longer be exercisable as of 5:00 p.m., Pacific Standard Time, on July 17, 2000. ADAC LABORATORIES By: ------------------- ROBERT A. STARR Assistant Secretary Date of Grant: July 17, 1995 ACCEPTED AND AGREED BAIN & COMPANY, INC. By: ------------------------------ Name: ---------------------------- Title: ----------------------------- 7 EX-5.1 4 OPINION OF GENERAL COUNSEL OF ADAC 1 EXHIBIT 5.1 August 20, 1997 ADAC Laboratories 540 Alder Drive Milpitas, California 95035 Gentlemen: I am the Vice President, General Counsel and Secretary of the Company and have acted as Company counsel in connection with the offering and proposed sale of up to 331,658 shares of the Company's Common Stock (the "Common Stock") to be offered by third parties pursuant to a Registration Statement on Form S-3 to be filed under the Securities Act of 1933, (the "Registration Statement"). In this connection I have examined: (a) the Company's Registration Statement; (b) the Company's Certificate of Incorporation and Bylaws, as amended to date; (c) minutes of meetings of the Company's Board of Directors; and (d) such other proceedings, documents and records as we have deemed necessary to enable me to render this opinion. Based upon the foregoing, I am of the opinion that, when sold as contemplated by the Registration Statement, the shares of Common Stock covered by the Registration Statement will be validly issued, fully paid and nonassessable. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to me under the caption "Legal Matters" in the Prospectus included therein. By /s/ KAREN L. MASTERSON ---------------------------------------- Karen L. Masterson Vice President, General Counsel and Secretary EX-23.1 5 CONSENT OF COOPERS & LYBRAND L.L.P. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this registration statement of ADAC Laboratories on Form S-3 of our report dated November 4, 1996 on our audits of the consolidated financial statements and financial statement schedules of ADAC Laboratories as of September 29, 1996 and October 1, 1995, and for each of the three fiscal years in the period ended September 29, 1996 which report is included in the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 1996. We also consent to the reference to our firm under the caption "Experts." /s/ Coopers & Lybrand L.L.P. San Jose, California August 20,1997 -----END PRIVACY-ENHANCED MESSAGE-----