-----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, D+i+I7bklg37IkWsdkuOzf/rJdeTFpYpLIuStAIK35DaII6O29UEcBMYImah39+O I2OUV5tS4UB6bPwH0gDIng== 0000950135-99-004817.txt : 19991022 0000950135-99-004817.hdr.sgml : 19991022 ACCESSION NUMBER: 0000950135-99-004817 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19991021 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VIVID TECHNOLOGIES INC CENTRAL INDEX KEY: 0001023813 STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844] IRS NUMBER: 043054475 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-49567 FILM NUMBER: 99731968 BUSINESS ADDRESS: STREET 1: 10 E COMMERCE WAY STREET 2: ONE POST OFFICE SQUARE STE 3800 CITY: WOBURN STATE: MA ZIP: 01801 BUSINESS PHONE: 6174828020 MAIL ADDRESS: STREET 1: 10E COMMERCE WAY CITY: WOBURN STATE: MA ZIP: 01801 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EG&G INC CENTRAL INDEX KEY: 0000031791 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 042052042 STATE OF INCORPORATION: MA FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02481 BUSINESS PHONE: 7812375100 MAIL ADDRESS: STREET 1: 45 WILLIAM ST CITY: WELLESLEY STATE: MA ZIP: 02481 FORMER COMPANY: FORMER CONFORMED NAME: EDGERTON GERMESHAUSEN & GRIER INC DATE OF NAME CHANGE: 19670626 SC 13D 1 EG&G, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ____)(1) Vivid Technologies, Inc. ------------------------ (Name of Issuer) Common Stock, par value $0.01 per share --------------------------------------- (Title of Class of Securities) 928538107 -------------- (CUSIP Number) Terrance L. Carlson, Esq. General Counsel EG&G, Inc. 45 William Street, Wellesley, Massachusetts 02481 (781) 237-5100 ------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 4, 1999 ------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. 1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 ------------------------ CUSIP NUMBER 928538107 Page 2 of 12 Pages ------------------------ - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) EG&G, Inc. 04-2052042 - --- ---------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] N/A (b) [ ] - --- ---------------------------------------------------------------------------- 3 SEC USE ONLY - --- ---------------------------------------------------------------------------- 4 SOURCE OF FUNDS* 00 - --- ---------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] N/A - --- ---------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Commonwealth of Massachusetts - -------------------------------- --- ------------------------------------------- 7 SOLE VOTING POWER 2,000,012 --- ------------------------------------------- 8 SHARED VOTING POWER NUMBER OF SHARES BENEFICIALLY OWNED BY 1,303,000 EACH REPORTING PERSON --- ------------------------------------------- WITH 9 SOLE DISPOSITIVE POWER 3,303,012 --- ------------------------------------------- 10 SHARED DISPOSITIVE POWER N/A - --- ---------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,303,012 - --- ---------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - --- ---------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 32.86% - --- ---------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- 3 ------------------------ CUSIP NUMBER 928538107 Page 3 of 12 Pages ------------------------ - -------------------------------------------------------------------------------- *See Instructions Before Filling Out Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission by EG&G, Inc. that it is the beneficial owner of any of the Common Stock referred to herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), or for any other purpose, and such beneficial ownership is expressly disclaimed. ITEM 1. SECURITY AND ISSUER. This statement on Schedule 13D relates to the Common Stock of Vivid Technologies, Inc., a Delaware corporation ("Vivid" or "Issuer"). The principal executive offices of Vivid are located at 10 E Commerce Way, Woburn, Massachusetts 01801. ITEM 2. IDENTITY AND BACKGROUND. The name of the corporation filing this statement is EG&G, Inc., a Massachusetts corporation ("EG&G"). EG&G's principal business is to provide optoelectronic, mechanical and electromechanical components and instruments to manufacturers and end-user customers. The address of the principal executive offices of EG&G is 45 William Street, Wellesley, Massachusetts 02481. Set forth on SCHEDULE A is the name, residence or business address, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted and citizenship of each of EG&G's directors and executive officers, as of the date hereof. Neither EG&G nor, to EG&G's best knowledge, any person named on SCHEDULE A hereto is required to disclose legal proceedings pursuant to Items 2(d) or 2(e). ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Pursuant to an Agreement and Plan of Merger, dated as of October 4, 1999 (the "Merger Agreement"), among EG&G, Venice Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of EG&G ("Merger Sub"), and Vivid and, subject to the conditions set forth therein (including approval by stockholders of Vivid), Merger Sub will merge with and into Vivid and Vivid will become a wholly owned subsidiary of EG&G (such events constituting the "Merger"). Once the Merger is consummated, Merger Sub will cease to exist as a corporation and all of the business, assets, liabilities and obligations of Merger Sub will be merged into Vivid with Vivid remaining as the surviving corporation (the "Surviving 4 ------------------------ CUSIP NUMBER 928538107 Page 4 of 12 Pages ------------------------ Corporation"). As a result of the Merger, each outstanding share of Vivid Common Stock, other than shares owned by EG&G, will be converted into the right to receive, subject to the limitations described below, 0.1613 of a share (the "Exchange Ratio") of EG&G Common Stock, and each outstanding option to purchase Vivid Common Stock under Vivid's stock option plans (each a "Vivid Common Stock Option") will be assumed by EG&G (each an "Assumed Option"), and each outstanding warrant to purchase Vivid Common Stock will be assumed by EG&G (each an "Assumed Warrant"), and each Assumed Option and each Assumed Warrant will become an option or a warrant, as the case may be, to purchase that number of shares of EG&G Common Stock as is equal (subject to rounding) to the number of shares of Vivid Common Stock that was subject to such option or warrant immediately prior to the Merger, multiplied by the Exchange Ratio. If the market value, defined below, of EG&G's Common Stock is greater than $46.49 (which corresponds to $7.50 per Vivid share), EG&G has the right to notify Vivid that EG&G desires to terminate the Merger Agreement. Upon receipt of that notice, Vivid may either accept the termination or agree to adjust the Exchange Ratio to a value of $7.50 per Vivid share based upon the then market value of EG&G's Common Stock. Conversely, if the market value of EG&G's Common Stock is less than $30.99 (which corresponds to $5.00 per Vivid share), Vivid has the right to notify EG&G that Vivid desires to terminate the Merger Agreement. Upon receipt of that notice, EG&G may either accept the termination or agree to adjust the Exchange Ratio to a value of $5.00 per Vivid share based upon the then market value of EG&G Common Stock. For purposes of the foregoing calculations, the market value of the EG&G Common Stock will be the weighted average selling prices of the EG&G Common Stock as reported by the New York Stock Exchange for the five consecutive trading days ending on the third trading day prior to the date of the Vivid shareholder meeting called to consider and act upon the proposed Merger, so long as the Merger is consummated within five business days of the meeting. If the Merger is consummated more than five business days after the meeting, the market value of EG&G's Common Stock will be equal to the weighted average selling prices of the EG&G Common Stock for the five consecutive trading days ending on the date of the Merger. The exercise price of each Assumed Option will be equal to the quotient determined by dividing the aggregate exercise price for the shares of Vivid Common Stock purchasable pursuant to the Vivid Common Stock Option immediately prior to the effective time of the Merger by the number of full shares of EG&G Common Stock deemed purchasable pursuant to the Vivid Common Stock Option in accordance with the foregoing, rounded up to the nearest whole cent. The exercise price of each Assumed Warrant will be equal to the quotient determined by dividing the aggregate exercise price for the shares of Vivid 5 ------------------------ CUSIP NUMBER 928538107 Page 5 of 12 Pages ------------------------ Common Stock purchasable pursuant to the terms and conditions of such warrant by the number of full shares of EG&G Common Stock deemed purchasable pursuant to the terms and conditions of such warrant in accordance with the foregoing, rounded up to the nearest whole cent. The foregoing summary of the Merger is qualified in its entirety by reference to the copy of the Merger Agreement included as Exhibit 1 to this Schedule 13D and incorporated herein in its entirety by this reference. In connection with the Merger Agreement, EG&G and the Issuer entered into a Seller Stock Option Agreement, dated as of October 4, 1999 (the "Option Agreement"). The Option Agreement grants EG&G the right, under certain circumstances where Vivid has received proposals for alternative transactions, to purchase up to 2,000,012 shares of Vivid Common Stock at a price of $6.25 per share (subject to adjustment) (the "Option"). The foregoing summary of the Option Agreement and the Option is qualified in its entirety by reference to the copy of the Option Agreement included as Exhibit 2 to this Schedule 13D and incorporated herein in its entirety by this reference. As an inducement to EG&G to enter into the Merger Agreement, each of the individuals and the entities set forth on SCHEDULE B, each a stockholder of Vivid (collectively, the "Stockholders"), has executed a Stockholder Agreement, dated as of October 4, 1999, with EG&G and the Merger Sub (the "Stockholder Agreement"), and, by doing so, has irrevocably appointed EG&G as such stockholder's lawful attorney and proxy. Such proxy gives EG&G the limited right to vote each of the 1,303,000 shares of Vivid Common Stock beneficially owned by the Stockholders in all matters related to the Merger. The shared voting power with the Stockholders relates to the same 1,303,000 shares of Issuer Common Stock (the "Shares"). The Stockholder Agreement also grants the Merger Sub the right to purchase all of the shares of Issuer Common Stock currently owned or thereafter acquired by each stockholder at a price of $6.25 per share (subject to adjustment) (the "Stockholder Option") in certain circumstances where the Merger does not take place and Vivid enters into an alternative transaction. The foregoing summary of the Stockholder Agreement is qualified in its entirety by reference to the copy of the Stockholder Agreement included as Exhibit 3 to this Schedule 13D and incorporated herein in its entirety by reference. In exercising its right to vote the Shares as lawful attorney and proxy of the Stockholders, EG&G (or any nominee of EG&G) will be limited, at every Vivid stockholders meeting and every written consent in lieu of such meeting, to vote the 6 ------------------------ CUSIP NUMBER 928538107 Page 6 of 12 Pages ------------------------ shares in favor of approval of the Merger and the Merger Agreement. The Stockholders may vote the Shares on all other matters. The Stockholder Agreement terminates upon the earlier to occur of (i) such date and time as the Merger shall become effective in accordance with the terms and provisions of the Merger Agreement, (ii) 181 days after the termination of the Merger Agreement and (iii) the date the Option Agreement is terminated pursuant to clause (c) of Section 18 thereof. ITEM 4. PURPOSE OF TRANSACTION. (a)-(b) As described in Item 3 above, this statement relates to the Merger of Merger Sub with and into Vivid in a statutory merger pursuant to the Delaware General Corporation Law and to the transactions contemplated by the Option Agreement and the Stockholder Agreement. At the effective time of the Merger, the separate existence of Merger Sub will cease to exist, and Vivid will continue as the Surviving Corporation and as a wholly owned subsidiary of EG&G. Holders of outstanding Vivid Common Stock will receive, subject to the limitations described in Item 3 above, in exchange for each share of Vivid Common Stock held by them, 0.1613 shares of EG&G Common Stock. EG&G will assume the outstanding options issued under Vivid stock option plans and Vivid's outstanding warrants. (c) Not applicable. (d) It is anticipated that, upon consummation of the Merger, the directors of the Surviving Corporation shall be the current directors of Merger Sub. It is anticipated that the initial officers of the Surviving Corporation shall be the officers of Merger Sub, until their respective successors are duly elected or appointed and qualified. (e) Other than as a result of the Merger described in Item 3 above, not applicable. (f) Not applicable. (g) Upon consummation of the Merger, the Certificate of Incorporation of Vivid, as in effect immediately prior to the Merger, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by Delaware Law and such Certificate of Incorporation; provided, however, that Article IV of the Certificate of Incorporation of the Surviving Corporation shall be amended to read as follows: "The total number of shares of all classes of stock which the Corporation 7 ------------------------ CUSIP NUMBER 928538107 Page 7 of 12 Pages ------------------------ shall have authority to issue is 1,000, all of which shall consist of Common Stock, $.01 par value per share." Upon consummation of the Merger, the By-laws of Merger Sub, as in effect immediately prior to the Merger shall be the By-laws of the Surviving Corporation until hereafter amended; provided, however, that the name of the corporation set forth in the By-laws shall be changed to the name of the Issuer. In addition, each of the Merger Agreement, the Option Agreement and the Stockholder Agreement may have the effect of impeding the acquisition of control of Issuer by any person other than EG&G. (h)-(i) If the Merger is consummated as planned, the Vivid Common Stock will be deregistered under the Act and delisted from the Nasdaq National Market. (j) Other than as described above, EG&G currently has no plan or proposals which relate to, or may result in, any of the matters listed in Items 4(a)-(j) of Schedule 13D (although EG&G reserves the right to develop such plans). ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a)-(b) As a result of the Option Agreement and the Stockholder Agreement, EG&G may be deemed to be the beneficial owner of at least 3,303,012 shares of Issuer Common Stock. Such Issuer Common Stock constitutes approximately 32.86% of the issued and outstanding shares of Issuer Common Stock. Schedule B sets forth the applicable information required by Item 2 with respect to each of the Stockholders with whom the power to vote is shared. (c)-(e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Other than the Merger Agreement, the Option Agreement and the Stockholder Agreement, to the best knowledge of EG&G, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons or entities listed in Item 2 and between such person or entity and any person or entity with respect to any securities of Vivid, including but not limited to transfer of voting of any of the securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. 8 ------------------------ CUSIP NUMBER 928538107 Page 8 of 12 Pages ------------------------ ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. The following documents are filed as exhibits: 1. Agreement and Plan of Merger, dated as of October 4, 1999, by and among EG&G, Merger Sub and Vivid. 2. Seller Stock Option Agreement, dated as of October 4, 1999, between EG&G and Vivid. 3. Stockholder Agreement, dated as of October 4, 1999, by and among EG&G, Merger Sub and each of the Stockholders. 9 ------------------------ CUSIP NUMBER 928538107 Page 9 of 12 Pages ------------------------ SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I hereby certify that the information set forth in this statement is true, complete and correct. DATED: October 20, 1999 EG&G, INC. /s/ Terrance L. Carlson By: _______________________________ Terrance L. Carlson Title: Senior Vice President and General Counsel 10 Schedule A - ------------------------------------------- ------------------------------------ NAME BUSINESS ADDRESS - ------------------------------------------- ------------------------------------ EXECUTIVE OFFICERS OF EG&G - ------------------------------------------- ------------------------------------ Gregory L. Summe 45 William Street Chairman of the Board, Wellesley, MA 02481 Chief Executive Officer and President - ------------------------------------------- ------------------------------------ Robert F. Friel 45 William Street Senior Vice President and Wellesley, MA 02481 Chief Financial Officer - ------------------------------------------- ------------------------------------ Terrance L. Carlson 45 William Street Senior Vice President - Wellesley, MA 02481 New Business Development and General Counsel - ------------------------------------------- ------------------------------------ Angelo D. Castellana 45 William Street Senior Vice President Wellesley, MA 02481 - ------------------------------------------- ------------------------------------ Richard F. Walsh 45 William Street Senior Vice President Wellesley, MA 02481 - ------------------------------------------- ------------------------------------ Robert A. Barrett EG&G Engineered Products Vice President and Strategic Business Unit 11642 Old Baltimore Pike President Beltsville, MD 20705 - ------------------------------------------- ------------------------------------ John J. Engel EG&G Optoelectronics Vice President and Strategic Business Unit 2175 Mission College Boulevard President Santa Clara, CA 95054-1520 - ------------------------------------------- ------------------------------------ Patrik Dahlen EG&G Life Sciences Vice President and Strategic Business Unit Mustionkatu 6 President P.O. Box 10 FIN-20101 Turku Finland - ------------------------------------------- ------------------------------------ Gregory Perry 45 William Street Vice President, Control and Treasury Wellesley, MA 02481 - ------------------------------------------- ------------------------------------ Robert J. Rosenthal 45 William Street Vice President and Strategic Business Unit Wellesley, MA 02481 President - ------------------------------------------- ------------------------------------ DIRECTORS OF EG&G (PRESENT PRINCIPAL OCCUPATION) - ------------------------------------------- ------------------------------------ Tamara J. Erickson 222 Third Street President, Consulting Suite 1100 The Concours Group Cambridge, MA 02142 - ------------------------------------------- ------------------------------------ Gabriel Schmergel 15 Lowell Road Retired Wellesley, MA 02481 (Home) - ------------------------------------------- ------------------------------------ 11 ------------------------ CUSIP NUMBER 928538107 Page 11 of 12 Pages ------------------------ - ------------------------------------------- ------------------------------------ Dr. Kent F. Hansen MIT Energy Lab (E-40-391) Professor of Nuclear Engineering One Amherst Street Massachusetts Institute of Technology Cambridge, MA 02139 - ------------------------------------------- ------------------------------------ John F. Keane Ten City Square President and CEO Charlestown, MA 02129 Keane, Inc. - ------------------------------------------- ------------------------------------ Nicholas A.Lopardo Two International Place Chairman and Chief Executive Officer Boston, MA 02110 State Street Global Advisors - ------------------------------------------- ------------------------------------ Greta E. Marshall 14 Concord Street Principal P.O. Box 593 The Marshall Plan, L.P. and GEM Trading Carlisle, MA 01741 Services, L.P. - ------------------------------------------- ------------------------------------ Michael C. Ruettgers 35 Parkwood Drive President and Chief Executive Officer Hopkinton, MA 01748-9103 EMC Corporation - ------------------------------------------- ------------------------------------ Gregory L. Summe 45 William Street President and Chief Executive Officer Wellesley, MA 02481 EG&G, Inc. - ------------------------------------------- ------------------------------------ John Larkin Thompson Nutter, McClennen & Fish Lawyer One International Place Boston, MA 02110-2699 - ------------------------------------------- ------------------------------------ G. Robert Tod P.O. Box 860 Retired Wolfeboro, NH 03894 (Home) - ------------------------------------------- ------------------------------------ Citizenship of the above named persons other than Patrick Dahlen: USA Citizenship of Patrick Dahlen: Finland 12 Schedule B STOCKHOLDER NAME AND ADDRESS NUMBER OF SHARES S. David Ellenbogen 164,884 Hologic, Inc. 35 Crosby Drive Bedford, Massachusetts 01730 Ellenbogen Family Irrevocable 237,500 Trust of 1996 c/o O'Neill & Neylon 950 Winter Street Waltham, Massachusetts 02451 S. David Ellenbogen 210,616 1996 Retained Annuity Trust c/o O'Neill & Neylon 950 Winter Street Waltham, Massachusetts 02451 Jay A. Stein 565,114 Hologic, Inc. 35 Crosby Drive Bedford, Massachusetts 01730 Jay A. Stein 124,886 1996 Retained Annuity Trust c/o O'Neill & Neylon 950 Winter Street Waltham, Massachusetts 02451 EX-1 2 AGREEMENT AND MERGER DATED 10/4/99 1 EXHIBIT 1 AGREEMENT AND PLAN OF MERGER among EG&G, Inc. Venice Acquisition Corp. and Vivid Technologies, Inc. October 4, 1999 2 TABLE OF CONTENTS Page ARTICLE I THE MERGER............................................................2 Section 1.01 Effective Time of the Merger............................2 Section 1.02 Closing.................................................2 Section 1.03 Effects of the Merger...................................2 Section 1.04 Directors and Officers..................................2 Section 1.05 Alternative Merger Structure............................2 ARTICLE II CONVERSION OF SECURITIES..............................................3 Section 2.01 Conversion of Capital Stock.............................3 Section 2.02 Exchange of Certificates................................5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..............................8 Section 3.01 Organization of Seller..................................8 Section 3.02 Seller Capital Structure................................9 Section 3.03 Authority; No Conflict; Required Filings and Consents..11 Section 3.04 SEC Filings; Financial Statements......................12 Section 3.05 No Undisclosed Liabilities.............................13 Section 3.06 Absence of Certain Changes or Events...................13 Section 3.07 Taxes..................................................13 Section 3.08 Real Properties........................................15 Section 3.09 Intellectual Property..................................15 Section 3.10 Agreements, Contracts and Commitments..................17 Section 3.11 Litigation.............................................17 Section 3.12 Environmental Matters..................................18 Section 3.13 Employee Benefit Plans.................................19 Section 3.14 Compliance With Laws...................................20 Section 3.15 Permits................................................20 Section 3.16 Registration Statement; Proxy Statement/Prospectus.....20 Section 3.17 Labor Matters..........................................21 Section 3.18 Insurance..............................................21 Section 3.19 Government Contracts...................................21 Section 3.20 Year 2000..............................................22 Section 3.21 Cash Balance...........................................22 -ii- 3 Section 3.22 Suppliers..............................................22 Section 3.23 Opinion of Financial Advisor...........................23 Section 3.24 Section 203 of the DGCL Not Applicable.................23 Section 3.25 Rights Agreement.......................................23 Section 3.26 Hologic License........................................23 Section 3.27 Gilardoni Dispute......................................23 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB......................24 Section 4.01 Organization of Buyer and Sub..........................24 Section 4.02 Capital Structure......................................25 Section 4.03 Authority; No Conflict; Required Filings and Consents..25 Section 4.04 SEC Filings; Financial Statements......................26 Section 4.05 Registration Statement; Proxy Statement/Prospectus.....27 Section 4.06 Operations of Sub......................................27 Section 4.07 No Undisclosed Liabilities.............................28 Section 4.08 Absence of Certain Changes or Events...................28 ARTICLE V CONDUCT OF BUSINESS..................................................28 Section 5.01 Covenants of Seller....................................28 Section 5.02 Cooperation............................................31 Section 5.03 Confidentiality........................................31 ARTICLE VI ADDITIONAL AGREEMENTS................................................31 Section 6.01 No Solicitation........................................31 Section 6.02 Proxy Statement/Prospectus; Registration Statement.....33 Section 6.03 Nasdaq Quotation.......................................34 Section 6.04 Access to Information..................................34 Section 6.05 Stockholders Meeting...................................35 Section 6.06 Legal Conditions to Merger.............................35 Section 6.07 Public Disclosure......................................37 Section 6.08 Tax-Free Reorganization................................37 Section 6.09 Affiliate Agreements...................................38 Section 6.10 NYSE Listing...........................................38 Section 6.11 Seller Stock Plans and Seller Warrants.................38 Section 6.12 Brokers or Finders.....................................39 Section 6.12(A) Employment Matters...................................40 Section 6.13 Indemnification........................................41 -iii- 4 Section 6.14 Letter of Seller's Accountants.........................42 Section 6.15 Notification of Certain Matters........................42 Section 6.16 Environmental Audit....................................42 ARTICLE VII CONDITIONS TO MERGER.................................................43 Section 7.01 Conditions to Each Party's Obligation To Effect the Merger...........................................43 Section 7.02 Additional Conditions to Obligations of Buyer and Sub..43 Section 7.03 Additional Conditions to Obligations of Seller.........45 ARTICLE VIII TERMINATION AND AMENDMENT............................................46 Section 8.01 Termination............................................46 Section 8.02 Effect of Termination..................................48 Section 8.03 Fees and Expenses......................................48 Section 8.04 Amendment..............................................50 Section 8.05 Extension; Waiver......................................50 ARTICLE IX MISCELLANEOUS........................................................51 Section 9.01 Nonsurvival of Representations, Warranties and Agreements...........................................51 Section 9.02 Notices................................................51 Section 9.03 Interpretation.........................................52 Section 9.04 Counterparts...........................................53 Section 9.05 Entire Agreement; No Third Party Beneficiaries.........53 Section 9.06 Governing Law and Venue................................53 Section 9.07 Waiver of Jury Trial...................................54 Section 9.08 Assignment.............................................54 Section 9.09 Severability...........................................54 Section 9.10 Other Remedies; Specific Performance...................54 Section 9.11 Proposed Name Change...................................55 Exhibit A Form of Seller Stock Option Agreement Exhibit B Form of Stockholder Agreement Exhibit C Termination With Resect to Hologic License Exhibit D Form of Seller Affiliate Agreement -iv- 5 TABLES OF DEFINED TERMS Cross Reference Terms in Agreement - ----- --------------- Acquisition Proposal...................................... Section 6.01(a) Affiliate................................................. Section 6.09 Affiliate Agreement....................................... Section 6.09 Agreement................................................. Preamble Alternative Merger ............................... Section 1.05 Alternative Transaction................................... Section 8.03(g) Antitrust Laws............................................ Section 6.06(b) Bankruptcy and Equity Exception........................... Section 3.03(a) Buyer Common Stock........................................ Section 2.01(c) Buyer Disclosure Schedule................................. Article IV Buyer Material Adverse Effect............................. Section 4.01 Buyer Preferred Stock..................................... Section 4.02 Buyer SEC Reports......................................... Section 4.04(a) Buyer Stock Plans......................................... Section 4.02(a) Certificates.............................................. Section 2.02(b) Closing................................................... Section 1.02 Closing Date.............................................. Section 1.02 Code...................................................... Preamble Confidentiality Agreement................................. Section 5.03 Continuing Employee....................................... Section 6.12(A)(a) Constituent Corporations.................................. Section 1.03 Daily Per Share Price..................................... Section 2.01(c) Exchange Ratio............................................ Section 2.01(c) Effective Time............................................ Section 1.01 -v- 6 Environmental Law......................................... Section 3.12(b) ERISA..................................................... Section 3.13(a) ERISA Affiliate........................................... Section 3.13(a) Exchange Act.............................................. Section 3.03(c) Exchange Agent............................................ Section 2.02(a) Exchange Fund............................................. Section 2.02(a) Governmental Entity....................................... Section 3.03(c) Hazardous Substance....................................... Section 3.12(c) Hologic License........................................... Section 3.26 HSR Act................................................... Section 3.03(c) Indemnified Parties....................................... Section 6.13(a) IRS....................................................... Section 3.07(b) Leases.................................................... Section 3.08 Market Value.............................................. Section 2.01(c) Maximum Premium........................................... Section 6.13(b) Merger.................................................... Preamble NYSE...................................................... Section 2.01(c) Order..................................................... Section 6.06(b) Outside Date.............................................. Section 8.01(b) Plan...................................................... Section 6.12A(d) Protection Policies....................................... Section 3.09(c) Proxy Statement........................................... Section 3.16 Registration Statement.................................... Section 3.16 Rule 145.................................................. Section 6.09 SEC....................................................... Section 3.03(c) Second Request............................................ Section 6.06(b) -vi- 7 Securities Act............................................ Section 3.04(a) Seller Balance Sheet ..................................... Section 3.04(b) Seller Common Stock ...................................... Section 2.01(b) Seller Disclosure Schedule ............................... Article III Seller Employee Plans .................................... Section 3.13(a) Seller Material Adverse Effect ........................... Section 3.01 Seller Material Contract ................................. Section 3.10 Seller Meeting ........................................... Section 3.16 Seller Permits............................................ Section 3.15 Seller Preferred Stock.................................... Section 3.02(a) Seller Rights ............................................ Section 3.02(b) Seller Rights Plan........................................ Section 3.02(b) Seller SEC Reports ....................................... Section 3.04(a) Seller Stock Option....................................... Section 3.02(a) Seller Stock Option Agreement ............................ Preamble Seller Stock Plans ....................................... Section 3.02(a) Seller Voting Proposal ................................... Section 6.05(a) Seller Warrants........................................... Section 3.02(a) Stockholders Agreements................................... Preamble Subsidiary................................................ Section 3.01 Superior Proposal......................................... Section 6.01(a)(A)(1) Surviving Corporation..................................... Section 1.03 Tax....................................................... Section 3.07(a) Taxes..................................................... Section 3.07(a) Third Party............................................... Section 8.03(g) Year 2000 Compliant....................................... Section 3.20 -vii- 8 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of October 4, 1999, by and among Europe, Inc., a Massachusetts corporation ("Buyer"), Venice Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of Buyer ("Sub"), and Venice, Inc., a Delaware corporation ("Seller"). WHEREAS, the Boards of Directors of Buyer and Seller deem it advisable and in the best interests of each corporation and its respective stockholders that Buyer and Seller combine in order to advance the long-term business interests of Buyer and Seller; WHEREAS, the combination of Buyer and Seller shall be effected by the terms of this Agreement through a merger of Sub into Seller, as a result of which the stockholders of Seller will become stockholders of Buyer (the "Merger"); WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Buyer's willingness to enter into this Agreement, Seller has entered into a Stock Option Agreement dated as of the date of this Agreement and attached hereto as EXHIBIT A (the "Seller Stock Option Agreement"), pursuant to which Seller granted Buyer an option to purchase shares of common stock of Seller under certain circumstances; WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Buyer's willingness to enter into this Agreement, the stockholders of Seller specified in Section 6.05(b) of this Agreement have entered into Stockholder Agreements dated as of the date of this Agreement in the form attached as EXHIBIT B (the "Stockholder Agreements"), pursuant to which such stockholders granted Sub an option to purchase shares of capital stock of Seller and agreed to give Sub a proxy to vote all of the shares of capital stock of Seller that such stockholders own; and WHEREAS, for federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth below, the parties agree as follows: 9 ARTICLE I THE MERGER Section 1.01 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this Agreement, a certificate of merger in such form as is required by the relevant provisions of the Delaware General Corporation Law ("DGCL") (the "Certificate of Merger") shall be duly executed and acknowledged by the Surviving Corporation (as defined in Section 1.03) and thereafter delivered to the Secretary of State of the State of Delaware for filing, as soon as practicable on the Closing Date (as defined in Section 1.02). The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (the "Effective Time") or at such later time as is established by Buyer and Seller and set forth in the Certificate of Merger. Section 1.02 CLOSING. The closing of the Merger (the "Closing") will take place at 10:00 a.m., E.S.T., on a date to be specified by Buyer and Seller (the "Closing Date"), which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VII (other than delivery of items to be delivered at Closing), at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, unless another date, place or time is agreed to in writing by Buyer and Seller. Section 1.03 EFFECTS OF THE MERGER. At the Effective Time (i) the separate existence of Sub shall cease and Sub shall be merged with and into Seller (Sub and Seller are sometimes referred to below as the "Constituent Corporations" and Seller following the Merger is sometimes referred to below as the "Surviving Corporation"), (ii) the Certificate of Incorporation of Seller shall be amended so that Article 4 of such Certificate of Incorporation reads in its entirety as follows: "The total number of shares of all classes of stock which the Corporation shall have authority to issue is 1,000, all of which shall consist of Common Stock, $.01 par value per share," and, as so amended, such Certificate of Incorporation shall be the Certificate of Incorporation of the Surviving Corporation, and (iii) the Bylaws of the Surviving Corporation shall be amended to read as the Bylaws of Sub as in effect immediately prior to the Effective Time. The Merger shall have the effects set forth in Section 259 of the DGCL. Section 1.04 DIRECTORS AND OFFICERS. The directors and officers of Sub immediately prior to the Effective Time shall be the initial directors and officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation. Section 1.05 ALTERNATIVE MERGER STRUCTURE. While it is currently contemplated that the Merger shall be effected through the merger of Sub with and into Seller, Buyer shall have the option, in its sole discretion, to cause the Merger to be effected through -2- 10 an alternative transaction structure of Seller merging with and into Buyer, with Buyer being the Surviving Corporation (the "Alternative Merger"), in which the case the appropriate technical provisions of this Agreement shall be deemed to be amended as necessary in order to effect the Alternative Merger. If Buyer desires to effect the Alternative Merger, it shall deliver a notice to Seller of its election to do so, which notice shall be available for the inspection of any stockholder of Seller upon request during normal business hours. As part of the Proxy Statement and in the manner required by applicable law, Seller shall describe the provisions of this Section 1.05 such that approval of the Seller Voting Proposal shall entail approval of both Merger and (if elected to be effected by Buyer) the Alternative Merger. In the event an Alternative Merger is effected, (i) Seller shall not be deemed to be in breach of any representation, warranty or covenant contained herein to the extent any such representation, warranty or covenant would not have been breached if the Merger had been consummated as contemplated by this Agreement without giving effect to this Section 1.05 and (ii) the Alternative Merger shall in no way reduce, impair or otherwise impact the indemnification of Seller's directors and officers after the Closing as set forth in Section 6.13. ARTICLE II CONVERSION OF SECURITIES Section 2.01 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of capital stock of Seller or capital stock of Sub: (a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the capital stock of Sub shall be converted into and become one fully paid and nonassessable share of Common Stock of the Surviving Corporation. (b) CANCELLATION OF TREASURY STOCK AND BUYER-OWNED STOCK. All shares of common stock, $.01 par value per share, of Seller ("Seller Common Stock") that are owned by Seller as treasury stock or by any wholly owned Subsidiary (as defined in Section 3.01) of Seller and any shares of Seller Common Stock owned by Buyer, Sub or any other wholly owned Subsidiary of Buyer shall be canceled and retired and shall cease to exist and no stock of Buyer or other consideration shall be delivered in exchange therefor. (c) EXCHANGE RATIO FOR SELLER COMMON STOCK. Subject to Section 2.02, each issued and outstanding share of Seller Common Stock (other than shares to be canceled in accordance with Section 2.01(b)), shall be converted into the right to receive 0.1613 -3- 11 shares (the "Exchange Ratio") of Common Stock, $1.00 par value per share, of Buyer ("Buyer Common Stock"). Notwithstanding the foregoing: (i) In the event that the Market Value (as defined below) of the Buyer Common Stock is greater than $46.49, then, if Buyer has notified Seller of its election to terminate this Agreement pursuant to Section 8.01(i) hereof, Seller shall have the option in its sole and absolute discretion, but not the obligation, exercisable as provided in Section 8.01(i), to adjust the Exchange Ratio to an amount equal to $7.50 divided by the Market Value of the Buyer Common Stock, and Buyer shall be obligated to accept such adjustment. In the event that the Market Value of the Buyer Common Stock is greater than $46.49 and Buyer does not elect to terminate this Agreement pursuant to Section 8.01(i), the Exchange Ratio shall be unchanged. (ii) In the event that the Market Value of the Buyer Common Stock is less than $30.99, then, if Seller has notified Buyer of its election to terminate this Agreement pursuant to Section 8.01(h) hereof, Buyer shall have the option in its sole and absolute discretion, but not the obligation, exercisable as provided in Section 8.01(h), to adjust the Exchange Ratio to an amount equal to $5.00 divided by the Market Value of the Buyer Common Stock, and Seller shall be obligated to accept such adjustment. In the event that the Market Value of the Buyer Common Stock is less than $30.99 and Seller does not elect to terminate this Agreement pursuant to Section 8.01(h), the Exchange Ratio shall be unchanged. The "Market Value" of the Buyer Common Stock means the average of the Daily Per Share Prices (as defined below) of the Buyer Common Stock for the five consecutive trading days ending on the third trading day prior to the date of the Seller Meeting (as defined in Section 3.16 hereof), so long as the Closing Date occurs within five business days of the Seller Meeting or, if the Closing Date is more than five business days after the Seller Meeting, the Closing Date. The "Daily Per Share Price" for any trading day means the weighted average of the per share selling prices of the Buyer Common Stock on the New York Stock Exchange (the "NYSE"), as reported in the NYSE Composite Transactions, for that day. All such shares of Seller Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the shares of Buyer Common Stock and any cash in lieu of fractional shares of Buyer Common Stock to be issued or -4- 12 paid in consideration therefor upon the surrender of such certificate in accordance with Section 2.02, without interest. (d) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio and each of the target dollar values set forth in Sections 2.01(c)(i), 2.01(c)(ii), 8.01(h) and 8.01(i) shall be equitably adjusted to reflect fully the effect of any stock split, reverse split, reclassification, stock dividend (including any dividend or distribution of securities convertible into Buyer Common Stock or Seller Common Stock), reorganization, recapitalization or other like change with respect to Buyer Common Stock or Seller Common Stock occurring after the date hereof and prior to the Effective Time. Section 2.02 EXCHANGE OF CERTIFICATES. The procedures for exchanging outstanding shares of Seller Common Stock for Buyer Common Stock pursuant to the Merger are as follows: (a) EXCHANGE AGENT. As of the Effective Time, Buyer shall deposit with a bank or trust company designated by Buyer (the "Exchange Agent"), in trust for the benefit of the holders of shares of Seller Common Stock, for exchange in accordance with this Section 2.02, through the Exchange Agent, (i) certificates representing the shares of Buyer Common Stock (such shares of Buyer Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund") issuable pursuant to Section 2.01 in exchange for outstanding shares of Seller Common Stock, (ii) cash in an amount sufficient to make payments required pursuant to Section 2.02(e), and (iii) any dividends or distributions to which holders of Certificates (as defined below) may be entitled pursuant to Section 2.02(c). (b) EXCHANGE PROCEDURES. Promptly after the Effective Time (but in any event within five business days thereof), Buyer shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Seller Common Stock (the "Certificates") whose shares were converted pursuant to Section 2.01 into the right to receive shares of Buyer Common Stock (i) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Buyer may reasonably specify; provided, however, that such other provisions shall not materially adversely effect the terms of the consideration to be received by Seller's stockholders in the Merger) and (ii) instructions for effecting the surrender of the Certificates in exchange for certificates representing shares of Buyer Common Stock (plus cash in lieu of fractional shares, if any, of Buyer Common Stock and any dividends or distributions as provided below). Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Buyer, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange -5- 13 therefor and Buyer shall cause the Exchange Agent to promptly deliver to such holder a certificate representing that number of whole shares of Buyer Common Stock which such holder has the right to receive pursuant to the provisions of this Article II plus cash in lieu of fractional shares pursuant to Section 2.02(e) and any dividends or distributions pursuant to Section 2.02(c), and the Certificate so surrendered shall immediately be canceled. In the event of a transfer of ownership of Seller Common Stock which is not registered in the transfer records of Seller, a certificate representing the proper number of shares of Buyer Common Stock plus cash in lieu of fractional shares pursuant to Section 2.02(e) and any dividends or distributions pursuant to Section 2.02(c) may be issued to a transferee if the Certificate representing such Seller Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the certificate representing shares of Buyer Common Stock plus cash in lieu of fractional shares pursuant to Section 2.02(e) and any dividends or distributions pursuant to Section 2.02(c) as contemplated by this Section 2.02. (c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or other distributions declared or made after the Effective Time with respect to Buyer Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Buyer Common Stock represented thereby and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to subsection (e) below until the holder of record of such Certificate shall surrender such Certificate. Subject to the effect of applicable laws, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of Buyer Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of a fractional share of Buyer Common Stock to which such holder is entitled pursuant to subsection (e) below and the amount of dividends or other distributions with a record date after the Effective Time previously paid with respect to such whole shares of Buyer Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Buyer Common Stock. (d) NO FURTHER OWNERSHIP RIGHTS IN SELLER COMMON STOCK. All shares of Buyer Common Stock issued upon the surrender for exchange of Certificates in accordance with the terms hereof (including any cash or other distributions paid pursuant to subsection (c) or (e) of this Section 2.02) shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Seller Common Stock, and from and after the Effective Time there shall be no further registration of transfers -6- 14 on the stock transfer books of the Surviving Corporation of the shares of Seller Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Section 2.02. (e) NO FRACTIONAL SHARES. No certificate or scrip representing fractional shares of Buyer Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a stockholder of Buyer. Notwithstanding any other provision of this Agreement, each holder of shares of Seller Common Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Buyer Common Stock (after taking into account all Certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of Buyer Common Stock multiplied by the Market Value of the Buyer Common Stock. (f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which remains undistributed to the stockholders of Seller for 180 days after the Effective Time shall be delivered to Buyer, upon demand, and any stockholders of Seller who have not previously complied with this Section 2.02 shall thereafter look only to Buyer for payment of their claim for Buyer Common Stock, any cash in lieu of fractional shares of Buyer Common Stock and any dividends or distributions with respect to Buyer Common Stock. (g) NO LIABILITY. To the extent permitted by applicable law, neither Buyer nor Seller shall be liable to any holder of shares of Seller Common Stock or Buyer Common Stock, as the case may be, for such shares (or dividends or distributions with respect thereto) properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (h) WITHHOLDING RIGHTS. Each of Buyer and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Seller Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by the Surviving Corporation or Buyer, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Seller Common Stock in respect of which such deduction and withholding was made by the Surviving Corporation or Buyer, as the case may be. (i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, -7- 15 the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Buyer Common Stock and any cash in lieu of fractional shares, and unpaid dividends and distributions on shares of Buyer Common Stock deliverable in respect thereof pursuant to this Agreement. (j) AFFILIATES. Notwithstanding anything herein to the contrary, Certificates surrendered for exchange by any Affiliate (as defined in Section 6.09) of Seller shall not be exchanged until Buyer has received an Affiliate Agreement (as defined in Section 6.09) from such Affiliate. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer and Sub that the statements contained in this Article III are true and correct, except as set forth herein or in the disclosure schedule delivered by Seller to Buyer on or before the date of this Agreement (the "Seller Disclosure Schedule"). The Seller Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III and the disclosure in any paragraph shall qualify other paragraphs in this Article III only to the extent that it is reasonably apparent from a reading of such disclosure that it also qualifies or applies to such other paragraphs. Section 3.01 ORGANIZATION OF SELLER. Each of Seller and its Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would be reasonably likely to have a material adverse effect on the business, properties, financial condition, results of operations or prospects of Seller and its Subsidiaries, taken as a whole, or to have a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement (a "Seller Material Adverse Effect"); provided however that (i) any adverse change, event or effect that is demonstrated to be primarily caused by conditions affecting the United States economy generally or the economy of any nation or region that is material to the business of Seller and its Subsidiaries, taken as a whole, in which Seller or any of its Subsidiaries conducts business shall not be taken into account in determining whether there has been or would be reasonably likely to be a "Seller Material Adverse Effect," (ii) any adverse change, event or effect that is demonstrated to be primarily caused by conditions -8- 16 generally affecting the explosives and contraband detection industry shall not be taken into account in determining whether there has been or would be reasonably likely to be a "Seller Material Adverse Effect," (iii) any adverse change, event or effect that is demonstrated to be primarily caused by the announcement or pendency of the Merger shall not be taken into account in determining whether there has been or would be reasonably likely to be a "Seller Material Adverse Effect," (iv) subject to the accuracy of Seller's representations in Section 3.27, any adverse change, event or effect that is demonstrated to be primarily caused by the matters described in Section 3.27 of the Seller Disclosure Schedule shall not be taken into account in determining whether there has been or would be reasonably likely to be a "Seller Material Adverse Effect" and (v) the failure of the Seller to obtain certification by or additional funding from the United States Federal Aviation Association of its Multiview Tomography (MVT) product shall not, in and of itself, constitute a "Seller Material Adverse Effect." Except as set forth in the Seller SEC Reports (as defined in Section 3.04) filed prior to the date hereof, neither Seller nor any of its Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity, excluding securities in any publicly traded company held for investment by Seller and comprising less than five percent (5%) of the outstanding stock of such company. As used in this Agreement, the word "Subsidiary" means, with respect to a party, any corporation or other organization, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting interest in such partnership) or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. Section 3.02 SELLER CAPITAL STRUCTURE. (a) The authorized capital stock of Seller consists of 30,000,000 shares of Seller Common Stock and 1,000,000 shares of preferred stock, $.01 par value per share ("Seller Preferred Stock"), of which 30,000 shares are designated Series A Junior Participating Preferred Stock. As of the date of this Agreement, (i) 10,050,316 shares of Seller Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable, (ii) 95,000 shares of Seller Common Stock were held in the treasury of Seller or by Subsidiaries of Seller, and (iii) no shares of Seller Preferred Stock were issued and outstanding. Section 3.02 of the Seller Disclosure Schedule shows the number of shares of Seller Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of the date of this Agreement and the plans under which such options were granted (collectively, the "Seller Stock Plans") and sets -9- 17 forth a complete and accurate list of all holders of outstanding options to purchase shares of Seller Common Stock (such outstanding options, the "Seller Stock Options") under the Seller Stock Plans, indicating the number of shares of Seller Common Stock subject to each Seller Stock Option, and the exercise price, the date of grant and the expiration date thereof. Section 3.02 of the Seller Disclosure Schedule shows the number of shares of Seller Common Stock reserved for future issuance pursuant to warrants or other outstanding rights to purchase shares of Seller Common Stock outstanding as of the date of this Agreement (such outstanding warrants or other rights, the "Seller Warrants") and the agreement or other document under which such Seller Warrants were granted and sets forth a complete and accurate list of all holders of Seller Warrants indicating the number and type of shares of Seller Common Stock subject to each Seller Warrant, and the exercise price, the date of grant and the expiration date thereof. All shares of Seller Common Stock subject to issuance as specified above are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. There are no obligations, contingent or otherwise, of Seller or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Seller Common Stock or the capital stock of Seller or any of its Subsidiaries or to provide funds to or make any material investment (in the form of a loan, capital contribution or otherwise) in Seller or any Subsidiary of Seller or any other entity other than guarantees of bank obligations of Subsidiaries of Seller entered into in the ordinary course of business. All of the outstanding shares of capital stock of each of Seller's Subsidiaries are duly authorized, validly issued, fully paid and nonassessable and all such shares (other than directors' qualifying shares in the case of foreign Subsidiaries) are owned by Seller or another Subsidiary of Seller free and clear of all security interests, liens, claims, pledges, agreements, limitations in Seller's voting rights, charges or other encumbrances of any nature. (b) Except for the Seller Stock Plans, the Seller Warrants, the Seller Stock Option Agreement and the rights (the "Seller Rights") issuable under the Rights Agreement dated as of October 13, 1998 between Seller and American Stock Transfer & Trust Company (the "Seller Rights Plan") and shares of capital stock and other securities of Seller issuable pursuant to any of the foregoing, (i) there are no equity securities of any class of Seller or any of its Subsidiaries, or any security exchangeable into or exercisable for such equity securities, issued, reserved for issuance or outstanding and (ii) there are no other options, warrants, equity securities, calls, rights, commitments or agreements of any character to which Seller or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound obligating Seller or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of Seller or any of its Subsidiaries or obligating Seller or any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or amend or enter into any such option, warrant, equity security, call, right, commitment or agreement. To the knowledge of Seller, other than the Stockholder Agreements, there -10- 18 are no voting trusts, proxies or other voting agreements or understandings with respect to the shares of capital stock of Seller or any of its Subsidiaries. Section 3.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Seller has all requisite corporate power and authority to enter into this Agreement and the Seller Stock Option Agreement and to consummate the transactions contemplated by this Agreement and the Seller Stock Option Agreement. The execution and delivery of this Agreement and the Seller Stock Option Agreement and the consummation of the transactions contemplated by this Agreement and the Seller Stock Option Agreement by Seller have been duly authorized by all necessary corporate action on the part of Seller, subject only to the approval of the Merger by Seller's stockholders under the DGCL. The Board of Directors of Seller has not taken any action to accelerate any options granted under the Seller Stock Plans and has approved the treatment of the Seller Stock Options and Seller Warrants set forth in Section 6.11 of this Agreement. Seller has delivered or concurrently with the execution of this Agreement is delivering any required notice under the Seller Warrants. This Agreement and the Seller Stock Option Agreement have been duly executed and delivered by Seller and constitute the valid and binding obligations of Seller, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (the "Bankruptcy and Equity Exception"). (b) The execution and delivery of this Agreement and the Seller Stock Option Agreement by Seller does not, and the consummation of the transactions contemplated by this Agreement and the Seller Stock Option Agreement will not, (i) conflict with, or result in any violation or breach of, any provision of the Certificate of Incorporation or Bylaws of Seller or the charter, by-laws, or other organizational document of any Subsidiary of Seller, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Seller or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) except as provided in clauses (i), (ii), (iii) and (iv) in paragraph (c) below, conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Seller or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which are not, individually or in the aggregate, reasonably likely to have a Seller Material Adverse Effect. -11- 19 (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, foreign or domestic ("Governmental Entity"), is required by or with respect to Seller or any of its Subsidiaries in connection with the execution and delivery of this Agreement and the Seller Stock Option Agreement or the consummation of the transactions contemplated hereby and thereby, except for (i) the filing of the pre-merger notification report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, ("HSR Act"), (ii) the filing of the Certificate of Merger with the Delaware Secretary of State, (iii) the filing of the Proxy Statement (as defined in Section 3.16 below) with the Securities and Exchange Commission (the "SEC") in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the laws of any foreign country and (v) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not be reasonably likely to have a Seller Material Adverse Effect. The Seller stockholder vote required for the approval of the Seller Voting Proposal (as defined below) is a majority of the outstanding shares of Seller Common Stock on the record date for the Seller Meeting (as defined below). Section 3.04 SEC FILINGS; FINANCIAL STATEMENTS. (a) Seller has filed and made available to Buyer all forms, reports and documents required to be filed by Seller with the SEC since January 1, 1996. All such required forms, reports and documents (including those that Seller may file after the date hereof until the Closing) are referred to herein as the "Seller SEC Reports." The Seller SEC Reports (i) were prepared in compliance in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Seller SEC Reports, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Seller SEC Reports or necessary in order to make the statements in such Seller SEC Reports, in the light of the circumstances under which they were made, not misleading. None of Seller's Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes or schedules) contained in the Seller SEC Reports (i) complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, (ii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by the SEC on Form 10-Q under the Exchange Act) -12- 20 and (iii) fairly presented in all material respects the consolidated financial position of Seller and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the periods indicated, consistent in all material respects with the books and records of Seller and its Subsidiaries, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments and for the absence of complete footnotes which were not or are not expected to be material in amount. The unaudited balance sheet of Seller as of June 30, 1999 is referred to herein as the "Seller Balance Sheet." Section 3.05 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Seller SEC Reports filed prior to the date hereof, and except for normal or recurring liabilities incurred since June 30, 1999 in the ordinary course of business consistent with past practices, Seller and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate are reasonably likely to have a Seller Material Adverse Effect. Section 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Seller SEC Reports filed prior to the date hereof, since the date of the Seller Balance Sheet, Seller and its Subsidiaries, taken as a whole, have conducted their businesses in all material respects in the ordinary course and in a manner in all material respects consistent with past practice and, since such date, there has not been (i) any change in the financial condition, results of operations, business, properties or prospects of Seller and its Subsidiaries, taken as a whole, that has had, or is reasonably likely to have, a Seller Material Adverse Effect; (ii) any damage, destruction or loss (whether or not covered by insurance) with respect to Seller or any of its Subsidiaries having a Seller Material Adverse Effect; (iii) any material change by Seller in its accounting methods not required pursuant to generally accepted accounting principles, principles or practices to which Buyer has not previously consented in writing; (iv) any revaluation by Seller of any of its assets having a Seller Material Adverse Effect; or (v) any other action or event that would have required the consent of Buyer pursuant to Section 5.01 of this Agreement had such action or event occurred after the date of this Agreement. Section 3.07 TAXES. (a) Seller and each of its Subsidiaries has filed all Tax Returns (as defined below) that it was required to file, and all such Tax Returns were correct and complete except for any failure to file, error or omission that, individually or in the aggregate, is not reasonably likely to have a Seller Material Adverse Effect. Seller and each of its Subsidiaries has paid all Taxes (as defined below) that are shown to be due on any such -13- 21 Tax Returns. All Taxes that Seller or any of its Subsidiaries is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity, except for any such Taxes with respect to which the failure to withhold, collect or pay, individually or in the aggregate, is not reasonably likely to have a Seller Material Adverse Effect. For purposes of this Agreement, "Taxes" means all taxes, charges, fees, levies or other similar assessments or liabilities, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, services, transfer, withholding, employment, payroll and franchise taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes. (b) Seller has delivered to Buyer correct and complete copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by any of Seller or any of its Subsidiaries since December 31, 1996. The federal income Tax Returns of Seller and each of its Subsidiaries have never been audited by the Internal Revenue Service. Seller has delivered or made available to Buyer correct and complete copies of all other material Tax Returns of Seller and its Subsidiaries together with all related examination reports and statements of deficiency for all periods from and after December 31, 1996. No examination or audit of any Tax Return of Seller or any of its Subsidiaries by any Governmental Entity is currently in progress or, to the knowledge of Seller, threatened or contemplated. Neither Seller nor any of its Subsidiaries has been informed in writing or, to Seller's knowledge, orally by any jurisdiction that the jurisdiction believes that Seller or any of its Subsidiaries was required to file any Tax Return that was not filed, except for any Tax Return with respect to which the failure to file, individually or in the aggregate, is not reasonably likely to have a Seller Material Adverse Effect. (c) Neither Seller nor any of its Subsidiaries has waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency. (d) Neither Seller nor any of its Subsidiaries is a "consenting corporation" within the meaning of Section 341(f) of the Code, and none of the assets of Seller or its Subsidiaries are subject to an election under Section 341(f) of the Code. -14- 22 (e) Neither Seller nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code. (f) Neither Seller nor any of its Subsidiaries has made any payment, is obligated to make any payment, or is a party to any agreement that obligates it to make any payment that will be an "excess parachute payment" under Section 280G of the Code. (g) Neither Seller nor any of its Subsidiaries has any actual or potential liability for any Taxes of any person (other than the Seller and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of federal, state, local, or foreign law), or as a transferee or successor, by contract, or otherwise. (h) Neither Seller nor any of its Subsidiaries has undergone a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481(h) of the Code. (i) Neither Seller nor any of its Subsidiaries is or has ever been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns, other than a group of which only Seller and its Subsidiaries are or were members. Section 3.08 REAL PROPERTIES. Section 3.08 of the Seller Disclosure Schedule sets forth a list of all real property leased by Seller or its Subsidiaries (collectively "Leases") and the location of the premises. The Seller has provided true and complete copies of all Leases to the Buyer. Seller is not in default under any of the Leases, except where the existence of such defaults, individually or in the aggregate, is not reasonably likely to have a Seller Material Adverse Effect. Seller does not and has never owned any real property. Section 3.09 INTELLECTUAL PROPERTY. (a) To Seller's knowledge, Seller and its Subsidiaries own, or are licensed or otherwise possess legally enforceable (subject to the Bankruptcy and Equity Exception) rights to use, all patents, trademarks, trade names, domain names, service marks and copyrights, any applications for and registrations of such patents, trademarks, trade names, service marks and copyrights, and all processes, formulae, methods, schematics, technology, know-how, computer software programs or applications and tangible or intangible proprietary information or material that are used or necessary to conduct the business of Seller and its Subsidiaries as currently conducted, the absence of which -15- 23 would, individually or in the aggregate, be reasonably likely to have a Seller Material Adverse Effect (the "Seller Intellectual Property Rights"). (b) The execution and delivery of this Agreement and consummation of the Merger will not result in the breach of, or create on behalf of any third party the right to terminate or modify, any license, sublicense or other agreement relating to the Seller Intellectual Property Rights, or any license, sublicense and other agreement as to which Seller or any of its Subsidiaries is a party and pursuant to which Seller or any of its Subsidiaries is authorized to use any third party patents, trademarks, copyrights or trade secrets ("Seller Third Party Intellectual Property Rights"), including software that is used in the manufacture of, incorporated in, or forms a part of any product or service sold by Seller or any of its Subsidiaries or in the development stage, the breach, termination or modification of which license, sublicense or other agreement, individually or in the aggregate, would be reasonably likely to have a Seller Material Adverse Effect. (c) All patents, registered trademarks, service marks and copyrights which are owned by Seller or any of its Subsidiaries and which are material to the business of Seller and its Subsidiaries, taken as a whole, are valid and subsisting. Seller's policies (the "Protection Policies") are to enter into confidentiality agreements in favor of Seller which protect the proprietary nature of the Seller Intellectual Property Rights that are proprietary with its employees, consultants and independent contractors who have access to any such Seller Intellectual Property Rights and to require such employees, consultants and independent contractors to maintain in confidence all trade secrets and confidential information owned or used by Seller or any of its Subsidiaries. Seller and its Subsidiaries have complied in all material respects with the Protection Policies, and any failure to comply, individually or in the aggregate, is not reasonably likely to have a Seller Material Adverse Effect. To the knowledge of Seller, no other person or entity is infringing, violating or misappropriating any of the Seller Intellectual Property Rights, except for infringements, violations or misappropriations that are not, individually or in the aggregate, reasonably likely to have a Seller Material Adverse Effect. To the knowledge of Seller, none of the activities or business currently conducted by the Seller or any of the Subsidiaries infringes, violates or constitutes a misappropriation of, any patents, trademarks, trade names, service marks and copyrights, any applications for and registrations of such patents, trademarks, trade names, service marks and copyrights, and all processes, formulae, methods, schematics, technology, know-how, computer software programs or applications and tangible or intangible proprietary information or material of any other person or entity, except for such infringements, violations and misappropriations that, individually or in the -16- 24 aggregate, are not reasonably likely to have a Seller Material Adverse Effect. Neither the Seller nor any of its Subsidiaries has received any written complaint, claim or notice alleging any such infringement, violation or misappropriation. Section 3.10 AGREEMENTS, CONTRACTS AND COMMITMENTS. (a) There are no contracts or agreements that are material contracts (as defined in Item 601(b)(10) of Regulation S-K) with respect to Seller and its Subsidiaries ("Seller Material Contracts"), other than those Seller Material Contracts identified on the exhibit indices of the Seller's most recent annual report on Form 10- K and the Seller SEC Reports filed thereafter and prior to the date of this Agreement. Each Seller Material Contract has not expired by its terms and is in full force and effect against the Seller and, to the knowledge of the Seller, against the other party or parties thereto. Neither Seller nor any of its Subsidiaries is in violation of or in default under (nor does there exist any condition which, upon the passage of time or the giving of notice or both, would cause such a violation of or default under) any lease, permit, concession, franchise, license or other contract or agreement to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that, individually or in the aggregate, have not resulted in and are not reasonably likely to result in a Seller Material Adverse Effect. (b) Section 3.10 of the Seller Disclosure Schedule sets forth a complete list of each lease, permit, concession, franchise, license or other contract or agreement to which Seller or any of its Subsidiaries is a party or bound (i) with any Affiliate of Seller (other than any Subsidiary which is a direct or indirect wholly owned subsidiary of Seller), other than any agreements which are or have been fully performed and under which neither Seller nor any Subsidiary of Seller has any continuing rights, liability or obligation, or (ii) that includes any non-competition or similar provision imposing any restrictions or undertakings on Seller or any Subsidiary of Seller, other than any agreements under which neither Seller nor any Subsidiary of Seller has any continuing rights, liability or obligation or is subject to any restriction or undertaking. Copies of all the agreements, contracts and arrangements set forth in Section 3.10 of the Seller Disclosure Schedule have heretofore been furnished to Buyer and such copies are accurate and complete. Section 3.11 LITIGATION. Except as described in the Seller SEC Reports filed prior to the date hereof, there is no action, suit or proceeding, claim, arbitration or, to the knowledge of Seller, investigation, against Seller or any of its Subsidiaries pending or as to which Seller or any of its Subsidiaries has received any written notice of assertion, which, if determined adversely, individually or in the aggregate, is reasonably likely to have a Seller Material Adverse Effect. -17- 25 Section 3.12 ENVIRONMENTAL MATTERS. (a) Except as disclosed in the Seller SEC Reports filed prior to the date hereof and except for such matters that, individually or in the aggregate, are not reasonably likely to have a Seller Material Adverse Effect: (i) Seller and its Subsidiaries have complied with all applicable Environmental Laws (as defined in Section 3.12(b)); (ii) the properties currently owned or operated by Seller and its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) are not contaminated with any Hazardous Substances (as defined in Section 3.12(c)) caused by Seller or, to the knowledge of Seller, by any third party; (iii) the properties formerly owned or operated by Seller or any of its Subsidiaries were not during the period of ownership or operation by Seller or any of its Subsidiaries contaminated with Hazardous Substances by Seller or, to the knowledge of Seller, by any third party; (iv) neither Seller nor its Subsidiaries are subject to liability for any Hazardous Substance disposal or contamination by them or, to the knowledge of Seller, by any third party on the property of any third party; (v) neither Seller nor any of its Subsidiaries have released any Hazardous Substance to the environment in violation of any Environmental Law; (vi) neither Seller nor any of its Subsidiaries has received any written notice, demand, letter, claim or request for information alleging that Seller or any of its Subsidiaries may be in violation of, liable under or have reporting or other affirmative obligations relating to a specific incident or event under any Environmental Law; (vii) neither Seller nor any of its Subsidiaries is the subject of any order, decree, injunction or other arrangement with any Governmental Entity or is subject to any indemnity or other agreement with any third party, in either case relating to liability under any Environmental Law or relating to Hazardous Substances; and (viii) to Seller's knowledge, there are no circumstances or conditions involving Seller or any of its Subsidiaries that could reasonably be expected to result in any claims, liability, obligations, investigations, costs or restrictions on the ownership, use or transfer of any property of Seller or any of its Subsidiaries pursuant to any Environmental Law. (b) As used herein, the term "Environmental Law" means any federal, state, local or foreign law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, human health and safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property. (c) As used herein, the term "Hazardous Substance" means any substance that is: (A) listed, classified, regulated or which falls within the definition of a "hazardous substance" or "hazardous material" pursuant to any Environmental Law; -18- 26 (B) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (C) any other substance which is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law. Section 3.13 EMPLOYEE BENEFIT PLANS. (a) Seller has listed in Section 3.13 of the Seller Disclosure Schedule all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar employee benefit plans, and all unexpired severance agreements, written or otherwise, for the benefit of, or relating to, any current or former employee of Seller or any of its Subsidiaries or any trade or business (whether or not incorporated) which is or was ever a member of a controlled group of corporations or which is or was ever under common control with Seller (an "ERISA Affiliate") within the meaning of Section 414 of the Code, or any Subsidiary of Seller (together, the "Seller Employee Plans"). (b) With respect to each Seller Employee Plan, Seller has furnished to Buyer, a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii) such Seller Employee Plan, (iii) each trust agreement and group annuity contract, if any, relating to such Seller Employee Plan and (iv) all reports, if any, regarding the satisfaction of the nondiscrimination requirements of Sections 410(b), 401(k) and 401(m) of the Code for the last three plan years. (c) With respect to the Seller Employee Plans, no event has occurred, and to the knowledge of Seller, there exists no condition or set of circumstances in connection with which Seller or any of its Subsidiaries could be subject to any liability that is reasonably likely, individually or in the aggregate, to have a Seller Material Adverse Effect under ERISA, the Code or any other applicable law. (d) With respect to the Seller Employee Plans, there are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with generally accepted accounting principles, on the financial statements of Seller, which obligations are reasonably likely, individually or in the aggregate, to have a Seller Material Adverse Effect. (e) Neither Seller, any Subsidiary of the Seller nor any ERISA Affiliate has (i) ever maintained a Seller Employee Benefit Plan which was ever subject to Title IV of -19- 27 ERISA or Section 412 of the Code or (ii) ever been obligated to contribute to a multiemployer plan (as defined in Section 4001(a)(3) of ERISA. (f) Except as disclosed in Seller SEC Reports filed prior to the date of this Agreement, and except as provided for in this Agreement, neither Seller nor any of its Subsidiaries is a party to any oral or written (i) agreement with any employee of Seller or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving Seller of the nature contemplated by this Agreement, (ii) agreement with any employee of Seller or any of its Subsidiaries providing any term of employment or compensation guarantee extending for a period longer than one year from the date hereof or for the payment of compensation in excess of $100,000 per annum, or (iii) agreement or plan, including any stock option plan, stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Section 3.14 COMPLIANCE WITH LAWS. Seller and each of its Subsidiaries has complied with, is not in violation of, and has not received any written notice alleging any violation with respect to, any foreign, federal, state or local statute, law or regulation (other than Environmental Laws) with respect to the conduct of its business, or the ownership or operation of its properties or assets, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Seller Material Adverse Effect. Section 3.15 PERMITS. Seller and each of its Subsidiaries have all permits, licenses and franchises from Governmental Entities required to conduct their businesses as now being conducted (the "Seller Permits"), except for such permits, licenses and franchises the absence of which, individually or in the aggregate, have not resulted in, and are not reasonably likely to result in, a Seller Material Adverse Effect. Seller and its Subsidiaries are in compliance with the terms of the Seller Permits, except where the failure to so comply, individually or in the aggregate, is not reasonably likely to have a Seller Material Adverse Effect. Section 3.16 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information to be supplied by Seller for inclusion in the registration statement on Form S-4 pursuant to which shares of Buyer Common Stock issued in the Merger will be registered under the Securities Act (the "Registration Statement"), shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the -20- 28 Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information to be supplied by Seller for inclusion in the proxy statement/prospectus (the "Proxy Statement") to be sent to the stockholders of Seller in connection with the meeting of Seller's stockholders to consider this Agreement and the Merger (the "Seller Meeting") shall not, on the date the Proxy Statement is first mailed to stockholders of Seller, at the time of the Seller Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Proxy Statement not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Seller Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Seller or any of its Affiliates, officers or directors should be discovered by Seller which should be set forth in an amendment to the Registration Statement or a supplement to the Proxy Statement, Seller shall promptly inform Buyer. Section 3.17 LABOR MATTERS. Neither Seller nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization. Neither Seller nor any of its Subsidiaries is the subject of any proceeding to which Seller or any Subsidiary has received written notice or is otherwise aware asserting that Seller or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization that, individually or in the aggregate, is reasonably likely to have a Seller Material Adverse Effect, nor is there pending or, to the knowledge of Seller, threatened, any labor strike, dispute, walkout, work stoppage or lockout involving Seller or any of its Subsidiaries that, individually or in the aggregate, is reasonably likely to have a Seller Material Adverse Effect. Section 3.18 INSURANCE. Section 3.18 of the Disclosure Schedule sets forth a list (including the name of the insurer, the name of the policyholder, the name of each insured, the periods of coverage and the scope of coverage) of all policies of fire, theft, casualty, liability, burglary, fidelity, workers compensation, business interruption, environmental, product liability, fidelity, workers compensation, product warranty, automobile and other forms of insurance of Seller and any of its Subsidiaries. Section 3.19 GOVERNMENT CONTRACTS. Neither Seller nor any of its Subsidiaries is or has been suspended or debarred (within the meaning of 48 C.F.R. Ch. 1, Section 52 or any similar foreign law, statute or regulation) from bidding on contracts or subcontracts with any Governmental Entity; to the knowledge of Seller, no such -21- 29 suspension or debarment has been initiated or threatened; and the consummation of the transactions contemplated by this Agreement will not result in any such suspension or debarment that, individually or in the aggregate, is reasonably likely to have a Seller Material Adverse Effect (other than primarily by reason of the identity of Buyer). Neither Seller nor any of its Subsidiaries has since January 1, 1993 been audited or investigated or is now being audited or, to Seller's knowledge, investigated by the U.S. Government Accounting Office, the U.S. Department of Defense or any of its agencies, the Defense Contract Audit Agency, the U.S. Department of Justice, the Inspector General of any U.S. Governmental Entity, any similar agencies or instrumentalities of any foreign Governmental Entity, or any prime contractor with a Governmental Entity nor, to Seller's knowledge, has any such audit or investigation been threatened that is reasonably likely, individually or in the aggregate, to have a Seller Material Adverse Effect. To Seller's knowledge, there is no valid basis for (a) the suspension or debarment of Seller or any of its Subsidiaries from bidding on contracts or subcontracts with any Governmental Entity or (b) any claim pursuant to an audit or investigation by any of the entities named in the foregoing sentence that is reasonably likely, individually or in the aggregate, to have a Seller Material Adverse Effect. Neither Seller nor any of its Subsidiaries has any agreements, contracts or commitments which require it to obtain or maintain a security clearance with any Governmental Entity. Section 3.20 YEAR 2000. Section 3.20 of the Seller Disclosure Schedule identifies each "year 2000" audit, report or investigation that has been performed by or on behalf of Seller or any of its Subsidiaries with respect to its business and operations. Except as set forth in such audits, reports and investigations, Seller is not aware of any failure of Seller's or any Subsidiary's computer hardware or software systems to be Year 2000 Compliant, which failure, individually or in the aggregate, is reasonably likely to have a Seller Material Adverse Effect. For purposes of this Agreement, "Year 2000 Compliant" means, with respect to each system referred to in the prior sentence that is intended to perform date-related functions, that such system, when used properly in accordance with its documentation, is capable of correctly receiving, processing and providing date data on and between December 31, 1999 and January 1, 2000; provided that all applications, hardware and other systems used in conjunction with such system correctly exchange date data with or provide data to such system. Section 3.21 CASH BALANCE. As of September 30, 1999, Seller and its Subsidiaries had a consolidated balance of cash, cash equivalents and marketable securities of not less than $20,500,000. Section 3.22 SUPPLIERS. No material supplier of Seller or any of its Subsidiaries has indicated to Seller or any of its Subsidiaries in writing or, to the Seller's knowledge, orally that it will stop, or decrease the rate of, supplying materials, products or services -22- 30 to them, which cessation or decrease is reasonably likely, individually or in the aggregate, to have a Seller Material Adverse Effect. Section 3.23 OPINION OF FINANCIAL ADVISOR. The financial advisor of Seller, Needham & Company, Inc., has delivered to Seller an opinion dated on or about the date of this Agreement to the effect, as of such date, that the Exchange Ratio is fair to the holders of Seller Common Stock from a financial point of view. Section 3.24 SECTION 203 OF THE DGCL NOT APPLICABLE. The Board of Directors of Seller has taken all actions so that the restrictions contained in Section 203 of the DGCL applicable to a "business combination" (as defined in Section 203) will not apply to the execution, delivery or performance of this Agreement, the Seller Stock Option Agreement, the Stockholders Agreements or the consummation of the Merger or the other transactions contemplated by this Agreement. Section 3.25 RIGHTS AGREEMENT. Immediately prior to the execution of this Agreement, Seller has (a) duly entered into an appropriate amendment to the Seller Rights Plan, which amendment has been provided to Buyer, and approved by the Board of Directors of Seller and (b) taken all other action necessary or appropriate so that (A) the entering into of this Agreement and the Seller Stock Option Agreement by the Seller and the entering into of the Stockholder Agreements by the Stockholders of the Seller specified in Section 6.05(b) of this Agreement does not and will not result in the ability of any person to exercise any Seller Rights under the Seller Rights Plan or enable or require the Seller Rights issued thereunder to separate from the shares of Seller Common Stock to which they are attached or to be triggered or become exercisable and (B) the Final Expiration Date (as defined in the Seller Rights Plan) will occur immediately prior to the Effective Time. Section 3.26 HOLOGIC LICENSE. Prior to or concurrently with the execution of this Agreement, Seller has duly entered into a Termination Agreement with respect to the License and Technology Agreement between Seller and Hologic, Inc. (the "Hologic License"), a copy of which is attached as EXHIBIT C hereto, and such Termination Agreement has been duly executed by Hologic, Inc. and is in full force and effect. Section 3.27 GILARDONI DISPUTE. The description of the current dispute between the Seller and Gilardoni SpA set forth in Section 3.27 of the Seller Disclosure Schedule is accurate and complete in all material respects. -23- 31 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB Buyer and Sub represent and warrant to Seller that the statements contained in this Article IV are true and correct, except as set forth herein or in the disclosure schedule delivered by Buyer to Seller on or before the date of this Agreement (the "Buyer Disclosure Schedule"). The Buyer Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article IV and the disclosure in any paragraph shall qualify other paragraphs in this Article IV only to the extent that it is reasonably apparent from a reading of such document that it also qualifies or applies to such other paragraphs. Section 4.01 ORGANIZATION OF BUYER AND SUB. Each of Buyer and Sub and Buyer's other Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has all requisite corporate power to own, lease and operate its property and to carry on its business as now being conducted, and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would be reasonably likely to have a material adverse effect on the business, properties, financial condition, results of operations or prospects of Buyer and its Subsidiaries, taken as a whole, or to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement (a "Buyer Material Adverse Effect"); provided however that (i) any adverse change, event or effect that is demonstrated to be primarily caused by conditions affecting the United States economy generally or the economy of any nation or region in which Buyer or any of its Subsidiaries conducts business that is material to the business of Buyer and its Subsidiaries, taken as a whole, shall not be taken into account in determining whether there has been or would be a "Buyer Material Adverse Effect," (ii) any adverse change, event or effect that is demonstrated to be primarily caused by conditions generally affecting any of the life sciences, aerospace, health care, advanced lighting systems or analytical instruments industries shall not be taken into account in determining whether there has been or would be reasonably likely to be a "Buyer Material Adverse Effect", and (iii) any adverse change, event or effect that is demonstrated to be primarily caused by the announcement or pendency of the Merger shall not be taken into account in determining whether there has been or would be reasonably likely to be a "Buyer Material Adverse Effect." -24- 32 Section 4.02 CAPITAL STRUCTURE. (a) As of the date of this Agreement, the authorized capital stock of Buyer consists of (i) 100,000,000 shares of Common Stock, $1.00 par value ("Buyer Common Stock") and (ii) 1,000,000 shares of Preferred Stock, $1.00 par value ("Buyer Preferred Stock"), of which 70,000 shares are designated Series C Junior Participating Preferred Stock. As of September 29, 1999, there were issued and outstanding 46,006,748 shares of Buyer Common Stock and no shares of Buyer Preferred Stock. The Buyer Disclosure Schedule shows the number of shares of Buyer Common Stock reserved for future issuance pursuant to stock options granted and outstanding as of September 29, 1999, and the plans under which such options were granted (collectively, the "Buyer Stock Plans"). No material change in such capitalization has occurred between September 29, 1999 and the date of this Agreement. All shares of Buyer Common Stock subject to issuance as specified above are duly authorized and, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be validly issued, fully paid and nonassessable. (b) The authorized capital stock of Sub consists of 1,000 shares of common stock, $.01 par value, all of which shares are issued and outstanding and are held beneficially and of record by Buyer. Such shares were validly issued and are fully paid and nonassessable. Section 4.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Each of Buyer and Sub has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of each of Buyer and Sub (including the approval of the Merger by Buyer as the sole stockholder of Sub). This Agreement and has been duly executed and delivered by each of Buyer and Sub and constitutes the valid and binding obligation of each of Buyer and Sub, enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception. (b) The execution and delivery of this Agreement by each of Buyer and Sub does not, and the consummation of the transactions contemplated by this Agreement will not, (i) conflict with, or result in any violation or breach of, any provision of the Articles of Organization or Bylaws of Buyer or the Certificate of Incorporation or Bylaws of Sub, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, or -25- 33 require a consent or waiver under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which Buyer or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) except as provided in clauses (i), (ii), (iii), (iv) and (v) in paragraph (c) below, conflict with or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Buyer or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such conflicts, violations, defaults, terminations, cancellations or accelerations which are not, individually or in the aggregate, reasonably likely to have a Buyer Material Adverse Effect. (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Buyer or any of its Subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) the filing of the pre-merger notification report under the HSR Act, (ii) the filing of the Registration Statement with the SEC in accordance with the Securities Act, (iii) the filing of the Certificate of Merger with the Delaware Secretary of State, (iv) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable state securities laws and the laws of any foreign country, (v) the approval by the NYSE of the listing of the shares of Buyer Common Stock to be issued in the transactions contemplated by this Agreement, and (vi) such other consents, authorizations, filings, approvals and registrations which, if not obtained or made, would not be reasonably likely to have a Buyer Material Adverse Effect. Section 4.04 SEC FILINGS; FINANCIAL STATEMENTS. (a) Buyer has filed all forms, reports and documents required to be filed by Buyer with the SEC since January 1, 1996. All such required forms, reports and documents (including those that Buyer may file after the date hereof until the Closing) are referred to herein as the "Buyer SEC Reports." The Buyer SEC Reports (i) were prepared in compliance in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Buyer SEC Reports, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated in such Buyer SEC Reports or necessary in order to make the statements in such Buyer SEC Reports, in the light of the circumstances under which they were made, not misleading. None of Buyer's Subsidiaries is required to file any forms, reports or other documents with the SEC. -26- 34 (b) Each of the consolidated financial statements (including, in each case, any related notes or schedules) contained in the Buyer SEC Reports,(i) complied as to form in all material respects with the applicable published rules and regulations of the SEC with respect thereto, (ii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements or, in the case of unaudited statements, as permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented in all material respects the consolidated financial position of Buyer and its Subsidiaries as of the dates and the consolidated results of its operations and cash flows for the periods indicated, consistent in all material respects with the books and records of Seller and its Subsidiaries, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. Section 4.05 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information in the Registration Statement (except for information supplied by Seller for inclusion in the Registration Statement, as to which Buyer makes no representation and which shall not constitute part of a Buyer SEC Report for purposes of this Agreement) shall not at the time the Registration Statement is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated in the Registration Statement or necessary in order to make the statements in the Registration Statement, in light of the circumstances under which they were made, not misleading. The information (except for information to be supplied by Seller for inclusion in the Proxy Statement, as to which Buyer makes no representation) in the Proxy Statement shall not, on the date the Proxy Statement is first mailed to stockholders of Seller, at the time of the Seller Meeting and at the Effective Time, contain any statement which, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Proxy Statement not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Seller Meeting which has become false or misleading. If at any time prior to the Effective Time any event relating to Buyer or any of its Affiliates, officers or directors should be discovered by Buyer which should be set forth in an amendment to the Registration Statement or a supplement to the Proxy Statement, Buyer shall promptly inform Seller. Section 4.06 OPERATIONS OF SUB. Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement. -27- 35 Section 4.07 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Buyer SEC Reports filed prior to the date hereof, and except for normal or recurring liabilities incurred since June 30, 1999 in the ordinary course of business consistent with past practices, as of the date of this Agreement Buyer and its Subsidiaries do not have any liabilities, either accrued, contingent or otherwise (whether or not required to be reflected in financial statements in accordance with generally accepted accounting principles), and whether due or to become due, which individually or in the aggregate are reasonably likely to have a Buyer Material Adverse Effect. Section 4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as expressly contemplated by this Agreement or as disclosed in the Buyer SEC Reports filed prior to the date hereof, since June 30, 1999, there has not been any change in the financial condition, results of operations, business, properties or prospects of Buyer and its Subsidiaries, taken as a whole, that has had, or is reasonably likely to have, a Buyer Material Adverse Effect. ARTICLE V CONDUCT OF BUSINESS Section 5.01 COVENANTS OF SELLER. Except as expressly contemplated hereby, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Seller agrees as to itself and its Subsidiaries (except to the extent that Buyer shall otherwise consent in writing), to carry on its business in the ordinary course in substantially the same manner as previously conducted, to pay its debts and Taxes and perform other obligations when due in the ordinary course in substantially the same manner as previously conducted, subject to good faith disputes over such debts, Taxes or obligations, and, to the extent consistent with such business, use commercially reasonable efforts consistent in all material respects with past practices and policies to preserve intact its present business organization, keep available the services of its present officers and key employees and to preserve its relationships with customers, suppliers, distributors, and others having business dealings with it. Except as expressly contemplated by this Agreement or set forth in the Seller Disclosure Schedule, Seller shall not (and shall not permit any of its Subsidiaries to), without the written consent of Buyer: (a) Accelerate, amend or change the period of exercisability of any Seller Warrant or any outstanding option or restricted stock granted under any Seller Stock Plan or any other employee stock plan of Seller or authorize cash payments in exchange for any Seller Warrant or any option granted under any of such plans except as -28- 36 required by the terms of such plans or any related agreements in effect as of the date of this Agreement; (b) Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or purchase or otherwise acquire, directly or indirectly, any shares of its capital stock; (c) Issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock or securities convertible into shares of its capital stock, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities, other than the issuance of shares of Seller Common Stock pursuant to the exercise of the Seller Warrants or options outstanding on the date of this Agreement under the Seller Stock Plans; (d) Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial equity interest in or substantial portion of the assets of, or by any other manner, any business or any corporation, partnership or other business organization or division, or otherwise acquire or agree to acquire any assets (other than inventory, supplies and other items, in each case, in the ordinary course of business consistent in all material respects with past practice); (e) Sell, lease, license or otherwise dispose of any of its properties or assets, except for sales of inventory or products, in each case, in the ordinary course of business consistent in all material respects with past practice; (f) (i) Increase or agree to increase the compensation payable or to become payable to its officers or employees, other than for normal scheduled bonuses set forth in Section 5.01(f) of the Seller Disclosure Schedule (it being understood that the Seller's normal scheduled salary increase for January 1, 2000 shall be subject to the Buyer's prior written approval), (ii) grant any severance or termination pay to, or enter into any employment or severance agreements with, any employees or officers, (iii) enter into any collective bargaining agreement, (iv) establish, adopt, enter into or amend (except as may be required by law) any bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination or severance or other plan, trust, fund, policy or arrangement for the benefit of any directors, officers or employees or (v) forgive any indebtedness of any employee to the Seller or any of its Subsidiaries; -29- 37 (g) Amend or propose to amend its charter or bylaws, except as contemplated by this Agreement; (h) Incur any indebtedness for borrowed money, make any loans to any person or entity or guarantee any debt securities of others (other than as a result of the endorsement of checks for collection and for advances for employee reimbursable expenses, in each case in the ordinary course of business consistent in all material respects with past practice); (i) Initiate, compromise, or settle any material litigation or arbitration proceeding; (j) Modify, amend or terminate any contract that is material to Seller and its Subsidiaries, taken as a whole (other than any immaterial modification or amendment to a purchase order in the ordinary course of business consistent with past practice), or waive, release or assign any material rights or claims, including any write-off or other compromise of any material accounts receivable of Seller or any of its Subsidiaries; (k) Make or rescind any Tax election, settle or compromise any Tax liability or amend any Tax return; (l) Change its methods of accounting as in effect at June 30, 1999 except as required by generally accepted accounting principles; (m) Make or commit to make any capital expenditures that exceed the capital budget furnished by Seller to Buyer; (n) Enter into any new license for any material intellectual property rights to or from any third party; (o) Revalue any of the significant assets of the Seller or any of its Subsidiaries, including the writing down of inventory other than in the ordinary course of business consistent in all material respects with past practice; (p) Close any facility or office; (q) Invest funds in debt securities or other instruments maturing more than 90 days after the date of investment except as set forth in Section 5.01(q) of the Seller Disclosure Schedule; -30- 38 (r) Adopt or implement any stockholder rights plan that could have the effect of impeding or restricting the consummation of the transactions contemplated hereby or modify, amend or terminate the Seller Rights Plan; (s) Fail to pay accounts payable and other obligations in the ordinary course of business in a manner consistent in all material respects with past practice or accelerate the payment of any accounts receivable other than in the ordinary course of business in a manner consistent in all material respects with past practice; (t) Modify, amend or terminate the Hologic License; or (u) Take, or agree in writing or otherwise to take, any of the actions described in paragraphs (a) through (t) above. Section 5.02 COOPERATION. Subject to compliance with applicable law, from the date hereof until the Effective Time, Seller and each of its Subsidiaries shall make its officers available to confer on a regular and frequent basis with one or more representatives of the Buyer at reasonable times and upon reasonable advance notice to report on the general status of ongoing operations and shall promptly provide Buyer or its counsel with copies of all filings made by such party with any Governmental Entity in connection with this Agreement, the Merger and the transactions contemplated hereby and thereby. Section 5.03 CONFIDENTIALITY. The parties acknowledge that Buyer and Seller have previously executed a Confidentiality Agreement, dated as of April 28, 1999 (the "Confidentiality Agreement"), which Confidentiality Agreement will continue in full force and effect in accordance with its terms, except as expressly modified herein. ARTICLE VI ADDITIONAL AGREEMENTS Section 6.01 NO SOLICITATION. (a) From and after the date of this Agreement until the earlier of the Effective Time or termination of this Agreement pursuant to its terms, Seller and its Subsidiaries shall not, directly or indirectly, through any officer, director, employee, financial advisor, representative or agent (i) solicit, initiate, or encourage any inquiries or proposals that constitute, or could reasonably be expected to lead to, a proposal or offer for a merger, consolidation, business combination, tender offer, sale of -31- 39 substantial assets, sale of shares of capital stock (excluding sales pursuant to existing Seller Stock Plans or pursuant to the Seller Warrants) or similar transaction involving Seller or any of its Subsidiaries, other than the transactions contemplated by this Agreement (any of the foregoing inquiries or proposals being referred to in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or discussions concerning, or provide any non-public information to any person or entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any Acquisition Proposal; PROVIDED, HOWEVER, that, if Seller has not breached this Section 6.01, nothing contained in this Agreement shall prevent Seller or its Board of Directors, from: (A) furnishing non-public information to, or entering into discussions or negotiations with, any person or entity in connection with an unsolicited bona fide written Acquisition Proposal by such person or entity or agreeing to (with the terms of any such agreement being subject to termination of this Agreement in accordance with Article VIII) or recommending an unsolicited bona fide written Acquisition Proposal to the stockholders of Seller, if and only to the extent that (1) the Board of Directors of Seller believes in good faith (after consultation with its financial advisor) that such Acquisition Proposal is reasonably capable of being completed on the terms proposed and would, if consummated, result in a transaction more favorable than the transaction contemplated by this Agreement (any such more favorable Acquisition Proposal being referred to in this Agreement as a "Superior Proposal") and Seller's Board of Directors determines in good faith after consultation with outside legal counsel that such action is necessary for such Board of Directors to comply with its fiduciary duties to stockholders under applicable law, (2) prior to furnishing such non-public information to, or entering into discussions or negotiations with, such person or entity, such Board of Directors receives from such person or entity an executed confidentiality agreement with terms no more favorable to such party than those contained in the Confidentiality Agreement, and (3) prior to recommending a Superior Proposal, Seller shall provide Buyer with at least five business days' prior notice of its proposal to do so, during which time Buyer may make, and in such event Seller shall consider, a counterproposal to such Superior Proposal, and, subject to the fiduciary duties of Seller's Board of Directors, Seller shall itself and shall cause its financial and legal advisors to negotiate on its behalf with Buyer with respect to the terms and conditions of such counterproposal for a reasonable period of time given the terms and conditions of such counterproposal and such Superior Proposal; or -32- 40 (B) complying with Rule 14d-9 and 14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal. (b) Seller will immediately cease any and all existing activities, discussions or negotiations with any parties conducted heretofore of the nature described in Section 6.01(a) and will use commercially reasonable efforts to obtain the return of any confidential information furnished to any such parties. (c) Seller shall notify Buyer promptly, but in any event no more than 24 hours, after receipt by Seller (or its advisors) of any Acquisition Proposal or any request for non-public information in connection with an Acquisition Proposal or for access to the properties, books or records of Seller by any person or entity that informs Seller that it is considering making, or has made, an Acquisition Proposal. Such notice shall be made in writing and shall indicate in reasonable detail the identity of the offeror and the terms and conditions of such proposal, inquiry or contact. Seller shall continue to keep Buyer informed, on a current basis, of all material developments with respect to the status of any such discussions or negotiations and the terms being discussed or negotiated. (d) Nothing in this Section 6.01 shall (i) permit Seller to terminate this Agreement (except as specifically provided in Section 8.01 hereof), (ii) permit Seller to enter into any agreement with respect to an Acquisition Proposal during the term of this Agreement (it being agreed that during the term of this Agreement, Seller shall not enter into any agreement with any person that provides for, or in any way facilitates, an Acquisition Proposal (other than a confidentiality agreement of the type referred to in Section 6.01(a) above)) or (iii) affect any other obligation of Seller under this Agreement. Section 6.02 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. (a) As promptly as practical after the execution of this Agreement, Buyer and Seller shall prepare and Seller shall file with the SEC the Proxy Statement, and Buyer shall prepare and file with the SEC the Registration Statement, in which the Proxy Statement will be included as a prospectus, provided that Buyer may delay the filing of the Registration Statement until approval of the Proxy Statement by the SEC. Buyer and Seller shall use all reasonable efforts to cause the Registration Statement to become effective as soon after such filing as practicable. Each of Buyer and Seller will promptly respond to any comments of the SEC and will use its respective commercially reasonable efforts to have the Proxy Statement cleared by the SEC and the Registration Statement declared effective under the Securities Act as promptly as practicable after such filings and Seller will cause the Proxy Statement and the prospectus contained -33- 41 within the Registration Statement to be mailed to its stockholders at the earliest practicable time after both the Proxy Statement is cleared by the SEC and the Registration Statement is declared effective under the Securities Act. Each of Buyer and Seller will notify the other promptly upon the receipt of any comments from the SEC or its staff or any other government officials and of any request by the SEC or its staff or any other government officials for amendments or supplements to the Registration Statement, the Proxy Statement or any filing pursuant to Section 6.02(b) or for additional information and will supply the other with copies of all correspondence between such party or any of its representatives, on the one hand, and the SEC, or its staff or any other government officials, on the other hand, with respect to the Registration Statement, the Proxy Statement, the Merger or any filing pursuant to Section 6.02(b). Each of Buyer and Seller will cause all documents that it is responsible for filing with the SEC or other regulatory authorities under this Section 6.02 to comply in all material respects with all applicable requirements of law and the rules and regulations promulgated thereunder. Whenever any event occurs which is required to be set forth in an amendment or supplement to the Proxy Statement, the Registration Statement or any filing pursuant to Section 6.02(b), Buyer or Seller, as the case may be, will promptly inform the other of such occurrence and cooperate in filing with the SEC or its staff or any other government officials, and/or mailing to stockholders of Seller, such amendment or supplement. (b) Buyer and Seller shall make all necessary filings with respect to the Merger under the Securities Act, the Exchange Act, applicable state blue sky laws and the rules and regulations thereunder. Section 6.03 NASDAQ QUOTATION. Seller agrees to continue the quotation of Seller Common Stock on the Nasdaq National Market during the term of this Agreement. Section 6.04 ACCESS TO INFORMATION. Upon reasonable notice, Seller shall (and shall cause each of its Subsidiaries to) afford to Buyer's officers, employees, accountants, counsel and other representatives, reasonable access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records and, during such period, Seller shall (and shall cause each of its Subsidiaries to) furnish promptly to Buyer (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws and (b) all other information concerning its business, properties and personnel as Buyer may reasonably request. Unless otherwise required by law, Buyer will and shall cause its officers, employees, accountants, counsel and other representatives or persons who have access to such information to hold any such information which is non-public in confidence in accordance with the Confidentiality Agreement. No information or knowledge -34- 42 obtained in any investigation pursuant to this Section 6.04 or otherwise shall affect or be deemed to modify any representation or warranty contained in this Agreement or the conditions to the obligations of the parties to consummate the Merger. Section 6.05 STOCKHOLDERS MEETING. (a) The Seller, acting through its Board of Directors, shall, subject to and in accordance with applicable law and its Certificate of Incorporation and Bylaws, promptly and duly call, give notice of, convene and hold as soon as practicable following the date on which the Registration Statement becomes effective the Seller Meeting for the purpose of voting to approve and adopt this Agreement and the Merger (the "Seller Voting Proposal"). The Board of Directors of the Seller shall (i) recommend approval and adoption of the Seller Voting Proposal by the stockholders of the Seller and include in the Proxy Statement such recommendation and (ii) take all reasonable and lawful action to solicit and obtain such approval; provided, however, that in the context of an Acquisition Proposal the Board of Directors of Seller may withdraw or modify such recommendation if (but only if) (i) the Board of Directors of Seller has received a Superior Proposal, (ii) such Board of Directors upon advice of its outside legal counsel determines that it is required, in order to comply with its fiduciary duties under applicable law, to recommend such Superior Proposal to the stockholders of Seller and (iii) Seller has complied with the provisions of Section 6.01. (b) S. David Ellenbogen, Ellenbogen Family Irrevocable Trust of 1996, S. David Ellenbogen 1996 Retained Annuity Trust, Jay A. Stein and Jay A. Stein 1996 Retained Annuity Trust have each executed and delivered a Stockholder Agreement to Buyer and Sub concurrently with the signing of this Agreement. Section 6.06 LEGAL CONDITIONS TO MERGER. (a) Subject to the terms hereof, Seller and Buyer shall use their respective commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary and proper under applicable law to consummate and make effective the transactions contemplated hereby as promptly as practicable, (ii) obtain from any Governmental Entity or any other third party any consents, licenses, permits, waivers, approvals, authorizations, or orders required to be obtained or made by Seller or Buyer or any of their Subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby including, without limitation, the Merger, (iii) as promptly as practicable, make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement and the Merger required under (A) the Securities Act and the Exchange Act, and any other applicable federal or state -35- 43 securities laws, (B) the HSR Act and any related governmental request thereunder, and (C) any other applicable law and (iv) execute or deliver any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. Seller and Buyer shall cooperate with each other in connection with the making of all such filings, including providing or making available copies of all such documents to the non-filing party and its advisors (or, in connection with information relating to filings under the HSR Act, to the advisors of the non-filing party) prior to filing and, if requested, consider in good faith all reasonable additions, deletions or changes suggested in connection therewith. Seller and Buyer shall use their respective commercially reasonable efforts to furnish to each other all information required for any application or other filing to be made by the other party pursuant to the rules and regulations of any applicable law (including all information required to be included in the Proxy Statement and the Registration Statement) in connection with the transactions contemplated by this Agreement. (b) Subject to the terms hereof, Buyer and Seller agree, and shall cause each of their respective Subsidiaries, to cooperate and to use their respective commercially reasonable efforts to obtain any government clearances or approvals required for Closing under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other federal, state or foreign law or, regulation or decree designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade (collectively "Antitrust Laws"). From and after the occurrence of a Second Request (as defined below), Seller shall, at Buyer's request and subject to Buyer's obligation to bear expenses as set forth below, cooperate in all reasonable respects with Buyer to respond to any government requests for information under any Antitrust Law, and to contest and resist any action, including any legislative, administrative or judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order (whether temporary, preliminary or permanent) (an "Order") that restricts, prevents or prohibits the consummation of the Merger or any other transactions contemplated by this Agreement under any Antitrust Law. The parties hereto will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to any Antitrust Law. Buyer shall be entitled to direct any proceedings or negotiations with any Governmental Entity relating to any of the foregoing, provided that it shall afford Seller a reasonable opportunity to participate therein and shall consider in good faith any proposals made by Seller in connection therewith. The Buyer shall have the right, directly and/or through its counsel, to assume full control over coordinating the response to any formal request for additional information or documentary material made by the Federal Trade -36- 44 Commission or the Antitrust Division of the U.S. Department of Justice pursuant to 16 C.F.R. 803.20 under the HSR Act ("Second Request") and for developing and implementing any strategies to resolve any governmental concerns; provided, however that, subject to the expense reimbursement provisions set forth in the following sentence, Seller shall make, on its own behalf, any submissions required to be made by Seller in connection with any such Second Request. In the event that Buyer so elects to assume the control over the response to such request, (i) Buyer shall bear all expenses relating to such response and (ii) Buyer shall keep Seller informed, on a current basis, of all material developments with respect to the status of such request at the request of Seller. Notwithstanding anything to the contrary in this Section 6.06, neither Buyer nor any of its Subsidiaries shall be required to (i) divest any of their respective businesses, product lines or assets, or to take or agree to take any other action or agree to any limitation, that could reasonably be expected to have a Buyer Material Adverse Effect or a material adverse effect on Buyer, combined with Seller, after the Effective Time or (ii) take any action under this Section 6.06 if the United States Department of Justice or the United States Federal Trade Commission authorizes its staff to seek a preliminary injunction or restraining order to enjoin consummation of the Merger. (c) Each of Seller and Buyer shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, their commercially reasonable efforts to obtain any third party consents related to or required in connection with the Merger that are (A) necessary to consummate the transactions contemplated hereby, (B) disclosed or required to be disclosed in the Seller Disclosure Schedule or the Buyer Disclosure Schedule, as the case may be, or (C) required to prevent a Seller Material Adverse Effect or a Buyer Material Adverse Effect from occurring prior to or after the Effective Time. Section 6.07 PUBLIC DISCLOSURE. Buyer and Seller shall use commercially reasonable efforts to consult with each other before issuing any press release or otherwise making any public statement with respect to the Merger or this Agreement and shall not issue any such press release or make any such public statement prior to using such efforts, except as may be required by law. The initial press release relating to this Agreement shall be in a form that was heretofore agreed by the parties. Section 6.08 TAX-FREE REORGANIZATION. Buyer and Seller shall each use its best efforts to cause the Merger to be treated as a reorganization within the meaning of Section 368(a) of the Code. The parties hereto hereby adopt this Agreement as a plan of reorganization. Section 6.09 AFFILIATE AGREEMENTS. Upon the execution of this Agreement, Seller will provide Buyer with a list of those persons who are, in Seller's reasonable judgment, -37- 45 "affiliates" of Seller, within the meaning of Rule 145 (each such person who is an "affiliate" of Seller within the meaning of Rule 145 is referred to as an "Affiliate") promulgated under the Securities Act ("Rule 145"). Seller shall provide such information and documents as Buyer shall reasonably request for purposes of reviewing such list and shall notify Buyer in writing regarding any change in the identity of its Affiliates prior to the Closing Date. Seller shall use its commercially reasonable efforts to deliver or cause to be delivered to Buyer by October 15, 1999 (and in any case prior to the mailing of the Proxy Statement) from each of its Affiliates, an executed Affiliate Agreement, in substantially the form appended hereto as EXHIBIT D. Buyer shall be entitled to place appropriate legends on the certificates evidencing any Buyer Common Stock to be received by Rule 145 Affiliates of Seller pursuant to the terms of this Agreement, and to issue appropriate stop transfer instructions to the transfer agent for the Buyer Common Stock (provided that such legends or stop transfer instructions shall be removed, two years after the Effective Date, upon the request of any stockholder that is not then an Affiliate of Buyer). Section 6.10 NYSE LISTING. Buyer shall use best efforts to cause the shares of Buyer Common Stock to be issued in the Merger to be listed on the NYSE, subject to official notice of issuance, on or prior to the Closing Date. Section 6.11 SELLER STOCK PLANS AND SELLER WARRANTS. (a) At the Effective Time, each outstanding Seller Stock Option under the Seller Stock Plans, whether vested or unvested, shall be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Seller Stock Option, the same number of shares of Buyer Common Stock as the holder of such Seller Stock Option would have been entitled to receive pursuant to the Merger had such holder exercised such option in full immediately prior to the Effective Time (rounded downward to the nearest whole number), at a price per share (rounded upward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Seller Common Stock purchasable pursuant to such Seller Stock Option immediately prior to the Effective Time divided by (z) the number of full shares of Buyer Common Stock deemed purchasable pursuant to such Seller Stock Option in accordance with the foregoing. (b) As soon as practicable after the Effective Time, Buyer shall deliver to the participants in Seller Stock Plans appropriate notice setting forth such participants' rights pursuant thereto and the grants pursuant to Seller Stock Plans shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 6.11 after giving effect to the Merger). -38- 46 (c) Buyer shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Buyer Common Stock for delivery under the Seller Stock Plans assumed in accordance with this Section 6.11. As soon as practicable after the Effective Time, and in any event within 30 days thereafter, Buyer shall file one or more registration statements on Form S-8 (or any successor or other appropriate forms), or another appropriate form, with respect to the shares of Buyer Common Stock subject to such options and shall use its best efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding. (d) The Board of Directors of Seller shall have approved, prior to the date of this Agreement, and shall take, prior to or as of the Effective Time, all necessary actions, if any, pursuant to and in accordance with the terms of the Seller Stock Plans and the instruments evidencing the Seller Stock Options, to provide for the conversion of the Seller Stock Options into options to acquire Buyer Common Stock in accordance with this Section 6.11, and that no consent of the holders of the Seller Stock Options is required in connection with such conversion. (e) At the Effective Time, each outstanding Seller Warrant shall be deemed to constitute a warrant to acquire, on the same terms and conditions as were applicable under such Seller Warrant, the same number of shares of Buyer Common Stock as the holder of such Seller Warrant would have been entitled to receive pursuant to the Merger (including with respect to the treatment of fractional shares) had such holder exercised such warrant in full immediately prior to the Effective Time, at a price per share (rounded upward to the nearest whole cent) equal to (y) the aggregate exercise price for the shares of Seller Common Stock purchasable pursuant to such Seller Warrant immediately prior to the Effective Time divided by (z) the number of full shares of Buyer Common Stock deemed purchasable pursuant to such Seller Warrant in accordance with the foregoing. (f) The Board of Directors of Seller shall have approved, prior to the date of this Agreement, and shall take, prior to or as of the Effective Time, all necessary actions, pursuant to and in accordance with the terms of the Seller Warrants, to provide for the conversion of the Seller Warrants into warrants to acquire Buyer Common Stock in accordance with this Section 6.11, and that no consent of the holders of any Seller Warrant is required in connection with such conversion. Section 6.12 BROKERS OR FINDERS. Each of Buyer and Seller represents, as to itself, its Subsidiaries and its Affiliates, that no agent, broker, investment banker, financial advisor or other firm or person is or will be entitled to any broker's or finder's fee or -39- 47 any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, except Needham & Company, Inc., whose fees and expenses will be paid by Seller in accordance with Seller's agreement with such firm (a copy of which has been delivered by Seller to Buyer prior to the date of this Agreement). Section 6.12(A) EMPLOYMENT MATTERS. (a) For purposes of eligibility, vesting and, except with respect to any pension benefit plan or retiree medical plan, calculation of benefits (except to the extent crediting such service would result in the duplication of benefits) under each of Buyer's employee benefit plans, programs and arrangements in which an employee of Seller who is employed as of the Closing Date and who becomes an employee of Buyer or the Surviving Corporation immediately following the Closing (each a "Continuing Employee") participates, Buyer shall grant, or shall cause the Surviving Corporation to grant, each Continuing Employee with credit for all service with Seller to the extent permitted by law. Sub and Buyer will provide as of the Closing that Sub will become a participating employer in the 401(k) plan which Buyer sponsors for its employees and employees of participating subsidiaries. (b) Buyer shall provide, or shall cause the Surviving Corporation to provide, to each Continuing Employee (and each Continuing Employee's beneficiaries and dependents) immediate coverage under a health benefit plan maintained by the Surviving Corporation or Buyer. Buyer shall waive, or cause the Surviving Corporation to waive, any applicable preexisting condition exclusion (to the extent such exclusion did not apply to a preexisting condition under Seller's plan) under any such health benefit plan to the extent permitted by law. (c) It is expressly agreed that the provisions of this Section 6.12(A) are not intended to be for the benefit of or otherwise enforceable by any third person including, without limitation, any employee of Seller, or any collective bargaining unit or employee organization. (d) At least two business days prior to the Closing, the Board of Directors of Seller will vote to terminate its Section 401(k) plan (the "Plan"). After the Closing, Sub or Buyer will assume sole sponsorship of the Plan and will authorize the distribution of assets to participants in accordance with Plan provisions, ERISA and qualification requirements of the Code. Participants will be permitted to make direct rollovers of their Plan balances (including loans) to the 401(k) plan of Buyer in which they participate. However, no distribution of assets will occur, except with respect to employees who discontinue employment with Sub or Buyer, prior to the issuance by -40- 48 the Internal Revenue Service of a ruling that the distribution of assets from the terminated Plan is in accordance with Section 401(k)(10) of the Code, taking into account the fact that participants of the Plan will immediately be eligible for participation in a defined contribution plan of the Sub or Buyer. In the event that such a ruling is not obtained, Sub or Buyer will either (i) maintain the Plan on a "frozen" basis, or (ii) merge the Plan into a Code qualified employee retirement plan sponsored by Sub or Buyer. Section 6.13 INDEMNIFICATION. (a) From and after the Effective Time, Buyer agrees that it will, and will cause the Surviving Corporation to, jointly and severally with the Surviving Corporation, defend, indemnify and hold harmless each present and former director and officer of Seller (the "Indemnified Parties"), against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities or amounts paid in settlement incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time (including acts or omissions of any such director or officer occurring prior to the Effective Time), whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Seller would have been permitted under Delaware law and its Certificate of Incorporation or Bylaws in effect on the date hereof to indemnify an Indemnified Party (and, to the extent permitted in the Certificate of Incorporation or Bylaws of Seller in effect on the date hereof, Buyer and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided the Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification). (b) For a period of six years after the Effective Time, Buyer shall cause the Surviving Corporation to maintain (to the extent available in the market) in effect a directors' and officers' liability insurance policy covering those persons who are currently covered by Seller's directors' and officers' liability insurance policy (a copy of which has been heretofore delivered to Buyer) with coverage in amount and scope at least as favorable to such persons as Seller's existing coverage; PROVIDED, that in no event shall Buyer or the Surviving Corporation be required to make annual premium payments to the extent such premiums exceed an amount equal to 175% of the annual premium paid by Seller for such coverage as of the date of this Agreement (the "Maximum Premium"); PROVIDED FURTHER, that if such premiums exceed the Maximum Premium the Surviving Corporation shall purchase insurance policies in such amounts and with such coverage as reasonably can be purchased for the Maximum Premium. -41- 49 (c) The provisions of this Section 6.13 are intended to be an addition to the rights otherwise available to the current officers and directors of Seller by law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. Section 6.14 LETTER OF SELLER'S ACCOUNTANTS. Seller shall use all reasonable efforts to cause to be delivered to Buyer and Seller a letter of Arthur Andersen LLP, Seller's independent auditors, dated a date within two business days before the date on which the Registration Statement shall become effective and addressed to Buyer, in form reasonably satisfactory to Buyer and customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement. Section 6.15 NOTIFICATION OF CERTAIN MATTERS. The Buyer will give prompt notice to Seller, and Seller will give prompt notice to Buyer, of the occurrence, or failure to occur, of any event, which occurrence or failure to occur would be reasonably likely to cause (a) any representation or warranty of such party contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date of this Agreement to the Effective Time, or (b) any material failure of Buyer and Sub or Seller, as the case may be, or of any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. Notwithstanding the above, the delivery of any notice pursuant to this section will not limit or otherwise affect the remedies available hereunder to the party receiving such notice or the conditions to such party's obligation to consummate the Merger. Seller and each of its Subsidiaries will promptly provide Buyer with copies of all correspondence between Seller and any Subsidiary, on the one hand, and the Federal Aviation Administration or BBA plc, on the other hand, and will keep Buyer informed of all material discussions with such entities. Section 6.16 ENVIRONMENTAL AUDIT. Buyer agrees that from and after the date of this Agreement and prior to the Effective Time, it shall not initiate or request a third party acting on its behalf to initiate a Phase I or II environmental audit of the real property of Seller or any Subsidiary of Seller. -42- 50 ARTICLE VII CONDITIONS TO MERGER Section 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of each party to this Agreement to effect the Merger shall be subject to the satisfaction prior to the Closing Date of the following conditions: (a) STOCKHOLDER APPROVAL. The Seller Voting Proposal shall have been approved and adopted at the Seller Meeting, at which a quorum is present, by the affirmative vote of the holders of a majority of the shares of Seller Common Stock outstanding on the record date for the Seller Meeting. (b) HSR ACT. The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. (c) GOVERNMENTAL APPROVALS. Other than the filing provided for by Section 1.02, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Governmental Entity, the failure of which to file, obtain or occur is reasonably likely to have a Buyer Material Adverse Effect or a Seller Material Adverse Effect shall have been filed, been obtained or occurred. (d) REGISTRATION STATEMENT. The Registration Statement shall have become effective under the Securities Act and shall not be the subject of any stop order or proceedings seeking a stop order. (e) NO INJUNCTIONS. No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any order, executive order, stay, decree, judgment or injunction (each an "Order") or statute, rule or regulation which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger. (f) NYSE. The shares of Buyer Common Stock to be issued in the Merger shall have been approved for listing on the NYSE, subject only to official notice of issuance. Section 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER AND SUB. The obligations of Buyer and Sub to effect the Merger are subject to the satisfaction of each of the following conditions, any of which may be waived in writing exclusively by Buyer and Sub: -43- 51 (a) REPRESENTATIONS AND WARRANTIES. (i) The representations and warranties of Seller set forth in this Agreement that are not qualified as to materiality or Seller Material Adverse Effect shall be true and correct in all material respects as of the date of this Agreement; (ii) The representations and warranties of Seller set forth in this Agreement that are qualified as to materiality or Seller Material Adverse Effect shall be true and correct in all respects as of the date of this Agreement; (iii) The representations and warranties of Seller set forth in this Agreement shall be true and correct as of the Closing Date (without regard to any materiality, Seller Material Adverse Effect or knowledge qualifications contained therein), except (A) for changes contemplated by this Agreement, (B) to the extent such representations and warranties speak as of an earlier date and (C) where the failures to be true and correct (without regard to any materiality, Seller Material Adverse Effect or knowledge qualifications contained therein), individually or in the aggregate, have not had and are not reasonably likely to have a Seller Material Adverse Effect; and (iv) Buyer shall have received a certificate signed on behalf of Seller by the chief executive officer and the chief financial officer of Seller to the effect that each of the conditions specified in paragraphs (i), (ii) and (iii) of this paragraph (a) is satisfied in all respects. (b) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date; and Buyer shall have received a certificate signed on behalf of Seller by the chief executive officer and the chief financial officer of Seller to such effect. (c) TAX OPINION. Buyer shall have received a written opinion from Hale and Dorr LLP, counsel to Buyer, to the effect that the Merger will be treated for federal income tax purposes as a tax-free reorganization within the meaning of Section 368(a) of the Code; provided that if Hale and Dorr LLP does not render such opinion, this condition shall nonetheless be deemed satisfied if Brown, Rudnick, Freed & Gesmer renders such opinion to Buyer (it being agreed that Buyer and Seller shall each provide reasonable cooperation, including making reasonable representations, to Brown, Rudnick, Freed & Gesmer or Hale and Dorr LLP, as the case may be, to enable them to render such opinion). -44- 52 (d) THIRD PARTY CONSENTS. The Seller shall have obtained (i) all consents and approvals of third parties referred to in Section 7.02(d) of the Seller Disclosure Schedule and (ii) any other consent or approval of any third party (other than a Governmental Entity) the failure of which to obtain, individually or in the aggregate, is reasonably likely to have a Seller Material Adverse Effect. Section 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller to effect the Merger is subject to the satisfaction of each of the following conditions, any of which may be waived, in writing, exclusively by Seller: (a) REPRESENTATIONS AND WARRANTIES. (i) The representations and warranties of Buyer and Sub set forth in this Agreement that are not qualified as to materiality or Seller Material Adverse Effect shall be true and correct in all material respects as of the date of this Agreement; (ii) The representations and warranties of Buyer and Sub set forth in this Agreement that are qualified as to materiality or Buyer Material Adverse Effect shall be true and correct in all respects as of the date of this Agreement; (iii) The representations and warranties of Buyer and Sub set forth in this Agreement shall be true and correct as of the Closing Date (without regard to any materiality, Buyer Material Adverse Effect or knowledge qualifications contained therein), except (A) for changes contemplated by this Agreement, (B) to the extent such representations and warranties speak as of an earlier date and (C) where the failures to be true and correct (without regard to any materiality, Buyer Material Adverse Effect or knowledge qualifications contained therein), individually or in the aggregate, have not had and are not reasonably likely to have a Buyer Material Adverse Effect; and (iv) Seller shall have received a certificate signed on behalf of Buyer by the chief executive officer or the chief financial officer of Buyer to the effect that each of the conditions specified in paragraphs (i), (ii) and (iii) of this paragraph (a) is satisfied in all respects. (b) PERFORMANCE OF OBLIGATIONS OF BUYER AND SUB. Buyer and Sub shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and Seller shall have received a certificate signed on behalf of Buyer by the chief executive officer or the chief financial officer of Buyer to such effect. -45- 53 (c) TAX OPINION. Seller shall have received the opinion of Brown, Rudnick, Freed & Gesmer counsel to Seller, to the effect that the Merger will be treated for federal income tax purposes as a tax-free reorganization within the meaning of Section 368(a) of the Code; provided that if Brown, Rudnick, Freed & Gesmer does not render such opinion, this condition shall nonetheless be deemed satisfied if Hale and Dorr LLP renders such opinion to Seller (it being agreed that Buyer and Seller shall each provide reasonable cooperation, including making reasonable representations, to Brown, Rudnick, Freed & Gesmer or Hale and Dorr LLP, as the case may be, to enable them to render such opinion). ARTICLE VIII TERMINATION AND AMENDMENT Section 8.01 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time (with respect to Sections 8.01(b) through 8.01(g), by written notice by the terminating party to the other party), whether before or after approval of the Merger by the stockholders of Seller: (a) by mutual written consent of Buyer and Seller; or (b) by either Buyer or Seller if the Merger shall not have been consummated by April 30, 2000 (the "Outside Date") (provided that the right to terminate this Agreement under this Section 8.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been a principal cause of or resulted in the failure of the Merger to occur on or before such date); or (c) by either Buyer or Seller if a Governmental Entity of competent jurisdiction shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action, in each case having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger; or (d) by either Buyer or Seller if at the Seller Meeting (including any adjournment or postponement), the requisite vote of the stockholders of Seller in favor of the Seller Voting Proposal shall not have been obtained (provided that the right to terminate this Agreement under this Section 8.01(d) shall not be available to the Seller where the failure to obtain Seller stockholder approval shall have been caused by the action or failure to act of Seller in breach of this Agreement and shall not be available to Buyer where such failure is caused by a breach of this Agreement by Buyer); or -46- 54 (e) by Buyer, if: (i) the Board of Directors of Seller shall have failed to recommend approval of the Seller Voting Proposal in the Proxy Statement or shall have withdrawn or modified its recommendation of the Seller Voting Proposal; (ii) after the receipt by Seller of an Acquisition Proposal, Buyer requests in writing that the Board of Directors of Seller reconfirm its recommendation of this Agreement or the Merger and the Board of Directors of Seller fails to do so within five business days after its receipt of Buyer's request or, in the case of an Acquisition Proposal that is a tender or exchange offer, within 10 business days after its receipt of Buyer's request; (iii) the Board of Directors of Seller shall have approved or recommended to the stockholders of Seller an Alternative Transaction (as defined in Section 8.03(g)); (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of Seller Common Stock is commenced (other than by Buyer or an Affiliate of Buyer) and the Board of Directors of Seller recommends that the stockholders of Seller tender their shares in such tender or exchange offer or within 10 business days after such tender offer or exchange offer fails to recommend against acceptance of such offer or takes no position with respect to acceptance thereof; or (v) for any reason Seller fails to call and hold the Seller Meeting by the Outside Date (unless primarily due to acts or omissions of the SEC or of Buyer); or (f) by either Buyer or Seller, if there has been a breach of any representation, warranty, covenant or agreement on the part of the other party set forth in this Agreement, which breach (i) causes the conditions set forth in Section 7.02(a) or (b) (in the case of termination by Buyer) or 7.03(a) or (b) (in the case of termination by Seller) not to be satisfied, and (ii) shall not have been cured within 10 days following receipt by the breaching party of written notice of such breach from the other party; (g) by Buyer, if: (i) Buyer has incurred (or incurred on behalf of Seller) more than an aggregate of $500,000 in out-of-pocket expenses seeking to obtain clearance or approval of the Merger and other transactions contemplated hereby under applicable Antitrust Laws or (ii) the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice has made a Second Request, and HSR clearance has not been received within 90 days of the date of such request; (h) by Seller, if the Market Value of the Buyer Common Stock would be less than $30.99 per share unless Buyer, within two days after receipt of written notice by Seller of its intention to so terminate, shall have elected in its sole discretion to adjust the Exchange Ratio pursuant to Section 2.01(c)(ii) hereof; or (i) by Buyer, if the Market Value of the Buyer Common Stock would be greater than $46.49 per share unless Seller, within two days after receipt of written -47- 55 notice by Buyer of its intention to so terminate, shall have elected in its sole discretion to adjust the Exchange Ratio pursuant to Section 2.01(c)(i) hereof. Section 8.02 EFFECT OF TERMINATION. In the event of termination of this Agreement as provided in Section 8.01, this Agreement shall immediately become void and there shall be no liability or obligation on the part of Buyer, Seller, Sub or their respective officers, directors, stockholders or Affiliates, except as set forth in Sections 5.03, 6.12, 8.03 and Article IX; provided that any such termination shall not relieve any party from liability for any willful breach of this Agreement (which includes without limitation the making of any representation or warranty by a party in this Agreement that the party knew was not true and accurate when made) and the provisions of the Seller Stock Option Agreement, Sections 5.03, 6.12, 8.03 and Article IX of this Agreement and the Confidentiality Agreement shall remain in full force and effect and survive any termination of this Agreement. Section 8.03 FEES AND EXPENSES. (a) Except as set forth in this Section 8.03, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Merger is consummated (it being understood that the HSR filing fee shall be paid 100% by Buyer); provided however, that Seller and Buyer shall share equally all fees and expenses, other than attorneys' fees, incurred with respect to the printing and filing of the Proxy Statement (including any related preliminary materials) and the Registration Statement (including financial statements and exhibits) and any amendments or supplements thereto. (b) Seller shall pay Buyer up to $500,000 (or $700,000 in the case of a termination described in clause (ii) below) as reimbursement for reasonable out-of-pocket expenses of Buyer actually incurred relating to the transactions contemplated by this Agreement prior to termination (including, but not limited to, reasonable fees and expenses of Buyer's counsel, accountants and financial advisors, but excluding any discretionary fees paid to such financial advisors), upon the termination of this Agreement (i) by Buyer pursuant to (A) Section 8.01(d); (B) Section 8.01(e), (C) Section 8.01(b) as a result of the failure to satisfy the condition set forth in Section 7.02(a)(i) or Section 7.02(a)(ii); or (D) Section 8.01(f); or (ii) by Seller pursuant to Section 8.01(h). Buyer shall promptly provide Seller with invoices or other reasonable evidence of such expenses upon written request by Seller. In the event that Seller pays Buyer the termination fee set forth in Section 8.03(c) in connection with the event giving rise to Seller's obligation to reimburse Buyer for expenses pursuant to this Section 8.03(b), such termination fee shall be deemed to satisfy Seller's obligations pursuant this Section 8.03(b). -48- 56 (c) Seller shall pay Buyer a termination fee of $2,500,000 upon the earliest to occur of the following events: (i) the termination of this Agreement by Buyer pursuant to Section 8.01(e); or (ii) the termination of this Agreement by Buyer pursuant to Section 8.01(f) after a willful breach by Seller of this Agreement, if before such termination or within 12 months thereafter Seller shall have entered into an agreement to engage in or shall have engaged in an Alternative Transaction; or (iii) the termination of this Agreement by Buyer or Seller pursuant to Section 8.01(d) as a result of the failure to receive the requisite vote for approval of the Seller Voting Proposal by the stockholders of Seller at the Seller Meeting if, at the time of such failure, there shall have been announced (and not unconditionally withdrawn) an Alternative Transaction relating to Seller and within 12 months Seller shall have entered into an agreement to engage in or shall have engaged in an Alternative Transaction. (d) Buyer shall pay Seller up to $500,000 (or $700,000 in the case of a termination described in clause (ii) below) as reimbursement for reasonable out-of-pocket expenses of Seller actually incurred relating to the transactions contemplated by this Agreement prior to termination (including, but not limited to, reasonable fees and expenses of Seller's counsel, accountants and financial advisors, but excluding any discretionary fees paid to such financial advisors), upon the termination of this Agreement (i) by Seller pursuant to (A) Section 8.01(b) as a result of the failure to satisfy the condition set forth in Section 7.03(a)(i) or Section 7.03(a)(ii) or (B) Section 8.01(f); or (ii) by Buyer pursuant to Section 8.01(i). Seller shall promptly provide Buyer with invoices or other reasonable evidence of such expenses upon written request by Buyer. (e) [Intentionally Omitted.] (f) The expenses and fees, if applicable, payable pursuant to Section 8.03(b), 8.03(c) and 8.03(d) shall be paid within two business days after demand therefor following the first to occur of the events giving rise to the payment obligation described in Section 8.03(b), 8.03(c)(i), (ii) or (iii) or 8.03(d); provided that in no event shall Buyer or Seller, as the case may be, be required to pay the expenses and fees, if applicable, to the other, if, immediately prior to the termination of this Agreement, the party to receive the expenses and fees, if applicable, was in material breach of its obligations under this Agreement. If one party fails to promptly pay to the other any expense -49- 57 reimbursement or fee due hereunder, the defaulting party shall pay the costs and expenses (including legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, taken to collect payment, together with interest on the amount of any unpaid fee at the publicly announced prime rate of Fleet Bank, N.A. plus five percent per annum, compounded quarterly, from the date such expense reimbursement or fee was required to be paid. (g) As used in this Agreement, "Alternative Transaction" means either (i) a transaction pursuant to which any person (or group of persons) other than Buyer or its affiliates (a "Third Party"), acquires more than 20% of the outstanding shares of Seller Common Stock pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other business combination involving Seller pursuant to which any Third Party acquires more than 20% of the outstanding shares of Seller Common Stock or of the entity surviving such merger or business combination, (iii) any other transaction pursuant to which any Third Party acquires control of assets (including for this purpose the outstanding equity securities of Subsidiaries of Seller, and the entity surviving any merger or business combination including any of them) of Seller having a fair market value equal to more than 20% of the fair market value of all the assets of Seller immediately prior to such transaction, or (iv) any public announcement by a Third Party of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. Section 8.04 AMENDMENT. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Seller, but, after any such approval, no amendment shall be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 8.05 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. -50- 58 ARTICLE IX MISCELLANEOUS Section 9.01 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, but shall expire with and be terminated and extinguished upon the Effective Time, except for the agreements contained in Articles I and II, Sections 6.11, 6.13 and Article IX, and the agreements of the Affiliates delivered pursuant to Section 6.09. The Confidentiality Agreement shall survive the execution and delivery of this Agreement. Section 9.02 NOTICES. All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered three business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service for next business day delivery, in each case to the intended recipient as set forth below: (a) if to Buyer or Sub, to EG&G, Inc. 45 William Street Wellesley, MA 02481 Attn: General Counsel Telecopy: (781) 431-4115 with a copy to: Hale and Dorr LLP 60 State Street Boston, MA 02109 Attn: David E. Redlick, Esq. Telecopy: (617) 526-5000 -51- 59 (b) if to Seller, to Vivid Technologies, Inc. 10 East Commerce Way Woburn, MA 01801 Attn: Chief Executive Officer Telecopy: (781) 939-3996 with a copy to: Brown, Rudnick, Freed & Gesmer One Financial Center Boston, MA 02111 Attn: Lawrence Levy, Esq. Telecopy: (617) 826-8201 Any party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. Section 9.03 INTERPRETATION. When a reference is made in this Agreement to Articles or Sections, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. The table of contents, table of defined terms and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The phrases "the date of this Agreement," "the date hereof," and terms of similar import, unless the context otherwise requires, shall be deemed to refer to October 4, 1999. The words "include," "includes" and "including" when used herein shall be deemed in each case to be following by the words "without limitation." References to "knowledge of Seller" or any similar expression shall mean the actual knowledge of the individuals listed in Section 9.03 of the Seller Disclosure Schedule and shall be deemed to include any information contained in any document in the possession or files of such persons. References to "knowledge of Buyer" or any similar expression shall mean the actual knowledge of the individuals listed in Section 9.03 of the Buyer Disclosure Schedule and shall be deemed to include any information contained in any document in the possession or files of such persons. -52- 60 Section 9.04 COUNTERPARTS. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 9.05 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement (including the documents and the instruments referred to herein) (a) constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 6.13 are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder; provided that the Confidentiality Agreement shall remain in full force and effect until the Effective Time. Each party hereto agrees that, except for the representations and warranties contained in this Agreement, neither Seller nor Buyer makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement or the transactions contemplated hereby, notwithstanding the delivery or disclosure to the other or the other's representatives of any documentation or other information with respect to any one or more of the foregoing. Section 9.06 GOVERNING LAW AND VENUE. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN, AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS TO BE PERFORMED WHOLLY IN SUCH STATE. The parties hereby (a) irrevocably submit to the jurisdiction of the Chancery Court of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and the Seller Stock Option and in respect of the transactions contemplated hereby and thereby and (b) waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject to such jurisdiction or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or the Seller Stock Option may not be enforced in or by such courts, and the parties irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such courts. The parties hereby consent to and grant any such court's jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or -53- 61 proceeding in the manner provided in Section 9.02, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. Section 9.07 WAIVER OF JURY TRIAL. EACH OF BUYER, SUB AND SELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SELLER STOCK OPTION AGREEMENT OR THE ACTIONS OF BUYER, SUB OR SELLER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF OR THEREOF. Section 9.08 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 9.09 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 and other purposes of such void or unenforceable provision. Section 9.10 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Section 9.11 PROPOSED NAME CHANGE. Seller acknowledges that Buyer has received approval from its stockholders of an amendment to Buyer's Articles of -54- 62 Organization to change the name of Buyer to "PerkinElmer, Inc." and that the proposed name change may be effective prior to the Effective Time. [Remainder of page intentionally blank] -55- 63 IN WITNESS WHEREOF, Buyer, Sub and Seller have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. EG&G, INC. By: /s/ Angelo Castellana ------------------------------- Title: Senior Vice President --------------------------- VENICE ACQUISITION CORP. By: /s/ Angelo Castellana ------------------------------- Title: Treasurer ------------------------------ VIVID TECHNOLOGIES, INC. By: /s/ S. David Ellenbogen ------------------------------- Title: Chief Executive Officer --------------------------- -56- EX-2 3 SELLER STOCK OPTION 1 EXHIBIT 2 SELLER STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated as of October 4, 1999 (the "Agreement"), between EG&G, INC. a Massachusetts corporation (the "Grantee"), and VIVID TECHNOLOGIES, INC., a Delaware corporation (the "Grantor"). WHEREAS, the Grantee, the Grantor and Venice Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Grantor ("Sub"), are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), which provides, among other things, for the merger (the "Merger") of Sub with and into the Grantee; WHEREAS, as a condition to its willingness to enter into the Merger Agreement, the Grantee has requested that the Grantor grant to the Grantee an option to purchase 2,000,012 shares of Common Stock, par value $.01 per share, of the Grantor (the "Common Stock"), upon the terms and subject to the conditions hereof; and WHEREAS, in order to induce the Grantee to enter into the Merger Agreement, the Grantor is willing to grant the Grantee the requested option. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the parties hereto agree as follows: 1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD. (a) Contemporaneously herewith the Grantee, Sub and the Grantor are entering into the Merger Agreement. Subject to the other terms and conditions set forth herein, the Grantor hereby grants to the Grantee an irrevocable option (the "Option") to purchase up to 2,000,012 shares of Common Stock (the "Shares") at a cash purchase price equal to $6.25 per Share (the "Purchase Price"). The Option may be exercised by the Grantee, in whole or in part, at any time, or from time to time, following the occurrence of one of the events set forth in Section 2(c) hereof and prior to the termination of the Option in accordance with the terms of this Agreement. (b) In the event the Grantee wishes to exercise the Option, the Grantee shall send a written notice to the Grantor (the "Stock Exercise Notice") specifying a date (subject to the HSR Act (as defined below)) not later than 20 business days and not earlier than the next business day following the date such notice is given for the closing of such purchase. In the event of any change in the number of issued and outstanding -1- 2 shares of Common Stock by reason of any stock dividend, stock split, split-up, recapitalization, merger or other change in the corporate or capital structure of the Grantor, the number of Shares subject to this Option and the purchase price per Share shall be appropriately adjusted to restore to the Grantee its rights hereunder. (c) If at any time the Option is then exercisable pursuant to the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to purchase Shares provided in Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise Notice") specifying a date not later than 20 business days and not earlier than 10 business days following the date such notice is given on which date the Grantor shall pay to the Grantee an amount in cash equal to the Spread (as hereinafter defined) multiplied by all or such portion of the Shares subject to the Option as Grantee shall specify. As used herein "Spread" shall mean the excess, if any, over the Purchase Price of the higher of (x) if applicable, the highest price per share of Common Stock (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by any person in an Alternative Transaction (as defined in the Merger Agreement) (the "Alternative Purchase Price") or (y) the closing price of the shares of Common Stock on the Nasdaq National Market on the last trading day immediately prior to the date of the Cash Exercise Notice (the "Closing Price"). If the Alternative Purchase Price includes any property other than cash, the Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if any, included in the Alternative Purchase Price plus (ii) the fair market value of such other property. If such other property consists of securities with an existing public trading market, the average of the closing prices (or the average of the closing bid and asked prices if closing prices are unavailable) for such securities in their principal public trading market on the five trading days ending five days prior to the date of the Cash Exercise Notice shall be deemed to equal the fair market value of such property. If such other property consists of something other than cash or securities with an existing public trading market and, as of the payment date for the Spread, agreement on the value of such other property has not been reached, the Alternative Purchase Price shall be deemed to equal the Closing Price. Upon exercise of its right to receive cash pursuant to this Section 1(c), the obligations of the Grantor to deliver Shares pursuant to Section 3 shall be terminated with respect to such number of Shares for which the Grantee shall have elected to be paid the Spread. 2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver Shares upon exercise of the Option or the Spread upon exercise of the Grantor's rights under Section 1(c) above is subject only to the conditions that: (a) No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction in the United States prohibiting the delivery of the Shares shall be in effect; and -2- 3 (b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated; and (c) A proposal for an Alternative Transaction involving Grantor shall have been made on or after the date of this Agreement and prior to the date the Merger Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and one or more of the following events shall have occurred on or after the date of the making of such proposal: (1) the requisite vote of the stockholders of Grantor in favor of the Seller Voting Proposal shall not have been obtained at the Seller Meeting (as such terms are defined in the Merger Agreement) or any adjournment or postponement thereof; (2) the Board of Directors of Grantor shall have failed to recommend approval of the Seller Voting Proposal in the Proxy Statement (as defined in the Merger Agreement) or shall have withdrawn or modified its recommendation of the Merger Agreement or the Merger; (3) the Board of Directors of Grantor shall have approved or recommended to the stockholders of Grantor an Alternative Transaction (as defined in the Merger Agreement); (4) a tender offer or exchange offer for 20% or more of the outstanding shares of Grantor Common Stock shall have been commenced (other than by Grantee or an affiliate of Grantee) and the Board of Directors of Grantor shall have recommended that the stockholders of Grantor tender their shares in such tender or exchange offer or within 10 days after such tender offer or exchange offer fails to recommend against acceptance of such offer or takes no position with respect to acceptance thereof; or (5) for any reason Grantor shall have failed to call and hold the Seller Meeting (as defined in the Merger Agreement) by the Outside Date (as defined in the Merger Agreement) (unless primarily due to acts or omissions of the Securities and Exchange Commission or the Grantee). 3. THE CLOSING. (a) Any closing hereunder shall take place on the date specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 10:00 A.M., local time, at the offices of Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, or, if the conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on the second business day following the satisfaction of such conditions, or at such other time and place as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a certificate or certificates, duly endorsed (or accompanied by duly executed stock powers), representing the Shares in the denominations designated by the Grantee in its Stock Exercise Notice and the Grantee will purchase such Shares from the Grantor at the price per Share equal to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) hereof, the Grantor will deliver to the Grantee cash in an amount determined pursuant to Section 1(c) hereof. Any payment -3- 4 made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement shall be made by certified or official bank check or by wire transfer of immediately available federal funds to a bank designated by the party receiving such funds. (b) The certificates representing the Shares may bear an appropriate legend relating to the fact that such Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). 4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor represents and warrants to the Grantee that (a) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to enter into and perform this Agreement; (b) the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Grantor and this Agreement has been duly executed and delivered by a duly authorized officer of the Grantor and constitutes a valid and binding obligation of the Grantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (c) the Grantor has taken all necessary corporate action to authorize and reserve the Shares issuable upon exercise of the Option and the Shares, when issued and delivered by the Grantor upon exercise of the Option, will be duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights; (d) except as otherwise required by the HSR Act, the execution and delivery of this Agreement by the Grantor and the consummation by it of the transactions contemplated hereby do not require the consent, waiver, approval or authorization of or any filing with any person or public authority and will not violate, result in a breach of or the acceleration of any obligation under, or constitute a default under, any provision of any charter or by-law, indenture, mortgage, lien, lease, agreement, contract, instrument, order, law, rule, regulation, judgment, ordinance, decree or restriction by which the Grantor or any of its subsidiaries or any of their respective properties or assets is bound; and (e) no "fair price", "moratorium", "control share acquisition" or other form of antitakeover statute or regulation (including, without limitation, Section 203 of the Delaware General Corporation Law) is or shall be applicable to the acquisition of Shares pursuant to this Agreement. 5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee represents and warrants to the Grantor that (a) the execution and delivery of this Agreement by the Grantee and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Grantee and this Agreement has been duly executed and delivered by a duly authorized officer of -4- 5 the Grantee and will constitute a valid and binding obligation of Grantee; and (b) the Grantee is acquiring the Option and, if and when it exercises the Option, will be acquiring the Shares issuable upon the exercise thereof for its own account and not with a view to distribution or resale in any manner which would be in violation of the Securities Act. 6. LISTING OF SHARES; HSR ACT FILINGS; GOVERNMENTAL CONSENTS. Subject to applicable law and the rules and regulations of the Nasdaq National Market, the Grantor will promptly file an application to list the Shares on the Nasdaq National Market and will use its best efforts to obtain approval of such listing and to effect all necessary filings by the Grantor under the HSR Act; provided, however, that if the Grantor is unable to effect such listing on the Nasdaq National Market by the Closing Date, the Grantor will nevertheless be obligated to deliver the Shares upon the Closing Date. Each of the parties hereto will use its best efforts to obtain consents of all third parties and governmental authorities, if any, necessary to the consummation of the transactions contemplated. 7. REGISTRATION RIGHTS. (a) In the event that the Grantee shall desire to sell any of the Shares within two years after the purchase of such Shares pursuant hereto, and such sale requires, in the opinion of counsel to the Grantee, which opinion shall be reasonably satisfactory to the Grantor and its counsel, registration of such Shares under the Securities Act, the Grantor will cooperate with the Grantee and any underwriters in registering such Shares for resale, including, without limitation, promptly filing a registration statement that complies with the requirements of applicable federal and state securities laws and entering into an underwriting agreement with such underwriters upon such terms and conditions as are customarily contained in underwriting agreements with respect to secondary distributions; provided that the Grantor shall not be required to have declared effective more than two registration statements hereunder and shall be entitled to delay the filing or effectiveness of any registration statement for up to 60 days if the offering would, in the judgment of the Board of Directors of the Grantor, require premature disclosure of any material corporate development or otherwise interfere with or adversely affect any pending or proposed offering of securities of the Grantor or any other material transaction involving the Grantor. (b) If the Common Stock is registered pursuant to the provisions of this Section 7, the Grantor agrees (i) to furnish copies of the registration statement and the prospectus relating to the Shares covered thereby in such numbers as the Grantee may from time to time reasonably request and (ii) if any event shall occur as a result of which it becomes necessary to amend or supplement any registration statement or -5- 6 prospectus, to prepare and file under the applicable securities laws such amendments and supplements as may be necessary, subject to the following two paragraphs, to keep available for at least 180 consecutive days a prospectus covering the Common Stock meeting the requirements of such securities laws, and to furnish the Grantee such numbers of copies of the registration statement and prospectus as amended or supplemented as may reasonably be requested. The Grantor may, by written notice to the Grantee, on one occasion suspend a registration statement after effectiveness for up to 30 days (the period of any such suspension being hereinafter referred to as a "Suspension Period"), and require that the Grantee immediately cease sales of shares pursuant to such registration statement, in the event that the Grantor is engaged in any activity or transaction or preparations or negotiations for any activity or transaction that the Grantor desires to keep confidential for business reasons, if the Board of Directors of the Grantor determines in good faith that the public disclosure requirements imposed on the Grantor under the Securities Act in connection with such registration statement would require disclosure of such activity, transaction, preparations or negotiations. To the extent the Grantor imposes a Suspension Period as a result of such determination by the Grantor's Board of Directors, the Grantor shall not impose an additional Suspension Period (and, if necessary, the 180-day period referred to above shall be extended), such that the Grantee is entitled to a total of 30 consecutive days without a Suspension Period. The Grantor agrees that no other holder of shares of Common Stock seeking to resell such shares pursuant to a registration statement will be permitted to sell shares of Common Stock pursuant to a registration statement during a Suspension Period. If the Grantor suspends the registration statement or requires the Grantee to cease sales of shares, the Grantor shall, as promptly as practicable following the termination of the circumstance which entitled the Grantor to do so, take such actions as may be necessary to reinstate the effectiveness of such registration statement and/or give written notice to the Grantee authorizing it to resume sales pursuant to such registration statement. The Grantor shall bear the cost of the registration, including, but not limited to, all registration and filing fees, printing expenses, and fees and disbursements of counsel and accountants for the Grantor, except that the Grantee shall pay the fees and disbursements of its counsel, the underwriting fees and selling commissions applicable to the shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold harmless Grantee, its affiliates and its officers and directors from and against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained in, omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it -6- 7 arises out of (i) any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the Grantee, its affiliates and its officers expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph (ii) any untrue statement or omission contained in a preliminary prospectus that was corrected in a final prospectus that was distributed to the Grantor prior to the written confirmation of the sale and which the Grantor failed to properly distribute. The Grantor shall also indemnify and hold harmless each underwriter and each person who controls any underwriter within the meaning of either the Securities Act or the Securities Exchange Act of 1934 against any and all losses, claims, damages, liabilities and expenses arising out of or based upon any statements contained in, omissions or alleged omissions from, each registration statement filed pursuant to this paragraph; provided, however, that this provision does not apply to any loss, liability, claim, damage or expense to the extent it arises out of any untrue statement or omission made in reliance upon and in conformity with written information furnished to the Grantor by the underwriters and/or the Grantee expressly for use in any registration statement (or any amendment thereto) or any preliminary prospectus filed pursuant to this paragraph. 8. PROFIT LIMITATION. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as defined in Section 8(c) below) exceed $2,500,000 and, if it otherwise would exceed such amount, the Grantee, at its sole election, shall either (i) deliver to the Grantor for cancellation Shares previously purchased by Grantee, (ii) pay cash or other consideration to the Grantor, (iii) receive a smaller termination fee under Section 8.03 of the Merger Agreement or (iv) undertake any combination thereof, so that Grantee's Total Profit shall not exceed $2,500,000 after taking into account the foregoing actions. (b) Notwithstanding any other provision of this Agreement, this Option may not be exercised for a number of Shares as would, as of the date of the Stock Exercise Notice, result in a Notional Total Profit (as defined in Section 8(c) below) of more than $2,500,000 and, if exercise of the Option otherwise would exceed such amount, the Grantee, at its discretion, may increase the Purchase Price for that number of Shares set forth in the Stock Exercise Notice so that the Notional Total Profit shall not exceed $2,500,000; provided, that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date at the Purchase Price set forth in Section 1(a) hereof. (c) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount of cash received by Grantee -7- 8 pursuant to Section 8.03(b) of the Merger Agreement and Section 1(c) hereof, and (ii) (x) the net cash amounts received by Grantee pursuant to the sale of Shares (or any other securities into which such Shares are converted or exchanged) to any unaffiliated party, less (y) the Grantee's purchase price for such Shares. (d) As used herein, the term "Notional Total Profit" with respect to any number of Shares as to which Grantee may propose to exercise this Option shall be the Total Profit determined as of the date of the Stock Exercise Notice assuming that this Option were exercised on such date for such number of Shares and assuming that such Shares, together with all other Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price for the Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). 9. EXPENSES. Each party hereto shall pay its own expenses incurred in connection with this Agreement, except as otherwise specifically provided herein. 10. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor fails to perform any of its obligations under this Agreement immediate and irreparable harm or injury would be caused to the Grantee for which money damages would not be an adequate remedy. In such event, the Grantor agrees that the Grantee shall have the right, in addition to any other rights it may have, to specific performance of this Agreement. Accordingly, if the Grantee should institute an action or proceeding seeking specific enforcement of the provisions hereof, the Grantor hereby waives the claim or defense that the Grantee has an adequate remedy at law and hereby agrees not to assert in any such action or proceeding the claim or defense that such a remedy at law exists. The Grantor further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief. 11. NOTICE. All notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly delivered three business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service for next business day delivery, in each case to the intended recipient as set forth below: If to the Grantor: Vivid Technologies, Inc. 10 East Commerce Way Woburn, MA 01801 Attn: Chief Executive Officer Telecopy: (781) 939-3996 -8- 9 With a copy to: Brown, Rudnick, Freed & Gesmer One Financial Center Boston, MA 02111 Attn: Lawrence Levy, Esq. Telecopy: (617) 856-8201 If to the Grantee: EG&G, Inc. 45 William Street Wellesley, MA 02481 Attn: General Counsel Telecopy: (781) 431-4115 With a copy to: Hale and Dorr LLP 60 State Street Boston, MA 02109 Attn: David E. Redlick, Esq. Telecopy: (617) 526-5000 Any party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail or electronic mail), but, except as expressly provided in Section 19 hereof, no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. 12. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns; provided, however, that such successors in interest or assigns shall agree to be bound by the provisions of this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any person other than the Grantor or the Grantee, or their successors or assigns, any rights or remedies under or by reason of this Agreement. 13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger Agreement and the other documents referred to therein, contains the entire -9- 10 agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, with respect to such transactions. This Agreement may not be changed, amended or modified orally, but may be changed only by an agreement in writing signed by the party against whom any waiver, change, amendment, modification or discharge may be sought. 14. ASSIGNMENT. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, except that the Grantee may assign its rights and obligations hereunder to any of its direct or indirect wholly owned subsidiaries, but no such transfer shall relieve the Grantee of its obligations hereunder if such transferee does not perform such obligations. 15. HEADINGS. The section headings herein are for convenience only and shall not affect the construction of this Agreement. 16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. 17. GOVERNING LAW AND VENUE. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN, AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS TO BE PERFORMED WHOLLY IN SUCH STATE. The parties hereby (a) irrevocably submit to the jurisdiction of the Chancery Court of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and in respect of the transactions contemplated hereby and thereby and (b) waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject to such jurisdiction or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the parties irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such courts. The parties hereby consent to and grant any such court's jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 11, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. -10- 11 18. TERMINATION. The right to exercise the Option granted pursuant to this Agreement shall terminate at the earlier of (a) the Effective Time (as defined in the Merger Agreement), (b) the date on which Grantee realizes a Total Profit of $2,500,000, (c) the date the Merger Agreement is validly terminated (i) by the Grantor and the Grantee pursuant to Section 8.01(a) thereof, (ii) by either the Grantor or the Grantee pursuant to Section 8.01(b) thereof (provided that the Grantor shall not have failed to fulfill any obligation under the Merger Agreement that was a principal cause or resulted in the failure of the Merger to occur), (iii) by either the Grantor or the Grantee pursuant to Section 8.01(c) thereof if a nonappealable final order, decree or ruling or other nonappealable final action is taken by the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice pursuant to the Antitrust Laws having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger, (iv) by the Grantor pursuant to Section 8.01(f) thereof or by the Grantee pursuant to Section 8.01(f) thereof in the event that the breach giving rise to the Grantee's right to terminate is not a willful breach by the Grantor, (v) by the Grantor pursuant to Section 8.01(g) thereof, (vi) by the Grantor pursuant to Section 8.10(h) thereof or (vii) by the Grantee pursuant to Section 8.01(i) thereof and (d) 181 days after the Merger Termination Date (the date referred to in clause (d) being hereinafter referred to as the "Option Termination Date"); provided, that if the Option cannot be exercised or the Shares cannot be delivered to Grantee upon such exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been satisfied, the Option Termination Date shall be extended until thirty days after such impediment to exercise has been removed; and provided, further, that, if at any time the Grantee seeks to exercise the Option by delivery of a Stock Exercise Notice but is unable to do so with respect to all of the Shares subject to the Option at the Purchase Price because of the limitation on profit contained in Section 8(b) hereof, the Option Termination Date shall be extended for an additional 180 days from the date of such Stock Exercise Notice (but in no event shall the Option Termination Date be more than 360 days after the Merger Termination Date). All representations and warranties contained in this Agreement shall survive delivery of and payment for the Shares. 19. RIGHT OF FIRST REFUSAL. Subject to the provisions of paragraph (e) below, the Grantee shall not sell or otherwise transfer ("transfer") Shares representing more than 5% of the outstanding capital stock of the Grantor in a single privately negotiated transaction (any such transfer being hereinafter returned to a "Private Block Sale"), except by a transfer which meets the following requirements: (a) If the Grantee proposes to engage in a Private Block Sale, then the Grantee shall first give written notice thereof (the "Transfer Notice") to the Grantor. The Transfer Notice shall name the proposed transferee and state the number of Shares that -11- 12 will be transferred (the "Offered Shares"), the price per share and all other material terms and conditions of the transfer. In addition, if the proposed transferee has set a deadline by which the Grantee must agree to the Private Black Sale (such time, the "Sale Deadline"), the Transfer Notice shall state such deadline. (b) For a period of beginning on the delivery of the Transfer Notice and ending 48 hours following delivery of the Transfer Notice (the "Notice Response Period"), the Grantor shall have the option to purchase all (but not less than all) of the Offered Shares at the price and upon the terms set forth in the Transfer Notice. In the event the Grantor elects to purchase all of the Offered Shares, it shall give irrevocable written notice of its election to the Grantee within the Notice Response Period and the settlement of the sale of such Offered Shares shall be made as provided below in paragraph (c). (c) If the Grantor elects to acquire all of the Offered Shares, the Grantor shall so notify the Grantee and settlement shall be made at the principal office of the Grantor by wire transfer of immediately available funds within two business days after the termination of the Notice Response Period. (d) If the Grantor does not elect to acquire all of the Offered Shares or does not give timely notice during the Response Period, the Grantee may, within the 90- day period following the expiration of the Notice Response Period, transfer the Offered Shares to the proposed transferee or any other purchaser, provided that the sale shall not be on terms and conditions more favorable to the purchaser than those contained in the Transfer Notice. Upon completion of such a transfer, the transferred shares shall thereafter be released from all restrictions under this Section. (e) The following transactions shall be exempt from the provisions (including without limitation the notice provisions) of this Section: (1) The Grantee's bona fide pledge or mortgage of its shares with a commercial lending institution; (2) The Grantee's transfer of any or all of its shares pursuant to and in accordance with the terms of any merger, consolidation, reclassification of shares or capital reorganization of the Grantee, or pursuant to a sale of substantially all of the stock or assets of the Grantee; (3) The Grantee's transfer of any or all of its shares to its stockholders on a pro rata basis; -12- 13 (4) Any transfer pursuant to an effective registration statement filed by the Grantor with the Securities and Exchange Commission or Rule 144 effected on the Nasdaq National Market or another securities exchange or otherwise in an open market transaction; and (5) Any single transfer involving 5% or less of the outstanding capital stock of the Grantor. (f) The foregoing right of first refusal shall terminate upon either of the following dates, whichever shall first occur: (1) On the expiration of the Repurchase Option; (2) Upon the sale of all or substantially all of the shares or business of the Grantor, by merger, consolidation, sale of assets or otherwise; or (3) On the date on which Grantee holds Shares representing 5% less of the outstanding capital stock of the Grantor. (g) Notwithstanding the provisions of Section 11, the Transfer Notice and all notices, requests, demands, claims and other communications under this Section 19 shall be deemed duly delivered only upon personal delivery or upon receipt of confirmation by telecopy with a copy sent via reputable nationwide overnight courier service for next day delivery, in each case to the intended recipient at the address set forth in Section 11. 20. OPTION TO REPURCHASE SHARES. (a) In the event (i) the Grantee has exercised all or any portion of the Option in accordance with the terms of this Agreement and acquired any Shares and (ii) the Grantor has not entered into a proposal, plan or agreement with respect to an Alternative Transaction on or before the first anniversary of the Merger Termination Date, then during the Repurchase Option Exercise Period (as defined below), the Grantor shall have the right and option (the "Repurchase Option") to purchase from the Grantee all Shares then held by the Grantee at the Repurchase Option Price (as defined below). The Repurchase Option Exercise Period shall mean the 30-day period beginning on the first business day following the first anniversary of the Merger Termination Date. The Repurchase Option Price shall mean the greater of (i) $6.25 (subject to adjustment by reason of any stock split, reverse split, reclassification, stock dividend, reorganization, recapitalization or other similar change effecting the -13- 14 Common Stock occurring on or after the date hereof) and (ii) the average of the Daily Per Share Prices (as defined below) of the Common Stock for the 20 consecutive trading days ending on the third trading day prior to the date that the Grantor delivers written notice of exercise of the Repurchase Option pursuant to paragraph (b) below. The "Daily Per Share Price" for any trading day means the weighted average of the per share selling prices of the Common Stock on the Nasdaq National Market for that day. (b) The Grantor may exercise the Repurchase Option by delivering or mailing to the Grantee during the Repurchase Option Exercise Period, a written notice of exercise of the Repurchase Option. If the Repurchase Option is not so exercised, by the giving of such a notice within the Repurchase Option Exercise Period, the Repurchase Option shall automatically expire and terminate effective upon the expiration of the Repurchase Option Exercise Period. (c) On the tenth day following delivery to the Grantee of the Grantor's notice of the exercise of the Repurchase Option pursuant to paragraph (b) above (or if such tenth day is not a business day, then on the next business day thereafter) (i) the Grantee shall tender to the Grantor at its principal offices the certificate or certificates representing the Shares then held by the Grantee, duly endorsed in blank or with duly endorsed stock powers attached thereto, all in form suitable for the transfer of such Shares to the Grantor and (ii) the Grantor shall simultaneously with its receipt of such certificates, pay to the Grantee the aggregate Repurchase Option Price for such Shares by wire transfer of immediately available funds. (d) Notwithstanding any provision in this Section 20, except as provided in Section 19 above, the Grantee shall be under no obligation to refrain from selling, transferring or otherwise disposing of any Shares at any time. 21. SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 22. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and the Grantor will consult with the Grantee before issuing any press release with respect to the initial announcement of this Agreement, the Option or the transactions contemplated hereby and neither party shall issue any such press release prior to such consultation except as may be required by law or by obligations pursuant to any listing agreement with any national securities exchange or by the National Association of Securities Dealers, Inc. -14- 15 23. WAIVER OF JURY TRIAL. EACH OF GRANTOR AND GRANTEE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF GRANTOR OR GRANTEE IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF. IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement to be duly executed and delivered on the day and year first above written. EG&G, Inc. By: /s/ Angelo Castellana -------------------------------- Title: Senior Vice President ---------------------------- Vivid Technologies, Inc. By: /s/ S. David Ellenbogen -------------------------------- Title: Chief Executive Officer ---------------------------- EX-3 4 STOCKHOLDER AGREEMENT 1 EXHIBIT 3 STOCKHOLDER AGREEMENT THIS STOCKHOLDER AGREEMENT (this "Agreement"), dated as of October 4, 1999, is made by and among EG&G, Inc., a Massachusetts corporation (the "Buyer"), Venice Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Buyer (the "Sub"), and the holders (the "Stockholders") of the shares of Common Stock, $0.01 par value (the "Shares"), of Vivid Technologies, Inc., a Delaware corporation (the "Company"), listed on SCHEDULE A hereto. WHEREAS, concurrently with the execution of this Agreement, each Stockholder and American Stock Transfer & Trust Company, as custodian, are entering into a Custody Agreement (the "Custody Agreement") providing for the safekeeping of the Stockholder Shares (as defined below), together with a fully executed stock power, in accordance with the provisions of this Agreement; WHEREAS, concurrently herewith, the Buyer, the Sub and the Company are entering into an Agreement and Plan of Merger (as it may be amended from time to time in the future in accordance with its terms, the "Merger Agreement") providing for the merger of the Sub with and into the Company (the "Merger"), with the Company being the entity surviving the Merger and becoming a wholly owned subsidiary of the Buyer; and WHEREAS, in order to induce the Buyer and the Sub to enter into the Merger Agreement, the Buyer and the Sub have requested the Stockholders, and the Stockholders have agreed, to enter into this Agreement; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I STOCK OPTION Section 1.1 GRANT OF STOCK OPTION. Each Stockholder hereby grants to the Sub an irrevocable option (the "Option") to purchase all Shares currently owned by such Stockholder and any additional Shares hereafter acquired by such Stockholder (such "Stockholder's Shares" and, collectively, the "Stockholder Shares") at a purchase price of $6.25 per Stockholder Share, net to the Seller in cash (as adjusted pursuant to Section 1.5, the "Purchase Price"). Section 1.2 EXERCISE OF OPTION. 2 (a) The Option may be exercised by the Sub, in whole or in part, at any time or from time to time after the date the Merger Agreement is terminated pursuant to the terms thereof (the "Merger Termination Date") and prior to the 180th day after the Merger Termination Date. In the event the Sub wishes to exercise the Option for all or some of the Stockholder Shares, the Sub shall send a written notice (the "Exercise Notice") to the Stockholders specifying the total number of Stockholder Shares it wishes to purchase pursuant to such exercise (and the corresponding number of each such Stockholder's Shares) and the place, the date (not less than two nor more than 20 business days from the date of the Exercise Notice), and the time for the closing of such purchase, provided that such date and time may be earlier than two days after the Exercise Notice if reasonably practicable. Each closing of a purchase of Stockholder Shares pursuant to this Section 1.2(a) (a "Closing") shall take place at the place, on the date and at the time designated by the Sub in its Exercise Notice, provided that if, at the date of the Closing herein provided for, the conditions set forth in paragraphs (i) or (ii) of Section 1.4 shall not have been satisfied, the Sub may postpone the Closing until a date within five business days after such conditions are satisfied. (b) The Sub shall not be under any obligation to deliver an Exercise Notice and may allow the Option to terminate without purchasing any Stockholder Shares hereunder; provided, however, that once the Sub has delivered to the Stockholders an Exercise Notice, subject to the terms and conditions of this Agreement, the Sub shall be bound to effect the purchase as described in such Exercise Notice unless there shall be a preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or order promulgated by any governmental authority, prohibiting or otherwise restraining the purchase of the Stockholder Shares pursuant to the Option. Section 1.3 CLOSING. At each Closing, (a) each Stockholder shall deliver to the Sub (in accordance with the Sub's instructions) a certificate or certificates (the "Certificates") representing the number of such Stockholder's Shares to be purchased at such Closing, duly endorsed or accompanied by stock powers duly executed in blank with an appropriate signature guarantee and (b) the Sub shall deliver to such Stockholder a certified or bank cashier's check or checks payable to or upon the order of such Stockholder in an amount equal to (i) the number of such Stockholder's Shares being purchased at such Closing multiplied by (ii) the Purchase Price. Section 1.4 CONDITIONS. The obligation of each Stockholder to sell Stockholder Shares at any Closing is subject to satisfaction of each of the following conditions: -2- 3 (i) All waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act") applicable to such exercise of the Option shall have expired or been terminated. (ii) There shall be no preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, nor any statute, rule, regulation or order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining such exercise of the Option. (iii) A proposal for an Alternative Transaction (as defined in the Merger Agreement) involving the Company shall have been made on or after the date of this Agreement and prior to the Merger Termination Date. (iv) At the time the Exercise Notice is sent, the Company shall have entered into a proposal, plan or agreement with respect to an Alternative Transaction. Section 1.5 CERTAIN ADJUSTMENTS. (a) In the event of any change in the Company's capital stock by reason of stock dividends, stock splits, mergers, consolidations, recapitalizations, combinations, conversions, exchanges of shares, extraordinary or liquidating dividends, or other changes in the corporate of capital structure of the Company which would have the effect of diluting or changing the Sub's rights hereunder, the number and kind of shares or securities subject to the Option and the Purchase Price per Stockholder Share (but not the total Purchase Price) shall be appropriately and equitably adjusted so that the Sub shall receive upon exercise of the Option the number and class of shares or other securities or property that the Sub would have received in respect of the Stockholder Shares purchasable upon exercise of the Option if the Option had been exercised immediately prior to such event. Each Stockholder shall take such steps in connection with such consolidation, merger, liquidation or other such action as may be necessary to assure that the provisions hereof shall thereafter apply as nearly as possible to any securities or property thereafter deliverable upon exercise of the Option. (b) In the event the value of the consideration per Share to be paid by the Sub pursuant to the Merger is increased, the Purchase Price shall be similarly -3- 4 increased and in the event any Closing hereunder shall have occurred, the Sub shall promptly pay to each Stockholder the product of the amount of such increase in the Purchase Price multiplied by the number of such Stockholder's Shares as to which the Option has been exercised. ARTICLE II VOTING AGREEMENT; IRREVOCABLE GRANT OF PROXY 2.1 VOTING AGREEMENT. Each Stockholder hereby agrees to vote all Shares that such Stockholder is entitled to vote to approve and adopt the Merger Agreement, the Merger and all agreements related to the Merger and any actions related thereto at any meeting of the stockholders of the Company, and at any adjournment thereof (or by written consent in lieu of a meeting), at which such Merger Agreement and other related agreements (or any amended version thereof), or such other actions, are submitted for the consideration and vote of the stockholders of the Company. Each Stockholder hereby agrees that it will not vote (or give a written consent with respect to) any Shares in favor of the approval of any (i) Acquisition Proposal by any person other than Buyer or its affiliates, (ii) reorganization, recapitalization, liquidation or winding up of the Company or any other extraordinary transaction involving the Company, (iii) corporate action the consummation of which would frustrate the purposes, or prevent or delay the consummation, of the transactions contemplated by the Merger Agreement or (iv) other matter relating to, or in connection with, any of the foregoing matters. 2.2. IRREVOCABLE PROXY. Each Stockholder hereby revokes any and all previous proxies granted with respect to such Stockholder's Shares. Each Stockholder hereby grants a proxy appointing the Sub as such Stockholder's attorney-in-fact and proxy, with full power of substitution, for and in such Stockholder's name, to vote, express consent or dissent, or otherwise to utilize such voting power in such manner and upon such matters as the Sub or its proxy or substitute shall, in the Sub's sole discretion, deem proper with respect to such Stockholder's Shares. The proxy granted by each Stockholder pursuant to this Section 2.2 is irrevocable and is granted in consideration of the Sub's entering into this Agreement and the Merger Agreement and incurring certain related fees and expenses. The proxy grant by each Stockholder shall be revoked upon termination of this Agreement in accordance with its terms. At the Sub's request, each Stockholder shall perform such further acts and execute such further documents as may be required to vest in the Sub the sole power to vote the Shares during the term of the proxy granted herein. -4- 5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Each of the Stockholders severally represents and warrants to the Sub that: Section 3.1 VALID TITLE. Such Stockholder is the sole, true, lawful record and beneficial owner of such Stockholder's Shares with no restrictions on such Stockholder's voting rights or rights of disposition pertaining thereto. At any Closing, such Stockholder will convey good and valid title to such Stockholder's Shares being purchased free and clear of any and all claims, liens, charges, encumbrances and security interests. None of such Stockholder's Shares is subject to any voting trust or other agreement or arrangement with respect to the voting of such Shares. Section 3.2 NON-CONTRAVENTION. The execution, delivery and performance by such Stockholder of this Agreement and the Custody Agreement and the consummation of the transactions contemplated hereby and thereby (i) are within such Stockholder's powers, have been duly authorized by all necessary action (including any consultation, approval or other action by or with any other person), (ii) require no action by or in respect of, or filing with, any governmental body, agency, official or authority (except as required under the HSR Act), and (iii) do not and will not contravene or constitute a default under, or give rise to a right of termination, cancellation or acceleration of any right or obligation of such Stockholder or to a loss of any benefit of such Stockholder under, any statute, rule or regulation applicable to such Stockholder (except that the pre-merger notification requirements of the HSR Act may apply), or injunction, order, decree, or other instrument binding on such Stockholder or result in the imposition of any lien on any asset of such Stockholder. Section 3.3 BINDING EFFECT. This Agreement and the Custody Agreement have been duly executed and delivered by such Stockholder and are the valid and binding agreements of such Stockholder, enforceable against such Stockholder in accordance with their respective terms except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. If this Agreement or the Custody Agreement is being executed in a representative or fiduciary capacity, the person signing this Agreement or the Custody Agreement, as the case may be, has full power and authority to enter into and perform this Agreement or the Custody Agreement. Section 3.4 TOTAL SHARES. The number of Shares set forth on SCHEDULE A hereto are the only Shares legally or beneficially owned by such Stockholder and, except as set forth on SCHEDULE A, such Stockholder owns no options to purchase or rights to -5- 6 subscribe for or otherwise acquire any securities of the Company and has no other interest in or voting rights with respect to any securities of the Company. Section 3.5 FINDER'S FEES. No investment banker, broker or finder is entitled to a commission or fee from the Buyer, the Sub or the Company in respect of this Agreement or the Custody Agreement based upon any arrangement or agreement made by or on behalf of such Stockholder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SUB The Sub represents and warrants to each of the Stockholders that the Sub has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance by the Sub of this Agreement and the consummation by the Sub of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Sub and no other corporate action on the part of the Sub is necessary to authorize the execution, delivery or performance by the Sub of this Agreement and the consummation by the Sub of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Sub and is a valid and binding agreement of the Sub, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally. ARTICLE V COVENANTS OF THE STOCKHOLDERS Each of the Stockholders hereby covenants and agrees that: Section 5.1 NO PROXIES FOR OR ENCUMBRANCES ON STOCKHOLDER SHARES. Except as provided in this Agreement, such Stockholder shall not, during the term of this Agreement, without the prior written consent of the Sub, directly or indirectly, (i) grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any Shares or (ii) sell, assign, transfer, encumber or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer, encumbrance or other disposition of, any Shares. Such Stockholder shall not seek or solicit any such sale, assignment, transfer, encumbrance or other disposition or any such contract, option or other arrangement or assignment or understanding and agrees to notify the Sub -6- 7 promptly and to provide all details required by the Sub if such Stockholder shall be approached or solicited, directly or indirectly, by any person with respect to any of the foregoing. Section 5.2 NO SHOP. Such Stockholder shall not directly or indirectly (i) solicit, initiate or encourage (or authorize any person to solicit, initiate or encourage) any inquiry, proposal or offer from any person to acquire the business, property or capital stock of the Company or any direct or indirect subsidiary thereof, or any acquisition of a substantial equity interest in, or a substantial amount of the assets of, the Company or any direct or indirect subsidiary thereof, whether by merger, purchase of assets, tender offer or other transaction or (ii) participate in any discussion or negotiations regarding, or furnish to any other person any information with respect to, or otherwise cooperate in any way with, or participate in, facilitate or encourage any effort or attempt by any other person to do or seek any of the foregoing. Such Stockholder shall promptly advise Sub of the terms of any communications it may receive relating to any of the foregoing. Section 5.3 CONDUCT OF STOCKHOLDERS. Such Stockholder will not (i) take, agree or commit to take any action that would make any representation and warranty of such Stockholder hereunder inaccurate in any respect as of any time prior to the termination of this Agreement or (ii) omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time. ARTICLE VI MISCELLANEOUS Section 6.1 EXPENSES. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. Section 6.2 FURTHER ASSURANCES. Except as otherwise provided in the Merger Agreement, the Stockholders will each execute and deliver or cause to be executed and delivered all further documents and instruments and use their respective best efforts to secure such consents and take all such further action as may be reasonably necessary in order to consummate the transactions contemplated hereby or to enable the Sub and any assignee to exercise and enjoy all benefits and rights of the Stockholders with respect to the Option and the Stockholder Shares. Section 6.3 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or -7- 8 cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations and which may be required under any agreements, contracts, commitments, instruments, understandings, arrangements or restrictions of any kind to which such party is a party or by which such party is governed or bound, to consummate and make effective the transactions contemplated by this Agreement. Section 6.4 SPECIFIC PERFORMANCE. The parties hereto agree that the Sub may be irreparably damaged if for any reason any Stockholder failed to sell such Stockholder's Shares (or other securities deliverable pursuant to Section 1.5) upon exercise of the Option or to perform any of its other obligations under this Agreement, and that the Sub would not have any adequate remedy at law for money damages in such event. Accordingly, the Sub shall be entitled to specific performance and injunctive and other equitable relief to enforce the performance of this Agreement by each Stockholder. This provision is without prejudice to any other rights that the Sub may have against any Stockholder for any failure to perform its obligations under this Agreement. Section 6.5 NOTICES. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly delivered two business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service for next business day delivery, if to the Buyer or the Sub, at its address set forth below its signature hereto; and if to a Stockholder, to such Stockholder at his address set forth on SCHEDULE A hereto. Any party may give any notice, request, demand, claim, or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the party for whom it is intended. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth. Section 6.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained in this Agreement shall survive delivery of and payment for the Stockholder Shares. Section 6.7 AMENDMENTS; TERMINATION; EXPIRATION. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. This Agreement may be terminated by the Buyer and the Sub upon written notice to the Stockholders. This -8- 9 Agreement and the Stockholder's obligations hereunder shall expire on the first to occur of (a) the Effective Time, (b) 181 days after the termination of the Merger Agreement in accordance with its terms, and (c) the termination of the Seller Stock Option Agreement (as defined in the Merger Agreement) pursuant to clause (c) of Section 18 thereof; PROVIDED, HOWEVER, that no such expiration shall relieve a Stockholder from such Stockholder's obligation to deliver Shares to the Sub to the extent the Sub has delivered an Exercise Notice prior to the 181st day after the termination of the Merger Agreement in accordance with its terms but the Closing has not occurred prior to such 181st day. Section 6.8 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that Sub may assign its rights and obligations to any affiliate of Sub and provided, further, that no Stockholder may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the Sub. Section 6.9 GOVERNING LAW AND VENUE. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN, AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS TO BE PERFORMED WHOLLY IN SUCH STATE. The parties hereby (a) irrevocably submit to the jurisdiction of the Chancery Court of the State of Delaware and the federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and in respect of the transactions contemplated hereby and thereby and (b) waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject to such jurisdiction or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the parties irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such courts. The parties hereby consent to and grant any such court's jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 6.5, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. Section 6.10 COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instruments. -9- 10 Section 6.11 BUYER GUARANTY. Buyer hereby unconditionally guarantees the Sub's obligations under this Agreement and agrees to be liable for any breach of this Agreement by the Sub. Section 6.12 HEADINGS. The headings and captions used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Section 6.13 OBLIGATIONS SEPARATE; STOCKHOLDER CAPACITY. The obligations of the Stockholders hereunder are several and not joint. Each Stockholder who is an individual signs solely in his capacity as the record holder and beneficial owner of, or the trustee of a trust whose beneficiaries are the beneficial owners of, such Stockholder's Shares and nothing herein shall limit or affect any actions taken by a Stockholder in his capacity as an officer or director of the Company. Section 6.14 DEFINED TERMS. Capitalized terms used in this Agreement and not otherwise defined shall have the meaning given to such terms in the Merger Agreement. [Remainder of page intentionally left blank.] -10- 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. BUYER: EG&G, INC. By: /s/ Angelo Castellana ----------------------------- Title: Senior Vice President Name: Angelo Castellana Address: 45 William Street Wellesley, MA 02481 copy to: Hale and Dorr LLP 60 State Street Boston, MA 02109 Attention: David E. Redlick, Esq. SUB: VENICE ACQUISITION CORP. By: /s/ Angelo Castellana ----------------------------- Title: Treasurer Name: Angelo Castellana Address: c/o EG&G, Inc. 45 William Street Wellesley, MA 02481 -11- 12 STOCKHOLDERS: /s/ S. David Ellenbogen --------------------------- S. David Ellenbogen ELLENBOGEN FAMILY IRREVOCABLE TRUST OF 1996 By: /s/ Charles T. O'Neill, Trustee ----------------------------------- Charles T. O'Neill, as Trustee S. DAVID ELLENBOGEN 1996 RETAINED ANNUITY TRUST By: /s/ Charles T. O'Neill, Trustee ----------------------------------- Charles T. O'Neill, as Trustee /s/ Jay A. Stein ----------------------------- Jay A. Stein JAY A. STEIN 1996 RETAINED ANNUITY TRUST By: /s/ Charles T. O'Neill, Trustee ----------------------------------- Charles T. O'Neill, as Trustee -12- 13 SCHEDULE A STOCKHOLDER NAME AND ADDRESS NUMBER OF SHARES S. David Ellenbogen 164,884 Hologic, Inc. 35 Crosby Drive Bedford, Massachusetts 01730 Ellenbogen Family Irrevocable 237,500 Trust of 1996 c/o O'Neill & Neylon 950 Winter Street Waltham, Massachusetts 02154 S. David Ellenbogen 210,616 1996 Retained Annuity Trust c/o O'Neill & Neylon 950 Winter Street Waltham, Massachusetts 02154 Jay A. Stein 565,114 Hologic, Inc. 35 Crosby Drive Bedford, Massachusetts 01730 Jay A. Stein 124,886 1996 Retained Annuity Trust c/o O'Neill & Neylon 950 Winter Street Waltham, Massachusetts 02154 -13- -----END PRIVACY-ENHANCED MESSAGE-----