EXHIBIT 1
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of March 1997, by
COMPSCRIPT, INC., Florida corporation ("Buyer"), COMPSCRIPT ACQUISITION
SUBSIDIARY, a Florida corporation and a wholly-owned subsidiary of Buyer
("Acquisition"); HYTREE PHARMACY, INC., an Ohio corporation (the "Company"),
XXXXX XXXXXX, an individual resident in Ohio ("X. Xxxxxx"), XXXXXX XXXXXX, an
individual resident in Ohio ("X. Xxxxxx"), XXXXXX XXXXXXXXXXXX, an individual
resident in Ohio ("Xxxxxxxxxxxx") and XXXXXX XXXXXXXX ("Lewarski") (X. Xxxxxx,
X. Xxxxxx, Xxxxxxxxxxxx and Lewarski each a "Seller" and, collectively the
"Sellers").
RECITALS
Shareholders own all of the issued and outstanding shares (the
"Shares") of capital stock of the Company,
WHEREAS, Buyer, Acquisition, the Company and the Shareholders wish to
set forth the terms and conditions upon which a merger of the Company with and
into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition and the
Company deems the merger advisable and in the best interests of each of Buyer,
Acquisition and the Company and of their respective shareholders. The Board of
Directors of each of Buyer, Acquisition and the Company has adopted resolutions
approving this Agreement and the transactions contemplated hereby, and each of
the Boards of Directors of Acquisition and the Company have directed that this
Agreement be submitted for consideration by the shareholders of Acquisition and
the Company; and
WHEREAS, the parties hereto intend this transaction to be treated as a
tax-free reorganization, as that term is defined under the Internal Revenue Code
of 1986, as amended.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"ACQUISITION"--as defined in the first paragraph of this Agreement.
"APPLICABLE CONTRACT"--any Contract (a) under which Company has or
may acquire any rights, (b) under which Company has or may become subject to any
obligation or liability, or (c) by which Company or any of the assets owned or
used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision,
or (b) any claim (by any Person) or other occurrence or circumstance that is or
was inconsistent with such representation, warranty, covenant, obligation, or
other provision, and the term "Breach" means any such inaccuracy, breach,
failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"BUYER COMPANIES"-- the collective combination of Buyer and
Acquisition.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing actually
takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Employment
Agreements, the Noncompetition Agreements and the Sellers' Releases;
(c) the performance by Buyer and Sellers of their respective
covenants and obligations under this Agreement; and
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(d) Buyer's acquisition and ownership of the Shares and exercise of
control over the Company.
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYMENT AGREEMENTS"--as defined in Section 7.2(6)(ii).
"ENCUMBRANCE"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
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(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as
amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing
the hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and
used so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES"--any real property, leaseholds, or other interests
currently or formerly owned or operated by Company and any buildings, plants,
structures, or
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equipment (including motor vehicles, tank cars, and rolling stock) currently or
formerly owned or operated by Company.
"GAAP"--generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
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"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"NONCOMPETITION AGREEMENTS"--as defined in Section 2.4(a)(iv).
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
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(a) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) [and is not required to be specifically authorized by the
parent company (if any) of such Person]; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
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(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves as
a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or
(c).
(g) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5% of the outstanding equity securities or
equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SELLERS' RELEASES"--as defined in Section 7.2(b)(i).
"SHARES"--as defined in the Recitals of this Agreement.
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"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the merger of
Acquisition into Company.
"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this Agreement, at
the Effective Time, Acquisition shall be merged with and into Company (the
"Merger"). The separate existence and corporate organization of Acquisition
shall thereupon cease and the Company and Acquisition shall thereupon be a
single corporation. The Company shall be the surviving corporation in the Merger
(the "Surviving Corporation") and shall continue its existence under the
provisions of the General Corporation Law of Ohio.
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2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles of
Merger") shall be executed by the Company and Acquisition and shall be filed
with the Secretary of States of the State of Florida and Ohio. The Merger shall
become effective at such time as the Certificate of Merger is filed with the
Secretary of State of the States of Florida and Ohio, such time being
hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Company as in effect immediately
prior to the Effective Time shall be and remain the Articles of Incorporation of
the Surviving Corporation from and after the Effective Time until amended as
provided by law.
2.4 BY-LAWS
The Regulations of the Company as in effect immediately prior to the
Effective Time shall be and remain the Regulations of the Surviving Corporation
from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause the Directors of the
Buyer to be appointed as directors of the Surviving Corporation. The officers of
Acquisition shall serve as the officers of the Surviving Corporation until their
successors have been elected or appointed and shall have qualified in accordance
with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be effective as of
March 26, 1997, or at such later date as the parties hereto shall agree in
writing (the "Closing Date"), and shall be held at the offices of Buyer's
counsel at 000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 at 10:00
a.m. (local time). Subject to the provisions of Section 9, failure to consummate
the purchase and sale provided for in this Agreement on the date and time and at
the place determined pursuant to this Section 2.6 will not result in the
termination of this Agreement and will not relieve any party of any obligation
under this Agreement.
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of capital stock of Buyer, Acquisition, Company
or Shareholders: (i) the shares of Common Stock of Acquisition purchased, issued
and outstanding immediately prior to the Effective Time shall be converted as a
result of the Merger and
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without any action on the part of the holder thereof, into 100 shares of capital
stock of the Surviving Corporation and shall represent all the issued and
outstanding Shares; (ii) each share of the Company shall be converted into and
shall become, without further action on the part of the of the Shareholders, the
right to receive 5555.5 shares of Buyer's Common Stock for each outstanding
share of Company Common Stock
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and Company hereby jointly and severally represent and
warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list for the Company of its jurisdiction of incorporation, other
jurisdictions in which it is authorized to do business, and its capitalization
(including the identity of each stockholder and the number of shares held by
each). The Company is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable Contracts. The Company
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and Company, enforceable against Sellers and Company in
accordance with its terms. Upon the execution and delivery by Sellers of the
Employment Agreements, and the Sellers' Releases (collectively, the "Sellers'
Closing Documents"), the Sellers' Closing Documents will constitute the legal,
valid, and binding obligations of Sellers, enforceable against Sellers in
accordance with their respective terms. Sellers have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Sellers' Closing Documents and to perform their obligations
under this Agreement and the Sellers' Closing Documents. The Company has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and perform its obligations under this Agreement.
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(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or any Seller, or any of
the assets owned or used by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no
Seller or the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers are acquiring the Buyer Common Stock for their own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act. Each Seller is an "accredited investor" as such
term is defined in Rule 501(a) under the Securities Act. Each Seller
acknowledges that each certificate
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representing the Buyer's Common Stock acquired pursuant to the transactions
contemplated hereby shall bear an appropriate restrictive legend.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 200
shares of common stock, no par value per share and 50 non-voting shares of
Common Stock, no par value per share, of which 150 voting shares 3 non-voting
shares are issued and outstanding and constitute the Shares. Sellers are and
will be on the Closing Date the record and beneficial owners and holders of the
Shares, free and clear of all Encumbrances. X. Xxxxxx owns 50 of the Shares, X.
Xxxxxx owns 50 of the Shares Xxxxxxxxxxxx owns 50 of the Shares and Lewarski
owns 3 of the non-voting Shares. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in Part 3.3 of the Disclosure Letter, there are no Contracts relating
to the issuance, sale, or transfer of any equity securities or other securities
of the Company. None of the outstanding equity securities or other securities of
the Company was issued in violation of the Securities Act or any other Legal
Requirement. Except as set forth in Part 3.3 of the Disclosure Letter, the
Company does not own, or has any Contract to acquire, any equity securities or
other securities of any Person or any direct or indirect equity or ownership
interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers and the Company have delivered to Buyer: (a) audited
consolidated balance sheets of the Company as at March 31, 1996, and the related
audited consolidated statements of income, changes in stockholders' equity, and
cash flow for each of the fiscal year then ended, together with the report
thereon of Ernst & Young, independent certified public accountants, and (b) an
audited consolidated balance sheet of the Company as at December 31, 1996 (the
"Interim Balance Sheet") and the related unaudited consolidated statements of
income, changes in stockholders' equity, and cash flow for the nine months then
ended, including in each case the notes thereto. Such financial statements and
notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet)]; the financial statements referred to in this
Section 3.4 reflect the consistent application of such accounting principles
throughout the periods involved. No financial statements of any Person other
than the Company is required by GAAP to be included in the consolidated
financial statements of the Company.
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3.5 BOOKS AND RECORDS
Except as set forth in Part. 3.5 of the Disclosure Letter, the
books of account, minute books, stock record books, and other records of the
Company, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices.
The minute books of the Company contains accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors, and committees of the Board of Directors of the Company, and no
meeting of any such stockholders, Board of Directors, or committee has been held
for which minutes have not been prepared and are not contained in such minute
books. At the Closing, all of those books and records will be in the possession
of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other interests therein owned
by the Company. Sellers and the Company have delivered or made available to
Buyer copies of the deeds and other instruments (as recorded) by which the
Company acquired such real property and interests, and copies of all title
insurance policies, opinions, abstracts, and surveys in the possession of
Sellers or the Company and relating to such property or interests. The Company
owns (with good and marketable title in the case of real property, subject only
to the matters permitted by the following sentence) all the properties and
assets (whether real, personal, or mixed and whether tangible or intangible)
that they purport to own located in the facilities owned or operated by the
Company or reflected as owned in the books and records of the Company, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Letter and personal
property sold since the date of the Balance Sheet and the Interim Balance Sheet,
as the case may be, in the Ordinary Course of Business), and all of the
properties and assets purchased or otherwise acquired by the Company since the
date of the Balance Sheet (except for personal property acquired and sold since
the date of the Balance Sheet in the Ordinary Course of Business and consistent
with past practice). Except as set forth in Part 3.6 of the Disclosure Letter,
all material properties and assets reflected in the Balance Sheet and the
Interim Balance Sheet are free and clear of all Encumbrances and are not, in the
case of real property, subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) mortgages or security interests
shown on the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or lapse of time or both, would constitute a default) exists, (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no
14
default (or event that, with notice or lapse of time or both, would constitute a
default) exists, (c) liens for current taxes not yet due, and (d) with respect
to real property, (i) minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of the Company, (ii)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto. All buildings, plants, and
structures owned by the Company lies wholly within the boundaries of the real
property owned by the Company and does not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person, and (e) other
items, if any, in Part 3.6 of the Disclosure Letter.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
Except as limited in Part 3.7 of the Disclosure Letter with
respect to the retail locations of the Company, the buildings, plants,
structures, and equipment of the Company are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The building, plants,
structures, and equipment of the Company is sufficient for the continued conduct
of the Company's business after the Closing in substantially the same manner as
conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. Unless paid
prior to the Closing Date, the Accounts Receivable are or will be as of the
Closing Date current and collectible net of the respective reserves shown on the
Balance Sheet or the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (which reserves are adequate and calculated
consistent with past practice and, in the case of the reserve as of the Closing
Date, will not represent a greater percentage of the Accounts Receivable as of
the Closing Date than the reserve reflected in the Interim Balance Sheet
represented of the Accounts Receivable reflected therein and will not represent
a material adverse change in the composition of such Accounts Receivable in
terms of aging). Subject to such reserves, each of the Accounts Receivable
either has been or will be collected in full, without any set-off, within ninety
days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Part 3.8 of the
Disclosure Letter contains a complete and accurate list of all Accounts
15
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the
Balance Sheet or the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below- standard quality, all of which have been written off or
written down to net realizable value in the Balance Sheet or the Interim Balance
Sheet or on the accounting records of the Company as of the Closing Date, as the
case may be. All inventories not written off have been priced at the lower of
cost or market on a first in, first out basis. The quantities of each item of
inventory (whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable in the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the
Company has no liabilities or obligations of any nature (whether known or
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance Sheet or
the Interim Balance Sheet and current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed (on a timely
basis since inception) all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. Sellers have delivered
to Buyer copies of, and Part 3.11 of the Disclosure Letter contains a complete
and accurate list of, all such Tax Returns filed since 1993. The Company has
paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Sellers or the Company, except such Taxes, if any, as are
listed in Part 3.11 of the Disclosure Letter and are being contested in good
faith and as to which adequate reserves (determined in accordance with GAAP)
have been provided in the Balance Sheet and the Interim Balance Sheet.
(b) The United States federal and state income Tax Returns of
the Company subject to such Taxes have been audited by the IRS or relevant state
tax authorities or are closed by the applicable statute of limitations for all
taxable years through March 31, 1993. Part 3.11 of the Disclosure Letter
contains a complete and accurate list of all audits of all such Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result
16
of such audits have been paid, reserved against, settled, or, as described in
Part 3.11 of the Disclosure Letter, are being contested in good faith by
appropriate proceedings. Part 3.11 of the Disclosure Letter describes all
adjustments to the United States federal income Tax Returns filed by the Company
or any group of corporations including the Company for all taxable years since
1993, and the resulting deficiencies proposed by the IRS. Except as described in
Part 3.11 of the Disclosure Letter, no Seller or Company has given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of the Company are adequate (determined in accordance
with GAAP) and are at least equal to the Company's liability for Taxes. There
exists no proposed tax assessment against the Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter. No consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper Governmental Body or other Person.
(d) All Tax Returns filed by (or that include on a
consolidated basis) the Company are true, correct, and complete. There is no tax
sharing agreement that will require any payment by Company after the date of
this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and no event has occurred or circumstance
exists that may result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
Except as set forth in Part 3.13 of the Disclosure Letter,
Company has not contributed to any pension, profit sharing, option or other
incentive plan or any other type of employment benefit plan or maintains, or is
or was a party to, or otherwise participates or participated in,on its own
behalf or on behalf of any former employee, any pension, profit sharing, option
or other incentive plan, or any other type of employee benefit plan, or any
obligation to, or arrangement with, former employees, if any, for bonuses,
incentive compensation, vacation, severance pay, sick pay, sick leave,
insurance, service awards, relocation, disability or other benefits whether
written or oral.
17
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) The Company is, and at all times since December 31,
1993 has been, in full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its business or the ownership
or use of any of its assets;
(ii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement, or (B) may give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and
(iii) The Company has not received, at any time since
December, 1993, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned or used
by, the Company. Each Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter is valid and in full force and effect.
Except as set forth in Part 3.14 of the Disclosure Letter:
(i) The Company is, and at all times since December 31,
1993 has been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified in Part 3.14
of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in Part 3.14
of the Disclosure Letter, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, or any
modification to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
18
(iii) The Company has not received, at any time since
December, 1993, any notice or other communication (whether oral or written) from
any Governmental Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and
(iv) all applications required to have been filed for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of
the Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its businesses in the manner it currently conducts and operates such businesses
and to permit the Company to own and use its assets in the manner in which they
currently own and use such assets.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Company, (1) no
such Proceeding has been Threatened, and (2) no event has occurred or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. Sellers have delivered to Buyer copies of
all pleadings, correspondence, and other documents relating to each Proceeding
listed in Part 3.15 of the Disclosure Letter. The Proceedings listed in Part
3.15 of the Disclosure Letter will not have a material adverse effect on the
business, operations, assets, condition, or prospects of the Company.
19
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which Company, or any of the
assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that relates to
the business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the
Company is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all times since December, 1993
has been, in full compliance with all of the terms and requirements of each
Order to which it, or any of the assets owned or used by it, is or has been
subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time since
December 31, 1993 any notice or other communication (whether oral or written)
from any Governmental Body or any other Person regarding any actual, alleged,
possible, or potential violation of, or failure to comply with, any term or
requirement of any Order to which the Company, or any of the assets owned or
used by the Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter,
since the date of the Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital stock of
the Company; issuance of any security convertible into such capital stock; grant
of any registration rights; purchase, redemption, retirement, or other
acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock except that the Company has amended its
capitalization to create non-voting stock and issued three (3) shares of non-
20
voting stock to Lewarski to meet Company's obligations under the agreement
described as the Lewarski Agreement in Part 3.16 of the Disclosure Letter;
(b) except as described in (a) above, amendment to the
Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer, or
(except in the Ordinary Course of Business) employee or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Company;
(f) entry into, termination of, or receipt of notice of
termination of (i) any license, distributorship, dealer, sales representative,
joint venture, credit, or similar agreement, or (ii) any Contract or transaction
excluding purchase orders issued in the Ordinary Course involving a total
remaining commitment by or to the Company of at least $5,000;
(g) sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company, including the sale, lease, or
other disposition of any of the Intellectual Property Assets;
(h) cancellation or waiver of any claims or rights with a
value to the Company in excess of $5,000;
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to
do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a
complete and accurate list, and Sellers have delivered to Buyer true and
complete copies, of:
21
(i) excluding purchase orders issued in the Ordinary
Course each Applicable Contract that involves performance of services or
delivery of goods or materials by the Company of an amount or value in excess of
$5,000;
(ii) excluding customer orders received in the Ordinary
Course each Applicable Contract that involves performance of services or
delivery of goods or materials to the Company of an amount or value in excess of
$5,000;
(iii) each Applicable Contract that was not entered into
in the Ordinary Course of Business and that involves expenditures or receipts of
the Company in excess of $5,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $5,000 and with terms of less than one year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual property,
including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that
in any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate of
the Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or
by any Person based on sales, purchases, or profits, other than direct payments
for goods;
(x) each power of attorney that is currently effective and
outstanding;
22
(xi) each Applicable Contract entered into other than in
the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for capital expenditures in
excess of $5,000;
(xiii) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance extended by the
Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth
reasonably complete details concerning such Contracts, including the parties to
the Contracts, the amount of the remaining commitment of the Company under the
Contracts, and the Company's office where details relating to the Contracts are
located.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) neither Seller (and no Related Person of either
Seller) has or may acquire any rights under, and neither Seller has or may
become subject to any obligation or liability under, any Contract that relates
to the business of, or any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part 3.17(a) of
the Disclosure Letter is in full force and effect and is valid and enforceable
in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) the Company is, and at all times since December, 1993
has been, in material compliance with material applicable terms and requirements
of each Contract under which the Company has or had any obligation or liability
or by which the Company or any of the assets owned or used by the Company is or
was bound;
23
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company has or had any rights is,
and at all times since December 31, 1993, has been, in material compliance with
material applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that
(with or without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other Person the
right to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any Applicable
Contract; and
(iv) the Company has not given to or received from any
other Person, at any time since December 31, 1993, any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such Person
has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Company has been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal
Requirement.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance
to which the Company is a party or under which the Company, or any director of
the Company, is or has been covered at any time within the three years preceding
the date of this Agreement;
(ii) true and complete copies of all pending applications
for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
24
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year,
for the current policy year and each of the three preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance
policy for an amount in excess of $5,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim;
and
(iii) a statement describing the loss experience for all
claims that were self-insured, including the number and aggregate cost of such
claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) All policies to which the Company is a party or that
provide coverage to either Seller, the Company, or any director or officer of
Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound
and reputable;
(C) taken together, provide adequate insurance
coverage for the assets and the operations of the Company for all risks normally
insured against by a Person carrying on the same business as the Company;
25
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by which any of
them is bound;
(E) will continue in full force and effect following
the consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of the Company.
(ii) No Seller or the Company has received (A) any refusal
of coverage or any notice that a defense will be afforded with reservation of
rights, or (B) any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to perform its obligations
thereunder.
(iii) The Company has paid all premiums due, and have
otherwise performed all of their respective obligations, under each policy to
which the Company is a party or that provides coverage to the Company or
director thereof.
(iv) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) To the Knowledge of Sellers and the Company, the Company
is, and at all times has been, in full compliance with, and has not been and is
not in violation of or liable under, any Environmental Law. No Seller or the
Company has any basis to expect, nor has any of them or, to their Knowledge, any
other Person for whose conduct they are or may be held to be responsible
received, any actual or Threatened order, notice, or other communication from
(i) any Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company has had an interest, or with respect to any
property or Facility at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used, or processed by Sellers, the
Company, or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
26
(b) There are no pending or, to the Knowledge of Sellers and
the Company, Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or affecting
any of the Facilities or any other properties and assets (whether real,
personal, or mixed) in which Sellers or the Company has or had an interest.
(c) No Seller or the Company has Knowledge of any basis to
expect, nor has any of them or, to their Knowledge, any other Person for whose
conduct they are or may be held responsible, received, any citation, directive,
inquiry, notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which Sellers or the Company had an interest
(d) No Seller or the Company, or, to their Knowledge, any
other Person for whose conduct they are or may be held responsible, has any
Environmental, Health, and Safety Liabilities with respect to the Facilities or
with respect to any other properties and assets (whether real, personal, or
mixed) in which Sellers or the Company (or any predecessor), has or had an
interest, or at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
(e) There are no Hazardous Materials present on or in the
Environment at the Facilities or, to the Knowledge of Sellers and the Company,
at any geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage tanks,
landfills, land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in land,
water, dumps, or any other part of the Facilities or such adjoining property, or
incorporated into any structure therein or thereon. No Seller, the Company, or,
to the Knowledge of Sellers and the Company, any other Person for whose conduct
they are or may be held responsible, or to the Knowledge of Sellers and the
Company, any other Person, has permitted or conducted, or is aware of, any
Hazardous Activity conducted with respect to the Facilities or any other
properties or assets (whether real, personal, or mixed) in which Sellers or the
Company has or had an interest.
(f) To the Knowledge of Sellers and the Company, there has
been no Release of any Hazardous Materials in such quantities, condition or
locations that would violate any Environmental Law at or from the Facilities or
from or by any other properties and assets (whether real, personal, or mixed) in
which Sellers or the Company has or had an interest, or any geologically or
hydrologically adjoining property, whether by Sellers, the Company, or any other
Person.
27
(g) Sellers have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by Sellers, the Company, or any other Person for whose conduct they are or may
be held responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status: employer;
name; job title; current compensation paid or payable and any change in
compensation since December 31, 1996; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under the Company's pension,
retirement, profit-sharing, thrift- savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any Director Plan.
(b) No employee or director of the Company is a party to, or
is otherwise bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee or director. To Sellers' Knowledge, no
director, officer, or other key employee of the Company intends to terminate his
employment with the Company.
(c) Part 3.20 of the Disclosure Letter also contains a
complete and accurate list of the following information for each retired
employee or director of the Company, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE
Since December 31, 1993, the Company has not been or is a
party to any collective bargaining or other labor Contract. Since December,
1993, there has not been, there is not presently pending or existing, and to
Sellers' Knowledge there is not Threatened, (a) any strike, slowdown, picketing,
work stoppage, or employee grievance process, (b) any Proceeding against or
affecting the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment
28
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Company or its premises, or
(c) any application for certification of a collective bargaining agent. To
Sellers' Knowledge no event has occurred or circumstance exists that could
provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by the Company, and no such action is contemplated by
the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) INTELLECTUAL PROPERTY ASSETS--The term "Intellectual
Property Assets" includes:
(i) the name, Hytree Pharmacy, all fictional business
names, trading names, registered and unregistered trademarks, service marks, and
applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions
and discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights
in Mask Works"); and
(v) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade Secrets");
owned, used, or licensed by the Company as licensee or licensor.
(b) AGREEMENTS--Part 3.22(b) of the Disclosure Letter
contains a complete and accurate list and summary description, including any
royalties paid or received by the Company, of all Contracts relating to the
Intellectual Property Assets to which the Company is a party or by which the
Company is bound, except for any license implied by the sale of a product and
perpetual, paid-up licenses for commonly available software programs with a
value of less than $5,000 under which the Company is the
29
licensee. There are no outstanding and, to Sellers' Knowledge, no Threatened
disputes or disagreements with respect to any such agreement.
(c) KNOW-HOW NECESSARY FOR THE BUSINESS
(i) The Intellectual Property Assets are all those
necessary for the operation of the Company's businesses as they are currently
conducted. The Company is the owner of all right, title, and interest in and to
each of the Intellectual Property Assets, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse claims, and has
the right to use without payment to a third party all of the Intellectual
Property Assets.
(ii) Except as set forth in Part 3.22(c) of the
Disclosure Letter, all former and current employees of the Company have executed
written Contracts with the Company that assign to the Company all rights to any
inventions, improvements, discoveries, or information relating to the business
of the Company. No employee of the Company has entered into any Contract that
restricts or limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than the Company.
(d) PATENTS
(i) Part 3.22(d) of the Disclosure Letter contains a
complete and accurate list and summary description of all Patents. The Company
is the owner of all right, title, and interest in and to each of the Patents,
free and clear of all liens, security interests, charges, encumbrances,
entities, and other adverse claims.
(ii) All of the issued Patents are currently in
compliance with formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing Date.
(iii) No Patent has been or is now involved in any
interference, reissue, reexamination, or opposition proceeding. To Sellers'
Knowledge, there is no potentially interfering patent or patent application of
any third party.
(iv) No Patent is infringed or, to Sellers' Knowledge,
has been challenged or threatened in any way. None of the products manufactured
and sold, nor any process or know-how used, by the Company infringes or is
alleged to infringe any patent or other proprietary right of any other Person.
30
(v) All products made, used, or sold under the Patents
have been marked with the proper patent notice.
(e) Trademarks
(i) Part 3.22(e) of Disclosure Letter contains a
complete and accurate list and summary description of all Marks. The Company is
the owner of all right, title, and interest in and to each of the Marks, free
and clear of all liens, security interests, charges, encumbrances, equities, and
other adverse claims.
(ii) All Marks that have been registered with the
United States Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Closing Date.
(iii) No Xxxx has been or is now involved in any
opposition, invalidation, or cancellation and, to Sellers' Knowledge, no such
action is Threatened with the respect to any of the Marks.
(iv) To Sellers' Knowledge, there is no potentially
interfering trademark or trademark application of any third party.
(v) No Xxxx is infringed or, to Sellers' Knowledge,
has been challenged or threatened in any way. None of the Marks used by the
Company infringes or is alleged to infringe any trade name, trademark, or
service xxxx of any third party.
(vi) All products and materials containing a Xxxx xxxx
the proper federal registration notice where permitted by law.
(f) Copyrights
(i) Part 3.22(f) of the Disclosure Letter contains a
complete and accurate list and summary description of all Copyrights. The
Company is the owner of all right, title, and interest in and to each of the
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All the Copyrights have been registered and are
currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the date of Closing.
31
(iii) No Copyright is infringed or, to Sellers'
Knowledge, has been challenged or threatened in any way. None of the subject
matter of any of the Copyrights infringes or is alleged to infringe any
copyright of any third party or is a derivative work based on the work of a
third party.
(iv) All works encompassed by the Copyrights have been
marked with the proper copyright notice.
(g) TRADE SECRETS
(i) With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
(ii) Sellers and the Company have taken all reasonable
precautions to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) The Company has good title and an absolute (but
not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are
not part of the public knowledge or literature, and, to Sellers' Knowledge, have
not been used, divulged, or appropriated either for the benefit of any Person
(other than the Company) or to the detriment of the Company. No Trade Secret is
subject to any adverse claim or has been challenged or threatened in any way.
3.23 CERTAIN PAYMENTS
Since December 31, 1993, the Company or director,
officer, agent, or employee of the Company, or to Sellers' Knowledge any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company, or
(iv) in violation of any Legal Requirement, (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers or
Company in this Agreement and no statement in the Disclosure Letter omits to
state a material fact
32
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to any Seller or the
Company that has specific application to Seller or the Company (other than
general economic or industry conditions) and that materially adversely affects
the assets, business, prospects, financial condition, or results of operations
of the Company that has not been set forth in this Agreement or the Disclosure
Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure
Letter, no Seller or any Related Person of Sellers or of the Company has, or has
had, any interest in any property (whether real, personal, or mixed and whether
tangible or intangible), used in or pertaining to the Company's businesses. No
Seller or any Related Person of Sellers or of the Company is, or has owned (of
record or as a beneficial owner) an equity interest or any other financial or
profit interest in, a Person that has (i) had business dealings or a material
financial interest in any transaction with the Company, or (ii) engaged in
competition with the Company with respect to any line of the products or
services of the Company (a "Competing Business") in any market presently served
by the Company. Except as set forth in Part 3.25 of the Disclosure Letter, no
Seller or any Related Person of Sellers or of the Company is a party to any
Contract with, or has any claim or right against, the Company.
3.26 BROKERS OR FINDERS
The Company, Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND BUYER
Acquisition and Buyer (collectively "Buyer Companies"),
jointly and severally, represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Each of Acquisition and Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Each of Acquisition and Buyer has the corporate power and authority to
own or lease and operate its
33
properties to carry on its business as now being conducted, and is duly
qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization except
where the failure to so qualify would not have a material adverse effect on the
Buyer and Acquisition, taken as a whole.
4.2 AUTHORITY
Each of Acquisition and Buyer has the corporate power
and has taken all necessary corporate action to authorize Acquisition or Buyer
as the case may be, to execute, deliver and perform the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery by
each of Acquisition and Buyer of this Agreement, and the Employment Agreement to
which it is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as maybe limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 INVESTMENT REPRESENTATIONS
Buyer is aware that the Shares are not registered
under the Securities Act. Buyer possesses such knowledge and experience in
business matters such that it is capable of evaluating the merits and risks of
an investment in the Shares hereunder. Buyer is acquiring the Shares for its own
account, for investment purposes only and not with a view to the distribution
thereof. Buyer agrees that the Shares will not be sold, transferred, pledged,
offered for sale or otherwise disposed of without registration under the
Securities Act, except pursuant to a valid exemption from registration under the
Securities Act.
4.4 CAPITALIZATION OF BUYER
(a) The authorized capital stock of Buyer consists of
(i) 50,000,000 shares of Buyer common stock, par value $.0001 per share, of
which 10,908,132 shares were issued and outstanding as of December 31, 1996; and
(ii) 1,000,000 shares of preferred stock, par value $.0001 per share, of which
no shares were issued and outstanding. All the issued and outstanding shares of
Buyer Common Stock are validly issued, fully paid and non-assessable. As of
December 31, 1996 Buyer had reserved 1,425,000 shares of Buyer Common Stock for
issuance upon exercise of outstanding stock options and warrants. Except as set
forth above or contemplated by this Agreement or as disclosed in the SEC
Documents (as defined in Section 4.5 hereof) and/or the Buyer Financial
Statements, (i) there are no shares of capital stock of Buyer issued or
outstanding and (ii) there are no outstanding subscriptions, options, warrants,
rights, convertible securities or other agreements or commitments of any
character obligating Buyer to issue any securities.
34
(b) The authorized capital stock of Acquisition
consists of (i) 100 shares of Acquisition common stock, par value $.0001 per
share, of which 100 shares were issued and outstanding as of December 31, 1996.
All the issued and outstanding shares of Acquisition Capital Stock are validly
issued, fully paid and non-assessable. There are no shares of capital stock of
Acquisition issued or outstanding and there are no outstanding subscriptions,
options, warrants, rights, convertible securities or other agreements or
commitments of any character obligating Acquisition to issue any securities.
(c) The shares of Buyer Common Stock to be issued to
the Sellers pursuant to the Merger, when so issued, will be duly and validly
authorized, issued and outstanding, fully paid, non-assessable and free of
preemptive rights.
4.5 BUYER FINANCIALS AND SEC REPORTS
Buyer has heretofore furnished to the Sellers a true
and complete copy of (i) each definitive proxy statement filed by Buyer with the
Securities and Exchange Commission (the "SEC") after April 25, 1996, and (ii)
each report on Form 10- K or 10-Q (and any amendments thereto) filed by Buyer
with the SEC after April 25, 1996 (collectively the "SEC Documents"). None of
the SEC Documents referred to in the preceding sentence as of the date they were
filed with the SEC contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the statements of consolidated financial position,
consolidated operations, consolidated stockholders' equity and changes in
consolidated financial position for the fiscal year or period ended, September
30, 1996 or thereafter included in the SEC Documents referred to in the first
sentence of this Section (the "Buyer Financials") (including any related notes
thereto) fairly presents the consolidated financial position and the
consolidated operations, shareholders' equity and changes in financial position,
as the case may be, of Buyer and its subsidiaries as of its date or for the
respective periods set forth therein (subject, in the case of unaudited
statements, to normal recurring year-end audit adjustments), in each case, in
accordance with generally accepted accounting principles consistently applied
during the periods involved (in the case of audited statements) or applicable
accounting requirements of the SEC.
4.6 COMPLIANCE WITH LAWS IN GENERAL
Neither Acquisition nor Buyer has received any notices
of material violations of any federal, state and local laws, regulations and
ordinances relating to its business and operations, including, without
limitation, HCFA, any environmental law, the Occupational Safety and Health Act,
the Americans with Disabilities Act, the Medicare or applicable Medicaid
statutes and regulations and any Environmental Laws.
35
4.7 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced
against Buyer and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To Buyer's Knowledge, no such Proceeding has been Threatened.
4.8 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold Sellers harmless from any such payment
alleged to be due by or through Buyer as a result of the action of Buyer or its
officers or agents.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company and its Representatives to, (a)
afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, "Buyer's Advisors") full and free access to the
Company's personnel, properties (including subsurface testing), contracts, books
and records, and other documents and data, (b) furnish Buyer and Buyer's
Advisors with copies of all such contracts, books and records, and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating, and other
data and information as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESSES OF THE COMPANY
Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to:
(a) conduct the business of the Company only in the
Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the
current business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
36
(c) confer with Buyer concerning operational matters
of a material nature; and
(d) otherwise report periodically to Buyer concerning
the status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
not, and will cause the Company not to, without the prior consent of Buyer, take
any affirmative action, or fail to take any reasonable action within their or
its control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this
Agreement, Sellers will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing
Date, each Seller will promptly notify Buyer in writing if such Seller or the
Company becomes aware of any fact or condition that causes or constitutes a
Breach of any of Sellers' representations and warranties as of the date of this
Agreement, or if such Seller or the Company becomes aware of the occurrence
after the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition. Should any
such fact or condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or discovery of any such
fact or condition, Sellers will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, each Seller
will promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
37
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement,
Sellers will cause all indebtedness owed to Company by either Seller or any
Related Person of either Seller to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Sellers will not, and will cause the Company
and each of its Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets of the Company,
or any of the capital stock of the Company, or any merger, consolidation,
business combination, or similar transaction involving the Company. Sellers
shall notify Buyer of any solicitation from any person.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing
Date, Sellers will use their Best Efforts to cause the conditions in Sections 7
and 8 to be satisfied.
6. COVENANTS OF ACQUISITION AND BUYER.
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this
Agreement, Buyer will, and will cause each of its Related Persons to, make all
filings required by Legal Requirements to be made by them to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Buyer will, and will cause each Related Person to, cooperate with Sellers
with respect to all filings that Sellers are required by Legal Requirements to
make in connection with the Contemplated Transactions, and (ii) cooperate with
Sellers in obtaining all consents identified in Part 3.2 of the Disclosure
Letter; provided that this Agreement will not require Buyer to dispose of or
make any change in any portion of its business or to incur any other burden to
obtain a Governmental Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1,
between the date of this Agreement and the Closing Date, Buyer will use its Best
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
38
6.3 POST-CLOSING TAX RETURNS
(a) Buyer shall cause Surviving Corporation to prepare
and file all federal and state income tax returns for the Surviving Corporation
(including those of the Company) for all tax periods ending on or after the
Closing Date.
(b) Buyer shall cause Surviving Corporation to include
the results of the respective operations of the Company and the Surviving
Corporation in any separate state or local income tax return for any taxable
year which is due after the Closing Date and to file such returns on a timely
basis. Buyer shall pay, or cause to be paid, all local income taxes (including
interest and penalties relating thereto) shown as due on any such return with
respect to the Company and the Surviving Corporation.
6.4 TAX FREE REORGANIZATION TREATMENT
Buyer will take all reasonable action to insure that
the Contemplated Transactions qualify as a tax-free reorganization under
applicable sections of the IRC. Buyer shall cause all tax returns relating to
the Company, Buyer and Acquisition to be filed on the basis of treating the
Merger as a tax free merger pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Code.
At the Closing, Buyer and Acquisition shall deliver a
certificate executed by an officer regarding Buyer's current intentions and
plans with regard to conduct of the Surviving Corporation of the merger of
Acquisition in the Company following the Closing. Such certificate shall be in
form and content reasonably acceptable to Sellers and shall provide, among other
things, that neither Buyer nor Acquisition (i) currently intends to issue any
Common Stock of Acquisition or the Surviving Corporation to any independent
third party, (ii) currently intends to reacquire any of the Buyer Common Stock
to be issued in connection with the Merger, (iii) currently intends to dispose
of the stock of Acquisition or the Surviving Corporation, other than to itself
or an affiliate, (iv) currently intends to liquidate or sell its assets
otherwise than in the ordinary course of the Surviving Corporation's business
and (v) currently intends to cause Acquisition, following the Closing, to
discontinue conducting the business conducted by the Company prior to the
Closing.
6.5 GENERAL COOPERATION IN TAX MATTERS
After the Closing Date, Buyer and the Surviving
Corporation shall cooperate fully with the Sellers and shall make available to
the Sellers as reasonably requested, and to any taxing authority, all
information, records, or documents relating to liabilities or potential
liabilities for taxes of, or related to, the Company, for all period ending on
or before the Closing Date. Surviving Corporation shall preserve all such
information, records, and documents until the expiration of any applicable
statute of limitations or extensions thereof. So long as taxable periods of, or
related to the
39
Company ending on or before the Closing Date remain open, Buyer shall promptly
notify the Sellers in writing of any pending or threatened tax audits of
assessments for which the Sellers have or may have sole, joint or several
liability within thirty (30) days following the receipt by Buyer or any
affiliate of notice of such pending or threatened audit or assessment. Buyer
shall keep the Sellers' reasonably informed as to all aspects of any
administrative or judicial proceeding that may result in the payments by the
Sellers of any tax.
6.6 COMPANY BANK LOAN
At the Closing Buyer shall payoff the Company's
$1,000,000 line of credit with Bank One or take necessary action to have each
Seller released from personal liability on their guaranties of the line of
credit.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to consummate the Merger and to
take the other actions required to be taken by Buyer at the Closing is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and Company's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date without giving effect to any supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers
and Company are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.
(b) There shall be delivered at Closing (i) Sellers
Releases in the form of Exhibit 7.2(b)(i) (collectively "Sellers Releases")
executed by Sellers; and (ii) Employment Agreements in the form of Exhibit
7.(b)(ii) executed by Sellers (collectively "Employment Agreements").
7.3 INTENTIONALLY LEFT BLANK
40
7.4 SHAREHOLDER APPROVAL
The Merger Agreement shall have been approved by the
Sellers.
7.5 ADDITIONAL DOCUMENTS
Each of the following documents must have been
delivered to Buyer:
(a) an opinion of Xxxxxx & Xxxxxxxxxx, P.L.L. dated
the Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer may reasonably
request for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.6(a), (ii) evidencing the accuracy of any of Sellers'
representations and warranties, (iii) evidencing the performance by either
Seller of, or the compliance by either Seller with, any covenant or obligation
required to be performed or complied with by such Seller, (iv) evidencing the
satisfaction of any condition referred to in this Section 7, or (v) otherwise
facilitating the consummation or performance of any of the Contemplated
Transactions.
7.6 NO PROCEEDINGS
Since the date of this Agreement, there must not have
been commenced or Threatened against Buyer, or against any Person affiliated
with Buyer, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Contemplated Transactions, or (b)
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any of the Contemplated Transactions.
7.7 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE
PROCEEDS
There must not have been made or Threatened by any
Person any claim asserting that such Person (a) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the Company, or
(b) is entitled to all or any portion of the Purchase Price payable for the
Shares.
7.8 NO PROHIBITION
Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence
41
under, (a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise proposed
by or before any Governmental Body.
8. CONDITIONS PRECEDENT TO SELLERS' AND COMPANY'S
OBLIGATION TO CLOSE
Sellers' and Company's obligation to consummate the
Merger and to take the other actions required to be taken by Sellers and Company
at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by Sellers, in
whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer
and Acquisition is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered the Employment
Agreements.
(c) Buyer shall deliver evidence of its compliance
with Section 6.6 concerning Company's Bank One line of credit.
8.3 INTENTIONALLY LEFT BLANK
8.4 SHAREHOLDER APPROVAL
The Merger Agreement shall have been approved by the
Sellers.
8.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have
been commenced or Threatened against Sellers or Company, or against any Person
affiliated with Sellers or Company, any Proceeding (a) involving any challenge
to, or seeking
42
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
8.6 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be
delivered to Sellers:
(a) an opinion of Atlas, Xxxxxxxx, Trop & Borkson,
P.A., dated the Closing Date, in the form of Exhibit 8.6(a); and
(b) such other documents as Sellers may reasonably
request for the purpose of (i) enabling their counsel to provide the opinion
referred to in Section 7.5(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer, (iii) evidencing the performance by Buyer
of, or the compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (ii) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions.
8.7 NO INJUNCTION
There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the Merger, and (b) has been
adopted or issued, or has otherwise become effective, since the date of this
Agreement.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
(a) by either Buyer and Acquisition or Sellers and
Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been waived;
(b) (i) by Buyer and Acquisition if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Sellers and Company, if any of the conditions in Section 8 has not been
satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers to comply with
their
43
obligations under this Agreement) and Sellers have not waived such condition on
or before the Closing Date;
(c) by mutual consent of Buyer and Acquisition and
Sellers and Company; or
(d) by either Buyer and Acquisition or Sellers and
Company if the Closing has not occurred (other than through the failure of any
party seeking to terminate this Agreement to comply fully with its obligations
under this Agreement) on or before April 15, 1997, or such later date as the
parties may agree upon.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is
in addition to any other rights it may have under this Agreement or otherwise,
and the exercise of a right of termination will not be an election of remedies.
If this Agreement is terminated pursuant to Section 9.1, all further obligations
of the parties under this Agreement will terminate, except that the obligations
in Sections 11.1 and 11.3 will survive; provided, however, that if this
Agreement is terminated by a party because of the Breach of the Agreement by the
other party or because one or more of the conditions to the terminating party's
obligations under this Agreement is not satisfied as a result of the other
party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE
All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, and any other certificate or document delivered pursuant to
this Agreement will survive the Closing. The right to indemnification, payment
of Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
44
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and
hold harmless Buyer, the Surviving Corporation, and its respective
Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any loss, liability, claim, damage (including incidental
and consequential damages), expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made
by Sellers or Company in this Agreement (without giving effect to any supplement
to the Disclosure Letter), the Disclosure Letter, the supplements to the
Disclosure Letter, or any other certificate or document delivered by Sellers
pursuant to this Agreement;
(b) any Breach of any representation or warranty made
by Sellers or Company in this Agreement as if such representation or warranty
were made on and as of the Closing Date without giving effect to any supplement
to the Disclosure Letter, other than any such Breach that is disclosed in a
supplement to the Disclosure Letter and is expressly identified in the
certificate delivered pursuant to Section 2.4(a)(v) as having caused the
condition specified in Section 7.1 not to be satisfied;
(c) any Breach by any Seller or Company of any
covenant or obligation of such Seller in this Agreement;
(d) any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date;
(e) any matter disclosed in Part 3.15(2) of the
Disclosure Letter to the extent any Damages exceed insurance proceeds; or
(f) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either Seller or
the Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will not be
exclusive of or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
45
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS--
ENVIRONMENTAL MATTERS
In addition to the provisions of Section 10.2,
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Surviving Corporation and the other Indemnified Persons for, and will pay to
Buyer, the Company, and the other Indemnified Persons the amount of, any Damages
(including costs of cleanup, containment, or other remediation) arising,
directly or indirectly, from or in connection with:
(a) any Environmental, Health, and Safety Liabilities
arising out of or relating to: (i) (A) the ownership, operation, or condition at
any time on or prior to the Closing Date of the Facilities or any other
properties and assets (whether real, personal, or mixed and whether tangible or
intangible) in which Sellers or the Company has or had an interest, or (B) any
Hazardous Materials or other contaminants that were present on the Facilities or
such other properties and assets at any time on or prior to the Closing Date; or
(ii) (A) any Hazardous Materials or other contaminants, wherever located, that
were, or were allegedly, generated, transported, stored, treated, Released, or
otherwise handled by Sellers or the Company or by any other Person for whose
conduct they are held responsible by a court of competent jurisdiction at any
time on or prior to the Closing Date, or (B) any Hazardous Activities that were,
or were allegedly, conducted by Sellers or the Company or by any other Person
for whose conduct they are held responsible by a court of competent jurisdiction
at any time on or prior to the Closing Date; or
(b) any bodily injury (including illness, disability,
and death, and regardless of when any such bodily injury occurred, was incurred,
or manifested itself), personal injury, property damage (including trespass,
nuisance, wrongful eviction, and deprivation of the use of real property), or
other damage of or to any Person, including any employee or former employee of
Sellers or the Company or any other Person for whose conduct they are held
responsible by a court of competent jurisdiction, in any way arising from or
allegedly arising from any Hazardous Activity conducted or allegedly conducted
with respect to the Facilities or the operation of the Company in violation of
the Environmental Law prior to the Closing Date, or from Hazardous Material that
was (i) present or suspected to be present on or before the Closing Date on or
at the Facilities (or present or suspected to be present on any other property,
if such Hazardous Material emanated or allegedly emanated from any of the
Facilities and was present or suspected to be present on any of the Facilities
on or prior to the Closing Date) in violation of the Environmental Law or (ii)
Released or allegedly Released by Sellers or the Company or any other Person for
whose conduct they are or may be held responsible, at any time on or prior to
the Closing Date in violation of the Environmental Law.
46
Sellers, with consent of Buyers which shall not be
unreasonably withheld, will be entitled to control any Cleanup, any related
Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under this Section
10.3. The procedure described in Section 10.9 will apply to any claim solely for
monetary damages relating to a matter covered by this Section 10.3.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and
will pay to Sellers the amount of any Damages arising, directly or indirectly,
from or in connection with (a) any Breach of any representation or warranty made
by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to
this Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement, or (c) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.5 TIME LIMITATIONS; MINIMUM CLAIM
If the Closing occurs, Sellers will have no liability
(for indemnification or otherwise) with respect to any representation or
warranty, or covenant or obligation to be performed and complied with prior to
the Closing Date, unless on or before one year from the Closing Date Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. A claim for indemnification
or reimbursement not based upon any representation or warranty or any covenant
or obligation to be performed and complied with prior to the Closing Date, may
be made on or before one year from the Closing Date. If the Closing occurs,
Buyer will have no liability (for indemnification or otherwise) with respect to
any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before one year from the
Closing Date Sellers notify Buyer of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Sellers.
Notwithstanding any conflicting or inconsistent
provisions hereof:
(a) Neither party shall be liable in damages,
indemnity or otherwise to the other party in respect of the inaccuracy or breach
of any representations, warranties, covenants or agreements herein except to the
extent that the Damages to the aggrieved party caused by such inaccuracy or
breach exceed the sum of $50,000.
47
(b) The maximum amount of liability for
indemnification by any party shall not exceed a dollar amount equal to the fair
market value on the Closing Date of Buyer's shares received pursuant to Section
2.7, provided, however, that such limitations shall not apply to a breach of the
Representations and Warranties contained in Sections 3.3, 3.11 and 3.15.
(c) This Section 10.5 will not apply to the extent
that damages are incurred by such party as the result of fraud or the willful
breach of any representation, warranty or covenant by another party to the
Agreement.
10.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party
under Section 10.2, 10.4, or (to the extent provided in the last sentence of
Section 10.3) Section 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 10.6(a)
is brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 10 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against
48
the indemnified party, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on Sellers with respect to such a
claim anywhere in the world.
10.7 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the party from whom
indemnification is sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Sellers will cause the
Company not to incur any fees or expenses in connection with this Agreement. In
the event of termination of this Agreement, the obligation of each party to pay
its own expenses will be subject to any rights of such party arising from a
breach of this Agreement by another party.
49
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Buyer determines. Unless consented to by
Buyer in advance or required by Legal Requirements, prior to the Closing Sellers
shall, and shall cause the Company to, keep this Agreement strictly confidential
and may not make any disclosure of this Agreement to any Person except Sellers'
counsel, financial advisors and accountants. Sellers and Buyer will consult with
each other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the
Closing Date, Buyer and Sellers will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings.
If the Contemplated Transactions are not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request. Whether or not the
Closing takes place, Sellers waive, and will upon Buyer's request cause the
Company to waive, any cause of action, right, or claim arising out of the access
of Buyer or its representatives to any trade secrets or other confidential
information of the Company except for the intentional competitive misuse by
Buyer of such trade secrets or confidential information.
11.4 NOTICES
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate
50
addresses and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
Sellers: Xxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxxxxxx
Xxxxxx Xxxxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx, P.L.L.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Company: Xxxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxx 00000
with a copy to: Xxxxxx & Xxxxxxxxxx, P.L.L.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Buyer and CompScript, Inc.
Acquisition Sub: 0000 Xxxxxx Xxxxx Xxxxxxx, X.X.
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile No.: 000-000-0000
51
with a copy to: Atlas, Xxxxxxxx, Trop & Borkson, P.A.
New River Center
000 Xxxx Xxx Xxxx Xxxxxxxxx
Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Facsimile No.: 000-000-0000
11.5 JURISDICTION; SERVICE OF PROCESS
Any controversy or claim arising out of or relating to
this Agreement or its breach, shall be settled by arbitration in accordance with
the governing rules of the American Arbitration Association with a panel of
three (3) arbitrators (one selected by Sellers, one by Buyer and the third
selected by the chosen arbitrators). Said arbitration shall be conducted in an
expeditious manner, and the parties agree that an arbitration hearing shall be
conducted on the first available date of the arbitrators after the parties have
completed discovery. In the event of an arbitration proceeding, the arbitration
shall occur in the city and state chosen by the non-moving party. In the event
of litigation or arbitration arising out of this Agreement, the prevailing party
shall be entitled to recover any and all reasonable attorneys' fees and costs
incurred both at the arbitration level and/or any appeal of the arbitration.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each
other such further information, (b) to execute and deliver to each other such
other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by
52
a party will be applicable except in the specific instance for which it is
given; and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements
between the parties with respect to its subject matter and constitutes (along
with the documents referred to in this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
11.9 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and
those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under
this Agreement without the prior consent of the other parties except that,
subject to the requirements of Section 6.4, Buyer may assign any of its rights
under this Agreement to any Subsidiary of Buyer. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement. This Agreement and all of its provisions and conditions are for
the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain
53
in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
11.13 TIME OF ESSENCE
With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
11.14 GOVERNING LAW
This Agreement will be governed by the laws of the
State of Florida without regard to conflicts of laws principles.
11.15 COUNTERPARTS
This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Merger
Agreement as of the date first written above.
BUYER: SELLERS:
COMPSCRIPT, INC.
By: /s/ XXXXXX XXXXXXX /s/ XXXXX XXXXXX
------------------------ --------------------------
Name: XXXXXX XXXXXXX XXXXX XXXXXX
Title: VICE PRESIDENT
54
ACQUISITION:
COMPSCRIPT ACQUISITION SUBSIDIARY
By: /s/ XXXXXX XXXXXXX /s/ XXXXXX XXXXXX
------------------------- ------------------------
Name: XXXXXX XXXXXXX XXXXXX XXXXXX
Title: VICE PRESIDENT
/s/ XXXXXX XXXXXXXXXXXX
------------------------
XXXXXX XXXXXXXXXXXX
/s/ XXXXXX XXXXXXXX
------------------------
XXXXXX XXXXXXXX
COMPANY:
HYTREE PHARMACY, INC.
By: /s/ XXXXX XXXXXX
--------------------------
Name: XXXXX XXXXXX
Title: PRESIDENT
55
