EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXX HEALTH SERVICES, INC.,
XXXXXX DISTRIBUTORS, INC.
AND
DRUG GUILD DISTRIBUTORS, INC.
Dated as of October 25, 1996
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TABLE OF CONTENTS
Page
I. NAME OF SURVIVING CORPORATION; CERTIFICATE OF
INCORPORATION AND BY-LAWS; BOARD OF DIRECTORS, OFFICERS................ 2
ss.1.01 The Merger..................................................... 2
ss.1.02 Certificate of Incorporation and By-laws....................... 2
ss.1.03 Board of Directors and Officers................................ 2
II. STATUS AND CONVERSION OF SECURITIES.................................... 3
ss.2.01 Stock of DGD................................................... 3
(a) DGD Common Stock........................................... 3
(b) Surrender and Exchange of DGD Common Stock; No Fractional
Shares..................................................... 4
(c) Transfer Taxes............................................. 5
(d) DGD Stock Transfers........................................ 5
(e) DGD Preferred Stock........................................ 5
ss.2.02 DGD Stock ..................................................... 6
III. SHAREHOLDER APPROVAL; BOARD OF DIRECTORS'
RECOMMENDATIONS; FILING; EFFECTIVE TIME................................ 6
ss.3.01 Shareholder Approvals; Board of Directors' Recommendations..... 6
ss.3.02 Dissenting Shareholders........................................ 7
ss.3.03 Filing; Effective Time......................................... 7
IV. CERTAIN EFFECTS OF MERGER.............................................. 7
V. COVENANTS.............................................................. 8
ss.5.01 Covenants of DGD............................................... 8
(a) Certificate of Incorporation and By-laws................... 8
(b) Shares and Options......................................... 8
(c) Dividends and Purchases of Stock........................... 9
(d) Financial Information; Access.............................. 9
(e) Conduct of Business........................................ 10
(f) Advice of Changes.......................................... 12
(g) Confidentiality............................................ 12
(h) Public Statements.......................................... 14
(i) Consents Without Any Condition............................. 15
(j) Transfer Taxes............................................. 15
(k) Compensation, Employment Plans, Retirement Plans, etc...... 15
(l) Liens; Indebtedness; etc................................... 17
(m) Business Combinations...................................... 17
(n) Compliance with Laws....................................... 17
(o) Taxes...................................................... 18
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(p) Material for Registration Statement and Proxy Statement.... 18
ss.5.02 Covenants of Xxxxxx............................................ 18
(a) Access..................................................... 18
(b) Conduct of Business........................................ 20
(c) Advice of Changes.......................................... 20
(d) Confidentiality............................................ 21
(e) Public Statements.......................................... 22
(f) Consents................................................... 22
(g) Employee Benefits. ....................................... 23
(h) Material for Proxy Statement............................... 23
(i) Transfer Taxes............................................. 24
(j) Officer and Director Indemnification....................... 24
(k) Securities Law Compliance.................................. 24
VI. REPRESENTATIONS AND WARRANTIES......................................... 25
ss.6.01 Certain Representations and Warranties of DGD.................. 25
(a) Organization and Qualification............................. 25
(b) Capitalization............................................. 26
(c) Financial Condition........................................ 27
(d) Taxes...................................................... 28
(e) Other Liabilities.......................................... 30
(f) Litigation and Claims; Labor Matters....................... 30
(g) Properties................................................. 32
(h) Contracts and Other Instruments............................ 34
(i) Employees.................................................. 37
(j) Patents, Trademarks, Etc................................... 43
(k) Questionable Payments...................................... 46
(l) Authority to Merge......................................... 46
(m) Insurance.................................................. 48
(n) Books and Records.......................................... 49
(o) Customers and Suppliers.................................... 49
(p) Bank Accounts; Securities.................................. 49
(q) Disclosure................................................. 50
(r) Information to be Included in the Registration
Statement and the Proxy Statement........................ 50
(s) Accuracy of SEC Filings.................................... 50
(t) Agreements Not to Compete.................................. 51
(u) Environmental Conditions................................... 51
ss.6.02 Certain Representations and Warranties of Xxxxxx &
Distributors............................................ 57
(a) Organization and Qualification............................. 57
(b) Authority to Merge......................................... 57
(c) Business After the Effective Time.......................... 59
(d) Status of Xxxxxx Common Stock To Be Issued................. 59
(e) Financial Condition........................................ 60
(f) Litigation and Claims...................................... 61
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(g) Other Liabilities.......................................... 61
(h) Capitalization............................................. 62
ss.7.01 Conditions of Xxxxxx........................................... 62
(a) Accuracy of Representations and Compliance
With Conditions.......................................... 62
(b) Certificates from DGD...................................... 63
(c) Opinions of DGD's Counsel.................................. 64
(d) Accountants' Letter........................................ 64
(e) Other Closing Documents.................................... 64
(f) Review of Proceedings..................................... 64
(g) Legal Action............................................... 65
(h) No Governmental Action..................................... 65
(i) INTENTIONALLY OMITTED...................................... 66
(j) Xxxx-Xxxxx-Xxxxxx Waiting Period........................... 66
(k) Fairness Opinion........................................... 66
(l) Contractual Consents Needed................................ 66
(m) Shareholder Consent........................................ 66
(n) No Material Adverse Effect................................. 67
(o) Financing Approvals........................................ 67
(p) Pooling.................................................... 67
(q) ISRA....................................................... 67
(r) Pension Plan............................................... 67
(s) Registration Statement..................................... 68
ss.7.02 Conditions of DGD.............................................. 68
(a) Accuracy of Representations and Compliance
With Conditions.......................................... 68
(b) Certificates from Xxxxxx................................... 69
(c) Opinion of Xxxxxx'x Counsel................................ 69
(d) Other Closing Documents.................................... 69
(e) Review of Proceedings...................................... 70
(f) Legal Action............................................... 70
(g) No Governmental Action..................................... 70
(h) Xxxx-Xxxxx-Xxxxxx Waiting Period........................... 71
(i) Fairness Opinion........................................... 71
(j) Securities Law Compliance.................................. 71
(k) No Material Adverse Effect................................. 71
VIII. TERMS OF ABANDONMENT................................................... 72
ss.8.01 Mandatory Abandonment.......................................... 72
ss.8.02 Optional Abandonment........................................... 72
ss.8.03 Effect of Abandonment.......................................... 73
IX. INTENTIONALLY OMITTED.................................................. 74
X. MISCELLANEOUS.......................................................... 74
ss.10.01 Further Actions............................................... 74
ss.10.02 Availability of Equitable Remedies............................ 74
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ss.10.03 Survival...................................................... 75
ss.10.04 Modification.................................................. 76
ss.10.05 Notices....................................................... 76
ss.10.06 Waiver........................................................ 77
ss.10.07 Binding Effect................................................ 77
ss.10.08 No Third-Party Beneficiaries.................................. 77
ss.10.09 Severability.................................................. 78
ss.10.10 Headings...................................................... 78
ss.10.11 Counterparts; Governing Law; Jurisdiction, Etc................ 78
ss.10.12 Election of Directors......................................... 79
ss.10.13 Pooling Modifications......................................... 80
ss.10.14 Definitions................................................... 80
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXX HEALTH SERVICES, INC.,
XXXXXX DISTRIBUTORS, INC.
AND
DRUG GUILD DISTRIBUTORS, INC.
AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of October 25,
1996, by and among Xxxxxx Health Services, Inc. a New Jersey corporation whose
address is 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Xxxxxx"), Xxxxxx
Distributors, Inc., a New Jersey corporation whose address is 000 Xxxxxxxx
Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Distributors") and Drug Guild
Distributors, Inc., a New Jersey corporation whose address is 000 Xxxxxxxxxx
Xxxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000 ("DGD"); (Distributors in its capacity as
the surviving corporation being herein sometimes called the "Surviving
Corporation," and Distributors and DGD being herein sometimes called the
"Constituent Corporations").
The parties hereto agree as follows:
I. NAME OF SURVIVING CORPORATION; CERTIFICATE OF INCORPORATION
AND BY-LAWS; BOARD OF DIRECTORS, OFFICERS
ss.1.01 The Merger
At the Effective Time (as defined in Section 3.03 hereof) and subject to
the terms and conditions of this Agreement and the New Jersey Business
Corporation Act (the "NJBCA"), DGD shall be merged with and into Distributors,
and Distributors shall survive the merger (the "Merger"). The name of the
Surviving Corporation shall be "Xxxxxx Distributors, Inc." Upon the Effective
Time, the separate corporate existence of DGD shall cease and Distributors shall
be the surviving corporation after the Merger. From and after the Effective
Time, the Surviving Corporation shall possess all the rights, privileges, powers
and franchises and be subject to all of the obligations, liabilities,
restrictions, disabilities and duties of DGD and Distributors, all as provided
under the NJBCA and as set forth in Article IV hereof. The parties hereto intend
the Merger to be (i) a tax free reorganization pursuant to Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) a "pooling of
interests" in accordance with generally accepted accounting principles ("GAAP").
ss.1.02 Certificate of Incorporation and By-laws
The certificate of incorporation (as defined in Section 14A:1-2.1 of the
NJBCA) and the by-laws of Distributors as in effect at the Effective Time shall
from and after the Effective Time be the certificate of incorporation and the
by-laws of the Surviving Corporation until they are amended.
ss.1.03 Board of Directors and Officers
The directors and the officers of the Surviving Corporation at the
Effective Time shall be the directors and the officers of Distributors at the
Effective Time, each to serve, in each
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case (subject to the Surviving Corporation's by-laws), until their respective
successors shall have been elected and qualified.
II. STATUS AND CONVERSION OF SECURITIES
ss.2.01 Stock of DGD
(a) DGD Common Stock. Subject to Section 2.01(b), each share of common
stock, $1.00 par value per share, of DGD (the "DGD Common Stock") outstanding at
the Effective Time shall, subject to the terms and conditions of this Agreement,
at the Effective Time, be converted into the right to receive that number of
shares of the common stock, no par value per share, of Xxxxxx (the "Xxxxxx
Common Stock") equal to the Per Share Consideration (as defined below) except
that shares of DGD Common Stock held in DGD's treasury shall, by virtue of the
Merger and without any action on the part of Xxxxxx, Distributors or DGD, be
canceled, and no cash, securities or other property shall be issued in the
Merger in respect thereof. In this Agreement, the term "Per Share Consideration"
shall mean the product arrived at by multiplying one share of Xxxxxx Common
Stock by a fraction: (i) the numerator of which shall be the number of shares of
Xxxxxx Common Stock which would have to be issued, in the aggregate, to DGD
shareholders so that upon consummation of the Merger such shareholders would own
23% of the issued and outstanding shares of Xxxxxx Common Stock and (ii) the
denominator of which shall be the sum of (A) the total amount of issued and
outstanding shares of DGD Common Stock immediately prior to the Effective Time
and (B) the number of shares of DGD Common Stock which could be purchased on the
day prior to the Effective Date pursuant to Subscriptions (as defined in Section
2.02); provided, however, that unless evidence satisfactory to Xxxxxx is
provided that a Subscription has been terminated or cancelled and
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is no longer in effect, all DGD Common Stock issuable pursuant to a Subscription
set forth on Schedule 2.02 will be included in the denominator. All shares of
Xxxxxx Common Stock issued in exchange for DGD Common Stock will be subject to
the same restrictions as are currently in effect for the holders of DGD Common
Stock and will not be freely tradable by the holder thereof until a public
offering of Xxxxxx Common Stock has occurred or any shares of Xxxxxx Common
Stock not issued as a result of the Merger are freely tradeable.
Xxxxxx covenants that prior to the Effective Date it will have authorized
sufficient shares of Xxxxxx Common Stock to cover the shares required to be
issued in the Merger.
(b) Surrender and Exchange of DGD Common Stock; No Fractional Shares.
Subject to the provisions of Section 2.01(a) and of Section 2.01(c), after the
Effective Time, each holder of an outstanding certificate or certificates (the
"Old Certificates") which represented shares of DGD Common Stock prior to the
Effective Time, upon surrender thereof to Xxxxxx, shall be entitled to receive
in exchange therefor a certificate or certificates (the "New Certificates"),
representing the number of shares rounded up to the nearest whole number of
shares of Xxxxxx Common Stock into and for which the shares of DGD Common Stock
theretofore represented by such surrendered Old Certificates have been converted
pursuant to Section 2.01(a). Until surrendered and exchanged, each Old
Certificate shall after the Effective Time be deemed for all purposes to
represent only the right to receive the number of whole shares of Xxxxxx Common
Stock into and for which the shares of DGD Common Stock theretofore represented
by such Old Certificate shall have been converted pursuant to Section 2.01(a).
If outstanding Old Certificates are not surrendered and exchanged for New
Certificates prior to seven years after the Effective Time (or if the relevant
abandonment statutes under applicable state law provide for an earlier
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period, then immediately prior to such earlier period) the number of whole
shares of Xxxxxx Common Stock into and for which the shares of DGD Common Stock
shall have been converted pursuant to Section 2.01(a) shall to the extent
permitted by applicable law become the property of Xxxxxx and, to the extent not
in its possession, shall be paid over to it, free and clear of all claims or
interests of any other Person (as hereinafter defined) previously entitled
thereto. In this Agreement, the term "Person" shall mean and include any
individual, corporation, partnership, joint venture, trust, association,
governmental agency or instrumentality or other entity.
(c) Transfer Taxes. If any New Certificate is to be issued in a name
other than that in which the Old Certificate surrendered for exchange is issued,
the Old Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and the Person requesting such exchange shall pay to
Xxxxxx any transfer or other taxes or governmental charges required by reason of
the issuance of the New Certificate in any name other than that of the
registered holder of the Old Certificate surrendered, or establish to the
satisfaction of Xxxxxx that such tax or charge has been paid or is not payable.
(d) DGD Stock Transfers. As of the Effective Time, no transfer of the
shares of DGD Common Stock outstanding prior to the Effective Time shall be made
on the stock transfer books of DGD.
(e) DGD Preferred Stock. The shares of DGD preferred stock, par value
$100 per share ("DGD Preferred"), outstanding at the Effective Time shall be
converted into Xxxxxx preferred stock, par value $100 per share, with the same
rights, preferences and limitations in effect on the date hereof for the DGD
Preferred.
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ss.2.02 DGD Stock Rights
DGD represents and warrants that: all of the outstanding options,
subscriptions for DGD Common Stock or DGD Preferred (the "Subscriptions"),
warrants, calls, commitments, rights, plans or arrangements of any kind relating
to any of the capital stock of DGD or any DGD Subsidiary (as defined in Section
6.01(a)) or any securities or other instruments convertible into, exercisable
for or exchangeable for capital stock of DGD or any DGD Subsidiary
(collectively, the "DGD Stock Rights") are set forth in Schedule 2.02 hereto.
III. SHAREHOLDER APPROVAL; BOARD OF DIRECTORS'
RECOMMENDATIONS; FILING; EFFECTIVE TIME
ss.3.01 Shareholder Approvals; Board of Directors' Recommendations
A meeting of the shareholders of DGD shall be held in accordance with
DGD's by-laws, the NJBCA and applicable securities laws, as promptly as
possible, after at least 20 days (or such longer period as may be required by
law or the instructions to the form used to prepare the Registration Statement
(as defined in Section 5.01(p), if any) prior written notice thereof given to
the shareholders of DGD to consider and vote upon the adoption and approval of
this Agreement, the Merger, and the other transactions contemplated hereby. The
Board of Directors of DGD shall recommend to its shareholders that this
Agreement, the Merger, and the other transactions contemplated hereby be adopted
and approved. The shareholders of Xxxxxx, shall, prior to the Effective Time,
vote all shares of capital stock of Xxxxxx in favor of the adoption and approval
of this Agreement, the Merger, and the other transactions contemplated hereby.
Xxxxxx, as the sole shareholder of Distributors, shall prior to the Effective
Time, vote all shares of capital stock of Distributors in favor of the
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adoption and approval of this Agreement, the Merger and the other transactions
contemplated hereby.
ss.3.02 Dissenting Shareholders
All dissenting shareholders (as defined in Section 14A:11-3 of the NJBCA)
of DGD shall have such rights and remedies as are set forth in Chapter 11 of
Title 14A of the NJBCA.
ss.3.03 Filing; Effective Time
As soon as practicable after the adoption and approval of this Agreement,
the Merger, and the other transactions contemplated hereby by the shareholders
of DGD (provided that if one or more of the conditions contained in Articles VII
or VIII have not then been fulfilled or waived, then as soon as practicable
after the fulfillment or waiver of all such conditions), an appropriate
certificate of merger relating to the Merger, shall be executed and filed in the
office of the Secretary of State of the State of New Jersey, at which time the
Merger shall become effective (the "Effective Time").
IV. CERTAIN EFFECTS OF MERGER
As of the Effective Time:
(i) the separate existence of DGD shall cease, DGD shall be merged
with and into Distributors, and the Surviving Corporation shall possess
all the rights, privileges, powers, immunities, purposes and franchises,
public and private, of each of the Constituent Corporations.
(ii) All real property and personal property, tangible and
intangible, of every kind and description, belonging to the Constituent
Corporations shall be vested in the Surviving Corporation without further
act or deed; and the title to any real estate, or
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any interest therein, vested in any of the Constituent Corporations shall
not revert or be in any way impaired by reason of the Merger.
(iii) The Surviving Corporation shall be liable for all the
obligations and liabilities of the Constituent Corporations; and any
claim existing or action or proceeding pending by or against any of the
Constituent Corporations may be enforced as if such Merger had not taken
place. Neither the rights of creditors nor any liens upon, or security
interests in, the property of any of the Constituent Corporations shall
be impaired by the Merger.
V. COVENANTS
ss.5.01 Covenants of DGD
DGD agrees that, unless Xxxxxx otherwise agrees in writing:
(a) Certificate of Incorporation and By-laws. Until the earlier of the
(i) Effective Time or (ii) the abandonment or termination of the Merger pursuant
to Article VIII hereof or otherwise, if required (the Effective Time and such
abandonment or termination of the Merger are collectively referred to as the
"Release Time"), no amendment will be made to the certificate of incorporation
or by-laws of DGD or of any DGD Subsidiary.
(b) Shares and Options. Until the Release Time, no share of capital stock
of DGD or any DGD Subsidiary, and no option, warrant, call, plan, commitment or
right relating to any such share, right to subscribe to or purchase any such
share or security or instrument convertible into, exercisable for or
exchangeable for, any such share, shall be issued, sold or entered into by DGD
or any DGD Subsidiary, otherwise than as may be required upon the exercise of
the Subscriptions set forth on Schedule 2.02.
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(c) Dividends and Purchases of Stock. Until the Release Time, no dividend
or liquidation or other distribution, and no recapitalization, reorganization,
reclassification or stock split, shall be authorized, declared, paid, or
effected by DGD or any DGD Subsidiary in respect of the outstanding shares of
DGD Common Stock or any other security or instrument issued by DGD or any DGD
Subsidiary, other than mandatory dividends in kind required to be paid on DGD
Preferred. Until the Release Time, no direct or indirect redemption or purchase
(except for mandatory redemptions or purchases at the option of a holder of DGD
Preferred), retirement or other acquisition shall be made by DGD or any DGD
Subsidiary of shares of DGD Common Stock or any other capital stock of DGD.
(d) Financial Information; Access. DGD will, promptly upon their
completion after the end of each calendar month until the Release Time, deliver
to Xxxxxx a true, complete and accurate copy of its consolidated financial
statements for such month (which shall include a consolidated balance sheet and
consolidated statements of income, shareholders' equity and cash flow for such
month and from the period beginning on August 1, 1996 and ending at the close of
such month), which financial statements shall (x) present fairly the
consolidated financial condition, assets, liabilities and shareholders' equity
of DGD and the DGD Subsidiaries as of their respective dates and the results of
operation of DGD and the DGD Subsidiaries for the period indicated and (y) be
prepared in accordance with GAAP and be in accordance with the books and records
of DGD and the DGD Subsidiaries. Until the Release Time (but subject to the
confidentiality agreements incorporated into the letter of intent dated February
6, 1996 previously executed on behalf of Xxxxxx and DGD (the "Confidentiality
Agreements")), DGD will, from time to time, (i) afford the officers, directors,
employees, counsel, agents, investment bankers, accountants, and other
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representatives of Xxxxxx free and full access to the officers, directors,
employees, counsel, agents, investment bankers, accountants, other
representatives, plants, properties, assets, books, records (including tax
returns) and systems of DGD and all DGD Subsidiaries, (ii) to the extent
reasonable, permit them to make extracts from and copies of such books and
records, and (iii) furnish them with such additional financial and operating
data and other information as to the condition (financial or otherwise), results
of operations, businesses, customer satisfaction, properties, assets, future
prospects or liabilities of DGD or any DGD Subsidiary as they from time to time
may reasonably request, provided that Xxxxxx shall use its best efforts to limit
access to information obtained pursuant to the foregoing clauses (i) through
(iii) to individuals on a need-to-know basis. Until the Release Time, DGD will
cause the independent certified public accountants of DGD and the DGD
Subsidiaries to make available to Xxxxxx and its independent certified public
accountants all of the work papers relating to the audits of DGD and the DGD
Subsidiaries referred to in Section 6.01(c). In furtherance of this paragraph,
DGD acknowledges and agrees that, from the date hereof through the Release Date,
Xxxxxx may have up to three of its representatives situated at DGD's premises on
a continuing basis for observation purposes.
(e) Conduct of Business. Until the Release Time, DGD will use its best
efforts to conduct its business and affairs, and DGD will use its best efforts
to cause the business and affairs of the DGD Subsidiaries to be conducted, so
that at the Effective Time no representation or warranty of DGD made in
connection with this Agreement will be inaccurate, no covenant, obligation or
agreement of DGD made in connection with this Agreement will be breached, and no
condition in this Agreement will remain unfulfilled by reason of the actions or
omissions of DGD or any DGD Subsidiary. Except as otherwise
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requested by Xxxxxx in writing, until the Release Time, DGD will, and DGD will
cause the DGD Subsidiaries to, use their best efforts to preserve the business
operations of DGD and the DGD Subsidiaries intact, to keep available the
services of their present personnel, to preserve in full force and effect the
contracts, agreements, instruments, leases, licenses, arrangements, undertakings
and understandings of DGD and the DGD Subsidiaries (collectively, the
"Contracts"), and to preserve the goodwill of their suppliers, customers, and
others having business relations with any of them. Until the Release Time, DGD
will, and DGD will cause the DGD Subsidiaries to, conduct their affairs in all
respects in a manner consistent with normal business practices. In addition to
and without limiting the foregoing, until the Release Time DGD shall not, and
shall not permit any DGD Subsidiary to: (i) engage in any transaction which is
not in the ordinary course of business, consistent with past practice, (ii)
materially alter existing sales or collection practices, terms or conditions,
(iii) defer payment of expenses, (iv) make any capital expenditure or
expenditures which in the aggregate will exceed $25,000 in the individual or
$250,000 in the aggregate (other than those capital expenditures set forth on
Schedule 5.01(e) for which DGD has already made a commitment therefor), (v)
terminate any key employees, (vi) hire any new employee or consultant whose
aggregate annual compensation for each such employee or consultant shall exceed
$50,000, or (vii) modify the terms of any lease; in any of the above cases
without the prior written consent of Xxxxxx, which consent shall not be
unreasonably withheld. If DGD or any DGD Subsidiary is required to obtain
Xxxxxx'x consent under the preceding sentence, it shall submit its request to
Xxxxxx. Xxxxxx shall decide promptly (but in no event later than seven (7)
business days after receiving from DGD all information reasonably requested by
them) whether or not to grant or deny such consent or request a
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modification of terms. If a request submitted to Xxxxxx is not acted upon within
such seven (7) business day period, such request shall automatically be deemed
approved. Notwithstanding anything to the contrary contained herein, DGD may
spend up to $75,000 to purchase run off coverage or a tail to the current D & O
insurance held by DGD without the consent of Xxxxxx.
(f) Advice of Changes. Until the Release Time, DGD will promptly advise
Xxxxxx in a reasonably detailed written notice of any fact or occurrence or any
pending or threatened occurrence, other than a material adverse change in the
economy in general, of which any officer or Executive Committee member of DGD or
any DGD Subsidiary (each a "DGD Responsible Employee") obtains knowledge and
which (w) (if existing at the date of the execution of this Agreement) would
have been required to be set forth or disclosed in or pursuant to this Agreement
or the Schedules hereto, (x) (if existing at any time prior to or at the
Effective Time) would make the performance by DGD of a covenant contained in
this Agreement impossible or make such performance materially more difficult
than in the absence of such fact or occurrence, (y) (if existing at the
Effective Time) would cause a condition to the obligations of Xxxxxx and
Distributors under Section 7.01 of this Agreement not to be fully satisfied or
(z) is otherwise material to the condition (financial or otherwise), results of
operations, businesses, properties, assets, future prospects (other than a
material adverse change in the economy in general) or current or future
liabilities of DGD or any DGD Subsidiary.
(g) Confidentiality. DGD agrees that all confidential information which
DGD, any DGD Subsidiary, or any of their respective officers, directors,
employees, counsel, agents, investment bankers, accountants or other
representatives may now possess or may
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hereafter create or obtain relating to the condition (financial or otherwise),
results of operations, businesses, customer satisfaction, properties, assets,
future prospects or current or future liabilities of DGD, any DGD Subsidiary,
Xxxxxx, Distributors, any subsidiary of Xxxxxx and Distributors, any affiliate
of any of them, or any customer or supplier of any of them or any such affiliate
shall not be published, disclosed, or made accessible by any of them to any
other Person at any time or used by any of them, except that pending the Release
Time DGD and the DGD Subsidiaries may use such information (other than
information relating to Xxxxxx, Distributors, any subsidiary of Xxxxxx or
Distributors, or any customer, supplier or affiliate of any of them) in the
business and for the benefit of DGD and the DGD Subsidiaries; provided, however,
that the restrictions of this sentence shall not apply (i) after the Release
Time (unless the Release Time occurs as a result of the effectiveness of the
Merger), but only to the extent such confidential information relates to the
condition (financial or otherwise), results of operations, businesses, customer
satisfaction, properties, assets, future prospects or current or future
liabilities of DGD, of any DGD Subsidiary, of any affiliate of any of them, or
(insofar as such confidential information was obtained directly by DGD, any DGD
Subsidiary, or any such affiliate from any customer or supplier of any of them)
of any such customer or supplier, (ii) as may otherwise be required by law,
provided that DGD shall give Xxxxxx sufficient notice of any such disclosure to
enable Xxxxxx, if it so elects in its sole discretion, to attempt to obtain a
protective order or otherwise to prevent or limit such disclosure, (iii) as may
be necessary in connection with the enforcement of this Agreement, or (iv) to
the extent the information shall have otherwise become publicly available
otherwise than through a breach or violation of any confidentiality requirement.
DGD shall, shall cause the DGD Subsidiaries to, and shall use its best efforts
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and cause the DGD Subsidiaries to use their best efforts to, cause all other
such Persons to, deliver to Xxxxxx all tangible evidence of the confidential
information relating to Xxxxxx, Distributors, any subsidiary of Xxxxxx and
Distributors, any affiliate of any of them, or (insofar as such confidential
information was obtained directly from Xxxxxx, Distributors, any subsidiary of
Xxxxxx and Distributors, or any such affiliate of Xxxxxx) any customer or
supplier of any of them or any such affiliate to which the restrictions of the
foregoing sentence apply immediately after the Release Time.
(h) Public Statements. DGD has heretofore furnished Xxxxxx with true,
correct and complete copies of all statements, communications and other
documents filed with or issued or sent by DGD or on DGD's behalf during the past
36 months with or to (i) the Securities and Exchange Commission (the "SEC")
including, but not limited to, Reports on Form 10-K, Form 10-Q or Form 8-K and
proxy statements, (ii) the National Association of Securities Dealers, Inc.,
(iii) any national securities exchange upon which the DGD Common Stock has been
listed, (iv) any other governmental agency or instrumentality, including, but
not limited to, the Food and Drug Administration, or (v) DGD's shareholders, and
all press releases issued by DGD or any DGD Subsidiary, during such 36 month
period. DGD shall, until the Release Time, further furnish or cause to be
furnished to Xxxxxx true and complete copies of all statements, communications
and other documents hereafter filed with, or issued or sent by DGD or on DGD's
behalf to, the SEC, the National Association of Securities Dealers, Inc., any
securities exchanges, any other governmental agency or instrumentality or DGD's
shareholders and all press releases issued by DGD or any DGD Subsidiary. Before
DGD files, issues or sends any such statements, communications or documents or
releases any information concerning this Agreement, the Merger, or any of the
other transactions
- 14 -
contemplated by this Agreement which is intended for or may result in public
dissemination thereof, DGD shall obtain Xxxxxx'x written consent, provided that
if the statement, communication, document or release is required by law,
Xxxxxx'x consent shall be limited to the content thereof and shall not be
unreasonably withheld.
(i) Consents Without Any Condition. DGD shall not make any agreement,
commitment or arrangement or reach any understanding not approved in advance in
writing by Xxxxxx, which approval shall not be unreasonably withheld, as a
condition for obtaining any consent, authorization, approval, order, license,
certificate, or permit required for the consummation of the transactions
contemplated by this Agreement, whether pursuant to Sections 7.01(j), 7.01(l) or
otherwise.
(j) Transfer Taxes. DGD shall timely prepare and file any declaration or
filing necessary to comply with any transfer tax statutes that require any such
filing before the Effective Time.
(k) Compensation, Employment Plans, Retirement Plans, etc.
(i) A complete and accurate description of all Contracts, plans,
programs, agreements, undertakings, understandings and arrangements with
respect to the salaries, commissions, bonuses, benefits, perquisites,
compensation of, or loans or advances to, directors, officers, employees,
agents (including sales agents), dealers or distributors of DGD or any
DGD Subsidiary is set forth in Schedule 5.01(k) hereto. Until the Release
Time, DGD will not, and will not permit any DGD Subsidiary to (i)
increase the rate of compensation of any of its directors, officers,
employees, agents (including sales agents), dealers or distributors other
than in the ordinary course and consistent with past practice, (ii) grant
or pay any additional or special
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compensation, bonus, perquisite, benefit, loan or advance to any of its
directors, officers, employees, agents (including sales agents), dealers
or distributors or (iii) except as required by law or as is necessary to
terminate any Pension Plan (as defined in Section 6.01(i)), institute,
enter into or amend any employment, employee benefit, pension,
retirement, stock option, profit sharing, compensation, consultant,
bonus, group insurance or similar plan in respect of any of its
directors, officers, employees, agents (including sales agents), dealers
or distributors.
(ii) DGD represents and warrants that true, complete and correct
copies of all directors' and officers' liability insurance policies in
effect on the date hereof, including the most recent application forms
which are made part of such policies, have been furnished to Xxxxxx, and
all such policies are accurately listed on Schedule 5.01(k)(ii) hereto.
Schedule 5.01(k)(ii) also sets forth a complete and correct list of all
corporate resolutions with respect to, and Contracts with, any director,
officer, employee, agent (including sales agents), dealer or distributor
of DGD or any DGD Subsidiary which contain a "change of control"
provision or which relate to the indemnification or exculpation from
liability of any such director, officer, employee, agent, dealer or
distributor.
(iii) Nothing contained in this Agreement or otherwise shall
obligate Xxxxxx, the Surviving Corporation or any DGD Subsidiary to
employ any Person who is now or in the future may be employed by DGD or
any DGD Subsidiary, or to maintain any particular compensation level or
benefits for any Person who is so employed, except to the extent an
employee under an employment agreement has, subject to applicable law,
rights thereunder.
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(l) Liens; Indebtedness; etc. Until the Release Time, DGD will not, and
will not permit any DGD Subsidiary to, (i) except in the ordinary course of
business consistent with past practices, mortgage, pledge or subject to a lien,
security interest or any other encumbrance any of its property or assets,
dispose of any of its property or assets or incur or cancel any obligation,
indebtedness or claims, (ii) incur, increase, renew, refinance or extend or
agree or commit to incur, increase, renew, refinance or extend any indebtedness
for borrowed money, obligation which is evidenced by any note, bond, debenture,
instrument or security or obligation with respect to any commercial or standby
letter of credit, or (iii) guaranty the obligations of any other Person, except
for guarantees of collection in the ordinary course of business, consistent with
past practice.
(m) Business Combinations. Until the Release Time, DGD shall not, and
shall not permit any DGD Subsidiary to, merge or consolidate with or into, or
acquire all or any substantial part of the stock, securities or property or
assets of, dispose of any substantial amount of property or assets outside the
ordinary course of business to, or engage in any business combination with, any
other Person.
(n) Compliance with Laws. To the best knowledge of DGD, DGD and all the
DGD Subsidiaries are and will remain in compliance in all respects with all
applicable federal, state, foreign and local legal requirements (including
without limitation Environmental Laws, as hereinafter defined) in each of the
jurisdictions in which they operate, except where such noncompliance does not
materially interfere with the business, property or assets of DGD or the DGD
Subsidiaries. DGD will promptly notify Xxxxxx if DGD or any of the DGD
Subsidiaries receives any claim or notice of violations with respect thereto.
- 17 -
(o) Taxes. DGD and the DGD Subsidiaries shall, from the date hereof
through the Effective Date, prepare and timely file all Tax (as defined in
Section 6.01(d)) returns required to be filed in any jurisdiction in which they
conduct business, and shall pay all Taxes required to be paid in such
jurisdictions.
(p) Material for Registration Statement and Proxy Statement. DGD shall
furnish or cause to be furnished, for inclusion in the Registration Statement on
Form S-4 (such Registration Statement, together with all financial statements,
exhibits, amendments, and supplements thereto, being herein called the
"Registration Statement") to be filed pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), in connection with the consummation of the
Merger, or for inclusion in Xxxxxx'x filings under state "blue-sky" laws, such
information about DGD, DGD Subsidiaries or DGD's security holders as may be
required or as may be reasonably requested by Xxxxxx, and shall continue to
furnish or cause to be furnished such information for the purpose of amending
the Registration Statement until the Release Time. DGD represents and warrants
that to its knowledge the information so furnished will not at the time the
Registration Statement becomes effective, nor at any time prior to the Release
Time, (i) contain an untrue statement of a material fact or (ii) omit to state a
material fact required to be stated therein or necessary to make the statements
therein not false or misleading in light of the circumstances in which they are
made.
ss.5.02 Covenants of Xxxxxx
Xxxxxx and Distributors agree that, unless DGD otherwise agrees in
writing:
(a) Access. Xxxxxx will, promptly upon their completion after the end of
each calendar month until the Release Time, deliver to DGD a true, complete and
accurate copy
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of its consolidated financial statements for such month (which shall include a
consolidated balance sheet and consolidated statements of income, shareholders'
equity and cash flow for such month and from the period beginning on August 1,
1996 and ending at the close of such month), which financial statements shall
(x) present fairly the consolidated financial condition, assets, liabilities and
shareholders' equity of Xxxxxx and the Xxxxxx subsidiaries as of their
respective dates and the results of operation of Xxxxxx and the Xxxxxx
subsidiaries for the period indicated and (y) be prepared in accordance with
GAAP and be in accordance with the books and records of Xxxxxx and the Xxxxxx
subsidiaries. Until the Release Time (but subject to the Confidentiality
Agreements) Xxxxxx will, from time to time, (i) afford the officers, directors,
employees, counsel, agents, investment bankers, accountants, and other
representatives of DGD free and full access to the officers, directors,
employees, counsel, agents, investment bankers, accountants, other
representatives, plants, properties, assets, books, records (including Tax
returns) and systems of Xxxxxx and all Xxxxxx subsidiaries, (ii) to the extent
reasonable, permit them to make extracts from and copies of such books and
records, and (iii) furnish them with such additional financial and operating
data and other information as to the condition (financial or otherwise), results
of operations, businesses, customer satisfaction, properties, assets, future
prospects or future or current liabilities of Xxxxxx or any Xxxxxx subsidiary as
they from time to time may reasonably request, provided that DGD shall use its
best efforts to limit access to information obtained pursuant to the foregoing
clauses (i) through (iii) to individuals on a need-to-know basis. Until the
Release Time, Xxxxxx will cause the independent certified public accountants of
Xxxxxx and the Xxxxxx subsidiaries to make available to DGD and its
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independent certified public accountants all of the work papers relating to the
audits of Xxxxxx and the Xxxxxx subsidiaries.
(b) Conduct of Business. Until the Release Time, Xxxxxx and Distributors
will use its best efforts to conduct its affairs so that at the Effective Time
no representation or warranty of Xxxxxx or Distributors will be inaccurate, no
covenant, obligation or agreement of Xxxxxx or Distributors will be breached,
and no condition in this Agreement will remain unfulfilled by reason of the
actions or omissions of Xxxxxx or Distributors .
(c) Advice of Changes. Until the Release Time, Xxxxxx will promptly
advise DGD in a reasonably detailed written notice of any fact or occurrence or
any pending or threatened occurrence, other than a material adverse change in
the economy in general, of which any officer or director of Xxxxxx or any Xxxxxx
subsidiary (each a "Xxxxxx Responsible Employee") obtains knowledge and which
(w) (if existing at the date of the execution of this Agreement) would have been
required to be set forth or disclosed in or pursuant to this Agreement or the
Schedules hereto, (x) (if existing at any time prior to or at the Effective
Time) would make the performance by Xxxxxx or Distributors of a covenant
contained in this Agreement impossible or make such performance materially more
difficult than in the absence of such fact or occurrence, (y) (if existing at
the Effective Time) would cause a condition to the obligations of DGD under
Section 7.02 of this Agreement not to be fully satisfied or (z) is otherwise
material to the condition (financial or otherwise), results of operations,
businesses, properties, assets, future prospects (other than a material adverse
change in the economy in general) or current or future liabilities of Xxxxxx or
any Xxxxxx subsidiary.
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(d) Confidentiality. Xxxxxx agrees that all confidential information
which Xxxxxx, Distributors, any subsidiary of Xxxxxx or Distributors, or any of
their respective officers, directors, employees, counsel, agents, investment
bankers, accountants or other representatives may now possess or may hereafter
create or obtain relating to the condition (financial or otherwise), results of
operations, businesses, customer satisfaction, properties, assets, future
prospects or liabilities of Xxxxxx, Distributors, any subsidiary or Xxxxxx or
Distributors, DGD, any DGD Subsidiary, any affiliate of any of them, or any
customer or supplier of any of them or any such affiliate shall not be
published, disclosed, or made accessible by any of them to any other Person at
any time or used by any of them, except that pending the Release Time Xxxxxx,
Distributors and the subsidiaries of Xxxxxx or Distributors may use such
information (other than information relating to DGD, any DGD Subsidiary, or any
customer, supplier or affiliate of any of them) in the business and for the
benefit of Xxxxxx, Distributors and the subsidiaries of Xxxxxx or Distributors;
provided, however, that the restrictions of this sentence shall not apply (i)
after the Effective Time or the Release Time (if the Release Time does not occur
as a result of the effectiveness of the Merger, but only to the extent such
confidential information relates to the condition (financial or otherwise),
results of operations, businesses, customer satisfaction, properties, assets,
future prospects or current or future liabilities of Xxxxxx, of Distributors, of
any subsidiary of Xxxxxx or Distributors, of any affiliate of any of them, or
(insofar as such confidential information was obtained directly by Xxxxxx,
Distributors any subsidiary of Xxxxxx or Distributors, or any such affiliate
from any customer or supplier of any of them) of any such customer or supplier),
(ii) as may otherwise be required by law, provided that Xxxxxx shall give DGD
sufficient notice of any such disclosure to enable DGD, if it so elects in its
sole
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discretion, to attempt to obtain a protective order or otherwise to prevent or
limit such disclosure, (iii) as may be necessary in connection with the
enforcement of this Agreement, or (iv) to the extent the information shall have
otherwise become publicly available otherwise than through a breach or violation
of any confidentiality requirement. Xxxxxx and Distributors shall, shall cause
their respective subsidiaries to, and shall use their best efforts and cause
their subsidiaries to use their best efforts to, cause all other such Persons
to, deliver to DGD all tangible evidence of the confidential information
relating to DGD, any DGD subsidiary, any affiliate of any of them, or (insofar
as such confidential information was obtained directly from DGD, any DGD
subsidiary, or any such affiliate of DGD) any customer or supplier of any of
them or any such affiliate to which the restrictions of the foregoing sentence
apply immediately after the Release Time (unless the Release Time occurs upon
the effectiveness of the Merger).
(e) Public Statements. Before Xxxxxx files, issues or sends any
statement, communications, documents or releases any information concerning this
Agreement, the Merger, or any of the other transactions contemplated by this
Agreement which is intended for or may result in public dissemination thereof,
Xxxxxx shall obtain DGD's prior written consent provided that, if the statement,
communication, document or release is required by law, DGD's consent shall be
limited to the content thereof and shall not be unreasonably withheld.
(f) Consents. Xxxxxx shall notify DGD of any agreement, commitment,
arrangement or understanding reached by Xxxxxx as a condition for obtaining any
consent, authorization, approval, order, license, certificate, or permit
required for the consummation
- 22 -
of the transactions contemplated by this Agreement, whether pursuant to Sections
7.02(h) 7.02(j) or otherwise.
(g) Employee Benefits. Following the Effective Time, the Surviving
Corporation will make reasonable efforts, consistent with present or anticipated
business conditions, to provide generally to officers and employees of DGD who
remain in the Surviving Corporation's employ and (A) who are not parties to
employment agreements and (B) who are not receiving such employee benefits from
any DGD Employee Benefit Plans which will survive the Effective Date, employee
benefits which in the aggregate are substantially no less favorable than those
currently provided by Xxxxxx to its employees at comparable levels; provided
that nothing in this Agreement shall require the Surviving Corporation to
provide benefits to officers or employees which are more favorable than those
which DGD or Xxxxxx currently provides to its employees. Following the Effective
Time, the Surviving Corporation shall cause the Drug Guild Distributors, Inc.
Defined Benefits Pension Plan (the "DB Plan") to be terminated; provided,
however, that no termination shall be effected unless (i) the DB Plan is fully
funded as on the Effective Time and (ii) the assets of the DB Plan on the
Effective Date shall not be invested in any equity securities. DGD will provide
sufficient evidence to Xxxxxx prior to the Effective Time of DGD's compliance
with (i) and (ii) above. However, except as may otherwise be specifically
provided in this Agreement, the Surviving Corporation shall have the right to
amend, modify, or terminate any employee benefit plan, program, or arrangement
after the Effective Time.
(h) Material for Proxy Statement. Xxxxxx shall furnish or cause to be
furnished, for inclusion in the proxy statement to be distributed to DGD
shareholders in connection with the consummation of the Merger (the "Proxy
Statement"), and to be used in connection with
- 23 -
the meeting of the shareholders of DGD referred to in Section 3.01, such
information as may be required or as may be reasonably requested by DGD, and
shall continue to furnish or cause to be furnished such information for the
purpose of supplementing the Proxy Statement, until the Release Time. Xxxxxx
represents and warrants that the information so furnished will not at the time
the Proxy Statement is sent to DGD Shareholders, and at any time prior to the
Release Time, (i) contain an untrue statement of a material fact or (ii) omit to
state a material fact required to be stated therein or necessary to make the
statements therein not false or misleading in light of the circumstances in
which they are made.
(i) Transfer Taxes. Xxxxxx shall timely prepare and file any declaration
or filing necessary to comply with any transfer tax statutes that require any
such filing before the Effective Time.
(j) Officer and Director Indemnification. (i) Xxxxxx and Distributors, as
the Surviving Corporation in the Merger, will observe all indemnification
provisions now existing in favor of the current or former directors or officers
of DGD and the DGD Subsidiaries as provided in their respective certificates of
incorporation or by-laws.
(ii) In the event Xxxxxx or Distributors or any of their successors
or assigns (A) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (B) transfers all or substantially all of its properties and assets to
any Person then, in each such case, proper provision shall be made so that the
successors and assigns of Xxxxxx or Distributors, as the case may be, shall
assume the obligation set forth in this section.
(k) Securities Law Compliance. At or prior to the Effective Time, Xxxxxx
shall use its best efforts to make all filings, and take all actions, necessary
to comply with all
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applicable federal securities and "blue-sky" laws with regard to the issuance of
Xxxxxx Common Stock pursuant to the Merger as contemplated by this Agreement.
VI. REPRESENTATIONS AND WARRANTIES
ss.6.01 Certain Representations and Warranties of DGD
DGD represents and warrants to Xxxxxx and Distributors as follows:
(a) Organization and Qualification. DGD owns, either directly or through
one or more wholly-owned subsidiaries, all the outstanding shares of capital
stock of each of the corporations (the "DGD Subsidiaries") listed on Schedule
6.01(a) hereto, free and clear of all liens, security interests, pledges,
charges, encumbrances, shareholders' agreements, and voting trusts, except as
set forth on Schedule 6.01(a). Other than the DGD Subsidiaries, neither DGD nor
any DGD Subsidiary has a subsidiary or affiliate corporation or directly or
indirectly owns any interest in any other Person or enterprise. Schedule 6.01(a)
also correctly sets forth as to DGD and as to each DGD Subsidiary its place of
incorporation and the jurisdictions in which it is licensed or qualified to do
business; and as to each DGD Subsidiary its authorized capitalization and its
shares of capital stock outstanding. Each of DGD and each of the DGD
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, with all requisite
corporate power and authority, and all necessary consents, authorizations and
approvals (including, without limitation, certificates of authority to do
business as a foreign corporation) from all federal, state, local, foreign and
other governmental authorities to own, lease, license, and use its properties
and assets and to carry on the businesses in which it is now engaged, except
such consents, authorizations, and approvals (including, without limitation,
certificates of authority to do business as a foreign corporation) which if not
- 25 -
obtained, would not have a material adverse effect on the condition (financial
or otherwise), results of operations, cash flows, businesses, properties,
assets, future prospects or liabilities of DGD and the DGD Subsidiaries, taken
as a whole (a "Material Adverse Effect"). Neither DGD nor any of the DGD
Subsidiaries has received notice from any state or any other jurisdiction to the
effect that DGD or any DGD Subsidiary is required to be licensed or to qualify
or otherwise to be authorized to do business as a foreign corporation therein or
has failed to obtain or maintain any consent, authorization or approval which
such state or jurisdiction has authority to grant.
(b) Capitalization. The authorized capital stock of DGD consists of (i)
Twenty-Five Million (25,000,000) shares of DGD Common Stock, of which as at July
31, 1996 10,022,667 shares were issued and outstanding, none of which are held
as treasury stock, and as at July 31, 1996 $639,300 is due for the purchase of
shares to be issued pursuant to DGD Common Stock Subscriptions, and (ii) Two
Hundred Fifty Thousand (250,000) shares of DGD Preferred, 25,893.44 shares of
which as at July 31, 1996 were issued and outstanding. Each outstanding share of
DGD Common Stock and DGD Preferred and each outstanding share of capital stock
of each DGD Subsidiary is duly authorized, validly issued, fully paid, and
nonassessable, has not been issued and is not owned or held in violation of any
preemptive right of shareholders, and there is no personal liability attached to
the ownership thereof. There is no commitment, plan, or arrangement to issue
(including preemptive rights), and no outstanding option, warrant, call or other
right calling for the issuance of, any share of capital stock of any DGD
Subsidiary or any security or other instrument convertible into, exercisable
for, or exchangeable for capital stock of any DGD Subsidiary, except as
disclosed in this Agreement. The shares of DGD Common Stock to be
- 26 -
issued upon exercise of the DGD Stock Rights are validly authorized and, when
the DGD Stock Rights are exercised in accordance with their respective terms,
such shares of DGD Common Stock will be validly issued, fully paid, and
nonassessable. Except for those Persons listed on Schedule 6.01(b), no Person
owns 5% or more of any voting stock of DGD. As at the Effective Time, there will
no longer be any Subscriptions in effect or outstanding; provided, however, that
the parties hereto agree that the Effective Time will not occur until 70 days
after the date hereof to allow for the cancellation of the Subscriptions.
(c) Financial Condition. DGD has delivered to Xxxxxx true, correct,
complete and accurate copies of the following: the audited balance sheets of DGD
as of July 31, 1994 and July 31, 1995; audited statements of income, statements
of shareholders' equity, and statements of cash flows of DGD for each of the
years within the three year period ended July 31, 1995; the unaudited
consolidated balance sheet of DGD as of October 31, 1995, January 31, 1996 and
April 30, 1996; and the unaudited consolidated statement of income, consolidated
statement of shareholders' equity, and consolidated statement of cash flows of
DGD for the quarters ended October 31, 1995, January 31, 1996 and April 30,
1996. Except as qualified by an 8-K dated August 23, 1996 filed with the SEC
(the "8-K"), each such balance sheet presents fairly the financial condition,
assets, liabilities, and shareholders' equity of DGD and the DGD Subsidiaries as
of its date; each such statement of income, shareholders' equity and cash flows
presents fairly the results of operations of DGD and the DGD Subsidiaries for
the periods indicated, all in accordance with GAAP. The financial statements
referred to in this Section 6.01(c) are in agreement with the detailed books and
records of DGD and the DGD Subsidiaries. Since April 30, 1996, except as may be
- 27 -
expressly disclosed in the April 30, 1996 unaudited financial statements, the
8-K or in the Schedules hereto:
(i) There has at no time been a Material Adverse Effect.
(ii) Neither DGD nor any DGD Subsidiary has authorized, declared,
paid, or effected any dividend (other than dividends in kind on the DGD
Preferred) or liquidation or other distribution, stock appreciation
rights, phantom stock options, stock split, recapitalization,
reclassification or reorganization in respect of its capital stock or any
direct or indirect redemption or purchase (other than those redemptions
or purchases set forth on Schedule 6.01(c)(ii)), retirement or other
acquisition of any stock of DGD or any DGD Subsidiary.
(iii) The operations and businesses of DGD and each DGD Subsidiary
have been conducted in all material respects only in the ordinary course,
consistent with past practices.
(iv) Neither DGD nor any DGD Subsidiary has suffered an
extraordinary or unusual loss (whether or not covered by insurance) or
waived any right of substantial value, any of which, individually or in
the aggregate, is material to DGD and the DGD Subsidiaries, taken as a
whole.
(d) Taxes.
To the best of DGD's knowledge, neither DGD nor any DGD Subsidiary has
any Tax liability of any nature, accrued or contingent, for which an adequate
provision has not been made in their financial statements. In this Agreement,
the term "Taxes" includes without limitation all liabilities for federal, state,
local, foreign or other taxes, whether based on, or related to income, profits,
capital, premiums, sales, use, gross receipts, property, ad
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valorem, franchise, employment, transfer, excise, payroll, import and other
taxes, duties, leases and assessments, and includes all related penalties,
interest, additions to tax and liabilities for taxes related to contractual
obligations with customers and suppliers.
The amounts set up as assets and liabilities for Taxes on the Last DGD
Balance Sheet (as defined in Section 6.01(e)(i)) are properly stated in
accordance with GAAP and are sufficient for all unpaid Taxes of DGD or the DGD
Subsidiaries, whether or not due and payable and whether or not disputed, under
tax laws, as in effect on the Last DGD Balance Sheet Date (as defined in Section
6.01(e)(i)) or now in effect, for the period ended on such date and for all
fiscal periods prior thereto. The execution, delivery, and performance of this
Agreement by DGD will not cause any Taxes (except as set forth on Schedule
6.01(d)) to be payable or cause any lien, charge, security interest or
encumbrance to secure any Taxes to be created either immediately or upon the
nonpayment of any Tax. Except as set forth on Schedule 6.01(d), the Internal
Revenue Service has not audited any federal income tax returns of DGD and the
DGD Subsidiaries for the last ten taxable years and no audit prior to that
period remains open. To the best of DGD's knowledge, each of DGD and each of the
DGD Subsidiaries has filed all known federal, state, local, foreign and other
tax returns required to be filed by it and, to the extent any such tax returns
were not properly and timely filed, DGD and the DGD Subsidiaries have either
paid all Taxes with respect thereto or have accrued or set aside reserves for
such Taxes which are equal to or greater than the aggregate amount of such Taxes
which may be paid or incurred; has made available to Xxxxxx a true, complete and
correct copy of each such return which was filed in the past three (3) years in
the case of federal tax returns and three (3) years in all other cases; has paid
all Taxes, assessments, and other governmental charges payable or remittable by
it or levied upon it or
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its properties, assets, income, or franchises which are due and payable; and
there are no reports as to adjustments received by it from any taxing authority
during the past five (5) years.
(e) Other Liabilities. Except as set forth in the Schedules hereto,
neither DGD nor any DGD Subsidiary has any indebtedness or liability of any
nature (including, without limitation, any liability arising from any
Environmental Claim, as hereinafter defined), accrued or contingent, for which
provision should be made on the financial statements which has not been made,
other than the following:
(i) Liabilities for which full provision has been made on the
audited balance sheet and the notes thereto (the "Last DGD Balance
Sheet") as of July 31, 1995 (the "Last DGD Balance Sheet Date") referred
to in Section 6.01(c); and
(ii) Other liabilities arising since the Last DGD Balance Sheet Date
and prior to the Effective Time in the ordinary course of business (which
shall not include liabilities to customers on account of defective
products or services) which are not inconsistent with the representations
and warranties of DGD or any other provision of this Agreement.
No DGD Responsible Employee has knowledge of any existing or
threatened occurrence(s), event(s) or development(s) which, as of the date
hereof, individually or in the aggregate, are likely to have a Material Adverse
Effect.
(f) Litigation and Claims; Labor Matters. (i) Except as set forth in
Schedule 6.01(f) hereto, there is no litigation, arbitration, grievance, claim,
governmental or other proceeding (formal or informal), or investigation pending,
or to the knowledge of DGD or any DGD Subsidiary, threatened, with respect to
DGD or any DGD Subsidiary. No
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litigation, arbitration, grievance, claim, governmental or other proceeding or
investigation set forth on Schedule 6.01(f), if adversely determined, would have
a Material Adverse Effect individually or in the aggregate. Except as set forth
on Schedule 6.01(f), neither DGD nor any DGD Subsidiary is, or during the past
six years has been, affected by any present or threatened strike, slowdown,
picketing, shutdown or stoppage or other labor disturbance or dispute, whether
involving DGD or any DGD Subsidiary or their employees or any other Person, nor
to the knowledge of DGD or any DGD Subsidiary is any union attempting or
campaigning to represent any employee of DGD or of any DGD Subsidiary or to be
certified as a collective bargaining unit. Except as set forth on Schedule
6.01(f), there are no collective bargaining agreements or union contracts
binding on DGD or any DGD Subsidiary. DGD and each DGD Subsidiary has fulfilled
any and all bargaining obligations it has with the collective bargaining
representative of its employees. There are no unfair labor practice complaints
involving DGD or any DGD Subsidiary before the National Labor Relations Board.
Neither DGD nor any DGD Subsidiary is in violation of, or in default with
respect to, any law, rule, regulation, order, judgment, or decree which would
have a Material Adverse Effect; nor is DGD or any DGD Subsidiary required to
take any action in order to avoid any violation or default. To the best of DGD's
knowledge, DGD and each DGD Subsidiary are in compliance with all applicable
laws, agreements, contracts and binding policies relating to employment,
employment practices, wages, hours and terms and conditions of employment.
(ii) Neither DGD nor any DGD Subsidiary shall at any time between the
date hereof and the Closing Date effectuate a "plant closing" or "mass layoff",
as those terms are defined in the Worker Adjustment and Retraining Notification
Act of 1988 or analogous state statute
- 31 -
("WARN"), without complying with the notice requirements and other provisions of
WARN and any analogous state law.
(g) Properties.
(i) Each of DGD and each DGD Subsidiary holds marketable and legal
title to each of the real properties set forth on Schedule 6.01(g).
Except as set forth on Schedule 6.01(g), neither DGD nor any DGD
Subsidiary legally or beneficially owns title to any real property. Each
of DGD and each of the DGD Subsidiaries has (i) valid and enforceable
leases to all property and intangibles which it uses in its business (all
of which leases and intangibles are described on Schedules 6.01(g) or
6.01(j)) and (ii) good title to all other material properties (including
the real property set forth on Schedule 6.01(g)) and assets used in its
businesses or owned by it, free and clear of all liens, mortgages,
security interests, pledges, charges, and encumbrances (except such as
are listed on Schedule 6.01(g), none of which have a Material Adverse
Effect or will interfere with the use or enjoyment of such property by
DGD or any DGD Subsidiary).
(ii) All accounts and notes receivable reflected on the Last DGD
Balance Sheet (net of stated reserves, which reserves have been made in
accordance with GAAP), or arising since the Last DGD Balance Sheet Date,
have been collected, or to our best knowledge are and will be good and
collectible in the ordinary course of business, in each case at the
aggregate recorded amounts thereof without right of recourse, defense,
deduction, counterclaim, offset, or set off on the part of the obligor.
- 32 -
(iii) All inventory of DGD and of each DGD Subsidiary (other than
immaterial amounts of inventory) is in quantities which are usable on a
normal basis in the existing service lines of DGD or such DGD Subsidiary,
as the case may be, at values at least equal to the values at which such
items are carried on DGD's books and records and contain no material
amounts of items with an expiration date less than six months after the
Effective Time except for items that are typically short dated in the
ordinary course of business, consistently applied. The values at which
such inventories are carried on DGD's books and records reflect the
inventory valuation policy, in accordance with GAAP, of DGD stating
inventories at the lower of average cost (determined on a first-in,
first-out basis) or market value, in accordance with GAAP. All inventory
is merchantable and fit for the particular purpose for which it is
intended. Except as set forth on Schedule 6.01(g)(iii), DGD has not made
any sales in the past two years on a consignment basis and no such sales
are currently contemplated.
(iv) Schedule 6.01(g) sets forth a true, correct and complete list,
by state and city of location, of all properties and assets owned by DGD
and the DGD Subsidiaries or leased or licensed by DGD or by any DGD
Subsidiary from a third party (not including Intangibles, as defined in
Section 6.01(j)), including with respect to such properties and assets
owned by DGD or by any DGD Subsidiary a statement of cost, book value and
reserve for depreciation of each item for financial reporting purposes,
and with respect to such properties and assets leased or licensed by DGD
or by any DGD Subsidiary from a third party, a description of such lease
or license and a statement of the book value and net book value of each
item for financial
- 33 -
reporting purposes. Except as set forth on Schedule 6.01(g), neither DGD
nor any DGD Subsidiary leases or licenses any property to any Person. All
properties and assets (including Intangibles) owned by DGD or by any DGD
Subsidiary are reflected on the Last DGD Balance Sheet (except for
acquisitions in the ordinary course of business consistent with past
practice subsequent to the Last DGD Balance Sheet Date and prior to the
Effective Time which are either noted on Schedules 6.01(g) or 6.01(j) or
will be approved in writing by Xxxxxx). All real and other tangible
properties and assets owned by DGD or by any DGD Subsidiary or leased or
licensed by DGD or by any DGD Subsidiary from a third party are in good
and usable condition (reasonable wear and tear which is not such as to
affect adversely the operation of the businesses of DGD or of such DGD
Subsidiary excepted). All leases or licenses to which DGD or any DGD
Subsidiary is a party are in full force and effect and no violations or
defaults by DGD or any DGD Subsidiary exist under any thereof which,
individually or in the aggregate, would have a Material Adverse Effect.
(v) The properties and assets (including Intangibles) owned by DGD
and each DGD Subsidiary or leased or licensed by DGD or such DGD
Subsidiary from a third party, as set forth on Schedules 6.01(g) and
6.01(j), constitute all properties and assets which are necessary and
adequate to conduct the businesses of DGD and each DGD Subsidiary as
presently conducted. (h) Contracts and Other Instruments. Schedule
6.01(h) contains a true, correct
and complete description of each Contract with respect to DGD and each DGD
Subsidiary which is required by its terms or is expected to result in the
payment or receipt of more than
- 34 -
$100,000 individually or has a term of more than one year. Except as set forth
on Schedule 6.01(h), DGD has no Contracts (written or oral) with Meadow
Trucking, Inc. Schedule 6.01(h) contains a true, correct and complete
description of each Contract with respect to DGD and each DGD Subsidiary which
is otherwise material to DGD or any DGD Subsidiary, identifying whether the
matter disclosed therein relates to DGD or to a DGD Subsidiary named therein.
DGD has furnished (or, in the case of clause (z)(A) below, made available) to
Xxxxxx true, complete and correct copies of (y) the certificate of incorporation
(or other charter document) and by-laws of DGD and each DGD Subsidiary and all
amendments thereto, as presently in effect, certified by the Secretary of such
corporation and (z) each of the following: (A) all Contracts referred to in
Schedule 6.01(h); (B) all deeds to real property, all real property and master
equipment leases and all licenses referred to in Schedules 6.01(g) or 6.01(j);
(C) written descriptions of all supply, distribution, agency, financing, or
other arrangements or understandings referred to in Schedule 6.01(h); (D) each
Contract defining the terms on which debts for borrowed money or guarantees by
DGD aggregating more than $25,000 have been or may be issued; (E) all employment
and consulting Contracts not terminable at will without penalty to which DGD or
any DGD Subsidiary is a party; and (F) any Contract limiting DGD's or any DGD
Subsidiary's freedom to compete in any line of business or with any Person.
Neither DGD nor any DGD Subsidiary nor (to the knowledge of DGD or any DGD
Subsidiary) any other party to any such Contract is now or expects in the future
to be in violation or breach of, or in default with respect to complying with,
any material term thereof, and each such Contract is in full force and is the
legal, valid, and binding obligation of DGD or the DGD Subsidiary party thereto
and (subject to applicable bankruptcy, insolvency, and other laws affecting the
- 35 -
enforceability of creditors' rights generally) is enforceable as to them in
accordance with its terms. To the best of DGD's knowledge, there is no existing
material breach, violation or default by any other party to any of such
Contracts and no event has occurred which with the passage of time or giving of
notice or both would constitute such a breach, violation or default by such
other party or result in a loss of material rights thereunder or pursuant
thereto. Neither DGD nor any DGD Subsidiary has any reason to believe that DGD
or any DGD Subsidiary will be unable to fulfill, when due, all of its respective
obligations under each of such Contracts which remain to be performed after the
date hereof. No Contract contains any provisions restricting DGD or any DGD
Subsidiary from carrying on its business as currently conducted or proposed to
be conducted anywhere in the United States or Canada. Each such supply,
distribution, agency, financing, or other arrangement or understanding is a
valid and continuing arrangement or understanding; neither DGD, any DGD
Subsidiary, nor any other party to any such arrangement or understanding has
given notice of termination or taken any action inconsistent with the
continuance of such arrangement or understanding; and the execution, delivery,
and performance of this Agreement will not prejudice any such arrangement or
understanding in any way. Neither DGD nor any DGD Subsidiary is party to or
bound by any Contract or subject to any charter or other restriction, which has
had or (to the knowledge of DGD or any DGD Subsidiary) will in the future have a
Material Adverse Effect. Except as set forth on Schedule 6.01(h), neither DGD
nor any DGD Subsidiary has engaged within the last five years in, is engaging
in, or intends to engage in, any transaction with, or has had within the last
five years, now has, or intends to have any Contract with, any director,
officer, or employee of DGD or of any DGD Subsidiary (except for employment
agreements or consulting agreements listed on
- 36 -
Schedule 6.01(h) and employment and compensation arrangements described on
Schedule 6.01(i), in each case with such directors, officers, and employees who
are not relatives or affiliates described in the next clause), any relative or
affiliate of any such director, officer, or employee, or any other Person or
enterprise in which any such director, officer, or employee, or any such
relative or affiliate, then had or now has, directly or indirectly, legally or
beneficially, a 5% or greater equity or voting or other substantial interest,
other than those listed and so specified on Schedule 6.01(h). The stock ledgers
and stock transfer books and the minute book records of DGD and the DGD
Subsidiaries relating to all issuances and transfers of stock by DGD and the DGD
Subsidiaries and all proceedings of the shareholders and the Board of Directors
and committees thereof of DGD and the DGD Subsidiaries since their respective
incorporation made available to Xxxxxx are the original stock ledgers and stock
transfer books and minute book records of DGD and the DGD Subsidiaries or true,
complete and correct copies thereof. Neither DGD nor any DGD Subsidiary is in
violation or breach of, or in default with respect to, any term of its
certificate of incorporation (or other charter document) or by-laws, as amended.
(i) Employees.
(i) Neither DGD nor any DGD Subsidiary has, or contributes to, any
pension, profit-sharing, option, other incentive plan, or any other type
of Employee Benefit Plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), or has any
obligation to or arrangement with employees for bonuses, incentive
compensation, vacations, severance pay, sick pay, sick leave, insurance,
service award, relocation, disability, tuition refund, or other benefits,
whether oral or written, except as set forth in Schedule 6.01(i).
Schedule
- 37 -
6.01(i) sets forth a complete and accurate list of each such Employee
Benefit Plan or arrangement. The total value of carry-forward vacation,
sick pay and sick leave for all employees of DGD or any DGD Subsidiary as
of July 31, 1996 is not more than $106,000. DGD has furnished to Xxxxxx
true, complete and correct copies of: (A) all documents evidencing plans,
obligations, or arrangements referred to on Schedule 6.01(i) (or true,
complete and correct written summaries of such plans, obligations, or
arrangements, which accurately and fully describe such plans, obligations
or arrangements in all material respects, to the extent not evidenced by
documents) and all documents evidencing trusts, summary plan
descriptions, and any other summaries or descriptions relating to any
such plans; (B) the two most recent annual reports (on Form 5500), if
any, including all schedules thereto and the most recent annual and
periodic accounting of related plan assets, with respect to each Employee
Benefit Plan; (C) the two most recent actuarial valuations with respect
to each Pension Plan (as defined in Section 3(2) of ERISA, other than a
multi-employer Pension Plan as defined in Section 3(37) of ERISA) subject
to Title IV of ERISA; and (D) the most recent determination letter issued
by the Internal Revenue Service with respect to each Pension Plan.
(ii) Each Pension Plan maintained by DGD or any DGD Subsidiary has
been funded in accordance with the assumptions contained in the
applicable actuarial valuations prepared with respect to such Pension
Plan and no such Pension Plan has incurred an "accumulated funding
deficiency" as such term is defined in Section 412 of the Code. All
contributions required to be made under each such Pension Plan have been
timely made. All liabilities (for contributions or otherwise) of DGD or
any
- 38 -
DGD Subsidiary as of the Effective Time to each Employee Benefit Plan and
with respect to each obligation to or customary arrangement with
employees for bonuses, incentive compensation, vacations, severance pay,
sick pay, sick leave, insurance, service award, relocation, disability,
tuition refund, or other benefits, whether oral or written, have been
paid or accrued for all periods ending prior to the Effective Time. For
purposes of the preceding sentence, "liabilities" shall include
contributions as due in accordance with the terms of each Employee
Benefit Plan to each Employee Benefit Plan or with respect to each such
obligation or arrangement for that portion of a plan year or other
applicable period which commences prior to and ends after the Effective
Time, and accrued liabilities for any portion of a plan year or other
applicable period shall be determined consistently with DGD's past
practices and in accordance with GAAP.
(iii) To the best knowledge of DGD and each DGD Subsidiary, there
has been no violation of the reporting and disclosure requirements
imposed either under ERISA or the Code with respect to any Employee
Benefit Plan of DGD or of any DGD Subsidiary. To the knowledge of DGD and
each DGD Subsidiary, there has been no breach of fiduciary duty or
responsibility with respect to any Employee Benefit Plan. To the
knowledge of DGD and each DGD Subsidiary, no Employee Benefit Plan or
related trust has any liability of any nature, accrued or contingent,
including without limitation liabilities for Taxes, other than for
administrative expenses and routine payments to be made in due course to
participants and beneficiaries, except as set forth on Schedule 6.01(i)
(none of which will have a Material Adverse Effect). Neither DGD nor any
DGD Subsidiary has any formal plan
- 39 -
or commitment, whether or not legally binding, to create any addition or
modification to any existing Employee Benefit Plan or benefit obligation
or arrangement described in Section 6.01(i). Each Employee Benefit Plan
which is a group health plan within the meaning of Section 5000(b)(1) of
the Code is and has been maintained in all material respects with the
applicable requirements of Section 4980B of the Code. To the knowledge of
DGD or any DGD Subsidiary, there is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation
pending, threatened, or in prospect (or any basis therefor known to DGD
or any DGD Subsidiary) with respect to any Employee Benefit Plan or
related trust or with respect to any fiduciary, administrator, or sponsor
(in its capacity as such) of any Employee Benefit Plan. To the knowledge
of DGD or any DGD Subsidiary, no Employee Benefit Plan or related trust
and no such obligation or arrangement is in material breach of, in
material violation of, or in material default with respect to, any law,
rule, regulation, order, judgment, or decree nor is DGD, any DGD
Subsidiary, any Employee Benefit Plan, or any related trust required to
take any action in order to avoid any breach, violation or default. No
event has occurred or, to the knowledge of a DGD Responsible Employee, is
threatened or about to occur with respect to any Employee Benefit Plan or
trust thereunder which would constitute a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code.
(iv) Each Pension Plan maintained for the employees of DGD or of any
DGD Subsidiary has received a favorable determination letter from the
Internal Revenue Service (a true, correct and complete copy of which has
previously been delivered to Xxxxxx) with respect to its tax qualified
status under Section 401(a) of
- 40 -
the Code and any related trust has been an exempt trust for such period
under Section 501 of the Code, and neither DGD nor any DGD Subsidiary has
knowledge of any event or condition which could now or with the passage
of time adversely affect such status. Each Pension Plan has in all
material respects been operated in accordance with its terms. No Pension
Plan which is subject to Title IV of ERISA has an accumulated or waived
funding deficiency within the meaning of Section 412 of the Code. No
investigation or review by the Internal Revenue Service is currently
pending or (to the knowledge of DGD or any DGD Subsidiary) is
contemplated in which the Internal Revenue Service has asserted or may
assert that any Pension Plan is not qualified under Section 401(a) of the
Code or that any related trust is not exempt under Section 501 of the
Code. Except as set forth in Schedule 6.01(i)(iv), neither DGD nor any
DGD Subsidiary, nor any organization to which DGD or any DGD Subsidiary
is a successor or parent corporation, within the meaning of Section
4069(b) of ERISA, has divested itself of any Person maintaining or with
an obligation to contribute to any Pension Plan which had an "amount of
unfunded benefit liabilities," as defined in Section 4001(a)(18) of
ERISA, at the time of such divestiture. No assessment of any federal
Taxes with respect to any Employee Benefit Plan has been made or (to the
knowledge of DGD or any DGD Subsidiary) is contemplated against DGD, any
DGD Subsidiary, or any related trust of any Pension Plan, and nothing has
occurred which would result in the assessment of unrelated business
taxable income under the Code with respect to any Employee Benefit Plan.
Each of DGD and each DGD Subsidiary has filed all Form 5500's required to
be filed by it with respect to all Employee Benefit Plans. No event has
occurred or (to
- 41 -
the knowledge of DGD or any DGD Subsidiary) is threatened or about to
occur which would constitute a reportable event within the meaning of
Section 4043(b) of ERISA. No notice of termination has been filed by the
plan administrator pursuant to Section 4041 of ERISA or issued by Pension
Benefit Guaranty Corporation pursuant to Section 4042 of ERISA with
respect to any Pension Plan.
(v) Except as set forth on Schedule 6.01(i)(v), neither DGD nor any
DGD Subsidiary currently contributes to any multi-employer Pension Plan
within the meaning of Section 3(37) of ERISA. Since January 1, 1986
neither DGD nor any DGD Subsidiary has effectuated either a complete or
partial withdrawal from any multi-employer Pension Plan within the
meaning of Section 3(37) of ERISA and as of the date hereof no withdrawal
liabilities with respect to such multi-employer Pension Plans exist.
(vi) Schedule 6.01(i)(vi) contains a true, complete and correct
statement of the names, relationship with DGD or any DGD Subsidiary,
present rates of compensation (whether in the form of salary, bonuses,
commissions, or other supplemental compensation now or hereafter
payable), and aggregate compensation for the calendar year ended December
31, 1995 of (A) each director, officer, or other employee of DGD or of
any DGD Subsidiary who earned at least $100,000, and (B) all sales
agents, dealers, or distributors of DGD or of any DGD Subsidiary. Except
as set forth on Schedule 6.01(i)(vi), since July 31, 1995, neither DGD
nor any DGD Subsidiary has changed the rate of compensation of any of its
directors, officers, employees, agents, dealers, or distributors
thereunder out of the ordinary course of business, nor has any Employee
Benefit Plan or program been instituted or amended
- 42 -
to increase benefits thereunder. Except as set forth on Schedule
6.01(i)(vi), there is no Contract covering any Person that, individually
or collectively, could give rise to the payment of any amount that would
not be deductible by DGD or any DGD Subsidiary by reason of Section 280G
of the Code.
(vii) As of the Effective Date, the present value of the accrued
benefits under any and all Pension Plans which are defined benefit plans,
as defined in Section 3(35) of ERISA, and which are maintained by DGD or
any DGD Subsidiary did not, as of the last annual valuation date for such
Pension Plan, exceed the value of assets of such Pension Plan allocable
to such benefits (computed on the basis of the actuarial assumptions
specified in the most recent actuarial valuation for such Pension Plan).
(j) Patents, Trademarks, Etc. Neither DGD nor any DGD Subsidiary owns or
has pending, or is licensed or otherwise permitted to use, any patent, patent
application, trademark, trademark application, trade name, service xxxx,
copyright, copyright application, franchise, trade secret, software (whether
developed or written by DGD, any DGD Subsidiary or any third party), computer
program (in object or source code form), or other intellectual property or
intangible property or asset (collectively, "Intangibles"), other than as
described on Schedule 6.01(g) or Schedule 6.01(j). Each Intangible is validly
issued and is currently in force, and to the knowledge of DGD or any DGD
Subsidiary is uncontested in all jurisdictions in which it is used or in which
such use is contemplated. Schedule 6.01(j) contains a true, complete and correct
listing, by city and state of location, of: (i) all Intangibles which are owned
(either in whole or in part), used by, or licensed to DGD or any DGD Subsidiary
or which otherwise relate to the businesses of DGD or any DGD Subsidiary, and a
description of each such Intangible which (A) identifies its owner,
- 43 -
registrant, or applicant and (B) where appropriate, provides a statement of
cost, book value and reserve for depreciation of each such item for tax
purposes, and net book value of each such item for financial reporting purposes;
(ii) all Contracts and identification of all parties thereto under which DGD or
any DGD Subsidiary owns or uses any Intangible (whether or not under license
from third parties), together with the identification of the owner, registrant,
or applicant of each such Intangible; (iii) all Contracts and identification of
all parties thereto under which DGD or any DGD Subsidiary grants the right to
use any Intangible; and (iv) all validity, infringement, right-to-use, or other
opinions of counsel (whether in-house or outside) which concern the validity,
infringement, or enforceability of any Intangible owned or controlled by a party
other than DGD or any DGD Subsidiary which relates to the businesses,
properties, or assets of DGD or any DGD Subsidiary. Except as specified on
Schedule 6.01(j): (1) DGD or an DGD Subsidiary, as the case may be, is the sole
and exclusive owner or licensee of, and has the right to use, all Intangibles;
(2) no Intangible is subject to any order, judgment, decree, contract,
agreement, instrument, lease, license or understanding restricting the scope of
the use thereof; (3) during the last five years, neither DGD nor any DGD
Subsidiary has been charged with, or has charged others with, unfair
competition, infringement of any Intangible, or wrongful use of confidential
information, trade secrets, or secret processes; and (4) neither DGD nor any DGD
Subsidiary is using any patentable invention, confidential information, trade
secret, or secret process of others. There is no right under any Intangible
necessary to the businesses of DGD or of any DGD Subsidiary as presently
conducted or as it contemplates conducting, except such as are so designated on
Schedule 6.01(j). Neither DGD nor any DGD Subsidiary has infringed, is
infringing, or has received notice of infringement in respect of the Intangibles
or asserted
- 44 -
Intangibles of others, nor has DGD or any DGD Subsidiary been advised by counsel
or others that it is infringing or may be infringing the Intangibles or asserted
Intangibles of others if any currently contemplated business activity is
effectuated. To the knowledge of DGD or any DGD Subsidiary, there is no
infringement by others of Intangibles of DGD and each DGD Subsidiary. As far as
DGD and each DGD Subsidiary can foresee, there is no Intangible or asserted
Intangible of others which may materially adversely affect the condition
(financial or otherwise), results of operations, businesses, properties, assets,
future prospects or current or future liabilities of DGD or of any DGD
Subsidiary. All Contracts pertaining to Intangibles to which DGD or any DGD
Subsidiary is a party, or to which any of their respective businesses,
properties, or assets are subject, are in compliance with all laws, rules,
regulations, orders, judgments, and decrees binding on DGD or any DGD Subsidiary
or to which any of their respective businesses, properties, or assets are
subject and the consummation of the transactions contemplated in this Agreement
will in no way affect the continuation, validity or effectiveness of any such
Contracts, or require the consent of any Person in respect thereof. Except as
set forth in Schedule 6.01(j), neither DGD nor any DGD Subsidiary uses any
trademark, tradename, service xxxx, design or name to identify, respectively,
the products, businesses, or services of DGD or any DGD Subsidiary. None of any
director, officer, or employee of DGD or of any DGD Subsidiary, any relative or
affiliate of any such director, officer, or employee, nor any other Person or
enterprise (other than DGD) in which any such director, officer, or employee, or
any such relative or affiliate had or now has, directly or indirectly, legally
or beneficially, a 5% or greater equity or voting or other substantial interest,
possesses any Intangible which relates to the businesses of DGD or any DGD
Subsidiary.
- 45 -
(k) Questionable Payments. To the best of DGD's knowledge, neither DGD,
any DGD Subsidiary nor any director, officer, employee, agent (including sales
agents), dealer, distributor or representative of any thereof has, directly or
indirectly: used any corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to political activity; made
any unlawful payment to foreign or domestic government officials or employees or
to foreign or domestic political parties or campaigns from corporate funds;
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended;
or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment.
(l) Authority to Merge. DGD has all requisite power and authority to
execute, deliver, and perform this Agreement and to consummate the transactions
contemplated hereby. All necessary corporate proceedings of DGD or any DGD
Subsidiary have been duly taken to authorize the execution, delivery, and
performance of this Agreement by DGD, other than approval of the holders of the
requisite number of shares of DGD Common Stock and DGD Preferred in accordance
with Section 14A:10-3 of the NJBCA. This Agreement has been duly authorized,
executed, and delivered by DGD, constitutes the legal, valid, and binding
obligation of DGD, and is enforceable as to it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, or similar laws affecting
creditors' rights generally and equitable principles. Except as set forth in
Sections 3.01, 5.01(i), 7.01 and 7.02, no consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, or notice to, any federal, state, local, or other governmental authority
or any court or other tribunal or any other Person is required to be obtained or
made by DGD or any DGD Subsidiary for the execution, delivery, or performance of
this Agreement by DGD.
- 46 -
No consent of any party to any Contract to which DGD or any DGD Subsidiary is a
party, or to which any of them or any of their respective businesses,
properties, or assets are subject, is required for the execution, delivery, or
performance of this Agreement; and the execution, delivery, and performance of
this Agreement will not (if the consents referred to on Schedule 6.01(h) are
obtained prior to the Effective Time) violate, result in a breach of, conflict
with, or (with or without the giving of notice or the passage of time or both)
entitle any Person to terminate or call a default under, entitle any Person to
receive rights or privileges that such party was not entitled to receive
immediately before this Agreement was executed under, or create any obligation
on the part of DGD, any DGD Subsidiary, or the Surviving Corporation to which it
was not subject immediately before this Agreement was executed under, any term
of any such Contract, or violate or result in a breach of any term of the
certificate of incorporation or by-laws of DGD or any DGD Subsidiary, or (if the
provisions of Sections 3.01, 5.01(i), 7.01, and 7.02 are satisfied) violate,
result in a breach of, or conflict with any law, rule, regulation, order,
judgment, or decree binding on DGD or any DGD Subsidiary or to which any of
their respective businesses, properties, or assets are subject. Except for Loeb
Partners, Inc. and Xxxxxx Xxxxxxxxx, neither DGD nor any of its officers,
directors, employees, counsel, investment bankers, accountants or agents or
representatives has employed any broker or finder or incurred any liability for
any fee, commission, or other compensation payable by any Person on account of
alleged employment as a broker or finder, or alleged performance of services as
a broker or finder, in connection with or as a result of this Agreement, the
Merger, or the other transactions contemplated by this Agreement.
- 47 -
(m) Insurance. Schedule 6.01(m) sets forth a true, correct and complete
list of all fire, theft, casualty, general liability, worker's compensation,
business interruption, environmental, automobile, property and other insurance
policies currently insuring the business or any assets or property of DGD or any
DGD Subsidiary and of all life insurance policies currently maintained insuring
the life of any director, officer or employee of DGD or any DGD Subsidiary of
which DGD is the beneficiary, specifying the policy number, the type of
coverage, the amount of coverage, the premium, the applicable deductibles, the
insurer and the expiration date of each such policy (collectively, the
"Insurance Policies"). Schedule 6.01(m) also sets forth all pending or
unresolved worker's compensation claims against DGD or any DGD Subsidiary,
including the amount involved in each such claim. A true, complete and correct
list of all claims made under such Insurance Policies since August 1, 1993 which
are still open or unresolved, and all claims made under such Insurance Policies
since August 1, 1993, are set forth on Schedule 6.01(m) and have been furnished
to Xxxxxx. True, correct and complete copies of all of the Insurance Policies
have been previously delivered by DGD to Xxxxxx, except that, as to those
Insurance Policies that have been recently renewed or obtained for which DGD and
the DGD Subsidiaries has not yet received a copy of the policy for the current
year, DGD has previously delivered to Xxxxxx true, correct and complete copies
of such policies for the prior year thereof and true, correct and complete
copies of the binders reflecting renewal of such policies for the current year
thereof. The Insurance Policies are in full force and effect. All premiums due
on the Insurance Policies or renewals thereof have been paid and DGD and the DGD
Subsidiaries are not in default under any of the Insurance Policies. DGD and the
DGD Subsidiaries have not received any notice or other communication from any
issuer of the
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Insurance Policies canceling or materially amending any of the Insurance
Policies, materially increasing the annual or other premiums payable thereunder,
and, to the best of DGD's knowledge, no such cancellation, amendment or increase
of deductibles, retainages or premiums is threatened.
(n) Books and Records. The general ledgers and books of account of DGD
and the DGD Subsidiaries and all other books and records of DGD and the DGD
Subsidiaries with respect to their business are in all material respects
complete and correct and have been maintained in a consistent manner in
accordance with good business practices and to the best knowledge of DGD in
accordance in all material respects with all applicable procedures required by
laws and regulations.
(o) Customers and Suppliers. Set forth on Schedule 6.01(o) are the list
of the top (20) twenty customers of DGD for each of its fiscal years ending in
1994, 1995 and 1996 and setting forth the name or customer number of each
customer. Schedule 6.01(o) sets forth a general description of the current
business arrangements (to the extent not reflected in any Contracts set forth on
Schedule 6.01(h)) between DGD and its customers and suppliers, and a list of the
top twenty (20) suppliers of DGD and each DGD Subsidiary (based on purchase
volumes) during the last two (2) years. Copies of all supplies and sales
Contracts for finished goods involving DGD or DGD Subsidiaries have been
previously furnished to Xxxxxx.
(p) Bank Accounts; Securities. Set forth on Schedule 6.01(p) is a
complete and correct list of all bank accounts, safe deposit boxes, money market
funds, certificates of deposit, stocks, bonds, notes and other securities
maintained by, in the name of or owned or
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controlled by DGD or any DGD Subsidiary or in which DGD or any DGD Subsidiary
has an interest.
(q) Disclosure. No representation or warranty by DGD in this Agreement or
on any Schedule hereto contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements contained
therein not misleading as of the date made.
(r) Information to be Included in the Registration Statement and the
Proxy Statement. The information concerning DGD and the DGD Subsidiaries which
DGD will furnish for inclusion in the Registration Statement and the Proxy
Statement, will comply as to form with all applicable rules of the SEC and shall
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading.
(s) Accuracy of SEC Filings. The filings made by DGD within the past
three (3) years with the SEC were, if filed under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), prepared in all material respects in
accordance with the then existing requirements of the Exchange Act and the rules
and regulations thereunder and, if filed under the Securities Act, prepared in
all material respects in accordance with the then existing requirements of the
Securities Act and the rules and regulations thereunder. Such filings when
filed, and the press releases and other public statements DGD has made
subsequent to the last such filing when considered together with such filings,
did not at the time of filing or issuance of the press releases or other public
statements, as the case may be, except as qualified by the 8-K, (y) contain an
untrue statement of a material fact or (z) omit to state a
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material fact required to be stated therein or necessary to make the statements
therein not false or misleading.
(t) Agreements Not to Compete. DGD has delivered to Xxxxxx true, complete
and accurate copies of all Contracts between DGD or any DGD Subsidiary and their
respective directors, officers, employees, agents (including sales agents),
dealers or distributors which prevent or restrict any such Person from competing
with DGD or any DGD Subsidiary in any manner. Each such agreement remains in
full force and effect.
(u) Environmental Conditions.
Except as set forth in Schedule 6.01(u), DGD represents and warrants as
of the closing date that:
(i) DGD, all DGD Subsidiaries, the real properties set forth on
Schedule 6.01(g) (the "Owned Properties") and the leased properties set
forth on Schedule 6.01(g) (the "Leased Properties") comply and to the
best knowledge of DGD have been in compliance with all applicable
Environmental Laws (as hereinafter defined), and there is no event,
condition, circumstance, activity, practice, incident, action or plan
which may interfere with or prevent the continued compliance with any
Environmental Law;
(ii) DGD and the DGD Subsidiaries have (a) taken all actions
required under Environmental Laws to register any products, materials or
structures at, on or under the Owned Properties and Leased Properties
required to be registered under Environmental Laws, and (b) obtained all
permits, licenses, approvals and authorizations required for their
operations at the Owned Properties and Leased Properties by any
applicable Environmental Law, and each such permit, license,
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approval, registration and authorization is valid and in full force and
effect and is not subject to any pending or threatened administrative or
judicial proceeding to revoke, cancel or declare such permit, license,
approval, registration and authorization invalid in any respect;
(iii) to the best knowledge of DGD, neither DGD, the DGD
Subsidiaries, nor any other person has caused any Release (as hereinafter
defined), threatened Release, or disposal of any Hazardous Material (as
hereinafter defined) at, from, under or about the Owned Properties, the
Leased Properties or any properties formerly owned or leased by DGD or
any DGD Subsidiary at the time of such ownership or tenancy by DGD or any
DGD Subsidiary, and none of the Owned Properties or Leased Properties are
adversely affected by any Release, threatened Release, or disposal of any
Hazardous Material at, from, under or about any such properties or
originating or emanating from any other property; DGD has no knowledge of
any groundwater or soil contamination;
(iv) there are no Hazardous Materials on, in or under the Owned
Properties or Leased Properties, whether contained in barrels, tanks,
equipment (moveable or fixed) or other containers, deposited or located
in land, waters, sumps or in any other part of such properties,
incorporated into any structure on such properties, or otherwise existing
thereon;
(v) neither the Owned Properties nor the Leased Properties contain
or has ever contained any: (a) underground storage tank or other
receptacle used for the storage of Hazardous Materials, (b)
asbestos-containing building material, (c) polychlorinated biphenyls
("PCBs"), (d) any landfills or dumps, (e) hazardous waste
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management facility as defined pursuant to the federal Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. xx.xx. 6901 et seq., or
any comparable state law, or (f) area designated for any removal or
cleanup activity pursuant to the federal Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. xx.xx.
901 et seq., or any comparable state law.
(vi) neither DGD, any DGD Subsidiary, nor any other person has used
any Hazardous Materials, or conducted any activities involving the use,
handling, treatment, storage, transportation or disposal of any Hazardous
Material (except for Hazardous Materials comprised exclusively of
inventoried items that are carried by DGD in the ordinary course which
are not in excess of amounts required to be reported under applicable
Environmental Law), at either the Owned Properties or the Leased
Properties, including but not limited to activities involving any sort of
manufacturing, processing or refining, or cleaning or degreasing of
equipment, machinery, part or component;
(vii) neither DGD nor any DGD Subsidiary has received any notice of
any pending or threatened Environmental Claim (as hereinafter defined),
and to the best of DGD's knowledge there are no Environmental Law
violations at the Owned Properties, the Leased Properties, any property
formerly owned or leased by DGD or any DGD Subsidiary, or any other
property (including, without limitation, any off-site disposal facility
to which Hazardous Materials originating from the Owned Properties,
Leased Properties, or any properties formerly owned or leased by DGD or
any DGD Subsidiary have been sent).
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(viii) neither DGD nor any DGD Subsidiary has submitted to any
governmental agency or other person any notice, and is not required to
give any such notice, regarding any Release on, under, or from the Owned
Properties, the Leased Properties, or any properties formerly owned or
leased by DGD or any DGD Subsidiary;
(ix) neither the Owned Properties nor the Leased Properties is
subject to, and neither DGD nor any DGD Subsidiary has any knowledge of,
any pending or threatened lien or restriction on the ownership,
occupancy, use, or transferability of the Owned Properties or the Leased
Properties in connection with any (a) Environmental Law or (b) Release,
threatened Release, or disposal of a Hazardous Material;
(x) Xxxxxx'x obligation to close shall be conditioned on DGD having
obtained prior to the Effective Time either (1) a Letter of
Non-Applicability, (2) a Remediation Agreement, (3) a No Further Action
letter, or (4) other approval from the New Jersey Department of
Environmental Protection authorizing consummation of the transaction,
pursuant to the New Jersey Industrial Site Recovery Act ("ISRA"),
N.J.S.A. xx.xx. 13:1K-6 et seq.,
(xi) DGD has provided or otherwise made available to Buyer true,
complete and accurate copies of all environmental audits, reports, and
assessments concerning DGD, the DGD Subsidiaries, and the Owned
Properties and the Leased Properties which DGD or the DGD Subsidiaries
possess or reasonably could have obtained.
"Environmental Claim" means any investigation, notice, violation, demand,
allegation, action, suit, injunction, judgment, order, consent decree, penalty,
fine, lien,
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proceeding, or claim (whether administrative, judicial, quasi-judicial or
private in nature) arising (a) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, or (b) from any investigatory,
abatement, removal, remedial, corrective, or other response action in connection
with a Hazardous Material or an Environmental Law, or (c) from any actual or
alleged damage, injury, threat, or harm to health, safety, natural resources,
property, or the environment, regardless of whether such matter is now known or
unknown, or how or when such matter occurred or is discovered.
"Environmental Law" means (a) any present federal, state or local law or
regulation relating to the handling, use, control, management, treatment,
storage, disposal, release or threat of release of any Hazardous Material,
including without limitation, CERCLA, RCRA, the federal Clean Water Act ("CWA"),
33 U.S.C. ss.ss.1251 et seq., the federal Clean Air Act ("CAA"), 42 U.S.C.
xx.xx. 7401 et seq., the Toxic Substances Control Act ("TSCA"), 7 U.S.C. xx.xx.
136 et seq., the Safe Drinking Water Act ("SDWA"), 42 U.S.C. xx.xx. 300f et
seq., the Occupation Safety and Health Act of 1970 (the "OSH Act"), 29 U.S.C.
xx.xx. 651 et seq., ISRA, the New Jersey Spill Compensation and Control Act
("Spill Act"), N.J.S.A. ss. 58:10-23.11 et seq., the New Jersey Solid Waste
Management Act ("SWMA"), N.J.S.A. ss. 13:1E-1 et seq., the New Jersey Air
Pollution Control Act ("APCA"), N.J.S.A. ss. 26:2C-1 et seq., the New Jersey
Water Pollution Control Act ("WPCA"), N.J.S.A. ss. 58:10A-1 et seq., and the New
Jersey Freshwater Wetlands Protection Act ("FWPA"), N.J.S.A. ss. 13:9B-1 et
seq., and any similar state or local laws, rules or regulations, and (b) any and
all requirements arising under applicable present federal, state or local laws,
statutes, rules, ordinances, codes, orders, licenses, permits, approvals, plans,
authorizations, concessions, or the like, and all applicable judicial,
administrative, and regulatory decrees, judgments, and orders,
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relating to the protection of human health or the environment, including without
limitation: (i) any and all requirements pertaining to reporting, licensing,
authorizing, approving, permitting, investigating, and remediating emissions,
discharges, releases, or threat of releases of any Hazardous Materials into the
indoor or outdoor air, surface water, groundwater, or land, or otherwise into
the environment, or relating to the manufacture, operation, processing,
distribution, use, treatment, storage, disposal, transport, handling or
management of any Hazardous Material; and (ii) any and all requirements
pertaining to the protection of the health and safety of employees or the public
and/or the environment.
"Hazardous Material" means any substance or material: (a) the presence of
which requires investigation or remediation under any Environmental Law, (b)
which is regulated by any federal, state or local governmental authority,
including without limitation, any substance or waste material which is defined
or listed as a "hazardous waste," "extremely hazardous waste," "restricted
hazardous waste," "industrial waste," "hazardous substance," "solid waste,"
"hazardous material," "pollutant" or "contaminant" under any Environmental Law;
(c) which contains gasoline, diesel fuel or other petroleum hydrocarbons or a
petroleum derivative; (d) which contains PCBs, asbestos or urea formaldehyde;
(e) which is explosive, corrosive, flammable, infectious, radioactive or toxic;
or (f) which poses an unreasonable risk of injury to human health or the
environment.
"Release" shall mean any spilling, leaking, seeping, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
placement, burying or disposing in or upon or under any land or water or air, or
otherwise into the indoor or outdoor environment, including, without limitation,
the abandonment or discarding of
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barrels, drums, containers, tanks, and other receptacles containing or
previously containing any Hazardous Material.
ss.6.02 Certain Representations and Warranties of Xxxxxx & Distributors
Xxxxxx and Distributors hereby represent and warrant to DGD that (it
being agreed that Xxxxxx and Distributors jointly and severally make the
representations and warranties with respect to Distributors set forth below, and
Xxxxxx alone makes the representations and warranties with respect to Xxxxxx):
(a) Organization and Qualification. Xxxxxx and Distributors are each a
corporation duly organized, validly existing, and in good standing under the
laws of its jurisdiction of incorporation, with all requisite corporate power
and authority, and all necessary consents, authorizations and approvals
(including, without limitation, certificates of authority to do business as a
foreign corporation) from, and declarations and filings with, all federal,
state, local, foreign and other governmental authorities, to own, lease,
license, and use its properties and assets and to carry on the businesses in
which it is now engaged, except where the failure to have any such consent,
authorization or approval would not result in a material adverse effect on the
condition (financial or otherwise), results of operations, businesses,
properties, assets, future prospects or liabilities of Xxxxxx or Distributors
taken as a whole.
(b) Authority to Merge. Xxxxxx and Distributors each has all requisite
power and authority to execute, deliver, and perform this Agreement, and to
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement. All necessary corporate proceedings of Xxxxxx and Distributors
have been duly taken to authorize the execution, delivery, and performance of
this Agreement by Xxxxxx and
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Distributors. This Agreement has been duly authorized, executed, and delivered
by Xxxxxx and Distributors, constitutes the legal, valid, and binding obligation
of Xxxxxx and Distributors, and is enforceable as to Xxxxxx and Distributors in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfers or
similar laws affecting creditors' rights generally and equitable principles.
Except as set forth in Sections 3.01, 5.02(f), 7.01 and 7.02, no consent,
authorization, approval, order, license, certificate, or permit of or from, or
declaration or filing with, or notice to any federal, state, local, or other
governmental authority or any court or other tribunal or any other Person is
required to be obtained or made by Xxxxxx or Distributors for the execution,
delivery, or performance of this Agreement by Xxxxxx and Distributors. No
consent of any party to any contract, agreement, instrument, lease, license,
arrangement, undertaking or understanding to which Xxxxxx or Distributors is a
party, or to which its businesses, properties, or assets are subject, is
required for the execution, delivery, or performance of this Agreement; and the
execution, delivery, and performance of this Agreement will not violate, result
in a breach of, conflict with, or (with or without the giving of notice or the
passage of time or both) entitle any Person to terminate or call a default
under, entitle any Person to receive rights or privileges that such Person was
not entitled to receive before this Agreement was executed under, or create any
obligation on the part of Xxxxxx or Distributors to which it was not subject
immediately before this Agreement was executed under, any term of any such
contract, agreement, instrument, lease, license, arrangement, or understanding,
or violate or result in a breach of any term of the certificate of incorporation
or by-laws of Xxxxxx or Distributors, or (if the provisions of Sections 3.01,
5.02(f), 7.01 and 7.02 are satisfied)
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violate, result in a breach of, or conflict with any law, rule, regulation,
order, judgment, or decree binding on Xxxxxx or to which any of its respective
businesses, properties, or assets are subject. Except for Dresdner Securities
(USA) Inc., neither Xxxxxx, nor any of its respective officers, directors,
employees, counsel, investment bankers, accountants or agents has employed any
broker or finder or incurred any liability for any fee, commission, or other
compensation payable by any Person on account of alleged employment as a broker
or finder, or alleged performance of services as a broker or finder, in
connection with or as a result of this Agreement, the Merger, or the other
transactions contemplated by this Agreement.
(c) Business After the Effective Time. It is the present intention of the
Surviving Corporation to continue at least one significant historic business
line of DGD, or to use at least a significant portion of DGD's historic business
assets in a business, within the meaning of Treasury Regulation Section
1.368-1(d), including the continued usage of the "Drug Guild" name. Xxxxxx and
Distributors will not discontinue the operation of significant historic business
lines of DGD or cease using a significant portion of DGD's historic business
assets in a business if counsel to Xxxxxx believes such action would cause the
Merger to fail to qualify as a tax free reorganization under the federal tax
laws as then construed.
(d) Status of Xxxxxx Common Stock To Be Issued. The shares of Xxxxxx
Common Stock to be issued pursuant to the Merger in exchange for shares of DGD
Common Stock, when issued in accordance with the terms of this Agreement and the
Registration Statement, will be duly authorized, validly issued, fully paid and
nonassessable, will not be issued in violation of any preemptive right of
shareholders and no personal liability will
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attach to the ownership thereof and such shares will be duly registered under
the Securities Act.
(e) Financial Condition. Xxxxxx has delivered to DGD true, correct,
complete and accurate copies of the following: the audited balance sheets of
Xxxxxx as of April 30, 1994, April 30, 1995 and April 30, 1996; audited
statements of income, statements of shareholders' equity, and statements of cash
flows of Xxxxxx for each of the years within the three year period ended April
30, 1996; the unaudited consolidated balance sheet of Xxxxxx as of July 31,
1996; and the unaudited consolidated statement of income, consolidated statement
of shareholders' equity, and consolidated statement of cash flows of Xxxxxx for
the quarter ended July 31, 1996. Each such balance sheet presents fairly the
financial condition, assets, liabilities, and shareholders' equity of Xxxxxx and
its subsidiaries as of its date; each such statement of income, shareholders'
equity and cash flows presents fairly the results of operations of Xxxxxx and
its subsidiaries for the periods indicated, all in accordance with GAAP. The
financial statements referred to in this Section 6.02(e) are in agreement with
the detailed books and records of Xxxxxx and its subsidiaries. Since July 31,
1996, except as may be expressly disclosed in the July 31, 1996 unaudited
financial statements or in the Schedules hereto:
(i) There has at no time been a Material Adverse Effect.
(ii) Neither Xxxxxx nor any Xxxxxx subsidiary has authorized,
declared, paid, or effected any dividend or liquidation or other
distribution, stock appreciation rights, phantom stock options, stock
split, recapitalization, reclassification or reorganization in respect of
its capital stock or any direct or indirect redemption or
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purchase, retirement or other acquisition of any stock of Xxxxxx or any
Xxxxxx subsidiary.
(iii) The operations and businesses of Xxxxxx, Distributors and
their subsidiaries have been conducted in all material respects only in
the ordinary course, consistent with past practices.
(iv) Neither Xxxxxx, Distributors, nor any of their subsidiaries
has suffered an extraordinary or unusual loss (whether or not covered by
insurance) or waived any right of substantial value, any of which,
individually or in the aggregate, is material to Xxxxxx, Distributors and
their subsidiaries, taken as a whole. (f) Litigation and Claims. Except
as set forth in Schedule 6.02(f) hereto, there is
no litigation, arbitration, grievance, claim governmental or other proceeding
(formal or informal), or investigation pending, or to the knowledge of Xxxxxx,
Distributors or any of their subsidiaries, threatened with respect to Xxxxxx,
Distributors or any of their subsidiaries. No litigation, arbitration,
grievance, claim, governmental or other proceeding or investigation set forth on
Schedule 6.02(f), if adversely determined, would have a Material Adverse Effect
individually or in the aggregate.
(g) Other Liabilities. Except as set forth on Schedule 6.02(g) hereto,
neither Xxxxxx, Distributors nor any of their subsidiaries has any indebtedness
or liability of any nature (including, without limitation, any liability arising
from any Environmental Claim), accrued or contingent, for which provision should
be made on the financial statements which has not been made, other than the
following:
(i) Liabilities for which full provision has been made on the
audited balance sheet and the notes thereto (the "Last Xxxxxx Balance
Sheet") as of April
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30, 1996 (the "Last Xxxxxx Balance Sheet Date") as set forth in the
Registration Statement; and
(ii) Other liabilities arising since the Last Xxxxxx Balance Sheet
Date and prior to the Effective Time in the ordinary course of business
(which shall not include liabilities to customers on account of defective
products or services) which are not inconsistent with the representations
and warranties of Xxxxxx and Distributors or any other provision of this
Agreement.
No Xxxxxx Responsible Employee has knowledge of any existing or
threatened occurrence(s), event(s) or development(s) which, as of the date
hereof, individually or in the aggregate, are likely to have a Material Adverse
Effect.
(h) Capitalization. The authorized capital stock of Xxxxxx consists of
Two Thousand Five Hundred (2500) shares of Xxxxxx Common Stock, of which One
Thousand (1000) shares are issued and outstanding. There are no outstanding
options, warrants, calls, commitments, rights, plans or arrangements of any kind
relating to any of the capital stock of Xxxxxx or any securities or other
instruments convertible into, exercisable for or exchangeable for capital stock
of Xxxxxx.
CONDITIONS TO CLOSING
ss.7.01 Conditions of Xxxxxx
The obligations of Xxxxxx to consummate the Merger shall be subject to
the following conditions precedent:
(a) Accuracy of Representations and Compliance With Conditions. All
representations and warranties of DGD made in or pursuant to this Agreement or
any related agreement shall be accurate when made in all material respects
(without regard to any
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knowledge limitations contained therein) and, in addition, shall be accurate in
all material respects as of the Effective Time as though such representations
and warranties were then made in exactly the same language by DGD (without
regard to any knowledge limitations contained therein), and regardless of
changes beyond its control. As of the Effective Time, DGD shall have performed
and complied in all material respects with all covenants and agreements and
satisfied all conditions required to be performed and complied with by it under
this Agreement or any related agreement at or before the Effective Time. Xxxxxx
shall have received certificates, each dated the Effective Time, in form and
substance reasonably satisfactory to Xxxxxx executed on behalf of DGD by the
Chief Financial Officer and another executive officer, to that effect, and as to
matters set forth in Sections 6.01(f), 6.01(h), 6.01(i), 6.01(k) and 6.01(o)
hereof.
(b) Certificates from DGD. Xxxxxx shall have received a certificate
executed by an executive officer on behalf of DGD dated the Effective Time, to
the effect that such officer has examined the Registration Statement and the
Proxy Statement, and any amendment or supplement thereto, and, to the best of
his knowledge, (i) neither the Registration Statement nor the Proxy Statement
nor any amendment or supplement thereto (A) contains an untrue statement of a
material fact or (B) omits to state a material fact required to be stated
therein or necessary to make the statements therein not false or misleading in
light of the circumstances in which they are made, provided in each case that
such untrue statement or omission relates to information furnished by or on
behalf of, or pertaining to, DGD or any DGD Subsidiary and (ii) since the
effective date of the Registration Statement and the date of the Proxy
Statement, no event with respect to DGD or any DGD Subsidiary, has occurred
which should have been set forth in an amendment to the
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Registration Statement or a supplement to the Proxy Statement, which has not
been set forth in such an amendment or supplement.
(c) Opinions of DGD's Counsel. There shall have been delivered to Xxxxxx
at the Effective Time, in form and substance reasonably satisfactory to Xxxxxx,
(i) the opinion of counsel to DGD regarding various customary corporate matters,
dated as of the Effective Date and (ii) the opinion of special tax counsel to
Xxxxxx, dated as of the Effective Date, to the effect that the Merger
constitutes a reorganization within Section 368 of the Code and will result in a
tax free acquisition with respect to the holders of the Xxxxxx Common Stock and
the DGD Common Stock.
(d) Accountants' Letter. (i) DGD shall have delivered to Xxxxxx at the
Effective Time, in form and substance reasonably satisfactory to Xxxxxx, a
letter from Xxxxxxx X. Xxxxxx & Company LLP dated as of such date, addressed to
Xxxxxx regarding various customary accounting matters and (ii) Xxxxxx shall have
received an opinion from Xxxxxx Xxxxxxxx LLP ("AA") to the effect that the
Merger as structured will constitute a pooling of interests, which letter will
contain a commitment that such treatment will be certified in the next audited
financial statements of Xxxxxx.
(e) Other Closing Documents. DGD shall have delivered to Xxxxxx at or
prior to the Effective Time such other documents (including certificates of
officers of DGD or of any DGD Subsidiary) as Xxxxxx may reasonably request in
order to enable Xxxxxx to determine whether the conditions to their obligations
under this Agreement have been met and otherwise to carry out the provisions of
this Agreement.
(f) Review of Proceedings. All actions, proceedings, instruments, and
documents required of DGD to carry out this Agreement or incidental thereto and
all other
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related legal matters shall be subject to the reasonable approval of counsel to
Xxxxxx and DGD shall have furnished such counsel such documents as such counsel
may have reasonably requested for the purpose of enabling them to pass upon such
matters.
(g) Legal Action. There shall not have been instituted or threatened any
legal proceeding relating to, or seeking to prohibit or otherwise challenge the
consummation of, the transactions contemplated by this Agreement, or to obtain
substantial damages with respect thereto which in the reasonable judgment of
Xxxxxx otherwise materially prohibits, restricts, conditions or delays
consummation of the Merger or any of the other transactions contemplated by this
Agreement or materially impairs the contemplated benefits to Xxxxxx of this
Agreement, the Merger, or any other transaction contemplated by this Agreement.
(h) No Governmental Action. There shall not have been any action taken,
or any law, rule, regulation, order, judgment, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the transactions
contemplated by this Agreement by any federal, state, local, or other
governmental authority or by any court or other tribunal, including the entry of
a temporary restraining order or a preliminary or permanent injunction, which,
in the reasonable judgment of Xxxxxx, (i) makes this Agreement, the Merger, or
any of the other transactions contemplated by this Agreement illegal, (ii)
results in a substantial delay in the ability of DGD, Xxxxxx or Distributors to
consummate the Merger or any of the other transactions contemplated by this
Agreement, (iii) requires the divestiture by Xxxxxx of a material portion of
their business or any other Xxxxxx subsidiary, or of DGD or any of the DGD
Subsidiaries, (iv) imposes material limitations on the ability of Xxxxxx
effectively to exercise full rights of ownership of shares of the Surviving
Corporation, including the right to vote such shares on all matters properly
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presented to the shareholders of the Surviving Corporation, or (v) otherwise
prohibits, or materially restricts, conditions or delays consummation of the
Merger or any of the other transactions contemplated by this Agreement or
impairs the contemplated benefits to Xxxxxx of this Agreement, the Merger, or
any of the other transactions contemplated by this Agreement.
(i) INTENTIONALLY OMITTED.
(j) Xxxx-Xxxxx-Xxxxxx Waiting Period. All applicable waiting periods in
respect of the Merger and the other transactions contemplated by this Agreement
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended,
shall have expired or been terminated at or prior to the Effective Time.
(k) Fairness Opinion. An opinion of Loeb Partners, Inc. to the effect
that the Merger and the other transactions contemplated by this Agreement are
fair, from a financial point of view, to DGD and its shareholders, shall have
been confirmed in writing at the Effective Time.
(l) Contractual Consents Needed. The parties to this Agreement shall have
obtained at or prior to the Effective Time all consents required to be delivered
by DGD for the consummation of the Merger and the other transactions
contemplated by this Agreement from any party to any material Contract, to which
any of them or any DGD Subsidiary is a party, or to which any of them or any of
their respective businesses, properties, or assets are subject.
(m) Shareholder Consent. DGD shall have obtained prior to the Effective
Time, the approval of the Merger and the transactions contemplated hereby by the
holders of the
- 66 -
requisite number of shares of DGD Common Stock and DGD Preferred pursuant to
Section 14A:10-3 of the NJBCA.
(n) No Material Adverse Effect. From July 31, 1996, through the Effective
Time there shall have been no Material Adverse Effect affecting DGD. For the
purposes of this Section 7.01(n) only, the following circumstance shall
constitute a Material Adverse Effect: the net worth of DGD and the DGD
Subsidiaries from July 31, 1996 shall have decreased in the aggregate by more
than 15%. There shall be no pending or threatened litigation or claims against
DGD or any DGD Subsidiary which could, individually or in the aggregate,
materially and adversely affect any of the conditions (financial or otherwise),
results of operations, businesses, customer satisfaction, properties, assets,
future prospects or current or future liabilities of DGD and the DGD
Subsidiaries, taken as a whole.
(o) Financing Approvals. Xxxxxx shall have received from Xxxxxx'x primary
lending institutions (i) written approval of the Merger and all of the
transactions relating thereto and (ii) financing in an amount sufficient to
refinance all of DGD's debt to DGD's lending institutions.
(p) Pooling. No event (other than events solely under the control of
Xxxxxx or Distributors) shall have occurred or be expected to occur that would
not allow the Merger to be a "pooling of interests", including, but not limited
to, the delivery of written notice of dissent prior to the shareholders' meeting
(which notice contains a demand for payment if the Merger is effected) by more
than 7% of the outstanding shares of DGD Common Stock.
(q) ISRA. The condition set forth in Section 6.01(u)(x) shall have been
fulfilled.
(r) Pension Plan. Xxxxxx shall have received all such documentation as
required to be delivered pursuant to Section 5.02(g).
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(s) Registration Statement. At or prior to the Effective Time, the
Registration Statement shall have been declared effective by the SEC and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or shall
be pending or contemplated by the SEC and any request on the part of the SEC for
additional information shall have been complied with to the reasonable
satisfactions of Xxxxxx'x counsel.
ss.7.02 Conditions of DGD
DGD's obligation to consummate the Merger is subject to the following
conditions precedent:
(a) Accuracy of Representations and Compliance With Conditions. All
representations and warranties of Xxxxxx and Distributors made in or pursuant to
this Agreement or any related agreement shall be accurate when made in all
material respects (without regard to any knowledge limitations contained
therein) and, in addition, shall be accurate in all material respects as of the
Effective Time as though such representations and warranties were then made in
exactly the same language by Xxxxxx and Distributors (without regard to any
knowledge limitations contained therein) and regardless of changes beyond their
control. As of the Effective Time, Xxxxxx and Distributors shall have performed
and complied in all material respects with all covenants and agreements and
satisfied all conditions required to be performed and complied with by them
under this Agreement at or before the Effective Time. DGD shall have received a
certificate in form and substance reasonably satisfactory to DGD, executed on
behalf of Xxxxxx and Distributors by the President or Chief Financial Officer of
Xxxxxx and Distributors, dated the Effective Time, to that effect.
- 68 -
(b) Certificates from Xxxxxx. DGD shall have received certificates
executed on behalf of Xxxxxx by an executive officer of Xxxxxx, dated the
Effective Time, to the effect that it has examined the Registration Statement
and the Proxy Statement, and any amendment or supplement thereto, and, to the
best of his knowledge, (i) neither the Registration Statement nor the Proxy
Statement, nor any amendment or supplement thereto (A) contains an untrue
statement of a material fact or (B) omits to state a material fact required to
be stated therein or necessary to make the statements therein not false or
misleading in light of the circumstances in which they are made, provided in
each case that such untrue statement or omission relates to information
furnished by or on behalf of, or pertaining to, Xxxxxx, Distributors or any
Xxxxxx security holder and (ii) since the effective date of the Registration
Statement, no event with respect to Xxxxxx or Distributors or any Xxxxxx
security holder has occurred which should have been set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement which has not
been set forth in such an amendment or supplement.
(c) Opinion of Xxxxxx'x Counsel. There shall have been delivered to DGD
at the Effective Time, in form and substance reasonably satisfactory to DGD and
its counsel (i) the opinion of Xxxxxx Xxxx & Xxxxxx LLP regarding certain
customary corporate matters, dated as of the Effective Date and (ii) a letter
from AA, dated as of the Effective Date, in form and substance reasonably
satisfactory to DGD, regarding matters customarily included in registration
statements on Form S-4.
(d) Other Closing Documents. Xxxxxx and Distributors shall have delivered
to DGD at or prior to the Effective Time such other documents (including
certificates of officers of Xxxxxx, Distributors or of any subsidiary of Xxxxxx
or Distributors) as DGD
- 69 -
may reasonably request in order to enable DGD to determine whether the
conditions to its obligations under this Agreement have been met.
(e) Review of Proceedings. All actions, proceedings, instruments, and
documents required by Xxxxxx and Distributors to carry out this Agreement or
incidental thereto and all other related legal matters shall be subject to the
reasonable approval of counsel to DGD, and Xxxxxx and Distributors shall have
furnished such counsel such documents as such counsel may have reasonably
requested for the purpose of enabling them to pass upon such matters.
(f) Legal Action. There shall not have been instituted or threatened any
legal proceeding relating to, or seeking to prohibit or otherwise challenge the
consummation of, the transactions contemplated by this Agreement, or to obtain
substantial damages with respect thereto.
(g) No Governmental Action. There shall not have been any action taken,
or any law, rule, regulation, order, judgment, or decree proposed, promulgated,
enacted, entered, enforced, or deemed applicable to the transactions
contemplated by this Agreement by any federal, state, local, or other
governmental authority or by any court or other tribunal, including the entry of
a temporary restraining order or a preliminary or permanent injunction, which,
in the reasonable judgment of DGD, (i) makes this Agreement, the Merger, or any
of the other transactions contemplated by this Agreement illegal, (ii) results
in a substantial delay in the ability of Xxxxxx, Distributors or DGD to
consummate the Merger or any of the other transactions contemplated by this
Agreement, or (iii) otherwise prohibits, restricts, conditions or delays
consummation of the Merger or any of the other transactions contemplated by this
Agreement or impairs the contemplated benefits to the
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shareholders of DGD of this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement.
(h) Xxxx-Xxxxx-Xxxxxx Waiting Period. All applicable waiting periods in
respect of the Merger and the other transactions contemplated by this Agreement
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended,
shall have expired or been terminated at or prior to the Effective Time.
(i) Fairness Opinion. The opinion of Loeb Partners, Inc. to be included
in written form in the Proxy Statement, to the effect that the Merger and the
other transactions contemplated by this Agreement are fair, from a financial
point of view, to DGD and its shareholders, shall have been confirmed in writing
at the Effective Time.
(j) Securities Law Compliance. At or prior to the Effective Time, Xxxxxx
shall use its best efforts to make all filings, and take all actions, necessary
to comply with all applicable federal securities and "blue-sky" laws with regard
to the issuance of Xxxxxx Common Stock pursuant to the Merger as contemplated by
this Agreement.
(k) No Material Adverse Effect. From July 31, 1996, through the Effective
Time there shall have been no Material Adverse Effect affecting Xxxxxx and
Distributors. For purposes of this Section 7.02(k) only, the following
circumstance shall constitute a Material Adverse Effect: the net worth of Xxxxxx
and the Xxxxxx subsidiaries from July 31, 1996 shall have decreased in the
aggregate by more than 15%. There shall be no pending or threatened litigation
or claims against Xxxxxx, Distributors or any subsidiary of Xxxxxx or
Distributors which could, individually or in the aggregate, materially and
adversely affect any of the conditions (financial or otherwise), results of
operations, businesses, customer
- 71 -
satisfaction, properties, assets, future prospects or current or future
liabilities of Xxxxxx, Distributors and any of their subsidiaries, taken as a
whole.
VIII. TERMS OF ABANDONMENT
ss.8.01 Mandatory Abandonment
The Merger shall be abandoned and terminated upon the earliest to occur
of: (i) February 15, 1997, if on or before such date the holders of at least a
majority of the shares of DGD Common Stock outstanding and entitled to vote and
voting as a class and the holders of at least a majority of the shares of DGD
Preferred outstanding and entitled to vote and voting as a class at the meeting
of shareholders of DGD referred to in Section 3.01 shall not have voted in favor
of the adoption and approval of this Agreement, the Merger, and the other
transactions contemplated hereby; (ii) November 30, 1996, if on or before such
date, the parties have not submitted applications for all governmental or
regulatory approvals, rulings or consents (other than shareholder approval);
(iii) any date after the submission of any such application on or after which
DGD or Xxxxxx reasonably determines that a request for information or an
amendment to be made or any condition imposed or proposed to be imposed by any
Person to which any such application was made is unduly burdensome; or (iv)
February 28, 1997, if on or before said date all governmental, regulatory or
other approvals, rulings or consents, none of which shall be subject to
conditions on DGD or Xxxxxx which the affected party shall reasonably deem to be
unduly burdensome, necessary for the Merger shall not have been obtained.
ss.8.02 Optional Abandonment
In addition to the provisions of Section 8.01, the Merger may be
abandoned or terminated at or before the Effective Time, notwithstanding
adoption and approval of this
- 72 -
Agreement, the Merger, and the other transactions contemplated hereby by the
shareholders of DGD:
(a) by mutual agreement of the Boards of Directors of Xxxxxx and DGD;
(b) at the option of either (i) Xxxxxx'x Board of Directors or (ii) DGD's
Board of Directors, if the Effective Time shall not have occurred on or before
February 28, 1997;
(c) at the option of Xxxxxx'x Board of Directors at any time after
October 31, 1996, if facts exist which render impossible compliance with one or
more of the conditions set forth in Section 7.01 and such are not waived by
Xxxxxx;
(d) at the option of DGD's Board of Directors at any time after October
31, 1996, if facts exist which render impossible compliance with one or more of
the conditions set forth in Section 7.02 and such are not waived by DGD; and
(e) at the option of Xxxxxx'x board of Directors at any time if the
result of Xxxxxx'x due diligence with respect to DGD's (i) July 31, 1996 audited
financial statements, (ii) Drug Enforcement Agency activities, (iii)
environmental matters or (iv) internal investigations are not reasonably
satisfactory to Xxxxxx; provided however, that such option shall terminate with
respect to each of the four items individually thirty days after DGD has
delivered or made available to Xxxxxx all information and material necessary
with regard to such item.
ss.8.03 Effect of Abandonment
If the Merger is abandoned or terminated in accordance with this Article
VIII, or otherwise:
(a) except for Sections 5.01(g) and 5.02(d), and except as specified in
Section 8.03(b), this Agreement shall forthwith become wholly void and of no
further force or effect
- 73 -
without liability on the part of any party to this Agreement or on the part of
any officer, director, controlling Person (if any), employee, agent, or
shareholder thereof; provided, however, that nothing in this Section 8.03(a)
shall release Xxxxxx, DGD or any officer, director, controlling Person (if any),
employee, agent, or shareholder thereof from liability for a willful failure to
carry out its respective obligations under this Agreement; and
(b) each of Xxxxxx and DGD shall pay and bear its own fees and expenses
incident to the negotiation, preparation, and execution of this Agreement and
any meeting of its respective shareholders, including fees and expenses of its
counsel, accountants, investment banking firm, and other experts.
IX. INTENTIONALLY OMITTED
X. MISCELLANEOUS
ss.10.01 Further Actions
At any time and from time to time, each party agrees, subject to the
terms and conditions of this Agreement, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the purposes
of this Agreement at the earliest practicable time.
ss.10.02 Availability of Equitable Remedies
Since a breach of the provisions of this Agreement could not adequately
be compensated by money damages, any party shall be entitled, either before or
after the Effective Time, in addition to any other right or remedy available to
it, to an injunction restraining such breach or threatened breach and to
specific performance of any such provision of this Agreement, and, in either
case, no bond or other security shall be required
- 74 -
in connection therewith, and the parties hereby consent to the issuance of such
an injunction and to the ordering of specific performance.
ss.10.03 Survival
The covenants, agreements, representations, and warranties contained in
or made pursuant to this Agreement shall not survive the Release Time, except
for (i) those contained in or made pursuant to Article VIII, which shall survive
the Release Time, (ii) those covenants and obligations contained herein which
expressly apply to periods beyond the Release Time, including but not limited to
those covenants and obligations contained in Sections 5.01(g) and 5.02(d) and
(iii) those contained in Sections 5.02(j) and 10.12 and those contained in the
final sentence of Section 6.02(c), which shall survive the Effective Time. The
statements contained in any document executed by DGD relating hereto or
delivered to Xxxxxx in connection with the transactions contemplated hereby or
thereby, or in any statement, certificate, or other instrument delivered by or
on behalf of DGD pursuant hereto or thereto or delivered to Xxxxxx in connection
with the transactions contemplated hereby or thereby shall be deemed
representations and warranties, covenants and agreements, or conditions, as the
case may be, of DGD hereunder for all purposes of this Agreement (including all
statements, certificates, or other instruments delivered pursuant hereto or
thereto or delivered in connection with this Agreement, the Merger, or any of
the other transactions contemplated hereby or thereby). The statements contained
in any document executed by Xxxxxx or Distributors relating hereto or delivered
to DGD in connection with the transactions contemplated hereby or thereby, or in
any statement, certificate, or other instrument delivered by or on behalf of
Xxxxxx or Distributors pursuant hereto or thereto or delivered to DGD in
connection with the transactions contemplated hereby or thereby shall
- 75 -
be deemed representations and warranties, covenants and agreements, or
conditions, as the case may be, of Xxxxxx or Distributors, as the case may be,
hereunder for all purposes of this Agreement (including all statements,
certificates, or other instruments delivered pursuant hereto or thereto or
delivered in connection with this Agreement, the Merger, or any of the other
transactions contemplated hereby or thereby).
ss.10.04 Modification
This Agreement sets forth the entire understanding of the parties with
respect to the subject matter hereof and supersedes all prior or existing
agreements among them concerning such subject matter, excluding the
Confidentiality Agreements. This Agreement may be amended prior to the Effective
Time (notwithstanding shareholder adoption and approval) by a written instrument
executed by Xxxxxx and DGD with the approval of their respective Boards of
Directors; provided, however, that no such amendment shall, without shareholder
adoption and approval by an appropriate vote by shareholders of DGD, if DGD's
shareholders have been adversely affected, change the Per Share Consideration
pursuant to Section 2.01(a) or materially and adversely affect the rights of DGD
shareholders.
ss.10.05 Notices
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested or by Federal Express, Express Mail, or similar overnight
delivery or courier service or delivered (in person or by facsimile, or similar
telecommunications equipment) against receipt to the party to which it is to be
given at the address of such party set forth in the preamble to this Agreement
(or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 10.05) or to the facsimile number
set forth
- 76 -
beneath such party's signature to this Agreement. Any notice: to DGD shall be
addressed to the attention of the Xxx Xxxx, Financial Vice President with a copy
to Scheichet & Xxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxx X.
Xxxxxxxxx, Esq.; or to Xxxxxx shall be addressed to the attention of the
President. Any notice given by any means permitted by this Section 10.05 shall
be deemed given at the time of receipt thereof.
ss.10.06 Waiver
Any waiver by any party of a breach, violation or default of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach, violation or default of that provision or of any breach,
violation or default of any other provision of this Agreement. The failure of a
party to insist upon strict adherence to any provision of this Agreement on one
or more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that provision or any other
provision of this Agreement. Any waiver must be in writing and be authorized by
an officer of the waiving party. No party shall have the right to waive
compliance with the second sentence of Section 10.04, any other condition
required by applicable law, or this sentence.
ss.10.07 Binding Effect
The provisions of this Agreement shall be binding upon and inure to the
benefit of Xxxxxx, Distributors and DGD, and their respective successors and
assigns.
ss.10.08 No Third-Party Beneficiaries
Except for the issuance of Xxxxxx Common Stock in exchange for shares of
DGD Common Stock set forth in Section 2.01 hereof and the indemnification
provisions provided for in Section 5.02(j) hereof, or except as otherwise
expressly provided for in this
- 77 -
Agreement, this Agreement does not create, and shall not be construed as
creating, any rights enforceable by any Person not a party to this Agreement.
ss.10.09 Severability
If any provision of this Agreement shall hereafter be held to be invalid
or unenforceable for any reason, such provision shall be reformed to the maximum
extent permitted to preserve the parties' original intent, failing which, it
shall be severed from this Agreement with the balance of this Agreement
continuing in full force and effect. Such occurrence shall not have the effect
of rendering the provision in question invalid in any other jurisdiction or in
any other case or circumstance, or of rendering invalid any other provisions
contained herein to the extent that such other provisions are not themselves
actually in conflict with or invalid or unenforceable under any applicable law.
ss.10.10 Headings
The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
ss.10.11 Counterparts; Governing Law; Jurisdiction, Etc.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by and construed in accordance
with the laws of the State of New Jersey, without giving effect to conflict of
laws. Any action, suit, or proceeding arising out of, based on, or in connection
with this Agreement, any document relating hereto or delivered in connection
with the transactions contemplated hereby, any statement, certificate, or other
instrument delivered by or on behalf of, or delivered to, any party hereto or
thereto in connection with the transactions contemplated hereby or thereby, any
breach of this
- 78 -
Agreement or such other document, the Merger, or the other transactions
contemplated hereby or thereby may be brought only in the United States District
Court for the Northern District of New Jersey or the Courts of the State of New
Jersey, and each party covenants, waives and agrees not to assert, by way of
motion, as a defense, or otherwise, in any such action, suit, or proceeding, any
claim that it is not subject personally to the jurisdiction of such court if it
has been duly served with process, that its property is exempt or immune from
attachment or execution, that the action, suit, or proceeding is brought in an
inconvenient forum, that the venue of the action, suit, or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by any such court. Each party hereto consents to the personal
jurisdiction of each such court and to the service of process by mail at its
address to which notices are to be sent under Section 10.05 hereof in connection
with any such action, suit or proceeding.
ss.10.12 Election of Directors
Xxxxxx agrees that for a period of two years subsequent to the Effective
Date two shareholders of Xxxxxx (who were formally shareholders of DGD
immediately prior to the Effective Date) (a "DGD Director") shall serve on the
Board of Directors of Xxxxxx. Initially, these directors shall be Xxxxxx
Xxxxxxxxxxxx and Xxxxxx Xxxxxxxxx. In addition, for a period of two years
following the initial two year period subsequent to the Effective Date (the
"Additional Period"), Xxxxxx agrees that one DGD Director shall serve on the
Board of Directors of Xxxxxx; provided, however, that if at any time during the
Additional Period Xxxxxx Xxxxxxx, Xx. does not control Xxxxxx or if a public
offering of any voting securities of Xxxxxx has occurred or is pending, Xxxxxx'x
obligations during the Additional Period shall terminate and such DGD Director
may be removed from Xxxxxx'x Board of
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Directors without recourse. If a pending public offering is aborted prior to its
consummation, Xxxxxx'x obligation under the previous sentence shall be
reinstated.
ss.10.13 Pooling Modifications
In the event that Xxxxxx'x accountants advise Xxxxxx that the form of the
Merger requires modification from the form set forth herein in order to obtain
"pooling of interests" treatment for Merger, Xxxxxx shall advise DGD of such
proposed modification and the reasons therefor. If DGD consents to the proposed
modification, this Agreement shall be amended to set forth any such change to
the structure of the Merger. DGD shall have the right to refuse to consent to
such modification for any reason whatsoever.
ss.10.14 Definitions
The following terms are defined in this Agreement at the locations
indicated below:
Term Section Page
---- ------- ----
"AA" ss. 7.01(d) 64
"Additional Period" ss. 10.12 79
"Agreement" Title 1
"APCA" ss. 6.01(u) 55
"CAA" ss. 6.01(u) 55
"CERCLA" ss. 6.01(u)(v) 53
"Code" ss. 1.01 2
"Confidentiality Agreements" ss. 5.01(d) 9
"Constituent Corporations" Title 1
"Contracts" ss. 5.01(e) 11
"CWA" ss. 6.01(u) 55
"DB Plan" ss. 5.02(g) 23
"DGD" Title 1
"DGD Common Stock" ss. 2.01(a) 3
- 80 -
"DGD Director" ss. 10.12 79
"DGD Preferred" ss. 2.01(e) 5
"DGD Responsible Employee" ss. 5.01(f) 12
"DGD Stock Rights" ss. 2.02 6
"DGD Subsidiaries" ss. 6.01(a) 25
"Distributors" Title 1
"8-K" ss. 6.01(c) 27
"Effective Time" ss. 3.03 7
"Environmental Claim" ss. 6.01(u) 54
"Environmental Law" ss. 6.01(u) 55
"ERISA" ss. 6.01(i)(i) 37
"Exchange Act" ss. 6.01(s) 50
"FWPA" ss. 6.01(u) 55
"GAAP" ss. 1.01 2
"Hazardous Material" ss. 6.01(u) 56
"Insurance Policies" ss. 6.01(m) 48
"Intangibles" ss. 6.01(j) 43
"ISRA" ss. 6.01(u)(x) 54
"Last DGD Balance Sheet" ss. 6.01(e)(i) 30
"Last DGD Balance Sheet Date" ss. 6.01(e)(i) 30
"Last Xxxxxx Balance Sheet" ss. 6.02(g)(i) 61
"Last Xxxxxx Balance Sheet Date" ss. 6.02(g)(i) 62
"Leased Properties" ss. 6.01(u)(i) 51
"Material Adverse Effect" ss. 6.01(a) 26
"Merger ss. 1.01 2
"Xxxxxx" Title 0
"Xxxxxx Xxxxxx Xxxxx" ss. 2.01(a) 3
"Xxxxxx Responsible Employee" ss. 5.02(c) 20
"New Certificates" ss. 2.01(b) 4
- 81 -
"NJBCA" ss. 1.01 2
"Old Certificates" ss. 2.01(b) 4
"OSH Act" ss. 6.01(u) 55
"Owned Properties" ss. 6.01(u)(i) 51
"PCBs" ss. 6.01(u)(v) 52
"Per Share Consideration" ss. 2.01(a) 3
"Person" ss. 2.01(b) 5
"Proxy Statement" ss. 5.02(h) 23
"RCRA" ss. 6.01(u)(v) 53
"Registration Statement" ss. 5.01(p) 18
"Release" ss. 6.01(u) 56
"Release Time" ss. 5.01(a) 8
"SDWA" ss. 6.01(u) 55
"SEC" ss. 5.01(h) 14
"Securities Act" ss. 5.01(p) 18
"Spill Act" ss. 6.01(u) 55
"Subscriptions" ss. 2.02 6
"Surviving Corporation" Title 1
"SWMA" ss. 6.01(u) 55
"Taxes" ss. 6.01(d) 28
"TSCA" ss. 6.01(u) 55
"WARN" ss. 6.01(f)(ii) 32
"WPCA" ss. 6.01(u) 55
- 82 -
IN WITNESS WHEREOF, this Agreement has been executed by duly authorized
officers of each of the parties hereto as of the date first above written.
XXXXXX HEALTH SERVICES, INC.
By ____________________________________
Name:
Title:
Facsimile No.:
Attest:
______________________________
Assistant Secretary
DRUG GUILD DISTRIBUTORS, INC.
By ____________________________________
Name:
Title:
Facsimile No.:
Attest:
______________________________
Assistant Secretary
XXXXXX DISTRIBUTORS, INC.
By ____________________________________
Name:
Title:
Facsimile No.:
Attest:
______________________________
Assistant Secretary
- 83 -
Schedule 2.02
As of July 31, 1996, there are subscriptions for $639,300 of DGD Common Stock
outstanding.
The DGD Board of Directors approved a resolution at its meeting on September 24,
1996 authorizing the cancellation of all outstanding subscriptions for DGD
Common Stock, which are not paid after written notice of cancellation has been
given in accordance with the DGD Common Stock Subscription Agreement, on or
before the effective date of the DGD/Xxxxxx Merger.
There are no subscriptions for DGD Preferred Stock outstanding.
Schedule 5.01(e)
DGD has made no commitments which are currently outstanding for any capital
expenditures in excess of $25,000 in the individual or $250,000 in the aggregate
except for weekly purchases of approximately $15,000 in computers for customers'
stores.
Schedule 5.01(k)
Resignation Agreement between DGD and Xxxxx Xxxxxxxxx dated December 5, 1995
which, among other things ratifies and confirms a Deferred Compensation
provision of an Employment Agreement between DGD and Xxxxx Xxxxxxxxx dated as of
October 1, 1993 whereby DGD shall pay Englander, commencing upon the earlier of
Englander's attaining age 65 or the date of termination of his employment,
additional compensation payable in one hundred twenty (120) equal monthly
installments of Eight Thousand Three Hundred Thirty-Three Dollars and
Thirty-Four Cents ($8,333.34) each.
Schedule 5.01(k)(ii)
DIRECTOR & OFFICER LIABILITY INSURANCE POLICY
Chubb - Liability - Expires January 20, 1997
--------------------------------------------------------------------------------
DEDUCTIBLE POLICY # TYPE COVERAGE ANNUAL
PREMIUM
--------------------------------------------------------------------------------
$100,000 8119-79-0114 Directors and Officers $3,000,000 $27,324
--------------------------------------------------------------------------------
CONTRACTS WITH DIRECTORS, OFFICERS OR EMPLOYEES RELATING TO INDEMNIFICATION
1. DGD with Xxxxxx X. Xxxxxxxxx dated June 18, 1996. See annexed Exhibit "A"
to this Schedule 5.01(k)(ii).
2. DGD has contracts with all of its directors regarding its indemnification
of their actions as directors. See annexed Exhibit "B" to this Schedule
5.01(k)(ii) for the model agreement executed by all such directors.
3. Amendment to DGD Certificate of Incorporation dated April 29, 1988 which
is annexed hereto as Exhibit "C" to this Schedule 5.01(k)(ii).
Schedule 6.01(a)
Corporate Organization of DGD
-------------------------------------------------------
STATE OF INCORPORATION New Jersey
-------------------------------------------------------
DATE OF INCORPORATION July 9, 1976
-------------------------------------------------------
JURISDICTIONS OTHER THAN STATE OF None
INCORPORATION, IN WHICH AUTHORIZED TO
DO BUSINESS
Corporate Organization of DGD Subsidiaries
SUBSIDIARY D.G. Marketing, Inc. Atlantic Wholesale, Inc.
------------------------------------------------------------------------------------------------------
FICTITIOUS NAMES None 1. Atlantic Health Care
Distributors
2. Atlantic Wholesale
Beauty Supply Company
------------------------------------------------------------------------------------------------------
STATE OF INCORPORATION New Jersey New Jersey
DATE OF INCORPORATION May 9, 1985 December 11, 1991
------------------------------------------------------------------------------------------------------
JURISDICTIONS OTHER THAN STATE OF None None
INCORPORATION, IN WHICH AUTHORIZED TO
DO BUSINESS
------------------------------------------------------------------------------------------------------
AUTHORIZED CAPITALIZATION 2,500 shares of common stock 2,500 shares of common stock
with no par value with no par value
------------------------------------------------------------------------------------------------------
OUTSTANDING SHARES 2,500 2,500
------------------------------------------------------------------------------------------------------
LIENS, SECURITY INTERESTS, PLEDGES, None None
CHARGES, ENCUMBRANCES, SHAREHOLDERS'
AGREEMENTS OR VOTING TRUSTS
------------------------------------------------------------------------------------------------------
Schedule 6.01(b)
HOLDER OF 5% OR MORE OF DGD COMMON STOCK
As of July 31, 1996, Xxxxxx Xxxxxxxxx, a director of DGD, who resides at 0000
Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 is the holder of 656,333 shares, or
approximately 6.56%, of DGD Common Stock.
Schedule 6.01(c)(ii)
REDEMPTIONS OF DGD PREFERRED STOCK SINCE APRIL 30, 1996
Xxxxxx Xxxxxxxxx had 494.4616 shares of DGD Preferred Stock redeemed by DGD in
August 1996.
8% DIVIDEND IN KIND PAID TO DGD PREFERRED STOCKHOLDERS ON
JULY 31, 1996 WHO HAVE EXCEEDED THE FIVE YEAR HOLDING PERIOD
Xxxx Xxxxxx $ 15,302.15
Xxxxxxx Xxxxx $ 3,903.71
Sparta, Inc. $ 6,671.44
Schedule 6.01(d)
1. The execution, delivery and performance of this Agreement by DGD will not
cause any Taxes to be payable or cause any lien, charge, security interest
or encumbrance to secure any Taxes to be created either immediately or
upon the nonpayment of any Tax.
2. DGD is currently undergoing an Internal Revenue Service audit for the
fiscal year ended July 31, 1994.
Schedule 6.01(f)
LITIGATION
MATTERS PENDING
Drug Guild Distributors v. Xxxxxx Xxxx Pharmacy, Inc, Plainsboro Pharmacy, Inc.
t/a Princeton Xxxxxxx Pharmacy, Xxxxxx Xxxxxx, Thrift Drug, Inc. and Xxxxxx X.
Xxxxxxxx, Esq. - Superior Court of New Jersey - Law Division - Xxxxxx County -
Docket No. HUD-L-6419-9.
Drug Guild Distributors, Inc. v. Lesser Drug and Xxxxxx X. Xxxxxx - Superior
Court of New Jersey - Law Division - Bergen County - Docket No. L-04485-95.
Drug Guild Distributors, Inc. v. Orange Drug and Surgical, Inc. Greenbo, Inc.
and Xxxxxx Xxxxxxxxx - Superior Court of New Jersey - Law Division - Essex
County - Docket No. L-9457-96.
Oak Tree at Marlboro, Inc. and Oak Tree Drug Corp. - United State Bankruptcy
Court for the District of New Jersey - Case Nos. 96-34741 and 96-34742.
Drug Guild Distributors, Inc. v. Drug City - Superior Court of New Jersey - Law
Division - Xxxxxx County - Docket No. HUD-L-6620-96
Drug Guild Distributors, Inc. v. Xxxxxxx X. Xxxxxxxxxx, Inc. and Xxxxxxx X.
Xxxxxxxxxx, Individually - Superior Court of New Jersey - Chancery Division -
Xxxxxx County - Docket No. HUD-L-1057- 96.
Drug Guild Distributors, Inc. v. Plymouth Drug - Supreme Court of the State of
New York - Kings County.
CLAIMS ASSERTED AND BEING NEGOTIATED - NO SUMMONS/COMPLAINT FILED.
Drug Guild Distributors, Inc. x. Xxxxx Drug
Drug Guild Distributors, Inc. v. Delewgowski Pharmacy, Inc. t/a Station Pharmacy
Drug Guild Distributors, Inc. x. X. Xxxxxxx and Xxxxxx X. Xxxxx t/a Xxxxxxx
Pharmacy
Drug Guild Distributors, Inc. v. Valley Fair
POTENTIAL CLAIM
Letter to DGD dated October 17, 1996 from Xxxxxx Xxxxxxx of McCarthy, Fingar,
Xxxxxxx, Xxxxxx & Xxxxx on behalf of Xxxxxx Xxxxxx, former director of DGD,
which letter has been previously delivered to Xxxxxx Xxxx and Xxxxxx, counsel
for Xxxxxx and Distributors.
UNION CONTRACT
Agreement dated March 3, 1995; retroactive to and effective as of February 15,
1995, by and between DGD and Drug, Chemical, Cosmetic, Plastics and Affiliated
Industries Warehouse Employees Local 815, affiliated with the International
Brotherhood of Teamsters, with a term to expire on February 14, 1998.
Schedule 6.01(g)
REAL PROPERTY OWNED BY DGD
None
REAL PROPERTY LEASED BY DGD
1. In March 1995, DGD modified its lease agreement with Xxxxx Mountain
Industries, Inc. (the "Landlord") for the 158,739 square foot premises
located at 000 Xxxxxxxxxx Xxxxxxx, Xxxxxxxx, Xxx Xxxxxx. Pursuant to this
third modification agreement, DGD: (i) extended the term of the lease from
June 1, 1995 until May 31, 2005; (ii) fixed the rent for the premises at
the rate of $3.50/square foot per annum from June 1, 1995 through May 31,
1996, $4.25/square foot per annum from June 1, 1996 through May 31, 1997,
$4.75/square foot per annum from June 1, 1997 through May 31, 2000 and
$5.50/square foot per annum from June 1, 2000 through May 31, 2005; (iii)
arranged for the right to terminate the lease upon not less than six (6)
months prior written notice received by the Landlord between June 1, 1997
and May 31, 1998 and the effective date of the termination shall occur
between December 1, 1997 and November 30, 1998, and provided further that
DGD shall pay to the Landlord a termination fee equivalent to the rent
which would have been payable for the six month period following the date
of termination which shall be payable at the time of such notice; (iv)
agreed that the Landlord shall not be responsible for the conditions of
the floors of the premises or for any existing or future floor
replacement, repair or maintenance and released the Landlord from any
claim or liability for damages sustained or suffered by DGD arising out of
defects in the floor of the premises; (v) agreed that if a material change
in the condition of the floor occurs after the date of the agreement which
results in DGD's inability to utilize all or substantially all of the
premises, which determination may be subject to arbitration at the option
of the Landlord, DGD may terminate the lease prior to December 1, 1997
upon prior written notice to the Landlord effective on the date DGD
vacates the premises; and (vi) agreed that any and all references in the
lease to an option to extend the lease are deleted.
2. In March 1995, DGD modified its lease agreement with Xxxxx Mountain
Industries, Inc. (the "Landlord") for the 33,280 square foot premises
located at 000 Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxxxx. Pursuant to this
modification agreement, DGD: (i) extended the term of the lease from June
1, 1995 until May 31, 2005; (ii) fixed the rent for the premises at the
rate of $4.75/square foot per annum from June 1, 1995 through May 31, 2000
and $5.50/square foot per annum from June 1, 2000 through May 31, 2005;
and (iii) arranged for the right to terminate the lease upon not less than
six (6) months prior written notice received by the Landlord between June
1, 1997 and May 31, 1998 and the effective date of the termination shall
occur between December 1, 1997 and November 30, 1998, and provided further
that
DGD shall pay to the Landlord a termination fee equivalent to the rent
which would have been payable for the six month period following the date
of termination which shall be payable at the time of such notice.
3. Sublease dated June 10, 1992 made between Hoogovens Aluminium Corporation
and DGD for 28,786 square feet located at 000 Xxxxxxx Xxx, Xxxxxxxx, Xxx
Xxxxxx at a rate of Eleven Thousand Three Hundred Ninety-Four Dollars and
Forty-Six Cents ($11,394.46) per month or $4.75 per square foot gross
which shall expire June 30, 1997.
PROPERTY AND EQUIPMENT OWNED BY DGD
See annexed Exhibit A to this Schedule 6.01(g)
PROPERTY AND EQUIPMENT LEASED BY DGD WITH ANY LIENS,
MORTGAGES, SECURITY INTERESTS, PLEDGES, ENCUMBRANCES AND
CHARGES ON ANY DGD OWNED OR LEASED PROPERTY, REAL OR OTHERWISE
1. Five (5) International Trucks, Model 4700 leased through First Fidelity
Leasing Group, Inc. with the following vehicle identification numbers and
lessor's cost:
VIN 0XXXXXXX0XX000000 - $35,641.70
VIN 0XXXXXXX0XX000000 - $35,641.70
VIN 0XXXXXXX0XX000000 - $35,641.70
VIN 0XXXXXXXXXX000000 - $35,641.70
VIN 0XXXXXXX0XX000000 - $35,641.70
2. Three (3) Dodge B350 Maxivans leased through First Fidelity Leasing Group,
Inc. with the following vehicle identification numbers and lessor's cost:
VIN 0X0XX00X0XX000000 - $17,941.14
VIN 0X0XX00X0XX000000 - $18,070.87
VIN 0X0XX00X0XX000000 - $18,194.99
3. Three (3) International Truck Model 4700 leased through Navistar Financing
with the following vehicle identification numbers and lessor's cost:
VIN 0XXXXXXXXXX000000 - $42,070.34
VIN 0XXXXXXX0XX000000 - $42,070.34
VIN 0XXXXXXX0XX000000 - $42,070.34
4. One (1) New Order Fulfillment Zone and Two (2) Tape Machines leased
through Master
Lease, Division of Tokai Financial Services, Inc.
VALUE OF ALL PROPERTY OWNED BY DGD
--------------------------------------------------------------------------------
TYPE OF PROPERTY COST ACCUMULATED BOOK
DEPRECIATION VALUE
--------------------------------------------------------------------------------
Leasehold Improvements $2,303,011 $1,301,438 $1,001,573
--------------------------------------------------------------------------------
Furniture and Fixtures $ 288,992 $ 286,676 $ 2,316
--------------------------------------------------------------------------------
Machinery and Equipment $2,538,950 $2,303,851 $ 235,099
--------------------------------------------------------------------------------
Data Processing Equipment $7,409,261 $5,577,780 $1,831,481
--------------------------------------------------------------------------------
Delivery Equipment $1,746,821 $1,236,187 $ 510,634
--------------------------------------------------------------------------------
Schedule 6.01(g)(iii)
SALES ON CONSIGNMENT
DGD has not made any sales in the past two (2) years on a consignment basis and
no such sales are contemplated.
Schedule 6.01(h)
There are no contracts in which DGD is a party which (i) have a payment or
receipt of $100,000 or more; (ii) have a term of greater than one year; or (iii)
is otherwise material other than those which are disclosed in various Schedules
to this Agreement.
There have been no contracts within the last 5 years between DGD and any
director, officer or employee of DGD or any relative or affiliate of any
director, officer or employee of DGD or any five (5%) percent or greater
shareholder other than those which are disclosed in various Schedules to this
Agreement.
Schedule 6.01(i)
ALL OF DGD'S EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS
Pension
Profit Sharing
Life Insurance
Accidental Death and Dismemberment
Medical
Long-Term Disability
Schedule 6.01(i)(iv)
None
Schedule 6.01(i)(v)
DGD makes contributions along with other employers to Union 815 multi-employer
plan. The expense for such plan was $351,504, $348,744 and $336,168 for the
years ended July 31, 1996, 1995 and 1994 respectively.
Schedule 6.01(i)(vi)
AGGREGATE COMPENSATION FOR FISCAL YEAR ENDED JULY 31, 1996 FOR
EACH DIRECTOR, OFFICER OR EMPLOYEE WHO EARNED $100,000 OR MORE
Xxxxx Xxxxxxxxx - $272,198
Xxxx Xxxxx - $202,800
Xxx Xxxx - $107,600
Xxxx Xxxxxxxxx - $106,000
Xxxxxx Xxxxxx - $105,500
AGGREGATE COMPENSATION FOR FISCAL YEAR ENDED JULY 31, 1996
FOR ALL SALES AGENTS, DEALERS OR DISTRIBUTORS OF DGD
None
Schedule 6.01(j)
INTANGIBLES
Trademark: NATURE GUILD
Registrant: Drug Guild Distributors, Inc.
Registration No.: 947,135
Date: November 14, 1972
Renewed: November 14, 1992
Expiration Date: November 14, 2002
Trademark: XXXXXX and Sailboat Design
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,400,076
Date: July 8, 1986
Expiration Date: July 8, 2006 (may be renewed for an additional 10 year term)
Trademark: COME FOR THE PRICE--YOU'LL STAY FOR THE QUALITY
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,221,258
Date: December 21, 1982
Expiration Date: December 21, 2002 (may be renewed for an additional
20 year term)
Trademark: KOLEX
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,204,273
Date: August 10, 1982
Expiration Date: August 10, 2002 (may be renewed for an additional
20 year term)
Trademark: KWIK-AID
Registrant: Drug Guild Distributors, Inc.
Registration No.: 818,169
Date: November 8, 1966
Renewed: November 8, 1986
Expiration Date: November 8, 2006
Trademark: KLEERIT
Registrant: Drug Guild Distributors, Inc.
Registration No.: 821,889
Date: January 10, 1967
Renewed: January 10, 1987
Expiration Date: January 10, 2007
Trademark: DURA-CHEWS
Registrant: Drug Guild Distributors, Inc.
Registration No.: 803,344
Date: February 8, 1966
Renewed: February 8, 1986
Expiration Date: February 8, 2006
Trademark: REST-RITE
Registrant: Drug Guild Distributors, Inc.
Registration No.: 806,285
Date: March 29, 1966
Renewed: March 29, 1986
Expiration Date: March 29, 2006
Trademark: SALONT
Registrant: Drug Guild Distributors, Inc.
Registration No.: 817,131
Date: October 18, 1966
Renewed: October 18, 1986
Expiration Date: October 18, 2006
Trademark: KLEENIZE
Registrant: Drug Guild Distributors, Inc.
Registration No.: 807,076
Date: March 7, 1966
Renewed: March 7, 1986
Expiration Date: March 7, 2006
Trademark: PROPED
Registrant: Drug Guild Distributors, Inc.
Registration No.: 802,581
Date: January 25, 1966
Trademark: BEVOCAPS
Registrant: Drug Guild Distributors, Inc.
Registration No.: 802,582
Date: January 25, 1966
Trademark: DURAVALS
Registrant: Drug Guild Distributors, Inc.
Registration No.: 789,317
Date: May 11, 1965
Renewed: May 11, 1985
Expiration Date: May 11, 2005
Trademark: ALL-ALERT
Registrant: Drug Guild Distributors, Inc.
Registration No.: 898,144
Status: Inactive
Trademark: NOVACAPS
Registrant: Drug Guild Distributors, Inc.
Registration No.: 808,779
Status: Inactive
Trademark: DRUG GUILD
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,072,001
Date: August 23, 1977
Expiration Date: August 23, 1997
Trademark: DRUG GUILD COOPERATIVE
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,074,295
Date: September 27, 1977
Expiration Date: September 27, 1997
Trademark: DRUG GUILD and design
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,070,443
Date: July 26, 1977
Expiration Date: July 26, 1997
Trademark: DRUG GUILD DISTRIBUTORS
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,074,294
Date: September 27, 1977
Expiration Date: September 27, 1997
Trademark: THE BETTER YOU KNOW US THE BETTER YOU'LL FEEL
Registrant: Drug Guild Distributors, Inc.
Registration No.: 1,069,577
Date: July 12, 1977
Expiration Date: July 12, 1997
Schedule 6.01(m)
INSURANCE POLICIES
1. Liberty Mutual - Expires May 31, 1997
--------------------------------------------------------------------------------
DEDUCTIBLE POLICY # TYPE COVERAGE ANNUAL
PREMIUM
--------------------------------------------------------------------------------
WC 7 131457993076 Workers' Compensation $500,000 $206,905
--------------------------------------------------------------------------------
$1,000 TB2 131457993026 General Liability $2,000,000 $37,050
--------------------------------------------------------------------------------
$10,000 TH1 131457993036 Umbrella $10,000,000 $24,450
--------------------------------------------------------------------------------
$10,000 MC2 13P457996016 Property $60,000,000 $57,283
--------------------------------------------------------------------------------
$25,000 YC1 13P457993056 Crime $1,000,000 $7,400
--------------------------------------------------------------------------------
$500 AS2 131457993046 Auto $1,000,000 $121,037
--------------------------------------------------------------------------------
2. Chubb - Liability - Expires January 20, 1997
--------------------------------------------------------------------------------
DEDUCTIBLE POLICY # TYPE COVERAGE ANNUAL
PREMIUM
--------------------------------------------------------------------------------
$100,000 8119-79-0114 Directors and Officers $3,000,000 $27,324
--------------------------------------------------------------------------------
3. Chubb - Fiduciary - Expires February 18, 1997
--------------------------------------------------------------------------------
DEDUCTIBLE POLICY # TYPE COVERAGE ANNUAL
PREMIUM
--------------------------------------------------------------------------------
$5,000 8109-26-210 T16 Fiduciary $1,000,000 $4,182
--------------------------------------------------------------------------------
4. Columbia Mutual - Xxxxx Xxxxxxxxx
--------------------------------------------------------------------------------
DEDUCTIBLE POLICY # TYPE COVERAGE ANNUAL
PREMIUM
--------------------------------------------------------------------------------
10053154 Life Insurance $500,000 $10,675
10053155 Life Insurance $500,000 $10,675
10054839 Life Insurance $600,000 $7,000
--------------------------------------------------------------------------------
PENDING OR UNRESOLVED WORKERS' COMPENSATION CLAIMS - 1992 THROUGH 1996
See annexed Exhibit A to this Schedule 6.01(m)
ALL CLAIMS MADE ON ANY INSURANCE POLICY SINCE AUGUST 1, 1993
See annexed Exhibit B to this Schedule 6.01(m)
Schedule 6.01(o)
20 LARGEST CUSTOMERS OF DGD
--------------------------------------------------------------------------------
CUSTOMER'S NAME 1996 1995 1994
--------------------------------------------------------------------------------
Pompton Nursing Home X X X
--------------------------------------------------------------------------------
CO Xxxxxxx Chemist, Inc. X X X
--------------------------------------------------------------------------------
Xxxxxxxx Drug and Surgical X X X
--------------------------------------------------------------------------------
Kings Boro Pharmacy Inc. X X -
--------------------------------------------------------------------------------
Ark Drug Co. Inc. X X -
--------------------------------------------------------------------------------
Hallmark Medical Co. X - -
--------------------------------------------------------------------------------
Bachs Drug Store X X X
--------------------------------------------------------------------------------
RAK Drug Co. Inc. X X -
--------------------------------------------------------------------------------
Bronx Rx Center So. Inc. X X X
--------------------------------------------------------------------------------
Emarzo Inc. X X -
--------------------------------------------------------------------------------
Mayfair Bros. Inc. X X X
--------------------------------------------------------------------------------
Fishmans Bond Drugs Inc. X X X
--------------------------------------------------------------------------------
Investra Corp. X X -
--------------------------------------------------------------------------------
Vitality Drug Corp. X - -
--------------------------------------------------------------------------------
Kabsil Corp. X X X
--------------------------------------------------------------------------------
Remcourt Drugs X - X
--------------------------------------------------------------------------------
Park Drug and Surgical Inc. X X X
--------------------------------------------------------------------------------
Xxxxx Drug X - X
--------------------------------------------------------------------------------
Xxxxxxx Drugs X - -
--------------------------------------------------------------------------------
Xxxxxxx Pharmacy Inc. X - -
--------------------------------------------------------------------------------
New London Pharmacy - X X
--------------------------------------------------------------------------------
Tompkinsville Pharmacy - X -
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1500 Met Drug Company - X X
--------------------------------------------------------------------------------
A&O Chemists Ltd. - X -
--------------------------------------------------------------------------------
58th Street Pharmacy - X -
--------------------------------------------------------------------------------
Oakland Drugs Inc. - X X
--------------------------------------------------------------------------------
Town and Country Pharmacy - - X
--------------------------------------------------------------------------------
Arrow Drug - - X
--------------------------------------------------------------------------------
Med World - - X
--------------------------------------------------------------------------------
Xxxxxxxxxx Pharmacy Inc. - - X
--------------------------------------------------------------------------------
Thriftway Xxxxx - - X
--------------------------------------------------------------------------------
Lenox Terrace - - X
--------------------------------------------------------------------------------
20 LARGEST SUPPLIERS TO DGD
--------------------------------------------------------------------------------
VENDOR'S NAME 1996 1995
Glaxo Inc. X X
--------------------------------------------------------------------------------
Pfizer X X
--------------------------------------------------------------------------------
JOM Pharmaceutical Services X X
--------------------------------------------------------------------------------
Xxxxxxx-Xxxxx Squibb Co. X X
--------------------------------------------------------------------------------
Schering Laboratories X X
--------------------------------------------------------------------------------
Xxx Lilly & Company X X
--------------------------------------------------------------------------------
Merck Sharp & Doue X X
--------------------------------------------------------------------------------
Roche Laboratories X -
--------------------------------------------------------------------------------
Smithkline Xxxxxxx Pharmaceuticals X X
--------------------------------------------------------------------------------
Hoechst Xxxxxx Xxxxxxx X X
--------------------------------------------------------------------------------
Xxxxxx Laboratories X X
--------------------------------------------------------------------------------
Xxxxxxx & Xxxxxx Distributors X X
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Sandoz X X
--------------------------------------------------------------------------------
XX Xxxxxx X X
--------------------------------------------------------------------------------
Astra Merck X X
--------------------------------------------------------------------------------
Ciba Geneva X X
--------------------------------------------------------------------------------
Bayer Corp. X -
--------------------------------------------------------------------------------
Park Xxxxx X X
--------------------------------------------------------------------------------
Amgen X X
--------------------------------------------------------------------------------
Xxxxxxxxx Welcome - X
--------------------------------------------------------------------------------
Rhone-Poalenc Xxxxx X X
--------------------------------------------------------------------------------
Aligen X X
--------------------------------------------------------------------------------
Schedule 6.01(p)
DGD BANK ACCOUNTS: Bank of New York:
Note Account: 610-0000000
General Account: 610-0000000
Payroll Account: 610-0000000
Special Account: 610-0000000
Bankers Trust NYC
Checking: 00006752
Bankers Trust (Delaware)
0000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
00505906
AUTHORIZED SIGNATORIES FOR ALL ABOVE ACCOUNTS ARE:
Xxx Xxxx
Xxxxxx Xxxxxxx
Xxxxxx Xxxxxx
DGD SAFE DEPOSIT BOXES: None
DGD MONEY MARKET FUNDS: None
DGD CERTIFICATES OF DEPOSIT: None
STOCKS HELD BY DGD: None
BONDS HELD BY DGD: None
NOTES AND OTHER SECURITIES
HELD BY DGD: None, other than notes receivable held against
customers' inventory for payment.
Schedule 6.01(u)
ENVIRONMENTAL MATTERS
The following are the only known environmental conditions:
1. DGD has two, 5,000 gallon each, underground storage tanks. The New
Jersey Department of Environmental Protection ("NJDEP") has approved
their removal and quotes for removal have been solicited. Truck
fueling will be done off-site at a licensed distributor.
2. Recent water samples from a monitoring well were tested and proved
negative for a sheen. NJDEP has promised a closure letter for this
matter.
3. DGD, at the request of NJDEP has retained Xxxx Environmental Co.,
Inc. to complete a well search and receptor evaluation as part of
the closure of the DGD site.
Schedule 6.02(f)
JMSM Ltd. is suing Distributors for $400,000 alleging a breach of an office
lease in South Plainfield, New Jersey. Provision for such amount has already
been reserved for on Xxxxxx'x financial statements.
