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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1996
REGISTRATION NO. 333-5157
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HENRY SCHEIN, INC.
(Exact name of registrant as specified in its charter)
EXHIBIT 5.1
[PROSKAUER ROSE GOETZ & MENDELSOHN LLP]
June 4, 1996
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Re: Registration Statement on Form S-1
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Ladies and Gentlemen:
You have requested our opinion in connection with the statement on Form S-1
filed on the date hereof (the "Registration Statement"), under which Henry
Schein, Inc. (the "Company") will offer 3,735,500 shares (including 855,000
shares subject to over-allotment in favor of the underwriters) (the "Primary
Shares") of its Common Stock, par value of $.01 per share (the "Common Stock"),
in a public offering, and certain stockholders of the Company will offer up to
2,819,500 shares (the "Selling Stockholder Shares") of the Common Stock in a
public offering. The shares of Common Stock to be offered by the Company and
such stockholders are collectively referred to herein as the "Offered Shares."
We have reviewed the Amended and Restated Certificate of Incorporation of
the Company, resolutions by the Company's Board of Directors, the Registration
Statement and the other exhibits thereto, including the form of Underwriting
Agreement (the "Underwriting Agreement") relating to the Offered Shares filed as
Exhibit 1.1 to the Registration Statement, and have examined such corporate
documents and records and other certificates and have made such investigations
of law as we deemed necessary in order to render the opinion hereinafter set
forth. Based upon and subject to the foregoing, the Selling Stockholder Shares,
and
Henry Schein, Inc.
June 4, 1996
Page 2
when issued in accordance with the terms of the Underwriting Agreement the
Primary Shares, will be duly authorized, legally issued and fully paid and
nonassessable.
We consent to the use of our name under the caption "Legal Matters" in the
Registration Statement and to the filing of this opinion as an exhibit to the
Registrstaion Statement. In giving this consent, we do not hereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
PROSKAUER ROSE GOETZ & MENDELSOHN LLP
Exhibit 10.92
AGREEMENT AND PLAN OF MERGER
among
HENRY SCHEIN, INC.
SSC HOLDINGS, INC.
SCIENTIFIC SUPPLY COMPANY
LAWRENCE J. FRANKEL
THE LAWRENCE AND PAMELA FRANKEL
CHARITABLE REMAINDER TRUST
NORMAN FRANKEL
RUDOLPH KELEMEN
and
BRUCE BARBER
Dated as of April 26, 1996
TABLE OF CONTENTS
ARTICLE I
THE MERGER; THE SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Effective Time of the Merger . . . . . . . . . . . . . . . 2
Section 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Certificate of Incorporation. . . . . . . . . . . . . . . . 2
Section 1.5 By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Exchange Ratio. . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.2 Exchange of Company Stock. . . . . . . . . . . . . . . . . 4
Section 2.3 No Fractional Securities. . . . . . . . . . . . . . . . . . 4
ARTICLE III
DETERMINATION OF EXCHANGE VALUE . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Parent's Calculations of 1995 EBITD and Adjusted February 29
Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2 The Stockholders' Dispute of Parent's Calculations of 1995
EBITD and/or Adjusted February 29 Net Worth. . . . . . . . 5
Section 3.3 Final 1995 EBITD and Final Adjusted February 29 Net Worth;
Determination of Exchange Value. . . . . . . . . . . . . . 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . 7
Section 4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.3 Company Subsidiaries. . . . . . . . . . . . . . . . . . . . 8
Section 4.4 Authority Relative to this Agreement. . . . . . . . . . . . 8
Section 4.5 Consents and Approvals; No Violations. . . . . . . . . . . 8
Section 4.6 Financial Statements. . . . . . . . . . . . . . . . . . . . 9
Section 4.7 Absence of Certain Changes or Events; Material Contracts. . 9
Section 4.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.9 Absence of Undisclosed Liabilities. . . . . . . . . . . . 10
Section 4.10 No Default. . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.12 Title to Properties; Encumbrances. . . . . . . . . . . . 11
Section 4.13 Intellectual Property. . . . . . . . . . . . . . . . . . 11
Section 4.14 Compliance with Applicable Law. . . . . . . . . . . . . . 12
Section 4.15 Employee Benefit Plans; ERISA; Labor Matters. . . . . . . 13
Section 4.16 Environmental Laws and Regulations . . . . . . . . . . . 14
Section 4.17 Accounting Matters. . . . . . . . . . . . . . . . . . . . 15
Section 4.18 Affiliate Transactions . . . . . . . . . . . . . . . . . 15
Section 4.19 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . . . 15
Section 5.1 Organization . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . 16
Section 5.3 Authority Relative to this Agreement. . . . . . . . . . . 16
Section 5.4 Consents and Approvals No Violations. . . . . . . . . . . 16
Section 5.5 Reports and Financial Statements. . . . . . . . . . . . . 17
Section 5.6 Accounting Matters . . . . . . . . . . . . . . . . . . . 17
Section 5.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . . . . . 18
Section 6.1 Conduct of Business by the Company Pending the Merger. . 18
Section 6.2 Conduct of Business by Parent Pending the Merger. . . . . 19
Section 6.3 Conduct of Business of Sub. . . . . . . . . . . . . . . . 19
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.1 Access and Information. . . . . . . . . . . . . . . . . . 20
Section 7.2 No Solicitation. . . . . . . . . . . . . . . . . . . . . 20
Section 7.3 Reasonable Best Efforts . . . . . . . . . . . . . . . . . 21
Section 7.4 Salary; Employee Benefits. . . . . . . . . . . . . . . . 21
Section 7.5 Stockholder Loans. . . . . . . . . . . . . . . . . . . . 21
Section 7.6 Certain Distributions. . . . . . . . . . . . . . . . . . 21
Section 7.7 Non-Compete Agreements. . . . . . . . . . . . . . . . . . 21
Section 7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.9 Public Announcements. . . . . . . . . . . . . . . . . . . 21
Section 7.10 Supplemental Disclosure. . . . . . . . . . . . . . . . . 22
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . . . 22
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
22
Section 8.2 Conditions to Obligations of Parent and Sub to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.3 Conditions to Obligation of the Company to Effect the Merger.
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ARTICLE IX
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . 25
ARTICLE X
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.1 Survival of Representations and Warranties . . . . . . . 25
Section 10.2 Indemnification by Stockholders . . . . . . . . . . . . . 26
Section 10.3 Indemnification by Parent . . . . . . . . . . . . . . . . 26
Section 10.4 Indemnification Procedures . . . . . . . . . . . . . . . 26
ARTICLE XI
RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . 28
Section 11.2 Non-Solicitation of Employees . . . . . . . . . . . . . . 28
Section 11.3
Non-Solicitation or Interference with Customers and Suppliers . . . . 28
Section 11.4
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XII
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.1 Amendment and Modification . . . . . . . . . . . . . . . 28
Section 12.2 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.3 Survivability; Investigations . . . . . . . . . . . . . . 29
Section 12.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.5 Descriptive Headings; Interpretation . . . . . . . . . . 30
Section 12.6 Entire Agreement; Assignment . . . . . . . . . . . . . . 30
Section 12.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . 30
Section 12.8 Severability. . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . 31
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 26, 1996, among HENRY
SCHEIN, INC., a Delaware corporation ("Parent"), SSC HOLDINGS, INC., an Illinois
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corporation and wholly-owned subsidiary of Parent ("Sub"), SCIENTIFIC SUPPLY
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COMPANY, an Illinois corporation (the "Company"), and LAWRENCE J. FRANKEL, the
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LAWRENCE AND PAMELA FRANKEL CHARITABLE REMAINDER TRUST CREATED UNDER A TRUST
AGREEMENT DATED AS OF MARCH 1, 1996, NORMAN FRANKEL, RUDOLPH KELEMEN and BRUCE
BARBER (collectively, the "Stockholders").
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The Parent, the Sub, the Company and the Stockholders desire that
Parent acquire the Company pursuant to the merger of Sub with and into the
Company in accordance with the terms of this Agreement, and the Illinois
Business Corporation Act ("IBCA").
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The parties hereto agree as follows:
ARTICLE I
THE MERGER; THE SURVIVING CORPORATION
Section 1.1 The Merger. In accordance with the provisions of this
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Agreement and the IBCA, at the Effective Time (as defined in Section 1.2), Sub
shall be merged with and into the Company (the "Merger"), the separate existence
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of Sub shall thereupon cease, and the Company shall be the surviving corporation
in the Merger (the "Surviving Corporation") and shall continue its corporate
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existence under the laws of the State of Illinois. The Merger shall have the
effects set forth in Section 11.50 of the IBCA.
Section 1.2 Effective Time of the Merger. The Merger shall become
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effective at the time of filing of or at such later time specified in, a
properly executed Certificate of Merger, in the form required by and executed in
accordance with the IBCA, filed with the Secretary of State of the State of
Illinois, in accordance with the provisions of Section 11.35 of the IBCA. Such
filing shall be made as soon as practicable after the Closing (as defined in
Section 1.3). When used in this Agreement, the term "Effective Time" shall mean
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the date and time at which the Merger shall become effective.
Section 1.3 Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Aronberg Goldgehn
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Davis & Garmisa, One IBM Plaza, Suite 3000, Chicago, Illinois, at 10:00 a.m.,
local time, on May 17, 1996 or on such other date and at such other time and
place as Parent and the Company shall agree (the "Closing Date").
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Section 1.4 Certificate of Incorporation. The Articles of
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Incorporation of Sub in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that the name of the Surviving Corporation shall be
"Scientific Supply Company."
Section 1.5 By-Laws. The By-Laws of Sub as in effect at the
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Effective Time shall be the By-Laws of the Surviving Corporation until amended
in accordance with applicable law.
Section 1.6 Directors and Officers of Surviving Corporation.
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(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation or By-Laws of
the Surviving Corporation or as otherwise provided by law.
(b) The officers of Sub at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation or By-Laws of
the Surviving Corporation, or as otherwise provided by law.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Exchange Ratio. At the Effective Time, by virtue of the
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Merger and without any action on the part of the holder thereof:
(a) Each share of common stock, par value $100.00 per share, of the
Company (the "Company Common Stock"), issued and outstanding immediately
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prior to the Effective Time (other than shares to be cancelled in
accordance with Section 2.1(b)) shall be converted into the right to
receive (x) a number of shares of the common stock, par value $.01 per
share, of Parent (the "Parent Common Stock"), payable upon the surrender of
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the certificate formerly representing such share of Company Common Stock
2
in accordance with Section 2.2, equal to the quotient derived by dividing
(i) the Interim Stock Value (as defined in Section 3.2(b)) by (ii) the
product of (A) the number of outstanding shares of Company Common Stock at
the Closing multiplied by (B) the average of the per share closing prices
for the Parent Common Stock on the NASDAQ National Market System ("NASDAQ")
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for the ten trading days immediately preceding the Closing and (y) an
amount in cash equal to the quotient derived by dividing (i) the Interim
Cash Value (as defined in Section 3.2(b)) by (ii) the number of outstanding
shares of Company Common Stock at the Closing.
(b) All shares of Company Common Stock that are held by the Company
as treasury shares shall be cancelled and retired and cease to exist, and
no securities of Parent or other consideration shall be delivered in
exchange therefor. As used in this Agreement, the term "Subsidiary" means,
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with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party and/or one or more
of its Subsidiaries.
(c) Each share of common stock, par value $.01 per share, of Sub
("Sub Common Stock"), issued and outstanding immediately prior to the
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Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
3
(d) The holders of shares of Company Common Stock as to which
appraisal rights shall have been duly demanded under applicable law
("Dissenting Shares"), if any, shall be entitled to payment by the
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Surviving Corporation of the appraised value of such shares to the extent
permitted by and in accordance with the provisions of applicable law;
provided, however, that (i) if any holder of the Dissenting Shares shall,
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under the circumstances permitted by applicable law, subsequently deliver a
written withdrawal of such holder's demand for appraisal of such shares or
(ii) if any holder fails to establish such holder's entitlement to rights
to payment as provided under applicable law or (iii) if neither any holder
of Dissenting Shares nor the Surviving Corporation has filed a petition
demanding a determination of the value of all Dissenting Shares within the
time provided under applicable law, such holder or holders (as the case may
be) shall forfeit such right to payment for such shares and such shares
shall thereupon be deemed to have been converted into Parent Common Stock
and cash pursuant to Section 2.1(a) as of the Effective Time. The
Surviving Corporation shall be solely responsible for, and shall pay out of
its own funds, any amounts which become due and payable to holders of
Dissenting Shares, and such amounts shall not be paid directly or
indirectly by Parent.
Section 2.2 Exchange of Company Stock. Promptly after the Effective
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Date, each Stockholder shall present to the Parent for cancellation a
certificate or certificates which immediately prior to the Effective Time repre-
sented outstanding shares of Company Common Stock (the "Certificates") that were
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converted pursuant to Section 2.1 into the right to receive shares of Parent
Common Stock prior to the Closing Date, and the Parent shall thereupon deliver
to such Stockholder in exchange therefor (x) a certificate representing that
number of whole shares of Parent Common Stock which such Stockholder has the
right to receive pursuant to the provisions of this Article II and (y) cash in
lieu of any fractional shares of Parent Common Stock to which such Stockholder
is entitled pursuant to Section 2.3, after giving effect to any required tax
withholdings. The shares of Parent Common Stock shall be deemed to have been
issued at the Effective Time.
Section 2.3 No Fractional Securities. No certificates or scrip
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representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates or pursuant to Section 3.4, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional securities, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Parent Common Stock upon surrender of such holder's
Certificates or pursuant to Section 3.4 will be entitled to receive, and Parent
will timely make a cash payment (without interest) determined by multiplying (i)
the fractional interest to which such holder would otherwise be entitled (after
taking into account all shares of Parent Common Stock then held of record by
such holder) and (ii) the average of the per share closing prices for Parent
Common Stock on NASDAQ for the ten trading days immediately preceding the
Closing (the "Parent Stock Price").
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4
ARTICLE III
DETERMINATION OF INTERIM AND FINAL EXCHANGE VALUE;
ADJUSTMENT TO MERGER CONSIDERATION
Section 3.1 Company's Calculations of 1995 EBITD, Adjusted April 12
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Net Worth and April 12 Inventory. On the date hereof, the Company shall deliver
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to Parent a statement (the "Company's Statement") in reasonable detail of the
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Company's calculation of 1995 EBITD (as defined below), Adjusted April 12 Net
Worth (as defined below) and April 12 Inventory (as defined below). For
purposes of this Agreement, "1995 EBITD" means the product of (x) the Company's
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net income, increased solely by non-recurring expenses and adjustments listed on
Exhibit A, interest, depreciation and taxes (but only to the extent such non-
recurring expenses and adjustments interest, depreciation and taxes have been
deducted in the computation of net income), for the eight-month period ending
February 29, 1996 and (y) 1.5; "Adjusted April 12 Net Worth" means (x) the
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Company's net worth as of April 12, 1996 (including in the calculation of
Adjusted April 12 Net Worth the items described on Exhibit B-1 and excluding
from the calculation of Adjusted April 12 Net Worth the Company's inventory as
of April 12, 1996 and the items described on Exhibit B-2); and "April 12
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Inventory" means the dollar value of the Company's inventory as of April 12,
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1996 (excluding from the calculation of April 12 Inventory the inventory
described on Exhibit C). 1995 EBITD, Adjusted April 12 Net Worth and April 12
Inventory shall be calculated in accordance with generally accepted accounting
principles consistently applied, including, in the case of Adjusted April 12 Net
Worth, principles relating to the establishment of reserves on inventory,
accounts receivable and the like ("GAAP"), as adjusted in accordance with the
----
accounting principles set forth on Exhibit D.
Section 3.2 Parent's Calculations of 1995 EBITD, Adjusted April 12
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Net Worth and/or April 12 Inventory.
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(a) Prior to and after the Closing, Parent's authorized
representatives shall have the right at reasonable times and on reasonable
notice, at the Parent's sole expense, to review and/or audit the books and
records of the Company and the work papers of the Company's accountants, and
shall be provided access to the Company's employees and/or representatives
(including, without limitation, the Company's accountants). If Parent disagrees
with the accuracy of the Company's calculation under Section 3.1 of 1995 EBITD
(the "Company's Calculation of 1995 EBITD"), the Company's calculation under
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Section 3.1 of Adjusted April 12 Net Worth (the "Company's Calculation of
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Adjusted April 12 Net Worth") or the Company's calculation under Section 3.1 of
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April 12 Inventory (the "Company's Calculation of April 12 Inventory"), the
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Parent shall deliver to the Company and each of the Stockholders, prior to the
end of the 15 business days following the date hereof, a statement and
explanation of such disagreement (the "Parent's Statement"), accompanied by an
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alternative determination of 1995 EBITD ("Parent's Calculation of 1995 EBITD"),
----------------------------------
Adjusted April 12 Net Worth ("Parent's Calculation
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5
of Adjusted April 12 Net Worth") and/or April 12 Inventory ("Parent's
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Calculation of April 12 Inventory"), provided that in no event shall Parent's
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delivery of Parent's Statement be a condition of Closing.
(b) For purposes of this Agreement: "Interim Exchange Value" means
----------------------
(i) the product of (A) Parent's Calculation of 1995 EBITD and (B) the Value
Multiple (as defined in Section 3.2(c)), plus (ii) if Parent's Calculation of
Adjusted April 12 Net Worth is greater than $275,000, then the difference
between Parent's Calculation of Adjusted April 12 Net Worth and $275,000, minus
(iii) if Parent's Calculation of Adjusted April 12 Net Worth is less than
$275,000, then the difference between $275,000 and Parent's Calculation of
Adjusted April 12 Net Worth, plus (iv) if Parent's Calculation of April 12
Inventory is greater than $1,675,000, then the product of (A) 60% and (B) the
difference between Parent's Calculation of April 12 Inventory and $1,675,000,
minus (v) if Parent's Calculation of April 12 Inventory is less than $1,675,000
but more than $725,000, then the product of (A) 60% and (B) the difference
between $1,675,000 and Parent's Calculation of April 12 Inventory, minus (vi) if
Parent's Calculation of April 12 Inventory is $725,000 or less, then the sum of
(A) $360,000 and (B) the difference between $725,000 and Parent's Calculation of
April 12 Inventory; "Interim Stock Value" means an amount equal to 20% of
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Interim Exchange Value, or, with respect to any Stockholder, such greater or (in
the case of any Stockholder other than Lawrence Frankel) lesser percentage as
such Stockholder may elect by notice to Parent not less than three business days
prior to the Closing (the "Stock Percentage"); and "Interim Cash Value" means an
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amount equal to 80% of Interim Exchange Value, or, with respect to any
Stockholder, such greater or lesser percentage such that the sum of such
percentage and the Stock Percentage for such Stockholder equals 100%.
Notwithstanding anything contained in the preceding sentence: (w) in no event
shall the aggregate amount of cash paid to the Stockholders at the Closing
exceed 80% of Interim Exchange Value; (x) upon any failure of Parent so to
timely deliver Parent's Statement, the Company's Statement shall be deemed
final, binding and conclusive on each of the parties hereto, and, for purposes
of the preceding sentence, the Company's Calculation of 1995 EBITD, the
Company's Calculation of Adjusted April 12 Net Worth and the Company's
Calculation of April 12 Inventory shall be deemed Parent's Calculation of 1995
EBITD, Parent's Calculation of Adjusted April 12 Net Worth and the Parent's
Calculation of April 12 Inventory, respectively; (y) if Parent's Calculation of
1995 EBITD is less than 90% of the Company's Calculation of 1995 EBITD, then,
for purposes of the preceding sentence, Final 1995 EBITD (as defined in Section
3.4(a)) shall be deemed Parent's Calculation of 1995 EBITD (it being understood
that, if Parent's Calculation of 1995 EBITD is less than 90% of the Company's
Calculation of 1995 EBITD, the Closing shall be deferred pending the
determination of 1995 EBITD pursuant to Sections 3.3 and 3.4); and (z) for
purposes of the preceding sentence, the Company's Calculation of 1995 EBITD
shall be deemed Parent's Calculation of 1995 EBITD, unless the difference
between the Company's Calculation of 1995 EBITD and Parent's Calculation of 1995
EBITD is greater than $50,000.
(c) For purposes of this Agreement, "Value Multiple" shall mean the
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6
quotient derived by dividing (i) (A) 10,080,000 minus (B) notes payable - bank
of the Company at the Closing minus (C) long term debt of the Company at the
Closing minus (D) other loans to Stockholders and indebtedness of the Company at
the Closing minus (E) accrued and unpaid interest in respect of (B), (C) and (D)
(the "Value Base") by (ii) 1,062,067.
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Section 3.3 Dispute Resolution.
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(a) If Parent shall timely deliver Parent's Statement, then Parent
and the Stockholders will attempt in good faith to resolve all differences with
regard to their respective determinations of 1995 EBITD, Adjusted April 12 Net
Worth and/or April 12 Inventory during the next 20 business days or such longer
period as Parent and the Stockholders may agree in writing. If Parent and the
Stockholders are unable to resolve such differences and agree as to 1995 EBITD,
Adjusted April 12 Net Worth and/or April 12 Inventory prior to the expiration of
such 20 business day period (or longer period if so agreed), 1995 EBITD,
Adjusted April 12 Net Worth and/or April 12 Inventory shall be determined as set
forth in Section 3.3(b).
(b) (i) Written reports of disagreement over the amounts in Sections
3.2(a) shall be prepared in concise form by Parent and the Stockholders and
submitted (along with copies of Parent's Statement and the Stockholders'
Dispute Statement) to the Third Accountants (as defined below) no later
than 10 business days following the later of (A) the last day of the 15
business day (or longer period if so agreed) period referred to in the last
sentence of Section 3.2(a) or (B) the designation of the Third Accountants.
For purposes of this Section 3.3(b), the "Third Accountants" shall be Ernst
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& Young (Chicago, Illinois office). Each of Parent and the Stockholders
shall also be entitled to make a brief supplemental oral presentation to
the Third Accountants in this regard.
(ii) The Third Accountants shall be instructed to deliver to
Parent and the Stockholders a written report setting forth such Third
Accountants' calculation, to the extent in dispute, of 1995 EBITD, Adjusted
April 12 Net Worth and/or April 12 Inventory (the "Third Accountants'
Report") no later than 20 business days following the earlier of (A) such
firm's receipt of the later of the reports of disagreement submitted to it
by Parent and the Stockholders as aforesaid and (B) the last day permitted
for the delivery of such reports as provided above. The determination, to
the extent in dispute, of 1995 EBITD, Adjusted April 12 Net Worth and/or
April 12 Inventory set forth in the Third Accountant's Report shall be
deemed final, binding and conclusive upon each party, absent manifest
error. One-half of any fees and expenses of the Third Accountants shall be
paid by Parent and the other half of such fees and expenses shall be paid
by the Stockholders.
Section 3.4 Final 1995 EBITD, Final Adjusted April 12 Net Worth and
-------------------------------------------------------
Final
- ------
7
April 12 Inventory; Adjustment to Merger Consideration.
- ------------------------------------------------------
(a) 1995 EBITD, Adjusted April 12 Net Worth and April 12 Inventory as
mutually agreed to by Parent and the Stockholders pursuant to 3.3(a), or as
deemed final, binding and conclusive pursuant to Section 3.3(b)(ii), shall be
deemed the "Final 1995 EBITD", "Final Adjusted April 12 Net Worth" and "Final
---------------- --------------------------------- -----
April 12 Inventory", respectively.
- ------------------
(b) For purposes of this Agreement: "Final Exchange Value" means (i)
--------------------
the product of (A) Final 1995 EBITD and (B) the Value Multiple, plus (ii) if the
Final Calculation of Adjusted April 12 Net Worth is greater than $275,000, then
the difference between the Final Calculation of Adjusted April 12 Net Worth and
$275,000, minus (iii) if the Final Calculation of Adjusted April 12 Net Worth is
less than $275,000, then the difference between $275,000 and the Final
Calculation of Adjusted April 12 Net Worth, plus (iv) if the Final Calculation
of April 12 Inventory is greater than $1,675,000, then the product of (A) 60%
and (B) the difference between the Final Calculation of April 12 Inventory and
$1,675,000, minus (v) if the Final Calculation of April 12 Inventory is less
than $1,675,000 but more than $725,000, then the product of (A) 60% and (B) the
difference between $1,675,000 and the Final Calculation of April 12 Inventory,
minus (vi) if the Final Calculation of April 12 Inventory is $725,000 or less,
then the sum of (A) $360,000 and (B) the difference between $725,000 and the
Final Calculation of April 12 Inventory; "Final Stock Value" means an amount
-----------------
equal to the Stock Percentage of the Final Exchange Value; and "Final Cash
----------
Value" means an amount equal to a percentage of the Final Exchange Value, equal
- -----
to 100% minus the Stock Percentage (the "Cash Percentage"). Notwithstanding
---------------
anything contained in the preceding sentence: (x) in no event shall the
aggregate amount of cash paid to the Stockholders hereunder exceed 80% of Final
Exchange Value; and (y) for purposes of the preceding sentence, the Company's
Calculation of 1995 EBITD shall be deemed Final 1995 EBITD, unless the
difference between the Company's Calculation of 1995 EBITD and Final 1995 EBITD
is greater than $50,000.
(c) If the Final Exchange Value exceeds the Interim Exchange Value,
then, promptly after the determination of Final Exchange Value, Parent shall
deliver to each Stockholder, with respect to each share of Company Common Stock
held by such Stockholder immediately prior to the Closing, (x) a number of
shares of Parent Common Stock equal to the quotient derived by dividing (i) the
Final Stock Value minus the Interim Stock Value by (ii) the product of (A) the
number of outstanding shares of Company Common Stock at the Closing multiplied
by (B) the Parent Stock Price and (y) an amount in cash equal to the quotient
derived by dividing (i) the Final Cash Value minus the Interim Cash Value by
(ii) the number of outstanding shares of Company Common Stock at the Closing.
(d) If the Interim Exchange Value exceeds the Final Exchange Value,
then, promptly after the determination of Final Exchange Value, each Stockholder
shall deliver to the Parent, with respect to each share of Company Common Stock
held by such
8
Stockholder immediately prior to the Closing, (x) a number of shares of Parent
Common Stock equal to the quotient derived by dividing (i) the Interim Stock
Value minus the Final Stock Value by (ii) the product of (A) the number of
outstanding shares of Company Common Stock at the Closing multiplied by (B) the
Parent Stock Price and (y) an amount in cash equal to the quotient derived by
dividing (i) the Interim Cash Value minus the Final Cash Value by (ii) the
number of outstanding shares of Company Common Stock at the Closing.
Section 3.5 Cash Earn-Out.
-------------
(a) For each of the 12-month periods ended December 31, 1996, 1997,
1998, 1999 and 2000, Parent shall pay to each Stockholder an amount equal to the
product of (x) a fraction, the numerator of which is the number of shares of
Company Common Stock owned by such Stockholder as of the Closing, and the
denominator of which is the aggregate number of outstanding shares of Company
Common Stock as of the Closing and (y) the Cash Earn-Out Amount (as defined
below) for such 12-month period. For purposes of this Agreement: "Cash Earn-
----------
Out Amount" for any 12-month period shall mean the product of (i) $10,000 and
- ----------
(ii) the product of (A) 100 and (B) a fraction, the numerator of which is (I)
Gross Profit (as defined below) for such 12-month period minus (II) Gross Profit
for the preceding 12-month period ("Base Gross Profit"), and the denominator of
-----------------
which is Base Gross Profit; and "Gross Profit" for any 12-month period means the
------------
aggregate gross profit, determined in accordance with generally accepted
accounting principles consistently applied, of Parent, its Subsidiaries and the
Company for such 12-month period in respect of sales of the Company, and sales
of Parent and its Subsidiaries to medical (and not podiatric) physicians,
clinics, hospital laboratories, schools and universities, government
institutions (sales to which are primarily of medical (and not podiatric)
products) and HMOs in Illinois (and any other territory mutually agreed to by
Parent and Lawrence Frankel), as shown on the consolidated financial statements
of Parent and the Company, as the case may be, and taking into consideration
manufacturer and vendor rebates and adjustments (such rebates and adjustments to
be allocated to products sold by the Company, and products sold by Parent and
its Subsidiaries to medical (and not podiatric) physicians, clinics, hospital
laboratories, schools and universities, government institutions (sales to which
are primarily of medical (and not podiatric) products) and HMOs in Illinois (and
any other territory mutually agreed to by Parent and Lawrence Frankel), in the
case of each product, based on the proportion that sales of such product bears
to the aggregate amount of sales of such product by the Company, Parent and its
Subsidiaries), the "actual" purchase price from the manufacturer or vendor
(including any discounts and rebates) and cash payment terms, provided that
Gross Profit for the Company for the 12-month period ended December 31, 1995
shall be deemed to be $5,162,000. The Cash Earn-Out Amount for each 12-month
period shall be paid within 90 days after the end of such 12-month period.
(b) If Parent or any of its Subsidiaries consummates prior to
December 31, 2000 an acquisition that is reasonably likely to have a material
effect on Gross Profit,
9
Parent and Lawrence Frankel shall discuss in good faith and agree to any
adjustment to Base Gross Profit appropriate in order to eliminate the effect of
such acquisition on Gross Profit.
(c) In no event shall payments to the Stockholders pursuant to the
preceding paragraph exceed an aggregate of $1,000,000.
Section 3.6 Additional Earn-Out. If (a) the difference between the
-------------------
Company's Calculation of 1995 EBITD is more than $50,000 greater than Parent's
Calculation of 1995 EBITD and (b) aggregate Gross Profit for the 36-month period
ended December 31, 1998 equals or exceeds the product of (i) 3.31 and (ii) Gross
Profit for the 12-month period ended December 31, 1995 (Gross Profit for the
Company for the 12-month period ended December 31, 1995 being deemed to be
$5,162,000), subject to adjustment in accordance with the second succeeding
sentence, then Parent shall: (1) issue to the Stockholders a number of shares
of Parent Common Stock equal to the quotient derived by dividing (x) the product
of (I) 20% and (II) (A) the Value Base minus (B) the product of the Value
Multiple and Final 1995 EBITD by (y) the Parent Stock Price and (2) pay to the
Stockholders in cash an amount equal to the product of (I) 80% and (II) (A) the
Value Base minus (B) the product of the Value Multiple and Final 1995 EBITD.
Such shares of Parent Common Stock shall be issued, and such cash shall be paid,
within 90 days after the end of such 36-month period and shall be allocated
among the Stockholders as the Stockholders shall direct in writing within 30
days after the end of such 36-month period. If Parent or any of its
Subsidiaries consummates prior to December 31, 1998 an acquisition that is
reasonably likely to have a material effect on Gross Profit, Parent and Lawrence
Frankel shall discuss in good faith and agree to any adjustment to Gross Profit
for the Company for the 12-month period ended December 31, 1995 appropriate in
order to eliminate the effect of such acquisition on Gross Profit.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Stockholders jointly and severally represent and
warrant to Parent and Sub as follows:
Section 4.1 Organization. The Company is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Illinois and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. The Company is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a Company Material Adverse Effect.
For purposes of this Agreement, "Company Material
-----------------
10
Adverse Effect" means a material adverse effect, individually or in the
- --------------
aggregate, on the financial condition, results of operations or business of the
Company and its Subsidiaries taken as a whole, or the ability of the Company to
consummate the Merger and the other transactions contemplated by this Agreement.
Section 4.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of 100,000
shares of Company Common Stock. As of the date hereof, 11,160 shares of Company
Common Stock were issued and outstanding. Schedule 4.2(a) lists each of the
stockholders of the Company and the number and class of common stock owned by
each such stockholder. Each of the Stockholders represents that all of the
shares of Company Common Stock set forth beside such Stockholder's name on
Schedule 4.2(a) are owned by such Stockholder free and clear of any Liens (as
defined in Section 4.3).
(b) Except as disclosed in this Section 4.2 or as set forth on
Schedule 4.2(b), (i) there is no outstanding right, subscription, warrant, call,
option or other agreement or arrangement of any kind (collectively, "Rights") to
------
purchase or otherwise to receive from the Company or any of its Subsidiaries any
of the outstanding authorized but unissued or treasury shares of the capital
stock or any other security of the Company or any of its Subsidiaries, (ii)
there is no outstanding security of any kind convertible into or exchangeable
for such capital stock and (iii) there is no voting trust or other agreement or
understanding to which the Company or any of its Subsidiaries is a party or is
bound with respect to the voting of the capital stock of the Company or any of
its Subsidiaries.
Section 4.3 Company Subsidiaries. Schedule 4.3(a) contains a
--------------------
complete and accurate list of all Subsidiaries or affiliates of the Company.
Each Subsidiary of the Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
Subsidiary of the Company has the corporate power to carry on its business as it
is now being conducted or presently proposed to be conducted. Each Subsidiary
of the Company is duly qualified as a foreign corporation authorized to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified will
not have a Company Material Adverse Effect. All of the outstanding shares of
capital stock of the Subsidiaries of the Company that are corporations are
validly issued, fully paid and nonassessable. All of the outstanding shares of
capital stock of each Subsidiary of the Company are owned by the Company or a
Subsidiary of the Company free and clear of any liens, pledges, security
interests, claims, charges or other encumbrances of any kind whatsoever
("Liens").
-----
Section 4.4 Authority Relative to this Agreement. The Company has
------------------------------------
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. Each of the
Stockholders has the
11
capacity to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated on its part hereby have been duly authorized by the Company's Board
of Directors and stockholders, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or for the Company to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and each of the Stockholders
and constitutes a valid and binding agreement of the Company and each of the
Stockholders, enforceable against the Company and each of the Stockholders in
accordance with its terms.
Section 4.5 Consents and Approvals; No Violations. Neither the
-------------------------------------
execution, delivery and performance of this Agreement by the Company or the
Stockholders, nor the consummation by the Company or the Stockholders of the
transactions contemplated hereby, will (i) conflict with or result in any breach
of any provisions of the charter, by-laws or other organizational documents of
the Company or any of its Subsidiaries, (ii) require a filing with, or a permit,
authorization, consent or approval of, any federal, state, local or foreign
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or administrative agency or
commission (a "Governmental Entity"), except the filing and recordation of a
-------------------
Certificate of Merger as required by the IBCA, (iii) except as set forth on
Schedule 4.5, result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of a
Lien on any property or asset of the Company or any of its Subsidiaries pursuant
to, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, license, contract, agreement or other instrument or
obligation (each, a "Contract") to which the Company or any of its Subsidiaries
--------
is a party or by which any of them or any of their properties or assets may be
bound or (iv) violate any law, order, writ, injunction, decree, statute, rule or
regulation of any Governmental Entity applicable to the Company, any of its
Subsidiaries or any of their properties or assets.
Section 4.6 Financial Statements. The Company has delivered to the
--------------------
Parent (a) the unaudited financial statements of the Company as of June 30,
1993, 1994 and 1995, and for each of the fiscal years then ended (the "Financial
---------
Statements"), and has delivered to the Parent the Company's internally prepared
- ----------
restated income statement of the Company for the six months ended December 31,
1995 and the eight months ended February 29, 1996 (the "Restated Financial
------------------
Statements"). Except as disclosed on Schedule 4.6, the Financial Statements of
- ----------
the Company have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein). The
Financial Statements and Restated Financial Statements, which are attached
hereto as Schedule 4.6, are true and correct, and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the dates thereof and the consolidated results of operations and cash
flows of the Company and its consolidated Subsidiaries for the periods then
ended. Since January 1, 1996, there has been no change
12
in any of the significant accounting (including tax accounting) policies,
practices or procedures of the Company or any of its consolidated Subsidiaries.
The accounting books and records of the Company are organized and maintained, in
a manner that would enable the financial statements of the Company to be
audited.
Section 4.7 Absence of Certain Changes or Events; Material Contracts.
--------------------------------------------------------
Except as set forth on Schedule 4.7, since December 31, 1995, (i) neither the
Company nor any of its Subsidiaries has conducted its business and operations
other than in the ordinary course of business and consistent with past practices
or taken any actions that, if it had been in effect, would have violated or been
inconsistent with the provisions of Section 6.1 and (ii) there has not been any
fact, event, circumstance or change affecting or relating to the Company or any
of its Subsidiaries which to the best knowledge of the Company and its
Stockholders has had or is reasonably likely to have a Company Material Adverse
Effect. Except as set forth on Schedule 4.7, the transactions contemplated by
this Agreement will not constitute a change of control under or require the
consent from or the giving of notice to a third party pursuant to the terms,
conditions or provisions of any material Contract to which Parent or any of its
Subsidiaries is a party.
Section 4.8 Litigation. Except as set forth on Schedule 4.8, there
----------
is no material suit, action, proceeding or investigation pending or, to the best
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, including any material suit, action or proceeding brought by
the Company, and, to the best knowledge of the Company, no basis for any such
suit, action, proceeding or investigation; nor is there any material judgment,
decree, injunction, ruling or order of any Governmental Entity outstanding
against the Company or any of its Subsidiaries.
Section 4.9 Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in the
Financial Statements or the Restated Financial Statements or which were incurred
after January 1, 1996 in the ordinary course of business and consistent with
past practice, and except as set forth on Schedule 4.9, none of the Company and
its Subsidiaries has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) in excess of $50,000.
Section 4.10 No Default. Except as set forth on Schedule 4.10,
----------
neither the Company nor any Subsidiary of the Company is in default or violation
(and no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its charter, by-laws or comparable organizational documents, (ii) any Contract
to which the Company or any of its Subsidiaries is a party or by which they or
any of their properties or assets may be bound, or (iii) any order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to the Company or any of its Subsidiaries, except, in the cases of
clauses (ii) and (iii), for defaults or violations which would not have a
Company Material Adverse Effect.
13
Section 4.11 Taxes.
-----
(a) The Company has heretofore delivered or will make available to
Parent true, correct and complete copies of the consolidated federal, state,
local and foreign income, franchise sales and other Tax Returns (as hereinafter
defined) filed by the Company and the Company Subsidiaries for each of the
Company's years ended June 30, 1995, 1994 and 1993 inclusive. Except as set
forth on Schedule 4.11, the Company has duly filed, and each Subsidiary has duly
filed, all material federal, state, local and foreign income, franchise, sales
and other Tax Returns required to be filed by the Company or any of its
Subsidiaries. All such Tax Returns are true, correct and complete, and the
Company and any of its Subsidiaries have duly paid, all Taxes (as hereinafter
defined) shown on such Tax Returns and has made adequate provision for payment
of all accrued but unpaid Taxes anticipated in respect of all periods since the
periods covered by such Tax Returns. Except as set forth on Schedule 4.11, all
deficiencies assessed as a result of any examination of Tax Returns of the
Company or any of its Subsidiaries by federal, state, local or foreign tax
authorities have been paid or reserved on the financial statements of the
Company in accordance with GAAP consistently applied. The Company has
heretofore delivered or will make available to Parent true, correct and complete
copies of all written tax-sharing agreements and written descriptions of all
such unwritten agreements or arrangements to which the Company or any of its
Subsidiaries is a party. Except as set forth in Schedule 4.11, no issue has
been raised during the past five years by any federal, state, local or foreign
taxing authority which, if raised with regard to any other period not so
examined, could reasonably be expected to result in a proposed material
deficiency for any other period not so examined. Except as disclosed in
Schedule 4.11 hereof, neither the Company nor any of its Subsidiaries has
granted any extension or waiver of the statutory period of limitations
applicable to any claim for any material Taxes. Except as set forth in Schedule
4.11, (i) no consent has been filed under Section 341(f) of the Internal Revenue
Code of 1986, as amended (the "Code"), with respect to any of the Company or the
----
Subsidiaries of the Company; (ii) neither the Company nor any of the
Subsidiaries of the Company has participated in, or cooperated with, an
international boycott within the meaning of Section 999 of the Code; and (iii)
neither the Company nor any of the Subsidiaries of the Company has issued or
assumed any corporate acquisition indebtedness, as defined in Section 279(b) of
the Code. The Company and each Subsidiary of the Company have complied (and
until the Effective Time will comply) in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under any foreign laws)
and have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under all applicable laws.
(b) For purposes of this Agreement, the term "Taxes" shall mean all
-----
taxes, charges, fees, levies, duties, imposts or other assessments, including,
without limitation, income, gross receipts, excise, property, sales, use,
transfer, gains, license, payroll,
14
withholding, capital stock and franchise taxes, imposed by the United States, or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto. For purposes of this
Agreement, the term "Tax Return" shall mean any report, return or other
----------
information or document required to be supplied to a taxing authority in
connection with Taxes.
Section 4.12 Title to Properties; Encumbrances. Except as described
---------------------------------
in the following sentence or as set forth on Schedule 4.12, each of the Company
and its Subsidiaries has good, valid and marketable title to, or a valid
leasehold interest in, all of its material properties and assets (real, personal
and mixed, tangible and intangible), including, without limitation, all the
properties and assets reflected in the consolidated balance sheet of the Company
and its Subsidiaries as of December 31, 1995 (except for properties and assets
disposed of in the ordinary course of business and consistent with past
practices since December 31, 1995). None of such properties or assets are
subject to any Liens (whether absolute, accrued, contingent or otherwise),
except minor imperfections of title and encumbrances, if any, which are not
substantial in amount, do not materially detract from the value of the property
or assets subject thereto and do not impair the operations of any of the Company
and its Subsidiaries.
Section 4.13 Intellectual Property. (a) Except as set forth on
---------------------
Schedule 4.13(a), the Company and its Subsidiaries are the sole and exclusive
owners of all material patents, patent applications, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights, service marks,
trade secrets, registrations for and applications for registration of
trademarks, service marks and copyrights, technology and know-how, rights in
computer software and other proprietary rights and information and all technical
and user manuals and documentation made or used in connection with any of the
foregoing, used or held for use in connection with the businesses of the Company
or any of its Subsidiaries as currently conducted, other than software licenses
(collectively, the "Intellectual Property"), free and clear of all Liens except
---------------------
as set forth on Schedule 4.13(a) and except minor imperfections of title and
encumbrances, if any, which are not substantial in amount, do not materially
detract from the value of the Intellectual Property subject thereto and do not
impair the operations of any of the Company and its Subsidiaries.
(b) All grants, registrations and applications for Intellectual
Property that are used in and are material to the conduct of the Business (as
hereinafter defined) (i) are valid, subsisting, in proper form and enforceable,
and have been duly maintained, including the submission of all necessary filings
and fees in accordance with the legal and administrative requirements of the
appropriate jurisdictions and (ii) have not lapsed, expired or been abandoned,
and no application or registration therefor is the subject of any legal or
governmental proceeding before any registration authority in any jurisdiction.
(c) Each of the Company and its Subsidiaries owns or has the right to
15
use all of the material Intellectual Property used by it or held for use by it
in connection with its business. To the knowledge of the Company, there are no
conflicts with or infringements of any Intellectual Property by any third party.
The conduct of the businesses of the Company and its Subsidiaries as currently
conducted (collectively, the "Business") does not conflict with or infringe in
--------
any way any proprietary right of any third party, which conflict or infringement
would have a Company Material Adverse Effect, and there is no claim, suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries (i) alleging any such conflict or
infringement with any third party's proprietary rights, or (ii) challenging the
ownership, use, validity or enforceability of the Intellectual Property.
Section 4.14 Compliance with Applicable Law. Except as set forth on
------------------------------
Schedule 4.14, (i) the Company and its Subsidiaries hold, and are in compliance
with the terms of, all permits, licenses, exemptions, orders and approvals of
all Governmental Entities necessary for the current and proposed conduct of
their respective businesses ("Company Permits"), except for failures to hold or
---------------
to comply with such permits, licenses, exemptions, orders and approvals which
would not have a Company Material Adverse Effect, (ii) no fact exists or event
has occurred, and no action or proceeding is pending or, to the Company's
knowledge, threatened, that has a reasonable possibility of resulting in a
revocation, nonrenewal, termination, suspension or other material impairment of
any material Company Permits, (iii) the businesses of the Company and its
Subsidiaries are not being conducted in violation of any applicable law,
ordinance, regulation, judgment, decree or order of any Governmental Entity
("Applicable Law"), and (iv) to the knowledge of the Company, (x) no investiga-
--------------
tion or review by any Governmental Entity with respect to the Company or its
Subsidiaries is pending or threatened and (y) no Governmental Entity has
indicated an intention to conduct the same.
Section 4.15 Employee Benefit Plans; ERISA; Labor Matters.
--------------------------------------------
(a) Schedule 4.15 hereto sets forth a true and complete list of each
material employee benefit plan, arrangement or agreement that is maintained, or
was maintained at any time during the five (5) calendar years preceding the date
of this Agreement (the "Company Plans"), by the Company or by any trade or
-------------
business, whether or not incorporated (a "Company ERISA Affiliate"), which
-----------------------
together with the Company would be deemed a "single employer" within the meaning
of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
-----
(b) Each of the Company Plans is and has been in compliance with
ERISA and the Code in all material respects; each of the Company Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code is so
qualified.
(c) Neither the Company nor any Company ERISA Affiliate nor any
predecessors of the Company or any Company ERISA Affiliate maintains, has ever
16
maintained, contributes to or has ever contributed to a plan which is subject to
Section 412 of the Code or Title IV of ERISA. No Company Plan is a
multiemployer plan (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA
or Section 414(f) of the Code) ("Multiemployer Plan") and no Company Plan is a
------------------
multiple employer plan as defined in Section 413 of the Code ("Multiple Employer
-----------------
Plan"); and all material contributions or other amounts payable by the Company
- ----
as of the Effective Time with respect to each Company Plan in respect of current
or prior plan years have been either paid or accrued on the balance sheet of the
Company. Neither the Company nor any Company ERISA Affiliate is or was
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan. To
the best knowledge of the Company, there are no material pending, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Plans or any trusts related thereto.
(d) Neither the Company nor any Company ERISA Affiliate, nor any
Company Plan, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in a transaction in connection with which the Company or any
Company ERISA Affiliate, any Company Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Company Plan or any such
trust could be subject to either a material civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code. No Company Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any Company ERISA Affiliate beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law
(excluding "COBRA") or (ii) death benefits under any "employee pension plan," as
that term is defined in Section 3(2) of ERISA) that is qualified under Section
401(a) of the Code).
(e) Neither the Company nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other understanding
with a labor union or labor organization and, to the knowledge of the Company,
there is no activity involving any employees of the Company or its Subsidiaries
seeking to certify a collective bargaining unit or engaging in any other
organizational activity.
(f) Neither the Company nor any Company ERISA Affiliate, or any
officer or employee thereof, has made any promises or commitments, whether
legally binding or not, to create any additional plan, agreement or arrangement,
or to modify or change any existing Company Plan.
Section 4.16 Environmental Laws and Regulations. (a) Except as set
----------------------------------
forth on Schedule 4.16(a): (i) the Company and its Subsidiaries are and, to the
best knowledge of the Company, have been in compliance with, and the Company is
not aware of any outstanding allegations by any person or entity that the
Company or its Subsidiaries is not and has not been in compliance with, all
applicable laws, rules, regulations, common law, ordinances, decrees, orders or
other binding legal requirements relating to pollution
17
(including the treatment, storage and disposal of wastes and the remediation of
releases and threatened releases of materials), the protection of the
environment, and the exposure to regulated substances, materials or wastes in
the environment or work place ("Environmental Laws"); and (ii) the Company and
------------------
its Subsidiaries currently hold all permits, licenses, registrations and other
governmental authorizations (including exemptions, waivers, and the like) and
financial assurance required under Environmental Laws for the Company and its
Subsidiaries to operate the Business.
(b) Except as set forth on Schedule 4.16(b), (i) to the knowledge of
the Company and its Stockholders, there is no friable asbestos-containing
material in or on any real property currently owned, leased or operated by the
Company or its Subsidiaries and (ii) there are and have been no underground
storage tanks (whether or not required to be registered under any applicable
law), dumps, landfills, lagoons, surface impoundments, injection wells or other
land disposal units in or on any property currently owned, leased or operated by
the Company or its Subsidiaries.
(c) Except as set forth on Schedule 4.16(c), (i) neither the Company
nor its Subsidiaries has received (x) any written communication from any person
stating or alleging that any of them may be a potentially responsible party
under any Environmental Law (including, without limitation, the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended) with respect to any actual or alleged environmental contamination or
(y) any request for information under any Environmental Law from any
Governmental Entity with respect to any actual or alleged material environmental
contamination; and (ii) none of the Company, its Subsidiaries or any
Governmental Entity is conducting or has conducted (or, to the knowledge of the
Company, is threatening to conduct) any environmental remediation or
investigation which could result in a material liability of the Company or its
Subsidiaries under any Environmental Law.
Section 4.17 Affiliate Transactions. Except as set forth in Schedule
----------------------
4.17, there are no material Contracts or other transactions between the Company
or any of its Subsidiaries, on the one hand, and any (i) officer, director or
stockholder of the Company or any of its Subsidiaries or (ii) affiliate (as such
term is defined in Regulation 12b-2 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") of any such officer, director or
------------
stockholder, on the other hand, other than compensation and benefits paid or
provided to employees in the ordinary course and on arms-length terms.
Section 4.18 Brokers. No broker, finder or financial advisor is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the
18
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 4.19 Customers and Suppliers. Except as set forth in
-----------------------
Schedule 4.19, the Company is not engaged in any disputes with customers or
suppliers. Except as disclosed in Schedule 4.19 hereto, to the best of the
Company's knowledge, no customer or supplier is considering termination, non-
renewal or any adverse modification of its arrangements with the Company, and
the transactions contemplated by this Agreement will not, to the best of the
Company's knowledge, have any adverse effect on the Company's relationship with
any of its suppliers or customers. Except as set forth on Schedule 4.19, there
has not been any adverse change and there are no facts known to the Company or
any Stockholder which may reasonably be expected to indicate that any adverse
change may occur in the business relationship of the Company with any material
customer of or supplier to the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 Organization. Parent is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Parent is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified will not have a Parent Material Adverse Effect. For
purposes of this Agreement, "Parent Material Adverse Effect" means a material
------------------------------
adverse effect, individually or in the aggregate, on the financial condition,
results of operations or business of Parent and its Subsidiaries taken as a
whole or on the ability of Parent to consummate the Merger and the other
transactions contemplated by this Agreement (a "Parent Material Adverse
-----------------------
Effect"). Sub is a corporation duly organized, validly existing and in good
- ------
standing under the laws of the State of Delaware. Sub has not engaged in any
business (other than in connection with this Agreement and the transactions
contemplated hereby) since the date of its incorporation.
Section 5.2 Capitalization.
--------------
(a) The authorized capital stock of Parent consists of 60,000,000
shares of Parent Common Stock. As of December 31, 1995, (i) 18,306,994 shares
of Parent Common Stock were issued and outstanding and (ii) options to acquire
651,297 shares of Parent Common Stock (the "Parent Stock Options") were
--------------------
outstanding under all stock
19
option plans of Parent. All of the outstanding shares of capital stock of
Parent are, and the shares of Parent Common Stock issuable in exchange for
shares of Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable.
(b) The authorized capital stock of Sub consists of 2,000 shares of
Sub Common Stock, of which 100 shares, as of the date hereof, were issued and
outstanding. All of such outstanding shares are owned by Parent, and are
validly issued, fully paid and nonassessable.
Section 5.3 Authority Relative to this Agreement. Each of Parent and
------------------------------------
Sub has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each of Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated on its part hereby have been
duly authorized by their respective Boards of Directors, and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or for Parent and Sub to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by each
of Parent and Sub and constitutes a valid and binding agreement of each of
Parent and Sub, enforceable against Parent and Sub in accordance with its terms.
Section 5.4 Consents and Approvals No Violations. Neither the
------------------------------------
execution, delivery and performance of this Agreement by Parent or Sub, nor the
consummation by Parent or Sub of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provisions of the Certificate of
Incorporation or Articles of Incorporation, as the case may be, of By-Laws of
Parent or of Sub, (ii) require a filing with, or a permit, authorization,
consent or approval of, any Governmental Entity except in connection with or in
order to comply with the applicable provisions of the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, state securities or "blue sky"
--------------
laws, the By-Laws of the National Association of Securities Dealers (the
"NASD"), and the filing and recordation of a Certificate of Merger as required
----
by the IBCA, (iii) except as set forth on Schedule 5.4 hereto, result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of a Lien on any property or
asset of Parent or any of its Subsidiaries pursuant to, any of the terms,
conditions or provisions of any material contract to which Parent or Sub is a
party or by which either of them or any of their properties or assets may be
bound or (iv) violate any law, order, writ, injunction, decree, statute, rule or
regulation of any Governmental Entity applicable to Parent, Sub or any of their
properties or assets.
Section 5.5 Reports and Financial Statements. Parent has timely
--------------------------------
filed all reports required to be filed with the Securities and Exchange
Commission ("SEC") pursuant to the Exchange Act or the Securities Act
---
(collectively, the "Parent SEC Reports"),
------------------
20
and has previously made available to the Company and the Stockholders true and
complete copies of all such Parent SEC Reports. Such Parent SEC Reports, as of
their respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parent included in the Parent
SEC Reports have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein or, in the
case of unaudited statements, as permitted by applicable law and fairly present
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments and any other adjustments described therein) the consolidated
financial position of Parent and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of operations and cash flows of Parent and
its consolidated Subsidiaries for the periods then ended. Except as set forth
on Schedule 5.5, since the date of Parent's last quarterly report on Form 10-Q,
there has not been any fact, event, circumstance or change affecting or relating
to the Company or any of its Subsidiaries which has had or is reasonably likely
to have a Parent Material Adverse Effect.
Section 5.6 Brokers. No broker, finder or financial advisor is
-------
entitled to any brokerage finder's or other fee or commission in connection with
the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub
Section 5.7 Legal Proceedings. There are no outstanding court orders
-----------------
or administrative decisions to which Parent or any of it Subsidiaries is a party
or bound which, if resolved adversely to Parent or such Subsidiary, would have a
Parent Material Adverse Effect. Parent has provided to the Company copies of
its "auditors' letter" in respect of the 1995 fiscal year and any updates
thereto.
Section 5.8 Absence of Undisclosed Liabilities. Except for
----------------------------------
liabilities or obligations which are accrued or reserved against in Parent's
financial statements or were thereafter incurred in the ordinary course of
business and consistent with past practice, Parent has no liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by generally accepted accounting principles to be reflected in its
consolidated balance sheet (or reflected in the notes thereto) or which would
have a Parent Material Adverse Effect.
Section 5.9 Taxes. Parent has duly filed, and each of its
-----
Subsidiaries has duly filed, all material federal, state, local and foreign
income, franchise, sales and other Tax Returns required to be filed by Parent or
any of its Subsidiaries. All such Tax Returns are true, correct and complete,
and Parent and each of its Subsidiaries have duly paid, all Taxes shown on such
Tax Returns and have made adequate provision for payment of all accrued but
unpaid Taxes anticipated in respect of all periods since the
21
periods covered by such Tax Returns. All deficiencies assessed as a result of
any examination of Tax Returns of Parent or any of its Subsidiaries by federal,
state, local or foreign tax authorities have been paid or reserved on the
financial statements of Parent in accordance with generally accepted accounting
principles consistently applied. Parent and each of its Subsidiaries have
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign laws) and have, within the time and in
the manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable laws.
Section 5.10 Insurance. Parent has delivered to the Company copies
---------
of each of its material insurance policies. All such insurance policies are in
full force and effect and the premiums due thereon have been timely paid.
Neither Parent nor any of its Subsidiaries is presently in default regarding the
provisions of such policy, nor have they failed to give any notice or present
any material claim thereunder in due and timely fashion. The consummation of
the transactions contemplated by this Agreement will not constitute a default
under any such insurance policy.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
Prior to the Effective Time, unless Parent shall otherwise agree in writing, or
as otherwise expressly contemplated by this Agreement:
(a) except as described on Schedule 6.1(a), the Company shall
conduct, and cause each of its Subsidiaries to conduct, its business only in the
ordinary and usual course consistent with past practice, and the Company shall
use, and cause each of its Subsidiaries to use, its reasonable efforts to
preserve intact the present business organization, keep available the services
of its present officers and key employees, and preserve the goodwill of those
having business relationships with it;
(b) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) amend its charter, bylaws or other organizational
documents, (ii) split, combine or reclassify any shares of its outstanding
capital stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or (iv) directly or indirectly
redeem or otherwise acquire any shares of its capital stock or shares of the
capital stock of any of its Subsidiaries;
(c) the Company shall not, nor shall it permit any of its
Subsidiaries to,
22
(i) authorize for issuance, issue or sell or agree to issue or sell any shares
of, or Rights to acquire or convertible into any shares of, its capital stock or
shares of the capital stock of any of its Subsidiaries (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise); (ii) merge or consolidate with another entity; (iii)
acquire or purchase an equity interest in or a substantial portion of the assets
of another corporation, partnership or other business organization or otherwise
acquire any assets outside the ordinary and usual course of business and
consistent with past practice or otherwise enter into any material contract,
commitment or transaction outside the ordinary and usual course of business
consistent with past practice; (iv) sell, lease, license, waive, release,
transfer, encumber or otherwise dispose of any of its assets outside the
ordinary and usual course of business and consistent with past practice; (v)
incur, assume or prepay any material indebtedness or any other material
liabilities other than in the ordinary course of business and consistent with
past practice; (vi) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person; (vii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to Subsidiaries of the Company and
extensions of credit to customers in the ordinary course of business consistent
with past practice; (viii) authorize or make capital expenditures other than in
the ordinary course of business consistent with past practice; (ix) permit any
insurance policy naming the Company or any Subsidiary of the Company as a
beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business; or (x) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing;
(d) the Company shall not, nor shall it permit its Subsidiaries to,
(i) adopt, enter into, terminate or amend (except as may be required by
Applicable Law) any Company Plan or other arrangement for the current or future
benefit or welfare of any director, officer or current or former employee, (ii)
increase in any manner the compensation or fringe benefits of, or pay any bonus
to, any director, officer or employee (except for normal increases in salaried
compensation in the ordinary course of business consistent with past practice),
or (iii) take any action to fund or in any other way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation or
benefits under any employee plan, agreement, contract, arrangement or other
Company Plan; and
(e) the Company shall not, nor shall it permit its Subsidiaries to,
take any action with respect to, or make any material change in, its accounting
or tax policies or procedures, except as required by law.
Section 6.2 Conduct of Business of Sub. During the period from the
--------------------------
date of this Agreement to the Effective Time, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement. It is understood that Sub was formed by Parent solely for the
purpose of effecting the Merger, and that Sub will have no material assets and
no material liabilities prior to the Merger.
23
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Each of the Company and Parent
-----------------------
shall (and shall cause its Subsidiaries and its and their respective officers,
directors, employees, auditors and agents to) afford to the other and to the
other's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives reasonable access during normal business
hours throughout the period prior to the Effective Time to all of its books and
records (other than privileged documents) and its properties, plants and
personnel and, during such period, each shall furnish promptly to the other a
copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal securities laws, provided that no
investigation pursuant to this Section 7.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Unless otherwise required by law, each party
agrees that it (and its Subsidiaries and its and their respective
representatives) shall hold in confidence all non-public information so
acquired.
Section 7.2 No Solicitation. Prior to the Effective Time, the
----------------
Company agrees that neither it, any of its Subsidiaries or its affiliates, nor
any of the respective directors, officers, employees, agents or representatives
of the foregoing will, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving the Company or any
Subsidiary of the Company or the acquisition of all or any significant assets or
capital stock of the Company or any Subsidiary of the Company taken as a whole
(an "Acquisition Transaction") or negotiate, explore or otherwise engage in
------------------------
discussions with any person (other than Parent and its representatives) with
respect to any Acquisition Transaction or enter into any agreement, arrangement
or understanding with respect to any such Acquisition Transaction or which would
require it to abandon, terminate or fail to consummate the Merger or any other
transaction contemplated by this Agreement. The Company agrees that as of the
date hereof, it, its Subsidiaries and affiliates, and the respective directors,
officers, employees, agents and representatives of the foregoing, shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person (other than Parent and its
representatives) conducted heretofore with respect to any Acquisition
Transaction. The Company agrees to immediately advise Parent in writing of any
inquiries or proposals (or desire to make a proposal) received by (or indicated
to), any such information requested from, or any such negotiations or
discussions sought to be initiated or continued with, any of it, its
Subsidiaries or affiliates, or any of the respective directors, officers,
employees, agents or representatives of the foregoing, in each case from a
person (other than Parent and its representatives) with respect to an
Acquisition Transaction, and the terms thereof, including the identity of such
third party, and to update on an ongoing basis or upon Parent's request, the
status thereof, as well as any actions taken or other developments
24
pursuant to this Section 7.2.
Section 7.3 Reasonable Best Efforts. Subject to the terms and
------------------------
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, the obtaining of
all necessary waivers, consents and approvals and the effecting of all necessary
registrations and filings.
Section 7.4 Salary; Employee Benefits. Parent agrees to cause the
--------------------------
Surviving Corporation, for not less than two years after the Effective Time, (A)
to maintain the salaries of members of the Company's senior management listed on
Schedule 7.4 at no less than their present Levels and (B)(i) to continue to
maintain the Company Plans listed on Schedule 4.15 that are in effect as of the
date hereof or (ii) to make available to employees of the Surviving Corporation
reasonably comparable benefits, considered in the aggregate, under one or more
employee benefit plans of Parent or any of its Subsidiaries.
Section 7.5 Stockholder Transactions. At the Closing, (a) Parent
-------------------------
shall cause the Company to pay or otherwise discharge in full in cash all loans
and other indebtedness to the Stockholders, including accrued and unpaid
interest, up to the aggregate amount of $2,100,000, and (b) each Stockholder
shall pay, and shall cause each of the Company's and Stockholder's affiliates,
and each of the entities and ventures listed on Schedule 4.3(a), to pay, in full
all accounts receivable and advances payable by such Stockholder or affiliate or
entity or venture to the Company.
Section 7.6 Non-Compete Agreements. Prior to and after the Closing,
-----------------------
the Company shall use its best efforts to have each of the salespersons listed
on Schedule 7.7 enter into Non-Compete Agreements, substantially in the form
attached hereto as Exhibit E ("Non-Compete Agreements"), with such changes as
----------------------
shall be mutually agreed to by Parent and Larry Frankel. Prior to and after the
Closing, the Company and Parent shall develop a mutually satisfactory plan
pursuant to which the Company's salespersons (the "Salespersons") will be paid
------------
by the Company, subsequent to the Closing, an aggregate of $250,000 in cash.
Such plan shall include, among other things, an allocation of amounts among the
Salespersons. Such amount shall be accrued as a liability on the books of the
Company prior to the Closing, but shall not be treated as a liability for
purposes of calculating Adjusted April 12 Net Worth.
Section 7.7 Certain Company Liabilities. The Company and
------------------------------
Stockholders agree that the sum of the Company's (a) notes payable - bank, (b)
long term debt, (c) other loans to the Stockholders and other indebtedness and
(d) accrued and unpaid interest with respect to the foregoing shall not exceed
an aggregate of $2,100,000 at the Closing.
25
Section 7.7 Expenses. Whether or not the Merger is consummated, all
--------
costs and expenses incurred in connection with this Agreement (including the
Exhibits hereto) and the transactions contemplated hereby (and thereby) shall be
paid by the party incurring such expenses, provided that if the Merger is
consummated, Parent shall cause the Company to pay up to $50,000 of Company and
Stockholder fees and expenses. The balance of Company and Stockholder fees and
expenses shall be paid by the Stockholders.
Section 7.8 Public Announcements. Each of Parent, Sub, and the
--------------------
Company agrees that it will not issue any press release or otherwise make any
public statement with respect to this Agreement (including the Exhibits hereto)
or the transactions contemplated hereby (or thereby) without the prior consent
of the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
- -------- -------
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with any national securities exchange and
(ii) the party making such disclosure has first used its reasonable best efforts
to consult with (but not obtain the consent of) the other party about the form
and substance of such disclosure.
Section 7.9 Supplemental Disclosure. The Company shall give prompt
-----------------------
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
existence, nonexistence, occurrence, or non-occurrence, of any fact,
circumstance or event the existence, nonexistence, occurrence, or non-occurrence
of which would be likely to cause (x) any representation or warranty by any
party contained in this Agreement to be untrue or inaccurate or (y) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of the Company or Parent, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
-------- -------
of any notice pursuant to this Section 7.10 shall not have any effect for the
purpose of determining the satisfaction of the conditions set forth in Article
VIII of this Agreement or otherwise limit or affect the remedies available
hereunder to any party (except to the extent any breach of representation or
warranty is cured by the breaching party within 20 business days after delivery
of such notice). If (p) any of Stanley Bergman, Mark Mlotek or Jeff Gasparini
("Parent Senior Management") obtains actual knowledge after March 25, 1996 and
------------------------
prior to the Effective Date, of the existence, nonexistence, occurrence, or non-
occurrence, of any fact, circumstance or event the existence, nonexistence,
occurrence, or non-occurrence of which would be likely to cause any
representation or warranty of the Company contained in this Agreement to be
untrue or inaccurate, (q) such member of Parent Senior Management fails to give
the Company prompt notice thereof and (r) if the Company had received prompt
notice thereof, it would have cured any breach of representation or warranty
resulting therefrom, then the Company shall have waived any right to seek
indemnification, arising out of such breach of representation or warranty.
26
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
-------------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
- ------
subject to the satisfaction at or prior to the Effective Time of the condition
that no Governmental Entity (including a federal or state court) of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger or any
transaction contemplated by this Agreement; provided, however, that the parties
-------- -------
shall use their reasonable best efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted.
Section 8.2 Conditions to Obligations of Parent and Sub to Effect the
---------------------------------------------------------
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
- ------
to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by Parent:
(a) Representations and Warranties. The representations and
---------------------------------
warranties of the Company and Stockholders set forth in this Agreement
shall be true and correct in all material respects, as of the date hereof
(or, to the extent such representations and warranties shall not have been
true and correct as of the date hereof, any breach thereof has been cured
within 30 days after written notice of such breach is given by the Company
to the Parent), and, except to the extent such representations and
warranties speak as of an earlier date, as of the Effective Time as though
made at and as of the Effective Time, and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer
or the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. Each of the Company
------------------------------------------
and its Subsidiaries and each Stockholder shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Effective Time, and Parent shall have received
a certificate signed on behalf of the Company by the chief executive
officer or the chief financial officer of the Company to such effect.
(c) Stock Price. The Parent Stock Price shall not be less than 80%
-----------
the average of the per share closing price for the Parent Common Stock on
NASDAQ for the ten trading days immediately preceding the date hereof.
(d) 1995 EBITD. Parent's Calculation of 1995 EBITD shall be not
-----------
greater than 120% of the Company's Calculation of 1995 EBITD.
27
(e) Opinion of Counsel. Parent shall have received the opinion of
-------------------
Aronberg Goldgehn Davis & Garmisa, in the form attached hereto as Exhibit
F.
(f) Consent. All notices to, and consents, approvals and waivers
-------
from, third parties under the Contracts set forth on Schedule 4.5 shall
have been obtained, in each case without any condition or qualification
adverse to Parent or Sub.
Section 8.3 Conditions to Obligation of the Company to Effect the
--------------------------------------------------------
Merger. The obligation of the Company and the Stockholders to effect the Merger
- ------
shall be subject to the satisfaction at or prior to the Effective Time of the
following additional conditions, unless waived in writing by the Company:
(a) Representations and Warranties. (i) The representations and
-------------------------------
warranties of Parent set forth in this Agreement shall be true and correct
in all material respects as of the date hereof, and, except to the extent
such representations and warranties speak as of an earlier date, as of the
Effective Time as though made on and as of the Effective Time, and the
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such
effect.
(b) Performance of Obligations of Parent and Sub. Each of Parent and
--------------------------------------------
Sub shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate signed on behalf of
Parent by the chief executive officer or the chief financial officer of
Parent to such effect.
(c) Stock Price. The Parent Stock Price shall not be less than 80%
-----------
of the average of the per share closing price for the Parent Common Stock
on NASDAQ for the ten trading days immediately preceding the date hereof;
provided, that, if the Parent Stock Price shall be less than 80% of the
--------
average of the per share closing price for the Parent Common Stock on
NASDAQ for the ten trading days immediately preceding the date hereof,
Parent shall have the right to pay each Stockholder, in lieu of Parent
Common Stock to be issued to such Stockholder pursuant to this Agreement
and notwithstanding anything contained in this Agreement that provides for
the issuance to such Stockholder of Parent Common Stock, an amount in cash
equal to the aggregate Parent Stock Price of such Parent Common Stock (and
thereby satisfy the condition contained in this Section 8.3(c)).
(d) 1995 EBITD. Parent's Calculation of 1995 EBITD shall be not less
----------
than 85% of the Company's Calculation of 1995 EBITD; provided that if this
Agreement terminates as a result of this condition not being satisfied or
waived, and the Company and/or the Stockholders enter into any agreement
with respect to the sale of the Company prior to the six month anniversary
of this Agreement,
28
Company shall pay to Parent, at the closing of any such transaction, an
amount equal to Parent's out-of-pocket costs incurred in connection with
the transactions contemplated hereby (including without limitation fees and
disbursements incurred in connection with due diligence and the preparation
and negotiation of any documentation), up to $100,000.
(e) Registration Rights Agreement. Parent shall have entered into a
-----------------------------
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit G.
(f) Opinion of Counsel. The Company and Stockholders shall have
-------------------
received the opinion of Proskauer Rose Goetz & Mendelsohn LLP, in the form
attached hereto as Exhibit H.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if the Merger shall not have
been consummated before July 31, 1996 (unless, in the case of any such
termination pursuant to this Section 9.1(b), the failure to so consummate
the Merger by such date shall have been caused by the action or failure to
act of the party (or its Subsidiaries) seeking to terminate this Agreement,
which action or failure to act constitutes a breach of this Agreement);
(c) by Parent, if (i) there has been a breach of any representations
or warranties of the Company set forth herein the effect of which is a
Company Material Adverse Effect or (ii) there has been a breach in any
material respect of any of the covenants or agreements set forth in this
Agreement on the part of the Company, which breach (in the case of either
(i) or (ii)) is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by Parent to the Company; or
(d) by the Company, if (i) there has been a breach of any
representations or warranties of Parent set forth herein the effect of
which is a Parent Material Adverse Effect or (ii) there has been a breach
in any material respect of any of the covenants or agreements set forth in
this Agreement on the part of Parent, which breach (in the case of either
(i) or (ii)) is not curable or, if curable, is not cured
29
within 30 days after written notice of such breach is given by the Company
to Parent.
Section 9.2 Effect of Termination. In the event of termination of
---------------------
this Agreement pursuant to this Article IX, the Merger shall be deemed abandoned
and this Agreement shall forthwith become void, without liability on the part of
any party hereto, except as provided in this Section 9.2, Section 7.1 and
Section 7.8 and 7.9, and except that nothing herein shall relieve any party from
liability for any breach of this Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties. All
---------------------------------------------
representations and warranties contained in Articles IV and V of this Agreement
shall survive the Closing until June 30, 1997, except that the representations
and warranties contained in Section 4.9 shall survive until the second
anniversary of the Closing, the representations and warranties contained in
Sections 4.11 and 4.17 shall survive the Closing until the expiration of the
applicable statute of limitations, and the representations and warranties
contained in Sections 4.2, 4.4, 4.5 (except, in the case of Section 4.5, to the
extent Losses (as defined in Section 10.2) arising from a breach of
representations and warranties contained therein involve only the payment of
cash to a third party), 4.16, 5.2, 5.3, 5.4 (except, in the case of Section 5.4,
to the extent Losses arising from a breach of representations and warranties
contained therein involve only the payment of cash to a third party) and 5.7
shall survive the Closing indefinitely.
Section 10.2 Indemnification by Stockholders. From and after the
--------------------------------
Closing, the Stockholders shall jointly and severally indemnify and save Parent,
the Surviving Corporation and their respective Affiliates, directors, officers,
employees, agents and representatives and all of their successors and assigns
(collectively "Parent Claimants" and individually "Parent Claimant") harmless
----------------- ---------------
from and defend each of them from and against any and all demands, claims,
actions, liabilities, losses, costs, damages or expenses whatsoever (including
any reasonable attorneys' fees) (collectively, "Losses") asserted against,
------
imposed upon or incurred by any Parent Claimant resulting from or arising out of
(a) any inaccuracy or breach of any representation or warranty of the
Stockholders or the Company contained herein; (b) any breach of any covenant or
obligation of Stockholders or the Company contained herein; or (c) the inability
of the Company to take as a deduction in the computation of its taxable income
any compensation or bonuses described in this Agreement or the schedules hereto.
Section 10.3 Indemnification by Parent. From and after the Closing,
-------------------------
Parent shall indemnify and save the Stockholders, and their respective
Affiliates and directors, officers, employees, agents and representatives
(collectively "Company Claimants" and
-----------------
30
individually "Company Claimant") harmless from and defend each of them from and
----------------
against any and all Losses asserted against, imposed upon or incurred by the
Company Claimants resulting from or arising out of (a) any inaccuracy or breach
of any representation or warranty of Parent or Sub contained herein; or (2) any
breach of any covenant or obligation of Parent or Sub contained herein.
Section 10.4 Indemnification Procedures.
--------------------------
(a) The rights and obligations of each party claiming a right to
indemnification hereunder ("Indemnitee") from the other party ("Indemnitor")
---------- ----------
shall be governed by the following rules:
(i) The Indemnitee shall give prompt written notice to the
Indemnitor of any state of facts which Indemnitee determines will give rise to a
claim by the Indemnitee against the Indemnitor based on the indemnity agreements
contained herein, stating the nature and basis of said claims and the amount
thereof, to the extent known. No failure to give such notice shall affect the
indemnification obligations of Indemnitor hereunder, except to the extent such
failure materially prejudices such Indemnitor's ability successfully to defend
the matter giving rise to the indemnification claim.
(ii) In the event any action, suit or proceeding is brought
against the Indemnitee, with respect to which the Indemnitor may have liability
under the indemnity agreements contained herein, then upon the written
acknowledgment by the Indemnitor within thirty days of the bringing of such
action, suit or proceeding that it is undertaking and will prosecute the defense
of the claim under such indemnity agreements and confirming that the claim is
one with respect to which the Indemnitor is obligated to indemnify and that it
will be able to pay the full amount of potential liability in connection with
any such claim, the action, suit or proceeding (including all proceedings on
appeal or for review which counsel for the Indemnitee shall deem appropriate)
may be defended by the Indemnitor, provided that the Indemnitee shall provide
--------
such reasonable assistance as is reasonably requested by Indemnitor, at no cost
to Indemnitee. However, in the event the Indemnitor shall not offer reasonable
assurances as to its financial capacity to satisfy any final judgment or
settlement, the Indemnitee may assume the defense and dispose of the claim,
after 30 days' prior written notice to the Indemnitor, at the Indemnitor's cost.
The Indemnitee shall have the right to employ its own counsel in any other case,
but the fees and expenses of such counsel shall be at the Indemnitee's own
expense unless (a) the employment of such counsel and the payment of such fees
and expenses both shall have been specifically authorized by the Indemnitor in
connection with the defense of such action, suit or proceeding or (b) the
Indemnitee shall have reasonably concluded and specifically notified the
Indemnitor that there may be specific defenses available to it which are
different from or additional to those available to the Indemnitor, or that such
action, suit or proceeding involves or could have an effect upon any matter
beyond the scope of the indemnity agreements contained herein.
31
(iii) In addition, in any event specified in clause (b) of the
second sentence of subparagraph (ii) above, the Indemnitor, to the extent made
necessary by such different or additional defenses, shall not have the right to
direct the defense of such action, suit or proceeding on behalf of the
Indemnitee. If Indemnitor and Indemnitee cannot agree on a mechanism to
separate the defense of matters extending beyond the scope of indemnification,
such matters shall be defended on the basis of joint consultation.
(iv) The Indemnitee shall be kept fully informed by the
Indemnitor of such action, suit or proceeding at all stages thereof, whether or
not it is represented by counsel. The Indemnitor shall, at the Indemnitor's
expense, make available to the Indemnitee and its attorneys and accountants all
books and records of the Indemnitor relating to such proceedings or litigation,
and the parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
(b) The Indemnitor shall make no settlement of any claims which
Indemnitor has undertaken to defend, without Indemnitee's consent, unless the
Indemnitor fully indemnifies the Indemnitee for all losses, there is no finding
or admission of violation of law by, or effect on any other claims that may be
made against, the Indemnitee and the relief granted in connection therewith
requires no action on the part of and has no effect on the Indemnitee.
10.5 Limitation on Indemnification. The Stockholders shall have no
------------------------------
liability under this Agreement for breach of warranty or misrepresentation: (a)
unless the aggregate amount of Losses to Parent and its affiliates from all
claims under this Agreement for breach of warranty and misrepresentation exceeds
$50,000 (the "Indemnification Threshold"); provided, that if the Indemnification
-------------------------
Threshold is met, all liabilities for breach of warranty or representation under
this Agreement shall be indemnifiable; and (b) in connection with any Losses (up
to $380,000) resulting from the adjustment described in the first sentence of
Schedule 4.6.
ARTICLE XI
RESTRICTIVE COVENANTS
Section 11.1 Non-Competition. Except as set forth on Schedule 11.1,
---------------
none of the Stockholders nor any of their respective affiliates shall, for a
period of five years after the Effective Date, directly or indirectly, engage,
anywhere in the world, in the sale or offering or promoting for sale of any
product, process, good or service which is the same as, is functionally similar
to, or competes with, any product, process, good or service which Parent has
sold or offered or promoted for sale within the three years preceding the
Effective Date in connection with Parent's business.
32
Section 11.2 Non-Solicitation of Employees. None of the Stockholders
-----------------------------
nor any of their respective Affiliates shall directly or indirectly, for itself
or on behalf of any other individual or entity, hire any employee of Parent,
including, without limitation, any employees of the Company that Parent or its
affiliates has hired in its sole discretion, or induce nor attempt to induce any
such employee to leave his or her employment with Parent at any time within five
years from the Effective Date.
Section 11.3 Non-Solicitation or Interference with Customers and
------------------------------------------------------
Suppliers. None of the Stockholders nor any of their respective Affiliates
- ---------
shall, directly or indirectly, for itself or on behalf of any other individual
or entity, solicit, divert, take away or attempt to take away any of Parent's or
Parent's affiliates' customers or suppliers or the business or patronage of any
such customers or suppliers or in any way interfere with, disrupt or attempt to
disrupt any then existing relationships between Parent or Parent's affiliates
and any of their respective customers or suppliers or other individuals or
entities with whom it deals or contact or enter into any business transaction
with any such customers or suppliers or other individuals or entities for any
purpose at any time within five years from the Effective Date.
Section 11.4 Acknowledgements. Each of the Stockholders acknowledges
----------------
that, in view of the nature of the Company's business and the business
objectives of Parent in acquiring the Company, and the consideration paid to the
Stockholders therefor, the restrictions contained in this Article XI are
reasonably necessary to protect the legitimate business interests of Parent and
that any violation of such restrictions will result in irreparable injury to
Parent and the business Parent has acquired hereunder for which damages will not
be an adequate remedy. Each of the Stockholders therefore acknowledges that, if
any such restrictions are violated, Parent shall be entitled to preliminary and
injunctive relief as well as to an equitable accounting of earnings, profits and
other benefits arising from such violation.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Amendment and Modification. At any time prior to the
--------------------------
Effective Time, this Agreement may be amended, modified or supplemented only by
written agreement (referring specifically to this Agreement) of Parent, Sub and
the Company with respect to any of the terms contained herein.
Section 12.2 Waiver. At any time prior to the Effective Time, Parent
------
and Sub, on the one hand, and the Company and the Stockholders, on the other
hand, may (i) extend the time for the performance of any of the obligations or
other acts of the other, (ii) waive any inaccuracies in the representations and
warranties of the other contained herein or in any documents delivered pursuant
hereto and (iii) waive compliance by the
33
other with any of the agreements or conditions contained herein which may
legally be waived. Any such extension or waiver shall be valid only if set
forth in an instrument in writing specifically referring to this Agreement and
signed on behalf of such party.
Section 12.3 Survivability; Investigations. The respective
------------------------------
representations and warranties of Parent, the Company and the Stockholders
contained herein or in any certificates or other documents delivered prior to or
as of the Effective Time (i) shall not be deemed waived or otherwise affected by
any investigation made by any party hereto and (ii) shall not survive beyond the
Effective Time. The covenants and agreements of the parties hereto (including
the Surviving Corporation after the Merger) shall survive the Effective Time
without limitation (except for those which, by their terms, contemplate a
shorter survival period).
Section 12.4 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof. Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.
(a) If to Parent or Sub, to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Richard L. Goldberg, Esq.
(b) if to the Company or the Stockholders, to:
Scientific Supply Company
9405 West River Street
Schiller Park, Illinois 60176
Attention: Lawrence Frankel
34
with a copy to:
Aronberg Goldgehn Davis & Garmisa
Suite 3000 One IBM Plaza
Chicago, Illinois 60611
Attention: Ned S. Robertson, Esq.
Section 12.5 Descriptive Headings; Interpretation. The headings
------------------------------------
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Schedules, Exhibits or Articles mean a Section, Schedule,
Exhibit or Article of this Agreement unless otherwise indicated. References to
this Agreement shall be deemed to include the Exhibits and Schedules hereto,
unless the context otherwise requires. The term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, a
Governmental Entity or an unincorporated organization.
Section 12.6 Entire Agreement; Assignment. This Agreement
----------------------------
(including the Schedules and other documents and instruments referred to herein)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. This Agreement is not intended to confer
upon any person not a party hereto any rights or remedies hereunder. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. This Agreement shall not be
assigned by operation of law or otherwise by Parent, Sub or the Company;
provided that Parent or Sub may assign its rights and obligations hereunder to a
- --------
direct or indirect subsidiary of Parent, but no such assignment shall relieve
Parent or Sub, as the case may be, of its obligations hereunder.
Section 12.7 Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of Delaware without
giving effect to the provisions thereof relating to conflicts of law.
Section 12.8 Severability. In case any one or more of the
------------
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific jurisdiction
where such judgment shall be made.
Section 12.9 Counterparts. This Agreement may be executed in two
------------
or more counterparts, each of which shall be deemed to be an original but all of
which shall
35
constitute one and the same agreement.
Section 12.10 Knowledge. When used in any representation or
---------
warranty contained herein, the term "knowledge" shall be deemed to mean
knowledge after due inquiry.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
HENRY SCHEIN, INC. SCIENTIFIC SUPPLY COMPANY
By:________________________________ By:________________________________
Authorized Officer Authorized Officer
SSC HOLDINGS, INC. ___________________________________
LAWRENCE FRANKEL
By:________________________________
Authorized Officer
THE LAWRENCE AND PAMELA FRANKEL
CHARITABLE REMAINDER TRUST CREATED
UNDER TRUST AGREEMENT DATED AS OF
MARCH 1, 1996
By:________________________________
Lawrence Frankel, Trustee
___________________________________
NORMAN FRANKEL
___________________________________
RUDOLPH KELEMEN
___________________________________
BRUCE BARBER
36
EXHIBIT 10.93
EXHIBIT G
REGISTRATION RIGHTS AGREEMENT
This agreement dated __________, 1996 is among Henry Schein, Inc., a
Delaware corporation ("Parent"), and Lawrence J. Frankel, Norman Frankel,
------
Rudolph Kelemen and Bruce Barber (collectively, the "Stockholders").
------------
Pursuant to the terms of the agreement and plan of merger (the "Merger
------
Agreement") dated April ___, 1996 among Parent, SSC Holdings, Inc., an Illinois
- ---------
corporation and wholly-owned subsidiary of Parent ("Sub"), Scientific Supply
---
Company, an Illinois corporation (the "Company"), and the Stockholders, each
-------
share of Company Common Stock (as defined in the Merger Agreement) issued and
outstanding immediately prior to the Effective Time (as defined in the Merger
Agreement) shall be convertible into the right to receive a number of shares of
common stock, par value $.01 per share, of Parent ("Parent Common Stock"), as
-------------------
provided in the Merger Agreement.
In connection with the transactions contemplated by the Merger
Agreement, the parties are entering into this registration rights agreement.
Accordingly, the parties agree as follows:
1. Definitions. As used in this agreement:
-----------
1.1 "Prior Holders" means any person or entity previously
-------------
granted rights pursuant to the registration rights agreement dated September 30,
1994 among Parent and certain parties named therein (the "Prior Registration
------------------
Rights Agreement").
- ----------------
1.2 "Registrable Shares" means the shares of Parent Common Stock
------------------
issued to the Stockholders pursuant to the Merger Agreement. Registrable Shares
shall cease to be such when (i) a registration statement covering such
Registrable Shares has become or been declared effective and they have been
disposed of pursuant to that registration statement, (ii) eligible to be sold,
transferred or distributed pursuant to or in compliance with Rule 144 (or any
similar provision then in force) or any other exemption from registration under
the Securities Act of 1933 (the "Securities Act") or (iii) they have been
--------------
otherwise transferred and Parent has delivered new certificates not
subject to any stop transfer order or other restriction on transfer and not
bearing a legend restricting transfer in the absence of an effective
registration statement.
2. Piggyback Registration.
----------------------
2.1 Inclusion in Registration. If at any time after the date of
-------------------------
this agreement, Parent proposes to register any of its shares of common stock
under the Securities Act (other than pursuant to Form S-8 or S-4 or a comparable
registration statement, pursuant to an employee benefits plan or in connection
with any transaction of the type referred to in Rule 145 under the Securities
Act) it will promptly give notice to the Stockholders of its intention to do so.
If any Stockholder notifies Parent within 20 days after receipt of any such
notice of its desire to include any Registrable Shares in such proposed
registration, Parent shall afford that Stockholder the opportunity to have such
Registrable Shares registered under such registration statement.
Notwithstanding anything in this section 2 to the contrary, Parent
shall have the right, in its sole and absolute discretion, at any time after it
shall have given any notice pursuant to this section 2 (irrespective of whether
a written request for inclusion of any Registrable Shares shall have been made),
to elect to postpone or not to file such proposed registration statement or to
withdraw the same after filing but prior to the effective date thereof.
2.2 Underwriting Requirements. If the registration of which
-------------------------
Parent gives notice pursuant to this section 2 is for a registered public
offering involving an underwriting of shares, Parent shall so advise the
Stockholders as part of the notice given pursuant to section 2.1. Parent shall
not be required under this section 2 to include any Registrable Shares in such
underwriting unless each Stockholder desiring to participate in such
underwritten public offering accepts the terms of the underwriting as agreed
upon between Parent and the underwriters selected by it, and then only in such
quantity as will not, in the opinion of the underwriters, jeopardize the success
of the offering by the Company. If any stockholder disapproves of the terms of
any such underwriting, that stockholder may elect to withdraw from the
underwriting by written notice to Parent and the representative of the
underwriters. Any Registrable Shares
2
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
Subject to the rights of the Prior Holders contained in the Prior
Registration Rights Agreement, notwithstanding any other provision of this
section 2, if the total number of shares, including the Registrable Shares,
requested by all stockholders, to be included in the offering exceeds the number
of shares to be sold other than by Parent that the underwriters reasonably
believe compatible with the success of the offering, then the number of selling
stockholders' shares (including the Registrable Shares) that may be included in
the offering shall be apportioned pro rata among all selling stockholders
(including the Stockholders) according to the total number of shares entitled to
be included in the offering owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by all selling stockholders. If the
number of Registrable Shares included in the underwriting is less than 50% of
the number of Registrable Shares proposed by the Stockholders to be distributed
through such underwriting, then, as promptly as practicable, but in any event
within six months after the effective date of such registration statement,
Parent shall use its reasonable best efforts to either (a) effect a registration
of the Registrable Shares or (b) repurchase the Registrable Shares at a price
equal to the fair market value of such Registrable Shares at the date of
repurchase.
2.3 Number. The Stockholders shall be entitled to have their
------
shares included in an unlimited number of registrations pursuant to this section
2.
3. Expenses of Registration. Except as otherwise provided in this
------------------------
agreement, Parent shall pay all registration, filing and qualification fees,
accounting fees and printing expenses of Parent, reasonable fees and
disbursements of counsel for Parent and reasonable fees and expenses of one
counsel for the Stockholders up to $5,000. All (i) underwriting discounts and
commissions, (ii) stock transfer taxes incurred in respect of the Registrable
Shares being sold and (iii) legal and accounting fees, expenses and
disbursements of the Stockholders (except as set forth above) shall be borne and
paid ratably by the Stockholders of the Registrable Securities included in any
such registration.
3
4. Registration Procedures. In the case of each registration
-----------------------
effected by Parent pursuant to this agreement, Parent shall:
(a) keep such registration statement effective for a period
of 120 days or until each Stockholder has completed the distribution described
in the registration statement, whichever occurs first;
(b) furnish each Stockholder copies of any registration
statement and each preliminary or final prospectus, or supplement or amendment
required to be prepared pursuant to this agreement, as any Stockholder may from
time to time reasonably request;
(c) prepare and promptly file with the Securities and
Exchange Commission (the "SEC") and promptly notify each Stockholder of the
---
filing of any amendments or supplements to such registration statement or
prospectus as may be necessary to correct any statements or omissions if, at any
time when a prospectus relating to the Registrable Shares is required to be
delivered under the Securities Act, any event with respect to Parent shall have
occurred as a result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading; and
(d) use its best efforts to qualify as soon as reasonably
practicable the Registrable Shares included in the registration statement for
sale under the securities or blue-sky laws of such states and jurisdictions
within the United States as shall be reasonably requested by any Stockholder;
provided that Parent shall not be required in connection therewith or as a
- --------
condition thereto to qualify to do business, to become subject to taxation or to
file a consent to service of process generally in any of the aforesaid states or
jurisdictions.
5. Delay of Registration
---------------------
No Stockholder shall have any right to take any action to restrain,
enjoin or otherwise delay any registration as a result of any controversy that
may arise with respect to the interpretation or implementation of this
agreement.
4
6. Indemnification
---------------
(a) Parent shall indemnify each Stockholder offering
Registrable Shares for sale pursuant to each registration that has been effected
pursuant to this agreement against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
of a material fact contained in any registration statement under which such
Registrable Shares were registered under the Securities Act, or based on any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
such Stockholder for any legal or other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that Parent shall pay for only one firm
-------- -------
of counsel for all such Stockholders and Parent shall not be liable to a
Stockholder in any such case (i) to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon information furnished to Parent by such Stockholder or
(ii) in the case of a sale directly by a Stockholder of Registrable Shares
(including a sale of such Registrable Shares through any underwriter retained by
such Stockholder engaging in a distribution on behalf of such Stockholder), such
untrue statement or omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and such Stockholder failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Shares to the person or entity
asserting any such loss, claim, damage or liability.
(b) Each of the Stockholders shall, if Registrable Shares
held by them are included in the securities as to which such registration is
being effected, severally indemnify Parent, each of its directors and officers
who sign such registration statement, each affiliate and control person of
Parent, each underwriter, if any, of Parent's securities covered by such
registration statement, each other Stockholder and each other security holder
whose securities are included in such registration, and each affiliate thereof
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement of a material fact
contained in any such registration statement under which such Registrable Shares
were registered under
5
the Securities Act, or based on any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse Parent, such directors, officers, employees,
affiliates, other Stockholders or security holders or underwriters for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement or omission is made
in such registration statement in reliance upon and in conformity with
information furnished to Parent by such Holder.
(c) Each party entitled to indemnification under this
section 6 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and any claim or any litigation resulting therefrom. In case any action
is brought against an Indemnified Party, and it notifies the Indemnifying
Parties of the commencement thereof, the Indemnifying Party will be entitled to
participate in and, to the extent it so determines, assume the defense thereof;
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense.
After notice from the Indemnifying Party of its election to so assume the
defense thereof, the Indemnifying Party will not be liable to such Indemnified
Party for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Conditions to Registration. As a condition to Parent's
--------------------------
obligation under this agreement to cause a registration statement to be filed or
Registrable Shares to be included in a registration statement, each Stockholder
shall provide such information and execute such documents as may reasonably be
required in connection with such registration. In addition, Parent shall not be
obligated to file a registration statement or to include Registrable
6
Shares in a registration statement under this agreement as to any Stockholder,
(i) if Parent shall have received opinions of counsel reasonably satisfactory to
such Stockholder and to the effect that the proposed disposition of such
Registrable Shares by such Holder may be effected without registration under the
Securities Act, (ii) to the extent any such Registrable Shares can then be sold
during a single three month period pursuant to Rule 144 under the Securities Act
or (iii) unless such Stockholder shall enter into customary agreements
(including underwriting and lock-up agreements in customary form) and take all
such other actions as Parent or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of the Registrable Shares of
such Stockholder. Without limiting the foregoing, no Stockholder may
participate in any registration under this agreement which is underwritten
unless such Stockholder (a) agrees to sell its securities on the basis provided
in any such underwriting arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
8. Rule 144. With a view to making available the benefits of
--------
certain rules and regulations of the SEC which may permit the sale of the
restricted securities to the public without registration, Parent agrees to (a)
make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act at all times filed by the Company
for an offering of its securities to the general Public, and (b) use its best
efforts to file with the SEC in a timely manner all reports and other documents
required of Parent under the Securities Exchange Act of 1934.
9. Notices. All notices and other communications under this
-------
agreement shall be in writing and shall be delivered personally or by next-day
courier or telecopied, to the parties at the addresses specified below (or at
such other address for a party as shall be specified by like notice):
7
if to Parent, to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Fax: 516-843-5675
Attention: Mark E. Mlotek, Esq.
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Fax: 212-969-2900
Attention: Richard L. Goldberg, Esq.
if to the Stockholders, to:
Scientific Supply Company
9405 West River Street
Schiller Park, Illinois 60176
Fax: 847-671-0064
Attention: Lawrence Frankel
with a copy to:
Aronberg Goldgehn Davis & Garmisa
Suite 3000 One IBM Plaza
Chicago, Illinois
Fax: 312-828-9635
Attention: Ned S. Robertson, Esq.
All such notices and communications shall be deemed received upon (a) actual
receipt by the addressee, (b) actual delivery to the appropriate address or (c)
in the case of a facsimile transmission, upon transmission by the sender and
issuance by the transmitting machine of a confirmation slip confirming the
number of pages constituting the notice have been transmitted without error.
10. Assignment. The registration rights granted pursuant to this
----------
agreement shall not be assignable.
11. Separability. If any provision of this agreement is invalid or
------------
unenforceable, the balance of this agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall
8
nevertheless remain applicable to all other persons and circumstances.
12. Governing Law. This agreement shall be governed by and construed
-------------
in accordance with the law of the State of Delaware applicable to agreements
made and to be performed wholly in Delaware.
13. Equitable Relief. The parties acknowledge that the remedy at law
----------------
for breach of this agreement may be inadequate and that, in addition to any
other remedy a party may have for a breach of this agreement, that party may be
entitled to an injunction restraining any such breach or threatened breach, or a
decree of specific performance, without posting any bond or security. The
remedy provided in this section 13 is in addition to, and not in lieu of, any
other rights or remedies a party may have.
14. Counterparts. This agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement.
HENRY SCHEIN, INC.
By:_____________________
Name:
Title:
_________________________
Lawrence J. Frankel
_________________________
Norman Frankel
_________________________
Rudolph Kelemen
_________________________
Bruce Barber
9
EXHIBIT 10.94
ACQUISITION AGREEMENT
dated as of May 23, 1996
Among
HENRY SCHEIN, INC.,
SILVERMAN'S DENTAL SUPPLY CORP.,
SAN FRANCISCO DENTAL SUPPLY, INC.,
and
LARRY OLSON
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II SALE AND PURCHASE OF INVENTORY, SALE AND PURCHASE OF EX-
TERRITORY BUSINESS, SALE AND PURCHASE OF SF DESIGNATED
TERRITORY RELATED BUSINESS AND SALE AND PURCHASE OF
SF/ROBIN BUSINESS . . . . . . . . . . . . . . . . . . . . . 21
2.1 Purchase of Inventory . . . . . . . . . . . . . . . . . . . 21
2.2 Purchase of the Ex-Territory Business. . . . . . . . . . . . 23
2.3 Purchase of the SF Designated Territory Related
Business. . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Purchase of SF/Robin Business. . . . . . . . . . . . . . . . 26
2.5 Adjusted Purchase Price Determination . . . . . . . . . . . 29
2.6 Options . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.7 HSI Bridge Loan . . . . . . . . . . . . . . . . . . . . . . 36
2.8 HSI Common Stock . . . . . . . . . . . . . . . . . . . . . . 36
2.9 Allocation of Purchase Price . . . . . . . . . . . . . . . . 37
2.10 Nonassignable Contracts and Authorizations . . . . . . . . . 37
2.11 Control of Acquired Business During Adjustment Period . . . 37
2.12 Guarantee of Performance by SF . . . . . . . . . . . . . . . 38
ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . 38
3.2 Obligations of SF and Olson . . . . . . . . . . . . . . . . 38
3.3 Obligations of HSI and Silverman's. . . . . . . . . . . . 39
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SF AND OLSON . . . . . . . 40
4.1 Organization and Qualification . . . . . . . . . . . . . . . 40
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.4 Financial Statements and Sales Information . . . . . . . . . 41
4.5 Absence of Certain Changes or Events . . . . . . . . . . . . 41
4.6 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.7 Real Property . . . . . . . . . . . . . . . . . . . . . . . 42
4.8 Intellectual Property . . . . . . . . . . . . . . . . . . . 42
4.9 Contracts and Commitments . . . . . . . . . . . . . . . . . 42
4.10 Accounts Receivable . . . . . . . . . . . . . . . . . . . . 43
4.11 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 43
(i)
PAGE
4.12 Customers and Suppliers . . . . . . . . . . . . . . . . . . 43
4.13 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . 43
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 44
4.15 Compliance with Law; Necessary Authorizations . . . . . . . 44
4.16 Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.17 Consents and Approvals of Governmental Authorities . . . . . 45
4.18 Related Party Transactions; Intercompany Accounts . . . . . 45
ARTICLE V REPRESENTATIONS AND WARRANTIES
OF HSI AND SILVERMAN'S . . . . . . . . . . . . . . . . . . . 45
5.1 Organization and Qualification . . . . . . . . . . . . . . . 45
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.4 HSI Financial Statements and Sales Information . . . . . . . 46
5.5 Absence of Certain Changes or Events . . . . . . . . . . . . 46
5.6 Customers and Suppliers . . . . . . . . . . . . . . . . . . 47
5.7 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . 47
5.8 Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.1 Certain Covenants of SF and Olson . . . . . . . . . . . . . 47
6.2 Obtaining Consents . . . . . . . . . . . . . . . . . . . . . 49
6.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.4 Transfer and Retention of Records . . . . . . . . . . . . . 50
6.5 Product Replacement and Repairs . . . . . . . . . . . . . . 50
6.6 Employee Matters . . . . . . . . . . . . . . . . . . . . . . 50
6.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . 51
6.8 Name Change . . . . . . . . . . . . . . . . . . . . . . . . 51
6.9 Certain Leased Property Related Matters . . . . . . . . . . 51
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
OF HSI AND SILVERMAN'S . . . . . . . . . . . . . . . . . . . 51
7.1 Representations and Warranties Accurate . . . . . . . . . . 51
7.2 Performance by SF and Olson. . . . . . . . . . . . . . . . 52
7.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 52
7.4 Opinions of Counsel for SF and Olson . . . . . . . . . . . . 52
7.5 Authorization; Legal Prohibition . . . . . . . . . . . . . . 52
7.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.7 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . 53
7.8 Absence of Adverse Changes . . . . . . . . . . . . . . . . . 53
7.9 Payments by SF to Shareholders and Debtholders. . . . . . . 53
7.10 Satisfactory Completion of Due Diligence. . . . . . . . . . 54
(ii)
PAGE
7.11 Confirmation of Agreed Upon Ex-Territory Business Value . . 54
7.12 Distribution Agreement . . . . . . . . . . . . . . . . . . . 54
7.13 Actions by SF . . . . . . . . . . . . . . . . . . . . . . . 54
7.14 Additional Documents, Etc. . . . . . . . . . . . . . . . . . 54
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF
SF AND OLSON . . . . . . . . . . . . . . . . . . . . . . . . 54
8.1 Representations and Warranties Accurate . . . . . . . . . . 54
8.2 Performance by Buyer . . . . . . . . . . . . . . . . . . . . 54
8.3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . 54
8.4 Opinion of Counsel for HSI and Silverman's . . . . . . . . . 55
8.5 Authorizations; Legal Prohibition . . . . . . . . . . . . . 55
8.6 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . 55
8.7 Actions by HSI and Silverman's. . . . . . . . . . . . . . 55
8.8 Additional Documents, Etc. . . . . . . . . . . . . . . . . . 55
ARTICLE IX RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . 55
9.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . . 55
9.2 Non-Solicitation of Employees . . . . . . . . . . . . . . . 56
9.3 Non-Solicitation or Interference with
Customers and Suppliers . . . . . . . . . . . . . . . . . . 56
9.4 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 57
10.1 Survival of Representations and Warranties . . . . . . . . . 57
10.2 Indemnification by SF and Olson . . . . . . . . . . . . . . 57
10.3 Indemnification by HSI and Silverman's . . . . . . . . . . . 57
10.4 Indemnification Procedures . . . . . . . . . . . . . . . . . 58
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 59
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 59
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 61
11.5 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 62
11.8 Governing Law; Submission to Jurisdiction . . . . . . . . . 62
11.9 Binding Effect; Assignment . . . . . . . . . . . . . . . . . 63
11.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . 63
11.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.12 No Partnership; Etc. . . . . . . . . . . . . . . . . . . . . 63
(iii)
PAGE
11.13 Third Parties . . . . . . . . . . . . . . . . . . . . . . . 63
(iv)
EXHIBITS AND SCHEDULES
Exhibits
1.29 Employment Agreement
2.7 SF Note
2.12 Olson Guaranty
3.2(b) Opinion of Counsel for SF and Olson
3.2(d)-1 Bill of Sale to HSI
3.2(d)-2 Bill of Sale to Silverman's
3.3(d) Opinion of Counsel for HSI and Silverman's
3.3(e)-1 Assumption Agreement in favor of SF from HSI
3.3(e)-2 Assumption Agreement in favor of SF from Silverman's
Schedules
1.52(a) Ex-Territory Contracts
1.52(b) Ex-Territory Excluded Assets
1.124 SF Designated Territory Excluded Assets
1.139 SF/Robin Excluded Assets
2.2.2(e) Ex-Territory Excluded Liabilities
2.3(b) Assumed SF Designated Territory Contracts
2.3(c) SF Excluded Liabilities
2.4(b) Assumed SF/Robin Contracts
2.4(c) SF/Robin Excluded Liabilities
4.3 No Breach
4.4A SF Financial Statements
4.4B SF Financial Statements - Exceptions to Generally Accepted Accounting
Principles
4.5 Absence of Certain Changes or Events
4.6 Certain Excluded Assets
4.7 Real Property
4.8 Intellectual Property
4.9 SF/Robin Contracts
4.10 Accounts Receivable
4.11 Inventory
4.12 Customers and Suppliers - Adverse Change, etc.
4.13 Litigation, etc.
4.14 Employee Benefit Plans
4.15(a) Compliance with Law
4.15(b) Authorizations
4.17 Consents and Approvals of Governmental Authorities
4.18 Related Party Transactions
5.4A HSI Financial Statements
(v)
5.4B HSI Financial Statements - Exceptions to Generally Accepted
Accounting Principles
5.5 Absence of Certain Changes or Events
5.7 Litigation, etc.
7.9 Payments by SF to Shareholders and Debtholders
(vi)
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of May 23, 1996 (the "Agreement"), by and among
Henry Schein, Inc., a Delaware corporation ("HSI"), Silverman's Dental Supply
Corp., a New York corporation ("Silverman's"), San Francisco Dental Supply,
Inc., a California corporation ("SF"), and Larry Olson, an individual and the
principal stockholder of SF ("Olson").
WITNESSETH
WHEREAS, HSI is principally engaged in the distribution of healthcare
products, supplies and equipment primarily to office-based healthcare
practitioners in the dental, medical and veterinary markets (the "HSI
Business"), including, without limitation, the Pattison Business (as such term
is hereinafter defined); and
WHEREAS, Silverman's is principally engaged in the distribution
through direct marketing of dental supplies and equipment (the "Silverman's
Business"); and
WHEREAS, SF is principally engaged in the distribution of dental
supplies and equipment (the "SF Business"); and
WHEREAS, Silverman's is a wholly-owned subsidiary of HSI; and
WHEREAS, Olson is the principal stockholder of SF and, in such
capacity, controls SF; and
WHEREAS, as a result of the transactions contemplated hereby, Olson
shall become the sole stockholder of SF; and
WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI desires to purchase and acquire, certain
specified inventory owned by SF; and
WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI desires to purchase and acquire, the Ex-
Territory Business (as such term is hereinafter defined); and
WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI desires to purchase and acquire, the SF
Designated Territory Related Business (as such term is hereinafter defined); and
WHEREAS, subject to the terms and conditions of this Agreement, SF
desires to sell and transfer, and HSI and Silverman's desire to purchase and
acquire, the SF/Robin Business (as such term is hereafter defined); and
WHEREAS, HSI and Pattison (as such term is hereinafter defined) have
concurrently entered into the Pattison Agreement (as such term is hereinafter
defined) pursuant to which, among other things, HSI shall acquire certain
specified assets and the related business from Pattison; and
WHEREAS, the parties hereto have previously entered into that certain
Acquisition Agreement, dated of even date herewith (the "Original Agreement"),
by means of their execution and delivery of that certain Agreement, dated of
even date herewith (the "Agreement"); and
WHEREAS, the parties hereto desire to enter into this Agreement to
amend and restate the Original Agreement as amended, modified and supplemented
by the Agreement and set forth their complete agreement and understanding with
respect to the subject matter hereof;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
ARTICLE I DEFINITIONS
-----------
The terms defined in this Article I, whenever used herein (including
the exhibits and schedules hereto, unless otherwise defined therein), shall have
the following meanings.
1.1 "Acquired Assets" shall mean, collectively, the Purchased
---------------
Inventory, the Ex-Territory Assets, the SF Designated Territory Related Assets
and the SF/Robin Assets.
1.2 "Adjusted Purchase Price Dispute Statement" shall mean either the
-----------------------------------------
Designated Territory Sales Dispute Statement or the Silverman's/Robin Sales
Dispute Statement, as the case may be.
1.3 "Affiliate" shall mean any Person that directly or indirectly
---------
controls, is controlled by or is under common control with another Person.
1.4 "Agreed Upon Ex-Territory Business Value" shall mean $2,383,231.
---------------------------------------
1.5 "Agreement" shall mean this Acquisition Agreement, including all
---------
Schedules and Exhibits hereto, in each case, as the same may be amended from
time to time.
1.6 "Agreement Date" shall mean May 23, 1996 which is the date on
--------------
which this Agreement shall be effective.
2
1.7 "Assumed Contracts" shall mean, collectively, the leases,
-----------------
agreements, contracts, commitments and understandings specifically assumed
pursuant to Sections 2.3(b) and 2.4(b).
1.8 "Authorizations" shall mean all licenses, permits, approvals,
--------------
authorizations, qualifications, concessions or the like, issued by any federal,
state, local or foreign regulatory or governmental authorities.
1.9 "Business" shall mean the distribution of dental supplies and
--------
equipment, including the HSI Business (but only to the extent the HSI Business
includes the distribution of dental supplies and equipment), the Silverman's
Business, the Pattison Business, the SF Business and the SF/Robin Business.
1.10 "Business Day" shall mean any day other than a Saturday, Sunday
------------
or other day on which banks are closed or are authorized to be closed in New
York, New York.
1.11 "Buyer Claimant" shall have the meaning set forth in Section
--------------
10.2 of this Agreement.
1.12 "Closing" shall mean the closing of the purchase and sale of the
-------
Acquired Assets and the Ex-Territory Business, the SF Designated Territory
Related Business and the SF/Robin Business as contemplated by this Agreement.
1.13 "Closing Date" shall have the meaning set forth in Section 3.1
------------
of this Agreement.
1.14 "Closing Inventory Report" shall have the meaning set forth in
------------------------
Section 2.1.3(a) of this Agreement.
1.15 "Closing Payments" shall mean the sum of (i) the SF Closing
----------------
Inventory Payment, (ii) the amount, if any, payable by HSI pursuant to Section
2.1.3(c), (iii) the Agreed Upon Ex-Territory Business Value, (iv) the HSI
Closing Sales Payment Amount, (v) the Silverman's/Robin Closing Sales Payment
Amount, (vi) the amount, if any, payable by HSI pursuant to Section 2.3(g) and
(vii) the amount, if any, payable by HSI pursuant to Section 2.4(g).
1.16 "Closing SF Inventory Value" shall mean the Inventory Purchase
--------------------------
Price of all Inventory of SF as of the Closing Date which is included in the
Purchased Inventory as determined in accordance with Section 2.1.3(b).
1.17 "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
1.18 "Combined Designated Territory Net Sales Base" shall mean
--------------------------------------------
$33,716,478
3
1.19 "Combined HSI/SF Sales" shall mean the sum of HSI Sales and SF
---------------------
Sales.
1.20 "Combined Silverman's/Robin Net Sales Base" shall mean
-----------------------------------------
$13,955,456.
1.21 "Combined Silverman's/Robin Sales" shall mean the sum of
--------------------------------
Silverman's Sales and SF/Robin Sales.
1.22 "Credit Agreement" shall have the meaning set forth in Section
----------------
7.6(b).
1.23 "Corporate Account" shall mean any customer which conducts a
-----------------
dental practice which is principally owned by one or more Persons who do not
practice dentistry at the location of such customer. For purposes of
illustration, the parties hereto agree that as of the Agreement Date the
Corporate Accounts include Parke-Dental.
1.24 "Dealer Sales" shall mean any customer who is not a practicing
------------
dentist or doctor or a Corporate Account.
1.25 "Designated Territory" shall mean, collectively, Iowa, Kansas,
--------------------
Minnesota, Missouri, Nebraska, Wisconsin, the portion of Upper Michigan included
within the following ZIP codes: all ZIP codes between 49800 and 49999, and the
portion of Greater St. Louis included within the following ZIP codes: all ZIP
codes between 62000 and 62299.
1.26 "Designated Territory Business" shall mean the HSI Business (but
-----------------------------
only to the extent the HSI Business includes the distribution of dental supplies
and equipment) and the SF Business as conducted in the Designated Territory.
1.27 "Designated Territory Sales" shall mean all Net Sales by HSI and
--------------------------
its Affiliates located in the Designated Territory for the 12-month period
beginning on the first day of the fourth calendar month immediately succeeding
the Closing Date minus New Reps Sales; provided, however, that with respect to
----- -------- -------
Corporate Accounts, Designated Territory Sales shall only include Corporate
Accounts of those Persons who maintain corporate headquarters in the Designated
Territory.
1.28 "Employee Benefit Plan" means any "employee benefit plan" within
---------------------
the meaning of Section 3(3) of ERISA, and any other bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, medical, post-retirement health or welfare benefit, medical
reimbursement, health, life, stock option, stock purchase, tuition refund,
service award, company car, scholarship, relocation, disability, accident, sick
pay, sick leave, vacation, termination, individual employment, executive
compensation, incentive, bonus, commission, payroll practices, retention or
other plan, agreement, policy, trust fund or arrangement, whether written
4
or unwritten, and whether maintained, sponsored or contributed to by SF or any
entity that would be deemed a "single employer" with SF under Section 414(b),
(c), (m) or (o) of the Code or Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") on behalf of any of the current, former or retired employees of SF
or their beneficiaries or with respect to which SF or any ERISA Affiliate of SF
has or has had any obligation on behalf of any such employee or beneficiary.
1.29 "Employment Agreement" shall mean the Employment Agreement
--------------------
between Olson and HSI substantially in the form of Exhibit 1.29.
1.30 "Encumbrance" shall mean any lien, charge, restriction, encum-
-----------
brance, option, right of first refusal, security interest, easement, obligation
or claim or other third party right of any kind.
1.31 "Environment" shall mean any surface or subsurface physical
-----------
medium or natural resource, including, air, land, soil, surface waters, ground
waters, stream and river sediments, and biota.
1.32 "Environmental Laws" shall mean any federal, state, local or
------------------
foreign law, rule, regulation, ordinance, code, order or judgment (including the
common law and any judicial or administrative interpretations, guidances,
directives or opinions) relating to the injury to, or the pollution or
protection of human health and safety or the Environment.
1.33 "Environmental Liabilities" shall mean any claims, judgments,
-------------------------
damages (including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation or defense of any matter
relating to human health, safety or the Environment of whatever kind or nature
by any party, entity or authority, (a) which are incurred as a result of (i) the
existence of Hazardous Substances in, on, under, at or emanating from any real
property presently or formerly owned or operated by SF or any of its Affiliates,
(ii) the offsite transportation, treatment, storage or disposal of Hazardous
Substances generated by SF or any of its Affiliates, or (iii) the violation of
any Environmental Laws or (b) which arise under the Environmental Laws.
1.34 "ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as amended, and the regulations thereunder.
1.35 "ERISA Affiliate" shall have the meaning set forth in Section
---------------
1.28 of this Agreement.
1.36 "Estimated Closing SF Inventory Value" shall mean an estimate of
------------------------------------
the Inventory Purchase Price of all Inventory of SF as of the Closing Date
prepared in good faith by SF in accordance with Section 2.1.3(a).
5
1.37 "Estimated Designated Territory Sales" shall mean an estimate of
------------------------------------
Designated Territory Sales prepared in good faith by HSI in accordance with
Section 2.5.1(d).
1.38 "Estimated Goodwill" shall mean an estimate of Goodwill prepared
------------------
in good faith by HSI in accordance with Section 2.6.3.
1.39 "Estimated HSI Sales" shall mean $25,076,044.
-------------------
1.40 "Estimated HSI/SF Average Eligible Sales" shall mean an estimate
---------------------------------------
of the HSI/SF Average Eligible Sales prepared in good faith by HSI in accordance
with Section 2.6.3.
1.41 "Estimated New Reps Sales" shall mean an estimate of New Reps
------------------------
Sales prepared in good faith by HSI in accordance with Section 2.5.1.1(a).
1.42 "Estimated New Reps Sales Statement" shall have the meaning set
----------------------------------
forth in Section 2.5.1.1(b).
1.43 "Estimated SF Sales" shall mean $8,640,434.
------------------
1.44 "Estimated SF Share of the Overlapping Business Purchase Price"
-------------------------------------------------------------
shall mean an estimate of the SF Share of the Overlapping Business Purchase
Price prepared in good faith by HSI in accordance with Section 2.6.3.
1.45 "Estimated SF Share of the Overlapping Designated Territory
----------------------------------------------------------
Business Purchase Price" shall mean an estimate of the SF Share of the
- -----------------------
Overlapping Designated Territory Business Purchase Price prepared in good faith
by HSI in accordance with Section 2.6.3.
1.46 "Estimated SF/Robin Sales" shall mean $7,745,456.
------------------------
1.47 "Estimated Silverman's Sales" shall mean $6,210,000.
---------------------------
1.48 "Estimated Silverman's/Robin Average Eligible Sales" shall mean
--------------------------------------------------
an estimate of the Silverman's/Robin Average Eligible Sales prepared in good
faith by HSI in accordance with Section 2.6.3.
1.49 "Estimated Silverman's/Robin Sales" shall mean an estimate of
---------------------------------
Silverman's/Robin Sales prepared in good faith by HSI in accordance with Section
2.5.2(d).
1.50 "Ex-Territory" shall mean any place located in the United States
------------
of America exclusive of the Designated Territory.
6
1.51 "Ex-Territory Assets" shall have the meaning set forth in
-------------------
Section 1.50.
1.52 "Ex-Territory Business" shall mean all of SF's right, title and
---------------------
interest in and to its assets (wherever located, tangible and intangible
(including goodwill), real, personal or mixed, whether known or unknown and
whether or not carried on the books and records of SF) and the SF Business as a
going concern, in each case, as conducted in the Ex-Territory (excluding only
the assets specified in the proviso below), including, but not limited to, the
following (the "Ex-Territory Assets"):
(a) all of SF's rights under agreements, arrangements,
commitments, and understandings ("Ex-Territory Contracts") relating to the SF
Business as a going concern as conducted in the Ex-Territory and which are set
forth on schedule 1.50(a);
(b) all of SF's records, files and other data relating to the
SF Business as a going concern as conducted in the Ex-Territory;
(c) all of SF's copyrights and all of SF's rights in the
trademarks, service marks, trade names and logos now or previously used by SF in
the SF Business as a going concern as conducted in the Ex-Territory;
(d) all of SF's inventions, computer software, trade secrets
and confidential data relating to the SF Business as a going concern as
conducted in the Ex-Territory;
(e) all rights to the name "San Francisco Dental Supply" and
all names derivative therefrom (the "SF Name") in the Ex-Territory, and all
rights to the names "DDS," "PRN Dental Supply," "Dental Preferred," "Critser's"
and "Midwestern Dental" (both within and outside the Ex-Territory) and all names
derivative therefrom (collectively, the "Other SF Names");
(f) all of SF's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used by SF in the SF Business
as a going concern conducted in the Ex-Territory;
(g) all other tangible assets owned by SF wherever located in
the Ex-Territory;
(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to SF or the SF
Business or the customers and suppliers thereto in the Ex-Territory;
7
(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;
(j) all Authorizations relating to the SF Business as conducted
in the Ex-Territory;
(k) all "800 numbers"; and
(l) all claims against third parties;
provided, however, that the term "Ex-Territory Business" shall not include (i)
- -------- -------
the minute books and stock ledger of SF; (ii) cash and cash equivalents on hand
or in banks and debt and equity securities; (iii) SF's accounts receivable or
Non-Matching Inventory which is not designated as Optional SF Inventory, (iv)
any asset or business included and used principally in the Designated Territory
Business or the SF/Robin Business, (v) the assets specifically listed on
Schedule 1.52 hereto or (vi) the Oats Business.
1.53 "Ex-Territory Contracts" shall have the meaning set forth in
----------------------
Section 1.52(a).
1.54 "Excess Designated Territory Sales" shall mean the amount, if
---------------------------------
positive, by which Designated Territory Sales exceed the Combined Designated
Territory Net Sales Base by more than the Inflation Rate.
1.55 "Excess Silverman's/Robin Sales" shall mean the amount, if
------------------------------
positive, by which Silverman's/Robin Sales exceed the Combined Silverman's/Robin
Net Sales Base by more than the Inflation Rate.
1.56 "Excluded Liabilities" shall mean all liabilities or obligations
--------------------
of SF or Olson of any kind whatsoever, excluding solely those liabilities or
obligations which become Assumed Contracts pursuant to this Agreement.
1.57 "GAAP" shall mean generally accepted accounting principles
----
consistently applied.
1.58 "Goodwill" shall mean with respect to any acquisition of an
--------
Overlapping Designated Territory Business or Overlapping Business, as the case
may be, the excess, if any, of the purchase price of any such Business over the
book value of such Business as determined in accordance with GAAP.
1.59 "Hazardous Discharge" shall mean any releasing, spilling,
-------------------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, migrating, disposing or dumping (including the movement of any
material through or in air, soil, surface or groundwater) of Hazardous
Substances, whether on, off, under or
8
from the Real Property or any other real property owned, operated, leased or
used at any time by SF or any of its predecessors.
1.60 "Hazardous Substances" shall mean petroleum, petroleum products,
--------------------
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing asbestos, and any materials, wastes or substances regulated
or defined as or included in the definition of "hazardous substances,"
"hazardous materials," "hazardous constituents," "toxic substances,"
"pollutants," "contaminants" or any similar denomination intended to classify
substances by reason of toxicity, carcinogenicity, ignitability, corrosivity or
reactivity under any Environmental Laws.
1.61 "HSI" shall mean Henry Schein, Inc., a Delaware corporation.
---
1.62 "HSI Business" shall have the meaning set forth in the recitals
------------
hereto.
1.63 "HSI Closing Documents" shall have the meaning set forth in
---------------------
Section 5.2.
1.64 "HSI Common Stock" shall mean the common stock, par value $.01
----------------
per share, of HSI.
1.65 "HSI Designated Territory Assets" shall mean only the following
-------------------------------
assets used by HSI in connection with the dental supply and equipment products
sold by HSI in the Designated Territory: customer lists, customer sales orders
and sales leads, customer shipping labels and forms, customer sales and vendor
purchase histories, catalogs, brochures, mailing lists, advertising materials,
records, files, computer software, and other information pertaining to the HSI
Designated Territory Related Business or the customers and suppliers thereto.
1.66 "HSI Designated Territory Related Business" shall mean the HSI
-----------------------------------------
Business as presently conducted to the extent it includes the sale of dental
supplies and equipment in the Designated Territory as a going concern.
1.67 "HSI Financial Statements" shall mean the audited consolidated
------------------------
financial statements of HSI as of December 25, 1993, December 31, 1994 and
December 30, 1995, and for each of the fiscal years then ended.
1.68 "HSI Material Adverse Effect" shall mean any material adverse
---------------------------
effect, individually or in the aggregate, on the condition (financial or
otherwise), business, assets, operations or prospects of any of HSI or
Silverman's, the HSI Designated Territory Related Business or the Silverman's
Business, taken as a whole.
1.69 "HSI Net Margin Factor" shall mean the product of (x) 8.5 and
---------------------
(y) the quotient of HSI's consolidated after tax net income divided by HSI's
consolidated net
9
sales, in each case, for the most recently completed fiscal year of HSI
preceding the determination of the HSI Net Margin Factor. For all purposes of
this Agreement, the amounts referred to in clause (y) of the immediately
preceding sentence shall be determined solely by reference to the audited
financial statements of HSI.
1.70 "HSI Sales" shall mean the sum of the Net Sales of HSI to
---------
customers located in the Designated Territory (other than Net Sales to Corporate
Accounts and Dealer Sales) for the fourth quarter of fiscal year 1995 and the
first quarter of fiscal year 1996 multiplied by 2, plus Net Sales of Pattison
for the fiscal year ending February 29, 1996, determined, in each case, in
accordance with Section 2.3(f).
1.71 "HSI Closing Sales Payment Amount" shall have the meaning set
--------------------------------
forth in Section 2.3(e).
1.72 "HSI/SF Combined Average Eligible Sales" shall mean the sum of
--------------------------------------
the following: (i) the product of (A) HSI/SF Combined Eligible Sales for the
12-month period ("Year 1") ending on the last day of the calendar month
immediately preceding the date of exercise of a put or call option pursuant to
Sections 2.6.1(a) or 2.6.2(a), as the case may be, and (B) 45%, (ii) the product
of (A) HSI/SF Combined Eligible Sales for the 12-month period immediately
preceding Year 1 ("Year 2") and (B) 35%, and (iii) the product of (A) HSI/SF
Combined Eligible Sales for the 12-month period immediately preceding Year 2 and
(B) 20%.
1.73 "HSI/SF Combined Eligible Sales" shall mean, for any period, the
------------------------------
dollar value of the aggregate Net Sales by HSI and its Affiliates under the
"Schein" or "SF Dental" name to customers located in the Designated Territory
(other than Net Sales to Corporate Accounts and Dealer Sales), as determined in
accordance with Section 2.6.3; provided, however, that with respect to Corporate
-------- -------
Accounts, HSI/SF Combined Eligible Sales shall only include Corporate Accounts
of those Persons who maintain corporate headquarters in the Designated
Territory.
1.74 "HSI/SF Combined Sales" shall mean the sum of HSI Sales and SF
---------------------
Sales.
1.75 "HSI/SF Designated Territory Assumed Liabilities" shall have the
-----------------------------------------------
meaning set forth in Section 2.3(b) hereto.
1.76 "HSI/SF Sales Dispute Statement" shall have the meaning set
------------------------------
forth in Section 2.3(f).
1.77 "HSI/Silverman's Authorizations" shall mean, collectively, all
------------------------------
Authorizations held, used or required by HSI and/or Silverman's in connection
with the HSI Designated Territory Related Business and the Silverman's Business.
10
1.78 "HSI/Silverman's Business" shall mean the HSI Business and
------------------------
Silverman's Business with respect to dental supplies and equipment sold under
the name "Schein" and "Silverman's".
1.79 "Indemnitee" and "Indemnitor" shall have the meanings set forth
---------- ----------
in Section 10.4(a) of this Agreement.
1.80 "Ineligible Inventory" shall mean all Inventory which is
--------------------
obsolete, damaged, excessive, below standard quality or slow moving (i.e., items
----
that are for discontinued or expected to be discontinued product lines, or have
a stated expiration date of 6 months or less from the Closing Date, or items
that have not been used or sold within 6 months prior to the date hereof, or
items that have not been sold within the customary inventory turnover cycle of
SF with respect to such item, or items for which there is excess capacity (i.e.,
----
more products are on hand of any such item than have been sold in the past nine
(9) months)).
1.81 "Inflation Rate" shall mean the increase in the cost of living
--------------
for the 12-month period beginning on the first day of the fourth calendar month
immediately succeeding the Closing Date based on "The Consumer Price Index for
all Urban Consumers (1967 = 100)" (the "Index"), published by the United States
Department of Labor and computed as follows:
(i) The Index number in the column for Chicago-Gary-Lake County,
Ill-In-Wi, entitled "all items," for the fourth calendar month immediately
succeeding the Closing Date, shall be the "base index number" and the
corresponding Index number for such month for the next year shall be the current
Index number;
(ii) The increase in the cost of living during the relevant
measurement period shall be determined by subtracting the base Index number
(BIN) from the current Index number (CIN), and dividing the result thereof by
the BIN, in accordance with the following formula: increase in cost of living =
CIN minus BIN BIN; and
- ---
(iii) In the event the Index is discontinued, the parties hereto shall
accept comparable statistics on the cost of living for Chicago-Gary-Lake County,
Ill-In-Wi as computed and published by an agency of the United States or by a
responsible financial periodical of recognized authority then to be selected by
the parties hereto.
1.82 "Intellectual Property" shall mean all United States and foreign
---------------------
patents and pending patent applications, unpatented inventions, trademarks,
service marks and trade names, including, without limitation, the marks and
patents described on Schedule 4.8 of this Agreement, and copyrights, and
registrations and pending applications therefor, and all trade secrets, trade
names, computer programs and software, research and development, know-how,
customer lists, manufacturing, engineering and other drawings and blueprints,
technology, technical information, engineering data, design and engineering
specifications, inventions and other proprietary processes and
11
information of any kind owned by SF or Olson or in which SF or Olson has a
proprietary or ownership or usage right, and all software necessary or desirable
to operate equipment included in the Acquired Assets, all as set forth on
Schedule 4.8 of this Agreement.
1.83 "Inventory" shall mean all inventory and related items
---------
(including all production, shipping and packaging supplies) relating to or used
or useful in connection with the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business.
1.84 "Inventory Dispute Statement" shall have the meaning set forth
---------------------------
in Section 2.1.3(b) of this Agreement.
1.85 "Inventory Disputed Items" shall have the meaning set forth in
------------------------
Section 2.1.3(b) of this Agreement.
1.86 "Inventory Purchase Price" shall mean the lower of (x) the
------------------------
Invoice Price or (y) market price of all Purchased Inventory goods and products
other than Ineligible Inventory, minus an inventory reserve computed in
accordance with GAAP.
1.87 "Invoice Price" shall mean, in the case of Purchased Inventory
-------------
finished goods and products other than Ineligible Inventory, the last actual
purchase price in accordance with SF's customary accounting principles (after
giving effect to any actual discounts or allowances (including cash discounts
and vendor rebates)) immediately prior to the Closing Date at which SF purchased
such Inventory from a non-Related Party.
1.88 "IRS" shall mean the Internal Revenue Service (or any successor
---
agency thereto).
1.89 "Losses" shall have the meaning set forth in Section 10.2 of
------
this Agreement.
1.90 "Material Adverse Effect" shall mean any material adverse
-----------------------
effect, individually or in the aggregate, on the condition (financial or
otherwise), business, assets, operations or prospects of SF, or the SF Business,
the Ex-Territory Business, the SF Designated Territory Related Business or the
SF/Robin Business or the Acquired Assets.
1.91 "New Reps Sales" shall mean all Net Sales attributable to New
--------------
Sales Reps for the 3-month period immediately succeeding the Closing Date
multiplied by 4, determined in accordance with Section 2.5.1.1(b).
1.92 "New Reps Sales Dispute Statement" shall have the meaning set
--------------------------------
forth in Section 2.5.1.1.(b).
1.93 "New Sales Reps" shall have the meaning set forth in Section
--------------
2.5.1.1(a).
12
1.94 "Net Sales" shall mean net sales (as determined in accordance
---------
with GAAP, taking into account any returns and allowances) of dental supplies
and equipment (other than software).
1.95 "Non-Matching Inventory" shall mean any Inventory owned or held
----------------------
by SF which is not SF Like Kind Inventory or Ineligible Inventory.
1.96 "Oats Business" shall mean the marketing, development and sale
-------------
of oats based products through any entity owned or controlled by Olson
including, but not limited to, Ultravena Industries USA Ltd., Sativa Medical USA
Ltd. and Advanced Dental Technologies Ltd.
1.97 "Olson" shall mean Larry Olson.
-----
1.98 "Option Dispute Statement" shall have the meaning set forth in
------------------------
Section 2.6.3.
1.99 "Option Statement" shall have the meaning set forth in Section
----------------
2.6.3.
1.100 "Optional SF Inventory" shall mean all Inventory owned by SF
---------------------
which is not SF Like Kind Inventory; provided, however, that the Optional SF
-------- -------
Inventory shall not include any Ineligible Inventory.
1.101 "Overlapping Business" shall mean any Person principally engaged
--------------------
in the distribution of dental supplies or equipment to the discount or "low end"
market segment of the same type or same customer base as the Silverman's/Robin
Business.
1.102 "Overlapping Business Purchase Price" shall mean the sum of all
-----------------------------------
cash and the fair market value of all property paid by HSI and/or its Affiliates
(including, for this purpose, the assumption of any debt) for the purchase of
each Overlapping Business, plus imputed interest thereon at the Prime Rate.
1.103 "Overlapping Designated Territory Business" shall mean any
-----------------------------------------
Person engaged in the distribution of dental supplies or equipment (in whole or
in part) to customers located in the Designated Territory.
1.104 "Overlapping Designated Territory Business Purchase Price" shall
--------------------------------------------------------
mean the sum of all cash and the fair market value of all property paid by HSI
and/or the Affiliates (including, for this purpose, the assumption of any debt)
for the purchase of each Overlapping Designated Territory Business, plus imputed
interest thereon at the Prime Rate.
1.105 "Pattison" shall mean Pattison-McGrath Company Dental Supplies,
--------
a Missouri corporation and wholly-owned subsidiary of SF.
13
1.106 "Pattison Agreement" shall mean the Acquisition Agreement, dated
------------------
as of May 23, 1996, by and between HSI and Pattison.
1.107 "Pattison Assets" shall mean the "Pattison Assets" as such term
---------------
is defined in the Pattison Agreement.
1.108 "Pattison Business" shall mean the "Business" as such term is
-----------------
defined in the Pattison Agreement.
1.109 "Pattison Note" shall mean the "Pattison Note" as such term is
-------------
defined in the Pattison Agreement.
1.110 "Permitted Activities" shall have the meaning set forth in
--------------------
Section 9.1 of this Agreement.
1.111 "Permitted Encumbrances" means mechanics', carriers', workmen's,
----------------------
repairmen's and other similar liens arising or incurred in the ordinary course
of business, purchase money liens arising in the ordinary course of business and
liens for taxes, assessments and other governmental charges not due and payable
or that may be paid without penalty.
1.112 "Person" shall mean any natural person, corporation, limited or
------
limited liability partnership, general partnership, joint venture, association,
joint-stock company, limited liability company, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any governmental unit or agency or political subdivision
thereof.
1.113 "Prime Rate" shall mean the fluctuating prime or base rate
----------
publicly announced from time to time by The Chase Manhattan Bank, N.A. (or any
successor thereto).
1.114 "Purchased Inventory" shall mean all Inventory purchased by HSI
-------------------
pursuant to Section 2.1.1.
1.115 "Real Property" shall mean the real property and interest in
-------------
real property described on Schedule 4.7 held by SF and the plants, buildings,
structures, storage tanks, erections and improvements of all kinds made to,
located on or forming a part of the real property and interests in real property
(including, without limitation, all fixtures), together with all easements,
rights-of-way, appurtenances and tenements to, on or otherwise beneficial to the
use of such real property or interests in real property or in the operation of
the SF Business, the Ex-Territory Business, the SF Designed Territory Related
Business or the SF/Robin Business.
1.116 "Related Party" shall have the meaning set forth in Section 4.18
-------------
of this Agreement.
14
1.117 "Robin Name" shall mean the name "Robin," "Robin Dental" or
----------
"Robin Dental Company" and all names derivative therefrom.
1.118 "Securities Act" shall mean the Securities Act of 1933, together
--------------
with the rules and regulations promulgated thereunder.
1.119 "Seller Claimant" shall have the meaning set forth in Section
---------------
10.3 of this Agreement.
1.120 "SF" shall mean San Francisco Dental Supplies, Inc., a
--
California corporation, and, unless the context otherwise requires, shall also
include all of SF's subsidiaries.
1.121 "SF Closing Documents" shall have the meaning set forth in
--------------------
Section 4.2.
1.122 "SF Closing Inventory Payment" shall have the meaning set forth
----------------------------
in Section 2.1.2.
1.123 "SF Closing Sales Payment Amount" shall have the meaning set
-------------------------------
forth in Section 2.3(c).
1.124 "SF Designated Territory Assets" shall mean all of SF's right,
------------------------------
title and interest in and to its assets (wherever located, tangible and
intangible (including goodwill), real, personal or mixed, whether known or
unknown and whether or not carried on the books and records of SF) and the SF
Business as a going concern, in each case, as conducted in the Designated
Territory (excluding only the assets specified in the proviso below), including,
but not limited to, the following:
(a) all of SF's rights under agreements, arrangements,
commitments, and understandings ("SF Designated Territory Contracts") relating
to the SF Designated Territory Related Business;
(b) all of SF's records, files and other data relating to the
SF Designated Territory Related Business;
(c) all of SF's copyrights and all of SF's rights in the
trademarks, service marks, trade names and logos now or previously used by SF in
the SF Designated Territory Related Business;
(d) all of SF's inventions, computer software, trade secrets
and confidential data relating to the SF Designated Territory Related Business;
(e) all rights to the SF Name and the Other Names in the
Designated Territory;
15
(f) all of SF's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used principally in
connection with the SF Designated Territory Related Business;
(g) all other tangible assets owned by SF wherever located in
the Designated Territory;
(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to the SF Designated
Territory Related Business or the customers and suppliers thereto in the
Designated Territory;
(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;
(j) all Authorizations relating to the SF Designated Territory
Related Business;
(k) all "800 numbers"; and
(l) all claims against third parties;
provided, however, that the term "SF Designated Territory Assets" shall not
- -------- -------
include (i) the minute books and stock ledger of SF; (ii) cash and cash
equivalents on hand or in banks and debt and equity securities; (iii) SF's
accounts receivable or Non-Matching Inventory which is not designated as
Optional SF Inventory, (iv) any asset or business included in the Ex-Territory
Business, the Robin Business or the SF/Robin Business, (v) the real property and
other SF assets specifically set forth on Schedule 1.124 hereto or (vi) the Oats
Business.
1.125 "SF Designated Territory Contracts" shall have the meaning set
---------------------------------
forth in Section 1.124(a).
1.126 "SF Designated Territory Related Business" shall mean the SF
----------------------------------------
Business as a going concern as conducted in the Designated Territory.
1.127 "SF Excluded Assets" shall mean, collectively, all of the assets
------------------
of SF referred to in the proviso contained in the definitions of Ex-Territory
Business, SF Designated Territory Assets and SF/Robin Assets and the Oats
Business.
1.128 "SF Financial Statements" shall mean, collectively, (a) in the
-----------------------
case of each of SF, Robin Dental Company and Critser's Dental Equipment, Inc.,
its unaudited financial statements as of (i) December 31, 1993, 1994 and 1995,
and for each of the fiscal
16
years then ended and (ii) March 31, 1996, and for the fiscal quarter then ended
and (b) in the case of Midwestern Dental, Inc., its unaudited financial
statements as of (i) February 29, 1996 and February 28, 1995, and for each of
the fiscal years then ended and (ii) March 31, 1996, and for the month then
ended.
1.129 "SF Like Kind Inventory" shall mean all Inventory owned by SF
----------------------
relating to or useful in connection with the SF Business, the SF Designated
Territory Related Business, the Ex-Territory Business or the SF/Robin Business
which (i) matches a stock keeping unit currently sold by HSI and/or (ii) is
large dental equipment, and which is not, in either case, Ineligible Inventory.
1.130 "SF Name" shall have the meaning set forth in Section 1.52(e).
-------
1.131 "SF Note" shall have the meaning set forth in Section 2.7.
-------
1.132 "SF Sales" shall mean the sum of the Net Sales of SF to non-
--------
Related Parties located in the Designated Territory (other than Net Sales to
Corporate Accounts and Dealer Sales) for the fourth quarter of fiscal year 1995
and the first quarter of fiscal year 1996 multiplied by 2, determined in
accordance with Section 2.3(f).
1.133 "SF Share of the Overlapping Business Purchase Price" shall mean
---------------------------------------------------
the product of (x) the Overlapping Business Purchase Price and (y) a fraction,
the numerator of which is total Net Sales of the Overlapping Businesses
attributable to the distribution of dental supplies and equipment to the
discount or "low-end" market segment of the same type or same customer base as
the Silverman's/Robin Business at the time of acquisition and the denominator of
which is the sum of the total Net Sales of the Overlapping Businesses at the
time of acquisition plus all other Net Sales of any such Overlapping Businesses
which do not constitute sales attributable to the distribution of dental
supplies and equipment to the discount or "low-end" market segment of the same
type and to the same customer base as the Silverman's/Robin Business, multiplied
----------
by 20%.
1.134 "SF Share of the Overlapping Designated Territory Business
---------------------------------------------------------
Purchase Price" shall mean the product of (x) the Overlapping Designated
- --------------
Territory Business Purchase Price and (y) a fraction, the numerator of which is
total Net Sales of the Overlapping Designated Territory Businesses within the
Designated Territory at the time of acquisition and the denominator of which is
the sum of total Net Sales of the Overlapping Designated Territory Businesses at
the time of acquisition plus all other Net Sales of any such Overlapping
Designated Territory Businesses to customers located inside or outside of the
Designated Territory, multiplied by 30%.
----------
1.135 "SF/Robin Authorizations" shall mean, collectively, all
-----------------------
Authorizations held, used or required by SF in connection with the SF Business,
the Ex-Territory Business, SF Designated Territory Related Business and/or the
SF/Robin Business.
17
1.136 "SF/Robin Business" shall mean the SF Business, but only with
-----------------
respect to the distribution through direct marketing of dental supplies and
equipment principally under the name "Robin" and "Robin Dental" as presently
conducted, excluding the Oats Business.
1.137 "SF/Robin Contracts" shall have the meaning set forth in Section
------------------
4.9.
1.138 "SF/Robin Closing Sales Payment Amount" shall have the meaning
-------------------------------------
set forth in Section 2.4(e).
1.139 "SF/Robin Assets" shall mean all right, title and interest of SF
---------------
in and to its assets (wherever located, tangible and intangible (including
goodwill), real, personal or mixed, whether known or unknown and whether or not
carried on the books and records of SF) relating to the SF/Robin Business and
the SF/Robin Business as a going concern (excluding only the assets specified in
the proviso below), including, but not limited to, the following:
(a) all of SF's rights under agreements, arrangements,
commitments, and understandings relating to the SF/Robin Business;
(b) all of SF's records, files and other data relating to the
SF/Robin Business;
(c) all of SF's copyrights and all of SF's rights in the
trademarks, service marks, trade names and logos now or previously used by SF in
the SF/Robin Business;
(d) all of SF's inventions, computer software, trade secrets
and confidential data relating to the SF/Robin Business;
(e) all rights to the SF Name and the Other Names as used in
the SF/Robin Business and all rights to the Robin Name;
(f) all of SF's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used principally in
connection with the SF/Robin Business;
(g) all other tangible assets owned by SF and used in the
SF/Robin Business wherever located;
(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to the SF/Robin
Business or the customers and suppliers thereto;
18
(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;
(j) all Authorizations relating to the SF/Robin Business;
(k) all "800 numbers"; and
(l) all claims against third parties;
provided, however, that the term "SF/Robin Assets" shall not include (i) the
- -------- -------
minute books and stock ledger of SF; (ii) cash and cash equivalents on hand or
in banks and debt and equity securities; (iii) SF's accounts receivable or Non-
Matching Inventory which is not designated as Optional SF Inventory, (iv) any
asset or business included in the Ex-Territory Business or the Designated
Territory Business, (v) any asset specifically listed on Schedule 1.134 hereto
or (vi) the Oats Business.
1.140 "SF/Robin Sales" shall mean the sum of the Net Sales of the
--------------
SF/Robin Business to non-Related Parties (other than Net Sales to Corporate
Accounts and Dealer Sales) for the fourth quarter of fiscal year 1995 and the
first quarter of fiscal year 1996 multiplied by 2, determined in accordance with
Section 2.4(f).
1.141 "Shortfall Designated Territory Sales" shall mean the amount, if
------------------------------------
positive, by which the Combined Designated Territory Sales Base exceeds
Designated Territory Sales.
1.142 "Shortfall Silverman's/Robin Sales" shall mean the amount, if
---------------------------------
positive, by which the Combined Silverman's/Robin Sales Base exceeds
Silverman's/Robin Sales.
1.143 "Silverman's" shall mean Silverman's Dental Supply Corp., a New
-----------
York corporation.
1.144 "Silverman's Assets" shall mean all of Silverman's right, title
------------------
and interest in and to its assets (wherever located, tangible and intangible
(including goodwill), real, personal or mixed, whether known or unknown and
whether or not carried on the books and records of Silverman's) and the
Silverman's Business as a going concern (excluding only the assets specified in
the proviso below), including, but not limited to, the following:
(a) all of Silverman's rights under agreements, arrangements,
commitments, and understandings ("Silverman's Contracts") relating to the
Silverman's Business;
(b) all of Silverman's records, files and other data relating
to the Silverman's Business;
19
(c) all of Silverman's copyrights and all of Silverman's rights
in the trademarks, service marks, trade names and logos now or previously used
by Silverman's in the Silverman's Business;
(d) all of Silverman's inventions, computer software, trade
secrets and confidential data relating to the Silverman's Business;
(e) all of Silverman's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used principally in
connection with the Silverman's Business;
(f) all other tangible assets owned by Silverman's wherever
located;
(g) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to the Silverman's
Business or the customers and suppliers thereto;
(h) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;
(i) all Authorizations relating to the Silverman's Business;
(j) all "800 numbers"; and
(k) all claims against third parties;
provided, however, that the term "Silverman's Assets" shall not include (i) the
- -------- -------
minute books and stock ledger of Silverman's; (ii) cash and cash equivalents on
hand or in banks and debt and equity securities; (iii) Silverman's accounts
receivable; (iv) Inventory of Silverman's or (v) any asset or business included
in the Ex-Territory Business or the Designated Territory Business.
1.145 "Silverman's Contracts" shall have the meaning set forth in
---------------------
Section 1.144(a).
1.146 "Silverman's Sales" shall mean the sum of the Net Sales of
-----------------
Silverman's to unaffiliated third parties (other than Net Sales to Corporate
Accounts and Dealer Sales) during the fourth quarter of fiscal year 1995 and the
first quarter of fiscal year 1996 multiplied by 2, determined in accordance with
Section 2.4(f).
1.147 "Silverman's/Robin Assumed Liabilities" shall have the meaning
-------------------------------------
set forth in Section 2.4(b).
20
1.148 "Silverman's/Robin Business" shall mean, collectively, the
--------------------------
combined businesses of Silverman's and SF/Robin.
1.149 "Silverman's Closing Sales Payment Amount" shall have the
----------------------------------------
meaning set forth in Section 2.4(e).
1.150 "Silverman's/Robin Combined Average Eligible Sales" shall mean
-------------------------------------------------
the sum of the following: (i) the product of (A) Silverman's/Robin Combined
Eligible Sales for the 12-month period ("Year 1") ending on the last day of the
calendar month immediately preceding the date of exercise of a put or call
option pursuant to Sections 2.6.1(b) or 2.6.2(b), as the case may be, and (B)
45%, (ii) the product of (A) Silverman's/Robin Combined Eligible Sales for the
12-month period immediately preceding Year 1 ("Year 2") and (B) 35%, and (iii)
the product of (A) Silverman's/Robin Combined Eligible Sales for the 12-month
period immediately preceding Year 2 and (B) 20%.
1.151 "Silverman's/Robin Combined Eligible Sales" shall mean, for any
-----------------------------------------
period, the dollar value of the aggregate Net Sales by HSI and/or Silverman's
under the "Silverman's" or "Robin" name (other than Net Sales to Corporate
Accounts and Dealer Sales), as determined in accordance with Section 2.6.3.
1.152 "Silverman's/Robin Sales" shall mean all Net Sales of the
-----------------------
Silverman's/Robin Business for the 12-month period beginning on the last day of
the fourth calendar month immediately succeeding the Closing Date.
1.153 "Silverman's/Robin Sales Dispute Statement" shall have the
-----------------------------------------
meaning set forth in Section 2.5.2(d).
1.154 "Silverman's/Robin Sales Statement" shall have the meaning set
---------------------------------
forth in Section 2.5.2(d).
1.155 "Taxes" (or "Tax" where the context requires) shall mean all
-----
federal, state, local, foreign or other taxes, duties, or similar charges
(including, without limitation, income (whether net or gross), profits, premium,
estimated, excise, sales, use, environmental (including taxes under Code Section
59A), occupancy, franchise, license, value added stamp, windfall profits, social
security, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, gains, withholding, occupation, employment and payroll
related and property taxes, alternative or add-on, minimum or estimated, import
and export duties and other governmental charges and assessments) imposed by any
taxing or governmental authority on or payable by SF or any other party with
respect to the income, operations, products, assets or properties of SF, whether
attributable to statutory or nonstatutory rules and whether or not measured in
whole or in part by net income, and including interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with contesting any proposed adjustment related to any of the foregoing.
21
1.156 "Third Accountants" shall mean Ernst & Young LLP.
-----------------
1.157 "Undisputed HSI Sales" shall have the meaning set forth in
--------------------
Section 2.3(f).
1.158 "Undisputed HSI/SF Combined Sales" shall mean the sum of
--------------------------------
Undisputed HSI Sales and Undisputed SF Sales.
1.159 "Undisputed SF Sales" shall have the meaning set forth in
-------------------
Section 2.3(f).
1.160 "Undisputed SF/Robin Sales" shall have the meaning set forth in
-------------------------
Section 2.4(e).
1.161 "Undisputed Silverman's Sales" shall have the meaning set forth
----------------------------
in Section 2.4(e).
1.162 "Undisputed Silverman's/Robin Combined Sales" shall mean the sum
-------------------------------------------
of Undisputed Silverman's Sales and Undisputed SF/Robin Sales.
ARTICLE II SALE AND PURCHASE OF INVENTORY, SALE
------------------------------------
AND PURCHASE OF EX-TERRITORY BUSINESS,
--------------------------------------
SALE AND PURCHASE OF SF DESIGNATED
----------------------------------
TERRITORY RELATED BUSINESS AND SALE AND
---------------------------------------
PURCHASE OF SF/ROBIN BUSINESS
-----------------------------
2.1 Purchase of Inventory.
---------------------
2.1.1 Purchased Inventory. (a) Upon terms and subject to the
-------------------
conditions hereof, upon the basis of the agreements, representations and
warranties contained in, and the schedules and exhibits to, this Agreement, at
the Closing, SF shall sell, transfer, assign, convey, and deliver to HSI, and
HSI shall purchase and acquire from SF, all of the SF Like Kind Inventory, free
and clear of all Encumbrances.
(b) At the Closing, at the option of HSI (the exercise of which
shall be in the sole and absolute discretion of HSI), HSI may purchase and
acquire from SF, and, if HSI exercises such option, SF shall sell, transfer,
assign, convey, and deliver to HSI, all or such portion of the Optional SF
Inventory as shall be designated by HSI, free and clear of all Encumbrances.
2.1.2 Purchase Price. In consideration for the Purchased
--------------
Inventory, HSI shall pay to SF at the Closing an amount equal to the product of
(x) the Estimated Closing SF Inventory Value and (y) 80% (the "SF Closing
Inventory Payment").
22
2.1.3 Closing Inventory. (a) At least five (5) Business
-----------------
Days before the Closing Date1, SF shall complete preparation of an inventory
report (by SKU number, quantity and Invoice Price) setting forth the Estimated
Closing SF Inventory Value (such inventory report is hereinafter referred to as
the "Closing Inventory Report").
(b) SF will deliver the Closing Inventory Report to HSI at
least three (3) Business Days before the Closing Date. Following receipt of the
Closing Inventory Report, HSI will have a period of twenty (20) Business Days
after the Closing Date to review the Closing Inventory Report. At or before the
end of such review period, HSI will either (i) accept the Closing Inventory
Report in its entirety, in which case the Closing SF Inventory Value shall be
deemed to be equal to the Estimated Closing SF Inventory Value as set forth in
the Closing Inventory Report or (ii) deliver to SF a written explanation (the
"Inventory Dispute Statement") of those items in the Closing Inventory Report
which HSI in good faith disputes (the "Inventory Disputed Items"), in which case
the Estimated Closing SF Inventory Value not affected by Inventory Disputed
Items shall be deemed to be as set forth in the Closing Inventory Report.
Within a further period of thirty (30) Business days from the date on which the
Inventory Dispute Statement is delivered by HSI, the parties will attempt to
resolve in good faith any Inventory Disputed Items. In the absence of such
resolution by the last day of such thirty (30) Business Day period, the
unresolved Inventory Disputed Items will be referred for final binding
resolution by the Third Accountants. Each of HSI and SF shall be entitled to
make a brief supplemental oral presentation to the Third Accountants. The
Closing SF Inventory Value affected by any Inventory Disputed Items will be
determined by the Third Accountants within thirty (30) days of such reference
based upon the definitions of Inventory, SF Like Kind Inventory, Closing SF
Inventory Value, Inventory Purchase Price, Invoice Price, Non-Matching Inventory
and Ineligible Inventory as set forth herein. The determination of such firm
will be final, binding, non-appealable and uncontestable by the parties hereto
and will not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI or SF, as the case may be, shall
make the payments, if any, required by Section 2.1.3(c). The fees and expenses
of the Third Accountants shall be paid one-half by HSI and one-half by SF.
(c) If the Closing SF Inventory Value is (i) greater than the
SF Closing Inventory Payment, then HSI shall pay SF an amount equal to such
difference within ten (10) days after the determination of the Closing SF
Inventory Value or (ii) less than the SF Closing Inventory Payment, then SF
shall pay HSI an amount equal to such difference within ten (10) days after the
determination of the Closing SF Inventory Value.
2.1.4 Right to Set-Off. Notwithstanding anything in this
----------------
Agreement to the contrary, HSI shall have the right to offset any amount
otherwise due and payable
--------------------
1 In light of the changed circumstances, it seemed appropriate
to make this change.
23
by HSI to SF on the Closing Date pursuant to any provision of this Agreement
against any amount due and payable by SF to HSI on the Closing Date.
2.2 Purchase of the Ex-Territory Business.
-------------------------------------
2.2.1 Purchase of the Ex-Territory Business. Upon terms and
-------------------------------------
subject to the conditions hereof, upon the basis of the agreements,
representations and warranties contained in, and the schedules and exhibits to,
this Agreement at the Closing, SF shall sell, transfer, assign, convey, and
deliver to HSI, and HSI shall purchase and acquire from SF, all of the Ex-
Territory Business free and clear of all Encumbrances (other than Permitted
Encumbrances).
2.2.2 Purchase Price. In consideration for the Ex-Territory
--------------
Business, at the Closing HSI shall pay to SF an amount equal to the Agreed Upon
Ex-Territory Business Value. Notwithstanding anything in this Agreement to the
contrary, HSI is not assuming, and shall not have any liability, (a) for any
income, franchise, sales, payroll, withholding or other taxes of SF, (b) for any
expenses of SF related to the negotiation, preparation and execution of this
Agreement, (c) as a "successor-in-interest" to SF with respect to the Ex-
Territory Business, (d) for any accounts payable of SF, or (e) for any matter or
thing set forth on Schedule 2.2.2(e).
2.2.3 Right to Set-Off. Notwithstanding anything in this
----------------
Agreement to the contrary, HSI shall have the right to offset any amount
otherwise due and payable by HSI to SF on the Closing Date pursuant to any
provision of this Agreement against any amount due and payable by SF to HSI on
the Closing Date.
2.3 Purchase of the SF Designated Territory Related Business.
--------------------------------------------------------
(a) At the Closing, and in accordance with the terms and
provisions of this Agreement, SF will assign, transfer, convey and deliver to
HSI, and HSI will acquire from SF, all of SF's right, title and interest in and
to the SF Designated Territory Assets and the SF Designated Territory Related
Business as a going concern, free and clear of all Encumbrances (other than
Permitted Encumbrances and the liabilities and obligations referred to in
Section 2.3(b)). Notwithstanding anything in this Agreement to the contrary, SF
is not assigning, transferring, conveying or delivering to HSI any of the SF
Excluded Assets. HSI shall initially use the HSI Designated Territory Assets,
HSI Designated Territory Related Business, the Pattison Assets and the Pattison
Business, together with the SF Designated Territory Assets and the SF Designated
Territory Related Business, to conduct the Designated Territory Business.
(b) At the Closing, and in accordance with the terms and
provisions of, this Agreement, HSI is assuming and agreeing to pay, perform and
discharge only the following obligations and liabilities relating to the SF
Designated Territory Assets and the SF Designated Territory Related Business
(collectively, the "HSI/SF Designated Territory Assumed Liabilities"): all
liabilities and obligations of SF
24
arising after the Closing Date under the SF Designated Territory Contracts
listed on Schedule 2.3(b) hereto.
(c) Except as specifically provided in Section 2.3(b), HSI is
not assuming, and shall not have any liability for, any liabilities or
obligations of SF or any liabilities or obligations which arose or may arise out
of the operations of the SF Designated Territory Assets or the SF Designated
Territory Related Business prior to the Closing Date, and SF shall pay, perform
and discharge all such liabilities and obligations when due in the ordinary
course of business. Without limitation to the generality of the foregoing, HSI
is not assuming, and shall not have any liability, (a) for any income,
franchise, sales, payroll, withholding or other taxes of SF, (b) for any
expenses of SF related to the negotiation, preparation and execution of this
Agreement or the consummation of the transactions contemplated hereby, (c) as a
"successor-in-interest" to SF with respect to the SF Designated Territory
Related Business, (d) for any accounts payable of SF, or (e) for any matter or
thing set forth on Schedule 2.3(c).
(d) As total consideration for the assets and business being
sold, transferred, conveyed and delivered to HSI by SF pursuant to this Section
2.3, HSI shall:
(i) Assume the HSI/SF Designated Territory Assumed
Liabilities; and
(ii) Pay SF the amount referred to in Section 2.3(e)(x)
and (g) below; and
(iii) Pay SF any amount which may become due and
payable pursuant to Section 2.5.1(a), 2.6.1(a) or 2.6.2(a), as the case may
be.
(e) In connection with the sale, transfer, conveyance and
delivery to HSI by SF of the SF Designated Territory Assets and SF Designated
Territory Related Business, at the Closing, (x) HSI shall pay SF an amount (the
"HSI Closing Sales Payment Amount"), if positive, equal to the Undisputed SF
Sales minus the product of (i) Undisputed HSI/SF Combined Sales and (ii) 30%,
-----
multiplied by 25% or (y) SF shall pay to HSI an amount (the "SF Closing Sales
- -------------
Payment Amount") if positive, equal to the Undisputed HSI Sales minus the
-----
product of (i) Undisputed HSI/SF Combined Sales and (ii) 70%, multiplied by 25%.
(f) The authorized representatives of each of HSI and SF shall
have the right at reasonable times and on reasonable notice, at the sole expense
of each of them, to review and/or audit the books and records of HSI and SF,
respectively, relating to the Estimated HSI Sales, on the one hand, and the
Estimated SF Sales, as well as the work papers of their respective independent
public accountants, in each case solely for the purpose of verifying the
Estimated HSI Sales and the Estimated SF Sales. Such right of review must be
completed within forty-five (45) Business Days after the Agreement Date. If
prior to the end of such review period, either HSI or SF in good faith
25
disagrees with or disputes the accuracy of the Estimated HSI Sales on the one
hand, or the Estimated SF Sales, on the other hand, then HSI or SF, as the case
may be, shall deliver to the other party a written statement and explanation of
such disagreement or dispute which sets forth in reasonable detail the good
faith bases of any such disagreement or dispute (a "HSI/SF Sales Dispute
Statement" (and, to the extent Estimated HSI Sales or Estimated SF Sales, are
not subject to any HSI/SF Sales Dispute Statement, such Estimated HSI Sales or
Estimated SF Sales are hereinafter referred to as "Undisputed HSI Sales" and
"Undisputed SF Sales", respectively)). If prior to the end of the above
referenced forty-five (45) Business Day review period following the Agreement
Date, either HSI or SF shall fail to deliver a HSI/SF Sales Dispute Statement,
then the Estimated HSI Sales or the Estimated SF Sales, as the case may be,
shall be deemed to equal both the HSI Sales and Undisputed HSI Sales, on the one
hand, or the SF Sales and Undisputed SF Sales on the other hand. If, however,
either HSI or SF shall have delivered an HSI/SF Sales Dispute Statement prior to
the end of such review period, then HSI and SF will attempt in good faith to
resolve all differences with regard to the determination of HSI Sales and/or SF
Sales during the next twenty (20) Business Day period commencing after the end
of such review period. If HSI and SF are unable to resolve such differences
prior to the expiration of such twenty (20) Business Day period (or such longer
period if so agreed by HSI and SF), the HSI Sales and/or SF Sales shall be
determined as set forth in Section 2.3(i) of this Agreement.
(g) Within ten (10) days after the determination of SF Sales
and HSI Sales, HSI shall pay SF an amount equal to the amount, if any, by which
(I) the SF Sales minus the product of (i) HSI/SF Combined Sales and (ii) 30%,
-----
multiplied by 25% exceeds (II) the HSI Closing Sales Payment Amount.
- ---------- --
(h) Within ten (10) days after the determination of HSI Sales
and SF Sales, SF shall pay to HSI an amount equal to the amount, if any, by
which (I) the HSI Sales minus the product of (i) HSI/SF Combined Sales and (ii)
-----
70%, multiplied by 25% exceeds (II) the SF Closing Sales Payment Amount.
---------- --
(i) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.3(f) shall be prepared in concise form by
HSI and SF and submitted, together with copies of any HSI/SF Sales Dispute
Statements, to the Third Accountants no later than ten (10) Business Days
following the last day of the twenty (20) Business Day period (or longer period
if so agreed) referred to in the last sentence of Section 2.2(f). Each of HSI
and SF shall also be entitled to make a brief supplemental oral presentation to
the Third Accountants regarding any such disagreement or dispute. The Third
Accountants shall be instructed by HSI and SF to deliver a written report
setting forth such Third Accountants' resolution of any difference or dispute
referred to it no later than thirty (30) Business Days following the earlier of
(i) such firm's receipt of the report of disagreement or disputes submitted to
it by HSI and SF pursuant to this Section 2.2(i) and (ii) the last day permitted
for the submission of such report as provided above. The determination of the
Third Accountants with respect to any disagreement or dispute referred to it by
HSI and SF as provided in this Section 2.2(i)
26
will be final, binding, non-appealable and uncontestable by the parties hereto
and will not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI or SF, as the case may be, shall
make the payments, if any, required by Sections 2.2(g) and (h).
(j) Notwithstanding anything in this Section 2.3 to the
contrary, no disagreement or dispute as to HSI Sales and/or SF Sales shall delay
or prevent the Closing.
(k) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to SF pursuant to any provision of this Agreement against any amount due and
payable by SF to HSI.
2.4 Purchase of SF/Robin Business.
-----------------------------
(a) At the Closing, and in accordance with the terms and
provisions of this Agreement, SF will assign, transfer, convey and deliver to
Silverman's, and Silverman's will acquire from SF, all of the right, title and
interest of SF in and to the SF/Robin Assets and the SF/Robin Business as a
going concern, free and clear of all Encumbrances (other than Permitted
Encumbrances and the liabilities and obligations referred to in Section 2.4(b)).
Notwithstanding anything in this Agreement to the contrary, SF is not assigning,
transferring, conveying or delivering to Silverman's any of the SF Excluded
Assets. Silverman's shall initially use the SF/Robin Assets and the SF/Robin
Business, together with the Silverman's Assets and the Silverman's Business, to
conduct the Silverman's/Robin Business.
(b) At the Closing, and in accordance with the terms and
provisions of this Agreement, Silverman's is assuming and agreeing to pay,
perform and discharge only the following obligations and liabilities relating to
the SF/Robin Assets and the SF/Robin Business (collectively, the
"Silverman's/Robin Assumed Liabilities"): all liabilities and obligations of SF
arising after the Closing Date under the SF/Robin Contracts listed on Schedule
2.4(b) hereto.
(c) Except as specifically provided in Section 2.4(b),
Silverman's is not assuming, and shall not have any liability for, any
liabilities or obligations of SF, or any liabilities or obligations which arose
or may arise out of the operations of the SF/Robin Assets or the SF/Robin
Business prior to the Closing Date, and SF shall pay, perform and discharge all
such liabilities and obligations when due in the ordinary course of business.
Without limitation to the generality of the foregoing, Silverman's is not
assuming, and shall not have any liability, (a) for any income, franchise,
sales, payroll, withholding or other taxes of SF, (b) for any expenses of SF
related to the negotiation, preparation and execution of this Agreement, (c) as
a "successor-in-interest" to SF with respect to the SF/Robin Business, (d) for
any accounts payable of SF, or (e) for any matter or thing set forth on Schedule
2.4(c).
27
(d) As total consideration for the assets and business being
sold, transferred, conveyed and delivered to Silverman's by SF pursuant to this
Section 2.4, Silverman's shall:
(i) Assume the Silverman's/Robin Assumed Liabilities;
and
(ii) Pay SF the amount referred to in Section 2.4(e)(x)
and (g) below; and
(iii) Pay SF any amount which may become due and
payable pursuant to Section 2.5.2(a), 2.6.1(b) or 2.6.2(b), as the case may
be.
(e) In connection with the sale, transfer, conveyance and
delivery to HSI by SF of the SF/Robin Assets and SF/Robin Business, at the
Closing, (x) HSI shall pay SF an amount (the "Silverman's Closing Sales Payment
Amount"), if positive, equal to the Undisputed SF/Robin Sales minus the product
-----
of (i) Undisputed Silverman's/Robin Combined Sales and (ii) 20%, multiplied by
-------------
20% or (y) SF shall pay to HSI an amount (the "SF/Robin Closing Sales Payment
Amount"), if positive, equal to the Undisputed Silverman's Sales minus the
-----
product of (i) Undisputed Silverman's/Robin Combined Sales and (ii) 80%,
multiplied by 20%.
- ---------- --
(f) The authorized representatives of each of Silverman's, on
the one hand, and SF, on the other hand, shall have the right at reasonable
times and on reasonable notice, at the sole expense of each of them, to review
and/or audit the books and records of Silverman's, on the one hand, and SF, on
the other hand, relating to the Estimated Silverman's Sales, on the one hand,
and the Estimated SF/Robin Sales, on the other hand, as well as the work papers
of their respective independent public accountants, in each case solely for the
purpose of verifying the Estimated Silverman's Sales and the Estimated SF/Robin
Sales. Such right of review must be completed within forty-five (45) Business
Days after the Agreement Date. If prior to the end of such review period,
either Silverman's on the one hand, or SF, on the other hand, in good faith
disagrees with or disputes the accuracy of the Estimated Silverman's Sales, on
the one hand, or the Estimated SF/Robin Sales, on the other hand, then
Silverman's or SF, as the case may be, shall deliver to the other party a
written statement and explanation of such disagreement or dispute which sets
forth in reasonable detail the good faith bases of any such disagreement or
dispute (a "Silverman's/Robin Sales Dispute Statement" (and, to the extent
Estimated Silverman's Sales or Estimated SF/Robin Sales are not subject to any
Silverman's/Robin Sales Dispute Statement, such Estimated Silverman's Sales or
Estimated SF/Robin Sales are hereinafter referred to as "Undisputed Silverman's
Sales" and "Undisputed SF/Robin Sales," respectively)). If prior to the end of
the above referenced forty-five (45) Business Day review period following the
Agreement Date, either Silverman's or SF shall fail to deliver a
Silverman's/Robin Sales Dispute Statement, then the Estimated Silverman's Sales
or the Estimated SF/Robin Sales, as the case may be, shall be deemed to equal
both the Silverman's Sales and Undisputed Silverman's Sales, on the
28
one hand, or the SF/Robin Sales and Undisputed Silverman's Sales, on the other
hand. If, however, either Silverman's or SF shall have delivered a
Silverman's/Robin Sales Dispute Statement prior to the end of such review
period, then Silverman's and SF will attempt in good faith to resolve all
differences with regard to the determination of Silverman's Sales and/or
SF/Robin Sales during the next twenty (20) Business Day period commencing after
the end of such review period. If Silverman's and SF are unable to resolve such
differences prior to the expiration of such twenty (20) Business Day period (or
such longer period if so agreed by Silverman's and SF), the Silverman's Sales
and/or SF/Robin Sales shall be determined as set forth in Section 2.4(i) of this
Agreement.
(g) Within ten (10) days after the determination of SF/Robin
Sales and Silverman's Sales, HSI shall pay SF an amount equal to the amount, if
any, by which (I) the SF/Robin Sales minus the product of (i) Silverman's/Robin
-----
Combined Sales and (ii) 20%, multiplied by 20% exceeds (II) the Silverman's
---------- --
Closing Sales Payment Amount.
(h) Within ten (10) days after the determination of Silverman's
Sales and SF/Robin Sales, SF shall pay to HSI an amount equal to the amount, if
any, by which (I) the Silverman's Sales minus the product of (i)
-----
Silverman's/Robin Combined Sales and (ii) 80%, multiplied by 20%, exceeds (II)
---------- --
the SF/Robin Closing Sales Payment Amount.
(i) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.4(f) shall be prepared in concise form by
Silverman's, on the one hand, and SF, on the other hand, and submitted, together
with copies of any Silverman's/Robin Sales Dispute Statements, to the Third
Accountants no later than ten (10) Business Days following the last day of the
twenty (20) Business Day period (or longer period if so agreed) referred to in
the last sentence of Section 2.2(f). Each of Silverman's, on the one hand, and
SF, on the other hand, shall also be entitled to make a brief supplemental oral
presentation to the Third Accountants regarding any such disagreement or
dispute. The Third Accountants shall be instructed by Silverman's and SF to
deliver a written report setting forth such Third Accountants' resolution of any
difference or dispute referred to it no later than thirty (30) Business Days
following the earlier of (i) such firm's receipt of the report of disagreement
or disputes submitted to it by Silverman's, on the one hand, and SF, on the
other hand, pursuant to this Section 2.4(i) and (ii) the last day permitted for
the submission of such report as provided above. The determination of the Third
Accountants with respect to any disagreement or dispute referred to it by
Silverman's, on the one hand, and SF, on the other hand, as provided in this
Section 2.4(i) will be final, binding, non-appealable and uncontestable by the
parties hereto and will not be subject to collateral attack for any reason.
Promptly after the determination by the Third Accountants, HSI, on the one hand,
or SF, on the other hand, as the case may be, shall make the payments, if any,
required by Sections 2.4(g) and (h).
29
(j) Notwithstanding anything in this Section 2.4 to the
contrary, no disagreement or dispute as to Silverman's Sales and/or SF/Robin
Sales shall delay or prevent the Closing.
(k) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to SF pursuant to any provision of this Agreement against any amount due and
payable by SF to HSI.
2.5 Adjusted Purchase Price Determination.
-------------------------------------
2.5.1 Designated Territory Adjusted Purchase Price.
--------------------------------------------
(a) If Designated Territory Sales exceed the Combined
Designated Territory Net Sales Base by more than the Inflation Rate, then HSI
shall pay to SF an amount equal to the product of (i) Excess Designated
Territory Sales and (ii) 30%, multiplied by 25%; provided, however, that in no
------------- -------- -------
event shall such amount exceed $2,000,000.
(b) If the Combined Designated Territory Net Sales Base exceeds
Designated Territory Sales by more than the Inflation Rate, then SF shall pay to
HSI an amount equal to the product of (i) Shortfall Designated Territory Sales
and (ii) 40%, multiplied by 25%; provided, however, that in no event shall such
------------- -------- -------
amount exceed $2,000,000.
(c) HSI shall have the right to offset any amount otherwise due
and payable by HSI pursuant to Section 2.5.1(a) against any amount due and
payable by SF or Olson, as the case may be, to HSI (i) pursuant to this Section
2.5 or (ii) as a result of any Losses incurred by any Buyer Claimant in
connection with a breach of a representation, warranty or covenant contained in
this Agreement.
(d) Not more than three (3) months after the first anniversary
of the Closing Date, HSI shall prepare a statement, signed by its chief
financial officer, providing reasonable detail as to the computation of the
Estimated Designated Territory Sales (such statement is hereinafter referred to
as the "Designated Territory Sales Statement"). The authorized representatives
of SF shall have the right at reasonable times and on reasonable notice, at the
sole expense of SF, to review and/or audit the books and records of HSI relating
to the Estimated Designated Territory Sales and the Designated Territory Sales
Statement, as well as the work papers of HSI's independent public accountants,
solely for the purpose of verifying the amounts and computations set forth in
the Designated Territory Sales Statement. Such right of review must be
completed within thirty (30) Business Days after receipt of such Statement by
SF. If prior to the end of such review period, SF in good faith disagrees with
or disputes the accuracy of the Estimated Designated Territory Sales and/or the
Designated Territory Sales Statement, then SF shall deliver to HSI a written
statement and explanation of such disagreement or dispute which sets forth in
reasonable detail the good faith bases of any such disagreement
30
or dispute (a Designated Territory Sales Dispute Statement"). If prior to the
end of the above referenced thirty (30) Business Day review period following the
receipt of the Designated Territory Sales Statement, SF shall fail to deliver a
Designated Territory Sales Dispute Statement, then the Designated Territory
Sales and the Designated Territory Sales Statement shall be deemed final and the
Estimated Designated Territory Sales as set forth therein shall be deemed to
equal the Designated Territory Sales. If, however, SF shall have delivered a
Designated Territory Sales Dispute Statement prior to the end of such review
period, then HSI and SF will attempt in good faith to resolve all differences
with regard to the determination of Designated Territory Sales during the next
twenty (20) Business Day period commencing after the end of such review period.
If HSI and SF are unable to resolve such differences prior to the expiration of
such twenty (20) Business Day period (or such longer period if so agreed by HSI
and SF), the Designated Territory Sales shall be determined as set forth in
Section 2.5.3 of this Agreement.
(e) Notwithstanding anything herein to the contrary, the term
"Designated Territory Sales" as used in this Section 2.5.1 shall not include Net
Sales attributable to any Overlapping Designated Territory Business acquired by
HSI or any of the Affiliates after the Closing Date.
(f) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to SF pursuant to any provision of this Agreement against any amount due and
payable by SF to HSI.
2.5.1.1 Interim Designated Territory Adjusted Purchase
----------------------------------------------
Price.
- -----
(a) Notwithstanding anything in this Agreement to the contrary,
during the period between the Agreement Date and the Closing Date SF shall not
employ, hire or otherwise engage any additional field sales personnel without
the prior written consent of HSI (which consent shall be given or withheld in
the sole discretion of HSI). Any such additional field sales personnel employed
by SF with the permission of HSI are hereinafter referred to collectively as
"New Sales Reps."
(b) Within twenty (20) Business Days after the third full
calendar month following the Closing Date, HSI shall prepare a statement (the
"Estimated New Reps Sales Statement") setting forth its computation of Estimated
New Reps Sales. Upon completion of the Estimated New Reps Sales Statement, HSI
will deliver the Estimated New Reps Sales Statement to SF. Following receipt of
the Estimated New Reps Sales Statement, SF will have a period of ten (10)
Business Days to review the Estimated New Reps Sales Statement. In connection
with such review, the authorized representatives of SF shall have the right at
reasonable times and on reasonable notice, at the sole expense of SF, to review
and/or audit the books and records of HSI relating to the Estimated New Reps
Sales Statement, as well as the work papers of its independent public
accountants,
31
solely for the purpose of computing the Estimated New Reps Sales. If prior to
the end of such review periods SF in good faith disagrees with or disputes the
accuracy of the Estimated New Reps Sales, then Pattison shall deliver to HSI a
written statement and explanation of such disagreement or dispute which sets
forth in reasonable detail the good faith bases of any such disagreement or
dispute (a "New Reps Sale Dispute Statement" (and, to the extent Estimated New
Reps Sales are not subject to any New Reps Sales Dispute Statement, such
Estimated New Reps Sales re hereinafter referred to as "Undisputed New Reps
Sales")). If prior to the end of the above referenced ten (10) Business Day
review period following receipt of the Estimated New Reps Sales Statement, SF
shall fail to deliver a New Reps Sales Dispute Statement, then the Estimated New
Reps Sales shall be deemed to equal both the New Reps Sales and Undisputed New
Reps Sales. If, however, SF shall have delivered a New Reps Sales Dispute
Statement prior to the end of such review period, then HSI and SF will attempt
in good faith to resolve all differences with regard to the determination of New
Reps Sales during the next twenty (20) Business Day period commencing after the
end of such review period. If HSI and SF are unable to resolve such differences
prior to the expiration of such twenty (20) Business Day period (or such longer
period if so agreed by HSI and SF), the New Reps Sales shall be determined as
set forth in Section 2.5.1.1(c) of this Agreement.
(c) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.5.1.1(b) shall be prepared in concise form
by HSI and SF and submitted, together with copies of any New Reps Sales Dispute
Statement, to the Third Accountants no later than ten (10) Business Days
following the last day of the twenty (20) Business Day period (or longer period
if so agreed) referred to in the last sentence of Section 2.5.1.1(b). Each of
HSI and SF shall also be entitled to make a brief supplemental oral presentation
to the Third Accountants regarding any such disagreement or dispute. The Third
Accountants shall be instructed by HSI and SF to deliver a written report
setting forth such Third Accountants' resolution of any difference or dispute
referred to it no later than thirty (30) Business Days following the earlier of
(i) such firm's receipt of the report of disagreement or disputes submitted to
it by HSI and SF pursuant to this Section 2.5.1.1(c) and (ii) the last day
permitted for the submission of such report as provided above. The
determination of the Third Accountants with respect to any disagreement or
dispute referred to it by HSI and SF as provided in this Section 2.5.1.1(c) will
be final, binding, non-appealable and uncontestable by the parties hereto and
will not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI shall make the payment, if any,
referred to in Section 2.5.1.1(d) of this Agreement.
(d) Within ten (10) days after the determination of New Reps
Sales, HSI shall pay SF an amount equal to the product of (i) News Reps Sales
and (ii) 20%.
(e) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to FS
32
pursuant to any provision of this Agreement against any amount due and payable
by SF to HSI.
2.5.2 Silverman's/Robin Related Adjusted Purchase Price.
-------------------------------------------------
(a) If Silverman's/Robin Sales exceed the Combined
Silverman's/Robin Net Sales Base by more than the Inflation Rate, then HSI shall
pay to SF an amount equal to the product of (i) Excess Silverman's/Robin Sales
and (ii) 20%, multiplied by 20%; provided, however, that in no event shall such
---------- -- -------- -------
amount exceed $1,000,000.
(b) If the Combined Silverman's/Robin Net Sales Base exceeds
Silverman's/Robin Sales by more than the Inflation Rate, then SF shall pay to
HSI an amount equal to the product of (i) Shortfall Silverman's/Robin Sales and
(ii) 50%, multiplied by 20%; provided, however, that in no event shall such
---------- -- -------- -------
amount exceed $1,000,000.
(c) HSI shall have the right to offset any amount otherwise due
and payable by HSI pursuant to Section 2.5.2(a) against any amount due and
payable by SF or Olson, as the case may be, to HSI (i) pursuant to this Section
2.5 or (ii) as a result of any Losses incurred by any Buyer Claimant in
connection with a breach of a representation, warranty or covenant contained in
this Agreement.
(d) Not more than three (3) months after the first anniversary
of the Closing Date, HSI shall prepare a statement, signed by its chief
financial officer, providing reasonable detail as to the computation of the
Estimated Silverman's/Robin Sales (such statement is hereinafter referred to as
the "Silverman's/Robin Sales Statement"). The authorized representatives of SF
shall have the right at reasonable times and on reasonable notice, at the sole
expense of SF, to review and/or audit the books and records of HSI relating to
the Estimated Silverman's/Robin Sales and the Silverman's/Robin Sales Statement,
as well as the work papers of HSI's independent public accountants, solely for
the purpose of verifying the amounts and computations set forth in the
Silverman's/Robin Sales Statement. Such right of review must be completed
within thirty (30) Business Days after receipt of such Statement by SF. If
prior to the end of such review period, SF in good faith disagrees with or
disputes the accuracy of the Estimated Silverman's/Robin Sales and/or the
Silverman's/Robin Sales Statement, then SF shall deliver to HSI a written
statement and explanation of such disagreement or dispute which sets forth in
reasonable detail the good faith bases of any such disagreement or dispute (a
"Silverman's/Robin Sales Dispute Statement"). If prior to the end of the above
referenced thirty (30) Business Day review period following the receipt of the
Silverman's/Robin Sales Statement, SF shall fail to deliver a Silverman's/Robin
Sales Dispute Statement, then the Silverman's/Robin Sales and the
Silverman's/Robin Sales Statement shall be deemed final and the Estimated
Silverman's/Robin Sales as set forth therein shall be deemed to equal the
Silverman's/Robin Sales. If, however, SF shall have delivered a
Silverman's/Robin Sales Dispute Statement prior to the end of such review
period, then HSI and SF will attempt
33
in good faith to resolve all differences with regard to the determination of
Silverman's/Robin Sales during the next twenty (20) Business Day period
commencing after the end of such review period. If HSI and SF are unable to
resolve such differences prior to the expiration of such twenty (20) Business
Day period (or such longer period if so agreed by HSI and SF), the
Silverman's/Robin Sales shall be determined as set forth in Section 2.5.3 of
this Agreement.
(e) Notwithstanding anything herein to the contrary, the term
"Silverman's/Robin Sales" as used in this Section 2.5.2 shall not include Net
Sales attributable to any Overlapping Business acquired by HSI or any of the
Affiliates after the Closing Date.
(f) Notwithstanding anything in this Agreement to the contrary,
HSI shall have the right to offset any amount otherwise due and payable by HSI
to SF pursuant to any provision of this Agreement against any amount due and
Payable by SF to HSI.
2.5.3 Dispute Resolution. Written reports of disagreement or
------------------
disputes with respect to any amounts referred to in Section 2.5.1 or 2.5.2 shall
be prepared in concise form by HSI and SF and submitted, together with copies of
any Adjusted Purchase Price Dispute Statement, to the Third Accountants no later
than ten (10) Business Days following the last day of the twenty (20) Business
Day period (or longer period if so agreed) referred to in the last sentence of
Sections 2.5.1(d) or 2.5.2(d), as the case may be. Each of HSI and SF shall
also be entitled to make a brief supplemental oral presentation to the Third
Accountants regarding any such disagreement or dispute. The Third Accountants
shall be instructed by HSI and SF to deliver a written report setting forth such
Third Accountants' resolution of any difference or dispute referred to it no
later than thirty (30) Business Days following the earlier of (i) such firm's
receipt of the report of disagreement or disputes submitted to it by HSI and SF
pursuant to this Section 2.5.3 and (ii) the last day permitted for the
submission of such report as provided above. The determination of the Third
Accountants with respect to any disagreement or dispute referred to it by HSI
and SF as provided in this Section 2.5.3 will be final, binding, non-appealable
and uncontestable by the parties hereto and will not be subject to collateral
attack for any reason. Promptly after the determination by the Third
Accountants, HSI or SF, as the case may be, shall make the payments, if any,
required by Sections 2.5.1 and 2.5.2. The fees and expenses of the Third
Accountants shall be paid one-half by HSI and one-half by SF.
2.6 Options.
-------
2.6.1 Put Options. (a) At any time after the fifth
-----------
anniversary of the Closing Date, SF may, at its option, by written notice given
to HSI, elect to receive the balance of the purchase price for the SF Designated
Territory Related Business and the SF Designated Territory Assets for an amount
equal to the greater of (i) the product of (x) 30% and (y) HSI/SF Combined
Average Eligible Sales, multiplied by 25% and (ii)
---------- --
34
the product of (x) HSI/SF Combined Average Eligible Sales and (y) the HSI Net
Margin Factor, multiplied by 30% minus, in either case, the SF Share of the
---------- -- -----
Overlapping Designated Territory Business Purchase Price; provided, however, if
-------- -------
HSI or any of its Affiliates shall hereafter acquire one or more Overlapping
Designated Territory Businesses and the Goodwill purchased as a result of any
such single acquisition or series of related acquisitions (or, in the case of
any acquisition structured as a "pooling," the amount of Goodwill which would
have resulted therefrom if the transaction was not structured as a "pooling")
equals or exceeds $1,000,000, then the foregoing clause (ii) shall not be
applicable.
(b) At any time after the fifth anniversary of the Closing
Date, SF may, at its option, by written notice given to HSI, elect to receive
the balance of the purchase price for the SF/Robin Business and the SF/Robin
Assets for an amount equal to the greater of (i) the product of (x) 20% and (y)
Silverman's/Robin Average Eligible Sales, multiplied by 20% and (ii) the product
---------- --
of (x) Silverman's/Robin Average Eligible Sales and (y) the HSI Net Margin
Factor, multiplied by 20% minus, in either case, the SF Share of the Overlapping
---------- -- -----
Business Purchase Price; provided, however, if HSI or any of its Affiliates
-------- -------
(including Silverman's) shall hereafter acquire one or more Overlapping
Businesses and the Goodwill purchased as a result of any such single acquisition
or series of related acquisitions (or, in the case of any acquisition structured
as a "pooling," the amount of Goodwill which would have resulted therefrom if
the transaction was not structured as a "pooling") equals or exceeds $1,000,000,
then the foregoing clause (ii) shall not be applicable.
2.6.2 Call Options. (a) At any time after the seventh
------------
anniversary of the Closing Date, provided the option under Section 2.6.1(a) has
not been exercised, HSI may, at its option, by written notice given to SF, elect
to pay the balance of the purchase price for the SF Designated Territory Related
Business and the SF Designated Territory Assets for an amount equal to the
greater of (i) the product of (x) 30% and (y) HSI/SF Average Eligible Sales,
multiplied by 25% and (ii) the product of (x) HSI/SF Average Eligible Sales and
- ---------- --
(y) the HSI Net Margin Factor, multiplied by 30% minus, in either case, the SF
---------- -- -----
Share of the Overlapping Designated Territory Business Purchase Price; provided,
--------
however, if HSI or any of its Affiliates shall hereafter acquire one or more
- -------
Overlapping Designated Territory Businesses and the Goodwill purchased as a
result of any such single acquisition or series of related acquisitions (or, in
the case of any acquisition structured as a "pooling," the amount of Goodwill
which would have resulted therefrom if the transaction was not structured as a
"pooling") equals or exceeds $1,000,000, then the foregoing clause (ii) shall
not be applicable.
(b) At any time after the seventh anniversary of the Closing
Date, provided the option under Section 2.6.1(b) has not been exercised, HSI
may, at its option, by written notice given to SF, elect to pay the balance of
the purchase price for the SF/Robin Business and the SF/Robin Assets for an
amount equal to the greater of (i) the product of (x) 20% and (y)
Silverman's/Robin Average Eligible Sales, multiplied by 20% and (ii) the product
---------- --
of (x) Silverman's/Robin Average Eligible Sales and (y) the HSI
35
Net Margin Factor, multiplied by 20% minus, in either case, the SF Share of the
---------- -- -----
Overlapping Business Purchase Price; provided, however, if HSI or any of its
-------- -------
Affiliates (including Silverman's) shall hereafter acquire one or more
Overlapping Businesses and the Goodwill purchased as a result of any such single
acquisition or series of related acquisitions (or, in the case of any
acquisition structured as a "pooling," the amount of Goodwill which would have
resulted therefrom if the transaction was not structured as a "pooling") equals
or exceeds $1,000,000, then the foregoing clause (ii) shall not be applicable.
2.6.3 Determination of HSI/SF Average Sales, Silverman's/
---------------------------------------------------
Robin Average Eligible Sales, Goodwill, SF Share of the Overlapping Designated
- ------------------------------------------------------------------------------
Territory Business Purchase Price and the SF Share of the Overlapping Business
- ------------------------------------------------------------------------------
Purchase Price. Not more than three (3) months after the exercise of any option
- --------------
pursuant to Section 2.6.1 or 2.6.2, HSI shall prepare a statement, signed by its
chief financial officer, providing reasonable detail as to the computation of
the Estimated HSI/SF Average Eligible Sales or Estimated Silverman's/ Robin
Eligible Sales, as the case may be, and, if applicable, the Estimated Goodwill,
the Estimated SF Share of Overlapping Designated Territory Business Purchase
Price or the SF Share of the Overlapping Business Purchase Price, as the case
may be, (such statement is hereinafter referred to as the "Option Statement").
The authorized representatives of SF shall have the right at reasonable times
and on reasonable notice, at the sole expense of SF, to review and/or audit the
books and records of HSI relating to the Estimated HSI/SF Average Eligible Sales
and/or Estimated Silverman's/Robin Average Eligible Sales, and, if applicable,
the Estimated Goodwill, the Estimated SF Share of Overlapping Designated
Territory Business Purchase Price or the SF Share of the Overlapping Business
Purchase Price, as the case may be, and Option Statement, as well as the work
papers of HSI's independent public accountants, solely for the purpose of
verifying the amounts and computations set forth in the Option Statement. Such
right of review must be completed within thirty (30) Business Days after receipt
of such Statement by SF. If prior to the end of such review period, SF in good
faith disagrees with or disputes the accuracy of the Estimated HSI/SF Average
Eligible Sales, the Estimated Silverman's/Robin Average Eligible Sales, and, if
applicable, the Estimated Goodwill, the Estimated SF Share of Overlapping
Designated Territory Business Purchase Price or the SF Share of the Overlapping
Business Purchase Price, as the case may be, and/or the Option Statement, then
SF shall deliver to HSI a written statement and explanation of such disagreement
or dispute which sets forth in reasonable detail the good faith bases of any
such disagreement or dispute (an "Option Dispute Statement"). If prior to the
end of the above referenced thirty (30) Business Day review period following the
receipt of the Option Statement, SF shall fail to deliver an Option Dispute
Statement, then the Estimated HSI/SF Average Eligible Sales and/or the
Silverman's/Robin Average Eligible Sales, and, if applicable, the Estimated
Goodwill, the Estimated SF Share of Overlapping Designated Territory Business
Purchase Price or the SF Share of the Overlapping Business Purchase Price, as
the case may be, and the Option Statement shall be deemed final and the HSI/SF
Average Eligible Sales and the Estimated Silverman's/Robin Average Eligible
Sales and, if applicable, the Estimated Goodwill, the Estimated SF Share of the
Overlapping Designated Territory Business Purchase Price or
36
the SF Share of the Overlapping Business Purchase Price, as the case may be, as
set forth therein shall be deemed to equal the HSI/SF Average Eligible Sales,
the Silverman's/Robin Average Eligible Sales, and, if applicable, the Goodwill,
the SF Share of the Overlapping Designated Territory Business Purchase Price or
the SF Share of the Overlapping Business Purchase Price, as the case may be.
If, however, SF shall have delivered an Option Dispute Statement prior to the
end of such review period, then HSI and SF will attempt in good faith to resolve
all differences with regard to the determination of HSI/SF Average Eligible
Sales and the Silverman's/Robin Average Eligible Sales, and, if applicable, the
Goodwill, during the next twenty (20) Business Day period commencing after the
end of such review period. If HSI and SF are unable to resolve such differences
prior to the expiration of such twenty (20) Business Day period (or such longer
period if so agreed by HSI and SF), the HSI/SF Average Eligible Sales and/or
Silverman's/Robin Average Eligible Sales, and, if applicable, the Goodwill, the
SF Share of the Overlapping Designated Territory Business Purchase Price or the
SF Share of the Overlapping Business Purchase Price, as the case may be, shall
be determined as set forth in Section 2.6.4 of this Agreement.
2.6.4 Dispute Resolution. Written reports of disagreement or
------------------
disputes with respect to any amounts referred to in Section 2.6.3 shall be
prepared in concise form by HSI and SF and submitted, together with copies of
any Option Dispute Statement, to the Third Accountants no later than ten (10)
Business Days following the last day of the twenty (20) Business Day period (or
longer period if so agreed) referred to in the last sentence of Section 2.6.3.
Each of HSI and SF shall also be entitled to make a brief supplemental oral
presentation to the Third Accountants regarding any such disagreement or
dispute. The Third Accountants shall be instructed by HSI and SF to deliver a
written report setting forth such Third Accountants' resolution of any
difference or dispute referred to it no later than thirty (30) Business Days
following the earlier of (i) such firm's receipt of the report of disagreement
or disputes submitted to it by HSI and SF pursuant to this Section 2.6.3 and
(ii) the last day permitted for the submission of such report as provided above.
The determination of the Third Accountants with respect to any disagreement or
dispute referred to it by HSI and SF as provided in this Section 2.6.3 will be
final, binding, non-appealable and uncontestable by the parties hereto and will
not be subject to collateral attack for any reason. Promptly after the
determination by the Third Accountants, HSI shall make the payments, if any,
required by Sections 2.6.1 and 2.6.2. The fees and expenses of the Third
Accountants shall be paid one-half by HSI and one-half by SF.
2.6.5 Closing under Section 2.6.1 or 2.6.2. If HSI or SF
------------------------------------
exercises an option under Section 2.6.1 or 2.6.2, HSI and SF shall consummate
the transactions contemplated thereby at HSI's offices at 10:00 a.m. (New York
time) on the Business Day HSI designates, by written notice given to SF, which
shall not be fewer than 10 days or more than 30 days after the determination of
HSI/SF Average Eligible Sales, Silverman's/Robin Average Eligible Sales or
Goodwill, as the case may be, pursuant to Section 2.6.3 above. At the closing,
(a) HSI shall pay the amount specified under Section 2.6.1 or 2.6.2, as the case
may be, by wire transfer of immediately available funds to an
37
account designated by SF at least three Business Days before the closing and
(b) the balance of the purchase price payable by HSI in respect of the SF
Designated Territory Related Business or the SF/Robin Business, as the case may
be, shall be deemed paid in full by HSI and HSI shall have no further obligation
to SF relating thereto.
2.6.6 Mandatory Exercise of Put Options. Notwithstanding
---------------------------------
anything in this Section 2.6 to the contrary, if, as and when (x) the SF Note
shall become due and payable (whether at stated maturity, by acceleration or
otherwise), or (y) the Accounts Payable Default (as such term is defined in
Section 6.1(b)) has occurred, then, at HSI's sole option upon written notice to
SF, SF shall be deemed to have exercised its option under Section 2.6.1(a)
and/or (b), a closing with respect to such exercise shall occur in accordance
with Section 2.6.5 and at the closing HSI shall have the right to offset any
amount otherwise due and payable by HSI to SF pursuant to Section 2.6.1(a)
and/or (b) against any amount then due and payable by SF to HSI pursuant to the
SF Note or as a result of the Accounts Payable Default, as the case may be.
2.7 HSI Bridge Loan. (a) In order to facilitate all the payments
---------------
which have to be made by SF at the Closing, including without limitation, the
payments described on Schedule 7.9 hereto, HSI shall loan SF an aggregate of
$2,800,000 pursuant to, and in accordance with the terms of, a promissory note
in the form of Exhibit 2.7 hereto (the "SF Note"). SF shall use the proceeds of
the loan solely for purposes of making the payment described on Schedule 7.9 and
repayment of the Pattison Note.
(b) HSI shall have the right to offset any amount otherwise due
and payable by HSI to SF pursuant to any provision in this Agreement against any
amount due and payable by SF to HSI pursuant to the SF Note.
2.8 HSI Common Stock. Notwithstanding anything to the contrary in
----------------
Sections 2.5 or 2.6, at the option of HSI, in lieu of making any cash payment
required to be made by HSI in accordance with the terms of Sections 2.5 and 2.6,
HSI may tender payment by means of the delivery of one (1) or more certificates
representing shares of HSI Common Stock and any such payment shall be deemed to
satisfy any cash payment obligation of HSI; provided, however, that without the
-------- -------
prior consent of SF, fifty percent (50%) of any payment to be made by HSI in
accordance with the terms of Section 2.5 and/or 2.6 must be paid in cash. If
HSI shall so deliver any such shares of HSI Common Stock, such shares shall be
freely tradeable under the Securities Act or HSI shall cause such shares to be
registered for resale under the Securities Act within 180 days of the delivery
thereof. For purposes of determining the number of shares of HSI Common Stock
to be delivered in lieu of a cash payment, the HSI Common Stock so delivered
shall be valued at the average of the per share closing sales prices for the HSI
Common Stock on the NASDAQ-NMS (or any national exchange on which shares of HSI
Common Stock are then traded) for the ten (10) trading days immediately
preceding the date on which the HSI Common Stock is tendered as payment.
38
2.9 Allocation of Purchase Price. The purchase price for the
----------------------------
Acquired Assets shall be allocated for federal, state, local and foreign tax
purposes by each party among the Acquired Assets sold, transferred and assigned
hereunder and the covenant contained in Article IX below as determined by HSI
and approved by Olson, acting on behalf of himself and SF (such approval not to
be unreasonably withheld or delayed), not later than three months after the
Closing Date. For all pertinent tax purposes each party hereto shall report the
purchase and sale and assignment provided for, and with the characterization
given these transactions, in this Agreement to taxing authorities on a basis
consistent with such allocation, and each party agrees not to take a position
inconsistent with such allocation. After the Closing, each of HSI and SF shall
timely file form 8594 with the IRS detailing this allocation. In the event that
HSI determines, subject to Olson's reasonable approval, that any adjustments to
such allocation are necessary, each of SF and Olson shall make such
modifications as are necessary reporting the same on form 8594 (if required) or
any tax report or return filed or to be filed by each of SF and Olson in order
to conform to HSI's allocation as adjusted.
2.10 Nonassignable Contracts and Authorizations. To the extent that
------------------------------------------
the assignment of any Assumed Contract or Authorization to be assigned to HSI or
Silverman's pursuant to this Agreement shall require the consent of any other
party, this Agreement shall not constitute a contract to assign the same if an
attempted assignment would constitute a breach thereof. Each of SF and Olson
shall use all reasonable efforts, and HSI and/or Silverman's, as the case may
be, shall cooperate where appropriate, to obtain any consent necessary to any
such assignment where such consent is requested by HSI and/or Silverman's. If
any such consent is not obtained, each of SF and Olson shall cooperate with HSI
and/or Silverman's, as the case may be, in any reasonable arrangement designed
to provide for HSI and/or Silverman's, as the case may be, the benefit, monetary
or otherwise, of any such Assumed Contract or Authorization including
enforcement of any and all rights of SF, Olson or the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business against the other party thereto arising out of a breach or cancellation
thereof by such other party or otherwise.
2.11 Control of Acquired Business During Adjustment Period. Each of
-----------------------------------------------------
SF and Olson acknowledges that, notwithstanding any other provision of this
Agreement (including, without limitation, Sections 2.5 and 2.6), HSI shall have
sole authority and control over the conduct of the Designated Territory Business
and the Silverman's/Robin Business during the 12-month period following the
Closing Date and thereafter, including, without limitation, all decisions
relating to products, pricing, sourcing and marketing programs. In addition,
HSI, in its absolute discretion, may determine to merge itself, Silverman's or
any subsidiaries of either of them into any Affiliate, to acquire the stock or
assets of another business or otherwise go into new businesses or undertake new
operations or activities, to consolidate all or part of the operations of HSI
with any Affiliate, or to liquidate or terminate all or part of the Designated
Territory Business and the Silverman's/Robin Business or to terminate any part
of its business, and liquidate its or any subsidiary's assets or any part
thereof. Any action referred to in this Section 2.11
39
undertaken by HSI shall be without prejudice to any right of SF or Olson to seek
monetary damages as a result of such action.
2.12 Guarantee of Performance by SF. From and after the Closing
------------------------------
Date, Olson unconditionally and irrevocably guarantees the full payment and/or
performance of each obligation of SF under this Agreement, the SF Note, each of
the other SF Closing Documents and the Pattison Agreement. This guaranty
constitutes a guaranty of payment and performance when due and not of
collection, and Olson specifically agrees that it shall not be necessary or
required that HSI (or any other Buyer Claimant) exercise any right, assert any
claim or demand or enforce any remedy whatsoever against SF before or as a
condition to the obligations of Olson hereunder. At the Closing, Olson shall
execute and deliver a guaranty in the form of Exhibit 2.12 hereto (the "Olson
Guaranty").
ARTICLE III CLOSING
-------
3.1 The Closing. The Closing shall take place at 10:00 a.m. local
-----------
time on June 24, 1996 or on such other date as may be agreed upon in writing by
the parties hereto (the "Closing Date"), at the offices of counsel to HSI and
Silverman's, Proskauer Rose Goetz & Mendelsohn LLP ("Proskauer"), 1585 Broadway,
New York, New York.
3.2 Obligations of SF and Olson. At the Closing, SF and Olson shall
---------------------------
deliver to HSI and Silverman's the following:
(a) A Closing Inventory Report.
(b) An opinion of Hanaway, Ross, Hanaway, Weidner & Bachhuber,
S.C., counsel to SF and Olson, dated as of the Closing Date, in the form of
annexed hereto as Exhibit 3.2(b).
(c) In the case of Olson, a duly executed counterpart of the
Employment Agreement.
(d) Bills of Sale, duly executed by SF, in the forms annexed
hereto as Exhibits 3.2(d)-1 and 3.2(d)-2.
(e) In the case of Olson, the duly executed Guaranty.
(f) If applicable, the SF Closing Sales Payment Amount.
(g) If applicable, the Silverman's Closing Sales Payment Amount.
(h) Firstar Bank Milwaukee, N.A. (or its applicable affiliate)
shall have delivered to SF and HSI a duly executed release of all Encumbrances
against SF, the Acquired Assets, the SF Business, the Ex-Territory Business, the
SF Designated Territory
40
Related Business and the SF/Robin Business, and all outstanding indebtedness
owed to Firstar Bank Milwaukee, N.A. (or its applicable affiliate) by SF shall
have been repaid.
(i) Each of First Bank National Association ("FBNA") (or its
applicable affiliate), Thompson-Schwinghammer, Inc. (d/b/a "FM Dental Supply")
and John Thompson (collectively, the "FM Dental Related Parties") shall have
advised SF and HSI in writing that it has no Encumbrances against SF, HSI, the
Acquired Assets, the SF Business, the Ex-Territory Business, the SF Designated
Territory Business, the SF/Robin Business, the Pattison Assets or the Pattison
Business, nor will it assert any purported Encumbrance in the future; provided,
--------
however, if the FM Dental Related Parties shall not have delivered a written
- -------
statement to the foregoing effect satisfactory to HSI, HSI and Silverman's may,
in their sole discretion, consummate the Closing, but HSI shall have the right
to withhold from the proceeds of the Closing Payments and/or the SF Note
$1,000,000 (the "FM Dental Claim Amount") to satisfy any claim made by (or which
could be made by) the FM Dental Related Parties against HSI, SF, the Acquired
Assets, the SF Business, the Ex-Territory Business, the SF Business, the Ex-
Territory Business, the SF-Designated Territory Business, the SF/Robin Business,
the Pattison Assets or the Pattison Business. If any such claim by the
FM Dental Related Parties shall not have been resolved within thirty (30) days
after the Closing Date, HSI shall be entitled on its own behalf and on behalf of
SF to compromise and settle any such claim directly with the FM Dental Related
Parties. Any payment of the FM Dental Claim Amount by HSI to the FM Dental
Related Parties shall be deemed for all purposes hereof to be a payment by HSI
to SF in an amount equal to the FM Dental Claim Amount so paid which SF shall be
deemed to have directed HSI to pay directly to the FM Dental Related Parties on
behalf of SF. If after HSI has paid the FM Dental Related Parties in respect of
any claim by the FM Dental Related Parties, there shall exist any surplus
FM Dental Claim Amount, HSI shall immediately pay such surplus to SF. Nothing
in this Section 3.2(i) shall relieve SF from the performance of any obligation
owed by SF to the FM Dental Related Parties or HSI, or impose any obligation on
HSI to perform any such obligation on SF's behalf.
(j) Such other instruments of assignment and conveyance as may
be necessary or appropriate to fully and effectively transfer the Acquired
Assets being transferred by SF in accordance with the terms of this Agreement.
3.3 Obligations of HSI and Silverman's. At the Closing, HSI and
----------------------------------
Silverman's shall deliver to SF and Olson the following:
(a) The SF Closing Inventory Payment.
(b) If applicable, the HSI Closing Sales Payment Amount.
(c) If applicable, the Silverman Closing Sales Payment Amount.
(d) An opinion of Proskauer, dated as of the Closing Date, in
the form annexed hereto as Exhibit 3.3(d).
41
(g) Assumption Agreement, duly executed by HSI and Silverman's,
in the form annexed hereto as Exhibits 3.3(e)-1 and 3.3(e)-2.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
---------------------------------
SF AND OLSON
------------
SF and Olson hereby jointly and severally represent and warrant to HSI
and Silverman's as follows:
4.1 Organization and Qualification. SF is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
California with full corporate power and authority to own, lease and operate its
properties and assets and to conduct the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business and the SF/Robin Business
respectively, as it is now being conducted. SF is duly qualified as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
the conduct of the business or the ownership of its assets requires such
qualification.
4.2 Authority. Olson has all requisite legal capacity, and SF has
---------
all requisite corporate power and authority, to execute and deliver this
Agreement and all documents, certificates, agreements, instruments and writings
related hereto (collectively, the "SF Closing Documents") to which he or it is a
party and to perform, carry out and consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and the other SF Closing Documents have been duly authorized by all necessary
corporate action on the part of SF (including the unanimous approval of the
shareholders of SF). This Agreement does, and when executed by SF and Olson,
the other SF Closing Documents shall, constitute the legal, valid and binding
obligations of each of them, enforceable against SF and Olson in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency or similar laws and by equitable principles.
4.3 No Breach. Subject to Section 8.5(b) and except as set forth on
---------
Schedule 4.3 hereto, neither the execution and delivery of this Agreement or the
other SF Closing Documents by SF and Olson nor the consummation of the
transactions contemplated hereby or thereby will: (a) in the case of SF,
violate any provision of the Certificate of Incorporation or By-Laws or other
organizational documents of SF; (b) conflict with, result in a breach of or
constitute a default (or an event which, with or without notice, lapse of time
or both, would constitute a default) under any material agreement, document,
certificate or other instrument to which SF or Olson is a party or by which SF
or Olson or any of its or his properties or assets (including the Acquired
Assets) is subject or bound; (c) result in the creation of, or give any party
the right to create, any Encumbrance upon assets or properties of SF or Olson
(including the Acquired Assets); (d) conflict with, violate, result in a breach
of or constitute a default under any
42
judgment, decree, order, or process of any court or governmental authority;
(e) conflict with or violate any material statute, law or regulation applicable
to the SF Business, the
Ex-Territory Business, the SF Designated Territory Related Business, the
SF/Robin Business, the Acquired Assets, SF or Olson; or (f) require SF or Olson
to obtain any authorization, consent, approval or waiver from, or to make any
filing with, any governmental or regulatory authority.
4.4 Financial Statements and Sales Information. (a) Prior to the
------------------------------------------
date hereof, SF has delivered to HSI the SF Financial Statements (to the extent
required by the definition thereof) attached hereto as Schedule 4.4A. Such
Financial Statements have been prepared from, and are in accordance with, the
books and records of SF, present fairly the financial position and results of
operations of the Acquired Assets, the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business and the SF/Robin Business as of and
for the periods set forth therein in accordance with GAAP and are true, correct
and complete in all material respects, except as set forth on Schedule 4.4B.
(b) The books and records of SF are accurate and complete and
have been maintained in accordance with good business practices.
4.5 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 4.5 hereto and the transactions contemplated by the Pattison Agreement,
since December 31, 1995:
(a) Each of the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business has been
conducted and the Acquired Assets have been acquired, owned and operated only in
the ordinary and usual course consistent with past practice.
(b) Neither the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business nor the Acquired
Assets have suffered any event or condition that has had a Material Adverse
Effect.
(c) Neither SF or Olson has become aware of any event or
condition that has occurred or would reasonably be expected to occur that could
result in a Material Adverse Effect.
4.6 Assets. SF has good and freely transferable title to all of the
------
Acquired Assets, free and clear of all Encumbrances (other than, in the case of
Acquired Assets which do not constitute Purchased Inventory, Permitted
Encumbrances), and has the complete and unrestricted power and right to sell
and/or transfer the Acquired Assets in accordance with the terms hereof. Each
item of equipment included in the Acquired Assets is and will when delivered be
adequate for the uses to which it is being put as of the Closing Date, is and
will when delivered be in good order and working condition, ordinary wear and
tear excepted, and have no material defects, and no condition exists
43
or will when such equipment is delivered exist which interferes with the value
thereof or the use thereof in the manner used by SF, in connection with the
operations of the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business prior to the date hereof.
SF has maintained such equipment in accordance with good business practices.
Except as set forth on Schedule 4.6, the Acquired Assets constitute all of the
properties and assets used by SF and Olson in connection with the operations of
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business and include all of the properties and assets
necessary to operate the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business as such
businesses have been operated immediately prior to the date hereof.
4.7 Real Property. Schedule 4.7 sets forth an accurate and complete
-------------
list of all Real Property owned by SF and all leases of Real Property used in
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business.
4.8 Intellectual Property. Schedule 4.8 hereto lists all licenses of
---------------------
Intellectual Property to or from any of SF or Olson with respect to the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business. No currently outstanding claims have been
asserted either orally or in writing to any of SF or Olson or the SF Business,
the Ex-Territory Business, the SF Designated Territory Related Business or the
SF/Robin Business, by any Person challenging the validity of or alleging
infringement by, or misuse of, any Intellectual Property used by SF or Olson or
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business, or challenging or questioning the validity or
enforceability of any license or agreement referred to on Schedule 4.8, no such
claims have been asserted during the last five years, and there is no valid
basis for any such claim. Except as set forth on Schedule 4.8, none of SF or
Olson nor the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business has, nor has SF or Olson or
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business been alleged to have, infringed upon or
violated any Intellectual Property right or misappropriated or misused any
invention, trade secret or other proprietary information entitled to legal
protection. None of SF or Olson nor the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business or the SF/Robin Business has
asserted any currently outstanding claim of infringement, misappropriation or
misuse of any Intellectual Property, nor has any of SF, Olson or the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business asserted any such claims during the last five
years.
4.9 Contracts and Commitments. (a) The contracts listed on Schedule
-------------------------
4.9 are all of the leases, agreements, arrangements, contracts, commitments or
understandings, written or oral, and whether legally binding or otherwise
("SF/Robin Contracts"), that relate to the SF Business, the Ex-Territory
Business, the SF Designated
44
Territory Related Business or the SF/Robin Business (excluding (i) any SF/Robin
Contract that involves a commitment by any of SF or Olson of less than $10,000
over the next 12 months and less than $50,000 over the balance of the term of
the SF/Robin Contract and (ii) customer sales orders entered into in the
ordinary course of business.)
(b) None of SF or Olson nor the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
is in breach or default, nor is there any basis for any valid claim of breach or
default by any of SF, Olson or the SF Business, the Ex-Territory Business, the
SF Designated Territory Related Business or the SF/Robin Business, under any
SF/Robin Contract. Except as set forth on Schedule 4.9, all SF/Robin Contracts
are valid and in full force and effect, and neither the consummation of the
transactions contemplated by this Agreement nor the consummation of the
transactions contemplated by any other SF Closing Document will cause any
SF/Robin Contract to cease to be valid and in full force and effect. None of
the SF/Robin Contracts contain "change of control" provisions (i.e., provisions
----
which would create a right against, or obligation of, SF as a result of the
consummation of the transactions contemplated by this Agreement and the other SF
Closing Documents). Accurate and complete copies of all SF/Robin Contracts,
including all amendments thereto, have been heretofore delivered to HSI.
4.10 Accounts Receivable. Schedule 4.10 sets forth a complete and
-------------------
accurate list of all accounts receivable of SF, including an aging thereof as of
a date within five days of the date hereof. All of such accounts receivable (a)
represent sales actually made in the ordinary course of business for goods or
services delivered or rendered to unaffiliated customers in bona fide arm's-
length transactions, (b) constitute valid claims, (c) have not been and will not
be extended or rolled over in order to make them current and (d) are not and
will not be subject to counterclaims or setoffs. Not less than 95% of the
accounts receivable of SF will be collected in full within 90 days of the date
they were created.
4.11 Inventory. The Inventory of SF is described on Schedule 4.11.
---------
Such Inventory is of merchantable quality, free of defects in workmanship or
design and is usable and salable by SF at normal profit margins and in
accordance with historical sales practices in the ordinary course of the SF
Business, the Robin Business or the SF/Robin Business. Such Inventory does not
include any items which are obsolete, damaged, excessive, below standard quality
or slow moving (i.e., items that are for discontinued or expected to be
----
discontinued product lines, or have a stated expiration date of 6 months or less
from the Closing Date, or items that have not been used or sold within 6 months
prior to the date hereof, or items that have not been sold within the customary
inventory turnover cycle of SF, as the case may be, with respect to such item,
or items for which there is excess capacity (i.e., more products are on hand of
----
any such item than have been sold in the past nine (9) months).
4.12 Customers and Suppliers. There have been no adverse changes and
-----------------------
there are no facts known to SF or Olson which may reasonably be expected to
indicate
45
that any adverse change may occur in the business relationship of the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business with any Person who was one of the fifteen
largest customers or suppliers of any of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
as of the end of the 12-month period ending on December 31, 1995.
4.13 Litigation, Etc. Except as set forth on Schedule 4.13 hereto:
----------------
(a) There has not been in the three years prior to the date
hereof, nor is there currently, any claim, action, suit, inquiry, proceeding or,
to the best knowledge of SF and Olson, investigation of any kind or nature
whatsoever (including, but not limited to, products liability issues and
Environmental Liabilities), by or before any court or governmental or other
regulatory or administrative agency, commission or tribunal brought, asserted or
initiated by or against SF or Olson, or pending or, to the best knowledge of SF
and Olson, threatened against or involving the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
and which is material, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by SF or Olson pursuant to this
Agreement or in connection with the transactions contemplated hereby. There is
no valid basis for any such claim, action, suit, inquiry, proceeding or
investigation.
(b) None of SF or Olson is subject to any judgment, order or
decree which may have a Material Adverse Effect.
4.14 Employee Benefit Plans. Schedule 4.14 hereto contains a
----------------------
complete and accurate list of all Employee Benefit Plans. Each Employee Benefit
Plan complies and has been maintained and operated in all respects in accordance
with its terms and the terms and the provisions of applicable law, including,
without limitation, ERISA and the Code, except where the failure to so comply
would not cause a Material Adverse Effect.
4.15 Compliance with Law; Necessary Authorizations. (a) Except as
---------------------------------------------
listed or described on Schedule 4.15(a) hereto, SF is and has been conducting
the SF Business, the Ex-Territory Business, the SF Designated Territory Related
Business and the SF/Robin Business, marketing its products and owning and
operating all of the Acquired Assets, in compliance with all applicable laws,
rules, regulations, orders, building and other codes, zoning and other
ordinances, Authorizations, judgments and decrees, including all Environmental
Laws, of all federal, state, local, foreign or other governmental authorities,
except, in any such case, where the failure to so conduct the SF Business, Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business or comply with any such laws, rules or regulations would not cause a
Material Adverse Effect.
(b) Schedule 4.15(b) lists or describes the material Authoriza-
tions held or required by SF, the SF Business, the Ex-Territory Business, the SF
Designated
46
Territory Related Business or the SF/Robin Business and, except as set forth in
that schedule, all such Authorizations are in full force and effect, SF is in
compliance with all such Authorizations and, to the best knowledge of SF and
Olson, there is no reasonable basis for the revocation or suspension of any
thereof. Except as set forth on Schedule 4.15(b), such Authorizations
constitute all the permits, licenses, approvals, qualifications or the like
issued by any regulatory authorities required for ownership of the Acquired
Assets and the operation of the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business, all of which
are transferable and will be transferred to HSI or Silverman's, as the case may
be, at Closing.
4.16 Finders. Neither SF or Olson, nor the SF Business, the Ex-
-------
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business or any of their respective Affiliates or any of their respective
directors or officers, has taken any action that, directly or indirectly, would
obligate HSI, Silverman's, or any of their respective Affiliates to anyone
acting as broker, finder, financial advisor or in any similar capacity in
connection with this Agreement or any of the transactions contemplated hereby.
4.17 Consents and Approvals of Governmental Authorities. Except as
--------------------------------------------------
set forth on Schedule 4.17, no consent, approval or authorization of, or
declaration, filing or registration with, or the giving of notice to, any
domestic or foreign governmental or regulatory authority is required in
connection with the execution, delivery and performance by SF or Olson of this
Agreement or the consummation by SF and Olson of the transactions contemplated
hereby.
4.18 Related Party Transactions; Intercompany Accounts. Except as
-------------------------------------------------
set forth on Schedule 4.18 hereto, there are no SF/Robin Contracts between any
of SF or Olson, on one hand, and any stockholder, director, officer or Affiliate
(including Olson) of SF (each, a "Related Party"), on the other; in each case,
other than routine employment agreements in the ordinary course of business (and
which are terminable without penalty in not more than 30 days). Set forth on
Schedule 4.18 is a true and complete list of each transaction during the prior
18 months between any of SF or Olson with respect to the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business, on one hand, and any Related Party, on the other hand. No amounts are
owed by or to any of SF or Olson with respect to the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business to or by any Related Party, and no amount is owed by or to the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business to or by any of SF or Olson or any Related
Party.
47
ARTICLE V REPRESENTATIONS AND WARRANTIES
------------------------------
OF HSI AND SILVERMAN'S
----------------------
HSI and Silverman's hereby, jointly and severally, represent and
warrant to SF and Olson as follows:
5.1 Organization and Qualification. HSI and Silverman's are
------------------------------
corporations duly organized, validly existing and in good standing under the
laws of Delaware and New York, respectively, with full corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business as it is now being conducted. Each of HSI and Silverman's is duly
qualified as a foreign corporation and is in good standing under the laws of
such jurisdiction in which the conduct of the business or the ownership of its
assets requires such qualification.
5.2 Authority. Each of HSI and Silverman's has all requisite
---------
corporate power and authority to execute and deliver this Agreement and all
documents, certificates, agreements, instruments and writings relating hereto
(collectively, the "HSI Closing Documents") to which it is a party and to
perform, carry out and consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of this Agreement and the
other HSI Closing Documents have been duly authorized by all necessary corporate
action on the part of HSI and Silverman's. This Agreement does, and when
executed by HSI and Silverman's, the other HSI Closing Documents shall,
constitute the legal, valid and binding obligations of each of them enforceable
against HSI and Silverman's in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency or similar laws and
by equitable principles.
5.3 No Breach. Subject to Sections 7.5(b) and 7.6(b) hereof, neither
---------
the execution and delivery of this Agreement by HSI or Silverman's nor the
consummation of the transactions contemplated herein will: (i) violate any
provision of the Certificate of Incorporation or By-laws of HSI or Silverman's;
(ii) conflict with, result in a breach of or constitute a default (or an event
which, with or without notice, lapse of time or both, would constitute a
default) under, or give any third party the right to terminate or modify, any
material agreement or other instrument to which HSI or Silverman's is a party or
by which it or any of its assets is bound; (iii) result in the creation of, or
give any party the right to create, any Encumbrance, upon assets or properties
of HSI, Silverman's, the HSI Designated Territory Related Assets or the
Silverman's Assets; (iv) conflict with, violate, result in a breach of or
constitute a default under any judgment, decree, order or process of any court
or governmental authority; (v) conflict with or violate any material statute,
law or regulation applicable to the business of HSI or Silverman's; or
(vi) require HSI or Silverman's to obtain any authorization, consent, approval
or waiver from, or to make any filing with, any governmental or regulatory
authority.
5.4 HSI Financial Statements and Sales Information. Prior to the
----------------------------------------------
date hereof, HSI delivered to SF and Olson the HSI Financial Statements (to the
extent
48
required by the definition thereof) attached hereto as Schedule 5.4A. Such HSI
Financial Statements have been prepared from, and are in accordance with, the
books and records of HSI, present fairly the financial position and results of
operations of the HSI Designated Territory Related Assets, the Silverman's
Assets, the HSI Designated Territory Related Business and the Silverman's
Business as of and for the periods set forth therein in accordance with GAAP and
are true, correct and complete in all material respects, except as set forth on
Schedule 5.4B.
5.5 Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 5.5 hereto, since December 31, 1995:
(a) The HSI Designated Territory Related Business and the
Silverman's Business has been conducted and the HSI/Silverman's Assets have been
acquired, owned and operated only in the ordinary and usual course consistent
with past practice.
(b) Neither the HSI Designated Territory Related Business or the
Silverman's Business nor the HSI Designated Territory Related Assets or the
Silverman's Assets have suffered any event or condition that has had a HSI
Material Adverse Effect.
(c) Neither HSI nor Silverman's has become aware of any event or
condition that has occurred or would reasonably be expected to occur that could
result in a HSI Material Adverse Effect.
5.6 Customers and Suppliers. There has not been any adverse change
-----------------------
and there are no facts known to HSI or Silverman's which may reasonably be
expected to indicate that any adverse change may occur in the business
relationship of HSI, the HSI Designated Territory Related Business or
Silverman's Business with any material customer.
5.7 Litigation, Etc. Except as set forth on Schedule 5.7 hereto:
----------------
(a) There has not been in the three years prior to the date
hereof, nor is there currently, any claim, action, suit, inquiry, proceeding or,
to the best knowledge of HSI and Silverman's, investigation of any kind or
nature whatsoever (including, but not limited to, products liability issues), by
or before any court or governmental or other regulatory or administrative
agency, commission or tribunal brought or asserted or initiated by or against
HSI or Silverman's, or pending or, to the best knowledge of HSI and Silverman's,
threatened against or involving the HSI Designated Territory Related Business or
the Silverman's Business which is material, or which questions or challenges the
validity of this Agreement or any action taken or to be taken by HSI or
Silverman's pursuant to this Agreement or in connection with the transaction
contemplated hereby. There is no valid basis for any such claim, action, suit,
inquiry, proceeding or investigation.
49
(b) Neither HSI nor Silverman's is subject to any judgment,
order or decree which may have a material adverse effect on the HSI Designated
Territory Related Business, the Silverman's Business, the HSI Designated
Territory Related Assets or the Silverman's Assets.
5.8 Finders. None of HSI or Silverman's, any of their respective
-------
Affiliates or any of their respective directors or officers, has taken any
action that, directly or indirectly, would obligate SF or Olson or any of their
Affiliates to anyone acting as a broker, finder, financial advisor or in any
similar capacity in connection with this Agreement or any of the transactions
contemplated hereby.
ARTICLE VI COVENANTS
---------
6.1 Certain Covenants of SF and Olson. SF and Olson, jointly and
---------------------------------
severally hereby covenant that (unless HSI otherwise gives its written approval
in its sole discretion) SF and Olson shall at their sole cost and expense take
the actions set forth below:
(a) At the Closing, SF and Olson shall pay or otherwise
discharge all the amounts set forth on Schedule 7.9 which are then due and owing
and SF and Olson shall thereafter pay or otherwise discharge in full all the
Excluded Liabilities relating to the SF Business, the Ex-Territory Business, the
SF Designated Territory Related Business and/or the SF/Robin Business as such
amounts shall become due in accordance with their terms.
(b) Prior to the Closing, SF and Olson shall operate the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business and the SF/Robin Business in the ordinary course of business as
historically conducted, and maintain the Acquired Assets in good operating
condition and both prior to and after the Closing pay those debts and accounts
payable relating to the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business and the Acquired
Assets (other than, after the Closing, those debts which constitute Assumed
Liabilities) that are incurred by SF in the ordinary course of business and on a
timely basis. Without limitation to the generality of the foregoing, SF and
Olson shall use the proceeds of the Closing Payments and the HSI Loan for the
purposes set forth on Schedule 7.9, including the payment of all accounts
payable in full within 30 days after the Closing Date. If (i) SF shall not have
paid and otherwise satisfied all such accounts payable by that date, (ii) the
failure to so pay such accounts payable has caused, in the good faith
determination of HSI, adverse consequences to any of the HSI Business, the
Silverman's Business, the Acquired Assets, the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
and (iii) the Trade Creditor Payment Amount (as such term is defined in Section
7.9) is zero (the occurrence of the events described in the foregoing clauses
(i) through (iii) is hereinafter referred to as the "Accounts Payable Default"),
then HSI, in its sole and absolute discretion, may (x)
50
pay all or any portion of such accounts payable on behalf of SF, which shall
promptly reimburse HSI for any such payment, plus interest thereon at the Prime
Rate or (y) upon prior written notice to Olson, pay all or any portion of such
accounts payable on behalf of SF and, as a consequence of any such payment by
HSI, SF shall be deemed to have effected a mandatory exercise of its option
under Section 2.6.1(a) and/or (b) in accordance with Section 2.6.6.
(c) Prior to the Closing and after the Closing, SF and Olson
shall afford HSI, its attorneys, accountants, consultants and representatives,
free and full access to the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business, and prior to
and after the Closing Date, SF and Olson shall afford HSI, its attorneys,
accountants, consultants and representatives free and full access to the
Acquired Assets to be sold, transferred or assigned by either of them pursuant
to this Agreement, the books and records of SF relating thereto and employees of
SF who are familiar with the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Robin Business and the Acquired
Assets, at all reasonable times upon reasonable notice and during normal
business hours, and shall provide to HSI and its representatives such additional
financial and operating data and other information as to the SF Business, the
Ex-Territory Business, the SF Designated Territory Related Business and/or the
SF/Robin Business and the Acquired Assets pursuant to this Agreement as HSI
shall from time to time reasonably request.
(d) Prior to and after the Closing, SF and Olson shall use their
respective reasonable efforts to preserve for HSI the goodwill of the customers
and suppliers of the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business and the SF/Robin Business, and others having business
relations with SF and Olson with respect to the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business and the SF/Robin Business
and Acquired Assets, and prior to and after the Closing shall do all things
reasonably requested by HSI for such purpose.
(e) Prior to the Closing, SF and Olson shall promptly advise HSI
in writing of the commencement or threat against SF or Olson of any suit,
litigation or legal proceeding that relates to or might affect the SF Business,
the Ex-Territory Business, the SF Designated Territory Related Business or the
SF/Robin Business or the Acquired Assets.
(f) Prior to the Closing, neither SF or Olson shall give its
permission to or authorize any officer, director, employee or representative to,
solicit or enter into negotiations with any party, other than HSI and
Silverman's, for the purchase and sale of any of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business or any of the Acquired Assets.
51
(g) Prior to the Closing Date, none of SF or Olson shall
dispose, encumber or cause any Encumbrance to be placed on the Acquired Assets
(other than the disposition of Inventory in the ordinary course of business).
(h) Prior to the Closing Date, neither SF or Olson shall amend
or terminate any Assumed Contract.
(i) Prior to the Closing Date, SF and Olson shall use their
respective best efforts to take any action where the failure or omission to take
such action would cause (i) any representation or warranty in Article IV hereof
(but excluding any representation or warranty which specifically relates to an
earlier date) to be untrue or incorrect as of the Closing or (ii) any of the
conditions to the Closing not to be satisfied.
6.2 Obtaining Consents. Prior to and after the Closing, SF and Olson
------------------
shall use all reasonable efforts to obtain all consents to the assignment to HSI
or Silverman's, as the case may be, of all of the Assumed Contracts and
Authorizations of SF, in each case without any condition or qualification
adverse to HSI or Silverman's, as the case may be. Prior to and after the
Closing, HSI and Silverman's, on the one hand, and SF and Olson, on the other
hand, shall use all reasonable efforts to obtain all consents, approvals and
waivers from, and give all notices to, and make all declarations, filings and
registrations with, any governmental and regulatory agencies that are required
to consummate the transactions contemplated hereby and to permit the continued
operation of the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business and the HSI/Silverman's
Business after the Closing Date as herein provided. HSI and Silverman's, on the
one hand, and SF and Olson, on the other hand, shall coordinate and cooperate
with one another and supply such assistance as may be reasonably requested by
each in connection with the foregoing.
6.3 Publicity. Prior to the Closing, none of SF, Olson, HSI or
---------
Silverman's shall issue or make, or cause to have issued or made, the
publication or dissemination of any press release or other announcement to
divulge the existence of this Agreement or with respect to the transactions
contemplated hereby, except after consultation with and prior approval of the
other party hereto, which approval shall not be unreasonably withheld, and
except as may be required by applicable law.
6.4 Transfer and Retention of Records. After the Closing Date,
---------------------------------
except as may be required for tax purposes, other regulatory purposes or
Permitted Activities, none of SF or Olson nor any of their respective successors
and assigns will retain any document, databases or other media embodying any
confidential or proprietary information relating to the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business which constitutes a part of the Acquired Assets or use, publish or
disclose to any third person any such confidential or proprietary information
relating to the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business; provided, however, that SF
-------- -------
and Olson shall be entitled to retain copies of any of the foregoing to the
extent
52
necessary in connection with prosecuting of defending any matter not expressly
assumed by HSI or Silverman's pursuant to this Agreement. SF and Olson shall
take all actions requested by HSI to transfer records relating to the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business to HSI or Silverman's which may include making
duplicate copies of any records retained by SF and Olson in the form of papers
or computer media.
6.5 Product Replacement and Repairs. After the Closing Date, HSI or
-------------------------------
Silverman's will, subject to the following sentence, honor all outstanding
warranties and guaranties and other claims for replacements, repairs and
credits, relating to products or services of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
shipped, sold or furnished by SF prior to the Closing Date, or relating to
Purchased Inventory. Any claims in respect of returned or damaged products
accepted by HSI or Silverman's shall be for the account of SF, which shall
promptly reimburse HSI or Silverman's, as the case may be, for the cost thereof.
6.6 Employee Matters. (a) HSI may, but shall not be required to,
----------------
offer employment to employees employed by SF in connection with the operations
of the SF Business, the Ex-Territory Business, the SF Designated Territory
Related Business or the SF/Robin Business on such terms as HSI in its sole
discretion deems appropriate. Any such offers shall be on terms which HSI
customarily hires new employees (e.g., without assumption of seniority).
Alternatively, at HSI's request, SF shall continue its employment of all or a
portion of its employees engaged in the operations of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business to assist HSI in its conduct of HSI Business or Silverman's Business,
as the case may be, after the Closing date on an interim basis not exceeding 90
days. HSI shall reimburse SF for all actual payroll costs and related
incidental costs incurred by it for continuing the employment of such employees
for HSI's benefit.
(b) Neither HSI nor Silverman's shall assume or be responsible
in any way for the obligations, liabilities or responsibilities (i) of any
Employee Benefit Plan of SF, (ii) of SF, any Affiliate or any fiduciary under,
arising from, or with respect to any Employee Benefit Plan of SF or (iii) to any
of SF's officers, directors, employees and agents, arising from or related to
the transactions contemplated by this Agreement, including, without limitation,
obligations, liabilities or responsibilities under the WARN Act. Neither HSI
nor Silverman's shall be deemed to be a successor employer with respect to the
employment of any employee of SF or with respect to any of Employee Benefit
Plans of SF.
6.7 Further Assurances. After the Closing, HSI and Silverman's, on
------------------
the one hand, and SF and Olson, on the other hand, shall, and shall cause their
respective Affiliates to, at the request and the expense of the other, execute
and deliver such other instruments of conveyance and transfer and assumption and
take such other action as may be reasonably requested so as to consummate the
transactions contemplated hereby or otherwise to consummate the intent of this
Agreement.
53
6.8 Name Change. SF hereby covenants and agrees that, promptly after
-----------
the Closing, it shall file a certificate of amendment of certificate of
incorporation of SF, and file appropriate documentation in those jurisdictions
in which it is qualified to do business as a foreign corporation, changing its
name from "San Francisco Dental Supply, Inc.", to a name that does not include
any of the Intellectual Property.
6.9 Certain Leased Property Related Matters. Solely for the purpose
---------------------------------------
of facilitating the orderly transfer of the conduct of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business and the
SF/Robin Business from SF to HSI, and Silverman's respectively, HSI shall
reimburse SF for its actual out-of-pocket rental obligations incurred by it for
continuing the rental of the following leased premises for the benefit of HSI
and the Silverman's: (i) warehouse space under lease at 2201 S. Oneida Street,
Green Bay, Wisconsin; (ii) warehouse space under lease at 3180 Coronet Way,
Green Bay, Wisconsin; and (iii) facilities space under lease at Darby Commons
Court, Georgetown Building, Bays 107 and 108, Folcroft West Business Park,
Folcroft, Pennsylvania. Notwithstanding anything in the immediately preceding
sentence to the contrary, unless otherwise requested by HSI, HSI shall have no
obligation to reimburse SF in respect of any rental obligations incurred by it
with respect to the leased premises referred to (x) in the foregoing clauses (i)
and (ii) for any period beyond October 31, 1996 and (y) in the foregoing clause
(iii) for any period beyond August 31, 1996.
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
OF HSI AND SILVERMAN'S
----------------------
The obligation of HSI and Silverman's under this Agreement to consum-
mate the transactions contemplated hereby at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing by HSI and Silverman's:
7.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of SF and Olson contained in this Agreement and the other SF Closing
Documents shall be true and accurate in all material respects on and as of the
Closing Date as if made again at and as of such date.
7.2 Performance by SF and Olson. SF and Olson shall have performed
---------------------------
and complied with all agreements required by this Agreement and the other SF
Closing Documents to be performed and complied with by each of them prior to or
on the Closing Date.
7.3 Certificate. HSI and Silverman's shall have received a
-----------
certificate, dated the Closing Date, signed on behalf of SF by a principal
corporate officer of SF, and by Olson, in his individual capacity, to the effect
that the conditions set forth in Sections 7.1 and 7.2 have been satisfied.
54
7.4 Opinions of Counsel for SF and Olson. HSI and Silverman's shall
------------------------------------
have received from counsel to SF and Olson a written opinion, dated the Closing
Date, in the form annexed hereto as Exhibit 3.2(b).
7.5 Authorization; Legal Prohibition. (a) SF and Olson shall have
--------------------------------
delivered to HSI and Silverman's copies of the resolutions of the Board of
Directors of SF and the stockholders of SF, in each case certified by the
secretary or assistant secretary of SF, which resolutions shall unanimously
approve and authorize the execution and delivery of this Agreement, the other SF
Closing Documents and the consummation of the transactions contemplated hereby
and thereby.
(b) No suit, action, investigation, inquiry or other proceeding
by any governmental body or other person shall have been instituted or
threatened which (i) could reasonably be expected to result in a material
adverse change in the SF Business, the Ex-Territory Business, the SF Designated
Territory Related Business or the SF/Robin Business; (ii) arises out of or
relates to this Agreement or the transactions contemplated hereby; or (iii)
questions the validity hereof or seeks to obtain substantial damages in respect
thereof. On the date of the Closing, there shall be no effective permanent or
preliminary injunction, writ, temporary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein not be consummated as so provided.
7.6 Consents. (a) All notices to, and declarations, filings and
--------
registrations with, and consents, approvals and waivers from, governmental and
regulatory agencies (including, without limitation, the FTC and DOJ) required to
consummate the transactions contemplated hereby and to permit the continued
operation by HSI or Silverman's, as the case may be, of the SF Business, the Ex-
Territory Business, the SF Designated Territory Related Business or the SF/Robin
Business after the Closing Date, shall have been obtained and all consents to
the assignment to HSI or Silverman's, as the case may be, of each of the
Acquired Assets and Authorizations of SF shall have been obtained, in each case
without any condition or qualification adverse to HSI or Silverman's, as the
case may be.
(b) On or prior to the Closing Date, HSI and Silverman's shall
have obtained the consent of the Banks (as such term is defined in that certain
Amended and Restated Credit Agreement, dated as of July 5, 1995 (the "Credit
Agreement"), among Henry Schein, Inc., The Chase Manhattan Bank, N.A., Natwest
Bank N.A., Cooperative Centrale Raiffeisen-Boerenleenbank, B.A. "Rabobank
Nederland", New York Branch and European American Bank) to the transactions
contemplated by this Agreement.
7.7 Closing Deliveries. HSI and Silverman's shall have received all
------------------
deliveries to be made to it pursuant to Article III of this Agreement.
7.8 Absence of Adverse Changes. There shall not have occurred since
--------------------------
the date hereof (i) any material adverse change in the condition (financial or
otherwise)
55
or results of operations of or prospects of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business;
or (ii) any other event, loss, damage, condition or state of facts of any
character which can reasonably be expected materially and adversely to affect
the business, financial condition, prospects, earnings, assets, properties, net
worth or results of operations of the SF Business, the Ex-Territory Business,
the SF Designated Territory Related Business or the SF/Robin Business.
7.9 Payments by SF to Shareholders and Debtholders. SF shall use the
----------------------------------------------
proceeds of the Closing Payments to (i) repurchase all of its outstanding equity
securities (including, without limitation, any options, warrants or convertible
securities) other than those held by Olson and (ii) repay, satisfy and discharge
all outstanding indebtedness of SF, including, without limitation, all
indebtedness reflected on the SF/Robin Financial Statements, in each case, as
more particularly described on Schedule 7.9. Notwithstanding anything in this
Agreement to the contrary, none of the proceeds from the Closing Payments and/or
the SF Note shall be used by SF to make any payment referred to on Schedule 7.9
to be made to any shareholder of SF unless at and as of the Closing Date, HSI
shall be satisfied that Schedule 7.9 adequately provides for the payment by SF
of outstanding amounts owed to its trade creditors. If HSI shall not be so
satisfied, HSI shall have the right to withhold from the proceeds of the Closing
Payments and/or the SF Note an amount (the "Trade Creditor Payment Amount")
estimated in good faith by HSI to be required to ensure that all such trade
creditors are paid all amounts due and payable by SF, and HSI shall be entitled
to pay the trade creditors of SF on behalf of SF and such payments shall be
deemed for all purposes hereof to be a payment by HSI to SF in an amount equal
to the Trade Creditor Payment Amount which SF shall be deemed to have directed
HSI to pay directly to SF's trade creditors on behalf of SF. If after HSI has
paid all such SF trade creditors, there shall exist any surplus Trade Creditor
Payment Amount, HSI shall immediately pay such surplus to SF. Nothing in this
Section 7.9 shall relieve SF from the performance of any obligation owed by SF
to any of its trade creditors or HSI, or impose any obligation on HSI to perform
any such obligation on SF's behalf. In no event shall SF make any payment to
Thomas F. Novotny or Larry Olson in respect of any SF debt or equity securities
owned or held by either of them unless and until (i) all amounts due and payable
by SF to its trade creditors as of the Closing Date shall have been paid and
(ii) all claims by the FM Dental Related Parties against SF, HSI, the Acquired
Assets, the SF Business, the Ex-Territory Business, the SF/Robin Business, the
Pattison Assets or the Pattison Business shall have been finally resolved to the
satisfaction of HSI and, in connection with such resolution, HSI shall have
received a release from each of the FM Dental Related Parties satisfactory to
HSI.
7.10 Satisfactory Completion of Due Diligence. HSI and its
----------------------------------------
representatives (including, without limitation, its attorneys and accountants)
shall have completed their due diligence review relating to the SF Business, the
Ex-Territory Business, the SF Designated Territory Related Business, the
SF/Robin Business, SF and the Acquired Assets, and the results of such review
shall be satisfactory to HSI.
56
7.11 Confirmation of Agreed Upon Ex-Territory Business Value. HSI
-------------------------------------------------------
shall have determined, following a review and/or audit of the books and records
of SF, that the Agreed Upon Ex-Territory Business Value is not less than
$2,383,231.
7.12 Distribution Agreement. HSI and SF shall have entered into a
----------------------
distribution agreement relating to the distribution of oats based medical and
dental products, such agreement to be in form and substance mutually
satisfactory to HSI and SF.
7.13 Actions by SF. SF shall have executed Bills of Sale in the form
-------------
of Exhibits 3.2(d)-1 and 3.2(d)-2.
7.14 Additional Documents, Etc. SF and Olson shall have delivered to
--------------------------
HSI and Silverman's such other documents, instruments and certificates as shall
be reasonably requested by HSI or Silverman's or counsel to HSI and Silverman's
for the purpose of effecting the transactions provided for and contemplated by
this Agreement and the other HSI Closing Documents.
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF
--------------------------------------
SF AND OLSON
-------------
The obligations of SF and Olson under this Agreement shall be subject
to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived in writing by SF and Olson.
8.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of HSI and Silverman's contained in this Agreement and the other HSI
Closing Documents shall be true and accurate in all material respects on and as
of the Closing Date as if made again at and as of such date.
8.2 Performance by Buyer. HSI and Silverman's shall have performed
--------------------
and complied with all agreements required by this Agreement and the other HSI
Closing Documents to be performed and complied with by it prior to or on the
Closing Date.
8.3 Certificate. SF and Olson shall have received a certificate,
-----------
dated the Closing Date, signed on behalf of HSI and Silverman's by a principal
corporate officer of HSI and Silverman's, to the effect that the conditions set
forth in Sections 8.1 and 8.2 have been satisfied.
8.4 Opinion of Counsel for HSI and Silverman's. SF and Olson shall
------------------------------------------
have received from Proskauer a written opinion, dated the Closing Date, in the
form annexed hereto as Exhibit 3.3(d).
57
8.5 Authorizations; Legal Prohibition. (a) HSI and Silverman's
---------------------------------
shall have delivered to SF and Olson copies of the resolutions of the Board of
Directors of each of HSI and Silverman's and, if necessary in the case of
Silverman's, resolutions of HSI, in its capacity as sole shareholder of
Silverman's, certified by the secretary or assistant secretary of each of HSI
and Silverman's, which resolutions shall approve and authorize the execution and
delivery of this Agreement, the other HSI Closing Documents and the consummation
of the transactions contemplated hereby and thereby.
(b) No suit, action, investigation, inquiry or other proceeding
by any governmental body or other person shall have been instituted which arises
out of or relates to this Agreement or the transactions contemplated hereby or
questions the validity hereof or seeks to obtain substantial damages in respect
thereof. On the date of the Closing, there shall be no effective permanent or
preliminary injunction, writ, temporary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein not be consummated as so provided.
8.6 Closing Deliveries. SF and Olson shall have received all
------------------
deliveries to be made to each of them pursuant to Article III of this Agreement.
8.7 Actions by HSI and Silverman's. HSI shall have executed a
------------------------------
counterpart to the Employment Agreement. HSI and Silverman's shall have
executed Assumption Agreements in the form of Exhibits 3.3(e)-1 and 3.3(e)-2.
8.8 Additional Documents, Etc. HSI and Silverman's shall have
--------------------------
delivered to SF and Olson such other documents, instruments and certificates as
shall be reasonably requested by any of them or their counsel for the purpose of
effecting the transactions provided for and contemplated by this Agreement and
the other SF Closing Documents.
ARTICLE IX RESTRICTIVE COVENANTS
---------------------
9.1 Non-Competition. None of SF or Olson nor any of their
---------------
respective Affiliates shall, until the later of a (x) period of five years after
the date hereof and (y) two (2) years after the cessation of Olson's employment
pursuant to the Employment Agreement, directly or indirectly, engage, anywhere
in the world, in the sale or offering or promoting for sale of any product,
process, good or service which is the same as, is functionally similar to, or
competes with, any product, process, good or service which any of HSI,
Silverman's or SF has sold or offered or promoted for sale within the three
years preceding the date hereof in connection with their respective businesses.
Notwithstanding anything in the immediately preceding sentence to the contrary,
nothing herein shall preclude (i) Olson from performing his duties pursuant to
the Employment Agreement; (ii) SF from collecting existing receivables or
satisfying their respective payables or any action reasonably related thereto,
(iii) SF selling or offering for sale within six (6) months after the date
hereof any Non-Matching Inventory or Ineligible
58
Inventory not purchased by HSI pursuant to the terms of this Agreement or (iv)
subject to the Employment Agreement, SF and Olson from engaging in the Oats
Business (collectively, the "Permitted Activities").
9.2 Non-Solicitation of Employees. None of SF or Olson nor any of
-----------------------------
their respective Affiliates shall directly or indirectly, for itself or himself
or on behalf of any other Person, hire any employee of HSI (or any of its
Affiliates), including, without limitation, any employees of SF that HSI (or any
of its Affiliates) has hired in its sole discretion, or induce nor attempt to
induce any such employee to leave his or her employment with HSI (or any of its
Affiliates) at any time until the later of (x) five years from the date hereof
and (y) two (2) years after the cessation of Olson's employment pursuant to the
Employment Agreement.
9.3 Non-Solicitation or Interference with Customers and Suppliers.
-------------------------------------------------------------
None of SF or Olson nor any of their respective Affiliates shall, directly or
indirectly, for itself or on behalf of any other Person, solicit, divert, take
away or attempt to take away any customers of HSI (or any of its Affiliates) or
suppliers or the business or patronage of any such customers or suppliers or in
any way interfere with, disrupt or attempt to disrupt any then existing
relationships between HSI (or any of its Affiliates) and any of its customers or
suppliers or other Persons with whom it deals or contact for business purposes
or enter into any business transaction with any such customers or suppliers or
other Persons for any purpose at any time until the later of (x) five years from
the date hereof and (y) two (2) years after the cessation of Olson's employment
pursuant to the Employment Agreement. Notwithstanding anything in the
immediately preceding sentence to the contrary, nothing herein shall preclude
Olson from engaging in any of the Permitted Activities.
9.4 Acknowledgements. Each of SF and Olson acknowledges that, in
----------------
view of the nature of the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business and the SF/Business and the business
objectives of HSI in acquiring such business (or portions thereof) as herein
provided, and the consideration paid to each of SF and Olson therefor, the
restrictions contained in this Article IX are reasonably necessary to protect
the legitimate business interests of HSI and that any violation of such
restrictions will result in irreparable injury to HSI and the business HSI has
acquired hereunder for which damages will not be an adequate remedy. Each of SF
and Olson therefore acknowledges that, if any such restrictions are violated,
HSI shall be entitled to preliminary and injunctive relief as well as to an
equitable accounting of earnings, profits and other benefits arising from such
violation.
59
ARTICLE X INDEMNIFICATION
---------------
10.1 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained in Articles IV and V of this Agreement shall survive
until the third anniversary of the Closing Date.
10.2 Indemnification by SF and Olson. From and after the Closing,
-------------------------------
each of SF and Olson shall jointly and severally indemnify and save HSI and its
Affiliates (including, for this purpose, Silverman's), their respective
directors, officers, employees, agents and representatives and all of their
successors and assigns (collectively "Buyer Claimants" and individually "Buyer
Claimant") harmless from and defend each of them from and against any and all
demands, claims, actions, liabilities, losses, costs, damages or expenses
whatsoever (including any reasonable attorneys' fees) (collectively, "Losses")
asserted against, imposed upon or incurred by the Buyer Claimants resulting from
or arising out of (a) any inaccuracy or breach of any representation or warranty
of SF or Olson contained herein; (b) any breach of any covenant or obligation of
SF or Olson contained herein; (c) any liability of SF or Olson or the SF
Business, the Ex-Territory Business, the SF Designated Territory Related
Business or the SF/Robin Business, except for the Assumed Liabilities; (d)
noncompliance with any applicable bulk sales or similar laws (including laws
which may impose transferee liability on HSI or an Affiliate (including, for
this purpose, Silverman's) or create Encumbrances on any Acquired Assets
relating to the liability of SF or Olson for sales, use or other taxes or
withholdings arising out of the operations of the SF Business, the Ex-Territory
Business, the SF Designated Territory Related Business or the SF/Robin Business
by SF or Olson); (e) any personal injuries, death or property damage arising
from products sold by SF or Olson prior to the Closing Date; (f) any liability
arising out of or related to the SF Business, the Ex-Territory Business, the SF
Designated Territory Related Business or the SF/Robin Business prior to Closing,
other than the Assumed Liabilities or the assertion against a Buyer Claimant of
a claim which, if valid, would constitute a liability arising out of or related
to the SF Business, the Ex-Territory Business, the SF Designated Territory
Related Business or the SF/Robin Business, other than the Assumed Liabilities;
(g) any claim made against HSI or Silverman's by Above the Rest, Inc. or any of
its Affiliates as a result of the transactions contemplated hereby or otherwise;
(h) any claim made against HSI or Silverman's by any FM Dental Related Party or
any of their respective Affiliates as a result of the consummation of the
transactions contemplated hereby, including, without limitation, the sale and
purchase of the Purchased Inventory; and (i) any liability of SF or Olson under
the WARN Act or any state equivalent.
10.3 Indemnification by HSI and Silverman's. From and after the
--------------------------------------
Closing, HSI and Silverman's shall indemnify and save SF and Olson and their
respective Affiliates and their respective directors, officers, employees,
agents and representatives (collectively "Seller Claimants" and individually
"Seller Claimant") harmless from and defend each of them from and against any
and all Losses asserted against, imposed upon or incurred by the Seller
Claimants resulting from or arising out of (a) any inaccuracy or breach of any
representation or warranty of HSI and Silverman's contained herein;
60
(b) any breach of any covenant or obligation of HSI and Silverman's contained
herein; (c) except as described in clause 10.2(e) above, HSI or Silverman's
ownership of Acquired Assets and operation of their respective businesses from
and after the Closing Date or any liability of HSI or Silverman's arising after
the Closing Date under any Assumed Contract; (d) any personal injuries, death or
property damage arising from products sold by HSI or Silverman's prior to the
Closing Date; (e) any liability arising out of or related to the HSI Business or
the Silverman's Business prior to Closing or the assertion against a Seller
Claimant of a claim which, if valid, would constitute a liability arising out of
or related to the HSI Business or the Silverman's Business; and (f) any
liability of HSI or Silverman's under the WARN Act or any state equivalent.
10.4 Indemnification Procedures.
--------------------------
(a) The rights and obligations of each party claiming a right
to indemnification hereunder ("Indemnitee") from the other party ("Indemnitor")
shall be governed by the following rules:
(i) The Indemnitee shall give prompt written notice to the
Indemnitor of any state of facts which Indemnitee determines will give rise
to a claim by the Indemnitee against the Indemnitor based on the indemnity
agreements contained herein, stating the nature and basis of said claims
and the amount thereof, to the extent known. No failure to give such
notice shall affect the indemnification obligations of Indemnitor
hereunder, except to the extent such failure materially prejudices such
Indemnitor's ability successfully to defend the matter giving rise to the
indemnification claim.
(ii) In the event any action, suit or proceeding is brought
against the Indemnitee, with respect to which the Indemnitor may have
liability under the indemnity agreements contained herein, then upon the
written acknowledgment by the Indemnitor within thirty (30) days of the
bringing of such action, suit or proceeding that it is undertaking and will
prosecute the defense of the claim under such indemnity agreements and
confirming that the claim is one with respect to which the Indemnitor is
obligated to indemnify and that it will be able to pay the full amount of
potential liability in connection with any such claim, the action, suit or
proceeding (including all proceedings on appeal or for review which counsel
for the Indemnitee shall deem appropriate) may be defended by the
Indemnitor. However, in the event the Indemnitor shall not offer
reasonable assurances as to its financial capacity to satisfy any final
judgment or settlement, the Indemnitee may assume the defense and dispose
of the claim, after 30 days' prior written notice to the Indemnitor. The
Indemnitee shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the Indemnitee's own
expense unless (a) the employment of such counsel and the payment of such
fees and expenses both shall have been specifically authorized by the
Indemnitor in connection with the defense of such action, suit or
proceeding or (b) the Indemnitee shall have reasonably concluded
61
and specifically notified the Indemnitor that there may be specific
defenses available to it which are different from or additional to those
available to the Indemnitor, or that such action, suit or proceeding
involves or could have an effect upon matters beyond the scope of the
indemnity agreements contained herein.
(iii) In addition, in any event specified in clause (b) of
the second sentence of subparagraph (ii) above, the Indemnitor, to the
extent made necessary by such different or additional defenses, shall not
have the right to direct the defense of such action, suit or proceeding on
behalf of the Indemnitee. If Indemnitor and Indemnitee cannot agree on a
mechanism to separate the defense of matters extending beyond the scope of
indemnification, such matters shall be defended on the basis of joint
consultation.
(iv) The Indemnitee shall be kept fully informed by the
Indemnitor of such action, suit or proceeding at all stages thereof,
whether or not it is represented by counsel. The Indemnitor shall, at the
Indemnitor's expense, make available to the Indemnitee and its attorneys
and accountants all books and records of the Indemnitor relating to such
proceedings or litigation, and the parties hereto agree to render to each
other such assistance as they may reasonably require of each other in order
to ensure the proper and adequate defense of any such action, suit or
proceeding.
(b) The Indemnitor shall make no settlement of any claims which
Indemnitor has undertaken to defend, without Indemnitee's consent, unless the
Indemnitor fully indemnifies the Indemnitee for all losses, there is no finding
or admission of violation of law by, or effect on any other claims that may be
made against, the Indemnitee and the relief granted in connection therewith
requires no action on the part of and has no effect on the Indemnitee.
(c) In the event any claim of a right to indemnification is
made by HSI or another indemnified party hereunder, such party may, at its sole
option, satisfy all or a portion of its Losses by way of setoff against any
payments due SF or Olson. Such right to setoff is without prejudice to any
right of SF or Olson, as the case may be, to challenge its liability hereunder.
This Section in no way constitutes a limitation on rights hereunder and HSI and
each other indemnified party hereunder may seek full indemnification for all
damages suffered and may pursue all rights and remedies available to it, at law
or in equity, against any party hereto, jointly with other parties hereto or
severally, without seeking recourse against any other party and without
exercising any right of offset.
62
ARTICLE XI MISCELLANEOUS
-------------
11.1 Termination. (a) This Agreement may be terminated at any time
-----------
prior to the Closing Date:
(i) by mutual consent of the parties hereto;
(ii) by HSI, by written notice given to SF and Olson, if
(A) any of the conditions set forth in Section 3.2 shall have become
incapable of fulfillment and shall not have been waived by HSI and/or
Silverman's or (B) there has been a material violation or breach by SF or
Olson of any agreement, representation or warranty contained in this
Agreement which has rendered the satisfaction of any condition to the
obligations of HSI or Silverman's impossible and such violation or breach
has not been waived by HSI or Silverman's, as the case may be; or
(iii) by Olson, acting on behalf of SF and himself, by
written notice given to HSI and Silverman's, if (A) any of the conditions
set forth in Section 3.3 shall have become incapable of fulfillment and
shall not have been waived by SF and Olson or (B) there has been a material
violation or breach by HSI or Silverman's of any agreement, representation
or warranty contained in this Agreement which has rendered the satisfaction
of any condition to the obligations of SF or Olson impossible and such
violation or breach has not been waived by Olson, acting on behalf of SF
and himself;
(iv) by any of the parties hereto:
(A) if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to vacate), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable; or
(B) if the Closing Date shall not have occurred on or
before June 30, 1996; provided, however, that the right to terminate this
-------- -------
Agreement shall not be available to any party whose breach of this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
(b) In the event of termination pursuant to Section 11.1(a) of
this Agreement, written notice thereof shall forthwith be given as therein
provided and this Agreement shall terminate, without further action by any of
the parties hereto. If this Agreement is terminated as provided herein:
63
(i) Upon request therefor, each party will redeliver all
documents, work papers and other material of any other party relating to
the transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(ii) no party hereto shall have any liability or further
obligation to any other party to this Agreement resulting from such
termination except (A) that the provision of this Section 11.1(b) and the
proviso of Section 11.1(a)(iv)(B) of this Agreement shall remain in full
force and effect and (B) no party waives any claim or right against a
breaching party to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement; and
(iii) no party hereto shall use any confidential or
proprietary information of any other party hereto which information was
acquired solely in connection with the transactions contemplated hereby for
the use in such party's business.
11.2 Expenses. Each party hereto shall pay its own expenses incurred
--------
in connection with this Agreement, except as otherwise specified in this
Agreement and except that all sales, transfer and other similar taxes, levies
and charges that may be imposed, levied or assessed in connection with the
consummation of the transactions contemplated hereby shall be borne by SF and
Olson with respect to the Acquired Assets.
11.3 Amendment. This Agreement may not be terminated, amended,
---------
altered or supplemented except by a written agreement executed by the parties
hereto.
11.4 Entire Agreement. This Agreement, including the schedules and
----------------
exhibits hereto, and the instruments and other documents delivered pursuant to
this Agreement contains the entire agreement of the parties relating to the
subject matter of this Agreement and supersedes all prior agreements and
understandings of any kind between the parties respecting such subject matter.
Each and every representation, warranty and covenant shall be deemed to include
the information contained in the schedules thereto.
11.5 Waivers. Waiver by either party of either breach of or failure
-------
to comply with any provision of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other provision of this
Agreement. No waiver of any such breach or failure or of any term or condition
of this Agreement shall be effective unless in a written notice signed by the
waiving party and delivered, in the manner required for notices generally, to
each affected party.
64
11.6 Notices. All notices, consents, directions, approvals,
-------
instructions, requests and other communications required or permitted by the
terms of this Agreement to be given to any Person shall be in writing, and any
such communication shall become effective five Business Days after being
deposited in the United States mails, certified or registered, with appropriate
postage prepaid for first class mail or, if delivered by hand or courier service
or in the form of a telex, telecopy or telegram, when received (if received
during normal business hours on a Business Day, or if not, then on the next
Business Day thereafter), and shall be directed to the following address or
telex or telecopy number:
If to SF or Olson:
San Francisco Dental Supply, Inc.
2201 South Oneida Street
Green Bay, Wisconsin 54304
Attention: Larry Olson
Telecopier: (414) 494-3386
With copies to:
Hanaway, Ross, Hanaway,
Weidner & Bachhuber, S.C.
345 S. Jefferson Street
Green Bay, Wisconsin 54301-4522
Attention: William S. Woodward, Esq.
Telecopier: (414) 432-4037
If to HSI or Silverman's:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
Telecopier: (516) 843-5675
With copies to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Richard L. Goldberg, Esq.
Telecopier: (212) 969-2900
or to such other address as a party may have furnished to the other parties in
writing in accordance herewith, except that notices of change of address shall
only be effective upon
65
receipt. Any notice which is so mailed shall be deemed delivered on the fourth
Business Day (or Days) after mailing; any notice which is transmitted by
telecopier shall be deemed delivered when transmitted to the telecopier number
specified above and acknowledgement of receipt of such facsimile is received.
11.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, and by the different parties hereto in separate counterparts each
of which when executed shall be deemed to be an original, but all of which
together shall constitute one and the same document.
11.8 Governing Law; Submission to Jurisdiction. This Agreement shall
-----------------------------------------
be governed by, and construed in accordance with, the law of the State of New
York, without regard to applicable principles of conflict of laws that might
otherwise govern. Each of SF and Olson hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State Court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. Each of SF and Olson irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
11.9 Binding Effect; Assignment. This Agreement shall be binding
--------------------------
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, that none of SF or Olson shall assign or
--------
transfer this Agreement nor any right or obligation hereunder by operation of
law or otherwise; further provided, that either HSI or Silverman's, in their
------- --------
sole discretion, may (a) prior to the Closing Date, assign all or a portion of
its rights hereunder to an Affiliate or Affiliates without the consent of SF or
Olson and (b) after the Closing Date, may assign all or a portion of its rights
hereunder to any Person without the consent of SF or Olson; further provided,
------- --------
that no assignment shall relieve HSI or Silverman's of its obligations
hereunder.
11.10 Severability. Any provision of this Agreement that shall be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties to such instrument waive any provision of law
that renders any provision thereof prohibited or unenforceable in any respect.
11.11 Headings. The headings contained in this Agreement (including
--------
the exhibits and schedules) are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
66
11.12 No Partnership; Etc. Nothing contained in this Agreement
--------------------
shall constitute or be deemed a representation, agreement or understanding that
the parties hereto are members of any partnership, joint venture, association,
syndicate or other entity, and each of the parties hereto expressly disclaims
the existence of any such relationship or arrangement.
11.13 Third Parties. Nothing herein is intended or shall be
-------------
construed to confer upon or give to any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.
67
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
SAN FRANCISCO DENTAL SUPPLY, INC.
By:__________________________________
Authorized Officer
_____________________________________
Larry Olson
HENRY SCHEIN, INC.
By:__________________________________
Authorized Officer
SILVERMAN'S DENTAL SUPPLY CORP.
By:__________________________________
Authorized Officer
68
Schedule 2.3(c)
(SF Excluded Liabilities)
-------------------------
1. Legal, accounting, brokerage, finder's fees, taxes or other
expenses incurred by SF, Olson or any of their respective Affiliates in
connection with this Agreement or the consummation of the transactions
contemplated hereby;
2. Any intercompany debt or other liability or obligation of any
nature between Olson and any past or present Affiliate, on the one hand, or SF
and any past or present Affiliate, on the other hand;
3. Liabilities or obligations incurred by SF after the Closing;
4. Any obligation or liability relating to any litigation or any
claim arising out of any dispute, whether or not listed on any schedule hereto
and regardless of whether accruing prior or subsequent to the Closing;
5. Any liability for any federal, state, local or foreign income or
other Taxes accrued to or incurred by Olson or SF or any of their respective
Affiliates or relating to the SF/Robin Business, the SF Designated Territory
Related Business or the Ex-Territory Business, operations, products or assets of
Olson or SF or any of their respective Affiliates, or as a consequence of the
transactions contemplated hereby;
6. Any liability or costs (including, without limitation, costs of
remediation) arising out of or relating to a Hazardous Discharge or the release,
discharge or disposal of any solid wastes or the handling, storage, use,
transportation or disposal of any of the foregoing, as these terms are defined
by the Environmental Laws in, on, under or from facilities of SF at any time
prior to the Closing regardless of whether such liability or costs arise before
or after Closing and whether or not in breach of any representation or warranty
under this Agreement;
7. Any liability or obligation to employees, government agencies or
other third parties in connection with any Employee Benefit Plan, option plan,
pension plan or any other ERISA plan, or other Employee Benefit Plan and any
health, dental or life insurance benefits, whether or not insured and whether or
not disclosed on any schedule hereto;
8. Any liability or obligation under any contract or commitment that
is not an Assumed Contract or under any SF/Robin Contract which relates to any
default in respect of such contract or other commitment or obligation of SF
prior to the Closing Date;
9. Any liability or obligation to employees in the nature of
workmen's compensation relating to the period prior to the Closing, whether or
not listed on any Schedule hereto and regardless of whether accruing prior or
subsequent to the Closing;
10. Any accounts payable, notes payable, bank debts, and/or debt to
any officer, director or stockholder of SF;
11. Any liability or obligation of any nature of SF or any of its
Affiliates owed or claimed by any FM Dental Related Party relating to the
Purchased Inventory or otherwise.
12. Any liability or obligation of any nature of SF or any of its
Affiliates owned or claimed by Above the Rest, Inc. or any of its Affiliates
relating to the transactions contemplated by the Agreement or otherwise.
13. Any other liability not expressly included as an Assumed
Contract.
EXHIBIT 10.95
ACQUISITION AGREEMENT
dated as of May 23, 1996
Between
HENRY SCHEIN, INC.,
and
PATTISON-MCGRATH COMPANY DENTAL SUPPLIES
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II SALE AND PURCHASE OF INVENTORY; SALE AND PURCHASE OF
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Purchase of Inventory . . . . . . . . . . . . . . . . . 9
2.2 Purchase of the Business. . . . . . . . . . . . . . . . 10
2.3 Allocation of Purchase Price . . . . . . . . . . . . . 12
2.4 Nonassignable Contracts and Authorizations . . . . . . 12
2.5 Guarantee of Performance by Pattison . . . . . . . . . 13
2.6 Pattison Bridge Loan . . . . . . . . . . . . . . . . . 13
ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 The Closing . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Obligations of Pattison . . . . . . . . . . . . . . . . 13
3.3 Obligations of HSI . . . . . . . . . . . . . . . . . . 15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PATTISON . . . . . . 15
4.1 Organization and Qualification . . . . . . . . . . . . 15
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Financial Statements and Sales Information . . . . . . 16
4.5 Absence of Certain Changes or Events . . . . . . . . . 16
4.6 Assets . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Real Property . . . . . . . . . . . . . . . . . . . . . 17
4.8 Intellectual Property . . . . . . . . . . . . . . . . . 17
4.9 Contracts and Commitments . . . . . . . . . . . . . . . 17
4.10 Accounts Receivable . . . . . . . . . . . . . . . . . . 18
4.11 Inventory . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Customers and Suppliers . . . . . . . . . . . . . . . . 18
4.13 Litigation, Etc. . . . . . . . . . . . . . . . . . . . 18
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . 19
4.15 Compliance with Law; Necessary Authorizations . . . . . 19
4.16 Finders . . . . . . . . . . . . . . . . . . . . . . . . 19
4.17 Consents and Approvals of Governmental Authorities . . 19
4.18 Related Party Transactions; Intercompany Accounts . . . 20
(i)
PAGE
ARTICLE V REPRESENTATIONS AND WARRANTIES OF HSI . . . . . . . . . . 20
5.1 Organization and Qualification . . . . . . . . . . . . 20
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 No Breach . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 HSI Financial Statements and Sales Information . . . . 21
5.5 Finders . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 21
6.1 Certain Covenants of Pattison . . . . . . . . . . . . . 21
6.2 Obtaining Consents . . . . . . . . . . . . . . . . . . 22
6.3 Transfer and Retention of Records . . . . . . . . . . . 22
6.4 Product Replacement and Repairs . . . . . . . . . . . . 22
6.5 Employee Matters . . . . . . . . . . . . . . . . . . . 22
6.6 Further Assurances . . . . . . . . . . . . . . . . . . 23
6.7 Name Change . . . . . . . . . . . . . . . . . . . . . . 23
6.8 Use of Facilities . . . . . . . . . . . . . . . . . . . 23
6.9 No Encumbrance on Premises . . . . . . . . . . . . . . 23
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF HSI . . . . . . . . . 23
7.1 Representations and Warranties Accurate . . . . . . . . 23
7.2 Performance by SF and Pattison . . . . . . . . . . . . 23
7.3 Certificate . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Opinions of Counsel for Pattison . . . . . . . . . . . 24
7.5 Authorization; Legal Prohibition . . . . . . . . . . . 24
7.6 Consents . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Closing Deliveries . . . . . . . . . . . . . . . . . . 24
7.8 Absence of Adverse Changes . . . . . . . . . . . . . . 24
7.9 Actions by Pattison . . . . . . . . . . . . . . . . . . 24
7.10 Additional Documents, Etc. . . . . . . . . . . . . . . 25
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF PATTISON . . . 25
8.1 Representations and Warranties Accurate . . . . . . . . 25
8.2 Performance by Buyer . . . . . . . . . . . . . . . . . 25
8.3 Certificate . . . . . . . . . . . . . . . . . . . . . . 25
8.4 Legal Prohibition . . . . . . . . . . . . . . . . . . . 25
8.5 Closing Deliveries . . . . . . . . . . . . . . . . . . 25
8.6 Additional Documents, Etc. . . . . . . . . . . . . . . 25
(ii)
PAGE
ARTICLE IX RESTRICTIVE COVENANTS . . . . . . . . . . . . . . . . . . . 26
9.1 Non-Solicitation of Employees . . . . . . . . . . . . . 26
9.2 Non-Solicitation or Interference with Customers
and Suppliers . . . . . . . . . . . . . . . . . . . . . 26
9.3 Acknowledgements . . . . . . . . . . . . . . . . . . . 26
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 26
10.1 Survival of Representations and Warranties . . . . . . 26
10.2 Indemnification by Pattison . . . . . . . . . . . . . . 26
10.3 Indemnification by HSI . . . . . . . . . . . . . . . . 27
10.4 Indemnification Procedures . . . . . . . . . . . . . . 27
ARTICLE XI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 29
11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . 29
11.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . 29
11.3 Entire Agreement . . . . . . . . . . . . . . . . . . . 29
11.4 Waivers . . . . . . . . . . . . . . . . . . . . . . . . 29
11.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . 29
11.6 Counterparts . . . . . . . . . . . . . . . . . . . . . 30
11.7 Governing Law; Submission to Jurisdiction . . . . . . . 31
11.8 Binding Effect; Assignment . . . . . . . . . . . . . . 31
11.9 Severability . . . . . . . . . . . . . . . . . . . . . 31
11.10 Headings . . . . . . . . . . . . . . . . . . . . . 31
11.11 No Partnership; Etc. . . . . . . . . . . . . . . . 31
11.12 Third Parties . . . . . . . . . . . . . . . . . . 31
(iii)
EXHIBITS AND SCHEDULES
Exhibits
1.57 Pattison Specified Contracts
2.5 SF Guaranty
2.6 Pattison Note
3.2(a) Opinion of Counsel for Pattison and Olson
3.2(b) Bill of Sale to HSI
3.2(c) Assignment Agreement
3.2(j) Security Agreement
3.2(l) Acknowledgement and Waiver Letters
3.3(c) Assumption Agreement in favor of Pattison from HSI
Schedules
1.6(a) Pattison Contracts
1.6(b) Pattison Excluded Assets
2.2(e) Pattison Excluded Liabilities
2.6(b) Life Insurance Policies
4.3 No Breach
4.4A Pattison Financial Statements
4.4B Pattison Financial Statements - Exceptions to Generally Accepted
Accounting Principles
4.5 Absence of Certain Changes or Events
4.6 Certain Excluded Assets
4.7 Real Property
4.8 Intellectual Property
4.9 Pattison/Robin Contracts
4.10 Accounts Receivable
4.11 Inventory
4.12 Customers and Suppliers - Adverse Change, etc.
4.13 Litigation, etc.
4.14 Employee Benefit Plans
4.15(a) Compliance with Law
4.15(b) Authorizations
4.17 Consents and Approvals of Governmental Authorities
4.18 Related Party Transactions
5.4A HSI Financial Statements
5.4B HSI Financial Statements - Exceptions to Generally Accepted
Accounting Principles
(iv)
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of May 23, 1996 (the "Agreement"), by
and between Henry Schein, Inc., a Delaware corporation ("HSI"), and Pattison-
McGrath Company Dental Supplies, a Missouri corporation ("Pattison").
WITNESSETH
WHEREAS, Pattison owns and operates the Business (as hereinafter
defined); and
WHEREAS, Pattison is a wholly-owned subsidiary of San Francisco Dental
Supply, Inc., a California corporation ("SF"), and will be merged with and into
SF as soon as practicable after the date hereof (the "Merger"); and
WHEREAS, Pattison desires to sell and transfer, and HSI desires to
purchase and acquire, certain of Pattison's assets used in connection with the
Business, all on the terms and conditions set forth herein; and
WHEREAS, the parties hereto and certain of their respective affiliates
have concurrently entered into that certain Acquisition Agreement, dated of even
date herewith (the "HSI/SF Agreement"), pursuant to which, among other things,
HSI shall acquire certain specified assets and businesses from SF; and
WHEREAS, the parties hereto have previously entered into that certain
Acquisition Agreement, dated of even date herewith (the "Original Agreement"),
by means of their execution and delivery of that certain Agreement, dated of
even date herewith (the "Agreement"); and
WHEREAS, the parties hereto desire to enter into this Agreement to
amend and restate the Original Agreement as amended, modified and supplemented
by the Agreement and set forth their complete agreement and understanding with
respect to the subject matter hereof;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
ARTICLE I DEFINITIONS
-----------
The terms defined in this Article I, whenever used herein (including
the exhibits and schedules hereto, unless otherwise defined therein), shall have
the following meanings.
1.1 "Acquired Assets" shall mean, collectively, the Purchased
----------------
Inventory and the Pattison Assets.
1.2 "Affiliate" shall mean any Person that directly or indirectly
---------
controls, is controlled by or is under common control with another Person.
1.3 "Agreement" shall mean this Acquisition Agreement, including all
---------
Schedules and Exhibits hereto, in each case, as the same may be amended from
time to time.
1.4 "Agreement Date" shall mean May 23, 1996 which is the date on
--------------
which this Agreement shall be effective.
1.5 "Authorizations" shall mean all licenses, permits, approvals,
--------------
authorizations, qualifications, concessions or the like, issued by any federal,
state, local or foreign regulatory or governmental authorities.
1.6 "Business" shall mean all of Pattison's right, title and interest
--------
in and to all of the assets (wherever located, tangible and intangible
(including goodwill), real, personal or mixed of Pattison, whether known or
unknown and whether or not carried on the books and records of Pattison) and the
Business as a going concern (excluding only the assets specified in the proviso
below), including, but not limited to, the following (the "Pattison Assets"):
(a) all of Pattison's rights under agreements, arrangements,
commitments, and understandings ("Pattison Contracts") relating to the Business
as a going concern as conducted and which are set forth on schedule 1.6(a);
(b) all of Pattison's records, files and other data relating to
the Business as a going concern;
(c) all of Pattison's copyrights and all of Pattison's rights
in the trademarks, service marks, trade names and logos now or previously used
by Pattison in the Business as a going concern;
(d) all of Pattison's inventions, computer software, trade
secrets and confidential data relating to the Business as a going concern;
(e) all rights to the name "Pattison" and all names derivative
therefrom (the "Pattison Name");
2
(f) all of Pattison's equipment (including office equipment),
computers, furniture, fixtures, leasehold improvements, stationery, forms,
labels, promotional materials and similar supplies used by Pattison in the
Business as a going concern;
(g) all other tangible assets owned by Pattison wherever
located;
(h) customer lists, customer sales orders and sales leads,
customer shipping labels and forms, customer sales and vendor purchase
histories, catalogs, brochures, mailing lists, advertising materials, records,
files, computer software, and other information pertaining to Pattison or the
Business or the customers and suppliers thereto;
(i) to the extent transferable, all manufacturer's warranties
with respect to any of the foregoing;
(j) all Authorizations relating to the Business;
(k) all "800 numbers"; and
(l) all claims against third parties;
provided, however, that the term "Business" shall not include (i) the minute
- -------- -------
books and stock ledger of Pattison; (ii) cash and cash equivalents on hand or in
banks and debt and equity securities; (iii) Pattison's accounts receivable or
Non-Matching Inventory which is not designated as Optional Pattison Inventory,
(iv) the assets specifically listed on Schedule 1.6(b) hereto or (v) life
insurance policies.
1.7 "Business Day" shall mean any day other than a Saturday, Sunday
------------
or other day on which banks are closed or are authorized to be closed in New
York, New York.
1.8 "Buyer Claimant" shall have the meaning set forth in Section 10.2
--------------
of this Agreement.
1.9 "Closing" shall mean the closing of the purchase and sale of the
-------
Acquired Assets and the Business as contemplated by this Agreement.
1.10 "Closing Date" shall have the meaning set forth in Section 3.1 of
------------
this Agreement.
1.11 "Closing Inventory Report" shall have the meaning set forth in
------------------------
Section 2.1.3(a) of this Agreement.
3
1.12 "Closing Pattison Inventory Value" shall mean the Inventory
-----------------------------------
Purchase Price of all Purchased Inventory as of the Closing Date as determined
in accordance with Section 2.1.3(b).
1.13 "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
1.14 "Employee Benefit Plan" means any "employee benefit plan" within
----------------------
the meaning of Section 3(3) of ERISA, and any other bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, medical, post-retirement health or welfare benefit, medical
reimbursement, health, life, stock option, stock purchase, tuition refund,
service award, company car, scholarship, relocation, disability, accident, sick
pay, sick leave, vacation, termination, individual employment, executive
compensation, incentive, bonus, commission, payroll practices, retention or
other plan, agreement, policy, trust fund or arrangement, whether written or
unwritten, and whether maintained, sponsored or contributed to by Pattison or
any entity that would be deemed a "single employer" with Pattison under Section
414(b), (c), (m) or (o) of the Code or Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") on behalf of any of the current, former or retired employees of
Pattison or their beneficiaries or with respect to which Pattison or any ERISA
Affiliate of Pattison has or has had any obligation on behalf of any such
employee or beneficiary.
1.15 "Employment Agreement" shall mean the Employment Agreement, dated
--------------------
as of the Agreement Date, by and between HSI and Tom McGrath.
1.16 "Encumbrance" shall mean any lien, charge, restriction, encum-
-----------
brance, option, right of first refusal, security interest, easement, obligation
or claim or other third party right of any kind.
1.17 "Environment" shall mean any surface or subsurface physical
-----------
medium or natural resource, including, air, land, soil, surface waters, ground
waters, stream and river sediments, and biota.
1.18 "Environmental Laws" shall mean any federal, state, local or
-------------------
foreign law, rule, regulation, ordinance, code, order or judgment (including the
common law and any judicial or administrative interpretations, guidances,
directives or opinions) relating to the injury to, or the pollution or
protection of human health and safety or the Environment.
1.19 "Environmental Liabilities" shall mean any claims, judgments,
--------------------------
damages (including punitive damages), losses, penalties, fines, liabilities,
encumbrances, liens, violations, costs and expenses (including attorneys' and
consultants' fees) of investigation, remediation or defense of any matter
relating to human health, safety or the Environment of whatever kind or nature
by any party, entity or authority, (a) which are incurred as a result of (i) the
existence of Hazardous Substances in, on, under, at or
4
emanating from any real property presently or formerly owned or operated by
Pattison or any of its Affiliates, (ii) the offsite transportation, treatment,
storage or disposal of Hazardous Substances generated by Pattison or any of its
Affiliates, or (iii) the violation of any Environmental Laws or (b) which arise
under the Environmental Laws.
1.20 "ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended, and the regulations thereunder.
1.21 "ERISA Affiliate" shall have the meaning set forth in Section
---------------
1.15 of this Agreement.
1.22 "Estimated Closing Pattison Inventory Value" shall mean an
----------------------------------------------
estimate of the Inventory Purchase Price of all Purchased Inventory as of the
Closing Date prepared in good faith by Pattison in accordance with Section
2.1.3(a).
1.23 "Estimated Pattison Sales" shall mean an estimate of the Pattison
------------------------
Sales prepared in good faith by HSI in accordance with Section 2.2(d).
1.24 "Estimated Pattison Sales Statement" shall have the meaning set
-----------------------------------
forth in Section 2.2(d).
1.25 "Excluded Liabilities" shall mean all liabilities or obligations
--------------------
of SF, Pattison or the Business of any kind whatsoever, except the HSI Assumed
Liabilities.
1.26 "Final Value" shall mean the sum of (i) the Closing Pattison
------------
Inventory Value and (ii) the product of (x) Pattison Sales and (y) 25%.
1.27 "Financial Statements" shall mean, in the case of Pattison, its
--------------------
unaudited compiled financial statements as of February 29, 1996, February 28,
1995 and February 28, 1994.
1.28 "GAAP" shall mean generally accepted accounting principles
----
consistently applied.
1.29 "Hazardous Discharge" shall mean any releasing, spilling,
--------------------
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, migrating, disposing or dumping (including the movement of any
material through or in air, soil, surface or groundwater) of Hazardous
Substances, whether on, off, under or from the Real Property or any other real
property owned, operated, leased or used at any time by Pattison or any of its
predecessors.
1.30 "Hazardous Substances" shall mean petroleum, petroleum products,
--------------------
petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, urea formaldehyde, asbestos or any
materials containing
5
asbestos, and any materials, wastes or substances regulated or defined as or
included in the definition of "hazardous substances," "hazardous materials,"
"hazardous constituents," "toxic substances," "pollutants," "contaminants" or
any similar denomination intended to classify substances by reason of toxicity,
carcinogenicity, ignitability, corrosivity or reactivity under any Environmental
Laws.
1.31 "HSI" shall mean Henry Schein, Inc., a Delaware corporation.
---
1.32 "HSI Assumed Liabilities" shall have the meaning set forth in
------------------------
Section 2.2(b).
1.33 "HSI Closing Documents" shall have the meaning set forth in
----------------------
Section 5.2.
1.34 "HSI Financial Statements" shall mean the audited consolidated
-------------------------
financial statements of HSI as of December 25, 1993, December 31, 1994 and
December 30, 1995, and for each of the fiscal years then ended.
1.35 "HSI Material Adverse Effect" shall mean any material adverse
----------------------------
effect, individually or in the aggregate, on the condition (financial or
otherwise), business, assets, operations or prospects of HSI and its
subsidiaries, taken as a whole.
1.36 "HSI/Pattison Closing Sales Payment Amount" shall have the
---------------------------------------------
meaning set forth in Section 2.2(d).
1.37 "Indemnitee" and "Indemnitor" shall have the meanings set forth
---------- ----------
in Section 10.4(a) of this Agreement.
1.38 "Ineligible Inventory" shall mean all Inventory which is
---------------------
obsolete, damaged, excessive, below standard quality or slow moving (i.e., items
----
that are for discontinued or expected to be discontinued product lines, or have
a stated expiration date of 6 months or less from the Closing Date, or items
that have not been used or sold within 6 months prior to the date hereof, or
items that have not been sold within the customary inventory turnover cycle of
Pattison with respect to such item, or items for which there is excess capacity
(i.e., more products are on hand of any such item than have been sold in the
----
past nine (9) months)).
1.39 "Intellectual Property" shall mean all United States and foreign
----------------------
patents and pending patent applications, unpatented inventions, trademarks,
service marks and trade names, including, without limitation, the marks and
patents described on Schedule 4.8 of this Agreement, and copyrights, and
registrations and pending applications therefor, and all trade secrets, trade
names, computer programs and software, research and development, know-how,
customer lists, manufacturing, engineering and other drawings and blueprints,
technology, technical information, engineering data,
6
design and engineering specifications, inventions and other proprietary
processes and information of any kind owned by Pattison or in which Pattison has
a proprietary or ownership or usage right, and all software necessary or
desirable to operate equipment included in the Acquired Assets, all as set forth
on Schedule 4.8 of this Agreement.
1.40 "Inventory" shall mean all inventory and related items (including
---------
all production, shipping and packaging supplies) relating to or used or useful
in connection with the Business.
1.41 "Inventory Dispute Statement" shall have the meaning set forth in
---------------------------
Section 2.1.3(b) of this Agreement.
1.42 "Inventory Disputed Items" shall have the meaning set forth in
------------------------
Section 2.1.3(b) of this Agreement.
1.43 "Inventory Purchase Price" shall mean the lower of (x) the
--------------------------
Invoice Price or (y) market price of all Purchased Inventory goods and products
other than Ineligible Inventory, minus an inventory reserve computed in
accordance with GAAP.
1.44 "Invoice Price" shall mean, in the case of Purchased Inventory,
-------------
finished goods and products other than Ineligible Inventory, the last actual
purchase price in accordance with Pattison's customary accounting principles
(after giving effect to any actual discounts or allowances (including cash
discounts and vendor rebates)) immediately prior to the Closing Date at which
Pattison purchased such Inventory from a non-Related Party.
1.45 "IRS" shall mean the Internal Revenue Service (or any successor
---
agency thereto).
1.46 "Losses" shall have the meaning set forth in Section 10.2 of this
------
Agreement.
1.47 "Material Adverse Effect" shall mean any material adverse effect,
-----------------------
individually or in the aggregate, on the condition (financial or otherwise),
business, assets, operations or prospects of the Business or the Acquired
Assets.
1.48 "Net Sales" shall mean net sales (as determined in accordance
----------
with GAAP, taking into account any returns and allowances) of dental supplies
and equipment (other than software).
1.49 "Non-Compete Agreement" shall mean the Noncompete Agreement,
----------------------
dated as of the Agreement Date, by and among HSI, and Thomas McGrath and Donald
McGrath.
7
1.50 "Non-Matching Inventory" shall mean any Inventory owned or held
----------------------
by Pattison which is not Pattison Like Kind Inventory or Ineligible Inventory.
1.51 "Optional Pattison Inventory" shall mean all Inventory owned by
---------------------------
Pattison which is not Pattison Like Kind Inventory; provided, however, that the
-------- -------
Optional Pattison Inventory shall not include any Ineligible Inventory.
1.52 "Pattison" shall mean Pattison-McGrath Company Dental Supplies, a
--------
Missouri corporation.
1.53 "Pattison Contracts" shall have the meaning set forth in Section
------------------
4.9.
1.54 "Pattison Closing Documents" shall have the meaning set forth in
--------------------------
Section 4.2.
1.55 "Pattison Like Kind Inventory" shall mean all Inventory owned by
----------------------------
Pattison relating to or useful in connection with the Business which (i) matches
a stock keeping unit currently sold by HSI and/or (ii) is large dental
equipment, and which is not, in either case, Ineligible Inventory.
1.56 "Pattison Sales" shall mean the sum of the Net Sales of Pattison
--------------
to non-Related Parties for the 12-month period ending February 29, 1996.
1.57 "Pattison Specified Contracts" shall mean, collectively, the
------------------------------
promissory notes attached to, or referred to in, Exhibit 1.57.
1.58 "Permitted Encumbrances" means mechanics', carriers', workmen's,
----------------------
repairmen's and other similar liens arising or incurred in the ordinary course
of business, purchase money liens arising in the ordinary course of business and
liens for taxes, assessments and other governmental charges not due and payable
or that may be paid without penalty.
1.59 "Person" shall mean any natural person, corporation, limited or
------
limited liability partnership, general partnership, joint venture, association,
joint-stock company, limited liability company, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any governmental unit or agency or political subdivision
thereof.
1.60 "Prime Rate" shall mean the fluctuating prime or base rate
-----------
publicly announced from time to time by The Chase Manhattan Bank, N.A. (or any
successor thereto).
1.61 "Purchased Inventory" shall mean all Inventory purchased by HSI
-------------------
pursuant to Section 2.1.1.
8
1.62 "Real Property" shall mean the real property and interest in real
-------------
property described on Schedule 4.7 held by Pattison and the plants, buildings,
structures, storage tanks, erections and improvements of all kinds made to,
located on or forming a part of the real property and interests in real property
(including, without limitation, all fixtures), together with all easements,
rights-of-way, appurtenances and tenements to, on or otherwise beneficial to the
use of such real property or interests in real property or in the operation of
the Business.
1.63 "Related Party" shall have the meaning set forth in Section 4.18
-------------
of this Agreement.
1.64 "Securities Act" shall mean the Securities Act of 1933, together
--------------
with the rules and regulations promulgated thereunder.
1.65 "Seller Claimant" shall have the meaning set forth in Section
---------------
10.3 of this Agreement.
1.66 "SF" shall mean San Francisco Dental Supply, Inc., a California
--
corporation.
1.67 "SF Business" shall mean the distribution of dental supplies and
-----------
equipment by SF.
1.68 "Stock Purchase Agreement" shall mean the Stock Purchase
---------------------------
Agreement, dated as of April 30, 1996, among SF and the shareholders of
Pattison.
1.69 "Taxes" (or "Tax" where the context requires) shall mean all
-----
federal, state, local, foreign or other taxes, duties, or similar charges
(including, without limitation, income (whether net or gross), profits, premium,
estimated, excise, sales, use, environmental (including taxes under Code Section
59A), occupancy, franchise, license, value added stamp, windfall profits, social
security, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, gains, withholding, occupation, employment and payroll
related and property taxes, alternative or add-on, minimum or estimated, import
and export duties and other governmental charges and assessments) imposed by any
taxing or governmental authority on or payable by Pattison or any other party
with respect to the income, operations, products, assets or properties of
Pattison, whether attributable to statutory or nonstatutory rules and whether or
not measured in whole or in part by net income, and including interest,
additions to tax or interest, and penalties with respect thereto, and including
expenses associated with contesting any proposed adjustment related to any of
the foregoing.
1.70 "Undisputed Pattison Sales" shall have the meaning set forth in
-------------------------
Section 2.2(e).
9
ARTICLE II SALE AND PURCHASE OF INVENTORY; SALE AND PURCHASE OF
------------------------------------------------------
BUSINESS
--------
2.1 Purchase of Inventory.
---------------------
2.1.1 Purchased Inventory. (a) Upon terms and subject to the
-------------------
conditions hereof, upon the basis of the agreements, representations and
warranties contained in, and the schedules and exhibits to, this Agreement, at
the Closing, Pattison shall sell, transfer, assign, convey, and deliver to HSI,
and HSI shall purchase and acquire from Pattison, all of the Pattison Like Kind
Inventory, free and clear of all Encumbrances.
(b) At the Closing, at the option of HSI (the exercise of which
shall be in the sole and absolute discretion of HSI), HSI may purchase and
acquire from Pattison, and, if HSI exercises such option, Pattison shall sell,
transfer, assign, convey and deliver to HSI, all or such portion of the Optional
Pattison Inventory as shall be designated by HSI, free and clear of all
Encumbrances.
2.1.2 Closing Inventory. (a) Within twenty (20) Business Days
------------------
after the Closing Date, Pattison shall complete preparation of an inventory
report (by SKU number, quantity and Invoice Price) setting forth the Estimated
Closing Pattison Inventory Value (such inventory report is hereinafter referred
to as the "Closing Inventory Report").
(b) Upon completion of the Closing Inventory Report, Pattison
will deliver the Closing Inventory Report to HSI. Following receipt of the
Closing Inventory Report, HSI will have a period of thirty (30) Business Days
after the receipt thereof to review the Closing Inventory Report. At or before
the end of such review period, HSI will either (i) accept the Closing Inventory
Report in its entirety, in which case the Closing Pattison Inventory Value shall
be deemed to be equal to the Estimated Closing Pattison Inventory Value as set
forth in the Closing Inventory Report or (ii) deliver to Pattison a written
explanation (the "Inventory Dispute Statement") of those items in the Closing
Inventory Report which HSI in good faith disputes (the "Inventory Disputed
Items"), in which case the Estimated Closing Pattison Inventory Value not
affected by Inventory Disputed Items shall be deemed to be as set forth in the
Closing Inventory Report. Within a further period of thirty (30) Business days
from the date on which the Inventory Dispute Statement is delivered by HSI, the
parties will attempt to resolve in good faith any Inventory Disputed Items. In
the absence of such resolution by the last day of such thirty (30) Business Day
period, the unresolved Inventory Disputed Items will be referred for final
binding resolution by the Third Accountants. Each of HSI and Pattison shall be
entitled to make a brief supplemental oral presentation to the Third
Accountants. The Closing Pattison Inventory Value affected by any Inventory
Disputed Items will be determined by the Third Accountants within thirty (30)
days of such reference based upon the definitions of Inventory, Closing Pattison
Inventory Value, Inventory Purchase Price, Invoice Price, and Ineligible
Inventory as set forth herein. The
10
determination of such firm will be final, binding, non-appealable and
uncontestable by the parties hereto and will not be subject to collateral attack
for any reason. Promptly after the determination by the Third Accountants, the
Pattison Note (as such term is defined in Section 2.6) shall be adjusted as set
forth in Section 2.6. The fees and expenses of the Third Accountants shall be
paid one-half by HSI and one-half by Pattison.
2.2 Purchase of the Business. (a) At the Closing, and in accordance
------------------------
with the terms and provisions of this Agreement, Pattison will assign, transfer,
convey and deliver to HSI, and HSI will acquire from Pattison, all of Pattison's
right, title and interest in and to the Pattison Assets and the Business as a
going concern, free and clear of all Encumbrances (other than Permitted
Encumbrances). Notwithstanding anything in this Agreement to the contrary,
Pattison is not assigning, transferring, conveying or delivering to HSI any of
the Pattison Excluded Assets.
(b) At the closing, and in accordance with the terms and
provisions of this Agreement, HSI is assuming and agreeing to pay, perform and
discharge only the following obligations and liabilities of Pattison relating to
the Business (the "HSI Assumed Liabilities"): all liabilities and obligations
of Pattison arising after the Closing Date under the Pattison Specified
Contracts.
(c) Except as specifically provided in Section 2.2(b), HSI is
not assuming, and shall not have any liability for, any liabilities or
obligations of Pattison or any liabilities or obligations which arose or may
arise out of the operations of the Acquired Assets or the Business or otherwise
prior to the Closing Date, and Pattison shall pay, perform and discharge all
such liabilities and obligations when due in the ordinary course of business.
Without limitation to the generality of the foregoing, HSI is not assuming, and
shall not have any liability, (a) for any income, franchise, sales, payroll,
withholding or other taxes of Pattison, (b) for any expenses of Pattison related
to the negotiation, preparation and execution of this Agreement or the
consummation of the transactions contemplated hereby, (c) as a "successor-in-
interest" to Pattison with respect to the Business, (d) for any accounts payable
of Pattison, or (e) for any matter or thing set forth on Schedule 2.2(e).
(d) As total consideration for the Purchased Inventory, and the
other assets and business being sold, transferred, conveyed and delivered to HSI
by Pattison pursuant to Sections 2.1 and 2.2, (i) HSI shall, at the Closing, pay
SF $500,000 (the "HSI/Pattison Closing Sales Payment Amount"), and assume the
HSI Assumed Liabilities and (ii) in connection with the assumption by HSI of the
HSI Assumed Liabilities, Pattison shall issue, execute and deliver the Pattison
Note (as such term hereinafter defined) and, within ten (10) days after the
determination of Pattison Sales and Closing Pattison Inventory Value, the
Pattison Note shall be adjusted as set forth in Section 2.6.
(e) Within thirty (30) Business Days after the Closing Date,
HSI shall prepare a statement (the "Estimated Pattison Sales Statement") setting
forth its
11
computation of Estimated Pattison Sales. In connection with the preparation of
such report, the authorized representatives of HSI shall have the right at
reasonable times and on reasonable notice, at the sole expense of HSI, to review
and/or audit the books and records of Pattison relating to the Estimated
Pattison Sales, as well as the work papers of its independent public
accountants, in each case solely for the purpose of computing the Estimated
Pattison Sales. Upon completion of the Estimated Pattison Sales Statement, HSI
will deliver the Estimated Pattison Sales Statement to SF. Following receipt of
the Estimated Pattison Sales Statement, Pattison will have a period of twenty
(20) Business Days to review the Estimated Pattison Sales Statement. If prior
to the end of such review period, Pattison in good faith disagrees with or
disputes the accuracy of the Estimated Pattison Sales, then Pattison shall
deliver to HSI a written statement and explanation of such disagreement or
dispute which sets forth in reasonable detail the good faith bases of any such
disagreement or dispute (a "HSI/Pattison Sales Dispute Statement" (and, to the
extent Estimated Pattison Sales are not subject to any HSI/Pattison Sales
Dispute Statement, such Estimated Pattison Sales are hereinafter referred to as
"Undisputed Pattison Sales")). If prior to the end of the above referenced
twenty (20) Business Day review period following receipt of the Estimated
Pattison Sales Statement, Pattison shall fail to deliver a HSI/Pattison Sales
Dispute Statement, then the Estimated Pattison Sales shall be deemed to equal
both the Pattison Sales and Undisputed Pattison Sales. If, however, Pattison
shall have delivered an HSI/Pattison Sales Dispute Statement prior to the end of
such review period, then HSI and Pattison will attempt in good faith to resolve
all differences with regard to the determination of Pattison Sales during the
next twenty (20) Business Day period commencing after the end of such review
period. If HSI and Pattison are unable to resolve such differences prior to the
expiration of such twenty (20) Business Day period (or such longer period if so
agreed by HSI and Pattison), the Pattison Sales shall be determined as set forth
in Section 2.2(f) of this Agreement.
(f) Written reports of disagreement or disputes with respect to
any amounts referred to in Section 2.3(d) shall be prepared in concise form by
HSI and Pattison and submitted, together with copies of any HSI/Pattison Sales
Dispute Statement, to the Third Accountants no later than ten (10) Business Days
following the last day of the twenty (20) Business Day period (or longer period
if so agreed) referred to in the last sentence of Section 2.2(e). Each of HSI
and Pattison shall also be entitled to make a brief supplemental oral
presentation to the Third Accountants regarding any such disagreement or
dispute. The Third Accountants shall be instructed by HSI and Pattison to
deliver a written report setting forth such Third Accountants' resolution of any
difference or dispute referred to it no later than thirty (30) Business Days
following the earlier of (i) such firm's receipt of the report of disagreement
or disputes submitted to it by HSI and Pattison pursuant to this Section 2.2(g)
and (ii) the last day permitted for the submission of such report as provided
above. The determination of the Third Accountants with respect to any
disagreement or dispute referred to it by HSI and Pattison as provided in this
Section 2.2(f) will be final, binding, non-appealable and uncontestable by the
parties hereto and will not be subject to collateral attack for any
12
reason. Promptly after the determination by the Third Accountants, the Pattison
Note shall be adjusted as set forth in Section 2.6.
2.3 Allocation of Purchase Price. The purchase price for the
-------------------------------
Acquired Assets shall be allocated for federal, state, local and foreign tax
purposes by each party among the Acquired Assets sold, transferred and assigned
hereunder and the covenant contained in the Non-Compete Agreement as determined
by HSI and approved by Pattison, acting on (such approval not to be unreasonably
withheld or delayed), not later than six (6) months after the Closing Date. For
all pertinent tax purposes each party hereto shall report the purchase and sale
and assignment provided for, and with the characterization given these
transactions, in this Agreement to taxing authorities on a basis consistent with
such allocation, and each party agrees not to take a position inconsistent with
such allocation. After the Closing, each of HSI and Pattison shall timely file
form 8594 with the IRS detailing this allocation. In the event that HSI
determines, subject to Pattison's reasonable approval, that any adjustments to
such allocation are necessary, Pattison shall make such modifications as are
necessary reporting the same on form 8594 (if required) or any tax report or
return filed or to be filed by Pattison in order to conform to HSI's allocation
as adjusted.
2.4 Nonassignable Contracts and Authorizations. To the extent that
-------------------------------------------
the assignment of any Pattison Contract or Authorization to be assigned to HSI
pursuant to this Agreement shall require the consent of any other party, this
Agreement shall not constitute a contract to assign the same if an attempted
assignment would constitute a breach thereof. Pattison shall use all reasonable
efforts, and HSI shall cooperate where appropriate, to obtain any consent
necessary to any such assignment where such consent is requested by HSI. If any
such consent is not obtained, Pattison shall cooperate with HSI in any
reasonable arrangement designed to provide for HSI the benefit, monetary or
otherwise, of any such Pattison Contract or Authorization including enforcement
of any and all rights of Pattison or the Business against the other party
thereto arising out of a breach or cancellation thereof by such other party or
otherwise.
2.5 Guarantee of Performance by Pattison. As a material inducement
-------------------------------------
to HSI to execute, deliver and perform its obligations under this Agreement,
from and after the Closing Date, SF unconditionally and irrevocably guarantees
the full payment and/or performance of each obligation of Pattison under this
Agreement (including, without limitation, the obligations of Pattison under
Section 10.2 hereof) and each of the other Pattison Closing Documents (including
the Pattison Note). This guaranty constitutes a guaranty of payment and
performance when due and not of collection, and SF specifically agrees that it
shall not be necessary or required that HSI (or any other Buyer Claimant)
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against Pattison before or as a condition to the obligations of SF hereunder.
At the Closing, SF shall execute and deliver a guaranty in the form of
Exhibit 2.5 hereto (the "SF Guaranty"). SF further acknowledges that it is its
intention to cause the merger of Pattison with and into SF as soon as
practicable after the date hereof and thereby
13
assume, and become liable for, all obligations of Pattison by law (including the
Pattison Note).
2.6 Pattison Bridge Loan. (a) At the Closing, Pattison shall
---------------------
execute and deliver its promissory note in the form of Exhibit 2.6 hereto (the
"Pattison Note") in an aggregate principal amount of $325,297.94; provided,
--------
however, that the original principal amount shall be subject to adjustment as
- -------
follows: (i) if the Final Value is greater than $1,450,000, then the face
amount of the Pattison Note shall be reduced by the amount by which the Final
Value exceeds such amount and (ii) if the Final Value is less than $1,450,000,
then the face amount of the Pattison Note shall be increased by the amount by
which the Final Value is less than such amount. If the event referred to in the
foregoing clause (i) is applicable, HSI hereby consents to any reduction of the
Pattison Note as a result thereof and if the event referred to in the foregoing
clause (ii) is applicable, Pattison hereby consents to an increase in the
Pattison Note as a result thereof, and, in either case, HSI and Pattison agree
to the exchange of a new promissory note to give effect to the applicable event.
(b) The Pattison Note shall be secured by an assignment in
favor of HSI of those certain life insurance policies listed on Schedule 2.6(b)
(the "Life Insurance Policies") and, at the election of HSI, an encumbrance on
the Real Property described on Schedule 4.7 hereto. If HSI elects to require
the imposition of an Encumbrance on such Real Property as additional security
for the Pattison Note, Pattison hereby agrees to execute such documentation as
shall be requested by HSI and its counsel to perfect such Lien.
ARTICLE III CLOSING
-------
3.1 The Closing. The Closing shall take place at 10:00 a.m. local
-----------
time on June 24, 1996 or on such other date as may be agreed upon in writing by
the parties hereto (the "Closing Date"), at the offices of counsel to HSI,
Proskauer Rose Goetz & Mendelsohn LLP ("Proskauer"), 1585 Broadway, New York,
New York.
3.2 Obligations of Pattison. At the Closing, Pattison shall deliver
-----------------------
to HSI the following:
(a) An opinion of Hanaway, Ross, Hanaway, Weidner & Bachhuber,
S.C., counsel to Pattison and SF, dated as of the Closing Date, in the form of
annexed hereto as Exhibit 3.2(a).
(b) Bill of Sale duly executed by Pattison, in the form annexed
hereto as Exhibit 3.2(b).
14
(c) An assignment, duly executed by SF and each of the former
shareholders of Pattison, pursuant to which SF shall assign to HSI, all of SF's
rights under the Stock Purchase Agreement, such assignment to be in the form
annexed hereto as Exhibit 3.2(c).
(d) FirstStar Financial shall have consented to the
consummation of the transactions contemplated by this Agreement and the Stock
Purchase Agreement, and HSI shall have received satisfactory evidence of such
consent.
(e) SF shall have delivered the duly executed Guaranty.
(f) Thomas McGrath shall have executed and delivered the
Employment Agreement.
(g) Thomas McGrath and Donald McGrath shall have executed the
Non-Compete Agreement.
(h) Pattison shall have delivered the duly executed Pattison
Note.
(i) Mercantile Bank of Kansas City ("Mercantile Bank") shall
have delivered to Pattison and HSI a duly executed release of all Encumbrances
against the Business and the Pattison Assets, and all outstanding indebtedness
owed to Mercantile Bank by Pattison shall have been repaid.
(j) Security Agreement duly executed by Pattison, in the form
annexed hereto as Exhibit 3.2(j), covering the Life Insurance Policies.
(k) Each of First Bank National Association ("FBNA") (or its
applicable affiliates), Thompson-Schwinghammer, Inc. (d/b/a "FM Dental Supply")
and John Thompson (collectively, the "FM Dental Related Parties") shall have
advised Pattison, SF and HSI in writing that it has no Encumbrance relating to
the Business or the Pattison Assets nor will it assert any purported Encumbrance
in the future; provided, however, if the FM Dental Related Parties shall not
-------- -------
have delivered written agreements to the foregoing effect satisfactory to HSI,
HSI may, in its sole discretion, consummate the Closing, but HSI may exercise
all of its rights described in the proviso to Section 3.2(i) of the HSI/SF
Agreement. Nothing in this Section 3.2(k) shall relieve Pattison from the
performance of any obligation owed by Pattison or SF to any FM Dental Related
Party or HSI, or impose any obligation on HSI to perform any such obligation on
behalf of Pattison or SF.
(l) Each of Norman E. Shepard, Robert D. Cowell, Donald M.
Shortess and Thomas J. McGowan shall have executed and delivered acknowledgment
and waiver letters to Pattison and HSI in the form annexed hereto as Exhibit
3.2(l).
15
(m) Such other instruments of assignment and conveyance as may
be necessary or appropriate to fully and effectively transfer the Acquired
Assets being transferred by Pattison in accordance with the terms of this
Agreement.
3.3 Obligations of HSI. At the Closing, HSI shall deliver to
--------------------
Pattison and SF the following (or cause the following to occur):
(a) The SF Closing Inventory Payment.
(b) The HSI/Pattison Closing Sales Payment Amount.
(c) Assumption Agreement, duly executed by HSI in the form
annexed hereto as Exhibit 3.3(c).
(d) HSI shall pay by wire transfer of funds to Mercantile Bank
the amount referred to in that certain pay-off letter included in the Pattison
Specified Contracts.
(e) HSI shall pay by wire transfer of funds to each of Thomas
McGrath, the amount of $45,882.46, the Estate of W.J. McGrath, the amount of
$31,415.48, Thomas McGrath, the amount of $28,000, Jack McGrath, the amount of
$10,000 and William McGrath, the amount of $10,000, in each case, in full
satisfaction of the promissory notes in such amounts included in the Pattison
Specified Contracts and HSI shall receive satisfactory receipts and releases
therefor. [SF Dental should obtain wire transfer instructions from the
McGraths.]
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PATTISON
------------------------------------------
Pattison hereby represents and warrants to HSI as follows:
4.1 Organization and Qualification. Pattison is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Missouri with full corporate power and authority to own, lease and operate its
properties and assets and to conduct the Business, as it is now being conducted.
Pattison is duly qualified as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the conduct of the business or the
ownership of its assets requires such qualification.
4.2 Authority. Pattison has all requisite corporate power and
---------
authority, to execute and deliver this Agreement and all documents,
certificates, agreements, instruments and writings related hereto (collectively,
the "Pattison Closing Documents") to which it is a party and to perform, carry
out and consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this
16
Agreement and the other Pattison Closing Documents have been duly authorized by
all necessary corporate action on the part of Pattison (including the unanimous
approval of SF, in its capacity as sole shareholder of Pattison). This
Agreement does, and when executed by Pattison, the other Pattison Closing
Documents shall, constitute the legal, valid and binding obligations of each of
Pattison, enforceable against Pattison in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws and by equitable principles.
4.3 No Breach. Subject to Section 8.5(b) and except as set forth on
---------
Schedule 4.3 hereto, neither the execution and delivery of this Agreement or the
other Pattison Closing Documents by Pattison nor the consummation of the
transactions contemplated hereby or thereby will: (a) violate any provision of
the Certificate of Incorporation or By-Laws or other organizational documents of
Pattison; (b) conflict with, result in a breach of or constitute a default (or
an event which, with or without notice, lapse of time or both, would constitute
a default) under any material agreement, document, certificate or other
instrument to which Pattison is a party or by which Pattison or any of its
properties or assets (including the Acquired Assets) is subject or bound;
(c) result in the creation of, or give any party the right to create, any
Encumbrance upon assets or properties of Pattison (including the Acquired
Assets); (d) conflict with, violate, result in a breach of or constitute a
default under any judgment, decree, order, or process of any court or
governmental authority; (e) conflict with or violate any material statute, law
or regulation applicable to the Business, the Acquired Assets or Pattison; or
(f) require Pattison to obtain any authorization, consent, approval or waiver
from, or to make any filing with, any governmental or regulatory authority.
4.4 Financial Statements and Sales Information. (a) Prior to the
-------------------------------------------
date hereof, Pattison has delivered to HSI the Financial Statements (to the
extent required by the definition thereof) attached hereto as Schedule 4.4A.
Such Financial Statements have been prepared from, and are in accordance with,
the books and records of Pattison, present fairly the financial position and
results of operations of the Acquired Assets and the Business as of and for the
periods set forth therein in accordance with GAAP and are true, correct and
complete in all material respects, except as set forth on Schedule 4.4B.
(b) The books and records of Pattison are accurate and complete
and have been maintained in accordance with good business practices.
4.5 Absence of Certain Changes or Events. Except as set forth on
--------------------------------------
Schedule 4.5 hereto, since February 29, 1996:
(a) The Business has been conducted, and the Acquired Assets
have been acquired, owned and operated only in the ordinary and usual course
consistent with past practice.
17
(b) Neither the Business nor the Acquired Assets have suffered
any event or condition that has had a Material Adverse Effect.
(c) Pattison has not become aware of any event or condition
that has occurred or would reasonably be expected to occur that could result in
a Material Adverse Effect.
4.6 Assets. Pattison has good and freely transferable title to all
------
of the Acquired Assets, free and clear of all Encumbrances (other than, in the
case of Acquired Assets which do not constitute Purchased Inventory, Permitted
Encumbrances), and has the complete and unrestricted power and right to sell
and/or transfer the Acquired Assets in accordance with the terms hereof. Each
item of equipment included in the Acquired Assets is and will when delivered be
adequate for the uses to which it is being put as of the Closing Date, is and
will when delivered be in good order and working condition, ordinary wear and
tear excepted, and have no material defects, and no condition exists or will
when such equipment is delivered exist which interferes with the value thereof
or the use thereof, in connection with the operations of the Business prior to
the date hereof. Such equipment has been maintained in accordance with good
business practices. Except as set forth on Schedule 4.6, the Acquired Assets
constitute all of the properties and assets used in connection with the
operations of the Business and include all of the properties and assets
necessary to operate the Business as such business has been operated immediately
prior to the date hereof.
4.7 Real Property. Schedule 4.7 sets forth an accurate and complete
-------------
list of all Real Property owned by Pattison and all leases of Real Property used
in the Business.
4.8 Intellectual Property. Schedule 4.8 hereto lists all licenses of
---------------------
Intellectual Property to or from Pattison with respect to the Business. No
currently outstanding claims have been asserted either orally or in writing to
Pattison or the Business, by any Person challenging the validity of or alleging
infringement by, or misuse of, any Intellectual Property used by Pattison or the
Business, or challenging or questioning the validity or enforceability of any
license or agreement referred to on Schedule 4.8, no such claims have been
asserted during the last five years, and there is no valid basis for any such
claim. Except as set forth on Schedule 4.8, none of Pattison nor the Business,
nor has Pattison or the Business, been alleged to have, infringed upon or
violated any Intellectual Property right or misappropriated or misused any
invention, trade secret or other proprietary information entitled to legal
protection. None of Pattison nor the Business has asserted any currently
outstanding claim of infringement, misappropriation or misuse of any
Intellectual Property, nor has any of Pattison or the Business asserted any such
claims during the last five years.
4.9 Contracts and Commitments. (a) The contracts listed on Schedule
-------------------------
4.9 are all of the leases, agreements, arrangements, contracts, commitments or
18
understandings, written or oral, and whether legally binding or otherwise
("Pattison Contracts"), that relate to the Business, (excluding (i) any Pattison
Contract that involves a commitment by Pattison of less than $10,000 over the
next 12 months and less than $25,000 over the balance of the term of the
Pattison Contract and (ii) customer sales orders entered into in the ordinary
course of business.)
(b) None of Pattison or the Business is in breach or default,
nor is there any basis for any valid claim of breach or default by any of
Pattison or the Business under any Pattison Contract. Except as set forth on
Schedule 4.9, all Pattison Contracts are valid and in full force and effect, and
neither the consummation of the transactions contemplated by this Agreement nor
the consummation of the transactions contemplated by any other Pattison Closing
Document will cause any Pattison Contract to cease to be valid and in full force
and effect. None of the Pattison Contracts contain "change of control"
provisions (i.e., provisions which would create a right against, or obligation
----
of, Pattison as a result of the consummation of the transactions contemplated by
this Agreement and the other Pattison Closing Documents). Accurate and complete
copies of all Pattison Contracts, including all amendments thereto, have been
heretofore delivered to HSI.
4.10 Accounts Receivable. Schedule 4.10 sets forth a complete and
--------------------
accurate list of all accounts receivable of Pattison, including an aging thereof
as of May 1, 1996. All of such accounts receivable (a) represent sales actually
made in the ordinary course of business for goods or services delivered or
rendered to unaffiliated customers in bona fide arm's-length transactions, (b)
constitute valid claims, (c) have not been and will not be extended or rolled
over in order to make them current and (d) are not and will not be subject to
counterclaims or setoffs.
4.11 Inventory. The Inventory of Pattison is described on Schedule
---------
4.11. Such Inventory is of merchantable quality, free of defects in workmanship
or design and is usable and salable by Pattison at normal profit margins and in
accordance with historical sales practices in the ordinary course of the
Business. Such Inventory does not include any items which are obsolete,
damaged, excessive, below standard quality or slow moving (i.e., items that are
----
for discontinued or expected to be discontinued product lines, or have a stated
expiration date of 6 months or less from the Closing Date, or items that have
not been used or sold within 6 months prior to the date hereof, or items that
have not been sold within the customary inventory turnover cycle of Pattison, as
the case may be, with respect to such item, or items for which there is excess
capacity (i.e., more products are on hand of any such item than have been sold
----
in the past nine (9) months).
4.12 Customers and Suppliers. There have been no adverse changes and
-----------------------
there are no facts known to Pattison which may reasonably be expected to
indicate that any adverse change may occur in the business relationship of the
Business with any Person who was one of the fifteen largest customers or
suppliers of the Business as of the end of the 12 month period ending on
February 29, 1996.
19
4.13 Litigation, Etc. Except as set forth on Schedule 4.13 hereto:
----------------
(a) There has not been in the three years prior to the date
hereof, nor is there currently, any claim, action, suit, inquiry, proceeding or,
to the best knowledge of Pattison, investigation of any kind or nature
whatsoever (including, but not limited to, products liability issues and
Environmental Liabilities), by or before any court or governmental or other
regulatory or administrative agency, commission or tribunal brought, asserted or
initiated by or against Pattison, or pending or, to the best knowledge of
Pattison, threatened against or involving the Business and which is material, or
which questions or challenges the validity of this Agreement or any action taken
or to be taken by Pattison pursuant to this Agreement or in connection with the
transactions contemplated hereby. There is no valid basis for any such claim,
action, suit, inquiry, proceeding or investigation.
(b) Pattison is not subject to any judgment, order or decree
which may have a Material Adverse Effect.
4.14 Employee Benefit Plans. Schedule 4.14 hereto contains a complete
----------------------
and accurate list of all Employee Benefit Plans. Each Employee Benefit Plan
complies and has been maintained and operated in all respects in accordance with
its terms and the terms and the provisions of applicable law, including, without
limitation, ERISA and the Code, except where the failure to so comply would not
cause a Material Adverse Effect.
4.15 Compliance with Law; Necessary Authorizations. (a) Except as
----------------------------------------------
listed or described on Schedule 4.15(a) hereto, the Business has been conducted,
marketed its products and owned and operated all of the Acquired Assets, in
compliance with all applicable laws, rules, regulations, orders, building and
other codes, zoning and other ordinances, Authorizations, judgments and decrees,
including all Environmental Laws, of all federal, state, local, foreign or other
governmental authorities, except, in any such case, where the failure to so
conduct the Business or comply with any such laws, rules or regulations would
not cause a Material Adverse Effect.
(b) Schedule 4.15(b) lists or describes the material Authoriza-
tions held or required by the Business and, except as set forth in that
schedule, all such Authorizations are in full force and effect, Pattison is in
compliance with all such Authorizations and, to the best knowledge of Pattison,
there is no reasonable basis for the revocation or suspension of any thereof.
Except as set forth on Schedule 4.15(b), such Authorizations constitute all the
permits, licenses, approvals, qualifications or the like issued by any
regulatory authorities required for ownership of the Acquired Assets and the
operation of the Business, all of which are transferable and will be transferred
to HSI at Closing.
4.16 Finders. Neither Pattison nor the Business has taken any action
-------
that, directly or indirectly, would obligate HSI or any of its Affiliates to
anyone acting as
20
broker, finder, financial advisor or in any similar capacity in connection with
this Agreement or any of the transactions contemplated hereby.
4.17 Consents and Approvals of Governmental Authorities. Except as
----------------------------------------------------
set forth on Schedule 4.17, no consent, approval or authorization of, or
declaration, filing or registration with, or the giving of notice to, any
domestic or foreign governmental or regulatory authority is required in
connection with the execution, delivery and performance by Pattison of this
Agreement or the consummation by Pattison of the transactions contemplated
hereby.
4.18 Related Party Transactions; Intercompany Accounts. Except as set
-------------------------------------------------
forth on Schedule 4.18 hereto, there are no Pattison Contracts between Pattison,
on one hand, and any stockholder, director, officer or Affiliate of Pattison
(each, a "Related Party"), on the other; in each case, other than routine
employment agreements in the ordinary course of business (and which are
terminable without penalty in not more than 30 days). Set forth on Schedule
4.18 is a true and complete list of each transaction during the prior 18 months
between any of Pattison or the Business, on one hand, and any Related Party, on
the other hand. No amounts are owed by or to Pattison with respect to the
Business to or by any Related Party, and no amount is owed by or to Pattison or
the Business to or by any Related Party.
ARTICLE V REPRESENTATIONS AND
-------------------
WARRANTIES OF HSI
-----------------
HSI hereby represents and warrants to Pattison as follows:
5.1 Organization and Qualification. HSI is a corporation duly
-------------------------------
organized, validly existing and in good standing under the laws of Delaware,
with full corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as it is now being conducted. HSI is
duly qualified as a foreign corporation and is in good standing under the laws
of such jurisdiction in which the conduct of the business or the ownership of
its assets requires such qualification.
5.2 Authority. HSI has all requisite corporate power and authority
---------
to execute and deliver this Agreement and all documents, certificates,
agreements, instruments and writings relating hereto (collectively, the "HSI
Closing Documents") to which it is a party and to perform, carry out and
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of this Agreement and the other HSI Closing Documents
have been duly authorized by all necessary corporate action on the part of HSI.
This Agreement does, and when executed by HSI, the other HSI Closing Documents
shall, constitute the legal, valid and binding obligations of each of them
enforceable against HSI in accordance with their respective
21
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws and by equitable principles.
5.3 No Breach. Subject to Section 7.5(b), neither the execution and
---------
delivery of this Agreement by HSI nor the consummation of the transactions
contemplated herein will: (i) violate any provision of the Certificate of
Incorporation or By-laws of HSI; (ii) conflict with, result in a breach of or
constitute a default (or an event which, with or without notice, lapse of time
or both, would constitute a default) under, or give any third party the right to
terminate or modify, any material agreement or other instrument to which HSI is
a party or by which it or any of its assets is bound; (iii) result in the
creation of, or give any party the right to create, any Encumbrance, upon assets
or properties of HSI; (iv) conflict with, violate, result in a breach of or
constitute a default under any judgment, decree, order or process of any court
or governmental authority; (v) conflict with or violate any material statute,
law or regulation applicable to the business of HSI; or (vi) require HSI to
obtain any authorization, consent, approval or waiver from, or to make any
filing with, any governmental or regulatory authority.
5.4 HSI Financial Statements and Sales Information. Prior to the
------------------------------------------------
date hereof, HSI delivered to Pattison the HSI Financial Statements (to the
extent required by the definition thereof) attached hereto as Schedule 5.4A.
Such HSI Financial Statements have been prepared from, and are in accordance
with, the books and records of HSI, present fairly the financial position and
results of operations of HSI as of and for the periods set forth therein in
accordance with GAAP and are true, correct and complete in all material
respects, except as set forth on Schedule 5.4B.
5.5 Finders. Neither HSI nor any of its respective Affiliates has
-------
taken any action that, directly or indirectly, would obligate Pattison or any of
its Affiliates to anyone acting as a broker, finder, financial advisor or in any
similar capacity in connection with this Agreement or any of the transactions
contemplated hereby.
ARTICLE VI COVENANTS
---------
6.1 Certain Covenants of Pattison. Pattison hereby covenants that
------------------------------
(unless HSI otherwise gives its written approval in its sole discretion)
Pattison shall at its sole cost and expense take the actions set forth below:
(a) Prior to and after the Closing Date, Pattison shall pay
those debts and accounts payable relating to the Business and the Acquired
Assets that are or have been incurred by Pattison in the ordinary course of
business and on a timely basis. If Pattison shall not pay and otherwise satisfy
all such accounts payable on a timely basis, then HSI, in its sole and absolute
discretion, may pay all or any portion of such accounts payable on behalf of
Pattison, which shall promptly reimburse HSI for any such payment, plus interest
thereon at the Prime Rate. Pattison shall thereafter pay or otherwise
22
discharge in full all the Excluded Liabilities relating to the Business as such
amounts shall become due in accordance with their terms.
(b) Prior to and after the Closing Date, Pattison shall afford
HSI, its attorneys, accountants, consultants and representatives free and full
access to the Acquired Assets to be sold, transferred or assigned by Pattison
pursuant to this Agreement, the books and records of Pattison relating thereto
and employees of Pattison who are familiar with the Business and the Acquired
Assets, at all reasonable times upon reasonable notice and during normal
business hours, and shall provide to HSI and its representatives such additional
financial and operating data and other information as to the Business and the
Acquired Assets pursuant to this Agreement as HSI shall from time to time
reasonably request.
(c) Prior to and after the Closing, Pattison shall use its
reasonable efforts to preserve for HSI the goodwill of the customers and
suppliers of the Business, and others having business relations with Pattison
with respect to the Business and Acquired Assets, and prior to and after the
Closing shall do all things reasonably requested by HSI for such purpose.
6.2 Obtaining Consents. Prior to and after the Closing, Pattison and
------------------
Pattison shall use all reasonable efforts to obtain all consents to the
assignment to HSI of all of the HSI Assumed Liabilities and Authorizations of
Pattison, in each case without any condition or qualification adverse to HSI.
HSI, on the one hand, and Pattison, on the other hand, shall coordinate and
cooperate with one another and supply such assistance as may be reasonably
requested by each in connection with the foregoing.
6.3 Transfer and Retention of Records. After the Closing Date,
------------------------------------
except as may be required for tax purposes, other regulatory purposes neither
Pattison nor any of its successors and assigns will retain any document,
databases or other media embodying any confidential or proprietary information
relating to the Business which constitutes a part of the Acquired Assets or use,
publish or disclose to any third person any such confidential or proprietary
information relating to the Business; provided, however, that Pattison shall be
-------- -------
entitled to retain copies of any of the foregoing. Pattison shall take all
actions requested by HSI to transfer records relating to the Business to HSI
which may include making duplicate copies of any records retained by Pattison in
the form of papers or computer media.
6.4 Product Replacement and Repairs. After the Closing Date, HSI
---------------------------------
will, subject to the following sentence, honor all outstanding warranties and
guaranties and other claims for replacements, repairs and credits, relating to
products or services of the Business shipped, sold or furnished by Pattison
prior to the Closing Date, or relating to Purchased Inventory. Any claims in
respect of returned or damaged products accepted by HSI shall be for the account
of Pattison, which shall promptly reimburse HSI for the cost thereof.
23
6.5 Employee Matters. (a) HSI may, but shall not be required to,
----------------
offer employment to employees employed by Pattison in connection with the
operations of the Business on such terms as HSI in its sole discretion deems
appropriate. Any such offers shall be on terms which HSI customarily hires new
employees (e.g., without assumption of seniority). Alternatively, at HSI's
request, Pattison shall continue its employment of all or a portion of its
employees engaged in the operations of the Business to assist HSI in its conduct
of the Business on an interim basis not exceeding 90 days. HSI shall reimburse
Pattison for all actual payroll costs and related incidental costs incurred by
it for continuing the employment of such employees for HSI's benefit.
(b) HSI shall not assume or be responsible in any way for the
obligations, liabilities or responsibilities (i) of any Employee Benefit Plan of
Pattison, (ii) of SF or Pattison, any Affiliate or any fiduciary under, arising
from, or with respect to any Employee Benefit Plan of Pattison or Pattison or
(iii) to any of SF's or Pattison's officers, directors, employees and agents,
arising from or related to the transactions contemplated by this Agreement,
including, without limitation, obligations, liabilities or responsibilities
under the WARN Act. HSI shall not be deemed to be a successor employer with
respect to the employment of any employee of Pattison or with respect to any of
Employee Benefit Plans of SF or Pattison.
6.6 Further Assurances. After the Closing, HSI, on the one hand, and
------------------
Pattison, on the other hand, shall, and shall cause their respective Affiliates
to, at the request and the expense of the other, execute and deliver such other
instruments of conveyance and transfer and assumption and take such other action
as may be reasonably requested so as to consummate the transactions contemplated
hereby or otherwise to consummate the intent of this Agreement.
6.7 Name Change. Pattison hereby covenants and agrees that, if the
-----------
Merger shall not occur within thirty (30) days of the Closing Date, it shall
file a certificate of amendment of certificate of incorporation of Pattison, and
file appropriate documentation in those jurisdictions in which it is qualified
to do business as a foreign corporation, changing its name from "Pattison-
McGrath Company Dental Supplies", to a name that does not include any of the
Intellectual Property.
6.8 Use of Facilities. In order to facilitate the orderly transition
-----------------
of the conduct of the Business from Pattison to HSI, Pattison hereby agrees to
permit HSI to operate and conduct the Business at the Pattison corporate
headquarters located at 1901 Baltimore, Kansas City, Missouri 64108 (the
"Premises") for a period not to exceed 90 days following the Closing Date. Such
occupancy of the Pattison corporate headquarters shall be at no cost to HSI.
6.9 No Encumbrance on Premises. For so long as the Pattison Note
---------------------------
shall be outstanding, Pattison shall not create or suffer to exist any
Encumbrance upon or with respect to the Premises, except an Encumbrance in favor
of HSI as contemplated by Section 2.6(b).
24
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
OF HSI
------
The obligation of HSI under this Agreement to consummate the
transactions contemplated hereby at the Closing shall be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived in writing by HSI:
7.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of Pattison contained in this Agreement and the other Pattison
Closing Documents shall be true and accurate in all material respects on and as
of the Closing Date as if made again at and as of such date.
7.2 Performance by SF and Pattison. SF and Pattison shall have
--------------------------------
performed and complied with all agreements required by this Agreement and the
other SF Closing Documents to be performed and complied with by each of them
prior to or on the Closing Date.
7.3 Certificate. HSI shall have received a certificate, dated the
-----------
Closing Date, signed on behalf of Pattison by a principal corporate officer of
Pattison to the effect that the conditions set forth in Sections 7.1 and 7.2
have been satisfied.
7.4 Opinions of Counsel for Pattison. HSI shall have received from
---------------------------------
counsel to SF and Pattison a written opinion, dated the Closing Date, in the
form annexed hereto as Exhibit 3.2(a).
7.5 Authorization; Legal Prohibition. (a) Pattison shall have
----------------------------------
delivered to HSI copies of the resolutions of the Board of Directors of Pattison
and the stockholders of Pattison, in each case certified by the secretary or
assistant secretary of Pattison, which resolutions shall unanimously approve and
authorize the execution and delivery of this Agreement, the other Pattison
Closing Documents and the consummation of the transactions contemplated hereby
and thereby.
(b) No suit, action, investigation, inquiry or other proceeding
by any governmental body or other person shall have been instituted or
threatened which (i) could reasonably be expected to result in a material
adverse change in the Business; (ii) arises out of or relates to this Agreement
or the transactions contemplated hereby; or (iii) questions the validity hereof
or seeks to obtain substantial damages in respect thereof. On the date of the
Closing, there shall be no effective permanent or preliminary injunction, writ,
temporary restraining order or any order of any nature issued by a
25
court of competent jurisdiction directing that the transactions provided for
herein not be consummated as so provided.
7.6 Consents. All notices to, and declarations, filings and
--------
registrations with, and consents, approvals and waivers from, governmental and
regulatory agencies (including, without limitation, the FTC and DOJ) required to
consummate the transactions contemplated hereby and to permit the continued
operation by HSI of the Business after the Closing Date, shall have been
obtained and all consents to the assignment to HSI of each of the Acquired
Assets and Authorizations of Pattison shall have been obtained, in each case
without any condition or qualification adverse to HSI.
7.7 Closing Deliveries. HSI shall have received all deliveries to be
------------------
made to it pursuant to Article III of this Agreement.
7.8 Absence of Adverse Changes. There shall not have occurred since
--------------------------
the date hereof (i) any material adverse change in the condition (financial or
otherwise) or results of operations of or prospects of the Business; or (ii) any
other event, loss, damage, condition or state of facts of any character which
can reasonably be expected materially and adversely to affect the business,
financial condition, prospects, earnings, assets, properties, net worth or
results of operations of the Business.
7.9 Actions by Pattison. Pattison shall have executed a Bill of Sale
-------------------
in the form of Exhibits 3.2(b).
7.10 Additional Documents, Etc. Pattison shall have delivered to HSI
--------------------------
such other documents, instruments and certificates as shall be reasonably
requested by HSI or counsel to HSI for the purpose of effecting the transactions
provided for and contemplated by this Agreement and the other HSI Closing
Documents.
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS
-----------------------------------
OF PATTISON
-----------
The obligations of Pattison under this Agreement shall be subject to
the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived in writing by Pattison.
8.1 Representations and Warranties Accurate. All representations and
---------------------------------------
warranties of HSI contained in this Agreement and the other HSI Closing
Documents shall be true and accurate in all material respects on and as of the
Closing Date as if made again at and as of such date.
26
8.2 Performance by Buyer. HSI shall have performed and complied with
--------------------
all agreements required by this Agreement and the other HSI Closing Documents to
be performed and complied with by it prior to or on the Closing Date.
8.3 Certificate. Pattison shall have received a certificate, dated
-----------
the Closing Date, signed on behalf of HSI by a principal corporate officer of
HSI, to the effect that the conditions set forth in Sections 8.1 and 8.2 have
been satisfied.
8.4 Legal Prohibition. No suit, action, investigation, inquiry or
------------------
other proceeding by any governmental body or other person shall have been
instituted which arises out of or relates to this Agreement or the transactions
contemplated hereby or questions the validity hereof or seeks to obtain
substantial damages in respect thereof. On the date of the Closing, there shall
be no effective permanent or preliminary injunction, writ, temporary restraining
order or any order of any nature issued by a court of competent jurisdiction
directing that the transactions provided for herein not be consummated as so
provided.
8.5 Closing Deliveries. Pattison and SF shall have received all
-------------------
deliveries to be made to each of them pursuant to Article III of this Agreement.
8.6 Additional Documents, Etc. HSI shall have delivered to SF and
---------------------------
Pattison such other documents, instruments and certificates as shall be
reasonably requested by any of them or their counsel for the purpose of
effecting the transactions provided for and contemplated by this Agreement and
the other Pattison Closing Documents.
ARTICLE IX RESTRICTIVE COVENANTS
---------------------
9.1 Non-Solicitation of Employees. Neither Pattison nor any of its
------------------------------
Affiliates shall directly or indirectly, for itself or himself or on behalf of
any other Person, hire any employee of HSI (or any of its Affiliates),
including, without limitation, any employees of Pattison that HSI (or any of its
Affiliates) has hired in its sole discretion, or induce nor attempt to induce
any such employee to leave his or her employment with HSI (or any of its
Affiliates) at any time until the later of five years from the date hereof.
9.2 Non-Solicitation or Interference with Customers and Suppliers.
----------------------------------------------------------------
Neither Pattison nor any of its respective Affiliates shall, directly or
indirectly, for itself or on behalf of any other Person, solicit, divert, take
away or attempt to take away any customers of HSI (or any of its Affiliates) or
suppliers or the business or patronage of any such customers or suppliers or in
any way interfere with, disrupt or attempt to disrupt any then existing
relationships between HSI (or any of its Affiliates) and any of its customers or
suppliers or other Persons with whom it deals or contact for business purposes
or enter into any business transaction with any such customers or suppliers or
other Persons for any purpose at any time until five years from the date hereof.
27
9.3 Acknowledgements. Pattison acknowledges that, in view of the
----------------
nature of the Business and the business objectives of HSI in acquiring such
business (or portions thereof) as herein provided, and the consideration paid to
Pattison therefor, the restrictions contained in this Article IX are reasonably
necessary to protect the legitimate business interests of HSI and that any
violation of such restrictions will result in irreparable injury to HSI and the
business HSI has acquired hereunder for which damages will not be an adequate
remedy. Pattison therefore acknowledges that, if any such restrictions are
violated, HSI shall be entitled to preliminary and injunctive relief as well as
to an equitable accounting of earnings, profits and other benefits arising from
such violation.
ARTICLE X INDEMNIFICATION
---------------
10.1 Survival of Representations and Warranties. All representations
-------------------------------------------
and warranties contained in Articles IV and V of this Agreement shall survive
until the third anniversary of the Closing Date.
10.2 Indemnification by Pattison. From and after the Closing,
-----------------------------
Pattison shall jointly and severally indemnify and save HSI and its Affiliates,
their respective directors, officers, employees, agents and representatives and
all of their successors and assigns (collectively "Buyer Claimants" and
individually "Buyer Claimant") harmless from and defend each of them from and
against any and all demands, claims, actions, liabilities, losses, costs,
damages or expenses whatsoever (including any reasonable attorneys' fees)
(collectively, "Losses") asserted against, imposed upon or incurred by the Buyer
Claimants resulting from or arising out of (a) any inaccuracy or breach of any
representation or warranty of Pattison contained herein; (b) any breach of any
covenant or obligation of Pattison contained herein; (c) any liability of SF or
Pattison or the Business; (d) noncompliance with any applicable bulk sales or
similar laws (including laws which may impose transferee liability on HSI or an
Affiliate or create Encumbrances on any Acquired Assets relating to the
liability of SF or Pattison for sales, use or other taxes or withholdings
arising out of the operations of the Business by SF or Pattison); (e) any
personal injuries, death or property damage arising from products sold by SF or
Pattison prior to the Closing Date; (f) any liability arising out of or related
to the Business prior to Closing; (g) any claim made against HSI by any FM
Dental Related Party or any of their respective Affiliates as a result of the
consummation of the transactions contemplated hereby, including, without
limitation, the sale and purchase of the Purchased Inventory; and (h) any
liability of SF or Pattison under the WARN Act or any state equivalent.
10.3 Indemnification by HSI. From and after the Closing, HSI shall
-----------------------
indemnify and save Pattison and its respective Affiliates and its respective
directors, officers, employees, agents and representatives (collectively "Seller
Claimants" and individually "Seller Claimant") harmless from and defend each of
them from and against
28
any and all Losses asserted against, imposed upon or incurred by the Seller
Claimants resulting from or arising out of (a) any inaccuracy or breach of any
representation or warranty of HSI contained herein; (b) any breach of any
covenant or obligation of HSI contained herein; (c) except as described in
clause 10.2(e) above, HSI's ownership of Acquired Assets and operation of its
businesses from and after the Closing Date; (d) any personal injuries, death or
property damage arising from products sold by HSI prior to the Closing Date; and
(e) any liability of HSI under the WARN Act or any state equivalent.
10.4 Indemnification Procedures. (a) The rights and obligations of
--------------------------
each party claiming a right to indemnification hereunder ("Indemnitee") from the
other party ("Indemnitor") shall be governed by the following rules:
(i) The Indemnitee shall give prompt written notice to the
Indemnitor of any state of facts which Indemnitee determines will give rise
to a claim by the Indemnitee against the Indemnitor based on the indemnity
agreements contained herein, stating the nature and basis of said claims
and the amount thereof, to the extent known. No failure to give such
notice shall affect the indemnification obligations of Indemnitor
hereunder, except to the extent such failure materially prejudices such
Indemnitor's ability successfully to defend the matter giving rise to the
indemnification claim.
(ii) In the event any action, suit or proceeding is brought
against the Indemnitee, with respect to which the Indemnitor may have
liability under the indemnity agreements contained herein, then upon the
written acknowledgment by the Indemnitor within thirty (30) days of the
bringing of such action, suit or proceeding that it is undertaking and will
prosecute the defense of the claim under such indemnity agreements and
confirming that the claim is one with respect to which the Indemnitor is
obligated to indemnify and that it will be able to pay the full amount of
potential liability in connection with any such claim, the action, suit or
proceeding (including all proceedings on appeal or for review which counsel
for the Indemnitee shall deem appropriate) may be defended by the
Indemnitor. However, in the event the Indemnitor shall not offer
reasonable assurances as to its financial capacity to satisfy any final
judgment or settlement, the Indemnitee may assume the defense and dispose
of the claim, after 30 days' prior written notice to the Indemnitor. The
Indemnitee shall have the right to employ its own counsel in any such case,
but the fees and expenses of such counsel shall be at the Indemnitee's own
expense unless (a) the employment of such counsel and the payment of such
fees and expenses both shall have been specifically authorized by the
Indemnitor in connection with the defense of such action, suit or
proceeding or (b) the Indemnitee shall have reasonably concluded and
specifically notified the Indemnitor that there may be specific defenses
available to it which are different from or additional to those available
to the
29
Indemnitor, or that such action, suit or proceeding involves or could have
an effect upon matters beyond the scope of the indemnity agreements
contained herein.
(iii) In addition, in any event specified in clause (b) of
the second sentence of subparagraph (ii) above, the Indemnitor, to the
extent made necessary by such different or additional defenses, shall not
have the right to direct the defense of such action, suit or proceeding on
behalf of the Indemnitee. If Indemnitor and Indemnitee cannot agree on a
mechanism to separate the defense of matters extending beyond the scope of
indemnification, such matters shall be defended on the basis of joint
consultation.
(iv) The Indemnitee shall be kept fully informed by the
Indemnitor of such action, suit or proceeding at all stages thereof,
whether or not it is represented by counsel. The Indemnitor shall, at the
Indemnitor's expense, make available to the Indemnitee and its attorneys
and accountants all books and records of the Indemnitor relating to such
proceedings or litigation, and the parties hereto agree to render to each
other such assistance as they may reasonably require of each other in order
to ensure the proper and adequate defense of any such action, suit or
proceeding.
(b) The Indemnitor shall make no settlement of any claims which
Indemnitor has undertaken to defend, without Indemnitee's consent, unless the
Indemnitor fully indemnifies the Indemnitee for all losses, there is no finding
or admission of violation of law by, or effect on any other claims that may be
made against, the Indemnitee and the relief granted in connection therewith
requires no action on the part of and has no effect on the Indemnitee.
(c) In the event any claim of a right to indemnification is
made by HSI or another indemnified party hereunder, such party may, at its sole
option, satisfy all or a portion of its Losses by way of setoff against any
payments due Pattison. Such right to setoff is without prejudice to any right
of Pattison to challenge its liability hereunder. This Section in no way
constitutes a limitation on rights hereunder and HSI and each other indemnified
party hereunder may seek full indemnification for all damages suffered and may
pursue all rights and remedies available to it, at law or in equity, against any
party hereto, jointly with other parties hereto or severally, without seeking
recourse against any other party and without exercising any right of offset.
ARTICLE XI MISCELLANEOUS
-------------
30
11.1 Expenses. Each party hereto shall pay its own expenses incurred
--------
in connection with this Agreement, except as otherwise specified in this
Agreement and except that all sales, transfer and other similar taxes, levies
and charges that may be imposed, levied or assessed in connection with the
consummation of the transactions contemplated hereby shall be borne by Pattison
with respect to the Acquired Assets.
11.2 Amendment. This Agreement may not be terminated, amended,
---------
altered or supplemented except by a written agreement executed by the parties
hereto.
11.3 Entire Agreement. This Agreement, including the schedules and
-----------------
exhibits hereto, and the instruments and other documents delivered pursuant to
this Agreement contains the entire agreement of the parties relating to the
subject matter of this Agreement and supersedes all prior agreements and
understandings of any kind between the parties respecting such subject matter.
Each and every representation, warranty and covenant shall be deemed to include
the information contained in the schedules thereto.
11.4 Waivers. Waiver by either party of either breach of or failure
-------
to comply with any provision of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of such provision, or a waiver
of any other breach of, or failure to comply with, any other provision of this
Agreement. No waiver of any such breach or failure or of any term or condition
of this Agreement shall be effective unless in a written notice signed by the
waiving party and delivered, in the manner required for notices generally, to
each affected party.
11.5 Notices. All notices, consents, directions, approvals,
-------
instructions, requests and other communications required or permitted by the
terms of this Agreement to be given to any Person shall be in writing, and any
such communication shall become effective five Business Days after being
deposited in the United States mails, certified or registered, with appropriate
postage prepaid for first class mail or, if delivered by hand or courier service
or in the form of a telex, telecopy or telegram, when received (if received
during normal business hours on a Business Day, or if not, then on the next
Business Day thereafter), and shall be directed to the following address or
telex or telecopy number:
If to Pattison:
San Francisco Dental Supply, Inc.
2201 South Oneida Street
Green Bay, Wisconsin 54304
Attention: Larry Olson
Telecopier: (414) 494-3386
31
With copies to:
Hanaway, Ross, Hanaway,
Weidner & Bachhuber, S.C.
345 S. Jefferson Street
Green Bay, Wisconsin 54301-4522
Attention: William S. Woodward, Esq.
Telecopier: (414) 432-4037
If to HSI:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
Telecopier: (516) 843-5675
With copies to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Richard L. Goldberg, Esq.
Telecopier: (212) 969-2900
or to such other address as a party may have furnished to the other parties in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt. Any notice which is so mailed shall be deemed
delivered on the fourth Business Day (or Days) after mailing; any notice which
is transmitted by telecopier shall be deemed delivered when transmitted to the
telecopier number specified above and acknowledgement of receipt of such
facsimile is received.
11.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, and by the different parties hereto in separate counterparts each
of which when executed shall be deemed to be an original, but all of which
together shall constitute one and the same document.
11.7 Governing Law; Submission to Jurisdiction. This Agreement shall
------------------------------------------
be governed by, and construed in accordance with, the law of the State of New
York, without regard to applicable principles of conflict of laws that might
otherwise govern. Pattison hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York and of
any New York State Court sitting in New York City for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Pattison irrevocably waives, to the
32
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
11.8 Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, that SF shall not assign or transfer this
--------
Agreement nor any right or obligation hereunder by operation of law or
otherwise; further provided, that HSI in its sole discretion, may assign all or
------- --------
a portion of its rights hereunder to an Affiliate or Affiliates without the
consent of Pattison and after the Closing Date, assign all or a portion of its
rights hereunder to any Person without the consent of Pattison; further
-------
provided, that no assignment shall relieve HSI of its obligations hereunder.
- --------
11.9 Severability. Any provision of this Agreement that shall be
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions thereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties to such instrument waive any provision of law
that renders any provision thereof prohibited or unenforceable in any respect.
11.10 Headings. The headings contained in this Agreement
--------
(including the exhibits and schedules) are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.11 No Partnership; Etc. Nothing contained in this Agreement
--------------------
shall constitute or be deemed a representation, agreement or understanding that
the parties hereto are members of any partnership, joint venture, association,
syndicate or other entity, and each of the parties hereto expressly disclaims
the existence of any such relationship or arrangement.
11.12 Third Parties. Nothing herein is intended or shall be
--------------
construed to confer upon or give to any person other than the parties hereto any
rights or remedies under or by reason of this Agreement.
33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
PATTISON-MCGRATH COMPANY DENTAL SUPPLIES
By:__________________________________
Authorized Officer
HENRY SCHEIN, INC.
By:__________________________________
Authorized Officer
34
Schedule 2.2(e)
(Pattison Excluded Liabilities)
-------------------------------
1. Legal, accounting, brokerage, finder's fees, taxes or other
expenses incurred by SF, Pattison, or any of their respective Affiliates in
connection with this Agreement or the consummation of the transactions
contemplated hereby;
2. Any intercompany debt or other liability or obligation of any
nature between Pattison and any past or present Affiliate, on the one hand, or
Pattison and any past or present Affiliate, on the other hand;
3. Liabilities or obligations incurred by Pattison after the
Closing;
4. Any obligation or liability relating to any litigation or any
claim arising out of any dispute, whether or not listed on any schedule hereto
and regardless of whether accruing prior or subsequent to the Closing;
5. Any liability for any federal, state, local or foreign income or
other Taxes accrued to or incurred by Pattison or SF any of their respective
Affiliates or relating to the Business, operations, products or assets of
Pattison or SF any of their respective Affiliates prior to the Closing, or as a
consequence of the transactions contemplated hereby;
6. Any liability or costs (including, without limitation, costs of
remediation) arising out of or relating to a Hazardous Discharge or the release,
discharge or disposal of any solid wastes or the handling, storage, use,
transportation or disposal of any of the foregoing, as these terms are defined
by the Environmental Laws in, on, under or from facilities of Pattison at any
time prior to the Closing regardless of whether such liability or costs arise
before or after Closing and whether or not in breach of any representation or
warranty under this Agreement;
7. Any liability or obligation to employees, government agencies or
other third parties in connection with any Employee Benefit Plan, option plan,
pension plan or any other ERISA plan, or other Employee Benefit Plan and any
health, dental or life insurance benefits, whether or not insured and whether or
not disclosed on any schedule hereto;
8. Any liability or obligation under any contract or commitment that
is not an HSI Assumed Liability or under any Pattison Contract which relates to
any default in respect of such contract or other commitment or obligation of
Pattison;
9. Any liability or obligation to employees in the nature of
workmen's compensation relating to the period prior to the Closing, whether or
not listed on any Schedule hereto and regardless of whether accruing prior or
subsequent to the Closing;
10. Any accounts payable, notes payable, bank debts, and/or debt to
any officer, director or stockholder of Pattison;
11. Any deferred compensation agreements of Pattison or any insurance
policies relating thereto; and
12. Any liability or obligation of any nature of Pattison or SF or
any of their respective Affiliates owed or claimed by any FM Dental Related
Party relating to the Purchased Inventory or otherwise.
13. Any other liability not expressly included as an HSI Assumed
Liability.
2
EXHIBIT 11.1
HENRY SCHEIN, INC. AND SUBSIDIARIES
COMPUTATION OF PRO FORMA EARNINGS PER SHARE
Year Ended Three Months Ended
----------- ---------------------
December April March
30, 1995 1, 1995 30, 1996
---------- ------- ---------
Pro forma net income per
consolidated statements of $9,407 $936 $2484
operations (in thousands) . . . ============= =========== =============
Pro forma weighted average common
shares
outstanding:
Shares outstanding at December 11,390,544 11,390,544 11,390,544
25, 1993 . . . . . . . . . . .
1994 issuances:
Shares issued, in part, to
extinguish liability
under long-term executive 489,456 489,456 489,456
incentive compensation plan
128,257 128,257 128,257
Shares issued to ESOP trust
in 1994 . . . . . . . . . . . 237,897 237,897 221,397
Stock options granted at an 65,871 --- 408,400
exercise price of
$4.21 per share1 . . . . .
IPO Options (Class B) . . . .
1995 Issuances:
Shares issued as of September
1, 1995 in 418,984 --- 1,260,416
connection with an 811,044 --- 5,090,000
acquisition . . . . . . . . ---------- ---------- ----------
IPO Shares . . . . . . . . .
13,542,053 12,246,154 18,988,470
Less: Treasury stock . . . . (8,235) --- (51,679)
---------- --------- ----------
13,533,818 12,246,154 18,938,791
Less assumed repurchase of shares
under treasury stock method
based on an average price of
$27.96 per share2:
Stock options -- 221,397
shares
x $4.21 (42,313)3 (62,597)4 (33,336)5
-------
$932,081/$27.96
IPO options --- 408,400
shares
x $16.00 (44,527)3 --- (233,705)5
-------- ------------ ----------- -----------
$8,534,400/$27.96 .
Weighted average common shares 13,446,978 12,183,557 18,669,750
outstanding ============ ============ ============
Pro forma net income per common $0.70 $0.08 $0.13
share ============ ============ ============
--------------------
1 Considered cheap stock and treated as outstanding since January 1,
1995.
2 The treasury stock method was not used for the shares issued to settle
the long-term incentive plan liability and the compensatory portion of
the stock options granted because the related special compensation
shares have been excluded from net income and, therefore, were not
assumed to be proceeds.
3 Computed using the average closing value per share of $23.67 for
237,897 Stock options and 413,400 IPO options.
4 Computed using the IPO value per share of $16.00 for 237,897 Stock
options.
5 Computed using the average closing value per share for the three months
ended March 30, 1996.
EXHIBIT 21.1
List of Subsidiaries
--------------------
Subsidiary State of Incorporation
---------- ----------------------
Avamark, Inc. New York
BDG UK Holdings Limited* England
Budget Dental Supplies Ltd.* England
C E Seminars, Inc.* New York
Debmar, Inc. Arizona
Dental Express (Supplies) England
Limited*
Dental Instrument Sales & New York
Service LLC
Dental Plan, Inc. Texas
Dentisoft, Inc.* Delaware
Florida Doctor Supply, Inc. Indiana
Health and Safety Delaware
Communications, Inc.
Henry Schein Canada Ltd. Ontario, Canada
Henry Schein Dental Supply, New York
Inc.
Henry Schein - Dentina Gmbh* Konstanz, Germany
Henry Schein Espana, S.A.*
Henry Schein Europe B.V.* The Netherlands
Henry Schein Europe, Inc. Delaware
Henry Schein Financial Delaware
Services, Inc.
Henry Schein France Holdings, Delaware
Inc.*
Henry Schein France S.A.* Paris, France
HSI Acquisition, Inc. Delaware
Henry Schein Holland Holding The Netherlands
B.V.*
Henry Schein Van den The Netherlands
Braak,B.V.*
Subsidiary State of Incorporation
---------- ----------------------
Henry Schein UK Holdings England
Limited*
HLH Acquisition Corp. Delaware
HSI Michigan Corp. Delaware
Jameson Management Inc. Delaware
JS Pacific LLC Delaware
Kent Dental Limited* England
Mayflower Healthcare Supply, New York
Inc.
Medenta International B.V.* The Netherlands
Precision Dental Specialties, Delaware
Inc.*
PRN Medical Inc. Indiana
PW Pharmacal, Inc. New York
Rockford Dental Mfg. Co.* Delaware
SSN Healthcare Supply, Inc. New York
Schein Creative Services, Inc. New York
Schein Dental Equipment Corp. New York
Schein Europe Marketing B.V.* The Netherlands
Schein Rexodent Limited* England
Silverman's Dental Supply New York
Corp.
South Jersey Medical Supply Delaware
Company Inc.*
Tri-State Medical Supply Co., New York
Inc.*
Universal Footcare Holdings Delaware
Corp.
Universal Footcare Products, Delaware
Inc.*
Zahn Dental Co., Inc.* Massachusetts
Zahn Dental Canada, Inc.* Ontario, Canada
Zahn Dental (Florida), Inc. Delaware
Zahn Dental (Illinois), Inc. Delaware
Zahn Dental Supplies, Limited* England
Subsidiary State of Incorporation
---------- ----------------------
Zahn Holdings, Inc. Delaware
__________________
* Indirect subsidiary of the Company.
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Henry Schein, Inc.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated February 23, 1996 relating to the
consolidated financial statements of Henry Schein, Inc. and Subsidiaries, our
report dated July 24, 1995 relating to the financial statements of Veratex (a
division of The Veratex Corporation) and our report dated February 16, 1996
relating to the consolidated financial statements of HS Pharmaceutical, Inc.
and Subsidiaries which are contained in that Prospectus, and of our report dated
February 23, 1996, relating to the schedule which is contained in Part II of
the Registration Statement.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
New York, New York
June 17, 1996