EXECUTION COPY
STOCK PURCHASE AGREEMENT
RELATING TO PURCHASE OF
▇▇▇▇▇▇'▇, INC.
BY
SUBURBAN OSTOMY SUPPLY CO., INC.
May 1, 1997
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................1
1.1 Definitions................................................1
ARTICLE II PURCHASE AND SALE OF SHARES.......................6
2.1 Purchase and Sale..........................................6
2.2 Consideration..............................................6
2.3 Escrow Account.............................................6
2.4 Time and Place of Closing..................................6
2.5 Deliveries by the Seller and the Buyer.....................6
2.6 Other Transactions at the Closing..........................8
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLER.....................9
3.1 Organization and Qualification.............................9
3.2 Authority; No Violation...................................10
3.3 Capitalization............................................10
3.4 Subsidiaries..............................................10
3.5 Financial Statements......................................11
3.6 Absence of Undisclosed Liabilities........................11
3.7 Absence of Certain Changes................................11
3.8 Title to Assets...........................................13
3.9 Sufficiency and Condition of Assets.......................13
3.10 Real Estate...............................................13
3.11 Accounts Receivable.......................................14
3.12 Inventories...............................................14
3.13 Intellectual Property.....................................15
3.14 Trade Secrets and Customer Lists..........................15
3.15 Contracts.................................................16
3.16 Customers and Suppliers...................................18
3.17 Compliance with Laws......................................18
3.18 Taxes.....................................................19
3.19 Employee Benefit Plans....................................20
3.20 Environmental Matters.....................................23
3.21 Employees.................................................24
3.22 Litigation................................................24
3.23 Insurance.................................................25
3.24 Company Products..........................................25
3.25 Powers of Attorney........................................25
3.26 Brokers...................................................25
3.27 Records and Books.........................................26
3.28 Transactions with Interested Persons......................26
3.29 Bank Accounts.............................................26
3.30 Status Under Certain Statutes.............................26
3.31 Disclosure of Material Information........................26
3.32 Acquisition for Investment................................26
3.33 Sole Representations and Warranties.......................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER......27
4.1 Organization and Qualification............................27
4.2 Authority.................................................27
4.3 Brokers...................................................28
4.4 Suburban Shares...........................................28
4.5 SEC Reports...............................................28
4.6 Disclosure of Material Information........................28
4.7 Capitalization............................................28
4.8 Sole Representations and Warranties.......................29
ARTICLE V INDEMNIFICATION..................................29
5.1 Survival of Representations and Warranties................29
5.2 Indemnification by Seller.................................29
5.3 Indemnification by Buyer..................................29
5.4 Minimum Indemnification...................................30
5.5 Notice and Opportunity to Defend..........................30
5.6 Adjustment for Insurance and Taxes........................31
5.7 Indemnification Exclusive.................................31
ARTICLE VI MISCELLANEOUS....................................32
6.1 Fees and Expenses.........................................31
6.2 Publicity and Disclosures.................................32
6.3 Notices...................................................32
6.4 Successors and Assigns....................................33
6.5 Descriptive Headings......................................33
6.6 Counterparts..............................................33
6.7 Severability..............................................33
6.8 Attorneys' Fees/Arbitration...............................34
6.9 Course of Dealing.........................................34
6.10 Third Parties.............................................34
6.11 Tax Matters...............................................34
6.12 Pension Plan.............................................36
6.13 Variations in Pronouns...................................36
6.14 Governing Law............................................36
6.15 Entire Agreement.........................................36
6.16 Mutual Covenants.........................................37
6.17 Disclosure Schedule......................................37
6.18 DEA Certificate..........................................37
Table of Exhibits
Exhibit A Escrow Agreement
Exhibit B Opinion of Counsel for the Company and the Seller
Exhibit C Employment Agreement
Exhibit D Opinion of Buyer's Counsel
Exhibit E Option Agreement
Exhibit F Registration Rights Agreement
Table of Schedules
Schedule 3.1 Qualification
Schedule 3.4 Subsidiaries
Schedule 3.5 Financial Statements
Schedule 3.6 Liabilities
Schedule 3.7 Changes
Schedule 3.10 Real Estate
Schedule 3.11 Accounts Receivables
Schedule 3.12 Inventories
Schedule 3.13 Intellectual Property
Schedule 3.14 Trade Secrets
Schedule 3.15 Contracts
Schedule 3.16 Major Customers
Schedule 3.18 Taxes
Schedule 3.19 Employee Benefit Plans
Schedule 3.20 Environmental Matters
Schedule 3.21 Employees
Schedule 3.22 Litigation
Schedule 3.23 Insurance
Schedule 3.24 Warranty and other Claims
Schedule 3.26 Brokers
Schedule 3.29 Transactions with Interested Persons
Schedule 3.30 Bank Accounts
Schedule 4.7 Capitalization
Schedule 5.1(a) Interim Conduct
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement (the "Agreement") dated as of May 1, 1997, by
and among Suburban Ostomy Supply Co., Inc., a Massachusetts corporation (the
"Buyer"), ▇▇▇▇▇▇'▇, Inc., an Illinois corporation (the "Company"), and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, the sole shareholder of the Company (the "Seller").
The Seller owns the outstanding shares (the "Shares") of Common Stock of
the Company, without par value per share, constituting all of the outstanding
Equity Securities of the Company. On the date hereof, Buyer desires to purchase,
and the Seller desires to sell, all of the outstanding Equity Securities of the
Company.
In consideration of the foregoing, the mutual representations,
warranties and covenants set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For the purposes of this Agreement, all capitalized
words or expressions used in this Agreement (including the Schedules and
Exhibits annexed hereto) shall have the meanings specified in this Article I
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Affiliate" means when used with respect to any Person, (a) if such
Person is a corporation, any officer or director thereof and any Person which
is, directly or indirectly, the beneficial owner (by itself or as part of any
group) of more than twenty-five percent (25%) of any class of any Equity
Security thereof, and, if such beneficial owner is a partnership, any general or
limited partner thereof, or if such beneficial owner is a corporation, any
Person controlling, controlled by or under common control with such beneficial
owner, or any officer or director of such beneficial owner or of any corporation
occupying any such control relationship, (b) if such Person is a partnership,
any general or limited partner thereof and (c) any other Person which, directly
or indirectly, controls or is controlled by or is under common control with such
Person. For purposes of this definition, "control" (including the correlative
terms "controlling", "controlled by" and "under common control with"), with
respect to any Person, shall mean possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" means this Stock Purchase Agreement (together with all
Exhibits and Schedules hereto) as from time to time assigned, supplemented,
modified, amended, or restated or as the terms hereof may be waived in
accordance with the terms hereof.
"Business Day" means any day, excluding Saturday, Sunday and any other
day on which commercial banks in Boston, Massachusetts and Chicago, Illinois are
authorized or required by law to close.
"Buyer" means Suburban Ostomy Supply, Co., Inc., a Massachusetts
corporation, and its successors and assigns.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, and the regulations thereunder.
"Charter" means the Certificate of Incorporation, Articles of
Incorporation or Organization or other organizational document of a corporation,
as amended and restated through the date hereof.
"Claim" means an action, suit, proceeding, hearing, investigation,
litigation, charge, complaint, claim or demand.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Commission" means the Securities and Exchange Commission and any other
similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Common Stock" means the common stock of the Company, without par value
per share.
"Company" means ▇▇▇▇▇▇'▇, Inc., an Illinois corporation, and its
successors and assigns.
"Environmental Action" means any administrative, regulatory or judicial
action, suit, written demand, demand letter, claim or notice of non-compliance
or violation, investigation, written request for information, proceeding,
consent order or consent agreement relating in any way to any Environmental Law
or any Environmental Permit, including without limitation (a) any written claim
by any governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any Environmental Law
related to the Company and (b) any written claim by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials, damage to the environment
or alleged injury or threat of injury to human health or safety from Hazardous
Materials related to the Company.
"Environmental Law" means any applicable federal, state or local law,
statute, rule, regulation, or ordinance relating to the environment, human
health or safety from Hazardous Materials, including, without limitation,
CERCLA, the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the Clean Water Act, the Toxic Substances
Control Act, the Clean Air Act, the Safe Drinking Water Act, the Atomic Energy
Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Occupational
Safety and Health Act, and any similar state and local laws, and the rules or
regulations thereunder.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental Law.
"Equity Security" shall have the meaning given to such term in Section
3(a)(11) of the Exchange Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
any similar or successor federal statute, and the rules and regulations
thereunder, all as the same shall be in effect at the time.
"ERISA Affiliate" means, for purposes of Title IV of ERISA, any trade or
business, whether or not incorporated, that together with the Company or any
Subsidiary of the Company, would be deemed to be a "single employer" within the
meaning of Section 4001 of ERISA, and, for purposes of the Code, any member of
any group that, together with the Company or any Subsidiary of the Company, is
treated as a "single employer" for purposes of Section 414 of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, and any
similar or successor federal statute, and the rules and regulations and
interpretations of the Commission thereunder, all as the same shall be in effect
at the time.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are applicable to the
circumstances as of the date of determination.
"Hazardous Materials" means (a) petroleum or petroleum products, natural
or synthetic gas, asbestos, urea formaldehyde foam insulation and radon gas, (b)
any substances defined as or included in the definition or "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes" "restricted hazardous waters," toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
Environmental Law and (c) any other substance exposure to which or emission of
which is regulated under any Environmental Law.
"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guaranties, endorsements (other than for
collection in the ordinary course of business).
"IRS" means the Internal Revenue Service and any similar or successor
agency of the federal government administering the Code.
"Last Balance Sheet" shall mean the consolidated balance sheet of the
Company and its Subsidiaries as at the month ended March 31, 1997, included in
the Financial Statements.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction,
adverse claim by a third party, title defect or encumbrance of any kind, any
filing of any financing statement as debtor under the Uniform Commercial Code or
comparable law of any jurisdiction and any agreement to give or make any of the
foregoing.
"Material Adverse Effect" means a material adverse impact or effect on
(a) the business, operations, assets, liabilities or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, (b) the ability
of the Company or the Seller to perform their respective material obligations
under any of the Purchase Documents, or (c) the validity or enforceability of
any of the Purchaser Documents.
"Officer's Certificate" means a certificate signed in the name of a
corporation by its President, Chief Executive Officer, Treasurer, Chief
Financial Officer, or, if so specified, the Clerk or Secretary, acting in his or
her official capacity.
"Person" means any individual, firm, partnership, association, trust,
corporation, limited liability company, governmental body or other entity.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
thereto.
"Purchase Documents" means this Agreement, the Employment Agreement and
any other material certificate, document, instrument, stock power, or agreement
executed in connection therewith.
"Release" means any release, disposal, discharge, dispersal, leaching or
migration into the environment including the movement of Hazardous Materials
through or in the air, soil, surface water, ground water, or property other than
in compliance with all Environmental Laws and Permits.
"Securities Act" means the Securities Act of 1933, and any similar or
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Shares" means the outstanding shares of Common Stock of the Company.
"Subsidiary" means, with respect to any Person (a) any corporation,
association or other entity of which at least a majority in interest of the
outstanding capital stock or other Equity Securities having by the terms thereof
voting power under ordinary circumstances to elect a majority of the directors,
managers or trustees thereof, irrespective of whether or not at the time capital
stock or other Equity Securities of any other class or classes of such
corporation, association or other entity shall have or might have voting power
by reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such Person, or (b) any entity (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly
at the date of determination thereof, has at least majority ownership interest.
For purposes of this Agreement, a Subsidiary of the Company shall include the
direct and indirect Subsidiaries of the Company.
"Suburban Shares" means the shares of Common Stock, no par value, of the
Buyer paid to the Seller as partial consideration for the Shares, so provided in
Section 2.2.
"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
The following terms are defined in the following Sections of this
Agreement:
Term Section
Closing 2.4
Closing Date 2.4
Financial Statements 3.5
Indemnifying Party 5.5
Losses 5.2
Plan 3.19(a)
Purchase Price 2.2
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1 Purchase and Sale. Upon the terms and subject to the conditions
contained in this Agreement, at the Closing (as defined in Section 2.4 below),
the Seller shall sell, assign, transfer and deliver to Buyer, and Buyer will
accept and purchase from the Seller, all of the Shares owned or held by the
Seller, free and clear of all Liens.
2.2 Consideration. Upon the terms and subject to the conditions
contained in this Agreement, in reliance upon the representations, warranties
and agreements of the Company and the Seller contained herein, and in
consideration of the sale, assignment, transfer and delivery of the Shares,
Buyer will pay to the Seller (i) Seven Million Dollars ($7,000,000), less the
amount of the Company's Indebtedness for borrowed money outstanding on the
Closing Date, which net amount shall be paid by wire transfer of immediately
available funds, and (ii) One Million Dollars ($1,000,000), which amount will be
paid by delivery to Seller of 111,111 shares of Common Stock, no par value, of
the Buyer (the "Suburban Shares"). The consideration payable to the Seller for
the Shares is referred to herein as the "Purchase Price". For the purpose of
determining the number of Suburban Shares which are issuable as part of the
Purchase Price, the parties hereto acknowledge that such Suburban Shares have
been valued at the average closing price of the common stock, no par value, of
the Buyer during the thirty (30) days immediately preceding the Closing Date.
2.3 Escrow Account. At the Closing, a certificate evidencing Suburban
Shares with an aggregate value of Six Hundred Thousand Dollars ($600,000) (the
"Escrow Shares"), together with an undated stock power executed by the Seller,
shall be deposited in an escrow account which shall be established and
maintained pursuant to the Escrow Agreement (the "Escrow Agreement") in the form
attached hereto as Exhibit A. For the purpose of determining the number of
Suburban Shares which shall be deposited in the escrow account maintained
pursuant to the Escrow Agreement, such Suburban Shares shall be valued as set
forth in Section 2.2.
2.4 Time and Place of Closing. The closing of the transactions described
in Sections 2.1 and 2.2 of this Agreement (the "Closing") shall take place at
the offices of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ at 10:00 a.m. on the date hereof. The date
hereof is hereinafter referred to as the "Closing Date."
2.5 Deliveries by the Seller and the Buyer. At the Closing on the date
hereof, the Seller will deliver to Buyer (a) the various certificates,
instruments and documents referred to in Section 2.5(a) below, and (b) stock
certificates representing the Shares duly endorsed for transfer or accompanied
by a stock power duly executed in blank, and any other documents that are
necessary to transfer to Buyer good title to all Shares free and clear of all
Liens, and Buyer will deliver to the Seller the various certificates,
instruments, and documents referred to in Section 2.5(b) below and the Purchase
Price so set forth in Section 2.2.
(a) At the Closing, the Company shall deliver to Buyer:
(i) an Officer's Certificate of the Secretary of
the Company certifying (x) the incumbency and genuineness of signatures of all
officers of the Company executing this Agreement, any document delivered b
the Company at the Closing and any other document, instrument or agreement
executed in connection herewith, (y) the truth and correctness of resolutions
of the Company authorizing the entry by the Company into this Agreement
and the transactions contemplated hereby and (z) the truth, correctness and
completeness of the By-Laws of the Company;
(ii) an Officer's Certificate of the President or
Chief Financial Officer of the Company certifying the amount of Indebtedness for
borrowed money of the Company as of the Closing Date;
(iii) the minute books and stock record books of the
Company;
(iv) the Charter of the Company certified as of a
recent date by the Secretary of State of the State of Illinois;
(v) certificates of corporate and tax good
standing and legal existence of the Company as of a recent date from the
Secretary of State of the State of Illinois;
(vi) written resignations of all directors of the
Company effective as of the Closing;
(vii) a favorable opinion, dated the Closing Date
and satisfactory in form to Buyer and its counsel, of Winston & ▇▇▇▇▇▇,
counsel to the Seller and the Company, as to the matters set forth on Exhibit
B attached hereto. In rendering such opinion such counsel may, to the
extent he may deem such reliance or limitation is proper, (a) rely on (x)
certificates of public officials, and (y) certificates, in form and substance
satisfactory to Buyer and its counsel, of the Seller or officers of the
Company and (b) limit the scope of such opinion to the laws of Illinois and the
federal laws of the United States;
(viii) the Seller shall have executed and delivered
to the Buyer the Employment Agreement in the form attached hereto as Exhibit C;
(ix) employment and non-competition agreements on
terms reasonably acceptable to the Buyer entered into between the Company and
each of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
(x) audited financial statements of the Company
for its year ended December 31, 1996, accompanied by an unqualified report of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, all in form acceptable to the Buyer in its sole discretion.
(b) At the Closing, the Buyer shall deliver to the Seller
and the Company:
(i) an Officer's Certificate of the Clerk of the
Buyer certifying (x) the incumbency and genuineness of signatures of all
officers of the Buyer executing this Agreement, any document delivered by the
Buyer at the Closing and any other document, instrument or agreement executed
in connection herewith, (y) the truth and correctness of resolutions of the
Buyer authorizing the entry by the Buyer into this Agreement and the
transactions contemplated hereby and (z) the truth, correctness and
completeness of the By-Laws of the Buyer;
(ii) the Charter of the Buyer, each certified as
of a recent date by the Secretary of State of the Commonwealth of Massachusetts;
(iii) certificate of corporate good standing and
legal existence of the Buyer as of a recent date from the Secretary of State of
the Commonwealth of Massachusetts;
(iv) a favorable opinion, dated the Closing Date
and satisfactory in form to the Seller, of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A
Professional Corporation, counsel to Buyer, in substantially the form
attached hereto as Exhibit D. In rendering such opinion such counsel may, to
the extent it may deem such reliance or limitation is proper, (a) rely on (x)
certificates of public officials, and (y) certificates, in form and
substance satisfactory to the Company, of the Buyer or officers of the
Buyer and (b) limit the scope of such opinion to the
laws of the Commonwealth of Massachusetts and the federal laws of the United
States; and
(v) an Employment Agreement in the form of
Exhibit C with the Seller.
2.6 Other Transactions at the Closing. Simultaneously with the
Closing,
(a) The Company and the Seller shall execute the Employment
Agreement in the form attached hereto as Exhibit C. Pursuant to the Employment
Agreement, the Buyer shall grant to the Seller an option (the "Option") to
purchase up to 90,000 shares of common stock, no par value, of the Buyer, which
Option shall be evidenced by an option agreement (the "Option Agreement") in the
form attached hereto as Exhibit E. Such option shall vest in five (5) equal
annual installments on the first through fifth anniversaries of the Closing
Date, shall continue for a period of ten (10) years from date of grant, subject
to earlier termination as set forth in the Option Agreement, and shall be on
such further terms, and subject to such further conditions, all as are set forth
in the Option Agreement. The Buyer hereby agrees, subject to stockholder
approval to be obtained at the Buyer's next annual meeting of stockholders or at
a special meeting in lieu thereof, of an amendment to the Buyer's 1995 Stock
Option Plan in order to an increase the number of shares subject to said Plan,
to file a registration statement on Form S-8 with the Securities and Exchange
Commission relating to the 90,000 shares subject to the Option.
(b) The Company shall pay to the Seller, not less than ten (10)
days prior to the date on which the Seller is obligated to pay the related
income taxes, amount sufficient to pay federal and state income taxes payable by
the Seller as a shareholder of the Company when it was taxable as an S
corporation, with respect to the income of the Company earned through the
Closing Date.
(c) On the Closing Date, the Buyer shall cause its Board of
Directors to be expanded by one (1) member, and the Seller shall be elected a
director of the Buyer, to serve in accordance with the by-laws and the Restated
Articles of Organization, as amended, of the Buyer, and Summit Ventures III,
L.P. and its affiliates shall have delivered to the Seller their written
agreement to vote their shares of the Buyer in favor of the Seller as a director
of the Buyer so long as he remains an employee of the Company, up to a maximum
of five years.
(d) The Buyer and the Seller shall enter into a Registration
Rights Agreement in the form of Exhibit F attached hereto pursuant to which the
Buyer will grant to the Seller certain registration rights with respect to the
Suburban Shares.
2.7 Retained Assets. Notwithstanding anything to the contrary to
this Agreement, the following assets shall be transferred by the Company to the
Seller immediately prior to the Closing:
(a) 1989 Mercedes Benz owned by the Company and used by
the Seller;
(b) the Company's rights and interests as owner and beneficiary
in that certain Insurance Policy with Federal ▇▇▇▇▇▇ Life Assurance
Company, Policy #FK5016913, naming the Company as the owner/beneficiary
of this insurance policy; and
(c) the Company's rights and interests as owner and beneficiary
in that certain Insurance Policy with Great-West Life Insurance Company,
Policy #4181620, naming the Company as the owner/beneficiary of this
insurance policy.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLER
Each of the Company and the Seller acting, jointly and severally, hereby
represents and warrants to Buyer as follows, except for the representations and
warranties contained in Section 3.34 which are being made solely by the Seller:
3.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Illinois. The Company has all requisite power and authority to own,
use and lease its properties and to conduct its business as
such properties are owned, used or leased and as such business is currently
conducted. The copies of the Company's Charter and By-Laws, as amended to date,
certified by its Secretary and delivered to Buyer's counsel at the Closing, are
true, complete and correct. The Company is qualified to do business as a foreign
corporation in each jurisdiction where the conduct of its business requires such
qualification.
3.2 Authority; No Violation.
(a) The Company has all requisite corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the Company
have been duly and validly authorized and approved by all necessary corporate
action. This Agreement constitutes the legal and binding obligation of the
Company and the Seller, enforceable against each of them in accordance with its
terms. The Shares are validly issued, fully paid and non-assessable, and free of
any Liens.
(b) Except as set forth on Schedule 3.2, assuming the accuracy
of the representations and warranties of Buyer hereunder, the entering into of
this Agreement by the Company and the Seller does not, and the consummation by
the Company and the Seller of the transactions contemplated hereby, including
specifically the transfer of the Shares to Buyer by the Seller, will not violate
the provisions of (i) to the knowledge of the Company and Seller, any applicable
federal, state, local or foreign laws, which violation might reasonably be
expected to have a Material Adverse Effect, (ii) the Company's Charter or
By-Laws, or (iii) any provision of, or result in a default or acceleration of
any obligation under, or result in any change in the rights or obligations of
the Company or the Seller under, any Lien, contract, agreement, license, lease,
instrument, indenture, order, arbitration award, judgment, or decree to which
the Company or the Seller is a party or by which any of them is bound, or to
which any property of the Company is subject.
3.3 Capitalization. The Company's authorized capital stock consists of
1,000,000 shares of Common Stock, without par value per share, of which 5,000
shares are issued and outstanding, all of which are owned beneficially and of
record by the Seller. All of such outstanding shares are duly authorized,
validly issued, fully paid, non-assessable, free of all Liens and pre-emptive
rights and have been issued in compliance with all applicable federal and state
laws. Except for the rights of Buyer hereunder, there are no outstanding
options, warrants, rights or agreements of any kind for the issuance or sale of,
or outstanding securities convertible into or exchangeable for, any additional
shares of Common Stock or any other Equity Security of the Company.
3.4 Subsidiaries. The Company has no Subsidiaries. Except as set forth
on Schedule 3.4, the Company does not own, directly or indirectly, any
securities issued by any other Person except for United States government
securities, certificates of deposit, or other cash equivalents and is not a
partner or participant in any partnership or joint venture of any kind.
3.5 Financial Statements. Attached hereto as Schedule 3.5 are the
following financial statements: (i) audited balance sheets and statements of
income, changes in stockholders' equity and cash flow as of and for the fiscal
year December 31, 1996, for the Company (the "Audited Financial Statements");
and (ii) reviewed and unaudited balance sheets and statements of income, changes
in stockholders' equity and cash flow as of and for the fiscal year ended
December 31, 1995 and unaudited balance sheets and statements of income, changes
in stockholders' equity, and cash flow as of and for the three months ended
March 31, 1997 for the Company (the "Unaudited Financial Statements" and
together with the Audited Financial Statements, the "Financial Statements"). The
Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods then
ended; provided, however, that the Unaudited Financial Statements are subject to
normal yearly adjustments (which will not be material individually or in the
aggregate) and lack footnotes otherwise required by GAAP.
3.6 Absence of Undisclosed Liabilities. Except as set forth in Schedule
3.6 attached hereto, there were no material liabilities of the Company, which
were required by GAAP to have been reflected in the Last Balance Sheet which
were not reflected therein, and since the Last Balance Sheet, no liabilities
have arisen except in the ordinary course of business of the Company. Schedule
3.6 sets forth a true and correct aged list of all accounts payable of the
Company as of the Last Balance Sheet Date, in excess of $5,000 to any one payee.
3.7 Absence of Certain Changes. Except as otherwise disclosed in
Schedule 3.5 attached hereto, since January 31, 1997, there has not been:
(a) any change in the business, operations, assets, liabilities
or condition (financial or otherwise) of the Company taken as a whole that, by
itself or in conjunction with all other such changes, arising outside of the
ordinary course of business, has been or is reasonably likely to be materially
adverse with respect to the Company;
(b) any obligation or liability incurred by the Company for an
amount not more than $25,000 in each case or $50,000 in the aggregate; other
than routine trade payables, payables and other obligations and liabilities
incurred in the ordinary course of business
(c) any Lien placed on any of the Company's properties or assets
which remains in existence on the date hereof other that Liens reflected in the
Financial Statements or on Schedule 3.7, all of which will be extinguished at
the Closing;
(d) any contingent liabilities incurred by the Company
with respect to the obligations of any other Person outside the ordinary course
of business of the Company;
(e) any purchase, sale, lease, assignment, transfer or
other disposition, or any agreement or other arrangement for the purchase,
sale, lease, assignment, transfer or other
disposition, of any part of the Company's properties or assets, other than
purchases and sales in the ordinary course of business, except for fixed assets
purchased or sold or other capital expenditures made in amounts not exceeding
$25,000 for any single item and $50,000 in the aggregate for all such items;
(f) any damage, destruction or loss, whether or not
covered by insurance, materially adversely affecting the Company's properties,
assets or business;
(g) any declaration, setting aside or payment of any dividend
on, or the making of any other distribution in respect of, any Equity Security
of the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of any of its own Equity Securities, or any issuance
by the Company of any Equity Security other than as contemplated by Section 2.7
hereof;
(h) any labor disputes or claim of unfair labor practices
involving the Company; any change in the employment contracts of or compensation
payable or to become payable by the Company to any of its officers, directors,
employees, consultants or agents, or any bonus payment or arrangement made to or
with any of such officers, directors, employees, consultants or agents; or any
change in coverage or benefits available under any Plan described in Section
3.19;
(i) any material change with respect to the Company's
management or supervisory personnel;
(j) any payment or discharge of a material Lien or
liability of the Company not disclosed on the Financial Statements or
incurred in the ordinary course of business;
(k) any obligation or liability incurred by the Company with
respect to any loan, advance or commitment to lend by any bank, financial
institution or institutional lender to any of the officers, directors,
employees, consultants, agents, or stockholders of the Company or to any other
Person; or any loans or advances made by the Company to any officers, directors,
employees, consultants, agents or stockholders of the Company, except for normal
compensation, professional fees and expense allowances payable to officers and
directors;
(l) any contracts, licenses, leases or agreements entered into
by the Company which are outside the ordinary course of business and which
obligate the Company for more than $5,000 in any one case or more than $25,000
in the aggregate;
(m) any recapitalization or reorganization;
(n) any amendment or other change (or any authorization to make
such an amendment or change) to the Company's Charter or By-Laws, except as
required in connection with the consummation of the transactions contemplated
hereby;
(o) any postponement or delay in payment of any accounts
payable or liability of the Company except in the ordinary course of business
consistent with prior practices;
(p) any cancellation, waiver, compromise or release of any
right or claim eithe involving more than $10,000;
(q) any cancellation, termination, modification, or acceleration
by any party to any contract, license, lease or agreement involving more than
$10,000 outside the ordinary course of business of the Company to which any of
the Company is a party or by which any of them is bound; or
(r) to the knowledge of the Seller, any other occurrence,
action, failure to act or transaction involving the Company other than
transactions in the ordinary course of business consistent with prior practices.
3.8 Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest or rights in, all of the property and assets used by
it, located on its premises, or shown on the Last Balance Sheet, free and clear
of all Liens, except for (a) properties and assets disposed of in the ordinary
course of business since the date of the Last Balance Sheet; (b) liens, claims
and encumbrances reflected in the Last Balance Sheet and to be released as of
the Closing, (c) liens for taxes not yet payable, (d) minor liens, claims and
encumbrances which would not materially adversely affect the value of such
assets, and (e) liens set forth on Schedule 3.8 hereto.
3.9 Sufficiency and Condition of Assets. The Company owns or leases all
real, personal, tangible and intangible property and assets necessary for the
conduct of its businesses as such businesses are presently conducted. To the
knowledge of each of the Sellers and Company, all tangible properties and assets
owned or leased by the Company are in good operating condition and repair,
ordinary wear and tear excepted, have been well maintained, and conform with all
applicable laws, statutes, ordinances, rules and regulations, except where the
failure thereof shall not result in a Material Adverse Effect.
3.10 Real Estate.
(a) The Company does not own any real property.
(b) Schedule 3.10(b) lists and describes briefly all real
property leased or subleased to the Company. With respect to each such lease
and sublease;
(i) correct and complete copies thereof have been
delivered to Buyer;
(ii) the lease or sublease is legal, valid binding,
enforceable, and in full force and effect and will continue to be so on
identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the lease or sublease is in
breach or default, and, to the knowledge of the Company and the Seller,
no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) no party to the lease or sublease has
repudiated any provision thereof, and there are no disputes, oral agreements,
or forbearance programs in effect as to the lease or sublease;
(v) with respect to each sublease, the
representations and warranties set forth in subsections (ii), (iii) and (iv)
above are true and correct with respect to the underlying lease;
(vi) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(vii) to the knowledge of the Company and the
Seller, all facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated
and maintained in accordance with applicable laws, statutes, ordinances,
rules and regulations; and
(viii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities.
3.11 Accounts Receivable. All of the accounts receivable of the Company
are properly reflected in the Last Balance Sheet consistent with past practice
and are, subject to the allowance for doubtful accounts set forth therein, valid
and enforceable claims, subject to no set-off or counterclaim, and are fully
collectible in the ordinary course of business; provided, however, that each
Medicare and Medicaid account receivable shall be collectible only in an amount
equal to 86% of the face amount thereof, and provided further that no Medicare
or Medicaid account receivable shall be deemed to be uncollectible unless it has
not been collected within twelve months after the date of this Agreement. Except
as set forth in Schedule 3.11 attached hereto, the Company does not have any
accounts receivable or loans or notes receivable from any Affiliates or from any
of its officers, directors, consultants, employees, agents or stockholders.
3.12 Inventories.
(a) Except as disclosed in Schedule 3.12 attached hereto: (i)
the inventories of the Company as of March 31, 1997 are properly reflected in
the Last Balance Sheet and are of a quality and quantity saleable in the
ordinary course of business of the Company at prevailing market prices, are
priced at the lower of a weighted average of actual cost or market and (ii) the
values of the inventories as of March 31, 1997 stated in the Financial
Statements reflect the
Company's normal inventory valuation policies and were determined in accordance
with GAAP consistently applied.
(b) As of the date hereof, purchase commitments for raw
materials and parts for the Company are not, individually or in the aggregate,
in excess of normal requirements and none of such material commitments are at
prices materially in excess of current market prices.
3.13 Intellectual Property. Except as set forth on Schedule 3.13, all
patents, patent applications, registered copyrights, trade names, registered
trademarks, trademark applications and software programs (other than business
software programs which are readily available at retail outlets) which are owned
by or licensed to the Company, if any, are listed in Schedule 3.13 attached
hereto, which indicates with respect to each the nature of the Company's
interest therein and the expiration date thereof or the date on which the
Company's interest therein terminates. Except as set forth on Schedule 3.13, the
Company owns and has the exclusive right to use, without the requirement to pay
any license or royalty, all software programs used in the conduct of the
business (other than business software programs which are readily available at
retail outlets). All of the Company's patents and registered trademarks have
been duly registered in, filed in or issued by the United States Patent Office
or the corresponding offices of other countries identified in Schedule 3.13, and
have been properly maintained and renewed in accordance with all applicable laws
and regulations in the United States and each such country. Except as set forth
in Schedule 3.13, use of said patents, patent applications, registered
copyrights, trade names, registered trademarks, trademark applications and
software programs (other than business software programs which are readily
available at retail outlets) owned by the Company does not require the consent
of any other Person and the same are freely transferable (except as otherwise
provided by law) and are owned exclusively by the Company, free and clear of any
Liens. Except as set forth in Schedule 3.13, (i) no other Person has an interest
in or right or license to use, or the right to license any other Person to use,
any of said patents, patent applications, registered copyrights, trade names,
registered trademarks, trademark applications and software programs (other than
business software programs which are readily available at retail outlets), (ii)
there are no claims or demands of any other Person pertaining thereto and no
proceedings have been instituted, or are pending or, to the knowledge of the
Company and each Seller, threatened, which challenge the Company's rights in
respect thereof, (iii) none of the patents, copyrights, trade names, trademarks
or software programs listed in Schedule 3.13 is being infringed by another
Person or is subject to any outstanding order, decree, ruling, charge,
injunction, judgment or stipulation, (iv) no Claim has been made or is
threatened charging the Company with infringement of any adversely held patent,
trade name, trademark or copyright and (v) there does not exist (a) any
unexpired patent with claims which are or would be infringed by products of the
Company or by apparatus, methods or designs employed by it in manufacturing such
products or (b) any patent or application therefor or invention which would
materially adversely affect the Company's ability to manufacture, use or sell
any such product, apparatus, method or design.
3.14 Trade Secrets and Customer Lists. The Company has the right to use,
free and clear of any Claims or rights of any other Person, all trade secrets,
customer lists, manufacturing and secret processes and know-how (if any)
required for or used in the manufacture or marketing of all products being sold,
manufactured, or under development by it, including products licensed from other
Persons. Any payments required to be made by the Company for the use of such
trade secrets, customer lists, manufacturing and secret processes and know-how
are described in Schedule 3.14 attached hereto. The Company is not in any way
making an unlawful or wrongful use of any confidential information, know-how, or
trade secrets of any other Person, including without limitation, to the
knowledge of the Company or the Seller, any former employer of any present or
past employee of the Company. Except as described on Schedule 3.14, neither the
Seller, nor to the Seller's knowledge, any officer, director or employee of the
Company, is a party to any non-competition or confidentiality agreement with any
Person other than the Company.
3.15 Contracts. Except for contracts, commitments, leases, licenses,
plans and agreements described in Schedule 3.15 attached hereto, the Company is
not a party to or subject to:
(a) any plan or contract regarding or providing for bonuses,
pensions, options, stock purchases, deferred compensation, severance benefits
retirement payments, profit sharing, stock appreciation, collective bargaining
or the like, or any contract or agreement with any labor union;
(b) any employment or consulting contract or contract for
personal services not terminable at will by the Company without penalty to the
Company;
(c) any contract or agreement for the purchase of any commodity,
product, material, supplies, equipment or other personal property, or for the
receipt of any service outside of the ordinary course of business, other than
purchase orders for less than $5,000 each and which in the aggregate do not
exceed $25,000;
(d) any contract, arrangement or program with vendors,
suppliers or customers relating to rebates, volume discounts or cooperative
Advertising;
(e) any contract or agreement for the purchase or lease of
any fixed asset, whether or not such purchase or lease is in the ordinary
course of business, for a price in excess of $25,000;
(f) any contract or agreement for the sale of any commodity,
product, material, equipment, or other personal property, or the furnishing by
the Company of any service, other than contracts entered into in the ordinary
course of business;
(g) any contract or agreement providing for the purchase of all
or substantially all of its requirements of a particular product from a
supplier, or for periodic minimum purchases of a particular product from a
supplier;
(h) any contract or agreement with any sales agent,
distributor or OEM of products of the Company;
(i) any contract or agreement concerning a partnership or
joint venture with one or more Persons;
(j) any confidentiality agreement or any non-competition
agreement or other contract or agreement containing covenants limiting the
Company's freedom to compete in any line of business or in any location or with
any Person;
(k) any license agreement (as licensor or licensee); or, in the
case of software generally available to the public, any license agreement
entered into outside the ordinary course of business;
(l) any contract or agreement with the Seller or any
present or former officer, director, consultant, or stockholder of the
Company or with any Affiliate of any of them;
(m) any loan agreement, indenture, note, bond, debenture
or any other document or agreement evidencing a capitalized lease obligation or
Indebtedness to any Person;
(n) any agreement of guaranty, indemnification, or other similar
commitment with respect to the obligations or liabilities of any other Person
outside of the ordinary course of business (other than lawful indemnification
provisions contained in the Charters and By-Laws of the Company);
(o) any agreement under which the consequences of a default
by the Company or termination could have a Material Adverse Effect; or
(p) any other agreement or contract (or group or related
agreements or contracts) the performance of which involves consideration paid or
received by the Company in excess of $25,000.
Copies of all such contracts, commitments, plans, leases, licenses and
agreements have been provided to Buyer or its counsel prior to the execution of
this Agreement, and all such copies are true, correct and complete and have been
subject to no amendment, extension or other modification as of the date hereof,
except such as are described in Schedule 3.15. Except as listed and described in
Schedule 3.15, neither the Company, nor to the knowledge of the Company and the
Seller, any other Person, is in default under any such contract, commitment,
plan, lease, license or agreement described in Schedule 3.15 (a "default" being
defined for
purposes hereof as an actual default or event of default or the existence of any
fact or circumstance which would, upon receipt of notice or passage of time,
constitute a default, except where such default would not result in a Material
Adverse Effect).
3.16 Customers and Suppliers. Except as disclosed on Schedule 3.16, to
the knowledge of the Company and the Seller, the relationships of the Company
with its suppliers and customers are good commercial working relationships
consistent with past practice and, except as set forth on Schedule 3.16, during
the period January 1, 1997 through the date hereof no Person who during the
twelve months ended December 31, 1995 or the twelve months ended December 31,
1996 accounted for more than five percent (5%) of the Company's revenues, or
more than five percent (5%) of the Company's purchases (the "Large Customers and
Suppliers") canceled or otherwise terminated, or, to the knowledge of the
Company and the Seller, has threatened to cancel or otherwise terminate, its
relationship with the Company.
3.17 Compliance with Laws.
Except as provided in Section 3.18, 3.19 and 3.20 hereof:
(a) The Company has all licenses, permits, franchises, orders,
approvals, accreditations, written waivers and other authorizations as are
necessary in order to enable it to own and conduct its business as currently
conducted and to occupy and use its real and personal properties except where
the failure thereof would not have a Material Adverse Effect. Except as set
forth on Schedule 3.17, no registration, filing, application, notice, transfer,
consent, approval, order, qualification, waiver or other action of any kind is
required by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to avoid the loss of any
material rights pertaining to any such license, permit, franchise, order,
approval, accreditation, waiver or authorization. The Company is in compliance
with the terms and conditions of all such licenses, permits, franchises, orders,
approvals, accreditations, waivers and authorizations except where the failure
to be in such compliance would not have a Material Adverse Effect.
(b) The Company has conducted and is conducting its business in
material compliance with applicable federal, state, local or foreign laws,
statutes, ordinances, regulations, rules or orders or other requirements of any
governmental, regulatory or administrative agency or authority or court or other
tribunal relating to it (including, but not limited to, any law, statute,
ordinance, regulation, rule, order or requirement applicable to it relating to
securities, properties, business, products, advertising, sales or employment
practices, immigration, terms and conditions of employment, workers
compensation, wages and hours, safety, occupational safety, health or welfare
conditions relating to premises occupied, product safety and liability or civil
rights), except when failure to so comply would not have a Material Adverse
Effect. To the knowledge of the Company and the Seller, the Company is not now
charged with, and, is not now under investigation with respect to, any possible
material violation of any applicable law, statute, ordinance, regulation, rule,
order or requirement relating to any of the foregoing in
connection with the business of the Company, and the Company has filed all
material reports required to be filed with any governmental, regulatory or
administrative agency or authority. The Company shall promptly inform Buyer of
any notice relating to the foregoing received after the date hereof and on or
prior to the Closing Date.
3.18 Taxes.
(a) The Company has had in effect since May 1, 1987 a valid
election to be treated as a "S" Corporation for federal purposes and under the
equivalent state statute. The Company has filed all Tax Returns that it was
required to file. To the knowledge of the Company and the Seller, all such Tax
Returns were correct and complete in all respects. All Taxes owed by any of the
Company have been paid (whether or not shown on any Tax Return). The Company is
not currently the beneficiary of any extension of time within which to file any
Tax Return. No Claim has ever been made by an authority in a jurisdiction where
the Company does not file Tax Returns that it is or may be subject to the
imposition of any Tax by that jurisdiction. There are no Liens on any of the
assets of any of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
consultant, independent contractor, creditor, stockholder, or other third party.
(c) Neither the Company nor the Seller is aware of any dispute
or Claim concerning any liability for Taxes of the Company. Schedule 3.18
attached hereto lists all federal, state, local, and foreign income Tax Returns
filed with respect to the Company for taxable periods ended on or after December
31, 1993, indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Seller has
delivered to Buyer correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company since December 31, 1993.
(d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The Company has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations. The Company has not made or is
obligated to make any payments or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code or that are subject to an excise tax under
Section 4999 of the Code. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The
Company is not a party to any Tax allocation or sharing agreement. The Company
(i) has not been a member of an Affiliated Group (as defined by Section 1504 of
the Code) filing a consolidated federal
income Tax Return or (ii) has any Liability for the Taxes of any Person (other
than any of the Company) under Treas. ▇▇▇.▇▇. 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor by contract or
otherwise.
(f) The unpaid Taxes of the Company (i) did not, as of the date
of the Last Balance Sheet, exceed the reserve for Tax Liabilities (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Last Balance Sheet (rather
than in any notes thereto) and (ii) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company in filing their Tax Returns.
(g) The Company has not agreed to and is not required to make an
adjustment under Section 481 of the Code (or any comparable provision of state,
local or foreign law) by reason of a change in accounting method.
3.19 Employee Benefit Plans.
(a) Identification of Plans.
Schedule 3.19 attached hereto lists and identifies each:
(1) "Employee Pension Benefit Plan" (as such term is
defined in Section 3(2) of ERISA) which is not a Multiemployer Plan;
(2) "Multiemployer Plan" (as such term is defined in
Section 3(37) or 4001(a)(3) of ERISA);
(3) "Employee Welfare Benefit Plan" (as such term is
defined in Section 3(3) of ERISA); and
(4) Stock purchase, option or bonus plan, deferred compensation,
severance pay, incentive, vacation, sick pay or leave, fringe benefit plan,
policy or arrangement or payroll practice, which is, or was within five (5)
years prior to the Closing Date, maintained or contributed to by the Company or
any ERISA Affiliate or under which the Company or any ERISA Affiliate has any
liability or contingent liability (individually a "Plan" and collectively, the
"Plans").
(b) Representations Applicable to All Employee
Pension Benefit Plans.
(1) Except as set forth on Schedule 3.19, each Plan which is
intended to be "qualified" under Section 401(a) of the Code has received a
current favorable determination letter as to its qualification under the Code.
Except as set forth on Schedule 3.19, there have been no
amendments to any such Plans since the date of such Plan's determination letter
which would adversely affect its qualification. To the best knowledge of the
Company and the Seller, no prohibited transaction or other event has occurred
that will give rise to disqualification of any such Plan under the Code. No
event has occurred that will or could subject any such Plan to tax under Section
511 of the Code.
(2) No Plan has incurred any "accumulated funding deficiency"
(as described in Section 302 of ERISA or Section 412 of the Code), whether or
not waived, nor has there been any failure to make by its due date a required
installment under Section 302(e) of ERISA or Section 412(m) of the Code with
respect to any Plan.
(c) Representations Applicable to All Title IV Plans.
(1) Except as disclosed on Schedule 3.19, with respect to each
Plan, no liability under Title IV or ERISA has been incurred since the effective
date of ERISA that has not been satisfied in full, and no condition exists that
presents a risk of incurring a liability under Title IV, other than liability
for PBGC premiums which have been paid when due.
(2) No steps have been taken to terminate any Plan subject
to Title IV of ERISA.
(3) No Plan has been the subject of a "reportable event" (as
described in Section 4043 of ERISA) as to which a notice would be required to be
filed with the PBGC.
(4) Except as disclosed on Schedule 3.19, with respect to each
Plan which is subject to Title IV of ERISA, neither (i) the present value of
accrued benefits under such Plan (based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by the Plan's
actuary with respect to such Plan), nor (ii) the "benefit liabilities" (as
described in Section 4001(a)(18) of ERISA) of such Plan exceeded, as of its last
valuation date, the then current value of the assets of such Plan. All costs of
any Plan subject to Title IV of ERISA have been provided for on the basis of
consistent methods in accordance with sound actuarial assumptions and practices.
Since the last valuation date for each such Plan, there have been no amendments
or changes to such Plans that would materially increase the amount of benefits
thereunder.
(d) Representations Applicable to All Multiemployer Plans.
(1) No Plan listed in Schedule 3.19(a) is a Multiemployer
Plan.
(e) Representations Applicable to All Plans.
(1) Each Plan complies and has been administered in form and
operation in all material respects with all requirements of law and regulation
applicable thereto. The Company and the ERISA Affiliates have performed all of
their obligations in all material respects under all such Plans.
(2) To the best knowledge of the Company and the Seller, there
have been no acts or omissions which have given rise to, or which could
reasonably be expected to give rise to, any penalty, tax, or fine under Sections
409, 502(c), or 502(i) of ERISA, or Sections 4975 or 4976 of the Code, for which
the Company or any ERISA Affiliate may be liable.
(3) Except as disclosed on Schedule 3.19, none of the assets of
any Plan are invested in any employer securities, employer real property, or any
annuity contracts.
(4) All contributions required with respect to any Plan for all
periods ending prior to the Closing (including periods from the first day of the
current plan year to the Closing) will be timely made prior to the Closing by
the Company or the ERISA Affiliates or will be properly recorded on the Closing
Balance Sheet.
(5) All required reports and descriptions of each Plan
(including IRS Form 5500 Annual Reports, Summary Annual Reports, and Summary
Plan Descriptions) have been timely filed and distributed.
(6) None of the Company or any ERISA Affiliate has any plan or
commitment to establish any additional Plans or to amend any existing Plan.
(7) No Plan provides benefits, including without limitation
death, medical, or severance benefits, with respect to current or former
employees or directors (or their beneficiaries) beyond their retirement or other
termination of service other than (i) coverage for benefits mandated by
applicable law, (ii) death benefits or retirement benefits under an Employee
Pension Benefit Plan, (iii) deferred compensation benefits properly accrued as
liabilities on the Financial Statements, or (iv) benefits the full cost of which
is borne by the current or former employee or director or his beneficiaries.
(8) There are no actions, suits, or claims (other than routine
claims for benefits made in the ordinary course of plan administration for which
plan administrative review procedures have not been exhausted) pending or
threatened involving any Plans or the assets of such Plans, and, to the best
knowledge of the Company and the Seller, no facts exist which could reasonably
be expected to give rise to any such action, suit, or claim.
(9) For each Plan, a true and complete copy of each of the
following documents have been delivered to Buyer: (i) Plan document and all
amendments thereto; (ii) most recent Summary Plan Description (together with
each Summary of Material Modifications required under ERISA); (iii) IRS Form
5500 Annual Report, if required under ERISA, for the two most recent plan years,
together with all schedules, financial statements, and opinions of independent
accountants; (iv) the actuarial report, if required under ERISA, for the two
most recent plan years; (v) Form PBGC-1, if required under ERISA, for the two
most recent plan years; (vi) if the Plan is funded through a trust or any third
party funding vehicle (including a voluntary employee benefit association under
Section 501(c)(9) of the Code, or a "multiple employer welfare arrangement"
described in Section 3(40) of ERISA), the trust or other funding agreement, all
amendments thereto, and the latest financial statements thereof for the two most
recent plan years; and (vii) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan that is intended to be
qualified under Section 401 of the Code.
3.20 Environmental Matters.
(a) Except as disclosed in Schedule 3.20 attached hereto, the
use and operation by the Company and, to the knowledge of the Company and the
Seller, by all past owners and operators, of all facilities and properties used
in the business of the Company have been, and will be on the Closing Date, in
compliance in all material respects with Environmental Laws, and no
Environmental Action has been filed, or, to the knowledge of the Company and the
Seller, threatened with or against any of them alleging any failure so to
comply.
(b) The Company has received all Environmental Permits required
to allow it to conduct its operations and businesses, such Environmental Permits
are valid and in effect, and the Company is in compliance with such
Environmental Permits.
(c) Except as disclosed in Schedule 3.20, to the knowledge of
the Company and the Seller, the Company has not sent or arranged for the
transportation of Hazardous Materials to a site, or owned or operated a site,
which, pursuant to CERCLA or any similar state law, has been placed or is
proposed (by the United States Environmental Protection Agency ("EPA") or
similar state authority) to be placed, on the "National Priorities List," as in
effect as of the Closing Date, of hazardous waste sites or any similar state
list.
(d) Except as disclosed in Schedule 3.20, neither the Company
nor the Seller has received written notice from any Person, (i) that the Company
has been identified by the EPA or similar state authority as a potentially
responsible party under CERCLA with respect to a site listed on the "National
Priorities List," as in effect as of the Closing Date, of hazardous waste sites
or any similar state list; (ii) that any Hazardous Materials which the Company
has generated, transported, or disposed of has been found at any site at which a
Person has conducted or has ordered that the Company conduct a remedial
investigation, removal, or other response action pursuant to any Environmental
Law; or (iii) that the Company is or shall be a named party
to any Environmental Action arising out of any Person's incurrence of costs,
expenses, losses, or damages of any kind whatsoever in connection with the
release of Hazardous Materials.
(e) Except as disclosed in Schedule 3.20, there are no
underground fuel tanks located at any of the facilities of the Company, except
in material compliance with Environmental laws.
(f) Except as disclosed in Schedule 3.20, there have been no
unpermitted Releases or threatened Releases by the Company of Hazardous
Materials on, upon, into, or from the Real Estate or other assets of the
Company; and, to the knowledge of the Company and the Seller, there have been no
Releases on, upon, from, or into any real property in the vicinity of the Real
Estate.
(g) Except as described on Schedule 3.20, to the knowledge of
the Company and the Seller, there is no friable asbestos contained in or forming
part of any building, building component, structure, or office space owned or
leased by the Company; and, to the knowledge of the Company and the Seller, no
polychlorinated biphenyls (PCBs) are used or stored at any property owned or
leased by the Company.
(h) None of the Real Property or other assets of the Company is
or shall be subject to any applicable environmental clean-up responsibility law
or environmental restrictive transfer law or regulation, solely by virtue of the
transactions set forth herein and contemplated hereby.
3.21 Employees. Schedule 3.21 attached hereto sets forth a true and
complete list of (a) all directors of the Company, (b) all officers (with office
held) of the Company, (c) all consultants and independent contractors retained
by the Company currently or during the last fiscal year to which the Company
paid compensation in excess of $50,000 during the year ended December 31, 1996
and (d) all employees of the Company who are compensated at an annual rate in
excess of $50,000, including each such employee's job title, remuneration and
duration of employment period. Except as disclosed in Schedule 3.21 or Schedule
3.19, the Company is not a party to any written or oral employment, consulting,
service, severance or pension agreement. The Company is not a party to, and none
of its employees are subject to, any collective bargaining agreement or other
union contract, other than as disclosed in Schedule 3.21. The Company is in
compliance in all material respects with applicable federal, state and local
laws affecting employment and employment practices, including terms and
conditions of employment and wages and hours, and there are, and have been
during the past five (5) years, no complaints against the Company pending or, to
the knowledge of the Company and the Seller, threatened before the National
Labor Relations Board or any similar state or local agency, except as set forth
on Schedule 3.21. The Company generally enjoys good relations with its employees
and there is no pending or, to the knowledge of the Company and the Seller,
threatened labor dispute with or effort to organize any of its employees, and
there has been no such labor dispute or, to the knowledge of the Company and the
Seller, effort to organize during the past five (5) years.
3.22 Litigation. Except as disclosed on Schedule 3.22 attached hereto,
(a) there is no Claim pending or, to the knowledge of the Company or the Seller
threatened (or, to the knowledge of the Company and the Seller, any facts which
could lead to such a claim) by, against, affecting or regarding the Company or
its businesses, properties or assets, at law or in equity, before any federal,
state, local or foreign court or any other governmental or administrative agency
or tribunal or any arbitrator or arbitration panel, and (b) there are no
judgments, orders, rulings, charges, decrees, injunctions, notices of violation
or other mandates against or affecting the Company or the Seller with respect to
the businesses, properties or assets of the Company of which the Company or the
Seller has knowledge. Nothing listed on Schedule 3.22, either individually or
when aggregated with other listings on such Schedule, would reasonably be
expected to have a Material Adverse Effect.
3.23 Insurance. Schedule 3.23 attached hereto sets forth a summary of
all insurance policies (including policies providing property, casualty,
liability, medical malpractice and workers' compensation coverage, benefits or
coverage for any Plan described in Section 3.19, and bond and surety
arrangements) to which the Company is a party, a named insured, or otherwise the
beneficiary of coverage and specifies the insurer, the amount of coverage, type
of insurance, expiration date, and any retroactive premium adjustments or other
loss sharing arrangements. The Company is covered by insurance in scope and
amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. Schedule 3.23 describes any self-insurance
arrangements affecting any of the Company. Within the past three (3) years, the
Company has not been denied insurance coverage. Schedule 3.23 attached hereto
sets forth all claims for insurance made by the Company within the past two (2)
years and all instances in which the Company was denied insurance coverage
relating to such claims.
3.24 Company Products. To the knowledge of the Company and the Seller,
each product manufactured, sold, leased, distributed or delivered by the Company
("Company Products") has been in conformity with all applicable contractual
commitments and all applicable express and implied service and product
warranties. Except as disclosed in Schedule 3.24 attached hereto, (a) there are
no existing or, to the knowledge of the Company or the Seller, threatened Claims
against the Company for services or merchandise which are defective or fail to
meet any express or implied service or product warranties, or to the knowledge
of the Company or the Seller, any facts which, if discovered by a third party,
would support such a Claim; and (b) no Claim has been asserted against the
Company for renegotiation or price redetermination with respect to any
transaction, and to the knowledge of the Company or the Seller, there are no
facts upon which any such Claim could be based. Except as set forth on Schedule
3.24, there are no statements, citations or decisions by any governmental or
regulatory body or agency of which the Company or the Seller has knowledge that
any Company Product is defective or fails to meet any standards promulgated by
any such governmental or regulatory body or agency. Except as set forth on
Schedule 3.24, to the knowledge of the Company and the Seller, there have been
no recalls ordered by any such governmental or regulatory body or agency with
respect to any Company Product.
3.25 Powers of Attorney. Except for powers of attorney granted in the
ordinary course of business to independent certified public accountants or in
connection with the establishment or amendment of a Plan described in Schedule
3.19(a)(1), the Company has not granted any outstanding power of attorney.
3.26 Brokers. Except as disclosed in Schedule 3.26 attached hereto, none
of the Company, the Seller, or anyone acting on their behalf, has engaged,
retained, or incurred any liability to any broker, investment banker, finder or
agent or has agreed to pay any brokerage fees, commissions, finder's fees or
other fees with respect to the sale of the Shares, this Agreement or the
transactions contemplated hereby.
3.27 Records and Books. The minute books of the Company have previously
been made available to Buyer. The stock transfer ledgers or record books of the
Company completely and accurately set forth all transfers of the Company's
capital stock from the date of organization through the date hereof.
3.28 Transactions with Interested Persons. Except as set forth on
Schedule 3.28 attached hereto, no officer, supervisory employee or director of
the Company owns directly or indirectly, either individually or jointly, any
material interest in, or serves as an officer or director of, any customer,
competitor or supplier of the Company, or any organization which has a material
contract or arrangement with the Company.
3.29 Bank Accounts. Schedule 3.29 contains a complete and accurate list
of all bank accounts, safe deposit boxes and lock boxes maintained by the
Company, together with a list of all authorized signatories thereto.
3.30 Status Under Certain Statutes. The Company is not: (i) a "public
utility company" or a "holding company," or an "affiliate" or a "subsidiary
company" of a "holding company," or an "affiliate" of such a "subsidiary
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (ii) a "public utility" as defined in the Federal Power Act,
as amended, or (iii) an "investment company," or an affiliated person" thereof
or an "affiliated person" of any such "affiliated person," as such terms are
defined in the Investment Company Act of 1940, as amended.
3.31 Disclosure of Material Information. Neither this Agreement
(including the Schedules and Exhibits hereto) nor any document, certificate or
instrument furnished in connection therewith contains, with respect to the
Company or the Seller, any untrue statement of a material fact or omits to state
a material fact necessary to made the statements therein not misleading.
3.32 Acquisition for Investment. The Seller acknowledges that the
Suburban Shares to be received hereunder have not been registered under the
Securities Act or under applicable state securities laws and accordingly must be
held indefinitely unless such Suburban Shares are
subsequently registered or exemption from applicable registration requirements
is available. The Seller is acquiring the Suburban Shares for his own account
for investment and will not sell, pledge or transfer the Suburban Stock in the
absence of any effective registration statement or an applicable exemption under
the Securities Act. The Seller is an ("accredited investor") as defined in the
regulations promulgated pursuant to the Securities Act. The Seller acknowledges
and agrees that there may be affixed to the certificates evidencing the Suburban
Stock a legend as follows:
"Shares of stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or under applicable state securities laws and were
acquired by the registered holder pursuant to representation
that such holder was acquiring such shares for his own account
and for investment, with no intention to transfer or dispose of
the same in violation of the registration requirements of the
Act. These shares may not be sold, signed, pledged or
transferred in the absence of any effective registration
statement under the Act, or an opinion of counsel, reasonably
satisfactory to counsel to the issuer, to the effect that
registration is not required under the Act."
3.33 Sole Representations and Warranties. The representations and
warranties contained in this Article III are the only representations and
warranties made by the Company and the Seller in connection with the
transactions contemplated by this Agreement and supersede any and all previous
written or oral statements made by the Company and the Seller to Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Company and the Sellers
as follows:
4.1 Organization and Qualification. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, with full power and authority to own, use or
lease its properties and to conduct its business as such properties are owned,
used or leased and as such business is conducted.
4.2 Authority. The Buyer has the requisite corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by Buyer have
been duly and validly authorized and approved by all necessary corporate action
on the part of the Buyer, and this Agreement constitutes the legal and binding
obligation of the Buyer, enforceable against it in accordance with its terms.
The Suburban Shares, when transferred in compliance with this Agreement, will be
validly issued, fully paid and non-assessable, and free of any Liens. Assuming
the accuracy of the representations and warranties of the Company and the Seller
hereunder, (a) the entering
into of this Agreement by the Buyer does not, and the consummation by the Buyer
of the transactions contemplated hereby, including specifically the transfer of
the Suburban Shares to the Seller by the Buyer, will not violate the provisions
of (i) to the knowledge of the Buyer, any applicable federal, state, local or
foreign laws, (ii) the Buyer's Charter or By-Laws, or (iii) any provision of, or
result in a default or acceleration of any obligation under, or result in any
change in the rights or obligations of the Buyer under, any Lien, contract,
agreement, license, lease, instrument, indenture, order, arbitration award,
judgment, or decree to which the Buyer is a party or by which any of them is
bound, or to which any property of the Buyer is subject; and (b) to the
knowledge of the Buyer, the offer and sale of the Suburban Shares, as
contemplated by this Agreement, are exempt from the registration requirements of
the Securities Act and from any registration or filing requirements of any
applicable state securities laws.
4.3 Brokers. Neither the Buyer nor anyone acting on its behalf has
engaged, retained or incurred any liability to any broker, investment banker,
finder or agent or has agreed to pay any brokerage fees, commissions, finder's
fees or other fees with respect to the purchase of the Shares, this Agreement or
the transactions contemplated hereby.
4.4 Suburban Shares. The Suburban Shares have been duly authorized, and,
when issued and delivered in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and non-accessible. Subject to the
Buyer's rights set forth in Section 2.3 hereof, the issuance of the Suburban
Shares at the Closing will vest in the Seller good and indefeasible title
thereof, free and clear of any liens, claims and encumbrances.
4.5 SEC Reports. The Buyer has furnished to the Seller true and complete
copies of its Annual Report on Form 10-K for the year ended August 31, 1996, its
proxy statement for its 1996 special meeting in lieu of annual meeting of
stockholders and all other documents required to be filed by Buyer with the
Securities and Exchange Commission (the "SEC") during the period from August 31,
1996 through the Closing Date (collectively the "SEC Reports"). The SEC Reports
did not, on their respective dates of filing, contain an untrue statement of a
material fact or omit 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 Buyer has filed all documents required
to be filed by it with the SEC and all such documents complied as to form with
the applicable requirements of law. All financial statements included in such
documents, including without limitation, the SEC Reports, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis except as noted therein, and fairly present the information purported to
be shown therein. Since August 31, 1996, Buyer has not suffered any change in
its financial condition or results of operations other than changes in the
ordinary course of business.
4.6 Disclosure of Material Information. Neither this Agreement
(including the Schedules and Exhibits hereto) nor any document, certificate or
instrument furnished in connection therewith contains, with respect to the
Purchaser, any untrue statement of a material fact or omits to state a material
fact necessary to make the statement therein not misleading.
4.7 Capitalization. The Buyer's authorized capital stock consists of
40,000,000 shares of Common Stock, without par value per share, of which
10,427,391 shares are issued and outstanding. Except for the rights of Buyer
hereunder or as disclosed on Schedule 4.7 hereto, there are no outstanding
options, warrants, rights or agreements of any kind for the issuance or sale of,
or outstanding securities convertible into or exchangeable for, any additional
shares of Common Stock or any other Equity Security of the Buyer.
4.8 Sole Representations and Warranties. The representations and
warranties contained in this Article IV are the only representations and
warranties made by Buyer in connection with the transactions contemplated by
this Agreement and supersede any and all previous written or oral statements
made by Buyer to the Company or the Seller.
ARTICLE V
INDEMNIFICATION
5.1 Survival of Representations and Warranties. The parties hereto agree
that no claim may be asserted under Article VIII after the lapse of twenty-four
(24) months after the Closing Date, and, subject to the survival of any claims
made within such twenty-four month period, for that purpose each and every such
representation and warranty set forth in this Agreement shall survive until the
second anniversary of the Closing Date, except with respect to (a) any claim
arising from a breach of the representations and warranties set forth in
Sections 3.2(a), 3.3, 4.3, 6.11(b) and 6.12, which shall survive the Closing
without limitation; and (b) any claim arising from a breach of the
representations and warranties set forth in Section 3.18, which shall survive
the Closing until the first to occur of (x) the expiration of the statute of
limitations (and any extensions thereof) applicable to the Tax in respect of
which indemnification is being sought without the assertion of a deficiency in
respect thereof by the applicable governmental entity, or (y) the completion of
the final audit and determination by the applicable governmental entity with
respect to such Tax and final disposition of any deficiency resulting therefrom.
From and after the twenty-four month anniversary of the Closing Date or the
other applicable period of survival with respect to such respective
representations and warranties of the Seller and Buyer, neither the Seller nor
the Buyer, nor any Affiliate of the Seller or Buyer shall have any liability
whatsoever with respect to any such claim, except for claims as to which any
party shall have notified the other party prior to such date.
5.2 Indemnification by Seller. The Seller hereby agrees to indemnify,
defend and hold Buyer, its officers, directors, employees, owners, agents and
Affiliates, harmless from and in respect of any and all losses, damages, costs
and expenses of any kind and nature whatsoever (including, without limitation,
interest and penalties, reasonable expenses of investigation and court costs,
reasonable attorneys' fees and disbursements and the reasonable fees and
disbursements of other professionals) which may be sustained or suffered by any
of them (collectively, "Losses"), arising out of or resulting from any breach or
inaccuracy of any
representation or warranty or the breach of or failure to perform any warranty,
covenant, undertaking or other agreement of the Company or any Seller contained
in this Agreement or any other Purchase Document provided, however, that the
maximum liability of the Seller pursuant to this Agreement for aggregate Losses
(other than those arising under Section 3.3, which will be uncapped) shall be
limited to $600,000.
5.3 Indemnification by Buyer. Buyer hereby agrees to indemnify, defend
and hold the Seller, its officers, directors, employees, consultants, owners,
agents and Affiliates, harmless from and in respect of any and all Losses which
may be sustained or suffered by any of them arising out of or resulting from any
breach or inaccuracy of any representation or warranty or the breach of or
failure to perform any warranty, covenant, undertaking or other agreement of
Buyer contained in this Agreement or any other Purchase Document and arising out
of any and all actions, suits, claims and administrative or other proceedings of
every kind and nature instituted or pending against any Seller or any of its
Affiliates at any time before or after the Closing Date.
5.4 Minimum Indemnification. Notwithstanding anything to the contrary
contained herein, no party hereto shall be entitled to recover from any other
party unless and until the total of all claims for indemnity or damages with
respect to any inaccuracy or breach of any such representations or warranties
(other than those contained in Sections 2.6(b), 3.1, 3.3, 3.26, 4.3, 6.11(b) and
6.12 above, as to which no minimum shall apply) or breach of or default in the
performance of any covenants, undertakings or other agreements, whether such
claims are brought under this Article V or otherwise, exceeds Seventy Five
Thousand Dollars ($75,000) and then only for the amount by which such claims for
indemnity or damages exceed Seventy Five Thousand Dollars ($75,000) (such amount
referred to herein as the "Deductible"); provided that Losses resulting from a
breach of the representation and warranty contained in Section 3.11 hereof
insofar as such representation and warranty relate to the collectibility of
Medicare or Medicaid accounts receivable shall not be subject to indemnification
unless and then only to the extent that the aggregate amount of such Losses does
not exceed the sum of (i) the Deductible (to the extent it has not theretofore
been applied against other Losses), and (ii) $25,000.
5.5 Notice and Opportunity to Defend. If there occurs an event which a
party asserts is an indemnifiable event pursuant to Section 5.2 or 5.3, the
parties seeking indemnification shall promptly notify the other parties
obligated to provide indemnification (collectively, the "Indemnifying Party").
If such event involves (a) any Claim or (b) the commencement of any action, suit
or proceeding by a third person, the party seeking indemnification will give
such Indemnifying Party prompt written notice of such Claim or the commencement
of such action, suit or proceeding, provided, however, that the failure to
provide prompt notice as provided herein will relieve the Indemnifying Party of
its obligations hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action, suit or proceeding shall
be brought against any party seeking indemnification and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to participate therein and, to the extent that it desires to do so, to
assume the defense thereof, with counsel reasonably satisfactory to such party
seeking indemnification and, after notice from the
Indemnifying Party to such party seeking indemnification of such election so to
assume the defense thereof, the Indemnifying Party shall not be liable to the
party seeking indemnification hereunder for any attorneys' fees or any other
expenses, in each case subsequently incurred by such party, in connection with
the defense of such action, suit or proceeding. The party seeking
indemnification agrees to cooperate fully with the Indemnifying Party and its
counsel in the defense against any such action, suit or proceeding. In any
event, the party seeking indemnification shall have the right to participate at
its own expense in the defense of such action, suit or proceeding. In no event
shall an Indemnifying Party be liable for any settlement or compromise effected
without its prior consent. If, however, the party seeking indemnification
refuses its consent to a bona fide offer of settlement which the Indemnifying
Party wishes to accept (which must include the unconditional release of the
parties seeking indemnification from all liability with respect to the Claim at
issue), the party seeking indemnification may continue to pursue such matter,
free of any participation by the Indemnifying Party, at the sole expense of the
party seeking indemnification. In such event, the obligation of the Indemnifying
Party to the party seeking indemnification shall be equal to the lesser of (i)
the amount of the offer or settlement which the party seeking indemnification
refused to accept plus the costs and expenses of such party prior to the date
the Indemnifying Party notifies the party seeking indemnification of the offer
of settlement and (ii) the actual out-of-pocket amount the party seeking
indemnification is obligated to pay as a result of such party's continuing to
pursue such matter.
5.6 Adjustment for Insurance and Taxes. The amount which an Indemnifying
Party is required to pay to, for or on behalf of any other party (hereinafter
referred to as an "Indemnitee") pursuant to this Article V shall be adjusted
(including, without limitation, retroactively) (i) by any insurance proceeds
actually recovered by or on behalf of such Indemnitee in reduction of the
related indemnifiable loss (the "Indemnifiable Loss") and (ii) to take account
of any Tax benefit realized as a result of any Indemnifiable Loss. Amounts
required to be paid, as so reduced, are hereafter sometimes called an "Indemnity
Payment." If an Indemnitee shall have received or shall have had paid on its
behalf an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently receive insurance proceeds in respect of such Indemnifiable Loss,
or realize any Tax benefit as a result of such Indemnifiable Loss, then the
Indemnitee shall pay to the Indemnifying Party the amount of such insurance
proceeds or Tax benefit or, if lesser, the amount of the Indemnity Payment.
5.7 Indemnification Exclusive. In the event of a breach of this
Agreement by an Indemnifying Party, including the breach by the Indemnifying
Party of any representation or warranty made in this Agreement by the
Indemnifying Party or the failure of the Indemnifying Party to perform any
obligations to be performed by the Indemnifying Party pursuant to this
Agreement, the remedies of the Indemnitee, and the procedures to be followed by
the Indemnitee shall be solely and exclusively specified in this Article V.
ARTICLE VI
MISCELLANEOUS
6.1 Fees and Expenses. Each of the parties hereto will pay and discharge
its own expenses and fees in connection of with the negotiation of and entry
into this Agreement and the consummation of the transactions contemplated
hereby; provided that the Seller shall pay the fees and expenses of counsel for
the Company and provided further that if the acquisition herein contemplated
does not close, the Buyer shall pay one-half of the payment to independent
accountants in connection with the audited financial statements described in
Section 2(a)(x).
6.2 Publicity and Disclosures. Prior to the Closing, no press release or
any public disclosure, either written or oral, of the transactions contemplated
by this Agreement shall be made by any party without the prior knowledge and
written consent of the Buyer, and any such press release or disclosure shall be
subject to the approval of the Company, not to be unreasonably withheld.
6.3 Notices. All notices, requests, demands, consents and communications
necessary or required under this Agreement or any other Purchase Document shall
be made in the manner specified, or, if not specified, shall be delivered by
hand or sent by registered or certified mail, return receipt requested, or by
telecopy (receipt confirmed) to:
if to Buyer: Suburban Ostomy Supply Co., Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Vice President and Chief Financial Officer
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
A Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile Transmission Number: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company or Seller: ▇▇▇▇▇▇'▇ Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile Transmission Number:
with a copy to: ▇▇▇▇▇, Kula & ▇▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile Transmission Number:
(▇▇▇) ▇▇▇-▇▇▇▇
and
Winston & ▇▇▇▇▇▇
▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile Transmission Number:
(▇▇▇) ▇▇▇-▇▇▇▇
All such notices, requests, demands, consents and other communications
shall be deemed to have been duly given or sent two (2) days following the date
on which mailed, or on the date on which delivered by hand or by facsimile
transmission (receipt confirmed), as the case may be, and addressed as
aforesaid.
6.4 Successors and Assigns. All covenants and agreements set forth in
this Agreement and made by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the successors and assigns of such party, whether or
not so expressed, except that none of the Seller or the Company may assign or
transfer any of their respective rights or obligations under this Agreement
without the consent in writing of Buyer.
6.5 Descriptive Headings. The headings of the sections and
paragraphs of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
6.7 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason in any
jurisdiction, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall not be in any
way impaired or affected, it being intended that each of parties' rights and
privileges shall be enforceable to the fullest extent permitted by law, and any
such invalidity, illegality and unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in
any other jurisdiction. To the fullest extent permitted by law, the parties
hereby waive any provision of any law, statute, ordinance, rule or regulation
which might render any provision hereof invalid, illegal or unenforceable.
6.8 Attorneys' Fees/Arbitration. In any action or proceeding brought to
enforce any provision of this Agreement or the other Purchase Documents, or
where any provision hereof or thereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three arbitrators, sitting in a
location selected by mutual agreement within twenty (20) miles from the location
of the Buyer, in accordance with the rules for commercial arbitration of the
American Arbitration Association then if effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
6.9 Course of Dealing. No course of dealing and no delay on the part of
any party hereto in exercising any right, power, or remedy conferred by this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. The failure of any of the parties to this Agreement
to require the performance of a term or obligation under this Agreement or the
waiver by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder. No single or partial exercise of any rights,
powers or remedies conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
6.10 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement or any other Purchase Document.
6.11 Tax Matters.
(a) Seller will timely file on behalf of the Company all
federal, state, local and foreign tax reports and returns for any period which
ends on or prior to the Closing Date and which are required to be filed to
reflect the operations of the Company. Buyer, at its expense or that of the
Company, shall be entitled to participate in the preparation of such reports and
returns. All such reports and returns will be prepared and filed using tax
accounting methods and principles which are substantially consistent with those
used in the returns and reports of taxes for the Company and its Subsidiaries
for preceding tax periods unless Buyer agrees otherwise. Any item of income,
deduction or credit to be included in any such tax return or report shall be
based on the permanent records (including work papers) of the Company and its
Subsidiaries. All items of income, gain and credit referred to in section 1366
of the Code shall be included on all appropriate Tax Returns using the method
provided for in section 1362(e)(3) of the Code. Buyer shall prepare and file on
behalf of the Company all federal, state, local and foreign tax
reports and returns for any period which ends after the Closing Date whether or
not such returns reflect the operations of the Company attributable to a period
prior to the Closing Date. Notwithstanding anything to the contrary herein, the
Seller shall be responsible for, and shall timely pay all Taxes of the Seller
(except for those under Section 6.11(g) of this Agreement) attributable to the
transaction contemplated herein.
(b) All Taxes attributable to the operation or ownership of the
Company after the Closing Date shall be borne by the Buyer and the Company and
the Buyer and the Company, jointly and severally, shall hold the Seller harmless
from such Taxes. The Seller shall be liable and indemnify the Buyer and the
Company (i) for all Taxes of the Company for taxable periods ending on or before
the Closing Date; and (ii) for other taxable years the portion of Taxes
attributable to the period ending on the Closing Date. For purposes of
determining the liability for Taxes for periods that include but do not end on
the Closing Date, (i) liability for Taxes determined by reference to income,
capital gains, gross income, gross receipts, sales, net profits, windfall
profits or similar items or from the transfer or assets shall be allocated based
on the date the item is accrued, and (ii) all other Taxes shall be allocated
between the Seller and the Company, pro rata based on the number of days in the
taxable period for which each party is liable for Taxes. The liability for Taxes
attributable to items described in section 1366(a) of the Code shall be
determined as provided for in section 1362(e)(3) of the Code.
(c) All refunds of Taxes attributable to any or all years or
periods (or portions thereof) ending on or prior to the Closing Date shall
belong to the Seller, and all such refunds of taxes attributable to any or all
years or periods (or portions thereof) commencing on or after the Closing Date
shall belong to the Company.
(d) Buyer will give notice to Seller of any claim with respect
to any Taxes which relate to any taxable year or period ending on or prior to
the Closing Date or that includes the Closing Date, and shall keep Seller
informed of the progress of, and the issues involved in, the same, in each case
which may be the subject of indemnification by Seller pursuant to this
Agreement. The parties hereto shall, and shall cause the Company to, provide
such necessary information as any other party hereto may reasonably request in
connection with the preparation of such parties' Tax Returns, or to respond to
or contest any audit, prosecute any claim for refund or credit or otherwise
satisfy any requirements relating to Taxes of each of the Company.
(e) Seller shall pay all stock transfer Taxes, real property
transfer Taxes, sales Taxes, documentary stamp Taxes, recording charges and
other similar Taxes of the Seller resulting from, arising under or in connection
with the transfer of the Shares or any other related transaction under the
Agreement.
(f) The obligations of the Seller, the Buyer and the Company set
forth in the section of this Agreement relating to Taxes shall, except as
otherwise agreed in writing, be unconditional and absolute and shall remain in
effect without limitation as to time or amount of recovery by the Seller, the
Buyer or the Company, as the case may be, until thirty (30) days after
the expiration of the applicable statute of limitations governing the Taxes to
which such obligations relate (after giving effect to any agreement extending or
tolling such statute of limitations).
(g) Section 338(h)(10) Election. At the Buyer's option, Seller
will join with the Buyer in making an election under Section 338(h)(10) of the
Code (and any corresponding elections under state, local or foreign tax law)
(collectively, a "Section 338(h)(10) election") with respect to the purchase and
sale of stock of the Company hereunder. The Buyer will pay any Tax attributable
to the making of the Section 338(h)(10) and will indemnify the Seller and the
Company against any incrimental adverse consequences arising out of any failure
to pay such Tax.
6.12 Pension Plan. As soon as reasonably practicable following the
Closing Date, the Seller will, on behalf of the Company, cause the ▇▇▇▇▇▇'▇,
Inc. Employee Pension Plan and Trust ("Pension Plan") to be terminated in
accordance with the applicable requirements of the Code and ERISA. All expenses
of terminating the Pension Plan shall be borne by the Seller, including all
contributions, legal, actuarial, and accounting fees, income and excise taxes,
interest and penalties, and other amounts required to be paid to the Pension
Plan or any third party in order to (i) obtain a favorable determination letter
from the Internal Revenue Service for the termination of the Pension Plan, (ii)
terminate the Pension Plan as a standard termination under Title IV of ERISA,
and (iii) satisfy all obligations to current and former participants and
beneficiaries of the Pension Plan (collectively "Pension Plan Termination
Expenses"). Seller and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ may elect to forego receipt of all or
part of their accrued benefits under the Pension Plan in accordance with the
PBGC's rules for the purpose of reducing the amount of cash required to be paid
by Seller as Pension Plan Termination Expenses. Seller shall provide the Company
with copies of all material notices, documents, and correspondence relating to
the plan termination in advance of filing or mailing. The Company agrees to
execute any documents which the Seller may reasonably request the Company to
execute in connection with the termination of the Pension Plan. Seller shall
indemnify and hold harmless Buyer and the Company from all Pension Plan
Termination Expenses.
6.13 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the Person or Persons may require.
6.14 Governing Law. THIS AGREEMENT, INCLUDING THE VALIDITY HEREOF AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE (WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF).
6.15 Entire Agreement. This Agreement, including the Schedules and
Exhibits referred to herein, is complete, and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof, and all inducements to the making of this Agreement relied upon by all
the parties hereto, have been expressed herein or in said Schedules or Exhibits.
This Agreement may not be amended except by an instrument in writing signed on
behalf of the Company, Buyer and the Seller.
6.16 Mutual Covenants. Each party agrees that after the Closing it
shall, upon the request and at the expense of any other party to this Agreement,
take such action and execute such documents as such other party may reasonably
request in order to effect the transaction hereby declared.
6.17 Disclosure Schedule A matter or item disclosed on any schedule to
this Agreement shall be deemed a disclosure for all schedules to this Agreement.
6.18 DEA Certificate. Pursuant to the prior advice of the United State
Department of Justice, Drug Enforcement Administration ("DEA") that such is
legally permissible and in compliance with applicable federal regulations, the
Company will permit the Buyer the use of the Company's DEA Controlled Substance
Registration Certificate ("Certificate") in order to permit Buyer to buy and
sell controlled substances for the purposes allowed under applicable law until
such time as Buyer obtains its own DEA Controlled Substances Registration
Certificate or June 14, 1997, whichever occurs first. The foregoing provisions
of Section 6.18 are intended only as an accommodation to Buyer as permitted
under federal regulations.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF the parties hereto have executed this Agreement under
seal as of the date first set forth above.
▇▇▇▇▇▇'▇ INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President
SELLER
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Individually
SUBURBAN OSTOMY SUPPLY CO., INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President
and Chief Financial Officer