Exhibit 10.109
AGREEMENT AND PLAN OF MERGER
by and among
▇▇▇▇▇ ▇▇▇▇▇▇, INC.
HSI ACQUISITION CORP.
▇. ▇▇▇▇ DENTAL SUPPLY CO.
and the
STOCKHOLDERS
of
▇. ▇▇▇▇ DENTAL SUPPLY CO.
TABLE OF CONTENTS
ARTICLE I THE MERGER; THE SURVIVING CORPORATION.......................................2
Section 1.1 The Merger..................................................................2
Section 1.2 Effective Time of the Merger................................................3
Section 1.3 Closing.....................................................................3
Section 1.4 Articles of Incorporation...................................................3
Section 1.5 By-Laws.....................................................................3
Section 1.6 Directors and Officers of Surviving Corporation.............................3
ARTICLE II CONVERSION OF SHARES........................................................3
Section 2.1 Exchange Ratio..............................................................3
Section 2.2 Exchange of Meer Stock......................................................4
Section 2.3 No Fractional Securities....................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF MEER
AND THE STOCKHOLDERS........................................................5
Section 3.1 Organization................................................................5
Section 3.2 Capitalization..............................................................5
Section 3.3 No Meer Subsidiaries; Affiliates............................................5
Section 3.4 Authority Relative to this Agreement........................................6
Section 3.5 Articles of Incorporation and By-laws.......................................6
Section 3.6 Consents and Approvals; No Violations.......................................6
Section 3.7 Financial Statements........................................................7
Section 3.8 Absence of Certain Changes or Events........................................7
Section 3.9 Litigation..................................................................8
Section 3.10 Absence of Undisclosed Liabilities..........................................8
Section 3.11 No Default..................................................................8
Section 3.12 Taxes.......................................................................8
Section 3.13 Title to Properties; Encumbrances...........................................9
Section 3.14 Intellectual Property......................................................10
Section 3.15 Compliance with Applicable Law.............................................10
Section 3.16 Employee Benefit Plans; ERISA..............................................11
Section 3.17 Labor Matters; Employment Matters..........................................14
Section 3.18 Environmental Laws and Regulations.........................................15
Section 3.19 Restrictions on Business Activities........................................16
Section 3.20 Accounting Matters.........................................................16
Section 3.21 Affiliate Transactions.....................................................17
Section 3.22 Brokers....................................................................17
Section 3.23 Certain Tax Matters........................................................17
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Section 3.24 Accounts Receivable........................................................17
Section 3.25 Inventory..................................................................17
Section 3.26 Real and Personal Property.................................................18
Section 3.27 Insurance..................................................................18
Section 3.28 Books and Records..........................................................18
Section 3.29 Illegal Payments...........................................................18
Section 3.30 Officers and Directors; Bank Accounts, etc.................................18
Section 3.31 Customers and Suppliers....................................................19
Section 3.32 Contracts and Commitments..................................................19
Section 3.33 Disclosure.................................................................20
Section 3.34 Stockholders' Investment Intent............................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT....................................21
Section 4.1 Organization...............................................................21
Section 4.2 Capitalization.............................................................21
Section 4.3 Authority Relative to this Agreement.......................................21
Section 4.4 Consents and Approvals; No Violations......................................21
Section 4.5 Reports and Financial Statements...........................................22
Section 4.6 Brokers....................................................................22
Section 4.7 Certain Tax Matters........................................................22
Section 4.8 Accounting Matters.........................................................23
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER.....................................23
Section 5.1 Conduct of Business by Meer Pending the Merger.............................23
Section 5.2 Conduct of Business by Parent Pending the Merger...........................24
ARTICLE VI ADDITIONAL AGREEMENTS......................................................24
Section 6.1 Access and Information.....................................................24
Section 6.2 No Solicitation............................................................26
Section 6.3 Reasonable Best Efforts....................................................26
Section 6.4 Expenses...................................................................26
Section 6.5 Public Announcements.......................................................27
Section 6.6 Supplemental Disclosure....................................................27
Section 6.7 Stock Transfers............................................................27
Section 6.8 Certain Tax Matters........................................................28
Section 6.9 Dissenters Rights..........................................................29
Section 6.10 Lease Amendment............................................................29
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER...................................29
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.................29
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Section 7.2 Conditions to Obligations of Parent and Sub to Effect the Merger...........30
Section 7.3 Conditions to Obligation of Meer and Stockholders to Effect the Merger.....31
ARTICLE VIII TERMINATION................................................................32
Section 8.1 Termination................................................................32
Section 8.2 Effect of Termination......................................................33
ARTICLE IX INDEMNIFICATION............................................................34
Section 9.1 Survival of Representations and Warranties.................................34
Section 9.2 Indemnification by Stockholders............................................34
Section 9.3 Limitations on Indemnification.............................................35
Section 9.4 Indemnification Procedures.................................................35
ARTICLE X RESTRICTIVE COVENANTS......................................................37
Section 10.1 Non-Competition............................................................37
Section 10.2 Non-Solicitation of Employees..............................................37
Section 10.3 Non-Solicitation or Interference with Customers and Suppliers..............38
Section 10.4 Confidentiality............................................................38
Section 10.5 Employment Agreements Covenants............................................38
Section 10.6 Acknowledgments............................................................38
ARTICLE XI GENERAL PROVISIONS.........................................................39
Section 11.1 Amendment and Modification.................................................39
Section 11.2 Waiver.....................................................................39
Section 11.3 Investigations.............................................................39
Section 11.4 Notices....................................................................39
Section 11.5 Descriptive Headings; Interpretation.......................................41
Section 11.6 Entire Agreement; Assignment...............................................41
Section 11.7 Governing Law..............................................................41
Section 11.8 Severability...............................................................41
Section 11.9 Counterparts...............................................................42
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SCHEDULES
Schedule 1.6 Officers of Surviving Corporation
Schedule 3.1 Organization
Schedule 3.2(a) Capitalization
Schedule 3.3(a) Agreements or obligations entered into or incurred by
Meer Affiliates on behalf of Meer
Schedule 3.3(b) List of Meer Affiliates
Schedule 3.4 Written Consents
Schedule 3.6 Consents and Approvals; No Violations
Schedule 3.7 Financial Statements
Schedule 3.8 Absence of Certain Changes or Events; Contracts
Schedule 3.9 Litigation
Schedule 3.10 Liabilities
Schedule 3.12 Taxes
Schedule 3.13 Title to Properties; Encumbrances
Schedule 3.16 Employee Benefit Plans; ERISA
Schedule 3.17 Labor Matters; Employment Matters
Schedule 3.18(b) Environmental Laws
Schedule 3.18(e) Hazardous Substances
Schedule 3.19 Restrictions on Business Activities
Schedule 3.21 Affiliates Transactions
Schedule 3.24 Accounts Receivables
Schedule 3.26 Real and Personal Property
Schedule 3.27 Insurance
Schedule 3.30 Officers and Directors; Bank Accounts
Schedule 3.31(a) Customers
Schedule 3.31(b) Suppliers
Schedule 3.31(c) Disputes with Customers or Suppliers
Schedule 3.31(d) Accounts Payables
Schedule 3.32 Contracts and Commitments
Schedule 5.1 Conduct of the Business
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EXHIBITS
Exhibit 7.2(e) Ancillary Agreements
Exhibit 7.3(e) Registration Rights Agreement
v
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 3, 1998,
among ▇▇▇▇▇ ▇▇▇▇▇▇, INC., a Delaware corporation ("Parent"), HSI ACQUISITION
CORP., a Michigan corporation and wholly-owned subsidiary of Parent ("Sub"), ▇.
▇▇▇▇ Dental Supply Co., a Michigan corporation ("Meer"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇,
individually and as Trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Living Trust dated
November 17, 1972 (the "▇▇▇▇▇▇ ▇. ▇▇▇▇ Trust"), ▇▇▇▇▇ ▇. ▇▇▇▇, individually and
as Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Living Trust dated May 10, 1989, as
amended, ▇▇▇▇▇▇ ▇. ▇▇▇▇, individually and as Trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇
Revocable Living Trust dated August 20, 1991, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, individually and
as Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Living Trust dated August 20, 1984,
as amended, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, individually and as Trustee of the ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ Revocable Living Trust dated December 18, 1993, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, individually and as Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Revocable
Living Trust dated December 18, 1993, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, individually and as
Trustee of the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Revocable Living Trust dated June 5, 1997, ▇▇▇
▇▇▇▇▇▇ and ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (each sometimes hereinafter referred to
individually as a "Stockholder" and, collectively, as the "Stockholders"). The
Stockholders are, collectively, the holders of all of the outstanding capital
stock of Meer.
Parent, Sub, Meer and the Stockholders desire that Parent
acquire Meer pursuant to the merger of Sub with and into Meer in accordance with
the terms of this Agreement and the Michigan Business Corporation Act (the
"Act").
For federal income tax purposes, it is intended that the
Merger, as defined herein, shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
For accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests.
The parties hereto agree as follows:
ARTICLE I
THE MERGER; THE SURVIVING CORPORATION
Section 1.1 The Merger. In accordance with and subject to the
provisions of this Agreement and the Act, at the Effective Time, as defined in
Section 1.2 hereof, Sub shall be merged with and into Meer (the "Merger"), the
separate existence of Sub shall thereupon cease, and Meer shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
corporate existence under the laws of the Act. The Merger shall have the effects
set forth in the applicable sections of the Act.
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Section 1.2 Effective Time of the Merger. The Merger shall
become effective at the time of filing of, or at such later time as is specified
in, a Certificate of Merger with respect to the Merger, in the form required by,
and executed and filed with the Michigan Department of Consumer and Industry
Services, Corporation, Securities & Land Development Bureau -- Corporate
Division, in accordance with, the applicable provisions of the Act. Such filing
shall be made as soon as practicable after the Closing (as defined in Section
1.3). When used in this Agreement, the term "Effective Time" shall mean the date
and time at which the Merger becomes effective.
Section 1.3 Closing. Subject to the fourth and fifth sentences
of Section 2.1(a), the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 a.m., local time, on the first
business day after the day on which all of the conditions set forth in Article
VII are satisfied or waived or on such other date and at such other time and
place as Parent and Meer shall agree (the "Closing Date").
Section 1.4 Articles of Incorporation. The Articles of
Incorporation of Meer in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law.
Section 1.5 By-Laws. The By-Laws of Meer as in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the Act.
Section 1.6 Directors and Officers of Surviving Corporation.
(a) The directors of Sub at the Effective Time shall be the
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Articles of Incorporation or By-Laws of
the Surviving Corporation or as otherwise provided by law.
(b) The officers of Meer at the Effective Time and the
individuals listed on Schedule 1.6 hereto shall be the officers of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Articles of Incorporation or By-Laws of the Surviving Corporation, or as
otherwise provided by law. Each of the individuals listed on Schedule 1.6 shall
hold the respective offices set forth opposite his or her name.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Exchange Ratio. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof:
3
(a) Subject to Section 6.4, the shares of Class A common
stock, par value $1.00 (the "Class A Meer Common Stock"), and the shares of
Class B Common stock, par value $1.00 (the "Class B Meer Common Stock and,
together with the Class A Meer Common Stock, the "Meer Common Stock"), issued
and outstanding immediately prior to the Effective Time shall be converted into
the right to receive, in the aggregate, 3,000,000 shares of the common stock,
par value $.01, of Parent (the "Parent Common Stock").
(b) All shares of Meer Common Stock, if any, that are held by
Meer as treasury shares shall be canceled and retired and cease to exist, and no
securities of Parent or other consideration shall be delivered in exchange
therefor.
(c) Each share of Common Stock, par value $.01, of Sub ("Sub
Common Stock") issued and outstanding immediately prior to the Effective Time,
shall be converted into and become one fully paid and nonassessable share of the
Class A common stock, par value $1.00, of the Surviving Corporation.
(d) In the event that Parent shall effect a stock split, stock
dividend, subdivision, recapitalization or combination of the issued and
outstanding shares of Parent Common Stock with a record date (or, if there is no
record date, an effective date) prior to the Closing Date, then the number of
shares of Parent Common Stock issuable pursuant to Section 2.1(a) shall be
adjusted accordingly.
Section 2.2 Exchange of Meer Stock. Immediately after the
Effective Time, the Stockholders shall present to Parent for cancellation the
certificates which immediately prior to the Effective Time represented
outstanding shares of Meer Common Stock (the "Certificates") that were converted
pursuant to Section 2.1 into the right to receive shares of Parent Common Stock,
and Parent shall thereupon deliver to each Stockholder in exchange therefor (i)
a certificate representing the number of whole shares of Parent Common Stock
that such Stockholder has the right to receive pursuant to the provisions of
this Article II and (ii) cash in lieu of any fractional shares of Parent Common
Stock to which such Stockholder is entitled in accordance with Section 2.3,
after giving effect to any required tax withholdings. The Merger Shares so
issued shall be deemed to have been issued at the Effective Time.
Section 2.3 No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional interests shall not
entitle any of the Stockholders to vote or to any of the rights of a security
holder. In lieu of any such fractional securities, each Stockholder shall be
entitled to receive, and Parent will make, a cash payment (without interest)
determined by multiplying (i) the fractional interest to which such Stockholder
would otherwise be entitled (after taking into account all shares of Meer Common
Stock then held of record by such holder) and (ii) the closing price of a share
of Parent Common Stock on the trading day immediately preceding the Closing Date
as reported on the Nasdaq Stock Market.
4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEER
AND THE STOCKHOLDERS
Meer and each of the Stockholders except ▇▇▇▇▇▇▇ ▇ ▇▇▇▇
(individually and as Trustee of the ▇▇▇▇▇▇▇ ▇ ▇▇▇▇ Revocable Living Trust dated
August 20, 1984) and ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, jointly and severally, represent and
warrant to Parent and Sub as follows:
Section 3.1 Organization. Meer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Meer is duly qualified as a
foreign corporation to do business and is in good standing in the jurisdictions
listed on Schedule 3.1 hereto and is not required to be so qualified and in good
standing in any other jurisdiction (except for jurisdictions in which the
failure to be so qualified and in good standing would not, individually or in
the aggregate, have a Meer Material Adverse Effect (as defined below).
Section 3.2 Capitalization.
(a) The authorized capital stock of Meer consists of 2,500
shares of Class A Meer Common Stock and 247,500 shares of Class B Meer Common
Stock. There are 2,000 shares of Class A Meer Common Stock and 230,142 shares of
Class B Meer Common Stock issued and outstanding, and the Stockholders are,
collectively, the sole record and beneficial owners of such shares. Such shares
are owned by the Stockholders free and clear of any and all liens, claims or
encumbrances of any nature whatsoever, whether absolute, accrued, contingent or
otherwise ("Liens"). All of the issued and outstanding shares of Meer Common
Stock are validly issued, fully paid and nonassessable. Set forth opposite each
Stockholder's name on Schedule 3.2(a) hereto is the number of shares of Meer
Common Stock owned of record and beneficially by such Stockholder and the date
or dates on which such shares were acquired by such Stockholder.
(b) There is no (i) outstanding right, subscription, warrant,
call, option or other agreement or arrangement of any kind (collectively,
"Rights") to purchase or otherwise to receive from Meer any shares of capital
stock or any other securities of Meer (including, without limitation, any
Rights), (ii) outstanding security of any kind convertible into or exchangeable
for such capital stock or other securities and (iii) voting trust or other
agreement or understanding to which Meer or any of the Stockholders is a party
or is bound with respect to the capital stock or other securities of Meer.
Section 3.3 No Meer Subsidiaries; Affiliates. Meer has no
Subsidiaries, as hereinafter defined, and the Business, as hereinafter defined,
has been conducted solely through Meer at all times since its incorporation
except as provided in Schedule 3.3(a). Except as set forth on Schedule 3.3(a),
all assets, properties and rights relating to the Business are held by, and all
agreements, obligations and transactions relating to the Business have been
entered into, incurred and conducted by, Meer rather than any of its Affiliates
or any of the Stockholders' Affiliates. As
5
used in this Agreement, (i) the term "Subsidiary" means, with respect to any
party, any corporation or other organization, whether incorporated or
unincorporated, of which (x) such party or any other Subsidiary of such party is
a general partner or (y) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party and/or one or more of its Subsidiaries, (ii) the term "Affiliate"
means, with respect to any party, an individual or entity controlled by, in
control of, or under common control with, such party, and (iii) the term
"Business" means the business as conducted by Meer as of the date of this
Agreement and as of the Closing Date (except to the extent that the reference to
the "Business" herein speaks as of any other date) including without limitation,
the distribution of dental supplies, equipment and software to dentists, dental
groups, clinics, health departments, dental schools and nursing homes. Schedule
3.3(b) contains a complete and accurate list of all Affiliates of Meer.
Section 3.4 Authority Relative to this Agreement. Meer has the
requisite corporate power and authority, and each of the Stockholders has the
capacity, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. On or before the Closing Date: (i) the
execution and delivery of this Agreement by Meer and the consummation by Meer of
the transactions contemplated on its part hereby shall have been duly authorized
by Meer's Board of Directors and each of the Stockholders entitled to vote, and
no other corporate proceedings on the part of Meer shall be necessary to
authorize this Agreement or for Meer to consummate the Merger and (ii) this
Agreement shall have been duly and validly executed and delivered by Meer and
each of the Stockholders and will constitute the valid and binding agreement of
Meer and the Stockholders, enforceable against each of them in accordance with
its terms, except to the extent that enforcement may be subject to bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies. Set forth on Schedule 3.4 are all copies of all
actions taken by the stockholders or Board of Directors of Meer since July 25,
1988. Since July 25, 1988, neither the stockholders nor the Board of Directors
of Meer has held a meeting or taken any action except by written consents. The
Amendment to the Articles of Incorporation being repealed referred to in Section
7.2(j) have been adopted solely with a view toward accelerating the Closing.
Section 3.5 Articles of Incorporation and By-laws. Meer has
heretofore furnished to Parent a complete and correct copy of the articles of
incorporation and by-laws, as amended or restated to date, of Meer. Such
articles of incorporation and by-laws, as furnished to Parent, are in full force
and effect. Meer has not violated and is not in violation of any of the
provisions of its articles of incorporation or by-laws.
Section 3.6 Consents and Approvals; No Violations. Except as
set forth on Schedule 3.6, neither the execution, delivery and performance of
this Agreement by Meer and each of the Stockholders, nor the consummation by
Meer and each of the Stockholders of the transactions contemplated hereby, will
(i) conflict with or result in any breach of any provisions of the articles of
incorporation, by-laws or other organizational documents of Meer, (ii) require a
filing with, or a permit, authorization, consent or approval of (including,
without limitation, any filing, permit,
6
authorization, consent or approval in connection with any existing Meer Permit,
as defined in Section 3.15), any federal, state, local or foreign legislature,
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or administrative agency or
commission (a "Governmental Entity"), except in connection with or an order to
comply with the applicable provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and for the filing and
recordation of Articles of Merger as required by the Act, (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of a Lien on any property or
asset of Meer pursuant to, any of the terms, conditions or provisions of any
oral or written note, bond, mortgage, indenture, license, contract, lease,
agreement or other instrument or obligation (each, a "Contract") to which Meer
is a party or by which Meer or any of its properties or assets may be bound or
(iv) violate any applicable law, statute, ordinance, rule, regulation, writ,
injunction, judgment, decree or order of any Governmental Entity (collectively,
"Law").
Section 3.7 Financial Statements. Meer has delivered to Parent
(i) the financial statements of Meer as of September 29, 1995, September 27,
1996 and September 26, 1997, and for each of the fiscal years then ended, in
each case accompanied by the audit opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP ("▇▇▇▇▇
▇▇▇▇▇▇▇▇") Meer's independent auditors (the "Year-End Financial Statements"),
(ii) the unaudited financial statements of Meer as of May 31, 1998 and for the
eight months then ended (the "Interim Financial Statements" and, together with
the Year-End Financial Statements, the "Financial Statements"). The Year-End
Financial Statements (including any related notes and schedules) have been
prepared in accordance with generally accepted accounting principles ("GAAP"),
consistently applied throughout the periods indicated. The Interim Financial
Statements were prepared in accordance with GAAP (except for the exclusion of
substantially all footnotes and the statement of cash flows), applied on a
consistent basis, subject to normal year-end closing adjustments. The Financial
Statements are set forth on Schedule 3.7 hereto and fairly present in all
material respects the financial position of Meer as of the dates thereof and the
results of operations of Meer for the periods then ended and, in addition, the
Year-End Financial Statements set forth therein also fairly present in all
material respects the cash flows of Meer for the periods then ended. There has
been no change in any of the significant accounting (including tax accounting)
policies, practices or procedures of Meer. Except as set forth on Schedule 3.7,
there were no audit adjustments in excess of $10,000 proposed by Meer's
Accountants with respect to any of the Financial Statements that were not
accepted by Meer and appropriately reflected thereon.
Section 3.8 Absence of Certain Changes or Events. Except as
set forth on Schedule 3.8, since September 26, 1997, (i) Meer has not conducted
its business and operations other than in the ordinary course of business and
consistent with past practices, or taken any actions of a type prohibited by the
provisions of Section 5.1 hereof, (ii) Meer has not, directly or indirectly,
declared, set aside or paid any dividend or distribution of any kind on or in
respect of its shares of capital stock or redeemed or purchased any of its
shares of capital stock or any Right, and (iii) there has not been any fact,
event, circumstance or change affecting or relating to Meer which, individually
or in the aggregate, has had or is reasonably likely to have a material adverse
effect on the financial condition, results of operations, business, assets,
liabilities, prospects or properties of Meer, or the ability of
7
Meer to consummate the Merger and the other transactions contemplated by this
Agreement (a "Meer Material Adverse Effect").
Section 3.9 Litigation. Except as set forth on Schedule 3.9,
there is no suit, action, proceeding or investigation pending or, to the
knowledge of Meer or any of the Stockholders, threatened against or affecting
Meer, any of its Affiliates or any of the Stockholders that relates to Meer or
the Business as conducted by Meer at any time or which would, if adversely
determined, impair the ability of any of the Stockholders to perform his or her
obligations under this Agreement or any of the Ancillary Agreements, as defined
in Section 7.2(e). Except as set forth in Schedule 3.9, there is no judgment,
decree, injunction, ruling or order of any Governmental Entity outstanding or,
to the knowledge of Meer or any of the Stockholders, threatened against Meer,
any of its Affiliates or any of the Stockholders that relates to Meer, or the
Business as conducted by Meer at any time or the Meer Common Stock.
Section 3.10 Absence of Undisclosed Liabilities. Except as set
forth on Schedule 3.10 and for liabilities or obligations which are accrued or
reserved against on the Financial Statements (including the financial statement
notes thereto) or which were incurred after May 31, 1998, in the ordinary course
of business and consistent with past practice and experience, Meer has no
liabilities or obligations (whether absolute, accrued, contingent or otherwise).
Section 3.11 No Default. Meer is not in default or violation
(and no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its articles of incorporation, or by-laws (ii) any Contract to which Meer is a
party or by which it or any of its properties or assets may be bound or any
order, writ, injunction, decree, statute, rule or regulation of any Governmental
Entity applicable to Meer.
Section 3.12 Taxes.
(a) Meer has heretofore delivered or hereafter will make
available to Parent true, correct and complete copies of the federal, state,
local and foreign income, franchise sales and other Tax Returns, as hereinafter
defined, filed by Meer for each of Meer's fiscal years in the five fiscal
year-period ended September 26, 1997; none of said Tax Returns has been the
subject of an audit or examination by any tax authority nor, to the knowledge of
Meer or any of the Stockholders, has been noticed for such audit or examination.
Meer has duly filed all material federal, state, local and foreign income,
franchise, sales and other Tax Returns required to be filed by it. Except as set
forth on Schedule 3.12, Meer has not received written notice from a taxing
authority in a jurisdiction where Meer does not file Tax Returns that Meer is or
may be subject to taxation by that jurisdiction. All such Tax Returns are true,
correct and complete in all material respects, and Meer has duly paid, all
Taxes, as hereinafter defined, shown on such Tax Returns and has paid or made
adequate provision for payment of all accrued but unpaid Taxes anticipated in
respect of all periods since the periods covered by such Tax Returns. All
deficiencies assessed as a result of any audit or examination of any Tax Return
of Meer by federal, state, local or foreign tax authorities have been paid or
reserved on the financial statements of Meer in accordance with GAAP
consistently applied. Meer has not received written notice of any current audit
or examination of any Meer Tax Return
8
or tax liability and there are no proposed tax assessments, suits, actions,
claims, investigations or inquiries by any tax authority with respect to Meer.
Meer has heretofore delivered or will make available to Parent true, correct and
complete copies of all written tax-sharing agreements and written descriptions
of all such unwritten agreements or arrangements to which Meer is a party, if
any. Except as set forth on Schedule 3.12, no issue has been raised in any
written communication to Meer during the past five years by any federal, state,
local or foreign taxing authority which, if raised with regard to any other
period not so examined, could reasonably be expected to result in a proposed
deficiency for any other period not so examined. Meer has not granted any
extension or waiver of the statutory period of limitations applicable to any
claim for any Taxes. Except as set forth on Schedule 3.12: (i) Meer is not a
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code; (ii) no consent has been filed under
Section 341(f) of the Code with respect to Meer; (iii) Meer has not participated
in, or cooperated with, an international boycott within the meaning of Section
999 of the Code; (iv) Meer has not issued or assumed any corporate acquisition
indebtedness, as defined in Section 279(b) of the Code, (v) Meer has not been a
party to any tax allocation or tax sharing agreement or a member of an
affiliated group filing a consolidated federal income Tax Return or consolidated
or combined state or local return and does not have any liability for the taxes
of any person under Treas. Reg. ss. 1.1502-6 or any similar provision of state,
local or foreign Law, or as a transferee or successor, by contract, or
otherwise; (vi) there has not been a change in a method of accounting within the
meaning of Code section 481 by Meer since 1988; (vii) all items that could give
rise to a substantial understatement of federal income tax (within the meaning
of Code section 6662(d)) were adequately disclosed on Meer's Tax Returns in
accordance with Code section 6662(d)(2)(B); (viii) Meer is not a party to a
closing agreement or other agreement with a taxing authority that could affect
its future liability for taxes; and (ix) Meer does not hold an evidence of
indebtedness of a purchaser that is subject to the installment method of gain
reporting under section 453 of the Code. Meer filed an election to be treated as
a S corporation effective on September 26, 1987, and, except as set forth on
Schedule 3.12, has been an S corporation since the effective date of such
election, and since such date has been an S corporation in every state or other
jurisdiction where it has been subject to income taxation and S corporation
treatment has been available. Meer has complied with all applicable Laws
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar
provisions under any foreign Law) and has, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under all applicable Law.
(b) For purposes of this Agreement (i) the term "Taxes" means
all income, gross receipts, excise, sales, use, gains, payroll and withholding
taxes imposed by the United States, or any state, local or foreign government or
subdivision or agency thereof, including any interest, penalties or additions
thereto, and (ii) the term "Tax Return" shall mean any report, return or other
information or document required to be supplied to a taxing authority in
connection with Taxes.
Section 3.13 Title to Properties; Encumbrances. Except as set
forth on Schedule 3.13 hereto, Meer has good, valid and marketable title to, or
a valid leasehold interest in, all of its
9
properties and assets (real, personal and mixed, tangible and intangible) shown
on its books and records as being owned or leased by it, as applicable, or used
in the Business, including, without limitation, all the properties and assets
reflected in the balance sheet of Meer as of May 31, 1998 other than properties
and assets disposed of in the ordinary course of business and consistent with
past practices since May 31, 1998, in each case free and clear of all Liens,
other than inchoate mechanic's, materialmen's, laborer's and carrier's liens and
other similar liens arising by operation of law or statute that are not
delinquent and arose in the ordinary course of business (collectively,
"Permitted Liens").
Section 3.14 Intellectual Property.
(a) Meer is the sole and exclusive owner of, or has a valid
license to use, all patent applications, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, service marks, trade
secrets, registrations for and applications for registration of trademarks,
service marks and copyrights, technology and know-how, rights in computer
software and other proprietary rights and information and all technical and user
manuals and documentation made or used in connection with any of the foregoing,
used or held for use in connection with the Business (collectively, the
"Intellectual Property"), free and clear of all Liens.
(b) All grants, registrations and applications for
Intellectual Property that are used in the conduct of the Business (i) are
valid, subsisting, in proper form and enforceable, and have been duly
maintained, including the submission of all necessary filings and fees in
accordance with the legal and administrative requirements of the appropriate
jurisdictions and (ii) have not lapsed, expired or been abandoned, and no grant,
registration or license therefor is the subject of any legal or governmental
proceeding before any registration authority in any jurisdiction.
(c) Meer owns or has the right to use all of the Intellectual
Property used by it or held for use by it in connection with the Business. Meer
and the Stockholders have no notice that any third party is engaging in conduct
which conflicts with or infringes in any way any Intellectual Property. The
conduct of the Business as currently conducted does not conflict with or
infringe in any way any proprietary right of any third party, and there is no
claim, suit, action or proceeding pending or threatened against Meer (i)
alleging any such conflict or infringement with any third party's proprietary
rights, or (ii) challenging the ownership, use, validity or enforceability of
the Intellectual Property.
Section 3.15 Compliance with Applicable Law.
(a) (i) Meer holds, and is in compliance with the terms of,
all material permits, licenses, exemptions, orders and approvals of all
Governmental Entities necessary for the current and proposed conduct of the
Business ("Meer Permits"), (ii) no fact exists or event has occurred, and no
action or proceeding is pending or, to the knowledge of Meer or any of the
Stockholders, threatened, that has a reasonable possibility of resulting in a
revocation, non-renewal, termination, suspension or other impairment of any Meer
Permits, (iii) the Business is not being conducted (and has not been conducted)
in violation of any applicable Law, and (iv) except as set forth on Schedule
3.15, no
10
investigation or review by any Governmental Entity with respect to Meer is
pending or, to the knowledge of Meer or any of the Stockholders, threatened and
(b) no Governmental Entity has indicated to Meer or any of the Stockholders an
intention to conduct the same.
(b) Meer (which, for purposes of paragraphs (b) and (c) of
this Section 3.15, is defined to include Meer and its Affiliates) has never
participated in the Medicare, Medicaid or CHAMPUS programs or any other health
care program, nor has it ever received any payment from any third-party payor
(each such program and payor, a "Medical Reimbursement Program").
(c) Neither Meer, any of the Stockholders, nor any of their
respective officers, directors or employees has ever been charged with or, to
the knowledge of Meer or any of the Stockholders, investigated for committing
any violation of any state or federal statute or regulation involving fraudulent
and abusive practices relating to its or his participation in any Medical
Reimbursement Program, including but not limited to fraudulent billing
practices. Neither Meer, any of its Affiliates, any of the Stockholders or their
respective Affiliates, any of their respective officers, directors or employees,
nor any other persons or entities providing professional services for Meer has
engaged in any of the following: (i) knowingly and willfully soliciting or
receiving any remuneration (including any kickback, bribe or rebate), directly
or indirectly, overtly or covertly, in cash or in kind or offering to pay such
remuneration (x) in return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by any Medical Reimbursement Program, or
(y) in return for purchasing, leasing or ordering or arranging for or
recommending the purchasing, leasing or ordering of any good, facility, service,
or item for which payment may be made in whole or in part by any Medical
Reimbursement Program; or (ii) billing a patient in violation of any Federal or
State law that prohibits referrals for certain services by physicians or
providers that have a financial interest in the entity receiving referrals.
Section 3.16 Employee Benefit Plans; ERISA.
(a) Schedule 3.16(a) contains a list of all "employee benefit
plans," within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any other bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, post-retirement, health, life, stock option, stock purchase,
restricted stock, tuition refund, service award, company car, scholarship,
relocation, disability, accident, sick, vacation, holiday, termination,
unemployment, individual employment, consulting, executive compensation,
incentive, commission, payroll practices, retention, change in control,
noncompetition, or other plan, agreement, policy, trust fund, or arrangement
(whether written or unwritten, insured or self-insured) (i) established,
maintained, sponsored, or contributed to (or with respect to which any
obligation to contribute has been undertaken) within the last six years by Meer
or any entity that would be deemed a "single employer" with Meer under Section
414(b), (c), (m), or (o) of the Code or Section 4001 of ERISA (an "ERISA
Affiliate") on behalf of any employee, director, shareholder, or beneficiary of
Meer (whether current, former, or retired) or their beneficiaries or (ii) with
respect to which Meer or any ERISA Affiliate has or has had any obligation on
behalf of any such employee, director, shareholder, or beneficiary (each a
"Plan" and,
11
collectively, the "Plans"). With respect to each Plan, true and complete copies,
if applicable, of the documents embodying or relating to the Plan, including,
without limitation, each communication received by or furnished to Meer or any
ERISA Affiliate from the Internal Revenue Service ("IRS"), the Pension Benefit
Guaranty Corporation ("PBGC"), U.S. Department of Labor ("DOL"), or any other
governmental authority including, without limitation, the most recent
application for determination letter submitted to the IRS and the most recent
determination letter received from the IRS, have been delivered to Parent.
(b) Except with regard to the single employer plan (within the
meaning of Section 4001(a)(15) of ERISA disclosed on Schedule 3.16(b) (the
"Terminated Pension Plan"), neither Meer, any ERISA Affiliate, nor any of their
respective predecessors has ever contributed to, contributes to, has ever been
required to contribute to, or otherwise participated in or participates in or in
any way, directly or indirectly, has any liability with respect to any plan
subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA,
including, without limitation any, "multiemployer plan" (within the meaning of
Sections (3)(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code), or any
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA). With regard to the Terminated Pension Plan, Meer has (i) taken all
corporate actions necessary to terminate the Terminated Pension Plan, (ii)
received a favorable determination letter from the Internal Revenue Service
approving the qualified status of the Terminated Pension Plan upon its
termination, (iii) timely filed all applicable forms with the PBGC, (iv) timely
filed the final Form 5500 with the Internal Revenue Service and (v) taken all
other actions as are necessary or appropriate to effectuate the termination of
the Terminated Pension Plan in accordance with its terms and the Code, ERISA and
other applicable Law. Neither Meer, any ERISA Affiliate, nor any of their
respective predecessors is liable for or will be liable for any liability with
respect to the Terminated Pension Plan.
(c) Meer, each ERISA Affiliate, each Plan, and each "plan
sponsor" (within the meaning of Section 3(16) of ERISA) of each "welfare benefit
plan" (within the meaning of Section 3(1) of ERISA) has complied in all respects
with the requirements of Section 4980B of the Code and Title I, Subtitle B, Part
6 of ERISA.
(d) With respect to each of the Plans on Schedule 3.16(a):
(i) each Plan intended to qualify under Section 401(a) of
the Code has been qualified since its inception and has received a determination
letter under Revenue Procedure 93-39 or its progeny from the IRS to the effect
that the Plan is qualified under Section 401 of the Code and any trust
maintained pursuant thereto is exempt from federal income taxation under Section
501 of the Code and nothing has occurred or is expected to occur through the
date of the Closing that caused or could cause the loss of such qualification or
exemption or the imposition of any penalty or tax liability;
(ii) all payments required by any Plan, any collective
bargaining agreement or other agreement, or by Law (including, without
limitation, all contributions, insurance premiums, or intercompany charges) with
respect to all periods through the date of the Closing shall
12
have been made prior to the Closing (on a pro rata basis where such payments are
otherwise discretionary at year end) or provided for by Meer as applicable, by
full accruals as if all targets required by such Plan had been or will be met at
maximum levels) on its financial statements;
(iii) no claim, lawsuit, arbitration or other action has
been threatened, asserted, instituted, or anticipated against the Plans (other
than non-material routine claims for benefits, and appeals of such claims), any
trustee or fiduciaries thereof, Meer, any ERISA Affiliate, any director,
officer, or employee thereof, or any of the assets of any trust of the Plans;
(iv) the Plan complies and has been maintained and
operated in accordance with its terms and applicable Law, including, without
limitation, ERISA and the Code;
(v) no "prohibited transaction," within the meaning of
Section 4975 of the Code and Section 406 of ERISA, has occurred or is expected
to occur with respect to the Plan (and the consummation of the transactions
contemplated by this Agreement will not constitute or directly or indirectly
result in such a "prohibited transaction");
(vi) no Plan is or expected to be under audit or
investigation by the IRS, DOL, or any other governmental authority and no such
completed audit, if any, has resulted in the imposition of any tax or penalty;
(vii) each Plan intended to meet requirements for
tax-favored treatment under any provision of the Code, including, without
limitation, Sections 79, 105, 106, 117, 120, 125, 127, 129, 132, 162(m), ▇▇▇,
▇▇▇▇, ▇▇▇, ▇▇▇▇, or 501(c)(9) of the Code satisfies the applicable requirements
under the Code; and
(viii) with respect to each Plan that is funded mostly or
partially through an insurance policy, neither Meer nor any ERISA Affiliate has
any liability in the nature of retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or partially
out of events occurring on or before the Closing.
(e) Except as provided in Schedule 3.16(e), the consummation
of the transactions contemplated by this Agreement will not give rise to any
liability, including, without limitation, liability for severance pay,
unemployment compensation, termination pay, or withdrawal liability, or
accelerate the time of payment or vesting or increase the amount of compensation
or benefits due to any employee, director, shareholder, or beneficiary of Meer
(whether current, former, or retired) or their beneficiaries solely by reason of
such transactions. No amounts payable under any Plan will fail to be deductible
for federal income tax purposes by virtue of Sections 280G or 162(m) of the
Code.
(f) Neither Meer nor any ERISA Affiliate maintains,
contributes to, or in any way provides for any benefits of any kind whatsoever
(other than under Section 4980B of the Code, the Federal Social Security Act, or
a plan qualified under Section 401(a) of the Code) to any current or future
retiree or terminee.
13
(g) Except as provided in Schedule 3.16(g), neither Meer, any
ERISA Affiliate, nor any officer or employee thereof, has made any promises or
commitments, whether legally binding or not, to create any additional plan,
agreement, or arrangement, or to modify or change any existing Plan.
(h) No event, condition, or circumstance exists that could
result in an increase of the benefits provided under any Plan or the expense of
maintaining any Plan from the level of benefits or expense incurred for the most
recent fiscal year ended before the Closing.
(i) Neither Meer nor any ERISA Affiliate has any unfunded
liabilities pursuant to any Plan that is not intended to be qualified under
Section 401(a) of the Code.
(j) No event, condition, or circumstance exists that would
prevent the amendment or termination of any Plan.
Section 3.17 Labor Matters; Employment Matters. Except as set
forth in Schedule 3.17: (i) there are no controversies pending or, to the
knowledge of Meer or any Stockholder, threatened, between Meer and any of its
employees regarding Meer's compliance with applicable wage and hour, equal
employment, safety and other similar legal requirements relating to its
employees, (ii) Meer is not a party to, or bound by, any collective bargaining
agreement, contract or other understanding with a labor union or labor
organization and there is, to Meer's or any of the Stockholders' knowledge, no
activity involving any employees of Meer seeking to certify a collective
bargaining unit or engaging in any other organizational activity; and (iii)
there are no strikes, slowdowns, work stoppages, lockouts, or threats thereof,
by or with respect to any group of employees of Meer. Each of the salespersons
employed by Meer are listed on Schedule 3.17 hereto. Schedule 3.17 identifies
the salespersons with whom Meer has entered into employment agreements or
non-competition arrangements (collectively, the "Salesperson Agreements"),
accurate and complete copies of which, including all amendments thereto, have
been delivered to Parent. Meer is not in breach or default, nor is there any
basis for any valid claim of breach or default by Meer, under any of the
Salesperson Agreements, and, to the knowledge of Meer or any of the
Stockholders, no salesperson is in breach or default of his or her respective
Salesperson Agreement. Except for those Salesperson Agreements specifically
identified on Schedule 3.17 with respect thereto, the consummation of the
transactions contemplated by this Agreement will not violate or breach any of
the Salesperson Agreements or give any Salesperson subject to any of the
Salesperson Agreements the right to terminate such Salesperson Agreement or
materially impact such Salesperson's rights or obligations therein. Except as
set forth on Schedule 3.17, all of the Salesperson Agreements are valid and
binding agreements in full force and effect; provided, however, that no
representation or warranty is given as to the enforceability of any
noncompetition agreement or covenant included therein. Meer has previously
provided to Parent a list of the names, office locations, hire date and
year-to-date compensation of all full- and part-time employees of Meer as of
June 30, 1998. No employee of Meer has received any salary increase not
reflected on the ADP computer printouts provided to representatives of Parent at
Meer's offices on July 30, 1998. No employee of Meer has indicated to Meer as of
the date of this Agreement that he or she is considering terminating his or
14
her employment. Meer has complied in all material respects with all applicable
wage and hour, equal employment, safety and other legal requirements relating to
its employees.
Section 3.18 Environmental Laws and Regulations.
(a) For purposes of this Agreement, the term "Environmental
Laws" means all federal, state, local or common law, rule, regulation,
ordinance, code, order or judgment (including any judicial or administrative
interpretations, guidances, directives, policy statements or opinions) relating
to the injury to, or the pollution or protection of human health and safety or
the Environment.
(b) Except as set forth on Schedule 3.18(b), all of the
current and past operations of Meer and the real property formerly or presently
owned, leased or otherwise used by Meer, including any operations at or from any
real property presently or formerly owned, used, leased, occupied, managed or
operated by Meer, (collectively, the "Real Property"), comply and have at all
times complied with all applicable Environmental Laws. Meer has not engaged in,
authorized, allowed or suffered any operations or activities upon any of the
Real Property for the purpose of or in any way involving the handling,
manufacture, treatment, processing, storage, use, generation, release,
discharge, spilling, emission, dumping or disposal of any petroleum, petroleum
products, petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, radon, urea formaldehyde, asbestos
or any materials containing asbestos, and any materials or substances regulated
or defined as or included in the definition of "hazardous substances,"
"hazardous materials," "hazardous constituents," "toxic substances,"
"pollutants," "contaminants" or any similar denomination intended to classify or
regulate substances by reason of toxicity, carcinogenicity, ignitability,
corrosivity or reactivity under any Environmental Law ("Hazardous Substances")
at, on, under or from the Real Property, except in full compliance with all
applicable Environmental Laws.
(c) Neither Meer's assets nor the Real Property contain any
Hazardous Substances in, on, over, under or at it, in concentrations which would
violate any applicable Environmental Laws or would be reasonably likely to
result in the imposition of liability or obligations on the present or former
owner, manager, or operator of the Real Property under any applicable
Environmental Laws, including any liability or obligations for the
investigation, corrective action, remediation or monitoring of Hazardous
Substances in, on, over, under or at the Real Property.
(d) None of the Real Property is listed or proposed for
listing on the National Priorities List pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss.
9601 et seq., or any similar inventory of sites requiring investigation or
remediation maintained by any state or locality. Meer has not received any
notice, whether oral or written, from any Governmental Entities or third party
of any actual or threatened claims, judgments, damages (including punitive
damages), losses, penalties, fines, liabilities, encumbrances, liens,
violations, costs and expenses (including attorneys' and consultants' fees) of
investigation, remediation, monitoring or defense of any matter relating to
human health, safety or any surface or subsurface physical medium or natural
resource, including, air, land, soil, surface waters, ground
15
waters, stream and river sediments, biota and any indoor area, surface or
physical medium (the "Environment") of whatever kind or nature by any party,
entity or authority, (i) which have been incurred as a result of (x) the
existence of Hazardous Substances in, on, under, at or emanating from any Real
Property, (y) the offsite transportation, treatment, storage or disposal of
Hazardous Substances generated by Meer or (z) the violation of or non-compliance
with any Environmental Laws or (ii) which arise under the Environmental Laws
("Environmental Liabilities") with respect to the Business as conducted by Meer
at any time, Meer's assets or Real Property.
(e) Except as set forth on Schedule 3.18(e), there are no
underground storage tanks, asbestos or asbestos containing materials,
polychlorinated biphenyls, urea formaldehyde, or other Hazardous Substances
(other than small quantities of Hazardous Substances for use in the ordinary
course of the business of Meer, which are stored and maintained in full
compliance with all applicable Environmental Laws) in, on, over, under or at any
Real Property.
(f) There are no conditions existing at any Real Property or
with respect to the assets or the Business, that require, or which with the
giving of notice or the passage of time or both will reasonably likely require
remedial or corrective action, removal, monitoring or closure pursuant to the
Environmental Laws.
(g) Meer has all the permits, licenses, authorizations and
approvals necessary for the conduct of the Business and for the operations on,
in or at the Real Property (the "Environmental Permits"), which are required
under applicable Environmental Laws. Meer is in full compliance with the terms
and conditions of all such Environmental Permits, and no reason exists why
Parent would not be capable of continued operation of the Business in full
compliance with the Environmental Permits and the applicable Environmental Laws.
(h) Meer has provided to Parent all environmental reports,
assessments, audits, studies, investigations, data, Environmental Permits and
other written environmental information in its custody, possession or control
concerning Meer's assets, the Business as conducted by Meer at any time and the
Real Property.
(i) Meer has not contractually, by operation of law, by the
Environmental Laws, by common law or otherwise assumed or succeeded to any
Environmental Liabilities of any predecessors or any other person or entity.
Section 3.19 Restrictions on Business Activities. Except for
this Agreement, there is no agreement, judgment, injunction, order or decree
binding upon Meer or any of the Stockholders which has or could reasonably be
expected to have (after giving effect to the consummation of the Merger) the
effect of prohibiting or impairing the business practices of Meer as currently
practiced, the acquisition of property by Meer or the conduct of the Business as
currently conducted by Meer.
Section 3.20 Accounting Matters. Neither Meer, any of its
directors or officers nor any of the Stockholders, has taken any action which
would prevent the accounting for the Merger as a pooling of interests in
accordance with Accounting Principles Board Opinion No. 16, the
16
interpretative releases pursuant thereto and the relevant pronouncements of the
Securities and Exchange Commission (the "Commission").
Section 3.21 Affiliate Transactions. Except as set forth in
Schedule 3.21, there are no Contracts or other transactions between Meer on the
one hand, and any (i) officer or director of Meer or any Stockholder or (ii)
Affiliate or family member of any such officer or director or any Stockholder,
on the other hand.
Section 3.22 Brokers. No broker, finder or financial advisor
is entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Meer except BancAmerica ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
pursuant to the express terms of the letter agreement between Meer and
BancAmerica ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dated November 19, 1997 (the "BankAmerica
Engagement Letter"), which remains in full force and effect and has not been
amended. A true and correct copy of the BancAmerica Letter Agreement has been
delivered to Parent.
Section 3.23 Certain Tax Matters. Neither Meer, any of its
directors or officers nor any of the Stockholders knows of any fact or
circumstance relating to Meer, the Business or its capital stock, or has taken
any action, which would be reasonably likely to cause the Merger to be treated
other than as a tax-free reorganization under Section 368(a) of the Code.
Section 3.24 Accounts Receivable. Schedule 3.24 contains a
complete and accurate summary aging of all of the accounts and notes receivable
of Meer set forth on the books and records of Meer as of May 31, 1998. Except as
set forth on Schedule 3.24, all of the accounts and notes receivable of Meer:
(i) represent sales actually made in the ordinary course of business for goods
or services delivered or rendered to unaffiliated customers in bona fide arm's
length transactions, (ii) constitute valid claims, (iii) are good and
collectible in full in time periods that are customary in the industry at the
aggregate recorded amounts thereof net of the reserve therefor without right of
recourse, defense (other than warranty claims in the ordinary course of business
consistent in type and aggregate amount with past practice), deduction, return
of goods, counterclaim or offset, and (iv) have not been extended or rolled over
in order to make them current.
Section 3.25 Inventory. Except to the extent of the reserve
therefor reflected on the books and records of Meer, (i) all inventory of Meer
is of merchantable quality and is usable and salable at normal profit margins
for Meer and in accordance with Meer's historical sales practices in the
ordinary course of the business of Meer; (ii) such inventory does not include
any items which are obsolete, damaged, excessive (i.e., more than a six-month
supply or such longer period with respect to any specific items as may be in
accordance with industry practice), below standard quality or slow moving (i.e.,
items that are for discontinued or expected to be discontinued product lines, or
items that have not been used or sold within 6 months prior to the date hereof
or such longer period with respect to any specific items as may be in accordance
with industry practice); and (iii) the Inventory amount shown on the Interim
Financial Statements is true and correct. Notwithstanding clause (iii) above,
should the Inventory Amount be less than that shown on the Interim Financial
Statements but any other current asset amount is greater or any other current
17
liability is lesser than the amounts shown on the Interim Financial Statements,
then the foregoing representation shall not be deemed violated to the extent of
such excesses.
Section 3.26 Real and Personal Property. Schedule 3.26
contains a complete and correct list of all real property (including buildings
and structures) owned or leased by Meer and all interests therein (including a
brief description of the property, the record title holder, the location and the
improvements thereon). All such real property, buildings and structures, and the
equipment therein, and the operations and maintenance thereof, comply with any
applicable agreements and restrictive covenants and conform in all material
respects to all applicable legal requirements, including those relating to
health and safety, land use and zoning, and all work required by law to be done
by Meer or any of the Stockholders or any of their respective Affiliates as
landlord or tenant has been duly performed. No condemnation or other proceeding
is pending or, to the knowledge of Meer or any of the Stockholders, threatened
which would affect the use of any such property by Meer. Schedule 3.26 contains
a complete and correct list and brief description of all equipment, machinery,
computers, furniture, leasehold improvements, vehicles and other personal
property owned or leased by Meer with a net book value of over $5,000 and all
interests therein as of June 24, 1998. Meer's buildings and other structures,
equipment and other physical assets (whether leased or owned) are in good
operating condition and repair, subject to ordinary wear and tear.
Section 3.27 Insurance. Schedule 3.27 contains a complete and
correct list of all policies of insurance of any kind or nature covering Meer,
including, without limitation, policies of life, fire, theft, casualty, product
liability, workmen's compensation, business interruption, employee fidelity and
other casualty and liability insurance, indicating the type of coverage, name of
insured, the insurer, the premium, the expiration date of each policy and the
amount of coverage. All such policies are (i) valid, outstanding and enforceable
policies in full force and effect, and (ii) sufficient for compliance with all
requirements of law and of all applicable Contracts. Complete and correct copies
of all such policies have been furnished to Parent. Meer has not been denied any
insurance coverage which it has requested or made any material reduction in the
scope or change in the nature of its insurance coverage.
Section 3.28 Books and Records. The books and records of Meer
are complete and correct in all material respects and have been maintained in
accordance with good business practices consistently applied. The minute books
of Meer contain complete and accurate records of all meetings and accurately
reflect all other corporate action of the shareholders and board of directors of
Meer.
Section 3.29 Illegal Payments. Meer and its officers and
agents have not made any illegal payments to, or provided any illegal benefit or
inducement for, any governmental official, supplier, customer or other person,
in an attempt to influence any such person to take or to refrain from taking any
action relating to Meer.
Section 3.30 Officers and Directors; Bank Accounts, etc.
Schedule 3.30 lists: (i) all officers, directors and fiduciaries of Meer; (ii)
all bank accounts and safe deposit boxes maintained by Meer and all authorized
signatories therefor, specifying their respective authority; and (iii) all
18
credit cards under which employees of Meer may incur liability, and the persons
holding such cards. No person or entity holds any general or special power of
attorney from Meer.
Section 3.31 Customers and Suppliers.
(a) Schedule 3.31(a) hereto sets forth a list of Meer's 50
largest customers (including the addresses) in order of dollar volume of sales
for its last fiscal year and for the period from the end of the last fiscal year
through May 31, 1998, showing the approximate total sales in dollars by Meer to
each such customer each such period.
(b) Schedule 3.31(b) hereto sets forth a list of the 25
largest suppliers of Meer in order of dollar volume of purchases for its last
fiscal year and for the period from the end of the last fiscal year through May
31, 1998, showing the approximate total purchases in dollars by Meer from each
such supplier during each such period.
(c) Except as set forth on Schedule 3.31(c): (i) Meer is not
engaged in any disputes with customers or suppliers except for minor returns,
warranty claims (with respect to which no litigation has been commenced or
threatened), ▇▇▇▇ adjustments and similar disputes in the ordinary course of
business not exceeding $25,000 with respect to any single return, ▇▇▇▇
adjustment or similar dispute and which individually or in the aggregate do not
result in a Meer Material Adverse Effect, and (ii) there has not been any
adverse change, and there are no facts known to Meer or any of the Stockholders
which may reasonably be expected to indicate that any adverse change may occur,
in the business relationship of Meer with any customer or supplier named on
Schedule 3.31(a) or Schedule 3.31(b). To the knowledge (excluding knowledge held
by participants in the dental distribution industry in general) of Meer or any
of the Stockholders and except as set forth on Schedule 3.31(c), none of the
customers or suppliers named on Schedule 3.31(a) or Schedule 3.31(b) is
considering termination, non-renewal or any adverse modification of its
arrangements with Meer, and the transactions contemplated by this Agreement will
not, to the knowledge of Meer or any of the Stockholders, have any adverse
effect on Meer's relationship with any of such suppliers or customers.
(d) Schedule 3.31(d) hereto sets forth a complete and accurate
summary aging of all accounts payable over $1,000 of Meer as of May 31, 1998
prepared in accordance with Meer's past practice of preparing accounts payable
schedules.
Section 3.32 Contracts and Commitments.
(a) The contracts listed on Schedule 3.32 hereto are all of
the Contracts, written or oral, to which Meer is a party or as to which it or
any of its properties are bound or which otherwise relate to the Business
(excluding any Contract entered into in the ordinary course of Business that
involves the payment, commitment or guarantee by Meer of, or Meer's indemnity or
liability for, less than $5,000 over the next 12 months and less than $25,000
over the balance of the term of such Contract).
19
(b) Meer is not in breach or default, nor is there any basis
for any valid claim of breach or default by Meer, under any Contract. Except as
set forth on Schedule 3.6, all Contracts are valid and in full force and effect,
and consummation of the transactions contemplated by this Agreement will not
cause any Contract to cease to be valid and in full force and effect. Accurate
and complete copies of all Contracts, including all amendments thereto, have
been heretofore delivered to Parent. Except as set forth on Schedule 3.6, the
transactions contemplated by this Agreement will not constitute a change of
control under, or require the consent from or the giving of notice to any party
pursuant to, the terms, conditions or provisions of any Contract to which Meer
is a party.
Section 3.33 Disclosure. No representation or warranty by Meer
and the Stockholders in this Agreement contains an untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained herein not misleading. Neither Meer nor any of the
Stockholders is aware of any matter that could reasonably be expected to have a
Meer Material Adverse Effect that has not been disclosed in writing to Parent.
The filing made on June 17, 1998 by ▇▇▇▇▇▇ ▇. ▇▇▇▇ as Trustee of the ▇▇▇▇▇▇ ▇.
▇▇▇▇ Trust with respect to the Merger under the HSR Act complied in all material
respects with the applicable requirements for such filing under the HSR Act.
Section 3.34 Stockholders' Investment Intent.
(a) Subject to their rights under the Registration Rights
Agreement (as hereinafter defined), each of the Stockholders is acquiring shares
of Parent Common Stock pursuant hereto for such Stockholder's own account for
investment and not with a view to the resale or distribution or public offering
thereof within the meaning of the Securities Act of 1933 (the "Securities Act").
(b) Each of the Stockholders understands that the shares of
Parent Common Stock to be received by him hereunder have not been registered
under the Securities Act and, therefore, cannot be resold unless they are
registered under the Securities Act or unless an exemption from registration is
available.
(c) Each of the Stockholders has such knowledge and experience
in financial and business matters that he is capable of evaluating the merits
and risks of an investment in the shares of Parent Common Stock to be received
by him hereunder and is a "Accredited Investor" within the meaning of Rule 501
promulgated under the Securities Act.
(d) Parent has made available to each of the Stockholders at a
reasonable time prior to the execution of this Agreement the opportunity to ask
questions and receive answers concerning the terms and conditions of this
Agreement and to obtain any additional information concerning Parent which
Parent possesses or can acquire without unreasonable effort or expense.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Meer as follows:
Section 4.1 Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan. Sub has not engaged in any business (other than in connection with
this Agreement and the transactions contemplated hereby) since the date of its
incorporation.
Section 4.2 Capitalization. The authorized capital stock of
Parent consists of 120,000,000 shares of Parent Common Stock and 1,000,000
shares of preferred stock, par value $.01 (the "Parent Preferred Stock"). As of
August 2, 1998, (i) approximately 36,000,000 shares of Parent Common Stock and
four (4) shares of Parent Preferred Stock were issued and outstanding and (ii)
options to acquire approximately 4,500,000 shares of Parent Common Stock (the
"Parent Stock Options") were outstanding. The shares of Parent Common Stock
issuable in exchange for shares of Meer Common Stock at the Effective Time in
accordance with this Agreement will be, when so issued, duly authorized, validly
issued, fully paid and nonassessable and free of pre-emptive rights. The shares
of Parent Common issuable upon exercise of the options to be granted to Meer
Executives, as hereinafter defined in Section 7.2(e), in connection with the
Merger have been duly authorized, and when issued against the payment therefor,
will be validly issued, fully paid, nonassessable and free from pre-emptive
rights. The authorized capital stock of Sub consists of 1,000 shares of Sub
Common Stock, of which 100 shares are issued and outstanding as of the date
hereof. All of such shares are owned beneficially and of record by Parent and
are fully paid and nonassessable.
Section 4.3 Authority Relative to this Agreement. Each of
Parent and Sub has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by each of Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated on its part
hereby have been duly authorized by their respective Boards of Directors, and no
other corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement or for Parent and Sub to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Sub and constitutes a valid and binding
agreement of each of Parent and Sub, enforceable against Parent and Sub in
accordance with its terms, subject to applicable bankruptcy, insolvency and
other similar laws affecting the enforceability of creditors' rights generally,
general equitable principles and the discretion of courts in granting equitable
remedies.
Section 4.4 Consents and Approvals; No Violations. Neither the
execution, delivery and performance of this Agreement by Parent or Sub, nor the
consummation by Parent or Sub of the
21
transactions contemplated hereby will (i) conflict with or result in any breach
of any provisions of the Certificate of Incorporation or By-Laws of Parent or
the Articles of Incorporation or By-Laws of Sub, (ii) require a filing with, or
a permit, authorization, consent or approval of, any Governmental Entity except
in connection with or in order to comply with the applicable provisions of the
HSR Act, the Securities Act, the Securities Exchange Act, state securities or
"blue sky" laws, the By-Laws of the National Association of Securities Dealers
(the "NASD"), and the filing and recordation of a Certificate of Merger as
required by the Act, or (iii) violate any law, order, writ, injunction, decree,
statute, rule or regulation of any Governmental Entity applicable to Parent, Sub
or any of their properties or assets.
Section 4.5 Reports and Financial Statements. Parent has
timely filed all reports required to be filed with the SEC pursuant to the
Exchange Act or the Securities Act since December 27, 1997 (collectively, the
"Parent SEC Reports"), and has previously made available to Meer true and
complete copies of all such Parent SEC Reports. Such Parent SEC Reports, as of
their respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Both the audited consolidated financial
statements of Parent (including the related notes and schedules) included (or
incorporated by reference) in its Annual Report on Form 10-K for the fiscal year
ended December 27, 1997, as amended, and the unaudited consolidated financial
statements of Parent (including any related notes and schedules) included
(incorporated by reference) in any quarterly or current reports filed by Parent
pursuant to the Exchange Act subsequent to the filing of such Form 10-K, as
amended, (i) have been prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto) subject, in the case of
the unaudited consolidated financial statements, to year-end closing adjustments
and the lack of full footnote presentations and except that the presentation and
disclosures in such statements conform with the applicable rules of the Exchange
Act but include all adjustments necessary to conform to GAAP requirements with
respect to interim financial statements, and (ii) fairly present, in all
material respects, the consolidated financial position of Parent and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and their cash flows for the periods then ended.
Section 4.6 Brokers. No broker, finder or financial advisor is
entitled to any brokerage finder's or other fee or commission in connection with
the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub except ▇▇▇▇▇▇ Gull ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇ Inc. ("▇▇▇▇▇▇ Gull"), which remains in full force and effect and
has not been amended.
Section 4.7 Certain Tax Matters. Neither Parent, Sub nor any
of their officers or directors has taken any action that would be reasonably
likely to cause the Merger to be treated other than as a tax-free reorganization
under Section 368(a) of the Code.
22
Section 4.8 Accounting Matters. Neither Parent nor any of its
directors, officers or, to Parent's knowledge, stockholders has taken any action
which would prevent the accounting for the Merger as a pooling of interests in
accordance with Accounting Principles Board Opinion No. 16, the interpretative
releases pursuant thereto and the relevant pronouncements of the Securities and
Exchange Commission.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business by Meer Pending the Merger.
Prior to the Effective Time, unless Parent shall otherwise agree in writing, or
as otherwise expressly contemplated by this Agreement or described on Schedule
5.1 hereto:
(a) Meer shall conduct, and the Stockholders shall cause Meer
to conduct, its business only in the ordinary and usual course consistent with
past practice, and Meer shall use its reasonable efforts to preserve intact the
present business organization, keep available the services of its present
officers and key employees, and preserve its business relationships with
customers, suppliers and other third parties;
(b) Meer shall not, and the Stockholders shall not permit Meer
to (i) amend its articles of incorporation or by-laws, (ii) split, combine or
reclassify any shares of its outstanding capital stock, (iii) except as provided
in Section 6.8, declare, set aside or pay any dividend or other distribution
payable in cash, stock or property, or (iv) directly or indirectly redeem or
otherwise acquire any shares of its capital stock;
(c) Meer shall not, and the Stockholders shall not permit Meer
to (i) authorize for issuance, issue or sell or agree to issue or sell any
shares of, or Rights to acquire or convertible into any shares of, its capital
stock (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise), (ii) merge or
consolidate with another entity, (iii) acquire or purchase an equity interest in
or a substantial portion of the assets of another corporation, partnership or
other business organization or otherwise acquire any assets outside the ordinary
and usual course of business and consistent with past practice or otherwise
enter into any contract, commitment or transaction outside the ordinary and
usual course of business consistent with past practice, (iv) sell, lease,
license, waive, release, transfer, encumber or otherwise dispose of any of its
assets outside the ordinary and usual course of business and consistent with
past practice, (v) incur, assume, guarantee, secure or prepay any indebtedness
(including, without limitation, capitalized lease obligations) or any other
liabilities other than in the ordinary course of business and consistent with
past practice, (vi) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, (vii) make any loans, advances or capital contributions to, or
investments in, any other person, (viii) authorize or make capital expenditures
in excess of the amounts currently budgeted therefor and disclosed to Parent,
(ix) permit any insurance policy naming Meer as a beneficiary or
23
a loss payee to be modified, canceled or terminated, except in connection with
the simultaneous issuance of a replacement policy providing equivalent coverage,
or (x) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) Meer shall not, and the Stockholders shall not permit Meer
to (i) adopt, enter into, terminate or amend (except as may be required by
applicable Laws) any Plan or other arrangement for the current or future benefit
or welfare of any director, officer or current or former employee, (ii) increase
in any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases in salaried
compensation in the ordinary course of business consistent with past practice),
or (iii) take any action to fund or in any other way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation or
benefits under any employee plan, agreement, contract, arrangement or other
Plan;
(e) Meer shall not, and the Stockholders shall not permit Meer
to, take any action with respect to, or make any change in, its accounting or
tax policies or procedures, except as required by law or to comply with GAAP;
(f) Neither Meer nor any of the Stockholders shall not take
any action that would jeopardize (i) the treatment of Parent's acquisition of
Meer as a pooling of interests for financial accounting purposes; or (ii) the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code;
(g) Meer will make or cause to be made all necessary filings
with all Governmental Entities; and
(h) Meer shall promptly provide to Parent a copy of all
correspondence and written communications received from or supplied to any
Governmental Entity.
Section 5.2 Conduct of Business by Parent Pending the Merger.
Prior to the Effective Time, unless Meer shall otherwise agree in writing, or as
otherwise expressly contemplated by this Agreement, neither Parent nor Sub shall
take any action that would jeopardize (i) the treatment of Parent's acquisition
of Meer as a pooling of interests for financial accounting purposes or (ii) the
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access and Information.
(a) Each of Meer and Parent shall (and shall cause its
officers, directors, employees, auditors and agents to) afford to the other and
to the other's officers, employees, financial
24
advisors, legal counsel, accountants, consultants and other representatives
reasonable access during normal business hours throughout the period prior to
the Effective Time to all of its books and records and its properties, plants
and personnel and, during such period, each shall furnish promptly to the other
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal securities laws, provided that no
investigation pursuant to this Section 6.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger.
(b) Parent shall retain an environmental consultant reasonably
acceptable to Meer to undertake a Phase I environmental assessment of each real
property owned or leased by Meer and used for the Business in accordance with a
Phase I scope of work generally followed by nationally recognized environmental
consulting firms and the protocol established by the American Society for
Testing and Materials, "Standard Practice for Environmental Site Assessments:
Phase I Environmental Site Assessment Process", E-1527-97. Meer shall provide
all necessary or appropriate access to said real properties for the conduct of
the Phase I environmental assessment and shall provide to Parent or the
environmental consultant any and all information concerning the environmental
condition of the real properties in their custody, possession or control,
including, all reports, data, assessments, investigations, tests.
(c) Unless otherwise required by law, each party agrees that
it and its directors, officers, employees, partners, Affiliates, financing
sources, agents, advisors or representatives (collectively, "Representatives")
shall hold in confidence all non-public information so acquired or otherwise
disclosed to him, her or it in connection with this Agreement or the
transactions contemplated hereby and make no use of such confidential
information except in connection with this Agreement; provided, however, that
neither Meer or the Stockholders (the "Meer Parties"), on the one hand, nor
Parent nor Sub (the "Parent Parties"), on the other hand, shall be required to
maintain the confidentiality of any confidential information that (i) becomes
generally available to the public other than as a result of a disclosure by the
Meer Parties or Parent Parties, as the case may be, or their respective
Representatives, (ii) were available to the Meer Parties or Parent Parties, as
the case may be, on a non-confidential basis prior to the disclosure of such
information pursuant to this Agreement, provided that the source of such
information was not known by the Meer Parties or Parent Parties, as the case may
be, or their Representatives to be bound by a confidentiality agreement with, or
other contractual, legal or fiduciary obligation of confidentiality to, any of
the Meer Parties or Parent Parties, as the case may be, or any of their
affiliates, with respect to such material, or (iii) becomes available to the
Meer Parties or Parent Parties, as the case may be, on a non-confidential basis
from a source other than the Meer Parties or Parent Parties, as the case may be,
or their Representatives, provided that the source of such information was not
known by any of the Meer Parties or Parent Parties, as the case may be, or their
Representatives, to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the Meer
Parties or Parent parties, as the case may be, or any of their affiliates.
Notwithstanding anything in the foregoing to the contrary, a party may disclose
confidential information if and to the extent that such party has been advised
by counsel that such disclosure is required under applicable Laws and, prior to
such disclosure, if practical, such party, to the extent not otherwise
prohibited
25
from doing so under applicable Laws, promptly advise and consult with Meer or
Parent, as applicable, concerning the information proposed to be so disclosed.
Section 6.2 No Solicitation. Prior to the Effective Time, Meer
and the Stockholders agree that neither they, any of their respective
Affiliates, nor any of the respective directors, officers, employees (under
authorization of Meer or any of the Stockholders), agents or representatives of
the foregoing will, directly or indirectly, solicit, initiate, facilitate,
cooperate with or encourage (including by way of furnishing or disclosing
non-public information) any inquiries or the making of any proposal with respect
to any merger, consolidation or other business combination involving Meer or the
acquisition of all or any significant assets or capital stock of Meer taken as a
whole or any recapitalization, liquidation or dissolution or similar transaction
including Meer (each, an "Acquisition Transaction"), or negotiate, explore or
otherwise engage in discussions with any person (other than Parent and its
Representatives) with respect to any Acquisition Transaction, or enter into any
agreement, arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement.
Meer and the Stockholders agree to advise Parent promptly in writing of any
inquiries or proposals (or desire to make a proposal) received by (or indicated
to), any such information requested from, or any such negotiations or
discussions sought to be initiated or continued with, Meer, any of the
Stockholders or any of their respective Affiliates, or any of the respective
directors, officers, employees, agents or representatives of the foregoing, in
each case from a person (other than Parent and its Representatives) with respect
to an Acquisition Transaction, and the terms thereof, including the identity of
such third party, and to update on an ongoing basis or upon Parent's request,
the status thereof, as well as any actions taken or other developments pursuant
to, or caused by, this Section 6.2.
Section 6.3 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable Law
to consummate and make effective the transactions contemplated by this Agreement
including, without limitation, the obtaining of all necessary waivers, consents
and approvals and the effecting of all necessary registrations and filings. Meer
and the Stockholders will furnish to Parent and Sub, and Parent and Sub will
furnish to Meer and the Stockholders, such information and assistance as the
other may reasonably request in connection with the preparation of any such
filings or submissions. Without limiting the generality of the foregoing, as
promptly as practicable, Meer, the Stockholders, Parent and Sub shall make all
additional filings and submissions under the HSR Act as may be reasonably
required to be made in connection with the transactions contemplated by this
Agreement
Section 6.4 Expenses. Except as hereinafter provided in this
Section 6.4 and in Article IX, each of Meer, the Stockholders, Sub and Parent
shall separately bear his, her or its own expenses, including the fees and
disbursements of counsel, investment bankers and accountants, incurred in
connection with this Merger Agreement, the Merger and the transactions
contemplated by this Agreement. Notwithstanding the foregoing: Parent (x) has
paid (and will not be entitled to reimbursement for) the filing fees (an
aggregate of $90,000) for the filings heretofore made by Parent
26
and ▇▇▇▇▇▇ ▇. ▇▇▇▇ as Trustee of the ▇▇▇▇▇▇ ▇. ▇▇▇▇ Trust under the HSR Act and
(y) shall pay to BancAmerica ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ at the Closing in immediately
available funds the fee payable under the BancAmerica Letter Agreement and the
aggregate number of shares constituting the Merger Shares shall be reduced
(rounded to the nearest whole share) by the quotient obtained by dividing the
aggregate amount of the fee payable under the BancAmerica Letter Agreement by
$38, and the resulting reduced number of Merger Shares shall be used for all
purposes under Section 2.1(a), and (z) no separate allocation of the fees and
disbursements incurred in connection with the negotiation, execution and
delivery of the Merger Agreement, the Registration Rights Agreement or the
Ancillary Agreements need be made to any Stockholder.
Section 6.5 Public Announcements. Meer and the Stockholders
agree that it and they will not issue any press release or otherwise make any
public statement with respect to this Agreement (including the Exhibits hereto)
or the transactions contemplated hereby (or thereby) without the prior consent
of Parent; provided, however, that such disclosure can be made without obtaining
such prior consent if (i) the disclosure is required by law and (ii) the party
making such disclosure has first used its reasonable best efforts to consult
with (but not obtain the consent of about the form and substance of such
disclosure. Parent and the Sub agree that, prior to the Effective Time, they
will not issue any press release or otherwise make any public statement with
respect to this Agreement (including the Exhibits hereto) or the transactions
contemplated hereby (or thereby) without the prior consent of Meer; provided,
however, that such disclosure can be made without obtaining such prior consent
if (i) the disclosure is required by law and (ii) the party making such
disclosure has first used its reasonable best efforts to consult with (but not
obtain the consent of) the Meer about the form and substance of such disclosure.
Section 6.6 Supplemental Disclosure. Meer and the Stockholders
shall give prompt notice to Parent, and Parent shall give prompt notice to Meer,
of (i) the occurrence, or non-occurrence, of any event known to Meer or any of
the Stockholders, the occurrence or non-occurrence, of which would be likely to
cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate or (y) any covenant, condition or agreement contained in
this Agreement not to be complied with or satisfied and (ii) any failure of
Meer, any Stockholder, Sub or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.6 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article VII of this Agreement or
otherwise limit or affect the remedies available hereunder or under applicable
Law to any party.
Section 6.7 Stock Transfers. The Stockholders shall hold the
Merger Shares subject to all applicable provisions of the Securities Act and the
rules and regulations promulgated by the Commission thereunder and shall not
make an illegal "distribution" (within the meaning of the Act and Rule 145
promulgated thereunder) of such Parent Common Stock. In addition, the
Stockholders shall hold the Merger Shares subject to the applicable requirements
for pooling of interest accounting under Accounting Principles Board Opinion No.
16, the interpretation releases pursuant thereto and the pronouncements of the
Commission. Without limiting the generality of the foregoing, the Stockholders:
27
(a) shall not sell any Parent Common Stock until after the
publication of financial results reflecting the combined operating results of
Parent and Meer for a period of not less than 30 days from and after the
Effective Time;
(b) shall not transfer any Parent Common Stock unless (i)
Parent shall have been furnished with an opinion of counsel, in form and
substance reasonably satisfactory to Parent's counsel, that registration under
the Securities Act is not required in respect of such transfer or (ii) a
registration statement covering the shares proposed to be transferred and the
proposed transfer thereof has been filed by Parent with the Commission and has
become effective under the Securities Act; and
(c) shall consent to the imposition of legends on Parent
Common Stock to be received by them in connection with the Merger to the effect
that such Parent Common Stock may not be sold except in compliance with the
Securities Act and is subject to the transfer restrictions provided for in this
Section 6.7.
Section 6.8 Certain Tax Matters.
(a) After the Closing Date, Meer will not amend in any
material respect, or consent to any material adjustment to, any Meer Return (or
any other federal or state income tax return for any taxable year ended on or
before the Closing Date) in a manner that would increase the tax liability of
the Stockholder without the Stockholder's written consent, which shall not be
unreasonably withheld.
(b) On the Closing Date Meer shall distribute to the
Stockholders, pro rata in accordance with their respective holdings of Meer
Common Stock, an aggregate of $2,010,719.04 (the "Distribution Amount"),
representing 44% of the estimated taxable income for Meer for the fiscal period
("Fiscal Period") ending on the Closing Date.
(c) A final determination ("Determination") of the taxable
income of Meer for the Fiscal Period ending on the Closing Date shall be
undertaken and completed within seventy-five (75) days of the Closing Date. The
Determination shall be computed in a manner consistent with the computation of
Meer's taxable income for prior fiscal years. The Determination shall be
undertaken by the Parent's certified public accountants. Upon completion of the
Determination, the Parent shall notify the Stockholders of the actual taxable
income amount ("Amount"). The Stockholders shall have a period of fifteen (15)
days after receipt of notice of the Amount to review the Parent's calculations
with respect to the same and to deliver to the Parent written notification of
any dispute concerning the Determination, along with a brief explanation in
reasonable detail to support the Stockholders' position in respect thereof. The
Parent's certified public accountants will cooperate with the Stockholders in
connection with the Stockholders' review of the Parent's calculations, work
papers and other information compiled by the Parent or its certified public
accountants in connection with the calculation of the Amount. In the event of
any dispute with respect to the Amount, the Parent and Stockholders shall
consult to resolve any dispute for a period of twenty (20) business days
following notification thereof. If such twenty (20) day consultation
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period expires and the dispute has not been resolved, the dispute shall be
submitted to a certified public accounting firm agreeable to the Stockholders
and Parent, the cost of which shall be borne equally by the Stockholders and
Parent. In the event the parties are unable to agree upon an independent
certified public accounting firm, the Parent and the Stockholders shall each
select one such certified public accounting firm, and the firm so selected shall
select a third, independent certified public accounting firm. The independent
certified public accounting firm mutually agreed upon by the Parent and
Stockholders (or in the event they are unable to agree, an independent certified
public firm selected by the accounting firms selected by the Parent and
Stockholders as provided in the immediately preceding sentence) (the "CPA Firm")
shall make its determination of the Amount, which determination will be final
and binding upon the parties hereto. Payment of any adjustment of the
Distribution Amount pursuant to this Section 6.8(c) and the fees and expenses of
the CPA Firm shall be made by the appropriate party or parties within ten (10)
days after completion of the Determination or resolution of any disputes by the
independent certified public accounting firms, whichever shall last occur.
Section 6.9 Dissenters Rights; Authorization and Approval. (i)
Meer and each of the Stockholders shall cause the Certificate of Amendment to
Meer's Articles of Incorporation described in Section 7.1(j) to be filed as
promptly as is practicable; (ii) Meer and each of the Stockholders shall
promptly thereafter take all corporate action to authorize or ratify the
execution and delivery by Meer of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the Merger; and
(iii) each of the Stockholders hereby waives any dissenter's rights that such
Stockholder may have, whether under the Act or otherwise, to the fullest extent
permitted under applicable law and irrevocably covenants not to exercise any
such rights and irrevocably covenants to take all such action as may be
necessary or appropriate to extinguish all such rights as quickly as is
possible.
Section 6.10 Lease Amendment. Meer and the Stockholders shall
have caused (i) each of the leases listed on Schedule 3.26 between Meer and any
Affiliate of any of the Stockholders to be amended so that they will terminate
on the first anniversary of the Closing Date, provided that Parent may renew any
or all of said leases for up to three successive one-year terms upon notice
given to Meer at least ninety days prior to the expiration date then in effect,
and (ii) the rent payable under the lease for the Canton, Michigan facility
shall be reduced by $50,000 a month (and all rental increases shall be adjusted
proportionally, if applicable).
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction or waiver at or prior to the Effective Time of
the following conditions:
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(a) HSR Approval. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the U.S. Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of this transaction, which action shall have not been withdrawn or
terminated.
(b) No Order. No Governmental Entity (including a federal or
state court) of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which enjoins, materially restricts, restrains or prohibits the
transactions contemplated hereby, including the consummation of the Merger, or
has the effect of making the Merger illegal; provided, however, that the party
or parties asserting this condition shall have used their reasonable best
efforts (as required under Section 6.3) to cause any such decree, judgment,
injunction or other order to be vacated or lifted.
(c) Approvals. Other than the filing of the Certificate of
Merger in accordance with the Act, all authorizations, consents, waivers, orders
or approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity the failure of which to obtain, make
or occur would individually, or in the aggregate have a material adverse effect
at or after the Effective Time on Parent and its subsidiaries (including,
without limitation, the Surviving Corporation), taken as a whole, shall have
been obtained or filed or have occurred.
(d) Statutes. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Merger or has the effect of making the Merger illegal.
Section 7.2 Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following additional conditions, unless waived in writing by Parent:
(a) Representations and Warranties. The representations and
warranties of Meer and the Stockholders set forth in this Agreement shall be
true and correct in all material respects as of the date hereof and, except to
the extent such representations and warranties speak as of an earlier date, as
of the Effective Time as though made at and as of the Effective Time, and Parent
shall have received a certificate signed by each of the Stockholders and, on
behalf of Meer, by the chief executive officer or the chief financial officer of
Meer, to such effect.
(b) Performance of Obligations of Meer and the Stockholders.
Each of Meer and the Stockholders shall have performed in all material respects
all obligations required to be performed by such person under this Agreement at
or prior to the Effective Time, and Parent shall have received a certificate
signed by each of the Stockholders and, on behalf of Meer, by the chief
executive officer or the chief financial officer of Meer, to such effect.
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(c) Letters of Resignation. Parent and Sub shall have received
letters of resignation addressed to Meer from each of the members of Meer's
board of directors, which resignations shall be effective as of the Effective
Time.
(d) Pooling Letter. Parent shall have received from BDO
▇▇▇▇▇▇▇, LLP a letter, dated the Closing Date and addressed to Parent, to the
effect that, subject to customary qualifications, the Merger qualifies for
pooling of interests treatment for financial reporting purposes in accordance
with GAAP, and Parent shall have received from Meer, with the consent of ▇▇▇▇▇
▇▇▇▇▇▇▇▇, a copy of a letter, dated the Closing Date, of such firm addressed to
Meer to the effect that, based upon inquiries and their examination of the
financial statements of Meer, they are not aware of any condition relating to
Meer that would preclude the use of pooling of interests treatment of the Merger
for financial reporting purposes in accordance with GAAP.
(e) Ancillary Agreements. Each of ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ Handelsmann,
▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇ shall have executed and delivered an employment
agreement with Meer and option agreement with Parent substantially in the
respective forms, including exhibits thereto, attached as Exhibit 7.2(e)
(collectively, the Ancillary Agreements").
(f) Legal Opinion. Parent shall have received from Meer's
counsel, Maddin, Hauser, Wartell, Roth, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ("Maddin ▇▇▇▇▇▇")
an opinion, dated the Closing Date, in form and substance reasonably
satisfactory to Parent, which opinion may rely on an opinion of local counsel as
to matters of New York law, provided that such local counsel and its opinion are
reasonably satisfactory to Parent and a copy of such opinion is (with the
consent of such local counsel set forth therein) attached to Maddin Hauser's
opinion (or, alternatively, such local counsel opinion may be addressed and
delivered directly to Parent).
(g) Tax Opinion. Parent shall have received an opinion from
Proskauer Rose, counsel to Parent, dated the Closing Date, to the effect that
the Merger will be treated for United States Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
(h) Lease Amendments. The lease amendments provided for in
Section 6.8 shall have been effected in writings in form and substance
reasonably satisfactory to Parent.
(i) Appraisal Rights; Surrender for Conversion. Appraisal
rights shall not have been asserted in connection with the Merger with respect
to 10% or more of the outstanding shares of Meer Common Stock and no Stockholder
shall have dissented with respect to less than all of its shares of Meer Common
Stock. Each of the outstanding shares of Meer Common Stock shall have been
tendered for conversion pursuant to Section 2.20.
(j) Certificate of Amendment. Meer shall have filed a duly
authorized and executed Certificate of Amendment to its Articles of
Incorporation reversing the Certificate of Amendment to its Articles of
Incorporation approved by stockholders on July 31, 1998 and Meer and the
Stockholders shall have taken all action reasonably requested by Parent (or
otherwise
31
necessary or advisable) in order to carry out the intent and purposes of Section
6.9 of this Agreement.
Section 7.3 Conditions to Obligation of Meer and Stockholders
to Effect the Merger. The obligation of Meer to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. (i) The representations
and warranties of Parent set forth in this Agreement shall be true and correct
in all material respects, as of the date hereof, and, except to the extent such
representations and warranties speak as of an earlier date, as of the Effective
Time as though made on and as of the Effective Time, and (ii) Meer shall have
received a certificate signed on behalf of Parent by the chief executive officer
or the chief financial officer of Parent, to such effect.
(b) Performance of Obligations of Parent and Sub. Each of
Parent and Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Effective
Time, and Meer shall have received a certificate signed on behalf of Parent by
the chief executive officer or the chief financial officer of Parent, to such
effect.
(c) Legal Opinion. Meer and the Stockholders shall have
received from Parent's counsel, Proskauer Rose LLP, an opinion in form and
substance reasonably satisfactory to Meer and the Stockholders, which opinion
may rely on an opinion of local counsel as to matters of Michigan law, provided
that such local counsel and its opinion reasonably satisfactory to Meer and a
copy of such opinion is (with the consent of such local counsel set forth
therein) attached to Proskauer Rose LLP's opinion (or, alternatively, such
opinion may be addressed and delivered directly to Meer and the Stockholders).
(d) Other Agreements. Parent shall have executed and delivered
the Registration Rights Agreement and each of the option agreements included in
the Ancillary Agreements.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time.
(a) by mutual consent of Parent and Meer;
(b) by either Parent or Meer, if the Merger shall not have
been consummated before August 20, 1998 (unless, in the case of any such
termination pursuant to this Section 8.1(b), the failure to so consummate the
Merger by such date shall have been caused by the action or failure to act of
the party seeking to terminate this Agreement (or Sub, in the case of
termination being
32
sought by Parent, or any Stockholder, in the case of termination being sought by
Meer), which action or failure to act constitutes a breach of this Agreement);
(c) by Parent, if (i) there has been a misrepresentation or
breach in any material respect in or of any representation or warranty of Meer
or any of the Stockholders or (ii) there has been a breach in any material
respect of any of the covenants or agreements set forth in this Agreement on the
part of Meer or any of the Stockholders, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by Parent to Meer;
(d) by Meer, if (i) there has been a misrepresentation or
breach in any material respect in or of any representation or warranty of Parent
or Sub or (ii) there has been a breach in any material respect of any of the
covenants or agreements set forth in this Agreement on the part of Parent or
Sub, which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by Meer to Parent; and
(e) by either Parent or Meer, if any permanent injunction or
action by any Governmental Entity of competent jurisdiction preventing the
consummation of the Merger shall have become final and nonappealable; provided,
however, that the party seeking to terminate this Agreement pursuant to this
Section 8.1(e) shall have used all reasonable efforts to remove such injunction
or overturn such action;
Section 8.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant
to this Article VIII, the Merger shall be deemed abandoned and this Agreement
shall forthwith become void, without liability on the part of any party hereto,
except as provided in this Section 8.2, Section 6.1 (solely with respect to
confidentiality) and Section 6.4, which provisions shall survive such
termination, and except that nothing in this Section 8.2 shall relieve any party
from liability that such party would otherwise have for any misrepresentation or
breach of representation, warranty, covenant or agreement in this Agreement.
(b) If Parent shall have terminated this Agreement pursuant to
Section 8.1(c) (or would have so terminated this Agreement but for any prior
termination of this Agreement by Meer pursuant to Sections 8.1(b) or 8.1(e)
prior to the expiration of the 30 day cure period provided for in Section
8.1(c), if applicable) as a result of a willful breach by Meer or any
Stockholder (including, without limitation, any willful breach under Section
6.9), Meer shall pay to Parent, as liquidated damages and not as a penalty,
seven and one-half million dollars ($7,500,000) plus Parent's reasonably
documented out-of-pocket expenses. Such liquidated damage amounts shall be
payable no later than five business days after such termination.
(c) If Meer shall have terminated this Agreement pursuant to
Section 8.1(d) (or would have so terminated this Agreement but for any prior
termination of this Agreement by Parent pursuant to Sections 8.1(b) or 8.1(e)
prior to the expiration of the 30 day cure period provided for in Section
8.1(d), if applicable) as a result of a willful breach by Parent or Sub, Parent
shall pay to
33
the Company, as liquidated damages and not as a penalty, seven and one-half
million dollars ($7,500,000) plus Meer's reasonably documented out-of-pocket
expenses. Such liquidated damage amounts shall be payable no later than five
business days after such termination.
(d) If this Agreement terminates for any reason other than a
termination as a result of which Parent is obligated to pay Meer liquidated
damages pursuant to Section 8.2(c), and (i) within six months after such
termination Meer or one or more of the Stockholders consummates or enters into a
definitive agreement with respect to an Acquisition Transaction and (ii) prior
to the termination of this Agreement a willful material breach of Section 6.2
occurred, then Meer shall pay to Parent, as liquidated damages and not as a
penalty, seven and one-half million dollars ($7,500,000) plus Parent's
reasonably documented out-of-pocket expenses. Such liquidated damage amounts
shall be payable on the date such Acquisition Transaction is consummated or such
definitive agreement is entered into, as applicable.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations and Warranties. All
representations and warranties contained in Articles III and IV of this
Agreement shall survive until the first anniversary of the Closing.
Section 9.2 Indemnification by Stockholders.
(a) Subject to Section 9.3(a), from and after the Closing the
Stockholders shall, jointly and severally, indemnify and save Parent, its
Subsidiaries (including, without limitation, the Surviving Corporation), and
their respective Affiliates, directors, officers, employees, agents, counsel and
representatives and all of their successors and assigns (collectively, the
"Parent Claimants" and, individually, a "Parent Claimant") harmless from, and
defend each of them from and against, any and all demands, claims, actions,
liabilities, losses, costs, damages or expenses whatsoever, including reasonable
attorneys' fees (collectively, "Losses"), imposed upon or incurred by the Parent
Claimants constituting, resulting from or arising out of (i) any
misrepresentation or breach of any representation or warranty of Meer or any of
the Stockholders contained in this Agreement or (ii) any breach of any covenant
or obligation of Meer or any of the Stockholders contained in this Agreement.
Without limiting the generality of the foregoing and subject to Section 9.3(a),
the Stockholders shall pay any Parent Claimant who is successful asserting any
claim for indemnification hereunder an amount sufficient to put such Parent
Claimant in the same position it would have been in had such representation or
warranty been accurate or had such covenant or obligation not been breached, as
the case may be, net of any tax benefit received by such Parent Claimant due to
such Losses (after taking into account any amounts to be received hereunder).
(b) Subject to Section 9.3(b), from and after the Closing,
Parent shall indemnify and save the Stockholders and their respective
Affiliates, beneficiaries, heirs, executors, successors
34
and assigns (collectively, the "Stockholder Claimants" and, individually, a
"Stockholder Claimant") harmless from and defend each of them from and against
any and all Losses imposed upon or incurred by the Stockholder Claimants,
constituting, resulting from or arising out of (i) any inaccuracy or breach of
any representation or warranty of Parent or Sub contained in Sections 4.1, 4.2,
4.3, 4.4, the last sentence of Section 4.5, 4.6, 4.7 or 4.8 of this Agreement or
(ii) any material breach of any covenant or obligation of Parent or Sub
contained in this Agreement or the Registration Rights Agreement. Without
limiting the generality of the foregoing and subject to Section 9.3(b), Parent
shall pay any Stockholder Claimant who is successful asserting any claim for
indemnification hereunder an amount sufficient to put the Stockholder Claimant
in the same position it would have been in had such representation or warranty
been accurate or had such covenant or obligation not been breached, as the case
may be, net of any tax benefit received by the Stockholder Claimant (after
taking into account any amounts to be received hereunder).
Section 9.3 Limitations on Indemnification.
(a) The Parent Claimants will not be entitled to such
indemnification under Section 9.2(a) unless and until the aggregate amount of
all Losses incurred by the Parent Claimants exceeds $1,125,000 (the "Basket
Amount"), in which event the Parent Claimants will be entitled to
indemnification for all Losses so incurred, not just Losses in excess of the
Basket Amount. The maximum aggregate amount of indemnification that the
Stockholders shall be obligated to pay under Section 9.2(a) shall be equal to
10% of the aggregate value (calculated using the Average Closing Price) of the
Merger Shares (the "Cap Amount"); provided, however, that the Basket Amount
threshold and the Cap Amount shall not apply to Losses arising with respect to
any misrepresentation or breach of any representation or warranty made in
Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.12, 3.16, 3.18 or 3.20 or any covenant
contained in Section 6.9, but in no event shall the aggregate amount of
indemnification payments made under Section 9.2(a) exceed the aggregate value
(calculated using the average closing price of the Parent Common Stock as
reported on the Nasdaq Stock Market for the ten consecutive trading day period
immediately preceding the Closing Date (the "Average Closing Price")) of the
Merger Shares.
(b) The Stockholder Claimants will not be entitled to seek
indemnification under Section 9.2(b) unless and until the aggregate amount of
all Losses incurred by the Stockholder Claimants exceeds the Basket Amount, in
which event the Stockholder Claimants will be entitled to indemnification for
all Losses so incurred, not just Losses in excess of the Basket Amount. The
maximum aggregate amount of indemnification that Parent shall be obligated to
pay under Section 9.2(b) shall be equal to the Cap Amount; provided, however,
that the Basket Amount threshold and the foregoing limitation shall not apply to
Losses arising with respect to any misrepresentation or breach of any
representation or warranty made in Section 4.1, 4.2, 4.3 or 4.4, and the Cap
Amount shall not apply to Losses arising out of any material breach by Parent
under the Registration Rights Agreement, but in no event shall the aggregate
amount of indemnification payments made under Section 9.2(b) exceed the
aggregate value (calculated using the Average Closing Price) of the Merger
Shares.
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Section 9.4 Indemnification Procedures.
(a) The rights and obligations of each party asserting a claim
for indemnification pursuant to Section 9.2 (each, an "Indemnitee") from a party
or parties obligated to provide such indemnification (collectively, the
"Indemnitor") shall be governed by the following rules:
(i) The Indemnitee shall give prompt written notice to the
Indemnitor of any state of facts which the Indemnitee determines will give rise
to a claim by it against the Indemnitor based on the indemnity agreement
contained herein, stating the nature and basis of said claims and the amount
thereof, to the extent known. No failure to give such notice shall affect the
indemnification obligations of the Indemnitor hereunder, except, in the case of
a third party claim subject to Section 9.4(a)(ii), to the extent such failure
materially prejudices the Indemnitor's ability successfully to defend the matter
giving rise to the indemnification claim. Notwithstanding the foregoing, the
Indemnitee shall not be entitled to indemnification hereunder unless it shall
have given written notice to the Indemnitor, setting forth its claim for
indemnification within the earlier of (x) one year after the Closing Date and
(y) with respect to those matters for which claims for indemnification must be
asserted not later than the date that the first combined annual audited
financial statements of Parent and Meer are issued (the "Financial Statements
Date") in order to account for the Merger as a pooling of interest, the
Financial Statements Date (the earlier of (x) and (y) the "Indemnification
Termination Date").
(ii) In the event any action, suit or proceeding is brought by
or before any Governmental Entity or arbitrator against an Indemnitee with
respect to which the Indemnitor may have liability hereunder, then, upon the
written acknowledgment by the Indemnitor within thirty days of the bringing of
such action, suit or proceeding that it is undertaking and will prosecute the
defense of the claim and confirming that the claim is one with respect to which
the Indemnitor is obligated to indemnify and that it will be able to pay the
full amount of potential liability in connection with any such claim, the
action, suit or proceeding (including all proceedings on appeal or for review
which counsel for the Indemnitee shall deem appropriate) may be defended by the
Indemnitor. However, in the event the Indemnitor shall fail promptly to assume
the defense of any action, suit or proceeding or shall not offer reasonable
assurances as to its financial capacity to satisfy any final judgment or
settlement, the Indemnitee may assume the defense and dispose of the action,
suit or proceeding. The Indemnitee shall have the right to employ its own
counsel and local counsel in any action, suit or proceeding, but the fees and
expenses of such counsel shall be at the Indemnitee's own expense unless (x) the
employment of such counsel and the payment of such fees and expenses both shall
have been specifically authorized by the Indemnitor in connection with the
defense of such action, suit or proceeding, (y) the Indemnitee shall have
reasonably concluded and specifically notified the Indemnitor that there may be
specific defenses available to it which are different from or additional to
those available to the Indemnitor, or that such action, suit or proceeding
involves or could have an effect upon matters beyond the scope of the indemnity
agreement contained herein, or (z) the Indemnitee shall have assumed the defense
of such action, suit or proceeding as provided above. In addition, if any event
specified in clause (y) of the immediately proceeding sentence occurs, the
Indemnitee shall have the right to direct the defense of such action, suit or
proceeding.
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(iii) The Indemnitee shall be kept fully informed by the
Indemnitor of such action, suit or proceeding at all stages thereof, whether or
not it is represented by counsel. The Indemnitor shall, at the Indemnitor's
expense, make available to the Indemnitee and its attorneys and accountants all
books and records of the Indemnitor relating to such proceedings or litigation,
and the parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
(b) The Indemnitor shall make no settlement of any claims
which the Indemnitor has undertaken to defend without the Indemnitee's consent
(which consent shall not be unreasonably withheld), unless the Indemnitor fully
indemnifies the Indemnitee for all Losses, there is no finding or admission of
violation of Laws by, or effect on any other claims that may be made against,
the Indemnitee, and the relief granted in connection therewith requires no
action on the part of and has no effect on the Indemnitee or the operation of
the business of Parent or any of its Subsidiaries (including, without
limitation, the Surviving Corporation).
(c) Arbitration. In order to insure that the Merger qualifies
for treatment as a pooling-of-interest for financial reporting purposes, the
parties agree that any dispute, disagreement or controversy between any
Indemnitee and the Indemnitor with respect to any claim for indemnification
pursuant to this Agreement, including, without limitation, any dispute with
respect to the Indemnitor's obligation to assume the defense and indemnify such
Indemnitee in connection with a third party claim pursuant to Section
9.3(a)(ii), that is not resolved by the Indemnification Termination Date shall
promptly be submitted to the American Arbitration Association (the "AAA") to be
resolved by binding arbitration in accordance with the arbitration rules of the
AAA. The place of arbitration shall be New York, New York. The arbitration
tribunal shall be composed of three arbitrators, one of which shall be appointed
by Parent within 10 business days of the Indemnification Termination Date, one
of which shall be appointed by the Stockholders within 10 business days of the
Indemnification Termination Date and one of which shall be appointed by the
arbitrators appointed by Parent and the Stockholders within 15 business days of
the Indemnification Termination Date. The arbitrators will be directed to
resolve such dispute, disagreement or controversy as soon as practicable (and,
in any event, within two months of the Indemnification Termination Date).
ARTICLE X
RESTRICTIVE COVENANTS
Section 10.1 Non-Competition. Except for those Stockholders
who enter into an employment agreement constituting one of the Ancillary
Agreements (the "Engaged Stockholders"), neither the Stockholders nor any of
their respective Affiliates shall, for a period of five years after the
Effective Time, directly or indirectly, engage or be interested (whether as
owner (excluding solely the ownership of not more than 1% of any class of
securities that are traded on a national securities exchange or on the Nasdaq
Stock Market), partner, lender, consultant, employee or otherwise), anywhere in
the United States, in any business, activity or enterprise that engages in or
37
constitutes any Competitive Activity (excluding working for manufacturers who
sell solely to distributors as opposed to directly to the healthcare
practitioner). For purposes of this Section 10.1, the term "Competitive
Activity" means the distribution of any healthcare products or services
(including computer software) primarily to office based practitioners.
Section 10.2 Non-Solicitation of Employees. Except for the
Engaged Stockholders, neither the Stockholders or any of their Affiliates shall,
for a period of five years after the Effective Date, directly or indirectly, for
himself, herself, or itself or on behalf of any other individual or entity, hire
any employee of Parent or any of its Subsidiaries, including, without
limitation, any employees of Meer, or induce nor attempt to induce any such
employee to leave his or her employment with Parent or any of its Subsidiaries
(including without limitation, Meer).
Section 10.3 Non-Solicitation or Interference with Customers
and Suppliers. Except for the Engaged Stockholders, neither the Stockholders nor
any of their Affiliates shall, for a period of five years after the Effective
Time, directly or indirectly, for himself, herself or itself or on behalf of any
other individual or entity, solicit, divert, take away or attempt to take away
any of Parent's or any of its Subsidiaries' (including without limitation,
Meer's) customers or suppliers or the business or patronage of any such
customers or suppliers or in any way interfere with, disrupt or attempt to
disrupt any then existing relationships between Parent or any of its
Subsidiaries (including without limitation, Meer) and any of their respective
customers or suppliers or other individuals or entities with whom they deal, or
contact or enter into any business transaction with any such customers or
suppliers or other individuals or entities for any purpose.
Section 10.4 Confidentiality. Except for the Engaged
Stockholders, neither the Stockholders nor any of their Affiliates shall ever
use or divulge any trade secrets, customer or supplier lists, pricing
information, marketing arrangements or strategies, business plans, internal
performance statistics, training manuals or any other information concerning the
Company, Parent or any of its Subsidiaries that is competitively sensitive,
proprietary or confidential, except on behalf of the Company, Parent or any of
its Subsidiaries, and shall not conduct himself in a manner that would
reasonably be expected to adversely affect the Company, Parent or any of its
Subsidiaries in any material respect, including, but not limited to, making
false, misleading or negative statements, either orally or in writing, about the
Company, Parent or any of its Subsidiaries, or their respective directors,
officers or employees; provided, however, that the confidentiality covenants
contained in this Section 10.4 shall not apply to the following: (i) information
which is already in the public domain at the time of its disclosure to a
Stockholder; (ii) information which, after its disclosure to a Stockholder,
becomes part of the public domain by publication or otherwise other than through
a Stockholder's act; (iii) information which a Stockholder received from a third
party having the right to make such disclosure without restriction on disclosure
or use thereof; or (iv) information which a Stockholder is legally compelled to
disclose.
Section 10.5 Employment Agreements Covenants. The Engaged
stockholders shall comply, from and after the Effective Date, with all of their
respective non-competition and non-solicitation (of employees, customers or
suppliers) covenants and agreements set forth in their respective employment
agreements included in the Ancillary Agreements.
38
Section 10.6 Acknowledgments. The Stockholders acknowledge
that, in view of the nature of Meer's business and the business objectives of
Parent in acquiring Meer, and the consideration paid in the Merger to the
Stockholders therefor, the restrictions and covenants contained or referenced in
this Article X are reasonably necessary to protect the legitimate business
interests of Parent and that any violation of such restrictions will result in
irreparable injury to Parent and its Subsidiaries, including Meer, for which
damages will not be an adequate remedy. The Stockholders therefore acknowledge
that, if any such restrictions or covenants are violated, Parent shall be
entitled to preliminary and injunctive relief as well to an equitable accounting
of earnings, profits and other benefits arising from such violation.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Amendment and Modification. At any time prior to
the Effective Time, this Agreement may be amended, modified or supplemented only
by written agreement (referring specifically to this Agreement) of Parent, Sub,
Meer and Stockholders with respect to any of the terms contained herein.
Section 11.2 Waiver. At any time prior to the Effective Time,
Parent and Sub, on the one hand, and Meer (on behalf of itself and the
Stockholders), on the other hand, may (i) extend the time for the performance of
any of the obligations or other acts of the other parties, (ii) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any documents delivered pursuant hereto, and (iii) waive compliance by the
other with any of the agreements or conditions contained herein which may
legally be waived. Any such extension or waiver shall be valid only if set forth
in an instrument in writing specifically referring to this Agreement and signed
on behalf of such party.
Section 11.3 Investigations. The respective representations
and warranties of Parent, Meer and Stockholders contained herein or in any
certificates or other documents delivered prior to or as of the Effective Time
shall not be deemed waived or otherwise affected by any investigation made by
any party hereto.
Section 11.4 Notices. All notices and other communications
hereunder shall be in writing and shall be delivered personally or by next-day
courier or telecopied with electronic confirmation of receipt, to the parties at
the addresses specified below (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof). Any such notice shall be effective upon
receipt, if personally delivered or telecopied, or one day after delivery to a
courier for next-day delivery.
39
(a) If to Parent or Sub, to:
▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
(b) if to Meer, to:
▇. ▇▇▇▇ Dental Supply Co.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
with a copy to:
Maddin, Hauser, Wartell, Roth, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
Third Floor Essex Centre
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇
(c) If to any Stockholder, to:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
40
with a copies to:
▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
24 954 Arcadia
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
Maddin, Hauser, Wartell, Roth, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
Third Floor Essex Centre
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Section 11.5 Descriptive Headings; Interpretation. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
References in this Agreement to Sections, Schedules, Exhibits or Articles mean a
Section, Schedule, Exhibit or Article of this Agreement unless otherwise
indicated. References to this Agreement shall be deemed to include the Exhibits
and Schedules hereto, unless the context otherwise requires. The term "person"
shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, a Governmental Entity or an unincorporated organization.
Section 11.6 Entire Agreement; Assignment. This Agreement
(including the Exhibits, Schedules and other documents and instruments referred
to herein) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them, with respect to the subject matter hereof. Except as expressly set
forth in Article IX hereof, this Agreement is not intended to confer upon any
person not a party hereto any rights or remedies hereunder. This Agreement shall
not be assigned by operation of law or otherwise; provided that Parent or Sub
may assign its rights and obligations hereunder to a direct or indirect
subsidiary of Parent, but no such assignment shall relieve Parent or Sub, as the
case may be, of its obligations hereunder.
Section 11.7 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
giving effect to the provisions thereof relating to conflicts of law.
Section 11.8 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the specific jurisdiction
where such judgment shall be made. To the extent that
41
any of the restrictive covenants contained in Article X of this Agreement are
determined by a court in any jurisdiction to be unenforceable, as to any
Stockholder or any Affiliate, as to duration, scope of activities restricted or
geographic area, such covenant shall automatically be deemed amended to the
extent necessary to make such covenant enforceable; provided, however, that
nothing in the foregoing shall be deemed to affect the enforceability of any
other covenant in Article X as written or the enforceability of the covenant
deemed to be amended in any other jurisdiction as written.
Section 11.9 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
42
IN WITNESS WHEREOF, each of Parent, Sub, Meer and the
Stockholders has executed this Agreement as of the date first above written.
▇▇▇▇▇ ▇▇▇▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name:
Title:
HSI ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name:
Title:
▇. ▇▇▇▇ DENTAL SUPPLY CO.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
Name:
Title: President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, Individually and as Trustee
of the ▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Living Trust
dated November 17, 1972
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Individually and as Trustee
of the ▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Living Trust
dated May 10, 1989, as Amended
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, Individually and as Trustee
of the ▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Living Trust
dated August 20, 1989
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Individually and as Trustee
of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Living Trust
dated August 20, 1984, as Amended
43
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Individually and as Trustee
of the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Revocable Living Trust
dated December 18, 1993
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Individually and as
Trustee of the ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ Revocable
Living Trust dated December 18, 1993
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Individually and as Trustee
of the ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Revocable Living Trust
dated June 5, 1997
/s/ ▇▇▇ ▇▇▇▇▇▇
----------------------------
▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
44