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ASSET PURCHASE AGREEMENT
BY AND AMONG
LENS EXPRESS, INC.,
SUMMIT TECHNOLOGY, INC.
AND
STRATEGIC OPTICAL HOLDINGS, INC.
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DATED MAY 4, 2000
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<PAGE>
<TABLE>
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TABLE OF CONTENTS
1. Definitions; Interpretation..............................................................................1
1.1 Definitions.....................................................................................1
1.2 Interpretation..................................................................................6
2. Purchase and Sale of Business............................................................................6
2.1 Purchase and Sale...............................................................................6
2.2 Assumed Liabilities.............................................................................7
2.3 Excluded Liabilities............................................................................8
3. Payment..................................................................................................8
3.1 Purchase Price, Payment on the Closing Date.....................................................8
3.2 Allocation of Purchase Price....................................................................9
3.3 Purchase Price Adjustment.......................................................................9
4. The Closing.............................................................................................10
4.1 The Closing....................................................................................10
4.2 Seller's Deliveries............................................................................10
4.3 Buyer's Deliveries.............................................................................11
4.4 Further Assurances.............................................................................12
5. Representations and Warranties of Seller................................................................12
5.1 Corporate Status...............................................................................12
5.2 Corporate Authority............................................................................12
5.3 Non-Contravention, Approvals and Consents......................................................13
5.4 Transferred Assets.............................................................................13
5.5 Changes........................................................................................13
5.6 Taxes..........................................................................................15
5.7 Employee Benefit Plans.........................................................................15
5.8 Litigation.....................................................................................17
5.9 Brokers........................................................................................17
5.10 Intellectual Property..........................................................................17
5.11 Agreements.....................................................................................18
5.12 Leases, Other Real Property....................................................................19
5.13 Financial Statements...........................................................................19
5.14 Compliance with Laws...........................................................................20
5.15 Environmental Compliance.......................................................................20
5.16 Condition of Transferred Assets................................................................20
5.17 Insurance......................................................................................20
5.18 Inventories....................................................................................21
5.19 Accounts Receivable............................................................................21
5.20 Labor Matters, etc.............................................................................21
5.21 Limitation on Representations and Warranties...................................................21
6. Representations and Warranties of Buyer.................................................................22
6.1 Corporate Status...............................................................................22
6.2 Corporate Authority............................................................................22
6.3 Non-Contravention..............................................................................22
6.4 Brokers........................................................................................23
6.5 Litigation.....................................................................................23
6.6 Financial Statements...........................................................................23
6.7 Capitalization.................................................................................23
6.8 Subsidiaries...................................................................................24
6.9 Valid Issuance of Securities...................................................................24
6.10 Financing......................................................................................24
6.11 Buyer's Business...............................................................................24
6.12 Limitation on Representations and Warranties...................................................24
7. Interim Covenants of Seller.............................................................................25
7.1 Operation of the Business......................................................................25
7.2 Application for Regulatory Consent and Licenses................................................26
7.3 Access to Facilities, Files and Records........................................................26
7.4 Notice of Proceedings..........................................................................27
7.5 Hart-Scott-Rodino Filing.......................................................................27
7.6 Reasonable Commercial Efforts..................................................................27
7.7 Notification of Certain Matters................................................................27
7.8 Transfers......................................................................................27
7.9 No Solicitation................................................................................27
7.10 Fiduciary Out..................................................................................28
8. Interim Covenants of Buyer..............................................................................29
8.1 Application for Regulatory Consent and Licenses................................................29
8.2 Notice of Proceedings..........................................................................29
8.3 Hart-Scott-Rodino Filing.......................................................................29
8.4 Reasonable Commercial Efforts..................................................................29
8.5 Notification of Certain Matters................................................................30
9. Conditions Precedent to Buyer's Obligations.............................................................30
9.1 Representations, Warranties and Covenants......................................................30
9.2 Proceedings....................................................................................31
9.3 Regulatory Approvals...........................................................................31
9.4 Hart-Scott-Rodino..............................................................................31
9.5 Deliveries, Release of Liens...................................................................31
9.6 Consents to Assignment of Leases...............................................................31
9.7 Opinion of Counsel to the Company and Summit...................................................31
9.8 Financing......................................................................................31
10. Conditions Precedent to Sellers' Obligations............................................................31
10.1 Representations, Warranties and Covenants......................................................31
10.2 Proceedings....................................................................................32
10.3 Hart-Scott-Rodino..............................................................................32
10.4 Deliveries.....................................................................................32
10.5 Opinion of Counsel to Buyer....................................................................32
11. Certain Post-Closing Matters............................................................................32
11.1 Access to Records, Information and Personnel...................................................32
11.2 Insurance......................................................................................33
11.3 Books and Records..............................................................................33
11.4 Taxes..........................................................................................33
11.5 Employee and Employee Benefits.................................................................34
11.6 Covenant Not to Compete........................................................................35
11.7 Post Closing Confidentiality...................................................................35
12. Indemnification.........................................................................................36
12.1 By Seller......................................................................................36
12.2 By Buyer.......................................................................................37
12.3 Entitlement to Indemnification, Exclusivity....................................................38
12.4 Notice and Defense of Claims...................................................................38
12.5 Survival of Representations and Warranties.....................................................40
12.6 Limitations on Parties' Right to Indemnification...............................................40
12.7 Special Indemnity..............................................................................41
13. Termination.............................................................................................41
13.1 Termination....................................................................................41
13.2 Effect of Termination..........................................................................42
14. Miscellaneous...........................................................................................42
14.1 Amendment and Modification, Waiver of Provisions...............................................42
14.2 Expenses.......................................................................................43
14.3 Successors and Assigns; Assignments............................................................43
14.4 Confidentiality, Public Announcement...........................................................43
14.5 Notices........................................................................................44
14.6 No Third Parties Benefited.....................................................................45
14.7 Law Governing..................................................................................45
14.8 Counterparts...................................................................................45
14.9 Severability...................................................................................45
14.10 Entire Agreement...............................................................................45
14.11 Construction...................................................................................45
14.12 Consent to Jurisdiction........................................................................46
14.13 Waiver of Jury Trial...........................................................................46
14.14 Supplements to Disclosures.....................................................................46
</TABLE>
Disclosure Schedules
Schedule 1.1.7(a) Payor Contracts
Schedule 1.1.7(b) Provider Contracts
Schedule 1.1.7(c) Miscellaneous Contracts
Schedule 1.1.18 Employees
Schedule 1.1.20 Excluded Assets
Schedule 1.1.22 Financial Statements
Schedule 1.1.34 Leases
Schedule 1.1.41 Personal Property
Schedule 2.3 Excluded Liabilities
Schedule 3.2 Allocation
Schedule 4.2(g) Required Consents
Schedule 5.3(a) Seller's Consents
Schedule 5.4 Transferred Assets
Schedule 5.5 Changes
Schedule 5.6 Taxes
Schedule 5.7 Employee Benefit Plans
Schedule 5.8 Litigation (Seller)
Schedule 5.10 Owned Intellectual Property
Schedule 5.11(a) Affiliate Agreements
Schedule 5.11(b) Contracts
Schedule 5.13 Undisclosed Liabilities
Schedule 5.14 Compliance with Laws
Schedule 5.17 Insurance
Schedule 6.3 Buyer's Consents
Schedule 6.5 Litigation (Buyer)
Schedule 6.6 Financial Statements of Buyer
Schedule 7.1 Operation of Business
Schedule 11.5(b) Assumed Employee Benefit Plans
Exhibits
Exhibit A....... Assignment and Assumption Agreement
Exhibit B....... Bill of Sale
Exhibit C....... SOH Stockholders' Agreement
Exhibit D....... SOH Registration Rights Agreement
Exhibit E....... Opinion of Counsel to the Company and Summit
<PAGE>
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of this 4th
day of May, 2000, by and between LENS EXPRESS, INC., a Florida corporation
("Seller" and the "Company"), SUMMIT TECHNOLOGY, INC., a Massachusetts
corporation and, directly or indirectly, the owner of all of the issued and
outstanding capital stock of Seller ("Summit"), and STRATEGIC OPTICAL HOLDINGS,
INC., a Delaware corporation ("Buyer").
Background Provisions
A........Seller is engaged in the Business (as defined below).
B........Buyer wishes to purchase from Seller and Seller and Summit
wish that Seller shall sell to Buyer, such Business in accordance with the
provisions set forth herein.
NOW THEREFORE, in consideration of and subject to the terms and
conditions hereof, and intending to be legally bound hereby, Seller, Summit and
Buyer hereby agree as follows:
1. Definitions; Interpretation.
1.1 Definitions. The following terms, as used herein, have the following
meanings:
1.1.1 "Accountants" shall mean Arthur Andersen LLP or another nationally
recognized accounting firm mutually designated by Buyer and Seller.
1.1.2 "Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such other Person. For purposes of this definition, "control" (including with
correlative meaning, the terms "controlled by" and "under common control with")
as used with respect to any Person shall mean (a) the ownership of 50% or more
of the voting securities or other voting interests of any Person, or (b) the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of such Person, whether through ownership
of voting securities, by contract or otherwise.
1.1.3 "Agreement" shall mean this Asset Purchase Agreement and all exhibits and
schedules attached hereto, as the same may be amended from time to time in
accordance with the provisions hereof.
1.1.4 "Applicable Law" shall mean all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including the common law), rules,
regulations, ordinances, by-laws, codes or orders of any Regulatory Authority,
(ii) Governmental Approvals and (iii) orders, decisions, directives,
injunctions, judgments, awards, decrees of, requirements of or agreements with
any Governmental Authority.
1.1.5 "Asserting Party" shall have the meaning set forth in Section 12.4(a).
1.1.6 "Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement between Buyer and Seller in substantially the form of
Exhibit A - Assignment and Assumption Agreement attached hereto.
1.1.7 "Assumed Contracts" shall mean, as of the date hereof, the following
contracts relating to the Business to which Seller is a party: (a) the contracts
set forth on Schedule 1.1.7(a) - Payor Contracts; (b) the contracts referred to
on Schedule 1.1.7(b) - Provider Contracts; and (c) the contracts set forth on
Schedule 1.1.7(c) - Miscellaneous Contracts.
1.1.8 "Assumed Liabilities" shall have the meaning set forth in Section 2.2.
1.1.9 "Bill of Sale" shall mean the Bill of Sale and Assignment from Seller to
Buyer, in substantially the form of Exhibit B - Bill of Sale attached hereto.
1.1.10 "Books and Records" shall mean all Seller's books, manuals and other
similar materials of any kind relating to the Transferred Assets, whether in
documentary form or on microfilm, microfiche, magnetic tape, computer disk or
other form.
1.1.11 "Business" shall mean the business carried on by Seller from time to
time, including the sale and distribution, by Seller or any of its Affiliates,
of contact lenses and related products, and all businesses and activities
ancillary thereto and including all rights, agreements and arrangements relating
to Managed Vision Limited, a Florida limited partnership, and Managed Vision
Inc., a Florida corporation.
1.1.12 "Business Day" shall mean any day other than a day on which the New York
Stock Exchange is closed.
1.1.13 "Closing" and "Closing Date" shall have the meanings set forth in Section
4.1.
1.1.14 "Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
1.1.15 "Commitment Letter" shall have the meaning set forth in Section 6.10.
1.1.16 "Defending Party" shall have the meaning set forth in Section 12.4(a).
1.1.17 "Employee Benefit Plans" shall include pension and profit sharing plans,
retirement and post retirement welfare benefits, health insurance benefits
(medical, dental and vision), disability, life and accident insurance, sickness
benefits, vacation, employee loans and banking privileges and any bonus,
incentive, deferred compensation, stock purchase, stock option, phantom stock or
other equity-based severance, employment, change of control or fringe benefit
plan, program or agreement (whether written or oral), including any employee
benefit plans as defined in Section 3.3 of ERISA.
1.1.18 "Employees" shall mean the individuals employed by Seller or an Affiliate
of Seller who are engaged in the Business (including those individuals who are
on temporary leave for medical, family, military, personal or other reasons).
Schedule 1.1.18 - Employees lists the Employees as of April 25, 2000.
1.1.19 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
1.1.20 "Excluded Assets" shall mean the assets of Seller specified on Schedule
1.1.20 - Excluded Assets.
1.1.21 "Excluded Liabilities" shall have the meaning set forth in Section 2.3.
1.1.22 "Financial Statements" shall mean the unaudited financial statements of
Seller for the three (3) months ended April 2, 2000 (the "April 2 Financial
Statements"), and the audited financial statements of Seller for each of the
twelve (12) months ended December 31, 1998 and December 31, 1999 (the "1999
Financial Statements"), respectively, a copy of each of which is attached hereto
as Schedule 1.1.22 - Financial Statements.
1.1.23 "GAAP" shall mean United States generally accepted accounting principles,
as in effect from time to time.
1.1.24 "Governmental Approval" shall mean all material approvals, permits,
qualifications, authorizations, licenses, franchises, consents, orders,
registrations or other approvals of all Regulatory Authorities necessary in
order to permit Seller to carry on the Business.
1.1.25 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
1.1.26 "Indemnified Buyer Claims" shall have the meaning set forth in Section
12.1.
1.1.27 "Indemnified Buyer Party" shall have the meaning set forth in Section
12.1.
1.1.28 "Indemnified Seller Claims" shall have the meaning set forth in Section
12.2.
1.1.29 "Indemnified Seller Party" shall have the meaning set forth in Section
12.2.
1.1.30 "Intellectual Property" shall mean any and all: (a) patents and patent
applications, patent disclosures awaiting filing determination, inventions and
improvements thereto; (b) trademarks, service marks, certification marks, trade
names, trade dress, domain names, logos, business and product names, slogans,
and registrations and applications for registration thereof; (c) copyrights
(including software) and registrations and Internet Web sites and the content
thereof; (d) inventions, processes, designs, formulae, trade secrets, know-how,
industrial models, confidential and technical information, manufacturing,
engineering and technical drawings, product specifications and confidential
business information; (e) mask work and other semiconductor chip rights and
registrations thereof, if any; (f) intellectual property rights similar to any
of the foregoing; (g) Software, if any; (h) licenses of any of the foregoing and
(i) copies and tangible embodiments thereof (in whatever form or medium,
including electronic media).
1.1.31 "Intellectual Property Assets" shall have the meaning set forth in
Section 5.10.
1.1.32 "Knowledge" shall mean, with respect to Seller, the actual knowledge of
one or more of Peter Litman, James Lightman, Robert Kelly, Robert Palmisano,
Menderes Akdag, Brian O'Neill and Harvey Berkowitz.
1.1.33 "Leased Premises" shall mean the offices and other facilities leased by
Seller or any of its Affiliates pursuant to the Leases and used in connection
with the Business.
1.1.34 "Leases" shall mean the real property leases and rental agreements
(including subleases), as amended, entered into with respect to the Leased
Premises, as set forth on Schedule 1.1.34 - Leases.
1.1.35 "Lien" shall mean any lien, pledge, charge, encumbrance, security
interest, mortgage, deed of trust, lease, option or other adverse claim of any
kind or description.
1.1.36 "Material Adverse Effect" shall mean, with respect to Seller or the
Business, (i) a material adverse effect on Seller's ability to consummate the
transactions contemplated by this Agreement and the other Transaction Documents,
or (ii) a material adverse effect on the business, financial condition or
operations of the Business taken as a whole. "Material Adverse Effect" shall
mean, with respect to Buyer, (i) a material adverse effect on Buyer's ability to
consummate the transactions contemplated by this Agreement and the other
Transaction Documents, or (ii) a material adverse effect on the business,
financial condition or results of operations of the Buyer's business taken as a
whole.
1.1.37 "Non-Third Party Claims" shall have the meaning set forth in Section
12.4(b).
1.1.38 "Owned Intellectual Property" shall have the meaning set forth in Section
5.10.
1.1.39 "Permitted Liens" shall mean (a) any Liens for Taxes not yet due and
payable or being contested by Seller or any Affiliate of Seller in good faith by
appropriate proceedings and for which appropriate reserves in accordance with
GAAP have been established on the Financial Statements, (b) Liens resulting from
a filing by a lessor as a precautionary filing for a true lease, (c) customary
landlord's Liens under Leases and (d) any other customary encumbrance affecting
any asset which does not materially impede or otherwise affect the ownership or
operation of such asset.
1.1.40 "Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
1.1.41 "Personal Property" shall mean all personal property and leasehold
improvements leased by or owned by Seller or any Affiliate of Seller as part of
the Business as of the date hereof, less any items sold or otherwise disposed of
plus new items acquired, leased or obtained by Seller or such Affiliate, in each
case, in the ordinary course of the Business consistent with past practices
through the close of business on the Closing Date. Schedule - 1.1.41 Personal
Property lists all Personal Property as of April 28, 2000.
1.1.42 "Pre-Closing Period" shall mean any taxable year or period (or a portion
thereof) ending on or prior to the Closing Date. Taxes with respect to any
period that begins before and ends after the Closing Date shall be allocated to
the Pre-Closing Period (i) on a per diem basis in the case of real and personal
property Taxes and (ii) on the basis of an interim closing of the books at the
end of the Closing Date in the case of all other Taxes.
1.1.43 "Purchase Price" shall have the meaning set forth in Section 3.1.
1.1.44 "Regulatory Authority" shall mean any federal, state, local or other
government authority or instrumentality, domestic or foreign.
1.1.45 "Software" shall mean the following: (a) computer software and subsequent
versions thereof developed or currently being developed by Seller or any
Affiliate of Seller or acquired or licensed from third parties and used in the
Business, including without limitation, source code, object code, objects,
comments, screens, and user interfaces; and (b) all files, data materials,
manuals, design notes and other items and documentation related thereto or
associated therewith.
1.1.46 "SOH Common Stock" shall have the meaning set forth in Section 3.1.
1.1.47 "SOH Registration Rights Agreement" shall have the meaning set forth in
Section 3.1.
1.1.48 "SOH Stockholders' Agreement" shall have the meaning set forth in
Section 3.1.
1.1.49 "Supplies" shall mean all supplies and inventory owned by Seller or any
Affiliate of Seller as part of the Business as of the date hereof, less any
items sold or consumed plus new items acquired or obtained, in each case in the
ordinary course of the Business consistent with past practices through the close
of business on the Closing Date.
1.1.50 "Tax" shall mean all taxes, charges, fees, levies or other assessments
(including without limitation, income, gross receipts, gains, transfer, ad
valorem, value added, excise, property, sales, use, production, recording,
license, payroll, transfer, net worth, capital, business and occupation,
disability, employment severance, franchise or withholding taxes), imposed
(whether directly or by withholding) by any Regulatory Authority and includes
any estimated tax, assessment interest and penalties (civil or criminal) or
additions to tax. It shall include any obligations of a Person in connection
with or related to any tax sharing or similar arrangements between such Person
and any other Person.
1.1.51 "Tax Returns" shall mean any report, return, schedule, form, attachment
or other information required to be supplied to a Regulatory Authority by a
Person in connection with Taxes including, where permitted or required, combined
or consolidated returns for any group of entities that includes such Person or
any Affiliate of Such Person.
1.1.52 "Third Party Claim" shall have the meaning set forth in Section 12.4(a).
1.1.53 "Transaction Documents" shall mean this Agreement, the Assignment and
Assumption Agreement, the Bill of Sale, the SOH Stockholders' Agreement and the
Registration Rights Agreement and all other documents required to give effect to
the transactions contemplated hereby.
1.1.54 "Transferred Assets" shall have the meaning set forth in Section 2.1.
1.1.55 "WARN Acts" shall mean the Worker Adjustment and Retraining Notification
Act, 29 U.S.C. ss. 2 101 et seq., and its corresponding regulations, and any
similar state law, rule or regulation or local ordinance, rule or regulation
providing for notification to employees affected by a closing, relocation, sale
of a business, mass layoff or similar event.
1.2 Interpretation. The headings preceding the text of Articles, Sections,
subsections, Exhibits and Schedules included in this Agreement are for
convenience only and shall not be deemed part of this Agreement or be given any
effect in interpreting this Agreement. The use of the terms "including" or
"include" shall, in all cases, mean "including, without limitation," and
"include, without limitation," respectively. The use of the masculine, feminine
or neuter gender herein shall, as applicable, also refer to the other gender(s).
Except as the context otherwise requires, the use of the singular form of any
term shall also refer to the plural, and vice versa. Unless the context
otherwise requires, whenever the terms "hereto," "hereunder," "herein" or
"hereof" are used in this Agreement, such terms shall be construed as referring
to this Agreement and references to "Articles," "Sections," "subsections,"
"paragraphs," "subparagraphs," "clauses," "Schedules," "Exhibits" and "Recitals"
shall be construed as referring to those of this Agreement.
2. Purchase and Sale of Business.
2.1 Purchase and Sale.
(a) Seller agrees to sell, assign, transfer and convey to Buyer or cause to be
sold, assigned, transferred and conveyed to Buyer, and Buyer agrees to purchase,
acquire and accept from Seller, at the Closing, all rights, titles and interests
in, to and under all of the properties, assets, rights, licenses, permits,
Governmental Approvals, claims and contracts of every kind, character and
description owned or leased by Seller or any of its Affiliates, or used or held
for use by Seller or any of its Affiliates, primarily in connection with the
Business, as the same may exist on the Closing Date, whether real, personal or
mixed, tangible or intangible (including goodwill), and whether now owned or
hereafter acquired, including all assets reflected on the Closing Balance Sheet,
less the Excluded Assets (the "Transferred Assets"). The Transferred Assets
shall include the following:
(i) all rights and interests of Seller and its Affiliates in and to the
Personal Property;
(ii) all assignable rights and interests of Seller and its Affiliates in
and to the Assumed Contracts;
(iii) all assignable rights and interests of Seller and its Affiliates in
and to the Leases;
(iv) the Books, and Records;
(v) all assignable rights and interests of Seller and its Affiliates in
and to the Intellectual Property Assets;
(vi) all rights and interests of Seller and its Affiliates in and to the
Supplies; and
(vii) all rights and interests of Seller and its Affiliates in and to the
accounts receivable of the Business.
(b) To the extent that the sale, conveyance, transfer or assignment of any
agreement, lease, license, contract or other document or instrument requires the
consent of any person or entity other than Buyer, Summit, or Seller, this
Agreement shall not constitute an agreement to effect such sale, conveyance,
transfer or assignment if such action would constitute a breach thereof. If
Seller is unable to obtain any of the consents set forth on Schedule 5.3(a) -
Seller's Consents, the Closing shall nevertheless take place if such consents
set forth on Schedule 5.3(a) - Seller's Consents, that Buyer is unable so to
obtain prior to the Closing shall relate to such agreements, licenses, leases,
contracts and other Transferred Assets that, individually and in the aggregate,
are not material to the Business or the Transferred Assets as a whole, as
determined by Buyer in its reasonable discretion. In the event that Seller is
unable to obtain any consent to the assignment of any agreement, lease, license,
contract or other document or instrument and the Closing takes place, Seller and
Summit shall take all reasonable action requested by Buyer to secure such
consents after the Closing or otherwise to transfer to Buyer the benefits of
such agreements, licenses, leases, contracts, documents or instruments.
2.2 Assumed Liabilities. Subject to the terms and conditions set forth in this
Agreement, from and after the Closing Date, Buyer shall assume and agree to pay,
perform and discharge the following obligations, in each case whether arising,
accruing or occurring before, on or after the Closing Date, (collectively, the
"Assumed Liabilities"): all liabilities and obligations of every kind, nature or
description of Seller, whether known or unknown, absolute, accrued, contingent
or otherwise and whether due or to become due, except for the Excluded
Liabilities. Nothing contained in this Agreement shall require Buyer to pay,
perform or discharge any of the Assumed Liabilities so long as it shall in good
faith contest or cause to be contested the amount or validity thereof and shall
have indemnified and have held harmless Seller and Summit with respect thereto.
2.3 Excluded Liabilities. Notwithstanding anything to the contrary set forth in
this Agreement, Buyer shall not assume or be responsible for any liabilities or
obligations of Seller or any of its Affiliates of any kind, known or unknown,
contingent or otherwise, other than the Assumed Liabilities (all of such
liabilities or obligations for which Buyer is not assuming any liability are
referred to collectively herein as the "Excluded Liabilities"). The parties
agree that the Excluded Liabilities shall be (1) any and all liabilities for
Taxes of Seller or any of its Affiliates and any and all liabilities for Taxes
in respect of, or relating to, the Business or the Transferred Assets for any
Pre-Closing Period, (2) any and all liabilities arising out of or relating to
(x) any Employee Benefit Plan not set forth on Schedule 11.5(b), and (y) any
Employee Benefit Plan set forth on Schedule 11.5(b) to the extent such liability
or obligation is accrued as of the Closing Date, but is not reserved for on the
Closing Balance Sheet or otherwise matched by a dedicated asset for such purpose
held by any such Employee Benefit Plan or reflected on the Closing Balance
Sheet, (3) any and all obligations, liabilities or responsibilities of Seller or
any of its Affiliates arising out of or relating to the breach by Seller or any
of its Affiliates of all indebtedness for borrowed money of Seller or any of its
Affiliates, (4) any obligations or liabilities with respect to gross-payments
pursuant to Section 2 of the Severance Agreement, dated August 4, 1998, between
Menderes Akdag and Seller and (5) any obligations, liability or responsibility
set forth on Schedule 2.3 hereto.
3. Payment.
3.1 Purchase Price, Payment on the Closing Date.
(a) Cash Payment. On the Closing Date (by Noon, Eastern time), Buyer shall
pay to Seller $31,000,000, to an account designated by Seller, by fedwire
transfer in immediately available U.S. dollars (the "Cash Purchase Price").
(b) Equity Payment. On the Closing Date (by Noon, Eastern time), Buyer shall
deliver to Seller, 21,563 shares of the Buyer's Common Stock, representing
approximately 9.7% of the fully-diluted Common Stock of Buyer, after giving
effect to the transactions contemplated hereby (the "SOH Common Stock") (the
"Stock Purchase Price," together with the Cash Purchase Price, the "Purchase
Price") and Summit shall execute and deliver to Buyer a Stockholders' Agreement
(the "SOH Stockholders' Agreement") in the form attached hereto as Exhibit C,
and a Registration Rights Agreement (the "SOH Registration Rights Agreement") in
the form attached hereto as Exhibit D.
3.2 Allocation of Purchase Price. The Purchase Price for the Transferred Assets
and the Assumed Liabilities shall be allocated, for Tax purposes, as set forth
on Schedule 3.2 - Allocation hereto. Neither Buyer nor Seller shall file any Tax
Returns (including filing of Internal Revenue Service Form 8594) or, in a
judicial or administrative proceeding, assert or maintain any Tax reporting
position that is inconsistent with this Agreement or the allocation agreed to in
accordance with this Agreement, unless required to do so by Applicable Law.
3.3 Purchase Price Adjustment.
(a) Within ninety (90) days after the Closing Date, the Buyer shall prepare and
deliver to Seller (i) an audited balance sheet of the Company as of the time
immediately preceding the Closing, prepared in accordance with GAAP, applied on
a basis consistent with the preparation of the 1999 Financial Statements (the
"Closing Balance Sheet"); provided, however, that the Closing Balance Sheet
shall (u) include the effect of paying off indebtedness and distributing cash
pursuant to Section 7.1(b) or otherwise, (v) include a $50,000 reserve for
returns, (w) not include any liability for Taxes accrued for any Pre-Closing
Period, (x) include a reserve for liabilities associated with Seller's "new and
fresh" program, determined in accordance with the methodology utilized in
establishing such reserve on the 1999 Financial Statements, (y) not include any
Excluded Asset, and (z) not include any Excluded Liability and (ii) a
calculation based on the Closing Balance Sheet of the Company's working capital
(accounts receivable, inventory, prepaid expenses, cash, cash equivalents and
other current assets, less accounts payable, accrued expenses and other current
liabilities) (the "Closing Working Capital"). In connection with the preparation
of the Closing Balance Sheet and Buyer's calculation of the Closing Working
Capital (collectively, the "Closing Financial Statements"), Buyer and its
authorized representatives, upon signing the necessary accountant's release,
shall have the right to review the information used in the preparation of
Seller's historical financial statements, including all existing workpapers of
the accountants that audited or reviewed such statements.
(b) The Purchase Price shall be decreased by the amount by which the $3,939,000
exceeds Closing Working Capital. If the Closing Working Capital equals or
exceeds $3,939,000, there will be no adjustment to the Purchase Price pursuant
to this Section 3.3. Seller and Summit, jointly and severally, shall pay to the
Buyer the amount of any such decrease in cash in same day funds within ten (10)
days after the first to occur of the events described in the last sentence of
paragraph 3.3(d) below , plus interest thereon at the rate of 10% from the
Closing Date to the date of such payment.
(c) Upon receipt of the Closing Financial Statements, Seller and Summit, and
their respective representatives, upon signing the necessary accountant's
release, shall have the right to review the work papers of the Buyer and its
accountants utilized in preparing the Closing Financial Statements and other
relevant documents, and to discuss related matters with the Buyer and
appropriate representatives of its accountants. The Closing Financial Statements
shall be binding on Seller unless Seller presents the Buyer within thirty (30)
days after its receipt of the Closing Financial Statements with written notice
of disagreement in accordance with Section 3.3(d).
(d) Seller may dispute items reflected on the Closing Financial Statements only
on the basis that such amounts were not arrived at in accordance with the
application of the principles, procedures and elections set forth in this
Section 3.3 or resulted from mechanical errors of computation. In the event
Seller so disagrees with any item on the Closing Financial Statements, Seller
shall, within 30 days after receipt thereof, give Buyer notice of such
disagreement specifying the items on the Closing Financial Statements in dispute
and setting forth Seller's proposed adjustments. If Seller and the Buyer are
unable to resolve any disagreement with respect to the Closing Financial
Statements within 15 days after the Buyer receives a timely notice of
disagreement, the items of disagreement alone shall be referred for final
determination to the Accountants. The Accountants shall, within 30 days after
such submission, determine and report to the parties upon such disputed items
and such report shall be final, binding and conclusive on the parties with
respect to such items. The Closing Financial Statements shall be deemed to be
binding on Seller and Buyer upon (i) Seller's failure to deliver to the Buyer a
notice of disagreement within 30 days of its receipt of the Closing Financial
Statements prepared by the Buyer, (ii) resolution of any disagreement by mutual
agreement of the parties after a timely notice of disagreement has been
delivered to the Buyer, or (iii) notification by the Accountants of their final
determination of the items of disagreement submitted to them.
(e) The fees and disbursements of the Accountants shall be shared equally
between the Buyer and Seller.
4. The Closing.
4.1 The Closing. The consummation of the transactions provided for in this
Agreement (the "Closing") shall take place (a) at the offices of Buyer's
Counsel, Debevoise & Plimpton, 875 Third Avenue, New York, New York, at 9:00
a.m., Eastern time, on the fifth Business Day after the last of the conditions
required to be satisfied or waived pursuant to Articles 9 and 10 is either
satisfied or waived (other than those conditions that by their nature are to be
satisfied at Closing, but subject to the fulfillment or waiver of those
conditions), or (b) at such other place, time or date as the parties shall agree
upon in writing. The date on which the Closing is to occur is referred to herein
as the "Closing Date." The Closing shall be deemed effective as of the close of
business on the Closing Date.
4.2 Seller's Deliveries.
At the Closing, Seller shall deliver to Buyer the following:
(a) a duly executed Bill of Sale;
(b) a duly executed Assignment and Assumption Agreement;
(c) certified copies of resolutions, duly adopted by the Board of Directors of
Seller, which shall be in full force and effect at the time of the Closing,
authorizing the execution, delivery and performance by Seller of this Agreement
and the consummation of the transactions contemplated hereby,
(d) the officer's certificate referred to in Section 9.1(c);
(e) UCC termination statements or partial release statements, as appropriate and
necessary to release in full all of the Transferred Assets from the Liens of the
credit facilities to which Seller and the Transferred Assets are bound;
(f) a duly executed SOH Stockholders' Agreement and SOH Registration Rights
Agreement;
(g) the consents and approvals listed on Schedule 4.2(g) - Required
Consents;
(h) a copy of Seller's best estimate of the composition of the Closing
Balance Sheet, prepared in accordance with the methodology set forth in Section
3.3(a); and
(i) such other documents as are reasonably required to be delivered by Seller to
effectuate the transfer of the Transferred Assets to, and the assumption of the
Assumed Liabilities by, Buyer.
4.3 Buyer's Deliveries.
At the Closing, Buyer shall deliver to Seller the following:
(a) the Purchase Price;
(b) the SOH Common Stock;
(c) a duly executed Assignment and Assumption Agreement;
(d) certified copies of resolutions, duly adopted by Buyer's Board of Directors,
which shall be in full force and effect at the time of the Closing, authorizing
the execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby, including without
limitation the issuance of the Shares;
(e) the officer's certificate referred to in Section 10.1(c); and
(f) a duly executed SOH Registration Rights Agreement and SOH Stockholders
Agreement;
(g) Such other documents or payments as are reasonably required to be delivered
or paid by Buyer to effectuate the transfer of the Transferred Assets to, and
the assumption of the Assumed Liabilities by, Buyer.
4.4 Further Assurances. After the Closing Date, each of Summit, Seller and Buyer
shall use reasonable commercial efforts from time to time to execute and deliver
at the request of the other party such additional documents and instruments as
may be reasonably required to carry out the intent of this Agreement and the
transactions contemplated hereby, to provide whatever documents or other
evidence of title as may be reasonably requested by Buyer to confirm Buyer's
ownership of the Transferred Assets and to provide whatever documents or other
evidence as may be reasonably requested by Seller to confirm Buyer's assumption
of the Assumed Liabilities. Without limiting the generality of the foregoing,
after the Closing Date, each of Summit and Seller will use reasonable commercial
efforts (at Buyer's expense) to ensure that Buyer continues to enjoy the
benefits of, and has the right to enforce, any confidentiality, standstill or
like agreement or arrangement entered into by Summit or Seller in connection
with the possible sale of the stock or assets of Seller or any other business
combination involving Seller.
5. Representations and Warranties of Seller.
In order to induce Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller and Summit each represents and
warrants to Buyer as follows:
5.1 Corporate Status. Each of Summit and Seller is duly organized, validly
existing and in good standing as a corporation under the laws of the state of
its incorporation. Each of Summit and Seller has the requisite corporate power
and authority to own or lease all of its properties and assets and to conduct
its businesses as they are now being conducted, except where the failure to have
such corporate power or to conduct its business has not had and would not
reasonably be expected to have a Material Adverse Effect.
5.2 Corporate Authority. Each of Summit and Seller, as applicable, has the
corporate power and authority to execute and deliver this Agreement and the
other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. All corporate actions and
proceedings necessary to be taken by or on the part of Seller or Summit, as
applicable, in connection with this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby have been or will
prior to the Closing be duly and validly taken. This Agreement has been, and at
the Closing the other Transaction Documents will be, duly and validly executed
and delivered by each of Summit (which is the sole owner of the issued and
outstanding shares of capital stock of Seller) and Seller, as applicable, and
constitute the legal, valid and binding obligation of each such Person,
enforceable against it in accordance with and subject to their terms, except as
such enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws from time to time in effect
affecting creditors' rights generally or by principles governing the
availability of equitable remedies.
5.3 Non-Contravention, Approvals and Consents.
(a) Neither the, execution and delivery by Seller or Summit, as applicable, of
this Agreement and the other Transaction Documents to which it is a party nor
the consummation by such Person of the transactions contemplated hereby and
thereby is an event that, of itself or with the giving of notice or the passage
of time or both, will (i) conflict with the charter or bylaws (or similar
governing instruments with different names) of such Person, (ii) assuming that
the consents and approvals described in Schedule 5.3(a) - Seller's Consents are
obtained, constitute a violation of, or conflict with or result in any breach of
or any default under, or constitute grounds for termination or acceleration of,
any material agreement or instrument to which such Person is a party or by which
such Person is, or any of the Transferred Assets are, bound, or result in the
creation of any material Liens upon any of the Transferred Assets, including,
under any of the Contracts or (iii) assuming receipt of the consents and
approvals described in Schedule 5.3(a) - Seller's Consents, violate any
Governmental Approval, material judgment, decree or order or statute, rule or
regulation applicable to Seller, the Business, or any of the Transferred Assets,
except in the case of clauses (ii) and (iii) above, for violations, conflicts,
breaches, defaults or Liens which, either individually or in the aggregate would
not have a Material Adverse Effect.
(b) Except as set forth on Schedule 5.3(a) - Seller's Consents, neither Seller
nor any of its Affiliates nor any of their respective officers, directors or
managing employees is required to obtain any license, approval or consent from,
or give any notice or make any other filing with respect to, any Regulatory
Authority in connection with the consummation of the transactions contemplated
by this Agreement and the other Transaction Documents, except for licenses,
approvals, consents, notices or filings the absence or failure to obtain of
which, either individually or in the aggregate, would not have a Material
Adverse Effect.
5.4 Transferred Assets. At Closing, Seller will have good and marketable title
to or a valid leasehold interest in all of the Transferred Assets, free and
clear of any and all Liens, except for Permitted Liens. Except as disclosed in
Schedule 5.4 - Transferred Assets, the Transferred Assets, taken as a whole,
constitute all assets necessary for the continued conduct of the Business as the
Business has been conducted historically by Seller and its Affiliates, up
through the Closing Date.
5.5 Changes. Except as disclosed in Schedule 5.5 - Changes, since
December 31, 1999, there has not been:
(a) any change in the assets, liabilities, financial condition or operations of
Seller or the Business from that reflected in the Financial Statements, except
changes in the ordinary course of the Business and consistent with past
practices that individually, or in the aggregate, have not had a Material
Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the Business,
properties or financial condition of Seller;
(c) any waiver or compromise by Seller of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance or payment
of any obligation by Seller, except in the ordinary course of business
consistent with past practices and that is not material to the Business,
properties or financial condition of Seller;
(e) any new material contract or agreement or any material change to a
material contract or agreement by which Seller or any of
its assets is bound or subject;
(f) any material change in any compensation (including severance and
other benefits), arrangement or agreement with any
employee, officer, director or shareholder;
(g) any sale, assignment, transfer or license of any Intellectual Property
or any settlement regarding the breach or
infringement of any license or any Intellectual Property;
(h) any resignation or termination of employment of any officer or key
employee of Seller; and Seller, is not aware of any impending resignation or
termination of employment of any such officer or key employee;
(i) any mortgage, pledge, transfer of a security interest in, or Lien, created
by Seller, with respect to any of its material properties or assets, except
Liens for Taxes not yet due or payable;
(j) any loan or guarantee made by Seller to any Person, other than travel
advances and other advances to employees, officers or directors made in the
ordinary course of its business, consistent with past practices;
(k) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of, or third-party
doing business with, Seller;
(l) any declaration, setting aside or payment or other distribution in respect
to any of Seller's capital stock (or any securities convertible into or
exchangeable for any such shares), or any direct or indirect redemption,
purchase, or other acquisition of any of such stock by Seller;
(m) to Seller's Knowledge, any other event or condition of any character
relating principally to the Business that is reasonably
likely to result in a Material Adverse Effect;
(n) any material transaction or event not in the ordinary course of
business and consistent with past practices; or
(o) any arrangement or commitment by Seller to do any of the things
described in this Section 5.5.
5.6 Taxes. Except as set forth in Schedule 5.6 - Taxes, (i) the Company or
Summit has timely filed all Tax Returns required to be filed by or on behalf of
the Company or the Business for any period on or before the date hereof, taking
into account any extension of time to file that has been granted to or obtained
on behalf of the Company or Summit, and all such Tax Returns are correct and
complete in all material respects, (ii) the Company or Summit has paid when due
all Taxes shown as due on such Tax Returns, and (iii) all other Taxes that are
due (or claimed by any Regulatory Authority to be due) in connection with the
Business or the Transferred Assets, that are chargeable as a lien upon the
Business or the Transferred Assets, or that may become due in connection with
the Business or the Transferred Assets with respect to any Pre-Closing Period,
have been paid or have been adequately reserved for in the books and records of
Seller. All Taxes required to be withheld by the Business have been duly
withheld and paid to the proper taxing authority or properly reserved for in
accounts for such purpose. No deficiency for Tax has been asserted or assessed
by a taxing authority against the Company, the Business or the Transferred
Assets. No written document or comparable consent extending or waiving, or
having the effect of extending or waiving, the application of the statute of
limitations with respect to any Taxes or Tax Returns in respect of, or relating
to, the Business or the Transferred Assets, and no power of attorney with
respect to any such Taxes or Tax Returns, is currently outstanding, pending or
otherwise in effect with the IRS or any other taxing authority. No Tax Returns
or Taxes in respect of, or relating to, the Business or the Transferred Assets
are currently under audit by any taxing authority.
5.7 Employee Benefit Plans.
(a) Schedule 5.7 - Employee Benefit Plans lists and identifies each Employee
Benefit Plan maintained or contributed to by Seller, or under which Seller has
any liability or contingent liability (individually a "Plan" and collectively,
the "Plans"), that provides or may provide benefits or compensation in respect
of any employee or former employee of any member of Seller or the beneficiaries
or dependents of any such employee or former employee (collectively, the
"Employees") or under which any Employee is or may become eligible to
participate or derive a benefit and that is or has been maintained or
established by Seller, or any other trade or business, whether or not
incorporated, which, together with Seller or Summit, is or would have been at
any date of determination occurring within the preceding six years, treated as a
single employer under section 414 of the Code (such other trades and businesses
hereinafter referred to as the "Related Persons"), or to which Seller, Summit or
any Related Person contributes or is or has been obligated or required to
contribute (collectively, the "Plans"). With respect to each such Plan that is
an Assumed Employee Benefit Plan identified on Schedule 11.5(b), Seller has
provided the Buyer complete and correct copies of: (i) such Plan, if written, or
a description of such Plan if not written, and (ii) to the extent applicable to
such Plan, all trust agreements, insurance contracts or other funding
arrangements, the two most recent trust reports, the two most recent Forms 5500
required to have been filed with the IRS and all schedules thereto, the most
recent IRS determination letter, all current summary plan descriptions, all
material communications received from or sent to the IRS or the Department of
Labor (including a written description of any oral communication), if any, and
all amendments and modifications to any such document. Neither any Seller nor
Summit has communicated to any Employee any intention or commitment to modify
any Plan or to establish or implement any other employee or retiree benefit or
compensation plan or arrangement.
(b) Each Assumed Employee Benefit Plan is in material compliance with Applicable
Laws and has been and currently is administered and operated in accordance with
its terms. Each Plan which is intended to be "qualified" within the meaning of
section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service and no event has occurred and no condition exists
which could reasonably be expected to result in the revocation of any such
determination. There are no material pending or threatened claims by or on
behalf of any of the Assumed Employee Benefit Plans, by any Employee or
otherwise involving any such Plan or the assets of any Plan (other than routine
claims for benefits, all of which have been fully reserved for on the regularly
prepared balance sheets of Seller).
(c) None of the Plans provide benefits with respect to current or former
employees, officers, or directors (or their beneficiaries) of Seller beyond
their retirement or other termination of employment, other than (i) coverage for
benefits mandated by Applicable Law, (ii) death benefits or retirement benefits
under an employee pension benefit plan (as defined by section 3(2) of ERISA), or
(iii) benefits, the full cost of which is borne by such current or former
employees, officers, directors, or beneficiaries.
(d) No Plan is a "multiemployer plan" within the meaning of section 4001(a)(3)
of ERISA or a "multiple employer plan" as addressed in section 413 of the Code.
None of the Plans, now, or within the preceding six years, is or has been
subject to Title IV of ERISA. None of Seller, or any entity required to be
aggregated with Seller for purposes of section 414 of the Code or section 4001
of ERISA has ever maintained, contributed to, or had any liability for any
employee pension benefit plan (as defined in section 3(2) of ERISA) that is or
has been subject to Title IV of ERISA.
(e) Neither Seller, Summit nor any Related Person has incurred (either directly
or indirectly, including as a result of an indemnification obligation) any
material liability under or pursuant to Title I or IV of ERISA or the penalty,
excise Tax or joint and several liability provisions of the Code relating to
Employee Benefit Plan and, to the best knowledge of Seller after due inquiry, no
event, transaction or condition has occurred or exists that could result in any
such liability to Seller, Summit, any such Related Person or, following the
Closing, the Buyer or any of its Affiliates. All required contributions to, and
all payments with respect to, the Plans have been timely made.
(f) The consummation of the transactions contemplated by this Agreement will not
(i) entitle any current or former employee, officer, or director of Seller to
any severance or termination pay, or (ii) increase the amount of or accelerate
the time of payment of any compensation due any such employee, officer, or
director. Except as set forth on Schedule 5.7(f), no payment or benefit which
will or may be made by Seller, Summit, the Buyer or any of their respective
Affiliates with respect to any Employee will be characterized as an "excess
parachute payment" within the meaning of Section 280G(b) of the Code.
5.8 Litigation. Except as set forth on Schedule 5.8 - Litigation (Seller), there
is no litigation, proceeding or investigation pending or, to Seller's Knowledge,
threatened, against Seller, any of its Affiliates or the Business that has had
or would, if adversely determined, reasonably be expected to have a Material
Adverse Effect.
5.9 Brokers. There is no investment banker, broker or finder or other Person
retained by Seller or any Affiliate thereof who would have a valid claim against
Seller or Buyer for a commission or brokerage fee in connection with this
Agreement or the transactions contemplated hereby.
5.10 Intellectual Property. Seller owns or possesses sufficient legal rights to
all Intellectual Property used in the Business (the "Intellectual Property
Assets") without any conflict with, or infringement of, the rights of others.
Schedule 5.10 - Owned Intellectual Property contains a list or description of
all Intellectual Property owned by Seller (the "Owned Intellectual Property").
There are no outstanding options, licenses or agreements of any kind relating to
the Owned Intellectual Property, other than end-user licenses or agreements
entered into in the ordinary course of business consistent with past practices,
nor is Seller bound by or a party to any options, licenses or agreements of any
kind with respect to the Intellectual Property of any other person or entity,
other than end user licenses entered into in the ordinary course of business
consistent with past practices. Seller is not aware of any third party that is
infringing or violating any of its Intellectual Property. The conduct of the
Business as currently conducted does not infringe or violate any Intellectual
Property rights of any other person or entity. After reasonable inquiry, Seller
does not have knowledge that any of its employees is obligated under or in
violation of any contract (including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment, decree or order of any
court or administrative agency, that would interfere with the use of such
employee's best efforts to promote the interest of Seller or that would conflict
with the Business. Neither the execution or delivery of this Agreement, nor the
carrying on of Seller's Business by the employees of Seller, nor the conduct of
Seller's Business as proposed, will, to Seller's Knowledge after reasonable
inquiry, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. The material Owned
Intellectual Property has been duly registered with, filed in or issued by, as
the case may be, the United States Patent and Trademark Office, United States
Copyright Office or such other filing offices, domestic or foreign, and Seller
has taken such other actions (including maintaining the confidentiality of all
confidential Intellectual Property), to ensure protection under any Applicable
Laws, and such registrations, filings, issuances and other actions remain in
full force and effect, in each case to the extent material to the Business,
except that Seller has not so registered, or obtained such other protections
described in this sentence with respect to, any Owned Intellectual Property for
which Seller has made a commercially reasonable determination that such
registration or other protection is not required for the conduct of the Business
as now being conducted. Notwithstanding the other provisions of this Section
5.10, Seller makes no representation or warranty with respect to readily
available, "off-the-shelf" software programs used in connection with the
Business, except that Seller owns or possesses sufficient legal rights to
utilize all such software in the manner in which it is utilized in the Business.
5.11 Agreements.
(a) Except for agreements explicitly set forth in Schedule 5.11(a) - Affiliate
Agreements, there are no agreements, understandings or proposed transactions
between Seller and any of its officers, directors, Affiliates, or any Affiliate
thereof.
(b) Except for agreements explicitly set forth in Schedule 5.11(b) - Contracts,
there are no agreements, understandings, instruments, contracts, commitments or
proposed transactions to which Seller is a party or by which it is bound that
(i) involve obligations (contingent or otherwise) of, or payments to, Seller in
excess of, $50,000, (ii) involve the license to or from others, or the
restriction, of Intellectual Property, other than end-user licenses granted in
the ordinary course of business consistent with past practices, (iii) involve
the grant of rights to manufacture, produce, assemble, license, market, or sell
its products to any other person or affect Seller's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products, or (iv) are
otherwise material to the Business or constitute Assumed Contracts
(collectively, the "Contracts"). All the Contracts are valid, binding and in
full force and effect in all material respects. Neither Seller nor any of its
Affiliates nor, to the Knowledge of Seller, any other party thereto has
materially breached any of the Contracts. Seller has delivered to Buyer correct
and complete copies of each of the Contracts.
(c) Seller is not a party to and is not bound by any contract, agreement or
instrument, or subject to any restriction under its Certificate of Incorporation
or Bylaws, as applicable, that adversely affects or, so far as Seller may now
reasonably foresee in the future, is reasonably likely to adversely affect its
Business, assets, properties or financial condition.
(d) Seller does not have any liability or obligation in connection with any
Contract which has been terminated by Seller or for which notice of termination
has been delivered by Seller.
5.12 Leases, Other Real Property.
(a) No real property, or interest in real property, is used in the operation of
the Business except for the Leased Premises. Seller has delivered to Buyer
correct and complete copies of the Leases.
(b) Each Lease is the legal, valid and binding obligation of the signatories
thereto, and each is enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws from time to time in effect
affecting creditors' rights generally or by principles governing the
availability of equitable remedies. Except for such matters as would not result
in a Material Adverse Effect, Seller has performed in all material respects all
obligations required to be performed by it under the Leases and is not in
default thereunder, and no event has occurred which, with the lapse of time or
action by a third party could result in a default by Seller, or, to Seller's
Knowledge, by any other party thereto, under any Lease. Seller enjoys peaceful
and undisturbed possession under its Leases.
(c) To the Knowledge of Seller, the Leased Premises is in full compliance with
all Applicable Law including applicable building, zoning, subdivision and other
land use and similar laws and regulations affecting the Real Property
(collectively, "Real Property Laws"), and Seller has not received any notice of
violation or claimed violation or, the Knowledge of Seller, no violation is
threatened in respect of any Real Property Law.
(d) Seller has no Knowledge that (i) any real property taxes, sales levies or
assessments with respect to the Leased Premises have not been paid in full or
(ii) any proceedings with respect thereto have been commenced.
5.13 Financial Statements.
(a) A true and complete copy of the Financial Statements is attached hereto as
Schedule 1.1.22 - Financial Statements. The Financial Statements (i) are derived
from the Books and Records of Seller and its Affiliates, (ii) have been prepared
in accordance with GAAP consistently applied throughout the periods covered
thereby, subject, in the case of the interim Financial Statements, to year end
adjustments and, in the case of the Financial Statements, to the absence of
footnotes, and (iii) fairly present in all material respects the results of
operations of the Business for the periods covered thereby.
(b) Seller does not have any liabilities or obligations of any nature, whether
known, unknown, absolute, accrued, contingent or otherwise and whether due or to
become due, except (i) as set forth in Schedule 5.13 -- Undisclosed Liabilities,
(ii) as and to the extent disclosed on, or reserved against on the face of the
April 2 Financial Statements and (iii) for liabilities and obligations that are
(A) incurred after April 2 in the ordinary course of the Business consistent
with past practices, and are not prohibited by this Agreement or (B)
individually and in the aggregate would not have or result in a Material Adverse
Effect.
5.14 Compliance with Laws. The conduct of the Business as currently conducted
does not violate, breach, constitute a default under, or conflict with, and to
the Knowledge of Seller, there exists no event that, with the giving of notice,
the passage of time or both, would constitute a violation, breach, default or
conflict with, of or under any Applicable Law, including any Governmental
Approval, except (a) as set forth in Part A of Schedule 5.14 - Compliance with
Laws and (b) solely with respect to the compliance of the Business with
Applicable Law and all Governmental Approvals (other than Applicable Law or any
Governmental Approval of the State of Florida) relating to the fulfillment of
contact lens orders, except as disclosed on Part B of Schedule 5.14 - Compliance
with Laws, where such violation would not reasonably be expected to have a
Material Adverse Effect. Part C of Schedule 5.14 - Compliance with Laws sets
forth a complete and correct general description of all efforts of the Company,
Summit, and their Affiliates to comply with Applicable Law relating to the
fulfillment of contact lens orders.
5.15 Environmental Compliance. Except as would not reasonably be expected to
have a Material Adverse Effect, (a) the Company currently holds all the permits,
licenses and approvals of Regulatory Authorities arising under any applicable
environmental law or regulation necessary for the current use, occupancy or
operation of its respective properties and assets (the "Environmental Permits")
and is in compliance with all such permits, licenses and approvals, (b) the
Company is in compliance with all applicable environmental laws and regulations,
(c) the Company has not received any written claim, demand, notice or complaint
alleging violation of, or liability under, any applicable environmental law and
(d) there are no pending environmental claims, or to the Company's knowledge,
environmental claims which have been threatened in writing, against the Company
or any of the Company's properties.
5.16 Condition of Transferred Assets. The Transferred Assets are in good
operating condition and repair, ordinary wear and tear excepted. The Transferred
Assets are adequate for the purposes for which such assets are currently used or
are held for use.
5.17 Insurance. Schedule 5.17 - Insurance contains a list of all insurance
policies relating to the Business or Transferred Assets. Seller has made
available to Buyer complete and correct copies of all such insurance policies,
together with all riders and amendments thereto. Seller has complied in all
material respects with the terms and provisions of such policies. No notice of
termination or premium increase has been received under any of the policies. To
the knowledge of Seller, the insurance coverage provided by such policies is
adequate and suitable for the Business and Transferred Assets, and is on such
terms (including, without limitation, as to deductibles and self-insured
retentions), covers such risks, contains such deductibles and retentions, and is
in such amounts, as the insurance customarily carried by comparable companies of
established reputation similarly situated and carrying on the same or similar
business as Seller.
5.18 Inventories. All inventories of raw materials, work in process, finished
products, goods, spare parts, replacement and component parts, and office and
other supplies reflected in the April 2, 2000 Financial Statements
(collectively, the "Inventories") of Seller or, to the extent related to the
Business, any of Seller's affiliates, taken as a whole, are of good, usable and
merchantable quality. All such Inventories are located at Seller's facility
located in the Quadrant Business Center, Phase II, Building 7, 350 Southwest
12th Avenue, Deerfield Beach, Broward County, Florida.
5.19 Accounts Receivable. Except to the extent expressly reserved against in the
April 2 Financial Statements or the Closing Balance Sheet, the accounts and
notes receivable reflected in such April 2 Financial Statements arose, and all
receivables reflected in the Closing Balance Sheet shall have arisen, only from
bona fide transactions in the ordinary course of business and consistent with
past practices.
5.20 Labor Matters, etc. Seller is not a party to or bound by any collective
bargaining agreement and there are no labor unions or other organizations
representing, purporting to represent or attempting to represent any employees
employed in the operation of the Business. Since January 1, 1999 there has not
occurred or, to the Knowledge of Seller, been threatened any material strike,
slowdown, picketing, work stoppage, concerted refusal to work overtime or other
similar labor activity with respect to any employees employed in the operation
of the Business. There are no labor disputes currently subject to any grievance
procedure, arbitration or litigation and there is no representation petition or,
to the knowledge of Seller, no representation application pending or, to the
knowledge of Seller, threatened with respect to any employee employed in the
operation of the Business. Seller has complied with all provisions of laws and
regulations pertaining to the employment of employees, including, without
limitation, all such Applicable Laws relating to labor relations, equal
employment, fair employment practices, entitlements, prohibited discrimination
or other similar employment practices or acts, except for any failure so to
comply that, individually or together with all such other failures, has not and
will not result in a material liability or obligation on the part of Buyer or
the Business, and has not had or resulted in, and will not have or result in, a
Material Adverse Effect.
5.21 Limitation on Representations and Warranties. Except as otherwise set forth
herein, Seller makes no representations or warranties as to the Transferred
Assets, the Assumed Liabilities or the Business. Without limiting the generality
of the foregoing, Seller makes no representation or warranty to Buyer with
respect to (a) any projections, estimates or budgets heretofore delivered to or
made available to Buyer of future revenues, expenses or expenditures, future
results of operations (or any component thereof), future cash flows or future
financial condition (or any component thereof) of the Business; or (b) any other
information or documents made available to Buyer or its counsel, accountants or
advisors with respect to the Business or the business or operations of the
Business, except as expressly covered by a representation and warranty contained
in Sections 5.1 through 5.20. EXCEPT AS EXPRESSLY STATED HEREIN, ALL WARRANTIES
AND REPRESENTATIONS OF SELLER ARE EXCLUDED. EXCEPT AS EXPRESSLY SET FORTH
HEREIN, SELLER HAS MADE NO REPRESENTATION OR WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE REGARDING ANY OF THE TRANSFERRED ASSETS.
6. Representations and Warranties of Buyer.
Buyer hereby represents and warrants to Seller as set forth below in
this Section 6. For purposes of this Section 6, the term "Buyer" shall mean the
Buyer and its subsidiaries.
6.1 Corporate Status. Buyer is duly organized, validly existing and in good
standing as a corporation under the laws of Delaware. Buyer has the requisite
power and authority to own or lease all of its properties and assets and to
conduct its business as it is now being conducted, except where the failure to
have such corporate power or to conduct its business has not had and would not
reasonably be expected to have a Material Adverse Effect.
6.2 Corporate Authority. Buyer has the corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby,
including the authorization, execution and delivery of the SOH Stockholders'
Agreement and the SOH Registration Rights Agreement, and the authorization,
issuance (or reservation for issuance), sale, and delivery of the SOH Common
Stock. All actions and proceedings necessary to be taken on the part of Buyer in
connection with this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby have been or will prior to the
Closing be duly and validly taken. This Agreement has been, and at the Closing
the other Transaction Documents to which it is a party will be, duly and validly
executed and delivered by Buyer and constitute the legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with and subject to
their terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws from
time to time in effect affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
6.3 Non-Contravention. Neither the execution and delivery by Buyer of this
Agreement and the other Transaction Documents to which it is a party nor the
consummation by Buyer of the transactions contemplated hereby and thereby is an
event that, of itself or with the giving of notice or the passage of time or
both, will (a) conflict with the charter or bylaws (or similar governing
instruments with different names) of Buyer, (b) assuming that the consents and
approvals described in Schedule 6.3 - Buyer's Consents are obtained, constitute
a violation of, or conflict with or result in any breach of or any default
under, or constitute grounds for termination or acceleration of, any material
mortgage, indenture, lease, contract, agreement or instrument to which Buyer is
a party or by which Buyer is bound, or result in the creation of any material
Liens upon any of Buyer's assets, or (c) assuming receipt of the consents and
approvals described in Schedule 6.3 - Buyer's Consents, violate any material
judgment, decree or order or statute, rule or regulation applicable to Buyer,
except, in the case of clauses (b) and (c) above, for violations, conflicts,
breaches, defaults or Liens which, either individually or in the aggregate,
would not have a Material Adverse Effect.
6.4 Brokers. Except for fees paid by Buyer, there is no investment banker,
broker or finder or other Person retained by Buyer or any Affiliate thereof who
would have a valid claim against Buyer or Seller for a commission or brokerage
fee in connection with this Agreement or the transactions contemplated hereby.
6.5 Litigation. Except as set forth on Schedule 6.5 - Litigation (Buyer), there
is no litigation, proceeding or investigation pending or, to Buyer's knowledge,
threatened, against Buyer or any Affiliate which has had or would, if adversely
determined, reasonably be expected to have a material adverse effect on Buyer's
ability to consummate the transactions contemplated by this Agreement.
6.6 Financial Statements. A true and complete copy of each of (i) the audited
financial statements of Wise/Contact Us Optical Corp. ("Wise") for the fiscal
year ended October 31, 1999, (ii) the financial statements, of which the balance
sheet is audited, of The Ultimate Contact, Inc. ("Ultimate") for the year ended
December 31, 1999, (iii) the unaudited financial statements of Wise for the four
months ended February 25, 2000, and (iv) the unaudited financial statements of
Ultimate for the two months ended February 29, 2000. The financial statements of
Buyer (a) are derived from the Books and Records of Wise and Ultimate, as
applicable, (b) have been prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, subject in the case of any interim
financial statements to year end adjustments and the absence of footnotes, and
(c) fairly present in all material respects the results of operations of the
Buyer for the periods covered thereby.
6.7 Capitalization. After giving effect to the Closing, the authorized
capital of the Buyer will consist of:
(a) Two hundred fifty thousand (250,000) shares of SOH Common Stock are
authorized, 204,500 shares of which will be issued and outstanding immediately
after the Closing. All of the outstanding shares of Common Stock will have been
duly authorized, fully paid and be non-assessable and issued in compliance with
all applicable federal and state securities laws.
(b) The Buyer will have reserved 14,000 shares of SOH Common Stock for issuance
to officers, directors, employees and consultants of the Buyer pursuant to its
Stock Option Plan duly adopted by the Board of Directors and approved by the
Buyer shareholders (the "Stock Plan"). Of such reserved shares of Common Stock,
no shares will have been issued upon exercise of options previously granted,
options to purchase 4,250 shares will have been granted and be outstanding, and
options for 9,750 shares of Common Stock will remain available for grant to
officers, directors, employees and consultants pursuant to the Stock Plan.
(c) Except for outstanding options issued pursuant to the Stock Plan, and except
for warrants for 2% of the issued and outstanding shares of SOH Common Stock to
be issued in connection with the Facilities delivered in the Commitment Letter,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal or similar rights) or agreements,
orally or in writing, for the purchase or acquisition from the Buyer, either
directly or indirectly, of any shares of its capital stock.
6.8 Subsidiaries. Buyer does not currently own or control, directly or
indirectly, any interest in any other corporation, association, or other
business entity other than Wise and Ultimate (the "Buyer Subsidiaries"). Buyer
owns all of the outstanding equity securities of the Buyer Subsidiaries.
6.9 Valid Issuance of Securities. The SOH Common Stock that is being issued to
Summit hereunder, when issued, sold and delivered in accordance with the terms
hereof for the consideration expressed herein, will be duly and validly issued,
fully paid and nonassessable.
6.10 Financing. Buyer has previously delivered to Summit the following: (a) a
fully executed commitment letter (the "Commitment Letter") from The Bank of New
York and its affiliated BNY Capital Markets, Inc. (the "Bank") and accepted by
Buyer providing the detailed terms and conditions upon which the Bank has
committed to provide a portion of the financing required by Buyer to consummate
the transactions hereunder. Buyer has also previously delivered to Summit a
fully exercised commitment letter (the "Equity Commitment Letter") from
Affiliates of Buyer providing the terms and conditions upon which such
Affiliates have committed to provide a portion of the financing required for
Buyer to consummate the transactions hereunder.
6.11 Buyer's Business. To the actual knowledge of the executive officers of
Rutledge & St. Dennis, Inc., a Delaware corporation, without any independent
investigation or duty of inquiry of any kind, the representations and warranties
contained in (i) Article II of the Merger Agreement, dated as of January 11,
1999, among Wise/Contact Holdings Inc., a Delaware corporation, Wise/Contact
Acquisition Inc., a New York corporation and wholly-owned subsidiary of
Holdings, Wise/Contact Us Optical Corporation, a New York corporation, and Barry
Weisfeld, and (ii) Article 6 of the Asset Purchase Agreement, dated as of March
3, 2000. among The Ultimate Contact, Inc., a New Jersey corporation, Larry
Edelson, Anthony Micale, Ultimate Contact Acquisition Corp., a Delaware
corporation and Strategic Optical Holdings, Inc., a Delaware corporation, in
each case were true and correct in all material respects as of the date of such
agreement, subject to the terms and limitations, including the matters reflected
in the disclosure schedules, of such agreement.
6.12 Limitation on Representations and Warranties. Except as otherwise set forth
herein, Buyer makes no representations or warranties as to the Buyer's business.
Without limiting the generality of the foregoing, Buyer makes no representation
or warranty to Seller or Summit with respect to (a) any projections, estimates
or budgets heretofore delivered to or made available to Seller or Summit of
future revenues, expenses or expenditures, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Buyer's business; or (b) any other information or
documents made available to Seller or Summit or its counsel, accountants or
advisors with respect to the Buyer's business or the business or operations of
the Buyer, except as expressly covered by a representation and warranty
contained in Sections 6.1 through 6.11. EXCEPT AS EXPRESSLY STATED HEREIN, ALL
WARRANTIES AND REPRESENTATIONS OF BUYER ARE EXCLUDED.
7. Interim Covenants of Seller.
From the date of this Agreement until the completion of the Closing,
subject to the requirements of Applicable Law and Regulatory Authorities, Seller
(and Buyer, as specified) and their respective Affiliates shall, and Summit
shall use commercially reasonable efforts to cause Seller to, comply with the
covenants set forth in this Article 7.
7.1 Operation of the Business. The Business will continue to be carried on in
the ordinary course and consistent with past practices in compliance in all
material respects with all Applicable Laws and reasonable commercial efforts
will be used to preserve the Business, its operations and employees and the
goodwill of its customers and others having business relations with it. Without
limiting the generality of the foregoing, without the prior written consent of
Buyer, Summit and Seller, jointly and severally, covenant and agree that Seller
will not do or agree to do any of the following (other than in the ordinary
course of business consistent with Seller's past practices) on or before the
Closing, except as expressly permitted by Section 5.5 or listed in Schedule 7.1
- Operation of Business:
(i) grant any increase in salary, fringe benefits or other compensation
payable, or to become payable, by Seller to any officer, employee, agent or
representative of Seller;
(ii) enter into any contract, commitment or transaction;
(iii) make any capital expenditure on or lease any item of capital equipment;
(iv) sell or dispose of any capital equipment;
(v) waive, cancel or compromise any material right or claim of Seller;
(vi) modify, amend, cancel or terminate any material contract or agreement
by which Seller or any of its assets is bound;
(vii) conduct all Tax affairs relating to Seller in a manner as such affairs
would have been conducted if the parties had not entered into this Agreement; or
(viii) take any action that would cause any of the representations and
warranties set forth in Section 5 to be untrue.
(b) Notwithstanding Section 7.1(a), Seller shall have the right, immediately
before the Closing, to pay off indebtedness for borrowed money and to distribute
cash to Summit provided, that the effect of all paying off of indebtedness and
distribution of cash pursuant to this Section 7.1(b) shall be included on the
Closing Balance Sheet.
(c) During the period from the date of this Agreement to the Closing, Seller and
Summit, jointly and severally, covenant and agree that Seller will continue, in
the ordinary course of its business and consistent with its past practices, to:
(i) market its services; and
(ii) use its commercially reasonable efforts to keep the Business intact, retain
its present employees so that they will be available after the Closing, and
maintain its relationships with its customers, suppliers and others with whom
Seller does business so that they will be preserved after the Closing.
7.2 Application for Regulatory Consent and Licenses. To the extent that Buyer or
its Affiliates requires any license or other approvals, consents or
authorizations from, or is required to give or make any notices to or filings
with respect to, any Regulatory Authority to permit Buyer or its Affiliates to
conduct the Business from and after the Closing Date, Seller shall use all
commercially reasonable efforts, as promptly as practicable after the date of
this Agreement, and in no event later than fifteen (15) days after the date of
this Agreement, to assist Buyer in the filing of all requisite applications and
make all other requisite filings with the appropriate Regulatory Authorities (as
listed on Schedule 5.3(a) - Seller's Consents) in all cases at Buyer's expense.
Seller shall diligently assist Buyer in taking all steps (at Buyer's expense)
that are necessary, proper or desirable to expedite the preparation of such
regulatory and license applications and filings and their prosecution to a
favorable conclusion. Seller will promptly provide Buyer with copies of any
application, amendment, pleading, notice, order, request for additional
information or other document filed by it or served on it relating to such
applications. Buyer shall cooperate with Seller and provide to Seller all
information regarding the Business reasonably required by Seller for use in
connection with such applications and filings.
7.3 Access to Facilities, Files and Records. Upon the reasonable request of
Buyer and upon not less than one (1) Business Day prior notice, Seller and its
Affiliates will give or cause to be given to the officers, employees,
accountants, counsel and authorized representatives of Buyer (a) reasonable
access during normal business hours to the management personnel, property,
copies of the Assumed Contracts, Leases and other records and files relating to
the Business except for any of the foregoing relating to the Excluded Assets or
Excluded Liabilities, and (b) all such other information solely relating to the
transactions contemplated by this Agreement as Buyer may reasonably request;
provided, however, that neither Seller nor its Affiliates shall be required to
permit such access or provide such information to the extent it would:
unreasonably interfere with the Business; jeopardize any relationship with a
customer of the Business; jeopardize any attorney-client privilege of Seller or
any of its Affiliates; or contravene any law, rule, regulation, order, judgment,
or decree applicable to Seller or any of its Affiliates; in each case in the
commercially reasonable judgment of Seller or any of its Affiliates.
7.4 Notice of Proceedings. Seller will promptly notify Buyer in writing upon (a)
becoming aware of any order or decree or any complaint praying for any order or
decree restraining or enjoining the execution of this Agreement or the
consummation of the transactions contemplated hereunder, or (b) receiving any
notice from any court or any Regulatory Authority of its intention (i) to
institute a suit or proceeding to restrain or enjoin the execution of this
Agreement or the consummation of the transactions contemplated by this
Agreement, or (ii) to nullify or render ineffective this Agreement if executed
or such transactions if consummated.
7.5 Hart-Scott-Rodino Filing. As promptly as practicable after the date of this
Agreement (but in no event later than ten (10) days after the date of this
Agreement), Seller shall prepare and file all documents and notifications with
the Federal Trade Commission and the United States Department of Justice as are
required to comply with the HSR Act, requesting early termination of the waiting
period thereunder. Seller will furnish promptly all materials thereafter
requested by any Regulatory Authority having jurisdiction over such filings.
Seller will cooperate with Buyer in the preparation of all such filings and
responses.
7.6 Reasonable Commercial Efforts. Subject to the terms of this Agreement,
Seller agrees, at its sole expense, to use its reasonable commercial efforts in
good faith to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary under Applicable Laws to permit consummation of the
transactions contemplated hereby and by the other Transaction Documents as
promptly as practicable and otherwise enable consummation of the transactions
contemplated hereby, including satisfaction of the conditions set forth in
Article 10 hereof, and shall cooperate fully with Buyer to that end.
7.7 Notification of Certain Matters. Seller shall give prompt notice to Buyer of
any fact, event or circumstance known to it that (a) is reasonably likely,
individually or taken together with all other facts, events and circumstances
known to it, to result in any Material Adverse Effect or (b) would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
7.8 Transfers. Prior to the Closing, Seller shall cause all of its Affiliates to
transfer to Seller all right, title and interest in and to all assets used
solely in connection with the Business (other than assets which would comprise
Excluded Assets), for transfer to Buyer at the Closing.
7.9 No Solicitation. During the term of this Agreement, Seller and Summit shall
not, and Seller and Summit shall cause each employee, agent, officer, director,
or other representative of Seller or Summit not to, directly or indirectly
solicit or encourage any inquiries or proposals for, or enter into or continue
any discussions with respect to, the acquisition by any Person of any of the
Transferred Assets (except for those assets disposed of in the ordinary course
consistent with past practices), or any other shares of capital stock or other
securities of Seller (or any of its subsidiaries) or all or any material portion
of the Business; provided, that this Section 7.9 shall not apply to any Person
making an unsolicited Superior Offer.
7.10 Fiduciary Out. Nothing in this Agreement shall prevent the Board of
Directors of Summit or Seller from withholding, withdrawing, amending or
modifying its unanimous recommendation in favor of the transactions contemplated
hereby or from accepting a Superior Offer (as defined below) if (i) an
unsolicited Superior Offer is made to Summit or Seller and is not withdrawn,
(ii) Summit or Seller shall have provided prompt written notice to Buyer (a
"Notice of Superior Offer") advising Buyer that Summit or Seller has received a
Superior Offer, specifying in detail the material terms and conditions of such
Superior Offer and identifying the Person making such Superior Offer, (iii)
Summit and Seller shall have caused their financial and legal advisors to
negotiate in good faith with Buyer during the three-day period referred to below
to make such adjustments to the terms and conditions of this Agreement as would
enable the parties to proceed with the sale of the Business to Buyer (iv) Buyer
shall not have, within three (3) Business Days of Buyer's receipt of the Notice
of Superior Offer, made an offer that the Summit Board by a majority vote
determines in its good faith judgment (after consultation with a financial
adviser of nationally recognized reputation) to be at least as favorable to
Summit's stockholders as such Superior Proposal (it being agreed that Summit's
Board shall convene a meeting to consider any such offer by Buyer promptly
following the receipt thereof), (v) the Board of Directors of Summit is advised
in writing by Hutchins, Wheeler & Dittmar, or another law firm of national
standing reasonably acceptable to Buyer, that, in light of such Superior Offer,
the withholding, withdrawal, amendment or modification of such recommendation or
the acceptance of such Superior Offer is required in order for the Board of
Directors of Summit to comply with its fiduciary obligations to Summit's
stockholders under applicable law and (v) neither Summit nor any of its
representatives shall have violated any of the restrictions set forth in Section
7.9 or this Section 7.10. Summit shall provide Buyer with at least three
business days prior notice (or such lesser prior notice as provided to the
members of Summit's Board of Directors but in no event less than twenty-four
hours) of any meeting of Summit's Board of Directors at which Summit's Board of
Directors is reasonably expected to consider any Superior Offer (as defined
below). For purposes of this Agreement "Superior Offer" shall mean an
unsolicited, bona fide written offer made by a third party to consummate any of
the following transactions: (i) a merger, consolidation involving Seller
pursuant to which Summit holds no more than 20% of the equity interest in the
surviving or resulting entity of such transaction or (ii) the acquisition by any
person or group (including by way of a tender offer or an exchange offer),
directly or indirectly, of ownership of at least 80% of the then outstanding
shares of capital stock of Seller, in each case on terms that the Board of
Directors of Summit determines, in its reasonable judgment (based on the written
advice of a financial adviser of nationally recognized reputation) to provide
Summit with consideration (in cash and other property or securities) of not less
than $39 million; provided, however, that any such offer shall not be deemed to
be a "Superior Offer" if all of the financing required to consummate the
transaction contemplated by such offer is not fully committed.
8. Interim Covenants of Buyer.
From the date of this Agreement until the completion of the Closing,
subject to the requirements of Applicable Law and Regulatory Authorities, Buyer
(and Seller, as specified) shall comply with the covenants set forth in this
Article 8.
8.1 Application for Regulatory Consent and Licenses. To the extent that Buyer or
its Affiliates requires any license or other approvals, consents or
authorizations from, or is required to give or make any notices to or filings
with respect to, any Regulatory Authority in connection with the consummation of
the transactions contemplated by this Agreement or the other Transaction
Documents or to permit Buyer or its Affiliates, to conduct the Business from and
after the Closing Date, as promptly as practicable after the date of this
Agreement, and in no event later than fifteen (15) days after the date of this
Agreement, Buyer will file all requisite applications and make all other
requisite filings with the appropriate Regulatory Authorities (as listed on
Schedule 6.3 - Buyer's Consents). Buyer will diligently take all steps that are
necessary, proper or desirable to expedite the preparation of such regulatory
and license applications and filings and their prosecution to a favorable
conclusion. Buyer will promptly provide Seller with copies of any application,
amendment, pleading, notice, order, request for additional information or other
document filed by it or served on it relating to such applications. Seller shall
cooperate with Buyer and provide to Buyer all information regarding the Business
reasonably required by Buyer for use in connection with such applications and
filings.
8.2 Notice of Proceedings. Buyer will promptly notify Seller in writing upon (a)
becoming aware of any order or decree or any complaint praying for an order or
decree restraining or enjoining the execution of this Agreement or the
consummation of the transactions contemplated hereunder, or (b) receiving any
notice from any court or Regulatory Authority of its intention (i) to institute
a suit or proceeding to restrain or enjoin the execution of this Agreement or
the consummation of the transactions contemplated by this Agreement, or (ii) to
nullify or render ineffective this Agreement if executed or such transactions if
consummated.
8.3 Hart-Scott-Rodino Filing. As promptly as practicable after the date of this
Agreement (but in no event later than ten (10) days after the date of this
Agreement), Buyer shall prepare and file all documents and notifications with
the Federal Trade Commission and the United States Department of Justice as are
required to comply with the HSR Act, requesting early termination of the waiting
period thereunder. Buyer shall promptly furnish all materials thereafter
requested by any Regulatory Authority having jurisdiction over such filings.
Buyer will cooperate with Seller in the preparation of all such filings and
responses.
8.4 Reasonable Commercial Efforts. Subject to the terms of this Agreement, Buyer
agrees to use its reasonable commercial efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary
under Applicable Laws to permit consummation of the transactions contemplated
hereby and by the Transaction Documents as promptly as practicable and otherwise
enable consummation of the transactions contemplated hereby, including
satisfaction of the conditions set forth in Article 10 hereof, and shall
cooperate fully with Seller to that end.
8.5 Notification of Certain Matters.
(a) Buyer shall give prompt notice to Seller of any fact, event or circumstance
known to it that (i) is reasonably likely, individually or taken together with
all other facts, events and circumstances known to it, to result in any Material
Adverse Effect as to Buyer or (ii) would cause or constitute a material breach
of any Buyer's representations, warranties, covenants or agreements contained
herein.
9. Conditions Precedent to Buyer's Obligations.
The obligations of Buyer under this Agreement are, at Buyer's option,
subject to the fulfillment (or waiver by Buyer) of the following conditions
prior to or at the Closing Date:
9.1 Representations, Warranties and Covenants.
(a) Except, in the case of clauses (x) and (y) below, for such breaches as have
not had and would not have, in the aggregate, a Material Adverse Effect, the
representations and warranties of Seller contained in this Agreement shall (x)
have been true and correct as of the date when made and (y) shall be deemed to
be made again on and as of the Closing Date and shall then be true and correct,
except, in all cases, to the extent that (i) such representations and warranties
speak as of the date of this Agreement or as of a specific date, in which case
they shall be deemed to have been made again on and as of the Closing Date but
speaking only as of the date of this Agreement or such specific date, as the
case may be, and (ii) changes are permitted or contemplated pursuant to this
Agreement; provided, however, that for purposes of determining the satisfaction
of the condition contained is this Section 9.1(a), no effect will be given to
any exception or qualification in such representations and warranties relating
to materiality or Material Adverse Effect except with respect to clause (b) of
Section 5.14.
(b) Except for any lack of performance or compliance that has not had and would
not have, in the aggregate, a Material Adverse Effect, Seller shall have
performed and complied with the covenants and agreements required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
(c) Seller shall have furnished Buyer with certificate(s), dated the Closing
Date and duly executed by an officer of Seller authorized to give such a
certificate, to the effect that the conditions set forth in subparagraphs (a)
and (b) of this Section 9.1 have been satisfied.
(d) Seller shall have delivered to Buyer a certificate of Seller, dated the
Closing Date and sworn to under penalty of perjury, setting forth the name,
address and federal tax identification number of Seller and stating that Seller
is not a "foreign person" within the meaning of section 1445 of the Code, such
certificate to be in the form set forth in the Treasury Regulations thereunder.
9.2 Proceedings. Neither Buyer nor any of its Affiliates shall be subject to any
restraining order or injunction restraining or prohibiting Buyer's performance
of the transactions contemplated hereby.
9.3 Hart-Scott-Rodino. The waiting period under the HSR Act shall have
expired or been terminated.
9.4 Deliveries, Release of Liens. Buyer shall have received the items to
be delivered by Seller pursuant to Section 4.2.
9.5 Consents to Assignment of Leases. The landlords under the Leases shall have
furnished consents to the assignments of the Leases to Buyer, to the extent such
consents are required under the terms of the Leases.
9.6 Opinion of Counsel to the Company and Summit. Buyer shall have received
favorable opinions of counsel to the Company and Summit dated the Closing Date,
reasonably satisfactory to the Buyer and substantially in the form and substance
set forth in Exhibit E.
9.7 Financing. Buyer shall have received the financing proceeds under the
Commitment Letter and the Equity Commitment Letter on the terms and conditions
set forth therein or upon terms and conditions substantially equivalent thereto.
10. Conditions Precedent to Sellers' Obligations.
The obligations of Seller under this Agreement are, at Seller's option,
subject to the fulfillment (or waiver by Seller) of the following conditions
prior to or at the Closing Date:
10.1 Representations, Warranties and Covenants.
(a) Except for such breaches as have not had and would not reasonably be
expected to have, in the aggregate, a Material Adverse Effect, the
representations and warranties of Buyer contained in this Agreement shall have
been true and correct as of the date when made and shall be deemed to be made
again on and as of the Closing Date and shall then be true and correct, except
to the extent that (i) such representations and warranties speak as of the date
of this Agreement or as of a specific date, in which case they shall be deemed
to have been made again on and as of the Closing Date but speaking only as of
the date of this Agreement or such specific date, as the case may be, and (ii)
changes are permitted or contemplated pursuant to this Agreement; provided,
however, that for purposes of determining the satisfaction of the condition
contained is this Section 10.1(a), no effect will be given to any exception in
such representations and warranties relating to materiality.
(b) Except for any lack of performance or compliance that has not had and would
not reasonably be expected to have, in the aggregate, a Material Adverse Effect,
Buyer shall have performed and compiled with the covenants and agreements
required by this Agreement to be performed or complied with by it prior to or at
the Closing Date.
(c) Buyer shall have furnished Seller with certificate(s) dated the Closing Date
and duly executed by an officer of Buyer authorized on behalf of Buyer to give
such a certificate, to the effect that the conditions set forth in subsections
(a) and (b) of this Section 10.1 have been satisfied.
10.2 Proceedings. Neither Seller nor any of its Affiliates shall be subject to
any restraining order or injunction restraining or prohibiting Seller's
performance of the transactions contemplated hereby.
10.3 Hart-Scott-Rodino. The waiting period under the HSR Act shall have
expired or been terminated.
10.4 Deliveries. Seller shall have received the items to be delivered by
Buyer pursuant to Section 4.3.
10.5 Opinion of Counsel to Buyer. Seller and Summit shall have received an
opinion of counsel to the Buyer dated the Closing Date and reasonably
satisfactory to Seller and Summit, in form and substance reasonably satisfactory
to Seller.
11. Certain Post-Closing Matters.
11.1 Access to Records, Information and Personnel.
(a) Information and Records. Subsequent to the Closing, Buyer agrees to provide
Seller with reasonable access to all Books and Records transferred to Buyer at
Closing and required by Seller for purposes of responding to any audits,
investigations or other proceedings by any Regulatory Authority or other Person
or for the defense or prosecution of any Excluded Liability or other Indemnified
Buyer Claim. Such access will be during normal business hours, upon reasonable
prior notice and without unreasonable interference with normal business
operations and will be at the sole cost and expense of Seller.
(b) Personnel. If, after the Closing Date, Seller shall require the
participation of officers and employees formerly employed by Seller for purposes
of responding to any audits, investigations or other proceedings by any
Regulatory Authority or the defense or prosecution of any Excluded Liability or
other Indemnified Buyer Claim, and so long as there exists no conflict of
interest between the parties, Buyer shall make such officers and employees
reasonably available to Seller to participate in such defense or prosecution;
provided, that Seller shall pay all out-of-pocket costs, charges and expenses
arising from such participation.
11.2 Insurance.
(a) Effective at 12:01 am on the Closing Date, the Business shall cease to be
covered by Seller's and its Affiliates' insurance policies. Prior to Closing,
Seller will put each insurance carrier on written notice in regard to known
incidents and claims and will provide Buyer with written documentation stating
there are no known claims that have not been reported to the appropriate
carrier.
(b) Effective at 12:01 am on the first day after Closing Date or at Closing,
Seller will provide written evidence of notice of cancellation to any bonding
and/or to every insurance company who have issued bonds or insurance policies on
behalf of or providing coverage to the Business under which Seller or an
Affiliate of Seller might be liable. Buyer will provide certificates of
insurance at the Closing with respect to the following categories of insurance:
directors' and officers' liability; errors and omissions; workers' compensation;
auto liability; commercial general liability; crime insurance; fiduciary
coverage; and property insurance (fixed and mobile). Said certificates of
insurance shall show the: type of coverage (occurrence or claims made); dates of
coverage; carrier name; address of carrier; limits of insurance; retroactive
date; and contact person for each line of insurance.
11.3 Books and Records.
(a) For a period of five (5) years after the Closing Date, or such longer period
as required by law, if Buyer desires to dispose of any of the Books and Records
relating to Taxes and acquired from Seller pursuant to this Agreement that
relate to the Business conducted prior to the Closing Date, notice to such
effect shall be given by Buyer to Seller and Seller shall be given an
opportunity prior to any such disposition, at its cost and expense, to remove
and retain all or any part of such Books and Records as it may select.
(b) For a period of five (5) years after the Closing Date, or such longer period
as required by law, if Seller desires to dispose of any of the Books and Records
in its possession on the Closing Date that relate to the Business conducted
prior to the Closing Date, notice to such effect shall be given by Seller to
Buyer and Buyer shall be given an opportunity prior to any such disposition, at
its cost and expense, to remove and retain all or any part of such Books and
Records as it may select. During the period such Books and Records are preserved
and kept by Seller, duly authorized representatives of Buyer shall, on
reasonable prior notice, have access thereto during normal business hours to
examine, inspect and copy such Books and Records at Buyer's expense.
11.4 Taxes.
(a) Seller and Buyer shall each be responsible for paying half of any and all
transfer, conveyance, recording and similar fees or Taxes (including, without
limitation, sales, use and real and personal property transfer Taxes) arising
from the sale of the Transferred Assets pursuant to this Agreement, and Buyer
shall be responsible for preparing and filing any Tax Returns in connection
therewith.
(b) Seller shall be liable for all Taxes in respect of or relating to the
Transferred Assets or the Business for any Pre Closing Period. Buyer shall be
liable for all Taxes in respect of or relating to the Transferred Assets or
Business for any taxable year or period that is not a Pre-Closing Period.
(c) From time to time after the Closing, the parties shall deliver (at the cost
of the requesting party) to each other such information and data as any party
may reasonably request, including that required in order to enable such party to
complete and file all Tax Returns that may be required to be filed by it and to
complete all customary Tax and accounting procedures and otherwise to enable
such party to satisfy its internal accounting, Tax and other requirements,
provided, that the foregoing shall be done in a manner so as not to interfere
unreasonably with the conduct of the business of the other party or its
Affiliates.
11.5 Employee and Employee Benefits.
(a) (i) Subject to Section 11.5(a)(ii), for a period of one year following the
Closing Date, Buyer shall be responsible for severance pay payable to any
Employee who is (x) employed by Seller immediately preceding the Closing and (y)
either (1) not offered employment with Buyer or (2) hired and thereafter
terminated by Buyer. Such payments shall be made pursuant to Buyer's severance
policy in effect on the date of termination. Buyer shall compute such severance
pay by giving affected Employees credit for years of service with Seller and its
Affiliates.
(ii) Notwithstanding anything to the contrary set forth in
this Agreement, Buyer shall pay and otherwise be responsible for thirty
percent (30%), and Summit and Seller, jointly and severally, shall pay
and otherwise be responsible for seventy percent (70%), of all
liabilities and obligations of Summit, Seller and Buyer arising under
the Severance Agreement, dated August 4, 1998, between Menderes Akdag
and Seller; provided that Summit shall be entitled to 100% of the
savings of any waiver by Mr. Akdag of any amounts due him under the
Severance Agreement due to inducements provided by Summit.
(b) Effective as of the Closing, the Buyer shall assume sponsorship of all of
the Employee Benefit Plans listed on Schedule 11.5(b) Assumed Employee Benefit
Plans.
(c) Neither Buyer nor Seller intends this Agreement to create any rights or
interests, except as between Buyer and Seller, and no present, former or future
employee of Buyer or Seller shall be treated as a third party beneficiary by, in
or under this Agreement.
(d) (i) Seller and Buyer will (x) treat Buyer and each Affiliate thereof, as
applicable, as a "successor employer" and Seller (as applicable) as a
"predecessor," within the meaning of sections 3121(a)(1) and 3306(b)(1) of the
Code, with respect to the employees of the Business who are employed by Buyer or
any of its Affiliates for purposes of Taxes imposed under the United States
Federal Unemployment Tax Act ("FUTA") or the United States Federal Insurance
Contributions Act ("FICA") and (y) cooperate with each other to avoid, to the
extent possible, the filing of more than one IRS Form W-2 with respect to each
such employee for the calendar year within which the Closing Date occurs, and
(ii) at the request of Buyer with respect to any particular applicable Tax law
relating to employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care or other similar Tax other than
Taxes imposed under FICA and FUTA, Seller will (x) treat Buyer and each of its
Affiliates, as applicable, as a successor employer and Seller, as applicable, as
a predecessor employer, within the meaning of the relevant provisions of such
Tax law, with respect to the employees of the Business who are employed by Buyer
(or, if applicable, any Affiliate thereof) and (y) cooperate with each other to
avoid, to the extent possible, the filing of more than one