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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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SUBURBAN OSTOMY SUPPLY CO., INC.
(NAME OF SUBJECT COMPANY)
COMMON STOCK, NO PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
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864471 10 7
(CUSIP NUMBER OF CLASS OF SECURITIES)
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DONALD H. BENOVITZ
PRESIDENT
75 OCTOBER HILL ROAD
HOLLISTON, MASSACHUSETTS 01746
(508) 429-1000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
JAMES WESTRA, ESQ.
HUTCHINS, WHEELER & DITTMAR
A PROFESSIONAL CORPORATION
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(617) 951-6600
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Suburban Ostomy Supply Co., Inc., a
Massachusetts corporation (the "Company"), and the address of the principal
executive offices of the Company is 75 October Hill Road, Holliston,
Massachusetts 01746. The title of the class of equity securities to which this
statement relates is the common stock, no par value per share, of the Company
(the "Company Common Stock").
ITEM 2. TENDER OFFER OF PURCHASER.
This statement relates to a cash tender offer by Inva Acquisition Corp., a
Massachusetts corporation ("Purchaser") and a wholly owned subsidiary of
Invacare Corporation, an Ohio corporation ("Parent"), disclosed in a Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), dated December 22,
1997, to purchase all of the outstanding shares of Company Common Stock (the
"Shares") at a price of $11.75 per share (such amount, or any greater amount per
share paid pursuant to the Offer, being hereafter referred to as the "Per Share
Amount"), net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 22, 1997 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 17, 1997, (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. The Merger Agreement provides that, among other
things, as soon as practicable after the consummation of the Offer and
satisfaction or waiver of certain conditions, a merger will be effected under
the terms of which either: (i) in the event that Purchaser acquires less than
90% of the outstanding Shares pursuant to the Offer, Purchaser will be merged
with and into the Company, with the Company surviving the merger, or (ii) in the
event that Purchaser acquires 90% or more of the outstanding Shares pursuant to
the Offer, and Purchaser determines, in its sole discretion to use the "short
form" merger procedure described below, the Company will be merged with and into
Purchaser, with Purchaser surviving the merger (the entity surviving either of
the transactions described in clauses (i) and (ii) of this statement being
hereinafter referred to as the "Surviving Corporation"). Irrespective of how the
merger is structured, the Surviving Corporation will be a wholly owned
subsidiary of Parent ( the "Merger"). A copy of the Merger Agreement is filed
herewith as Exhibit 1, and is incorporated herein by reference.
Based on the information in the Offer to Purchase, the principal executive
offices of Parent and Purchaser are located at One Invacare Way, Elyria, Ohio
44036.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth below, none of the officers or directors of the
Company is presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including without limitation any
material contract, agreement, arrangement or understanding (i) providing for the
furnishing of services to or by, (ii) providing for rental of real or personal
property to or from, or (iii) otherwise requiring payments to or from, any
officer or director, any member of the family of any officer or director or any
corporation, partnership, trust or other entity in which any officer or director
has a substantial interest or is an officer, director, trustee or partner.
Stock Options. Pursuant to the terms of the 1995 Stock Option Plan as
currently in effect (the "Option Plan"), all outstanding stock options (the
"Company Stock Options") under the Option Plan, whether or not such Company
Stock Options would otherwise then be exercisable, shall become immediately
exercisable upon a Change in Control of the Company (as defined in the Option
Plan), which would occur upon completion of the Offer. As a result, all
outstanding Company Stock Options will be exchanged for, and the holder of each
such Company Stock Option will be entitled to receive upon surrender of such
Company Stock Option for cancellation, cash equal to the product of (x) the
difference between the Per Share Amount and the exercise price of each such
Company Stock Option multiplied by (y) the number of Shares covered by
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such Company Stock Option. As of December 17, 1997, there were Company Stock
Options covering 795,895 Shares outstanding at exercise prices ranging from
approximately $.81 to $11.00. Upon the acceleration of the Company Stock
Options, certain executive officers and directors of the Company will
respectively receive, in exchange for cancellation of previously vested Company
Stock Options and Company Stock Options accelerated as a result of the Merger,
the following amounts, representing the Per Share Amount less the exercise price
of the Company Stock Options: Herbert P. Gray will receive $2,035,500; Donald H.
Benovitz will receive $1,357,000; Stephen N. Aschettino will receive $1,696,250
and John G. Manos will receive $1,332,377.
Employment Agreements
Effective July 3, 1995, the Company entered into five (5) year employment
agreements with each of Messrs. Gray, Benovitz, Aschettino, Bohan and Manos. Mr.
Gray's agreement provides for his employment as Chairman of the Board of
Directors and Chief Executive Officer at an initial base annual salary of
$150,000. Mr. Benovitz' agreement provides for his employment as President and
Chief Operating Officer of the Company at a base annual salary of $195,000. Mr.
Aschettino's agreement provides for his employment as Vice President, Chief
Financial Officer, Treasurer and Clerk of the Company at an initial base annual
salary of $115,000. Mr. Bohan's agreement provides for his employment as Vice
President of Sales and Marketing of the Company at an initial base annual salary
of $130,000. Mr. Manos' agreement provides for his employment as Vice President
of MIS of the Company at an initial annual base salary of $100,000. Each of the
foregoing agreements provides for annual salary increases (i) to reflect
increases in the applicable consumer price index and (ii) in such other amounts,
if any, as determined by the Company's Compensation Committee. In addition,
Messrs. Gray, Benovitz, Aschettino, Bohan and Manos are eligible to receive
bonuses upon the achievement by the Company of certain financial targets
determined by the Company's Compensation Committee. Each of the employment
agreements extends until July 1, 2000, with annual renewals thereafter unless
terminated prior thereto in accordance with their respective terms.
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST
Indemnification of Officers and Directors. The Company's Restated Articles
of Organization, as amended ("Articles of Organization"), contain a provision
which limits directors' and officers' liability to the fullest extent permitted
by the Massachusetts Business Corporation Law (the "MBCL"). Another provision
requires the Corporation to indemnify its current and former directors and
officers against any and all liabilities and expenses incurred in connection
with their service in such capacities to the maximum extent permitted by the
MBCL. The provision allows for the advancement of expenses to the fullest extent
permitted by MBCL to the persons mentioned above. In addition, the Company's
By-Laws provide that the Company must indemnify directors and officers against
liabilities incurred in their capacities as such to the fullest extent permitted
by MBCL, as in effect from time to time.
The Company has entered into separate indemnification agreements with
certain of its directors and its officers. These agreements require the Company,
among other things, to indemnify the directors and officers of the Company
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from actions not taken
in good faith or in a manner the indemnitee believed to be opposed to the best
interests of the Company or arising from certain other actions taken by the
indemnitee), to advance their expenses incurred as a result of any proceedings
against them as to which they could be indemnified and to obtain directors'
insurance if available on reasonable terms. These indemnification agreements
will be terminated on or before the Effective Time (as such term is defined
herein) of the Merger.
The Merger Agreement provides that for a period of six (6) years following
the Effective Time, Parent will cause the Surviving Corporation to indemnify and
hold harmless the present and former officers and directors of the Company
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent as would have been permitted in their respective
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articles of organization or by-laws consistent with applicable law, to the
extent such Costs have not been paid for by insurance and shall, in connection
with defending against any action for which indemnification is available
hereunder, reimburse such officers and directors, from time to time upon receipt
of sufficient supporting documentation, for any reasonable costs and expenses
reasonably incurred by such officers and directors; provided that such
reimbursement shall be conditioned upon such officer's or director's agreement
promptly to return such amounts to the Company if a court of competent
jurisdiction shall ultimately determine that indemnification of such officer or
director is prohibited by applicable law. The Company will maintain for a period
of not less than six (6) years from the Effective Time, the Company's current
directors' and officers' insurance and indemnification policy (or a policy
providing substantially similar coverage) to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O Insurance")
for all persons who are directors and officers of the Company on the date of the
Merger Agreement; provided that the Company shall not be required to spend as an
annual premium for such D&O Insurance an amount in excess of 150% of the annual
premium paid for directors' and officers' insurance in effect prior to the date
of the Merger Agreement; and provided further that the Company shall
nevertheless be obligated to provide such coverage as may be obtained for such
amount.
Affiliated Leases
The Company leases a distribution center in Atlanta, Georgia from the
Suburban Grayson Atlanta Partnership, a Georgia general partnership in which
Messrs. Gray and Melvin Aronson each has a 50.0% interest. In May 1995, the
Company exercised an option to renew the lease covering this property through
August 4, 2006. The annual rent during each of fiscal years 1996 and 1997 was
$160,000.
The Company leases its distribution center in Holliston, Massachusetts from
GBA Realty Trust, a Massachusetts realty trust in which Messrs. Gray, Aronson
and Benovitz have a 40%, 40% and 20% interest, respectively. This lease, which
expires in December 31, 2006, provides for monthly rental payments equal to 110%
of the amounts due and payable each month under a promissory note between GBA
Realty Trust and United of Omaha Life Insurance, provided that the minimum
annual rent is $329,037. The rent paid to GBA Realty Trust was $330,000 during
fiscal year 1996 and $333,000 during fiscal year 1997. Such promissory note is
the obligation solely of GBA Realty Trust and is not guaranteed by, or otherwise
an obligation of, the Company.
In addition, the Company leases its South Bend, Indiana distribution center
from GBA Realty Corp., an Indiana corporation in which Messrs. Gray, Aronson,
Benovitz, Aschettino and Bohan and Mr. Doug Gray own 20%, 30%, 20%, 10%, 10% and
10%, respectively, of the outstanding capital stock. The lease, which expires on
July 31, 2003, provides for an annual rent of $108,000, subject to periodic
adjustments, at the option of GBA Realty Corp.
Other Related Party Arrangements
The Company provides general business insurance to GBA Realty Corp., GBA
Realty Trust and Suburban Grayson Atlanta Partnership under its umbrella policy.
Life Insurance Policies
On June 30, 1995, life insurance policies in the amount of $2.5 million for
each of Messrs. Gray and Aronson, which had previously been carried by the
Company were transferred to each of them. In the event of either individual's
death, the proceeds of this insurance were to be used to repurchase the
individual's stock in the Company at book value. In return for the transfer of
the insurance, the executives exchanged certain notes payable to them from the
Company and issued notes payable to the Company of $129,520, an amount equal to
the difference between the old notes payable and the cash surrender value of the
insurance, plus prepaid insurance premiums at the date of transfer.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions thereof
and is qualified in its entirety by reference to the full text thereof, which is
incorporated herein by reference and a copy of which is filed herewith as
Exhibit 1.
The Offer. The Merger Agreement provides for the making of the Offer. The
obligation of Purchaser to accept for payment or pay for Shares is subject,
among other things, to the satisfaction of the condition that there shall be
validly tendered in accordance with the terms of the Offer prior to the
expiration date of the Offer and not withdrawn a number of Shares which,
together with the Shares then owned by Parent and Purchaser represents at least
two-thirds of the total number of outstanding shares of the Company, assuming
the exercise of all outstanding options, rights and convertible securities (if
any), and the issuance of all shares of the Company that the Company is
obligated to issue and certain other conditions that are set forth on Annex 1 to
the Merger Agreement (the "Minimum Condition"). Pursuant to the terms of the
Merger Agreement, Parent and Purchaser expressly reserve the right to waive any
of the conditions to the Offer (including the Minimum Condition). The expiration
date of the Offer is January 22, 1998. If by Midnight, New York City time, on
Thursday, January 22, 1998, (or any other date or time then set as the
expiration date) all conditions to the Offer have not been satisfied or waived,
and if Purchaser determines that all such conditions are reasonably capable of
being satisfied and subject to the rules of the Securities and Exchange
Commission (the "Commission") with respect to extension of time periods, the
Merger Agreement provides that the Offer will be extended from time to time
until such conditions are satisfied or waived, provided, however, that the
Merger Agreement does not obligate Purchaser to extend the Offer beyond January
31, 1998.
Certain Conditions of the Offer. Notwithstanding any other provision of
the Offer or the Merger Agreement, and subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) relating to Purchaser's
obligation to pay for or return tendered shares after termination of the Offer,
Purchaser shall not be required to accept for payment or pay for any shares of
Company Common Stock tendered pursuant to the Offer and may terminate the Offer
at any time after January 31, 1998, if (i) the Minimum Condition has not been
satisfied; (ii) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, (the "HSR Act") has not expired
or terminated; or (iii) at any time after the date of the Merger Agreement, and
before acceptance for payment of any shares of Company Common Stock, any of the
following events shall occur and be continuing: (a) there shall be instituted or
pending by any Federal, state or local government or any court, administrative
agency or commission or other governmental authority, foreign or domestic (a
"Governmental Entity"), any suit, action or proceeding (i) challenging the
acquisition by Parent or Purchaser of any shares of Company Common Stock under
the Offer or seeking to restrain or prohibit the making or consummation of the
Offer or the Merger, (ii) seeking to prohibit or materially limit the ownership
or operation by the Company, Parent or any of Parent's subsidiaries of a
material portion of the business or assets of the Company or Parent and its
subsidiaries, taken as a whole, or to compel the Company or Parent to dispose of
or hold separate any material portion of the business or assets of the Company
or Parent and its subsidiaries, taken as a whole, in each case as a result of
the Offer or the Merger or (iii) seeking to impose material limitations on the
ability of Parent or Purchaser to acquire or hold, or exercise full rights of
ownership of, any shares of Company Common Stock to be accepted for payment
pursuant to the Offer including, without limitation, the right to vote such
shares of Company Common Stock on all matters properly presented to the
stockholders of the Company or (iv) seeking to prohibit Parent or any of its
subsidiaries from effectively controlling in any material respect any material
portion of the business or operations of the Company; (b) there shall be any
statute, rule, regulation, judgment, order or injunction enacted, entered,
enforced, promulgated or deemed applicable to the Offer or the Merger, by any
Governmental Entity or court, other than the application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that would result in any
of the consequences referred to in clauses (i) through (iv) of paragraph (a)
above; (c) any of the representations and warranties of the Company and its
subsidiaries contained in the Merger Agreement shall not be true and correct at
and as of the date of consummation of the Offer (except to the extent such
representations and warranties speak to an earlier date), in each case except as
contemplated or permitted by the Merger Agreement, and except, in the case of
any such breach when such breach would not have, individually or in the
aggregate, a Material
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Adverse Effect (as defined in the Merger Agreement) with respect to the Company
or materially affect the ability of the Company to consummate the Merger or
Purchaser to accept for payment or pay for shares of Company Common Stock
pursuant to the Offer; (d) the Company shall have failed to perform the
obligations required to be performed by it under the Merger Agreement at or
prior to the date of expiration of the Offer, including but not limited to its
obligations under "Transaction Proposals" below (except for such failures to
perform as have not had or would not individually or in the aggregate, have a
Material Adverse Effect with respect to the Company or materially adversely
affect the ability of the Company to consummate the Merger or Purchaser to
accept for payment or pay for shares of Company Common Stock pursuant to the
Offer); (e) the Board of Directors of the Company or any committee thereof shall
have (i) withdrawn, modified or amended in any respect adverse to Parent or
Purchaser its approval or recommendation of the Offer or the Merger, (ii)
recommended or approved any Transaction Proposal from a person other than
Parent, Purchaser or any of their respective affiliates, (iii) failed to
publicly announce, within ten (10) business days after the occurrence of a
Transaction Proposal, its opposition to such Transaction Proposal, or amended,
modified or withdrawn its opposition to any Transaction Proposal in any manner
adverse to Parent or Purchaser or (iv) resolved to do any of the foregoing; (f)
the Merger Agreement shall have been terminated in accordance with its terms; or
which, in the good faith judgment of Parent or Purchaser, in its sole
discretion, make it inadvisable to proceed with such acceptance of shares of
Company Common Stock for payment or the payment therefor.
Board of Directors. The Merger Agreement provides that effective upon the
acceptance for payment by Purchaser of Shares pursuant to the Offer such that
the Parent or Purchaser shall own at least a majority of the Shares on a fully
diluted basis, the Parent will be entitled to designate the number of Directors,
rounded up to the next whole number, on the Company's Board of Directors that
equals the product of (i) the total number of directors on the Company's Board
of Directors (giving effect to the election of any additional directors pursuant
to this provision of the Merger Agreement) and (ii) the percentage that the
number of Shares owned by Purchaser or the Parent (including shares of Company
Common Stock accepted for payment) bears to the total number of shares of
Company Common Stock outstanding, and the Company will take all necessary action
to cause the Parent's designees to be elected or appointed to the Company's
Board of Directors. The Merger Agreement also provides that the Company will use
its best efforts to cause individuals designated by the Parent to constitute the
same percentage as such individuals represent on the Company's Board of
Directors of each committee of the Board (other than committees established to
take action under the Merger Agreement), each board of directors of each
subsidiary of the Company and each committee of each such board. The Company's
obligations to appoint designees to the Board of Directors are subject to
Section 14(f) of the Exchange Act. The Company has agreed to take all action
required pursuant to Section 14(f) and Rule 14(f)-1 in order to fulfill its
obligations to appoint such directors, including mailing to its stockholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14(f)-1 promulgated thereunder, which Information
Statement is attached hereto as Annex 1. The Merger Agreement further provides
that in the event that Purchaser's designees are elected to the Board of
Directors of the Company, until the Effective Time the Board of Directors of the
Company will have at least two (2) directors who are directors on the date of
the Merger Agreement and who are not officers of the Company or any of its
subsidiaries.
Vote Required to Approve Merger. The MBCL requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved by the Board of Directors of the Company and, if the "short form"
merger procedure described below is not available, by the holders of two-thirds
of the Company's outstanding Shares. The Board of Directors of the Company has
approved the Offer, the Merger and the Merger Agreement; consequently, the only
additional action of the Company that may be necessary to effect the Merger is
approval by such stockholders if the "short-form" merger procedure described
below is not available. Under the MBCL, the affirmative vote of holders of
two-thirds of the outstanding Shares (including any Shares owned by Purchaser),
is generally required to approve the Merger. If Purchaser acquires, through the
Offer or otherwise, voting power with respect to at least two-thirds of the
outstanding Shares (which would be the case if the Minimum Condition was
satisfied and Purchaser was to accept for payment Shares tendered pursuant to
the Offer), it would have sufficient voting power to effect a merger of the
Company with and into Purchaser without the vote of any other stockholders of
the Company. However,
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the MBCL also provides that if a parent company owns at least 90% of each class
of stock of a subsidiary, the parent company can effect a short-form merger with
that subsidiary merging into the parent without the action of the other
stockholders of the subsidiary. Accordingly, if, as a result of the Offer or
otherwise, Purchaser acquires or controls the voting power of at least 90% of
the outstanding Shares, Purchaser could effect a merger of the Company into
Purchaser using the "short-form" merger procedures without prior notice to, or
any action by, any other stockholder of the Company. In such an event,
stockholders of the Company shall not be adversely affected thereby (other than
the right to receive a proxy statement, attend a meeting of the stockholders and
vote on the Merger, which shall no longer be applicable).
Conditions to the Merger. The Merger Agreement provides that the Merger is
subject to the satisfaction of certain conditions, including the following: (1)
if required by applicable law, the Merger Agreement having been approved and
adopted by the affirmative vote of holders of two-thirds of the outstanding
Shares, (2) the expiration or termination of the applicable waiting period under
the HSR Act; and (3) no temporary restraining order, preliminary or permanent
injunction or other order issued by any Governmental Entity or other legal
restraint or prohibition preventing or prohibiting the acceptance for payment of
or payment for Shares pursuant to the Offer or the consummation of the Merger
being in effect; provided, however, that each of the parties shall have used
their best efforts to have any such injunction, order, restraint or prohibition
or other order vacated.
Termination of the Merger Agreement The Merger Agreement may be terminated
at any time prior to the effective time of the Merger (the "Effective Time"),
whether before or after approval by the stockholders of the Company (1) by
mutual written consent of Purchaser and the Company; (2) by either Purchaser or
the Company if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Shares pursuant to
the Offer or the Merger and such order, decree or ruling or other action has
become final and nonappealable or if any other legal restraint or prohibition
preventing or prohibiting the acceptance for payment of, or payment for, Shares
pursuant to the Offer or Merger shall be in effect and shall have become final
and non-appealable: (other than due to the failure of the party seeking to
terminate the Merger Agreement to perform its obligations thereunder required to
be performed at or prior to the Effective Time); (3) by the Company if Purchaser
has not (a) commenced the Offer within five (5) business days after the initial
public announcement of Parent's intention to commence the Offer or (b) accepted
for payment any Shares pursuant to the Offer prior to March 31, 1998 (other than
due to the failure of the Company to perform its obligations thereunder); (4) by
Purchaser in the event of a material breach or failure to perform in any
material respect by the Company of any representation, warranty, covenant or
other agreement contained in the Merger Agreement which cannot be or has not
been cured within twenty (20) days after the giving of written notice to the
Company; (5) by the Company upon its execution, prior to the Parent or
Purchaser's purchase of Shares pursuant to the Offer, of a binding agreement
with a third party with respect to a Transaction Proposal (as defined below in
"Transaction Proposals"), provided that it has complied with all provisions of
the Agreement, including the notice provisions described in "Transaction
Proposals" below, and that it pays the Termination Fee (as defined below) as
provided in the terms of the Merger Agreement described below in "Fees and
Expenses;" (6) by the Company in the event of a material breach or failure to
perform in any material respect by Purchaser or Parent of any representation,
warranty, covenant or other agreement contained in the Merger Agreement which
cannot be or has not been cured within twenty (20) days after the giving of
written notice to the Parent and Purchaser; or (7) by Purchaser if Purchaser
terminates the Offer as a result of the occurrence of any event set forth under
"Certain Conditions of the Offer."
Transaction Proposals. The Merger Agreement provides that neither the
Company nor any of its subsidiaries, nor any of their respective officers,
directors, employees, representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or any of its subsidiaries) will directly or indirectly initiate,
solicit or knowingly encourage (including by way of furnishing non-public
information or assistance), or take any other action to facilitate, knowingly,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to any Transaction Proposal (as defined below) or enter into
or maintain or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain a Transaction Proposal or agree to or
endorse any Transaction Proposal or authorize or permit any of its officers,
directors, or employees of any of its subsidiaries
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or any investment banker, financial advisor, attorney, accountant or other
representative retained by any of its subsidiaries to take any such action;
provided, however, that if, at any time prior to the acceptance for payment of
Shares pursuant to the Offer, the Board of Directors of the Company determines
in good faith, after consultation with their financial advisors and after
consultation with and based upon the advice of independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), that it is
necessary to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Company may, subject to compliance with
the notification provisions discussed below and the receipt of a confidentiality
agreement containing terms and provisions substantially similar to those
contained in the confidentiality agreement executed by the Company and Parent,
(a) furnish information to or enter into discussions or negotiations with any
person or entity that makes an unsolicited written, bona fide proposal, to
acquire the Company and/or its subsidiaries pursuant to a merger, consolidation,
share exchange, business combination, tender or exchange offer or other similar
transaction in respect of which such person or entity has the necessary funds or
commitments therefor. The Merger Agreement defines "Transaction Proposal" as any
of the following (other than the transactions between the Company and Purchaser
contemplated by the Offer and the Merger Agreement) involving the Company or any
of its subsidiaries: (i) any merger, consolidation, share exchange,
recapitalization, business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of 20% or
more of the assets of the Company and its subsidiaries, taken as a whole, in a
single transaction or series of transactions; (iii) any tender offer or exchange
offer for, or the acquisition (or right to acquire) of beneficial ownership by
any person, group or entity, other than a person, group or entity which has
signed the Stockholders Agreement (as such term is defined herein), of 20% or
more of the outstanding shares of capital stock of the Company or the filing of
a registration statement under the Securities Act in connection therewith; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. The Merger
Agreement provides further that if a Transaction Proposal exists and the Board
of Directors of the Company, after consultation with their financial advisors
and after consultation with and based upon advice of independent legal counsel
(who may be the Company's regularly engaged independent legal counsel)
determines in good faith that such action is necessary for the Board of
Directors to comply with its fiduciary duties to stockholders under applicable
law in connection with such Transaction Proposal, the Board of Directors of the
Company may, at any time prior to the acceptance for payment of Shares pursuant
to the Offer and subject to the notification requirements described below: (i)
withdraw or modify its recommendation of the Offer, the Merger or the Merger
Agreement and (ii) make to the Company's stockholders any recommendation and
related filing with the Commission as required by Rule 14e-2 and 14d-9 under the
Exchange Act with respect to any tender offer, or take any other legally
required action with respect to such tender offer (including, without
limitation, the making of public disclosures as may be necessary or reasonably
advisable under applicable securities laws).
The Merger Agreement obligates the Company to promptly advise Purchaser
orally and in writing of any request for nonpublic information from, or
discussions or negotiations with, any person or entity or of any Transaction
Proposal known to it, the material terms and conditions of such request or
Transaction Proposal and the identity of the person or entity making such
request or Transaction Proposal, and to promptly inform Purchaser of any
material change in the details of such request, the contents of any discussions
or negotiations or any material change in such Transaction Proposal. In
addition, neither the Board of Directors nor any committee thereof may take any
action with respect to the matters set forth in clauses (i) or (ii) of the last
sentence of the preceding paragraph until a time that is after the later of the
fourth business day following Purchaser's receipt of written notice advising it
that the Board of Directors of the Company has received a Transaction Proposal,
specifying the material terms thereof and identifying the person making the same
and, in the event of any amendment to the price or any material term of a
Transaction Proposal, two (2) business days following Purchaser's receipt of
written notice containing the material terms of such amendment, including any
change in price (it being understood that each further amendment to the price or
any material terms of a Transaction Proposal will necessitate an additional
written notice to Parent and an additional two (2) business day period prior to
which the Company can take the actions set forth in the last sentence of the
preceding paragraph).
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Fees and Expenses. The Merger Agreement provides that except as provided
below, all fees and expenses incurred in connection with the Offer, the Merger,
the Merger Agreement and the transactions contemplated by the Merger Agreement
will be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated. The Merger Agreement further provides that,
subject to the last sentence of this paragraph, the Company will pay to
Purchaser the amount equal to 4.25% of the aggregate consideration to be paid
pursuant to the Merger Agreement (the "Termination Fee") if any person (other
than Purchaser or any of its affiliates) has made, proposed, communicated or
disclosed a Transaction Proposal in a manner which is or otherwise becomes
public and the Merger Agreement is terminated: (1) by the Company in accordance
with the provisions described above in clause 5 of "Termination of the Merger
Agreement" or in accordance with the provisions described above in clause 3 of
"Termination of the Merger Agreement" if Purchaser's failure to accept Shares
for payment results from the failure of the Minimum Condition to be satisfied or
the occurrence of any of the events set forth in subparagraphs (c), (d) or (e)
of "Certain Conditions of the Offer" or (2) by Purchaser in accordance with the
provisions described above in clause 4 of "Termination of the Merger Agreement"
or in accordance with the provisions described above in clause 7 of "Termination
of the Merger Agreement" if Purchaser's failure to accept Shares for payment
results from the failure of the Minimum Condition to be satisfied or the
occurrence of any of the events set forth in subparagraphs (c), (d) or (e) of
"Certain Conditions of the Offer." Notwithstanding the foregoing, the Merger
Agreement provides that no Termination Fee will be payable if such termination
is based upon the Company's breach of certain representations and warranties
relating to the absence of a Material Adverse Change (as defined below) in its
business and the absence of any condition, event or occurrence which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect (as defined below) on the Company or give rise to a
Material Adverse Change with respect to the Company.
The Merger Agreement defines the terms Material Adverse Change or Material
Adverse Effect to mean, when used in connection with the Company, any change or
effect that either individually or in the aggregate with all such other changes
or effects is materially adverse to the business, financial condition, prospects
or results of operations of the Company and its subsidiaries taken as a whole;
provided, however, that no Material Adverse Change or Material Adverse Effect
will be deemed to have occurred as a result solely of any one or more of: (i)
those matters described in a separate writing dated the date of the Merger
Agreement and specifically referencing the pertinent section of the Merger
Agreement delivered by the Company to Parent, (ii) general economic conditions
affecting generally the industry in which the Company competes and general
market conditions in the United States, or (iii) changes after the date of the
Merger Agreement in the relationship between the Company and any customer or
supplier, so long as any such change is not attributable to or does not arise
from a breach by the Company of any of its representations, warranties or
covenants contained in the Merger Agreement.
In addition, in connection with any termination of the Merger Agreement
under any circumstance in which the Termination Fee would be payable, the Merger
Agreement provides that the Company will also be obligated, simultaneously with
such termination, to reimburse Purchaser for all out-of-pocket expenses and fees
in an aggregate amount not to exceed $1.5 million.
Conduct of Business by the Company. The Merger Agreement provides that
until the earlier of the Effective Time and consummation of the Offer, the
Company will, and will cause its subsidiaries to, act and carry on their
respective businesses in the usual, regular and ordinary course of business
consistent with past practice and, to the extent consistent therewith, use their
respective reasonable best efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, licensors,
licensees, advertisers, distributors and others having business dealings with
them and to preserve goodwill. Without limiting the generality of the foregoing,
during the period from the date of the Merger Agreement until the earlier of the
Effective Time and consummation of the Offer, the Company will not, and will not
permit any of its subsidiaries to, without Purchaser's prior written consent:
(a) declare, set aside or pay any dividends on, or make any other distributions
in respect of, any of its capital stock, (b) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock (c)
purchase, redeem or otherwise acquire any shares of capital stock of the Company
or any of its subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares or
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other securities, except for the acquisition of shares of Company Common Stock
from holders of Company Stock Options in full or partial payment of the exercise
price payable by such holder upon exercise of Company Stock Options outstanding
on the date of the Merger Agreement; (d) authorize for issuance, issue, deliver,
sell, pledge or otherwise encumber any shares of its capital stock or the
capital stock of any of its subsidiaries, any other voting securities or any
securities convertible into, any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities or any other securities
or equity equivalents (including without limitation stock appreciation rights,
other than an increase in the number of shares subject to the Stock Option Plan
pursuant to existing contractual obligations and the issuance of Company Common
Stock upon the exercise of Company Stock Options outstanding on the date of the
Merger Agreement and in accordance with their present terms); (e) in the case
where the Company, amends its Articles of Organization, by-laws or other
comparable charter or organizational documents; (f) acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization or
division thereof material to the Company; (g) other than as specifically
permitted by the Merger Agreement, sell, lease, license, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any of its properties or
assets other than any such properties or assets the value of which do not exceed
$1.0 million individually and $3.0 million in the aggregate, except sales of
inventory, in the ordinary course of business consistent with past practice; (h)
incur any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its subsidiaries, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for short-term borrowings and for lease obligations, in each case
incurred in the ordinary course of business consistent with past practice; (i)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or any direct or indirect wholly owned
subsidiary of the Company, other than loans to employees in the ordinary course
of business not to exceed $1,000 in any one case or 25,000 in the aggregate; (j)
pay, discharge or satisfy any claims (including claims of stockholders),
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), except for the payment, discharge or satisfaction, (i)
of liabilities or obligations in the ordinary course of business consistent with
past practice or in accordance with their terms as in effect on the date hereof
or (ii) claims settled or compromised to the extent permitted under clause (n)
below, or waive, release, grant, or transfer any rights of material value or
modify or change in any material respect any existing license, lease, permit,
contract or other document, other than in the ordinary course of business
consistent with past practice; (k) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization; (l) enter into any new collective bargaining agreement; (m)
change any material accounting principle used by it; (n) settle or compromise
any litigation (whether or not commenced prior to the date of the Merger
Agreement) other than settlements or compromises of litigation where the amount
paid (after giving effect to insurance proceeds actually received) in settlement
or compromise is not material to the Company; or (o) authorize any of, or commit
or agree to take any of, the foregoing actions.
Stock Options and Bank Warrant. The Merger Agreement provides that as soon
as practicable following the date of the Merger Agreement, the Board of
Directors of the Company (or, if appropriate, any committee administering the
Company's Stock Option Plan) will adopt such resolutions or take such other
actions if any, as may be reasonably required to: (1) adjust the terms of all
outstanding Company Stock Options to purchase the Company Common Stock granted
under the Stock Option Plan, whether vested or unvested, as necessary to provide
that, at the Effective Time, each Company Stock Option outstanding immediately
prior to the Effective Time will vest as a consequence of the Merger and be
canceled in exchange for a payment from the Company after the Merger (subject to
any applicable withholding taxes) equal to the product of (a) the total number
of shares of Company Common Stock subject to such Company Stock Option and (b)
the excess of $11.75 over the exercise price per share of Company Common Stock
subject to such Company Stock Option and applicable withholding taxes, payable
in cash immediately following the Effective Time of the Merger; (2) cause the
cancellation of an outstanding warrant to purchase 86,180 shares of
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Company Common Stock (the "Bank Warrant") by causing a "Redemption Event" (as
defined in the Bank Warrant) to occur and taking such other steps as may be
necessary to cause such cancellation, including making all payments required to
be made in connection therewith.
Reasonable Best Efforts. Upon the terms and subject to the conditions set
forth in the Merger Agreement, each of the parties has agreed to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other transactions contemplated by the Merger Agreement. Parent, Purchaser
and the Company will use their reasonable best efforts and cooperate with one
another (i) in promptly determining whether any filings are required to be made
or consents, approvals, waivers, licenses, permits or authorizations are
required to be obtained (or, which if not obtained, would result in a breach or
violation, or an event of default, termination or acceleration of any agreement
or any put right under any agreement) under any applicable law or regulation or
from any governmental authorities or third parties, including parties to loan
agreements or other debt instruments, in connection with the transactions
contemplated by the Merger Agreement, including the Offer and the Merger and
(ii) in promptly making any such filings, in furnishing information required in
connection therewith and in timely seeking to obtain any such consents,
approvals, permits or authorizations. Notwithstanding the foregoing, or any
other covenant contained in the Merger Agreement, in connection with the receipt
of any necessary approvals under the HSR Act, neither the Company nor any of its
subsidiaries will be entitled to divest or hold separate or otherwise take or
commit to take any action that limits its freedom of action with respect to, or
its ability to retain, the Company or any of its subsidiaries or any material
portions thereof or any of the businesses, product lines, properties or assets
of the Company or any of its subsidiaries, without Purchaser's prior written
consent. The Merger Agreement requires the Company to make, subject to the
condition that the transactions contemplated by the Merger Agreement actually
occur, any undertakings (including undertakings to make divestitures, provided,
in any case, that such divestitures need not themselves be effective or made
until after the transactions contemplated hereby actually occur) required in
order to comply with the antitrust requirements or laws of any Governmental
Entity, including the HSR Act, in connection with the transactions contemplated
by the Merger Agreement; provided that no such divestiture or undertaking may be
made unless acceptable to Purchaser. Each of the parties has also agreed to
cooperate with each other in taking, or causing to be taken, all actions
necessary to delist the Company Common Stock from The Nasdaq National Market
("Nasdaq"), provided that such delisting shall not be effective until after the
Effective Time of the Merger. The Merger Agreement also contains an
acknowledgment by the parties that it is Purchaser's intent that the Shares
following the Offer and the Merger will not be quoted on Nasdaq or listed on any
national securities exchange.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties, including representations from the
Company to the Parent and Purchaser with respect to, among other things, its
organization, subsidiaries, capitalization, authorization and validity of the
Merger Agreement, consents and approvals, public filings and financial
statements, undisclosed liabilities, conduct of business and absence of certain
adverse changes or events, labor matters, compliance with laws, employee benefit
plans, tax matters, litigation, employee benefit plans, environmental matters,
material contracts, brokers and finders and opinion of financial advisor,
recommendation of the Board of Directors, state takeover statutes, intellectual
property, related party transactions, permits, insurance policies, business
practices, relationships with suppliers and customers and product warranties.
Procedure for Termination, Amendment, Extension or Waiver. The Merger
Agreement provides that the affirmative vote of the majority of the Directors of
the Company, who were Directors on the date of the Merger Agreement and who are
not officers of the Company or any of its subsidiaries, will be required to \(i)
amend or otherwise modify the Company's Articles of Organization, (ii) approve
any amendment, modification or waiver by the Company of any provisions of the
Merger Agreement or (iii) approve any other action by the Company that
materially and adversely affects the interests of the stockholders of the
Company (other than Purchaser and Parent) with respect to the transactions
contemplated hereby, including without limitation any actions which would
constitute a breach by the Company of its representations, warranties or
covenants contained in the Merger Agreement.
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Appraisal Rights. Under the MBCL, stockholders of the Company will not be
entitled to appraisal rights as a result of the Offer. However, if the Merger is
consummated, the Company's stockholders will be entitled to appraisal rights,
pursuant to the provisions of Chapter 156B of the MBCL. If the Merger is
approved by the stockholders of the Company at a meeting of stockholders and the
Merger is effected by the Company, then any stockholder (1) who files with the
Company before the taking of the vote on the Merger, written objection to the
proposed action stating that such stockholder intends to demand payment for such
stockholder's Shares if the action is taken and (2) whose Shares are not voted
in favor of such action has or may have the right to demand in writing from the
Company, within twenty (20) days after the date of mailing to such stockholder
of notice in writing that the corporate action has become effective, payment for
such stockholder's Shares and an appraisal of the value thereof. The Company and
any such stockholder shall in such case have the rights and duties and shall
follow the procedures set forth in sections 86 to 98, inclusive, of the MBCL.
Failure to vote against the Merger will constitute a waiver of such rights set
forth in Exhibit 2 filed herewith. Except as set forth herein, stockholders of
the Company will not be entitled to appraisal rights in connection with the
Merger.
Within ten (10) days after the date on which the Merger becomes effective,
the Company must notify each stockholder who, in compliance with the
requirements described above, filed a written objection and did not vote any
Shares in favor or such action, that the action approved at the meeting of the
stockholders of the Company has become effective. If within twenty (20) days
after the date of mailing of this notice, any stockholder to whom the Company is
required to give such notice demands in writing from the Company payments for
such stockholder's Shares, the Company will pay to such stockholder the fair
value of the Shares within thirty (30) days after the expiration of the period
during which such demand may be made. If during this thirty (30) day period, the
Company and any such objecting stockholder fail to agree as to the value of such
Shares, the Company or any such stockholder, may within four (4) months after
the expiration of such thirty (30) day period demand a determination of the
value of the Shares of all such objecting stockholders by a bill in equity filed
in the superior court in the county where the Company's principal offices are
located in Massachusetts.
If Parent acquires 90% or more of the Company's Common Stock and elects to
use a short form merger in which a vote of stockholders is not required for
approval of the Merger, then within ten (10) days after the Effective Time,
Parent must send a written notice to each stockholder of the Company. Such
notice must set forth the date of filing of the articles of merger and the
effective date of the Merger, the terms and conditions of the Merger and the
right of any stockholder who objects to the Merger to demand in writing from
Parent payment for his, her or its Shares and appraisal thereof. If any
stockholder demands in writing from Parent within twenty (20) days after the
mailing of such notice payment for his, her or its Shares and an appraisal
thereof, such stockholder and Parent shall in such case have the rights and
duties and follow the procedures set forth in Sections 89 to 98, inclusive, of
the MBCL.
The foregoing is only a partial summary of sections 86 and 98, inclusive,
of the MBCL and is qualified in its entirety by reference to the provisions
thereof, the full text of which is filed herewith as Exhibit 2 and is
incorporated herein by reference.
STOCKHOLDERS AGREEMENT
Simultaneously with the execution of the Merger Agreement, Herbert P. Gray,
Donald H. Benovitz, Summit Ventures III, L.P., Summit Investors II, L.P. and
Summit Subordinated Debt Fund, L.P. (collectively, the "Selling Stockholders")
entered into a Stockholders Agreement with Parent and Purchaser (the
"Stockholders Agreement"). The following is a summary of the material terms of
the Stockholders Agreement. This summary is not a complete description of the
terms and conditions thereof and is qualified in its entirety by reference to
the full text thereof which is incorporated herein by reference and a copy of
which is filed herewith as Exhibit 3.
Tender of Shares. In connection with the execution of the Merger
Agreement, Parent and Purchaser entered into a separate Stockholders Agreement
with each of the Selling Stockholders. Upon the terms and subject to the
conditions of the Stockholders Agreement, each of the Selling Stockholders has
agreed to
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validly tender (and not withdraw) pursuant to and in accordance with the terms
of the Offer, no later than the fifteenth business day after commencement of the
Offer, the number of Shares owned beneficially by such Selling Stockholder. The
Selling Stockholders beneficially own an aggregate of 4,867,465 Shares directly
and Messrs. Gray and Benovitz hold Company Stock Options to purchase an
aggregate of 310,000 additional Shares (which aggregate number of Shares
represent approximately 45% of the Company's outstanding Shares on a fully
diluted basis).
Provisions Concerning the Shares. The Selling Stockholders have agreed
that during the period commencing on the date of the Stockholders Agreement and
continuing until the first to occur of the Effective Time or the termination of
the Merger Agreement in accordance with its terms, at any meeting of the
Company's stockholders or in connection with any written consent of the
Company's stockholders, the Selling Stockholders will vote (or cause to be
voted) the Shares held of record or beneficially owned by each of such Selling
Stockholders: (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement, and the Stockholders
Agreement and any actions required in furtherance thereof; and (ii) against any
Transaction Proposal and against any action or agreement that would impede,
frustrate, prevent or nullify the Stockholders Agreement or result in a breach
in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which would
result in any of the conditions to the Offer or to the Merger not being
fulfilled. In addition, each of the Selling Stockholders has appointed
representatives of Parent and certain officers of Parent as proxies to vote such
Selling Stockholder's Shares or grant a consent or approval in respect of such
Shares in favor of the various transactions contemplated by the Merger Agreement
and against any Transaction Proposal. Each of the Selling Stockholders also has
agreed not to transfer such Selling Stockholder's Shares (other than to certain
permitted transferees who would be required, as a condition to any such
transfer, to sign a similar Stockholders Agreement) and not to, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any Transaction Proposal.
Other Covenants, Representations and Warranties. In connection with the
Stockholders Agreement, each of the Selling Stockholders made certain customary
representations and warranties, including with respect to (i) ownership of the
Shares, (ii) the Selling Stockholder's authority to enter into and perform its
or his obligations under the Stockholders Agreement, (iii) the absence of
conflicts and requisite governmental consents and approvals, and (iv) the
absence of encumbrances on and in respect of the Selling Stockholder's Shares.
Parent and Purchaser have made certain representations and warranties with
respect to Parent and Purchaser's authority to enter into the Stockholders
Agreement and the absence of conflicts and requisite governmental consents and
approvals.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has unanimously approved the Merger Agreement and
the transactions contemplated thereby and determined that each of the Offer and
the Merger is fair to, and in the best interests of, the stockholders of the
Company. The Board of Directors recommends that all holders of Shares accept the
Offer and tender their Shares pursuant to the Offer.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION.
Background. In July, 1997, the Board of Directors of the Company
determined that, in light of (i) increasing consolidation among distributors of
home health care supplies, (ii) increasing consolidation among the Company's
customer base and (iii) the fact that certain manufacturers of disposable home
health care supplies had broadened the distribution of their products, which had
increased competition from larger, national distributors of medical products
with substantial sales forces and greater capital resources, it would be in the
best interest of the stockholders of the Company to consider the potential sale
of the Company. On July 15, 1997, the Company engaged Bear, Stearns & Co. Inc.
("Bear Stearns") to serve as its financial
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advisor to explore strategic alternatives to enhance stockholder value,
including a potential sale of the Company.
In August, 1997, Bear Stearns contacted a competitor of the Company in the
medical supply distribution industry to determine whether it had an interest in
acquiring the Company and the Company entered into an agreement with the
competitor pursuant to which the competitor would have until August 19, 1997 to
negotiate mutually acceptable terms with the Company. Following two (2) meetings
with the competitor, during which the competitor conducted due diligence and
discussed the terms of a potential transaction, the competitor made a
preliminary oral offer to purchase the Company in a stock-for-stock transaction,
subject to further due diligence. The Company declined the offer and the Board
of Directors directed Bear Stearns to solicit interest from other potential
acquirors.
In late August, 1997, Thomas R. Miklich, Parent's Chief Financial Officer,
General Counsel, Treasurer and Secretary, contacted Donald H. Benovitz, the
Company's President and Chief Operating Officer, and informed him of Parent's
interest in acquiring the Company. Shortly thereafter, Mr. Miklich was contacted
by a representative of Bear Stearns who indicated that Bear Stearns had been
retained by the Company to explore strategic alternatives to enhance stockholder
value. The Bear Stearns representative indicated that among the alternatives to
be explored was the potential sale of the Company.
A Confidential Information Memorandum describing the Company was prepared
in September, 1997. Bear Stearns contacted twelve (12) potential strategic
buyers (excluding the competitor who had been approached in the first instance,
and including Parent) who were deemed to be viable candidates to acquire the
Company. Of the twelve (12) potential strategic buyers, seven (7) signed a
Confidentiality Agreement and received the Confidential Information Memorandum.
On September 5, 1997, Parent executed a Confidentiality Agreement with the
Company. On September 11, 1997, at the Company's executive offices in Holliston,
Massachusetts, A. Malachi Mixon, III, Parent's Chairman and Chief Executive
Officer, Mr. Miklich, Thomas J. Buckley, then Parent's Group Vice-
President -- Standard Products and Louis F. J. Slangen, Parent's Senior Vice
President -- Sales and Marketing, met with Herbert P. Gray, the Company's
Chairman and Chief Executive Officer, Mr. Benovitz, Steven N. Aschettino, the
Company's Vice President and Chief Financial Officer, Patrick Bohan, the
Company's Vice President of Sales and Marketing, and John Manos, the Company's
Vice President of MIS, and discussed the benefits of a close relationship
between the two (2) companies. The parties discussed the possibility of Parent
becoming a supplier to the Company as well as the potential benefits of a merger
between Parent and the Company.
Following this meeting, Parent was provided with additional information
concerning the Company. On October 3, 1997, Parent sent Bear Stearns a letter
outlining its preliminary interest in acquiring the Company. The letter included
a discussion of Parent's preliminary views of the consideration involved in such
a transaction and identified further steps that would be required to finalize
the terms and conditions of a formal acquisition proposal.
Of the seven (7) potential strategic buyers to whom a copy of the
Confidential Information Memorandum was sent, one (1) such party in addition to
Parent made a preliminary bid to acquire the Company.
On October 20, 1997, the Company and its financial advisors met with the
other bidder and its financial advisors and discussed at length the Company's
operations and financial results, fiscal 1998 financial projections and
potential merger synergies.
On October 29, 1997, Messrs. Buckley, Miklich and Slangen met with Messrs.
Gray, Benovitz, Bohan, Aschettino and a representative of Bear Stearns in
Boston. At that meeting, the parties reviewed the Company's financial results
for fiscal 1997 and fiscal 1998 financial projections. A detailed discussion
took place regarding the strategies behind the Company's recent acquisitions,
and the parties also discussed the potential synergies associated with an
acquisition of the Company by Parent.
On November 4, 1997, Bear Stearns sent a letter to Parent and the other
bidder requesting final bids by November 10, 1997 and enclosing for comment a
preliminary draft of the Merger Agreement. On
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November 10, 1997, the other bidder submitted a written offer to acquire the
Company in a stock-for-stock transaction, subject to certain parameters with
respect to the trading price of the bidder's stock, and confirmation of pre-tax
synergies and operating income for the calendar year 1998. On November 10, 1997,
Parent advised Bear Stearns that it declined to extend an offer, indicating that
the price suggested by Bear Stearns would be excessive. Bear Stearns and certain
members of the Company's Board of Directors continued discussions with the other
bidder for several days regarding the consideration offered and other financial
conditions of its offer.
On November 18, 1997, Mr. Miklich received a telephone call from a Bear
Stearns representative indicating that a proposal within a range of values
acceptable to Parent might be acceptable to the Company. Parent's Board of
Directors was meeting that day, and Parent reviewed its financial analysis of
the Company with its Board. Management recommended, and Parent's Board of
Directors approved in principle, an offer to acquire the Company for a cash
purchase price of $11.75 per share. Parent's Board of Directors' decision was
communicated to Bear Stearns and confirmed in a letter dated November 20, 1997.
Bear Stearns provided an opportunity for the other potential bidders with
whom it had negotiated previously to submit final offers to purchase the
Company. One potential bidder submitted a final offer to purchase the Company in
a stock-for-stock transaction in a range of prices which, at the higher end of
the range, was potentially higher than the final offer submitted by Parent,
subject to extensive financial and legal due diligence, and confirmation of
merger synergies. The other bidder submitted a final offer to purchase the
Company in a stock-for-stock transaction for a lower price than the final offer
from Parent, subject to extensive due diligence and confirmation of merger
synergies. The Company determined that it was in the best interests of the
stockholders of the Company to pursue a transaction with Parent, given that its
offer was in cash, was not subject to a financing contingency or other
significant conditions, and was likely to be able to close more quickly than a
transaction with one of the other bidders.
On November 24, 1997, Parent and the Company executed a letter agreement
providing that, until December 15, 1997, the Company would negotiate exclusively
with Parent concerning a proposed sale of the Company. From time to time during
the course of the next several weeks, representatives of Parent and
representatives of the Company discussed valuation parameters of the Company and
continued to discuss generally the terms and conditions of a possible
transaction.
On December 1, 1997, Messrs. Mixon, Buckley, Miklich, Slangen and Gerald B.
Blouch, President and Chief Operating Officer of Parent, met with Messrs.
Benovitz, Bohan, Gray, Aschettino and representatives of Bear Stearns in Boston
to conduct further due diligence. Beginning with that meeting, and continuing
through the date of the Merger Agreement, representatives of Parent, together
with Parent's legal counsel and environmental consultants, conducted a due
diligence review at the offices of the Company's legal counsel and at the
Company's regional distribution facilities. During the same period, Parent's
legal counsel and the Company's legal counsel discussed structural issues
regarding the proposed acquisition, including Parent's requirement that there be
agreements along the lines of the Stockholders Agreement and that there be
certain other provisions in the event of a termination of the Merger Agreement
(including the payment of a termination fee to Parent) by the Company in
connection with a competing transaction.
On December 8, 1997, Parent delivered a draft Merger Agreement to the
Company's legal counsel, and on December 11, 1997, Parent delivered a draft of
the Stockholders Agreement to the Company's legal counsel. Negotiations between
Parent and the Company continued through December 16, 1997, and the Merger
Agreement and the Stockholders Agreement were executed as of December 17, 1997.
Reasons for the Transaction; Factors Considered by the Board.
The Board of Directors and the Company's senior management have reviewed
the Company's strategic position in the medical supply distribution industry,
the near and longer term prospects for that industry, the consolidation trends
within that industry, and the Company's potential position in the industry and
the strategic alternatives available to the Company, all with a view to
maximizing stockholder value. In conducting its review, the Board considered the
Company's results of operations, including those for the quarter ended November
30, 1997. In light of the Board's review of the Company's competitive position
and
14
<PAGE> 16
recent operating results, anticipated trends in the industry, and the prospects
for the Company as an independent entity, the Board determined that it would be
in the best interests of the Company's stockholders to approve the Merger
Agreement. In approving the Merger Agreement and the transactions contemplated
thereby and recommending that all holders of shares of Company Common Stock
tender their shares pursuant to the Offer, the Board of Directors considered a
number of factors, including:
(i) The terms of the Merger Agreement and the Stockholders Agreement
executed by certain stockholders in connection therewith;
(ii) Presentations by senior management of the Company at meetings of
the Board of Directors held December 2, 11 and 16, 1997;
(iii) The trading price of shares of the Company since its initial
public offering on October 10, 1996, including recent trends;
(iv) The Company's competitive position and current trends in the home
health care supply distribution industry;
(v) The results of the process undertaken by Bear Stearns to identify
and solicit indications of interest from a number of potential purchasers
with respect to a purchase of the Company;
(vi) The presentations by Bear Stearns at the December 2, 11 and 16,
1997 meetings of the Board of Directors and the oral opinion of Bear
Stearns delivered to the Board at the December 16th meeting (which was
subsequently confirmed in writing) to the effect that, as of such date and
based upon the assumptions and the other matters to be set forth in its
written opinion, the $11.75 per share cash consideration to be received by
the holders of the shares in the Offer and the Merger is fair to such
holders from a financial point of view. A copy of the opinion of Bear
Stearns, which sets forth the assumptions made, the matters considered and
the limitations of the review undertaken by Bear Stearns, is attached
hereto as Exhibit 4. STOCKHOLDERS ARE URGED TO READ THE OPINION OF BEAR
STEARNS CAREFULLY IN ITS ENTIRETY;
(vii) The fact that the holders of approximately 45% of the Shares
were prepared to endorse the Merger Agreement;
(viii) The fact that the Offer and the Merger are not conditioned on
the availability of financing; and
(ix) The availability of dissenters' rights of appraisal in the
Merger.
The Board of Directors did not assign relative weight to the above factors
or determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations are being based on the
totality of the information presented to and considered by it.
Opinion of Financial Advisor. The Board of Directors of the Company
retained Bear Stearns to act as its financial advisor and to render an opinion
to the Board of Directors of the Company as to the fairness from a financial
point of view of the Merger Consideration to be received in the Offer and the
Merger by the stockholders of the Company. Bear Stearns acted as investment
adviser to the Company's founders in connection with the recapitalization of the
Company effected in July, 1995, served as a managing underwriter of the
Company's initial public offering in October, 1996, and as of the date hereof,
holds 112,667 shares of Company Common Stock. On December 16, 1997, Bear Stearns
delivered its oral opinion to the Board of Directors of the Company, and on
December 22, 1997, Bear Stearns delivered its written opinion to the Board of
Directors of the Company to the effect that, as of such date, and based upon the
assumptions and other matters set forth therein, the consideration to be
received by the Company stockholders in the Offer and the Merger was fair, from
a financial point of view, to the stockholders of the Company (the "Bear Stearns
Opinion"). No restrictions were imposed by the Company's Board of Directors upon
Bear Stearns with respect to investigations made or procedures followed by Bear
Stearns in rendering its opinion.
15
<PAGE> 17
THE FULL TEXT OF THE BEAR STEARNS OPINION IS ATTACHED HERETO AS EXHIBIT 4.
THE COMPANY STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE BEAR STEARNS OPINION
CAREFULLY IN ITS ENTIRETY FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
THE REVIEW BY BEAR STEARNS.
The Bear Stearns Opinion addresses only the fairness from a financial point
of view of the Merger Consideration to be received in the Merger by the
stockholders of the Company and does not constitute a recommendation to any
stockholder of the Company as to whether such stockholder should tender his, her
or its Shares pursuant to the Offer or to vote such Shares in favor of the
Merger. The Bear Stearns Opinion also does not address the Company's underlying
business decision to pursue the Merger. The summary of the Bear Stearns Opinion
set forth below is qualified in its entirety by reference to the full text of
such opinion.
Although Bear Stearns evaluated the financial terms of the Merger and
participated in discussions concerning the consideration to be paid, Bear
Stearns did not recommend the specific consideration to be paid in the Offer and
the Merger. The consideration to be received by the Company's stockholders as a
result of the Offer and the Merger was determined by negotiations between the
Company and Parent after consultation by each of such parties with their
respective financial advisors. In connection with rendering its opinion, Bear
Stearns, among other things: (i) reviewed the Merger Agreement; (ii) reviewed
the Offer to Purchase, and the Schedule 14D-9 in substantially the forms to be
distributed to the Company's stockholders; (iii) reviewed the Company's Annual
Reports to Stockholders and Annual Reports on Form 10-K for the fiscal years
ended August 31, 1996 and August 30, 1997; (iv) reviewed certain operating and
financial information, including projections, provided to Bear Stearns by
management relating to the Company's business and prospects; (v) met with
certain members of the Company's management to discuss its operations,
historical financial statements and future prospects; (vi) reviewed the
historical prices and trading volume of the common shares of the Company; (vii)
reviewed publicly available financial data and stock market performance data of
companies which it deemed generally comparable to the Company; (viii) reviewed
the terms of recent acquisitions of companies which it deemed generally
comparable to the Company; and (ix) conducted such other studies, analyses,
inquiries and investigations as it deemed appropriate.
In the course of its review, Bear Stearns relied upon and assumed without
independent verification (i) the accuracy and completeness of all of the
financial and other information provided to it by the Company for purposes of
its opinion and (ii) the reasonableness of the assumptions made by the
management of the Company with respect to its projected financial results. Bear
Stearns further relied upon the assurances of the management of the Company that
they are unaware of any facts that would make the information provided to Bear
Stearns incomplete or misleading. In addition, Bear Stearns did not make or seek
to obtain appraisals of the Company's assets or liabilities in rendering its
opinion. The Bear Stearns Opinion is also necessarily based upon the market,
economic and other conditions as in effect, and the information made available
to it, as of the date thereof.
The following is a summary of certain of the financial analyses used by
Bear Stearns in connection with providing its opinion to the Board of Directors
of the Company.
Comparable Company Analysis. Bear Stearns reviewed and compared the
financial and market performance of the Company to the financial and market
performance of ten publicly-traded companies engaged in the medical distribution
industry that Bear Stearns believed were comparable in certain respects to the
Company (the "Comparable Companies"). The Comparable Companies included: Henry
Schein, Inc. ("Schein"); Physician Sales & Service, Inc.; Patterson Dental
Company; Gulf South Medical Supply, Inc.; Graham-Field Health Products, Inc.;
Cardinal Health, Inc.; McKesson Corporation ("McKesson"); Allegiance
Corporation; Bindley Western Industries and Owens & Minor, Inc. The Comparable
Companies were chosen by Bear Stearns as companies that, based on publicly
available data, possess general business, operating and financial
characteristics representative of companies in the industry in which the Company
operates, although Bear Stearns recognizes that each of the Comparable Companies
is distinguishable from the Company in certain respects. For each of the
Comparable Companies, Bear Stearns examined certain publicly available financial
data including, net revenue, earnings before interest, taxes, depreciation and
amortization ("EBITDA"), earnings before interest and taxes ("EBIT"), net
income, earnings per share and profit margins. Bear Stearns examined balance
sheet items, published earnings forecasts and the trading
16
<PAGE> 18
performance of the common stock of each of the Comparable Companies. In
addition, Bear Stearns calculated the ratio of the closing price (as of December
15, 1997) of the stock of each of the Comparable Companies' stock in relation to
each company's earnings per share and the ratio of the "Enterprise Value" (the
total market value of the common stock outstanding plus the par value of total
debt less cash and investments) of each of the Comparable Companies in relation
to each company's net revenue, EBITDA and EBIT for the latest twelve months.
Bear Stearns then compared those ratios to the ratios being paid for the Company
in the Offer and the Merger based upon the price offered by Parent for the
Company's Common Stock of $11.75 per share. Based on a price for the Company of
$11.75 per share, the implied purchase price for the equity of the Company was
approximately $130.8 million, and (ii) the implied "Transaction Value" (defined
as the total purchase price of the common stock plus the par value of total debt
less cash and investments) for the Company was approximately $132.2 million.
The ratios of the stock prices of the Comparable Companies to projected
calendar 1997 earnings per share ranged from 20.1x to 37.4x and had a harmonic
mean of 27.3x and a median of 30.9x. These ratios compare to a purchase price
per share to be paid in the Offer and the Merger to the Company's projected
calendar 1997 earnings per share provided by the Company management of 26.8x.
The ratios of the stock prices of the Comparable Companies to projected calendar
1998 earnings per share ranged from 17.9x to 26.9x and had a harmonic mean of
21.4x and a median of 21.7x. These ratios compare to a purchase price per share
to be paid in the Offer and the Merger to the Company's projected calendar 1998
earnings per share provided by the Company management of 19.9x.
The ratios of the Enterprise Value to latest twelve months ("LTM") net
sales of the Comparable Companies ranged from 0.1x to 2.2x and had a harmonic
mean of 0.4x and a median of 0.8x. These ratios compared to a Transaction Value
to the Company's LTM net revenue of 1.4x. The ratios of the Enterprise Value to
LTM EBITDA of the Comparable Companies ranged from 7.8x to 24.4x and had a
harmonic mean of 14.2x and a median of 17.1x. These ratios compare to a
Transaction Value to the Company's LTM EBITDA of 13.9x. The ratios of the
Enterprise Value to LTM EBIT of the Comparable Companies ranged from 11.8x to
34.0x and had a harmonic mean of 17.8x and a median of 18.3x. These ratios
compare to a Transaction Value to the Company's LTM EBIT of 15.5x.
Bear Stearns noted that, based upon these ratios, (i) the ratio of the
Company's Transaction Value to LTM net revenue was greater than the harmonic
mean and median and within the range of the LTM net revenue ratios for the
Comparable Companies, (ii) the ratio of the Company's Transaction Value to LTM
EBITDA was approximately the same as the harmonic mean, less than the median and
within the range of the LTM EBITDA ratios for the Comparable Companies, (iii)
the ratio of the Company's Transaction Value to LTM EBIT was less than the
harmonic mean and median and within the range of the LTM EBIT ratios for the
Comparable Companies and (iv) the ratios of the Company's purchase price per
share to projected 1997 and 1998 earnings per share were less than the harmonic
mean and median and within the range of the comparable ratios for the Comparable
Companies.
Precedent Transaction Analysis. Bear Stearns reviewed certain financial
data and the purchase prices paid in the following twenty-one (21) selected
prior merger and acquisition transactions completed in the medical distribution
industry (target company/acquiring company): Gulf South Medical Supply,
Inc./Physician Sales & Service, Inc. (pending); AmeriSource Health
Corporation/McKesson Corporation (pending); Bergen Brunswig Corporation/Cardinal
Health, Inc. (pending); Sullivan Dental Products, Inc./Henry Schein, Inc.;
Thompco Medical, Inc./Physician Sales & Service, Inc.; Micro Bio-Medics,
Inc./Henry Schein, Inc.; General Medical, Inc./McKesson Corporation; Walker Drug
Company/AmeriSource Health Corporation; Owen Healthcare, Inc./Cardinal Health,
Inc.; Gateway Healthcare Corporation/Gulf South Medical Supply, Inc.; X-Ray
Corporation/Physician Sales & Service, Inc.; Chesapeake X-Ray
Corporation/Physician Sales & Service, Inc.; FoxMeyer Drug Company/McKesson
Corporation; PCI Services, Inc./Cardinal Health, Inc.; Crocker-Fels
Company/Physician Sales & Service, Inc.; Automated Healthcare, Inc./McKesson
Corporation; Pyxis Corporation/Cardinal Health, Inc.; Taylor Medical,
Inc./Physician Sales & Service, Inc.; Randolph Medical, Inc./General Medical,
Inc.; F.D. Titus & Son, Inc./General Medical, Inc.; and Stuart Medical,
Inc./Owens & Minor, Inc. In its review of these transactions, Bear Stearns
focused specifically upon two (2) transactions, which were deemed to be most
17
<PAGE> 19
comparable to the Merger: Sullivan Dental/Schein and General Medical/McKesson
(the "Comparable Transactions").
For each of the target companies involved in the Comparable Transactions,
Bear Stearns examined certain publicly available financial data, including net
revenue, EBITDA, EBIT, net income, earnings per share and profit margins. Bear
Stearns examined the balance sheet items and published earnings forecasts (when
available) of the common stock of each of the target companies involved in the
Comparable Transactions. In addition, Bear Stearns calculated (i) the ratios of
the purchase price of the target company in relation to the target company's
projected net income (for the next fiscal year based on research analysts'
estimates immediately prior to the announcement of such transactions) and (ii)
the ratios of the Transaction Value of each target company to its LTM net sales,
LTM EBITDA and LTM EBIT. Bear Stearns then compared those ratios to the ratios
being paid for the Company in the Offer and the Merger based upon the price
offered by Parent for the Company's Common Stock of $11.75 per share.
The ratios of the purchase price of the equity to projected net income of
the target company in Sullivan Dental/Schein was 24.2x (the ratio of the
purchase price to projected net income of the General Medical in General
Medical/McKesson was not available). This ratio compared to a ratio of purchase
price per share to the Company's projected fiscal 1998 net income of 20.6x. The
ratios of the Transaction Value to LTM net sales of the target companies in the
Comparable Transactions were 0.5x and 1.1x and had a harmonic mean of 0.7x.
These ratios compared to a Transaction Value to the Company's LTM net sales of
1.4x. The ratios of the Transaction Value to LTM EBITDA of the target companies
in the Comparable Transactions were 12.8x and 16.0x and had a harmonic mean of
14.2x. These ratios compared to a Transaction Value to the Company's LTM EBITDA
of 13.9x. The ratios of the Transaction Value to LTM EBIT of the target
companies in the Comparable Transactions were 13.7x and 18.6x and had a harmonic
mean of 15.8x. These ratios compared to a Transaction Value to the Company's LTM
EBIT of 15.5x.
Bear Stearns noted that, based upon these ratios, (i) the ratio of
Transaction Value to the Company's LTM net sales was greater than the harmonic
mean of the LTM net sales ratios for the target companies in the Comparable
Transactions, (ii) the ratio of Transaction Value to the Company's LTM EBITDA
was approximately the same as the harmonic mean of the LTM EBITDA ratios for the
target companies in the Comparable Transactions, (iii) the ratio of Transaction
Value to the Company's LTM EBIT was approximately the same as the harmonic mean
of the LTM EBIT ratios for the target companies in the Comparable Transactions
and (iv) the ratio of purchase price to the Company's projected 1998 net income
was less than the Sullivan Dental/Schein purchase price to projected fiscal net
income ratio for Sullivan Dental in the Sullivan Dental/Schein transaction.
Discounted Cash Flow Analysis. A discounted cash flow analysis is a
traditional valuation methodology used to derive a valuation of a corporate
entity based on its future expected cash flows discounted back to the present.
Bear Stearns performed a discounted cash flow analysis of the Company based upon
a set of financial projections for the years 1998 through 2002 which were
provided by management.
The discounted cash flow analysis was conducted using a range of estimates
of the Company's after-tax cost of capital of 11.5% to 13.5%, which was
calculated based upon the equity betas of Comparable Companies. Using this
estimate of after-tax cost of capital, Bear Stearns calculated the present value
of free cash flows for each of the fiscal years ended August 31, 1998 through
2002 and the present value of the terminal value (the calculated value of the
Company at the end of the projection period). Bear Stearns calculated the
terminal value in year 2002 based upon a perpetual growth rate methodology using
growth rates ranging from 3.0% to 6.0%. The range of growth rates were selected
by Bear Stearns and were chosen to reflect the anticipated growth prospects and
relative risk of both the Company and the medical distribution industry in the
terminal year. Bear Stearns calculated the equity value of the Company by
subtracting total debt minus cash of the Company from the sum of the present
value of cash flows and the present value of the terminal value. Based on this
analysis, Bear Stearns calculated equity values of the Company ranging from
$5.63 to $9.81 per share with a mean value of $7.43 per share. The values were
calculated without giving effect to any expense savings or revenue enhancement
opportunities that may result from the Merger. Bear Stearns compared the range
of equity values calculated using the discounted cash flow methodology to $11.75
per
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<PAGE> 20
share, the value being paid for the Company in the Offer and the Merger, and
noted the purchase price was higher than the indicated range of discounted cash
flow values.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying the Bear Stearns Opinion. In arriving at its opinion, Bear Stearns
considered the results of all such analyses. The analyses were prepared solely
for purposes of providing its opinion as to the fairness from a financial point
of view of the consideration to be received by the stockholders of the Company
in the Offer and the Merger and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable than
suggested by such analyses. As described above, Bear Stearns' opinion and
presentation to the Board of Directors of the Company was one of many factors
taken into consideration by the Board of Directors of the Company in making its
determination to approve the Merger. The foregoing summary does not purport to
be a complete description of the analyses performed by Bear Stearns.
As part of its engagement, Bear Stearns assisted the Company in identifying
and contacting a number of knowledgeable and qualified buyers which were given
the opportunity to make a thorough evaluation of the Company in preparation for
the submission of a proposal to acquire the Company. As a result of these
efforts, the Company received various indications of interest regarding possible
business transactions involving the Company, which Bear Stearns assessed and
reviewed with the senior management and the Board of Directors of the Company.
In the ordinary course of its business as a full-service securities firm,
Bear Stearns and its affiliates may actively trade the debt and equity
securities of Parent and the Company for their own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities, as may The Bear Stearns Companies, Inc., the parent company of
Bear Stearns. See Item 5. below for a description of the fees to be paid to Bear
Stearns.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
For its services in connection with the Merger, the Company shall pay Bear
Stearns a total transaction fee of approximately $1,537,000 (the "Transaction
Fee"). Of the Transaction Fee, $200,000 became payable upon delivery of Bear
Stearns' oral opinion of December 16, 1997 (the "Opinion Fee") and approximately
$1,337,000 becomes payable upon consummation of the Merger. The Company also has
agreed to reimburse Bear Stearns for its out-of-pocket expenses, including the
fees and expenses of legal counsel and other advisors, and to indemnify Bear
Stearns and certain related persons or entities against certain liabilities,
including liabilities under the federal securities laws, relating to or arising
out of its engagement.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past sixty
(60) days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender
such Shares to Parent pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other
19
<PAGE> 21
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) Except as set forth herein, there are no transactions, Board of
Directors' resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7 (a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached hereto as Annex I is being furnished
pursuant to Rule 14f-1 under the Exchange Act in connection with the possible
designation by Parent and Purchaser, pursuant to the Merger Agreement, of
certain persons to be appointed to the Board of Directors other than at a
meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ----------
<S> <C>
Exhibit-1 Agreement and Plan of Merger, dated as of December 17, 1997, by and among
Invacare Corporation, Inva Acquisition, Corp. and Suburban Ostomy Supply Co.,
Inc.
Exhibit-2 Chapter 156B, Sections 86 to 98, of the Massachusetts Business Corporation Law.
Exhibit-3 Stockholders Agreement, dated as of December 17, 1997, by and among Invacare
Corporation, Inva Acquisition Corp. and the stockholders of Suburban Ostomy
Supply Co., Inc. named therein.
Exhibit-4 Opinion of Bear Stearns & Co., Inc.*
Exhibit-5 Text of Press Release issued by Suburban Ostomy Supply Co., Inc. and Invacare
Corporation, dated December 17, 1997.
Exhibit-6 Letter to Stockholders of Suburban Ostomy Supply Co., Inc.*
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
20
<PAGE> 22
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 22, 1997
SUBURBAN OSTOMY SUPPLY CO., INC.
By: /s/ DONALD H. BENOVITZ
------------------------------------
Donald H. Benovitz
President
21
<PAGE> 23
ANNEX I
SUBURBAN OSTOMY SUPPLY CO., INC.
75 OCTOBER HILL ROAD
HOLLISTON, MA 01746
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 22, 1997,
as part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the Common Stock of Suburban Ostomy Supply Co.,
Inc (the "Company"). Capitalized terms used and not otherwise defined herein
shall have the meaning set forth in the Schedule 14D-9. You are receiving this
Information Statement in connection with the possible election of persons (the
"Parent Designees") designated by Invacare Corporation ("Parent") to a majority
of the seats on the Board of Directors of the Company.
Pursuant to the Merger Agreement, on December 22, 1997, Inva Acquisition
Corp. ("Purchaser") commenced the Offer. The Offer is scheduled to expire at
12:00 Midnight on January 22, 1998, unless otherwise extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, Purchaser and the
Parent Designees has been furnished to the Company by Parent and Purchaser, and
the Company assumes no responsibility for the accuracy or completeness of any
such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Company's common stock, no par value per share ("Company Common
Stock"), is the only class of voting securities of the Company outstanding. Each
share of Company Common Stock has one vote. As of December 16, 1997, there were
10,538,622 shares of Company Common Stock outstanding. The Company does not have
any treasury shares. The Board of Directors of the Company currently consists of
seven (7) members, and there are currently no vacancies on the Board. The Board
of Directors has three (3) classes and each director serves a term of three (3)
years until his successor is duly elected and qualified or until his earlier
death, resignation or removal.
PARENT DESIGNEES
The Agreement and Plan of Merger (the "Merger Agreement") by and among
Parent, Purchaser and the Company, dated December 17, 1997, provides that at the
Effective Time of Merger (as defined in the Merger Agreement), the directors of
Purchaser shall become the directors of the Company following the Merger. In
addition, effective upon Purchaser's acceptance for payment of share of Company
Common Stock pursuant to the Offer representing at least a majority of the
outstanding shares on a fully diluted basis, the Purchaser will be able to
designate the number of directors, rounded up to the next whole number, that
equals the product of (i) the total number of directors on the Company's Board
and (ii) the percentage that the number of shares of Company Common Stock owned
by Purchaser bears to the total number of shares outstanding.
Prior to the Effective Time, the current Company directors will resign,
subject to the Merger Agreement's requirements that, until the Effective Time,
the Company shall have at least two (2) directors, who were directors on the
date of the Merger Agreement and who are not officers of the Company or any of
its subsidiaries.
I-1
<PAGE> 24
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS OF THE COMPANY
The names of the current directors, their ages as of December 18, 1997 and
certain other information about them are set forth below. As indicated above,
some of the current directors will resign effective immediately following the
purchase of shares by Purchaser pursuant to the Offer.
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY OR
YEAR FIRST PRINCIPAL
ELECTED A OCCUPATION DURING THE PAST FIVE
NAME OF DIRECTOR AGE DIRECTOR YEARS
- ------------------------------------ --- ---------- ------------------------------------
<S> <C> <C> <C>
Serving for a term ending in 2000
Joseph F. Trustey................... 35 1995 General Partner of Summit Partners,
a venture capital firm, since
January 1996. Vice President of
Summit Partners from December 1994
until January 1996. Prior to that,
strategy consultant with Bain & Co.,
Inc.
Barry D. Derman..................... 51 1997 President of Peiser's, Inc.
(formerly known as Peiser's Medical
Supplies and Services Inc.) since
1970.
Serving for a term ending in 1999
Herbert P. Gray..................... 63 1977 Chairman of the Board of Directors
and Chief Executive Officer of the
Company since 1979.
Martin J. Mannion................... 38 1995 General partner of Summit Partners
since 1987. Director of numerous
private companies.
Richard F. Belloff.................. 48 1997 Chairman of the Board, Chief
Executive Officer and President of
Private Healthcare Systems, Inc.
since 1996. Managing Partner at
Longfellow Consultancy, a health
care consulting firm, from 1995
until 1996. President and Chief
Executive Officer of Health New
England, Inc. from 1986 to 1995.
Serving for a term ending in 1998
Donald H. Benovitz.................. 56 1987 President and Chief Operating
Officer of the Company since 1987.
William S. Green.................... 38 1997 Chairman, President, and Chief
Executive Officer of Wilmar
Industries, Inc. since 1986.
</TABLE>
Herbert P. Gray is the brother-in-law of Donald H. Benovitz.
INFORMATION CONCERNING THE BOARD OF DIRECTORS OF THE COMPANY
During fiscal 1997, there were three (3) meetings of the Board of Directors
of the Company and the Board acted by written consent four (4) times. All of the
directors attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors during which they served as director and (ii)
the total number of meetings held by committees of the Board of Directors on
which they served. The Board of Directors does not have a Nominating Committee.
The Audit Committee of the Board of Directors reviews, with the Company's
independent auditors, the scope of the audit for the year, the results of the
audit when completed, and the independent auditors' fees for services performed.
The Audit Committee also recommends independent auditors to the Board of
Directors and reviews, with management, various matters related to its internal
accounting controls. The present members of the Audit Committee are Martin J.
Mannion and Joseph F. Trustey, both of whom became
I-2
<PAGE> 25
members of the Audit Committee in June 1996. The Audit Committee was formed in
1996 in anticipation of the Company's initial public offering.
EXECUTIVE OFFICERS OF THE COMPANY
Information required by Item 7(b) of Schedule 14A with respect to executive
officers of the Company is set forth below. The executive officers of the
Company are elected annually by the Board of Directors and hold office until
their successors are elected and qualified, or until their earlier removal or
resignation.
Herbert P. Gray, 63, has been the Chairman of the Board and Chief Executive
Officer of the Company since 1979.
Donald H. Benovitz, 56, has been the President and Chief Operating Officer
of the Company since 1987. Prior to his employment with the Company, Mr.
Benovitz worked for Medi-Mart Drug Stores, a regional drug store chain, serving
in various capacities, including Vice President of Corporate Pharmacy Operations
and President.
Stephen N. Aschettino, 48, has been the Vice President and Chief Financial
Officer of the Company since 1991 and Treasurer and Clerk since 1992. Prior to
that time he served as Vice President and General Manager for Woodcraft Supply
Company, a national direct marketer and distributor of specialty woodworking
tools and equipment.
Patrick Bohan, 41, joined the Company as Vice President of Sales and
Marketing in 1990. Prior to that time, he was Vice President of Sales and
Marketing for H.L. Moore, a national direct marketing wholesaler of
pharmaceuticals, over-the-counter and home health care products.
John Manos, 41, has been the Vice President of MIS of the Company since
1992. Prior to that time, Mr. Manos served as Director of Management Information
Systems at National Medical Care, a division of W.R. Grace.
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
GENERAL
Messrs. Gray, Benovitz, Mannion and Trustey served as members of the Board
of Directors during all of fiscal 1997 and participated in Board of Directors'
deliberations on executive compensation. Mr. Gray served as Chief Executive
Officer and Chairman of the Board of the Company during fiscal 1997. Neither Mr.
Mannion nor Mr. Trustey was an officer or employee of the Company or any of its
subsidiaries during fiscal 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Employment Agreements
Effective July 3, 1995, the Company entered into five (5) year employment
agreements with each of Messrs. Gray, Benovitz, Aschettino, Bohan and Manos. Mr.
Gray's agreement provides for his employment as Chairman of the Board of
Directors and Chief Executive Officer at an initial base annual salary of
$150,000. Mr. Benovitz' agreement provides for his employment as President and
Chief Operating Officer of the Company at an initial base annual salary of
$195,000. Mr. Aschettino's agreement provides for his employment as Vice
President, Chief Financial Officer, Treasurer and Clerk of the Company at a base
annual salary of $115,000. Mr. Bohan's agreement provides for his employment as
Vice President of Sales and Marketing of the Company at an initial base annual
salary of $130,000. Mr. Manos' agreement provides for his employment as Vice
President of MIS of the Company at an initial annual base salary of $100,000.
Each of the foregoing agreements provides for annual salary increases (i) to
reflect increases in the applicable consumer price index and (ii) in such other
amounts, if any, as determined by the Company's Compensation Committee. In
addition, Messrs. Gray, Benovitz, Aschettino, Bohan and Manos are eligible to
receive bonuses upon the achievement by the Company of certain financial targets
determined by the Company's Compensa-
I-3
<PAGE> 26
tion Committee. Each of the employment agreements extends until July 1, 2000,
with annual renewals thereafter unless terminated prior thereto in accordance
with their respective terms.
Affiliated Leases
The Company leases a distribution center in Atlanta, Georgia from the
Suburban Grayson Atlanta Partnership, a Georgia general partnership in which
Messrs. Gray and Melvin Aronson each has a 50.0% interest. In May 1995, the
Company exercised an option to renew the lease covering this property through
August 4, 2006. The annual rent during each of fiscal years 1996 and 1997 was
$160,000.
The Company leases its distribution center in Holliston, Massachusetts from
GBA Realty Trust, a Massachusetts realty trust in which Messrs. Gray, Aronson
and Benovitz have a 40%, 40% and 20% interest, respectively. This lease, which
expires in December 31, 2006, provides for monthly rental payments equal to 110%
of the amounts due and payable each month under a promissory note between GBA
Realty Trust and United of Omaha Life Insurance, provided that the minimum
annual rent is $329,037. The rent paid to GBA Realty Trust was $330,000 during
fiscal year 1996 and $333,000 during fiscal year 1997. Such promissory note is
the obligation solely of GBA Realty Trust and is not guaranteed by, or otherwise
an obligation of, the Company.
In addition, the Company leases its South Bend, Indiana distribution center
from GBA Realty Corp., an Indiana corporation in which Messrs. Gray, Aronson,
Benovitz, Aschettino and Bohan and Mr. Doug Gray own 20%, 30%, 20%, 10%, 10% and
10%, respectively, of the outstanding capital stock. The lease, which expires on
July 31, 2003, provides for an annual rent of $108,000 subject to periodic
adjustments, at the option of GBA Realty Corp.
Other Related Party Arrangements
The Company provides general business insurance to GBA Realty Corp., GBA
Realty Trust and Suburban Grayson Atlanta Partnership under its umbrella policy.
Life Insurance Policies
On June 30, 1995, life insurance policies in the amount of $2.5 million for
each of Messrs. Gray and Aronson, which had previously been carried by the
Company were transferred to each of them. In the event of either individual's
death, the proceeds of this insurance were to be used to repurchase the
individual's stock in the Company at book value. In return for the transfer of
the insurance, the executives exchanged certain notes payable to them from the
Company and issued notes payable to the Company of $129,520, an amount equal to
the difference between the old notes payable and the cash surrender value of the
insurance, plus prepaid insurance premiums at the date of transfer.
BOARD OF DIRECTORS
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation is supervised by the Board of
Directors. Compensation paid to the Company's executive officers is intended to
reflect the responsibility associated with each executive's position, the past
performance of the specific executive, the goals of management, and the
profitability of the Company.
Executive compensation is designed to be competitive within the wholesale
distribution industry and other companies of comparable size and in order to
attract and retain talented and motivated individuals in key positions.
Compensation in any particular case may vary from any industry average on the
basis of annual and long-term Company performance, as well as individual
performance. The Board of Directors will exercise its discretion to set
compensation where, in its judgment, external or individual circumstances
warrant it. The compensation of Mr. Gray, Chief Executive Officer of the
Company, was based upon an employment agreement between the Company and Mr.
Gray. Although Mr. Gray's compensation is not directly tied to any particular
measurement of the financial performance of the Company during the Company's
fiscal year, the
I-4
<PAGE> 27
Board of Directors does exercise discretion in assessing the Company's
performance and adjusting the compensation of the Chief Executive Officer
accordingly.
The Company utilizes a compensation system comprised of base salaries,
annual bonuses, and stock option awards.
The Board of Directors reviews executive officer compensation annually.
Executive officers are eligible to receive annual cash bonuses upon
achievement of predetermined performance targets.
The Board of Directors may award stock options under the Company's 1995
Stock Option Plan (the "1995 Plan") to directors, executive officers or
employees of the Company. Stock options under the 1995 Plan are designed to
provide incentive to the Company's employees to increase the market value of the
Company's stock, thus linking corporate performance and stockholder value to
executive compensation.
1995 Stock Option Plan. The 1995 Plan provides for the granting of
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and non-qualified stock options, each in
such amounts, on such terms, and to such officers and other employees of the
Company as the administrators of the 1995 Plan, in accordance with the terms of
the 1995 Plan, may select. The 1995 Plan is administered by the Board of
Directors. A total of 909,652 shares of Company Common Stock are reserved for
issuance pursuant to the 1995 Plan. As of December 18, 1997, options to purchase
an aggregate of 620,000 shares of Company Common Stock have been granted to four
executive officers of the Company, two of whom are directors of the Company, at
an exercise price of $.81 per share. Options to purchase an aggregate amount of
110,000 shares of Company Common Stock, at an exercise price ranging between
$9.00 and $11.00 per share was granted to Messrs. Derman (90,000 shares), Green
(10,000 shares) and Belloff (10,000 shares). Since the adoption of the 1995
Plan, options to purchase an aggregate of 106,630 shares of Company Common Stock
have been granted to a number of employees of the Company, none of whom are
directors or executive officers of the Company, at exercise prices ranging from
$1.62 per share to $11.00 per share. These options vest over time periods
ranging from three to (6) six years.
The 1995 Plan will terminate on July 3, 2005, but the Board of Directors
may, at any time, terminate, modify, or amend the 1995 Plan; provided, however,
that the Board of Directors may not, without the approval of the Stockholders of
the Company, increase the maximum number of shares for which options may be
granted, change the designation of the class of persons eligible to receive
options under the 1995 Plan, or make any other change in the 1995 Plan which
requires stockholder approval under applicable law or regulations.
BOARD OF DIRECTORS
<TABLE>
<S> <C>
Herbert P. Gray Barry D. Derman
Donald H. Benovitz William S. Green
Martin J. Mannion Richard F. Belloff
Joseph F. Trustey
</TABLE>
I-5
<PAGE> 28
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Company's Chief Executive Officer and each of the Company's four (4)
most highly compensated executive officers (other than the Chief Executive
Officer) whose total annual salary and bonus exceeded $100,000 for all services
rendered in all capacities to the Company and its subsidiaries for the Company's
fiscal year ended August 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSATION
NAME YEAR SALARY($) BONUS COMPENSATION($) OPTIONS(#) ($)(1)
- -------------------------- ----- ------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Herbert P. Gray........... 1997 162,127(2) 49,788 3,252 -- --
1996 150,000(2) 60,000 2,393 -- --
1995 324,722(2) -- 186,000
Donald H. Benovitz........ 1997 208,101(2) 38,649 1,355 -- --
1996 195,000(2) 78,000 1,081 -- --
1995 192,907(2) -- 124,000 --
Stephen N. Aschettino..... 1997 129,547 24,404 238 -- --
1996 155,000 71,000 -- -- --
1995 115,000 -- 155,000 --
Patrick Bohan............. 1997 138,575 24,832 171 -- --
1996 130,000 52,000 -- -- --
1995 130,000 --
John G. Manos............. 1997 108,519 19,775 106 -- --
1996 100,000 50,000 -- -- --
1995 100,000 300,000(3) 155,000
</TABLE>
- ---------------
(1) Does not include other benefits that did not exceed in the aggregate $50,000
or 10% of total annual salary and bonus reported for the named executive
officer.
(2) Does not include compensation paid to the spouses of Messrs. Gray and
Benovitz, each of whom is an employee of the Company.
(3) Bonus paid by the Company to Mr. Manos at the time of the Company's July 3,
1995 Recapitalization with proceeds from capital contributions from certain
stockholders.
OPTION GRANTS IN LAST FISCAL YEAR
The Company granted no options to purchase Company Common Stock to any of
its executive officers during fiscal year 1997. John Manos exercised an option
to purchase 10,000 shares of Company Common Stock in fiscal year 1997.
I-6
<PAGE> 29
SUBURBAN OSTOMY PERFORMANCE GRAPH
The graph set forth below compares the change in the Company's cumulative
total stockholder return on its Company Common Stock (as measured by dividing
(i) the sum of (A) the cumulative amount of dividends for the period indicated,
assuming dividend reinvestment, and (B) the difference between the Company's
share price at the end of the period and October 9, 1996, the date the Company's
Common Stock commenced trading on the Nasdaq National Market; by (ii) the share
price at August 30, 1997 with the cumulative total return of the Nasdaq Stock
Market (U.S.) Index and the cumulative total return of SIC Group number 504
(assuming the investment of $100 in the Company's Common Stock, the Nasdaq Stock
Market (U.S.) Index and the Nasdaq Non-Financial Stocks Index on October 9,
1997, and reinvestment of all dividends). During fiscal 1997, the Company paid
no dividends.
<TABLE>
<CAPTION>
NASDAQ Stocks
(SIC 5040-5049 US
Companies)|Professional
Nasdaq Stock and Commercial
Measurement Period Suburban Ostomy Market (US Equipment and
(Fiscal Year Covered) Co. Companies) Supplies
<S> <C> <C> <C>
8/28/92 44.230 58.967
9/30/92 45.839 68.365
10/30/92 47.644 72.795
11/30/92 51.435 78.760
12/30/92 52.916 79.594
1/29/93 54.847 88.041
2/26/93 52.801 83.733
3/30/93 54.005 85.862
4/30/93 52.011 75.433
5/28/93 55.118 83.200
6/30/93 55.373 80.851
7/30/93 55.438 84.731
8/30/93 57.844 87.174
9/30/93 60.010 90.611
10/29/93 61.389 93.481
11/30/93 59.559 91.082
12/30/93 60.752 98.783
1/28/94 62.752 98.275
2/28/94 62.489 99.325
3/30/94 58.739 88.085
4/29/94 57.886 84.422
5/27/94 57.859 85.606
6/30/94 55.905 68.855
7/29/94 57.051 69.810
8/30/94 60.745 72.189
9/30/94 60.533 74.898
10/28/94 61.597 74.669
11/30/94 59.675 71.000
12/30/94 59.843 67.316
1/30/95 59.918 67.722
2/28/95 63.361 67.149
3/30/95 65.200 69.831
4/28/95 67.294 71.784
5/30/95 68.544 76.307
6/30/95 74.624 84.566
7/28/95 80.435 88.983
8/30/95 81.117 88.314
9/29/95 83.613 90.162
10/30/95 83.482 85.443
11/30/95 85.086 87.646
12/29/95 84.633 92.446
1/30/96 84.353 90.062
2/29/96 88.287 91.755
3/29/96 88.580 88.744
4/30/96 95.929 101.289
5/30/96 99.521 107.754
6/28/96 95.811 98.192
7/30/96 86.584 86.222
8/30/96 92.168 85.201
9/30/96 99.218 100.171
10/10/96 100.000 100.000 100.000
10/30/96 88.182 96.871 92.461
11/29/96 82.727 104.187 96.792
12/30/96 96.136 103.833 92.569
1/30/97 100.000 110.649 95.219
2/28/97 82.727 105.329 82.386
3/27/97 69.091 100.734 75.634
4/30/97 65.455 101.531 71.713
5/30/97 68.182 113.043 83.599
6/30/97 68.182 116.500 87.643
7/30/97 70.909 128.283 95.521
8/29/97 70.909 128.600 96.192
</TABLE>
I-7
<PAGE> 30
SECURITY OWNERSHIP OF
PRINCIPAL HOLDERS OF VOTING SECURITIES,
DIRECTORS AND OFFICERS
The following information is furnished as of December 18, 1997 with respect
to Common Stock of the Company beneficially owned, within the meaning of Rule
13d-3, by any person who is known by the Company to be the beneficial owner of
more than five percent (5%) of any class of voting securities of the Company, by
all Directors of the Company and nominees, by all executive officers of the
Company and by all Directors and executive officers of the Company as a group.
Unless otherwise indicated, the named individuals held sole voting and
investment power over the shares listed below.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AND NAME OF TITLE OF AMOUNT AND NATURE OF PERCENT
DIRECTOR(9)(10) CLASS BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------------------------- ------------- -------------------- --------
<S> <C> <C> <C>
Herbert P. Gray(1).................................. Common Stock 742,914 7.0%
Donald H. Benovitz(2)............................... Common Stock 338,520 3.2%
Stephen N. Aschettino(3)............................ Common Stock 120,900 1.1%
Patrick Bohan(4).................................... Common Stock 211,837 2.0%
John Manos(5)....................................... Common Stock 91,366 *
Martin J. Mannion(6)................................ Common Stock 3,937,831 37.4%
Joseph F. Trustey(6)................................ Common Stock 3,937,831 37.4%
Richard F. Belloff(7)............................... Common Stock 2,500 *
William S. Green(7)................................. Common Stock 2,500 *
Barry D. Derman..................................... Common Stock 111,111 1.1%
All Directors and Officers as a group (10
persons).......................................... Common Stock 5,539,479(8) 51.3%
</TABLE>
- ---------------
* Less than 1.0%
(1) Includes options currently exercisable to purchase 89,280 shares of Company
Common Stock and 33,634 shares as to which the beneficial owner has voting
power as trustee for two separate trusts.
(2) Includes options currently exercisable to purchase 59,520 shares of Company
Common Stock and 33,634 shares as to which the beneficial owner has
investment power as trustee for two separate trusts.
(3) Includes options currently exercisable to purchase 74,400 shares of Company
Common Stock.
(4) Includes options currently exercisable to purchase 165,337 shares of
Company Common Stock.
(5) Includes options currently exercisable to purchase 38,050 shares of Company
Common Stock.
(6) Reflects the shares held by Summit Ventures III, L.P., Summit Investors II,
L.P. and Summit Subordinated Debt Fund, L.P., in each of which this
beneficial owner is a general partner. The beneficial owner disclaims
beneficial ownership of these shares, except to the extent of his direct
pecuniary interest.
(7) Consists of options currently exercisable to purchase 2,500 shares of
Company Common Stock.
(8) Included in this figure are 255,250 shares purchasable by certain officers
and Directors under options presently exercisable.
(9) The address of each beneficial owner is Suburban Ostomy Supply Co., Inc.,
75 October Hill Road, Holliston, MA 01746.
(10) Purchaser and Parent are the beneficial owners of 5,177,465 shares of
Company Common Stock, pursuant to the terms and conditions of that certain
Stockholders Agreement, dated as of December 17, 1997, by and among Parent,
Purchaser, Herbert P. Gray, Donald H. Benovitz, Summit Ventures III, L.P.,
Summit Investors II, L.P. and Summit Subordinated Debt Fund, L.P.
I-8
<PAGE> 31
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons owning more than 10% of the outstanding
Company Common Stock of the Company to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("Commission"). Officers,
Directors and owners of greater than 10% holders of Company Common Stock are
required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on copies of such forms furnished as provided above, or
written representations that no Forms 5 were required, the Company believes that
through the date hereof, all Section 16(a) filing requirements applicable to its
officers, Directors and owners of greater than 10% of its Company Common Stock
were complied with.
INFORMATION WITH RESPECT TO PARENT DESIGNEES
As of the date of this Information Statement, the Parent has determined who
will be Parent Designees.
Set forth below is the name, business address, principal occupation or
employment and five (5) year employment history of the persons who will be
Parent Designees. Unless otherwise indicated, each such person has held the
occupation listed opposite his name for at least the past five (5) years and
each occupation refers to employment with the Parent. All persons listed below
are citizens of the United States. None of the persons listed below owns any
Shares.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND BUSINESS ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ---------------------------------- ----------------------------------------------------------
<C> <S> <C>
1. A. Malachi Mixon, III........ A. Malachi Mixon, III, has been Chief Executive Officer
and a Director of Parent since 1979 and Chairman of the
Board since 1983. Mr. Mixon also served as President from
1979 until November of 1996. Mr. Mixon also serves as a
Director of The Lamson & Sessions Co., Cleveland, Ohio, a
New York Stock Exchange listed company and a supplier of
engineered thermoplastic products, The Sherwin-Williams
Company, Cleveland, Ohio, a New York Stock Exchange listed
company and a manufacturer and distributor of coatings and
related products, NCS HealthCare, Inc., a Nasdaq listed
company and a provider of pharmacy services to long term
care institutions and PRIMUS, a Cleveland-based venture
capital company. Mr. Mixon also serves as Chairman of the
Board of The Cleveland Clinic Foundation, Cleveland, Ohio,
one of the world's leading teaching and health care
institutions.
2. Gerald B. Blouch............. Gerald B. Blouch was named President in November 1996 and
has been Chief Operating Officer since December 1994 and
Chairman -- Invacare International since December 1993.
Previously, Mr. Blouch was President -- Home Care Division
from March 1994 to December 1994 and Senior Vice
President -- Home Care Division from September 1992 to
March 1994. Mr. Blouch served as Chief Financial Officer
from May 1990 to May 1993 and Treasurer from March 1991 to
May 1993.
3. Thomas R. Miklich............ Thomas R. Miklich has been Chief Financial Officer,
General Counsel and Treasurer since May 1993 and in
September 1993 was named Secretary. Previously, Mr.
Miklich was Executive Vice President and Chief Financial
Officer of Van Dorn Company from 1991 to 1993, and Chief
Financial Officer of The Sherwin-Williams Company from
1986 to 1991.
</TABLE>
I-9
<PAGE> 32
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL OCCUPATIONS, POSITIONS, OFFICES OR
NAME AND BUSINESS ADDRESS EMPLOYMENT HELD DURING THE LAST FIVE YEARS
- ---------------------------------- ----------------------------------------------------------
<C> <S> <C>
4. Thomas J. Buckley............ Thomas J. Buckley was named Senior Vice President,
Continuing Care & Distributed Products Group in November
1997. Mr. Buckley was previously Vice
President -- Standard Products from August 1995 to
November 1997, and General Manager of Manual Wheelchairs
from December 1994 to August 1995. From November 1993 to
December 1994 Mr. Buckley was the Business Unit Leader of
the Bed Products and Pressure Relief Business Units.
Before this period, Mr. Buckley served as Director of
Distribution.
5. Joseph B. Richey, II......... Joseph B. Richey, II has been a Director since 1980. In
1992 he was named President -- Invacare Technologies and
Senior Vice President -- Total Quality Management. From
1989 to 1992, he was Senior Vice President and General
Manager -- North American Operations and was Senior Vice
President and General Manager -- Rehabilitation and
Laboratory Division from 1984 to 1989. Mr. Richey also
serves as a Director of Steris Corporation, Cleveland,
Ohio, a Nasdaq listed manufacturer and distributor of
medical sterilizing equipment, a Director of Royal
Appliance Manufacturing Co., Cleveland, Ohio, a New York
Stock Exchange listed manufacturer of vacuum cleaners, and
a Director of Unique Mobility Inc., Golden, Colorado, an
American Stock Exchange listed engineering concern and
manufacturer of high efficiency permanent magnet motors
and electronic controls.
</TABLE>
I-10
<PAGE> 1
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
between
Invacare Corporation
Inva Acquisition Corp.
And
Suburban Ostomy Supply Co., Inc.
Dated as of December 17, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I THE OFFER...........................................................2
1.1 The Offer.........................................................2
1.2 Action by The Company.............................................3
ARTICLE II THE MERGER.........................................................6
2.1. The Merger.......................................................6
2.2. Closing..........................................................6
2.3. Effective Time of the Merger.....................................6
2.4. Effects of the Merger............................................6
2.5. Certificate of Incorporation; By-Laws............................7
2.6. Directors........................................................7
2.7. Officers.........................................................7
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS..........................................7
3.1. Effect on Capital Stock..........................................7
3.2. Stock Plans......................................................8
3.3. Exchange of Certificates.........................................9
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................11
4.1 Organization, Standing and Corporate Power.......................11
4.2 Subsidiaries.....................................................11
4.3 Capital Structure................................................11
4.4 Authority; Noncontravention......................................13
4.5 SEC Documents; Undisclosed Liabilities...........................14
4.6 Information Supplied.............................................14
4.7 Absence of Certain Changes or Events.............................15
4.8 Litigation; Labor Matters; Compliance with Laws..................15
4.9 Employee Benefit Plans...........................................16
4.10 Taxes...........................................................18
4.11 Environmental matters...........................................18
4.12 Material Contracts..............................................20
4.13 Brokers.........................................................20
4.14 Opinion of Financial Advisor....................................21
4.15 Board Recommendation............................................21
4.16 Required Company Vote...........................................21
4.17 State Takeover Statutes.........................................21
<PAGE> 3
4.18 Intellectual Property...........................................21
4.19 Related Party Transactions......................................22
4.20 Permits.........................................................22
4.21 Insurance Policies..............................................22
4.22 Certain Business Practices......................................23
4.23 Suppliers and Customers.........................................23
4.24 Product Warranties..............................................23
4.25 Sole Representations............................................23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO...............23
5.1 Organization, Standing and Corporate Power.......................23
5.2 Subsidiaries.....................................................24
5.3 Capital Structure................................................24
5.4 Authority; Noncontravention......................................24
5.5 Brokers..........................................................25
5.6 Financing........................................................25
5.7 Offer Documents and Schedule 14D-9...............................25
5.8 Information Supplied.............................................25
5.9 Sole Representations.............................................25
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER.........26
6.1 Conduct of Business of the Company...............................26
6.2 Changes in Employment Arrangements...............................28
6.3 Severance........................................................28
6.4 WARN.............................................................28
ARTICLE VII ADDITIONAL AGREEMENTS............................................28
7.1. Preparation of Proxy Statement: Stockholder Meeting.............28
7.2. Access to Information, Confidentiality..........................29
7.3. Reasonable Best Efforts.........................................30
7.4 Indemnification..................................................30
7.5 Public Announcements.............................................31
7.6 No Solicitation..................................................31
7.7 Resignation of Directors.........................................33
7.8 Employee Benefits................................................33
7.9 Notification of Certain Matters.................................34
7.10 State Takeover Laws.............................................34
7.11 Indemnification Agreements......................................34
ii
<PAGE> 4
ARTICLE VIII CONDITIONS PRECEDENT.............................................35
8.1 Conditions to Each Party's Obligation............................35
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER.................................35
9.1 Termination......................................................35
9.2 Effect of Termination............................................36
9.3 Amendment........................................................36
9.4 Extension; Waiver................................................36
9.5 Procedure for Termination, Amendment, Extension or Waiver........37
ARTICLE X GENERAL PROVISIONS..................................................37
10.1 Nonsurvival of Representations and Warranties...................37
10.2 Fees and Expenses...............................................37
10.3 Notices.........................................................38
10.4 Definitions.....................................................39
10.5 Interpretation..................................................40
10.6 Counterparts....................................................40
10.7 Entire Agreement; No Third-Party Beneficiaries..................40
10.8 Governing Law...................................................40
10.9 Assignment......................................................41
10.10 Enforcement....................................................41
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 17th day
of December, 1997 by and between Invacare Corporation, an Ohio corporation (the
"Buyer"), Inva Acquisition Corp., a Massachusetts corporation and wholly-owned
subsidiary of Buyer ("MergerCo"), and Suburban Ostomy Supply Co., Inc., a
Massachusetts corporation (the "Company").
WHEREAS, the respective Boards of Directors of the Company, the Buyer
and MergerCo have determined that the merger of MergerCo with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
in this Agreement, would be advisable and in the best interests of their
respective companies and stockholders, and such Boards of Directors have
approved such Merger, pursuant to which each share of common stock, no par value
per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger (as defined in Section
1.3) will be converted into the right to receive cash, other than (a) shares of
Company Common Stock owned, directly or indirectly, by the Company or any
subsidiary (as defined in Section 10.4) of the Company and (b) Dissenting Shares
(as defined in Section 3. l(d));
WHEREAS, subject to the terms and conditions of this Agreement and in
furtherance of the Merger, the Buyer will make, or will cause MergerCo to make,
a tender offer (the "Offer") to acquire any and all shares of Company Common
Stock;
WHEREAS, the Merger and this Agreement require the vote of two-thirds
in interest of the issued and outstanding shares of Company Common Stock for the
approval thereof (the "Company Stockholder Approval");
WHEREAS, simultaneously with the execution hereof, certain stockholders
of the Company have executed and delivered to Buyer and MergerCo a Stockholders
Agreement of even date herewith (the "Stockholders Agreement") pursuant to which
such stockholders have agreed to tender their shares of Company Common Stock
pursuant to the Offer and to vote for the Merger described herein, which
Stockholders Agreement has been relied upon by Buyer and MergerCo in their
decision to execute this Agreement; and
WHEREAS, Buyer, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various terms of and conditions to
the Offer and the Merger; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
<PAGE> 6
ARTICLE I
THE OFFER
---------
1.1 THE OFFER.
1.1.1 GENERAL. Provided that this Agreement shall not have
been terminated in accordance with Article IX, the Buyer shall commence, or
shall cause MergerCo to commence, the Offer to acquire any and all shares of
Company Common Stock for a cash price per share equal to the Merger
Consideration (as defined in Section 3.1(c)), as promptly as reasonably
practicable after the date hereof, but in no event later than five (5) business
days after the initial public announcement of Offeror's intention to commence
the Offer. For purposes of this Article I, the party which makes the Offer,
whether the Buyer or MergerCo, shall be referred to as the "Offeror." Offeror
may not accept any shares of Company Common Stock tendered for purchase in
response to the Offer unless it accepts all such shares that are properly
tendered in accordance with the terms thereof. Acceptance by Offeror of shares
of Company Common Stock for payment pursuant to the Offer shall be irrevocable.
The Offer shall be subject: (i) to the condition that there shall be validly
tendered in accordance with the terms of the Offer prior to the expiration date
of the Offer and not withdrawn a number of shares of Company Common Stock which,
together with the shares of Company Common Stock then owned by the Buyer, and
MergerCo, represents at least two-thirds of the total number of outstanding
shares of the Company Common Stock, assuming the exercise of all outstanding
options, rights and convertible securities (if any) and the issuance of all
shares of Company Common Stock that the Company is then obligated to issue (such
total number of outstanding or issuable shares of Company Common Stock being
hereinafter referred to as the "Fully Diluted Shares") (the "Minimum Condition")
and (ii) to the other conditions set forth in Annex I attached hereto
(collectively, the "Offer Conditions"). The Buyer and MergerCo expressly reserve
the right to waive any of the conditions to the Offer, including but not limited
to, the satisfaction of the Minimum Condition. The expiration date of the Offer
shall be twenty (20) business days after commencement. Buyer and MergerCo agree
that if all of the Offer Conditions are not satisfied on such initial expiration
date of the Offer then, provided that the Offeror determines that all such
Conditions are reasonably capable of being satisfied and subject to SEC rules
with respect to extension of time periods, Offeror shall extend the Offer from
time to time until such Conditions are satisfied or waived; provided, that
Offeror shall not be required to extend the offer beyond January 31, 1998. Buyer
and MergerCo agree that upon the initial expiration date of the Offer, as the
same may be extended in accordance with the immediately preceding sentence, if
the Offer Conditions have been satisfied, Offeror shall accept the shares of
Company Common Stock properly tendered for purchase, subject to the right to
extend the Offer not more than ten (10) business days in the aggregate if less
than 90% of the Fully Diluted Shares have been properly tendered. Without the
prior written consent of the Company, no change may be made by Offeror which
reduces the maximum number of shares of Company Common Stock to be purchased in
the Offer or which changes the form of consideration or makes any other change
in the terms and conditions of the Offer, except as may be required pursuant to
SEC rules with respect to extension of time periods, in any manner which is
adverse to the holders of shares of Company Common Stock or which imposes
conditions to the Offer in addition to those set forth above; provided, however,
that if on a scheduled expiration date of the Offer (as it may be
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<PAGE> 7
extended in accordance with the terms hereof), all conditions to the Offer shall
not have been satisfied or waived, the Offer may be extended from time to time
without the consent of the Company for such period of time as is reasonably
expected to be necessary to satisfy the unsatisfied conditions and provided
further that if, as of a scheduled expiration date all of the conditions to the
Offer have been satisfied, but less than 90% of the Fully Diluted Shares have
been properly tendered, Offeror may extend the Offer up to an aggregate of an
additional ten (10) business days. The Merger Consideration shall, subject to
applicable withholding of taxes, be net to the seller in cash, payable upon the
terms and subject to the conditions of the Offer. Subject to the terms and
conditions of the Offer, Offeror shall pay, as promptly as practicable after
expiration of the Offer, for all shares of Company Common Stock validly tendered
and not withdrawn. At or prior to the expiration of the Offer, Offeror will take
all steps necessary to provide its paying agent any funds necessary to make the
payments contemplated by the Offer. Upon the execution of this Agreement, the
Merger Consideration shall be the amount set forth in Section 3.1(c) payable
without interest thereon, and such initial Merger Consideration shall be
adjusted only in accordance with the following provisions. The Merger
Consideration payable in connection with the Offer shall automatically be
adjusted appropriately for any stock dividend, split or any conversion or
reclassification in respect of the Company Common Stock occurring after the date
hereof and prior to the date of consummation of the Offer, which shall occur
only in accordance with the terms of this Agreement. MergerCo shall have the
right to increase the Merger Consideration in effect hereunder at any time.
1.1.2 SECURITIES LAW COMPLIANCE. On the date of commencement
of the Offer, Offeror shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, the
"Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). Offeror and the Company agree
to promptly correct any information provided by either of them for use in the
Offer Documents which shall have become false or misleading, and Offeror further
agrees to take all steps necessary to cause the Schedule 14D-1 as so corrected
to be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of shares of the Company Common Stock, in each case as
and to the extent required by applicable federal securities laws. Offeror agrees
to provide the Company with a written copy of any comments it or its counsel may
receive from time to time from the SEC or its staff with respect to the Schedule
14D-1 promptly after receipt of such comments.
1.1.3 TERMINATION OF THE OFFER. Offeror shall not, without the
prior written consent of the Company, (i) terminate the Offer (except in
accordance with the terms of Annex I attached hereto), or (ii) extend the
Expiration Date to a date later than March 31, 1998.
1.2 ACTION BY THE COMPANY.
1.2.1 APPROVAL AND RECOMMENDATION OF THE BOARD. The Company
hereby approves of and consents to the making of the Offer and represents that
(a) the Board of
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Directors of the Company, at a meeting duly called and held on December 16,
1997, has unanimously (i) determined that the Merger and the Offer, taken
together, are fair to, and in the best interests of, the Company and the holders
of the Company Common Stock, (ii) advised, authorized and approved this
Agreement and approved the Merger and the other transactions contemplated hereby
(including but not limited to the Offer), (iii) recommended that the
stockholders of the Company accept the Offer and authorize and approve this
Agreement and the transactions contemplated hereby, and (iv) agreed to recommend
that holders of Company Common Stock tender their shares of Company Common Stock
pursuant to the Offer, and (b) Bear, Stearns & Co., Inc. has delivered to the
Board an oral opinion on December 16, 1997, which will be confirmed promptly in
writing, to the effect that, as of such date, the consideration to be received
by the holders of shares of Company Common Stock pursuant to the Offer and the
Merger, taken together, is fair to the holders of shares of Company Common Stock
from a financial point of view. Subject to the provisions of Section 7.6 hereof
and the other provisions of this Agreement, the Company hereby consents to the
inclusion in the Offer Documents prepared in connection with the Offer of the
recommendation of the Board of Directors of the Company described in the
immediately preceding sentence.
1.2.2 SECURITIES LAW COMPLIANCE. On the date of commencement
of the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing, subject to the provisions of Section
6.6 hereof and the other provisions of this Agreement, the recommendation of the
Board of Directors of the Company described in Section 1.2.1 and shall mail the
Schedule 14D-9 to the stockholders of the Company. The Company and Offeror agree
to correct promptly any information provided by any of them for use in the
Schedule 14D-9 which shall have become false or misleading, and the Company
further agrees to take all steps necessary to cause the Schedule 14D-9 as so
corrected to be filed with the SEC and disseminated to holders of shares of the
Company Common Stock, in each case as and to the extent required by applicable
federal securities laws. The Company agrees to provide Offeror with a written
copy of any comments it or its counsel may receive from time to time from the
SEC or its staff with respect to the Schedule 14D-9, promptly after receipt of
such comments.
1.2.3 STOCKHOLDER LISTS. In connection with the Offer and the
Merger, the Company shall furnish Offeror with mailing labels containing the
names and addresses of all record holders of shares of Company Common Stock and
with security position listings of shares of Company Common Stock held in stock
depositories, each as of a recent date, and of those persons becoming record
holders subsequent to such date. The Company shall furnish Offeror with all such
additional information (including, but not limited to, updated lists of holders
of shares of Company Common Stock and their addresses, mailing labels and lists
of security positions) and such other assistance as Offeror or its agents may
reasonably request in communicating the Offer to the record and beneficial
owners of shares of the Company Common Stock. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Offeror shall hold in confidence the information contained in such
labels, listings and files, shall use such information only in connection with
the Offer and the Merger, and, if
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<PAGE> 9
this Agreement shall be terminated in accordance with Section 9, shall deliver
to the Company all copies of such information then in its or any of its
affiliate's possession.
1.2.4 DIRECTORS.
(a) Effective upon the acceptance for payment by Offeror of
shares pursuant to the Offer such that Buyer or MergerCo shall own at least a
majority of the Fully Diluted Shares, the Offeror shall be entitled to designate
the number of Directors, rounded up to the next whole number, on the Company's
Board of Directors that equals the product of (i) the total number of directors
on the Company's Board of Directors (giving effect to the election of any
additional directors pursuant to this Section) and (ii) the percentage that the
number of shares of Company Common Stock owned by Offeror (including shares of
Company Common Stock accepted for payment) bears to the total number of Shares
of Company Common Stock outstanding, and the Company shall take all action
necessary to cause Offeror's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, and seeking and accepting resignations of incumbent
directors. At such times, the Company will use its best efforts to cause
individuals designated by Offeror to constitute the same percentage as such
individuals represent on the Company's Board of Directors of (x) each committee
of the Board (other than any committee of the Board established to take action
under this Agreement), (y) each board of directors of each Subsidiary of the
Company and (z) each committee of each such board. provided; however, that in
the event that Offeror's designees are elected to the Board of Directors of the
Company, until the Effective Time, such Board of Directors shall have at least
two directors who are directors of the Company on the date of this Agreement and
who are not officers of the Company or any of its subsidiaries (the "Independent
Directors") and; provided further that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever, the
remaining Independent Director shall designate a person to fill such vacancy who
shall be deemed to be an Independent Director for purposes of this Agreement or,
if no Independent Directors then remain, the other directors of the Company on
the date hereof shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company or any of its Subsidiaries, or officers
or affiliates of Buyer or any of its subsidiaries, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement.
Notwithstanding anything in this Agreement to the contrary, the affirmative vote
of the majority of the Independent Directors shall be required to (i) amend or
otherwise modify the Articles of Organization of the Company, (ii) approve any
amendment, modification or waiver by the Company of any provisions of this
Agreement or (iii) approve any other action by the Company that materially
adversely affects the interests of the stockholders of the Company (other than
Buyer or MergerCo) with respect to the transactions contemplated hereby,
including without limitation, any actions which would constitute a breach by the
Company of its representations, warranties or covenants contained herein.
(b) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. Subject to applicable law, the Company shall
promptly take all action requested by Offeror necessary to effect any such
election, including mailing to its stockholders the information statement
containing the information required by Section 14(f) of the Exchange Act and
Rule
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<PAGE> 10
14f-1 promulgated thereunder, and the Company agrees to make such mailing with
the mailing of the Schedule 14D-9 (provided that Offeror shall have provided to
the Company on a timely basis all information required to be included in the
Information Statement with respect to Offeror's designees). In connection with
the foregoing, the Company will promptly, at the option of Offeror, either
increase the size of the Company's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
Offeror's designees to be elected or appointed to, and to constitute a majority
of the Company's Board of Directors as provided above.
Offeror will supply to the Company in writing and be solely
responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Massachusetts Business
Corporation Law, MergerCo shall be merged with and into the Company at the
Effective Time of the Merger (as hereafter defined). Upon the Effective Time of
the Merger, the separate existence of MergerCo shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
shall continue under the name ["Suburban Ostomy Supply Co., Inc."].
2.2 CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 9.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VIII, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the second business day after satisfaction or waiver of the
conditions set forth in Article VIII (the "Closing Date"), at the offices of
Hutchins, Wheeler & Dittmar, A Professional Corporation, unless another date,
time or place is agreed to in writing by the parties hereto.
2.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date, the parties
shall file a certificate or certificates of merger and other appropriate
documents (the "Certificate of Merger") executed in accordance with the relevant
provisions of the Massachusetts law and shall make all other filings or
recordings required under the Massachusetts Business Corporation Law in
connection with the Merger. The Merger shall become effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of the
Commonwealth at Massachusetts or at such other time as is specified in the
Certificate of Merger and the Articles of Merger in accordance with the
Massachusetts Corporation Business Law and as MergerCo and the Company shall
agree should be specified in the Certificate of Merger (the time the Merger
becomes effective being the "Effective Time of the Merger").
2.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the Massachusetts Business Corporation Law.
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2.5 CERTIFICATE OF INCORPORATION; BY-LAWS. (a) The Articles of
Organization of MergerCo, as in effect immediately prior to the Effective Time
of the Merger, shall be amended to change the name of the Surviving Corporation
to "Suburban Ostomy Supply Co., Inc.", and, as so amended, until thereafter
further amended as provided therein and under the Massachusetts Business
Corporation Law, it shall be the Articles of Organization of the Surviving
Corporation following the Merger.
(b) The By-laws of MergerCo as in effect at the Effective Time of
the Merger shall be the By-laws of the Company following the Merger until
thereafter changed or amended as provided therein or by applicable law.
2.6 DIRECTORS. The directors of MergerCo at the Effective Time of
the Merger shall be the directors of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
2.7 Officers. The officers of the Company at the Effective Time of
the Merger shall be the officers of the Company following the Merger, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
3.1 EFFECT ON CAPITAL STOCK. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of
MergerCo:
(a) Common Stock of MergerCo Each share of common stock of
MergerCo issued and outstanding immediately prior to the Effective Time of the
Merger shall be converted into one share of the common stock, no par value per
share, of the Company.
(b) Cancellation of Treasury Stock. Each share of Company Common
Stock that is owned by the Company or by any wholly owned subsidiary of the
Company shall automatically be canceled and retired and shall cease to exist,
and no cash or other consideration shall be delivered or deliverable in exchange
therefor.
(c) Conversion of Company Common Stock. Except as otherwise
provided herein and subject to Section 3.3, each issued and outstanding share of
Company Common Stock, other than shares owned by Buyer, MergerCo or any other
direct or indirect subsidiary of Buyer (collectively, the "Excluded Shares"),
and other than Dissenting Shares and treasury stock, shall be converted into the
right to receive in cash from the Company following the Merger an amount equal
to $11.75 (the "Merger Consideration"). Contextually, the term "Merger
Consideration" shall mean the per share amount in reference to the consideration
designated on a per share basis, and otherwise shall refer to the aggregate
consideration represented by the per share amount multiplied by the total number
of shares of Company Common Stock then outstanding.
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<PAGE> 12
(d) Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger held by a holder who has
the right to demand payment for and an appraisal of such shares in accordance
with the Massachusetts Business Corporation Law Chapter 156B (or any successor
provision) ("Dissenting Shares") shall not be converted into the right to
receive Merger Consideration unless such holder fails to perfect or otherwise
withdraws, forfeits or loses such holder's right to such payment or appraisal,
if any. If, after the Effective Time of the Merger, such holder fails to perfect
or withdraws, forfeits or loses any such right to appraisal, each share of such
holder shall be treated as a share that had been converted as of the Effective
Time of the Merger into the right to receive Merger Consideration in accordance
with this Section 3.1. The Company shall give prompt notice to MergerCo of any
demands received by the Company for appraisal of shares of Company Common Stock,
and MergerCo shall have the right to participate in and, at MergerCo's
reasonable discretion, to direct all communications, negotiations and
proceedings with respect to such demands. The Company shall not, except with the
prior written consent of MergerCo, make any payment with respect to, or settle
or offer to settle, any such demands.
(e) Cancellation and Retirement of Excluded Shares. Each Excluded
Share issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
cease to be outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(f) Cancellation and Retirement of Company Common Stock. As of the
Effective Time of the Merger, all shares of Company Common Stock (other than
shares referred to in Section 3.1(b)) issued and outstanding immediately prior
to the Effective Time of the Merger, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall, to
the extent such certificate represents such shares, cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
applicable thereto, upon surrender of such certificate in accordance with
Section 3.3.
3.2 STOCK PLANS; BANK WARRANT. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Stock Plans (as defined below))
shall adopt such resolutions or take such other actions as may be required to
effect the following:
(i) cause written notification of the Merger to be given to
each holder of a Company Stock Option (as defined below) by the Board
of Directors as provided in the Stock Plans to the effect that each
such holder of a Company Stock Option may exercise such Company Stock
Option (whether or not such Company Stock Option was exercisable
immediately before such notification was given) no later than thirty
days from the date of such notification (the "Exercise Period"); and
(ii) adjust the terms of all outstanding employee stock
options to purchase shares of Company Common Stock ("Company Stock
Options") granted under the
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Company's 1995 Stock Option Plan (the "Stock Option Plan") to
provide that, at the Effective Time of the Merger each Company
Stock Option outstanding immediately prior to the Effective Time
of the Merger shall vest as a consequence of the Merger and shall
be canceled in exchange for a payment from the Company after the
Merger (subject to any applicable withholding taxes) equal to the
product of (1) the total number of shares of Company Common Stock
subject to such Company Stock Option and (2) the excess of $11.75
over the exercise price per share of Company Common Stock subject
to such Company Stock Option and applicable withholding taxes,
payable in cash immediately following the Effective Time of the
Merger;
(iii) cause the cancellation of the Bank Warrant (as defined
below) by causing a "Redemption Event" (as defined in the Bank Warrant)
to occur and taking such other steps as may be necessary in order to
cause such cancellation, including making all payments required to be
made in connection therewith;
(iv) except as provided herein or as otherwise agreed to by
the parties, the Stock Option Plan and any other plan, program or
arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company or any subsidiary shall
terminate as of the Effective Time of the Merger, and the Company shall
ensure that following the Effective Time of the Merger no holder of a
Company Stock Option nor any participant in any Stock Option Plan shall
have any right thereunder to acquire equity securities of the Company
following the Merger.
(b) The Company hereby represents and warrants that upon taking of
the actions specified above, immediately following the Effective Time of the
Merger, and after giving effect to the payments described in this Section 3.2,
no holder of a Company Stock Option nor any participant in any Stock Option Plan
nor the holder of any warrant to purchase Company Common Stock (including the
Bank Warrant) shall have the right thereunder to acquire equity securities of
the Company, or any other benefit, after the Merger.
3.3 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. At or prior to the Effective Time of the
Merger, Buyer shall deposit or cause to be deposited with the Exchange Agent
(who shall be appointed by the Company prior to the Closing and shall be
reasonably acceptable to MergerCo), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Article III, the
aggregate Merger Consideration. Promptly after the Effective Time, the Exchange
Agent shall mail to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented shares of Company Common Stock (the "Certificates"), a letter
of transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor (or such other documents as may reasonably be
required in connection with such surrender) in customary form to be agreed by
MergerCo and the Company prior thereto.
(b) Exchange Procedures. (i) After the Effective Time of the
Merger, each holder of an outstanding Certificate or Certificates shall, upon
surrender to the Exchange Agent of such
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Certificate or Certificates and acceptance thereof by the Exchange Agent, be
entitled to receive the amount of cash into which such Certificate or
Certificates surrendered shall have been converted pursuant to this Agreement.
(ii) After the Effective Time of the Merger, there shall be no
further transfer on the records of the Company or its transfer agent of
Certificates, and if Certificates are presented to the Company for transfer,
they shall be canceled against delivery of cash. If cash is to be remitted to a
name other than that in which the Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to the Company or its transfer agent any transfer or other taxes required or
establish to the satisfaction of the Company or its transfer agent that such tax
has been paid or is not applicable. Until surrendered as contemplated by this
Section 3.3(b), each Certificate shall be deemed at any time after the Effective
Time of the Merger to represent only the right to receive upon such surrender
the Merger Consideration applicable thereto as contemplated by Section 3.1. No
interest will be paid or will accrue on any cash payable as Merger Consideration
or in lieu of any fractional shares of Company Common Stock.
(iii) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Buyer, the posting by such person of a bond in such amount as Buyer may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, or the provision of other reasonable assurances requested by Buyer,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
(c) No Further Ownership Rights in Company Common Stock Exchanged
For Cash. All cash paid upon the surrender for exchange of Certificates in
accordance with the terms of this Article II shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such shares.
(d) Termination of Exchange Fund. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section 3.3
(the "Exchange Fund") which remains undistributed to the holders of the
Certificates for six months after the Effective Time of the Merger shall be
delivered to the Company, upon demand, and any holders of shares of Company
Common Stock prior to the Merger who have not theretofore complied with this
Article II shall thereafter look only to the Company and only as general
creditors thereof for payment of their claim for cash, if any, to which such
holders may be entitled.
(e) No Liability. None of Buyer, MergerCo, the Company or the
Exchange Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to the later of (i) one year after the Effective Time of
the Merger and (ii) immediately prior to such date on which any cash, if any, in
respect of such Certificate would otherwise escheat to or become the property of
any Governmental
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Entity (as defined in Section 3.4), any such cash, dividends or distributions in
respect of such certificate shall, to the extent permitted by applicable law,
become the property of the Company, free and clear of all claims or interest of
any person previously entitled thereto.
(f) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by the Company, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Buyer and MergerCo as
follows:
4.1 Organization, Standing and Corporate Power. Each of the
Company and each of its Subsidiaries (as defined in Section 4.2) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of the
Company and each of its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) would not have a
Material Adverse Effect (as defined in Section 10.4) with respect to the
Company. Attached as Section 4.1 of the disclosure schedule ("Disclosure
Schedule") delivered to MergerCo by the Company at the time of execution of this
Agreement are complete and correct copies of the Restated Articles of
Organization, as amended, and bylaws, as amended, of the Company. The Company
has delivered to MergerCo complete and correct copies of the articles of
organization and by-laws (or other comparable organizational documents) of each
of its Subsidiaries, in each case as amended to the date of this Agreement.
4.2 Subsidiaries. The only direct or indirect subsidiaries of the
Company are those listed in Section 4.2 of the Disclosure Schedule (the
"Subsidiaries"). All the outstanding shares of capital stock of each such
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned (of record and beneficially) by the Company, by another wholly owned
Subsidiary of the Company or by the Company and another such wholly owned
Subsidiary, free and clear of all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever (collectively, "Liens").
Except for the ownership interests set forth in Section 4.2 of the Disclosure
Schedule, the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, partnership, business association,
joint venture or other entity.
4.3 Capital Structure. The authorized capital stock of the Company
consists of (i) 40,000,000 shares of Company Common Stock, no par value, and
(ii) 1,000,000 shares of preferred stock. Subject to any Permitted Changes (as
defined in Section 6.1(d)) there are, as of the close of business on December
16, 1997: (i) 10,538,622 shares of Company Common Stock
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issued and outstanding; (ii) no shares of Company Common Stock are held in the
treasury of the Company; (iii) no shares of Company Common Stock are reserved
for issuance upon exercise of authorized but unissued Company Stock Options
pursuant to the Stock Option Plan including any increases pursuant to existing
contractual obligations; (iv) 795,895 shares of Company Common Stock issuable
upon exercise of outstanding Company Stock Options; and (v) 86,180 shares of
Company Common Stock issuable upon exercise of an outstanding warrant (the "Bank
Warrant"). Section 4.3 of the Disclosure Schedule sets forth the exercise price
for the outstanding Company Stock Options and the Bank Warrant. Except as set
forth above or in Section 3.3 of the Disclosure Schedule, no shares of capital
stock or other equity securities of the Company are issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of the Company
are, and all shares which may be issued pursuant to the Stock Option Plan
including any increases pursuant to existing contractual obligations and the
Bank Warrant will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. Except as set forth on
Section 4.3 of the Disclosure Schedule, there are no outstanding bonds,
debentures, notes or other indebtedness or other securities of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which stockholders of the Company
may vote. Except as set forth above, there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity or voting securities of
the Company or of any of its Subsidiaries or obligating the Company or any of
its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
Other than as disclosed in the most recent balance sheet of the Company included
in the SEC Documents (as defined below) or as set forth in Section 4.3 of the
Disclosure Schedule, no indebtedness for borrowed money of the Company or its
Subsidiaries contains any restriction upon the incurrence of indebtedness for
borrowed money by the Company or any of its Subsidiaries or restricts the
ability of the Company or any of its Subsidiaries to grant any Liens on its
properties or assets. Other than the Company Stock Options and other than as
disclosed in Section 4.3 of the Disclosure Schedule, (i) there are no
outstanding contractual obligations, commitments, understandings or arrangements
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire or make any payment in respect of any shares of capital stock of the
Company or any of its Subsidiaries and (ii) to the knowledge of the Company,
there are no irrevocable proxies with respect to shares of capital stock of the
Company or any subsidiary of the Company. Section 4.3 of the Disclosure Schedule
sets forth the record and, to the knowledge of the Company, beneficial ownership
of, and voting power in respect of, the capital stock of the Company held by the
Company's directors, officers and stockholders owning five percent (5%) or more
of the Company's outstanding common stock. Except as set forth on Section 4.3 of
the Disclosure Schedule, there are no agreements or arrangements pursuant to
which the Company is or could be required to register shares of Company Common
Stock or other securities under the Securities Act of 1933, as amended (the
"Securities Act") or other agreements or arrangements with or among any security
holders of the Company with respect to securities of the Company.
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4.4 Authority; Noncontravention. The Company has the requisite
corporate and other power and authority to enter into this Agreement and,
subject to the Company Stockholder Approval with respect to the consummation of
the Merger, to consummate the transactions contemplated hereby. The Offer, the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby have been duly
authorized by the Company's Board of Directors, which constitutes all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to the Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms subject,
as to enforceability, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights and to
general principles of equity. Except for the Company's credit facility and
except as disclosed in Section 4.4 of the Disclosure Schedule, the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by the Offer and this Agreement and compliance with the provisions
hereof will not, conflict with, or result in (a) any breach or violation of, or
default (with or without notice or lapse of time, or both) under, or right of
termination, cancellation, acceleration or "put", with respect to any obligation
or (b) the loss of a benefit or other right or (c) the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries under,
(i) the Restated Articles of Organization, as amended, or By-laws, as amended,
of the Company or the comparable organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, note purchase agreement,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule, regulation or
arbitration award applicable to the Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (i), (ii)
and (iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not have a Material Adverse
Effect with respect to the Company or would not prevent, hinder or materially
delay the ability of the Company and/or MergerCo to consummate the transactions
contemplated by this Agreement if not cured or waived by the Closing Date. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), or any other person under any
material agreement, indenture or other instrument to which the Company or any
Subsidiary is a party or to which any of its properties is subject, is required
by or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated hereby, except for (i) the
filing of a pre-merger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing with the SEC of (x) a proxy statement relating to the
Company Stockholder Approval (such proxy statement as amended or supplemented
from time to time, the "Proxy Statement"), and (y) such reports under the
Exchange Act as may be required in connection with the Offer and this Agreement
and the transactions contemplated by this Agreement, (iii) the filing of the
Certificate of Merger with the Secretary of the Commonwealth of Massachusetts
and appropriate documents
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with the relevant authorities of other states in which the Company is qualified
to do business and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices as are set forth in Section 4.4
of the Disclosure Schedule.
4.5 SEC Documents; Undisclosed Liabilities. The Company has timely
filed all required reports, schedules, forms, statements and other documents
with the Securities and Exchange Commission ("SEC") since October 9, 1996
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, as amended, the "SEC Documents").
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents (including any
and all financial statements included therein) as of such dates contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Except to the extent revised or superseded by a subsequent filing with the SEC
(a copy of which has been provided to MergerCo prior to the date of this
Agreement), none of the SEC Documents filed by the Company since May 31, 1997
and prior to the date of this Agreement (the "Recent SEC Documents") contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company included in all
SEC Documents filed since October 9, 1996 (the "SEC Financial Statements")
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited consolidated quarterly statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments, none of
which, individually or in the aggregate is material). Except as provided for in
the balance sheet contained in the most recent audited financial statements of
the Company included in the Recent SEC Documents (the "Year End Balance Sheet")
and except as disclosed in Section 4.5 of the Disclosure Schedule, neither the
Company nor any Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) except (x) liabilities
incurred in the ordinary and usual course of business and consistent with past
practice, (y) liabilities specifically incurred in connection with the
transactions contemplated by this Agreement, and (z) other liabilities which
will not exceed $2,000,000 in the aggregate, exclusive of obligations under
Section 10.2 hereof.
4.6 Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the
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circumstances under which they are made, not misleading, except that no
representation or warranty is made by the Company with respect to the
information supplied by MergerCo or any affiliate of MergerCo in writing
specifically for inclusion in the Proxy Statement. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder. Neither the Schedule
14D-9 nor any information supplied by the Company for inclusion in the Offer
Documents will, at the respective times the Schedule 14D-9, the Offer Documents
or any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading (except to
the extent information contained therein is based upon information supplied
solely by the Buyer or MergerCo). The Schedule 14D-9 shall comply in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
4.7 Absence of Certain Changes or Events. Except as disclosed in
the Recent SEC Documents or on Section 4.7 of the Disclosure Schedule, since the
date of the Year End Balance Sheet, the Company has conducted its business only
in the ordinary course consistent with past practice, and there is not and has
not been: (i) any Material Adverse Change with respect to the Company; (ii) any
condition, event or occurrence which, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect or give rise to a
Material Adverse Change with respect to the Company; (iii) any event which, if
it had taken place following the execution of this Agreement, would not have
been permitted by Section 6.1 without the prior consent of MergerCo; or (iv) any
condition, event or occurrence which would reasonably be expected to prevent,
hinder or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement.
4.8 Litigation; Labor Matters; Compliance with Laws. (a) Except as
disclosed in the Recent SEC Documents, there is (i) no suit, action or
proceeding or investigation pending and, (ii) to the knowledge of the Company,
no suit, action or proceeding or investigation threatened against or affecting
the Company or any of its Subsidiaries that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect with respect to
the Company or prevent, hinder or materially delay the ability of the Company to
consummate the transactions contemplated by this Agreement nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries having, or
which in the future could have, any such effect.
(b) Except as disclosed in Section 4.8 of the Disclosure Schedule,
(i) neither the Company nor any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) neither the Company
nor any of its Subsidiaries is the subject of any proceeding asserting that it
or any subsidiary has committed an unfair labor practice or seeking to compel it
to bargain with any labor organization as to wages or conditions of employment;
(iii) there is no strike, work stoppage or other labor dispute involving it or
any of its Subsidiaries pending or, to its knowledge, threatened; and (iv) the
Company is not liable for any severance pay. or other
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payments to any employee or former employee, or any other person, arising from
the termination of employment, or other change in the legal relationship with
such person, under any benefit or severance policy, practice, agreement, plan,
or program of the Company, nor will the Company have any liability which exists
or arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or as a result of the termination by the Company of any persons
employed by the Company or any of its Subsidiaries on or prior to the Effective
Time of the Merger.
(c) The ownership of the assets of and the conduct of the business
of the Company and each of its Subsidiaries have not been in violation of, and
comply with all statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees or arbitration awards applicable thereto, except for violations
or failures so to comply, if any, that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect with respect to the
Company.
4.9 Employee Benefit Plans. With respect to the employee benefit
plans (as that phrase is defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and any other benefit or
compensation plan, program, or arrangement maintained for the benefit of any
current or former employee, officer, or director of the Company or any ERISA
Affiliate (as defined below) ("Benefit Plans"), except as set forth in Section
4.9 of the Disclosure Schedule:
(i) none of the Benefit Plans is a "multiemployer plan"
within the meaning of ERISA nor has the Company ever maintained or contributed
to such a Plan;
(ii) none of the Benefit Plans promises or provides
retiree medical or life insurance benefits to any person;
(iii) none of the Benefit Plans or any other agreement
with any employee of the Company or its Subsidiaries provides for payment of a
benefit, the increase of a benefit amount, the payment of a contingent
benefit, or the acceleration of the payment or vesting of a benefit by reason
of the execution of this Agreement or the consummation of the transactions
contemplated by this Agreement;
(iv) each Benefit Plan intended to be qualified under
section 401 (a) of the Internal Revenue Code of 1986, as amended ("Code") has
received a favorable determination letter from the Internal Revenue Service
that it is so qualified and nothing has occurred since the date of such letter
that could reasonably be expected to result in the revocation of such
determination letter;
(v) each Benefit Plan has been operated in all respects in
accordance with its terms and the requirements of all applicable law except
where the failure to do so would not have a Material Adverse Effect and all
premiums payable to the Pension Benefits Guarantee Corporation have been paid
in full;
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(vi) neither the Company nor any ERISA Affiliate has
liability under Title IV of ERISA in connection with the termination of, or
withdrawal from, any Benefit Plan; and
(vii) the Company has provided to Buyer or MergerCo (x)
true and complete copies of all Benefit Plans, (y) the most recent annual
actuarial valuation, if any, prepared for each Benefit Plan, and (z) the most
recent annual report (Form 5500), if any, required under ERISA with respect to
each Benefit Plan;
(viii) no payment that is owed or may become due to any
director, officer, employee, or agent of the Company will be non-deductible to
the Company or subject to tax under I.R.C. ss.280G or ss.4999, respectively,
nor will the Company be required to "gross up" or otherwise compensate any
such person because of the imposition of any excise tax on a payment to such
person;
(ix) as of the date hereof, subject to the requirements of
Section 412 of the Code or Section 302 of ERISA, no Pension Plan has incurred
an accumulated funding deficiency nor has any sponsor of such a Pension Plan
obtained a funding waiver (as such terms are defined in such applicable
sections and any regulations thereunder) with respect thereto;
(x) neither the Company nor any ERISA Affiliates has
engaged in, and neither the Company nor any Affiliate knows of any other
person who or which has engaged in, any "prohibited transaction" (within the
meaning of Section 406 of ERISA or Section 4975 of the Code, excluding any
transactions which are exempt under Section 408 of ERISA or Section 4975 of
the Code) with respect to any Benefit Plan, which could reasonably be expected
to subject the Company or any Subsidiary or Buyer or MergerCo to any material
liability;
(xi) no reportable event (as defined in ERISA and the
regulations thereunder, but excluding any such event for which the thirty (30)
day notice requirement has been waived) has occurred or is continuing with
respect to any Benefit Plan;
(xii) there are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of the Company, any
actions, suits or claims (other than routine claims for benefits) which can
reasonably be expected to be asserted, against the Company with respect to any
Benefit Plan or other plan or arrangement, or against any such Benefit Plan or
other plan or the assets thereof;
(xiii) the Company and each ERISA Affiliate is, and at all
relevant times, has been in material compliance with the provisions of COBRA
(as defined below); and
(xiv) except as specifically set forth herein, the Company
has not taken any action or made any statement, promise or representation to,
or agreement with, any of its employees, officers or directors that after the
Closing, Buyer will continue or establish any Benefit Plan or other plan or
arrangement or provide any particular benefits or compensation to employees.
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For purposes of this Agreement, "ERISA Affiliate" shall mean any corporation,
trade or business which controls, is controlled by, or is under common control
with, the Company within the meaning of Sections 414(b), 414(c), 414(m) or
414(o) of the Code or Section 4001(a)(14) of ERISA and "COBRA" shall mean Part 6
of Subtitle B of Title I of ERISA and Section 4980B(f) of the Code.
Schedule 4.9 of the Disclosure Schedule sets forth a complete and
accurate list of all Benefit Plans currently in effect.
4.10 Taxes. Except as disclosed in Section 4.10 of the Disclosure
Schedule, the Company and each of its Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which the Company or
any of its Subsidiaries is or has been a member (a "Consolidated Group") has
timely filed all Tax Returns required to be filed by it (except for certain Tax
Returns, each of which is immaterial in amount and scope, involving aggregate
liability for Taxes of no more than $100,000, which may not have been timely
filed), has paid all Taxes shown thereon to be due and has provided adequate
reserves in its financial statements for any material Taxes that have not been
Paid, whether or not shown as being due on any Tax Returns. Except as disclosed
in Section 4.10 of the Disclosure Schedule, (i) no claim for unpaid Taxes has
become a lien against the property of the Company or any of its Subsidiaries or
is being asserted against the Company or any of its Subsidiaries; (ii) no audit
of any Tax Return of the Company or any of its Subsidiaries is being conducted
by a Tax authority; (iii) no extension of the statute of limitations on the
assessment of any Taxes has been granted by the Company or any of its
Subsidiaries and is currently in effect and (iv) there is no tax sharing
arrangement that will require any payment by the Company or any of its
Subsidiaries after the date of this Agreement. As used herein, "Taxes" shall
mean all taxes of any kind, including, without limitation, those on or measured
by or referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, back-up withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
As used herein, "Tax Return" shall mean any return, report or statement required
to be filed with any governmental authority with respect to Taxes. Except as set
forth on Schedule 4.10, there are no written or, to its knowledge, oral proposed
assessments of Taxes against the Company or any of its Subsidiaries or written
or, to its knowledge, oral proposed adjustments to any Tax Return filed, pending
against the Company or any of its Subsidiaries, or written or, to its knowledge,
oral proposed adjustments to the manner in which any Tax of the Company or any
of its Subsidiaries is determined.
4.11 Environmental matters. Except as disclosed in Section 4.11 of
the Disclosure Schedule, which disclosed items of non-compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company:
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(a) The Company and its Subsidiaries hold and formerly held, and
are, and have been, in material compliance with, all Environmental Permits, and
the Company and its Subsidiaries are, and have been, otherwise in material
compliance with all applicable Environmental Laws;
(b) None of the Company or its Subsidiaries has received any
Environmental Claim, and none of the Company or its Subsidiaries is aware, after
diligent inquiry, of any threatened Environmental Claim or of any circumstances,
conditions or events that could reasonably be expected to give rise to a
material Environmental Claim, against the Company or any of its Subsidiaries;
(c) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyls, (iii) asbestos or asbestos-containing materials, (iv)
urea-formaldehyde insulation, (v) sumps, (vi) surface impoundments, (vii)
landfills, (viii) sewers or septic systems or (ix) Hazardous Materials present
at any facility currently or owned, leased, operated or otherwise used or, to
the knowledge of the Company, formerly owned, leased, operated or otherwise
used, by the Company or any of its Subsidiaries that could reasonably be
expected to give rise to liability of the Company or any of its Subsidiaries
under any Environmental Laws which liability could reasonably be expected to
have a Material Adverse Effect on the Company;
(d) No modification, revocation, reissuance, alteration, transfer,
or amendment of the Environmental Permits, or any review by, or approval of, any
third party of the Environmental Permits is required in connection with the
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of the Company or its
Subsidiaries following such consummation;
(e) Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to be released at, on, from
or under any of the properties or facilities currently or owned, leased or
otherwise used or, to the knowledge of the Company, formerly owned, leased,
operated or otherwise used, including without limitation for receipt of the
Company's wastes, by the Company or any of its Subsidiaries, in violation of or
in a manner or to a location that could give rise to liability under any
Environmental Laws which liability could reasonably be expected to have Material
Adverse Effect on the Company;
(f) The Company and its Subsidiaries have not assumed,
contractually or by operation of law, any liabilities or obligations under any
Environmental Laws except, in the case of those assumed by operation of law,
those assumed which in and of themselves (and irrespective of any contribution
or indemnification rights) could not reasonably be expected to have a Material
Adverse Effect on the Company.
(g) For purposes of this Agreement, the following terms shall have
the following meanings:
"Environmental Claim" means any written or oral notice, claim, demand,
action, complaint, proceeding, request for information or other communication by
any person alleging liability or potential liability (including without
limitation liability or potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resource damages,
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property damage, personal injury, fines or penalties) arising out of, relating
to, based on or resulting from (i) the presence, discharge, emission, release
or threatened release of any Hazardous Materials at any location, whether or
not owned, leased or operated by the Company or any of its Subsidiaries or
(ii) circumstances forming the basis of any violation or alleged violation of
any Environmental Law or Environmental Permit or (iii) otherwise relating to
obligations or liabilities under any Environmental Laws.
"Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required for the Company and its Subsidiaries
and the operations of the Company's and its Subsidiaries', facilities and
otherwise to conduct its business under Environmental Laws.
"Environmental Laws" means all applicable domestic and foreign federal,
state and local statutes, rules, regulations, ordinances, orders, decrees and
common law relating in any manner to contamination, pollution or protection of
human health or the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste Disposal
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state and local laws.
"Hazardous Materials" means all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants and all other materials, substances and forces, including but not
limited to electromagnetic fields, regulated pursuant to, or that could form the
basis of liability under, any Environmental Law.
4.12 Material Contracts. The Company has provided or made available
to MergerCo true and complete copies of all written contracts, agreements
(including, but not limited to, distribution agreements and licensing
agreements), commitments, arrangements, leases (including with respect to
personal property), policies and other instruments to which it or any of its
Subsidiaries is a party or by which it or any such Subsidiary is bound which is
or was required to be filed as an exhibit to the SEC Documents ("Material
Contracts"). Neither the Company nor any of its Subsidiaries is, or has received
any notice or has any knowledge that any other party is, in breach or default in
any respect under any such Material Contract, except for those breaches or
defaults which would not reasonably be likely, either individually or in the
aggregate, to have a Material Adverse Effect with respect to the Company; and
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a material breach or default. Except as set
forth on Section 4.12 of the Disclosure Schedule and subject to Section 4.23,
all Material Contracts are valid and subsisting and in full force and effect in
accordance with their terms, and the Company has duly performed its obligations
thereunder in all material respects to the extent such obligations have
occurred.
4.13 Brokers. No broker, investment banker, financial advisor or
other person, other than Bear, Stearns & Co., Inc., the fees and expenses of
which will be paid by the Company (pursuant to a fee agreement, a copy of which
has been provided to MergerCo), is entitled to any
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broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The aggregate fees payable
to Bear, Stearns & Co., Inc. pursuant to such arrangement shall not exceed
$1,600,000.
4.14 Opinion of Financial Advisor. The Company has received the
opinion of Bear, Stearns & Co., Inc. dated the date hereof, to the effect that
the consideration to be received in the Offer and the Merger by the Company's
stockholders (other than as contemplated by Section 3. 1 (b)) is fair to the
holders of Company Common Stock from a financial point of view, a signed copy of
which opinion has been delivered to MergerCo.
4.15 Board Recommendation. The Board of Directors of the Company,
at a meeting duly called and held, has (a) determined that the Offer, this
Agreement and the transactions contemplated hereby, taken together, are
advisable and in the best interests of the Company and the stockholders of the
Company, and (b) subject to the other provisions hereof, resolved to recommend
that the holders of the shares of Company Common Stock approve the Offer, this
Agreement and the transactions contemplated herein, including the Merger.
4.16 Required Company Vote. The Company Stockholder Approval, being
the affirmative vote of two-thirds in interest of the shares of the Company
Common Stock, is the only vote of the holders of any class or series of the
Company's securities necessary to approve this Agreement, the Merger and the
other transactions contemplated hereby.
4.17 State Takeover Statutes. No state takeover statute or similar
statute or regulation of Massachusetts (and, to the knowledge of the Company
after due inquiry, of any other state or jurisdiction) applies or purports to
apply to the Company or any of its Subsidiaries, or to this Agreement, the
Offer, the Merger, or any of the other transactions contemplated hereby, except
any such statutes or regulations which are no longer applicable in any respect
upon the execution of this Agreement. Neither the Company nor any of its
Subsidiaries has any rights plan, preferred stock or similar arrangement which
have any of the aforementioned consequences in respect of the transactions
contemplated hereby.
4.18 Intellectual Property. All patents, patent applications,
registered and unregistered copyrights, trade names, registered and unregistered
trademarks and trademark applications, trade secrets, formulas, customer lists
and other proprietary information of the Company or any of its Subsidiaries
("Intellectual Property") are owned by or licensed to the Company or any of its
Subsidiaries, free and clear of all Liens. All of the Company's and its
Subsidiaries' Intellectual Property consisting of patents and trademarks have
been duly registered in, filed in or issued by the United States Patent Office
or the corresponding offices of other countries wherein use of such patent or
trademark is made, and have been properly maintained and renewed in accordance
with all applicable laws and regulations in the United States and each such
country, except where the failure to be so registered, filed, issued or
maintained would not have a Material Adverse Effect on the Company. Except as
set forth in Section 4.18 of the Disclosure Schedule, use of the Intellectual
Property by the Company and its Subsidiaries does not require the consent of any
other person and the same are freely transferable (except as otherwise provided
by law).
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Except as set forth in Section 4.18 of the Disclosure Schedule, (a) no
other person has an interest in or right or license to use, or the right to
license any other person to use, any of the Intellectual Property, (b) there are
no claims or demands of any other person pertaining thereto and no proceedings
have been instituted, or are pending or, to the knowledge of the Company,
threatened, which challenge the Company's or its Subsidiaries' rights in respect
thereof and (c) none of the Intellectual Property is being infringed by another
person or is subject to any outstanding order, decree, ruling, charge,
injunction, judgment or stipulation.
4.19 Related Party Transactions. Except as set forth in Section
4.19 of the Disclosure Schedule hereto, no director, officer, partner, employee,
"affiliate" or "associate" (as such terms are defined in Rule 12b-2 under the
Exchange Act) of the Company or any of its Subsidiaries (i) has borrowed any
monies from or has outstanding any indebtedness or other similar obligations to
the Company or any of its Subsidiaries; (ii) owns any direct or indirect
interest of any kind in, or is a director, officer, employee, partner, affiliate
or associate of, or consultant or lender to, or borrower from, or has the right
to participate in the management, operations or profits of, any person or entity
which is (1) a competitor, supplier, customer, distributor, lessor, tenant,
creditor or debtor of the Company or any of its Subsidiaries, (2) engaged in a
business related to the business of the Company or any of its Subsidiaries, or
(3) participating in any transaction to which the Company or any of its
Subsidiaries is a party; or (iii) is otherwise a party to any contract,
arrangement or understanding with the Company or any of its Subsidiaries.
Section 4.20 Permits. The Company and its Subsidiaries have all
Permits, except for those Permits the failure to have would not, individually or
in the aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole ("Material Permits"). Schedule 4.20 of the
Disclosure Schedule contains a complete list of the Material Permits, indicating
which of such Material Permits require the consent or approval of any third
party as a result of the transactions contemplated by this Agreement, exclusive
of any environmental Permits and Permits with respect to state or local sales,
use or other Taxes. All of the Permits are in full force and effect. No
outstanding written notice or, to the knowledge of the Company, oral notice of
cancellation or termination has been delivered to the Company or any subsidiary
in connection with any such Permit nor has any such cancellation or termination
been threatened. No application, action or proceeding for the modification of
any such Permits is pending or, to the knowledge of the Company, threatened that
may result in the revocation of such Permit.
Section 4.21 Insurance Policies. Schedule 4.21 of the Disclosure
Schedule contains a list of all insurance policies of the Company and its
Subsidiaries and each such policy is in full force and effect. All premiums with
respect to the insurance policies listed on Schedule 4.21 which are due and
payable prior to the Effective Time have been paid or will be paid prior to the
Effective Time, and no written notice of cancellation or termination has been
received by the Company with respect to any such policy. To the Company's
knowledge, there are no pending claims against such insurance by the Company or
any Subsidiary as to which the insurers have denied coverage or otherwise
reserved rights. To the Company's knowledge, neither the Company nor any
Subsidiary has been refused any insurance with respect to its assets or
operations during the past five years.
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Section 4.22 Certain Business Practices. Neither the Company, any of
its Subsidiaries, nor to the Company's knowledge (after inquiry from the
Company) any directors, officers, agents or employees of the Company or any of
its Subsidiaries (i) has used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity; (ii) has
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; (iii)
has made any other payment prohibited by applicable Law; or (iv) in the case of
the Company, any of its Subsidiaries or any of its officers or key employees, is
a party to or bound by any noncompetition or similar agreement or obligation
with any third party, which restricts its or his or her business practices.
Section 4.23 Suppliers and Customers. As of the date hereof, and except
as set forth in Section 4.23 of the Disclosure Schedule, the Company has
received no written notice from or, to its knowledge, any oral notice from any
significant supplier to or customer of the Company's business of such supplier's
or customer's intention to materially and adversely alter its existing business
relationship with the Company; provided, however, that subject to the Company's
obligations under Sections 6.1 and 7.3, no representation or warranty is made
hereunder (or under Section 4.12) with respect to any changes after the date
hereof in the relationship between the Company and any customer or supplier, so
long as any such change is not attributable to or does not arise from a breach
by the Company of any of its representations, warranties or covenants contained
in this Agreement.
Section 4.24 Product Warranties. Section 4.24 of the Disclosure
Schedule sets forth complete and accurate copies of the written, and
descriptions of all oral, product warranties and guaranties by the Company or
any of its Subsidiaries currently in effect. None of the salesmen, employees,
distributors or agents of the Company or any of its Subsidiaries is authorized
to undertake obligations to any customer or to other third parties in excess of
such warranties or guaranties and, to the knowledge of the Company, there have
not been any material deviations from such warranties and guaranties.
Section 4.25 Sole Representations. The representations and warranties
contained in this Agreement are the sole representations and warranties which
the Company is making in connection with the transactions contemplated herein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGERCO
Each of Buyer and MergerCo hereby, jointly and severally, represents
and warrants to the Company as follows:
5.1 Organization, Standing and Corporate Power. Buyer and MergerCo
are corporations duly organized, validly incorporated and in good standing in
the States of Ohio and Massachusetts, respectively, and each has the requisite
corporate power and authority to carry on its business as now being conducted.
Each of Buyer and MergerCo is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its business or
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the ownership or leasing of its properties makes such qualification or
licensing necessary. Each of Buyer and MergerCo has delivered to the Company
complete and correct copies of its certificate of incorporation (or other
organizational documents) and by-laws.
5.2 Subsidiaries. MergerCo has no direct or indirect subsidiaries.
5.3 Capital Structure. The authorized capital stock of MergerCo
consists of 200,000 shares of common stock, without par value, all of which have
been validly issued, are fully paid and nonassessable.
5.4 Authority; Noncontravention. Each of Buyer and MergerCo has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by each of Buyer and MergerCo and the consummation by
each of Buyer and MergerCo of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of each
of Buyer and MergerCo. This Agreement has been duly executed and delivered by
and constitutes a valid and binding obligation of each of Buyer and MergerCo,
enforceable against each of them in accordance with its terms subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general application relating to or affecting creditors' rights and to general
principles of equity. Except as disclosed on Section 5.4 of the Disclosure
Schedule, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in (a)
any breach or violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration or "put" with respect to any obligation or (b) the loss of a
benefit, or other right or the creation of any Lien upon any of the properties
or assets of either Buyer or MergerCo under, (i) the certificate of
incorporation or by-laws of either Buyer or MergerCo, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to either Buyer
or MergerCo or its properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to either Buyer or MergerCo or its properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts, breaches, violations,
defaults, rights, losses or Liens that individually or in the aggregate could
not have a Material Adverse Effect with respect to either Buyer or either Buyer
or MergerCo or could not prevent, hinder or materially delay the ability of
MergerCo to consummate the transactions contemplated by this Agreement. No
consent, approval, order or authorization of, or registration, declaration or
filing with, or notice to, any Governmental Entity or any other person under any
agreement, indenture or other instrument to which Buyer or MergerCo is a party
or to which any of its properties is subject, is required by or with respect to
either Buyer or MergerCo in connection with the execution and delivery of this
Agreement by either Buyer or MergerCo or the consummation by Buyer and MergerCo
of any of the transactions contemplated by this Agreement, except for (i) the
filing of a pre-merger notification and report form under the HSR Act, (ii) the
filing with the SEC of (y) the Offer Documents and the Proxy Statement and (z)
such reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (iii) the
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filing of the Certificate of Merger with the Secretary of State of the
Commonwealth of Massachusetts and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business
and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices as may be required under the
"takeover" or "blue sky" laws of various states.
5.5 Brokers. No broker, investment banker, financial advisor or
other person, other than Wheat First Butcher & Singer, a division of Wheat,
First Securities, Inc., the fees and expenses of which will be paid by Buyer or
MergerCo, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or an behalf of MergerCo to its
affiliates.
5.6 Financing. As of the date of this Agreement, Buyer and
MergerCo have, and at all times through the expiration of the Offer and the
Effective Time, Buyer and MergerCo will have available all the funds necessary
for the acquisition of all Shares pursuant to the Offer and to perform their
respective obligations under this Agreement, including without limitation
payment in full for all shares of Company Common Stock validly tendered into the
Offer or outstanding at the Effective Time, the payment of all amounts payable
under Section 3.2, and the payment of all fees and expenses payable by Buyer and
Merger Co.
5.7 Offer Documents and Schedule 14D-9. The Offer Documents will
not, at the time the Offer Documents or any amendments or supplements thereto
are filed with the SEC or are first published, sent or given to stockholders of
the Company, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading (except to the extent information contained therein is based upon
information supplied solely by the Company). The Offer Documents shall comply in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder.
5.8 Information Supplied. None of the information supplied or to
be supplied by MergerCo or its affiliates in writing specifically for inclusion
or incorporation by reference in the Proxy Statement will, at the time the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
5.9 Sole Representations. The representations and warranties
contained in this Agreement are the sole representations and warranties which
Buyer or MergerCo are making in connection with the transactions contemplated
herein.
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ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as set forth in
Section 6.1 of the Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time of the Merger (except as otherwise specifically
required by the terms of this Agreement), the Company shall, and shall cause its
Subsidiaries to, act and carry on their respective businesses in the usual,
regular and ordinary course of business consistent with past practice and use
its and their respective reasonable best efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and others having
business dealings with them and to preserve goodwill. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time of the Merger, the Company shall not, and shall not permit
any of its Subsidiaries to, without the prior written consent of MergerCo:
(a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends and
distributions by a direct or indirect wholly owned subsidiary of the Company to
its parent in accordance with applicable law;
(b) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock;
(c) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities, except for the acquisition of shares of Company Common Stock from
holders of Company Stock Options in full or partial payment of the exercise
price payable by such holder upon exercise of Company Stock Options outstanding
on the date of this Agreement;
(d) authorize for issuance, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock or the capital stock of any
of its Subsidiaries, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities or any other securities or equity
equivalents (including without limitation stock appreciation rights) (other than
an increase in the number of shares subject to the Stock Option Plan pursuant to
existing contractual obligations and the issuance of Company Common Stock upon
the exercise of Company Stock Options outstanding on the date of this Agreement
and in accordance with their present terms (such issuances, together with the
acquisitions of shares of Company Common Stock permitted under clause (c) above,
being referred to herein as "Permitted Changes"));
(e) in the case of the Company, amend its articles of
organization, by-laws or other comparable charter or organizational documents;
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(f) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the stock or assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof material to the
Company;
(g) other than as specifically permitted by Section 6.1 of the
Disclosure Schedule, sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
other than any such properties or assets the value of which do not exceed $1.0
million individually and $3.0 million in the aggregate, except sales of
inventory, in the ordinary course of business consistent with past practice;
(h) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its Subsidiaries, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for short-term borrowings and for lease
obligations, in each case incurred in the ordinary course of business consistent
with past practice;
(i) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect wholly owned subsidiary of the Company and other than loans to
employees in the ordinary course of business not to exceed $1,000 in any one
case or $25,000 in the aggregate;
(j) pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, (a) of liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof or (b) claims settled or compromised to the extent
permitted by Section 6. 1 (n), or waive, release, grant, or transfer any rights
of material value or modify or change in any material respect any existing
license, lease, Permit, contract or other document, other than in the ordinary
course of business consistent with past practice;
(k) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization;
(1) enter into any new collective bargaining agreement;
(m) change any material accounting principle used by it;
(n) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) other than settlements or compromises of
litigation where the amount paid (after giving effect to insurance proceeds
actually received) in settlement or compromise is not material to the Company;
or
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(o) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 CHANGES IN EMPLOYMENT ARRANGEMENTS. Except as set forth in
Section 6.2 of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries shall adopt or amend (except as may be required by law) any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
or other arrangement (including any Company Plan) for the benefit or welfare of
any employee, director or former director or employee, other than increases for
individuals other than officers and directors) in the ordinary course of
business consistent with. past practice or increase the compensation or fringe
benefits of any director, employee or former director or employee or pay any
benefit not required by any existing plan, arrangement or agreement.
6.3 SEVERANCE. Neither the Company nor any of its Subsidiaries
shall grant any new or modified severance or termination arrangement or increase
or accelerate any benefits payable under its severance or termination pay
policies in effect on the date hereof.
6.4 WARN. Neither the Company nor any of its Subsidiaries shall
effectuate a "plant closing" or "mass layoff", as those terms are defined in the
Worker Adjustment and Retraining Notification Act of 1988 or similar state law
("WARN") affecting in whole or in part any site of employment, facility,
operating unit or employee of the Company or any subsidiary, without the prior
written consent of MergerCo or its affiliates in advance and without complying
with the notice requirements and other provisions of WARN.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 PREPARATION OF PROXY STATEMENT: STOCKHOLDER MEETING.
(a) As promptly as practicable after Buyer or MergerCo first
purchases Shares pursuant to the Offer, and if required by applicable law, the
Company shall prepare the Proxy Statement. The Company will use its best efforts
to cause the Proxy Statement to be mailed to the Company's stockholders as
promptly as practicable after clearance thereof with the SEC. If, at any time
prior to the Stockholders Meeting, any event, with respect to the Company, its
Subsidiaries, directors, officers, and/or the Merger or the other transactions
contemplated hereby, shall occur, which is required to be described in the Proxy
Statement, the Company shall so describe such event and, to the extent required
by applicable law, shall cause it to be disseminated to the Company's
stockholders.
(b) The Company will immediately notify MergerCo and its
affiliates of (i) the receipt of any comments from the SEC regarding the Proxy
Statement and (ii) the approval of the Proxy Statement by the SEC. MergerCo
shall be given a reasonable opportunity to review and comment on all filings
with the SEC and all mailings to the Company's stockholders in
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connection with the Merger prior to the filing or mailing thereof, and the
Company shall use its best efforts to reflect all such reasonable comments.
(c) The Company will, as promptly as practicable following the
expiration of the Offer and in consultation with MergerCo, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Stockholders
Meeting") for the purpose of approving this Agreement and the transactions
contemplated by this Agreement. The Company will, through its Board of
Directors, recommend to its stockholders approval of the foregoing matters and
seek to obtain all votes and approvals thereof by the stockholders, as set forth
in Section 4.15; PROVIDED, HOWEVER; that the obligations contained herein shall
be subject to the provisions of Section 7.6 of this Agreement. Subject to the
foregoing, such recommendation, together with a copy of the opinion referred to
in Section 4.14 shall be included in the Proxy Statement. The Company will use
its best efforts to hold such meetings as soon as practicable after the date
hereof. Notwithstanding the foregoing, if MergerCo shall acquire at least 90% of
the outstanding Company Common Stock pursuant to the Offer, MergerCo may, in its
sole discretion, and in lieu of completing the Merger in accordance with this
Agreement, cause the Company to be merged into Merger Co without a Stockholders
Meeting and in accordance with the Massachusetts Business Corporation Law;
provided, however, that in such event, the rights of stockholders of the Company
under this Agreement (including, without limitation, the right to receive the
Merger Consideration) shall not be adversely affected thereby (other than the
right to receive the Proxy Statement, attend the Stockholders Meeting and vote
on the Merger, which shall no longer be applicable).
(d) The Company will cause its transfer agent to make stock
transfer records relating to the Company available to the extent reasonably
necessary to effectuate the intent of this Agreement.
7.2 ACCESS TO INFORMATION, CONFIDENTIALITY.
The Company shall, and shall cause its Subsidiaries, officers,
employees, counsel, financial advisors and other representatives to, afford to
MergerCo and its representatives and to potential financing sources reasonable
access during normal business hours, in a manner initially coordinated with
Bear, Stearns & Co., Inc. and/or the chief executive officer, president or chief
financial officer of the Company, and thereafter coordinated with those persons
designated by the chief executive officer, during the period prior to the
Effective Time of the Merger to its properties, books, contracts, commitments,
personnel and records (including, without limitation, to the extent available,
the work papers of the Company's independent public accountants) and, during
such period, the Company shall, and shall cause its Subsidiaries, officers,
employees and representatives to, furnish promptly to MergerCo (i) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of Federal or state securities
laws and (ii) all other information concerning its business, properties,
financial condition, operations and personnel as MergerCo may from time to time
reasonably request. Except as required by law, each of the Company and MergerCo
will hold, and will cause its respective directors, officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in confidence to the extent
required by and in accordance with that certain Confidentiality Agreement, dated
September 5,
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1997, by and between Bear, Stearns & Co., Inc., on behalf of the Company and
Buyer, the other terms of which Confidentiality Agreement are hereby
terminated.
7.3 REASONABLE BEST EFFORTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Offer, the Merger and the other transactions
contemplated by this Agreement. The Buyer, MergerCo and the Company will use
their reasonable best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or consents, approvals,
waivers, licenses, Permits or authorizations are required to be obtained (or,
which if not obtained, would result in a breach or violation, or an event of
default, termination or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by this Agreement,
including the Offer, the Merger and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits or authorizations. Notwithstanding
the foregoing, or any other covenant herein contained, in connection with the
receipt of any necessary approvals under the HSR Act, neither the Company nor
any of its Subsidiaries shall be entitled to divest or hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of its
Subsidiaries or any material portions thereof or any of the businesses, product
lines, properties or assets of the Company or any of its Subsidiaries, without
MergerCo's prior written consent.
(b) The Company shall make, subject to the condition that the
transactions contemplated herein actually occur, any undertakings (including
undertakings to make divestitures, provided, in any case, that such divestitures
need not themselves be effective or made until after the transactions
contemplated hereby actually occur) required in order to comply with the
antitrust requirements or laws of any governmental entity, including the HSR
Act, in connection with the transactions contemplated by this Agreement;
provided that no such divestiture or undertaking shall be made unless acceptable
to MergerCo.
(c) Each of the parties agrees to cooperate with each other in
taking, or causing to be taken, all actions necessary to delist Company Common
Stock from The NASDAQ National Stock Market ("NASDAQ"), provided that such
delisting shall not be effective until after the Effective Time of the Merger.
The parties also acknowledge that it is MergerCo's intent that Company Common
Stock following the Offer and the Merger will not be quoted on NASDAQ or listed
on any national securities exchange.
7.4 INDEMNIFICATION. For six years after the Effective Time of the
Merger, the Company and the Buyer shall indemnify all present and former
directors or officers of the Company and its Subsidiaries ("Indemnified
Parties") against any costs or expenses (including
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reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time of the Merger, whether
asserted or claimed prior to, at or after the Effective Time of the Merger, to
the fullest extent as would have been permitted in their respective articles of
organization or by-laws consistent with applicable law, to the extent such Costs
have not been paid for by insurance and shall, in connection with defending
against any action for which indemnification is available hereunder, reimburse
such officers and directors, from time to time upon receipt of sufficient
supporting documentation, for any reasonable costs and expenses reasonably
incurred by such officers and directors; provided that such reimbursement shall
be conditioned upon such officer's or director's agreement promptly to return
such amounts to the Company if a court of competent jurisdiction shall
ultimately determine that indemnification of such officer or director is
prohibited by applicable law. The Company will maintain for a period of not less
than six years from the Effective Time of the Merger, the Company's current
directors' and officers, insurance and indemnification policy (or a policy
providing substantially similar coverage) to the extent that it provides
coverage for events occurring prior to the Effective Time of the Merger (the
"D&O Insurance") for all persons who are directors and officers of the Company
on the date of this Agreement; provided that the Company shall not be required
to spend as an annual premium for such D&O Insurance an amount in excess of 150%
of the annual premium paid for directors' and officers' insurance in effect
prior to the date of this Agreement; and provided further that the Company shall
nevertheless be obligated to provide such coverage as may be obtained for such
amount. The provisions of this Section are intended for the benefit of, and
shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.5 PUBLIC ANNOUNCEMENTS. Neither MergerCo or the Buyer, on the
one hand, nor the Company, on the other hand, will issue any press release or
public statement with respect to the transactions contemplated by this
Agreement, including the Offer and the Merger, without the other party's prior
consent, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with NASDAQ. In addition to the
foregoing, MergerCo and the Company will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any such
press release or other public statements with respect to such transactions. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
7.6 NO SOLICITATION. From and after the date hereof until the
termination of this Agreement neither the Company or any of its Subsidiaries,
nor any of their respective officers, directors, employees, representatives,
agents or affiliates (including, without limitation, any investment banker,
attorney or accountant retained by the Company or any of its Subsidiaries) will
directly or indirectly initiate, solicit or knowingly encourage (including by
way of furnishing non-public information or assistance), or take any other
action to facilitate knowingly, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to any Transaction Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Transaction
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Proposal or agree to or endorse any Transaction Proposal or authorize or permit
any of its officers, directors or employees or any of its Subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative retained by any of its Subsidiaries to take any such action,
provided, however, that nothing contained in this Agreement shall prohibit the
Board of Directors of the Company from, prior to the acceptance for payment of
Company Common Stock pursuant to the Offer (i) furnishing information to or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited written, bona fide proposal, to acquire the Company and/or its
Subsidiaries pursuant to a merger, consolidation, share exchange, business
combination, tender or exchange offer or other similar transaction and in
respect of which such person or entity has the necessary funds or commitments
therefor if, and only to the extent that: (A) the Board of Directors of the
Company, after consultation with their financial advisors and after consultation
with and based upon the advice of independent legal counsel (who may be the
Company's regularly engaged independent legal counsel) determines in good faith
that such action is necessary for the Board of Directors of the Company to
comply with its fiduciary duties to stockholders under applicable law and (B)
prior to taking such action the Company receives from such person or entity an
executed confidentiality agreement containing terms and provisions substantially
similar to those contained in the Confidentiality Agreement described in Section
7.2, (ii) failing to make or withdrawing or modifying its recommendation
referred to in Section 4.15 if there exists a Transaction Proposal and the Board
of Directors of the Company, after consultation with their financial advisors
and after consultation with and based upon the advice of independent legal
counsel (who may be the Company's regularly engaged independent counsel),
determines in good faith that such action is necessary for the Board of
Directors of the Company to comply with its fiduciary duties to stockholders
under applicable law in connection with such Transaction Proposal or (iii)
making to the Company's stockholders any recommendation and related filing with
the SEC as required by Rule 14e-2 and 14d-9 under the Exchange Act, with respect
to any tender offer, or taking any other legally required action with respect to
such tender offer (including, without limitation, the making of public
disclosures as may be necessary or reasonably advisable under applicable
securities laws) if the Board of Directors of the Company, after consultation
with their financial advisors and after consultation with and based upon the
advice of independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines in good faith that such action is necessary for
the Board of Directors of the Company to comply with its fiduciary duties to
stockholders under applicable law; and PROVIDED FURTHER, HOWEVER, that, in the
event of an exercise of the Company's or it's Board of Director's (or the
Special Committee's) rights under clauses (i), (ii) or (iii) above and subject
to compliance with the next three sentences hereof, notwithstanding anything
contained in this Agreement to the contrary, such exercise of rights shall not
constitute a breach of this Agreement by the Company. The Company shall promptly
advise MergerCo orally and in writing of any request for nonpublic information
from, or discussions or negotiations with, any person or entity or of any
Transaction Proposal known to it, the material terms and conditions of such
request or Transaction Proposal and the identity of the person or entity making
such request or Transaction Proposal. The Company will promptly inform MergerCo
of any material change in the details (including amendments or proposed
amendments) of any such request for nonpublic information, the contents of any
discussions or negotiations or any material change in such Transaction Proposal.
Neither the Board of Directors of the Company nor any committee thereof shall
take any action pursuant to clauses (ii)
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or (iii) above until a time that is after the later of (x) the fourth business
day following MergerCo's receipt of written notice advising MergerCo that the
Board of Directors of the Company has received a Transaction Proposal,
specifying the material terms of such Transaction Proposal and identifying the
person making such Transaction Proposal and (y) in the event of any amendment to
the price or any material term of a Transaction Proposal, two business days
following MergerCo's receipt of written notice containing the material terms of
such amendment, including any change in price (it being understood that each
such further amendment to the price or any material terms of a Transaction
Proposal shall necessitate an additional written notice to MergerCo and an
additional two business day period prior to which the Company can take any
action set forth in clauses (ii) or (iii) above). For purposes of this
Agreement, "Transaction Proposal" shall mean any of the following (other than
the transactions between the Company and MergerCo contemplated by the Offer and
this Agreement) involving the Company or any of its Subsidiaries: (i) any
merger, consolidation, share exchange, recapitalization, business combination,
or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 20% or more of the assets of the Company and
its Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for, or the acquisition
(or right to acquire) of "beneficial ownership" by any person, "group" or entity
(as such terms are defined under Section 13 (d) of the Securities Exchange Act
of 1934), other than a person, group or entity which has signed the Stockholders
Agreement, of 20% or more of the outstanding shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
7.7 RESIGNATION OF DIRECTORS. Prior to the Effective Time of the
Merger, the Company shall deliver to MergerCo evidence satisfactory to MergerCo
of the resignation of all directors of the Company, effective at the Effective
Time of the Merger.
7.8 EMPLOYEE BENEFITS. Except as contemplated by this Agreement,
Buyer agrees that, for a period of twelve (12) months following the Effective
Time, the Surviving Corporation shall maintain employee benefits plans and
arrangements (directly or in conjunction with Buyer) which, in the aggregate,
will provide a level of benefits to continuing employees of the Company and its
Subsidiaries substantially comparable in the aggregate to those provided under
the Benefit Plans set forth on Schedule 4.9 of the Disclosure Schedule
("Disclosed Benefits") as in effect immediately prior to the Effective Time
(other than discretionary benefits); provided, however, that Buyer may cause
modifications to be made to such Benefit Plans and arrangements to the extent
necessary to comply with applicable Law or to reflect widespread adjustments in
benefits (or costs thereof) provided to employees under compensation and benefit
plans of Buyer and its subsidiaries, and no specific compensation and Benefit
Plans need be provided. For purposes of determining eligibility and vesting with
respect to all Disclosed Benefits (except with respect to any defined benefit
plans), Buyer shall use the employee's hire date with the Company or such other
date as has been previously determined by the Company for credit for prior
employment with any ERISA Affiliate of the Company. Benefit Plans which provide
medical, dental, or life insurance benefits after the Effective Time to any
individual who is an active or former employee of the Company or any of its
Subsidiaries as of the Effective Time or a dependent of such an
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employee shall, with respect to such individuals, waive any waiting periods, any
pre-existing conditions, and any actively-at-work exclusions to the extent so
waived under present policy and shall provide that any expenses incurred on or
before the Effective Time by such individuals shall be taken into account under
such plans for purposes of satisfying applicable deductible, coinsurance, and
maximum out-of-pocket provisions to the extent taken into account under present
policy. Nothing in this Section 7.8 shall prohibit the Company from terminating
the employment of any employee at any time with or without cause (subject to,
and in accordance with the terms of any existing employment agreements), or
shall be construed or applied to restrict the ability of the Buyer or Surviving
Corporation and its Subsidiaries to establish such types and levels of
compensation and benefits as they determine to be appropriate. Buyer agrees to
cause the Surviving Corporation (or the applicable Subsidiary employer) to honor
the existing employment agreements that are set forth on Schedule 7.8 of the
Disclosure Schedule.
7.9 Notification of Certain Matters. The Company shall give prompt
notice to Buyer and MergerCo and Buyer and MergerCo shall give prompt notice to
the Company of: (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which does or would be likely to cause (A) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, or (B) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied; and (ii) any
failure of the Company on the one hand, or Buyer or MergerCo on the other hand,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 7.9 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
7.10 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated hereby, including the Offer or the
Merger, the Company and Buyer, and their respective Boards of Directors shall
use their reasonable best efforts to grant such approvals and to take such other
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
shall otherwise use their reasonable best efforts to eliminate the effects of
any such statute or regulation on the transactions contemplated hereby.
7.11 INDEMNIFICATION AGREEMENTS. Prior to the expiration of the
Offer, the Company shall obtain the termination of all rights under certain
Indemnification Agreements (each, an "Indemnification Agreement") between the
Company and each of the Company's management listed on Section 7.11 of the
Disclosure Schedule (the "Indemnified Persons"), in form and substance
reasonably satisfactory to Buyer and its counsel. This covenant shall not impact
the obligations set forth in Section 7.4 hereof.
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ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION. The respective
obligation of each party to effect the Merger is subject to the satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained if required by applicable law.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any Governmental
Entity or other legal restraint or prohibition shall be in effect preventing or
prohibiting the acceptance for payment of, or payment for, shares of Common
Stock pursuant to the Offer, or the consummation of the Merger; provided,
however, that the parties hereto shall, subject to the last sentence of Section
7.3 (a) hereof, use their best efforts to have any such injunction, order,
restraint or prohibition vacated.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated and abandoned at
any time prior to the Effective Time of the Merger, whether before or after
approval of matters presented in connection with the Merger by the stockholders
of the Company:
(a) by mutual written consent of MergerCo and the Company; or
(b) by either MergerCo or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting or if there shall be
in effect any other legal restraint or prohibition preventing or prohibiting the
acceptance for payment of, or payment for, shares of Company Common Stock
pursuant to the Offer or the consummation of the Merger and such order, decree,
ruling or other action shall have become final and nonappealable (other than due
to the failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to the
Effective Time of the Merger); or
(c) by the Company if Offeror shall not have (i) commenced the
Offer within five (5) business days after the initial public announcement of
Buyer's intention to commence the Offer, or (ii) accepted for payment any shares
of Company Common Stock pursuant to the Offer prior to March 31, 1998 (other
than due to the failure of the Company to perform its obligations under this
Agreement); or
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(d) by the Company upon its execution, prior to Buyer's or
MergerCo's purchase of shares of Company Common Stock pursuant to the Offer, of
a binding agreement with a third party with respect to a Transaction Proposal,
provided that it has complied with all provisions of this Agreement, including
the notice provisions herein, and that it pays the Termination Fee as provided
by and defined in Section 10.2;
(e) by MergerCo in the event of a material breach or failure to
perform in any material respect by the Company of any representation, warranty,
covenant or other agreement contained in this Agreement which cannot be or has
not been cured within 20 days after the giving of written notice to the Company;
or
(f) by the Company in the event of a material breach or failure to
perform in any material respect by MergerCo or Buyer of any representation,
warranty, covenant or other agreement contained in this Agreement which cannot
be or has not been cured within 20 days after the giving of written notice to
MergerCo or Buyer.
(g) by MergerCo, if Offeror terminates the Offer in accordance
with the terms of Annex I.
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or MergerCo as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of MergerCo or the Company, other than the provisions
of Section 4.13, Section 5.5, the last sentence of Section 7.2, this Section
9.2, Section 10.2 and Section 10.7. Nothing contained in this Section shall
relieve any party for any breach of the representations, warranties, covenants
or agreements set forth in this Agreement.
9.3 AMENDMENT. This Agreement way be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time of
the Merger, the parties may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 9.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
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9.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 9.1, an amendment of this
Agreement pursuant to Section 9.3 or an extension or waiver pursuant to Section
9.4 shall, in order to be effective, require in the case of MergerCo or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE X
GENERAL PROVISIONS
10.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time of the Merger and
all such representations and warranties will be extinguished on consummation of
the Merger and none of the Company, Buyer and MergerCo, nor any officer,
director or employee or shareholder thereof shall be under any liability
whatsoever with respect to any such representation or warranty after such time.
This Section 10.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger.
10.2 FEES AND EXPENSES.
(a) In addition to any other amounts which may be payable or
become payable pursuant to any other paragraph of this Section 10.2, the Company
shall, simultaneously with the termination of this Agreement in any of the
circumstances described in Section 10.2(b), reimburse MergerCo for all
out-of-pocket expenses and fees, in an aggregate amount not to exceed $1.5
million (including, without limitation, fees payable to all banks, investment
banking firms and other financial institutions, and their respective agents and
counsel, and all fees of counsel, accountants, financial printers, experts and
consultants to MergerCo and its affiliates), whether incurred prior to, on or
after the date hereof, in connection with the Merger and the consummation of all
transactions contemplated by this Agreement, and the financing thereof.
(b) If any Person (other than MergerCo or any of its affiliates)
shall have made, proposed, communicated or disclosed a Transaction Proposal in a
manner which is or otherwise becomes public and this Agreement is terminated
pursuant to any of the following provisions:
(i) by the Company pursuant to Section 9.1(c) if
Offeror's failure to accept for payment shares of Company
Common Stock results from the failure of the Minimum Condition
to be satisfied or the occurrence of any of the events set
forth in subparagraph (c), other than a breach of the
representations in clauses (i) and (ii) of Section 4.7, or
subparagraphs (d) or (e) of Annex I;
(ii) by the Company pursuant to Section 9.1 (d);
(iii) by MergerCo pursuant to Section 9.1 (e) ),
other than a breach of the representations in clauses (i) and
(ii) of Section 4.7, or
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(iv) by MergerCo pursuant to Section 9.1(g) if
Offeror has terminated the Offer as a result of the failure of
the Minimum Condition to be satisfied or the occurrence of any
of the events set forth in subparagraphs (c), other than a
breach of the representations in clauses (i) and (ii) of
Section 4.7, or subparagraphs (d) or (e) of Annex I.
then the Company shall, simultaneously with such termination of this Agreement,
pay MergerCo a fee of 4.25% OF THE AGGREGATE MERGER CONSIDERATION in cash, which
amount shall be payable in same day funds. No termination of this Agreement at a
time when a fee is reasonably expected to be payable pursuant to this Section
10.2(b) shall be effective until such fee is paid. Only one fee in the aggregate
of 4.25% of the aggregate Merger Consideration shall be payable pursuant to this
Section 10.2(b). No amount payable pursuant to any of the other provisions of
this Section 10.2 shall reduce the amount of the fee payable pursuant to this
paragraph (b).
(c) Except as provided otherwise in paragraph (a) above, all costs
and expenses incurred in connection with this Agreement, and the transactions
contemplated hereby shall be paid by the party incurring such expenses,, except
that the Company shall pay all costs and expenses (i) in connection with
printing and mailing the Proxy Statement, as well as all SEC filing fees
relating to the transactions contemplated herein and (ii) of obtaining any
consents of any third party.
10.3 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to MergerCo or Buyer, to
Invacare Corporation
One Invacare Way
Elyria, Ohio 44035
Attention: Thomas R. Miklich
Chief Financial Officer, Secretary and Treasurer
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with a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attn: Dale C. LaPorte, Esq.
(b) if to the Company, to
Suburban Ostomy Supply Co., Inc.
75 October Hill Road
Holliston, Massachusetts 01746
Attn: Herbert P. Gray, Chairman of the Board
with copies to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, MA 021 10
Attn: James Westra, Esq.
10.4 DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) a "business day" means any day, other than Saturday, Sunday or
a federal holiday, and shall consist of the time period from 12:01 a.m. through
12:00 midnight Eastern time. In computing any time period under Section 14(d)(5)
or Section 14(d)(6) of the Exchange Act or under Regulation 14D or Regulation
14E, the date of the event which begins the running of such time period shall be
included except that if such event occurs on other than a business day such
period shall begin to run on and shall include the first business day
thereafter;
(c) "knowledge", with respect to the Company means the actual
knowledge of the following officers and employees (as well as any of their
successors) of the Company and its Subsidiaries: Herbert P. Gray, Donald
Benovitz, Stephen Aschettino, Patrick Bohan and John Manos and, without
duplication, the employees in charge of environmental, tax, labor, employee
benefits and real estate matters or any of the foregoing, in each case after
reasonable investigation and inquiry.
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(d) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company, any change or effect that either
individually or in the aggregate with all other such changes or effects is
materially adverse to the business, financial condition, prospects or results of
operations of the Company and its Subsidiaries taken as a whole and the terms
"material" and "materially" shall have correlative meanings; provided, however,
that no Material Adverse Change or Material Adverse Effect shall be deemed to
have occurred as a result solely of any one or more of: (i) those matters
described in a separate writing dated the date of this Agreement and
specifically referencing this Section delivered by the Company to the Buyer,
(ii) general economic conditions affecting generally the industry in which the
Company competes and general market conditions in the United States, or (iii)
changes after the date hereof in the relationship between the Company and any
customer or supplier, so long as any such change is not attributable to or does
not arise from a breach by the Company of any of its representations, warranties
or covenants contained in this Agreement.
(e) "person" means an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other
entity; and
(f) a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors
(or other governing body) or, if there are no such voting interests, 50% or more
of the equity interests of which is owned directly or indirectly by such first
person.
10.5 INTERPRETATION. When a reference is made in this Agreement to
a Section, Exhibit or Schedule, such reference shall be to a section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words -without
limitation".
10.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
10.7 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
and the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This
Agreement, other than Sections 7.4 and 10.2, is not intended to confer upon any
Person other than the parties any rights or remedies.
10.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS.
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10.9 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties; provided, however, that Buyer or MergerCo
may, without the Company's prior written consent, assign its rights under this
Agreement to any financial institution that requires such assignment in
connection with such financial institution's agreement to provide financing to
either Buyer or MergerCo Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
10.10 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Buyer, MergerCo and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
INVA ACQUISITION CORP.
By: /s/ Thomas R. Miklich
-----------------------------------
Name: Thomas R. Miklich
Title: Director
SUBURBAN OSTOMY SUPPLY CO., INC.
By: /s/ Herbert P. Gray
-----------------------------------
Name: Herbert P. Gray
Title: Chairman
INVACARE CORPORATION
By: /s/ Thomas R. Miklich
-----------------------------------
Name: Thomas R. Miklich
Title: CFO
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Annex I
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CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer or this
Agreement, and subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) relating to MergerCo's obligation to pay for or return
tendered shares after termination of the Offer, MergerCo shall not be required
to accept for payment or pay for any shares of Company Common Stock tendered
pursuant to the Offer and may terminate the Offer at any time after January 31,
1998, if (i) less than two-thirds of the Fully Diluted Shares of Company Common
Stock has been tendered pursuant to the Offer by the expiration of the Offer and
not withdrawn (the "Minimum Condition"); (ii) any applicable waiting period
under the HSR Act has not expired or terminated; or (iii) at any time after the
date of this Agreement, and before acceptance for payment of any shares of
Company Common Stock, any of the following events shall occur and be continuing:
(a) there shall be instituted or pending by any
Governmental Entity any suit, action or proceeding (i)
challenging the acquisition by Buyer or MergerCo of any shares
of Company Common Stock under the Offer, or seeking to
restrain or prohibit the making or consummation of the Offer
or the Merger, (ii) seeking to prohibit or materially limit
the ownership or operation by the Company, Buyer or any of
Buyer's subsidiaries of a material portion of the business or
assets of the Company or Buyer and its subsidiaries, taken as
a whole, or to compel the Company or Buyer to dispose of or
hold separate any material portion of the business or assets
of the Company or Buyer and its subsidiaries, taken as a
whole, in each case as a result of the Offer or the Merger or
(iii) seeking to impose material limitations on the ability of
Buyer or MergerCo to acquire or hold, or exercise full rights
of ownership of, any shares of Company Common Stock to be
accepted for payment pursuant to the Offer including, without
limitation, the right to vote such shares of Company Common
Stock on all matters properly presented to the stockholders of
the Company or (iv) seeking to prohibit Buyer or any of its
subsidiaries from effectively controlling in any material
respect any material portion of the business or operations of
the Company;
(b) there shall be any statute, rule, regulation,
judgment, order or injunction enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger,
by any Governmental Entity or court, other than the
application to the Offer or the Merger of applicable waiting
periods under the HSR Act, that would result in any of the
consequences referred to in clauses (i) through (iv) of
paragraph (a) above;
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(c) any of the representations and warranties of the
Company and its Subsidiaries contained in this Agreement shall
not be true and correct at and as of the date of consummation
of the Offer (except to the extent such representations and
warranties speak to an earlier date), as if made at and as of
the date of consummation of the Offer, in each case except as
contemplated or permitted by this Agreement and except, in the
case of any such breach when such breach would not have,
individually or in the aggregate, a Material Adverse Effect
with respect to the Company or materially affect the ability
of the Company to consummate the Merger or the Offeror to
accept for payment or pay for shares of Company Common Stock
pursuant to the Offer;
(d) the Company shall have failed to perform the
obligations required to be performed by it under this
Agreement at or prior to the date of expiration of the Offer,
including but not limited to its obligations pursuant to
Section 7.6 hereof, except for such failures to perform as
have not had or would not individually or in the aggregate,
have a Material Adverse Effect with respect to the Company or
materially adversely affect the ability of the Company to
consummate the Merger or the Offeror to accept for payment or
pay for shares of Company Common Stock pursuant to the Offer;
(e) the Board of Directors of the Company or any
committee thereof shall have (i) withdrawn, modified or
amended in any respect adverse to Buyer or MergerCo its
approval or recommendation of the Offer or the Merger, (ii)
recommended or approved any Transaction Proposal from a person
other than Buyer, MergerCo or any of their respective
affiliates (iii) failed to publicly announce, within ten (10)
business days after the occurrence of a Transaction Proposal,
its opposition to such Transaction Proposal, or amended,
modified or withdrawn its opposition to any Transaction
Proposal in any manner adverse to Buyer or MergerCo or (iv)
resolved to do any of the foregoing;
(f) this Agreement shall have been terminated in
accordance with its terms; or
which, in the good faith judgment of Buyer or MergerCo, in its sole discretion,
make it inadvisable to proceed with such acceptance of shares of Company Common
Stock for payment or the payment therefor.
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EXHIBIT 2
SECTIONS 86 TO 98 OF MASSACHUSETTS BUSINESS CORPORATION LAW
86 RIGHT OF APPRAISAL. If a corporation proposes to take a corporate
action as to which any section of this chapter provides that a stockholder who
objects to such action shall have the right to demand payment for his shares and
an appraisal thereof, sections eighty-seven to ninety-eight, inclusive, shall
apply except as otherwise specifically provided in any section of this chapter.
Except as provided in sections eighty-two and eighty-three, no stockholder shall
have such right unless (1) he files with the corporation before the taking of
the vote of the stockholders on such corporate action, written objection to the
proposed action stating that he intends to demand payment for his shares if the
action is taken and (2) his shares are not voted in favor of the proposed
action.
87 NOTICE OF STOCKHOLDERS MEETING TO CONTAIN STATEMENT AS TO APPRAISAL
RIGHTS. The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such
action, written objection to the proposed action stating that he intends
to demand payment for his shares if the action is taken and (2) whose
shares are not voted in favor of such action has or may have the right
to demand in writing from the corporation (or, in the case of a
consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of
mailing to him of notice in writing that the corporate action has become
effective, payment for his shares and an appraisal of the value thereof.
Such corporation and any such stockholder shall in such cases have the
rights and duties and shall follow the procedure set forth in sections
88 to 98, inclusive, of chapter 156B of the General Laws of
Massachusetts."
88 NOTICE TO OBJECTING STOCKHOLDER THAT CORPORATE ACTION HAS BECOME
EFFECTIVE. The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
89 DEMAND FOR PAYMENT BY OBJECTING STOCKHOLDER. If within twenty days
after the date of mailing a notice under subsection (e) of section eighty-two,
subsection (f) of section eighty-three, or section eighty-eight any stockholder
to whom the corporation was required to give such notice shall demand in writing
from the corporation taking such action, or in the case of a consolidation or
merger from the resulting or surviving corporation, payment for his stock, the
corporation upon which such demand is made shall pay to him the fair value of
his stock within thirty days after the expiration of the period during which
such demand may be made.
90 DETERMINATION OF VALUE OF STOCK BY SUPERIOR COURT. If during the
period of thirty days provided for in section eighty-nine the corporation upon
which such demand is made and any such objecting stockholder fail to agree as to
the value of such stock, such corporation or any such stockholder may within
four months after the expiration of such thirty-day period demand a
determination of the value of the stock of
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all such objecting stockholders by a bill in equity filed in the superior court
in the county where the corporation in which such objecting stockholder held
stock had or has its principal office in the commonwealth.
91 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; PARTIES TO BILL ETC.; SERVICE OF BILL
ON CORPORATION; NOTICE TO STOCKHOLDER PARTIES, ETC. If the bill is filed by the
corporation, it shall name as parties respondent all stockholders who have
demanded payment for their shares and with whom the corporation has not reached
agreement as to the value thereof. If the bill is filed by a stockholder, he
shall bring the bill in his own behalf and in behalf of all other stockholders
who have demanded payment for their shares and with whom the corporation has not
reached agreement as to the value thereof, and service of the bill shall be made
upon the corporation by subpoena with a copy of the bill annexed. The
corporation shall file with its answer a duly verified list of all such other
stockholders, and such stockholders shall thereupon be deemed to have been added
as parties to the bill. The corporation shall give notice in such form and
returnable on such date as the court shall order to each stockholder party to
the bill by registered or certified mail, addressed to the last known address of
such stockholder as shown in the record of the corporation, and the court may
order such additional notice by publication or otherwise as it deems advisable.
Each stockholder who makes demand as provided in section eighty-nine shall be
deemed to have consented to the provisions of this section relating to notice,
and the giving of notice by the corporation to any such stockholder in
compliance with the order of the court shall be a sufficient service of process
on him. Failure to give notice to any stockholder making demand shall not
invalidate the proceedings as to other stockholders to whom notice was properly
given, and the court may at any time before the entry of a final decree make
supplementary orders of notice.
92 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; ENTRY OF DECREE DETERMINING VALUE OF
STOCK; DATE ON WHICH VALUE IS TO BE DETERMINED. After hearing the court shall
enter a decree determining the fair value of the stock of those stockholders who
have become entitled to the valuation of and payment for their shares, and shall
order the corporation to make payment of such value, together with interest, if
any, as hereinafter provided, to the stockholders entitled thereto upon the
transfer by them to the corporation of the certificates representing such stock
if certificated or if uncertificated, upon receipt of an instruction
transferring such stock to the corporation. For this purpose, the value of the
shares shall be determined as of the day preceding the date of the vote
approving the proposed corporate action and shall be exclusive of any element of
value arising from the expectation or accomplishment of the proposed corporate
action.
93 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; COURT MAY REFER BILL, ETC., TO SPECIAL
MASTER TO HEAR PARTIES, ETC. The court in its discretion may refer the bill or
any question arising thereunder to a special master to hear the parties, make
findings and report the same to the court, all in accordance with the usual
practice in suits in equity in the superior court.
94 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; STOCKHOLDER PARTIES MAY BE REQUIRED TO
SUBMIT THEIR STOCK CERTIFICATES FOR NOTATION THEREON OF PENDENCY OF BILL,
ETC. On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for notation thereon of the
pendency of the bill, and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
95 BILL IN EQUITY TO DETERMINE VALUE OF STOCK OF OBJECTING STOCKHOLDERS ON
FAILURE TO AGREE ON VALUE THEREOF, ETC.; TAXATION OF COSTS, ETC.; INTEREST ON
AWARD, ETC. The costs of the bill, including the reasonable compensation and
expenses of any master appointed by the court, but exclusive of fees of counsel
or of experts retained by any party, shall be determined by the court and taxed
upon the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
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96 STOCKHOLDER DEMANDING PAYMENT FOR STOCK NOT ENTITLED TO NOTICE OF
STOCKHOLDERS' MEETINGS OR TO VOTE STOCK OR TO RECEIVE DIVIDENDS, ETC.;
EXCEPTIONS. Any stockholder who has demanded payment for his stock as provided
in this chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections
to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
97 CERTAIN SHARES PAID FOR BY CORPORATION TO HAVE STATUS OF TREASURY
STOCK, ETC. The shares of the corporation paid for by the corporation pursuant
to the provisions of this chapter shall have the status of treasury stock or in
the case of a consolidation or merger the shares or the securities of the
resulting or surviving corporation into which the shares of such objecting
stockholder would have been converted had he not objected to such consolidation
or merger shall have the status of treasury stock or securities.
98 ENFORCEMENT BY STOCKHOLDER OF RIGHT TO RECEIVE PAYMENT FOR HIS SHARES
TO BE EXCLUSIVE REMEDY; EXCEPTION. The enforcement by a stockholder of his
right to receive payment for his shares in the manner provided in this chapter
shall be an exclusive remedy except that this chapter shall not exclude the
right of such stockholder to bring or maintain an appropriate proceeding to
obtain relief on the ground that such corporate action will be or is illegal or
fraudulent as to him.
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Exhibit (c)(3)
STOCKHOLDERS AGREEMENT
AGREEMENT, dated as of December 17, 1997, among Invacare Corporation, an Ohio
corporation (the "Buyer"), Inva Acquisition Corp., a Massachusetts corporation
and a wholly owned subsidiary of Buyer (the "MergerCo."), and the stockholders
identified on the signature page hereof (the "Stockholders").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this Agreement, Buyer,
MergerCo., and Suburban Ostomy Supply Co., Inc., a Massachusetts corporation
(the "Company"), have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which MergerCo. will be merged with and into the Company (the
"Merger");
WHEREAS, in furtherance of the Merger, Buyer, MergerCo. and the Company desire
that as soon as practicable (and not later than five business days) after the
announcement of the execution of the Merger Agreement, MergerCo. shall commence
a cash tender offer (the "Offer") to purchase at a price of $11.75 per share all
outstanding shares of Common Stock (as defined in Section 1 hereof) of the
Company, including all of the Shares (as defined in Section 2 hereof)
beneficially owned by the Stockholders; and
WHEREAS, as an inducement and a condition to entering into the Merger Agreement,
Buyer and MergerCo. have required that the Stockholders agree, and Stockholders
have agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having beneficial ownership of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as within the meaning of Section 13(d)(3) of
the Exchange Act.
(b) "Common Stock" shall mean at any time the Common Stock, no
par value, of the Company.
(c) "Permitted Transferee" means, as to any Stockholder, any
one or more of the following Persons to whom such Stockholder transfers Shares:
(i) the spouse, child, grandchild or parent of such Stockholder, (ii) a trust
created for the exclusive benefit of the Stockholder and any one or more of the
Persons identified in clause (i), or (iii) a charitable organization or trust
created for the exclusive benefit of a charitable organization.
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(d) "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(e) Capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement.
2. TENDER OF SHARES.
(a) In order to induce Buyer and MergerCo. to enter into the
Merger Agreement, the Stockholders hereby agree to validly tender (or cause the
record owner of such shares to validly tender), and not to withdraw, pursuant to
and in accordance with the terms of the Offer, not later than the fifteenth
business day after commencement of the Offer pursuant to Section 1.1 of the
Merger Agreement and Rule 14d-2 under the Exchange Act, the number of shares of
Common Stock set forth opposite the Stockholder's name on Schedule I hereto (the
"Existing Shares"), all of which are Beneficially Owned by such Stockholder, and
any shares of Common Stock acquired by such Stockholder in any capacity after
the date hereof and prior to the termination of this Agreement by means of
purchase, dividend, distribution or in any other way (such shares of Common
Stock, together with the Existing Shares, the "Shares"). The Stockholders hereby
acknowledge and agree that MergerCo.'s obligation to accept for payment and pay
for the Shares in the Offer, including the Shares Beneficially Owned by the
Stockholders, is subject to the terms and conditions of the Offer.
(b) The Stockholders hereby permit Buyer and MergerCo. to
publish and disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC), their identity and ownership of
the Shares, and the nature of their commitments, arrangements and understandings
under this Agreement.
3. ADDITIONAL AGREEMENTS.
(a) VOTING AGREEMENT. Each Stockholder shall, at any meeting
of the holders of Common Stock, however called, or in connection with any
written consent of the holders of Common Stock, vote (or cause to be voted) the
Shares (if any) then held of record or Beneficially Owned by such Stockholder,
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
actions contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; and (ii) against any Transaction
Proposal and against any action or agreement that would impede, frustrate,
prevent or nullify this Agreement, or result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or which would result in any of the
conditions set forth in Annex I to the Merger Agreement or set forth in Article
VIII of the Merger Agreement not being fulfilled.
(b) NO INCONSISTENT ARRANGEMENTS. Each Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement and the
Merger Agreement, such Stockholder shall not (i) transfer (which term shall
include, without limitation, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of the Shares or any interest therein,
(ii) enter into any contract, option or other agreement or understanding with
respect to any transfer of any or all of the Shares or any interest therein,
(iii) grant any proxy,
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power-of-attorney or other authorization in or with respect to the Shares, (iv)
deposit the Shares into a voting trust or enter into a voting agreement or
arrangement with respect to the Shares or (v) take any other action that would
in any way restrict, limit or interfere with the performance of such
Stockholder's obligations hereunder or the transactions contemplated hereby or
by the Merger Agreement. Notwithstanding the foregoing, a Stockholder may
transfer Shares to a Permitted Transferee if prior to such transfer such
Permitted Transferee executes a counterpart of this Agreement in form
satisfactory to Buyer agreeing to be bound by all of the terms hereof as if such
Permitted Transferee were an original signatory of this Agreement.
(c) GRANT OF IRREVOCABLE LIMITED PROXY; APPOINTMENT OF LIMITED
PROXY. (i) Each Stockholder hereby irrevocably grants to, and appoints, Buyer
and Thomas R. Miklich and Thomas J. Buckley, or any one of them, in their
respective capacities as officers of Buyer, and any individual who shall
hereafter succeed to any such office held by such individuals with Buyer, and
each of them individually, the Stockholder's limited proxy and attorney-in-fact
(with full power of substitution), for and in the name, place and stead of the
Stockholder, solely for the purpose of voting the Shares, or granting a consent
or approval in respect of the Shares in favor of the Merger and against any
Transaction Proposal, (ii) Each Stockholder represents that any proxies
heretofore given in respect of such Stockholder's Shares are not irrevocable,
and that any such proxies are hereby revoked; (iii) Each Stockholder understands
and acknowledges that Buyer and MergerCo. are entering into the Merger Agreement
in reliance upon such Stockholder's execution and delivery of this Agreement.
Each Stockholder hereby affirms that the irrevocable limited proxy set forth in
this Section 3(c) is given in connection with the execution of the Merger
Agreement, and that such irrevocable limited proxy is given to secure the
performance of the duties of such Stockholder under this Agreement. Each
Stockholder hereby further affirms that the irrevocable limited proxy is coupled
with an interest and may under no circumstances be revoked except upon
termination in accordance with the provisions of Section 8. Each Stockholder
hereby ratifies and confirms all that such irrevocable limited proxy holder may
lawfully do or cause to be done by virtue hereof. Such irrevocable limited proxy
is executed and intended to be irrevocable in accordance with the provisions of
Chapter 156B, Section 41 of the Massachusetts General Laws.
(d) NO SOLICITATION. The Stockholders hereby agree, in their
capacities as Stockholders of the Company, that neither the Stockholders nor any
of their subsidiaries or affiliates shall (and each Stockholder shall cause its
officers, directors, employees, representatives and agents, including, but not
limited to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Buyer, any of its affiliates or
representatives) concerning any Transaction Proposal. The Stockholders will
immediately cease any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Transaction Proposal. The
Stockholders will immediately communicate to Buyer the terms of any proposal,
discussion, negotiation or inquiry (and will disclose any written materials
received by any Stockholder in connection with such proposal, discussion,
negotiation or inquiry) and the identity of the party making such proposal or
inquiry which any Stockholder may receive in respect of any such transaction.
Any action taken by the Company or any member of the Board of Directors of the
Company in accordance with Section 7.6 of the Merger Agreement shall be deemed
not to violate this Section 3(d).
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(e) CONSULTATION. Each party shall promptly consult with the
others and provide any necessary information and material with respect to all
filings made by such party with any governmental entity in connection with this
Agreement and the Merger Agreement, the Offer and the transactions contemplated
hereby and thereby.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder hereby
separately represents and warrants (solely with respect to such Stockholder and
not with respect to any other Stockholder) to Buyer and MergerCo. as follows:
(a) OWNERSHIP OF SHARES. The Stockholder is the record and
Beneficial Owner of the Existing Shares, as set forth on Schedule I. On the date
hereof, the Existing Shares constitute all of the Shares owned of record or
Beneficially Owned by the Stockholders. The Stockholder has sole voting power
and sole power to issue instructions with respect to the matters set forth in
Sections 2, 3 and 4 hereof, sole power of disposition and sole power to agree to
all of the matters set forth in this Agreement, in each case with respect to all
of the Existing Shares with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement.
(b) POWER; BINDING AGREEMENT. The Stockholder has the power
(corporate, partnership or other) and authority to enter into and perform all of
such Stockholder's obligations under this Agreement. The execution, delivery and
performance of this Agreement by such Stockholder will not violate any other
agreement to which the Stockholder is a party including, without limitation, any
voting agreement, proxy arrangement, pledge agreement, stockholders agreement or
voting trust. This Agreement has been duly and validly executed and delivered by
the Stockholder and constitutes a valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Stockholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation by
the Stockholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act (i) no filing with, and no permit, authorization, consent or
approval of, any governmental entity is necessary for the execution of this
Agreement by the Stockholder and the consummation by the Stockholder of the
transactions contemplated hereby and (ii) none of the execution and delivery of
this Agreement by the Stockholder, the consummation by the Stockholder of the
transactions contemplated hereby or compliance by the Stockholder with any of
the provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of kind to which the Stockholder is a party or by which
the Stockholder or any of its properties or assets may be bound, or (C) violate
any order, writ, injunction, decree, judgment, order, statute, rule or
regulation applicable to the Stockholder or any of its properties or assets.
(d) NO ENCUMBRANCES. Except as permitted by this Agreement,
the Existing
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Shares and the certificates representing the Existing Shares are now, and at all
times during the term hereof will be, held by the Stockholder, or by a nominee
or custodian for the benefit of the Stockholder, free and clear of all liens,
claims, charges or encumbrances ("Encumbrances"), proxies, voting trusts or
agreements, understandings or arrangements or any other rights whatsoever,
except for any such Encumbrances or proxies arising hereunder.
(e) NO FINDER'S FEES. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(f) RELIANCE BY BUYER AND MERGERCO. The Stockholder
understands and acknowledges that Buyer and MergerCo. are entering into the
Merger Agreement and commencing the Offer in reliance upon the Stockholder's
execution and delivery of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF BUYER AND THE MERGERCO. Each of Buyer and
MergerCo. hereby represents and warrants to the Stockholders as follows:
(a) POWER; BINDING AGREEMENT. Buyer and MergerCo. each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this Agreement
by each of Buyer and MergerCo. will not violate any other agreement to which
either of them is a party. This Agreement has been duly and validly executed and
delivered by each of Buyer and MergerCo. and constitutes a valid and binding
agreement of each of Buyer and the Purchaser, enforceable against each of Buyer
and MergerCo. in accordance with its terms.
(b) NO CONFLICTS. Except for filings under the HSR Act and the
Exchange Act, (i) no filing with, and no permit, authorization, consent or
approval of, any governmental entity is necessary for the execution of this
Agreement by each of Buyer and MergerCo. and the consummation by each of Buyer
and MergerCo. of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by each of Buyer and MergerCo., the
consummation by each of Buyer and MergerCo. of the transactions contemplated
hereby or compliance by each of Buyer and MergerCo. with any of the provisions
hereof shall (A) conflict with or result in any breach of any organizational
documents applicable to either of Buyer or MergerCo., (B) result in a violation
or breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which either of Buyer or MergerCo. is a party or by
which either of Buyer or MergerCo. or any of their properties or assets may be
bound, or (C) violate any order, writ, injunction, decree, judgment, order,
statute, rule or regulation applicable to either of Buyer or MergerCo. or any of
their properties or assets.
6. FURTHER ASSURANCES. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective the agreements set forth in
Sections 2 and 3 of this Agreement.
5
<PAGE> 6
7. STOP TRANSFER. No Stockholder shall request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated interest
representing any of the Shares, unless such transfer is made in compliance with
this Agreement. In the event of a stock dividend or distribution, or any change
in the Common Stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall refer to
and include the Shares as well as all such stock dividends and distributions and
any shares into which or for which any or all of the Shares may be changed or
exchanged.
8. TERMINATION. The covenants, agreements and proxy contained herein with
respect to the Shares, and all other obligations of the Stockholders hereunder,
shall terminate upon the termination of the Merger Agreement in accordance with
its terms.
9. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations
hereunder shall attach to the Shares and shall be binding upon any person or
entity to which legal or beneficial ownership of the Shares shall pass, whether
by operation of law or otherwise, including, without limitation, any
Stockholder's administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
parties hereto; provided that Buyer or MergerCo. may assign, in its sole
discretion, its rights and obligations hereunder to any direct or indirect
wholly owned subsidiary of Buyer, but no such assignment shall relieve Buyer or
MergerCo. of its obligations hereunder if such assignee does not perform such
obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholder, to the address set forth on Schedule I hereto,
with a copy to:
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
6
<PAGE> 7
Boston, MA 02110
Attn: James Westra
Telephone No.: (617) 951-6600
Telecopy No.: (617) 951-1295
If to Buyer or MergerCo.,
Invacare Corporation
One Invacare Way
Elyria, Ohio 44035
Attention: Thomas R. Miklich
Chief Financial Officer, Secretary and Treasurer
Telephone No.: (440) 329-6111
Telecopy No.: (440) 366-9008
with a copy to:
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attn: Dale C. LaPorte
Telephone No.: (216) 622-8200
Telecopy No.: (216) 241-0816
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore in the event of any such breach the aggrieved party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any
right, power or
7
<PAGE> 8
remedy provided under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of conflicts of law thereof; PROVIDED,
however, that the laws of the respective jurisdictions of incorporation of each
of the parties shall govern the relative rights, obligations, powers, duties and
other internal affairs of such party and its board of directors.
(l) WAIVER OF JURY TRIAL. Each party hereto hereby waives any
right to a trial by jury in connection with any action, suit or proceeding
brought in connection with this Agreement.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, Buyer and MergerCo. have caused this Agreement to
be duly executed as of the day and year first above written.
BUYER: STOCKHOLDERS:
INVACARE CORPORATION /s/ Herbert Gray
By: /s/ Thomas R. Miklich ----------------------------------
-------------------------------- Herbert Gray
Name: Thomas R. Miklich
----------------------------
Title: CFO /s/ Donald Benovitz
---------------------------- ----------------------------------
Donald Benovitz
SUMMIT VENTURES III, L.P.
MERGERCO.: By: Summit Partners III, L.P.,
Its General Partner
INVA ACQUISITION CORP. By: Stamps, Woodsum & Co. III,
By: /s/ Thomas R. Miklich Its General Partner
-------------------------------
Name: Thomas R. Miklich By: /s/ Martin J. Mannion
---------------------------- ------------------------------
Title: Director General Partner
----------------------------
SUMMIT INVESTORS II, L.P.
By: /s/ Martin J. Mannion
------------------------------
Authorized Signatory
SUMMIT SUBORDINATED DEBT
FUND, L.P.
By: Summit Partners SD, L.P.,
Its General Partner
By: Stamps, Woodsum & Co. III,
Its General Partner
By:/s/ Martin J. Mannion
-------------------------------
General Partner
9
<PAGE> 10
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY OWNED
-----------------------------------
ADDRESS
STOCKHOLDER OPTIONS DIRECT OWNERSHIP
- ----------- ------- ----------------
<S> <C> <C> <C>
Herbert Gray 300 Boylston St. Apt 5-10 620,000 (as individual) 186,000
Boston, MA 02116 33,634 (as trustee)
Donald Benovitz One Everett Terrace 245,366 (as individual) 124,000
South Natick, MA 01760 33,634 (as trustee)
Summit Ventures III, L.P. 600 Atlantic Ave. Suite 2800 3,357,509
Boston, MA 02110-2227
Summit Investors II, L.P. 600 Atlantic Ave. Suite 2800 78,696
Boston, MA 02110-2227
Summit Subordinated 600 Atlantic Ave. Suite 2800 498,626
Debt Fund, L.P. Boston, MA 02110-2227
</TABLE>
10
<PAGE> 1
[BEAR STEARNS LETTERHEAD]
December 22, 1997
Suburban Ostomy Supply Co., Inc.
75 October Hill Road
Holliston, MA 01746
Dear Sirs:
We understand that Suburban Ostomy Supply Co., Inc. ("Suburban") has received an
offer from Invacare Corporation ("Invacare") to acquire all of the outstanding
shares of the common stock of Suburban (the "Shares"). As more fully described
in the Agreement and Plan of Merger (the "Merger Agreement") among Suburban,
Invacare and a wholly-owned subsidiary of Invacare ("Subsidiary"), Subsidiary
(i) would promptly commence a tender offer (the "Tender Offer") to purchase all
Shares for $11.75 per share in cash (the "Consideration") and (ii) as promptly
after the completion of the Tender Offer as practicable, would merge with
Suburban (the "Merger") and each outstanding Share not previously tendered and
accepted for payment pursuant to the Tender Offer would be converted into the
right to receive $11.75 in cash (the Tender Offer and the Merger are
collectively referred to herein as the "Transaction"). You have provided us with
the Offer to Purchase and the Form 14D-9 in substantially the form to be sent to
shareholders of Suburban (collectively, the "Tender Offer Documents").
You have asked us to render our opinion as to whether the Consideration to be
received in the Transaction is fair, from a financial point of view, to the
shareholders of Suburban.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement and Tender Offer Documents;
2. reviewed Suburban's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended August 31, 1996 and August 30,
1997;
3. reviewed certain operating and financial information, including
projections, provided to us by the management of Suburban relating to
Suburban's business and prospects;
4. met with certain members of Suburban's senior management to discuss its
operations, historical financial statements and future prospects;
5. reviewed the historical prices and trading volume of the common shares
of Suburban;
6. reviewed publicly available financial data and stock market performance
date of companies which we deemed generally comparable to Suburban;
7. reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Suburban; and
8. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
Page 1
<PAGE> 2
In the course of our review, we have relied upon and assumed the accuracy and
completeness of the financial and other information provided to us by Suburban.
With respect to Suburban's projected financial results, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Suburban as to its
expected future performance. We have not assumed any responsibility for
independent verification of any such information or of the projections provided
to us and we have further relied upon the assurances of the senior management
of Suburban that it is unaware of any facts that would make the information or
projections provided to us incomplete or misleading. In arriving at our
opinion, we have not performed or obtained any independent appraisal of the
assets or liabilities of Suburban. Our opinion is necessarily based on
economic, market and other conditions, and the information made available to
us, as of the date hereof.
We have acted as financial advisor to Suburban in connection with the
Transaction and will receive a fee for such services, payment of a significant
portion of which is contingent upon the consummation of the Transaction. As
part of our engagement, we assisted Suburban in identifying and contacting
various knowledgeable and qualified buyers which were given the opportunity to
make a thorough evaluation of Suburban in preparation for the submission of a
proposal to acquire Suburban. As a result of these efforts, Suburban received
various indications of interest regarding possible business transactions
involving Suburban, which we have assessed and reviewed with the senior
management and the Board of Directors of Suburban.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of Suburban and does not constitute a recommendation to the
Board of Directors of Suburban as to how to vote in connection with the Merger
or to any holder of Shares as to whether to tender such Shares in connection
with the Tender Offer. This opinion does not address Suburban's underlying
business decision to pursue the Merger. This letter is not to be used for any
other purpose, or reproduced, disseminated, quoted to or referred to at any
time, in whole or in part, without our prior written consent; provided, however,
that this letter may be included in its entirety in any Form 14D-9 to be
distributed to the holders of Shares in connection with the Tender Offer.
In the ordinary course of our business as a full-service securities firm, we
may actively trade the equity and/or debt securities of Suburban and Invacare
for our own account or for the accounts of customers, and, accordingly, may at
any time hold a long or short position in such securities. As of the date of
this opinion, we held for our own account approximately 113,000 Shares.
Based on the foregoing, it is our opinion that the Consideration to be received
in the Transaction is fair, from a financial point of view, to the shareholders
of Suburban.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ David H. Glaser
-----------------------
Managing Director
Page 2
<PAGE> 1
Exhibit (a)(8)
[Invacare logo]
Invacare, Suburban Ostomy Announce Merger Agreement
Deal will broaden distribution channels, enhance growth
ELYRIA, Ohio -- December 17, 1997 -- Invacare Corporation
(NASDAQ:IVCR), the world's leading manufacturer and distributor of home health
care products and mobility products for people with disabilities, and Suburban
Ostomy Supply Co., Inc. (NASDAQ:SOSC), a leading national direct marketing
wholesaler of medical supplies and related products to the home care industry,
today announced the execution of a definitive merger agreement whereby Invacare
would acquire for cash all outstanding shares of Suburban's common stock for
$11.75 per share. This represents an 8 percent premium to yesterday's Suburban
closing price of $10.875. Invacare's stock closed yesterday at $22.34.
Under the terms of the merger agreement, unanimously approved
by both company Boards, Invacare will initiate a tender offer for all of the
outstanding shares of Suburban to commence within five business days. Once
initiated, the offer will be open for 20 business days unless further extended.
Invacare's offer is contingent upon, among other things, a valid tender of at
least two-thirds of the outstanding shares of Suburban on a fully diluted basis.
After consummation of the tender offer, Invacare will acquire, pursuant to the
merger, any remaining outstanding Suburban shares for the same price per share.
It is anticipated that the proposed merger will be accounted for using purchase
accounting. The transaction is subject to a number of customary conditions
including the receipt of required regulatory approvals. In connection with the
merger agreement, certain shareholders owning, in the aggregate, approximately
45 percent of Suburban's outstanding shares have agreed to tender all of their
shares in the tender offer.
A. Malachi Mixon, III and Herbert P. Gray, Invacare and
Suburban's chief executive officers, respectively, note that the proposed merger
offers significant opportunities for enhancing sales growth in an increasingly
competitive environment.
"Suburban complements Invacare's industry-leading One Stop
Shopping strategy," said Mixon. "Suburban's product lines present a $1 billion
market opportunity for Invacare to further serve the dealer/provider channel.
Disposable medical supplies can represent as much as 20 percent of
dealer/provider revenues. The integrated company will leverage customer
relationships by combining Invacare's field sales and Suburban's inside sales
organizations. In a rapidly evolving health care environment that demands
increased efficiency, the combination creates an organization capable of
lowering our customers' operating costs and increasing their cash flow," he
added.
Gray said, "Suburban and its management have a high regard for
Invacare's growth and achievements in serving the home health care equipment
market. We believe our business will be strengthened through the addition of a
comprehensive line of home medical equipment products."
Mixon said Suburban will be a core strategic business to
Invacare and will be run as a separate operating group by the current management
team, who are based in Holliston, MA.
<PAGE> 2
"This acquisition is consistent with Invacare's previously
stated objective to augment future growth with strategic acquisitions," said
Mixon. "We anticipate that the acquisition will result in combined revenues
exceeding $860 million with a neutral effect on earnings in 1998, assuming a
January 31, 1998 closing." Gray added, "We believe this transaction will deliver
the highest value available to Suburban's stockholders."
Suburban Ostomy Co., Inc., which completed its initial public
offering in October 1996, is a direct marketing wholesaler of medical supplies
and related products to the home health care industry. The company sells
products to over 23,000 customers, including: home medical equipment suppliers
and pharmacies; home health agencies; national home health care chains; and
managed care organizations. Through its direct sales and marketing programs, the
company markets a comprehensive selection of more than 7,000 stock keeping
units, primarily products for ostomy, incontinence, diabetic and wound care.
Invacare's headquarters are in Elyria, OH, with manufacturing
plants in the United States, Australia, Canada, Germany, France, Mexico, New
Zealand, Portugal, Switzerland and the United Kingdom. Products are distributed
worldwide through more than 10,000 professional home health care providers,
institutions and retail outlets.
This press release contains forward-looking statements based
on current expectations which are covered under the "safe harbor" provision
within the Private Securities Litigation Reform Act of 1995. Actual results and
events related to the acquisition may differ from those anticipated as a result
of risks and uncertainties, which include, but are not limited to, the
successful completion of this transaction, the effective integration of Suburban
and its recent acquisitions and the overall economic, market and industry
conditions, as well as the risks described from time to time in Invacare's and
Suburban's reports as filed with the Securities and Exchange Commission,
including their most recently filed Form 10-K reports.
CONTACT: Invacare Corporation
Media Inquiries: Susan A. Elder, 440/329-6549
Investor Inquiries: Thomas R. Miklich, 440/329-6111
<PAGE> 1
SUBURBAN OSTOMY SUPPLY CO., INC.
75 OCTOBER HILL ROAD
HOLLISTON, MASSACHUSETTS 01746
December 22, 1997
To Our Stockholders:
On behalf of the Board of Directors of Suburban Ostomy Supply Co., Inc.
(the "Company"), we are pleased to inform you that, on December 17, 1997, the
Company entered into an Agreement and Plan of Merger (the "Merger Agreement")
with Invacare Corporation and its wholly-owned subsidiary, Inva Acquisition
Corp., pursuant to which Inva Acquisition Corp. has today commenced a cash
tender offer (the "Offer") to purchase all of the outstanding shares (the
"Shares") of the Company's Common Stock at $11.75 per share. Under the Merger
Agreement, the Offer will be followed by a merger (the "Merger") in which any
remaining shares of the Company's Common Stock will be converted into the right
to receive $11.75 per share in cash, without interest.
Your Board of Directors has unanimously determined that the Offer and the
Merger are fair to and in the best interests of the Company and its
stockholders, approved the Offer and the Merger, and recommends that the
Company's stockholders accept the Offer and tender their Shares pursuant to the
Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the terms and conditions of the Merger Agreement
and the opinion of Bear, Stearns & Co. Inc., the Company's financial advisor, to
the effect that, as of the date of such opinion and based upon the assumptions
and other matters set forth therein, the consideration to be received by holders
of Shares in the Offer and the Merger is fair to such holders from a financial
point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated December 22, 1997, of Inva Acquisition
Corp., together with related materials, including a Letter of Transmittal, to be
used for tendering your Shares. These documents set forth the terms and
conditions of the Offer and the Merger and provide instructions as to how to
tender your Shares. We urge you to read the enclosed material carefully in
making your decision with respect to tendering your shares pursuant to the
Offer.
On behalf of the Board of Directors,
<TABLE>
<S> <C>
Herbert P. Gray signature Donald H. Benovitz
signature
Herbert P. Gray Donald H. Benovitz
Chairman President and Director
</TABLE>
