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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended November 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission File Number: 0-12665
- --------------------------------
MICRO BIO-MEDICS, INC.
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(Exact name of Registrant as specified in its charter)
New York 13-2692560
- ----------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization (Identification No.)
846 Pelham Parkway
Pelham Manor, New York 10803
- ---------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (914) 738-8400
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.03 par value
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in part III
of this Form 10-K or any amendment to this Form 10-K [ X].
As of February 21, 1997 at 4:00 P.M., the aggregate market value of the
voting stock held by non-affiliates, approximately 4,700,000 shares of Common
Stock, $.03 par value, was approximately $76,375,000 based on the last sale
price of $16.25 for one share of Common Stock on such date. The number of shares
issued and outstanding of the Registrant's Common Stock, as of February 21, 1997
was 5,070,248.
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ITEM 1. BUSINESS
OVERVIEW
Micro Bio-Medics, Inc. (the "Company" or "MBM") is a New York company which
was incorporated in 1971. The Company distributes medical supplies to
physicians and hospitals in the New York metropolitan area, as well as to health
care professionals in the sports medicine, emergency medicine, school health,
industrial safety, government and laboratory markets nationwide. The Company
depends upon the continued supply of the products it distributes, however, it
does not depend upon any single source. The Company has neither encountered nor
does it anticipate any difficulty in obtaining the necessary products. No one
customer has accounted for more than 10% of the Company's revenues during the
fiscal years ended November 30, 1996, November 30, 1995 and November 30, 1994.
RECENT DEVELOPMENTS
On March 7, 1997, MBM entered into an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which HSI Acquisition Corp. ("HSI"), a
wholly-owned subsidiary of Henry Schein, Inc. ("Schein"), will merge into MBM
and MBM will be the surviving corporation as a subsidiary of Schein. As a
result of the transaction, which has been approved by each of the companies'
Board of Directors, outstanding shares of MBM's Common Stock will be exchanged
at a fixed rate of 0.62 of a share of Schein's Common Stock for each outstanding
1.0 share of MBM. The members of MBM's Board of Directors have granted to
Schein a proxy to vote their shares of MBM Common Stock in favor of the Merger
and an option, exercisable under certain circumstances, to acquire their shares
for the consideration that they would have received in the Merger in respect of
those shares.
Schein is a Delaware corporation with its principal executive offices at
135 Duryea Road, Melville, NY 11747 and its telephone number is (516)
843-5500. Schein is a large direct marketer of healthcare products and
services to office-based healthcare practitioners including dental practices
and laboratories, physician practices and veterinary clinics in the combined
North American and European markets.
The completion of the transaction is subject to the following:
Hart-Scott-Rodino waiting periods, including no action being instituted by
the Department of Justice or the Federal Trade Commission challenging or
seeking to adjoin the consummation of the transaction, which action shall
have not been withdrawn or terminated; the transaction being treated as a
"pooling of interest"; MBM shareholder approval (with dissenters' rights
being exercised with respect to no more than 9% of the outstanding Shares of
MBM Common Stock); and other customary closing conditions. The transaction is
expected to be completed by mid-1997 although no assurances can be given in
this regard. For a more complete description of the terms of the Merger
Agreement and other related agreements entered into in connection with the
Merger Agreement, reference is made to the texts of such agreements, which
are filed as Exhibits to this Form 10-K, and the foregoing summary of certain
principal terms of such agreements are qualified in their entirety thereby. In
addition, Schein intends to file a Registration Statement on Form S-4 with
the Securities and Exchange Commission (the "Commission") with respect to the
securities to be issued to
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MBM shareholders in the Merger. After the Registration Statement has been filed
and subsequently declared effective by the Commission, MBM stockholders of
record of a date to be determined by its Board of Directors will receive copies
of a Proxy Statement/Prospectus which will contain a complete description of the
material terms of Merger Agreement and other related agreements and will be
entitled to vote in person or by proxy at an upcoming stockholder meeting at a
date to be determined by MBM's Board of Directors. See "Item 13."
CALIGOR DIVISION
The Company's Caligor Division is a physician and hospital supplier in the
New York metropolitan area, serving over 12,000 physicians and laboratories. It
also serves nursing homes and industrial medical departments.
Caligor provides its physicians and hospitals with a comprehensive
selection of supplies and related logistical and software services. The
division's estimated 50,000 supplies range from bandages and pharmaceuticals to
sophisticated diagnostic equipment, while the services range from equipment
repair to the complete design and installation of new offices, waiting rooms,
exam rooms and laboratories.
The Caligor division's logistical and software services include "stockless"
inventory services for hospitals which allow the customer to reduce on-hand
inventory by up to ninety percent and significantly reduce operating expenses.
Software services include purchase order management systems and materials
management systems to be used on the customer's premises to control parts of
their business operations
The Caligor division through Caligor Physicians & Hospital Supply Corp., a
wholly owned subsidiary of the Company, also operates a pharmacy in Manhattan
to serve local physicians and their patients. In addition, the Caligor Division
supplies independent clinical labs, hospital labs, and physician in-office labs
with diagnostic equipment, test kits, reagents and disposables.
Over the past few years, the Caligor Division has been able to acquire a
number of smaller distributors, resulting in significant economies of scale and
improved operating efficiencies. Caligor has increased its market share in
these new territories with the same combination of sales force support, direct
mail, catalogs and telemarketing sales that it uses in existing territories.
Caligor is the Company's largest division in terms of annual sales.
Revenues during fiscal 1996 were approximately $129,300,000 or 86% of the
Company's total revenues for the same period as compared to approximately
$98,300,000 or 82% of total revenues for the comparable period of fiscal 1995,
as compared to approximately $101,000,000 or 83% of the total revenues for the
comparable period of fiscal 1994. The Company's revenues since 1995 have
increased as a result of the Company's acquisition of the business and assets
from Stone Medical Supply Corporation, the opening of the Hospital Division's
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stockless distribution operation and sales and marketing efforts aimed at the
acquired and existing customer base.
MBM DIVISION
The MBM Division distributes sports medicine supplies, school nurse
supplies, medical equipment and rehabilitation equipment to over 10,000 schools,
colleges, municipalities, emergency medical units and professional sports teams
around the country, including many of the major and minor league baseball,
basketball, football and hockey teams. Revenues derived from municipalities and
school districts are derived from competitive bidding.
Like the Caligor Division, MBM Division serves its customers with a
comprehensive line of supplies and services, ranging from the delivery of
athletic tape to an NFL team on the road to the complete design, furnishing and
stocking of a training room, sports medicine clinic, or school nurse office.
MBM Division markets its product line primarily via three catalogs which it
distributes to customers and prospective customers each year. These catalogs
are supported by direct mail, telemarketing, professional journal advertising,
national and local trade show exhibitions, and an inside sales and customer
service staff.
The seasonal buying habits of the Company's school and athletic customers
is concentrated between the months of June and September of each year. Although
the Company's marketing expenses relating to such customers are incurred
throughout the year, the Company has experienced no problem in meeting its cash
requirements as a result of its working capital and extension of credit under
its Revolving Credit Agreement.
Revenues derived from the MBM Division during fiscal 1996 were
approximately $18,100,000 or 12% of the Company's total revenues for the same
period as compared with approximately $18,800,000 or 16% of total revenues for
fiscal 1995 and approximately $18,100,000 or 15% total revenues for fiscal 1994.
Revenues have remained relatively constant for this Division.
HEALER PRODUCTS DIVISION
The Company's Healer Products Division is an assembler and wholesaler of
first aid kits and private label medical products. These products, in turn, are
marketed by the Company's other divisions, and sold to numerous outside markets
through a network of commissioned sales agents. The first aid and medical kits
are produced in a variety of forms and sizes, but are generally designed for use
in government, industry, schools, emergency medical organizations, hospitals,
homes and recreational facilities.
The Healer Products Division also produces specialized kits for volunteer
ambulance corps, emergency squads, corporate offices, construction operations,
restaurants, retail stores, boats, athletic activities, motor vehicles, and
sales promotion
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purposes as well as for specific medical problems such as burns, poisoning,
insect stings, traumatic accidents, obstetrical emergencies and eye injuries.
Many of the products contained in the kits are generic and are marketed
under the Company's private label. The use of private-label generic products
permits attractive pricing for the Company and its customers and creates a
consistent, positive brand image among customers.
Revenues derived from the Healer Products Division during fiscal year 1996
were approximately $2,700,000 representing 2% of the Company's total revenues as
compared with approximately $2,700,000 representing 2% of total revenues for
fiscal 1995 and as compared to approximately $2,500,000 representing 2% of total
revenues for fiscal 1994. Revenues have remained relatively constant for this
Division.
ACQUISITION OF STONE MEDICAL SUPPLY CORPORATION
Pursuant to an Agreement for Merger and Reorganization dated November 2,
1995 among MBM, Diagnostic Leasing Corp. ("DLC"), Stone Medical Supply
Corporation ("Stone"), a distributor of physician and podiatry supplies and
equipment, and Andrew D. Stone, Stone was merged into DLC with DLC as the
surviving corporation on January 18, 1996. The Company issued approximately
280,696 shares of its Common Stock in exchange for the outstanding shares of
Stone. Subsequent to the merger, DLC changed its name to Stone Medical Supply
Corporation and then merged into MBM.
ACQUISITION OF MID COUNTY MEDICAL SUPPLY CO., INC.
On March 27, 1995, MBM acquired certain assets and customer accounts of Mid
County Medical Supply Co., Inc., a distributor of physician and hospital
supplies, for approximately $500,000. The purchase price was allocated based
upon the fair market value of the assets at the date of acquisition. The
operations of Mid County Medical Supply Co., Inc., have been combined into the
Caligor Division.
ACQUISITION OF JOSEPH WEINTRAUB, INC.
On June 1, 1994, MBM acquired certain assets and customer accounts of
Joseph Weintraub, Inc., a distributor of physician and hospital supplies for
approximately $1,100,000. The purchase price was allocated based upon the fair
market value of the assets at the date of acquisition. The operations of Joseph
Weintraub Inc. have been combined into the Caligor Division.
ACQUISITION OF CLARK SURGICAL CORP.
On November 19, 1993, MBM Hospital Supply Corp., a wholly owned subsidiary
of MBM entered into an agreement with Clark Surgical Corp. ("Clark") to acquire
from Clark substantially all of the assets and customer accounts subject to
certain specific liabilities and obligations arising out of the contracts and
personal property leases acquired (the
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"Agreement"). This transaction closed on December 1, 1993 and was accounted for
as a purchase.
The purchase price for all the assets was approximately $16,500,000. The
purchase price was based upon the book value of the inventory, accounts
receivable and fixed assets purchased by MBM Hospital plus $1 million for
Clark's goodwill as described in the Agreement. MBM also issued to certain
persons warrants to purchase an aggregate of 40,000 shares of MBM's Common Stock
at a purchase price of $8.00 per share, subject to MBM's right to terminate the
unvested portion of the Warrants upon certain conditions at the sole discretion
of the Board of Directors. The Warrants vested 20% at closing and the balance
was scheduled to vest in four equal annual amounts on the anniversary date of
the Closing Date. However, the unvested portion of the Warrants to purchase
32,000 shares have been terminated.
The Agreement also provided for the execution of agreements not to compete
with Alfred S. Bretan and Burt Wexler, the sole shareholders of Clark
(hereinafter referred to as the "Shareholders"). The agreements not to compete
provide for the payment of $2.725 million in cash over a seven year period.
The operations of MBM Hospital Supply Corp. have been combined into the
various divisions of MBM.
REVOLVING CREDIT AGREEMENT
MBM has entered into a Credit Agreement with Chase Manhattan Bank N.A.
("Chase") to act as agent of and as a participant in a $25 million secured
revolving credit facility for MBM. Fleet Bank of New York ("Fleet") also acted
as a participant in the Credit Agreement. Chase's and Fleet's commitment under
the Credit Agreement is limited to $15 million and $10 million, respectively.
All references to MBM include MBM and its subsidiaries.
The Credit Agreement, as amended, which expires on February 15, 1999,
provides for a three year secured revolving credit in an amount which shall not
exceed the lesser of (a) $25,000,000 or (b) the borrowing base as defined in the
Credit Agreement.
The Credit Agreement provides for MBM to pay interest on loans made under
the facility at the rate of 1/4 of 1% over the Banks periodic base rate unless
MBM elects to pay based upon an alternative formula at the time of each
borrowing. MBM has been borrowing primarily by utilizing Eurodollar loans based
on LIBOR. Currently, based on certain financial ratios, the Company's
prevailing borrowing rate on the Eurodollar loans is LIBOR plus 1.25%. The
prevailing rate varies based upon the term of the LIBOR. Upon request by MBM,
the Banks may, at their option, create banker acceptances under the facility.
On June 7, 1995, MBM entered into a three year interest rate swap agreement with
Chase for $10,000,000. It is Management's intent to match the agreement's terms
as to principal amounts and repricing maturities in order to reduce MBM's
interest rate risk on its revolving loans. Effectively, the agreement serves to
limit the net interest rate
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charged on MBM's first $10,000,000 of revolving loans to 8.25%. However, MBM
would receive no further interest rate benefit once the applicable interest rate
falls below 6.55%.
The Credit Agreement is subject to several conditions and financial
covenants such as the following:
- WORKING CAPITAL: MBM shall maintain a Consolidated Working Capital of
no less than $10,500,000 as of the end of each fiscal quarter.
- INTEREST COVERAGE RATIO: MBM shall maintain a ratio of Consolidated
EBITA (earnings before interest, taxes and amortization) to
Consolidated Interest Expense, measured at the end of each fiscal
quarter for a period comprised of such fiscal quarter and the three
immediately preceding fiscal quarters, of not less than 2.50 to 1.00.
- CURRENT RATIO: MBM shall maintain a ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than 1.20 to
1.0, calculated at each fiscal quarter end.
- LEVERAGE RATIO: MBM shall maintain a ratio of (a)(i) total
liabilities of MBM and its Consolidated Subsidiaries less (ii)
Approved Subordinated Debt divided by (b)(i) net worth of MBM and its
Consolidated Subsidiaries plus (ii) Approved Subordinated Debt less
(iii) intangible assets of MBM and its Consolidated Subsidiaries, as
of the end of each fiscal quarter of MBM of not more than 2.75 to
1.00.
- TANGIBLE NET WORTH: MBM shall maintain a Consolidated Tangible Net
Worth, calculated at the end of each fiscal year, of no less than
$400,000 more than the Consolidated Tangible Net Worth for the
respective immediately preceding fiscal year.
The Credit Agreement provides, among other things that, (1) MBM shall not
declare or pay any dividends or make any distribution of assets to stockholders,
except that MBM may declare dividends and make distributions solely in the
Common Stock of MBM, (2) MBM shall not purchase any of its capital stock now or
hereafter outstanding which purchase shall, when aggregated with all other such
purchases, exceed $250,000 (excluding certain purchases as set forth in the
Credit Agreement relating to MBM's shares that were issued in connection with
MBM's purchase of Harrisburg Health Care, Inc.), (3) MBM shall not lease,
assign, transfer or dispose of assets other than in the ordinary course of
business, (4) MBM shall not change its fiscal year, (5) MBM shall not incur any
debt other than the following: debt owed to the Banks under the facility;
existing debt disclosed to and approved by the Banks; approved subordinated
debt; debt between MBM and a subsidiary; accounts payable to trade creditors
incurred in the ordinary course of business; commercial letters of credit issued
for the account of MBM by other than the Banks in amount not to exceed in the
aggregate at any time the principal sum of $500,000; and such other debt as
provided for in the Credit Agreement.
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REGULATORY REQUIREMENTS
The manufacturers of many products sold by MBM are required to obtain U.S.
Food and Drug Administration ("FDA") approval for such products, failing such
approval, sales of such products cannot lawfully be made. MBM's assembly,
warehousing and distribution procedures are subject to the Good Manufacturing
Practices regulation of the FDA. MBM has registered itself with the FDA and has
renewed said registration annually. Such registration permits MBM to distribute
supplies and medical devices.
The Caligor Division, among its various activities, operates as a
wholesaler and retailer of prescription drugs and medical devices in the State
of New York. The practice of pharmacy at the wholesale and retail level is
regulated by federal, state and local statutes, rules and regulations. MBM is
duly licensed to permit its Caligor Division to operate as wholesalers and
retailers in prescription drugs and medical devices in the State of New York.
In the future, should MBM expand such activities, it will have to comply with
all applicable federal, state and local rules.
COMPETITION
MBM, in all phases of its activities, experiences competition from other
manufacturers and distributors of products in the same categories as those of
MBM, as well as from wholesale and retail pharmacies, selling to the same
general markets as those of MBM. Additionally, the Caligor Division's services
are subject to competition from similar service organizations. Many of MBM's
competitors have far greater resources than MBM and, in addition, many larger
and better financed firms not presently in MBM's lines of business may
conceivably enter these lines of business in the future. However, most of MBM's
markets are serviced by hospital and surgical supply dealers, athletic
retailers, pharmacies and equipment repair firms. MBM believes that its
purchasing power, quick service including next day delivery where possible,
competitive pricing and marketing expertise enable it to compete favorably with
such firms although it continues to experience significant competition from
other firms which are better established and have substantially greater
financial resources than MBM.
EMPLOYEES
At January 31, 1997, MBM employed 299 full-time employees, including 121
sales and customer service persons, 93 warehouse and shipping workers, 53
clerical workers, 10 delivery persons, 6 computer programmers, 2 pharmacists, 7
purchasing agents and 7 senior management officers. MBM usually employs
seasonal summer employees during peak sales volume periods. MBM's employees are
not covered under any collective bargaining agreements and there have been no
work stoppages. Management believes MBM has satisfactory employee relations at
all levels.
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ITEM 2. DESCRIPTION OF PROPERTY.
MBM leases one central location consisting of approximately 88,000 square
feet of assembly and storage space and 20,000 square feet of office space in a
31 year old industrial building at 846 Pelham Parkway, Pelham Manor, New York.
This location's facilities are leased from a non-affiliated entity and are in
good condition and sprinklered. MBM leased these premises pursuant to a lease
which expires on July 31, 2007. MBM pays an annual rent of approximately
$540,000, with certain additional sums based upon property tax costs.
The Pelham Manor, New York facilities are equipped to house the assembly
processing, customer service, warehousing and shipping requirements of all MBM's
divisions to the extent located at these facilities. It contains an order
picking conveyor system, fork lifts, large numbers of pallet racks and shelving,
manually operated material handling equipment, packaging equipment, assembly
equipment (tables, benches and conveyers), engraving machinery (for medical
equipment), and conventional office equipment, including an electronic data
processing system used to facilitate all areas of MBM's business.
MBM leases for its Caligor Division approximately 5,000 square feet of
space at 1226 Lexington Avenue, New York, New York, under a lease which expires
on April 30, 2000, for which it presently pays an annual rental of approximately
$49,000 per annum, together with additional sums for heat, utilities and
property tax costs. This location contains a store front facility fully
equipped to operate as a wholesale and retail pharmacy, and a basement storage
facility.
MBM leases for its MBM division approximately 4,290 square feet of space at
211 Harbor Way, South San Francisco, California under a lease which expires on
January 31, 2000 for which it pays an annual rental of approximately $30,000.
This location's facilities are in good condition with approximately 1,000 square
feet being devoted to office space and the balance to warehouse space.
MBM also leases approximately 3,100 square feet of space in Jacksonville,
Florida, under a lease which expires June 30, 1997. The annual rental under the
lease is approximately $17,500.
MBM leases for its Caligor Division approximately 120,000 square feet of
warehouse space including offices and warehouse dock at 300 Michael Drive,
Syosset, New York. The building is fully sprinklered and alarmed. MBM leases
these facilities pursuant to a lease which expires April 29, 2001. MBM pays an
annual rent of $240,000 with certain additional sums based upon property tax
costs, insurance and utilities.
In February 1996, MBM leased for its Caligor Division approximately 82,000
square feet of space in the Bronx, New York, under a lease which expires in
January, 2001. The annual rent is approximately $308,000. The space is used by
Caligor's Hospital Division
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for its stockless distribution operations. The premises are in good condition,
sprinklered and alarmed.
All of MBM's facilities are adequate for MBM's present needs. In the event
that additional facilities are needed, Management believes that such facilities
can be obtained at a reasonable cost.
Stone's executive and sales offices and its storage facilities were
located at 2487 North Jerusalem Road, East Meadow, New York 11550, containing
approximately 13,800 square feet. Stone purchased the aforesaid premises on
July 13, 1984, for the sum of $200,000. A first mortgage was obtained from
Citibank, N.A., in the principal amount of $175,000, payable over twenty years
at the monthly rate of $730, plus interest on the unpaid balance. On March 15,
1985, the Job Development Authority of the State of New York (the "JDA") made
an additional loan on the premises for alterations in the sum of $149,000,
replacing temporary financing. All of Stone's operations were assimilated into
the Caligor Division's operations. MBM is actively attempting to sell the
property.
None of MBM's leases are with related parties. Additionally, MBM now owns
1 automobile and 1 truck and leases 1 station wagon, 8 trucks and 12
automobiles, all of which are utilized for business purposes.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET INFORMATION
The Company's Common Stock is quoted on the National Association of
Securities Dealers' Automated Quotation System National Market System
("NASDAQ/NMS") under the symbol "MBMI." As of February 21, 1997 at 4:00 P.M.
Eastern Standard Time, the last sale price of the Common Stock in the
over-the-counter market was $16.25.
The following table reflects the high and low sales prices for the
Company's Common Stock for the periods indicated as reported by the National
Association of Securities Dealers, Inc. ("NASD") from its NASDAQ system:
Common Stock
------------
Quarter Ended
---------------------------------------------------------
February 28 May 31 August 31 November 30
High Low High Low High Low High Low
- -------------------------------------------------------------------------------
Fiscal
Year Ended
November
30, 1996 14-3/4 12-1/4 17 13-7/8 21 14-3/8 18-1/4 16-1/8
Fiscal
Year Ended
November
30, 1995 10 9-7/16 12-5/8 9-5/16 13-7/8 11-1/4 14 12
The over-the-counter market quotations reported above reflects inter-dealer
prices, without retail markup, markdown or commission.
Management has been advised by its transfer agent (American Stock Transfer
& Trust Company) that the approximate number of record holders of the Company's
Common Stock, as of February 21, 1997, the record date, was approximately 690.
No cash dividends have been paid by the Company on its Common Stock and no such
payment is anticipated in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
<TABLE><CAPTION>
AS AT AND FOR THE YEARS ENDED NOVEMBER 30,
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1996 1995 1994 1993 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NET SALES $ 150,142,529 $ 119,873,764 $ 121,604,461 $ 73,951,410 $ 61,629,435
COST OF GOODS SOLD 119,205,502 94,307,143 94,923,689 56,347,353 47,287,409
------------- ------------- ------------- ------------- -------------
GROSS PROFIT 30,937,027 25,566,621 26,680,772 17,604,057 14,342,026
------------- ------------- ------------- ------------- -------------
EXPENSES:
Selling, shipping and warehouse 17,357,225 14,511,793 14,421,280 8,521,021 6,852,670
General and administrative 9,795,069 7,901,052 8,581,615 6,525,488 5,015,128
Interest and financing costs
- net 719,198 1,238,887 1,044,257 502,329 289,355
------------- ------------- ------------- ------------- -------------
Total expenses 27,871,492 23,651,732 24,047,152 15,548,838 12,157,153
------------- ------------- ------------- ------------- -------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 3,065,535 1,914,889 2,633,620 2,055,219 2,184,873
PROVISION FOR INCOME TAXES 1,320,700 806,000 952,000 853,000 962,000
------------- ------------- ------------- ------------- -------------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1,744,835 1,108,889 1,681,620 1,202,219 1,222,873
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES
PRIOR TO 1994 - - (60,000) - -
------------- ------------- ------------- ------------- -------------
NET INCOME $ 1,744,835 $ 1,108,889 $ 1,621,620 $ 1,202,219 $ 1,222,873
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ .31 $ .25 $ .37 $ .30 $ .41
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES
PRIOR TO 1994 - - (.01) - -
------------- ------------- ------------- ------------- -------------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ .31 $ .25 $ .36 $ .30 $ .41
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
AVERAGE NUMBER OF SHARES USED TO
COMPUTE EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE 5,816,469(*) 5,121,634(*) 4,896,518(*) 4,734,746(*) 3,481,415(*)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
DIVIDENDS PAID None None None None None
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
WORKING CAPITAL $ 28,112,222 $ 29,965,266 $ 30,141,450 $ 20,965,370 $ 15,819,417
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
LONG-TERM DEBT (net of
current maturities) $ 8,714,567 $ 17,270,062 $ 19,381,239 $ 9,584,684 $ 9,410,079
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TOTAL ASSETS $ 60,443,816 $ 51,135,712 $ 54,461,087 $ 32,784,324 $ 27,934,060
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
STOCKHOLDERS' EQUITY $ 31,391,765 $ 21,064,152 $ 18,067,056 $ 16,193,524 $ 10,461,736
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
STOCKHOLDERS' EQUITY PER SHARE $ 5.40(*) $ 4.11(*) $ 3.69(*) $ 3.42(*) $ 3.01(*)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
TANGIBLE BOOK VALUE PER SHARE $ 3.98(*) $ 3.14(*) $ 2.92(*) $ 3.13(*) $ 2.72(*)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
(*) Includes additional shares assuming conversion of stock options and
warrants utilizing the modified treasury stock method.
12
<PAGE>
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
For fiscal 1996, net sales increased 25.3%. The increase in net sales
resulted from the Company's increased volume to hospitals, the acquisition of
Stone Medical Supply Corporation ("Stone") and our continuing effort to gain
market penetration and sales volume to its existing customer base and the
addition of new customers.
For fiscal 1995, net sales decreased 1.4%. The decrease in net sales for
the fiscal 1995 resulted in MBM's downsizing of unprofitable divisions acquired
from Clark Surgical Corp. ("Clark") during the prior year. For fiscal 1994 net
sales increased 64.4% as compared with the prior year. This increase in sales
resulted from MBM's acquisition of Clark and its continuing effort to increase
market penetration and sales volume on the existing customer base and the
addition of new customers. During 1996, 1995 and 1994, the introduction of new
products, changing prices and inflation had no material impact on MBM's
operations.
Net income for fiscal 1996 was 1.2% of net sales versus .9% of net sales in
fiscal 1995. The increase for fiscal 1996 versus fiscal 1995 was due to
increased sales volume to hospitals, the Company's acquisition of Stone, lower
interest expense as a result of using the proceeds from the conversion of
outstanding warrants to decrease long-term debt and decreases in the interest
rates charged by financial institutions.
Net income for fiscal 1995 was .9% of net sales versus 1.3% of net sales in
fiscal 1994. Net income before the cumulative effect of accounting change in
1994 was 1.4% of net sales. The decrease for fiscal 1995 versus fiscal 1994 was
due to increased interest rates charged by financial institutions, the
downsizing of unprofitable divisions acquired from Clark Surgical Corp. during
the prior year, a decrease in the overall consolidated gross profit percentage
and an increase in the effective income tax rate for 1995.
GROSS PROFIT/OPERATING EXPENSES
Gross profit for fiscal 1996 was 20.6% of net sales versus 21.3% of net
sales in fiscal 1995. The decrease in gross profit was a result of increased
sales to hospitals and changes in MBM's product mix. Gross profit for fiscal
1995 was 21.3% of net sales versus 21.9% of net sales in fiscal 1994. The
decrease in gross profit was a result of changes in MBM's product mix.
Selling, shipping and warehouse and general and administrative expenses
expressed as a percent of net sales decreased .6% for fiscal 1996 as compared to
fiscal 1995. Selling, shipping and warehouse and general and administrative
expenses expressed as a percent of net sales decreased .2% for fiscal 1995 as
compared to fiscal 1994.
13
<PAGE>
INTEREST AND FINANCING COSTS (NET OF INTEREST INCOME)
Interest expense net of interest income expressed as a percent of net sales
decreased .6% for fiscal 1996 when compared to the prior year as a result of
using the proceeds from the conversion of outstanding warrants to decrease
long-term debt and decreases in the interest rates charged by financial
institutions. Interest expense net of interest income expressed as a percent of
net sales increased .1% for fiscal 1995 when compared to the prior year as a
result of increases in the interest rates charged by financial institutions.
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years, MBM continued to meet its cash needs
via cash flow from operations and borrowings. During fiscal 1996, 1995 and
1994, MBM had an average of approximately $14,800,000, $10,500,000 and
$11,000,000 respectively, of unused credit lines available each month over its
normal operating requirements.
Management believes that its working capital of approximately $28,100,000
at November 30, 1996 provides sufficient liquidity for its short and long-term
requirements and that MBM's long-term liquidity is not materially effected by
any restrictive covenants contained in MBM's Revolving Credit Agreement.
Further, Management believes that MBM should not experience a problem in
connection with the maintenance of such covenants and that its $25,000,000 line
of credit provides MBM with the resources it reasonably expects to require to
meet its cash commitments through fiscal 1997.
For fiscal 1996, MBM generated cash from operating activities. An increase
in accounts payable, accrued expenses and prepaid expenses over and above an
increase in accounts receivable and inventory contributed to MBM's generation of
cash. During fiscal 1996, MBM's financing activities used cash as a result of
repayments of the bank loan under its long-term credit agreement exceeding
proceeds from the exercise of warrants. For fiscal 1996, MBM used cash in
investing activities to make capital expenditures and payments for intangible
assets.
For fiscal 1995, MBM generated cash flow from operating activities.
Decreases in accounts receivable and inventory over and above a decrease in
accounts payable and an increase in prepaid expenses contributed to MBM's
generation of cash. During fiscal 1995, MBM's financing activities used cash
as a result of repayments of the bank loan under its long-term credit
agreement. For fiscal 1995, MBM used cash in investing activities to make
capital expenditures and payments for intangible assets.
For fiscal 1994, MBM generated cash flow from operating activities. An
increase in accounts payable over and above increases in inventory, accounts
receivable and prepaid expenses contributed to MBM's generation of cash. During
fiscal 1994, MBM's financing activities used cash as a result of repayments of
the bank loan under its long-term credit agreement. For fiscal 1994, MBM used
cash in investing activities to make capital expenditures and payments for
intangible assets. During fiscal 1994, MBM
14
<PAGE>
acquired the business and certain assets of Clark through an increase in MBM's
line-of-credit and the use of same.
Reference is made to "Recent Developments" for a complete description of
the terms of the Merger Agreement pursuant to which MBM expects to be acquired
by Schein by way of a merger of Schein's wholly-owned subsidiary into MBM in a
stock-for-stock transaction.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8, and an index thereto commences on page
F-1, which pages follow this page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
15
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report F-2
Consolidated Balance Sheets
November 30, 1996 and 1995 F-3 - F-4
Consolidated Statements of Income
Years Ended November 30, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows
Years Ended November 30, 1996, 1995 and 1994 F-6 - F-7
Consolidated Statements of Changes in
Stockholders' Equity
Years Ended November 30, 1996, 1995 and 1994 F-8
Notes to Consolidated Financial Statements F-9 - F-21
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts F-22
Exhibit 11 - Earnings Per Share Calculation F-23
Schedules other than those referred to above have been
omitted as the conditions requiring their filing are not
presented or the information has been presented
elsewhere in the financial statements
Separate financial statements and schedules of
Micro Bio-Medics, Inc. (Parent) have been omitted
since the conditions for omission have been met
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
MICRO BIO-MEDICS, INC.
PELHAM MANOR, NEW YORK
We have audited the accompanying consolidated balance sheets of Micro
Bio-Medics, Inc. and Subsidiaries as of November 30, 1996 and 1995, and the
related consolidated statements of income, cash flows, and changes in
stockholders' equity for each of the three years in the period ended
November 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Micro Bio-Medics,
Inc. and Subsidiaries as of November 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1996, in conformity with generally accepted accounting principles.
We have also audited Schedule II and Exhibit 11 for the years ended November 30,
1996, 1995 and 1994 included in the 1996 annual report of Micro Bio-Medics, Inc.
and Subsidiaries on Form 10-K. In our opinion, such schedules present fairly
the information required to be set forth therein.
MILLER, ELLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
February 12, 1997, except for
Notes 8 and 12 which are
dated March 7, 1997
F-2
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
NOVEMBER 30,
---------------------------
1996 1995
---------- ----------
CURRENT ASSETS:
Cash $1,513,750 $2,817,285
Accounts receivable, less allowance
for doubtful accounts of
$686,179 in 1996 and
$674,210 in 1995 (Note 5) 31,280,932 25,657,607
Inventory (Note 5) 13,488,244 12,318,756
Prepaid expenses and other current assets 875,451 657,768
Prepaid income taxes 329,918 471,710
Deferred income taxes (Note 6) 781,500 485,500
----------- -----------
Total current assets 48,269,795 42,408,626
PROPERTY, PLANT AND EQUIPMENT - at cost,
net of accumulated depreciation and
amortization of $3,433,070 in 1996 and
$3,616,134 in 1995 (Notes 2, 3 and 5) 3,758,348 3,477,807
INTANGIBLE ASSETS, net of accumulated
amortization of $1,155,260 in 1996 and
$1,061,323 in 1995 (Notes 2 and 4) 8,254,087 4,990,073
OTHER ASSETS 161,586 259,206
----------- -----------
$60,443,816 $51,135,712
=========== ===========
The notes to consolidated financial statements are made a part hereof.
F-3
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
NOVEMBER 30,
----------------------------
1996 1995
----------- -----------
CURRENT LIABILITIES:
Current maturities of long-term
debt (Note 5) $ 432,755 $ 479,195
Accounts payable 17,182,644 10,297,403
Accrued expenses and sundry
liabilities (Note 7) 2,542,174 1,666,762
----------- -----------
Total current liabilities 20,157,573 12,443,360
LONG-TERM DEBT, net of current
maturities (Note 5) 8,714,567 17,270,062
DEFERRED INCOME TAXES (Note 6) 179,911 358,138
----------- -----------
Total liabilities 29,052,051 30,071,560
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (Notes 5 and 9):
Preferred stock $1 par value:
Authorized - 1,000,000 shares,
no shares issued - -
Common stock $.03 par value:
Authorized - 20,000,000 shares
Issued - 5,062,115 shares in
1996 and 3,878,804
shares in 1995 151,863 116,364
Additional paid-in capital 20,954,536 12,407,257
Retained earnings 10,286,530 8,541,695
Less: Cost of 1,167 shares of common
stock in treasury (1,164) (1,164)
------------ ------------
Total stockholders' equity 31,391,765 21,064,152
------------ ------------
$ 60,443,816 $ 51,135,712
============ ============
The notes to consolidated financial statements are made a part hereof.
F-4
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED NOVEMBER 30,
--------------------------------------------
1996 1995 1994
------------- ------------- -------------
NET SALES $ 150,142,529 $ 119,873,764 $ 121,604,461
COST OF GOODS SOLD 119,205,502 94,307,143 94,923,689
------------- ------------- -------------
GROSS PROFIT 30,937,027 25,566,621 26,680,772
------------- ------------- -------------
OPERATING EXPENSES:
Selling, shipping and
warehouse 17,357,225 14,511,793 14,421,280
General and administrative 9,795,069 7,901,052 8,581,615
Interest and financing
costs (net of interest
income of approximately
$206,400 in 1996,
$172,600 in 1995 and
$173,000 in 1994) 719,198 1,238,887 1,044,257
------------- ------------- -------------
Total operating expenses 27,871,492 23,651,732 24,047,152
------------- ------------- -------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 3,065,535 1,914,889 2,633,620
PROVISION FOR INCOME
TAXES (Note 6) 1,320,700 806,000 952,000
------------- ------------- -------------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,744,835 1,108,889 1,681,620
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES
PRIOR TO 1994 - - (60,000)
------------- ------------- -------------
NET INCOME $ 1,744,835 $ 1,108,889 $ 1,621,620
------------- ------------- -------------
------------- ------------- -------------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (Note 10) $ .31 $ .25 $ .37
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES
PRIOR TO 1994 - - (.01)
------------- ------------- -------------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ .31 $ .25 $ .36
------------- ------------- -------------
------------- ------------- -------------
NUMBER OF SHARES USED IN COMPUTING
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE (Note 10) 5,816,469 5,121,634 4,896,518
------------- ------------- -------------
------------- ------------- -------------
DIVIDENDS PER COMMON SHARE NONE NONE NONE
------------- ------------- -------------
------------- ------------- -------------
The notes to consolidated financial statements are made a part hereof.
F-5
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,744,835 $ 1,108,889 $ 1,621,620
----------- ----------- -----------
Adjustments to reconcile net
income to net cash
provided by operating activities:
Cumulative effect of
accounting change - - 60,000
Depreciation and
amortization 1,371,283 1,056,365 952,109
Provision for losses on
accounts receivable 44,000 24,210 268,551
Deferred income taxes (155,300) 89,000 (96,000)
Changes in assets and
liabilities, net of
effect of asset
acquisitions (Note 2):
Accounts receivable (4,381,287) 1,098,227 (1,055,450)
Inventory (1,198,068) 3,130,709 (2,506,516)
Prepaid expenses and other
current assets (159,254) 113,258 (265,042)
Prepaid income taxes 205,691 (471,710) -
Other assets 97,618 (7,622) (15,604)
Accounts payable 5,785,344 (3,462,612) 8,441,961
Accrued expenses and
sundry liabilities 710,872 85,421 255,913
----------- ----------- -----------
2,320,899 1,655,246 6,039,922
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,065,734 2,764,135 7,661,542
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise
of warrants 3,586,059 300,601 126,409
Net repayments under revolving
loan agreements (7,000,000) (150,000) (3,224,695)
Net repayments of long-term debt (603,532) (419,952) (380,085)
Exercise of employee stock options 371,122 197,606 125,503
----------- ----------- -----------
NET CASH USED IN FINANCING
ACTIVITIES (3,646,351) (71,745) (3,352,868)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for certain net
assets of businesses acquired - (931,466) (2,718,009)
Capital expenditures (664,433) (788,330) (713,484)
Payments for intangible assets (1,058,485) (1,488,654) (1,027,851)
Note receivable - - 1,000,000
----------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (1,722,918) (3,208,450) (3,459,344)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (1,303,535) (516,060) 849,330
CASH - beginning of year 2,817,285 3,333,345 2,484,015
----------- ----------- -----------
CASH - end of year $ 1,513,750 $ 2,817,285 $ 3,333,345
----------- ----------- -----------
----------- ----------- -----------
The notes to consolidated financial statements are made a part hereof.
F-6
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
YEARS ENDED NOVEMBER 30,
-----------------------------------
1996 1995 1994
--------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 986,000 $ 1,424,000 $ 1,217,000
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 1,150,000 $ 948,000 $ 1,214,000
----------- ----------- -----------
----------- ----------- -----------
ASSETS ACQUIRED FOR DEBT - capital leases,
which are not reflected in
the above statements $ - $ - $ 202,658
----------- ----------- -----------
----------- ----------- -----------
NET ASSETS OF A BUSINESS ACQUIRED
FOR ISSUANCE OF COMMON STOCK
which is not reflected in the
above statements $ 3,228,004 $ - $ -
----------- ----------- -----------
----------- ----------- -----------
BUSINESS ACQUIRED FOR ISSUANCE OF
LONG-TERM DEBT which is not
reflected in the
above statements $ - $ - $ 4,217,981
----------- ----------- -----------
----------- ----------- -----------
DEBENTURES CONVERTED INTO COMMON
STOCK $ 1,400,000 $ 1,390,000 $ -
----------- ----------- -----------
----------- ----------- -----------
The notes to consolidated financial statements are made a part hereof.
F-7
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK
$.03 PAR VALUE ADDITIONAL
----------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
------ ------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCES AT
NOVEMBER 30, 1993 3,535,452 $ 106,063 $ 10,277,439 $ 5,811,186 $ 1,164
Shares issued for exercise
of warrants 29,057 872 125,537 - -
Shares issued for stock options 30,900 927 124,576 - -
Net income - - - 1,621,620 -
---------- --------- ------------ ----------- --------
BALANCES AT
NOVEMBER 30, 1994 3,595,409 107,862 10,527,552 7,432,806 1,164
Shares issued for conversion
of debentures (Note 5) 187,500 5,625 1,384,375 - -
Shares issued for stock options 45,133 1,354 196,252 - -
Shares issued for exercise
of warrants 50,762 1,523 299,078 - -
Net income - - - 1,108,889
---------- --------- ------------ ----------- --------
BALANCES AT
NOVEMBER 30, 1995 3,878,804 116,364 12,407,257 8,541,695 1,164
Shares issued for conversion
of debentures (Note 5) 187,500 5,625 1,391,968 - -
Shares issued for stock options 56,049 1,681 369,441 - -
Shares issued for exercise
of warrants 659,066 19,772 3,566,287 - -
Shares issued in connection
with acquisition (Note 2) 280,696 8,421 3,219,583 - -
Net income - - - 1,744,835 -
---------- --------- ------------ ----------- --------
BALANCES AT
NOVEMBER 30, 1996 5,062,115 $ 151,863 $ 20,954,536 $ 10,286,530 $ 1,164
---------- --------- ------------ ----------- --------
---------- --------- ------------ ----------- --------
</TABLE>
The notes to consolidated financial statements are made a part hereof.
F-8
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Micro Bio-Medics, Inc. (the "Company") and its subsidiaries are a United
States based distributor. The Company's principal line of business is the
distribution, at wholesale, of medical supplies and related products. The
principal markets are the New York metropolitan area for physicians and
hospitals, and throughout the United States for health care professionals
in sports medicine, schools, emergency services, industrial safety and
government and laboratory markets. Included in their operations are the
assembly and distribution of first aid medical kits and school and athletic
medical supplies. The foregoing operations are all considered as one
business segment.
CONCENTRATIONS OF CREDIT RISK
CASH
The Company maintains various bank accounts and at times, balances may
be in excess of the FDIC insurance limit. At November 30, 1996 and
1995, the amounts in excess of FDIC insurance limits were
approximately $1,200,000 and $2,200,000, respectively.
ACCOUNTS RECEIVABLE
Historically, the Company has not experienced significant losses
related to receivables from any individual customers or group of
customers in any industry or geographic area.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, which are all wholly-owned. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
F-9
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are being depreciated primarily on the
straight-line basis over the estimated useful lives of the individual
classes of assets.
INTANGIBLES
Certain computer programming costs are being amortized over five years
using the straight-line method.
The excess of the purchase price paid over the net assets of businesses
acquired is being amortized over five to forty years using the
straight-line method.
The Company evaluates the recoverability of goodwill and other intangible
assets and if there is a decline in related profitability it will recognize
an impairment of value if appropriate.
DEFERRED INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes," which requires the use of
the liability method of accounting for income taxes. The liability method
measures deferred income taxes by applying enacted statutory rates in
effect at the balance sheet date to the differences between the tax bases
of assets and liabilities and their reported amounts in the financial
statements.
REVENUE RECOGNITION
The Company recognizes revenues when its products are shipped.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
F-10
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which will require the determination
by the Company of whether the carrying amount of an asset is recoverable
and if an impairment loss should be recognized. SFAS No. 121 is effective
for fiscal years beginning after December 15, 1995 and management believes
that such adoption will not significantly affect the Company's consolidated
financial statements since the Company was generally in conformance with
this standard.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock Based Compensation", which is effective for
fiscal years beginning after December 15, 1995 and is effective for the
Company's fiscal year ended November 30, 1997. Under SFAS No. 123,
companies can elect but are not required to recognize compensation expense
for all stock based awards, using a fair value methodology. The Company
expects to implement in 1997 the disclosure only provisions, as permitted
by SFAS No. 123.
For the year ended November 30, 1996, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Post-retirement Benefits Other than Pensions." Such adoption did not
significantly affect the Company's consolidated financial statements.
NOTE 2 - ACQUISITIONS
Prior to fiscal year ended November 30, 1993, the Company made several
acquisitions.
On December 1, 1993, a subsidiary of the Company purchased certain net
assets and customer accounts of Clark Surgical Corp. ("Clark") subject to
certain specific liabilities and obligations under existing contracts and
leases. Clark was a major distributor of physician, hospital and
veterinary supplies in the New York Metropolitan area and Southern
Florida. The purchase price as adjusted was approximately $16,500,000
consisting of inventory of approximately $5,000,000, accounts receivable
of approximately $10,200,000, property and equipment of approximately
$300,000 and goodwill of $1,000,000. The Company borrowed approximately
$14,200,000 under its existing bank line of credit to finance this
acquisition and made payments during the year ended November 30, 1994 of
approximately $1,000,000. The remaining balance of approximately
$1,000,000 was paid in November 1995.
In addition, the Company agreed to pay the two former stockholders of Clark
an aggregate of $2,725,000 in cash, payable over a seven year period ending
December 31, 2000 for their agreement not to compete for a period of twenty
years. As part of the acquisition of Clark's assets, which is included
above, the Company issued 40,000 warrants at an exercise price of $8.00 to
these two stockholders with 20% exercisable immediately and the remainder
contingent upon certain conditions being met. Effective November 29, 1994,
these warrants were canceled.
F-11
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 2 - ACQUISITIONS (CONTINUED)
Effective June 1, 1994, the Company acquired certain assets and customer
accounts of Joseph Weintraub, Inc., a distributor of physician and hospital
supplies for approximately $1,100,000. The purchase price was allocated
based upon the fair market value of the assets at the date of acquisition.
Effective January 18, 1996, the Company acquired 100% of Stone Medical
Supply Corporation's ("Stone's") $.01 par value common stock outstanding of
approximately 3,432,000 shares in exchange for the issuance of 280,696
shares of the Company's $.03 par value common stock (valued at $11.50 per
share). This tax-free merger was accounted for as a purchase. The
purchase price was approximately $3,200,000, and the excess of cost over
the fair values of assets acquired was approximately $2,300,000 which is
being amortized over a life of thirty years. In addition, the Company
entered into two fifteen year non-competition agreements with two former
executives of Stone in the anticipated amount of $1,750,000, of which
$916,666 was paid during 1996 with the remainder payable over five years
subject to a final determination.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
COST
---------------------------
NOVEMBER 30,
--------------------------- ESTIMATED
1996 1995 USEFUL LIFE
------------ ------------ -----------
(Years)
Land $ 93,552 $ -
Building and improvements 343,448 - 40
Furniture, fixtures and
equipment (*) 5,457,771 5,716,810 5 - 8
Transportation equipment 140,825 93,419 5
Leasehold improvements 1,155,822 1,283,712 Life of lease
----------- ----------
7,191,418 7,093,941
Less: Accumulated depreciation
and amortization 3,433,070 3,616,134
----------- ----------
$ 3,758,348 $ 3,477,807
----------- ----------
----------- ----------
(*) Equipment held under capital leases amounted to approximately
$2,400,000 and $2,249,000 as of November 30, 1996 and 1995,
respectively.
Depreciation expense totalled approximately $976,000, $764,000 and $717,000
for the years ended November 30, 1996, 1995 and 1994, respectively.
F-12
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 4 - INTANGIBLE ASSETS
Intangible assets consist of the following:
NOVEMBER 30,
--------------------------
1996 1995
----------- -----------
Excess cost of acquisitions over net
tangible assets acquired $ 6,668,876 $ 3,997,570
Agreements not to compete (Note 2) 2,455,680 1,607,183
Computer programming costs 284,791 446,643
----------- -----------
9,409,347 6,051,396
Less: Accumulated amortization 1,155,260 1,061,323
----------- -----------
$ 8,254,087 $ 4,990,073
----------- -----------
----------- -----------
Amortization expense amounted to approximately $395,000, $292,000 and
$235,000 for the years ended November 30, 1996, 1995 and 1994, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
NOVEMBER 30,
--------------------------
1996 1995
----------- -----------
Capitalized leases (collateralized by equipment
with an aggregate cost of approximately
$2,400,000 and $2,249,000) payable in various
installments through fiscal 2001; interest
at 6.5% to 9.06% or varies with changes in
prime rate $ 1,194,240 $ 1,426,384
Bank loans (i) 7,500,000 14,500,000
7% convertible subordinated
debentures, due
October 30, 2003 (ii) - 1,500,000
Obligations related to acquisitions 453,082 322,873
----------- -----------
9,147,322 17,749,257
Less: Current maturities 432,755 479,195
----------- -----------
$ 8,714,567 $ 17,270,062
----------- -----------
----------- -----------
F-13
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 5 - LONG-TERM DEBT (CONTINUED)
The approximate non-current portion of long-term debt at November 30, 1996 is
payable as follows:
YEAR ENDING NOVEMBER 30,
------------------------
1998 $ 435,000
1999 7,865,000
2000 278,000
2001 71,000
2002 17,000
Subsequent 49,000
-----------
$ 8,715,000
-----------
-----------
(i) The Company has a $25 million secured revolving loan agreement with Chase
Manhattan Bank NA and Fleet Bank of New York. Chase's and Fleet's
commitment under the loan agreement is limited to $15,000,000 and
$10,000,000, respectively. The loan agreement expires on February 15,
1999. The loan bears interest at the bank's prime rate plus 1/4%, except
for Eurodollar loans. As of November 30, 1996, $4,000,000 of the
$7,500,000 revolving loan outstanding was utilized for Eurodollar loans at
an average interest rate of 6.625%. The debt is collateralized by
accounts receivable and inventory. In connection with the loan agreement,
the Company has agreed to certain restrictions relating to its
indebtedness and liens, and has agreed to maintain specified financial
ratios and covenants. The loan agreement prohibits the Company from
paying any dividends and restricts capital distributions or redemptions
and purchases or retirements of any of the Company's capital stock. There
are also restrictions as to investments, acquisitions, capital
expenditures and payments to related parties. A commitment fee equal to
1/8% per annum will be charged on the unused portion of the loan. The
loan may be repaid at any time.
On June 7, 1995, the Company entered into a zero cost, three year interest
rate swap agreement with Chase for $10,000,000. It is management's intent
to match the agreement's terms as to principal amounts and repricing
maturities in order to reduce the Company's interest rate risk on its
revolving loans. As of November 30, 1996, the agreement serves to limit
the net interest rate charged on the Company's first $10,000,000 of
revolving loans to 8.25%. However, the Company would receive no further
interest rate benefit once the applicable interest rate falls below 6.55%.
(ii) In November 1993, the Company completed the private sale and issuance of
its 7% convertible subordinated Debentures ("Debentures") due October 30,
2003. Net proceeds from the issuance of the Debentures with a face value
of $3,000,000 were approximately $2,700,000. The Debentures were
immediately convertible into shares of common stock at the rate of $8.00
per share until October 28, 2003.
On September 28, 1995, $1,500,000 of the Debentures were converted into
187,500 shares of the Company's common stock. As of May 10, 1996, the
remaining outstanding Debentures were converted into shares of the
Company's common stock.
F-14
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 6 - INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
Provision for income taxes consists of the following:
YEARS ENDED NOVEMBER 30,
--------------------------------------
1996 1995 1994
------------ ----------- -----------
Currently payable:
Federal $ 1,055,000 $ 508,000 $ 745,000
State and local 421,000 209,000 303,000
----------- --------- ---------
1,476,000 717,000 1,048,000
----------- --------- ---------
Deferred:
Federal (124,300) 72,000 (77,000)
State and local (31,000) 17,000 (19,000)
----------- --------- ---------
(155,300) 89,000 (96,000)
----------- --------- ---------
$ 1,320,700 $ 806,000 $ 952,000
----------- --------- ---------
----------- --------- ---------
The difference between the statutory United States federal income tax rate
and the effective income tax rate is as follows:
YEARS ENDED NOVEMBER 30,
-------------------------------------
1996 1995 1994
----------- --------- ---------
Statutory federal income tax rate 34.0 34.0 34.0
Current year state and local taxes
(net of federal tax effect) 6.8 7.9 7.0
Other 2.3 .2 (4.9)
----- ------ ------
43.1% 42.1% 36.1%
----- ------ ------
----- ------ ------
The net current and non-current components of deferred income taxes
recognized in the balance sheets at November 30, are as follows:
1996 1995
--------- ---------
Net current assets $ 781,500 $ 485,500
Net non-current liabilities 179,911 358,138
--------- ---------
Net asset $ 601,589 $ 127,362
--------- ---------
--------- ---------
F-15
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 6 - INCOME TAXES (CONTINUED)
The components of the net deferred tax asset as of November 30, are as
follows:
1996 1995
--------- ---------
Deferred tax assets:
Accounts receivable allowances $ 248,274 $ 283,080
Inventory - uniform capitalization and
allowances 533,226 189,420
Net operating loss 262,360 -
Other 44,100 13,000
--------- ---------
1,087,960 485,500
Deferred tax liability:
Depreciation and amortization 486,371 358,138
--------- ---------
Net deferred tax asset $ 601,589 $ 127,362
--------- ---------
--------- ---------
In connection with its acquisition of Stone (Note 2), the Company has
recorded a deferred tax asset of $336,927 reflecting the benefit of
approximately $800,000 in loss carryforwards which expire in the year 2011.
Realization is dependent on generating sufficient taxable income prior to
expiration of the loss carryforwards. Although realization is not assured,
management believes it is more likely than not that all of the deferred tax
asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced. However, no
valuation allowance has been provided. During the year ended November 30,
1996, $74,567 of this deferred tax asset was realized by the utilization of
net operating loss carryforwards.
NOTE 7 - ACCRUED EXPENSES
Accrued expenses and sundry liabilities consist of:
NOVEMBER 30,
------------------------
1996 1995
----------- -----------
Compensation $ 1,273,444 $ 660,638
Freight-out 194,222 356,795
Commissions 273,747 166,871
Other 800,761 482,458
----------- -----------
$ 2,542,174 $ 1,666,762
----------- -----------
----------- -----------
F-16
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 8 - COMMITMENTS AND CONTINGENCIES
RETIREMENT PLAN
The Company's 401(k) deferred retirement plan is available to all eligible
employees and provides for matching contributions by the Company equal to
20% of the amount of the participants' contributions that are not in excess
of 5% of compensation. For the years ended November 30, 1996, 1995 and
1994, the Company's matching contributions were approximately $78,000,
$62,000 and $30,000, respectively.
DIRECTORS' RETIREMENT PLAN
The 1996 Directors' Retirement Plan to provide certain retirement benefits
for the directors of the Company was approved by the stockholders in
June 1996. Under the plan, a director must render continuous service to
the Company for a period of seven years after the commencement of the plan
and shall receive a retirement benefit on the earlier of retirement date,
disability or death. The retirement benefit is an annual benefit equal to
the aggregate director's fees paid during the twelve month period preceding
the payment of benefits. The Plan also provides that in the event of a
"change in control" as defined, a director may elect to receive either an
actuarial equivalent lump sum of the product of the director's compensation
and the director's life expectancy or a lump sum equal to the product of
the director's compensation and the number of completed years of service.
The total of such payments in a "change in control" would amount to
approximately $1,400,000 (See Note 12).
For the year ended November 30, 1996, the adoption of SFAS No. 106,
"Employers' Accounting for Post-retirement Benefits Other than Pensions,"
resulted in a retirement expense which was immaterial to the Company's
consolidated financial statements and for which no provision has been made.
EMPLOYMENT/CONSULTING CONTRACTS
The Company has an employment agreement with its Chief Executive Officer
and a consulting agreement with a Director, terminating on March 31, 2000
and December 31, 1996, respectively. The current aggregate annual base
compensation under these contracts is approximately $340,000. The Chief
Executive Officer's contract provides for annual increments plus a bonus
based on income before taxes. If the contract is terminated prior to
expiration, payments are to be made equal to the greater of $2,000,000 or
the sum of five years' salary, based upon the rate of compensation then in
effect, plus five times the last annual bonus received (See Note 12).
For the years ended November 30, 1996, 1995 and 1994, bonuses of
approximately $299,000, $144,000 and $199,000, respectively, were paid
under the employment contract.
F-17
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
SELF-INSURANCE
The Company acts as a self-insurer for its employees' health insurance up
to a maximum of $50,000 per covered individual. The Company is liable up
to a maximum of $460,000 for the year. Claims, including estimates for
charges incurred but not reported, are charged to operations during the
year in which they occur. As of November 30, 1996, 1995 and 1994, the
liability for claims incurred but not submitted amounted to $50,000,
$75,000 and $75,000, respectively.
LEASES
The approximate aggregate minimum annual rental commitments under long-term
operating leases in effect at November 30, 1996 are as follows:
YEAR ENDING OFFICE, WAREHOUSE TRANSPORTATION
NOVEMBER 30, AND SALES EQUIPMENT TOTAL
------------ ------------------ --------------- -----------
1997 $ 1,234,000 $ 149,000 $ 1,383,000
1998 1,266,000 126,000 1,392,000
1999 1,320,000 103,000 1,423,000
2000 1,287,000 75,000 1,362,000
2001 927,000 35,000 962,000
Thereafter 4,647,000 3,000 4,650,000
----------- --------- -----------
$10,681,000 $ 491,000 $11,172,000
----------- --------- -----------
----------- --------- -----------
Certain leases contain escalation clauses which increase the rents for
various operating expenses and fluctuations in property taxes.
Rent expense consists of the following:
YEARS ENDED NOVEMBER 30,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
Office, warehouse and
sales $ 1,552,500 $ 1,141,700 $ 1,392,046
Transportation
equipment 111,216 117,417 85,555
----------- ----------- -----------
$ 1,663,716 $ 1,259,117 $ 1,477,601
----------- ----------- -----------
----------- ----------- -----------
F-18
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company leases certain equipment under capital leases. The following
is a schedule by years of approximate future minimum lease payments under
the capitalized leases together with the present value of the net minimum
lease payments at November 30, 1996:
YEAR ENDING NOVEMBER 30,
------------------------
1997 $ 516,000
1998 274,000
1999 263,000
2000 255,000
2001 53,000
-----------
Total minimum lease payments 1,361,000
Less: Amount representing
interest at 6.5% to 9% 167,000
-----------
$ 1,194,000
-----------
-----------
NOTE 9 - STOCK OPTIONS AND WARRANTS
OPTIONS
Under various plans, the Company may grant stock options to directors,
officers and employees. The options must be granted at exercise prices of
not less than fair market value and expire within ten years from the date
of grant. Transactions under the various stock option and incentive plans
for the periods indicated were as follows:
YEARS ENDED NOVEMBER 30,
------------------------------------------
1996 1995 1994
--------- ---------- -----------
Outstanding at
beginning of year 1,491,568 1,372,368 1,244,767
Add (deduct):
Granted 215,000 207,000 180,500
Terminated (15,100) (42,667) (22,000)
Exercised (56,049) (45,133) (30,899)
--------- ---------- -----------
Outstanding at
end of year 1,635,419 1,491,568 1,372,368
--------- ---------- -----------
--------- ---------- -----------
Remaining shares
reserved for issuance 687,732 387,632 51,965
--------- ---------- -----------
--------- ---------- -----------
Options outstanding at November 30, 1996, 1995 and 1994 ranged in price
from $2.25 to $16.50. Options exercised ranged in price from $2.25 to
$10.25 in 1996, 1995 and 1994.
F-19
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 9 - STOCK OPTIONS AND WARRANTS (CONTINUED)
WARRANTS
The Company's Series 1 warrants expired in June 1996 and almost all were
exercised at $6.00 per 1.047 shares. The total net proceeds from the
exercise of all warrants from 1992 (inception) through June 1996 were
approximately $7,900,000 with approximately 1,400,000 shares of common
stock being issued.
NOTE 10 - EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the weighted
average number of common shares and common equivalent shares outstanding
during the period. The modified treasury stock method was utilized to
calculate the dilutive effect of the options and warrants upon the earnings
per share data. Fully diluted earnings per common and common equivalent
share were the same as for the primary calculation.
NOTE 11 - FINANCIAL INSTRUMENTS
The amounts at which cash, accounts receivable, accounts payable and other
current liabilities are presented in the balance sheets approximate their
fair value due to their short maturities. The carrying amount of long-term
debt approximates its fair value determined based on discounted cash flow
using a market rate of interest at the balance sheet dates as applicable to
comparable debt.
NOTE 12 - SUBSEQUENT EVENT
On March 7, 1997, the Company entered into an agreement and plan of merger
whereby HSI Acquisition Corp., a wholly-owned subsidiary of Henry Schein,
Inc. ("Schein"), will merge into the Company. The Company will be the
surviving corporation as a subsidiary of Schein. Schein is a marketer of
healthcare products and services to office-based healthcare practitioners
including dental practices and laboratories, physician practices and
veterinary clinics in the North American and European markets. As a result
of the transaction, outstanding shares of the Company's common stock will
be exchanged at a rate of .62 shares of Schein's common stock for each
outstanding share of the Company. Existing options and warrants will be
exchanged for Schein's options and warrants at the same rate. It is
intended that the merger shall qualify as a tax free reorganization for
income tax purposes and accounted for as a pooling of interests for
financial reporting purposes.
F-20
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 12 - SUBSEQUENT EVENT (CONTINUED)
The completion of the transaction is subject to approval by the Company's
shareholders and to termination of any waiting period under the
Hart-Scott-Rodino Act, and further, all dissenting shares shall not
constitute more than 9% of the Company's outstanding common stock
immediately prior to the effective date of the merger.
The agreement may be terminated based upon certain conditions as defined
in the Plan of Merger including if the merger is not consummated before
September 30, 1997. In the event that the merger is not completed due to
cause by either party, liquidated damages of $3,000,000 will be payable by
such party to the other party. If (i) the Company terminates the Plan of
Merger in order to effect an Acquisition Transaction (as defined) with
another person, (ii) Schein terminates the Plan of Merger due to the
Company's Board of Directors withdrawing or adversely modifying its
recommendation that the Company's shareholders approve the Plan of Merger,
or (iii) the Plan of Merger terminates under certain other circumstances
and the Company effects an Acquisition Transaction or enters into a
definitive agreement with respect thereto within six months of such
termination, the Company will pay Schein a termination fee of $5,000,000.
In connection with the Merger Agreement, the Chief Executive Officer of
the Company entered into an employment agreement, which becomes effective
when the merger is completed, to be employed as Executive Vice-President
of Schein and President of Schein's medical products group. The existing
employment agreement (see Note 8) will be terminated and Schein will cause
the Company to pay him $3,000,000 in five equal installments pursuant
thereto. The first payment is due on the effective date of the merger and
the remaining installments are payable on each January 1st thereafter.
If the merger becomes effective, the Board of Directors of the Company
will terminate the 1996 Directors' Retirement Plan (see Note 8) and the
directors will not seek to obtain the benefits payable under such plan.
F-21
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------- ----------- ---------- ----------- ----------
BALANCE ADDITIONS BALANCE
BEGINNING CHARGED TO END OF
OF YEAR OPERATIONS DEDUCTIONS* YEAR
----------- ---------- ----------- ---------
DESCRIPTION
-----------
Allowance for Doubtful Accounts
Year ended November 30, 1994 $ 600,000 $ 268,551 $ 218,551 $ 650,000
Year ended November 30, 1995 650,000 96,000 71,790 674,210
Year ended November 30, 1996 674,210 44,000 32,031 686,179
* Deductions represent accounts written off, net of recoveries of accounts
written off in prior years.
F-22
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE:
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
YEARS ENDED NOVEMBER 30,
------------------------------------
1996 1995 1994
----------- ----------- ----------
PRIMARY EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
EARNINGS
Income before cumulative effect of
accounting change $ 1,744,835 $1,108,889 $1,681,620
MODIFIED TREASURY STOCK METHOD
Incremental income after the application
of assumed proceeds toward repurchase
of 20% of the outstanding common shares
at the average market price, the reduction
of debt and the balance of funds invested
in U.S. government securities, net of
applicable income taxes 59,709 191,461 146,222
----------- ---------- -----------
Adjusted earnings $ 1,804,544 $1,300,350 $1,827,842
----------- ---------- -----------
----------- ---------- -----------
SHARES
Weighted average number of common shares
outstanding 4,554,046 3,690,092 3,551,732
Additional shares assuming conversion of:
Stock options and warrants utilizing the
modified treasury stock method 1,262,423 1,431,542 1,344,786
----------- ---------- -----------
Number of common and common
equivalent shares 5,816,469 5,121,634 4,896,518
----------- ---------- -----------
----------- ---------- -----------
Earnings per common and common equivalent
share before cumulative effect of
accounting change $.31 $.25 $.37
----------- ---------- -----------
----------- ---------- -----------
Fully diluted earnings per common and common equivalent share were the same.
F-23
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) IDENTIFICATION OF DIRECTORS
The names, ages and principal occupations of the Company's present
directors, and the date on which their term of office commenced and expires, are
as follows:
First
Term of Became Principal
Name Age Office Director Occupation
- ---- --- -------- -------- --------------
Bruce J. Haber 44 (1) 1981 President of the
Company
Marvin S. Caligor 66 (1) 1982 Consultant
Renee Steinberg 74 (1) 1971 Secretary of
the Company
K. Deane Reade, Jr. 55 (1) 1987 President of
Bangert, Dawes,
Reade,
Davis & Thom
Incorporated
___________________________
(1) Directors are elected at the annual meeting of stockholders and hold office
until the following annual meeting.
(b) IDENTIFICATION OF EXECUTIVE OFFICERS.
Bruce J. Haber is President of the Company and its subsidiaries. Louis
Buther, Ernest W. Nelson and Michael Levy are each a Vice-President of the
Company. Donald Sabia is Vice President of Operations of the Company. Stuart
F. Fleischer is Vice President of Finance and the Principal Financial and
Accounting Officer and Gary Butler is Treasurer of the Company. Renee Steinberg
is Secretary of the Company.
The terms of all officers expire at the annual meeting of directors
following the annual stockholders meeting. Subject to their contract rights to
compensation, if any, officers may be removed, either with or without cause, by
the Board of Directors, and a successor elected by a majority vote of the Board
of Directors, at any time.
16
<PAGE>
(c) BUSINESS EXPERIENCE
Bruce J. Haber is serving as President and a Director of MBM. Mr. Haber
was elected to the position of President in December, 1983; has served as a
Director of MBM since September, 1981; and, from that date, until his election
as President of MBM, served as Executive Vice-President of MBM. Prior to his
affiliation with MBM, Mr. Haber served from 1977 to August, 1981 as a
Vice-President of Commercial Credit Business Services, Inc., New York.
Mr. Haber holds a Bachelor of Science degree from the City College of New York
and a Master of Business Administration from Baruch College in New York. Mr.
Haber is a full-time employee of MBM.
Louis Buther has been a Vice-President of MBM since December, 1983. He has
served as Vice-President of MBM's wholly-owned subsidiary Caligor Physicians and
Hospital Supply Corp. since May, 1983 and from March 1, 1982 to April, 1983,
served as its Sales Manager. Mr. Buther also served as Sales Manager for the
Caligor business from 1980 until its acquisition and prior thereto served it in
the capacity of a licensed pharmacist and pharmacist intern. Mr. Buther holds
an Associate Arts Science degree in Chemistry from Bronx Community College and a
Bachelor of Science degree in Pharmacy from Long Island University. Mr. Buther
is a full-time employee of MBM.
Ernest W. Nelson has been a Vice-President of MBM since December, 1983.
From January, 1982 until his election as a Vice-President, he was employed by
MBM as a Sales Representative and then promoted to the position of National
Sales Manager for MBM's MBM division. Prior thereto, Mr. Nelson was employed
from June, 1981, to December, 1981, as a Sales Representative for United States
Lines and, from July, 1976, to June, 1981, as an Athletic Trainer and Associate
Professor at Columbia University, New York City. Mr. Nelson holds a Bachelor of
Science degree from Central Connecticut State University and a Master of Arts
degree from Columbia University. Mr. Nelson is a full-time employee of MBM.
Donald R. Sabia has been Vice-President of Operations since August of 1996.
Prior to his appointment as Vice-President, Donald Sabia has served as Customer
Service Manager of the Caligor Division from September 1991 to April of 1995 and
Purchasing Director of the Company from April 1995 to his appointment of
Vice-President. Mr. Sabia joined MBM in 1990 through the acquisition of his
company, Eastern Medical Supply Co., Stamford, CT, in which he was a major
shareholder and held the position of Vice-President for 15 years. Mr. Sabia is
a full time employee of MBM.
Michael Levy joined MBM in 1990 as Vice President of the Healer Products
Division. Prior to joining MBM, Mr. Levy served as a Management Consultant in
the women's apparel industry from 1987 to 1990. He was Senior Vice President of
Rudco Industries, Inc., a financial forms manufacturer from 1975 to 1987 and
held two management positions in the hardware industry from 1960 to 1975. Mr.
Levy holds a Bachelor of Science degree from New York University. Mr. Levy is a
full-time employee of MBM.
17
<PAGE>
Stuart F. Fleischer has been Vice President of Finance, Principal Financial
and Accounting Officer since April 1995. Stuart Fleischer joined the Company in
March 1995. From February 1986 through March 1995, Mr. Fleischer served as a
Senior Vice President and Chief Financial Officer of Communications Diversified,
a promotional marketing entity. From June 1974 through January 1986, he worked
on the audit staff at Price Waterhouse. Mr. Fleischer is a Certified Public
Accountant and holds a Bachelor of Science degree from Lehigh University. Mr.
Fleischer is a full-time employee of MBM.
Gary L. Butler has been Treasurer of MBM and has served at various times as
an executive officer in other capacities since December, 1983. From March 1,
1982 until December, 1983, Mr. Butler served as the Controller of MBM's
wholly-owned subsidiary, Caligor Physicians and Hospital Supply Corp., and,
prior thereto, served in such capacity with the Caligor business from May, 1975
until its acquisition by MBM. From December, 1984 to the present, Mr. Butler
has served as Treasurer of Caligor Physicians & Hospital Supply Corp.
Mr. Butler holds a Bachelor of Science degree from New York University. Mr.
Butler is a full-time employee of MBM.
Marvin S. Caligor, a Director of MBM since March 1, 1982, when Caligor
Physicians and Hospital Supply division of Health-Chem Corporation was acquired
by MBM. Mr. Caligor also served as Senior Vice-President of MBM from March,
1982 until December, 1987. Since December, 1987, Mr. Caligor has been employed
by MBM as a consultant on a part-time basis. From 1969 until its acquisition by
MBM, Mr. Caligor was President of the division and an officer and director of
Health-Chem Corporation. Mr. Caligor is a licensed pharmacist and holds a
Bachelor of Science in Pharmacy from Columbia University.
Renee Steinberg has served as Secretary and a Director of MBM for more than
the past 5 years and has not been associated with any firm other than MBM and
its subsidiaries during such period. Mrs. Steinberg received a Bachelor of
Science degree from Cornell University and is a founder of MBM.
K. Deane Reade, Jr. has been a Director of MBM since July, 1987. Mr. Reade
is a General Partner of Gramercy Hills Partners, L.P. Mr. Reade is a founder
and, since 1975, has served as President and a director of Bangert, Dawes,
Reade, Davis & Thom, Incorporated, a private investment banking firm with
offices in New York and San Francisco. Between 1989 and 1996, Mr. Reade served
as Managing Director of John Hancock Capital Growth Management, Inc. Mr. Reade
is a graduate of Rutgers University. He is a director of American/Elgen, Inc.
(Irvington, New Jersey); Myers Industries, Inc. (Lincoln, Illinois); U. S.
Souvenir, Inc. (Honolulu, Hawaii) and Trail Blazers Camps, Inc. (New York, N.Y.)
a 100 year old social service organization with a year round educational program
for disadvantaged children from the Metropolitan New York - New Jersey area.
Directors are elected at the annual meeting of stockholders and hold office
until the following annual meeting. The terms of all officers expire at the
annual meeting of directors following the annual stockholders meeting. Subject
to their contract rights to compensation, if any, officers may be removed,
either with or without cause, by the Board
18
<PAGE>
of Directors, and a successor elected by a majority vote of the Board of
Directors, at any time.
In October 1987, MBM established an Executive Compensation Committee with
Renee Steinberg as Chairman and Bruce Haber and K. Deane Reade as members and an
Audit Committee with K. Deane Reade as Chairman and Bruce Haber and Marvin
Caligor as members.
The Compensation Committee has the power to review compensation of MBM's
executive officers, including salaries, the granting of stock options and other
forms of compensation for executive officers whose salaries are within the
purview of the Board of Directors. In some cases, the Compensation Committee may
make recommendations to the entire Board of Directors for its approval or,
itself exercise the powers and authority of the Board of Directors to designate
compensation.
The Audit Committee has the power to:(i)select the independent certified
public accountant; (ii) satisfy itself on behalf of the Board that the external
and internal auditing procedures assure reliable and informative accounting and
financial reporting;(iii) have meetings with management, or with the auditors,
or with both management and auditors, to review the scope of the auditor's
examination, audit reports and the Corporation's internal auditing procedures
and reviews;(iv) monitor policies established to prohibit unethical,
questionable, or illegal activities by those associated with the Corporation;
and (v) review the compensation paid to the auditors through annual audit and
non-audit fees and the effect on the independence of the auditors in relation
thereto, and it may exercise the powers and authority of the Board of Directors
to implement changes in connection with the foregoing or, at its option, may
make recommendations to the entire Board of Directors for its approval.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than ten percent
stockholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. To Management's knowledge, no
officer, director or person owning more than 10% of the Company's Common Stock
filed any reports late during its fiscal year ended November 30, 1996.
Item 11. EXECUTIVE COMPENSATION
The following table provides a summary compensation table with respect to
the compensation of MBM's Chief Executive Officer (CEO) and the executive
officers other than the CEO who are serving as executive officers at the end of
fiscal 1996 whose total annual salary and bonus, if any, exceeded $100,000.
19
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
- --------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- --------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Number of Payouts sation
Position Year Salary ($) Bonus ($) ($) ($) (1) Options ($) ($) (2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 237,509 298,742 -0- -0- 70,000 -0- 40,500
Bruce J. Haber 1995 222,577 144,131 -0- -0- 70,000 -0- 40,431
CEO, 1994 209,385 199,097 -0- -0- 70,000 -0- 40,848
- --------------------------------------------------------------------------------------------------------------------------------
1996 116,720 170,517 -0- -0- 15,000 -0- 1,150
Louis Buther 1995 115,885 50,874 -0- -0- 17,500 -0- 1,150
Vice President 1994 114,058 89,365 -0- -0- 17,500 -0- 1,766
- --------------------------------------------------------------------------------------------------------------------------------
1996 93,211 40,437 -0- -0- 10,000 -0- 1,326
Ernest Nelson 1995 85,654 40,890 -0- -0- 15,000 -0- 1,217
Vice President 1994 85,346 46,445 -0- -0- 10,000 -0- 1,228
- --------------------------------------------------------------------------------------------------------------------------------
1996 79,731 32,483 -0- -0- 7,000 -0- 1,112
Donald Sabia 1995 74,487 10,551 -0- -0- 2,000 -0- 840
Vice President 1994 72,114 13,353 -0- -0- 2,500 -0- 845
Operations
- --------------------------------------------------------------------------------------------------------------------------------
Stuart Fleischer 1996 114,654 33,825 -0- -0- 10,000 -0- 575
Vice President- 1995 71,621 11,446 -0- -0- 10,000 -0- -0-
Finance and 1994 -0- -0- -0- -0- -0- -0- -0-
Principal Financial
and Accounting
Officer
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
(1) The restricted stock awards are based upon the dollar value of restricted
stock, calculated by multiplying the closing market price of the
Registrant's unrestricted stock on the date of grant by the number of shares
awarded on that date.
(2) Includes contributions to MBM's 401(K) Plan and in the case of Bruce
Haber, all other compensation includes insurance premiums paid for a whole
life policy which Mr. Haber is allowed to designate the beneficiary and
directors fees.
21
<PAGE>
During the past three fiscal years, MBM has not granted stock appreciation
rights. In addition, MBM does not have a defined benefit or actuarial plan.
See Section 401(k) or deferred retirement plan regarding the cash or deferred
retirement plan pursuant to Section 401(k) of the Code. Directors currently
receive $16,000 annual compensation for their services as directors, $4,000 for
services on each Audit and Compensation Committee and are eligible to receive
stock options.
22
<PAGE>
OPTION GRANTS TABLE
The information provided in the table below provides information with
respect to individual grants of stock options during fiscal 1996 of each of the
executive officers named in the summary compensation table above. MBM did not
grant any stock appreciation rights during 1996.
Option Grants in Last Fiscal Year
- -------------------------------------------------------------------------------
Potential
Realizable Value at
Assumed Annual
Individual Grants Rates of Stock Price
Appreciation
for Option Term (2)
- -------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of
Total
Options/
Granted to
Options Employees Exercise Expira-
Granted in Fiscal Price tion
Name (#) Year (1) ($/Sh) Date 5% ($) 10% ($)
- -------------------------------------------------------------------------------
Bruce Haber 70,000 32.6% 12.25 2/13/06 539,000 1,366,400
Louis Buther 15,000 7.0% 12.25 2/13/06 115,500 292,800
Ernest Nelson 10,000 4.7% 12.25 2/13/06 77,000 195,200
Stuart Fleischer 10,000 4.7% 12.25 2/13/06 77,000 195,200
Donald Sabia 2,000 0.9% 12.25 2/13/06 15,400 39,040
Donald Sabia 5,000 2.3% 16.50 10/2/06 51,900 131,500
- -------------------------------------------------------------------------------
N/A - Not Applicable.
(1) The percentage of total options granted to employees in fiscal year is
based upon options granted to officers, directors and employees.
(2) The potential realizable value of each grant of options assumes that the
market price of MBM's Common Stock appreciates in value from the date of
grant to the end of the option term at annualized rates of 5% and 10%,
respectively, and after subtracting the exercise price from the potential
realizable value.
23
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
The information provided in the table below provides information with
respect to each exercise of stock option during fiscal 1996 by each of the
executive officers named in the summary compensation table and the fiscal year
end value of unexercised options.
- -------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Shares Unexercised In-the-Money
Acquired Options at Options
on Value FY-End (#) at Fy-End($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) Unexercisable Unexercisable(1)
- -------------------------------------------------------------------------------
Bruce Haber 8,333 113,662 796,667/0 9,700,005/0
Louis Buther 5,333 72,742 160,000/15,800 1,702,743/168,420
Ernest Nelson 5,333 72,742 108,333/15,800 1,084,170/167,700
Stuart Fleischer -0- -0- 20,000/8,000 74,500/68,000
Donald Sabia -0- -0- 20,500/12,700 89,750/77,875
- -------------------------------------------------------------------------------
_______________________
(1) The aggregate dollar values in column (c) and (e) are calculated by
determining the difference between the fair market value of the Common
Stock underlying the options and the exercise price of the options at
exercise or fiscal year end, respectively. In calculating the dollar value
realized upon exercise, the value of any payment of the exercise price is
not included.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three board members, namely, Bruce J. Haber, the Company's the Chief
Executive Officer ("CEO"), Renee Steinberg, the Company's Secretary, and K.
Deane Reade, Jr. This Committee is responsible for reviewing, determining and
recommending to the Board the annual salary, bonuses, stock option grants, stock
awards and other compensation of the executive officers of the Company.
The report describes the policies and rationales of the Committee in
establishing the principal components of executive compensation in 1996. The
Committee's review and determination of executive compensation includes
consideration of the following factors: (a) compensation surveys of similar
size companies, (b) past and future performance contributions of each executive
officer, (c) the performance of the Company, both separately and relative to
similar size companies, (d) historical compensation levels and (e)
recommendations of independent board members with respect to compensation
competitiveness.
24
<PAGE>
Under the direction of the Committee, the Company has developed a
compensation strategy designed to compensate its executives on a competitive
basis relative to performance and comparable to other companies of similar size.
The program is intended to (a) reward executives for long-term strategic
management and the enhancement of shareholder value, (b) facilitate the
Company's short- and long-term planning process and (c) attract and retain key
executives critical to the long-term success of the Company.
Compensation for each of the Named Executives consists of a fixed base
salary and variable components, including both short- and long-term incentive
compensation in the form of bonuses, stock option grants and stock awards. An
annual salary and performance incentive plan for each of the Company's executive
officers, other than the CEO, based on the above-described considerations and
the Company's compensation strategy, has been developed and prepared under the
direction of the CEO and approved by the Committee. Subject to the CEO's
contractual rights in his employment contract, the Committee reviews and fixes
the CEO's compensation based on similar data as well as an assessment of his
past and future contributions in leading the Company toward its objectives.
Based on the Company's profitable operations over the past ten years, the
Committee believes that the Company's executive management is dedicated to its
corporate objectives of achieving significant improvements in long-term
financial and operating performance. The executive compensation program
outlined below is designed to implement this strategy by rewarding management
for achieving these objectives.
BASE SALARY. The Company's base salary is designed to recognize the
sustained and cumulative effect on long-term results that its executives have
demonstrated. The base salary is a remuneration for services provided and is
fixed at levels which are competitive with amounts paid to executives at
comparable companies.
SHORT-TERM INCENTIVES. Short-term incentives in the form of annual bonuses
are paid to each of the Executives named in the summary compensation table to
recognize performance that is related to the achievement of key financial and
operating objectives that have been established for a fiscal year. Since short-
term incentives should generally reflect one year contributions, the size of the
payments may vary considerably from year to year, depending on performance. At
the beginning of each year, performance goals for the purposes of determining
annual incentive compensation are established in each of the Company's divisions
as well as in certain staff departments. These goals are objective, measurable
and controllable by the responsible executive.
LONG-TERM INCENTIVES. The Committee recognizes that long-term incentive
compensation is a substantial component of the total pay package linking
executive pay and corporate performance. At the Company, long-term incentive
compensation in the form of equity based compensation is intended to link the
interests of its executives with the interests of the Company's shareholders.
The payment of stock option grants and stock grant awards are designed to be
issued to executives when the Company has
25
<PAGE>
provided the shareholders with an acceptable return on their investment over a
prolonged period of time.
CHIEF EXECUTIVE OFFICER'S 1996 COMPENSATION. As more specifically set
forth in the Summary of Compensation table, Mr. Haber earned during fiscal 1996,
an annual salary of $237,509 (computed at the rate of $240,750 per annum) and an
annual bonus of $298,742 equal to 7% of the Company's income before deducting
taxes and the amount of his bonus in accordance with his employment contract.
In addition, Mr. Haber received options to purchase 70,000 shares of the
Company's Common Stock at the then current fair market value at the time of
grant.
In determining Mr. Haber's 1996 compensation, the Committee considered the
factors applied to the compensation of all executive officers as discussed
above. The Committee decided that, based on these criteria, the Company's
performance was successful. The Committee decided that Mr. Haber's total 1996
compensation package reflects the Company's overall performance based on the
creation of shareholder value, cash flow, and net income and that his annual
bonus which was based upon the terms of his employment contract, compares to
that paid to CEO's of similar sized companies.
The foregoing report has been approved by all members of the Committee.
Renee Steinberg, Chairperson
K. Deane Reade, Jr.
Bruce J. Haber
COMPARATIVE PERFORMANCE BY THE COMPANY
The Securities and Exchange Commission requires the Company to present a
chart comparing the cumulative total shareholder return on its Common Stock with
the cumulative shareholder return of (1) a broad equity market index, and (2) a
published industry index or peer group for the past five years. Such chart
compares the performance of the Company's Common Stock with (1) the NASDAQ Stock
Market Index and (2) a group of public companies each of whom are listed in the
peer group machinery, equipment and supplies and assumes an investment of $100
on December 1, 1991 in each of the Company's Common Stock, the stock comprising
the NASDAQ Stock Market index and the stocks of the machinery, equipment and
supplies.
26
<PAGE>
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
MICRO BIO-MEDICS, INC.
PREPARED BY THE CENTER FOR RESEARCH IN SECURITY PRICES
Produced on 01/27/97 including data to 11/29/96
LEFT BLANK INTENTIONALLY
[INSERT GRAPH OF "5-YEAR CUMULATIVE TOTAL RETURNS"]
LEGEND
<TABLE>
<CAPTION>
Symbol CRSP Total Returns Index for: 11/29/91 11/30/92 11/30/93 11/30/94 11/30/95 11/29/96
- ------ ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
______ - MICRO BIO-MEDICS, INC. 100.0 179.7 339.0 257.6 352.5 488.1
...__. - Nasdaq Stock Market (US Companies) 100.0 126.0 145.8 146.1 208.3 255.2
- ------ - NASDAQ Stocks (SIC 5080-5089 US Companies) 100.0 113.1 163.8 133.9 138.7 158.4
Machinery, Equipment, and Supplies
</TABLE>
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 11/29/91.
27
<PAGE>
EMPLOYMENT AND CONSULTING AGREEMENTS
MBM has a five year Employment Agreement with Bruce J. Haber subject to an
automatic one year extension on April 1st of each year commencing April 1,
1996, unless either party elects not to extend the contract after giving the
other party at least 180 days prior written notice. Pursuant to this agreement,
Mr. Haber has agreed to devote his full time and efforts to the business of MBM
and to serve as MBM's President and Chief Executive Officer. Mr. Haber is
currently receiving a base salary of $260,000 per annum which compensation is
increased annually by at least $5,000 per annum until the termination of the
agreement, subject to additional increases at the discretion of the Board of
Directors. Mr. Haber is also entitled to be paid each year an annual bonus for
the most recently completed fiscal year equal to no less than 7% of MBM's income
before income taxes and Mr. Haber's bonus. Mr. Haber received a whole-life
policy covering his life, presently in the sum of $2,000,000 and the use of a
Company motor vehicle. In the event Mr. Haber's employment agreement is
terminated for any reason other than his willful misconduct, then Mr. Haber
shall be entitled, as liquidated damages, to an amount of money equal to the
greater of $2,000,000 or the sum of five years compensation. In the event there
is a dispute as to the amount of liquidated damages payable to Mr. Haber, then
on the termination date MBM shall be required to pay into an interest bearing
escrow account, the sum of $4,000,000 less the amount of liquidated damages paid
to Mr. Haber which is not in dispute. Mr. Haber will continue to receive his
full compensation during the continuation of any dispute.
If there is a substantial change in the management of MBM, wherein any
Board of Directors that may be elected becomes opposed to, or acts contrary to,
the policy of the Board of Directors now in control of MBM and, as a result
thereof, Mr. Haber, in his sole discretion, finds it difficult for him to work
harmoniously and effectively with any such Board of Directors of MBM, or the
Board of Directors of MBM shall determine that Mr. Haber shall not be the
President and Chief Executive Officer of MBM, or Mr. Haber shall not be elected
as a member of the Board of Directors of MBM, then, in any of such events, Mr.
Haber shall have the absolute right and option to resign upon giving MBM 60 days
written notice of his intention to do so. Upon such resignation, Mr. Haber
shall be entitled to the liquidated damages and expenses as set forth above in
consideration of Mr. Haber's agreement not to compete with MBM for a period of
one year following his resignation. Pursuant to Mr. Haber's employment
agreement, MBM is obligated to provide to Mr. Haber indemnification for any
claim or lawsuit which may be asserted against him when acting in his capacity
as an officer and director of MBM provided said indemnification is not in
violation of any federal or state law, rule or regulations.
On January 1, 1988, Mr. Caligor commenced serving MBM as a part-time
consultant at an annual cash compensation of $100,000. Mr. Caligor's consulting
contract which originally provided for a termination date of December 31, 1990
was extended by MBM's Board of Directors and currently terminates on
December 31, 1997.
28
<PAGE>
STOCK OPTION PLANS
An Incentive Stock Option Plan (the "1982 Incentive Plan") was adopted by
the Board of Directors and stockholders on February 24, 1982 and terminated on
February 24, 1992 as to the granting of new options. The 1982 Plan provided
that an aggregate of 166,666 shares of MBM's Common Stock were issuable, subject
to adjustment in the event of changes in the capital structure of MBM.
Employees of MBM were eligible for selection as participants. During fiscal
1996, 1995 and 1994, 26,966 shares, 11,300 shares and 12,666 shares,
respectively, of MBM's Common Stock were issued at exercise prices ranging from
$2.25 per share to $4.00 per share. As of February 28, 1997, MBM has 62,400
options outstanding under the 1982 Plan at exercise prices ranging from $2.25
per share to $4.00 per share.
On April 14, 1989, the Board of Directors adopted and the shareholders
later approved a 1989 Non-qualified Stock Option Plan, (the "1989 Plan"), in
order to attract and retain qualified employees, officers and directors. Under
the 1989 Plan, options to purchase a maximum of 416,666 shares of Common Stock
may be granted to employees, officers and directors of MBM. If any options
granted under the 1989 Plan expire or terminate for any reason without having
been exercised in full, the unpurchased shares shall become available for
further options pursuant to the 1989 Plan. The 1989 Plan also provides that no
options may be granted after April 13, 1999. The 1989 Plan is administered by
the Board of Directors of MBM or by a Stock Option Committee appointed by the
Board which consists of not less than three directors. The maximum term of any
option under the Plan is ten years. The Board of Directors or Committee
appointed by the Board determines which employee, officer or director shall have
options under the 1989 Plan, the number of shares of Common Stock that may be
purchased under each option, the option price and all other provisions of the
respective option agreements (which need not be identical), including but not
limited to provisions concerning the time or times when, and the extent to
which, the options may be exercised and any limitations upon the transferability
of such shares. Each option granted under the 1989 Plan is non-transferable,
may be exercised only if the participant has been continuously a director,
consultant or employee of MBM. However, in the case of death, the lawful heirs
and/or beneficiaries of a deceased optionee may exercise such options for a
period of six months after the optionee's death. As of November 30, 1996, MBM
had outstanding options under the 1989 Plan to purchase an aggregate of 398,567
shares of MBM's Common Stock at exercise prices from $2.25 per share to $4.00
per share to various officers and members of the Board of Directors. As of
November 30, 1996, substantially all of these options are exercisable. During
fiscal 1996, 1995 and 1994, 2,000 shares, 4,333 shares and 4,000 shares,
respectively, of MBM's Common Stock were issued at exercise prices ranging from
$2.25 to $4.00 per share.
On January 28, 1992, the Board of Directors of MBM adopted a Stock Option
Plan (the "1992 Plan") which was approved by stockholders. The 1992 Plan, as
amended, covers 1,850,000 shares of Common Stock. The 1992 Plan authorizes the
issuance of the options covered thereby as either "Incentive Stock Options"
within the meaning of the Internal Revenue Code of 1986, as amended, or as "Non-
Statutory Stock Options."
29
<PAGE>
Persons eligible to receive options under the 1992 Plan includes employees,
directors, officers, consultants or advisors, provided that bona fide services
shall be rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital raising
transaction; however, only employees are eligible to receive an Incentive
Option. The 1992 Plan also provides that no options may be granted after
January 27, 2002.
The 1992 Plan is administered by MBM's Board of Directors or a stock option
committee consisting of three members of the Board which has the authority to
determine the persons to whom options shall be granted, whether any particular
option shall be an Incentive Option or a Non-Statutory Option, the number of
shares to be covered by each option, the time or times at which options will be
granted or may be exercised and the other terms and provisions of the Options.
An Optionee of a Stock Option who terminates his employment with MBM, other than
by reason of his death or disability, may not exercise his Option. The lawful
heirs or beneficiaries of a deceased Optionee may exercise Stock Options for a
maximum period of six months after the Optionee's death, so long as the Option
has otherwise not expired. All Stock Options are non-transferable except by
will or the laws of descent and distribution.
The 1992 Plan also provides that: (i) the exercise price of options
granted thereunder is not less than 100% (or in the case of an Incentive Option,
110% if the optionee owns 10% or more of the outstanding voting securities of
MBM) of the fair market value of such shares on the date of grant, as determined
by the Board or Stock Option Committee, and (ii) no option by its terms may be
exercised more than ten years (five years in the case of an Incentive Option,
where the optionee owns 10% or more of the outstanding voting securities of MBM)
after the date of grant. Any options which are canceled or not exercised within
the option period become available for future grants.
The 1992 Plan will (a) upon the occurrence of an Acquisition Event (as
defined in the 1992 Plan), at the election of an optionee, permit each optionee
to exercise all or any portion of such optionee's exercisable Options by
borrowing from MBM, and MBM shall be obligated to loan such optionee an amount
equal to the aggregate exercise price of such Options intended to be exercised
by such optionee. Such optionee shall use the proceeds of such loan to exercise
such Options. Such optionee shall issue to MBM a promissory note made by such
optionee in a principal amount equal to the amount of such loan. The optionee
will pledge to MBM to secure the repayment of such loan all shares of Common
Stock issued to the optionee upon exercise of Options pursuant to this
paragraph. At the time of such loan, such loan shall have a rate of interest
and such loan and pledge shall have such additional terms and conditions all as
determined by the Board of a Committee thereof; (b) upon the occurrence of a
Change of Control, as defined in the 1992 Plan, which Change of Control is not
approved by a vote of at least eighty percent (80%) of the directors that
constitute the Board immediately prior to the occurrence of such Change of
Control, terminate all Options as of the time immediately prior to the
occurrence of such Change of Control and the respective optionees shall
surrender all of their unexercised Options for cancellation by MBM and, upon
such surrender, the optionee shall receive (1) the cash, securities or other
consideration he would have received had he been entitled
30
<PAGE>
to exercise, and had he exercised, such Option or Options immediately prior to
such Change of Control and had he disposed of his shares issuable upon such
exercise in connection with such Change of Control (subject to required
deductions and withholdings), minus (2) an amount of cash or fair market value
of securities or other such consideration equal to the exercise price of such
Option or Options surrendered. (i) The foregoing shall not apply to all
incentive stock options granted prior to the June 23, 1995, the date of
stockholder approval of such provisions, (ii) any non-statutory stock option
granted prior to June 23, 1995 where a written consent is required to be
obtained from the optionee whose rights have been adversely affected and such
consent is not obtained from the optionee, or (iii) any Option whatsoever where
an event of default would be created under MBM's then-existing institutional
loan(s) and such event of default is not waived prior to such occurrence or
cured pursuant to the terms of said loan agreements. As of February 28, 1997,
MBM has under the 1992 Plan Incentive and Non-Statutory Stock Options
outstanding to purchase 1,335,700 shares of MBM's Common Stock at exercise
prices ranging from $4.00 per share to $16.25 per share. During fiscal 1996,
22,750 shares of MBM's Common Stock were issued at exercise prices ranging from
$4.00 to $10.25 per share.
SECTION 401(K) OR DEFERRED RETIREMENT PLAN
Effective December 1, 1985, MBM initiated a cash or deferred retirement
plan pursuant to Section 401(k) of the Code (the "Plan"). All employees are
eligible to enroll and to receive benefits under the Plan, beginning February 1,
1986, the commencement date of the plan. Employees can elect to contribute up
to 20% of their compensation to the Plan and MBM will make matching
contributions in an amount equal to 20% of the amount of the Participant's
contribution that is not in excess of 5% of compensation. A Participant shall
at all times have a one hundred (100%) percent vested interest in his
contribution Account. Any distributions to be made under the Plan to a
Participant will begin not later than the 60th day after the latest of the close
of the Plan year in which (a) the Participant attains his normal retirement age
(i.e. 59-1/2), or (b) the date the Participant terminates his employment with
MBM, or (c) such later date pursuant to his written election. Prior to
retirement, Plan savings may be payable upon an employee's death (payable to his
or her designated beneficiary), disability (as defined in the Plan) or
termination by MBM. Plan savings are payable, at the Plan Administrator's
option, in either one lump sum or in installments. The Participant may be
consulted prior to making such determination. For the fiscal years ended
November 30, 1996, 1995 and 1994, MBM's matching contributions amounted to
$78,000, $62,200 and $29,985, respectively.
31
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock by all persons known by the
Company to be beneficial owners of more than 5% of its Common Stock and all
executive officers and directors, both individually and as a group. For
purposes of calculating the amount of beneficial ownership and the respective
percentages, the number of shares of Common Stock which may be acquired by a
person are considered outstanding notwithstanding the vesting schedule, but
shall not be deemed to be outstanding for the purpose of computing the
percentage of Common Stock owned by any other person.
Amount
and Nature Approximate
Name and Address of of Beneficial Percent
Beneficial Owner (1) Ownership (1) of Class (2)
- -------------------- ------------- ------------
Renee Steinberg (3)(12)
20080 Boca West Drive
Apt. 458
Boca Raton, FL 33434 145,667 2.9
Bruce J. Haber (4) 973,834 16.4
Louis Buther (5) 191,667 3.7
Marvin S. Caligor (11) 111,083 2.2
Ernest W. Nelson (6) 131,834 2.5
Gary Butler (7) 22,000 *
K. Deane Reade, Jr.(8)(10)
605 Third Avenue
New York, NY 10158 229,519 4.4
Michael Levy (12) 8,500 *
Stuart F. Fleischer (13) 30,000 *
Donald R. Sabia (14) 25,500 *
All executive officers
and directors as a group
(ten persons) (9) 1,869,604 28.4
32
<PAGE>
____________
* Represents less than one percent of the outstanding Common Stock.
(1) Unless otherwise indicated, all shares are directly owned and investing
power is held by the persons named. All addresses, except as otherwise
noted, are c/o of Micro Bio-Medics, Inc., 846 Pelham Parkway, Pelham
Manor, NY 10803.
(2) Based upon 5,070,248 shares of Common Stock outstanding on February 28,
1997. The foregoing does not include the possible issuance of shares in
connection with the exercise of outstanding options.
(3) May be deemed to be a "founder" or "parent" of MBM for purposes of the
Securities Act of 1933, as amended. Includes options to purchase 22,000
shares granted to Renee Steinberg.
(4) Includes options to purchase 866,667 shares granted to Mr. Haber. A non-
executive officer of MBM has agreed for a period of ten years from
January 18, 1996, unless such shares are transferred to an unrelated
third party, to vote such shares in accordance with the directions of
Bruce J. Haber, or if Mr. Haber dies, becomes disabled or is unable to
give such directions, then in accordance with the directions of the board
of directors of MBM. The amount of shares included in Mr.Haber's
beneficial ownership does not include such non-executive officer's
shares. If such non-executive officer's shares are deemed beneficially
owned by Mr. Haber, then Mr. Haber may be deemed to beneficially own
1,104,560 shares (16.8%).
(5) Includes options to purchase 175,000 shares granted to Mr. Buther.
(6) Includes options to purchase 118,666 shares granted to Mr. Nelson.
(7) Includes options to purchase 15,666 shares granted to Mr. Butler.
(8) Includes shares owned under certain retirement trusts and profit sharing
plans.
(9) Includes options to purchase 1,504,666 shares granted to officers and
directors. The amount of shares owned by all executive officers and
directors as a group does not include 130,726 shares of Common Stock
which may be deemed beneficially owned by Bruce Haber as discussed in
footnote 4. In the event that such 130,726 shares were deemed
beneficially owned by Mr. Haber, then the amount of shares beneficially
owned by all executive officers and directors as a group would be
2,000,330 representing 30.4% of MBM's outstanding shares.
(10) Includes options to purchase 163,333 shares granted to Mr. Reade.
(11) Includes options to purchase 79,667 shares granted to Mr. Caligor.
(12) Includes options to purchase 8,500 shares granted to Mr. Levy.
(13) Includes options to purchase 30,000 shares granted to Mr. Fleischer.
(14) Includes options to purchase 25,500 shares granted to Mr. Sabia.
33
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On January 18, 1996, MBM issued 280,696 shares in connection with its
acquisition of Stone Medical Supply Corporation, 161,452 shares of which are
owned by Andrew Stone. During 1996, Mr. Stone sold 30,000 of these shares. Mr.
Stone has agreed for a period of ten years from January 18, 1996 to vote his MBM
shares in accordance with directions of Bruce J. Haber or if Mr. Haber dies,
becomes disabled or unable to give directions, then in accordance with
directions of the MBM Board of Directors, until such time as such shares are
transferred to an unrelated third party.
Reference is made to "Item 1" under "Recent Developments" for a
description of the Merger Agreement pursuant to which MBM would become a
wholly owned subsidiary of Schein and the stockholders of MBM would exchange
their MBM outstanding shares for shares of Schein Common Stock. The terms of
the Merger Agreement were determined following lengthy negotiations between
the respective managements of Schein and MBM. The respective managements and
Board of Directors of each company are not affiliated or related to one
another. The terms of the Merger Agreement are the result of arms' length
negotiations. Various agreements have been entered into between Schein and
the Company's directors. All of the Company's directors, namely, Bruce J.
Haber, K. Deane Reade, Jr., Marvin S. Caligor and Renee Steinberg have
entered into an Option and Proxy Agreement dated March 7, 1997 pursuant to
which they have agreed to grant Schein their individual proxies to vote all
common stock beneficially owned by them (excluding certain shares
beneficially owned by Mr. Reade in pension plans and in margin accounts) or
which they have the right to vote in favor of the Merger Agreement at an
upcoming stockholder meeting to be called for the purpose of adopting and
approving the Merger Agreement. Further, the Option and Proxy Agreements
provide that in the event of termination of the Merger Agreement, under
certain circumstances, Schein has the option to compel all directors to
exercise their options to purchase MBM Common Stock and to compel them to
exchange all MBM Common Stock beneficially owned by them (excluding certain
shares beneficially owned by Mr. Reade in pension plans and in margin
accounts) for Schein Common Stock at the conversion ratio of 0.62 of a share
of Schein Common Stock for each 1.0 share of MBM Common Stock. Further, Mr.
Haber has entered into an employment agreement with Schein and an agreement
with Schein to terminate his existing contract with MBM for a termination fee
of $3,000,000 to be paid over three and one-half years which becomes effective
upon the consummation of the Merger. For complete details of these
agreements and other related agreements which will be entered into between Mr
Haber and Schein upon the consummation of the Merger, reference is made to
the texts of such agreements, which are filed as Exhibits to this Form 10-K,
and the foregoing summary of certain principal terms of such agreements are
qualified in their entirety.
The Company has entered into an agreement with Bangert, Dawes, Reade,
Davis & Thom Incorporated ("BDRDT") pursuant to which it engaged them to
perform financial advisory services to MBM in connection with the Merger
Agreement with Schein and its subsidiary, HSI. Upon the consummation of the
Merger, BDRDT will receive a fee currently estimated to be approximately
$1,230,000 and if the Merger is not consummated, BDRDT will receive a fee of
$150,000.
34
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM
8-K.
(a)(1)(2) FINANCIAL STATEMENTS/SCHEDULES.
A list of the Financial Statements and Financial Statement
Schedules filed as a part of this Report is set forth in Item 8, and appears at
Page F-1 of this Report; which list is incorporated herein by reference and
follows Item 9.
(a)(3) EXHIBITS
3 Articles of Incorporation, as amended (incorporated by reference
to the Registrant's Form S-2 Registration Statement File No.
33-46319, Exhibit 3)
3(A) By-Laws (incorporated by reference to the Registrant's Form S-2
Registration Statement File No. 33-46319, Exhibit 3(A))
10 Employment Agreement of Bruce Haber dated February 11, 1992
(incorporated by reference to Exhibit 10(C) included in the
Company's Form 10-K for the fiscal year ended November 30, 1991)
10(A) Contract with Marvin Caligor (incorporated by reference to Exhibit
10.2 included in the Company's Form S-18 Registration Statement,
File No. 2-89795-NY)
10(B) Amendments to Caligor's Agreement (incorporated by reference to
Exhibit 10(D) included in the Company's Form 10-K for the fiscal
year ended November 30, 1991)
10(C) New lease for Pelham Manor, New York (incorporated by reference to
Exhibit 10(B) included in the Company's Form 10-K for the fiscal
year ended November 30, 1991)
10(D) Credit Agreement dated November 18, 1993 among Micro Bio-Medics,
Inc., the Bank's signatory thereto, and the Chase Manhattan, N.A.
as agent (incorporated by reference to Exhibit 10.1 included in
the Company's Form 8-K dated November 19, 1993)
10(E) First Amendment to Credit Agreement dated August 1, 1994
(incorporated by reference to Exhibit 10(a)(1) included in the
Company's Form 10-K for the fiscal year ended November 30, 1994)
10(F) Second Amendment to Credit Agreement dated December 1, 1994
(incorporated by reference to Exhibit 10(a)(2) included in the
Company's Form 10-K for the fiscal year ended November 30, 1994)
10(F.1) Form of Third Amendment to Credit Agreement dated as of
December 1, 1995 (incorporated by reference to Exhibit 10(F.1)
included in the Company's Form 10-K for its fiscal year ended
November 30, 1995.
35
<PAGE>
10(G) Asset Purchase Agreement dated November 19, 1993 by and between
MBM Hospital supply Corp. and Clark Surgical Corp. (incorporated
by reference to Exhibit 10.2 included in the Company's Form 8-K
dated November 19, 1993)
10(H) Amendments 1-4 to Asset Purchase Agreement dated November 19, 1993
by and between MBM Hospital Supply Corp. and Clark Surgical Corp.
(incorporated by reference to Exhibit 10(b)(1) included in the
Company's Form 10-K for the fiscal year ended November 30, 1993)
10(I) Lease for the Company's facilities located in Syosset, New York by
and between the Company and Lin Pac, Inc. dated December 8, 1994
(incorporated by reference to Exhibit 10(c)(2) included in the
Company's Form 10-K for the fiscal year ended November 30, 1994)
10(J) Amendment dated December 23, 1993 to Bruce Haber's Employment
Contract (incorporated by reference to Exhibit 10(e) included in
the Company's Form 10-K for the fiscal year ended November 30,
1993)
10(K) 1982 Incentive Stock Option Plan of Registrant (incorporated by
reference to Exhibit 10.4 included in the Company's Form S-18
Registration Statement, File No. 2-89795-NY)
10(L) 1989 Non-Qualified Stock Option Plan (incorporated by reference to
Exhibit 28 included in the Company's Form 10-K for the fiscal year
ended November 30, 1989)
10(M) 1992 Incentive and Non-Statutory Stock Option Plan (incorporated
by reference to Exhibit 28(A) included in the Company's Form 10-K
for the fiscal year ended November 30, 1991)
10(N) Subscription Agent Agreement (incorporated by reference to Exhibit
10(m) included in the Registrant's Form S-2 Registration Statement
File No. 33-463191, Exhibit M)
10(O) Agreement for Merger and Reorganization dated as of November 2,
1995*
10(P) Noncompetition, Indemnification and Release Agreement of Andrew D.
Stone dated as of November 2, 1995 *
10(Q) Noncompetition Agreement of Lyudmila Stone dated as of November 2,
1995*
10(R) Form of Escrow Agreement *
36
<PAGE>
10(S) Employment Agreement of Andrew D. Stone dated as of November 2,
1995*
10(T) Form of Put and Call Agreement *
10(U) Management Agreement dated as of November 2, 1995 *
10(V) Amendment to Bruce Haber Employment Agreement dated as of December
23, 1993 *
10(W) Amendment to Bruce Haber Employment Agreement dated as of April 1,
1995 *
10(X) Amendment to Bruce J. Haber's Employment Agreement dated as of
March 12, 1996 **
10(Y) Amendments to 1992 Incentive and Non-Statutory Stock Option Plan *
10(Z) Consent of Chase Manhattan Bank dated as of November 2, 1995 *
10(a)(a) Further Amendment to 1992 Incentive and Non-Statutory Stock Option
Plan **
10(b)(b) Agreement and Plan of Merger dated March 7, 1997 by and among
Henry Schein, Inc., HSI Acquisition Corp. and the Registrant
together with exhibits which include Form of Affiliate Agreement,
Form of Option and Proxy Agreement and Form of counsel opinions.**
10(c)(c) Employment Agreement dated March 7, 1997 between Bruce J. Haber
and Henry Schein, Inc.**
10(d)(d) Form of Agreement between Bruce J. Haber and Henry Schein, Inc.
relating to a change in control of Schein.**
10(e)(e) Termination of MBM Employment Agreement between Bruce J. Haber and
Henry Schein, Inc.**
10(f)(f) Form of Restricted Stock Agreement between Bruce J. Haber and
Henry Schein, Inc.**
10(g)(g) Agreement between the Registrant and Bangert, Dawes, Reade, Davis
& Thom Incorporated**
11 Statements re: computation of per share earnings (included in
Notes to Consolidated Financial Statements and Schedules thereto)
37
<PAGE>
21 Subsidiaries of Registrant (Caligor Physicians & Hospital Supply
Corp., a wholly-owned New York corporation does business under the
name "Caligor Pharmacy")
23 Consent of Accountants **
27 Financial Data Schedule **
________________
* Incorporated by reference to Exhibits 10(N) through 10(X) and
Exhibit 21 filed as Exhibits to the Registrant's Form S-4
Registration Statement, File No. 33-64399.
** Filed herewith
(b) REPORTS ON FORM 8-K
During the three months ended November 30, 1996, a Form 8-K was not filed
or required to be filed.
38
<PAGE>
SIGNATURES
Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MICRO BIO-MEDICS, INC.
By: /s/ Bruce J. Haber
----------------------------------------
Bruce J. Haber, President
Dated: Pelham Manor, N.Y.
March 14, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signatures Titles Date
---------- ------ ----
/s/ Bruce J. Haber
- -----------------------
Bruce J. Haber President, Principal
Executive Officer
and Director March 14, 1997
/s/ Marvin S. Caligor
- -----------------------
Marvin S. Caligor Director March 14, 1997
/s/ Stuart F. Fleischer
- -----------------------
Stuart F. Fleischer Vice President of Finance,
Principal Accounting
and Financial Officer March 14, 1997
/s/ Renee Steinberg
- -----------------------
Renee Steinberg Secretary and Director March 14, 1997
/s/ K. Deane Reade, Jr.
- -----------------------
K. Deane Reade, Jr. Director March 14, 1997
39
<PAGE>
EXHIBIT 10(X)
Amendment to Bruce J. Haber's Employment Agreement
Dated as of March 12, 1996
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT DATED FEBRUARY 11, 1992
AS FIRST AMENDED ON DECEMBER 23, 1993 AND
AS FURTHER AMENDED ON APRIL 1, 1995
AGREEMENT made as of the 12th day of March, 1996 by and between BRUCE J.
HABER residing at 989 Marcel Road, Baldwin Harbor, NY 11510 (hereinafter
referred to as the "Executive") and MICRO BIO-MEDICS, INC., a New York
corporation, with principal executive offices located at 717 South Third Avenue,
Mt. Vernon, NY 10550 (hereinafter referred to as the "Company").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Executive have entered into an Employment
Agreement dated February 11, 1992 (the "Agreement"); and
WHEREAS, the Company and the Executive on December 23, 1993 entered into an
amendment to the Agreement; and
WHEREAS, the Company and the Executive on April 1, 1995 entered into an
amendment to the Agreement; and
WHEREAS, the Company and the Executive agree to amend Article III of the
Agreement to increase Executive's annual compensation; and
WHEREAS, the Company and the Executive agree that Article VI in the April
1, 1995 Amendment is not correct as to the renewal terms of Executive's
contract.
NOW, THEREFORE, it is mutually agreed by and between the parties hereto as
follows:
1. Article III is hereby amended and shall be replaced with the following
language:
ARTICLE III
COMPENSATION
(A) The Company shall pay to the Executive for all services to be rendered
pursuant to the terms of this agreement, a base salary at the rate of Two
Hundred Forty Thousand Seven Hundred Fifty ($240,750) Dollars per year, or
$20,062.50 per month, during each year of the term of this agreement, payable in
accordance with the Company's normal payroll procedures. However, such payments
shall not be made less frequently than on a monthly basis. Salary for the
Executive shall be increased by at least $5,000 per annum commencing on January
1, 1997 until the termination of this Agreement.
(B) Executive shall be entitled to be paid no later than March 15 of each
year, commencing on March 15, 1993, an annual bonus for the most recently
completed fiscal
1
<PAGE>
year equal to no less than seven (7%) percent of the Company's income before
income taxes (as defined under generally accepted accounting principles) and
Haber's bonus.
2. Article VI is hereby amended and shall be replaced with the following
language:
"ARTICLE VI
TERM
The term of this agreement shall commence as of the date hereof and
continue until March 31, 2000 and on each April 1 commencing on April 1, 1996
the term of this contract shall be automatically extended for an additional
period of one year unless either party elects not to extend the agreement after
giving the other party at least 180 days prior written notice. Accordingly, on
April 1 of each year, unless notice is given as provided above, the Executive
shall have an employment contract with a term of five years."
2. All other provisions of the Agreement remain unchanged and shall be in
full force and effect. The Agreement as amended on December 23, 1993, April 1,
1995 and as amended herein shall constitute the full agreement between the
parties hereto; no change, addition or amendment shall be made hereto except by
written agreement signed by the parties hereto. This agreement supersedes all
prior agreements and understandings.
IN WITNESS WHEREOF, the parties hereto have executed this agreement and
affixed their hands and seal the day and year first above written.
/s/ BRUCE J. HABER
------------------------------
Bruce J. Haber, Executive
(Corporate Seal) MICRO BIO-MEDICS, INC.
BY /s/ STUART FLEISCHER
---------------------------
Stuart Fleischer
Chief Financial and Accounting
Officer and Authorized Person
by the Compensation Committee
ATTEST:
/s/ FRANCES BARR
- -------------------
Frances Barr
<PAGE>
EXHIBIT 10(a)(a)
Further Amendment to 1992 Incentive and Non-Statutory Stock Option Plan
<PAGE>
AMENDMENT NO. 4
TO THE
MICRO BIO-MEDICS, INC.
1992 INCENTIVE AND NON-STATUTORY
STOCK OPTION PLAN (the "Plan")
Paragraph 3 of the 1992 Plan is amended to read as follows:
"3. STOCK SUBJECT TO PLAN.
Subject to the provisions of paragraph 12 hereof, there shall be reserved
for issuance or transfer upon the exercise of Options to be granted from time
to time Under the Plan an aggregate of 1,850,000 shares of Common Stock, which
shares may be in whole or in part, as the Board of Directors of the Company
shall from time to time determine, authorized and unissued shares of Common
Stock or issued shares of Stock which shall have been reacquired by the
Company. If any Option granted under the Plan shall expire or terminate for
any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for the purposes of the Plan."
<PAGE>
Exhibit 10.(b)(b)
AGREEMENT AND PLAN OF MERGER
by and among
HENRY SCHEIN, INC.,
HSI ACQUISITION CORP.
and
MICRO BIO-MEDICS, INC.
Dated March 7, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I THE MERGER............................................ 1
Section 1.1 The Merger............................................ 1
Section 1.2. Effective Time of the Merger.......................... 2
Section 1.3. Closing............................................... 2
ARTICLE II THE SURVIVING CORPORATION............................ 2
Section 2.1 Certificate of Incorporation.......................... 2
Section 2.2 By-Laws............................................... 2
Section 2.3 Directors and Officers of Surviving Corporation....... 2
ARTICLE III CONVERSION OF SHARES.................................. 3
Section 3.1 Exchange Ratio........................................ 3
Section 3.2 Exchange of Company Common Stock; Procedures.......... 4
Section 3.3 Dividends; Transfer Taxes; Escheat.................... 4
Section 3.4 No Fractional Securities.............................. 5
Section 3.5 Closing of Company Transfer Books..................... 5
Section 3.6 Further Assurances.................................... 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY............................................... 6
Section 4.1 Organization.......................................... 6
Section 4.2 Capitalization........................................ 6
Section 4.3 Company Subsidiaries.................................. 7
Section 4.4 Authority Relative to this Agreement.................. 7
Section 4.5 Consents and Approvals; No Violations................. 8
Section 4.6 Reports and Financial Statements...................... 8
Section 4.7 Absence of Certain Changes or Events; Material
Contracts............................................. 9
Section 4.8 Litigation............................................ 9
Section 4.9 Absence of Undisclosed Liabilities.................... 9
Section 4.10 No Default............................................ 9
Section 4.11 Taxes................................................. 10
Section 4.12 Title to Properties; Encumbrances..................... 11
Section 4.13 Intellectual Property................................. 11
Section 4.14 Compliance with Applicable Law........................ 12
Section 4.15 Information in Disclosure Documents and
Registration Statement................................ 12
Section 4.16 Employee Benefit Plans; ERISA......................... 13
Section 4.17 Environmental Laws and Regulations.................... 14
Section 4.18 Vote Required......................................... 15
Section 4.19 Opinion of Financial Advisor.......................... 15
Section 4.20 Accounting Matters.................................... 15
Section 4.21 NYBCL Section 912..................................... 15
Section 4.22 Labor Matters......................................... 15
<PAGE>
Section 4.23 Affiliate Transactions................................ 16
Section 4.24 Brokers............................................... 16
Section 4.25 Tax Matters........................................... 16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT.............. 16
Section 5.1 Organization.......................................... 16
Section 5.2 Capitalization........................................ 17
Section 5.3 Authority Relative to this Agreement.................. 17
Section 5.4 Consents and Approvals No Violations.................. 18
Section 5.5 Reports and Financial Statements...................... 18
Section 5.6 Absence of Certain Changes or Events; Material
Contracts............................................. 18
Section 5.7 Information in Disclosure Documents and
Registration Statement................................ 19
[Section 5.8 Absence of Undisclosed Liabilities.................... 19
[Section 5.9 Brokers............................................... 19
[Section 5.10 Opinion of Financial Advisor.......................... 19
[Section 5.11 Accounting Matters.................................... 20
[Section 5.12 Tax Matters........................................... 20
Section 5.13 Brokers............................................... 20
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER................ 20
Section 6.1 Conduct of Business by the Company Pending
the Merger............................................ 20
Section 6.2 Conduct of Business by Parent Pending the Merger...... 22
Section 6.3 Conduct of Business of Sub............................ 22
ARTICLE VII ADDITIONAL AGREEMENTS........................................ 22
Section 7.1 Access and Information................................ 22
Section 7.2 No Solicitation....................................... 23
Section 7.3 Registration Statement................................ 24
Section 7.4 Proxy Statements; Stockholder Approval................ 24
Section 7.5 Compliance with the Securities Act.................... 25
Section 7.6 Reasonable Best Efforts............................... 25
Section 7.7 Proxy and Option Agreement............................ 26
Section 7.8 Company Stock Options................................. 26
Section 7.9 Public Announcements.................................. 27
Section 7.10 Expenses.............................................. 27
Section 7.11 Listing Application................................... 27
Section 7.12 Supplemental Disclosure............................... 27
Section 7.13 Letters of Accountants................................ 27
<PAGE>
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER..................... 28
Section 8.1 Conditions to Each Party's Obligation to
Effect the Merger..................................... 28
Section 8.2 Conditions to Obligations of Parent and Sub to
Effect the Merger......................................29
Section 8.3 Conditions to Obligation of the Company to
Effect the Merger..................................... 30
ARTICLE IX TERMINATION........................................... 31
Section 9.1 Termination........................................... 31
Section 9.2 Effect of Termination................................. 32
ARTICLE X GENERAL PROVISIONS.................................... 33
Section 10.1 Amendment and Modification............................ 33
Section 10.2 Waiver................................................ 33
Section 10.3 Survivability; Investigations......................... 34
Section 10.4 Notices............................................... 34
Section 10.5 Descriptive Headings; Interpretation.................. 35
Section 10.6 Entire Agreement; Assignment.......................... 35
Section 10.7 Governing Law......................................... 35
Section 10.8 Severability.......................................... 35
Section 10.9 Counterparts.......................................... 35
<PAGE>
SCHEDULES
Schedule 4.2(b) Rights to Acquire Capital Stock
Schedule 4.2(c) Vesting and Modification of Company Stock Options
Schedule 4.3 Subsidiaries of the Company
Schedule 4.5 No Violations
Schedule 4.6 Accounting Changes
Schedule 4.7 Absence of Certain Changes
Schedule 4.9 Undisclosed Liabilities
Schedule 4.10 No Defaults
Schedule 4.11 Taxes
Schedule 4.12 Liens
Schedule 4.13(a) Intellectual Property
Schedule 4.14 Compliance with Applicable Laws
Schedule 4.16 Employee Benefit Plans
Schedule 4.17(a) Compliance with Environmental Laws and Regulations
Schedule 4.17(b) Asbestos; Underground Storage, Etc.
Schedule 4.17(c) Certain Communications and Requests for Information;
Remediation
Schedule 4.23 Affiliate Transactions
Schedule 5.1 Subsidiaries of Parent
Schedule 5.4 No Violations (Parent)
Schedule 5.5 Accounting Changes (Parent)
Schedule 5.8 Undisclosed Liabilities (Parent)
Schedule 5.9 Compliance with Applicable Laws (Parent)
Schedule 6.1 Conduct of Business
Schedule 6.2(d) Changes to Parent's Capitalization
Schedule 8.2(h) Required Governmental Approvals
<PAGE>
EXHIBITS
Exhibit A Proxy and Option Agreement
Exhibit B Affiliate Agreement
Exhibit C Opinion of Otterbourg, Steindler, Houston & Rosen, P.C.
Exhibit D Opinion of Proskauer Rose Goetz & Mendelsohn LLP
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated March 7, 1997, by and among Henry
Schein, Inc., a Delaware corporation ("Parent"), HSI Acquisition Corp., a New
York corporation and wholly-owned subsidiary of Parent ("Sub"), and Micro
Bio-Medics, Inc., a New York corporation (the "Company").
The Boards of Directors of Parent and Sub and the Company deem it
advisable and in the best interests of their respective stockholders that Parent
acquire the Company pursuant to the terms and conditions of this Agreement, and,
in furtherance of such acquisition, such Boards of Directors have unanimously
approved the merger of Sub with and into the Company in accordance with the
terms of this Agreement and the New York Business Corporation Law (the "NYBCL").
Concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, certain holders of shares of the Common Stock, par value $.03 per
share, of the Company (the "Company Common Stock") are entering into an
agreement with Parent and Sub in the form attached hereto as Exhibit A (the
"Proxy and Option Agreement") granting Parent the right to vote such shares of
the Company Common Stock and granting Parent an option to purchase such shares
of the Company Common Stock in accordance with the terms set forth in the Proxy
and Option Agreement.
For federal income tax purposes, it is intended that the Merger (as
defined in Section 1.1) shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
For accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests.
In consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows: ARTICLE I
THE MERGER
Section 1.1 The Merger. In accordance with the provisions of this
Agreement and the NYBCL, at the Effective Time (as defined in Section 1.2), Sub
shall be merged with and into the Company (the "Merger"), the separate existence
of Sub shall thereupon cease, and the Company shall be the surviving corporation
in the Merger (sometimes hereinafter called the "Surviving Corporation") and
shall continue its corporate existence under the laws of the State of New York.
The Merger shall have the effects set forth in Section 906 of the NYBCL.
<PAGE>
Section 1.2. Effective Time of the Merger. The Merger shall become
effective at the time of filing of, or at such later time specified in, a
properly executed Certificate of Merger, in the form required by and executed in
accordance with the NYBCL, filed with the Secretary of State of the State of New
York in accordance with the provisions of Section 904 of the NYBCL. Such filing
shall be made as soon as practicable after the Closing (as defined in Section
1.3). When used in this Agreement, the term "Effective Time" shall mean the date
and time at which the Merger shall become effective.
Section 1.3. Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Proskauer
Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New York, at 10:00 a.m.,
on the day on which all of the conditions set forth in Article VIII are
satisfied or waived or on such other date and at such other time and place as
Parent and the Company shall agree (such date, the "Closing Date").
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of Sub in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law, except that the name of the Surviving Corporation shall be
"Micro Bio-Medics, Inc.".
Section 2.2 By-Laws. The By-Laws of Sub as in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation until amended
in accordance with applicable law.
Section 2.3 Directors and Officers of Surviving Corporation.
(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation or By-Laws
of the Surviving Corporation or as otherwise provided by law.
(b) The officers of the Company at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation or
By-Laws of the Surviving Corporation, or as otherwise provided by law.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
in accordance with Section 3.1(b) and other than shares of Company Common
Stock as to which appraisal rights shall have been duly demanded under the
NYBCL ("Dissenting Shares")) shall be converted into the right to receive
0.62 (the "Exchange Ratio") of a share of the Common Stock, par value $.01
per share, of Parent (the "Parent Common Stock"), payable upon the
surrender of the certificate formerly representing such share of Company
Common Stock.
(b) All shares of Company Common Stock that are held by the Company
as treasury shares shall be canceled and retired and cease to exist, and
no securities of Parent or other consideration shall be delivered in
exchange therefor.
(c) Each share of Common Stock, par value $.01 per share, of Sub
("Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.03 per share, of the
Surviving Corporation.
(d) Each outstanding option to purchase Company Common Stock set
forth on Schedule 4.2(b) (each, a "Company Stock Option") and each warrant
to purchase Company Common Stock set forth on Schedule 4.2(b) (each, a
"Company Warrant") shall be assumed by Parent as more specifically
provided in Section 7.8.
(e) The holders of Dissenting Shares, if any, shall be entitled to
payment by the Surviving Corporation of the appraised value of such shares
to the extent permitted by and in accordance with the provisions of
Section 623 of the NYBCL; provided, however, that (i) if any holder of the
Dissenting Shares shall, under the circumstances permitted by the NYBCL,
subsequently deliver a written withdrawal of such holder's demand for
appraisal of such shares, or (ii) if any holder fails to establish such
holder's entitlement to rights to payment as provided in such Section 623,
or (iii) if neither any holder of Dissenting Shares nor the Surviving
Corporation has filed a petition demanding a determination of the value of
all Dissenting Shares within the time provided in such Section 623, such
holder or holders (as the case may be) shall forfeit such right to payment
for such shares and such shares shall thereupon be deemed to have been
converted into Parent Common Stock pursuant to Section 3.1(a) as of the
Effective Time. The Surviving Corporation shall be solely responsible for,
and shall pay out of its own funds, any amounts which become due and
payable to holders of Dissenting Shares, and such amounts shall not be
paid directly or indirectly by Parent.
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Section 3.2 Exchange of Company Common Stock; Procedures.
(a) Prior to the Closing Date, Parent shall designate a bank or
trust company reasonably acceptable to the Company to act as Exchange Agent
hereunder (the "Exchange Agent"). As soon as practicable after the Effective
Time, Parent shall deposit with or for the account of the Exchange Agent stock
certificates representing the number of shares of Parent Common Stock issuable
pursuant to Section 3.1 in exchange for outstanding shares of Company Common
Stock, which shares of Parent Common Stock shall be deemed to have been issued
at the Effective Time.
(b) As soon as practicable after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") that were
converted pursuant to Section 3.1 into the right to receive shares of Parent
Common Stock (i) a form of letter of transmittal specifying that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and (ii)
instructions for use in surrendering such Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of this Article III and (y) cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.4, after giving effect to any required tax withholdings,
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a transferee if the Certificate
representing such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer, and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 3.2(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender a certificate representing shares of Parent Common
Stock and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Article III.
Section 3.3 Dividends; Transfer Taxes; Escheat. No dividends or
distributions that are declared on shares of Parent Common Stock will be paid to
persons entitled to receive certificates representing shares of Parent Common
Stock until such persons surrender their Certificates. Upon such surrender,
there shall be paid, to the person in whose name the certificates representing
such shares of Parent Common Stock shall be issued, any dividends or
distributions with respect to such shares of Parent Common Stock which have a
record date after the Effective Time and shall have become payable between the
Effective Time and the time of such surrender. In no event shall the person
entitled to receive such dividends or distributions be entitled to receive
interest thereon. Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to the Surviving Corporation
all cash, certificates and other documents in its possession relating to the
transactions described in this
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Agreement, and any holders of Company Common Stock who have not theretofore
complied with this Article III shall look thereafter only to the Surviving
Corporation for the shares of Parent Common Stock, any dividends or
distributions thereon, and any cash in lieu of fractional shares thereof to
which they are entitled pursuant to this Article III. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to a
holder of Company Common Stock for any shares of Parent Common Stock, any
dividends or distributions thereon or any cash in lieu of fractional shares
thereof delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws upon the lapse of the applicable time periods
provided for therein.
Section 3.4 No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
of any such fractional securities, each holder of Company Common Stock who would
otherwise have been entitled to a fraction of a share of Parent Common Stock
upon surrender of such holder's Certificates will be entitled to receive, and
Parent will timely provide (or cause to be provided) to the Exchange Agent
sufficient funds to make, a cash payment (without interest) determined by
multiplying (i) the fractional interest to which such holder would otherwise be
entitled (after taking into account all shares of Company Common Stock then held
of record by such holder) and (ii) the average of the per share closing prices
for Parent Common Stock on the Nasdaq National Market ("Nasdaq") for the five
trading days immediately preceding the Effective Time. It is understood (i) that
the payment of cash in lieu of fractional shares of Parent Common Stock is
solely for the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained-for
consideration and (ii) that no holder of Company Common Stock will receive cash
in lieu of fractional shares of Parent Common Stock in an amount greater than
the value of one full share of Parent Common Stock.
Section 3.5 Closing of Company Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall thereafter be made on such stock transfer
books. If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided in this Article
III.
Section 3.6 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of Sub or the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of Sub and the Company or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in such names and on such
behave or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect
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or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out the
purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. The Company is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a material adverse effect,
individually or in the aggregate, on the financial condition, results of
operations, business, assets, liabilities, prospects or properties of the
Company and its Subsidiaries (as defined below) taken as a whole, or the ability
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement (a "Company Material Adverse Effect"). As used in this
Agreement, the term "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (x) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (y) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party and/or one or more of its Subsidiaries.
Section 4.2 Capitalization.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock and 1,000,000 shares of Preferred
Stock, par value $1.00 per share, of the Company (the "Company Preferred
Stock"). As of the date hereof, (i) 5,072,848 shares of Company Common Stock are
issued and outstanding, (ii) no shares of Company Preferred Stock are issued and
outstanding, (iii) Company Stock Options to acquire 1,842,668 shares of Company
Common Stock are outstanding under all stock option plans of the Company or
otherwise, (iv) Company Warrants to acquire 106,420 shares of Company Common
Stock are outstanding, and (v) 2,524,090 shares of Company Common Stock are
reserved for issuance pursuant to the Company Stock Options, the Company
Warrants and all other Rights (as hereinafter defined) to purchase or otherwise
receive capital stock or other securities of the Company. All of the issued and
outstanding shares of Company Common Stock are validly issued, fully paid and
nonassessable.
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(b) Except as set forth on Schedule 4.2(b), (i) there is no
outstanding right, subscription, warrant, call, option or other agreement or
arrangement (including, without limitation, pursuant to any employee benefit
plan) of any kind (collectively, "Rights") to purchase or otherwise to receive
from the Company or any of its Subsidiaries, any of the outstanding authorized
but unissued or treasury shares of the capital stock or any other security of
the Company or any of its Subsidiaries or to require the Company or any of its
Subsidiaries to purchase any such security, (ii) there is no outstanding
security of any kind convertible into or exchangeable for such capital stock,
and (iii) there is no voting trust or other agreement or understanding to which
the Company or any of its Subsidiaries is a party or is bound with respect to
the voting of the capital stock of the Company or any of its Subsidiaries. The
conversion of the Company Stock Options provided for in Section 7.8 of this
Agreement is in accordance with the respective terms of the Company Stock
Options and the plans under which they were issued.
(c) Since December 1, 1995, except as set forth on Schedule 4.2(c),
the Company has not in any manner accelerated or provided for the acceleration
of the vesting or exercisability of, or otherwise modified the terms and
conditions applicable to, any of the Company Stock Options, whether set forth in
the governing stock option plans of the Company, a stock option grant, award or
other agreement or otherwise. Except as set forth on Schedule 4.2(c), none of
the awards, grants or other agreements pursuant to which Company Stock Options
were issued have provisions which accelerate the vesting or right to exercise
such options upon the execution of this Agreement (including the documents
attached as Exhibits hereto), the consummation of the transactions contemplated
hereby (or thereby) or any other "change of control" events.
Section 4.3 Company Subsidiaries. Schedule 4.3 contains a complete
and accurate list of all Subsidiaries of the Company. Each Subsidiary of the
Company that is a corporation is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
Subsidiary of the Company that is a partnership is duly formed and validly
existing under the laws of its jurisdiction of formation. Each Subsidiary of the
Company has the corporate power or the partnership power, as the case may be, to
carry on its business as it is now being conducted or presently proposed to be
conducted. Each Subsidiary of the Company is duly qualified as a foreign
corporation or a foreign partnership, as the case may be, authorized to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified will
not have a Company Material Adverse Effect. All of the outstanding shares of
capital stock of the Subsidiaries of the Company that are corporations are
validly issued, fully paid and nonassessable, except to the extent provided in
Section 630 of the NYBCL. All of the outstanding shares of capital stock of, or
other ownership interests in, each Subsidiary of the Company are owned by the
Company or a Subsidiary of the Company, in each case, except as set forth in the
Company SEC Reports (as hereinafter defined), free and clear of any liens,
pledges, security interests, claims, charges or other encumbrances of any kind
whatsoever ("Liens").
Section 4.4 Authority Relative to this Agreement. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate
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the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated on its part hereby have been duly authorized by the Company's Board
of Directors and, except for the approval of its stockholders to be sought at
the stockholders meeting contemplated by Section 7.4(a) with respect to this
Agreement, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or for the Company to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
Section 4.5 Consents and Approvals; No Violations. Neither the
execution, delivery and performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby, will (i)
conflict with or result in any breach of any provisions of the charter, by-laws
or other organizational documents of the Company or any of its Subsidiaries,
(ii) require a filing with, or a permit, authorization, consent or approval of,
any federal, state, local or foreign court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory authority or
administrative agency or commission (a "Governmental Entity"), except in
connection with or in order to comply with the applicable provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state
securities or "blue sky" laws, the By-Laws of the National Association of
Securities Dealers (the "NASD"), the filing and recordation of a Certificate of
Merger as required by the NYBCL, and filing with the New York Board of Pharmacy
and with the New York State Department of Social Services (as required by 18
NYCRR Section 502.5(b), (iii) except as set forth on Schedule 4.5, result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of a Lien on any property or
asset of the Company or any of its Subsidiaries pursuant to, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation (each, a
"Contract") to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound or (iv)
violate any material law, order, writ, injunction, decree, statute, rule or
regulation of any Governmental Entity applicable to the Company, any of its
Subsidiaries or any of their properties or assets.
Section 4.6 Reports and Financial Statements. The Company has timely
filed all reports required to be filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act or the Securities Act since
December 1, 1993 (collectively, the "Company SEC Reports"), and has previously
made available to Parent true and complete copies of all such Company SEC
Reports. Such Company SEC Reports, as of their respective dates, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and none of such Company SEC Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Reports have
been
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prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied throughout the periods indicated (except as otherwise noted
therein) and fairly present the consolidated financial position of the Company
and its consolidated Subsidiaries as at the dates thereof and the consolidated
results of operations and cash flows of the Company and its consolidated
Subsidiaries for each of the periods then ended, except that in the case of the
unaudited consolidated financial statements included in any Form 10-Q, the
presentation and disclosures conform with the applicable rules of the Exchange
Act, but include all adjustments necessary to conform to GAAP requirements with
respect to interim financial statements. Except as set forth on Schedule 4.6,
since December 1, 1993, there has been no change in any of the significant
accounting (including tax accounting) policies, practices or procedures of the
Company or any of its consolidated Subsidiaries.
Section 4.7 Absence of Certain Changes or Events; Material
Contracts. Except as set forth on Schedule 4.7 or in the Company SEC Reports,
since December 1, 1995, (i) neither the Company nor any of its Subsidiaries has
conducted its business and operations other than in the ordinary course of
business and consistent with past practices or taken any actions that, if it had
been in effect, would have violated or been inconsistent with the provisions of
Section 6.1 and (ii) there has not been any fact, event, circumstance or change
affecting or relating to the Company or any of its Subsidiaries which has had or
is reasonably likely to have a Company Material Adverse Effect. Except as set
forth on Schedule 4.7, the transactions contemplated by this Agreement will not
constitute a change of control under or require the consent from or the giving
of notice to a third party pursuant to the terms, conditions or provisions of
any material Contract to which Parent or any of its Subsidiaries is a party, or
require any payment to be made under any Contract to which the Parent or any of
its Subsidiaries is a party.
Section 4.8 Litigation. Except for litigation disclosed in the notes
to the financial statements included in the Company's Annual Report to
Stockholders for the year ended November 30, 1995 or in the Company SEC Reports
filed subsequent thereto, there is no suit, action, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries, the outcome of which, in the reasonable
judgment of the Company, is likely to have a Company Material Adverse Effect;
nor is there any judgment, decree, injunction, ruling or order of any
Governmental Entity outstanding against the Company or any of its Subsidiaries
having, or which is reasonably likely to have, a Company Material Adverse
Effect.
Section 4.9 Absence of Undisclosed Liabilities. Except for
liabilities or obligations which are accrued or reserved against in the
Company's financial statements (or reflected in the notes thereto) included in
the Company SEC Reports or which were incurred after August 31, 1996 in the
ordinary course of business and consistent with past practice, and except as set
forth on Schedule 4.9, none of the Company and its Subsidiaries has any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of a nature required by GAAP to be reflected in a consolidated balance sheet (or
reflected in the notes thereto) or which would reasonably be expected to have a
Company Material Adverse Effect.
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Section 4.10 No Default. Except as set forth on Schedule 4.10,
neither the Company nor any Subsidiary of the Company is in default or violation
(and no event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its charter, by-laws or comparable organizational documents, (ii) any material
Contract to which the Company or any of its Subsidiaries is a party or by which
they or any of their properties or assets may be bound, or (iii) any material
order, writ, injunction or decree, or any material statute, rule or regulation,
of any Governmental Entity applicable to the Company or any of its Subsidiaries.
Section 4.11 Taxes.
(a) The Company has heretofore delivered or made available to Parent
true, correct and complete copies of the consolidated federal, state, local and
foreign income, franchise sales and other Tax Returns (as hereinafter defined)
filed by the Company and the Company Subsidiaries for each of the Company's
years ended November 30, 1995, 1994, 1993, 1992 and 1991 inclusive. Except as
set forth on Schedule 4.11, the Company has duly filed, and each Subsidiary has
duly filed, all material federal, state, local and foreign income, franchise,
sales and other Tax Returns required to be filed by the Company or any of its
Subsidiaries. All such Tax Returns are true, correct and complete, in all
material respects, and the Company and its Subsidiaries have paid all Taxes (as
hereinafter defined) shown on such Tax Returns and have made adequate provision
for payment of all accrued but unpaid material Taxes anticipated in respect of
all periods since the periods covered by such Tax Returns. Except as set forth
on Schedule 4.11, all material deficiencies assessed as a result of any
examination of Tax Returns of the Company or any of its Subsidiaries by federal,
state, local or foreign tax authorities have been paid or reserved on the
financial statements of the Company in accordance with GAAP consistently
applied, and true, correct and complete copies of all revenue agent's reports,
"30-day letters," or "90-day letters" or similar written statements proposing or
asserting any Tax deficiency against the Company or any of its Subsidiaries for
any open year have been heretofore delivered to Parent. The Company has
heretofore delivered or will make available to Parent true, correct and complete
copies of all written tax-sharing agreements and written descriptions of all
such unwritten agreement or arrangements to which the Company or any of its
Subsidiaries is a party. Except as set forth in Schedule 4.11, no material issue
has been raised during the past five years by any federal, state, local or
foreign taxing authority which, if raised with regard to any subsequent period,
could reasonably be expected to result in a proposed material deficiency for any
such subsequent period. Except as disclosed in Schedule 4.11 hereof, neither the
Company nor any of its Subsidiaries has granted any extension or waiver of the
statutory period of limitations applicable to any claim for any material Taxes.
Schedule 4.11 lists the consolidated federal income tax returns of the Company
and its Subsidiaries that have been examined by and settled with the Internal
Revenue Service (the "Service"). Except as set forth in Schedule 4.11, (i) no
consent has been filed under Section 341(f) of the Code with respect to any of
the Company or the Subsidiaries of the Company; (ii) neither the Company nor any
of the Subsidiaries of the Company has participated in, or cooperated with, an
international boycott within the meaning of Section 999 of the Code; and (iii)
neither the Company nor any of the Subsidiaries of the Company has issued or
assumed any corporate acquisition indebtedness, as defined in Section 279(b) of
the Code. The Company and each Subsidiary of the Company have complied (and
until the Effective
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Time will comply) in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign laws) and have, within the time and in
the manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable laws.
(b) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies, duties, imposts or other assessments, including,
without limitation, income, gross receipts, excise, property, sales, use,
transfer, gains, license, payroll, withholding, capital stock and franchise
taxes, imposed by the United States, or any state, local or foreign government
or subdivision or agency thereof, including any interest, penalties or additions
thereto. For purposes of this Agreement, the term "Tax Return" shall mean any
report, return or other information or document required to be supplied to a
taxing authority in connection with Taxes.
Section 4.12 Title to Properties; Encumbrances. Except as described
in the following sentence, each of the Company and its Subsidiaries has good,
valid and marketable title to, or a valid leasehold interest in, all of its
material properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all the properties and assets
reflected in the consolidated balance sheet of the Company and its Subsidiaries
as of August 31, 1996 included in the Company's Quarterly Report on Form 10-Q
for the period ended on such date (except for properties and assets disposed of
in the ordinary course of business and consistent with past practices since
August 31, 19. None of such properties or assets are subject to any Liens
(whether absolute, accrued, contingent or otherwise), except (i) as specifically
set forth in the Company SEC Reports; (ii) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by the Company or its Subsidiaries and have been duly reflected on their
books and records and, with respect to reserves taken on or prior to August 31,
1996, the financial statements of the Company ("Proper Reserves"); (iii)
deposits or pledges to secure obligations under workmen's compensation, social
security or similar laws, or under unemployment insurance as to which the
Company and its Subsidiaries are not in default; (iv) deposits or pledges to
secure bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business of the Company or its
Subsidiaries; (v) judgment Liens listed on Schedule 4.12 that have been stayed
or bonded and mechanics', workmen's, materialmen's or other like liens with
respect to obligations which are not due or which are being contested in good
faith by the Company or its Subsidiaries and as to which they have taken Proper
Reserves; and (vi) minor imperfections of title and encumbrances, if any, which
are not substantial in amount, do not materially detract from the value of the
property or assets subject thereto and do not materially impair the operations
of any of the Company and its Subsidiaries.
Section 4.13 Intellectual Property.
(a) Except as set forth on Schedule 4.13(a), the Company and its
Subsidiaries are the sole and exclusive owners of all material patents, patent
applications, patent rights,
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trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks and registrations for and applications for registration of
trademarks, service marks and copyrights, and are the sole and exclusive owners
of, or have an irrevocable, royalty free right to use, all material technology
and know-how, trade secrets, rights in computer software and other proprietary
rights and information and all technical and user manuals and documentation made
or used in connection with any of the foregoing, in each case used or held for
use in connection with the businesses of the Company or any of its Subsidiaries
as currently conducted (collectively, the "Intellectual Property"), free and
clear of all Liens except as set forth on Schedule 4.13(a) and except minor
imperfections of title and encumbrances, if any, which are not substantial in
amount, do not materially detract from the value of the Intellectual Property
subject thereto and do not impair in any material respect the operations of any
of the Company and its Subsidiaries.
(b) All outstanding registrations and applications for Intellectual
Property (i) are valid, subsisting, in proper form and enforceable, and have
been duly maintained, including the submission of all necessary filings and fees
in accordance with the legal and administrative requirements of the appropriate
jurisdictions and (ii) have not lapsed, expired or been abandoned, and no
application or registration therefor is the subject of any pending, or, to the
knowledge of the Company, threatened legal or governmental proceeding before any
registration authority in any jurisdiction.
(c) To the knowledge of the Company, there are no conflicts with or
infringements of any Intellectual Property by any third party. The conduct of
the businesses of the Company and its Subsidiaries as currently conducted
(collectively, the "Business") does not conflict with or infringe in any way any
proprietary right of any third party, which conflict or infringement would have
a Company Material Adverse Effect, and there is no claim, suit, action or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries (i) alleging any such conflict or
infringement with any third party's proprietary rights, or (ii) challenging the
ownership, use, validity or enforceability of the Intellectual Property.
Section 4.14 Compliance with Applicable Law. Except as set forth on
Schedule 4.14 or as disclosed in the Company SEC Reports, (i) the Company and
its Subsidiaries hold, and are in compliance with the terms of, all material
permits, licenses, exemptions, orders and approvals of all Governmental Entities
necessary for the current and presently proposed conduct of their respective
businesses ("Company Permits"), (ii) no fact exists or event has occurred, and
no action or proceeding is pending or, to the Company's knowledge, threatened,
that has a reasonable possibility of resulting in a revocation, nonrenewal,
termination, suspension or other material impairment of any material Company
Permits, (iii) the businesses of the Company and its Subsidiaries are not being
conducted in violation, in any material respect, of any material applicable law,
ordinance, regulation, judgment, decree or order of any Governmental Entity
("Applicable Law"), and (iv) to the knowledge of the Company, (x) no
investigation or review by any Governmental Entity with respect to the Company
or its Subsidiaries is pending or threatened or has been undertaken within the
past six years, and (y) no Governmental Entity has indicated an intention to
conduct the same.
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Section 4.15 Information in Disclosure Documents and Registration
Statement. None of the information to be supplied by the Company for inclusion
in (i) the Registration Statement to be filed with the SEC by Parent on Form S-4
under the Securities Act for the purpose of registering the shares of Parent
Common Stock to be issued in connection with the Merger (the "Registration
Statement") or (ii) the proxy statement to be distributed in connection with the
Company's meeting of stockholders to vote upon this Agreement (the "Proxy
Statement") will, in the case of the Registration Statement, at the time it
becomes effective and at the Effective Time, or, in the case of the Proxy
Statement or any amendments thereof or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto, and at
the time of the meeting of stockholders of the Company to be held in connection
with the Merger, 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 light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all material
respects with the applicable provisions of the Exchange Act, and the rules and
regulations promulgated thereunder, except that no representation is made by the
Company with respect to statements made therein based on information supplied by
Parent or its representatives for inclusion in the Proxy Statement or with
respect to information concerning Parent or any of its Subsidiaries incorporated
by reference in the Proxy Statement.
Section 4.16 Employee Benefit Plans; ERISA.
(a) Schedule 4.16 hereto sets forth a true and complete list of each
material employee benefit plan, arrangement or agreement that is maintained, or
was maintained at any time during the five (5) calendar years preceding the date
of this Agreement (the "Company Plans"), by the Company or by any trade or
business, whether or not incorporated (a "Company ERISA Affiliate"), which
together with the Company would be deemed a "single employer" within the meaning
of Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) Each of the Company Plans that is subject to ERISA is and has
been in compliance with ERISA and the Code in all material respects; each of the
Company Plans intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified; no Company Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Code; neither the Company
nor any Company ERISA Affiliate has incurred, directly or indirectly, any
material liability (including any material contingent liability) to or on
account of a Company Plan pursuant to Title IV of ERISA; no proceedings have
been instituted to terminate any Company Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in Section 4043(b) of
ERISA, has occurred with respect to any Company Plan; and no condition exists
that presents a material risk to the Company or any Company ERISA Affiliate of
incurring a liability to or on account of a Company Plan pursuant to Title IV of
ERISA.
(c) The current value of the assets of each of the Company Plans
that are subject to Title IV of ERISA, based upon the actuarial assumptions (to
the extent reasonable) presently used by the Company Plans, exceeds the present
value of the accrued benefits under each such Company Plan; no Company Plan is a
multiemployer plan (within the meaning of Section
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4001(a)(3) of ERISA) and no Company Plan is a multiple employer plan as defined
in Section 413 of the Code; and all material contributions or other amounts
payable by the Company as of the Effective Time with respect to each Company
Plan in respect of current or prior plan years have been either paid or accrued
on the balance sheet of the Company. To the knowledge of the Company, there are
no material pending, threatened or anticipated claims (other than routine claims
for benefits) by, on behalf of or against any of the Company Plans or any trusts
related thereto.
(d) Neither the Company nor any Company ERISA Affiliate, nor any
Company Plan, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in a transaction in connection with which the Company or any
Company ERISA Affiliate, any Company Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Company Plan or any such
trust could be subject to either a material civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code. No Company Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any Company ERISA Affiliate beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law or
(ii) death benefits under any "employee pension plan," as that term is defined
in Section 3(2) of ERISA).
Section 4.17 Environmental Laws and Regulations. (a) Except as set
forth on Schedule 4.17(a): (i) the Company and its Subsidiaries are and have
been, in all material respects, in compliance with, and there are no outstanding
allegations by any person or entity that the Company or its Subsidiaries has not
been in compliance with, all material applicable laws, rules, regulations,
common law, ordinances, decrees, orders or other binding legal requirements
relating to pollution (including the treatment, storage and disposal of wastes
and the remediation of releases and threatened releases of materials), the
preservation of the environment, and the exposure to materials in the
environment or work place ("Environmental Laws") and (ii) the Company and its
Subsidiaries currently hold all material permits, licenses, registrations and
other governmental authorizations (including exemptions, waivers, and the like)
and financial assurance required under Environmental Laws for the Company and
its Subsidiaries to operate their businesses as currently conducted.
(b) Except as set forth on Schedule 4.17(b), to the knowledge of the
Company (and without special investigation for purposes hereof) (i) there is no
friable asbestos-containing material in or on any real property currently owned,
leased or operated by the Company or its Subsidiaries and (ii) there are and
have been no underground storage tanks (whether or not required to be registered
under any applicable law), dumps, landfills, lagoons, surface impoundments,
injection wells or other land disposal units in or on any property currently
owned, leased or operated by the Company or its Subsidiaries.
(c) Except as set forth on Schedule 4.17(c), (i) neither the Company
nor its Subsidiaries has received (x) any written communication from any person
stating or alleging that any of them may be a potentially responsible party
under any Environmental Law (including, without limitation, the Federal
Comprehensive Environmental Response, Compensation, and
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Liability Act of 1980, as amended) with respect to any actual or alleged
environmental contamination or (y) any request for information under any
Environmental Law from any Governmental Entity with respect to any actual or
alleged material environmental contamination; and (ii) none of the Company, its
Subsidiaries or any Governmental Entity is conducting or has conducted (or, to
the knowledge of the Company, is threatening to conduct) any environmental
remediation or investigation.
Section 4.18 Vote Required. The affirmative vote of the holders of
two-thirds of the outstanding shares of the Company Common Stock are the only
votes of the holders of any class or series of the Company's capital stock
necessary to approve the Merger. The Board of Directors of the Company, at a
meeting duly called and held on March 7, 1997, unanimously (i) approved this
Agreement and the Proxy and Option Agreement, (ii) determined that the
transactions contemplated hereby and thereby are fair to and in the best
interests of the holders of Company Common Stock and (iii) determined to
recommend this Agreement, the Merger and the other transactions contemplated
hereby to such holders for approval and adoption. The resolutions of the
Company's Board of Directors taking the actions described in the preceding
sentence have not been rescinded, withdrawn, amended or otherwise modified,
remain in full force and effect, and constitute the only action of such Board of
Directors with respect to the Merger or the other transactions contemplated by
this Agreement.
Section 4.19 Opinion of Financial Advisor. The Company has received
the opinion of Houlihan, Lokey, Howard & Zukin, Inc., dated March 7, 1997,
substantially to the effect that the consideration to be received in the Merger
by the holders of Company Common Stock is fair to such holders from a financial
point of view, a copy of which opinion has been delivered to Parent.
Section 4.20 Accounting Matters. None of the Company, any of its
Subsidiaries or any of their respective directors, officers or stockholders has
taken any action which would prevent the accounting for the Merger as a pooling
of interests in accordance with Accounting Principles Board Opinion No. 16, the
interpretative releases pursuant thereto and the pronouncements of the SEC.
Section 4.21 NYBCL Section 912. Prior to the date hereof, the Board
of Directors of the Company has approved this Agreement and the Proxy and Option
Agreement, and the Merger and the other transactions contemplated hereby and
thereby, and such approval is sufficient to render inapplicable to the Merger
and any of such other transactions the provisions of Section 912 of the NYBCL.
Section 4.22 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other understanding with a labor union or labor organization and, to
the knowledge of the Company, there is no activity involving any employees of
the Company or its Subsidiaries seeking to certify a collective bargaining unit
or engaging in any other organizational activity.
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Section 4.23 Affiliate Transactions. Except as set forth in Schedule
4.23 or as disclosed in the Company SEC Reports, there are no Contracts or other
transactions between the Company or any of its Subsidiaries, on the one hand,
and any (i) officer or director of the Company or any of its Subsidiaries, (ii)
record or beneficial owner of five percent or more of the voting securities of
the Company or (iii) affiliate (as such term is defined in Regulation 12b-2
promulgated under the Exchange Act) of any such officer, director or beneficial
owner, on the other hand.
Section 4.24 Brokers. Except for its financial advisors, Houlihan,
Lokey, Howard & Zukin, Inc., Bangert, Dawes, Reade, Davis & Thom, Incorporated,
and Royce Investment Group, Inc. no broker, finder or financial advisor is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company, and the Company has delivered
to the Parent true, complete and correct copies of (or, in the case of any oral
agreement or arrangement, a true, complete and correct summary of) each
agreement or arrangement pursuant to which either of such advisors is entitled
to any such fee or commission.
Section 4.25 Tax Matters. The Company knows of no fact or
circumstance which is reasonably likely to cause the Merger to be treated other
than as a tax-free reorganization under Section 368(a) of the Code.
Section 4.26 Accounts Receivable. All of the accounts and notes
receivable of the Company and its Subsidiaries set forth on the books and
records of the Company or to be incurred after the date hereof (in each case net
of the applicable reserves reflected or, with respect to future accounts and
notes receivable, to be reflected on the books and records of the Company and in
the financial statements included in the Company's SEC reports): (i) represent
or will represent sales actually made or to be made in the ordinary course of
business for goods or services delivered or rendered to unaffiliated customers
in bona fide arm's length transactions, (ii) constitute or will constitute valid
claims, and (iii) are, or upon incurrence will be, good and collectible, in each
case at the aggregate recorded amounts thereof without right of recourse,
defense, deduction, return of goods, counterclaim, or offset and have been or
will be collected in the ordinary course of business and consistent with past
experience.
Section 4.27 Inventory. All inventory of the Company and its
Subsidiaries is (net of the applicable reserves reflected on the books and
records of the Company and inthe financial statements included in the Company's
SEC reports) of merchantable quality, free of defects in workmanship or design
and is usable and salable at normal profit margins and in accordance with
historical sales practices in the ordinary course of the business of the Company
and its Subsidiaries. The Inventory (net of such reserves) does not include any
items which are obsolete, damaged, excessive, below standard quality or slow
moving (i.e., items that are for discontinued or expected to be discontinued
product lines, or items that have not been used or sold within 12 months prior
to the date hereof).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 Organization. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Parent is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified will not have a material adverse effect individually
or in the aggregate, on the financial condition, results of operations,
business, assets, liabilities, prospects or properties of Parent and its
Subsidiaries taken as a whole or on the ability of Parent to consummate the
Merger and the other transactions contemplated by this Agreement (a "Parent
Material Adverse Effect"). Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York. Sub has not
engaged in any business (other than in connection with this Agreement and the
transactions contemplated hereby) since the date of its incorporation. Schedule
5.1 contains a complete and accurate list of all Subsidiaries of Parent.
Section 5.2 Capitalization.
(a) The authorized capital stock of Parent consists of 60,000,000
shares of Parent Common Stock and 1,000,000 shares of Preferred Stock, par value
$.01 per share, of Parent ("Parent Preferred Stock"). As of the date hereof, (i)
approximated 23,282,000 shares of Parent Common Stock are issued and
outstanding, (ii) no shares of Parent Preferred Stock are issued and
outstanding, (iii) options to acquire approximately 800,000 shares of Parent
Common Stock (the "Parent Stock Options") are outstanding under all stock option
plans of Parent, and (iv) approximately 800,000 shares of Parent Common Stock
are reserved for issuance pursuant to the Parent Stock Options and all other
Rights to purchase or otherwise receive capital stock or other securities of
Parent. All of the outstanding shares of capital stock of Parent are, and the
shares of Parent Common Stock issuable in exchange for shares of Company Common
Stock at the Effective Time in accordance with this Agreement will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable.
(b) The authorized capital stock of Sub consists of 1,000 shares of
Sub Common Stock, of which 1,000 shares, as of the date hereof, were issued and
outstanding. All of such outstanding shares are owned by Parent, and are validly
issued, fully paid and nonassessable.
(c) Except as disclosed in this Section 5.2, (i) there are no
outstanding Rights to purchase or otherwise to receive from Parent or Sub any of
the outstanding authorized but unissued or treasury shares of the capital stock
or any other security of Parent or Sub, (ii) there is no outstanding security of
any kind convertible into or exchangeable for such capital stock, and
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(iii) there is no voting trust or other agreement or understanding to which
Parent or Sub is a party or is bound with respect to the voting of the capital
stock of Parent or Sub.
(d) Parent and its subsidiaries do not beneficially own any shares
of the Company's voting stock and, to Parent's knowledge, none of its affiliates
or associates (as such terms are defined in Section 912 of the NYBCL)
beneficially own any shares of the Company's voting stock.
Section 5.3 Authority Relative to this Agreement. Each of Parent and
Sub has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each of Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated on its part hereby have been
duly authorized by their respective Boards of Directors, and by Parent as the
sole stockholder of Sub, and no other corporate proceedings on the part of
Parent or Sub are necessary to authorize this Agreement or for Parent and Sub to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Sub and constitutes a
valid and binding agreement of each of Parent and Sub, enforceable against
Parent and Sub in accordance with its terms.
Section 5.4 Consents and Approvals No Violations. Neither the
execution, delivery and performance of this Agreement by Parent or Sub, nor the
consummation by Parent or Sub of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provisions of the Certificate of
Incorporation or By-Laws of Parent or of Sub, (ii) require a filing with, or a
permit, authorization, consent or approval of, any Governmental Entity except in
connection with or in order to comply with the applicable provisions of the HSR
Act, the Securities Act, the Exchange Act, state securities or "blue sky" laws,
the By-Laws of the NASD, and the filing and recordation of a Certificate of
Merger as required by the NYBCL, (iii) except as set forth on Schedule 5.4
hereto, result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of a
Lien on any property or asset of Parent or any of its Subsidiaries pursuant to,
any of the terms, conditions or provisions of any material Contract to which
Parent or Sub is a party or by which either of them or any of their properties
or assets may be bound or (iv) violate any material law, order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to Parent, Sub or any of their properties or assets.
Section 5.5 Reports and Financial Statements. Parent has timely
filed all reports required to be filed with the SEC pursuant to the Exchange Act
or the Securities Act since November 3, 1995 (collectively, the "Parent SEC
Reports"), and has previously made available to the Company true and complete
copies of all such Parent SEC Reports. Such Parent SEC Reports, as of their
respective dates, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and
none of such SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parent
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included in the Parent SEC Reports have been prepared in accordance with GAAP
consistently applied throughout the periods indicated (except as otherwise noted
therein) and fairly present the consolidated financial position of Parent and
its consolidated Subsidiaries as at the dates thereof and the consolidated
results of operations and cash flows of Parent and its consolidated Subsidiaries
for each of the periods then ended, except that in the case of the unaudited
consolidated financial statements included in any Form 10-Q, the presentation
and disclosures conform with the applicable rules of the Exchange Act, but
include all adjustments necessary to conform to GAAP requirements with respect
to interim financial statements. Since December 31, 1995, there has been no
change in any of the significant accounting (including tax accounting) policies,
practices or procedures of the Parent or, except as set forth on Schedule 5.5,
any of its consolidated Subsidiaries.
Section 5.6 Absence of Certain Changes or Events; Material
Contracts. Except as set forth in the Parent SEC Reports, since September 29,
1996, (i) Parent has not conducted its business and operations other than in the
ordinary course of business and consistent with past practices or taken any of
the actions set forth in Section 6.2(b) and (ii) there has not been any fact,
event, circumstance or change affecting or relating to Parent and its
Subsidiaries which has had or is reasonably likely to have a Parent Material
Adverse Effect.
Section 5.7 Information in Disclosure Documents and Registration
Statement. None of the information to be supplied by Parent or Sub for inclusion
in (i) the Registration Statement or (ii) the Proxy Statement will in the case
of the Registration Statement, at the time it becomes effective and at the
Effective Time, or, in the case of the Proxy Statement or any amendments thereof
or supplements thereto, at the time of the mailing of the Proxy Statement and
any amendments or supplements thereto, and at the time of the meeting of
stockholders of the Company to be held in connection with the Merger, 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 light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act, and the rules and regulations promulgated thereunder, except that no
representation is made by Parent with respect to statements made therein based
on information supplied by the Company or its respective representatives for
inclusion in the Registration Statement or the Proxy Statement or with respect
to information concerning the Company or any of its Subsidiaries incorporated by
reference in the Registration Statement or the Proxy Statement.
Section 5.8 Absence of Undisclosed Liabilities. Except for
liabilities or obligations which are accrued or reserved against in Parent's
consolidated financial statements (or reflected in the notes thereto) included
in the Company SEC Reports or which were incurred after September 30, 1996 in
the ordinary course of business and consistent with past practice, and except as
set forth on Schedule 5.8, none of Parent and its Subsidiaries has any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of a nature required by GAAP to be reflected in a consolidated balance sheet (or
reflected in the notes thereto) or which would have a Parent Material Adverse
Effect.
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Section 5.9 Compliance with Applicable Law. Except as set forth on
Schedule 5.9 or as disclosed in the Parent SEC Reports, (i) the Parent and its
Subsidiaries hold, and are in compliance with the terms of, all material
permits, licenses, exemptions, orders and approvals of all Governmental Entities
necessary for the current and presently proposed conduct of their respective
businesses ("Parent Permits"), (ii) no fact exists or event has occurred, and no
action or proceeding is pending or, to Parent's knowledge, threatened, that has
a reasonable possibility of resulting in a revocation, nonrenewal, termination,
suspension or other material impairment of any material Parent Permits, (iii)
the businesses of Parent and its Subsidiaries are not being conducted in
violation of Applicable Law, and (iv) to the knowledge of Parent, (x) no
investigation or review by any Governmental Entity with respect to Parent or its
Subsidiaries is pending or threatened and (y) no Governmental Entity has
indicated an intention to conduct the same.
Section 5.10 Litigation. Except for litigation disclosed in the
notes to the financial statements included in Parent's Annual Report to
Stockholders for the year ended December 31, 1995 or in Parent SEC Reports filed
subsequent thereto, there is no suit, action, proceeding or investigation
pending or, to the knowledge of Parent, threatened against or affecting Parent
or any of its Subsidiaries, the outcome of which, in the reasonable judgment of
Parent, is likely to have a Parent Material Adverse Effect; nor is there any
judgment, decree, injunction, ruling or order of any Governmental Entity
outstanding against Parent or any of its Subsidiaries having, or which is
reasonably likely to have, a Parent Material Adverse Effect.
Section 5.11 Opinion of Financial Advisor. Parent has received the
opinion of Tanner & Co., Inc., dated March 7, 1997, substantially to the effect
that the consideration to be received in the Merger by the holders of Company
Common Stock is fair to the holders of Parent Common Stock from a financial
point of view, a copy of which opinion has been delivered to the Company.
Section 5.12 Accounting Matters. None of the Parent, any of its
Subsidiaries or any of their respective directors, officers or stockholders has
taken any action which would prevent the accounting for the Merger as a pooling
of interests in accordance with Accounting Principles Board Opinion No. 16, the
interpretative releases pursuant thereto and the pronouncements of the SEC.
Section 5.13 Tax Matters. Parent knows of no fact or circumstance
which is reasonably likely to cause the Merger to be treated other than as a
tax-free reorganization under Section 368(a) of the Code.
Section 5.14 Brokers. Except for its financial advisor, Tanner &
Co., Inc., no broker, finder or financial advisor is entitled to any brokerage
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
Section 5.15 No Default. Neither Parent nor any Subsidiary of Parent
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (i) its charter, by-laws or
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comparable organizational documents, (ii) any material Contract to which Parent
or any of its Subsidiaries is a party or by which they or any of their
properties or assets may be bound, or (iii) any material order, writ, injunction
or decree, or any material statute, rule or regulation, of any Governmental
Entity applicable to Parent or any of its Subsidiaries.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger.
From the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, unless Parent shall otherwise agree in writing,
or as otherwise expressly contemplated by this Agreement:
(a) the Company shall conduct, and cause each of its Subsidiaries to
conduct, its business only in the ordinary and usual course consistent with past
practice, and the Company shall use, and cause each of its Subsidiaries to use,
its reasonable efforts to preserve intact the present business organization,
keep available the services of its present officers and key employees, and
preserve the goodwill of those having business relationships with it;
(b) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) amend its charter, bylaws or other organizational
documents, (ii) split, combine or reclassify any shares of its outstanding
capital stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or (iv) directly or indirectly
redeem or otherwise acquire any shares of its capital stock or shares of the
capital stock of any of its Subsidiaries;
(c) the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) authorize for issuance, issue or sell or agree to issue or
sell any shares of, or Rights to acquire or convertible into any shares of, its
capital stock or shares of the capital stock of any of its Subsidiaries (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except for the issuance of
shares of Company Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement, or amend any outstanding Company
Stock Option, Company Warrant or other Right, except that the Company may amend
the terms of the Company Stock Options set forth on Schedule 4.2(b) under the
heading "1987 Plan" to provide that the holders thereof may exercise such
options prior to their expiration dates regardless of whether such holders are
then serving as directors of the Company; (ii) merge or consolidate with another
entity; (iii) acquire or purchase an equity interest in or a substantial portion
of the assets of another corporation, partnership or other business organization
(except for such potential acquisitions, and on substantially such terms, as
have been described in a letter executed and delivered by the Company and Parent
simultaneously with the execution and delivery of this Agreement and provided
that the Company keeps Parent informed as to the status of all negotiations with
respect thereto (including any termination of such negotiations) and gives
Parent prior notice of the consummation of any such
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acquisition and the signing of any agreement with respect thereto) or otherwise
acquire any assets outside the ordinary and usual course of business and
consistent with past practice or otherwise enter into any material contract,
commitment or transaction outside the ordinary and usual course of business
consistent with past practice; (iv) sell, lease, license, waive, release,
transfer, encumber or otherwise dispose of any of its assets outside the
ordinary and usual course of business and consistent with past practice; (v)
incur, assume or prepay any material indebtedness or any other material
liabilities other than in the ordinary course of business and consistent with
past practice; (vi) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person other than a Subsidiary of the Company or customers, in each
case in the ordinary course of business and consistent with past practice; (vii)
make, extend or modify in any material respect any loans, advances or capital
contributions to, or investments in, any other person, other than to
Subsidiaries of the Company or loans to employees of the Company or any of its
Subsidiaries, in an aggregate amount not exceeding $25,000, for such reasons,
and on such terms and conditions, as are consistent with past practice; (viii)
authorize or make capital expenditures in excess of the respective amounts set
forth on Schedule 6.1 hereto; (ix) permit any insurance policy naming the
Company or any Subsidiary of the Company as a beneficiary or a loss payee to be
canceled or terminated other than in the ordinary course of business; or (x)
enter into any contract, agreement, commitment or arrangement with respect to
any of the foregoing;
(d) the Company shall not, nor shall it permit its Subsidiaries to,
(i) adopt, enter into, terminate or amend (except as may be required by
Applicable Law) any Company Plan or other arrangement for the current or future
benefit or welfare of any director, officer or current or former employee, (ii)
increase in any manner the compensation or fringe benefits of, or pay any bonus
to, any director, officer or employee (except for normal increases in
compensation in the ordinary course of business consistent with past practice
and accrued and unpaid bonuses in respect of the Company's fiscal year ended
November 30, 1996 that are consistent with past practice and have been properly
accrued and reflected on the Company's books and records, or (iii) take any
action to fund or in any other way secure, or to accelerate or otherwise remove
restrictions with respect to, the payment of compensation or benefits under any
employee plan, agreement, contract, arrangement or other Company Plan (including
the Company Stock Options);
(e) the Company shall not, nor shall it permit its Subsidiaries to,
take any action with respect to, or make any material change in, its accounting
or tax policies or procedures, except as required by law or to comply with GAAP;
and
(f) the Company shall not (i) take any action or allow any action to
be taken by any of its Subsidiaries or affiliates which would jeopardize the
treatment of Parent's acquisition of the Company as a pooling of interests for
accounting purposes; or (ii) take any action which would jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
Section 6.2 Conduct of Business by Parent Pending the Merger. From
the date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement,
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unless the Company shall otherwise agree in writing, or as otherwise expressly
contemplated by this Agreement:
(a) Parent shall conduct its business and the business of its
Subsidiaries in a manner designed, in the good faith judgment of its Board of
Directors, to enhance the long-term value of the Parent Common Stock and the
business prospects of Parent and its Subsidiaries;
(b) Parent shall not (i) split, combine or reclassify any shares of
its outstanding capital stock; or (ii) declare, set aside or pay any dividend or
other distribution payable in cash, stock or property;
(c) Parent shall not authorize for issuance, issue or sell or agree
to issue or sell any shares of, or Rights to acquire or convertible into any
shares of, its capital stock, except for (i) the issuance of shares of Parent
Common Stock (x) upon the exercise of Parent Stock Options or other Rights
outstanding on the date of this Agreement or (y) upon the exercise of Rights
described in the immediately following clause (ii), (ii) the issuance of Rights
pursuant to existing employee benefit plans or arrangements in a manner
consistent with past practice, and (iii) the issuance of shares of Parent Common
Stock in connection with arms' length acquisitions with non-affiliates; and
(d) Except as described on Schedule 6.2(d), Parent shall not, nor
shall it permit any of its Subsidiaries to, (i) amend its charter, bylaws or
other organizational documents, (ii) split, combine or reclassify any shares of
its outstanding capital stock, or (iii) directly or indirectly redeem or
otherwise acquire any shares of its capital stock or shares of the capital stock
of any of its Subsidiaries.
Section 6.3 Conduct of Business of Sub. During the period from the
date of this Agreement to the Effective Time, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement. It is understood that Sub was formed by Parent solely for the purpose
of effecting the Merger, and that Sub will have no material assets and no
material liabilities prior to the Merger. Parent shall cause Sub to perform its
obligations under this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. Each of the Company and Parent
shall (and shall cause its Subsidiaries and its and their respective officers,
directors, employees, auditors and agents to) afford to the other and to the
other's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives reasonable access, during normal business
hours throughout the period from the date hereof until the earlier of the
Effective Time and the termination of this Agreement, to all of its books and
records and its properties, plants and personnel and, during such period, each
shall furnish promptly to the other a copy of each report,
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schedule and other document filed or received by it pursuant to the requirements
of federal securities laws, provided that no investigation pursuant to this
Section 7.1 shall affect any representations or warranties made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. Unless otherwise required by law, each of Parent and the Company agrees
that it (and its respective Subsidiaries and its and their respective
representatives) shall hold in confidence all non-public information so acquired
in accordance with the terms of the confidentiality agreement between Parent and
the Company executed in November 1996 (the "Confidentiality Agreement").
Section 7.2 No Solicitation.
(a) Prior to the Effective Time, the Company agrees that neither it,
any of its Subsidiaries or its affiliates, nor any of the respective directors,
officers, employees, affiliates, agents or representatives of the foregoing
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its Subsidiaries) will, directly or
indirectly, solicit, initiate, facilitate or encourage (including by way of
furnishing or disclosing non-public information) any inquiries or the making of
any proposal with respect to or which may reasonably be expected to lead to, any
merger, consolidation or other business combination involving the Company or any
Subsidiary of the Company (other than any acquisition by the Company permitted
under Section 6.1(c)) or the acquisition of all or any significant assets or
capital stock of the Company or any Subsidiary of the Company taken as a whole
(an "Acquisition Transaction") or negotiate, explore or otherwise engage in
discussions with any corporation, partnership, person, other entity or group (as
defined in Section 13(d)(2) of the Exchange Act) (other than Parent and its
representatives) in furtherance of such inquiries or with respect to any
Acquisition Transaction, or endorse any Acquisition Transaction, or enter into
any agreement, arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement;
provided, however, that the Company may, in response to an unsolicited written
proposal from a third party, furnish information to and engage in discussions
with such third party, in each case only if the Board of Directors of the
Company determines in good faith by a majority vote, after consultation with its
financial advisor, Houlihan, Lokey, Howard & Zukin, Inc., and after reviewing
the advice of outside counsel to the Company, that such action is reasonably
likely to be required by the fiduciary duties of the Board of Directors and,
prior to taking such action, the Company (i) provides reasonable notice to
Parent to the effect that it is taking such action and (ii) receives from such
corporation, partnership, person or other entity or group (and delivers to
Parent) an executed confidentiality agreement in reasonably customary form. The
Company agrees that as of the date hereof, it, its Subsidiaries and affiliates,
and the respective directors, officers, employees, agents and representatives of
the foregoing, shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any person (other than Parent and
its representatives) conducted heretofore with respect to any Acquisition
Transaction. The Company agrees to immediately advise Parent in writing of any
inquiries or proposals (or desire to make a proposal) received by (or indicated
to), any such information requested from, or any such negotiations or
discussions sought to be initiated or continued with, any of it, its
Subsidiaries or affiliates, or any of the respective directors, officers,
employees, agents or representatives of the foregoing, in each case from a
corporation,
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partnership, person or other entity or group (other than Parent and its
representatives) with respect to an Acquisition Transaction, and the terms
thereof, including the identity of such third party, and to update on an ongoing
basis or upon Parent's request, the status thereof, as well as any actions taken
or other developments pursuant to this Section 7.2(a). Notwithstanding anything
in the foregoing provisions of the Section 7.2(a) to the contrary: (i) the
Company shall not disclose any information received by it or any of its
directors, officers, employees, agents or representatives pursuant to the
Confidentiality Agreement or any other confidentiality or other similar
agreement between the Company and Parent to any person in violation of such
agreement and (ii) the Company shall not be obligated to disclose to Parent any
confidential information provided to the Company by any third party in violation
of any confidentiality agreement between the Company and such third party
provided for in this Section 7.2.
(b) Except as set forth in this Section 7.2(b), the Board of
Directors of the Company shall not (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Parent or the Sub, the approval
or recommendation by the Board of Directors of this Agreement or the Merger,
(ii) approve or recommend, or propose to approve or recommend, any Acquisition
Transaction or (iii) cause the Company to enter into any agreement with respect
to any Acquisition Transaction. Notwithstanding the foregoing, in the event that
prior to the Effective Time the Board of Directors of the Company determines in
good faith by a majority vote, after consultation with its financial advisor,
Houlihan, Lokey, Howard & Zukin, Inc., and after reviewing the advice of outside
counsel to the Company, that such action is reasonably likely to be required by
the fiduciary duties of the Board of Directors, the Board of Directors of the
Company may withdraw or modify its approval or recommendation of this Agreement
and the Merger, approve or recommend an Acquisition Transaction or cause the
Company to enter into an agreement with respect to an Acquisition Transaction,
provided, in each case, that such Board determines in its good faith reasonable
judgment, by a majority vote after consultation with its financial advisor and
after reviewing the advice of outside counsel to the Company, that the
Acquisition Transaction is more favorable to the stockholders of the Company
than the Merger. The Company shall provide reasonable prior notice to the Parent
or the Sub to the effect that it is taking such action.
Section 7.3 Registration Statement. As promptly as practicable,
Parent and the Company shall in consultation with each other prepare and file
with the SEC the Proxy Statement and Parent in consultation with the Company
shall prepare and file with the SEC the Registration Statement. Each of Parent
and the Company shall use its reasonable best efforts to have the Registration
Statement declared effective as soon as practicable. Parent shall also use its
reasonable best efforts to take any action required to be taken under state
securities or "blue sky" laws in connection with the issuance of the shares of
Parent Common Stock pursuant to this Agreement in the Merger. The Company shall
furnish Parent with all information concerning the Company and the holders of
its capital stock and shall take such other action as Parent may reasonably
request in connection with the Registration Statement and the issuance of shares
of Parent Common Stock, and Parent shall furnish the Company with all
information concerning Parent and the holders of its capital stock and shall
take such other action as the Company may reasonably request in connection with
the Proxy Statement. If at any time prior to the Effective Time any event or
circumstance relating to Parent, any Subsidiary of Parent, the Company, any
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Subsidiary of the Company, or their respective officers or directors, should be
discovered by such party which should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement, such party shall
promptly inform the other thereof and take appropriate action in respect
thereof.
Section 7.4 Proxy Statements; Stockholder Approval.
(a) The Company, acting through its Board of Directors, shall,
subject to and in accordance with applicable law and its Certificate of
Incorporation and By-Laws, promptly and duly call, give notice of and, as soon
as practicable following the date upon which the Registration Statement becomes
effective, hold a meeting of the holders of Company Common Stock for the purpose
of voting to approve and adopt this Agreement and the transactions contemplated
hereby, and, except as otherwise provided in Section 7.2(b), (i) recommend
approval and adoption of this Agreement and the transactions contemplated
hereby, by the stockholders of the Company and include in the Proxy Statement
such recommendation and (ii) take all reasonable and lawful action to solicit
and obtain such approval.
(b) The Company, as promptly as practicable, shall cause the
definitive Proxy Statement to be mailed to its stockholders.
(c) At or prior to the Closing, the Company shall deliver to Parent
a certificate of its Secretary setting forth the voting results from its
stockholder meeting.
Section 7.5 Compliance with the Securities Act.
(a) At least 10 days prior to the Effective Time, the Company shall
cause to be delivered to Parent a list identifying all persons who were at the
record date for its stockholders' meeting convened in accordance with Section
7.4 hereof, "affiliates" of the Company, as that term is used in paragraphs (c)
and (d) of Rule 145 under the Securities Act (the "Affiliates").
(b) The Company shall use its reasonable best efforts to cause each
person who is identified as one of its Affiliates in its list referred to in
Section 7.5(a) above to deliver to Parent (with a copy to the Company), at least
10 days prior to the Effective Time, a written agreement, in the form attached
hereto as Exhibit B (the "Affiliate Agreement").
(c) If any Affiliate of the Company refuses to provide an Affiliate
Agreement, Parent may place appropriate legends on the certificates evidencing
the shares of Parent Common Stock to be received by such Affiliate pursuant to
the terms of this Agreement and to issue appropriate stop transfer instructions
to the transfer agent for shares of Parent Common Stock to the effect that the
shares of Parent Common Stock received by such Affiliate pursuant to this
Agreement only may be sold, transferred or otherwise conveyed (i) pursuant to an
effective registration statement under the Securities Act, (ii) in compliance
with Rule 145 promulgated under the Securities Act, or (iii) pursuant to another
exemption under the Securities Act.
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Section 7.6 Reasonable Best Efforts. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, the obtaining of
all necessary waivers, consents and approvals and the effecting of all necessary
registrations and filings. Without limiting the generality of the foregoing, as
promptly as practicable, the Company, Parent and Sub shall make all filings and
submissions under the HSR Act as may be reasonably required to be made in
connection with this Agreement and the transactions contemplated hereby. Subject
to the Confidentiality Agreement, the Company will furnish to Parent and Sub,
and Parent and Sub will furnish to the Company, such information and assistance
as the other may reasonably request in connection with the preparation of any
such filings or submissions. Subject to the Confidentiality Agreement, the
Company will provide Parent and Sub, and Parent and Sub will provide the
Company, with copies of all material written correspondence, filings and
communications (or memoranda setting forth the substance thereof) between such
party or any of its representatives and any Governmental Entity, with respect to
the obtaining of any waivers, consent or approvals and the making of any
registrations or filings, in each case that is necessary to consummate the
Merger and the other transactions contemplated hereby. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers or directors of Parent and the
Surviving Corporation shall take all such necessary action.
Section 7.7 Proxy and Option Agreement. Concurrently herewith, and
as an essential inducement for Parent's entering into this Agreement, Parent and
Sub are entering into the Proxy and Option Agreement with certain holders of
Company Common Stock with respect to all such shares of Company Common Stock
held by such holders.
Section 7.8 Company Stock Options. To the extent permitted by the
respective terms of the Company Stock Options and the plans under which they
were issued and the respective terms of the Company Stock Warrants, at the
Effective Time, each of the Company Stock Options (and, solely with respect to
such options, the applicable option plans pursuant to which such options were
issued) and each of the Company Warrants which is outstanding immediately prior
to the Effective Time and listed on Schedule 4.2(b) shall be assumed by Parent
on the terms set forth herein and converted automatically into an option or a
warrant, as the case may be, to purchase shares of Parent Common Stock (each, a
"Converted Option" or a "Converted Warrant", as the case may be) in an amount
and at an exercise price determined as provided below:
(a) The number of shares of Parent Common Stock to be subject to a
Converted Option or a Converted Warrant shall be equal to the product of the
number of shares of Company Common Stock remaining subject (as of immediately
prior to the Effective Time) to the original option or warrant and the Exchange
Ratio, provided that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded down to the nearest share; and
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(b) The exercise price per share of Parent Common Stock under a
Converted Option or a Converted Warrant shall be equal to the exercise price per
share of Company Common Stock under the original option or warrant divided by
the Exchange Ratio, provided that such exercise price shall be rounded down to
the nearest cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be modified to the
extent required to comply with Section 424(a) of the Code and the applicable
Treasury Regulations. After the Effective Time, each Converted Option shall be
exercisable and shall vest upon the same terms and conditions as were applicable
to the related Company Stock Option immediately prior to the Effective Time,
except that all references to the Company shall be deemed to be references to
Parent. Parent shall file with the SEC a registration statement on Form S-8 (or
other appropriate form) and shall take any action required to be taken under
state securities "blue sky" laws for purposes of registering all shares of
Parent Common Stock issuable after the Effective Time upon exercise of the
Converted Options, and use all reasonable efforts to have such registration
statement (or a successor or replacement registration statement) become
effective with respect thereto as promptly as practicable after the Effective
Time and to remain in effect while any of the Converted Options remain
exercisable. Parent shall reserve for issuance in connection with the exercise
of Converted Options such number of shares of Parent Common Stock as shall be
required to be issued upon such exercise.
Section 7.9 Public Announcements. Each of Parent, Sub and the
Company agrees that it will not issue any press release or otherwise make any
public statement with respect to this Agreement (including the Exhibits hereto)
or the transactions contemplated hereby (or thereby) without the prior consent
of the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with any national securities exchange or
quotation system and (ii) the party making such disclosure has first used its
reasonable best efforts to consult with (but not obtain the consent of) the
other party about the form and substance of such disclosure.
Section 7.10 Expenses. Except as otherwise set forth in Section
9.2(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement (including the Exhibits hereto) and
the transactions contemplated hereby (and thereby) shall be paid by the party
incurring such expenses, except that (i) the filing fee in connection with
filings under the HSR Act, (ii) the expenses incurred in connection with
printing the Registration Statement and the Proxy Statement and (iii) the filing
fee with the SEC relating to the Registration Statement or the Proxy Statement
will be shared equally by Parent and the Company.
Section 7.11 Listing Application. Parent will use its reasonable
best efforts to cause the shares of Parent Common Stock to be issued pursuant to
this Agreement in the Merger (as well as the shares of Parent Common Stock
issuable after the Effective Time upon exercise of the Parent Options) to be
listed for quotation and trading on the Nasdaq National Market.
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Section 7.12 Supplemental Disclosure. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 7.12 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article VIII of this Agreement or
otherwise limit or affect the remedies available hereunder to any party.
Section 7.13 Letters of Accountants.
(a) Parent shall use all reasonable efforts to cause to be delivered
to the Company a letter of BDO Seidman, LLP, Parent's independent auditors,
dated a date within two business days before the date on which the Registration
Statement shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement, which letter
shall be brought down to a date within two business days prior to the Effective
Time.
(b) The Company shall use all reasonable best efforts to cause to be
delivered to Parent a letter of Miller, Ellin & Company, the Company's
independent auditors, dated a date within two business days before the date on
which the Registration State shall become effective and addressed to Parent, in
form and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement, which letter
shall be brought down to a date within two business days prior to the Effective
Time.
Section 7.14 Recruitment. Prior to the Effective Time, and, if this
Agreement is terminated by the Company pursuant to Section 9.1(e)(i) or
9.1(e)(ii), prior to the first anniversary of the date of such termination,
neither Parent nor any of its Subsidiaries shall hire or solicit the employment
of any employee of the Company or any of its Subsidiaries. Prior to the
Effective Time and, if this Agreement is terminated by Parent pursuant to
Section 9.1(d)(i) or 9.1(d)(ii) prior to the first anniversary of such
termination, neither the Company nor any of its Subsidiaries shall hire or
solicit the employment of any employee of Parent or any of its Subsidiaries. If
this Agreement terminates without the Merger being consummated except as
provided in the preceding sentences of this Section 7.14, neither Parent nor its
Subsidiaries, on the one hand, nor the Company nor its Subsidiaries, on the
other, will hire or solicit the employment of any employee of any of the others,
for a period of six months from the date of such termination.
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Section 7.15 Indemnification.
(a) For a period of six years after the Effective Time, Parent
shall, and shall cause the Surviving Corporation to, indemnify, defend and hold
harmless the present and former directors, officers, employees and agents of the
Company and its Subsidiaries (each, an "Indemnified Party") against any and all
losses, costs, damages, claims and liabilities (including reasonable attorneys'
fees) arising out of the Indemnified Party's service or services as a director,
officer, employee or agent of the Company or, if at the Company's request, of
another corporation, partnership, joint venture, trust or other enterprise
occurring at or prior to the Effective Time (including the transactions
contemplated by or related to this Agreement) to the fullest extent permitted
under New York Law and the Company's Articles of Incorporation and Bylaws as in
effect on the date hereof, including provisions relating to advances of expenses
incurred in the defense of any litigation, action, claim or proceeding and
whether or not Parent or Surviving Corporation is insured against any such
matter. Without limiting the foregoing, in any case in which approval by the
Surviving Corporation is required to effectuate any indemnification and subject
to the applicable requirements of the NYBCL, the Surviving Corporation shall
direct, at the election of the Indemnified Party, that the determination of any
such approval shall be made by independent counsel selected by the Surviving
Corporation and reasonably acceptable to the Indemnified Party.
(b) The Surviving Corporation or the Parent shall maintain in effect
(for at least six years from the Effective Time in the case of claims made
policies) directors' and officers' liability insurance policies providing
coverage in an aggregate amount of at least $10,000,000 and with a carrier(s)
having a Best rating at least equal to the Best rating of the current carrier(s)
covering directors and officers of the Company serving as of or after December
1, 1990 with respect to claims arising from occurrences prior to or at the
Effective Time (including the transactions contemplated by or related to this
Agreement).
(c) If Parent or the Surviving Corporation or any successors or
assigns shall transfer all or substantially all of its assets to any person or
entity, then and in each case, proper provision shall be made so that the
assigns of Parent or the Surviving Corporation shall assume the obligations set
forth in this Section 7.15.
(d) The provisions of this Section 7.15 are intended to be for the
benefit of and shall be enforceable by, each Indemnified Party and his or her
respective heirs and representatives.
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) HSR Approval. Any waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated, and
no action shall have been instituted by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation
of this transaction, which action shall have not been withdrawn or
terminated.
(b) Stockholder Approvals. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote (as described in Section 4.18) of the stockholders of the Company, in
accordance with applicable law.
(c) Nasdaq Listing. The shares of Parent Common Stock issuable to
the holders of Company Common Stock pursuant to this Agreement in the
Merger shall have been authorized for listing on the Nasdaq National
Market, upon official notice of issuance.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceeding by the SEC seeking a stop order.
(e) No Order. No Governmental Entity (including a federal or state
court) of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which materially restricts, prevents or
prohibits consummation of the Merger or any transaction contemplated by
this Agreement; provided, however, that the parties shall use their
reasonable best efforts to cause any such decree, judgment, injunction or
other order to be vacated or lifted.
(f) Approvals. Other than the filing of Merger documents in
accordance with the NYBCL, all authorizations, consents, waivers, orders
or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity the failure of which
to obtain, make or occur would, individually or in the aggregate, have a
material adverse effect at or after the Effective Time on Parent and its
Subsidiaries including the Surviving Corporation and its Subsidiaries,
shall have been obtained, been filed or have occurred. Parent shall have
received all state securities or "blue sky" permits and other
authorizations necessary to issue the shares of Parent Common Stock
pursuant to this Agreement in the Merger.
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(g) Litigation. No preliminary or permanent injunction or other
order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which enjoins, restrains or prohibits
the transactions contemplated hereby, including the consummation of the
Merger or has the effect of making the Merger illegal and which is in
effect at the Effective Time (each party agreeing to use its best efforts
to have any such injunction or order lifted).
(h) Statutes. No statute, rule, regulation, executive order, decree
or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the
consummation of the Merger or has the effect of making the Merger illegal.
(i) Market Events. There shall not have occurred and be continuing
any general suspension or limitation of trading in Parent Common Stock
(exclusive, however, of any temporary suspension pending an ensuing public
announcement) or in securities generally on Nasdaq.
(j) Tax Opinion. The Company shall have received the opinion of
Cummings & Lockwood, counsel to the Company, which opinion shall be
reasonably satisfactory to Parent, to the effect that the Merger will be
treated for United States federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, which opinion shall be
dated on or about the date that is two business days prior to the date the
Proxy Statement is first mailed to stockholders of the Company and shall
have not have been withdrawn or modified in any material respect. Such
opinion may be based, as to the matters of fact set forth in such
certificates, on certificates of officers of the Company and Parent and of
other appropriate persons that are provided to Parent.
Section 8.2 Conditions to Obligations of Parent and Sub to Effect
the Merger. The obligations of Parent and Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by Parent:
(a) Representations and Warranties. (i) The aggregate effect of all
inaccuracies in the representations and warranties of the Company set
forth in this Agreement does not and would not reasonably be expected to
have a Company Material Adverse Effect and (ii) the representations and
warranties of the Company that are qualified with reference to a Company
Material Adverse Effect or materiality shall, subject to such
qualification, be true and correct and the representations and warranties
that are not so qualified shall be true and correct in all material
respects, in each case as of the date hereof, and, except to the extent
such representations and warranties speak as of an earlier date, as of the
Effective Time as though made at and as of the Effective Time, and Parent
shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to
such effect.
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(b) Performance of Obligations of the Company. Each of the Company
and its Subsidiaries shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the Effective Time, and Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer or the
chief financial officer of the Company to such effect.
(c) Affiliate Agreements. Parent shall have received the Affiliate
Agreements from each of the Affiliates of the Company, as contemplated in
Section 7.5.
(d) "Pooling Letter." Parent shall have received from BDO Seidman,
LLP a letter, dated the Closing Date and addressed to Parent, to the
effect that, subject to customary qualifications, the Merger qualifies for
pooling of interests treatment for financial reporting purposes in
accordance with GAAP, and Parent shall have received from the Company,
with the consent of Miller, Ellin & Company, a copy of a letter, dated the
Closing Date, of Miller, Ellin & Company addressed to the Company to the
effect that, subject to customary qualifications, the Merger qualifies for
pooling of interests for financial reporting purposes in accordance with
GAAP.
(e) Letters of Resignation. Parent and Sub shall have received
letters of resignation addressed to the Company from the members of the
Company's board of directors, which resignations shall be effective as of
the Effective Time.
(f) Dissenting Shares. The aggregate number of shares of Company
Common Stock into which all Dissenting Shares are convertible shall not
constitute more than 9% of the number of shares of Company Common Stock
outstanding as of immediately prior to the Effective Time (calculated
assuming no dilution).
(g) Legal Opinion. Parent shall have received opinions, dated the
Closing Date, of Otterbourg, Steindler, Houston & Rosen, P.C. and Lester
Morse, P.C. substantially to the effect set forth in Exhibit C hereto,
subject to assumptions, qualifications and limitations reasonably
satisfactory to Parent, which opinions shall be reasonably satisfactory to
Parent.
(h) The Company's 1996 Directors' Retirement Plan shall have
terminated and neither the Company, Parent nor any of their respective
Subsidiaries shall have any liability or obligation to any person arising
under or in respect of such plan.
Section 8.3 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties. (i) The aggregate effect of all
inaccuracies in the representations and warranties of Parent set forth in
this Agreement does not and will not have a Parent Material Adverse Effect
and (ii) the representations and warranties of Parent contained in this
Agreement that are qualified with reference to a Parent Material
33
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Adverse Effect or materiality shall be true and correct and the
representations and warranties that are not so qualified shall be true and
correct in all material respects as of the date hereof, and, except to the
extent such representations and warranties speak as of an earlier date, as
of the Effective Time as though made on and as of the Effective Time, and
the Company shall have received a certificate signed on behalf of Parent
by the chief executive officer or the chief financial officer of Parent to
such effect.
(b) Performance of Obligations of Parent and Sub. Each of Parent and
Sub shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate signed on behalf
of Parent by the chief executive officer or the chief financial officer of
Parent to such effect.
(c) Legal Opinion. The Company shall have received an opinion, dated
the Closing Date, of Proskauer Rose Goetz & Mendelsohn LLP, reasonably
satisfactory to the Company, substantially to the effect set forth in
Exhibit D hereto.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if (i) the Merger shall not
have been consummated before September 30, 1997, or (ii) the approval of
the stockholders of the Company required by Section 4.18 shall not have
been obtained at a meeting duly convened therefor or any adjournment
thereof (unless, in the case of any such termination pursuant to this
Section 9.1(b), the failure to so consummate the Merger by such date or to
obtain such stockholder approval shall have been caused by the action or
failure to act of the party (or its Subsidiaries) seeking to terminate
this Agreement, which action or failure to act constitutes a breach of
this Agreement);
(c) by either Parent or the Company, if any permanent injunction or
action by any Governmental Entity of competent jurisdiction preventing the
consummation of the Merger shall have become final and nonappealable;
provided, however, that the party seeking to terminate this Agreement
pursuant to this Section 9.1(c) shall have used all reasonable efforts to
remove such injunction or overturn such action;
(d) by Parent, if (i) there has been a breach of any representations
or warranties of the Company set forth herein the effect of which,
individually or together with all other
34
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such breaches, is a Company Material Adverse Effect, (ii) there has been a
breach in any material respect of any of the covenants or agreements set
forth in this Agreement on the part of the Company, which breach is not
curable or, if curable, is not cured within 30 days after written notice
of such breach is given by Parent to the Company, (iii) the Board of
Directors of the Company (x) withdraws or amends or modifies in a manner
materially adverse to Parent or Sub its recommendation or approval in
respect of this Agreement or the Merger, (y) makes any recommendation with
respect to an Acquisition Transaction (including making no recommendation
or stating an inability to make a recommendation), other than a
recommendation to reject such Acquisition Transaction, or (z) takes any
action that would be prohibited by Section 7.2, (iv) any corporation,
partnership, person or other entity or group ("Acquiring Person") other
than Parent, or any affiliate or Subsidiary of Parent, shall have become
the beneficial owner of more than 20% of the outstanding voting equity of
the Company (either on a primary or a fully diluted basis); provided,
however that "Acquiring Person" shall not include any corporation,
partnership, person, other entity or group which beneficially owns as of
the date hereof (either on a primary or a fully diluted basis) more than
20% of the outstanding voting equity of the Company (either on a primary
or a fully diluted basis) and which has not after the date hereof
increased such ownership percentage by more than an additional 1% of the
outstanding voting equity of the Company (either on a primary or a fully
diluted basis), or (v) any other Acquisition Transaction shall have
occurred with any Acquiring Person other than Parent, or any affiliate or
Subsidiary of Parent;
(e) by the Company, if (i) there has been a breach of any
representations or warranties of Parent set forth herein the effect of
which, individually or together with all other such breaches, is a Parent
Material Adverse Effect, (ii) there has been a breach in any material
respect of any of the covenants or agreements set forth in this Agreement
on the part of Parent, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by the
Company to Parent or (iii) such termination is necessary to allow the
Company to enter into an Acquisition Transaction in accordance with
Section 7.2(b); and
(f) by Parent, if the meeting of stockholders of the Company to vote
upon this Agreement is canceled or is otherwise not held prior to August
31, 1997 except as a result of a judgment, injunction, order or decree of
any competent authority or events or circumstances beyond the reasonable
control of the Company.
Section 9.2 Effect of Termination.
(a) In the event of termination of this Agreement pursuant to this
Article IX, the Merger shall be deemed abandoned and this Agreement shall
forthwith become void, without liability on the part of any party hereto, except
as provided in this Section 9.2, Section 7.1, Section 7.10 and Section 7.14.
(b) If (x) Parent shall have terminated this Agreement pursuant to
Sections 9.1(d)(iii), 9.1(d)(iv) or 9.1(d)(v) or (y) either (1) Parent or the
Company shall have terminated
35
<PAGE>
this Agreement pursuant to Section 9.1(b) or (2) Parent shall have terminated
this Agreement pursuant to Section 9.1(d)(i), 9.1(d)(ii) or 9.1(f) and, prior to
or within one (1) year after any termination described in this clause (y), the
Company (or any of its Subsidiaries) shall have directly or indirectly entered
into a definitive agreement for, or shall have consummated, an Acquisition
Transaction or (z) the Company shall have terminated this Agreement pursuant to
Section 9.1(e)(iii), then, in any of such cases, the Company shall pay Parent
(A) a termination fee of five million dollars ($5,000,000), plus (B) an amount
equal to Parent's actual, documented out-of-pocket expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, legal, professional and service fees and
expenses; provided, however, that any liquidated damage amounts previously paid
by the Company to Parent pursuant to Section 9.2(c) shall be credited against
the termination fee payable under this Section 9.2(b); provided further,
however, that no amounts paid in respect of expenses pursuant to Section 9.2(c)
shall be credited against any additional expenses covered hereunder and not
previously paid under Section 9.2(c). Any fees or amounts payable under this
Section 9.2(b) shall be paid in same day funds no later than: (i) two business
days after a termination described in clause (x) of this Section 9.2(b); (ii)
concurrently with or prior to the entering into of the definitive agreement for,
or the consummation of, such Acquisition Transaction, in the case of a
termination described in clause (y) of this Section 9.2(b); or (iii)
concurrently with or prior to a termination described in clause (z) of this
Section 9.2(b).
(c) If Parent shall have terminated this Agreement pursuant to
Sections 9.1(d)(i), 9.1(d)(ii) or 9.1(f), then, in any of such cases, the
Company shall pay to Parent as liquidated damages and not as a penalty, three
million dollars ($3,000,000). Such liquidated damage amount shall be payable
no later than two business days after such termination.
(d) If the Company shall have terminated this Agreement pursuant
to Section 9.1(e)(i) or 9.1(e)(ii), then, in either such case, Parent shall
pay to the Company as liquidated damages and not as a penalty, three million
dollars ($3,000,000). Such liquidated damage amount shall be payable no later
than two business days after such termination.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Amendment and Modification. At any time prior to the
Effective Time, this Agreement may be amended, modified or supplemented only by
written agreement (referring specifically to this Agreement) of Parent, Sub and
the Company with respect to any of the terms contained herein; provided,
however, that after any approval and adoption of this Agreement by the
stockholders of the Company, no such amendment, modification or supplementation
shall be made which under applicable law requires the approval of such
stockholders, without the further approval of such stockholders.
Section 10.2 Waiver. At any time prior to the Effective Time, Parent
and Sub, on the one hand, and the Company, on the other hand, may (i) extend the
time for the performance
36
<PAGE>
of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any documents delivered pursuant hereto and (iii) waive compliance by the
other with any of the agreements or conditions contained herein which may
legally be waived. Any such extension or waiver shall be valid only if set forth
in an instrument in writing specifically referring to this Agreement and signed
on behalf of such party.
Section 10.3 Survivability; Investigations. The respective
representations and warranties of Parent and the Company contained herein or in
any certificates or other documents delivered prior to or as of the Effective
Time (i) shall not be deemed waived or otherwise affected by any investigation
made by any party hereto and (ii) shall not survive beyond the Effective Time.
The covenants and agreements of the parties hereto (including the Surviving
Corporation after the Merger) shall survive the Effective Time without
limitation (except for those which, by their terms, contemplate a shorter
survival period).
Section 10.4 Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof. Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.
(a) If to Parent or Sub, to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Fax: (516) 843-5675
Attention: Mark E. Mlotek, Esq.
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Fax: (212) 969-2900
Attention: Robert A. Cantone
(b) if to the Company, to:
Micro Bio-Medics, Inc.
864 Pelham Parkway
Pelham Manor, New York 10803
Fax: (914) 738-9538
37
<PAGE>
Attention: Bruce J. Haber, Esq.
with a copy to:
Otterbourg, Steindler, Houston & Rosen, P.C.
230 Park Avenue
New York, New York 10169
Fax: (212) 682-6104
Attention: Donald N. Gellert, Esq.
Section 10.5 Descriptive Headings; Interpretation. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Schedules, Exhibits or Articles mean a Section, Schedule,
Exhibit or Article of this Agreement unless otherwise indicated. The term
"person" shall mean and include an individual, a partnership, a joint venture, a
limited liability company, a corporation, a trust, a Governmental Entity or an
unincorporated organization.
Section 10.6 Entire Agreement; Assignment. This Agreement (including
the Schedules and other documents and instruments referred to herein), together
with the Proxy and Option Agreement and the Confidentiality Agreement,
constitute the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. This Agreement is not intended to confer
upon any person not a party hereto any rights or remedies hereunder. This
Agreement shall not be assigned by operation of law or otherwise; provided that
Parent or Sub may assign its rights and obligations hereunder to a direct or
indirect subsidiary of Parent, but no such assignment shall relieve Parent or
Sub, as the case may be, of its obligations hereunder.
Section 10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the provisions thereof relating to conflicts of law, except to the
extent relating to matters governed by the General Corporation Law of the State
of Delaware.
Section 10.8 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 10.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
38
<PAGE>
IN WITNESS WHEREFORE, each of Parent, Sub and the Company has caused
this Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
HENRY SCHEIN, INC.
By: /s/ Mark Mlotek
----------------------------
Name:
Title:
MICRO BIO-MEDICS, INC.
By: /s/ Bruce Haber
----------------------------
Name:
Title:
HSI ACQUISITION CORP.
By: /s/ Mark Mlotek
----------------------------
Name:
Title:
39
<PAGE>
Exhibit A
AFFILIATE AGREEMENT
AGREEMENT dated March 7, 1997, between Henry Schein, Inc., a Delaware
corporation ("Parent"), and the undersigned stockholder (the "Affiliate") of
Micro Bio- Medics, Inc., a New York corporation (the "Company").
In order to induce Parent to consummate that certain Agreement and
Plan of Merger, dated the date hereof (the "Merger Agreement"), by and among
Parent, Manor Acquisition Corp., a New York corporation and wholly owned
subsidiary of Parent, and the Company, and in consideration of the agreements
contained herein and in the Merger Agreement;
The parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Act.
"Person" shall mean an individual, corporation, partnership, limited
liability company, trust or other entity or organization.
"Transfer" shall mean to transfer, sell, assign, pledge,
hypothecate, convey or otherwise dispose of.
2. Rule 145. The Affiliate shall hold the Parent Common Stock (as
such term is defined in the Merger Agreement) that he or she receives pursuant
to the Merger Agreement subject to all applicable provisions of the Act and the
rules and regulations promulgated by the Commission thereunder and shall not
make an illegal "distribution" (within the meaning of the Act and Rule 145
promulgated thereunder) of such Parent Common Stock. Without limiting the
generality of the foregoing, the Affiliate:
(a) shall not sell any Parent Common Stock until after the
publication of financial statements reflecting the combined operating
results of Parent and the Company for a period of not less than 30 days
from and after the Effective Time (as such term is defined in the Merger
Agreement);
(b) shall not transfer any Parent Common Stock unless (i) the
transfer is being made in accordance with the provisions of Rule 145 (as
it
<PAGE>
may be amended from time to time) and such Affiliate shall have delivered
written notice to Parent substantially in the forms annexed hereto and
made a part hereof as Annex A and Annex B, (subject to any appropriate
amendments thereto as a result of any amendments to Rule 145), (ii) Parent
shall have been furnished with an opinion of counsel, in form and
substance reasonably satisfactory to Parent's counsel, that registration
under the Act is not required in respect of such transfer or (iii) a
registration statement covering the shares proposed to be transferred and
the proposed transfer thereof has been filed by Parent with the Commission
and has become effective under the Act; and
(c) shall consent to the imposition of a legend on the Parent Common
Stock to be received by such Affiliate in connection with the merger
contemplated by the Merger Agreement to the effect that such Parent Common
Stock may not be sold except in compliance with the Act.
3. Successors and Assigns; Assignment. This Agreement shall inure to
the benefit of and be binding upon the parties and their respective heirs,
personal representatives, successors and permitted assigns. Except as otherwise
herein provided, no party shall assign such party's rights or obligations
hereunder without the other party's prior written consent.
4. Notices. All notices and other communications hereunder shall be
in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof. Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.
(a) If to Parent, to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Robert A. Cantone, Esq.
2
<PAGE>
(b) if to the Affiliate, to:
___________________________
___________________________
___________________________
5. Injunctive Relief; Remedies Cumulative. (a) Parent, on the one
hand, and the Affiliate, on the other hand, acknowledge that the other party
will be irreparably harmed and that there will be no adequate remedy at law for
a violation of any of the covenants or agreements of such party that are
contained in this Agreement. It is accordingly agreed that, in addition to any
other remedies that may be available to the non-breaching party upon the breach
by any other party of such covenants and agreements, the non-breaching party
shall have the right to obtain injunctive relief to restrain any breach or
threatened breach of such covenants or agreements or otherwise to obtain
specific performance of any of such covenants or agreements.
(b) No remedy conferred upon or reserved to any party herein is
intended to be exclusive of any other remedy, and every remedy shall be
cumulative and in addition to every other remedy herein or now or hereafter
existing at law, in equity or by statute.
6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the provisions thereof relating to conflicts of law.
7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
8. Effect of Partial Invalidity. Whenever possible, each provision
of this Agreement shall be construed in such a manner as to be effective and
valid under applicable law. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect
against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
as of the date first above written.
3
<PAGE>
HENRY SCHEIN, INC.
By:_________________________________
Name:
Title:
AFFILIATE:
____________________________________
____________________________________
[Please Print Name]
4
<PAGE>
ANNEX A
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
Ladies and Gentlemen:
I propose to sell ____________ shares (the "Shares") of Parent
Common Stock that I received in connection with the business combination of
Parent and MBM. I propose to effect such sale through _____________, my broker,
in accordance with the requirements relating to sales by "affiliates" under Rule
145 under the Securities Act of 1933, as amended.
To induce you to remove the restrictive legend from the stock
certificate(s) representing such Shares, I hereby represent and warrant as
follows:
1. It is my bona fide intention to sell the Shares within 90 days
from the date hereof. If for some reason all of the Shares have not been sold
within such 90 day period, I will send to Parent the stock certificate
evidencing the balance of the Shares which were not sold in order that a
restrictive legend may be placed thereon. The Shares are presently evidenced by
stock certificate no.(s) _____, which stock certificate (s) represent(s) an
aggregate of _____ shares of Parent Common Stock. I understand that to the
extent such certificate(s) represent(s) a greater number of shares of Parent
Common Stock than those proposed to be sold, a new stock certificate for the
balance of such shares of Parent Common Stock will be sent to me with the same
restrictive legend as is presently affixed to my certificate(s).
2. As of the date of this letter and as of the time of any sale of
the Shares for my account, the aggregate number of shares of Parent Common Stock
sold during the preceding three months for my account and for the account of any
person whose sales are required by Rule 144 under the Securities Act of 1933, as
amended, to be aggregated with my sales have not and will not exceed the greater
of: (a) 1% of the outstanding Parent Common Stock, or (b) the average weekly
reported volume of trading in Parent Common Stock on all securities exchanges or
quotation systems during the four calendar weeks preceding the date of sale of
such Shares.
3. During the past three months I have not and during the next three
months I will not, alone or in conjunction with others, sell any Parent Common
Stock
A-1
<PAGE>
under circumstances which could jeopardize the exemption from registration
available under Rule 145 and Rule 144.
4. I have not solicited or arranged for the solicitation of, and I
will not solicit or arrange for the solicitation of, orders to buy the Shares in
anticipation of or in connection with such proposed sale.
5. I have not made, and will not make, any payment in connection
with the offering or sale of the Shares to any person other than the payment of
the usual and customary broker's commission to ____________________.
Very truly yours,
A-2
<PAGE>
ANNEX B
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
Ladies and Gentlemen:
We have been asked to sell ________ shares (the "Shares") of Parent
Common Stock owned by _______________ ("Seller"). We understand that the Seller
is an "affiliate" within the meaning of Rule 145 promulgated under the
Securities Act of 1933, as amended, and that sales by him of the Shares must
comply with certain provisions of Rule 144 under such Act.
To induce you to remove the restrictive legend from the stock
certificate evidencing the Shares so that they may be transferred pursuant to
Rules 144 and 145, we hereby represent and warrant as follows:
1. We have made reasonable inquiry as required by paragraph (g)(3)
of Rule 144 and, based upon such inquiry, we are not aware of circumstances
indicating that the Seller is an underwriter with respect to the Shares or that
the transaction is part of a distribution of the Shares.
2. The Shares for which we are acting as broker will be sold by us
in "brokers' transactions" as defined in paragraph (g) of Rule 144.
3. Neither the Seller nor we have solicited or arranged nor will we
solicit or arrange for the solicitation of orders to buy the Shares (except as
permitted by Rule 144) nor have we received nor will we receive any payment in
connection with the sale of the Shares other than usual and customary brokerage
commissions.
Very truly yours,
B-1
<PAGE>
EXHIBIT B
OPTION AND PROXY AGREEMENT
OPTION AND PROXY AGREEMENT dated as of March 7, 1997, by and among
Henry Schein, Inc., a Delaware corporation ("Parent"), and the persons listed on
Schedule A hereto (collectively, the "Shareholders" and each a "Shareholder"),
each a shareholder of Micro Bio-Medics, Inc. a New York corporation (the
"Company").
Contemporaneously with the execution of this Agreement, the Company,
Parent and HSI Acquisition Corp., a New York corporation and wholly-owned
subsidiary of Parent ("Sub"), are entering into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which it is contemplated that Sub will be
merged with and into the Company (the "Merger") and the holders of the Company's
Common Stock, par value $.03 per share (the "Company Common Stock"), will be
entitled to receive shares of Parent's Common Stock, par value $.01 per share
("Parent Common Stock"), for such shares of Company Common Stock.
Parent, as a condition to its willingness to enter into the Merger
Agreement, has required the Shareholders to grant Parent an option and an
irrevocable proxy with respect to all of the shares of Company Common Stock
owned by the Shareholders (except as expressly noted below), together with any
additional shares of Company Common Stock hereafter acquired by the Shareholders
(pursuant to Section 10, by exercise of options or warrants, by conversion of
debentures or otherwise and including any Additional Shares (as defined below)
acquired by such Shareholder) (such specified number of shares, and any
additional shares when and if acquired, being referred to as the "Shares") on
the terms and conditions hereinafter set forth.
The parties hereto agree as follows:
1. Grant of Option.
(a) Each Shareholder hereby grants to Parent an option
(collectively, the "Options") to purchase all but not less than all of that
Shareholder's Shares (exclusive of those Shares beneficially owned by Deane
Reade that are currently held in pension plans and approximately 20,000 shares
currently held in Deane Reade margin accounts subject to the terms thereof (the
"Excluded Reade Shares"). Except as otherwise provided in Section 1(b), the
consideration for the purchase of such Shareholder's Shares shall be the
issuance to such Shareholder of the number of shares of Parent Common Stock that
such Shareholder would have been entitled to receive by virtue of the Merger had
the Effective Time (as defined in the Merger Agreement) occurred at the time of
the exercise of the Options.
(b) Each Shareholder hereby agrees to exercise all options,
warrants or other rights to acquire any Shares, and to convert or exchange any
securities or other rights that are convertible into or exchangeable for Shares,
whether now owned or hereafter acquired by
<PAGE>
such Shareholder (collectively, "Rights"), in connection with any exercise by
Parent of the Options in order to permit the acquisition by Parent of the Shares
receivable upon such exercise, conversion or exchange (the "Additional Shares")
pursuant to the exercise of the Options. To the extent that a Shareholder is
obligated to pay any consideration in connection with the exercise, conversion
or exchange of such Shareholder's Rights (the "Rights Consideration"), such
Rights Consideration shall be paid in such form as is permitted under the Rights
as Parent shall direct. If payment of the Rights Consideration is to be made in
cash, Parent shall fund such payment; if payment of a Shareholder's Rights
Consideration may be made by delivery of shares of Company Common Stock, at
Parent's direction such Shareholder shall deliver that number of shares owned by
him or her in payment (or partial payment, as the case may be) of the Rights. If
any Right is to be exercised by means of a "cashless exercise," the Shareholder
exercising such Right shall cause the net number of shares from such cashless
exercise to be issued and delivered to Parent. In the event that Parent funds
any Rights Consideration payment on behalf of any Shareholder (i) the number of
shares of Parent Common Stock to be issued by Parent in respect of the
Additional Shares that were acquired pursuant to the payment of such Rights
Consideration shall be reduced by that number of shares (rounded to the nearest
whole share) as is equal to the quotient obtained by dividing the aggregate
amount of Rights Consideration so paid by Parent by the closing sales prices of
the Parent Common Stock on the last trading date prior to the exercise of the
Options; and (ii) if the funding of the Rights Consideration payment on behalf
of such Shareholder subjects such Shareholder to income tax in respect of such
payment, the Parent shall pay to such Shareholder the amount of such income tax,
provided such Shareholder shall cooperate with Parent (at Parent's expense) in
disputing the imposition of such income tax; and provided further, that if
Parent determines in good faith that there is a basis for disputing all or any
amount of the income tax imposed, Parent shall be entitled to direct any such
dispute, but shall indemnify the Executive against any additional income tax for
which he or she may become liable as a result.
(c) Each Shareholder agrees not to acquire any Right that
provides, whether contingent or otherwise, for any reduction in the amount of
the Rights Consideration payable upon the exercise, conversion or exchange of
such Right, whether or not such reduction is contingent or fixed as to
occurrence or amount, and shall immediately decline in writing any such Right
that may be granted to him or her.
2. Exercise of Option. The Options, in each case, shall be
exercisable, in whole, but not in part, by Parent as follows:
(a) If the Merger Agreement is terminated by Parent pursuant
to Sections 9.1(d)(iii), 9.1(d)(iv) or 9.1(d)(v) of the Merger Agreement, or by
the Company pursuant to Section 9.1(e)(iii) of the Merger Agreement, then Parent
may exercise the Options at any time during the six month period beginning on
the date of such termination, provided, however, that if the Company is the
terminating party, Parent's right to exercise the Options shall commence on the
earlier of Parent's receipt of notice of such termination and such time as
knowledge of such termination becomes publicly available.
-2-
<PAGE>
(b) If (i) the Merger Agreement is terminated by Parent
pursuant to Sections 9.1(d)(i), 9.1(d)(ii) or 9.1(f) of the Merger Agreement, or
by either Parent or the Company pursuant to Section 9.1(b), and the Company (or
any of its Subsidiaries shall have, directly or indirectly, entered into a
definitive agreement for, or shall have consummated, an Acquisition Transaction,
as that term is defined in the Merger Agreement, within one year of such
termination, then Parent may exercise the Options during the period beginning on
the earlier of the date on which Parent first receives notice of the occurrence
of the event triggering HSI's right to exercise the Options and the date on
which such event becomes publicly known and (except as otherwise provided below)
ending on the date three business days after the date that the Acquisition
Transaction (or any successive Acquisition Transaction or any other Acquisition
Transaction made in response thereto) occurs.
At any time when Parent wishes to exercise the Options, Parent shall give
written notice (the "Notice") to the Shareholders specifying a place and a date
not less than two nor more than 20 business days from the date of the Notice for
the closing of such purchase (the "Closing"); provided, however, that such date
may be extended to the extent necessary to comply with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and applicable
regulations thereunder. The date on which the Parent gives the Notice shall be
deemed to be the date on which the Options are exercised. Each Shareholder
agrees to the use his or her reasonable best efforts (subject to any applicable
fiduciary duties) to give Parent at least five business days prior written
notice of the occurrence of any event triggering Parent's right to exercise the
Options.
3. Payment and delivery of Certificate(s). At the Closing hereunder:
(a) Parent will deliver to the Shareholders the shares of
Parent Common Stock to be issued in consideration for the Shares being purchased
upon exercise of the Options as provided in Section 1; and
(b) the Shareholders will deliver to Parent against receipt of
the shares of Parent Common Stock as provided in Section 3(a), a certificate or
certificates representing the number of Shares so purchased by Parent duly
endorsed or with executed blank stock powers attached, in either event with
signature guaranteed such that registered ownership of the Shares may be
registered for transfer on the books of the Company.
4. Irrevocable Proxy. Each Shareholder hereby irrevocably
constitutes and appoints Parent or any designee of Parent the lawful agent,
attorney and proxy of such Shareholder during the term of this Agreement, to
vote all of his, her or its Shares (excluding the Excluded Reade Shares") and
Additional Shares and, in the case of Bruce Haber, all shares of Company Common
Stock owned by Andrew D. Stone that he has an irrevocable proxy to vote (the
"Stone Shares") at any meeting or in connection with any written consent of the
Company's shareholders (a) in favor of the Merger, (b) in favor of the Merger
Agreement, as such may be modified or amended from time to time, (c) against any
Acquisition Transaction (other than the Merger) or other merger, sale, or other
business combination between the Company and any
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other person or entity or any other action which would make it impractical for
Parent to effect a merger or other business combination of the Company with
Parent or Sub, and (d) against any other action or agreement that would result
in a breach 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 Company's obligations under the Merger Agreement not being fulfilled.
This proxy shall not authorize Parent to vote the Shares of the Stone Shares on
any matters other than those specified above which may be presented to the
Company's shareholders at any meeting or in connection with any written consent
of the Company's shareholders. This power of attorney is irrevocable, is granted
in consideration of Parent entering into the Merger Agreement and is coupled
with an interest sufficient in law to support an irrevocable power. This
appointment shall revoke all prior attorneys and proxies appointed by any
Shareholder at any time with respect to the Shares or the Stone Shares and the
matters set forth in clauses (a) through (d) above and no subsequent attorneys
or proxies will be appointed by such Shareholder, or be effective, with respect
thereto.
5. Representations and Warranties of the Shareholders. Each
Shareholder represents and warrants to Parent as follows:
(a) Ownership of Shares and Rights. That Shareholder is the
sole beneficial owner of the number of Rights set forth as being granted to that
Shareholder on Schedule A. The Rights set forth opposite that Shareholder's name
on Schedule A constitute all the Rights owned beneficially or of record by that
Shareholder. The Shares owned by that Shareholder are validly issued, fully paid
and nonassessable and such Shares (excluding the Excluded Reade Shares) and/or
the Rights set forth opposite that Shareholder's name on Schedule A, are held by
that Shareholder, or by a nominee or custodian for the benefit of that
Shareholder, free and clear of all liens, claims, security interests, agreements
and other encumbrances, except for encumbrances arising under this Agreement.
(b) Power; Binding Agreement. That Shareholder has the legal
capacity to enter into and perform all of that Shareholder's obligations under
this Agreement. The execution, delivery and performance of this Agreement by
that Shareholder will not violate any other agreement to which that Shareholder
is a party, including, without limitation, any voting agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by that Shareholder and constitutes a valid and binding obligation of
that Shareholder, enforceable against that Shareholder in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally and subject to
general principles of equity. If that Shareholder is married and that
Shareholder's Shares constitute community property, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
obligation of, that Shareholder's spouse, enforceable against that spouse in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject to general principles of equity.
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(c) Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by that Shareholder nor the
consummation of the transactions contemplated by this Agreement will: (i)
require any consent, approval, authorization or permit of, or filing with or
notification to, any person or entity or any governmental or regulatory
authority, except in connection with the HSR Act or pursuant to the Securities
Exchange Act of 1934; (ii) conflict with, result in a breach of, or result in a
default (or give rise to a right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, license, agreement
or other instrument or obligation to which that Shareholder is a party or by
which that Shareholder or any of that Shareholder's assets may be bound; or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to that Shareholder or by which any of that Shareholder's assets are
bound.
(d) Brokers. No broker, finder or other investment banker is
entitled to any broker's, finder's or other similar fee or commission in
connection with this Agreement or the transactions contemplated by this
Agreement based upon agreements made by or on behalf of that Shareholder.
6. Representations and Warranties of Parent. Parent represents and
warrants to each Shareholder that:
(a) Power; Binding Agreement. Parent has the corporate power
and authority to enter into and perform all its obligations under this
Agreement. The execution, delivery and performance of this Agreement by Parent
will not violate any other agreement to which Parent is a party. This Agreement
has been duly and validly authorized, executed and delivered by Parent and
constitutes a valid and binding obligation of Parent, enforceable against Parent
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject to general principles of equity.
(b) Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by Parent nor the consummation by
Parent of the transactions contemplated by this Agreement will: (i) require any
consent, approval, authorization or permit of, or filing with or notification
to, any person or entity or any governmental or regulatory authority, except in
connection with the HSR Act or pursuant to the Securities Exchange Act of 1934;
(ii) conflict with, result in a breach of, or result in a default (or give rise
to a right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, license, agreement or other instrument or
obligation to which Parent is a party or by which Parent or any of its assets
may be bound; or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or by which any of its assets are bound.
(c) Brokers. No broker, finder or other investment banker is
entitled to any broker's, finder's or other similar fee or commission in
connection with this Agreement or the transactions contemplated by this
Agreement based upon agreements made by or on behalf of Parent.
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7. Additional Covenants of the Shareholders. Each Shareholder hereby
covenants and agrees that:
(a) that Shareholder will not enter into any transaction, take
any action, or by inaction permit any event to occur that would (i) result in
any of the representations or warranties of such Shareholder herein contained
not being true and correct at and as of the time immediately after the
occurrence of such transaction, action or event; or (ii) have the effect of
preventing or disabling that Shareholder from performing that Shareholder's
obligations under this Agreement;
(b) that Shareholder will not grant any proxies or powers of
attorney with respect to any shares, deposit any Shares into a voting trust or
enter into a voting agreement with respect to such Shares; provided, however,
that the Shareholders may grant proxies to third parties provided that such
proxies are expressly made subject to the terms of this Agreement;
(c) until the termination of this Agreement, such Shareholder
will at all times use his, her or its best efforts in his, her or its capacity
as a shareholder of the Company to prevent the Company from taking any action in
violation of the Merger Agreement;
(d) from and after the date hereof until the termination of
this Agreement, other than under the circumstances contemplated by Section 10
hereof, the Shares will not be sold, transferred, pledged, hypothecated,
transferred by gift, or otherwise disposed of in any manner whatsoever without
notifying Parent in advance and obtaining and delivering to Parent any evidence
that Parent may reasonably request to evidence the transferee's agreement to be
bound by this Agreement; provided, however, that in the event of such
Shareholder's death during the term of this Agreement, the Shares and Rights may
be transferred in accordance with the Shareholder's last will and testament, or
if none, in accordance with the applicable laws of intestate succession, in
either of which cases, the Shares shall remain subject in all respects to the
terms of this Agreement; and
(e) the Shareholder will execute and deliver any additional
documents reasonably necessary or desirable, in the opinion of Parent's or the
Company's counsel, to evidence the irrevocable proxy granted in Section 4 with
respect to the Shares or otherwise implement and effect the provisions of this
Agreement.
8. No Solicitation. No Shareholder shall, in that Shareholder's
capacity as such, directly or indirectly, (a) solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any Acquisition
Transaction, (b) negotiate, explore or otherwise engage in discussion with any
person (other than Parent and its representatives) with respect to any
Acquisition Transaction, (c) agree to or endorse an Acquisition Transaction with
any person (other than Parent or Sub) or any agreement, arrangement or
understanding with respect to any such Acquisition Transaction or which would
require the Company to abandon, terminate or fail to consummate the Merger or
any other transaction contemplated by this Agreement, or (d)
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authorize or permit any person or entity acting on behalf of that Shareholder to
do any of the foregoing. If any Shareholder receives any inquiry or proposal
regarding any Acquisition Transaction, that Shareholder shall promptly inform
Parent of that inquiry or proposal.
9. Legending of Certificates; Nominee Shares. Each Shareholder
agrees to submit to Parent contemporaneously with or promptly following
execution of this Agreement (or promptly following receipt of any additional
certificates representing any additional Shares) all certificates representing
the Shares so that Parent may note thereon a legend referring to the option and
proxy granted to it by this Agreement. If any of the Shares beneficially owned
by a Shareholder are held of record by a brokerage firm in "street name" or in
the name of any other nominee (a "Nominee," and, as to such Shares, "Nominee
Shares"), the Shareholder agrees that, upon written notice by Parent requesting
it, such Shareholder will within five days of the giving of such notice execute
and deliver to Parent a limited power of attorney in such form as shall be
reasonably satisfactory to Parent enabling Parent to require the Nominee to
grant to Parent an option and irrevocable proxy to the same effect as Sections
1, 2 and 4 hereof with respect to the Nominee Shares held by such Nominee and to
submit to Parent the certificates representing such Nominee Shares for notation
of the above-referenced legend thereon.
10. Adjustments to Prevent Dilution, Etc. In the event of a stock
dividend or distribution, or any change in Company Common Stock by reason of any
stock dividend, split-up, recapitalization, combination, exchange of shares or
the like, the term "Shares" shall be deemed to 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.
11. Shareholder Capacity. No person executing this Agreement who is
or becomes during the term of this Agreement a director of the Company makes any
agreement in his or her capacity as a director. Each Shareholder is executing
and delivering this Agreement solely in that Shareholder's capacity as the
record and beneficial owner of that Shareholder's Shares. Notwithstanding
anything to the contrary in this Agreement, no action or inaction by a
Shareholder in his capacity as a director, officer, or employee of the Company
shall be deemed to contravene Section 8, as long as the action or inaction does
not contravene Section 7.2 of the Merger Agreement.
12. Termination. This Agreement shall terminate on the earlier of
(i) the Effective Time of the Merger, (ii) the termination of the last period of
time during which Parent could have exercised the Options pursuant to Section 2;
provided, however, that the appointment of Parent or any designee of Parent as
agent, attorney and proxy pursuant to Section 4 hereof, and any proxy or other
instrument executed pursuant thereto, shall in any event automatically terminate
upon the termination of the Merger Agreement. Notwithstanding the foregoing, in
the event that Parent is at any time prohibited from exercising the Options as a
result of any actions by the Federal Trade Commission or the Department of
Justice in connection with the HSR Act, then this Agreement shall not terminate
until (i) the earlier of 30 days from the date such prohibition is removed by
the Federal Trade Commission or the Department of Justice, or (ii) six months
after the date Parent's right to exercise the Options would otherwise have
terminated.
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13. Miscellaneous.
(a) No Waiver. The failure of any party to exercise any right,
power or remedy under this Agreement or otherwise available in respect of this
Agreement at law or in equity, or to insist upon compliance by any other party
with that party's obligations under this Agreement, shall not constitute a
waiver of any right to exercise any such or other right, power or remedy or to
demand such compliance.
(b) Notices. All notices and other communications hereunder
shall be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.
(i) If to Parent, to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attn: Mark E. Mlotek, Esq.
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Robert A. Cantone, Esq.
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(ii) if to a Shareholder, to:
c/o Bruce Haber
Micro Bio-Medics
846 Pelham Manor
New York, NY 10803
with a copy to:
Otterbourg, Steindler, Houston & Rosen
230 Park Avenue
New York, New York 10169
Fax: (212) 682-6104
Attention: Donald N. Gellert, Esq.
(c) Descriptive Headings; Interpretation. The headings
contained in this Agreement are for reference purposes only and shall not affect
in way the meaning or interpretation of this Agreement. References in this
Agreement to Sections and Schedules mean a Section or Schedule of this Agreement
unless otherwise indicated. The terms "beneficially own" and "beneficial owner"
with respect to any securities shall have the same meaning as in, and shall be
determined in accordance with, Rule 13d-3 under the Securities Exchange Act of
1934.
(d) Entire Agreement; Assignment. This Agreement (including
the schedule and other documents and instruments referred to herein), together
with the Merger Agreement, constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof. Except as
otherwise expressly provided herein, this Agreement is not intended to confer
upon any person not a party hereto any rights or remedies hereunder. Except as
otherwise expressly provided herein, this Agreement shall not be assigned by
operation of law or otherwise; provided that Parent or Sub may assign its rights
and obligations hereunder to a direct or indirect subsidiary of Parent, but no
such assignment shall relieve Parent or Sub, as the case may be, of its
obligations hereunder.
(e) Liability After Transfer. Each Shareholder agrees that,
notwithstanding any transfer of that Shareholder's Shares in accordance with
Section 7(d), that Shareholder shall remain liable for his or her performance of
all obligations under this Agreement.
(f) Injunctive Relief; Remedies Cumulative.
(i) Parent, on the one hand, and the Shareholders, on
the other hand, acknowledge that the other party will be irreparably harmed and
that there will be no
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adequate remedy at law for a violation of any of the covenants or agreements of
such party that are contained in this Agreement. It is accordingly agreed that,
in addition to any other remedies that may be available to the non-breaching
party upon the breach by any other party of such covenants and agreements, the
non-breaching party shall have the right to obtain injunctive relief to restrain
any breach or threatened breach of such covenants or agreements or otherwise to
obtain specific performance of any of such covenants or agreements.
(ii) No remedy conferred upon or reserved to any party
herein is intended to be exclusive of any other remedy and every remedy shall be
cumulative and in addition to every other remedy herein or now or hereafter
existing at law, in equity or by statute.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the provisions thereof relating to conflicts of laws.
(h) Effect of Partial Invalidity. Whenever possible, each
provision of this Agreement shall be construed in such a manner as to be
effective and valid under applicable law. If any provision of this Agreement or
the application thereof to any party or circumstance shall be prohibited by or
invalid under applicable law, such provisions shall be ineffective to the extent
of such prohibition without invalidating the remainder of such provision or any
other provisions of this Agreement or the application of such provision to the
other party or other circumstances.
(i) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
as of the date first above written.
THE SHAREHOLDERS:
______________________________
BRUCE HABER
______________________________
MARVIN CALIGOR
______________________________
RENEE STEINBERG
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______________________________
DEANE READE
HENRY SCHEIN, INC.
By:___________________________
Authorized Officer
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Exhibit C
[Form of Opinion of counsel to the Company]
1. The Company is a corporation validly existing and in good
standing under the laws of the State of New York. Each Subsidiary of the Company
set forth on Schedule A hereto is a corporation validly existing and in good
standing under the laws of its jurisdiction of incorporation.
2. The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock and 1,000,000 shares of Company
Preferred Stock. As of the date hereof, (i) ________ shares of Company Common
Stock are issued and outstanding, (ii) no shares of Company Preferred Stock are
issued and outstanding, (iii) to our knowledge, Company Stock Options to acquire
________ shares of Company Common Stock are outstanding under all stock option
plans of the Company or otherwise, (iv) to our knowledge, Company Warrants to
acquire __________ shares of Company Common Stock are outstanding, and (v) to
our knowledge, ________ shares of Company Common Stock are reserved for issuance
pursuant to the Company Stock Options, the Company Warrants and all other Rights
to purchase or otherwise receive capital stock or other securities of the
Company. All of the issued and outstanding shares of Company Common Stock are
validly issued, fully paid and nonassessable. All of the issued and outstanding
shares of capital stock of the Subsidiaries of the Company are validly issued,
fully paid and nonassessable and are owned by the Company or a Subsidiary of the
Company.
3. The Company and each Subsidiary of the Company has all requisite
corporate power and authority to own, lease and operate its respective
properties and to carry on its respective businesses as now being conducted.
4. The Company is duly qualified or licensed to do business and is
in good standing as a foreign corporation in the States of [ ]. Each Subsidiary
of the Company is duly qualified or licensed to do business and is in good
standing as a foreign corporation in the respective jurisdictions set forth
opposite such Subsidiary's name on Schedule A hereto.
<PAGE>
5. The Company has all necessary corporate power and authority to
execute and deliver the Agreement, to perform its obligations thereunder, and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of the Agreement and the consummation by the Company of the
transactions contemplated thereby have been authorized by all necessary
corporate action on the part of the Company. Upon the filing of the Certificate
of Merger with the Department of State of New York, all steps required to be
taken by the Company under the laws of the State of New York to effect the
Merger of SUB with and into the Company shall have been duly and properly taken.
6. The Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company enforceable in
accordance with its terms, except to the extent that enforceability may be
subject to applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer, reorganization, moratorium and similar laws presently or hereafter in
effect affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether enforcement is sought in a
proceeding in law or in equity).
7. The execution, delivery and performance of the Agreement by the
Company and the consummation by the Company of the transactions contemplated
thereby will not result in a violation by the Company of any provision of the
Company's certificate of incorporation, as amended, or by-laws.
8. Except for the filing of the Certificate of Merger in New York,
we have no knowledge of any consent or approvals by New York or Federal
governmental authorities which are required in connection with the consummation
by the Company of the transactions contemplated by the Agreement which have not
been obtained.
9. We have no knowledge of any action, suit, proceeding or
investigation which is pending or threatened which questions the validity of the
Agreement or any action taken or to be taken by the Company in connection with
the Agreement.
We have participated in the preparation of the Proxy Statement and
the Registration Statement and meetings with members of management of the
Company and its independent certified public accountants relating to the
disclosure contained in the Proxy Statement and the Registration Statement as it
pertains to the Company. Although we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fullness of the information
relating to the Company contained in the Proxy Statement the Registration
Statement, nothing has come to our attention that has caused us to believe that
at the date such materials were mailed to the shareholders of the Company and/or
filed with the Commission, as applicable, and at the Closing Date, the
information relating to the Company in the Proxy Statement or the Registration
Statement contained any misstatement of a material fact or omission of
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a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that no
statement is made with respect to any financial statements or schedules, or
other financial or statistical data contained therein).
The opinions set forth herein are limited to the matters set forth
in this letter, and no other opinion should be inferred beyond the opinions
expressly stated.
Very truly yours,
By:____________________________________
A Member of the Firm
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<PAGE>
Exhibit D
[Form of Opinion of counsel to the Parent]
1. Parent is a corporation validly existing and in good standing
under the laws of the State of Delaware. Sub is a corporation duly formed,
validly existing and in good standing under the laws of the State of New York.
2. The authorized capital stock of Parent consists of 60,000,000
shares of Parent Common Stock and 1,000,000 shares of Parent Preferred Stock. As
of the date hereof, (i) ________ shares of Parent Common Stock are issued and
outstanding, (ii) no shares of Parent Preferred Stock are issued and
outstanding, (iii) to our knowledge, options to acquire ________ shares of
Parent Common Stock (the "Parent stock Options") are outstanding under all stock
option plans of Parent, and (iv) to our knowledge, ________ shares of Parent
Common Stock are reserved for issuance pursuant to the Parent Stock Options and
all other Rights to purchase or otherwise receive capital stock or other
securities of Parent. All of the outstanding shares of Parent Common Stock are
duly authorized, validly issued, fully paid and nonassessable and all of the
shares of Parent Common Stock to be issued upon consummation of the Merger (the
"Merger Shares") are duly authorized and, when issued in accordance with the
Agreement, will be validly issued, fully paid and nonassessable.
3. The authorized capital stock of Sub consists of 1,000 shares of
Sub Common Stock, of which 1,000 shares, as of the date hereof, are issued and
outstanding. All of such outstanding shares are owned of record and, to our
knowledge, beneficially by Parent, and are validly issued, fully paid and
nonassessable.
4. The Parent has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted.
5. The issuance of the Merger Shares in accordance with the Merger
Agreement has been registered under the Securities Act of 1933 and is either
registered or exempt from registration under all applicable state securities or
blue sky laws.
<PAGE>
6. Each of Parent and Sub has all necessary corporate power and
authority to execute and deliver the Agreement, to perform its obligations
thereunder, and to consummate the transactions contemplated thereby. The
execution, delivery and performance of the Agreement and the consummation by
Parent and Sub of the transactions contemplated thereby have been authorized by
all necessary corporate action on the part of each of Parent and Sub. Upon the
filing of the Certificate of Merger with the Department of State of New York,
all steps required to be taken by Parent and Sub under the laws of the State of
New York to effect the Merger of SUB with and into the Company shall have been
duly and properly taken.
7. The Agreement has been duly executed and delivered by each of
Parent and Sub and constitutes the valid and binding obligation of each of
Parent and Sub enforceable in accordance with its terms, except to the extent
that enforceability may be subject to applicable bankruptcy, insolvency,
fraudulent conveyance, fraudulent transfer, reorganization, moratorium and
similar laws presently or hereafter in effect affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether enforcement is sought in a proceeding in law or in equity).
8. The execution, delivery and performance of the Agreement by each
of Parent and Sub and the consummation by each of Parent and Sub of the
transactions contemplated thereby will not result in a violation of any
provision of their respective certificates of incorporation (as amended, in the
case of Parent) or by-laws.
9. Except for the filing of the Certificate of Merger in New York,
we have no knowledge of any consent or approval which is required in connection
with the consummation by Parent and Sub of the transactions contemplated by the
Agreement which have not been obtained.
10. We have no knowledge of any action, suit, proceeding or
investigation which is pending or threatened which questions the validity of the
Agreement or any action taken or to be taken by Parent or Sub in connection with
the Agreement.
We have participated in the preparation of the Proxy Statement and
the Registration Statement and meetings with members of management of Parent and
its independent certified public accountants relating to the disclosure
contained in the Proxy Statement and the Registration Statement as it pertains
to Parent or Sub. Although we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fullness of the information
relating to Parent or Sub contained in the Proxy Statement or the Registration
Statement, nothing has come to our attention that has caused us to believe that
at the date such materials were mailed to the shareholders of the Company,
and/or filed with the Commission, as applicable, and at the Closing Date, the
information relating to Parent or Sub in the Proxy Statement or the Registration
Statement contained any misstatement of a material fact or omission of
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a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (except that no
statement is made with respect to any financial statements or schedules, or
other financial or statistical data contained therein).
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Exhibit 10.(c)(c)
EMPLOYMENT AGREEMENT
AGREEMENT dated March 7, 1997, between BRUCE J. HABER (the "Executive")
and HENRY SCHEIN, INC., a Delaware corporation (the "Company").
The Executive is presently the President and Chief Executive Officer of
Micro Bio-Medics, Inc. ("MBM").
The Company and MBM are parties to an Agreement and Plan of Merger dated
the date hereof (the "Merger Agreement"), pursuant to which it is contemplated
that HSI Acquisition Corp., a wholly-owned subsidiary of the Company, will be
merged with and into MBM.
The Company desires to employ the Executive, and the Executive desires to
be employed by the Company, at the Effective Time, as that term is defined in
the Merger Agreement. Accordingly, the parties hereto are entering into this
Agreement to set forth and confirm their respective rights and obligations with
respect to the Executive's employment by the Company commencing as of the
Effective Time.
The parties agree as follows:
i. Employment. The Company shall employ the Executive, as of the
Effective Time, as Executive Vice President of the Company and
President of the Company's medical products group and the Executive
shall accept such employment and serve as such, subject to and upon
the terms and conditions set forth in this Agreement; provided,
however, that this Agreement shall terminate and be of no further
force or effect if the Executive shall have died or, in the
reasonable judgment of the Company, become disabled (as that term is
used in Section 7(a)(i)(A) hereof), or his employment by MBM shall
have been terminated for cause (as that term is defined in Section
7(a)(i)(B) hereof), in any such case, prior to the Effective Time.
At the Effective Time, the Executive's Employment Agreement with MBM
dated February 11, 1992 (the "MBM Agreement"), as amended, shall
terminate and be of no further force or effect.
ii. Duties and Authority.
(i) At all times during his employment with the Company, the
Executive shall, subject to the direction and control of
the Boards of Directors of the Company and MBM and the
Chief Executive Officer of the Company, perform such
executive duties and functions as he may be called upon
by
<PAGE>
such Boards or such Chief Executive Officer to perform,
consistent with his employment hereunder as Executive
Vice President of the Company and President of the
Company's medical products group. As President of the
Company's medical products group, the Executive shall
have the authority customarily vested in the chief
executive officer of an operating division, including
with respect to such division, day to day authority with
respect to, among other matters, purchasing, pricing,
sales and the hiring, compensating and discharging of
employees, all subject to the overall authority of the
Boards of Directors of the Company and MBM and the Chief
Executive Officer of the Company.
(ii) The Executive shall devote his full business time and
effort to the performance of his duties hereunder; and,
to the extent requested by the Board of Directors of the
Company or MBM or the Chief Executive Officer of the
Company, render such executive services for any other
subsidiary or affiliated business of the Company,
provided such other subsidiaries or affiliated
businesses are engaged principally in sales of medical
supplies and equipment; and provided, further, that
nothing herein contained shall prevent the Executive
from managing his personal investments and participating
in charitable and civic endeavors so long as such
activities do not materially interfere with the
Employee's performance of his duties hereunder.
iii. Compensation.
(i) The Company shall pay to the Executive for all services
to be rendered by him pursuant to this Agreement a base
salary at the annual rate of Four Hundred Thousand
Dollars ($400,000), payable in accordance with the
Company's practices (which, for purposes of this
Agreement, means the practices of the Company with
respect to its most senior executives as in effect from
time to time). Such
<PAGE>
salary shall be increased each year by an amount
determined in good faith by the Board of Directors of
the Company, which amount shall be no less than the
percentage increase in the cost of living over the
preceding year, as determined in accordance with the
Company's practices.
(ii) The Executive shall be entitled to a bonus in respect of
each fiscal year of the Company during which he is
employed hereunder, payable no later than 90 days after
the end of each year for which such bonus is payable, in
an amount determined in accordance with Exhibit A;
provided however, that if the Effective Time occurs
after November 30, 1997, in lieu of a bonus calculated
pursuant to Exhibit A, the bonus payable hereunder with
respect to HSI's fiscal 1997 shall be the amount that
would have been payable to the Executive pursuant to
Section III(B) of the MBM Agreement with respect to the
twelve months ended November 30, 1997.
(iii) At the Effective Time, the Executive shall be granted
(i) options to purchase shares of common stock, par
value $.01 per share ("Common Stock"), of the Company in
accordance with the stock option agreement attached
hereto as Exhibit B (the "Option Agreement"); and (ii)
restricted Common Stock pursuant to the terms of a
Restricted Stock Agreement to be executed and delivered
by the Company and the Executive in the form attached
hereto as Exhibit D.
(iv) If the performance targets set forth in Exhibit A hereto
are met in respect of a fiscal year of the Company
during which he is employed hereunder, the Executive
shall be entitled to additional grants of options to
purchase Common Stock as set forth and in accordance
with the form of Option Agreement, such options to be
issuable no later than 90 days after the end of each
year from which such options are issuable.
<PAGE>
iv. Working Conditions and Benefits. While employed by the Company
hereunder:
(i) The Executive shall be entitled to four (4) weeks of
paid vacation per year, sick leave, and personal time,
all in accordance with the Company's practices.
(ii) The Executive shall be authorized to incur reasonable
and necessary expenses for promoting the business of the
Company, including expenses for entertainment, travel
and similar items, all in accordance with the Company's
practices. The Company shall reimburse the Executive for
all such expenses, promptly upon presentation by the
Executive of an itemized account of such authorized
expenditures in accordance with the Company's practices
with respect to expense reimbursement.
(iii) The Executive shall be employed by the Company at such
executive offices of the Company in New York City, Long
Island and Westchester County, as may be determined by
the Company from time to time and at no other location
without the consent of the Executive, such consent not
to be unreasonably withheld. The Executive shall travel
on the Company's behalf within and outside such area to
the extent necessary to perform his duties hereunder.
(iv) The Company shall provide to the Executive a car
allowance sufficient to provide the Executive with a
Mercedes 400S model automobile, or comparable
automobile, for business use, and shall pay for all
other expenses incurred in connection with such use in
accordance with the Company's practices with respect to
car expense reimbursement.
(v) The Company shall provide the Executive with term life
insurance in an amount equal to twice his annual rate of
salary from time to time, payable to the Executive's
designee as beneficiary. The Executive hereby represents
and warrants to the Company that he is not aware of any
reason he
<PAGE>
would be denied life insurance coverage at prevailing
rates for healthy non-smokers of the Executive's age.
The Executive shall submit to such medical examinations
and take such other actions as shall be reasonably
necessary for the Company to provide such life insurance
coverage.
(vi) The Company shall provide to the Executive to the full
extent provided for under the laws of the Company's
state of incorporation and the Company's Certificate of
Incorporation and Bylaws, indemnification for any claim
or lawsuit which may be asserted against the Executive
when acting in such capacity for the Company and/or any
subsidiary or affiliated business of a type referred to
in Section 2 hereof, provided that said indemnification
is not in violation of any Federal or state law, rule or
regulation. The Company shall use reasonable best
efforts to include the executive as an insured under all
applicable directors' and officers liability insurance
policies maintained by the Company, and any other
subsidiary or affiliated business of a type referred to
in Section 2 hereof and shall include him to the same
extent as other senior executives of the Company are
included.
v. Other Benefits. While employed by the Company hereunder:
(i) The Executive shall be entitled to participate in all
benefit, welfare and perquisite plans, policies and
programs, in accordance with the terms thereof, as are
generally provided from time to time by the Company for
its senior executive officers and for which the
Executive is eligible pursuant to the terms of such
plans, policies and programs, including, without
limitation, the plans and programs listed on Exhibit C.
(ii) The Company shall use its reasonable best efforts to
cause the Executive to be nominated for election to the
Company's and MBM's Board of Directors.
vi. Term. The Executive's employment hereunder shall commence at the
Effective Time and shall continue until the earlier of (a) the fifth
<PAGE>
anniversary of the Effective Time, (b) his death, or (c) termination
of employment pursuant to Section 7 hereof.
vii. Termination; Non-Renewal.
(i) Notwithstanding anything to the contrary herein
contained, the Executive's employment shall terminate
prior to the fifth anniversary of the Effective Time
upon the occurrence of any of the following events:
(i) by notice given by the Company to the Executive, to terminate
the Executive's employment as of a date (not earlier than 10 days from such
notice) to be specified in such notice if (A) the Executive shall be physically
or mentally incapacitated or disabled or otherwise unable fully to discharge his
duties hereunder for a period of 180 days, whether or not continuous, in any
period of 12 months, or (B) the Executive shall have given the Company cause
therefor. For purposes of this Agreement, "cause" shall be limited to (x) action
by the Executive involving willful malfeasance having a material adverse effect
on the Company, (y) the Executive being convicted of a felony involving theft,
fraud or moral turpitude (other than resulting from a traffic violation or like
event), or (z) any other action by the Executive constituting a material breach
of this Agreement which is not cured within 30 days after notice from the
Company thereof;
(ii) by notice given by the Executive to the Company to terminate
the Executive's employment as of a date (not earlier than 10 days from such
notice) to be specified in such notice if the Company shall have given the
Executive good reason therefor. For purposes of this Agreement, "good reason"
shall be limited to a material breach by the Company of this Agreement, which
breach is not cured within 30 days after notice from the Executive thereof.
(ii) Upon the Executive's death or termination of the
Executive's employment pursuant to Section 7(a)(i)(A),
the Executive (or his estate, as the case may be) shall
be entitled to receive only (i) his unpaid salary at the
rate provided in Section 3(a) to the date of
termination, (ii) any unpaid bonus pursuant to Section
3(b) in respect of the fiscal year of the Company ended
prior to the year in which such termination occurs, and
(iii) an amount equal to such bonus in respect of such
prior fiscal year multiplied by a fraction the numerator
of which shall be the number of days that shall have
elapsed from the first day of the fiscal year in which
such termination occurs to the date of such termination
and the denominator of which shall be 365 (the aggregate
amounts referred to in (i), (ii) and (iii)
<PAGE>
being hereinafter referred to as the "Accrued
Obligations"). The Accrued Obligations shall be paid
within 30 days of the termination of the Executive's
employment.
(iii) Upon termination of the Executive's employment hereunder
pursuant to Section 7(a)(ii) hereof or by the Company
other than pursuant to Section 7(a)(i) hereof, the
Executive shall be entitled to receive only (i) the
Accrued Obligations, (ii) continuation of the
Executive's base salary for a period after the date of
such termination equal to the unexpired term of this
Agreement but in no event less than eighteen months at
the rate in effect at such date of termination, and
(iii) during the one- year period following such
termination, continuation of the participation of the
Executive and his spouse and dependent children, if any,
in all health and medical benefit plans, policies and
programs in effect from time to time with respect to the
most senior executive officers of the Company and their
families generally (at the same levels and at the same
cost, if any, as provided to such officers generally).
Notwithstanding anything to the contrary contained in
the preceding clause (iii), if the continued
participation of the Executive and such family members
thereunder is not possible under the general terms and
provisions thereof, the Company shall provide such
benefits at such levels to the Executive and such family
members either by obtaining other insurance or by
self-insuring such amounts, net of any reimbursement any
of them shall receive with respect to health and medical
costs from insurance other than pursuant to such clause
(iii); provided, however, that prior to receiving
benefits hereunder from the Company, the Executive and
such family members shall first endeavor to obtain
reimbursement with respect to health and medical costs
from other insurance the Executive and such family
members may own, if any, provided that such
reimbursement can be obtained without unreasonable
effort or expense on the part of the Executive and such
family members. The Executive is hereby expressly not
required to mitigate damages or seek any other
employment;
<PAGE>
provided, however, that any amounts that the Executive
may receive from any other employment or consulting
engagement during the one-year period following such
termination shall reduce in equal amounts the amounts
that the Company otherwise is obligated to pay to the
Executive pursuant to clause (ii) of this Section 7(c).
(iv) Upon termination of the Executive's employment hereunder
pursuant to Section 7(a)(i)(B) hereof or by the
Executive other than pursuant to Section 7(a)(ii)
hereof, the Executive shall be entitled to receive only
(i) his salary at the rate provided in Section 3(a) to
the date of such termination, and (ii) any unpaid bonus
pursuant to Section 3(b) in respect of the fiscal year
of the Company ended prior to the year in which such
termination occurs.
(v) If the Company does not offer to extend the term of this
Agreement from and after the fifth anniversary of the
Effective Time, and the Executive is employed by the
Company at such date, the Executive shall be entitled to
receive continuation of the Executive's base salary for
a period of one year after such fifth anniversary at the
rate in effect at such anniversary.
viii. Confidentiality and Non-Competition. In view of the unique and
valuable services it is expected the Executive will render to the
Company, the Executive's knowledge of the customers, trade secrets,
and other proprietary information relating to the business of the
Company and its customers and suppliers, and in consideration of the
compensation to be received hereunder, the Executive agrees that he
will not, during his employment with the Company and (x) for three
years thereafter in the case of a termination pursuant to Section
7(a)(i) of this Agreement, (y) for one-half of the unexpired term of
this Agreement but not less than one year in case of a termination
pursuant to Section 7(a)(ii) of this Agreement or a termination by
the Company other than pursuant to Section 7(a)(i) of this
Agreement, and (z) for two years in case of a non-renewal pursuant
to Section 7(e) of this Agreement: (a) directly or indirectly engage
or be interested (whether as owner, partner, lender, consultant,
employee, agent, supplier, distributor or otherwise) in any
business, activity or enterprise which competes with any aspect of
the business conducted by the Company or any of the Company's
affiliates (including MBM) at any time
<PAGE>
prior to termination of his employment with the Company; (b) except
on behalf of the Company, directly or indirectly employ or otherwise
engage, or offer to employ or otherwise engage, any person who is
then (or was at any time within one year prior to the time of such
employment, en gagement or offer thereof) an employee or sales
representative of the Company or any of the Company's affiliates
(including MBM); or (c) except on behalf of the Company, solicit any
business from any person or entity that has been a customer of the
Company or any of the Company's affiliates (including MBM) or
directly or indirectly induce or influence any customer, supplier or
other person that has a business relationship with the Company or
any of the Company's affiliates (including MBM) to discontinue or
reduce the extent of such relationship with the Company or any of
the Company's affiliates (including MBM); and provided further, that
nothing herein contained shall preclude the Executive (i) from
holding not more than two (2%) percent of the total outstanding
stock of a publicly held company, and (ii) at any time after
termination of his employment hereunder, soliciting any business
from any person or entity that has been a customer of the Company or
any of the Company's affiliates (including MBM), provided such
solicitation does not involve the offer of products or services
comparable to, or that could be reasonably deemed in substitution
for, products or services theretofore offered by the Company or any
of the Company's affiliates (including MBM) and (iii) investing in
(provided he owns no more than 5% of the outstanding equity) and
serving on the board of directors of an entity currently developing
software to enable manufacturers of medical products to track
rebates. In addition, the Executive shall never use or divulge any
trade secrets, customer or supplier lists, pricing information,
marketing arrangements or strategies, business plans, internal
performance statistics, training manuals or other information
concerning the Company or its affiliates that is competitively
sensitive or confidential, except on behalf of the Company, and
shall not conduct himself in a manner that would reasonably be
expected to adversely affect the Company in any material respect,
including but not limited to making knowingly false, misleading or
negative statements, either orally or in writing, about the Company
or its affiliates, or their respective directors, officers or
employees; provided, however, that this sentence shall not apply to
the following: (i) information which is already in the public domain
at the time of its disclosure to the Executive; (ii) information
which, after its disclosure to the Executive, becomes part of the
public domain by publication or otherwise other than through the
Executive's act; (iii) information which was in the Executive's
possession before it was disclosed to him by the Company as shall be
evidenced by written documents dated prior to the time of
disclosure; (iv) information which the Executive received from a
third party having the right to make such disclosure without
restriction on disclosure or use thereof; or (v) information which
the Executive is legally compelled to disclose. Because
<PAGE>
the breach or attempted or threatened breach of this restrictive
covenant will result in immediate and irreparable injury to the
Company for which the Company will not have an adequate remedy at
law, the Company shall be entitled, in addition to all other
remedies, to a decree of specific performance of this covenant and
to a temporary and permanent injunction enjoining such breach,
without posting bond or furnishing similar security. The provisions
of this Section 8 are in addition to and independent of any
agreements or covenants contained in any consulting or other
agreement between the Company and the Executive. If any restriction
contained in this Section 8 shall be deemed to be invalid, illegal,
or unenforceable by reason of the extent, duration, or geographical
scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration,
geographical scope, or other provisions hereof, and in its reduced
form such restriction shall then be enforceable in the manner
contemplated hereby.
ix. Representations and Warranties.
(a) The Company represents and warrants to the Executive that the Company
has the full legal corporate power to execute and deliver this Agreement and the
agreements referred to herein. The execution, delivery and performance of this
Agreement and such other agreements have been duly authorized by the Company's
board of directors and do not conflict with or result in a breach of any
provision of (i) the Certificate of Incorporation or Bylaws of the Company, (ii)
any material agreement, commitment or other instrument to which the Company is a
party or by which it is bound or (iii) any order, judgment or decree of any
court or arbitrator.
(b) The Executive represents and warrants to the Company that the
execution and delivery of this Agreement and the performance of his obligations
pursuant hereto do not conflict with or result in a breach of any provisions of
any (i) material agreement, commitment, or other instrument to which the
Executive is a party or by which the Executive is bound or (ii) order, judgment
or decree of any court or arbitrator.
x. Amendment and Modification; Waiver. This Agreement may be amended,
modified or supplemented only by written agreement (referring
specifically to this Agreement) of the parties. The waiver by either
party of any breach or violation of any provision of this agreement
shall not operate or be construed as a waiver of any subsequent
breach.
xi. Notice. All notices required to be given under the terms
of this agreement shall be in writing and shall be
deemed to have been duly given if delivered to the
addressee in person or mailed by certified mail, return
receipt requested, as follows:
<PAGE>
If to the Company, addressed to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
With a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Robert A. Cantone, Esq.
If to the Executive, addressed to:
Bruce J. Haber
989 Marcel Road
Baldwin Harbor, NY 11510
With a copy to:
Otterbourg, Steindler, Houston & Rosen P.C.
230 Park Avenue
New York, New York 10169
Attention: Donald N. Gellert, Esq.
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph.
xii. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
xiii. Entire Agreement; Benefit. This Agreement constitutes the entire
agreement and supersede all other prior agreements and
understandings, both written and oral, between the parties, with
respect to the subject matter hereof. This agreement shall inure to
and shall be binding upon the parties hereto, the successors and
assigns of the Company and the heirs and personal representatives of
the Executive.
xiv. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving
effect to the provisions thereof relating to conflicts of law.
<PAGE>
xv. Attorney's Fees. If the Executive shall engage counsel to bring suit
against HSI and/or MBM to enforce his rights hereunder, the
Executive shall be entitled to be reimbursed by HSI for the
reasonable fees and expenses of such counsel incurred in connection
with such suit if the Executive is the prevailing party in such
suit.
xvi. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
/s/ Bruce J. Haber
--------------------------
BRUCE J. HABER
HENRY SCHEIN, INC.
By: /s/ Mark Mlotek
----------------------
Authorized Officer
<PAGE>
EXHIBIT A
Fiscal 1997
If Adjusted Pre-Tax Earnings (as defined below) is greater than $6 million an
amount equal to $65,000, plus, if Adjusted Pre-Tax Earnings is $7,000,000 or
more an additional amount equal to $135,000 multiplied by a fraction, the
numerator of which is the excess of such Adjusted Pre-Tax Earnings over $7
million (such excess not to exceed $1 million) and the denominator of which is
1,000,000. In determining whether any adjustment with respect to the foregoing
is necessary or desirable, the Compensation Committee of the Board of Directors
shall take into account synergies achieved with, and contribution to, the
Company's medical products division.
For purposes of the preceding paragraph, "Adjusted Pre-Tax Earnings" shall
mean, net income of MBM for the twelve-month period ending in December, 1997,
less the base salary and cost of benefits payable or provided pursuant to this
agreement with respect to such period, before income taxes, as determined in
accordance with generally accepted accounting principles consistently applied
(but with charges for corporate overhead and for inter-corporate borrowing costs
in a manner consistent with charges to other divisions of the Company and in no
event in a proportion greater than the percentage which the division sales bear
to total Company sales) adjusted as follows: pre-tax earnings will be after all
bonuses paid to MBM employees, will include financing costs for all payments and
expenses related to the Merger and associated transactions.
Fiscal 1998-2001
An amount, not less than $200,000, determined by the Compensation Committee of
the Company's Board of Directors upon achievement by the executive of
performance targets to be set by such Committee in consultation with the
Executive. Among the matters to be taken into account by the Compensation
Committee in connection with its determination shall be synergies achieved with,
and contribution to, the Company's medical products division.
<PAGE>
EXHIBIT B
HENRY SCHEIN, INC.
CLASS B OPTION AGREEMENT
PURSUANT TO THE
1994 STOCK OPTION PLAN
AGREEMENT dated _____________, 1997, between Henry Schein, Inc. (the
"Corporation") and Bruce J. Haber (the "Participant").
Preliminary Statement
The Stock Option Committee of the Board of Directors of the Corporation
(the "Committee"), pursuant to the Corporation's 1994 Stock Option Plan, as
amended (the "Plan"), has authorized the granting to the Participant, as a Key
Employee, of a nonqualified stock option (the "Option") to purchase the number
of shares of the Corporation's Common Stock, par value $.01 per share, set forth
below. The parties hereto desire to enter into this Agreement in order to set
forth the terms of the Option. Capitalized terms used but not defined herein
shall have the same meanings as set forth in the Plan.
Accordingly, the parties hereto agree as follows:
A. Tax Matters. No part of the Option granted hereby is intended to
qualify as an "incentive stock option" under Section 422 of the Internal Revenue
Code of 1986, as amended.
B. Grant of Option. Subject in all respects to the Plan and the terms and
conditions set forth herein, the Participant is hereby granted the Option to
purchase from the
<PAGE>
Corporation up to (a) shares (the "Shares"), at a price per Share of $ (b) (the
"Option Price"). Subject to Sections D and E hereof, the Option may be exercised
by the Participant, in whole or in part, at any time or from time to time prior
to the expiration of the Option as provided herein.
C. Restriction on Transfer. The Option granted hereby is not transferable
otherwise than by will or under the applicable laws of descent and distribution
and during the lifetime of the Participant may be exercised only by the
Participant or his guardian or legal representative, provided, however, that,
from and after the date that the Plan is amended to provide for such transfers,
the Options may be transferred by the Participant to his wife or daughter or to
trusts the sole beneficiaries of which are the Participant's wife or daughter.
Except as provided in the preceding sentence, the Option shall not be assigned,
negotiated, pledged or hypothecated in any
- ----------
(a) At the Effective Time, pursuant to Section 3(c) of the Participant's
employment agreement with the Corporation, the Participant will be issued
options ("Closing Options") to purchase shares of the Corporation's Common
Stock having a value of $1,000,000 determined by application of the
Block-Shares formula in the same manner in which it is applied in granting
options to the Corporation's other most senior executives. In addition,
and subject to the satisfaction of the performance targets set forth in
Exhibit A thereto, pursuant to Section 3(d) of the Participant's
employment agreement with the Corporation, the Participant will be issued
options ("Annual Option") to purchase shares of the Corporation's Common
Stock in respect of each fiscal year of the Corporation during which he is
employed under the employment agreement, issuable no later than 90 days
after the end of each year for which such options are issuable, such
number of Annual Options to have a value of $170,000 determined by
application of the Block- Shares formula in the same manner in which it is
applied in granting options to the Corporation's other most senior
executives:
The value of options to be granted after the Effective Time shall be
increased or decreased, as the case may be, to reflect the cumulative
change in the [CPI] between the date of the Effective Time and the date of
grant.
(b) In all cases, the fair market value on the date of grant.
15
<PAGE>
way (whether by operation of law or otherwise), and the Option shall not be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, negotiate, pledge or hypothecate the Option not expressly
permitted hereby, or in the event of any levy upon the Option by reason of any
execution, attachment or similar process contrary to the provisions hereof, the
Option shall immediately become null and void.
D. Term of Option. Unless terminated as provided below or otherwise
pursuant to the Plan, the Option shall expire on the tenth anniversary of the
date of grant.
E. Exercise of Option.
1. No Options may be exercised unless and until such Options shall
have become vested. (c) of the Options granted hereunder shall automatically and
immediately vest on each of the (d) anniversaries of the date hereof, provided
that the Participant is employed by the Corporation on such anniversary dates.
The Chief Executive Officer of the Corporation shall have the right to
accelerate the vesting of any such Options in his sole discretion.
2. The Option may be exercised by the Participant by delivering
notice to the Committee of the election to exercise the Option and of the number
of Shares with respect to which the Option is being exercised, which notice
shall be accompanied by payment in full for the Shares. Payment for such Shares
may be made as follows:
- ----------
(c) "One-fifth (1/5)" in the case of Closing Options; and "One-third (1/3)" in
the case of Annual Options.
(d) "first, second, third, fourth and fifth" in the case of Closing Options;
and "first, second and third" in the case of Annual Options.
16
<PAGE>
(a) In cash or by certified check, bank draft or money order
payable to the order of the Corporation;
(b) Through the delivery of unencumbered Shares (including
Shares to be acquired under the Options then being exercised) provided such
Shares (or such Option) have been owned by the Participant for at least six
months, or such longer period as required by applicable accounting standards to
avoid a charge to earnings;
(c) If so permitted by the Committee (i) through a combination
of Shares and cash as provided above, (ii) by delivery of a promissory note of
the Participant to the Corporation, or (iii) by a combination of cash (or cash
and Shares) and the Participant's promissory note; provided, that, if the Shares
delivered upon exercise of the Option is an original issue of authorized Shares,
at least so much of the exercise price as represents the par value of such
Shares shall be paid in cash or by a combination of cash and Shares; or
(d) On such terms and conditions as may be acceptable to the
Committee and in accordance with applicable law.
3. Upon receipt of payment and satisfaction of the requirements, if
any, as to withholding of taxes set forth in the Plan, the Corporation shall
deliver to the Participant as soon as practicable a certificate or certificates
for the Shares then purchased.
4. The exercise of any Option after termination of employment shall
be subject to satisfaction of the conditions precedent that the Participant be
in compliance with Section 8 of his employment agreement with the Corporation
(as amended, revised or replaced from time to time, the "Employment Agreement").
If the Participant exercises his Options and the Corporation
17
<PAGE>
determines that the Participant subsequently (within a year following
termination of employment) engages in conduct which would have breached such
Section 8 had it taken place prior to exercise of the Options, then the
Participant hereby agrees to immediately return to the Corporation any financial
benefit he received from the Options upon request of the Corporation.
5. Upon a change in control (as defined in the Plan), the Options
shall immediately become vested, unless two-thirds of members of the Board of
Directors have approved the change of control, in which event, there shall be no
accelerated vesting of the Options.
F. Termination of Employment.
1. Death, Disability, Retirement. Subject to Section E hereof, upon
termination of employment by reason of death or normal retirement on or after
the Company's normal retirement age, or pursuant to Section 7(a)(i) of the
Employment Agreement, all outstanding Options then exercisable and not exercised
by the Participant prior to such termination of employment shall remain
exercisable by the Participant (to the extent exercisable by such Participant
immediately prior to such termination) for a period of one (1) year from the
date of termination of employment. All Options not yet exercisable on the date
of termination of employment because of vesting provisions or otherwise shall be
canceled.
2. Cause or Voluntary Termination. Upon termination of employment of
a Participant under the Employment Agreement for Cause (as defined therein) or
by the Participant under the Employment Agreement without Good Reason (as
defined therein) or any other
18
<PAGE>
written agreement between the Participant and the Company, all outstanding
Options shall immediately be canceled.
3. Other Termination. In the event of termination of employment for
any reason other than as provided in Sections F(1) or F(2), all outstanding
Options not exercised by the Participant prior to such termination of employment
shall, subject to Section E hereof, remain exercisable (to the extent
exercisable by such Participant immediately before such termination) for a
period of three (3) months after such termination. All Options not yet
exercisable on the date of termination of employment because of vesting
provisions or otherwise shall be canceled. Notwithstanding the foregoing, if the
Participant terminates his employment for Good Reason, as defined therein, or
the Company terminates the Participant's employment with the Company without
Cause (as defined in the Employment Agreement), all options shall thereafter
automatically vest and be exercisable in accordance with the provisions of this
Agreement for a period of three months from the date of such termination.(e)
G. Rights as a Stockholder. Participant shall have no rights as a
stockholder with respect to any Shares covered by the Option until Participant
shall have become the holder of record of the Shares, and no adjustments shall
be made for dividends in cash or other property, distributions or other rights
in respect of any such Shares except as otherwise specifically provided for in
the Plan.
H. Provisions of Plan Control. This Agreement is subject to all of the
terms, conditions and provisions of the Plan and to such rules, regulations and
interpretations relating to
- ----------
(e) The treatment of termination for Cause or without Good Reason shall apply
only to the Options granted at the Effective Time.
19
<PAGE>
the Plan as may be adopted by the Committee and as may be in effect from time to
time. A copy of the Plan is available to you at the offices of the Corporation,
and the terms thereof are incorporated herein by reference. If and to the extent
that this Agreement conflicts or is inconsistent with the terms, conditions and
provisions of the Plan, the Plan shall control, and this Agreement shall be
deemed to be modified accordingly.
I. Notices. Any notice or communication given hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, or
by United States mail, to the appropriate party at the address set forth below
(or such other address as the party shall from time to time specify):
If to the Corporation, to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Corporate Secretary
If to the Participant, to:
the address indicated on the signature page at the end of this
Agreement.
J. Rights of Employer. This Agreement does not guarantee that the
Corporation will employ the Participant for any specific time period, nor does
it modify in any respect the Corporation's right to terminate or modify the
Participant's employment or compensation.
K. Withholding. The Corporation shall be entitled to withhold (or, in its
discretion, secure payment from the Participant in cash or other property in
lieu of withholding) the amount of any Federal, state or local taxes required by
law to be withheld by the Corporation for any
20
<PAGE>
Shares deliverable under this Agreement, and the Corporation may defer such
delivery unless such withholding requirement is satisfied.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
and year first above written.
HENRY SCHEIN, INC.
By:__________________________
Authorized Officer
_____________________________
BRUCE J. HABER
Address:
21
<PAGE>
EXHIBIT C
1. Participation in the Company's SERP and profit sharing program.
2. A "golden parachute" equal to 2.99 times "average annual base
compensation". See form of agreement attached.
22
<PAGE>
Exhibit 10.(d)(d)
AGREEMENT dated [CLOSING DATE], among HENRY SCHEIN, INC., a Delaware
corporation (the "Company"), and BRUCE HABER (the "Executive").
The Company and the Executive are parties to an Employment Agreement dated
March 7, 1997 (the "Employment Agreement"). Each capitalized term used herein
and not otherwise defined shall have the meaning given such term in the
Employment Agreement.
The parties agree as follows:
1. If the Executive's employment with the Company terminates for any
reason other than (i) the Executive's death, (ii) the Executive's termination of
his employment without good reason (as that term is used in Section 7(a)(ii) of
the Employment Agreement), or (iii) by the Company pursuant to Section 7(a)(i)
of the Employment Agreement, within two years after a Significant Date, the
Company will pay, within 30 days after the date of such termination, the
Executive (the "Termination Payment"), in full satisfaction of all its
obligations hereunder, severance equal to (x) the product of (A) the base salary
and automobile allowance paid to the Executive during the three months
immediately preceding the date of termination (not including incentive
compensation or any non-cash compensation) and (B) the number of full months the
Executive had been employed by the Company prior to the termination, with a
minimum severance pay equal to eighteen months' base salary (plus eighteen
months' automobile allowance) and a maximum severance pay equal to thirty-six
months' base salary (plus thirty-six months' automobile allowance), plus (y)
three times the amount of bonus, if any, paid to the Executive for the full
fiscal year preceding the termination; provided, however, that the maximum
amount payable under this Section 1 shall be limited to the amount which when
added to all other payments (or the value of all other benefits) that are
received by the Executive from the Company and which are "contingent upon a
change in control" as such term is defined in the Internal Revenue Code of 1986
(the "Code") would not constitute a "parachute payment" (as such term is defined
on the date hereof by the Code, i.e. the aggregate present value of the payments
in the nature of compensation to such individual which are contingent on such
change would be less than three (3) times the "base amount" as such term is
defined on the date hereof by the Code); and provided further, however, that the
Termination Payment shall be reduced to the extent that the Executive is
entitled to cash and/or benefits as a result of the termination of employment
(other than cash and/or benefits accrued to the date of termination). The term
that the Executive has been employed by the Company for purposes of this
Agreement shall include the term of his employment by Micro Bio-Medics, Inc.
("MBM") prior to the Effective Time (as defined in the Agreement and Plan of
Merger by and among the Company, MBM and HSI Acquisition Corp. dated as of
February 28, 1997).
The Termination Payment payable pursuant to this Section 1 will not be
subject to offset on account of any remuneration paid or payable to the
Executive for any subsequent employment the Executive may obtain, whether during
or after the period during which the Termination Payment is made and the
Executive shall have no obligation whatsoever to seek any subsequent employment.
<PAGE>
2. In all events, the Termination Payment will be subject to any
applicable payroll or other taxes required to be withheld.
3. The Company will reimburse the Executive for reasonable attorneys' fees
and expenses incurred by the Executive if the Executive is employed hereunder
and prevails against the Company with respect to a claim hereunder.
4. This Agreement shall be binding upon and inure to the benefit of the
Executive and his legal representatives and the Company and any assignee or
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company.
5. This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof, may not be modified or terminated orally,
and shall be construed and governed in accordance with the laws of the State of
New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
HENRY SCHEIN, INC.
By:______________________________
Authorized Officer
_________________________________
BRUCE HABER
2
<PAGE>
SCHEDULE A
A "Significant Date" shall be deemed to have occurred if after the date
hereof: (i) any person (as defined in Section 3(a)(9) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d) and
14(d) thereof), excluding (A) the Company, (B) any "Subsidiary" thereof, (C) any
employee benefit plan sponsored or maintained by the Company, or any Subsidiary
thereof (including any trustee of any such plan acting in his or her capacity as
trustee) and (D) any person who (or group which includes a person who) is the
beneficial owner (as defined in Rule 13(d)-3 under the Exchange Act) as of
January 1, 1995 of at least fifteen percent (15%) of the common stock of the
Company, becomes the beneficial owner (as defined in Rule 13(d)-3 under the
Exchange Act) of shares of the Company having at least thirty percent (30%) of
the total number of votes that may be cast for the election of directors of the
Company; (ii) the shareholders of the Company shall approve any merger or other
business combination of the Company, sale of all or substantially all of the
Company's assets or combination of the foregoing transactions (a "Transaction"),
other than a Transaction involving only the Company and one or more of its
Subsidiaries, or a Transaction immediately following which the shareholders of
the Company immediately prior to the Transaction continue to have a majority of
the voting power in the resulting entity (excluding for this purpose any
shareholder owning directly or indirectly more than ten percent (10%) of the
shares of the other company involved in the Transaction if such shareholder is
not as of January 1, 1994, the beneficial owner (as defined in Rule 13(d)-3
under the Exchange Act) of at least fifteen percent (15%) of the common stock of
the Company); (iii) within any twenty-four (24) month period beginning on or
after the date hereof, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Directors") shall cease (for
any reason other than death) to constitute at least a majority of the board of
directors of the Company or the board of directors of any successor to the
Company (the "Board"), provided that, any director who was not a director as of
the date hereof shall be deemed to be an Incumbent Director if such director was
elected to the Board by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually or by prior operation of the foregoing unless such election,
recommendation or approval was the result of an actual or threatened election
contest of the type contemplated by Regulation 14a-11 promulgated under the
Exchange Act or any successor provision); or (iv) a Voting Trust Termination
Date, as such term is defined in the Voting Trust Agreement dated as of
September 30, 1994 among the Company, Stanley Bergman, as voting trustee and
others. Notwithstanding the foregoing, no Significant Date shall be deemed to
have occurred for purposes of this Agreement by reason of any Transaction which
shall have been approved by at least two-thirds of the Incumbent Directors.
3
<PAGE>
Exhibit 10.(e)(e)
TERMINATION OF EMPLOYMENT AGREEMENT
AGREEMENT, dated March 7, 1997, between BRUCE J. HABER (the "Executive")
and HENRY SCHEIN, INC., a Delaware corporation ("HSI").
The Executive is currently serving as the President and Chief Executive
Officer of Micro Bio-Medics, Inc. ("MBM") pursuant to an employment agreement
dated as of February 11, 1992, as amended (the "MBM Employment Agreement").
Concurrently with the execution and delivery of this Agreement, HSI and
MBM are entering into an Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which HSI Acquisition Corp., a wholly-owned subsidiary of HSI, will
be merged with and into MBM (the "Merger").
Concurrently with the execution and delivery of this Agreement and the
Merger Agreement, the Executive and HSI are entering into an Employment
Agreement, pursuant to which, at the Effective Time, as that term is defined in
the Merger Agreement, the Executive shall commence employment with HSI as its
Executive Vice President and as President of its medical products group (the
"HSI Employment Agreement").
To induce HSI to enter into the Merger Agreement and the HSI Employment
Agreement and in consideration of the agreements of HSI hereinafter set forth,
the Executive has agreed to terminate his MBM Employment Agreement on the terms
provided herein.
The parties agree as follows:
1. Termination of the MBM Employment Agreement
Effective as of the Effective Time, the MBM Employment Agreement
shall terminate and be of no further force or effect, and neither MBM, HSI nor
any of their respective Subsidiaries will have any obligation towards the
Executive under the MBM Employment Agreement except to pay to him any unpaid
base salary through the date on which the Effective Time occurs. Without
limiting the generality of the foregoing, the Executive shall not have any right
to receive any bonus under the MBM Employment Agreement in respect of MBM's 1997
fiscal year or any portion of such fiscal year occurring prior to the Effective
Time.
2. Payment
(a) In consideration of the termination of the MBM Employment
Agreement, and upon the effectiveness of the HSI Employment Agreement, HSI shall
cause MBM to pay to the Executive the aggregate amount of Three Million Dollars
($3,000,000) (the "Contract
<PAGE>
Termination Obligation"), payable in five equal consecutive installments of Six
Hundred Thousand Dollars ($600,000) each. Subject to Section 2(b) hereof, the
first such installment shall be paid on the date on which the Effective Time
occurs, and the four remaining installments shall be paid on January 1 of each
of the four succeeding calendar years commencing after the Effective Time.
Interest shall accrue on the outstanding balance of the Contract Termination
Obligation from the date on which the Effective Time occurs to the date paid at
a rate per annum equal to the greater of (i) 6% or (ii) the prime rate of Chase
Manhattan Bank, less 2.50%, which rate shall be adjusted, as necessary, when
such prime rate changes; provided, however, that from and after the date the
aggregate unpaid amount of the Contract Termination Obligation is payable
pursuant to Section 2(c) such rate per annum shall be the lesser of the
foregoing rate plus 8% or the maximum rate permitted under applicable law.
(b) Notwithstanding anything in Section 2(a) to the contrary if, (i)
the Executive dies or becomes disabled, (ii) the Executive's employment is
terminated (1) by HSI without cause (as defined in the HSI Employment Agreement)
or (2) by the Executive for good reason (as defined in the HSI Employment
Agreement) or pursuant to Section 7(a)(i)(A) the HSI Employment Agreement, (iii)
a Significant Date shall have occurred (as that term is defined in the form of
agreement attached to Exhibit C to the HSI Employment Agreement), or (iv) HSI
shall not deliver the letter of credit provided for in the following sentence
under the circumstances set forth therein, then HSI shall cause MBM to pay to
the Executive the aggregate unpaid amount of the Contract Termination
Obligation, together with all accrued and unpaid interest thereon, in a lump sum
within 30 days after the date of such termination. In the event Stanley Bergman
shall cease to be the Chief Executive Officer of HSI, HSI shall cause to be
delivered to the Executive an unconditional irrevocable bank standby letter of
credit drawn on a member of the New York Clearinghouse Association in an amount
equal to the then aggregate unpaid Contract Termination Obligation.
(c) In the event that the Contract Termination Obligation becomes
subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or any similar tax that may
hereafter be imposed under the Code, then HSI shall pay to the Executive the
amount of the Excise Tax that the Executive is obligated to pay in respect of
the Contract Termination Obligation plus an amount equal to the Executive's
income tax incurred with respect to such amount of the Excise Tax, provided
however that the maximum amount payable pursuant to this clause shall be an
amount equal to 50% of such Excise Tax, and provided further that the Executive
shall cooperate with HSI (at HSI's expense) in disputing the imposition of the
Excise Tax. If HSI determines in good faith that there is a basis for disputing
the amount of the Excise Tax imposed, HSI shall be entitled to direct any such
dispute, but shall indemnify the Executive against any additional Excise Tax for
which he may become liable as a result.
-2-
<PAGE>
3. Representations and Warranties.
(a) HSI represents and warrants to the Executive that it has full
corporate power to execute and deliver this Agreement. The execution, delivery
and performance of this Agreement has been duly authorized by HSI's Board of
Directors and does not conflict with or result in a breach of any provision of
(i) the Certificate of Incorporation, as amended, or Bylaws of HSI, (ii) any
material agreement, commitment or other instrument to which HSI is a party or by
which it is bound or (iii) any order, judgment or decree of any court or
arbitrator.
(b) The Executive represents and warrants to HSI that the execution
and delivery of this Agreement and the performance of his obligations pursuant
hereto do not conflict with, or result in a breach of any provisions of, any (i)
material agreement, commitment, or other instrument to which the Executive is a
party or by which the Executive is bound or (ii) order, judgment or decree of
any court or arbitrator.
4. Amendment and Modification; Waiver. This Agreement may be amended,
modified or supplemented only by the written agreement (referring specifically
to this Agreement) of the parties. The waiver by either party of any breach or
violation of any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach or violation.
5. Notice. All notices required to be given under the terms of this
agreement shall be in writing and shall be deemed to have been duly given if
delivered to the addressee in person or mailed by certified mail, return receipt
requested, as follows:
If to HSI, addressed to:
Henry Schein, Inc.
135 Duryea Road
Melville, New York 11747
Attention: Mark E. Mlotek, Esq.
With a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Robert A. Cantone, Esq.
If to the Executive, addressed to:
Bruce J. Haber
989 Marcel Road
Baldwin Harbor, NY 11510
-3-
<PAGE>
With a copy to:
Otterbourg, Steindler, Houston & Rosen P.C.
230 Park Avenue
New York, New York 10169
Attention: Donald N. Gellert, Esq.
or to any such other address as the party to receive the notice shall advise by
due notice given in accordance with this paragraph.
6. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
7. Entire Agreement; Benefit. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, between the parties, with respect to the subject matter hereof
other than the HSI Employment Agreement. This Agreement shall inure to and shall
be binding upon the parties hereto, the successors and assigns of HSI and the
heirs and personal representatives of the Executive.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
provisions thereof relating to conflicts of law.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
10. Attorneys' Fees. If the Executive shall engage counsel to bring suit
against HSI and/or MBM to enforce his rights hereunder, the Executive shall be
entitled to be reimbursed by HSI for the reasonable fees and expenses of such
counsel incurred in connection with such suit if the Executive is the prevailing
party in such suit.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
/s/ Bruce J. Haber
---------------------------
BRUCE J. HABER
HENRY SCHEIN, INC.
By: /s/ Mark Mlotek
----------------------
Authorized Officer
-4-
<PAGE>
Exhibit 10.(f)(f)
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, made this _____ day of __________, 1997, by and between
HENRY SCHEIN, INC., a Delaware corporation (the "Company"), and BRUCE J. HABER,
(the "Executive").
WHEREAS, in consideration of his agreement not to compete with the
Company, the Company has agreed to issue the Executive _________________* shares
of its Common Stock, par value $.01, per share.
WHEREAS, such shares are to be subject to certain restrictions.
NOW, THEREFORE, the company and the Executive agree as follows:
1. Grant of Shares
The Company is issuing to the Employee _________* shares of Common Stock
of the Company, par value $.01 (the "Shares"). Pursuant to Section 3 hereof, the
Shares are subject to certain restrictions, which restrictions shall expire at
various times with regard to portions of the Shares. While such restrictions are
in effect, the Shares subject to such restrictions shall sometimes be referred
to herein as "Restricted Stock".
- ----------
* A number of shares equal to the quotient of $1 million divided by the
average of the closing sales price of Company Common Stock as reported by
NASDAQ for the 20 trading days preceding the date upon which the Effective
Time occurs.
<PAGE>
2. Restrictions on Transfer.
The Employee shall not sell, transfer, pledge, hypothecate, assign or
otherwise dispose of the Shares, except as set forth in this Agreement. Any
attempted sale, transfer, pledge, hypothecation, assignment or other disposition
of the Shares in violation of this Agreement shall be void and of no effect and
the Company shall have the right to disregard the same on its books and records
and to issue "stop transfer" instructions to its transfer agent.
3. Restricted Stock.
3.1 Deposit of Certificates. The Executive will deposit with and
deliver to the Company the stock certificates representing the Restricted Stock,
each duly endorsed in blank or accompanied by stock powers duly executed in
blank. In the event the Executive receives a stock dividend on the Restricted
Stock or the Restricted Stock is split or the Executive receives any other
shares, securities, moneys or property representing a dividend on the Restricted
Stock (other than regular cash dividends on and after the date of this
Agreement) or representing a distribution or return of capital upon or in
respect of the Restricted Stock or any part thereof, or resulting from a
split-up, reclassification or other like changes of the Restricted Stock, or
otherwise received in exchange therefor, and any warrants, rights or options
issued to the Executive in respect of the Restricted Stock (collectively "RS
Property"), the Executive will also immediately deposit with and deliver to the
Company any of such RS Property, including any certificates representing shares
duly endorsed in blank or accompanied by stock powers duly executed in blank,
and such RS
-2-
<PAGE>
Property shall be subject to the same restrictions, including that of this
Section 3.1, as the Restricted Stock with regard to which they are issued and
shall herein be encompassed within the term "Restricted Stock."
3.2 Rights with Regard to Restricted Stock. The Executive will have
the right to vote the Restricted Stock, to receive and retain all regular cash
dividends payable to holders of Common Stock of record on and after the issuance
of the Restricted Stock (although such dividends shall be treated, to the extent
required by law, as additional compensation for tax purposes if paid on
Restricted Stock), and to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to the Restricted Stock, with the exceptions
that (i) the Executive will not be entitled to delivery of the stock certificate
or certificates representing the Restricted Stock until the restriction period
shall have expired and unless all other vesting requirements with respect
thereto shall have been fulfilled, (ii) the Company will retain custody of the
stock certificate or certificates representing the Restricted Stock and the
other RS Property during the restriction period, (iii) no RS Property shall bear
interest or be segregated in separate accounts during the restriction period and
(iv) the Executive may not sell, assign, transfer, pledge, exchange, encumber or
dispose of the Restricted Stock during the restricted period.
3.3 Vesting. The Restricted Stock shall become vested and cease to
be Restricted Stock (but still subject to the other terms of this Agreement) as
to one-tenth of the Shares on each anniversary of the date hereof if the
Executive has been continuously employed by the Company or its subsidiaries
within the meaning of Section 424 of the Internal Revenue Code (the "Control
Group") until such date.
-3-
<PAGE>
There shall be no proportionate or partial vesting in the periods
prior to each such anniversary and all vesting shall occur only on such
anniversary provided that, if the (a) the Executive dies, (b) Executive's
employment is terminated by the Company without cause as such term is used in
the Executive's Employment Agreement with the Company dated the date hereof (the
"Employment Agreement"), (c) his employment is terminated by him for good
reason, as such term is used in the Employment Agreement, (d) his employment is
terminated pursuant to Section 7(a)(i)(A) of the Employment Agreement, or (e) a
Significant Date shall have occurred as that term is defined in Schedule A to
Exhibit C to the Employment Agreement, he shall also vest at such time in the
Restricted Stock that would otherwise have vested on each succeeding anniversary
of the date hereof. When any Restricted Stock becomes vested, the Company shall
promptly issue and deliver to the Executive a new stock certificate registered
in the name of the Executive for such Shares without the legend set forth in
Section 4(a) hereof and deliver to the Executive any related other RS Property.
3.4 Forfeiture. In the event that the employment of the Executive
with the Company terminates, or is terminated, for any reason whatsoever, other
than those described in the second paragraph of Section 3.3, the Executive shall
forfeit to the Company, without compensation, all unvested Restricted Stock (but
no vested portion of the Shares); provided that, in the event of death or
disability of the Executive, the Compensation Committee of the Board of
Directors of the Company may, in its sole discretion, but shall not be obligated
to, fully vest and not forfeit all or any portion of the Executive's Restricted
Stock.
-4-
<PAGE>
3.5 Adjustments. In the event of any stock dividend, split up,
split- off, spin-off, distribution, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or liquidation or the like, the
Restricted Stock shall, where appropriate in the sole discretion of the
Compensation Committee of the Board of Directors of the Company, receive the
same distributions as other shares of Common Stock or be adjusted either on the
same basis as other shares of Common Stock or on some other basis as determined
by the Compensation Committee of the Board of Directors. In any such event, the
Compensation Committee of the board of Directors may, in its sole discretion,
determine to aware additional Restricted Stock in lieu of the distribution or
adjustment being made with respect to other shares of Common Stock. In any such
event, the determination made by the Compensation Committee of the Board of
Directors shall be conclusive. The Compensation Committee of the Board of
Directors may, in its sole discretion, at any time fully vest and not forfeit
all or any portion of the Executive's Restricted Stock.
3.6 Withholding. The Employee agrees that, subject to subsection 3.7
below,
(a) No later than the date on which any Restricted Stock shall
have become vested, the Executive will pay to the Company, or make
arrangements satisfactory to the Company regarding payment of, any
federal, state or local taxes of any kind required by law to be
withheld with respect to any Restricted Stock which shall have
become so vested;
-5-
<PAGE>
(b) The Company shall, to the extent permitted by law, have
the right to deduct from any payment of any kind otherwise due to
the Executive any federal, state or local taxes of any kind required
y law to be withheld with respect to any Restricted Stock which
shall have become so vested; and
(c) In the event the Executive does not satisfy (a) above on a
timely basis, the Company may, but shall not be required to, pay
such required withholding and treat such amount as a demand loan to
the Employee at the maximum rate permitted by law, with such loan,
at the Company's sole discretion and provided the Company so
notifies the Employee within thirty (30) days of the making of the
loan, secured by the Shares and any failure by the Executive to pay
the loan upon demand shall entitle the Company to all of the rights
at law of a creditor secured by the Shares. The Company may hold as
security any certificates representing any Shares and, upon demand
of the Company, the Executive shall deliver to the Company any
certificates in his possession representing Shares together with a
stock power duly endorsed in blank.
3.7 Section 83(b). If the Executive properly elects (as required by
Section 83(b) of the Internal Revenue Code) within thirty (30) days after the
issuance of the Restricted Stock to include in gross income for federal income
tax purposes in the year of issuance the fair market value of such Restricted
Stock, the Executive shall pay to the
-6-
<PAGE>
Company or make arrangements satisfactory to the Company to pay to the Company
upon such election, any federal, state or local taxes required to be withheld
with respect to such Restricted Stock. If the Executive shall fail to make such
payment, the Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to the Executive any federal,
state or local taxes of any kind required by law to be withheld with respect to
such Restricted Stock, as well as the rights set forth in Section 3.6(c) hereof.
The Executive acknowledges that it is his sole responsibility, and not the
Company's, to file timely the election under Section 83(b) of the Internal
Revenue Code and any corresponding provisions of state tax laws if he elects to
utilize such election.
3.8 Special Incentive Compensation. The Executive agrees that the
award of the Restricted Stock hereunder is special incentive compensation and
that it, any dividends paid thereon (even if treated as compensation for tax
purposes) and any other RS Property will not be taken into account as "salary"
or "compensation" or "bonus" in determining the amount of any payment under any
pension, retirement or profit-sharing plan of the Company or any life insurance,
disability or other benefit plan of the Company.
3.9 Delivery Delay. The delivery of any certificate representing
Restricted Stock or other RS Property may be postponed by the Company for such
period as may be required for it to comply with any applicable federal or state
securities law, or any national securities exchange listing requirements and the
Company is not obligated to issue or deliver any securities if, in the opinion
of counsel for the Company, the issuance of such Shares shall constitute a
violation by the Executive or the Company of any provisions of any law or of any
regulations of any governmental authority or any national securities exchange.
-7-
<PAGE>
4. All certificates representing the Shares shall have endorsed thereon
the following legends:
(a) If Restricted Stock, "THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING A VESTING SCHEDULE AND
FORFEITURE PROVISION AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.
(b) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(c) Any legend required to be placed thereon by applicable blue sky
laws of any state.
-8-
<PAGE>
5. Securities Representations.
The Shares are being issued to the Executive and this Agreement is being
made by the Company in reliance upon the following express representations and
warranties of the Employee.
The Employee acknowledges, represents and warrants that:
(a) the Shares are being acquired for his own account and not with a
view to, or for sale in connection with, the distribution thereof, nor
with any present intention of distributing or selling any of such Shares;
(b) he has been advised that the Shares have not been registered
under the Securities Act of 1933 (the "Act") on the ground that no
distribution or public offering of the Shares is to be effected, and in
this connection the Company is relying in part on his representations set
forth in this Section;
(c) in the event that the Employee is permitted to sell, transfer,
pledge, hypothecate, assign or otherwise dispose of the Shares, the
Employee may only do so pursuant to a registration statement under the Act
and qualification under applicable state securities laws or pursuant to an
opinion of counsel satisfactory to the Company that such registration and
qualification are not required, and that the transaction (if it involves a
sale in the over-the-counter market or on a securities exchange) does not
violate the
-9-
<PAGE>
provisions of Rule 144 under the Act. A stop-transfer order will be placed
on the books of the Company respecting the certificates evidencing the
Shares, and such certificates shall bear, until such time as the Shares
evidenced by such certificates shall have been registered under the Act or
shall have been transferred in accordance with an opinion of counsel for
the Company that such registration is not required, the legends set forth
in Section 4 hereof;
(c) the transfer of the Shares has not been registered under the
Act, and the Shares must be held indefinitely unless subsequently
registered under the Act or an exemption from such registration is
available and the Company is under no obligation to register the Shares;
(e) he understands that the Shares are restricted securities within
the meaning of Rule 144 promulgated under the Act; that the exemption form
registration under Rule 144 will not be available unless (i) a public
trading market then exists for the common stock of the Company, (ii)
adequate information concerning the Company is then available to the
public, and (iii) other terms and conditions of Rule 144 or any exemption
therefrom are complied with; and that any sale of the Shares may be made
only in limited amounts in accordance with such terms and conditions.
6. Not an Employment Agreement.
The issuance of the Shares hereunder does not constitute an agreement by
the Company to continue to employ the Executive during the entire, or any
portion of the, term
-10-
<PAGE>
of this Agreement, including but not limited to any period during which
Restricted Stock is outstanding.
7. Power of Attorney. The Company, its successors and assigns, is hereby
appointed the attorney-in-fact, with full power of substitution, of the
Executive for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instruments which such attorney-in-fact may
deem necessary or advisable to accomplish the purposes hereof, which appointment
as attorney-in-fact is irrevocable and coupled with an interest. The Company, as
attorney-in-fact for the Executive, may in the name and stead of the Executive,
make and execute all conveyances, assignments and transfers of the Restricted
Stock, Shares and property provided for herein, and the Executive hereby
ratifies and confirms all that the Company, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Executive shall, if so requested by the
Company, execute and deliver to the Company all such instruments as may, in the
judgment of the Company, be advisable for the purpose.
8. Miscellaneous.
8.1 This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, legal representatives, successors
and assigns.
8.2 This Agreement constitutes the entire agreement between the
parties and cannot be changed or terminated orally. No modification or waiver of
any of the
-11-
<PAGE>
provision hereof shall be effective unless in writing and signed by the party
against whom it is sought to be enforced.
8.3 This Agreement may be executed in one or more counterparts, all
of which taken together shall constitute one contract.
8.4 The failure of any party hereto at any time to require
performance by another party of any provision of this Agreement shall not affect
the right of such party to require performance of that provision, and any waiver
by any party of any breach of any provision of this Agreement shall not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right under this Agreement.
8.5 The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
modify any of the terms or provisions hereof.
8.6 All notices, consents, requests, approvals, instructions and
other communications provided for herein shall be in writing and validly given
or made when delivered, or on the second succeeding business day after being
mailed by registered or certified mail, whichever is earlier, to the persons
entitled or required to receive the same, at the addresses set forth below or to
such other address as either party may designate by like notice.
-12-
<PAGE>
If to the Company:
Henry Schein, Inc.
___________________
___________________
Attention: Marke Mlotek, Esq.
With a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Robert A. Cantone, Esq.
If to the Executive:
Bruce J. Haber
___________________
___________________
With a copy to:
Otterbourg Steindler
___________________
___________________
Attention: Donald Gellert, Esq.
8.7 This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the internal laws of
the State of New York.
8.8 Notwithstanding anything to the contrary contained in this
Agreement, the Restricted Stock may be transferred by the Executive to any
member of his immediate family or any trust for the benefit of any such family
member, provided such transferee agrees to be bound by the terms of this
Agreement to the same extent as the Executive.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
HENRY SCHEIN, INC.
By:________________________________
Authorized Officer
___________________________________
Executive
-14-
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this day of , 19__ before me personally appeared
_________________________ to me known to be the person described in and who
executed the foregoing agreement, and acknowledged that he executed the same as
his or her free act and deed.
________________________________
Notary Public
-15-
<PAGE>
[BANGERT, DAWES, READE, DAVIS & THOM LETTERHEAD]
PERSONAL & CONFIDENTIAL
November 27, 1996
VIA FAX: (516) 223-5496
Board of Directors
Micro Bio-Medics, Inc.
846 Pelham Parkway
Pelham Manor, N.Y. 10803
Attention: Mr. Bruce J. Haber
Dear Mr. Haber:
1. Bangert, Dawes, Reade, Davis & Thom Incorporated ("BDRD&T") is pleased to
act as exclusive financial advisor to the Board of Directors (the "Board") of
Micro Bio-Medics, Inc. ("MBM" or the "Company") in connection with any
contemplated Business Transaction involving entities, persons or their
affiliates of Henry Schein, Inc. or any competing entity ("HSI" or the
"Acquirer(s)") who may express interest in entering into a merger, acquisition
or other form of business combination with MBM. This letter agreement
("Agreement") is to confirm our understanding with respect to our engagement.
As used in this Agreement, the term "Business Transaction" means whether
effected in one transaction or a series of transactions, (a) any financing,
acquisition, recapitalization, merger, consolidation, refinancing,
reorganization or other business combination pursuant to which all or any part
of the business of MBM is combined with that of HSI or any competing Acquirer or
one or more entities/persons formed by or affiliated with HSI or any competing
Acquirer, including without limitation, any joint venture; (b) the acquisition,
directly or indirectly, by HSI or any competing Acquirer of 5% or more of the
then outstanding capital stock of MBM by way of a negotiated purchase or other
means, or (c) the acquisition, directly or indirectly, by HSI or any competing
Acquirer of all or a substantial portion of the assets of, or of any right to
all or a substantial portion of the revenues or income of MBM by way of a
negotiated purchase, lease, license, exchange, joint venture or other means.
2. BDRD&T will meet with, exchange information, and communicate with such
aforementioned potential Acquirers, and/or their advisors/representatives who
may have the interest and ability to enter into a merger, acquisition, asset
purchase, stock purchase or other form of Business Transaction with MBM. BDRD&T
will advise the Board of MBM in negotiations with any such Acquirer(s), will
assist the Board in analyzing, structuring, negotiating and effecting a Business
Transaction(s) on terms mutually agreeable to MBM and any such Acquirer(s), and
will provide to the Board of MBM such information, reports and analyses with
respect thereto as it may request.
<PAGE>
Page 2
3. MBM will furnish BDRD&T with such information as BDRD&T may reasonably
request to perform its obligations hereunder ("Information"); provided however,
BDRD&T shall observe any confidentiality restrictions that MBM may require with
respect to the use and dissemination of Information, and shall promptly return
all Information to MBM upon termination of this Agreement. MBM recognizes and
confirms that BDRD&T (a) will use and rely primarily on the Information and on
information available directly to BDRD&T from generally recognized public
sources in performing its obligations hereunder, without having independently
verified the same; (b) does not assume responsibility for the accuracy or
completeness of the Information and information obtained by BDRD&T from
generally recognized public sources; and (c) will not make an appraisal of any
assets of MBM.
4. For the purposes of this Agreement, the term "Consideration" means the
aggregate fair market value, as determined by mutual agreement of the Board of
MBM and BDRD&T upon the closing of the Business Transaction, of any securities
and any other non-cash consideration (including, without limitation, any joint
venture, leasing, licensing, non-compete arrangements and/or partnership
interest) and the face amount (in United States dollars) of any cash
consideration, received by MBM and/or its security holders in such a Business
Transaction, calculated as if one hundred percent (100%) of MBM's capital stock
or assets were sold or transferred to such Acquirer(s).
If, during the term of this Agreement or within one year thereafter, a
Business Transaction is consummated between MBM and such aforementioned
Acquirer(s) or MBM enters into a written agreement which subsequently results in
a Business Transaction with any Acquirer which BDRD&T identified to MBM or with
which MBM and/or BDRD&T had discussions regarding a Business Transaction, in
either case during the term of this Agreement, MBM will pay BDRD&T a
"Transaction Fee" in the amount of $1,230,000.00; such Transaction Fee being
payable to BDRD&T at its option in cash or securities in kind upon the closing
of such Business Transaction, provided however, that any portion of the
Transaction Fee computed with respect to installment or contingent payments
which are part of the Consideration shall be due and payable to BDRD&T only when
such amounts actually are received by MBM, and/or its securities' holders.
In the event a transaction in connection with or as contemplated by this
Agreement is not consummated, BDRD&T will be paid $150,000.00 plus reimbursement
of all related expenses as compensation for its services.
<PAGE>
Page 3
5. In addition to any Transaction Fee that may be payable to BDRD&T under
paragraph 4 hereof, MBM agrees to reimburse BDRD&T, upon its request from time
to
time and submission to MBM of documentation thereof, for its reasonable
out-of-pocket expenses incurred by BDRD&T to perform its obligations hereunder.
6. The Company agrees to indemnify BDRD&T and its affiliates and their
respective directors, officers, employees, agents and controlling persons
(BDRD&T and each such person being an "Indemnified Party") from and against any
and all losses, claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under any applicable federal or state law
or otherwise, and related to or arising out of any Business Transaction
contemplated by this Agreement or the engagement of BDRD&T pursuant to, and the
performance by BDRD&T of the services contemplated by this Agreement and will
reimburse any Indemnified Party for all expenses (including counsel fees and
expenses) as they are incurred in connection with the investigation of,
preparation for, or defense of any pending or threatened claim, or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
and whether or not such claim, action or proceeding is initiated or brought by
or on behalf of the Company and/or its securities' holders. The Company will
not be liable under the foregoing indemnification provision to the extent that
any loss, claim, damage, liability or expense is found in a final judgment by a
court to have resulted from BDRD&T's bad faith or gross negligence. The Company
also agrees that no Indemnified Party shall have any liability (whether direct
or indirect, in contract or tort or otherwise) to the Company, its securities'
holders, or creditors related to or arising out of the engagement of BDRD&T
pursuant to, or the performance by BDRD&T of the services contemplated by this
Agreement, except to the extent that any loss, claim, damage or liability is
found in a final judgment by a court to have resulted from BDRD&T's bad faith or
gross negligence.
7. If the indemnification of an Indemnified Party provided for in paragraph 6
hereof is for any reason held unenforceable, MBM agrees to contribute to the
losses, claims, damages and liabilities as to which such indemnification is held
unenforceable (a) in such proportion as is appropriate to reflect the relative
benefits to MBM and/or its securities holders, on the one hand, and BDRD&T on
the other hand, of a proposed Business Transaction (whether or not such Business
Transaction is consummated) or (b) if (but only if) the allocation provided for
in clause (a) hereof is for any reason held unenforceable, in such proportion as
is determined to reflect the relative fault of MBM and/or its securities
holders, on the one hand, and BDRD&T on the other hand, as well as any other
relevant equitable considerations. MBM agrees that, for the purposes of this
paragraph 7, the relative benefits of a proposed Business Transaction to itself
and/or its security holders and to BDRD&T, respectively, are deemed to be in the
same proportion as (i) the Consideration received or contemplated to be received
by MBM and/or its security holders as a result of or in connection with such
Business Transaction, net of the Transaction Fee and fees and expenses paid or
to be paid to BDRD&T under this Agreement; and (ii) the Transaction Fee and
reimbursement for fees and expenses paid or
<PAGE>
Page 4
to be paid to BDRD&T under this Agreement; provided, however, to the extent
permitted by applicable law, in no event shall the Indemnified Parties be
required to contribute an
aggregate amount in excess of the Transaction Fees and reimbursement for fees
and expenses actually paid or to be paid to BDRD&T under this Agreement.
8. MBM agrees that, without BDRD&T's prior written consent, it will not
settle, compromise or consent to the entry of any judgment on behalf of an
Indemnified Party in any pending or threatened claim, action or proceeding with
respect to which an Indemnified Party has a right of indemnification under
paragraph 6 hereof (whether or not any Indemnified Party is an actual party to
such claim, action or proceeding), unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party from all liability
arising out of such claim, action or proceeding.
9. MBM acknowledges and agrees that BDRD&T has been retained to act solely as
its financial advisor in furtherance of a possible Business Transaction, that
BDRD&T shall perform its obligations hereunder solely as an independent
contractor, and that MBM does not intend that any duties of BDRD&T arising out
of its engagement pursuant hereto shall be owed to any person or entity other
than MBM.
10. BDRD&T's engagement hereunder may be terminated by either the Company
and/or BDRD&T at any time after December 31, 1997 upon written notice to that
effect to the other party, it being understood that the provisions relating to
the payment of fees and expenses, indemnification, limitations on the liability
of Indemnified Parties, contribution, settlements, the status of BDRD&T as an
independent contractor the limitation as to whom BDRD&T shall owe any duties and
waiver of the right to trial by jury will survive any such termination.
In the event that an Indemnified Party is requested or required to appear
as a witness in any action brought by or on behalf of or against the Company
and/or its securities' holders or any of the former in which such Indemnified
Party is not named as a defendant, the Company agrees to reimburse BDRD&T for
all expenses incurred by it in connection with Indemnified Party's appearing and
preparing to appear as such a witness, including, without limitation, the fees
and disbursement of its legal counsel.
11. MBM acknowledges that BDRD&T may, at its option and expense, place an
announcement in such newspapers and periodicals as it may choose, stating that
BDRD&T has acted as the exclusive financial advisor to MBM in connection with
such Business Transaction.
12. This Agreement is the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes any prior agreements or
understanding with respect thereto, whether oral or in writing. No waiver,
amendment, assignment or other
<PAGE>
Page 5
modification of this Agreement shall be effective unless it is in writing and
signed by each party to be bound thereby.
Each of BDRD&T and the Company (in its own behalf and, to the extent
permitted by applicable law, on behalf of its securities' holders) waive all
right to trial by jury in any action, proceeding or counterclaim (whether based
upon contract, tort or otherwise) related to or arising out of the engagement of
BDRD&T pursuant to, or the performance by BDRD&T of the services contemplated
by, this Agreement.
13. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York applicable to contracts executed in and to be
performed in the state.
Agreed to as of November 27, 1996 by:
MICRO BIO-MEDICS, INC. and BANGERT, DAWES, READE,
its Board of Directors DAVIS & THOM INCORPORATED
By: /s/ Bruce J. Haber By: /s/ K. Deane Reade,Jr.
------------------- ------------------------
Title: President Title: President
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated February 12, 1997,
except for Notes 8 and 12, which are dated March 7, 1997, which is
incorporated by reference into the Form S-8 Registration Statement filed on
behalf of Micro Bio-Medics, Inc., file #33-46231, file #33-66726 and file
#333-02019.
/s/ Miller, Ellin & Company
Miller, Ellin & Company
New York, New York
March 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<CASH> 1,513,750
<SECURITIES> 0
<RECEIVABLES> 31,967,111
<ALLOWANCES> 686,179
<INVENTORY> 13,488,244
<CURRENT-ASSETS> 48,269,795
<PP&E> 7,191,418
<DEPRECIATION> 3,433,070
<TOTAL-ASSETS> 60,443,816
<CURRENT-LIABILITIES> 20,157,573
<BONDS> 8,714,567
0
0
<COMMON> 151,863
<OTHER-SE> 31,239,902
<TOTAL-LIABILITY-AND-EQUITY> 60,443,816
<SALES> 150,142,529
<TOTAL-REVENUES> 150,142,529
<CGS> 119,205,502
<TOTAL-COSTS> 119,205,502
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 44,000
<INTEREST-EXPENSE> 719,198
<INCOME-PRETAX> 3,065,535
<INCOME-TAX> 1,320,700
<INCOME-CONTINUING> 1,744,835
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<NET-INCOME> 1,744,835
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<EPS-DILUTED> .31
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