<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 1995
----------------------
(May 2, 1995)
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AMERICAN CONSOLIDATED LABORATORIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2624130
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6416 PARKLAND DRIVE, SARASOTA, FLORIDA 34243
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(Address of principal executive offices) (Zip Code)
(813) 753 - 0383
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Registrant's telephone number, including area code
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 2, 1995, American Consolidated Laboratories, Inc. ("AC Labs") or
("the Company") formerly known as Salvatori Ophthalmics, Inc. completed its
acquisition (effective May 1, 1995) of the business and assets of Philcon
Laboratories, Inc. ("Philcon") based in Philadelphia, Pennsylvania. All of the
business and assets, subject to scheduled liabilities (approximately $300,000),
were acquired by AC Labs from Philcon Laboratories, Inc. for $95,000 in cash, a
$125,000 Subordinated Promissory Note and 8,117 shares of AC Labs Common stock
(valued at $20,000 for this transaction). AC Labs will account for the
acquisition using the purchase method of accounting. The $240,000 purchase price
is subject to post-closing adjustments based upon, among other things, the net
difference between the assets acquired and liabilities assumed as of May 1,
1995.
Philcon is a manufacturer of RGP (rigid gas permeable) contact lenses and a
distributor of hydrophilic (soft) contact lenses and lens care products. The
existing manufacturing and distribution businesses of Philcon will continue in
place for the time being.
The Company obtained the funding for the acquisition from internal working
capital sources.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Philcon Laboratories, Inc.
Report of Independent Certified Public Accountant
Balance Sheet - February 28, 1995
Statement of Operations and Changes in Retained Earnings Twelve
Months Ended February 28, 1995
Statement of Cash Flows Twelve Months Ended February 28, 1995
Notes to Financial Statements
Pro forma financial information is not available, but will be filed on
Form 8 as soon as practicable, but not later than 60 days after the due date
of this report.
Exhibits in accordance with the provisions of Item 601 of Regulation S-B
are as follows:
Exhibit
Number Description
------- -----------
2.1 Asset Purchase Agreement between AC Labs and Philcon
Laboratories, Inc. dated February 1, 1995, effective
May 1, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN CONSOLIDATED LABORATORIES, INC.
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(Registrant)
Date: May 16, 1995 By:/s/ Edward J. Pocilujko
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Edward J. Pocilujko
Chief Financial Officer
<PAGE>
Philcon Laboratories, Inc.
Financial Statements
February 28, 1995
and the Twelve Months then Ended
<PAGE>
Philcon Laboratories, Inc.
Financial Statements
February 28, 1995
and the Twelve Months then Ended
Table of contents:
Auditor's Report 2
Balance Sheet 3
Statement of Operations and
Changes in Retained Earnings 5
Statement of Cash Flows 6
Notes to the Financial Statements 7
<PAGE>
[LETTERHEAD OF HENRY C. STOUGHTON APPEARS HERE]
To the Stockholders of
Philcon Laboratories, Inc.
Philadelphia, PA
I have audited the accompanying balance sheet as of February 28, 1995 and
the statements of operations, retained earnings and cash flows for the twelve
months then ended. These financial statements are the responsibility of the
management of Philcon Laboratories, Inc.. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Philcon Laboratories, Inc.
as of February 28, 1995 and the results of operation and its cash flows for the
twelve months then ended in conformity with generally accepted accounting
principles.
It is my understanding that these financial statements will be used to
satisfy the requirements of American Consolidated Laboratories, Inc. in
connection with their proposal to acquire a majority of the assets and
liabilities of Philcon Laboratories, Inc. (see note 8). My audit was made for
the purpose of expressing an opinion on the basic financial statements taken as
a whole, including notes. All other information that may be associated with
these financial statements is presented for additional information purposes only
and is not part of the basic financial statements. Such information has not
been subject to the auditing procedures applied in the audit of the basic
financial statements, and, accordingly, I express no opinion on it.
/s/ Henry C. Stoughton
- ---------------------------------------
Henry C. Stoughton, CPA
April 28, 1995
<PAGE>
Philcon Laboratories, Inc. 3
Balance Sheet
February 28, 1995
Assets
<TABLE>
<S> <C>
Current assets:
Cash $ 6,127
Accounts receivable 161,513
Inventories 229,939
Other current assets 625
---------
Total current assets 398,204
---------
Property and Equipment:
Furniture and fixtures 26,723
Computer equipment 49,833
Lab Equipment 97,545
Vehicles 12,533
Leasehold improvements 23,705
Less accumulated depreciation (194,318)
---------
Property and equipment - net 16,021
---------
Deposits 150
---------
Total Assets $ 414,375
=========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Philcon Laboratories, Inc. 4
Balance Sheet
February 28, 1995
Liabilities and Stockholders' Equity
<TABLE>
<S> <C>
Current liabilities:
Current maturities of long-term debt $ 15,032
Accounts payable 305,096
Accrued expenses and other current liabilities 10,725
Income taxes - net of benefit of loss
carryforwards 0
--------
Total current liabilities 330,853
--------
Long-term liabilities - net of current maturities:
Long-term debt 4,339
Loans from stockholder 1,591
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Total long-term debt 5,930
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Commitments (see note 7)
Stockholders' equity:
Common stock, $1.00 par value; 50,000
shares authorized; 25,000 shares
issued and outstanding 25,000
Retained earnings 52,592
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Total stockholders' equity 77,592
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Total liabilities and stockholder's equity $414,375
========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Philcon Laboratories, Inc. 5
Statement of Operations
and Changes in Retained Earnings
Twelve Months Ended February 28, 1995
<TABLE>
<S> <C>
Sales $1,546,206
Cost of sales 1,187,022
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Gross profit 359,184
Selling, general and administrative expenses 421,719
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Operating loss (62,535)
Interest expense (2,483)
Other income (expense) 2,899
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Loss before income taxes (62,119)
Provision for income taxes (see note 6) 0
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Net Loss (62,119)
Retained Earnings - February 28, 1994 114,711
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Retained Earnings - February 28, 1995 $ 52,592
==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Philcon Laboratories, Inc. 6
Statement of Cash Flows
Twelve Months Ended February 28, 1995
<TABLE>
<S> <C>
Net Income ($ 62,119)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,170
Increase in accounts receivable (14,296)
Decrease in inventories 234,532
Increase in other current assets (625)
Decrease in accounts payable (156,415)
Increase in accrued expenses
and other current liabilities 764
---------
Net cash provided by operating activities 9011
Cash flows used in investing activities:
Purchases of equipment (2,121)
---------
Cash flows provided by (used in) financing activities:
Advances from stockholder 12,000
Repayments to stockholder (14,182)
Principal payments on long-term debt (2,524)
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Net cash used in financing activities (4,706)
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Net increase in cash 2,184
Cash - February 28, 1994 3,943
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Cash - February 28, 1995 $ 6,127
=========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Philcon Laboratories, Inc. 7
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
1. Summary of significant accounting policies
a. Company activities
The Company is a privately held rigid (RGP) contact lens manufacturer
and a soft (gas permeable) contact lens distributor serving the
Delaware Valley locally and other national markets
b. Accounts receivable
The Company accounts for bad debts by the reserve method. Accounts
considered uncollectible have been reserved in the allowance for
doubtful accounts. At February 28, 1995, the allowance for doubtful
accounts was $4,671.
Accounts receivable are primarily due from optometrists,
ophthalmologists and opticians located in the Delaware Valley.
c. Property and equipment
Property and equipment are stated at cost and are depreciated using
both straight-line and accelerated methods over 5 to 7 years.
Leasehold improvements are amortized using the straight-line method
over the useful lives of the improvements of 7 to 30 years.
Expenditures for repairs and maintenance are charged to expense as
incurred. The cost of major renewals and betterments are capitalized
and depreciated.
d. Statement of cash flow
For purposes of reporting cash flows, the Company considers cash to be
cash on hand and cash in banks.
Supplemental disclosure of cash flow information:
Cash paid during the year for:
<TABLE>
<S> <C>
Interest $ 2,483
Income taxes $ 0
</TABLE>
<PAGE>
Philcon Laboratories, Inc. 8
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
2. Inventories
Inventories are stated at the lower of cost or market on a first-in first-
out basis. At February 28, 1995 inventories consisted of the following:
<TABLE>
<S> <C>
Soft contact lenses $199,361
Hard contact lens materials 22,637
Supplies 7,941
--------
$229,939
========
</TABLE>
3. Accrued expenses
Accrued expenses and other current liabilities consisted of the following:
<TABLE>
<S> <C>
Employee taxes withheld and accrued $ 4,288
Payroll 5,622
Other business taxes 815
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$10,725
=======
</TABLE>
4. Notes payable
Notes payable consisted of the following:
<TABLE>
<S> <C>
Uncollateralized notes payable to stockholder
due on demand. Interest payable at varying rates
ranging from 6% to 8%. $13,855
Note payable to bank, collateralized by a
vehicle. Payable in monthly installments of
$276 including interest computed at 9.25%. Matures
July 1997. 7,107
-------
Total notes payable 20,962
Less current maturities 15,032
-------
Long-term maturities $ 5,930
=======
</TABLE>
Notes payable mature as follows:
<TABLE>
<CAPTION>
Twelve months ending February 28,
<S> <C>
1996 $15,032
1997 4,626
1998 1,304
</TABLE>
<PAGE>
Philcon Laboratories, Inc. 9
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
5. Retirement plan
The company has adopted and administrates a retirement savings plan for its
employees under the Internal Revenue Code as a qualified 401(K) tax
deferred salary reduction plan amended October 1989. The purpose of the
plan is to reward eligible employees for long and loyal service by
providing them with retirement benefits. The plan year ends each September
30th.
As of September 30, 1994, the most recent plan year ending, the company
made a tax deductible contribution in the amount of $18,752 and all funding
requirements have been met. At September 30, 1994 the value of the plan
assets was $352,246.
6. Income taxes
Due to the loss from operations for the current period and tax loss
carryforwards available to the company to offset future taxable earnings
there is no provision for federal or state income taxes. At the most
recent fiscal year ending September 30, 1994 the company had $ 285,875 in
tax loss carryforwards expiring in varying amounts beginning 2001.
Statement of Financial Accounting Standards No. 109 requires that tax
benefits of loss carryforwards should be recorded and then reduced by a
valuation allowance if there is less than a 50% probability that these
benefits will be realized. As of the most recent fiscal year ending
September 30, 1994, the company had suffered continuing losses without
favorable outlook for the possibility to recover any benefits for these
losses. Under these circumstances, the valuation allowance would reduce
this deferred tax benefit to $0 as of September 30, 1994 and February 28,
1995.
If the sale of assets is consummated (see note 8), this scenario will
change significantly. If the sale were completed as described, the company
would have an ability to offset approximately $225,000 in taxable income,
providing approximately $70,000 in federal tax benefit and $14,000 in state
tax benefits. As the outcome of this event cannot be guaranteed, no
deferred tax benefit for these loss carryforwards has been recorded.
<PAGE>
Philcon Laboratories, Inc. 10
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
7. Commitments
The company leases its operating facility from its stockholders under a
non-cancelable operating lease through the year 2007. Rent expense charged
to operations under this obligation for the twelve months ending February
28, 1995 is $31,347.
The company is obligated under the terms of this lease agreement for
minimum rental payments as follows:
<TABLE>
<CAPTION>
Twelve months ending February 28,
<S> <C>
1996 $ 34,560
1997 34,560
1998 34,560
1999 34,560
2000 34,560
Thereafter 264,960
--------
$437,760
========
</TABLE>
8. Subsequent events
Inventory value reduction:
During April 1995 a principal supplier issued a memorandum indicating that
certain soft lenses would be issued at a reduced price from previous
shipments. Based on this price reduction in the marketplace, the company
has written down the value of its inventory holdings in these lens
categories as of February 28, 1995 in the amount of $6,700, which has been
included in the cost of sales for the twelve months then ended.
Asset purchase agreement:
At the balance sheet date, the stockholders of the Company were in the
process of negotiating, with an unrelated third party, for the sale of a
majority of its assets and liabilities excluding cash, loans and certain
other debt.
If this sale is consummated on its expected closing date, certain
transactions and approvals will be completed and/or obtained which are not
now reflected in the financial statements for the twelve month period ended
February 28, 1995, but will be included in the balance sheet and results
<PAGE>
Philcon Laboratories, Inc. 11
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
of operations for the year ended September 30, 1995. These transactions
and approvals among other items are:
. Payment for net assets: $115,000
. Covenant not to compete, payable in the form of a promissory
note due October 1995: $125,000
. Assignment of operating lease to purchaser
. Continuation of employee salary deferral plan (see note 5)
<PAGE>
EXHIBIT 2.1
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is made and entered into this 1st day of
---
February, 1995, by and among American Consolidated Laboratories, Inc., a Florida
corporation (the "Purchaser"), Philcon Laboratories, Inc., a Pennsylvania
corporation (the "Seller"), and Joseph W. Kelly and Lucille M. Kelly
(collectively, the "Stockholders").
W I T N E S S E T H:
--------------------
WHEREAS, the Seller is the owner of certain assets used in the operation of
a contact lens manufacturing and distribution business; and
WHEREAS, the Purchaser desires to purchase the assets used in the operation
of the business of the Seller, subject only to certain specified liabilities,
and the Seller and the Stockholders desire to sell such assets subject to such
liabilities, all upon the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained in this Agreement, and in order to consummate the
purchase and sale of the property aforementioned, it is hereby agreed as
follows:
1. PURCHASE AND SALE OF ASSETS; CLOSING.
------------------------------------
(a) Purchase and Sale of Assets. Upon the terms and subject to the
---------------------------
conditions hereinafter set forth, at the closing of the transactions
contemplated hereby (the "Closing"), the Seller will sell, assign, transfer,
convey and deliver to the Purchaser free and clear of all liabilities, liens,
encumbrances, equities, claims and charges or interests of third persons, except
those listed on Exhibit A to this Agreement, and the Purchaser shall purchase
from the Seller, all of the assets (other than cash) used in connection with the
operation by the Seller of its contact lens manufacturing and distribution
business, including without limitation all personal property of every kind,
equipment, fixtures, inventory, books, records, ledgers, leasehold improvements
and the like (as so conveyed, collectively referred to in this Agreement as the
"Assets"). In consideration of the sale, conveyance, transfer and delivery of
the Assets, and upon and subject to the conditions of this Agreement, the
Purchaser will deliver to the Seller consideration as provided in Section 2 of
this Agreement.
(b) Procedure for Closing. Subject to the satisfaction or appropriate
---------------------
waiver of all conditions precedent thereto, the Closing shall be held at the
offices of the Seller at 2010 Wheatsleaf Lane, Philadelphia, Pennsylvania, on
May 2, 1995, at 11:00 a.m., or at such other place, date and time as the parties
to this Agreement may otherwise agree (such date to be referred to in this
Agreement as the "Closing Date"). At the Closing, the Seller will deliver to
the Purchaser a bill or bills of sale and all other instruments necessary or
appropriate in the opinion of counsel to the Purchaser to convey title to the
Assets to the Purchaser, and the
<PAGE>
Purchaser shall deliver to the Seller consideration for the purchase of the
Assets as provided in Section 2 of this Agreement.
2. CALCULATION AND PAYMENT OF PURCHASE PRICE.
-----------------------------------------
(a) Consideration. As total consideration for the purchase and the sale of
-------------
the Assets, the Purchaser shall pay to the Seller, and the Seller agrees to
accept, an amount equal to $240,000, payable as follows: (i) $95,000 shall be
paid in cash at Closing; (ii) $100,000 shall be payable by delivery at Closing
of a promissory note of the Purchaser payable to the Seller on October 1, 1995,
with interest thereon at the rate of 12% per annum; and (iii) 8,117 shares of
common stock of the Purchaser shall be delivered at Closing to the Stockholders
subject to Section 6(h) hereof (collectively, the "Purchase Price").
(b) Allocations. The parties to this Agreement represent, warrant and
-----------
covenant that the Purchase Price shall be allocated as follows:
(i) covenant not to compete - $125,000
(ii) goodwill 15,000
(iii) all other Assets - 100,000
(c) Application of Purchase Price. (i) In compliance with Section 13.6101
-----------------------------
et. seq. Consolidated Pennsylvania Statutes, the Purchase Price shall be applied
- -- ---
first to the discharge of any unpaid debts and liabilities of the Seller that
are either filed in writing pursuant to Section 13.6101 et. seq. Consolidated
-- ---
Pennsylvania Statutes, or shown on the affidavit of creditors to be furnished to
the Purchaser by the Seller in accordance with Section 5(c) of this Agreement
and which are not to be assumed by the Purchase pursuant to Exhibit A hereto.
At the Closing, the Purchaser shall pay from the Purchase Price all of such
unpaid debts and liabilities, up to the full amount of the Purchase Price;
provided, however, that the Seller may pay and discharge all such debts, claims
and other obligations, in which event it shall present evidence, satisfactory to
the Purchaser and its counsel, of such payment and discharge.
(d) Adjustment of Prepaid Amounts. Prepaid security deposits, real estate
-----------------------------
taxes and assessments, premiums for any insurance policies which may be assigned
to the Purchaser, transferable occupational license fees, personal property
taxes on the Assets, and any other prepaid items assumed by or continued for the
benefit of the Purchaser shall be adjusted in accordance with generally accepted
business practices. Utility deposits shall not be prorated; the Seller shall
order final meter readings with appropriate credit for deposits made against
final billings, and the Purchaser shall be responsible from and after the
Closing Date for making its own utility deposits. At the Closing, the Seller
and the Purchaser each shall pay in cash the amount owed to the other party as a
result of such adjustments.
(e) Post Closing Adjustments. (i) As soon as is practicable after the
------------------------
Closing, the Purchaser will make an account reconciliation reflecting the
financial condition of the Seller as of the Closing Date, including credits and
exchanges relating to inventory on hand as of the Closing Date (the "Closing
Statements"). If the Closing Statements show that total assets minus current
liabilities of the Seller at the Closing Date are less than $100,000, calculated
in accordance with generally accepted accounting principles consistently
applied, then the Stockholders will pay to the Purchaser the amount of the
difference between such total assets
2
<PAGE>
minus current liabilities and $100,000 within 15 days of receipt of the Closing
Statements. One-half of any such adjustment will be paid by the Purchaser in
cash and one-half will be paid by delivery to the Purchaser, of common stock of
the Purchaser owned by the Stockholders, at a value of $2.464 per share, to the
extent sufficient stock is available to cover such amounts. The Closing
Statements shall be presented to the Stockholders and, upon request, related
work papers and such other documentation as the Stockholders or his/her
independent certified public accountant(s) may reasonably request.
If the Stockholders disagree with determination of total assets and current
liabilities as shown on the Closing Statements, the parties hereto agree to
mutually select a firm of independent certified public accountants to review the
Closing Statements and the underlying calculations in accordance with generally
accepted accounting principles and consistently applied. The parties further
agree to be mutually bound by the determination of such accountants as a result
of such review, without right to judicial or other review or appeal. The
Purchaser and the Stockholders shall share equally in the cost and expense of
any such review.
(f) Closing Costs. The Seller and the Purchaser, in equal shares, shall pay
-------------
for any documentary stamps necessary in connection with the assignment of the
Assets and for the cost of recording any title instruments or assignments of
Assets to the Purchaser and any costs incurred in connection with filings under
the Uniform Commercial Code.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDERS.
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The Seller and the Stockholders hereby jointly and severally represent and
warrant to the Purchaser the following:
(a) Organization and Standing. The Seller is a corporation duly organized,
-------------------------
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has the corporate power and authority to carry on its business
as it is now being conducted. A true and correct copy of (i) its Certificate of
Incorporation, and all amendments thereof to date, certified by the Secretary of
State of the Commonwealth of Pennsylvania, and (ii) its by-laws, as then in
effect, certified by the Secretary of such corporation, will be delivered to the
Purchaser within 10 days from the date hereof. The minute books of the Seller
will be made available to the Purchaser and its representatives at any
reasonable time or times at or prior to the Closing for inspection and will be
complete and correct as of the date of any such inspection and at Closing.
(b) Capitalization. The authorized capital stock of the Seller consists of
--------------
50,000 shares of common stock, par value $1.00 per share, and as of the date
hereof there are outstanding 25,000 shares, all of which have been validly
issued and are fully paid and nonassessable and all of such capital stock of the
Seller (the "Stock") is owned by the Stockholders.
(c) Restrictions on Stock. (i) Neither the Seller nor the Stockholders are
---------------------
a party to any agreement, written or oral, creating rights in respect of the
Stock in any third person or relating to the voting of the Stock.
3
<PAGE>
(ii) The Stockholders are the lawful owners of all the Stock, free and
clear of all security interests, claims, liens, encumbrances, equities and
other charges.
(iii) There are no existing warrants, options, stock purchase
agreements, redemption agreements, restrictions of any nature, calls or
rights to subscribe of any character relating to the Stock, nor are there any
securities convertible into the Stock.
(d) Qualification To Do Business. By reason of the nature of the business
----------------------------
conducted by it, its ownership of property or otherwise, the Seller is not
required to be qualified to do business as a foreign corporation in any state.
[alternatively, indicate states where qualified]
(e) Subsidiaries. The Seller has no subsidiaries.
------------
(f) Authority Relative to this Agreement. The execution of this Agreement
------------------------------------
by the Seller and the delivery of this Agreement to the Purchaser have been duly
authorized by the Board of Directors of the Seller and by the Stockholders as
its sole stockholder, and no further corporate or other action is necessary on
their part to make this Agreement valid and binding upon each of them and
enforceable against each of them in accordance with the terms hereof or to carry
out the transactions contemplated hereby. Subject to obtaining the consents
listed on Exhibit B hereto, the execution, delivery and performance of this
Agreement by the Seller and the Stockholders will not (i) constitute a breach or
a violation of the Seller's Articles of Incorporation or by-laws or any law,
rule or regulation, agreement, indenture, deed of trust, mortgage loan agreement
or other instrument to which the Seller or the Stockholders are a party or by
which either of such parties is bound; (ii) constitute a violation of any order,
judgment or decree to which the Seller or the Stockholders are a party or by
which any of the Seller's assets or properties are bound or affected; or (iii)
result in the creation of any lien, charge or encumbrance upon the Assets.
(g) Financial Statements. Attached hereto as Exhibit C are the audited
--------------------
financial statements of the Seller for the twelve months ended February 28,
1995, including the report of Henry C. Stoughton, C.P.A., thereon, and the
unaudited financial statements of the Seller for the fiscal years ended
September 30, 1994 and 1993, all of which statements (i) are in accordance with
the books and records of the Seller, (ii) are true and accurate statements and
fairly set forth the financial condition and results of operations of the Seller
as of the relevant dates thereof and for the periods covered thereby; (iii) have
been prepared in accordance with generally accepted accounting principles,
applied on a consistent basis; and (iv) contain and reflect all necessary
adjustments for a fair presentation of the results of operations and financial
condition for the periods covered by the statements.
(h) Absence of Undisclosed Liabilities. Except as disclosed on (i) Exhibit
----------------------------------
A,C or D to this Agreement, the Seller is not obligated for, nor are any of its
assets or properties subject to any liabilities of any kind (whether accrued,
absolute, contingent or otherwise), regardless of whether such liabilities are
customarily reflected in a corporate balance sheet prepared in accordance with
generally accepted accounting principles. There are no facts in existence on the
date hereof known to the Seller or the Stockholders that might reasonably serve
as the
4
<PAGE>
basis now or in the future for any liabilities or obligations not disclosed in
this Agreement or the exhibits thereto.
(i) Absence of Certain Changes or Events. Other than as disclosed in
------------------------------------
exhibits to this Agreement and in the ordinary course of its business or in
connection with effecting the transactions contemplated by this Agreement, since
February 28, 1995, the Seller has not:
(i) experienced any material, adverse change in its financial
condition, assets, liabilities, results of operations or business.
(ii) suffered any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting its properties or business;
(iii) transferred or leased any of its assets or properties;
(iv) cancelled or compromised any debt or claim (except for adjustments
made with respect to contracts for the purchase of supplies or for the sale
of products which in the aggregate are not material);
(v) transferred or granted any right under any lease, license,
agreement, patent, invention, trademark, trade name or copyright or with
respect to know-how or any other intangible asset
(vi) experienced any other event or condition of any character which
has materially and adversely affected its business or may do so in the
future.
(j) Tax Matters. The Seller has prepared and filed in a timely manner all
-----------
federal, state and local tax returns and reports as are and have been required
to be filed, which returns were prepared on a basis consistent with the
financial statements of such corporation, and all taxes shown thereon to be due
have been paid in full. The Seller has paid or made adequate provision for
payment of all taxes for that portion of its current fiscal year to and
including the Closing Date. The Stockholders agree to prepare and file, or make
arrangements for the preparation and filing of all federal and state tax returns
for the Seller and to pay any taxes due in connection with such returns. Neither
the Seller nor the Stockholders have executed or filed with the Internal Revenue
Service or any other taxing authority any agreement extending the period for
assessment or collection of any income or other taxes; and, as of the date
hereof, the Seller is not a party to any pending tax examination or any pending
action or proceeding by any governmental authority for assessment or collection
of taxes, and no claim for assessment or collection of taxes has been asserted
against such corporation. In the event that a deficiency is determined in the
amount of federal or state tax payable by the Seller, whether relating to a
period ending prior to or after the Closing Date, the Stockholders and the
Seller shall be fully responsible for the payment of said deficiency. No accrued
and unpaid taxes of any type exist, and no formal claims have been made or
asserted by the United States Government or by any state or foreign country or
local government for income or any other taxes, except such as have been paid or
(whether or not disputed) are disclosed pursuant to Section 3(i) hereof.
5
<PAGE>
(k) Litigation. Except as disclosed in Exhibit E to this Agreement, (i) the
----------
Seller is not a party to any litigation, proceeding or administrative
investigation and none is pending or threatened against such corporation, its
properties, any property used in its business or the transactions contemplated
by this Agreement; (i) there is no outstanding order, writ, injunction or decree
of any court, government, governmental authority or arbitration against or
affecting it, its properties or business; (ii) there is no basis for any such
litigation, proceeding or investigation which might have a material adverse
affect, financial or otherwise, on the business, property, operations or
prospects of the Seller; (iii) there is no material infringement of any
copyright, trademark, trade name, patent or other proprietary right owned or
licensed by it; (iv) the Seller has not experienced any labor trouble, dispute,
grievance, controversy or strike nor is there any pending or threatened against
such corporation; and, (v) neither the Seller nor the Stockholders know of any
basis for any such labor trouble, dispute, grievance, controversy or strike
which might have a material adverse effect on the business, properties, assets,
operations or prospects or on the condition, financial or otherwise, of the
Seller.
(l) Title to and Condition of the Assets. The Seller has good and
------------------------------------
marketable title to all of the Assets including without limitation all
properties, machinery, equipment and assets, both real and personal, and such
properties and assets are subject to no mortgage, guaranty, judgment, execution,
pledge, lien, conditional sales agreement, security agreement, encumbrance or
charge, except as disclosed pursuant to this Agreement (with respect to which no
default exists) and except for liens for taxes not delinquent. The Assets,
including without limitation all such properties and assets referred to above,
are in good condition and repair, reasonable wear and tear expected, and are
operated in conformity with all applicable building and zoning ordinances and
regulations and all other applicable laws, ordinances and regulations. The
Seller owns no interest in any real property except the Lease Agreement from the
Stockholders to the Seller, which Lease will be terminated at Closing.
(m) Leases, Contracts and Commitments. Except as listed on Exhibit F to
---------------------------------
this Agreement, the Seller is not a party to any equipment leases, contracts,
agreements or commitments, written or oral, of any nature (including employment
or consulting agreements, mortgages, loans, deeds of trust, indentures, credit
and collective bargaining agreements, distribution agreements, supply contracts,
etc.) which in any case extend beyond one year or create a liability in excess
of $3,000. Exhibit F lists each such lease, contract, agreement or commitment,
indicating the parties thereto and briefly summarizing the material terms of
each agreement. Copies of each such lease, agreement, contract or commitment
have previously been delivered to the Purchaser. The Seller is in compliance
with all of the terms of all leases, contracts, agreements and commitments to
which it is a party or by which any of its assets or properties is or may be
bound; and, to the best of the Stockholders' knowledge, there is no default by
any other party under any of them.
(n) Accounts Receivable. All of the accounts receivable reflected on the
-------------------
February 28, 1995 balance sheet of the Seller are and at the Closing will be
bona fide accounts receivable and have been collected in full or are or will be
collectible in full (net of any stated reserve for doubtful accounts) within 60
days. A true and complete list of all accounts receivable at April 28, 1995,
together with information as to the aging of each account, is shown on Exhibit
G. Any accounts receivable created after April 28, 1995, by the Seller will be
bona fide accounts receivable at the time of their creation and at the Closing
will have been
6
<PAGE>
collected in full or will be collectible in full (less any reserve for doubtful
accounts) within 60 days.
The Stockholders and the Seller jointly and severally warrant to Purchaser
that the unpaid balance of all accounts receivable of the Seller on hand at the
date of the Closing Statements will be paid during a collection period of 60
days immediately following the Closing. Within ten (10) business days after
delivery to the Stockholders of a schedule of all these accounts receivable
unpaid at the end of this collection period, the Stockholders and the Seller
will pay to Purchaser the full amount of these unpaid receivables, in cash, less
the amount of any receivables written off as uncollectible by the Seller before
the Closing Date but paid to the Seller during this collection period. All
payments of the scheduled accounts made after the collection period and payment
of such accounts by the Stockholders shall promptly be paid over to the
Stockholders. If more than one invoice is outstanding for any customer, the
"first-in, first-out" principle shall be applied in determining the invoice to
which a payment relates, unless the payment by its terms specifies or clearly
indicates the invoice to which it relates.
Purchaser shall exercise prompt and diligent efforts to collect all such
unpaid accounts receivable before the end of this collection period; provided,
however, neither Purchaser, Seller nor Stockholders shall be required to
initiate legal proceedings for this purpose. Purchaser shall cause all unpaid
accounts receivable to be assigned to the Stockholders without recourse, on the
Stockholders' payment of those accounts. Purchaser will not take any action out
of the ordinary course of business which would impair the collectability of any
such accounts receivable which are assigned to the Stockholders. Purchaser
agrees, at the request of the Stockholders, to continue billing and collection
of accounts which have been assigned to the Stockholders, in the ordinary course
and according to its normal billing practices.
(o) Inventories. All the inventories of the Seller consist of items shown
-----------
on the February 28, 1995 balance sheet of the Seller, all of which have been
valued at the lower of cost or market and are suitable for use or sale in the
ordinary course of business at customary retail prices in the business operated
by the Seller. A list of inventory as of April 28, 1995, is attached hereto as
Exhibit H.
(p) Insurance Coverage. The Seller maintains policies of fire casualty,
------------------
liability, use and occupancy and other insurance covering all of its properties
and assets, including the Assets, in amounts customarily obtained by businesses
in the region in which such properties or assets are located. Exhibit I to this
Agreement lists each policy by its identification number and indicates as to
each policy the issuer, type of policy, amount of coverage, annual premium and
expiration date. Such policies or like policies are as of the date of this
Agreement and will be on the Closing Date outstanding and duly in force and
assumable by the Purchaser at its option in connection with the consummation of
the transactions contemplated hereby. True and complete copies of all such
policies have previously been delivered or made available to the Purchaser.
(q) Employee Welfare Benefits. Except as set forth in Exhibit J to this
-------------------------
Agreement, the Seller does not have in force any bonus, stock option, employee
welfare, pension or profit sharing plan or any other written or oral employee
benefit arrangement, agreement or
7
<PAGE>
understanding. A summary of the terms of each such plan, agreement or
understanding is set forth on Exhibit J to this Agreement indicating as to each
whether it is a "qualified plan" within the meaning of Section 401(a) of the
Internal Revenue Code of 1954, as amended. Each such "qualified" employee
welfare, pension or profit sharing plan, if any, has since its adoption been a
"qualified plan" within the meaning of the Internal Revenue Code of 1954, as
amended. Copies of each such written plan, trust, agreement or understanding and
the most recent determination letters of the Internal Revenue Service relating
to each "qualified plan" have previously been delivered or made available to the
Purchaser.
(r) Executive Compensation and Employees. Attached as Exhibit K to this
------------------------------------
Agreement is a schedule showing the name, position and salary rate for the
current and preceding fiscal years of each director, officer or employee of the
Seller whose aggregate annual compensation (including bonuses and sales
commissions) in 1994 exceeded, or is expected in 1995 to exceed, $50,000. Also
included on Exhibit K is a list of current employees of the Seller who will be
hired by the Purchaser immediately following the Closing.
(s) Trade Names, Copyrights, Trademarks, Etc. Attached as Exhibit L to this
----------------------------------------
Agreement is a summary of all trade names and trademark regulations and
applications therefor, licenses, franchises, copyrights, patents, patent
applications, inventions and other assets of like kind, whether domestic or
foreign, any interest in which is owned by the Seller or registered in its name
or in which such corporation has any interest. The Seller possesses licenses or
other rights to use (without payment of royalties) all trade names, trademarks,
copyrights, patents, inventions and processes now used in the conduct of its
business. The use of such trade names, trademarks, copyrights, inventions and
processes does not conflict with any rights of others. The Seller has performed
all the obligations required to be performed by it to date and there is no
default in any material respect under any of the licenses or other rights to use
any trade names, trademarks, copyrights, patents, inventions or other processes
now used in the conduct of the Seller's business.
(t) Customers. There has been no termination, cancellation, limitation,
---------
modification or change since February 28, 1995 in the business relationship of
the Seller, or any material dispute, with any customer or supplier or group of
customers or suppliers whose purchases or sales, individually or in the
aggregate, provided more than five percent of aggregate gross revenues or
payables for the previous fiscal year of the Seller.
(u) No Interest in Properties, Competitors, Etc. No director, officer or
-------------------------------------------
stockholder of the Seller (i) owns, directly or indirectly, in whole or in part,
any of the properties necessary for the business of the Seller as currently
conducted (excluding the real property identified in Exhibit N) or (ii) owns,
directly or indirectly, any interest in (except for the ownership of marketable
securities of publicly owned corporations, representing in no case more than
three percent of the outstanding shares of such class of securities) or controls
or is an employee, officer, director or partner of, participant in or consultant
to any corporation, association, partnership, limited partnership, joint venture
or other business organization which is a competitor, supplier, customer,
landlord or tenant of the Seller or the Purchaser.
(v) Compliance With Applicable Laws. The conduct of its business by the
-------------------------------
Seller does not violate or infringe any federal, state, local or foreign law,
statute, ordinance, license or regulation presently in effect or that, to the
knowledge of the Seller or the Stockholders, is
8
<PAGE>
proposed to be adopted, or any right or concession, copyright, trademark, trade
name, patent, know-how or other proprietary right of others, the enforcement of
which would materially adversely affect the Seller's business or the value of
the Assets being conveyed hereunder. The Seller has and has maintained all
licenses and permits required by all local, state and federal authorities and
regulating bodies.
(w) Hazardous Material. Neither the Seller nor the Stockholders have
------------------
generated, stored, or disposed of any hazardous material, or transferred any
hazardous material. No hazardous material has been generated, stored or
disposed of on any of the property leased by the Seller or is now located on
such property. The Seller is in full compliance with all applicable
environmental laws and has not been notified of any action, suit, proceeding or
investigation which calls into question compliance by the Seller with any
environmental laws or which seeks to suspend, revoke or terminate any license,
permit or approval necessary for the generation, handling, storage, treatment or
disposal of any hazardous material. The Seller has not been notified by the
U.S. Environmental Protection Agency or any other state, federal or local
environmental agency, court or other body that it is in violation of any
environmental laws, rules or regulations.
(x) Disclosure. No representation or warranty made by the Seller or the
----------
Stockholders in this Agreement, the exhibits hereto or any of the documents and
papers required to be delivered pursuant to this Agreement or in connection with
the consummation of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
-----------------------------------------------
The Purchaser hereby represents and warrants the following:
(a) Organization and Standing. The Purchaser is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Florida and has the corporate power and authority to carry on its business as it
is now being conducted.
(b) Authority Relative to this Agreement. The execution and delivery of
------------------------------------
this Agreement by the Purchaser has been duly authorized by the Board of
Directors of the Purchaser and no further corporate action will be necessary on
its part to make this Agreement valid and binding upon it and enforceable
against it in accordance with the terms hereof or to carry out the actions
contemplated hereby.
(c) Approvals and Consents. No additional consent, approval or
----------------------
authorization is required in connection with the execution or delivery of this
Agreement by the Purchaser or the consummation by the Purchaser of the
transactions contemplated hereby.
(d) Employment Agreement. Upon execution and delivery in accordance with
--------------------
the terms and subject to the conditions of this Agreement, the Employment
Agreement to be executed in accordance with this Agreement will be the legal,
valid and binding obligation of the Purchaser.
9
<PAGE>
(e) Warranties. The Purchaser agrees to make any replacements,
----------
substitutions or corrections of lenses sold by the Seller which were covered by
a Warranty of the Seller prior to Closing, to the extent necessary to meet the
terms of the Warranty offered by the Seller at the time such lenses were sold as
if the Seller were satisfying such Warranty.
5. TRANSACTIONS PRIOR TO THE CLOSING.
---------------------------------
The Seller and the Stockholders hereby jointly and severally covenant the
following:
(a) Conduct of the Business Until Closing. Except as the Purchaser may
-------------------------------------
otherwise consent in writing, prior to completion of the Closing on the Closing
Date the Seller and the Stockholders will:
(i) operate the business of the Seller only in the usual, regular and
ordinary manner and, to the extent consistent with such operation, use their
best efforts to preserve the present business organization intact, keep
available the services of its present officers and employees and preserve
the present business relationships with customers, suppliers and others
having business dealings with the Seller; and
(ii) neither enter into any transaction, take any action nor fail to
take any action which would result in, or could reasonably be expected to
result in or cause, any of the representations, warranties, disclosures,
agreements or covenants of the Seller or the Stockholders contained in this
Agreement, the exhibits hereto or any document delivered pursuant to this
Agreement or in connection with the consummation of the transactions
contemplated hereby not being true and complete at and as of the time
immediately after the occurrence of such transaction or the action is taken
or failed to be taken and also on the Closing Date.
(b) Corporate Action; Approvals and Consents. The Seller and the
----------------------------------------
Stockholders will each take all corporate and other action and use their best
efforts to obtain in writing as promptly as possible all approvals and consents
required to be obtained by any of them in order to effectuate the consummation
of the transactions contemplated hereby, including those consents referred to in
or disclosed pursuant to Section 3(f) hereof.
(c) Bulk Sales Compliance. The Seller shall comply with all laws of the
---------------------
Commonwealth of Pennsylvania relating to bulk sales.
(i) In connection therewith but without limiting the foregoing, the Seller
will furnish to the Purchaser simultaneously with the execution of this
Agreement statements signed and sworn to by the appropriate officers of the
Seller setting forth (A) the names and business addresses of all existing
creditors of the Seller, both general and secured, with the amounts, if
known, of the debts owed and to become owing to any such creditor, (B) the
names and business addresses of all persons who are known to assert claims
against the Seller and the amounts of such claims, even though such claims
are disputed (and indicating whether disputed), (C) a schedule of the Assets
with sufficient particularly to identify the items being purchased
10
<PAGE>
hereunder, and (D) a true and accurate list of all names and business
addresses used by the Seller or its predecessors in interest, if any, within
the three years immediately preceding the date of this Agreement.
(i) The Seller and the Stockholders agree that the Purchaser shall
have the right to distribute at the Closing the consideration to be paid
under this Agreement to the creditors of the Seller, in accordance with
Section 13.6101 et. seq. Consolidated Pennsylvania Statutes, and Section
-- ---
2(c) of this Agreement. In connection with the performance of the duties of
the Purchaser imposed by said Section, the Seller and the Stockholders agree
that the Purchaser may, but shall not be obligated to, withhold from the
consideration provided in Section 2 of this Agreement such amount(s) as may
be necessary to pay those debts of and claims against the Seller which are
either shown in the affidavit required to be delivered by Section 5(c)(i)
or are filed in writing at the place to which creditors of and claimants
against the Seller are notified to send their claims within 30 days after
the mailing of notice by the Purchaser, as stated in such notice to such
creditors and claimants; and, the Purchaser may thereafter pay or distribute
the remaining consideration payable pursuant to Section 2, provided,
however, that the Seller or the Stockholders, at their option, may pay and
discharge all such debts, claims, and other obligations, in which case,
evidence, satisfactory to the Purchaser, of such payment and discharge shall
be provided to the Purchaser.
(d) Advice of Changes. Between the date of this Agreement and the Closing,
-----------------
the Seller and the Stockholders will promptly advise the Purchaser in writing of
any fact which, if existing or known at the date of this Agreement, would have
been required to be set forth in or disclosed pursuant to this Agreement.
(e) Access to Properties and Records, Etc. The Purchaser and its counsel,
-------------------------------------
accountants and other representatives will be given full access during normal
business hours to all of the properties, personnel, books, tax returns,
contracts, commitments and records of the Seller, and the Purchaser will be
furnished with all such additional documents (certified if requested) and
information with respect to the affairs of the Seller as the Purchaser or its
counsel or accountants may from time to time reasonably request.
6. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER.
--------------------------------------------------------
The obligations of the Purchaser under this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(the fulfillment of any of which may be waived in writing by the Purchaser):
(a) Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties and statements of the Seller and the Stockholders contained in this
Agreement, all exhibits hereto and any documents delivered in connection
herewith shall be true and complete on the date of this Agreement and also and
on the Closing Date.
(b) Compliance. The Seller and the Stockholders shall each have performed
----------
and complied with all agreements, covenants and conditions required by this
Agreement and all exhibits hereto to be performed and complied with by each of
them at or prior to the Closing.
11
<PAGE>
(c) Consents. The Seller shall have obtained in writing the consents
--------
referred to in Section 3(f) of this Agreement, all of which consents shall be
subject to the assumption by the Purchaser of the related obligations.
(d) Good Standing Certificates. The Purchaser shall have received a
--------------------------
certificate executed by the Secretary of State of the Commonwealth of
Pennsylvania dated within 10 days prior to the Closing Date certifying that the
Seller is a corporation in good standing under the laws of the Commonwealth of
Pennsylvania and listing all documents filed in the Office of the Secretary of
State relating to the Articles of Incorporation of such corporation.
(e) Certificate. The Purchaser shall have received a certificate executed
-----------
by the President of the Seller, attested to by the Secretary of such corporation
under its corporate seal, and executed by the Stockholders individually, dated
the Closing Date, satisfactory in form and substance to the Purchaser and its
counsel, certifying as to (i) the fulfillment of matters set forth in Sections
6(a) through 6(c) of this Agreement, (ii) the resolutions adopted by the Board
of Directors and the Seller and the Stockholders approving the execution of this
Agreement and the consummation of the transactions contemplated hereby; (iii)
the incumbent officers of the Seller and the authenticity of the signatures of
each; and (iv) the information, if any, required to be furnished to the
Purchaser pursuant to Section, 5(c) and 5(d) of this Agreement.
(f) Opinion of Counsel. The Purchaser shall have received an opinion of
------------------
Joseph A. Gembala, III, counsel to the Seller, dated the Closing Date,
satisfactory in form and substance to the Purchaser and its counsel, to the
effect that:
(i) the Seller is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania with
full corporate power and authority to carry on its business as it is
presently conducted and to own the Assets;
(ii) the capitalization of the Seller is as set forth in Section 3(b)
of this Agreement, all of the outstanding capital stock of such corporation
is validly issued, fully paid and nonassessable and all of such stock is
owned by the Stockholders free and clear of all liens, encumbrances or
interests of third persons;
(iii) the Seller has good and marketable title to the Assets being
conveyed to the Purchaser pursuant to this Agreement and title to the Assets
as conveyed to the Purchaser hereunder is free and clear of all liens,
encumbrances, equities and interests of third persons except as specifically
noted in this Agreement and the exhibits hereto;
(iv) this Agreement has been duly authorized, executed and delivered
by the Seller and the Stockholders and constitutes a legal, valid and binding
obligation of each of them enforceable against each of them in accordance
with its terms;
(i) the execution and delivery of this Agreement and performance of
the transactions contemplated hereby will not violate any provision of state
law
12
<PAGE>
applicable to the Seller or any of the Stockholders; will not conflict with,
result in the breach of any provision of or the termination of or constitute
a default under any corporate charter, by-laws, indenture, mortgage, deed of
trust, partnership agreement, joint venture agreement or other instrument or
agreement to which any of them is a party or by which any of the Assets are
abound; will not constitute a violation of any order, judgment or decree to
which any of them is a party or by which any of the Assets are bound; and
will not result in the creation of any lien, charge or encumbrance upon any
of the Assets; and
(ii) such counsel has investigated and it knows of no facts which
would constitute a breach of any of the representations and warranties,
covenants or agreements made by the Seller or any of the Stockholders in this
Agreement.
Such opinion shall also be delivered with respect to such other matters as the
Purchaser or its counsel may reasonably request.
(g) Audits. The Purchaser shall have received the audited financial
------
statements of the Seller for the twelve months ended February 28, 1995, prepared
by independent certified public accountants for and at the expense of the
Seller. Such audited financial statements shall not show any materially adverse
change in the financial condition of the Seller as compared to its position
shown by the unaudited financial statements of the Seller provided to the
Purchaser for the fiscal year ended September 30, 1994.
(h) Employment Agreement and Lease. The Purchaser and the Stockholders
------------------------------
shall have entered into (A) an employment agreement substantially in the form
attached to this Agreement as Exhibit M, (B) a lease for a term of one year at
the rent of $3,000 per month for approximately 5,785 square feet of space in the
building located at 2010 Wheatsheaf Lane, Philadelphia, Pennsylvania, in form
and substance reasonably acceptable to the parties thereto, and (C) a stock
pledge agreement in form and substance acceptable to the Purchaser pledging the
stock received by the Stockholders hereunder through April 30, 1998 to secure
his obligations under section 8 of this Agreement.
(i) Litigation. There shall not be any litigation or proceeding to restrain
----------
or invalidate the consummation of the transactions contemplated hereby the
defense of which, in the sole discretion of the Purchaser, would involve expense
to the Purchaser or lapse of time that would be materially adverse to the
interests of the Purchaser.
(j) Casualty; Eminent Domain. Since February 25, 1995, and prior to the
------------------------
completion of the Closing on the Closing date, no portion of the Assets or of
the leased premises of the Seller deemed by the Purchaser in its sole discretion
to be material to the operations of the Seller shall have been destroyed or
damaged (whether or not there exists insurance against such loss), and no such
portion of the Assets shall have been taken or threatened to be taken by power
of eminent domain.
(k) Claims to be Paid. The claims to be paid by the Purchaser out of the
-----------------
Purchase Price in accordance with the provisions of Section 2(c) of this
Agreement and in accordance with the requirements of Section 13.6101 et. seq.
-- ---
Consolidated Pennsylvania Statutes, in the aggregate shall not exceed the total
of the cash consideration specified in Section 2(a).
13
<PAGE>
(l) Assignment of Licenses, Permits, Etc. The Purchaser shall have received
------------------------------------
assignments, satisfactory in form and substance to its counsel, of all licenses,
permits and the like applicable to the operation of the business, in each case,
to the extent that the same are assignable and useful to the Purchaser.
(m) Termination of Financing Statements. No financing statements shall be
-----------------------------------
of record with the Secretary of State of the Commonwealth of Pennsylvania, or in
the public records of any county thereof, with respect to any of the Assets, and
the Seller shall have furnished evidence satisfactory to counsel to the
Purchaser of the termination of all such filings previously on record with
respect to any of the Assets.
(n) Sales Taxes. The Purchaser shall have been furnished with a Tax
-----------
Clearance Certificate from the Pennsylvania Department of Revenue, pursuant to
Section 1403 of the Pennsylvania Code, showing that all taxes imposed by the
Commonwealth of Pennsylvania, have been paid in full as of the Closing Date or,
in the alternative, the Purchaser shall have been furnished with a certificate
from the Department of Revenue stating that no such taxes, interest or penalties
are due.
(o) Actions, Proceedings, Etc. All actions, proceedings, instruments,
-------------------------
agreements and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
have been reasonably satisfactory to and approved by Schifino & Fleischer, P.A.,
counsel to the Purchaser; and, such counsel shall have been furnished with such
copies (certified if requested) all of such actions, proceedings, instruments,
agreements and documents as they shall have reasonably requested.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND THE
-------------------------------------------------------------
STOCKHOLDERS.
------------
The obligations of the Seller and the Stockholders under this Agreement are
subject to the satisfaction at or prior to the Closing of each of the following
conditions (the fulfillment of any one of which may be waived in writing by such
parties):
(a) Accuracy of Representations and Warranties. The representations and
------------------------------------------
warranties and statements of the Purchaser contained in this Agreement shall be
true and complete on the date of this Agreement and when signed and on the
Closing Date.
(b) Compliance. The Purchaser shall have performed and complied with all
----------
agreements, covenants and conditions required by this Agreement and all exhibits
hereto to be performed and complied with by it at or prior to the Closing.
(c) Certificate. The Seller shall have received a certificate executed by
-----------
the President of the Purchaser and attested to by its Secretary under its
corporate seal, dated the Closing Date, certifying as to (i) the fulfillment of
the matters mentioned in Sections 7(a) and (b) of this Agreement and (ii) the
resolutions adopted by the Board of Directors of the Purchaser approving the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
14
<PAGE>
(d) Employment Agreement, Lease. The Purchaser shall have entered into (A)
---------------------------
an employment agreement with the Stockholders substantially in the form attached
to this Agreement as Exhibit M, and (B) a lease for a term of one year at the
rent of $3,000 per month for approximately 5,785 square feet of space in the
building located at 2010 Wheatsheaf Lane, Philadelphia, Pennsylvania, in form
and substance reasonably acceptable to the parties thereto.
8. INDEMNIFICATION.
---------------
(a) General. The Seller and the Stockholders jointly and severally agree to
-------
indemnify the Purchaser in respect of any and all claims, losses and expenses
which may be incurred by the Purchaser (the "Indemnified Party") arising out of:
(i) any breach by either the Seller or any of the Stockholders of any of
their representations, warranties, covenants or agreements made in this
Agreement, the exhibits hereto or any document or paper delivered in
connection with the transactions contemplated hereby;
(ii) any attempt (whether or not successful) by any person to cause or
require the Indemnified Party to pay or discharge any debt, obligation,
liability or commitment inconsistent with any such representation, warranty,
covenant or agreement; or
(iii) any action, suit, proceeding, assessment or judgment arising out of
or incident to any of the matters indemnified against in this Section 8,
including reasonable fees and disbursements of counsel (before and at trial
and in appellate proceedings).
(b) Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification under this Section 8, the Indemnified Party shall notify the
party or parties (as the case may be) against whom indemnification is sought
(whether one party or more, the "Indemnifying Party") in writing by registered
mail within 30 days after the Indemnified Party has actual knowledge of the
facts constituting the basis for such claim. Such notice shall specify all
facts known to the Indemnified Party giving rise to such indemnification right
and the amount or an estimate of the amount of the liability arising therefrom.
The right to indemnification hereunder and the amount or the estimated amount
thereof, as set forth in such notice, shall be deemed agreed to by the
Indemnifying Party unless, within 15 days after the receipt of such notice, the
Indemnified Party is notified in writing that the Indemnifying Party disputes
the right to indemnification as set forth or estimated in such notice.
(c) Right to Defend; Third-Party Claims, Etc. (i) If the facts giving rise
----------------------------------------
to any such indemnification right shall involve any actual or threatened claim
or demand by any third party against the Indemnified Party or any possible claim
by the Indemnified Party against any third party, such claim by or against a
third party shall be referred to as a "Third-Party Claim." If the Indemnifying
Party gives the Indemnified Party an agreement in writing, in form and substance
reasonably satisfactory to counsel to the Indemnified Party, agreeing to
indemnify and save the Indemnified Party harmless from all costs and liability
arising from any Third-Party Claim, the Indemnifying Party may at its own
expense undertake full responsibility
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for the defense or prosecution of such Third-Party Claim and may contest or
settle it on such terms as it may choose. If the Indemnifying Party fails to
deliver such an agreement of indemnity to the Indemnified Party, (A) the
Indemnifying Party at its own expense may nevertheless participate with the
Indemnified Party in the defense or prosecution of the Third-Party Claim in any
and all settlement negotiations relating thereto, and (B) the Indemnified Party
may contest or settle the Third-Party Claim on such terms as it may choose,
although the Indemnified Party shall not reach a settlement until it has
consulted in good faith with the Indemnifying Party. Any such participation
shall not relieve the Indemnifying Party of its obligations to indemnify the
Indemnified Party under this Section 8.
(ii) If by reason of any Third-Party Claim a lien, attachment, garnishment
or execution is placed upon any of the property or assets of the Indemnified
Party, the Indemnifying Party, if it desires to exercise its right to defend or
prosecute such suit, shall furnish a satisfactory indemnity bond to obtain the
prompt release of such lien, attachment, garnishment or execution.
(d) Cooperation. The parties to this Agreement shall execute such powers of
-----------
attorney as may be necessary or appropriate to permit participation of counsel
selected by any party hereto and, as may reasonably be related to any such claim
or action, shall provide access to the counsel, accountants and other
representatives of each party during normal business hours to all properties,
personnel, books, tax records, contracts, commitments and all other business
records of such other party and will furnish to such other party copies of all
such documents as may reasonably be requested (certified, if requested).
(e) Right of Offset. With respect to any claims by the Purchaser for
---------------
indemnification under this Section 8 against the Seller or the Stockholders, in
furtherance and not in limitation of its rights under this Agreement, the
Purchaser, at its option, shall be entitled to an immediate right of offset
against any amounts owed by the Purchaser to such party, including, without
limitation, any amounts to be paid under Section 2 of this Agreement. Such
right of offset shall be exercised by written notice to the party or parties
against which the right of offset is taken, which notice shall be given in
accordance with the requirements of Section 8(b) and shall indicate the total
amount of such offset.
9. SECURITIES LAW MATTERS.
----------------------
(a) Status Under Securities Laws. (i) The parties to this Agreement
----------------------------
understand and agree that the Purchaser's stock to be delivered in connection
with the transactions contemplated by this Agreement will not have been
registered under the Securities Act of 1933, as amended (the "Act"), the
Pennsylvania Securities Act of 1972 or Chapter 517, Florida Statutes. The
Stockholders represent and warrant to the Purchaser that they will be acquiring
the stock of the Purchaser for their own account, for investment, and without a
view to, or in connection with, any resale or distribution thereof in violation
of applicable state and federal securities laws. The Stockholders do not have
any contract, understanding or arrangement with any person to sell, assign,
transfer or pledge to such person, or to anyone else, any portion of the stock
being acquired hereunder; and the Stockholders have no present plans or
intention to enter into any such contract, understanding or arrangement.
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<PAGE>
(ii) The Stockholders agree and covenant not to sell, pledge, hypothecate or
otherwise dispose of or attempt to dispose of any portion of the stock in
violation of such statutes or this Agreement. The stock may only be sold,
transferred, or assigned if it is registered under the Act or in compliance with
an applicable exemption from registration. The Stockholders agree to notify the
Purchaser in writing before any such proposed transaction or disposition and
------
provide the Purchaser an opinion of counsel satisfactory to it that any proposed
disposition will not violate the terms of this Agreement and that no
registration under such statutes is required.
(b) Registration. The parties to this Agreement acknowledge, agree,
------------
represent and warrant between and among themselves that the Purchaser is under
no obligation to register the stock under the Securities Act of 1933, the
Pennsylvania Securities Act of 1972 or Chapter 517, Florida Statutes, and that
no promise or representation to the contrary has been made, the Seller and the
Stockholders having been informed of the restrictions on the transferability of
the stock which is to be received hereunder.
(c) Legend. The Purchaser's stock delivered in connection with the
------
transactions contemplated by this Agreement will bear a legend in substantially
the following form:
This Stock has not been registered under the Securities Act of 1933 or
chapter 517, Florida Statutes. This Stock has not been acquired with a view
to, or in connection with, any distribution thereof and may not be sold,
pledged, hypothecated, transferred or otherwise disposed of in the absence
of an effective registration statement for the shares under the Securities
Act of 1933 and Chapter 517, Florida Statutes, or an opinion of counsel
satisfactory to the corporation that registration is not required under said
statutes.
10. ADDITIONAL TERMS OF TERMINATION.
-------------------------------
In addition to the provisions of Section 6 and 7 of this Agreement, this
Agreement may be terminated before the Closing by mutual written agreement of
the Boards of Directors of the corporate parties hereto and by the written
agreement of the Stockholders. This Agreement may also be terminated by the
Purchaser if, within five days after serving written demand on any of the other
parties to this Agreement to provide satisfactory assurances of such party's
abilities to perform its obligations hereunder, such satisfactory assurances are
not forthcoming. In the event this Agreement is terminated as provided in this
Section 11 or in Section 6 or 7 of this Agreement, this Agreement shall
forthwith become wholly void and of no effect, except as to Sections 11(e) and
11(g) of this Agreement, and there shall be no liability under this Agreement on
the part of any of the parties hereto or their respective directors, officers or
stockholders.
11. GENERAL.
-------
(a) No Brokers. Each of the parties to this Agreement represents and
----------
warrants, each to the others, that it has not utilized the services of any
finder, broker or agent. Each of the parties agrees to indemnify the other
parties against and hold them harmless from any and all liabilities to any
person, firm or corporation claiming any broker's or finder's fee or commission
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of any kind on account of services rendered on behalf of such corporation in
connection with the transactions contemplated by this Agreement.
(b) Survival of Representations, Warranties, Etc. Each of the parties to
--------------------------------------------
this Agreement covenants and agrees that its representations, warranties,
covenants, statements and agreements contained in this Agreement and the
exhibits hereto and any document delivered in connection herewith shall survive
the Closing Date and terminate on the fifth anniversary of such date, except
that any such representations, warranties, covenants, statements, exhibits,
documents and agreements with respect to any income tax liability, liability
under any federal statutes or regulation or other liability measured by income
of the Seller shall not terminate until the earlier of (1) ten days after the
expiration of the period of limitations on assessment and collection (including
any extension thereof) applicable to such taxes under Chapter 66 of the Internal
Revenue Code of 1954, as amended, or any other applicable provision of law or
(2) six years after the Closing date.
(c) Waivers. No action taken pursuant to this Agreement, including any
-------
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein, therein and in any document
delivered in connection herewith or therewith. The waiver by any party to this
Agreement of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
(d) Specific Performance; Remedies. The parties to this Agreement
------------------------------
acknowledge that the performance of their respective obligations hereunder is
essential to the consummation of the transactions contemplated by this
Agreement. Each of them further acknowledges that the Assets are unique and
that no party will have an adequate remedy at law if any other party fails to
perform its or his obligations hereunder. In such event, each party shall have
the right, in addition to any other rights it may have, to compel specific
performance of this Agreement.
(e) Expenses. Each of the parties to this Agreement shall pay its own
--------
expenses in connection with this Agreement and the transactions contemplated
hereby, including the fees and expenses of its counsel and its certified public
accountants and other experts. Cash expenses of the Seller and the Stockholders
incurred in connection with the execution of this Agreement and the consummation
of the transactions contemplated hereby are specifically agreed to be
liabilities that will not be assumed by the Purchaser pursuant to this
Agreement. In addition, the cost of documentary and intangible tax stamps
required to be affixed on the stock shall be borne by the payee of such stock.
(f) Public Disclosure. Before the Closing, neither Purchaser, Seller nor
-----------------
Stockholders shall make any public release of information regarding the matters
contemplated herein except (i) that a press release in form agreed upon by both
Purchaser and Stockholders shall be issued as promptly as is practicable after
the execution of this Agreement, (ii) that Purchaser and Stockholders may each
continue such communications with employees, customers, suppliers, lenders,
lessors and other particular groups as may be legally required, necessary or
appropriate and not inconsistent with the best interests of the other party or
the prompt consummation of the transactions contemplated by this letter, without
disclosing the details of the transactions and (iii) as required by law.
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(g) Confidentiality. If the transactions contemplated by this Agreement are
---------------
not consummated and are terminated pursuant to Section 6, 7 or 10 of this
Agreement, then each of the parties to this Agreement agrees to keep
confidential and shall not use for its own benefit any of the information
(unless in the public domain) obtained from any other party and shall promptly
return to such other parties all schedules, documents or other written
information (without retaining copies thereof) previously obtained from such
other parties.
(h) Notices. All notices, requests, demands and other communications which
-------
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if personally delivered or if mailed, first
class mail, postage prepaid, to:
If to the Purchaser: American Consolidated Laboratories, Inc.
6416 Parkland Drive
Sarasota, Florida 34243
Attention: President
with a copy to: Schifino & Fleischer, P.A.
One Tampa City Center, Suite 2700
Tampa, Florida 33602
If to the Seller or the Stockholders:
Joseph W. Kelly
1563 Jarrettown Road
Drecher, Pennsylvania 19025
with a copy to: Joseph Gembala, III
1831 Chestnut Street
Suite 501
Philadelphia, Pennsylvania 19103
or to such other address as such party shall have specified by notice in writing
to the other parties.
(i) Entire Agreement; Amendment. This Agreement (including the exhibits
---------------------------
hereto and all documents and papers delivered pursuant hereto and any written
amendments hereof executed by the parties to this Agreement) constitutes the
entire agreement, and supersedes all prior agreements and understandings, oral
and written, among the parties to this Agreement with respect to the subject
matter hereof.
(j) Assignability. This Agreement shall not be assignable by any of the
-------------
parties to this Agreement without the prior written consent of all other parties
to this Agreement.
(k) Further Assurance. The parties to this Agreement will execute and
-----------------
deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements or other instruments as the Purchaser or
its counsel may reasonably request for the purpose of carrying out the
transactions contemplated by this Agreement.
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(l) Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(m) Section and Other Headings. The section and other headings contained in
--------------------------
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
(n) Governing Law. This Agreement has been negotiated and prepared and will
-------------
be performed in the State of Florida, and the validity, construction and
enforcement of, and the remedies under, this Agreement shall be governed in
accordance with the laws of the State of Florida (except any choice of law
provision of Florida law shall not apply if the law of a state or jurisdiction
other than Florida would apply thereby).
IN WITNESS WHEREOF, this Agreement has been signed by each of the individual
parties hereto and signed by an officer thereunto duly authorized and attested
under the corporate seal by the Secretary of each of the corporate parties
hereto, all on the date first above written.
WITNESS: AMERICAN CONSOLIDATED
LABORATORIES, INC.
/s/ Joseph A. Gembala /s/ Mr. Smith
- --------------------------------- ---------------------------------
Chairman
ATTEST: PHILCON LABORATORIES, INC.
(CORPORATE SEAL)
/s/ Marianne K. O'Hara /s/ Joseph W. Kelly
- --------------------------------- By: ---------------------------------
Secretary President
STOCKHOLDERS
/s/ Joseph A. Gembala /s/ Joseph W. Kelly
- --------------------------------- ---------------------------------
Witness Joseph W. Kelly
/s/ Joseph A. Gembala /s/ Lucille M. Kelly
- --------------------------------- ---------------------------------
Witness Lucille M. Kelly
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EXHIBITS
A Liabilities to be assumed by Purchaser
B Required consents
C Seller's financial statements
D Liabilities not assumed by Purchaser
E Litigation involving Seller
F Leases, contracts and commitments of Seller
G Accounts receivable
H Inventory
I Seller's insurance
J Employee benefit plans of Seller
K Salaries of highly paid officers, directors and employees of Seller
L Trade names, trademarks, copyrights, etc. in which Seller has an interest
M Employment agreement
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