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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): November 25, 1996
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PHYSICIAN SALES & SERVICE, INC.
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(Exact name of registrant as specified in its charter)
Florida 0-23832 59-2280364
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
7800 Belfort Parkway, Suite 250, Jacksonville, Florida 32256
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(Address, including zip code, of principal executive offices)
(904) 281-0011
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(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On November 25, 1996, Physician Sales & Service, Inc. ("PSS") completed
the merger with Diagnostic Imaging, Inc. ("DII") of Jacksonville, Florida
pursuant to an Agreement and Plan of Merger dated September 3, 1996, among the
Company, DII and PSS Merger Corporation (the "Merger"). The Merger is a
stock-for-stock transaction, to be accounted for as a pooling of interests, by
issuing an aggregate of 662,330 shares of PSS Common Stock. As part of the
transaction, PSS also assumed approximately $6.1 million of outstanding
indebtedness of DII.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired. The financial
statements for the business acquistion referred to in Item 2 above are not
included in this Form 8-K report and shall be filed by amendment not later than
60 days after the date of this initial report on Form 8- K as provided by Item
7(a)(4).
(b) Pro Forma Financial Information. The financial statements for
the business acquistion referred to in Item 2 above are not included in this
Form 8-K report and shall be filed by amendment not later than 60 days after
the date of this initial report on Form 8-K as provided by Item 7(a)(4).
(c) Exhibits.
2.1 Agreement and Plan of Merger dated September 3, 1996 by and
among Physician Sales & Service, Inc., PSS Merger Corp. and
Diagnostic Imaging, Inc.
99.1 Press Release dated November 27, 1996.
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.
PHYSICIAN SALES & SERVICE, INC.
(Registrant)
By: /s/ David A. Smtih
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Title: Senior Vice President and Chief
Financial Officer
Date: December 5, 1996
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EXHIBIT INDEX
Page
2.1 Agreement and Plan of Merger dated September 3, 1996 by
and among Diagnostic Imaging, Inc., PSS Merger Corp. and
Physician Sales & Service, Inc.,
99.1 Press Release dated November 27, 1996.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DIAGNOSTIC IMAGING, INC.
PSS MERGER CORP.
AND
PHYSICIAN SALES & SERVICE, INC.
DATED AS OF SEPTEMBER 3, 1996
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of September 3, 1996, by and among DIAGNOSTIC IMAGING, INC.
("DII"), a Florida corporation having its principal office located in
Jacksonville, Florida; PSS MERGER CORP. ("Merger Corp."), a Florida corporation
having its principal office located in Jacksonville, Florida; and PHYSICIAN
SALES & SERVICE, INC. ("PSS"), a Florida corporation having its principal
office located in Jacksonville, Florida.
PREAMBLE
The Boards of Directors of PSS, Merger Corp., a wholly owned subsidiary
of PSS, and DII are of the opinion that the transactions described herein are
in the best interests of the parties and their respective shareholders. This
Agreement provides for the acquisition of DII by PSS pursuant to the merger of
Merger Corp. with and into DII. At the Effective Time of such merger, the
outstanding shares of the capital stock of DII shall be converted into the
right to receive shares of the common stock of PSS (except as provided herein).
As a result, shareholders of DII shall become shareholders of PSS and DII shall
continue to conduct its business and operations as a wholly owned subsidiary of
PSS. The transactions described in this Agreement are subject to the approvals
of the shareholders of DII and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the Merger shall qualify (i) as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes, and (ii) for treatment as a pooling of interests for accounting
purposes.
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, Merger Corp. shall be merged with and into DII in
accordance with the applicable provisions of the FBCA (the "Merger"). DII
shall be the Surviving Corporation resulting from the Merger and shall become a
wholly owned Subsidiary of PSS and shall continue to be governed by the Laws of
the State of Florida. The Merger shall be consummated pursuant to the terms of
this Agreement, which has been approved and adopted by the respective Boards of
Directors of DII, Merger Corp. and PSS and the shareholders of DII and Merger
Corp.
1.2 Time and Place of Closing. The closing (the "Closing") will
take place at 10:00 A.M. on a date to be specified by the parties (the "Closing
Date"), which (subject to the satisfaction or waiver of the conditions set
forth in Sections 9.2 and 9.3) shall be no later than the second business day
after the satisfaction of the conditions set forth in Section 9.1. The place
of Closing shall be at the offices of Alston & Bird, One Atlantic Center, 1201
West Peachtree Street, Atlanta, Georgia 30309-3424, or such other place as may
be mutually agreed upon by the Parties.
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1.3 Effective Time. Subject to the provisions of this Agreement,
the parties shall file Articles of Merger executed in accordance with the
relevant provisions of the FBCA and shall make all other filings or recordings
required under the FBCA as soon as practicable on or after the Closing Date.
The Merger and other transactions contemplated by this Agreement shall become
effective on the date and at the time the Articles of Merger reflecting the
Merger become effective with the Secretary of State of the State of Florida
(the "Effective Time").
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Articles of Incorporation of DII in effect
immediately prior to the Effective Time shall be amended and restated,
effective at the Effective Time, in a manner satisfactory to PSS. The Articles
of Incorporation of DII, as so amended and restated, shall be the Articles of
Incorporation of the Surviving Corporation until otherwise amended or repealed.
2.2 Bylaws. The Bylaws of Merger Corp. in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
2.3 Tax-Free Reorganization. The parties intend to adopt this
Agreement as a tax-free plan of reorganization under Section 368(a) of the
Internal Revenue Code.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of the Parties or the shareholders of any of the Parties,
the shares of the constituent corporations of the Merger shall be converted as
follows:
(a) Each share of Merger Corp. Common Stock issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into one share of DII Common Stock.
(b) Each share of DII Common Stock (excluding treasury shares
and excluding shares held by shareholders who perfect their statutory
dissenters' rights as provided in Section 3.4 of this Agreement) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for: (i) the right to receive that number of
shares of PSS Common Stock obtained by dividing the Common Stock Per Share
Purchase Price by the Base Period Trading Price, and (ii) a contingent right to
receive that portion of the Escrow Shares, that are attributable to each such
share of DII Common Stock, that are deposited into escrow by PSS pursuant to
Section 4.3 of this Agreement. The sum of clause (i) and (ii) of the preceding
sentence is the "Common Stock Exchange Ratio." The Base Period Trading Price
is defined to mean the average of the daily closing prices for the shares of
PSS Common Stock for the five (5) consecutive trading days on which such shares
are actually traded as over-the-counter securities and quoted on the Nasdaq
National Market (as reported by The Wall Street Journal or, if not reported
thereby, any other authoritative source) ending at the close of trading on the
second trading day immediately prior to the Closing Date; provided, that for
purposes of this calculation, the Base Period Trading Price shall be deemed to
equal (i) $19.25 in the event the Base Period Trading Price is greater than
$19.25 and (ii) $15.75 in the event the Base Period Trading Price is less than
$15.75 (collectively, $19.25 and $15.75 are referred to as the "Base Period
Trading Price Limitations").
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(c) Subject to adjustment as set forth below, the Aggregate
Purchase Price shall equal $13,000,000, (i) plus or minus the Book Value
Adjustment, if any, (ii) minus any expenses incurred by DII or on DII's behalf
in connection with the transactions contemplated hereunder in excess of
$200,000, determined in accordance with Section 11.2 hereof. The Aggregate
Purchase Price shall be (i) increased by the amount by which the shareholders'
equity of DII as of June 30, 1996, as determined pursuant to the audit of
Arthur Andersen LLP to be conducted as set forth in Section 8.1 hereof, is
greater than $4,343,110 (shareholders' equity of DII as reflected on the June
30, 1996 unaudited balance sheet), and (ii) decreased by the amount by which
the shareholders' equity of DII as of June 30, 1996, as determined pursuant to
the audit of Arthur Andersen LLP to be conducted as set forth in Section 8.1
hereof, is less than $4,343,110 (the "Book Value Adjustment"). The Aggregate
Purchase Price shall also be increased dollar for dollar in an amount equal to
any reduction below $6,200,000 in the Funded Debt of DII as reflected on the
balance sheet of DII as of June 30, 1996 included in the Financial Statements,
provided that such reductions shall not be the result of any increase in
accounts payable or decrease in working capital.
3.2 Anti-Dilution Provisions. In the event DII or PSS changes the
number of shares of DII Common Stock or PSS Common Stock, respectively, issued
and outstanding prior to the Effective Time as a result of a stock split, stock
dividend, combination of shares or similar recapitalization with respect to
such stock (an "Anti-Dilution Event") and the record date therefor (in the case
of a stock dividend) or the effective date thereof (in the case of a stock
split, share exchange or similar recapitalization for which a record date is
not established) shall be prior to the Effective Time, the Common Stock
Exchange Ratio shall be proportionately adjusted to insure that holders of DII
Common Stock shall receive PSS Common Stock having the same value as they would
have received prior to the Anti-Dilution Event. In the event PSS has an
Anti-Dilution Event and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split, share
combination, share exchange or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the Base Period
Trading Price shall be adjusted to appropriately adjust the ratio under which
shares of DII Common Stock will be converted into shares of PSS Common Stock
pursuant to Section 3.1(b) or Section 3.6, as the case may be, of this
Agreement to insure that holders of DII Common Stock shall receive PSS Common
Stock having the same value as they would have received prior to the Anti-
Dilution Event.
3.3 Shares Held by DII. Each share of DII Capital Stock held in
treasury by DII shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 Dissenting Shareholders. Any holder of shares of DII Capital
Stock who perfects its dissenters' rights in accordance with and as
contemplated by Section 607.1320 of the FBCA shall be entitled to receive the
value of such shares in cash from DII after the Effective Time as determined
pursuant to such provision of Law; provided, that no such payment shall be made
to any dissenting shareholder unless and until such dissenting shareholder has
complied with the applicable provisions of the FBCA and surrendered to DII the
certificate or certificates representing the shares for which payment is being
made. In the event that a dissenting shareholder of DII fails to perfect, or
effectively withdraws or loses, its right to appraisal and of payment for its
shares, PSS shall issue and deliver the consideration to which such holder of
shares of DII Capital Stock is entitled under this Article 3 (without interest)
upon surrender by such holder of the certificate or certificates representing
such shares held by such holder.
3.5 Fractional Shares. No certificates representing fractional
shares of PSS Common Stock will be issued as a result of the Merger. Each
holder of shares of DII Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of PSS Common
Stock shall receive, in lieu thereof, cash (without interest) in an amount
equal to such fractional part of a
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share of PSS Common Stock multiplied by the Base Period Trading Price. No such
holder will be entitled to dividends, voting rights, or any other rights as a
shareholder in respect of any fractional shares.
3.6 Issuance of Additional Shares. Additional shares of DII Common
Stock may be issued in accordance with the provisions of Section 2.6 of that
certain Reorganization Agreement dated December 31, 1995 by and among DII,
American Medical Diagnostic Imaging, Inc., B&B X-Ray, Inc., Kings Diagnostic
Imaging, Inc., United X-Ray Company, Inc. and all of the shareholders of DII
(the "Reorganization Agreement"), provided that such additional shares of DII
Common Stock are issued prior to the Effective Time and reflected in the Fully
Diluted Common Equivalents. All remaining rights of any shareholder to receive
additional shares of DII Common Stock under the Reorganization Agreement or
otherwise shall be terminated by DII prior to the Effective Time.
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ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. Promptly (and in no event more than five
(5) calendar days) after the Effective Time, PSS and DII shall cause the
exchange agent selected by PSS (the "Exchange Agent") to mail to the former
holders of DII Common Stock appropriate transmittal materials (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of DII Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent). After
the Effective Time, each holder of shares of DII Common Stock (other than
shares to be canceled pursuant to Section 3.3 of this Agreement or as to which
statutory dissenters' rights have been perfected as provided in Section 3.4 of
this Agreement) issued and outstanding at the Effective Time shall surrender
the certificate or certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement. To the extent
required by Section 3.5 of this Agreement, each holder of shares of DII Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of PSS Common Stock to which such holder may be
otherwise entitled (without interest). PSS shall not be obligated to deliver
the consideration to which any former holder of DII Common Stock is entitled as
a result of the Merger until such holder surrenders his certificate or
certificates representing the shares of DII Common Stock for exchange as
provided in this Section 4.1 or such holder provides an appropriate affidavit
regarding loss of such certificate and an indemnification for loss in favor of
PSS. The certificate or certificates of DII Common Stock so surrendered shall
be duly endorsed as the Exchange Agent may require.
4.2 Rights of Former DII Shareholders. At the Effective Time, the
stock transfer books of DII shall be closed and no transfer of DII Common Stock
by any such holder shall thereafter be made or recognized. Until surrendered
for exchange in accordance with the provisions of Section 4.1 of this
Agreement, each certificate theretofore representing shares of DII Common Stock
(other than shares to be canceled pursuant to Sections 3.3 and 3.4 of this
Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Sections 3.1, 3.5 and
3.6 of this Agreement in exchange therefor. To the extent permitted by Law,
former shareholders of record of DII shall be entitled to vote after the
Effective Time at any meeting of PSS shareholders the number of whole shares of
PSS Common Stock into which their respective shares of DII Common Stock are
converted, regardless of whether such holders have exchanged their certificates
representing DII Common Stock for certificates representing PSS Common Stock in
accordance with the provisions of this Agreement. Whenever a dividend or other
distribution is declared by PSS on the PSS Common Stock, the record date for
which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of PSS Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any certificate representing shares of DII
Common Stock issued and outstanding at the Effective Time until such holder
surrenders such certificate for exchange as provided in Section 4.1 of this
Agreement. However, upon surrender of such certificate, both the PSS Common
Stock certificate (together with all such undelivered dividends or other
distributions without interest) and any undelivered cash payments to be paid
for fractional share interests (without interest) shall be delivered and paid
with respect to each share represented by such certificate.
4.3 Escrow Shares. At the Effective Time, and pursuant to the terms
of the Escrow Agreement attached hereto as Exhibit 4.3, PSS shall issue an
aggregate number of shares of PSS Common Stock equal to the sum of (A) with
respect to the specific indemnity set forth in Section 2.3 of the Escrow
Agreement, the aggregate dollar amount of the specific indemnity items to be
set forth in the Escrow Agreement as
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determined pursuant to Section 8.1 hereof, divided by the Base Period Trading
Price, and (B) with respect to the general indemnity set forth in Section 2.2 of
the Escrow Agreement, five percent (5%) of the Aggregate Purchase Price, divided
by the Base Period Trading Price.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF DII
DII hereby represents and warrants to PSS and Merger Corp. as follows:
5.1 Organization, Standing, and Power. Each of DII and its
Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the Laws of the state of its incorporation, and has the
corporate power and authority to carry on its business as it has been and is
now being conducted and to own, lease and operate its Assets. Each of DII and
its Subsidiaries is duly qualified or licensed to transact business as a
foreign corporation and is in good standing in all jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, in the
aggregate, a Material Adverse Effect on DII and its Subsidiaries, taken as a
whole. Copies of the articles or certificate of incorporation and all
amendments thereto of DII and its Subsidiaries and the bylaws, as amended, of
DII and its Subsidiaries and copies of the corporate minutes (or resolutions
adopted by the shareholders or Board of Directors) of DII and its Subsidiaries,
which have been made available to PSS for review, are true and complete, in all
Material respects, as in effect on the date of this Agreement, and accurately
reflect all proceedings of the shareholders and Board of Directors (and all
committees thereof) of DII and its Subsidiaries. The stock record books of DII
and its Subsidiaries, which have been made available to PSS for review, contain
true and complete records of the stock ownership of DII and all prior transfers
of the shares of its capital stock.
5.2 Authorization of Agreement; No Breach. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary corporate action of DII, other than the meeting (or written consent)
of the shareholders of DII to approve this Agreement to be held pursuant to
Section 8.13. This Agreement constitutes, and all agreements and other
instruments and documents to be executed and delivered by DII pursuant to this
Agreement will constitute, legal, valid and binding obligations of DII
enforceable against DII in accordance with their respective terms. The
execution, delivery and performance of this Agreement and the agreements and
other documents and instruments to be executed and delivered by DII pursuant to
this Agreement and the consummation of the transactions contemplated hereby and
thereby will not, subject to obtaining the consents identified herein, (i)
violate or result in a breach of or Default under the articles or certificate
of incorporation or bylaws of DII or any of its Subsidiaries or any other
Material instrument or agreement to which DII or any of its Subsidiaries is a
party or is bound; (ii) to the knowledge of DII and its Subsidiaries, violate
any Law, administrative decision or award of any court, arbitrator, mediator,
tribunal, administrative agency or governmental body applicable to or binding
upon DII or its Subsidiaries or upon their respective securities, property or
business; (iii) except as set forth on 5.2 or 5.16 conflict with or constitute
a Default under any Material Contract to which DII or any of its Subsidiaries
is a party or by which DII or any of its Subsidiaries is bound; or (iv) create
a Lien upon the securities, property or business of DII or any of its
Subsidiaries.
5.3 Capital Stock. The authorized capital stock of DII consists of
10,000,000 shares of DII Common Stock, of which (i) 3,000,000 are designated as
Class A Common Stock, $.01 par value per share, and (ii) 7,000,000 are
designated as Class B Common Stock, $.01 par value per share, issuable in
series consisting of 500,000 shares each, designated as Series A through M,
respectively, with 500,000
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shares undesignated. No shares of Class A Common Stock are issued and
outstanding. Of the Class B Common Stock, (i) 42,232 shares of Class B, Series
A Common Stock are issued and outstanding, (ii) 54,816 shares of Class B, Series
B Common Stock are issued and outstanding, (iii) 43,314 shares of Class B,
Series C Common Stock are issued and outstanding, and (iv) 23,833 shares of
Class B, Series D Common Stock are issued and outstanding No other shares or
series of Class B Common Stock are issued and outstanding and no shares are
issued and held as treasury shares. All of such issued and outstanding shares
are duly and validly issued and outstanding, are fully paid and non-assessable,
and were issued pursuant to a valid exemption from registration under the 1933
Act and all applicable state securities laws. Except as set forth on Schedule
5.3, there are no outstanding warrants, options, rights (including outstanding
rights to demand registration or to sell in connection with a registration by
DII under the 1933 Act), calls or other commitments of any nature relating to
the DII Common Stock, and there are no outstanding securities of DII convertible
into or exchangeable for shares of DII Common Stock or any other capital stock.
Except as set forth on Schedule 5.3, DII is not obligated to issue or repurchase
any shares of its capital stock for any purpose, and to the knowledge of DII no
person or entity has entered into any Contract or option or any right or
privilege (whether preemptive or contractual) capable of becoming a Contract or
option for the purchase, subscription or issuance of any unissued shares, or
other securities of DII. Subject to adjustment for the issuance of shares of
DII Common Stock pursuant to the Reorganization Agreement, as of the date
hereof, DII's Fully Diluted Common Equivalents represent 164,195 shares of DII
Common Stock. All holders of rights with respect to DII Common Stock pursuant
to the Reorganization Agreement are currently shareholders of DII.
5.4 DII Subsidiaries. Schedule 5.4 attached hereto contains a true
and correct list of each Subsidiary of DII. All of the outstanding shares of
capital stock of each such Subsidiary of DII are duly and validly issued and
outstanding, are fully paid and non-assessable, and were issued pursuant to a
valid exemption from registration under the 1933 Act and all applicable State
securities laws and, except as set forth on Schedule 5.4, are owned of record
and beneficially by DII, free and clear of any and all Liens. No shares of
capital stock of any Subsidiary are reserved for issuance and there are no
outstanding options, warrants, rights, subscriptions, claims of any character,
Contracts, obligations, convertible or exchangeable securities or other
commitments, contingent or otherwise, relating to the capital stock of any
Subsidiary, or pursuant to which any Subsidiary is or may become obligated to
issue or exchange any share of capital stock. Neither DII nor any Subsidiary
owns, directly or indirectly, any capital stock or other equity or ownership or
proprietary interest in any corporation, partnership, or other entity, except
as set forth on Schedule 5.4.
5.5 Financial Statements.
(a) Schedule 5.5 contains true and correct copies of the (i)
unaudited consolidating balance sheet of DII as of December 31, 1995, and (ii)
unaudited consolidated balance sheets of DII as of June 30, 1996 and the
unaudited consolidated statements of income and unaudited consolidated
statements of cash flows for the six-month period ended June 30, 1996 (the
"Financial Statements").
(b) The Financial Statements (i) are in accordance with the
books and records of DII and its Subsidiaries, which books and records have
been maintained in accordance with reasonable business practices; (ii) present
fairly the consolidated financial condition, assets and liabilities of DII and
its Subsidiaries, taken as a whole, as of the respective dates indicated and
the results of operations and cash flows for the respective periods indicated;
(iii) have been consistently prepared throughout the periods involved, except
that interim unaudited consolidated statements are subject to normal year end
adjustments of the type specifically listed in Schedule 5.5 which will not,
individually or in the aggregate, be Material; and (iv) reflect adequate
reserves for all known Material Liabilities and reasonably anticipated losses.
The
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Financial Statements contain no untrue statements of any Material fact nor
omit to state any Material fact required to be stated to make the Financial
Statements as a whole not misleading, except that there are no notes to the
interim unaudited consolidated statements.
5.6 Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 5.6, as of the date hereof, neither DII nor any of its Subsidiaries
has any Undisclosed Liabilities in excess of $50,000 in the aggregate, except
for unpaid liabilities and obligations incurred since June 30, 1996, in the
ordinary course of business and not involving Funded Debt.
5.7 Absence of Changes. Except as disclosed on Schedule 5.7 or as
specifically reflected in the Book Value Adjustment, since June 30, 1996 there
has not been any Material transaction or Material occurrence (or, in the case
of subparagraphs (i), (l) and (m) below, any transaction or occurrence) in
which DII or any of its Subsidiaries has:
(a) issued or delivered or agreed to issue or deliver any
capital stock or other securities (whether stock, bonds, debentures or other
corporate securities) or granted or agreed to grant any options or rights to
purchase any securities or borrowed or agreed to borrow any Funded Debt;
(b) knowingly incurred or become subject to, or agreed to
incur or become subject to, any Material Liability other than in the ordinary
course of business;
(c) discharged or satisfied any Lien or paid any Material
Liability other than (i) current liabilities shown on the balance sheet as of
June 30, 1996 included in the Financial Statements, (ii) current liabilities
incurred since that date in the ordinary course of business, or (iii) Funded
Debt shown on such balance sheet or incurred since June 30, 1996;
(d) except as permitted elsewhere in this Agreement or
disclosed in Schedule 5.7, declared, set aside or made, or agreed to declare,
set aside or make any payments or dividends or any distribution to shareholders
or purchased, redeemed or otherwise acquired, directly or indirectly, or agreed
to purchase, redeem or acquire, any shares of capital stock or other
securities;
(e) mortgaged, pledged, subjected or agreed to subject any of
its assets, tangible or intangible, to any Lien, except for any liens regarding
current real and personal property taxes not yet due and payable;
(f) sold, assigned or transferred (or agreed so to do) any of
its tangible assets, or canceled or agreed to cancel any debts or claims,
except, in each case, in the ordinary course of business;
(g) sold, assigned or transferred any patents, trademarks,
trade names, copyrights or other intangible assets;
(h) suffered any Material damage, destruction or loss, whether
or not covered by insurance, which materially and adversely affected the
properties or business thereof, or suffered any extraordinary losses or waived
any rights of substantial value, whether or not in the ordinary course of
business;
(i) increased the rate of compensation payable or to become
payable by it to any of its officers, directors, employees or agents over the
rate being paid to them at June 30, 1996, or agreed so to do, except general
hourly rate increases and normal merit increases for employees other than
officers;
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(j) terminated or amended any Material Contract, License or
other instrument to which it is a party or suffered any loss or termination or
threatened loss or termination, of any existing business arrangement or
Material supplier, the termination or loss of which would materially and
adversely affect DII or its Subsidiaries;
(k) through negotiation or otherwise, made any commitment or
incurred any Liability, whether or not enforceable, to any labor organization;
(l) except for any year-end compensation bonuses to be paid
consistent with past practice, if any, made or agreed to make any accrual or
arrangement for or payment of any bonus or special compensation of any kind to
any officer, director, employee or agent;
(m) directly or indirectly paid or entered into a Contract to
pay any severance or termination pay to any officer, director, employee or
agent;
(n) changed any of the accounting principles followed by it or
the methods of applying such principles;
(o) reclassified its shares of capital stock into a different
number of shares;
(p) except in the ordinary course of business or as otherwise
disclosed in writing to PSS, offered or extended more favorable prices,
discounts or other allowances than were offered or extended regularly on and
prior to June 30, 1996;
(q) made or approved the making of any capital expenditure
exceeding the amount of $25,000;
(r) except in the ordinary course of business, loaned funds to
or increased the aggregate amount of existing loans to any Person; or
(s) suffered or experienced any other event or condition
materially and adversely affecting the business, operations, assets, properties
or condition of DII and its Subsidiaries, taken as a whole, financial or
otherwise.
5.8 Indebtedness. Schedule 5.8 lists all Funded Debt of DII as of
June 30, 1996, setting forth the principal amounts outstanding, per annum
interest rates and maturity dates for all such indebtedness. All of the
indebtedness (including Funded Debt) of DII and its Subsidiaries as of the
respective dates of the Financial Statements and as of the date of this
Agreement is accurately reflected in the Financial Statements, and with respect
to any Funded Debt, neither DII nor any of its Subsidiaries is in breach or
Default under any of the terms or conditions set forth in the loan documents or
any other document or instrument related thereto. Except as disclosed on
Schedule 5.8, all of the Funded Debt of DII and its Subsidiaries is prepayable
at any time without penalty or premium at the option of the obligor. Except as
disclosed on Schedule 5.8, (i) the transactions contemplated in this Agreement
will not result in any penalty or incurrence of any additional obligation or
change of any terms with respect to any such indebtedness, and (ii) neither DII
nor any of its Subsidiaries have any obligations, Liabilities or indebtedness
to any Affiliate.
5.9 Tax Matters.
<PAGE> 11
(a) DII and each of its Subsidiaries have filed all federal
and state income tax returns for all periods prior to the date hereof which
were required to be filed, and, except as described on Schedule 5.9, no
returns so filed have been examined by the IRS or any state agency with respect
to any such period. Except as listed on Schedule 5.9, neither DII nor any of
its Subsidiaries have received notice of any Material Tax claims being asserted
or any proposed assessment by any taxing authority and no Tax returns thereof
have been examined by the IRS or the appropriate state agencies for any fiscal
year or period ended prior to the date hereof, and neither DII nor any of its
Subsidiaries are presently under, nor has any such entity received notice of
any contemplated, investigation or audit by the IRS or any state agency
concerning any fiscal year or period ended prior to the date hereof. Except as
listed on Schedule 5.9, neither DII nor any of its Subsidiaries have executed
any extension or waivers of any statute of limitations on the assessment or
collection of any tax due that is currently in effect.
(b) As of the date hereof, DII and each of its Subsidiaries
have filed all Tax returns required to be filed at this date, taking into
account any extensions of the filing deadlines which have been validly granted
to any such entity, and such returns are true and correct in all Material
respects and properly reflect the Tax Liabilities of DII and each of its
Subsidiaries for the periods, property or events covered thereby, and each such
entity has paid all Taxes (including penalties and interest in respect thereof,
if any) that have become or are due with respect to any period through the date
hereof whether shown on such returns or not.
(c) Adequate provision has been made in the Financial
Statements in accordance with GAAP as of June 30, 1996, for all Tax Liabilities
not required to be paid prior to such date and for all current and deferred
Taxes.
(d) DII and each of its Subsidiaries, and each of their
respective predecessors to which any such entity has succeeded, has withheld or
collected from each payment made to each of their employees the amount of all
Taxes required to be withheld or collected therefrom and has paid the same to
the proper tax depositories or collecting authorities.
(e) All ad valorem property taxes for years prior to 1996
imposed on DII, or any of its Subsidiaries or their respective predecessors
have been paid in full or adequately reserved in the Financial Statements, as
appropriate.
(f) Neither DII nor any of its Subsidiaries, nor to the
knowledge of DII or its Subsidiaries, their respective predecessors to which
any such entity has succeeded, has ever made an election under Section 341(f)
of the Internal Revenue Code and no such entity is a United States real
property holding corporation as defined in Section 897 of the Internal Revenue
Code.
5.10 Real Property.
(a) None of DII or any of its Subsidiaries owns any real
property.
(b) True and correct copies of all real property leases of DII
and its Subsidiaries have been made available to PSS. Each of such leases is
in full force and effect on the date hereof, except as the validity of such
leases may be affected by actions, events or conditions involving only the
other party thereto, none of which actions, events or conditions have occurred
or exist to the knowledge of DII. No Default under any of the terms or
conditions set forth in any of the foregoing leases or any other documents or
instruments related thereto has occurred or been asserted by any party. Except
as disclosed on Schedule
<PAGE> 12
5.10, the continuation, validity and effectiveness of the terms and conditions
of such leases will not be affected in any way by the transactions contemplated
by this Agreement.
(c) No proceedings for the taking of any of such real property
by eminent domain by any governmental authority are pending or, to the
knowledge of DII or any of its Subsidiaries, threatened.
5.11 Personal Property.
(a) True and correct copies of all leases for personal
property (except miscellaneous leases of office machinery, medical equipment,
or any leases having future minimum lease payments of less than $10,000) used
or employed by DII or any of its Subsidiaries have been provided or made
available to PSS. Each of such leases is in full force and effect on the date
hereof, except as the validity of such leases may be affected by actions,
events or conditions affecting the other party thereto, none of which actions,
events or conditions exists of has occurred to the knowledge of DII. No
Default under any of the terms or conditions set forth in any of the foregoing
leases or any document or instrument related thereto has been asserted or, to
the knowledge of DII, occurred by any party. Except as disclosed on Schedule
5.11, the continuation, validity and effectiveness of such leases will not be
affected in any way by the transactions contemplated by this Agreement. Except
as disclosed on Schedule 5.11, neither DII nor any of its Subsidiaries lease
any personal property as lessor.
(b) All Material items of personal property and leasehold
improvements used in the business of DII are owned or leased by DII or any of
its Subsidiaries and are shown on or reflected in the unaudited consolidated
balance sheet of DII as of June 30, 1996, included in the Financial Statements,
are in satisfactory operating condition and in a state of reasonable
maintenance and repair, consistent with the uses to which they are being put.
5.12 Intellectual Property.
(a) Schedule 5.12 contains a true and complete list of all
Intellectual Property owned by, registered in the name of, or used by DII or
any of its Subsidiaries in their respective businesses on the date hereof, or
for which application has been made. All such Intellectual Property rights are
in full force and effect and constitute legal, valid and binding obligations of
the respective parties thereto; and there have not been, and to the knowledge
of DII and its Subsidiaries, there currently are not any Defaults thereunder by
any party. DII or one of its Subsidiaries owns or is a valid licensee of all
such Intellectual Property rights free and clear of all Liens or claims of
infringement. Neither DII nor any of its Subsidiaries or, to the knowledge of
DII and any of its Subsidiaries, their respective predecessors have misused the
Intellectual Property rights of others and none of the Intellectual Property
rights as used in the business conducted by any such entity infringes upon or
otherwise violates the rights of others, nor has any person asserted a claim of
such infringement. Neither DII nor any of its Subsidiaries is obligated to pay
any royalties to any person or entity with respect to any such Intellectual
Property. Each such entity owns or has the valid right to use all of the
Intellectual Property rights which it is presently using, or in connection with
the performance of any Material contract, proposal or letter of intent to which
it is a party.
(b) To the knowledge of DII, except as described on Schedule
5.12, no officer, director or employee of DII or any of its Subsidiaries has
entered into any Contract which requires such officer, director or employee to
assign any interest in any Intellectual Property or keep confidential any trade
secrets, proprietary data, patient lists or other business information or which
restricts or prohibits such officer, director or employee from engaging in
activities competitive with DII or its Subsidiaries.
<PAGE> 13
5.13 Accounts Receivable. The accounts receivable and receivables
from Affiliates of DII and its Subsidiaries as of June 30, 1996, as reflected
in the Financial Statements (net of reserves reflected in such Financial
Statements), to the extent uncollected on the date hereof, and the accounts
receivable and receivables from Affiliates reflected on the books of DII and
its Subsidiaries on the date hereof, are validly existing and represent monies
due for goods sold and delivered or services performed, and the value of such
accounts receivable as shown in the Financial Statements are, in the aggregate,
net of adequate reserves for doubtful and uncollectible accounts as determined
in accordance with GAAP. Except as set forth in Schedule 5.13, there are no
refunds, discounts or other adjustments payable with respect to any such
accounts receivable and receivables from Affiliates and there are no defenses,
rights of set-off, assignments, restrictions, encumbrances, or conditions
enforceable by third parties on or affecting any of the foregoing.
5.14 Inventories. All items of inventory of DII reflected on the
June 30, 1996 unaudited consolidated balance sheet contained in the Financial
Statements consisted, and all such items on hand on the date of this Agreement
consist of items of a quality and quantity usable and saleable in the ordinary
course of business and conform to generally accepted standards in the industry
in which DII is a part. The value of the inventories reflected on the June 30,
1996 unaudited consolidated balance sheet contained in the Financial Statements
were, in each instance, net of adequate reserves for damaged, excess, slow
moving, obsolete and unsaleable items as determined in accordance with GAAP.
Except as disclosed on Schedule 5.14, (i) purchase commitments are not
materially in excess of normal requirements, and none of such purchase
commitments are at prices in excess of the prevailing market prices at the time
of the purchase, and (ii) since June 30, 1996, no inventory items have been
sold or disposed of, except through sales in the ordinary course of business.
5.15 Insurance. All of the properties and business of DII and its
Subsidiaries of an insurable nature and of a character usually insured by
companies of similar size and in similar businesses are insured in such amounts
and against such losses, casualties or risks as is usual in such companies and
for such properties and business. A complete and accurate list of all
insurance policies held by DII or its Subsidiaries and now in force (including,
without limitation, property damage, public liability, worker's compensation,
fidelity bonds, errors and omissions, theft, forgery and other coverage) is
attached hereto as Schedule 5.15, and true and correct copies of all such
policies have been provided or made available to PSS. All such policies are in
full force and effect and the premiums due thereon have been timely paid.
Neither DII nor any of its Subsidiaries is now in Default regarding the
provisions of any such policy, nor have they failed to give any notice or
present any Material claim thereunder in due and timely fashion. The
consummation of the transactions contemplated by this Agreement will not
constitute a Default under, or otherwise affect the coverage under any such
insurance policies.
5.16 Compliance with Laws.
(a) Each of DII and its Subsidiaries has in effect all Permits
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on DII or its Subsidiaries, taken as a whole. Neither DII nor
any of its Subsidiaries is in violation of any Laws, Orders or Permits
applicable to its business or employees conducting its business, except for
violations which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect. No notice or warning from any Regulatory
Authority with respect to any failure or alleged failure of DII or any of its
Subsidiaries to comply with any Law has been issued or given, nor is any such
notice or warning proposed or threatened.
<PAGE> 14
(b) Except as set forth on Schedule 5.16, no consent or
approval of, prior filing with or notice to, or other action by, any Regulatory
Authority or any other third party is required in connection with the execution
and delivery of this Agreement or any assignment, agreement or other instrument
to be executed and delivered pursuant to this Agreement by DII or the
consummation by it of the transactions provided for herein or therein except
for such consents and approvals that have been obtained and filings, notices
and other actions that have been taken or made or which are otherwise provided
for in this Agreement.
(c) To the knowledge of DII and its Subsidiaries, there are no
Material capital expenditures that DII anticipates will be required to be made
in connection with the business of DII or any of its Subsidiaries as now
conducted in order to comply with any existing Laws or other governmental
requirements applicable to the business of DII as now conducted including,
without limitation, requirements relating to occupational health and safety and
protection of the environment. "Capital Expenditures" shall have the same
meaning as it has in the Financial Statements if and to the extent that the
treatment thereof is in accordance with GAAP.
(d) Neither DII or any of its Subsidiaries nor, to the
knowledge of DII, any officer, director, employee, agent or other
representative thereof acting or purporting to act on behalf of any such entity
or any business enterprise with which DII has been associated or affiliated,
has, directly or indirectly, made or authorized any payment, contribution or
gift of money, property, or services, in violation of applicable law (i) as a
kickback or bribe to any person, or (ii) to any political organization or the
holder of, or any aspirant to, any elective or appointive office of any nation,
state, political subdivision thereof, or other governmental body or
instrumentality.
5.17 Environmental Matters.
(a) Except as set forth on Schedule 5.17, there are no claims,
actions, suits, proceedings or investigations related to Environmental Matters
with respect to the ownership, use, condition or operation of any of the assets
held for use or sale by DII or any of its Subsidiaries or any of their
respective predecessors in any court or before or by any federal, state or
other governmental agency or private arbitration tribunal (hereinafter
collectively referred to as "Environmental Litigation"). Except as set forth on
Schedule 5.17, there are no existing Material violations of federal, state or
local Laws related to Environmental Matters by DII or any of its Subsidiaries
with respect to the ownership, use, condition, lease or operation of any assets
thereof or any property formerly held for use or sale by any of their
respective predecessors. Neither DII, its Subsidiaries, nor, to the knowledge
of DII and its Subsidiaries, any of its predecessors has used any assets or
premises thereof for the handling, treatment, storage, or disposal of any
Hazardous Substances except in compliance with all applicable environmental
Laws. Except as set forth on Schedule 5.17, no written or oral notice, or
other communication from any court or governmental agency, official or
instrumentality, of any alleged violation of any Law related to Environmental
Matters has been filed or communicated to management of any such entity with
respect to the use, ownership, condition, operation, or disposal of any of the
assets of DII or any of its Subsidiaries or any property formerly held for use
or sale by any such entity or, to the knowledge of DII or any of its
Subsidiaries, any of their respective predecessors. To the knowledge of DII,
no basis exists for the allegation of any such violations.
(b) Except as set forth on Schedule 5.17, no release,
discharge, spillage or disposal of any Hazardous Substances in violation of any
Law has occurred or is occurring at any assets or premises of DII or any of its
Subsidiaries or, to the knowledge of DII and its Subsidiaries, any of their
respective
<PAGE> 15
predecessors while or before such premises were owned leased, operated, or
managed, directly or indirectly, by any such entity.
(c) Except as set forth on Schedule 5.17, no soil or water in,
under or adjacent to any of the premises of DII or any of its Subsidiaries or
property formerly held for use or sale by any such entity or, to the knowledge
of DII and its Subsidiaries, their respective predecessors has been
contaminated by any Hazardous Substance while or before such assets or premises
were owned, leased, operated or managed, directly or indirectly, by DII or its
Subsidiaries, or any of their respective predecessors.
(d) Except as set forth on Schedule 5.17, all waste containing
any Hazardous Substances generated, used, handled, stored, treated or disposed
of (directly or indirectly) by DII or any of its Subsidiaries or, to the
knowledge of DII and its Subsidiaries, any of their respective predecessors has
been released or disposed of in compliance with all applicable reporting
requirements under CERCLA and RCRA and other applicable legal requirements.
(e) DII and each of its Subsidiaries and, to the knowledge of
DII and its Subsidiaries, their respective predecessors have complied with all
applicable reporting requirements under CERCLA and RCRA concerning the disposal
or release of Hazardous Substances, and except as set forth on Schedule 5.17,
no such entity has made a report concerning any of their premises, operations
or activities.
(f) Except as set forth on Schedule 5.17, to the knowledge of
DII and its Subsidiaries, no building or other improvement or any premises
owned, leased, operated or managed by DII or any of its Subsidiaries contains
any asbestos-containing materials.
(g) Copies of any environmental audits or environmental
surveys of any real estate owned or leased by DII, and in the possession of
DII, are attached to Schedule 5.17.
5.18 Litigation and Claims. There are no outstanding Court Orders
or administrative decisions to which DII or any of its Subsidiaries is subject,
and, except as disclosed on Schedule 5.18, there is no Litigation pending or,
to the knowledge of DII and its Subsidiaries, threatened against or relating to
DII or any of its Subsidiaries or their respective Assets or businesses, and to
the knowledge of DII and its Subsidiaries, there is no specific event which has
occurred for which any such action or any state of facts or occurrence of any
event which might give rise to the foregoing. Except as disclosed on Schedule
5.18, neither DII nor any of its Subsidiaries have been advised by any attorney
representing any such entity that there are any "loss contingencies" (as
defined in Statement of Financing Accounting Standards No. 5 issued by the
Financial Accounting Standards Board in March 1975 ("FASB 5")), which would be
required by FASB 5 to be disclosed or accrued in the consolidated financial
statements of DII.
5.19 Contracts and Commitments.
(a) Schedule 5.19 sets forth a true, correct and complete list
of Contracts to which DII or any of its Subsidiaries is a party or by which
their assets are bound, and which involve payment by or the receipt of payment
by DII or its Subsidiaries of any amounts in excess of $25,000, all of which
have been made available to PSS for review:
(i) any Contract for the employment of any officer,
director, employee or consultant;
(ii) any Contract for the purchase, sale, production
or supply, whether on a
<PAGE> 16
continuing basis or otherwise, of goods or services of any type except
those made in the ordinary course of business;
(iii) any distributor, sales agency or vendor Contract
or sub-contract or any License agreement, except those made in the
ordinary course of business;
(iv) any Contract not made in the ordinary course of
business;
(v) any continuing Contract for the purchase of
materials, supplies, equipment or services in excess of normal operating
requirements;
(vi) any Contracts that are, in the reasonable opinion
of DII, materially adverse, onerous or otherwise harmful to any of the
Company's businesses, properties, operations or assets;
(vii) any Contract pursuant to which such entity
receives a management fee or a billings and collections fee; or
(viii) any Contracts, leases, quotas, restrictions or
trade conditions upon which the business, rights or assets, or
condition, financial or otherwise, of DII depends or is or would be
Materially affected.
(b) Except as set forth on Schedule 5.19 or as to Contracts
that are cancelable at will or upon 30 days' notice or less, (i) each of the
Contracts described in this Section 5.19 is in full force and effect on the
date hereof, except as the validity of such Contracts may be affected by
actions, events or conditions involving only the other party thereto, none of
which actions, events or conditions have occurred or exist to the knowledge of
DII, (ii) no Default by DII or its Subsidiaries (or, to the knowledge of DII or
its Subsidiaries, by the other party thereto) under any of the terms or
conditions set forth in any of the Contracts to which DII or any of its
Subsidiaries is a party or any document or instrument related thereto has
occurred or been asserted by any party, and (iii) the continuation, validity
and effectiveness of such Contracts, and all other Material terms thereof, will
not be affected by the transactions contemplated by this Agreement.
(c) Except as set forth on Schedule 5.19, none or DII or any
of its Subsidiaries is a party to any covenant not to compete or other
agreement which restricts the ability of DII or its Subsidiaries or Affiliates
to engage in any business.
5.20 Powers of Attorney. Except as disclosed on Schedule 5.20,
neither DII nor any of its Subsidiaries have given or granted any power of
attorney, whether limited or general, to any Person that is continuing in
effect.
5.21 Benefit Plans.
(a) Schedule 5.21.1 lists (i) every pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plan, any other written or
unwritten employee program, arrangement, agreement or understanding, whether
arrived at through collective bargaining or otherwise; (ii) any medical,
vision, dental or other health plan, and any life insurance plan; or (iii) any
other employee benefit plan or fringe benefit plan, including, without
limitation, any "employee benefit plan," as that term is defined in Section
3(3) of ERISA, currently or expected to be adopted, maintained by, sponsored in
whole or in part by, or contributed to by DII or any
<PAGE> 17
of its Subsidiaries or any entity aggregated therewith under Internal Revenue
Code Sections 414(b) or 414(c) for the benefit of employees, former employees,
retirees, directors, independent contractors, spouses or dependents of any of
the foregoing or any other beneficiaries and under which such employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "Benefit Plans").
Any Benefit Plan that is an "employee pension benefit plan," as that t 3(2) of
ERISA, or an "employee welfare benefit plan" as that term is defined in Section
3(1) of ERISA, is referred to herein as an "ERISA Plan." On or after September
26, 1980, neither DII nor any of its Subsidiaries or any entity aggregated
therewith under Internal Revenue Code Section 414(b) or 414(c) have had an
"obligation to contribute" (as defined in ERISA Section 4212) to a
"multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and 3(37)(A))
("Multiemployer Plan"). Except as disclosed on Schedule 5.21, neither DII nor
any of its Subsidiaries have incurred, nor is reasonably expected to incur prior
to the Closing Date, any liability under Title I or Title IV of ERISA or under
Internal Revenue Code Section 412 other than funding obligations and claims for
benefits in accordance with ERISA. All Liabilities arising out of or related to
Benefit Plans and ERISA Plans of DII and of its ERISA Affiliates are reflected
in the Financial Statements in accordance with GAAP.
(b) True, correct and complete copies of all written Benefit
Plans, as currently in effect (or as otherwise requested by PSS), listed on
Schedule 5.21.1 and all trust agreements or other funding arrangements,
including insurance contracts, all amendments thereto and, where applicable,
with respect to any such plans or plan amendments, the most recent determination
letters issued by the IRS, all advisory opinions issued by the United States
Department of Labor after December 31, 1974, the annual reports or returns,
audited or unaudited financial statements, actuarial valuations, and summary
annual reports for the most recent three plan years, the most recent summary
plan descriptions and any Material modifications thereto have been made
available to PSS.
(c) Except as listed on Schedule 5.21.2, all of the Benefit
Plans and the related trusts subject to ERISA comply with and have been
administered in all Material respects in compliance with the provisions of
ERISA, all provisions of the Internal Revenue Code relating to qualification
and tax exemption under Internal Revenue Code Section 401(a) and 501(a) or
otherwise applicable to secure intended tax consequences, and all other
applicable laws, rules and regulations and collective bargaining agreements in
all Material respects. Except as listed on Schedule 5.21.2, all governmental
approvals for the Benefit Plans have been obtained, including, but not limited
to, timely determination letters on the qualification of the ERISA Plans and
tax exemption of related trusts, as applicable under the Internal Revenue Code,
and all such governmental approvals continue in full force and effect. Neither
DII, nor any of its Subsidiaries, nor any administrator or fiduciary of any
such Benefit Plan (or agent of any of the foregoing) has engaged in any
transaction or acted or failed to act in any manner which could subject any
such entity to any direct or indirect liability (by indemnity or otherwise) for
a breach of any fiduciary, co-fiduciary or other duty under ERISA. No oral or
written representation or communication with respect to any aspect of the
Benefit Plans has been made to employees of DII or any of its Subsidiaries or
any of their respective predecessors prior to or on the Closing Date that is
not in accordance with the written or otherwise preexisting terms and
provisions of such Benefit Plans in effect immediately prior to the Closing
Date. There are no unresolved claims or disputes under the terms of, or in
connection with, the Benefit Plans and no action, legal or otherwise, has been
commenced with respect to any claim other than processing of claims in the
ordinary course of business..
(d) All annual reports or returns, audited or unaudited
financial statements, actuarial valuations, summary annual reports and summary
plan descriptions issued with respect to the Benefit Plans are correct and
accurate in all Material respects.
<PAGE> 18
(e) Since December 31, 1974, no "party in interest" (as
defined in Section 3(14) of ERISA) or "disqualified person" (as defined in
Section 4975(e)(2) of the Internal Revenue Code) of any ERISA Plan has engaged
in any "prohibited transaction" (within the meaning of Section 4975(c) of the
Internal Revenue Code or Section 406 of ERISA).
(f) No Liability exists and no event that could result in a
Liability has occurred with respect to any Benefit Plan that individually or in
the aggregate could have a Material Adverse Effect on DII or any of its
Subsidiaries.
(g) Neither DII nor any of its Subsidiaries have maintained,
or currently maintain, a Benefit Plan providing welfare benefits (as defined in
ERISA Section 3(1)) to employees after retirement or other separation of
service except to the extent required under Part 6 of Title I of ERISA and
Internal Revenue Code Section 4980B(f).
(h) Except as set forth on Schedule 5.21.3, the consummation
of the transactions contemplated by this Agreement will not entitle any current
or former employee of DII, any of its Subsidiaries or any of their respective
predecessors whose employment is not terminated as a result of such
transactions, to severance pay, unemployment compensation or any similar
payment, and will not accelerate the time of payment or vesting, or increase
the amount, of compensation due any such employee or former employee.
(i) All Benefit Plans subject to Section 4980B of the Internal
Revenue Code or Part 6 of Title I of ERISA, or both, have been maintained in
compliance in all Material respects with the requirements of such laws and any
regulations (proposed or otherwise) issued thereunder.
5.22 Remuneration. Schedule 5.22 contains a complete and accurate
schedule of the direct compensation (including wages, salaries and actual or
anticipated bonuses), plus a description of other annual benefits not made
available to the other employees generally, to be paid in the current fiscal
year to (i) all of the officers and directors of DII; and (ii) all of the
employees of DII or any of its Subsid iaries who received or will be receiving
in excess of $50,000 during such year. No unpaid salary, other than for the
immediately preceding pay period and other than pursuant to the existing
deferred compensation plans of DII or any of its Subsidiaries is now payable to
any of such officers, directors or employees.
5.23 Union and Employment Agreements. Except as set forth on
Schedule 5.23, neither DII nor any of its Subsidiaries is a party to any union
agreement, nor does any such entity have any written or oral agreement that is
not terminable by it at will with any of its officers, directors, employees,
consultants, agents, or any other person performing services therefor, relating
to their employment by or performance of services for any such entity or their
compensation therefor. To the knowledge of DII and its Subsidiaries, no union
attempts to organize the employees of DII or any of its Subsidiaries have been
made, nor are any such attempts now threatened. Except as set forth on
Schedule 5.23, neither DII nor any of its Subsidiaries has received notice, or
has any reason to believe, that any of the officers or directors of any such
entity will terminate or contemplates terminating his or her employment
currently or at any time within sixty (60) days of the Closing Date.
5.24 Interested Transactions.
(a) Except as set forth on Schedule 5.24, neither DII nor any
of its Subsidiaries are currently a party to any Contract, loan or other
transaction with any of the following persons, or in which
<PAGE> 19
any of the following persons have any direct or indirect interest (other than as
a shareholder or employee of DII):
(i) Any director, officer or employee of DII or its
Subsidiaries or any of the shareholders of DII;
(ii) Any of the spouses, parents, siblings, children,
aunts, uncles, nieces, nephews, in-laws and grandparents of any of the
persons described in clause (i); or
(iii) Any corporation, trust, partnership or other
entity in which any of the persons described in clauses (i) or
(ii) has a beneficial interest (other than in a corporation whose
shares are publicly traded and in which such persons own beneficially
in the aggregate no more than 5% of the equity interest).
(b) Except as set forth on Schedule 5.24, none of the
shareholders of DII is an employee, consultant, partner, principal, director or
shareholder of any business entity which is engaged in a business which
competes with or is similar to the business of DII or any of its Subsidiaries.
5.25 Brokers and Finders. No broker, agent, finder or consultant or
other person has been retained by or on behalf of DII or is entitled to be paid
based upon any agreements or understandings made by DII in connection with the
transactions contemplated hereby. Neither PSS nor DII shall have any Liability
for any broker's fee, finder's fee, consultant's fee or similar third party
remuneration by reason of any action of DII.
5.26 Statements True and Correct. No statement, certificate,
instrument, or other writing furnished or to be furnished by DII to PSS
pursuant to this Agreement or any other document, agreement, or instrument
referred to herein contains or will contain any untrue statement of Material
fact or will omit to state a Material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
5.27 Accounting, Tax and Regulatory Matters. Neither DII nor any
Affiliate thereof has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the last sentence of such Section.
5.28 State Takeover Laws. DII has taken all necessary action to
exempt the transactions contemplated by this Agreement from any applicable
state takeover Law, including Section 607.0902 of the FBCA.
5.29 Schedules. All Schedules attached hereto are true, correct and
complete as of the date of this Agreement. Matters disclosed on any Schedule
shall be deemed disclosed for purposes of all other Schedules and Sections
herein, provided that such disclosure is responsive and complete with respect
to such other Schedules and Sections herein, unless expressly provided to the
contrary therein.
ARTICLE 6
<PAGE> 20
REPRESENTATIONS AND WARRANTIES OF PSS
PSS hereby represents and warrants to DII as follows:
6.1 Organization, Standing, and Power. Each of PSS and its
Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the Laws of the state of its incorporation, and has the power
and authority to carry on its business as it has been and is now being
conducted and to own, lease and operate its Assets. Each of PSS and its
Subsidiaries is duly qualified or licensed to transact business as a foreign
corporation and is in good standing in all jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on PSS or such Subsidiary.
6.2 Authorization of Agreement; No Breach. The execution, delivery
and performance of this Agreement has been duly authorized by all necessary
corporate action of PSS. This Agreement constitutes, and all agreements and
other instruments and documents to be executed and delivered by PSS pursuant to
this Agreement will constitute, legal, valid and binding obligations of PSS
enforceable against PSS in accordance with their respective terms. The
execution, delivery and performance of this Agreement and the agreements and
other documents and instruments to be executed and delivered by PSS pursuant to
this Agreement and the consummation of the transactions contemplated hereby and
thereby will not, subject to obtaining the consents identified herein, (i)
violate or result in a breach of or Default under the articles or certificate
Material instrument or agreement to which PSS or any of its Subsidiaries is a
party or is bound; (ii) to the knowledge of PSS and its Subsidiaries, violate
any Law, administrative decision or award of any court, arbitrator, mediator,
tribunal, administrative agency or governmental body applicable to or binding
upon PSS or its Subsidiaries or upon their respective securities, property or
business; (iii) conflict with or constitute a Default under any Material
Contract to which PSS or any of its Subsidiaries is a party or by which PSS or
any of its Subsidiaries is bound; or (iv) create a Lien upon the securities,
property or business of PSS or any of its Subsidiaries.
6.3 Capital Stock. The authorized capital stock of PSS consists of
(i) 60,000,000 shares of Common Stock, 36,449,085 of which shares are issued
and outstanding as of June 30, 1996, and none of which are issued and held as
treasury shares, and (ii) 1,000,000 shares of Preferred Stock, none of which
shares are issued and outstanding as of the date of this Agreement and none of
which are issued and held as treasury shares. All of such shares are duly and
validly issued and outstanding, and are fully paid and non-assessable and were
issued pursuant to an effective registration statement under the 1933 Act or
applicable state securities laws or pursuant to an exemption from registration
under the 1933 Act or applicable state securities laws. Except as set forth on
Schedule 6.3 and as contemplated by this Agreement, there are no outstanding
warrants, options, rights (including outstanding rights to demand registration
or to sell in connection with a registration by PSS under the Securities Act of
1933, as amended), calls or other commitments of any nature relating to the PSS
Common Stock or any other capital stock of PSS, and there are no outstanding
securities of PSS convertible into or exchangeable for shares of PSS Common
Stock or any other capital stock of PSS. PSS and its Subsidiaries have no
knowledge of any voting agreements or voting trusts between or among any Person
or Persons relating to PSS, the PSS Common Stock or any of its Subsidiaries (if
not wholly owned by PSS). Except as set forth on Schedule 6.3, PSS is not
obligated to issue or repurchase any shares of its capital stock for any
purpose, and no person or entity has entered into any Contract or option or any
right or privilege (whether preemptive or contractual) capable of becoming a
Contract or option for the purchase, subscription or issuance of any unissued
shares, or other securities of PSS.
<PAGE> 21
6.4 PSS Subsidiaries. Schedule 6.4 attached hereto is a true and
correct list of each Subsidiary of PSS. All of the outstanding shares of
capital stock of each such Subsidiary are duly and validly issued and
outstanding, are fully paid and non-assessable, and were issued pursuant to a
valid exemption from registration under the Securities Act of 1933, as amended,
and all applicable state securities laws, and, except as set forth on Schedule
6.4, are owned of record and beneficially by PSS, free and clear of any and all
Liens. No shares of capital stock of any Subsidiary are reserved for issuance
and there are no outstanding options, warrants, rights, subscriptions, claims
of any character, Contracts, obligations, convertible or exchangeable
securities or other commitments, contingent or otherwise, relating to the
capital stock of any Subsidiary, pursuant to which any Subsidiary is or may
become obligated to issue or exchange any share of capital stock. Neither PSS
nor any Subsidiary owns, directly or indirectly, any capital stock or other
equity or ownership or proprietary interest in any corporation, partnership, or
other entity, except as set forth on Schedule 6.4.
6.5 PSS Documents. PSS has heretofore furnished the following
documents to DII:
(a) its final Prospectus, dated November 13, 1995,
contained in its Registration Statement on Form S-3 (Registration No.
33-97524);
(b) its Annual Report on Form 10-K for the fiscal
years ended March 29, 1996 and March 30, 1995;
(c) its Proxy Statement dated June 6, 1996.
Documents (a) - (c) above are collectively referred to herein as the
"PSS Documents." As of their respective dates, the PSS Documents complied in
all Material respects with all applicable Laws. Since May 5, 1994, PSS has
filed all reports and statements, together with any amendments required to be
made with respect thereto, that it was required to file with the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q, Forms 8-K, and proxy
statements. The PSS Documents did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such PSS Document, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements (including, in each case, any related notes)
contained in the PSS Documents complied as to form in all material respects
with the applicable published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes to such financial statements or, in
the case of unaudited statements, as permitted by the published rules and
regulations of the SEC with respect thereto) and fairly presented the
consolidated financial position of PSS and its Subsidiaries, taken as a whole,
at the respective dates and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements do not include notes and are subject to normal year end adjustments
which will not, in the aggregate, be Material. There have been no changes in
PSS' accounting policies and practices between the dates of the PSS Documents
and the date hereof that have had or are likely to have a Material Adverse
Effect on the present or future financial performance of PSS, and no such
change is contemplated as of the date hereof.
6.6 Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 6.6, as of the date hereof neither PSS nor any of its Subsidiaries has
any Undisclosed Liabilities in excess of $300,000 in the aggregate, except for
unpaid liabilities and obligations incurred since March 29, 1996, in the
ordinary course of business and not involving Funded Debt.
<PAGE> 22
6.7 Absence of Certain Changes or Events. Since March 29, 1996,
except as disclosed on Schedule 6.7, (i) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PSS, and (ii) neither PSS or any
of its Subsidiaries has taken any action, or failed to take any action, prior
to the date of this Agreement, which action or failure, if taken after the date
of this Agreement, would represent or result in a Material breach or violation
of any of the covenants and agreements of PSS provided in Article 7 of this
Agreement.
6.8 Legal Proceedings. There are no outstanding Court Orders or
administrative decisions to which PSS or any of its Subsidiaries is subject,
and there is no Litigation pending or threatened against or relating to PSS or
any of its Subsidiaries or their respective assets or businesses, which if
resolved adversely to PSS would have a Material Adverse Effect on PSS and its
Subsidiaries, taken as a whole. Neither PSS nor any of its Subsidiaries have
been advised by any attorney representing any such entity that there are any
"loss contingencies" as defined in FASB 5, which would be required by FASB 5 to
be disclosed or accrued in the consolidated financial statements of PSS and
which are not so disclosed or accrued.
6.9 Brokers and Finders. No broker, agent, finder or consultant or
other person has been retained by or on behalf of PSS (other than legal or
accounting advisors), or is entitled to be paid based upon any agreements or
understandings made by PSS in connection with the transactions contemplated
hereby. Neither DII nor PSS shall have any Liability for any broker's fee,
finder's fee, consultant's fee or similar third party remuneration by reason of
any action of PSS.
6.10 Statements True and Correct. No statement, certificate,
instrument or other writing furnished or to be furnished by PSS or any
Affiliate thereof to DII pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of Material fact or will omit to state a Material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
6.11 Authority of Merger Corp. Merger Corp. is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Florida as a wholly owned Subsidiary of PSS. The authorized capital stock of
Merger Corp. consists of 1,000 shares of Merger Corp. Common Stock, all of
which is validly issued and outstanding, fully paid and nonassessable and is
owned by PSS free and clear of any Lien. Merger Corp. has the corporate power
and authority necessary to execute, deliver and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Merger Corp. This Agreement represents a legal, valid, and binding
obligation of Merger Corp., enforceable against Merger Corp. in accordance with
its terms.
6.12 Schedules. All Schedules attached hereto are true, correct and
complete as of the date of this Agreement. Matters disclosed on each Schedule
shall be deemed disclosed only for purposes of the matters to be disclosed on
such Schedule and shall not be deemed to be disclosed for any other purpose.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
<PAGE> 23
7.1 Conduct of DII Business. Except as set forth on Schedule 7.1,
prior to the Closing Date, except with the prior written consent of PSS, and
except as necessary to effect the transactions contemplated in this Agreement,
DII shall:
(a) conduct its business in substantially the same manner as
presently being conducted and refrain from entering into any transaction or
Contract other than in the ordinary course of business (or, even if in the
ordinary course of business, not in excess of $100,000), and not make any
Material change in its methods of management, marketing, accounting, or
operations;
(b) consult with PSS prior to undertaking any Material new
business opportunity outside the ordinary course of business and not undertake
such new business opportunity without the prior written consent of PSS, which
consent will not be unreasonably withheld;
(c) confer on a regular basis with one or more designated
representatives of PSS to report Material operational matters and to report the
(d) notify PSS of any unexpected Material change in the normal
course of business or in the operation of its properties, and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), adjudicatory proceedings or
submissions involving any Material property, and DII agrees to keep PSS fully
informed of such events and permit PSS's representatives prompt access to all
materials prepared in connection therewith;
(e) Except as set forth on Schedule 7.1, not enter into any
new employment Contract or, except in the ordinary course of business, any
commitment to employees (including any commitment to pay retirement or other
benefits);
(f) not increase the compensation (including fringe benefits)
payable or to become payable to any officer, director, employee, agent or
independent contractor of either such company, except general hourly rate
increases and normal merit increases for employees other than officers made in
the ordinary course of business and consistent with past practice;
(g) except in the ordinary course of business, not (i) create
or incur any indebtedness, (ii) enter into (other than renewals of) or
terminate any lease of real estate, or (iii) release or create any Liens of any
nature whatsoever;
(h) except in the ordinary course of business and, even if in
the ordinary course of business, then not in an amount to exceed $100,000 in
the aggregate, make or commit to make any capital expenditure, or enter into
any lease of capital equipment as lessee or lessor;
(i) not sell any Material asset or make any Material
commitment relating to its assets other than in the ordinary course of
business;
(j) not amend the Articles of Incorporation, Bylaws or other
governing instruments of DII or any of its Subsidiaries, or
(k) not make any changes in its accounting methods or
practices, except for changes in its tax accounting methods or practices that
may be necessitated by changes in applicable tax laws;
<PAGE> 24
(l) except for this Agreement, or pursuant to the exercise of
stock options outstanding as of the date hereof in accordance with their
current terms, issue, sell, pledge, encumber, authorize the issuance of, enter
into any Contract to issue, sell, pledge, encumber, or authorize the issuance
of, or otherwise permit to become outstanding, any additional shares of DII
Capital Stock or any other capital stock of its Subsidiaries, or any stock
appreciation rights, or any option, warrant, conversion, or other right to
acquire any such stock, or any security convertible into any such stock, or pay
or declare or agree to pay or declare any dividend with respect to any DII
Capital Stock;
(m) other than in the ordinary course of business, not take
any action, or omit to take any action, which would cause the representations
and warranties contained in Article Five to be untrue or incorrect;
(n) not make any loan to any Person or increase the aggregate
amount of any loan currently outstanding to any Person, except for usual and
customary advances to employees made in the ordinary course of business; and
(o) not make any agreement or commitment which will result in
or cause to occur a violation of any of the items contained in paragraphs (a)
through (n).
Notwithstanding the foregoing, DII shall be entitled, without the consent of
PSS, to take such action as DII deems prudent with respect to the operations of
DII and its Subsidiaries.
7.2 Conduct of PSS Business. PSS agrees that from the date hereof
to the Effective Time, except to the extent that DII shall otherwise consent by
an instrument in writing signed on behalf of DII by its President:
(a) Operation of Business. It will operate its business
substantially as presently operated and only in the ordinary course, except
that any business acquisition by PSS or the incurrence of additional debt or
the issuance or sale of equity securities shall be deemed to be in the ordinary
course.
(b) No Amendments; Corporate Existence. Except as previously
disclosed in writing by PSS to DII, it will not, and it will not permit Merger
Corp. to, amend its Articles of Incorporation or By-Laws; and it will maintain
its corporate existence and corporate powers.
7.3 Adverse Changes in Condition. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries which (i) is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on it, or (ii) would cause or
constitute a Material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.4 Reports. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
Material). As of their respective dates, such reports filed with the SEC
<PAGE> 25
will comply in all Material respects with the securities Laws and will not
contain any untrue statement of a Material fact or omit to state a Material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Audit by Arthur Andersen LLP. As soon as practicable after the
date of this Agreement, PSS shall cause Arthur Andersen LLP to conduct an audit
prepared in accordance with GAAP of DII's consolidated statement of income for
the six months ended June 30, 1996 and consolidated balance sheet as of June
30, 1996. As soon as practicable after the date of this Agreement, DII shall
cause Arthur Andersen LLP to conduct an audit prepared in accordance with GAAP
pro forma combined statements of income for each of the years in the three-year
period ending December 31, 1995 and pro forma combined balance sheets for DII
as of December 31, 1993, 1994 and 1995. DII shall make available to Arthur
Andersen all financial records and personnel requested in connection with such
audit. The audits shall be for the purpose of meeting the financial reporting
requirements of the Securities Act of 1933, as amended, and determining the
Book Value Adjustment, if any, and the specific escrow items and amounts as
provided in Section 2.3 of the Escrow Agreement, the form of which is attached
hereto as Exhibit 4.3. The Parties shall use their best efforts to identify,
determine and agree upon the specific escrow items and amounts in accordance
with the audits. The expenses for the audits pursuant to this Section 8.1
shall be paid for as provided in Section 11.2 hereof.
8.2 Applications; Antitrust Notification. PSS shall promptly
prepare and file, and DII shall cooperate in the preparation and, where
appropriate, filing of, applications with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by
this Agreement. Each of the Parties will promptly file with the United States
Federal Trade Commission and the United States Department of Justice the
notification and report form required for the transactions contemplated hereby
and any supplemental or additional information which may reasonably be
requested in connection therewith pursuant to the HSR Act and will comply in
all Material respects with the requirements of the HSR Act.
8.3 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, DII and Merger Corp. shall execute and file the
Articles of Merger with the Secretary of State of the State of Florida in
connection with the Closing.
8.4 Agreement as to Efforts to Consummate. Subject to the terms
and conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions contemplated by
this Agreement, including using its reasonable best efforts to lift or rescind
any Order adversely affecting its legal ability to consummate the transactions
contemplated herein and to cause to be satisfied the conditions referred to in
Article 9 of this Agreement; provided, that nothing herein shall preclude
either Party from exercising its rights under this Agreement. Each Party shall
use, and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
<PAGE> 26
8.5 Investigation and Confidentiality.
(a) Prior to the Effective Time, each party shall keep the
other party advised of all Material developments relevant to its business and
to consummation of the Merger. DII shall provide PSS open and exclusive access
to DII, its records and employees in order for PSS to make or cause to be made
such investigation of the business and properties of DII and its Subsidiaries
and of its financial and legal condition as PSS reasonably requests, provided
that such investigation shall not interfere unnecessarily with normal
operations. No investigation by a Party shall affect the representations and
warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents
to, maintain the confidentiality of all confidential information not otherwise
in the public domain furnished to it by the other Party concerning its and its
Subsidiaries' businesses, operations, customers and financial positions and
shall not use such information for any purpose except in furtherance of the
transactions contemplated by this Agreement. If this Agreement is terminated
prior to the Effective Time, each Party shall promptly return or certify the
destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon
as practicable after any determination by it of any fact or occurrence relating
to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent,
either a Material breach of any representation, warranty, covenant or agreement
of the other Party or which has had or is reasonably likely to have a Material
Adverse Effect on the other Party.
8.6 Press Releases. Prior to the Effective Time, DII and PSS shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.6
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.7 No Shopping. Until the termination of this Agreement pursuant
to Article XI, except with respect to this Agreement and the transactions
contemplated hereby, neither DII nor any of its Subsidiaries or Affiliates, nor
any Representatives thereof shall directly or indirectly solicit or respond to
any Acquisition Proposal by any Person. None of DII or any Affiliate or
Representative thereof shall furnish any non-public information, negotiate with
respect to, or enter into any Contract with respect to, any Acquisition
Proposal. DII shall promptly notify PSS orally and in writing in the event that
it receives any inquiry or proposal relating to any such transaction. DII
shall (i) immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Persons conducted heretofore with respect
to any of the foregoing, and (ii) direct and use its reasonable best efforts to
cause all of its Representatives not to engage in any of the foregoing.
8.8 Accounting and Tax Treatment. Each of the Parties undertakes
and agrees to use its best efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for pooling-of-interests
accounting treatment and treatment as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
8.9 Investment Agreement. DII shall use its reasonable best
efforts to cause each shareholder of DII to deliver to PSS not later than 10
days prior to the Effective Time, a written agreement, substantially in the
form of Exhibit 8.9, providing that such Person will not sell, pledge,
transfer, or
<PAGE> 27
otherwise dispose of the shares of DII Common Stock held by such Person except
as contemplated by such agreement or by this Agreement and will not sell,
pledge, transfer, or otherwise dispose of the shares of PSS Common Stock to be
received by such Person upon consummation of the Merger except in compliance
with applicable provisions of the 1933 Act and the rules and regulations
thereunder and until such time as financial results covering at least 30 days of
combined operations of PSS and DII have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies. If
the Merger will qualify for pooling-of-interests accounting treatment, shares of
PSS Common Stock issued to such affiliates of DII in exchange for shares of DII
Common Stock shall not be transferable until such time as financial results
covering at least 30 days of combined operations of PSS and DII have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, regardless of whether each such person has
provided the written agreement referred to in this Section 8.9 (and PSS shall be
entitled to place restrictive legends upon certificates for shares of PSS Common
Stock issued to affiliates of DII pursuant to this Agreement to enforce the
provisions of this Section 8.9).
8.10 Conditional Releases. Simultaneously with the execution and
delivery of this Agreement, each officer and director of DII has executed and
delivered a Conditional Release, in the form of Exhibit 8.10 to this Agreement,
to be effective only if the Effective Time occurs.
8.11 Registration Rights. (a) After (i) February 15, 1997 if the
Closing Date occurs prior to December 1, 1996 or (ii) May 15, 1997 if the
Closing Date occurs on or after December 1, 1996, PSS shall, upon the written
demand of shareholders of DII holding an aggregate of at least fifty (50)
percent of DII Common Stock prior to Closing ("Registration Affiliate"), use its
best efforts to effect the registration (the "Demand Registration") under the
1933 Act of such number of Shares held by such Registration Affiliate as shall
be indicated in a written demand sent to PSS; provided, that (a) PSS shall only
be obligated to effect one Demand Registration, (b) PSS shall not be required to
register in the Demand Registration an amount of PSS Common Stock which is less
than $1,000,000 in market value. Upon receipt of the Registration Affiliate's
written demand, PSS shall expeditiously effect the registration under the 1933
Act of the shares of PSS Common Stock as to which registration was demanded and
use its best efforts to have such registration declared effective as soon as
practicable after the filing thereof; provided, that PSS shall not be required
to file any registration statement during any period of time (not to exceed an
aggregate of ninety days) when (a) PSS is contemplating a public offering of its
securities and, in the judgment of the managing underwriter thereof (or PSS, if
such offering is not underwritten) such filing would have a material adverse
effect on the contemplated offering; (b) PSS is in possession of material
information that it deems advisable not to disclose in a registration statement;
or (c) PSS is engaged in a program for the repurchase of shares of PSS Common
Stock.
(b) If PSS proposes to register any of its securities under the 1933 Act
for sale for cash (otherwise than in connection with registration of securities
issuable pursuant to an employee stock option, stock purchase or similar plan or
pursuant to a merger, exchange offer or a transaction of the type specified in
Rule 145(a) under the Securities Act), PSS shall give the Registration
Affiliates notice of such proposed registration at least 20 days prior to the
filing of a registration statement. At the written request of a Registration
Affiliate delivered to PSS within 15 days after the receipt of the notice from
PSS, which request shall state the number of shares of PSS Common Stock that the
Registration Affiliate wishes to sell or distribute publicly under the
registration statement proposed to be filed by PSS, PSS shall use its best
efforts to effect the registration ("Piggyback Registration") under the 1933 Act
of such shares, and to cause such registration to remain effective for a
reasonable period of time not to exceed 45 days or such longer period of time
acceptable to PSS; provided that PSS may, without the consent of the
Registration Affiliate, withdraw such registration statement prior to its
becoming effective if PSS has abandoned its proposal to register its securities.
If the managing underwriters thereof advise PSS in writing that in their opinion
the
<PAGE> 28
number of securities requested to be included in the registration exceeds
the number which can be sold in the offering, PSS shall include in the
registration the shares the Registration Affiliate proposes to sell and the
securities PSS proposes to sell in proportion to the number of shares each
proposes to sell.
(c) Nothwithstanding anything to the contrary herein, the Registration
shall have no rights to a Demand Registration or Piggyback Registration after
two (2) years after the Effective Time
(d) In the event of any registration of any shares of PSS Common Stock
held by Registration Affiliates under the 1933 Act, PSS shall, and hereby does,
indemnify and hold harmless in the case of any Demand or Piggyback Registration,
the Registration Affiliates, their directors and officers and each other Person,
if any, who controls such seller within the meaning of Section 15 of the 1933
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Registration Affiliates or any such director or officer or controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such shares were registered under the
1933 Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances in
which they were made not misleading, and PSS shall reimburse the Registration
Affiliates, and each such director, officer and controlling person, for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided that PSS shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to PSS through an instrument duly executed by
or on behalf of such Registration Affiliate, specifically stating that it is for
use in the preparation thereof. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of PSS, or any such
director, officer or controlling person and shall survive the transfer of such
shares by the Registration Affiliate.
(e) PSS may require, as a condition to including any shares of PSS
Common Stock to be offered by a Registration Affiliate in any registration
statement filed pursuant to this Section 8.11, that PSS shall have received an
undertaking reasonably satisfactory to it from such Registration Affiliate, to
indemnify and hold harmless in the case of any Demand or Piggyback Registration,
PSS, its directors and officers and each other Person, if any, who controls PSS
within the meaning of Section 15 of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which PSS or any such director or
officer or controlling person may become subject under the Securities Act or
state securities laws, insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
in or omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contain therein,
or any amendment or supplement thereto, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information about such Registration Affiliate as a shareholder of PSS
furnished to PSS through an instrument duly executed by such Registration
Affiliate specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect, regardless of any
<PAGE> 29
investigation made by or on behalf of PSS or any such director, officer or
controlling person and shall survive the transfer by any Registration Affiliate
of such shares.
(f) Promptly after receipt by an undemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in
Section 8.11(d) or (e), such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under Section 8.11(d) or (e), except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist or the indemnified
party may have defenses not available to the indemnifying party in respect of
such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No party shall be
liable for any settlement of any action or proceeding effected without its
consent. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.
(g) The indemnification required by Section 8.11(d) and (e) shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills not contested in good faith are
received or expense, loss, damage or liability is actually incurred.
(h) In the event that any shares of PSS Common Stock held by a
Registration Affiliate are to be registered pursuant to this Section 8.11, PSS
covenants and agrees that it shall use its best efforts to effect the
registration and cooperate in the sale of such shares to be registered and
shall, subject to PSS's rights to delay or withdraw certain registrations, as
expeditiously as reasonably possible:
(i) prepare and file with the SEC a registration statement on the
shortest form registration statement for which PSS then qualifies
(including registration statements on Form S-3 or Form S-2) with
respect to the shares (as well as any necessary amendments or
supplements thereto) and use its best efforts to cause the registration
statement to become effective and, upon the request of the Registration
Affiliates, keep such registration statement effective for a reasonable
period of time as requested by the Registration Affiliates not to
exceed 60 days;
(ii) notify the Registration Affiliates, promptly after PSS shall
receive notice thereof, of the time when the registration statement
becomes effective;
(iii) advise the Registration Affiliates after PSS shall receive
notice or otherwise obtain knowledge of the issuance of any order by the
SEC suspending the effectiveness of the registration statement or
amendment thereto or of the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal promptly if a
stop order should be issued;
(iv) furnish to the Registration Affiliates such number of copies
of the registration statement, each amendment and supplement thereto,
the prospectus included in the registration
<PAGE> 30
statement (including each preliminary prospectus) and such other
documents as the Registration Affiliates may reasonably request in
order to facilitate the disposition of the shares of PSS Common Stock
owned by the Registration Affiliates;
(v) enter into such customary agreements (including an underwriting
agreement in customary form, including appropriate mutual
indemnification provisions) and take all such other action, if any, as
the Registration Affiliates or the underwriters shall reasonably
request in order to expedite or facilitate the disposition of such
shares;
(vi) use its best efforts to register or qualify the shares of PSS
Common Stock under the securities or blue sky laws of such jurisdiction
as the Registration Affiliate may reasonably request; and
(vii) notify the Registration Affiliates, at any time when a
prospectus relating thereto is required to be delivered under the 1933
Act, of the occurrence of any event as a result of which the
Registration Statement would contain an untrue statement of material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, at which
time any sales pursuant to such Registration Statement shall cease,
and, as soon as practicable after PSS reasonably deems, if appropriate,
to disclose such information in a registration statement, prepare a
supplement or amendment to the Registration Statement so that such
Registration Statement shall not, to PSS' knowledge, contain an untrue
statement of material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(i) PSS shall pay one-half and the Registration Affiliates shall pay
one-half of all expenses (which shall be shared with other persons whose shares
are being registered in the Registration Statement) in connection with any
Demand Registration and PSS shall pay all expenses in connection with any
Piggyback Registration, which expenses include without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, and the reasonable fees and disbursements of
counsel for PSS and of its independent accountants. Notwithstanding the
foregoing, in any registration, each party shall pay for its own underwriting
discounts and commissions and transfer taxes.
(j) The Registration Affiliates may not assign their rights under this
Section 8.11 to anyone without the prior written consent of PSS, and any
attempted transfer in violation of this Section 8.11(j) shall be null and void.
8.12 Conditions to Closing. DII and PSS agree to use their
commercially reasonable efforts to satisfy the closing conditions set forth in
Article 9 of this Agreement by October 31, 1996, and if not by such time, as
soon thereafter as possible.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.6 of this Agreement:
<PAGE> 31
(a) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent so obtained which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
which in the reasonable judgment of the Board of Directors of PSS would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger.
(b) Consents and Approvals. Except as set forth on Schedule
9.1, each Party shall have obtained any and all Consents required for
consummation of the Merger or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
such Party. Except as set forth on Schedule 9.1, no Consent so obtained which
is necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner which in the reasonable judgment of the
Board of Directors of PSS would so materially adversely impact the economic or
business benefits of the transactions contemplated by this Agreement so as to
render inadvisable the consummation of the Merger.
(c) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
9.2 Conditions to Obligations of PSS. The obligations of PSS to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by PSS pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. The representations and
warranties of DII set forth or referred to in this Agreement shall be true and
correct in all Material respects (except that those representations and
warranties which are qualified as to materiality shall be true and correct in
all respects) as of the date of this Agreement and as of the Effective Time with
the same effect as though all such representations and warranties had been made
on and as of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such date).
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of DII to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. DII shall have delivered to PSS (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.2(a) and 9.2(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by DII's Board of Directors and shareholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as PSS and its counsel shall
request.
(d) Investment Agreements. PSS shall have received from each
shareholder of DII the investment letter referred to in Section 8.9 of this
Agreement, to the extent necessary to assure in the
<PAGE> 32
reasonable judgment of PSS that the transactions contemplated hereby will
qualify for pooling-of-interests accounting treatment.
(e) Pooling Letters. PSS shall have received a letter, dated
as of the Effective Time, in form and substance reasonably acceptable to PSS,
from Arthur Andersen to the effect that the Merger will qualify for
pooling-of-interests accounting treatment. PSS and Arthur Andersen also shall
have received a letter, dated as of the date hereof and as of the Effective
Time, in form and substance reasonably acceptable to such Party, from McGladrey
& Pullen LLP to the effect that DII and its Subsidiaries qualify for
pooling-of-interests accounting treatment.
(f) Employment and Noncompetition Agreements. Those persons
listed on Schedule 9.2(f) shall have entered into employment and noncompetition
agreements with PSS, in substantially the form of Exhibit 9.2(f) hereto.
(g) Noncompetition Agreements. Roddy G. Richman, William F.
Bronson, Glen E. Green and Harvey A. Shores shall have entered into
noncompetition agreements in substantially the form of Exhibits 9.2(g)(i)-(iv)
respectively. All other shareholders of DII shall have entered into
noncompetition agreements in substantially the form of Exhibit 9.2(g)(v)
hereto.
(h) Retention of Sales Force. At the Effective Time, DII
shall have retained at least 22 full-time sales persons and 70 full-time
service technicians.
(i) Delivery of Documents. DII shall have delivered all of
its books and records to PSS including, but not limited to, (i) all corporate
and other records of DII and each Subsidiary and their respective predecessors,
including the minute books, stock books, stock transfer registers, books of
account, leases and Contracts, deeds and title documents, and Financial
Statements; and (ii) such other documents or certificates as shall be
reasonably requested by PSS.
(j) Resignation of DII Directors. On or prior to the Closing
Date, DII shall have delivered to PSS evidence satisfactory to PSS of the
resignation of the directors of DII effective as of the Closing Date.
(k) Statements for Services Rendered. DII shall have received
final statements for all legal, accounting and advisory fees for which it is
responsible for payment in connection with the transactions contemplated by
this Agreement, together with an acknowledgment by each such legal counsel,
accountant or advisor that such statement represents its final bill for all
services rendered to DII in connection with the transactions contemplated by
this Agreement.
(l) No Material Adverse Change. There shall not have been any
Material adverse change in the business, assets, Liabilities, financial
condition, or results of operations of DII and its Subsidiaries, taken as a
whole, between June 30, 1996 and the Closing Date, and DII shall have delivered
to PSS a certificate, dated as of the Closing Date, signed by its chief
executive officer and chief financial officer certifying to such effect.
(m) Consent of Lender. PSS shall have received from
NationsBank, as agent bank, under PSS' senior credit facility its written
consent to the consummation of the Merger and the other transactions
contemplated by this Agreement.
<PAGE> 33
(n) Escrow Agreement. The Escrow Agreement shall have been
executed and delivered by DII and a national bank as the Escrow Agent in
substantially the form of Exhibit 4.3 hereto, with the specific escrow items
included in form and substance satisfactory to PSS.
(o) Release of Liens by First Union National Bank. DII shall
have received and delivered to PSS a payoff letter from First Union National
Bank indicating the amount required for the loan to be paid in full at Closing
and acknowledging the release of all liens on the assets of DII upon payment in
full of such amount.
(p) Opinion of Counsel. PSS shall have received an opinion
from Smith Hulsey & Busey, counsel for DII, dated as of the Effective Time, as
to the matters set forth in Exhibit 9.2(p).
(q) Termination of Employment Agreements. The existing
employment agreements between DII and Rutherford C. Deas and Thomas A. Bronson,
shall have been terminated.
(r) Termination of DII Stock Plan. The DII Stock Plan and all
rights under the DII Stock Plan shall have been terminated by DII and each
participant in the DII Stock Plan prior to the Effective Time.
(s) Termination of Rights under Reorganization Agreement. All
rights under Section 2.6 of the Reorganization Agreement, to the extent
determinable, shall have been converted into shares of DII Common Stock prior
to the Effective Time and shall be reflected in the Fully Diluted Common
Equivalents. Any remaining rights under Section 2.6 of the Reorganization
Agreement or otherwise shall have been terminated by DII and each shareholder
of DII prior to the Effective Time.
9.3 Conditions to Obligations of DII. The obligations of DII to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by DII pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. The representations and
warranties of PSS set forth or referred to in this Agreement shall be true and
correct in all Material respects (except that those representations and
warranties which are qualified as to materiality shall be true and correct in
all respects) as of the date of this Agreement and as of the Effective Time
with the same effect as though all such representations and warranties had been
made on and as of the Effective Time (provided that representations and
warranties which are confined to a specified date shall speak only as of such
date, other than Section 6.3, which shall be updated as of the date most
reasonably practicable nearest the Closing Date).
(b) Performance of Agreements and Covenants. Each and all of
the agreements and covenants of PSS to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with.
(c) Certificates. PSS shall have delivered to DII (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.3(a) and 9.3(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by PSS's Board of Directors and Merger Corp.'s Board of Directors and
sole shareholder evidencing the taking of all corporate action necessary to
consummation of the transactions contemplated hereby, all in such reasonable
detail as DII and its counsel shall request.
<PAGE> 34
(d) No Material Adverse Change. There shall not have been any
Material adverse change in the business, assets, Liabilities, financial
condition, or results of op erations of PSS and its Subsidiaries, taken as a
whole, between June 30, 1996 and the Closing Date, and PSS shall have delivered
to DII a certificate, dated as of the Closing Date, signed by its chief
executive officer and chief financial officer certifying to such effect.
(e) Escrow Agreement. The Escrow Agreement shall have been
executed and delivered by PSS and a national bank as the Escrow Agent in
substantially the form of Exhibit 4.3 hereto, with the specific escrow items
included in form and substance satisfactory to DII.
(f) Employment and Noncompetition Agreements. PSS shall have
entered into employment and noncompetition agreements with those persons listed
on Schedule 9.2(f), in substantially the form of Exhibit 9.2(f) hereto.
(g) Noncompetition Agreements. Roddy G. Richman, William F.
Bronson, Glen E. Green and Harvey A. Shores shall have entered into
noncompetition agreements in substantially the form of Exhibits 9.2(g)(i)-(iv)
respectively. All other shareholders of DII shall have entered into
noncompetition agreements in substantially the form of Exhibit 9.2(g)(v)
hereto.
(h) Shareholder Approval. At least sixty percent (60%) of the
shareholders of DII shall have approved the Merger and less than 10% of the
shareholders of DII shall have exercised dissenters' rights in connection with
the Merger.
(i) Payoff of Loans to First Union National Bank. At the
Closing, PSS shall have paid by wire transfer the balance of the outstanding
principal incurred in the operation of the business and interest accrued
through the date of Closing (other than any interest owed by reason of any
default under the loan documents), owed by DII to First Union National Bank.
(j) Opinion of Counsel. DII shall have received an opinion
from Fred Elefant, P.A., General Counsel of PSS, dated as of the Effective
Time, as to the matters set forth in Exhibit 9.3(j).
ARTICLE 10
TERMINATION
10.1 Termination. Notwithstanding any other provision of this
Agreement, this Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of PSS and the
Board of Directors of DII; or
(b) By the Board of Directors of either Party (provided that
the terminating Party is not then in Material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching Party of such breach
and which breach is reasonably likely, in the reasonable opinion of the
non-breaching Party, to have, individually or in the aggregate, a Material
Adverse Effect on the breaching Party; or
<PAGE> 35
(c) By the Board of Directors of either Party (provided that
the terminating Party is not then in Material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a Material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching Party of such breach;
or
(d) By the Board of Directors of either Party (provided that
the terminating Party is not then in Material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal; or
(e) By the Board of Directors of either Party in the event
that the Merger shall not have been consummated by October 31, 1996, if the
failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By the Board of Directors of either Party in the event
that the Merger shall not have been consummated by November 30, 1996;
(g) By the Board of Directors of either Party (provided that
the terminating Party is not then in Material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date specified in
Section 10.1(e) of this Agreement; or
(h) By the Board of Directors of either Party if the if the
Base Period Trading Price is less than $21.00 or greater than $14.00 (in each
case, calculated without regard to the Base Period Trading Price Limitations);
(i) By the Board of Directors of DII in the event that the
Book Value Adjustment, as determined in accordance with Section 3.1(c), is
greater than $2,000,000;
(j) By the Board of Directors of PSS or DII in the event that
the Specific Escrow items are in excess of ten percent (10%) of the Aggregate
Purchase Price;
(k) By the Board of Directors of PSS in the event that at
least sixty percent (60%) of the shareholders of DII do not approve the terms
of the Merger or in the event than 10% or more of the shareholders of DII shall
have exercised dissenters' rights in connection with the Merger.; or
(l) By the Board of Directors of PSS in the event that Arthur
Andersen LLP determines that any of the DII financial statements to be audited
as set forth in Section 8.1 is unauditable and that it will be unable to
deliver an audit letter with respect to any of such financial statements.
10.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Section 8.5(b) of this Agreement shall survive any
such termination and abandonment, and (ii) a termination pursuant to Sections
10.1(b), 10.1(c) or 10.1(f) of this
<PAGE> 36
Agreement shall not relieve a breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
10.3 Non-Survival of Representations and Covenants. The respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except Articles 2, 3, 4 and 11 and
Sections 8.8, 8.12, 10.2 and 10.3 this Agreement, and except with respect to
the indemnification obligations in the Escrow Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.
(a) Except as otherwise provided herein, the capitalized terms
set forth below shall have the following meanings:
"Acquisition Proposal" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of all
of the stock or assets of, or other business combination involving such Party
or any of its Subsidiaries or the acquisition of a substantial equity interest
in, or a substantial portion of the assets of, such Party or any of its
Subsidiaries.
"Affiliate" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any officer,
director, partner, employer, or direct or indirect beneficial owner of any 10%
or greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"Agreement" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"Articles of Merger" shall mean the Articles of Merger to be
executed by Merger Corp. and DII and filed with the Secretary of State of the
State of Florida relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"Closing Date" shall mean the date on which the Closing occurs.
"Common Stock Per Share Purchase Price" shall mean the quotient
obtained by dividing (i) the Aggregate Purchase Price minus the Escrow Dollar
Amount by (ii) the Fully Diluted Common Equivalents.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant to
any Contract, Law, Order, or Permit.
<PAGE> 37
"Contract" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of or default
under any Contract, Order or Permit, (ii) any occurrence of any event that with
the passage of time or the giving of notice or both would constitute a breach
or violation of or default under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"DII Common Stock" shall mean the Class A Common Stock, $.01
par value per share, and all series of the Class B Common Stock, $.01 par value
per share, of DII.
"DII Executives" shall mean all present and former officers and
directors of DII or any constituent corporation absorbed into DII pursuant to
merger or consolidation.
"DII Stock Plan" shall mean the Diagnostic Imaging, Inc.
Employee Cash and Stock Bonus Plan.
"Environmental Laws" shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and which are
administered, interpreted or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases or threatened releases of any
Hazardous Substance, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
Hazardous Substance.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall have the meaning provided in Section
5.14 of this Agreement.
"Escrow Agreement" shall mean the Escrow Agreement attached to
this Agreement as Exhibit 4.3.
"Escrow Dollar Amount" shall mean the aggregate dollar amount of
the specific indemnity items as provided in Section 2.3 of the Escrow Agreement
plus five percent (5%) of the Aggregate Purchase Price.
"Escrow Shares" shall mean the shares of PSS Common Stock
issued pursuant to Section 4.3 hereof.
<PAGE> 38
"Exhibits" shall mean the Exhibits so marked, copies of which
are attached to this Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof, and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto.
"FBCA" shall mean the Florida Business Corporation Act.
"Fully Diluted Common Equivalents" shall mean the sum of (i)
all issued and outstanding shares of DII Common Stock, and (ii) all shares of
DII Common Stock issuable upon the exercise of all outstanding DII options and
the conversion of all other convertible securities of DII and the issuance of
all DII Common Stock issuable pursuant to any other rights or commitments of
any nature.
"Funded Debt" shall mean any outstanding indebtedness
(including leases required to be capitalized under GAAP) of such party or its
Subsidiaries, except Funded Debt between such parties, representing borrowing,
but excluding trade payables.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"Hazardous Material" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of Regulatory Authorities and any
polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added by
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean the copyrights, patents,
trademarks, service marks, service names, tradenames, applications therefor,
technology rights and licenses.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Law" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or statute applicable to a Person or
its Assets, Liabilities or business, including those promulgated, interpreted
or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of notes,
bills, checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current
<PAGE> 39
property Taxes not yet due and payable and (ii) Liens which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on a
Party.
"Litigation" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including Contracts related to it), or the transactions
contemplated by this Agreement.
"Material" for purposes of this Agreement shall be determined
in light of the facts and circumstances of the matter in question; provided
that any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"Material Adverse Effect" on a Party shall mean an event,
change or occurrence which, individually or together with any other event,
change or occurrence, has a Material adverse impact on (i) the financial
position, business, or results of operations of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability of such Party to perform
its obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, provided that Material Adverse
Effect shall not be deemed to include the impact of (x) changes in Laws of
general applicability or interpretations thereof by courts or governmental
authorities, (y) changes in generally accepted accounting principles, and (z)
the Merger and compliance with the provisions of this Agreement on the
operating performance of the Parties.
"Merger Corp. Common Stock" shall mean the $0.01 par value
common stock of Merger Corp.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Order" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award, ruling,
or writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"Party" shall mean either DII, Merger Corp. or PSS, and
"Parties" shall mean all of DII, Merger Corp. and PSS.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets or business.
"Person" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PSS Capital Stock" shall mean, collectively, the PSS Common
Stock, the PSS Preferred Stock and any other class or series of capital stock
of PSS.
<PAGE> 40
"PSS Common Stock" shall mean the $0.01 par value common stock
of PSS.
"PSS Preferred Stock" shall mean the $0.01 par value preferred
stock of PSS.
"PSS Stock Plans" shall mean the existing stock option and
other stock-based compensation plans of PSS designated as follows: Amended and
Restated 1994 Long Term Incentive Plan, Amended and Restated 1994 Long Term
Stock Plan, 1994 Incentive Stock Option Plan, Amended and Restated Directors'
Stock Plan, Employee Stock Purchase Plan and 1986 Incentive Stock Option Plan.
"Regulatory Authorities" shall mean, collectively, all federal
and state regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, including the NASD, and the SEC.
"Representative" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative of a Person.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of any Regulatory Authority promulgated thereunder.
"Subsidiaries" shall mean all those corporations, partnerships,
associations, or other entities of which the entity in question owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its parent;
provided, there shall not be included any such entity acquired through
foreclosure or any such entity the equity securities of which are owned or
controlled in a fiduciary capacity.
"Surviving Corporation" shall mean DII as the surviving
corporation resulting from the Merger.
"Tax" or "Taxes" shall mean any federal, state, county, local,
or foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, occupancy, and other taxes,
assessments, charges, fares, or impositions, including interest, penalties, and
additions imposed thereon or with respect thereto.
"Undisclosed Liabilities" shall mean any liability or
obligation of a Party to this Agreement, whether accrued, liquidated,
unliquidated, absolute, contingent, matured, unmatured or otherwise, as of the
Closing Date, that is not fully reflected or reserved against in their
respective financial statements or fully disclosed in a Schedule.
(b) In addition to the terms defined in Section 11.1(a) above,
the terms set forth below shall have the meanings ascribed thereto in the
referenced sections:
Aggregate Purchase Price - Section 3.1(c)
Base Period Trading Price - Section 3.1(b)
Base Period Trading Price Limitations - Section 3.1(b)
Book Value Adjustment - Section 2.1(c)
<PAGE> 41
Benefit Plans - Section 5.21
Closing - Section 1.2
Closing Date - Section 1.2
Common Stock Exchange Ratio - Section 3.1(b)
Effective Time - Section 1.3
Environmental Litigation - Section 5.7
ERISA Plan - Section 5.21
Exchange Agent - Section 4.1
FASB - Section 5.18
Financial Statements - Section 5.5
Merger - Section 1.1
Multiemployer Plan - Section 5.21(a)
Per Share Purchase Price - Section 3.1(b)
PSS Documents - Section 6.5
DII Options - Section 3.5
(c) Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
11.2 Expenses. PSS shall bear and pay all direct costs and expenses
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel. Upon consummation of the Merger,
PSS shall bear and pay the following costs and expenses in an amount not to
exceed $200,000 in the aggregate: (i) the reasonable fees and expenses of DII's
counsel, (ii) expenses for the audits conducted pursuant to Section 8.1 hereof,
and (iii) other reasonable fees and expenses of DII incurred by DII or on DII's
behalf in connection with the transactions contemplated hereunder ((i), (ii)
and (iii) collectively, the "Expenses"). In the event this Agreement is
terminated pursuant to Section 10.1(a) or (d) hereof, PSS and DII shall share
evenly the Expenses, provided that PSS shall only bear reasonable expenses of
DII in an amount not to exceed $100,000 in the aggregate. In the event this
Agreement is terminated pursuant to Section 10.1(b), (c) or (g), the party in
breach of the representation, warranty, covenant or other agreement, or whose
actions or inaction (or the actions or inaction of such Party's affiliates,
shareholders, representatives or agents) result in the failure of satisfaction
of the condition, shall bear the Expenses, provided that PSS shall only bear
reasonable expenses of DII in an amount not to exceed $200,000 in the
aggregate. In the event this Agreement is terminated pursuant to Section
10.1(e), (f), (h), (i) or (j) hereof, the party who elects to terminate this
Agreement shall bear the Expenses, provided that PSS shall only bear reasonable
expenses of DII in an amount not to exceed $200,000 in the aggregate. DII
shall bear the Expenses in the event of a termination pursuant to Section
10.1(k) or (l).
11.3 Brokers and Finders. Each of the Parties represents and
warrants that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder or incurred any Liability for any
financial advisory fees, investment bankers' fees, brokerage fees, commissions,
or finders' fees in connection with this Agreement or the transactions
contemplated hereby. In the event of a claim by any broker or finder based
upon his or its representing or being retained by or allegedly representing or
being retained by DII or PSS, each of the shareholders of DII (out of the
Escrow Agreement only) and PSS, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
<PAGE> 42
11.4 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herei the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. Nothing
in this Agreement expressed or implied, is intended to confer upon any Person,
other than the Parties or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, other than as
specifically provided in Sections 8.11 or 8.12 of this Agreement.
11.5 Amendments. To the extent permitted by Law, this Agreement may
be amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties, whether before or
after shareholder approval of this Agreement has been obtained.
11.6 Waivers.
(a) Prior to or at the Effective Time, PSS, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by DII, to waive or extend the time for the compliance or fulfillment
by DII of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of PSS under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of PSS.
(b) Prior to or at the Effective Time, DII, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by PSS, to waive or extend the time for the compliance or fulfillment
by PSS of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of DII under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of DII.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained
in this Agreement in one or more instances shall be deemed to be or construed
as a further or continuing waiver of such condition or breach or a waiver of
any other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date received by the other
party:
<PAGE> 43
DII: Diagnostic Imaging, Inc.
9428 Baywood Center III, Suite 500
Jacksonville, Florida 32256
Telecopy Number: (904) 636-9673
Attention: Rutherford C. Deas
Copy to Counsel: Smith Hulsey & Busey
225 Water Street, Suite 1800
Jacksonville, Florida 32202
Telecopy Number: (904) 359-7708
Attention: M. Richard Lewis, Jr., Esq.
PSS: Physician Sales & Service, Inc.
7800 Belfort Parkway, Suite 250
Jacksonville, Florida 32256
Telecopy Number: (904) 281-9555
Attention: Mr. David A. Smith
Copy to Counsel: Alston & Bird
One Atlantic Center
1201 W. Peachtree Street
Atlanta, Georgia 30309
Telecopy Number: (404) 881-4777
Attention: J. Vaughan Curtis, Esq.
11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Florida, without regard
to any applicable conflicts of Laws.
11.10 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
together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. The parties acknowledge and agree
that this Agreement has been reviewed, negotiated and accepted by all parties
and their attorneys and shall be construed and interpreted according to the
ordinary meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
11.13 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
<PAGE> 44
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
[Signatures on next page.]
<PAGE> 45
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: DIAGNOSTIC IMAGING, INC.
/s/ Tom Bronson By: /s/ Rutherford C. Deas
- -------------------------- -----------------------------------
Secretary Rutherford C. Deas, Chief Executive
Officer
[CORPORATE SEAL]
ATTEST: PHYSICIAN SALES & SERVICE, INC.
/s/ David A. Smith By: /s/ Patrick Kelly
- --------------------------- -----------------------------------
Assistant Secretary Title: Chief Executive Officer
---------------------------------
[CORPORATE SEAL]
ATTEST: PSS MERGER CORP.
/s/ David A. Smith By: /s/ Patrick Kelly
- ---------------------------- -----------------------------------
Assistant Secretary Title: Chief Executive Officer
--------------------------------
[CORPORATE SEAL]
<PAGE> 1
EXHIBIT 99.1
PHYSICIAN SALES & SERVICE COMPLETES MERGER WITH RADIOLOGY AND IMAGING
DISTRIBUTOR
November 27, 1996, 8:15 AM EST
JACKSONVILLE, Fla.--(BUSINESS WIRE)--Nov. 27, 1996--Physician Sales & Service,
Inc. (Nasdaq:PSSI) today announced that it completed the merger with
Diagnostic Imaging, Inc. ("DII") of Jacksonville, Florida. DII distributes
radiology and imaging equipment, chemicals and supplies, and provides technical
service to the acute and alternate site markets through 13 locations in 5
southeastern states. DII reported $58 million in revenues for the twelve month
period ended June 30, 1996.
The agreement is a stock-for-stock transaction, to be accounted for as a
pooling of interest, by issuing approximately 662,000 shares of PSS's common
stock. As part of the transaction, PSS also assumes approximately $4.9 million
of outstanding DII debt.
Commenting on the merger, Patrick Kelly, Chairman and Chief Executive Officer,
stated, "This transaction represents an important opportunity for PSS to expand
our product offerings to the physician market, which accounts for approximately
$1.2 billion in sales of radiology and imaging equipment, services and
supplies. Currently, the radiology and imaging equipment, chemicals and
supplies market totals approximately $4.1 billion. We plan to aggressively
pursue consolidation opportunities in this niche market, which is comprised of
over 450 distributors."
Mr. Kelly added, "We are also pleased to announce the appointment of Frederick
E. "Gene" Dell to President of DII. Gene has served as Regional Vice President
of PSS since December 1993 and in various sales and management positions with
PSS since April 1984. We believe Gene will provide DII with focus and
commitment to complete customer satisfaction, attributes responsible for past
and future successes of PSS."
PSS is a leading distributor of medical supplies, equipment and pharmaceuticals
to primary care and other office-based physicians in the United States and
distributes in Europe through WorldMed, Inc.
ADDITIONAL SOURCES OF INFORMATION
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SEC Filings - From EDGAR Online
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