AGREEMENT OF EXCHANGE
DATED AS OF DECEMBER 22, 1993
BY AND AMONG
STUART MEDICAL, INC.,
OWENS & MINOR, INC.,
OMI HOLDING, INC.
and
CERTAIN SHAREHOLDERS OF
STUART MEDICAL, INC.
TABLE OF CONTENTS
ARTICLE I
Definitions
1.01 "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 "Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03 "BCL". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 "Balance Sheet Deficiency" . . . . . . . . . . . . . . . . . . 2
1.05 "Balance Sheet Holdback Shares". . . . . . . . . . . . . . . . 2
1.06 "CERCLA" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.07 "Certificates" . . . . . . . . . . . . . . . . . . . . . . . . 2
1.08 "Closing". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.09 "Closing Balance Sheet". . . . . . . . . . . . . . . . . . . . 2
1.10 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Competing Transaction". . . . . . . . . . . . . . . . . . . . 2
1.12 "Contracts". . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 "E&Y". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 "ERISA". . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 "ERISA Affiliate". . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Exchanges". . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 "First C Year" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 "GAAP" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 "Hazardous Materials". . . . . . . . . . . . . . . . . . . . . 3
1.22 "HSR Act". . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 "Intellectual Property". . . . . . . . . . . . . . . . . . . . 3
1.24 "J.P. Morgan". . . . . . . . . . . . . . . . . . . . . . . . . 3
1.25 "Knowledge". . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 "KPMG" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.27 "Last SMI Year". . . . . . . . . . . . . . . . . . . . . . . . 3
1.28 "Law". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.29 "Leased Property". . . . . . . . . . . . . . . . . . . . . . . 3
1.30 "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.31 "Midwest". . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 "Midwest Accounts Receivable". . . . . . . . . . . . . . . . . 4
1.33 "Midwest Acquisition". . . . . . . . . . . . . . . . . . . . . 4
1.34 "Net Worth Deficiency" . . . . . . . . . . . . . . . . . . . . 4
1.35 "Notice of Objection". . . . . . . . . . . . . . . . . . . . . 4
1.36 "O&M". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.37 "O&M Holding". . . . . . . . . . . . . . . . . . . . . . . . . 4
1.38 "O&M Articles of Exchange" . . . . . . . . . . . . . . . . . . 4
1.39 "O&M Common Stock" . . . . . . . . . . . . . . . . . . . . . . 4
1.40 "O&M Disclosure Schedule". . . . . . . . . . . . . . . . . . . 4
1.41 "O&M Exchange" . . . . . . . . . . . . . . . . . . . . . . . . 4
1.42 "O&M Financial Statements" . . . . . . . . . . . . . . . . . . 4
1.43 "O&M Holding Common Stock" . . . . . . . . . . . . . . . . . . 4
1.44 "O&M Holding Preferred Stock". . . . . . . . . . . . . . . . . 5
1.45 "O&M's Indemnitees". . . . . . . . . . . . . . . . . . . . . . 5
1.46 "O&M Plan of Exchange" . . . . . . . . . . . . . . . . . . . . 5
1.47 "O&M Shareholders' Meeting". . . . . . . . . . . . . . . . . . 5
1.48 "O&M Subsidiaries" . . . . . . . . . . . . . . . . . . . . . . 5
1.49 "PBGC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.50 "Pension Plans". . . . . . . . . . . . . . . . . . . . . . . . 5
1.51 "Permitted Liens". . . . . . . . . . . . . . . . . . . . . . . 5
1.52 "Phantom Stock Plans". . . . . . . . . . . . . . . . . . . . . 5
1.53 "Proxy Statement/Prospectus" . . . . . . . . . . . . . . . . . 5
1.54 "Qualified Pension Plan" . . . . . . . . . . . . . . . . . . . 5
1.55 "RCRA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.56 "Real Property". . . . . . . . . . . . . . . . . . . . . . . . 5
1.57 "Registration Rights Agreement". . . . . . . . . . . . . . . . 6
1.58 "Related Agreements" . . . . . . . . . . . . . . . . . . . . . 6
1.59 "Review Auditors". . . . . . . . . . . . . . . . . . . . . . . 6
1.60 "SMI". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.61 "SMI 401(k) Plan". . . . . . . . . . . . . . . . . . . . . . . 6
1.62 "SMI Articles of Exchange" . . . . . . . . . . . . . . . . . . 6
1.63 "SMI Common Stock" . . . . . . . . . . . . . . . . . . . . . . 6
1.64 "SMI Current Balance Sheet". . . . . . . . . . . . . . . . . . 6
1.65 "SMI Disclosure Schedule". . . . . . . . . . . . . . . . . . . 6
1.66 "SMI Exchange" . . . . . . . . . . . . . . . . . . . . . . . . 6
1.67 "SMI Exchange Consideration" . . . . . . . . . . . . . . . . . 6
1.68 "SMI Financial Statements" . . . . . . . . . . . . . . . . . . 6
1.69 "SMI Funding". . . . . . . . . . . . . . . . . . . . . . . . . 6
1.70 "SMI Plan of Exchange" . . . . . . . . . . . . . . . . . . . . 6
1.71 "Sale and Administration Agreement". . . . . . . . . . . . . . 7
1.72 "SEC". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.73 "SEC Reports". . . . . . . . . . . . . . . . . . . . . . . . . 7
1.74 "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . 7
1.75 "Series B Preferred Stock" . . . . . . . . . . . . . . . . . . 7
1.76 "Severance Agreements" . . . . . . . . . . . . . . . . . . . . 7
1.77 "Shareholder" or "Shareholders". . . . . . . . . . . . . . . . 7
1.78 "Shareholders' Indemnitees". . . . . . . . . . . . . . . . . . 7
1.79 "Shareholders' Representative" . . . . . . . . . . . . . . . . 7
1.80 "Specialty". . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.81 "Specialty Litigation" . . . . . . . . . . . . . . . . . . . . 7
1.82 "Specialty Obligations". . . . . . . . . . . . . . . . . . . . 7
1.83 "Subordinated Note". . . . . . . . . . . . . . . . . . . . . . 7
1.84 "Subordinated Note Holdback Shares". . . . . . . . . . . . . . 7
1.85 "Transfer" . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.86 "VHA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.87 "VSCA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.88 "Welfare Plans". . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II
The Closing
2.01 The Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . 8
2.02 Closing; Filing of Articles of Exchange. . . . . . . . . . . . 8
2.03 Holdback Shares. . . . . . . . . . . . . . . . . . . . . . . . 8
2.04 Voting of Holdback Shares; Dividends; Interest . . . . . . . . 9
2.05 Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
The Exchanges
ARTICLE IV
Representations of SMI and the Shareholders
4.01 Existence and Good Standing. . . . . . . . . . . . . . . . . . 12
4.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 13
4.03 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.04 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 13
4.05 Subsidiaries, Affiliated Companies and
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . 14
4.07 No Material Adverse Changes. . . . . . . . . . . . . . . . . . 14
4.08 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 16
4.09 Governmental Authorization . . . . . . . . . . . . . . . . . . 16
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.12 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.13 Personal Property, Inventory and Accounts
Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.14 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.15 Obligations for Money Borrowed . . . . . . . . . . . . . . . . 19
4.16 Employment Agreements and Benefits . . . . . . . . . . . . . . 19
4.17 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 19
4.18 Employee Relations . . . . . . . . . . . . . . . . . . . . . . 21
4.19 Transactions with Affiliates . . . . . . . . . . . . . . . . . 21
4.20 Environmental Compliance . . . . . . . . . . . . . . . . . . . 21
4.21 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.23 Absence of Certain Practices . . . . . . . . . . . . . . . . . 24
4.24 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 24
4.25 Certain Obligations. . . . . . . . . . . . . . . . . . . . . . 24
4.26 Pricing Audits . . . . . . . . . . . . . . . . . . . . . . . . 24
4.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.28 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . . 24
ARTICLE V
Representations of O&M
5.01 Existence and Good Standing. . . . . . . . . . . . . . . . . . 25
5.02 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 25
5.03 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.04 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 26
5.05 Subsidiaries, Affiliated Companies and
Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . 26
5.07 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.08 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 27
5.09 Governmental Authorization . . . . . . . . . . . . . . . . . . 27
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.11 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 27
5.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.14 Securities Reports . . . . . . . . . . . . . . . . . . . . . . 28
5.15 Broker's or Finder's Fees. . . . . . . . . . . . . . . . . . . 28
ARTICLE VI
Conduct of Businesses and Certain Other Actions
Pending the Effective Time
6.01 Access to Information Concerning Properties and
Records for Due Diligence Review . . . . . . . . . . . . . . . 28
6.02 Obligations Concerning Confidentiality . . . . . . . . . . . . 29
6.03 Conduct of Business by SMI Pending the Effective
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.04 HSR Act Filings. . . . . . . . . . . . . . . . . . . . . . . . 31
6.05 No Shopping. . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.06 Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . 32
6.07 Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . 32
6.08 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 32
6.09 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . 33
6.10 Shareholders Meeting; Proxy Statement/Prospectus . . . . . . . 33
6.11 Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . 33
6.12 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 34
6.13 Severance Agreements . . . . . . . . . . . . . . . . . . . . . 34
6.14 Phantom Stock Plans. . . . . . . . . . . . . . . . . . . . . . 34
6.15 SMI Funding. . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.16 Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . 35
6.17 Servicing Agreements . . . . . . . . . . . . . . . . . . . . . 35
6.18 Midwest Acquisition. . . . . . . . . . . . . . . . . . . . . . 35
6.19 Fixed Assets Inventory . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII
Conditions Precedent to Obligations of SMI and the Shareholders
7.01 O&M Obligations. . . . . . . . . . . . . . . . . . . . . . . . 36
7.02 Accuracy of Representations and Warranties . . . . . . . . . . 36
7.03 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 36
7.04 Court Orders . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.05 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.06 Actions and Proceedings. . . . . . . . . . . . . . . . . . . . 36
7.07 O&M Shareholder Vote . . . . . . . . . . . . . . . . . . . . . 37
7.08 Completion of Investigation. . . . . . . . . . . . . . . . . . 37
7.09 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII
Conditions Precedent to the Obligations of O&M and O&M Holding
8.01 SMI and Shareholders Obligations . . . . . . . . . . . . . . . 38
8.02 Accuracy of Representations and Warranties . . . . . . . . . . 38
8.03 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 38
8.04 Court Orders . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.05 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.06 Actions and Proceedings. . . . . . . . . . . . . . . . . . . . 38
8.07 O&M Shareholder Vote . . . . . . . . . . . . . . . . . . . . . 39
8.08 Opinion of J. P. Morgan. . . . . . . . . . . . . . . . . . . . 39
8.09 Completion of Investigation. . . . . . . . . . . . . . . . . . 39
8.10 VHA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.11 Opinion Concerning Certain Tax Matters . . . . . . . . . . . . 39
8.12 Title to Real Property . . . . . . . . . . . . . . . . . . . . 39
8.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 39
8.14 Refinancing of SMI Indebtedness; Additional O&M
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.15 Registration Statement . . . . . . . . . . . . . . . . . . . . 40
8.16 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX
Indemnification and
Additional Agreements
9.01 The Shareholders' Indemnity. . . . . . . . . . . . . . . . . . 41
9.02 O&M's Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 43
9.03 Acquisition for Investment; Transfer Limitations . . . . . . . 44
9.04 Right of First Refusal . . . . . . . . . . . . . . . . . . . . 44
9.05 Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.06 Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . 47
9.07 Noncompetition Covenant. . . . . . . . . . . . . . . . . . . . 48
9.08 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.09 Board Nominee. . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . 49
9.11 Tax Status of Exchanges. . . . . . . . . . . . . . . . . . . . 49
9.12 Shareholders' Representative . . . . . . . . . . . . . . . . . 50
9.13 Books and Records. . . . . . . . . . . . . . . . . . . . . . . 50
9.14 Phantom Stock Plans. . . . . . . . . . . . . . . . . . . . . . 50
9.15 New York Stock Exchange Listing Application. . . . . . . . . . 51
9.16 Midwest Accounts Receivable Guarantee. . . . . . . . . . . . . 51
ARTICLE X
Termination, Amendment and Waiver
10.01 Termination. . . . . . . . . . . . . . . . . . . . . . . 51
10.02 Effect of Termination. . . . . . . . . . . . . . . . . . 52
10.03 Post-Termination Covenants . . . . . . . . . . . . . . . 52
ARTICLE XI
General Provisions
11.01 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 53
11.02 Break-up Fee.. . . . . . . . . . . . . . . . . . . . . . 53
11.03 Publicity. . . . . . . . . . . . . . . . . . . . . . . . 53
11.04 Further Assurances . . . . . . . . . . . . . . . . . . . 54
11.05 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 54
11.06 Descriptive Headings . . . . . . . . . . . . . . . . . . 55
11.07 Parties in Interest. . . . . . . . . . . . . . . . . . . 56
11.08 Severability . . . . . . . . . . . . . . . . . . . . . . 56
11.09 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 56
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . 56
11.11 Amendment. . . . . . . . . . . . . . . . . . . . . . . . 56
11.12 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 56
Exhibit A O&M Plan of Exchange
Exhibit B Registration Rights Agreement
Exhibit C SMI Plan of Exchange
Exhibit D Series B Preferred Stock Terms
Exhibit E Opinion of Hunton & Williams
Exhibit F Opinion of Cohen & Grigsby, P.C.
Exhibit G Opinion of Counsel to the Shareholders
SMI Disclosure Schedule
Item 1.23 Intellectual Property
Item 1.29 Leased Property
Item 1.56 Real Property
Item 1.76 Severance Agreements
Item 4.03 Consents, etc.
Item 4.04 Capitalization of SMI
Item 4.07 Material Adverse Changes
Item 4.10A Litigation
Item 4.10B Specialty Litigation
Item 4.14 Contracts
Item 4.15 Obligations for Money Borrowed
Item 4.16 Employment Agreements
Item 4.17 Employee Benefit Plans
Item 4.18 Employee Relations
Item 4.19 Transactions with Affiliates
Item 4.21 Tax Matters
Item 4.22 Insurance
Item 4.24 Compliance with Laws
Item 4.26 Pricing Audits
O&M Disclosure Schedule
Item 1.48 O&M Subsidiaries
Item 5.03 Consents, etc.
Item 5.10 Litigation
Item 5.12 Compliance with Laws
AGREEMENT OF EXCHANGE
AGREEMENT OF EXCHANGE (this "Agreement"), dated as of December 22, 1993,
among Stuart Medical, Inc., a Pennsylvania corporation ("SMI"), Owens &
Minor, Inc., a Virginia corporation ("O&M"), OMI Holding, Inc., a Virginia
corporation ("O&M Holding"), and Henry L. Hillman, Elsie H. Hillman and C. G.
Grefenstette, Trustees under the Henry L. Hillman Trust under agreement of
trust dated November 18, 1985, Juliet Lea Hillman Simonds, Audrey Hillman
Fisher, Henry L. Hillman, Jr., William T. Hillman, Howard B. Hillman and
Tatnall L. Hillman, each a shareholder of SMI (each, a "Shareholder", and
collectively, the "Shareholders").
WHEREAS, SMI, O&M Holding and the Shareholders desire to effect a share
exchange pursuant to which all outstanding shares of SMI Common Stock will be
exchanged for 1,150,000 shares of Series B Preferred Stock and $40,200,000 to
be allocated among the holders of SMI Common Stock in accordance with their
elections pursuant to the SMI Plan of Exchange;
WHEREAS, O&M and O&M Holding desire to effect a share exchange pursuant
to which each outstanding share of O&M Common Stock will be exchanged for one
share of O&M Holding Common Stock; and
WHEREAS, O&M, O&M Holding, SMI and the Shareholders acknowledge that
such exchanges are intended to qualify as a transaction described in Section
351 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound, SMI, O&M, O&M
Holding and the Shareholders hereby agree as follows:
ARTICLE I
Definitions
1.01 "Affiliate" shall mean, with respect to any person, any person that
directly, or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such person.
1.02 "Agreement" shall mean this Agreement of Exchange and the Related
Agreements, together with the Exhibits and Schedules attached hereto,
including the SMI Disclosure Schedule and the O&M Disclosure Schedule, as
amended from time to time in accordance with the terms hereof.
1.03 "BCL" shall mean the Pennsylvania Business Corporation Law.
1.04 "Balance Sheet Deficiency" shall mean the excess, if any, of (i)
the sum of the amount, as of the Effective Time, of (x) any assets reflected
on the Closing Balance Sheet that are not actually owned or in the possession
of SMI at the Effective Time and (y) any liabilities to which SMI was subject
at the Effective Time that were not reflected on the Closing Balance Sheet,
over (ii) the sum of (x) the amount of any assets owned and in the possession
of SMI at the Effective Time that are not reflected on the Closing Balance
Sheet and (y) the amount of liabilities that as of the Effective Time were
actually less than the amount reflected in respect thereof on the Closing
Balance Sheet (limited, in the case of any amount described in this clause
(ii), to the extent such amounts are within the Knowledge of O&M Holding at
the time any of O&M's Indemnitees makes a claim with respect to a Balance
Sheet Deficiency under Section 9.01(a)(v) hereof).
1.05 "Balance Sheet Holdback Shares" shall mean the shares of O&M
Holding Preferred Stock issued and retained pursuant to Section 2.03(a)
hereof.
1.06 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
1.07 "Certificates" shall mean the certificates that, immediately prior
to the Effective Time, represented shares of SMI Common Stock.
1.08 "Closing" shall mean the conference held at 10:00 a.m. local time,
on the date determined in accordance with Section 2.02 hereof, at the offices
of Hunton & Williams, or such other time and place as the parties may
mutually agree in writing.
1.09 "Closing Balance Sheet" shall mean the audited balance sheet of SMI
at the Effective Time prepared by E&Y in accordance with Section 2.05 hereof.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.11 "Competing Transaction" shall have the meaning set forth in Section
6.05 hereof.
1.12 "Contracts" shall have the meaning set forth in Section 4.14
hereof.
1.13 "E&Y" shall mean Ernst & Young.
1.14 "Effective Time" shall mean the effective time specified in (a) the
SMI Articles of Exchange and (b) the O&M Articles of Exchange.
1.15 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.16 "ERISA Affiliate" shall mean a trade or business, whether or not
incorporated, which, with SMI, would be treated as a single employer under
Section 414 of the Code of ERISA.
1.17 "Exchanges" shall mean, collectively, the O&M Exchange and the SMI
Exchange.
1.18 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.19 "First C Year" shall have the meaning set forth in Section 9.08
hereof.
1.20 "GAAP" shall mean generally accepted accounting principles applied
in a manner consistent with prior periods.
1.21 "Hazardous Materials" shall mean (a) material defined as "hazardous
substances," "hazardous wastes", "solid wastes" or "pollutants" in CERCLA,
RCRA, the Clean Air Act, the Clean Water Act or similar state or local
environmental statutes and (b) petroleum products, pollutants, contaminants
or hazardous or toxic substances, materials or wastes.
1.22 "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
1.23 "Intellectual Property" shall mean the trademarks, service marks,
trade names, copyrights and other intellectual property owned or used by SMI
listed on Item 1.23 of the SMI Disclosure Schedule.
1.24 "J.P. Morgan" shall mean J.P. Morgan Securities Inc.
1.25 "Knowledge" as to O&M and SMI shall mean the knowledge of any
officer or director of such party after due investigation and as to any
individual, including a Shareholder, shall mean the knowledge of such person
after due investigation.
1.26 "KPMG" shall mean KPMG Peat Marwick.
1.27 "Last SMI Year" shall have the meaning set forth in Section 9.08
hereof.
1.28 "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, including judgments, decrees or orders,
and the rules, regulations and orders promulgated thereunder.
1.29 "Leased Property" shall mean real property leased by SMI pursuant
to a Contract and listed on Item 1.29 of the SMI Disclosure Schedule.
1.30 "Losses" shall have the meaning set forth in Section 9.01 hereof.
1.31 "Midwest" shall mean Midwest Hospital Supply Company, Inc..
1.32 "Midwest Accounts Receivable" shall mean the accounts receivable of
Midwest that have not been sold to SMI Funding in accordance with Section
6.15(b) hereof and are reflected on the Closing Balance Sheet.
1.33 "Midwest Acquisition" shall mean the acquisition by SMI of certain
assets and the assumption of certain liabilities of Midwest in accordance
with the terms and provisions of an agreement that is substantially similar
to the Asset Purchase Agreement, draft of December 17, 1993, among Midwest,
the shareholders of Midwest and SMI.
1.34 "Net Worth Deficiency" shall mean the amount by which the
shareholders' equity of SMI as reflected on the Closing Balance Sheet is less
than $41,000,000.
1.35 "Notice of Objection" shall have the meaning set forth in Section
2.05 hereof.
1.36 "O&M" shall mean Owens & Minor, Inc., a Virginia corporation.
1.37 "O&M Holding" shall mean OMI Holding, Inc., a Virginia corporation
and a wholly owned subsidiary of O&M.
1.38 "O&M Articles of Exchange" shall mean the Articles of Exchange to
be filed by O&M with the Commonwealth of Virginia State Corporation
Commission with respect to the O&M Plan of Exchange.
1.39 "O&M Common Stock" shall mean the Common Stock of O&M, $2.00 par
value per share.
1.40 "O&M Disclosure Schedule" shall mean the disclosure schedule of O&M
attached hereto.
1.41 "O&M Exchange" shall mean the exchange of each outstanding share of
O&M Common Stock for one share of O&M Holding Common Stock pursuant to the
O&M Plan of Exchange.
1.42 "O&M Financial Statements" shall have the meaning set forth in
Section 5.06 hereof.
1.43 "O&M Holding Common Stock" shall mean the Common Stock of O&M
Holding, $2.00 par value per share.
1.44 "O&M Holding Preferred Stock" shall mean the 1,150,000 shares of
Series B Preferred Stock to be issued to the holders of SMI Common Stock
pursuant to the SMI Plan of Exchange.
1.45 "O&M's Indemnitees" shall mean O&M, O&M Holding, SMI and their
respective successors, assigns and representatives.
1.46 "O&M Plan of Exchange" shall mean the plan of exchange with respect
to the O&M Exchange attached hereto as Exhibit A.
1.47 "O&M Shareholders' Meeting" shall mean the annual or special
meeting of the holders of O&M Common Stock held and conducted in accordance
with O&M's Articles of Incorporation and Bylaws, the VSCA and the proxy rules
of the SEC for the approval of the transactions contemplated by this
Agreement, including the O&M Plan of Exchange.
1.48 "O&M Subsidiaries" shall mean the companies listed on Item 1.48 of
the O&M Disclosure Schedule.
1.49 "PBGC" shall mean the Pension Benefit Guaranty Corporation.
1.50 "Pension Plans" shall have the meaning set forth in Section 4.17
hereof.
1.51 "Permitted Liens" shall mean: (a) liens for taxes and assessments
that are accrued on the SMI Current Balance Sheet or the Closing Balance
Sheet, as the case may be, that are not due and payable; (b) liens securing
indebtedness reflected on the SMI Current Balance Sheet; and (c) carrier's,
warehousemen's, mechanic's, materialmen's, repairmen's or other like liens
arising in the ordinary course of business and in respect of obligations
which are not due.
1.52 "Phantom Stock Plans" shall mean, collectively, the 1993 Phantom
Stock Plan for Senior Management and the Second 1993 Phantom Stock Plan for
Senior Management.
1.53 "Proxy Statement/Prospectus" shall mean the proxy statement of O&M
to be distributed in connection with the O&M Shareholders' Meeting pursuant
to Regulation 14A of the Exchange Act and the prospectus of O&M Holding to be
distributed in connection with the O&M Exchange pursuant to the Securities
Act.
1.54 "Qualified Pension Plan" shall have the meaning set forth in
Section 4.17 hereof.
1.55 "RCRA" shall mean the Resource Conservation and Recovery Act, as
amended.
1.56 "Real Property" shall mean the property, fixtures and improvements
located thereon and appurtenances thereto owned by SMI listed on Item 1.56 of
the SMI Disclosure Schedule.
1.57 "Registration Rights Agreement" shall mean the agreement attached
hereto as Exhibit B.
1.58 "Related Agreements" shall mean the Registration Rights Agreement
and any other document or agreement delivered pursuant hereto.
1.59 "Review Auditors" shall have the meaning set forth in Section 2.05
hereof.
1.60 "SMI" shall mean Stuart Medical, Inc., a Pennsylvania corporation.
1.61 "SMI 401(k) Plan" shall mean the Stuart Medical, Inc.
Retirement/Savings Plan.
1.62 "SMI Articles of Exchange" shall mean the Articles of Exchange to
be filed by SMI with the Department of State of the Commonwealth of
Pennsylvania with respect to the SMI Plan of Exchange.
1.63 "SMI Common Stock" shall mean the Common Stock of SMI, $.0025 par
value per share.
1.64 "SMI Current Balance Sheet" shall have the meaning set forth in
Section 4.06 hereof.
1.65 "SMI Disclosure Schedule" shall mean the disclosure schedule of SMI
and the Shareholders attached hereto.
1.66 "SMI Exchange" shall mean the exchange of all outstanding shares of
SMI Common Stock for the SMI Exchange Consideration pursuant to the SMI Plan
of Exchange.
1.67 "SMI Exchange Consideration" shall mean the O&M Holding Preferred
Stock and $40,200,000 in cash to be received by the holders of SMI Common
Stock in exchange for all the outstanding shares of SMI Common Stock pursuant
to the SMI Plan of Exchange, such consideration to be allocated among the
holders of SMI Common Stock in accordance with the SMI Plan of Exchange.
1.68 "SMI Financial Statements" shall have the meaning set forth in
Section 4.06 hereof.
1.69 "SMI Funding" shall mean Stuart's Funding Corporation, a
Pennsylvania corporation.
1.70 "SMI Plan of Exchange" shall mean the plan of exchange with respect
to the SMI Exchange attached hereto as Exhibit C.
1.71 "Sale and Administration Agreement" shall mean the Amended and
Restated Sale and Administration Agreement between SMI and SMI Funding dated
as of September 30, 1993.
1.72 "SEC" shall mean the Securities and Exchange Commission.
1.73 "SEC Reports" shall have the meaning set forth in Section 5.14
hereof.
1.74 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.75 "Series B Preferred Stock" shall mean the O&M Holding Series B
Preferred Stock, $100 par value per share, having the rights and designations
substantially as set forth in Exhibit D attached hereto.
1.76 "Severance Agreements" shall mean the agreements with certain
employees of SMI listed on Item 1.76 of the SMI Disclosure Schedule.
1.77 "Shareholder" or "Shareholders" shall mean individually or
collectively Henry L. Hillman, Elsie H. Hillman and C. G. Grefenstette,
Trustees under the Henry L. Hillman Trust under agreement of trust dated
November 18, 1985, Juliet Lea Hillman Simonds, Audrey Hillman Fisher, Henry
L. Hillman, Jr., William T. Hillman, Howard B. Hillman and Tatnall L.
Hillman, each a shareholder of SMI.
1.78 "Shareholders' Indemnitees" shall mean the Shareholders and their
respective successors, assigns and representatives.
1.79 "Shareholders' Representative" shall mean C. G. Grefenstette or his
designee.
1.80 "Specialty" shall mean National Medical Specialty, Inc.
1.81 "Specialty Litigation" shall mean the litigation described on Item
4.10B of the SMI Disclosure Schedule.
1.82 "Specialty Obligations" shall mean any note or notes and other
obligations payable by Specialty to SMI.
1.83 "Subordinated Note" shall mean the deferred payment note, dated
September 30, 1993, payable to SMI and made by SMI Funding.
1.84 "Subordinated Note Holdback Shares" shall mean the number of shares
of O&M Holding Preferred Stock issued and retained pursuant to Section
2.03(b) hereof.
1.85 "Transfer" shall mean, when used as a verb, to sell, to transfer,
to pledge, to encumber or to otherwise dispose of, and shall mean, when used
as a noun, sale, transfer, pledge, encumbrance or other disposition.
1.86 "VHA" shall mean Voluntary Hospitals of America, Inc.
1.87 "VSCA" shall mean the Virginia Stock Corporation Act.
1.88 "Welfare Plans" shall have the meaning set forth in Section 4.17
hereof.
ARTICLE II
The Closing
2.01 The Exchanges. At the Effective Time and subject to the terms and
conditions of this Agreement, the VSCA and the BCL, (a) all of the
outstanding shares of SMI Common Stock other than Dissenting Shares (as
defined in the SMI Plan of Exchange) will be exchanged for the SMI Exchange
Consideration and the SMI Exchange Consideration shall be allocated among the
holders of SMI Common Stock in accordance with their elections made pursuant
to the SMI Plan of Exchange and (b) each of the outstanding shares of O&M
Common Stock will be exchanged for one share of O&M Holding Common Stock.
2.02 Closing; Filing of Articles of Exchange. Upon the terms and
subject to the conditions hereof, as soon as practicable after all of the
conditions to the obligations of the parties hereunder have been satisfied or
waived, the parties shall conduct the Closing for the purpose of confirming
the foregoing. As soon as practicable after the Closing, (a) SMI shall in
the manner required by the BCL deliver to and file with the Department of
State of the Commonwealth of Pennsylvania the duly executed SMI Articles of
Exchange in accordance with the provisions of the BCL, (b) O&M Holding shall
in the manner required by the VSCA deliver to and file with the Commonwealth
of Virginia State Corporation Commission the duly executed O&M Articles of
Exchange in accordance with the VSCA and (c) the parties hereto shall take
all such other action as may be required by law to make the Exchanges
effective.
2.03 Holdback Shares.
(a) At the Effective Time, O&M Holding shall issue and retain,
pending final determination of the Closing Balance Sheet pursuant to the
provisions of Section 2.05 hereof, from the SMI Exchange Consideration to be
received by each Shareholder, certificates representing 3% of that number of
shares (rounded up to the nearest whole share) of the O&M Holding Preferred
Stock that would be issued to such Shareholder if the cash election permitted
by Section 3.02 of the SMI Plan of Exchange were not exercised by any holder
of SMI Common Stock in the SMI Exchange (the "Balance Sheet Holdback Shares")
. The Balance Sheet Holdback Shares shall be held and delivered as provided
in Section 2.05 hereof.
(b) At the Effective Time, O&M Holding shall issue and retain from
the SMI Exchange Consideration to be received by the Shareholders,
certificates representing in the aggregate that number of shares of O&M
Holding Preferred Stock (rounded up to the nearest whole share) determined by
dividing the outstanding principal balance (plus accrued interest thereon) of
the Subordinated Note as of the Effective Time by $100 (the "Subordinated
Note Holdback Shares"). The number of the Subordinated Note Holdback Shares
to be so retained in respect of each Shareholder (rounded to the nearest
whole share) shall be determined by multiplying the aggregate number of the
Subordinated Note Holdback Shares by a fraction, the numerator of which is
the number of shares of the O&M Holding Preferred Stock that would be issued
to such Shareholder in the SMI Exchange if the cash election permitted by
Section 3.02 of the SMI Plan of Exchange were not exercised by any holder,
and the denominator of which is the aggregate number of shares of the O&M
Holding Preferred Stock that would be so issued to all Shareholders in the
SMI Exchange under the same assumption. Upon payment in full by SMI Funding
of the Subordinated Note within 150 days after the Effective Time (including
all accrued interest thereon to the date of payment), O&M Holding shall
promptly deliver to the Shareholder's Representative the share certificates
representing the Subordinated Note Holdback Shares (including any dividends
paid or distributions made with respect thereto and any interest thereon).
In the event SMI Funding fails to pay in full the Subordinated Note
(including accrued interest thereon) on or before 150 days after the
Effective Time, O&M Holding shall (a) retain and cancel ratably, in the same
proportion as the Subordinated Note Holdback Shares were withheld from the
Shareholders, the number of whole Subordinated Note Holdback Shares
(including any dividends paid or distributions made with respect thereto)
that when multiplied by $100 equals or exceeds by less than $100 the unpaid
principal amount of the Subordinated Note (less the accounts receivable
reserve reflected on the Closing Balance Sheet other than any reserve for the
Midwest Receivables) plus any unpaid accrued interest thereon through 150
days after the Effective Time and (b) shall assign without recourse the
Subordinated Note to the Shareholders' Representative. O&M Holding shall
promptly deliver to the Shareholders' Representative any Subordinated Note
Holdback Shares (including any dividends paid or distributions made with
respect thereto and any interest thereon) not retained and canceled pursuant
to the preceding sentence.
2.04 Voting of Holdback Shares; Dividends; Interest. Each Shareholder
shall have full power to vote his respective Balance Sheet Holdback Shares
and Subordinated Note Holdback Shares in accordance with Section 9.06 hereof.
Any dividends paid on or other distributions made with respect to the Balance
Sheet Holdback Shares or the Subordinated Note Holdback Shares shall be
invested by O&M Holding in any of the following securities or accounts as
designated in writing to O&M Holding by the Shareholders' Representative:
(a) direct obligations of the United States of America; (b) general
obligations of any state or political subdivision thereof if such obligations
are rated by at least two nationally recognized rating agencies as "AA" or
higher; and (c) certificates of deposit of any national bank or state bank
member of the Federal Reserve System having an aggregate capital and surplus
of at least $100,000,000.
2.05 Closing Balance Sheet.
(a) Within 60 days after the Effective Time, the Shareholders
shall cause E&Y to prepare a balance sheet of SMI as of immediately prior to
the Effective Time (the "Closing Balance Sheet") and the Shareholders shall
deliver the Closing Balance Sheet to O&M Holding together with a certificate
signed by the Shareholders certifying that the Closing Balance Sheet has been
prepared in accordance with GAAP (except for the absence of footnotes) and
this Agreement and fairly presents the assets and liabilities of SMI as of
immediately prior to the Effective Time. The Closing Balance Sheet shall be
prepared in accordance with GAAP (except for the absence of footnotes);
provided that: (i) the Closing Balance Sheet shall not include (x) any
accounts receivable other than Midwest Accounts Receivable or any accruals
for the payments to be made by SMI with respect to the Phantom Stock Plans in
accordance with Section 6.14 hereof or (y) any accrual of amounts that may be
payable with respect to holders of Dissenting Shares (as defined in the SMI
Plan of Exchange); and (ii) the reserve for obsolescent inventory on the
Closing Balance Sheet shall include, without limitation, the following
(except with respect to inventory acquired from U.S. Surgical that may be
exchanged for other U.S. Surgical inventory without additional cost to SMI):
(A) a reserve for 100% of any item of inventory that has
shown no arm's length and bona fide sales activity for a
period of 12 months before the Effective Time (other than
inventory purchased within 60 days before the Effective Time);
(B) a reserve for 25% of any item of inventory, the on-
hand quantities of which exceed two times the total cumulative
arm's length and bona fide sales of such item during the 12
months before the Effective Time, if SMI has made a
substantial purchase of such item of inventory within 12
months prior to the Effective Time; and
(C) a reserve for 100% of any item of inventory, the on-
hand quantities of which exceed two times the total cumulative
arm's length and bona fide sales of such item during the 12
months prior to the Effective Time, if SMI has not made a
substantial purchase of such item of inventory within 12
months before the Effective Time.
SMI's inventory shall be valued on a first-in, first-out basis at the lower
of cost or market value. Commencing on the date of the Effective Time, SMI
shall conduct, and the Shareholders' Representative, or his designee, and E&Y
shall observe, a physical count of SMI's inventory as of the Effective Time.
E&Y will make its work papers available to SMI, the Shareholders'
Representative, KPMG and O&M Holding's representatives once E&Y has completed
the Closing Balance Sheet.
(b) Within 30 days after delivery of the Closing Balance Sheet to
O&M Holding, O&M Holding may object to such balance sheet by delivering
written notice of such objection ("Notice of Objection") to the Shareholders'
Representative. If no Notice of Objection is delivered in accordance with
the terms hereof, the Closing Balance Sheet shall be final and binding on the
parties to this Agreement without modification. If a Notice of Objection is
delivered in accordance with the terms hereof, the Shareholders'
Representative and O&M Holding shall confer together and attempt in good
faith to agree upon a resolution of the objection. If they have not agreed
upon such a resolution within 15 days after delivery of the Notice of
Objection, the disputed items on the Closing Balance Sheet shall be referred
to independent certified public accountants other than E&Y and KPMG (the
"Review Auditors") selected by mutual agreement of O&M Holding and the
Shareholders' Representative. Within 30 days after the matter is referred to
them, the Review Auditors shall issue a report on their resolution of the
disputed items on the Closing Balance Sheet, which shall either confirm the
correctness thereof or state specifically the modifications to be made
thereto. Upon delivery of such report to O&M Holding and the Shareholders'
Representative, the Closing Balance Sheet shall be deemed confirmed or
modified, as the case may be, in accordance therewith. The Closing Balance
Sheet, as so confirmed or modified, shall be final and binding on all parties
to this Agreement. O&M Holding and the Shareholders shall cooperate fully
with the Review Auditors and, following the Effective Time, each of O&M
Holding, on the one hand, and the Shareholders, on the other, shall bear one
half of the fees and expenses of the Review Auditors for the work undertaken
by them pursuant to this Section 2.05.
(c) O&M Holding shall retain and cancel, ratably in the same
proportion as the Balance Sheet Holdback Shares were withheld from the
Shareholders, the number of whole Balance Sheet Holdback Shares that, when
multiplied by $100 equals or exceeds by less than $100 any Net Worth
Deficiency and O&M Holding shall retain any dividends paid or distributions
made with respect thereto. No later than ten days after the Closing Balance
Sheet becomes final and binding pursuant to Section 2.05(b) hereof, O&M
Holding shall deliver to the Shareholders' Representative certificates
representing any Balance Sheet Holdback Shares (including any dividends paid
or distributions made with respect thereto and any interest thereon) not
retained and canceled pursuant to the preceding sentence. In the event the
aggregate par value of the Balance Sheet Holdback Shares is less than the Net
Worth Deficiency, then the Shareholders shall be obligated, jointly and
severally, to immediately pay to O&M Holding the amount of such shortfall.
ARTICLE III
The Exchanges
At the Effective Time, by virtue of the Exchanges and without any action
on the part of SMI, O&M, O&M Holding, or the holders of O&M Common Stock or
SMI Common Stock:
(a) All of the shares of SMI Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of SMI Common
Stock then held in the treasury of SMI) shall, by reason of the SMI Exchange
and without any action by any holder of SMI Common Stock, be exchanged for
the right to receive the SMI Exchange Consideration (subject to adjustment
for any stock split, reverse stock split, stock dividend or other similar
distribution or reclassification with respect to the outstanding SMI Common
Stock or O&M Common Stock, or any issuance of SMI Common Stock, from the date
hereof to the Effective Time, with any fractional shares of O&M Holding
Preferred Stock to which a holder of SMI Common Stock would otherwise be
entitled being rounded to the nearest full share (with a fraction of .5 or
greater being rounded to the next highest full share)). The SMI Exchange
Consideration shall be allocated among the holders of SMI Common Stock in
accordance with such holders' elections made pursuant to Section 3.02 of the
SMI Plan of Exchange.
(b) Each share of SMI Common Stock held in the treasury of SMI
immediately prior to the Effective Time shall be automatically canceled and
retired and cease to exist, and no cash or securities or other property shall
be paid or payable in respect thereof.
(c) Each share of O&M Common Stock validly issued and outstanding
immediately prior to the Effective Time shall, by reason of the O&M Exchange
and without any action by any holder of O&M Common Stock, be exchanged for
the right to receive one share of O&M Holding Common Stock in accordance with
the O&M Plan of Exchange.
ARTICLE IV
Representations of SMI and the Shareholders
SMI and each of the Shareholders, jointly and severally, represent and
warrant as follows:
4.01 Existence and Good Standing. SMI is a corporation duly organized
and validly subsisting under the laws of the Commonwealth of Pennsylvania and
is duly qualified and in good standing to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on SMI's
business or financial condition or would not impair SMI's right to enforce
any material agreement to which it is a party. SMI has full power, authority
and legal right to own its property and to carry on its business as now being
conducted. SMI has delivered to O&M true and complete copies of its Articles
of Incorporation, as amended, and Bylaws, as currently in effect.
4.02 Authorization. SMI has corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Each of the Shareholders has power and authority to execute and
deliver this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby. This Agreement constitutes,
and the Related Agreements (when executed and delivered pursuant hereto for
value received) will constitute, the valid and binding agreements of SMI and
each of the Shareholders, respectively, enforceable against SMI and each of
the Shareholders in accordance with their respective terms.
4.03 No Conflict. The execution, delivery and performance of this
Agreement by SMI and the Shareholders does not and will not (a) violate,
conflict with or result in the breach of any provision of the Articles of
Incorporation or Bylaws of SMI, (b) conflict with or violate any Law
applicable to SMI or any of the Shareholders or by which any of its assets,
properties or businesses is bound or affected or (c) except as provided on
Item 4.03 of the SMI Disclosure Schedule, conflict with, result in any breach
of, constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, require any consent under,
or give to others any rights of termination, amendment, acceleration,
suspension revocation or cancellation of, or result in the creation of any
lien, security interest, charge or encumbrance on any of the assets or
properties of SMI pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease (including any leases with respect to the Leased
Property), sublease, license, permit, franchise or other instrument or
arrangement to which SMI or any of the Shareholders is a party or by which
any of such assets or properties is bound or affected.
4.04 Capitalization. The authorized capital stock of SMI consists of
10,000,000 shares of Common Stock, $.0025 par value, of which 2,000,000
shares are issued and outstanding. All of the outstanding shares of SMI
Common Stock are owned of record and beneficially by the holders indicated
and in the amounts set forth on Item 4.04 of the SMI Disclosure Schedule.
All such outstanding shares have been duly authorized and validly issued and
are fully paid and non-assessable and free of adverse claims, liens, options,
encumbrances, judgments, or restrictions of any kind, and preemptive or other
rights that entitle or entitled any person to acquire such shares, and no
shares of capital stock are reserved for issuance. Except as set forth on
Item 4.04 of the SMI Disclosure Schedule, there are no outstanding options,
warrants, rights, calls, subscriptions, commitments, conversion rights,
rights of exchange, plans or other agreements or claims of any character
providing for the purchase, issuance or sale of any shares of the capital
stock of SMI. Except as provided on Item 4.04 of the SMI Disclosure
Schedule, there are no shares of SMI Common Stock held in the treasury of
SMI. There are an aggregate of 173,913 Rights (as such term is defined in
the Phantom Stock Plans) issued and outstanding under the Phantom Stock
Plans, each of which Rights has an Initial Value (as such term is defined in
the Phantom Stock Plans) of $69.00. No shares of SMI Common Stock have been
issued in violation of applicable securities laws.
4.05 Subsidiaries, Affiliated Companies and Investments. SMI does not
own, directly or indirectly, of record or beneficially, any capital stock or
other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
4.06 Financial Statements. SMI has heretofore furnished O&M with (a)
the financial statements including the notes thereto as of and for the twelve
months ended April 30, 1992, and the eight months ended December 31, 1992,
which statements include the balance sheets as of those dates, and the
related statements of income, shareholders' equity and cash flows for the
periods then ended, as audited by E&Y and (b) the unaudited balance sheet of
SMI as of October 31, 1993 (the "SMI Current Balance Sheet"), together with
the related statement of income for the ten months then ended (all such
financial statements being referred to collectively as the "SMI Financial
Statements"). The SMI Financial Statements have been prepared in accordance
with GAAP (except as may be noted therein and except for the absence of
footnotes with respect to the SMI Current Balance Sheet) and fairly present
the financial condition of SMI at the respective dates thereof and the
results of operations of SMI and changes in its financial position for the
periods indicated (subject, in the case of the SMI Current Balance Sheet, to
normal, recurring year-end audit adjustments that are not in the aggregate
material).
4.07 No Material Adverse Changes. Since December 31, 1992, the business
of SMI has been operated in the ordinary course and there has been no change
(and to the Knowledge of SMI and the Shareholders, no fact or condition
exists or is contemplated or threatened which might cause such a change in
the future) in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations or prospects, of SMI,
which individually or in the aggregate, have had a material adverse effect on
the business prospects, properties or condition, financial or otherwise, of
SMI; provided, however, that any deterioration in SMI's condition (financial
or otherwise) or relationships with customers (other than VHA) or employees
resulting from (i) SMI's announcement of the transactions contemplated hereby
or (ii) business or personnel policies or actions (e.g., terminations) which
O&M Holding may implement with respect to SMI following the Effective Time
shall not constitute a material adverse change for these purposes (or for
purposes of Section 8.02 hereof). Without limiting the foregoing, except as
set forth on Item 4.07 of the SMI Disclosure Schedule, since December 31,
1992, there has not been:
(a) any loss, damage, destruction or other casualty materially and
adversely affecting the business prospects, properties, assets or business of
SMI (whether or not covered by insurance);
(b) (i) any increase made or agreed to in the compensation
(including, without limitation, any increase pursuant to any pension, profit
sharing or other plan) payable or to become payable by SMI to any of its
directors, officers, agents, consultants, or any of its employees whose total
compensation after such increase was in excess of $100,000 per annum other
than to the persons listed on Item 4.16 of the SMI Disclosure Schedule, (ii)
any bonus, percentage compensation, service award or other like benefit
having a value in excess of $25,000 granted, made, agreed to or accrued to
the credit of any such director, officer, agent, consultant or employee other
than to the persons listed on Item 4.16 of the SMI Disclosure Schedule, or
(iii) any welfare, pension, retirement or similar payment or arrangement made
or agreed to by SMI for the benefit of any such director, officer, agent,
consultant or employee other than to the persons listed on Item 4.16 of the
SMI Disclosure Schedule;
(c) any change in any method of accounting or accounting practice
of SMI;
(d) any notes or accounts receivable or portions thereof written
off by SMI as uncollectible, if such write offs were either in excess of the
bad debt reserve established therefor in the SMI Current Balance Sheet or
incurred other than in the ordinary course of business;
(e) any issuance or sale of any stock, bonds or other corporate
securities of which SMI is the issuer, or the grant or issuance of any stock
options, warrants, or other rights to purchase securities of SMI;
(f) any direct or indirect redemption, purchase or other
acquisition by SMI of any shares of capital stock of SMI;
(g) any declaration, setting aside or payment of any dividend or
distribution (direct or indirect, whether in cash or property, and whether
characterized as salary, bonus, dividend or otherwise) other than
distributions totaling $3,838,000;
(h) any discharge or satisfaction of any lien or encumbrance or
payment or satisfaction of any obligation or liability (whether absolute,
accrued, contingent or otherwise and whether due or to become due), other
than (x) current liabilities shown on the SMI Current Balance Sheet, (y)
current liabilities incurred since the date of the SMI Current Balance Sheet
in the ordinary course of business and consistent with past practice, and (z)
indebtedness outstanding under the credit agreement identified in paragraph
1 of Item 4.15 of the SMI Disclosure Schedule;
(i) any sale, assignment, transfer, mortgage, pledge or
encumbrance of any assets (real, personal or mixed, tangible or intangible)
of SMI, cancellation of any debts or claims or waiver of any rights of
substantial value, except, in each case, in the ordinary course of business
and consistent with past practice;
(j) any assumption, guarantee or endorsement by SMI of the
obligations of any other individual or entity or any loans or advances to any
individual or entity except in the normal course of business;
(k) any sale, assignment or transfer of any patents, trademarks,
trade names, copyrights or other similar assets, including applications or
licenses therefor;
(l) any capital expenditures, or commitment to make any capital
expenditures, for additions to property, plant or equipment, not in the
ordinary course of business;
(m) any payment of any amounts or liability incurred to or in
respect of, or sale of any properties or assets (real, personal or mixed,
tangible or intangible) to, or any transaction or any agreement or
arrangement with, any corporation or business in which SMI or any of its
corporate officers or directors, or any affiliate or associate of any such
person, has any direct or indirect ownership interest other than the
transactions listed on Item 4.19 of the SMI Disclosure Schedule;
(n) any material deterioration of relations between SMI and its
customers considered as a whole, including but not limited to the loss, or to
the Knowledge of SMI and the Shareholders, any threatened loss of VHA;
(o) any collective bargaining agreements entered into by SMI;
(p) any other transaction other than in the ordinary course of
business or otherwise contemplated by this Agreement; or
(q) any agreement to do any of the foregoing.
4.08 Books and Records. The minute books of SMI, which have been made
available to O&M, contain accurate and complete records of all corporate
actions taken by the shareholders and Board of Directors (and committees
thereof) of SMI from incorporation to date. The books of accounts and
records of SMI are true, complete and correct in all material respects.
4.09 Governmental Authorization. The execution, delivery and
performance by SMI and the Shareholders of this Agreement, and the
consummation of the transactions contemplated hereby by SMI and the
Shareholders, require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than filings required
to be made under the HSR Act, filings required to be made under applicable
federal and state securities laws and filing of the SMI Articles of Exchange
in connection with the SMI Exchange.
4.10 Litigation. There is no action, suit, proceeding, claim or
investigation pending, or, to the Knowledge of SMI and the Shareholders,
threatened against or affecting SMI which could materially and adversely
affect SMI or which in any manner challenges or seeks to prevent, enjoin,
alter or delay any of the transactions contemplated by this Agreement; to the
Knowledge of SMI and the Shareholders, there is no valid basis for any such
action, proceeding or investigation. Item 4.10A of the SMI Disclosure
Schedule sets forth each pending action, suit, proceeding, claim or
investigation to which SMI is a party, as well as the forum, parties thereto,
a brief description of the subject matter thereof and the amount of damages
claimed. Item 4.10B of the SMI Disclosure Schedule sets forth each pending
action, proceeding, claim or investigation to which SMI is a party related to
any separate line of business formerly, but not now, conducted by SMI
(whether as an unincorporated division or business function or as a
subsidiary), including without limitation Specialty and the former AIP
division. SMI is not subject to any order, judgment, decree or obligation of
any court, arbitrator, governmental department, commission, board, bureau,
agency or instrumentality.
4.11 Liabilities. SMI has no outstanding claims, liabilities or
indebtedness, contingent or otherwise, except as set forth in the SMI Current
Balance Sheet, other than liabilities incurred subsequent to the date of the
SMI Current Balance Sheet in the ordinary course of business and consistent
with past practices. SMI is not in default in respect of the terms or
conditions of any indebtedness in excess of $1,000,000, regardless of whether
SMI has received notice of the existence of any such default.
4.12 Assets.
(a) Item 1.56 of the SMI Disclosure Schedule contains a complete
and correct list of all of the Real Property owned by SMI. Item 1.29 of the
SMI Disclosure Schedule contains a complete and correct list of all the
Leased Property used by SMI. All buildings, structures and appurtenances
included in the Real Property and the Leased Property: (i) are in good
operating condition and in a state of good maintenance and repair, normal
wear and tear excepted; (ii) are adequate and suitable for the purposes for
which they are presently being used; (iii) comply in all material respects
with existing Law currently applicable to the use of each building as it is
currently being used, including but not limited to, zoning, building and
Occupational Safety and Health Act regulations; and (iv) contain no asbestos
deemed hazardous by Law. There are two underground storage tanks located on
the Real Property and no underground storage tanks located on the Leased
Property.
(b) SMI has good, valid and marketable title to all assets owned
by it (whether real, fee or leasehold, personal or mixed, tangible or
intangible) and used in its business, including without limitation, all
assets reflected in the SMI Financial Statements and all assets acquired by
SMI since October 31, 1993 (except for assets that have been sold or
otherwise disposed of in the ordinary course of business), free and clear of
any and all mortgages, liens, encumbrances, charges, claims, restrictions,
pledges, security interests or impositions other than Permitted Liens.
(c) Item 1.23 of the SMI Disclosure Schedule contains a complete
and correct list of all of the Intellectual Property owned or used in the
business of SMI. SMI owns all right, title and interest in and to or
otherwise has the right to use the Intellectual Property. There are no
claims or proceedings pending or, to the Knowledge of SMI and the
Shareholders, threatened against SMI asserting that its use of any of the
Intellectual Property infringes on the rights of any other person. SMI has
not licensed or assigned the Intellectual Property to any third party and, to
the Knowledge of SMI and the Shareholders, there are no infringing uses of
any of the Intellectual Property by third parties.
4.13 Personal Property, Inventory and Accounts Receivable.
(a) All of the tangible personal property owned by SMI or used in
its business is in good operating condition and repair, normal wear and tear
excepted, and is sufficient for the operation of the business of SMI as
presently conducted.
(b) SMI's inventory is valued on a first-in, first-out basis at
the lower of cost or market value. All of such inventory shown on the SMI
Financial Statements or acquired after October 31, 1993, but prior to the
Effective Time is, or will be, set forth on the books and records of SMI in
accordance with GAAP applied on a basis consistent with the audited financial
statements of SMI for prior periods. All of such inventory (net of all
inventory reserves shown on the SMI Financial Statements) is useable or
saleable in the ordinary course of business.
(c) The SMI Financial Statements do not reflect any accounts
receivable.
4.14 Contracts. Item 4.14 of the SMI Disclosure Schedule contains a
complete and correct list of each contract, agreement, lease, plan, purchase
order, arrangement or commitment of SMI, whether oral or written (the
"Contracts"), that (a) is a lease of real property, (b) relates to (i) the
purchase of products for resale or delivery to customers of amounts in excess
of $100,000 or having a duration in excess of three years or (ii) the supply
of products to customers with actual sales in calendar year 1992 or expected
sales in calendar year 1993 of $1,000,000 or more, (c) relates to the
purchase of goods, equipment or services used in support of SMI's business or
operations of amounts in excess of $20,000 per year and having a duration in
excess of one year, (d) contains covenants pursuant to which SMI has agreed
not to compete with any person or any person has agreed not to compete with
SMI or (e) upon which any substantial part of SMI's business is dependent or
which, if breached, could reasonably be expected to materially and adversely
affect the earnings, assets, financial condition or operations of SMI. All
such Contracts are valid, binding and in full force and effect, and true and
correct copies thereof have been delivered to O&M. Except as set forth on
Item 4.14 of the SMI Disclosure Schedule, SMI has performed each material
term, covenant and condition of each of the Contracts that is to be performed
by it at or before the date hereof and will perform each material term,
covenant and condition of each Contract to be performed by it prior to the
Effective Time. No event has occurred that would, with the passage of time
or compliance with any applicable notice requirements, constitute a default
by SMI under any of the Contracts and, to the Knowledge of SMI and the
Shareholders, no party to any of the Contracts intends to cancel, terminate
or exercise any option under any of the Contracts. Except as set forth on
Item 4.14 of the SMI Disclosure Schedule, SMI's execution, delivery and
performance of this Agreement will not constitute a breach of or a default
under any Contract. As to those Contracts noted on Item 4.14 of the SMI
Disclosure Schedule, copies of which will be made available to O&M only upon
the expiration of any applicable waiting period provided for by Section 7A of
the HSR Act, such Contracts individually and in the aggregate are properly
reflected and accounted for in the financial records of SMI, will not impose
any otherwise undisclosed additional material financial burdens or risks upon
O&M or are, by their terms, terminable at will by SMI and do not obligate
SMI, and will not obligate O&M, to undertake any activity of questionable
legality or to be in breach or risk of breach of such Contracts in the
ordinary course of SMI's business or, to the Knowledge of the Shareholders,
O&M's ordinary business.
4.15 Obligations for Money Borrowed. Item 4.15 of the SMI Disclosure
Schedule contains a complete and correct list of all liabilities of SMI for
money borrowed. Each such obligation outstanding as of the Effective Time
may be prepaid by SMI after the Effective Time without penalty under the
terms thereof. Except as set forth on Item 4.15 of the SMI Disclosure
Schedule, SMI is not in default under any such obligations and no event has
occurred or is contemplated by SMI or, to the Knowledge of SMI and the
Shareholders, by any other party that would constitute a default or an event
that with the giving of notice or passage of time or both would constitute a
default thereunder. SMI has paid, and through the Effective Time will pay,
all amounts then due and payable under the terms of each such obligation.
4.16 Employment Agreements and Benefits. Item 4.16 of the SMI
Disclosure Schedule contains a complete and correct list of all agreements
relating to the compensation and other benefits of present and former
employees, salesmen, consultants, contractors and other agents of SMI,
including all collective bargaining agreements and all pension, retirement,
bonus, stock option, profit sharing, health, disability, life insurance,
hospitalization, education, severance, termination or other similar plans or
arrangements (whether or not subject to ERISA), true and complete copies of
which (or true and complete descriptions of which, in the case of oral
agreements) have been delivered to O&M. None of the agreements listed on
Item 4.16 of the SMI Disclosure Schedule will be breached by SMI's execution,
delivery and performance of this Agreement. Except as set forth on Item 4.16
of the SMI Disclosure Schedule, no such agreement requires O&M Holding to
assume or make payments with respect to any employment, compensation, fringe
benefit, pension, profit sharing or deferred compensation plan in respect of
any employee. Item 4.16 of the SMI Disclosure Schedule includes a complete
list of all officers and employees paid more than $100,000 by SMI per year.
4.17 Employee Benefit Plans.
(a) Item 4.17 of the SMI Disclosure Schedule contains a list of
each "pension plan" (as defined in Section 3(2) of ERISA) (the "Pension
Plans") and each "welfare plan" (as defined in Section 3(1) of ERISA) (the
"Welfare Plans") now or previously maintained for the benefit of employees of
SMI or to which SMI now contributes or has contributed on behalf of its
employees or the employees of an ERISA Affiliate. Except as provided in Item
4.17 of the SMI Disclosure Schedule, each such plan is enforceable in
accordance with its terms, and to the Knowledge of SMI and the Shareholders,
no present or former employee, salesman, consultant, contractor or other
agent of SMI or any dependent or beneficiary of such person has been advised
with respect to any such plan in a manner that is inconsistent with the terms
of such plan.
(b) Item 4.17 of the SMI Disclosure Schedule identifies each
Pension Plan that is intended to be qualified (a "Qualified Pension Plan")
under Section 401(a) of the Code. Each Qualified Pension Plan is in
compliance with applicable law as of the date hereof. The Internal Revenue
Service has issued a favorable determination letter with respect to each
Qualified Pension Plan's compliance with Section 401(a) of the Code. Except
as disclosed on Item 4.17 of the SMI Disclosure Schedule, there are no facts
or circumstances that could reasonably be expected to jeopardize or adversely
affect the qualification under Section 401(a) of any Qualified Pension Plan.
(c) No "prohibited transaction" (as defined in Section 4975 of the
Code) has occurred and no "accumulated funding deficiency" (as defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived,
exists with respect to any Qualified Pension Plan. No Qualified Pension Plan
currently or previously maintained or contributed to for the benefit of
employees of SMI or an ERISA Affiliate is or was subject to the provisions of
Title IV of ERISA. None of the Qualified Pension Plans has been completely
or partially terminated and there has not been any "reportable event" (as
defined in Section 4043(b) of ERISA) with respect to any such plans required
to be reported to the PBGC by law or regulation.
(d) Each employee plan has been administered in accordance with
its terms. In addition, each employee plan is in compliance with and has
been administered in accordance with, the provisions of ERISA (including the
rulings and regulations promulgated thereunder) and all other applicable law.
All reports, returns and other documentation that are required to have been
filed with the Internal Revenue Service, the Department of Labor, the PBGC or
any other governmental agency (federal, state or local) with respect to the
employee plans have been filed on a timely basis. Except as set forth in
Item 4.17 of the SMI Disclosure Schedule, no claims or complaints to or by
any person or governmental entity have been filed or, to the knowledge of SMI
and each of the Shareholders, are contemplated or threatened, with respect to
any employee plan.
(e) Neither SMI nor any ERISA Affiliate contributes to or has ever
contributed to or maintained a "multiemployer plan" (as defined in Section
3(37) of ERISA).
(f) Except as required by Section 601 of ERISA and Section 4980B
of the Code, SMI does not maintain or contribute to any plan or arrangement
which provides or has any liability to provide life insurance, medical or
other benefits under a welfare benefit plan (as defined in Section 3(2) of
ERISA) to any employee or former employee upon his retirement or termination
of employment and SMI has never represented, promised or contracted (whether
in oral or written form) to any employee or former employee that such
benefits would be provided. The execution of and performance of the
transactions contemplated in this Agreement and the Related Agreements will
not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event of default under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or may result in any
payment, acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
employee.
4.18 Employee Relations. Except as set forth on Item 4.18 of the SMI
Disclosure Schedule, SMI has paid or made provision for payment of all
salaries and wages accrued through the date of this Agreement and is in
material compliance with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours and
non-discrimination in employment and is not engaged in any unfair employment
practice. There is no charge pending or, to the Knowledge of SMI and the
Shareholders, threatened before any court or agency alleging unlawful
discrimination in employment practices or any unfair labor practice by SMI's
nor is there a basis for any such claim. SMI has not experienced any
material labor difficulty during the three years immediately preceding the
date of this Agreement.
4.19 Transactions with Affiliates. Except as set forth in Item 4.19 of
the SMI Disclosure Schedule, since December 31, 1992, SMI has not, in the
ordinary course of business or otherwise, purchased, leased or otherwise
acquired any property or assets or obtained any services from, or sold,
leased or otherwise disposed of any property or assets or provided any
services to (except with respect to remuneration for services as an officer
or employee of SMI) any officer, employee or Affiliate of SMI. Except as set
forth on Item 4.19 of the SMI Disclosure Schedule, SMI does not owe any
amount or have any contractual obligation or commitment to any Affiliate
(other than compensation for current services not yet due and payable and
reimbursement of expenses arising in the ordinary course of business) and no
Affiliate (including an employee of SMI) owes any amount or has any
contractual obligation to SMI. Except as set forth on Item 4.19 of the SMI
Disclosure Schedule, none of the holders of SMI Common Stock has any
interest, direct or indirect, in any property, real or personal, tangible or
intangible, used in or pertaining to the business of SMI except as a
shareholder or employee of SMI.
4.20 Environmental Compliance. SMI is in compliance in all material
respects with all applicable Laws relating to pollution control and
environmental contamination including, but not limited to, all Laws governing
the generation, use, collection, treatment, storage, transportation,
recovery, removal, emission, discharge, or disposal of Hazardous Materials
and all Laws with regard to recordkeeping, notification and reporting
requirements respecting Hazardous Materials. SMI has not been alleged to be
in violation of, nor has it been subject to any administrative or judicial
proceeding pursuant to, such Laws either now or any time during the past
three years. Seller has obtained all environmental permits, including those
related to environmental quality and the emission, discharge, storage,
handling, treatment, use, generation or transportation of Hazardous
Materials. There are no liabilities, known or unknown, absolute or
contingent, related to the Real Property or Leased Property or the conduct of
SMI's business arising in connection with the generation, use, treatment,
storage, release, disposal, emission, discharge, arranging for disposal or
transportation of Hazardous Materials. SMI has not, and to the Knowledge of
SMI and the Shareholders, no other person has, released from or deposited on
the Real Property or Leased Property any, Hazardous Materials or used the
Real Property or Leased Property as a hazardous waste treatment, storage or
disposal site. There are no facts or circumstances that SMI or the
Shareholders reasonably believe could form the basis for the assertion of any
claim against SMI relating to environmental matters including, but not
limited to, any claim arising from past or present environmental practices
asserted under CERCLA, RCRA, the Clean Air Act, the Clean Water Act or any
other federal, state or local environmental statute, regulation, policy,
guideline, order, judgment or decree. Promptly upon learning thereof, SMI
and the Shareholders will advise O&M of any facts or circumstances that could
form the basis for the assertion of any claim against SMI relating to
environmental matters including, but not limited to, any claim arising from
past or present environmental practices under CERCLA, RCRA, the Clean Air
Act, the Clean Water Act or any other federal, state or local environmental
statute.
4.21 Tax Matters. Pursuant to an election made before January 1, 1987,
in accordance with Section 1362(a) and (b) of the Code and the regulations
thereunder, SMI continuously has been and is an "S Corporation" within the
meaning of Section 1361(a)(1) of the Code. SMI has filed or, in the case of
returns not yet due, will file all tax returns and reports required to have
been filed by it on or before the date of the Effective Time, and all
material information set forth in such returns or reports is or (in the case
of returns or reports not yet due) will be accurate and complete. SMI has
paid or made adequate provision for or (with respect to returns or reports
not yet due) on or before the date of the Effective Time will pay or make
adequate provision for all taxes, additions to tax, penalties and interest
payable by SMI for all periods covered by those returns or reports. Except
as set forth on Item 4.21 of the SMI Disclosure Schedule and (solely with
respect to liabilities arising after the date hereof) except as will be
accrued on the Closing Balance Sheet, there are, and on the date of the
Effective Time will be, no unpaid taxes, additions to tax, penalties, or
interest payable by SMI or by any other person that are or could become a
lien on any asset, or otherwise adversely affect the business, properties, or
financial condition, of SMI. SMI has collected or withheld, or will collect
or withhold before the date of the Effective Time, all amounts required to be
collected or withheld by it for any taxes or assessments, and all such
amounts have been, or on or before the date of the Effective Time will have
been, paid to the appropriate governmental agencies or set aside in
appropriate accounts for future payment when due. SMI is in compliance with,
and its records contain all information and documents (including, without
limitation, executed Forms W-9) necessary to comply with, all applicable
information reporting and tax withholding requirements. The balance sheets
contained in the SMI Financial Statements fully and properly reflect, as of
the date thereof, the liabilities of SMI for all accrued taxes, additions to
tax, penalties and interest. For periods ending after October 31, 1993, the
books and records of SMI fully and properly reflect and the Closing Balance
Sheet will reflect SMI's liability for all accrued taxes, additions to tax,
penalties and interest. Except as disclosed in Item 4.21 of the SMI
Disclosure Schedule, SMI has not granted nor is it subject to any waiver of
the period of limitations for the assessment of tax for any currently open
taxable period, no unpaid tax deficiency has been asserted against or with
respect to SMI by any taxing authority, and SMI is not required to include in
income any amount for an adjustment pursuant to Section 481 of the Code or
the regulations thereunder. Item 4.21 of the SMI Disclosure Schedule lists
by jurisdiction the date of the last clearance or audit of SMI by a state or
local authority with respect to sales or income taxes. Item 4.21 of the SMI
Disclosure Schedule describes all material tax elections and consents
affecting SMI. SMI has not made or entered into, and holds no asset subject
to, a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder or a "safe harbor lease" subject to former Section
168(f)(8) of the Code and the regulations thereunder. None of the
Shareholders is a "foreign person" for purposes of Section 1445 of the Code.
4.22 Insurance. Item 4.22 of the SMI Disclosure Schedule contains a
complete and correct list of all policies of property, fire and casualty,
product liability, workers' compensation, automobile and other forms of
insurance owned or held by SMI and includes for each such policy its type,
term, limits and retentions, deductibles, name of insurer, annual premiums,
the aggregate remaining unused limits for each such policy giving effect to
claims made and expected to be made thereunder and, for product liability
policies, whether such policy is claims made coverage or occurrence-based
coverage. All such policies (a) are in full force and effect with all
premiums due having been paid in full and are sufficient for compliance by
SMI with all requirements of law and all agreements to which SMI is a party,
(b) are valid, outstanding and enforceable policies, (c) insure against risks
of the kind customarily insured against and (d) provide that they will remain
in full force and effect through the respective dates set forth in Item 4.22
of the SMI Disclosure Schedule, subject to the cancellation rights specified
in such policies. Except as set forth on Item 4.22 of the SMI Disclosure,
during the last two years, SMI has not been denied any insurance coverage
which it has requested, has made no material change in the scope or nature of
its insurance coverage and has not received notice of any material increase
in premiums for any of such policies nor of any termination or refusal to
renew such policies. All policies of primary comprehensive general liability
insurance and excess carriers insurance which insure against product
liability claims which SMI has maintained during the past five years are set
forth on Item 4.22 of the SMI Disclosure Schedule including the same
information with respect to such policies as is set forth for SMI's current
policies. All vendors to SMI which maintain vendor's endorsements on their
liability insurance policies are set forth on Item 4.22 of the SMI Disclosure
Schedule. During the past five years, there has been no lapse in coverage of
SMI's property, fire and casualty, product liability, workers' compensation,
automobile, comprehensive general liability or other form of insurance
carried by SMI in the ordinary course of its business.
4.23 Absence of Certain Practices. To the Knowledge of SMI and the
Shareholders, no officer, director, shareholder, employee or agent of SMI
has, directly or indirectly, given or made or agreed to give or make any
improper or illegal commission, payment, gratuity, gift, political
contribution or similar benefit to any customer, supplier, governmental
employee or other person who is or may be in a position to assist or hinder
the business of SMI.
4.24 Compliance with Laws. Except as disclosed on Item 4.24 of the SMI
Disclosure Schedule, SMI is in compliance in all material respects with all
Laws applicable to SMI or its operations. SMI holds all licenses,
certificates and permits from all regulatory authorities that are material to
the conduct of its business, all of which are valid and in full force and
effect.
4.25 Certain Obligations. None of SMI or the Shareholders have any
continuing obligations to Baxter International, Inc. or any Affiliate thereof
pursuant to any written or oral agreement or otherwise.
4.26 Pricing Audits. Item 4.26 of the SMI Disclosure Schedule sets forth
the results of all of SMI's customer pricing audits conducted since December
31, 1991. Except as disclosed in Item 4.26 of the SMI Disclosure Schedule,
as of the date hereof, there are no customer pricing audits of SMI being
conducted.
4.27 Disclosure. Neither this Agreement nor the SMI Financial
Statements contains any untrue statement of a fact or omits to state a fact
necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they are made, not misleading. To the
Knowledge of SMI and the Shareholders, there is no fact which materially and
adversely affects or could affect the business, prospects or financial
condition of SMI or its properties or assets, which has not been described in
this Agreement or the SMI Financial Statements.
4.28 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of SMI or the Shareholders is or will be entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any
Affiliate of the parties hereto, in connection with any of the transactions
contemplated by this Agreement.
ARTICLE V
Representations of O&M
O&M hereby represents and warrants as follows:
5.01 Existence and Good Standing.
(a) O&M is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia and is duly
qualified and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure
to be so qualified would not have a material adverse effect on its business
or financial condition or would not impair O&M's right to enforce any
material agreement to which it is a party. O&M has full power, authority and
legal right to own its property and to carry on its business as now being
conducted. O&M has delivered to SMI true and complete copies of its Articles
of Incorporation, as amended, and Bylaws, as currently in effect.
(b) O&M Holding is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia.
5.02 Authorization. Each of O&M and O&M Holding has the corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement constitutes and the Related
Agreements (when executed and delivered pursuant hereto for value received)
will constitute the valid and binding agreements of O&M and O&M Holding
enforceable against O&M and O&M Holding in accordance with their respective
terms.
5.03 No Conflict. The execution, delivery and performance of this
Agreement by O&M and O&M Holding do not and will not (a) violate, conflict
with or result in the breach of any provision of the Articles of
Incorporation or Bylaws of O&M or O&M Holding, (b) conflict with or violate
any Law applicable to O&M or O&M Holding or by which any of O&M's assets,
properties or businesses is bound or affected or (c) except as provided by
Item 5.03 of the O&M Disclosure Schedule, conflict with, result in any breach
of, constitute a default (or event which with the giving of notice or lapse
of time, or both, would become a default) under, require any consent under,
or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
lien, security, interest, charge or encumbrance on any of the assets or
properties of O&M pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or arrangement to which O&M is a party or by which any of such
assets or properties is bound or affected.
5.04 Capitalization.
(a) The authorized capital stock of O&M consists of (a) 30,000,000
shares of O&M Common Stock, $2.00 par value, of which (i) 20,282,405 shares
are issued and outstanding, (ii) no shares are issued and held in treasury
and (iii) 1,453,524 shares are reserved for issuance upon the exercise or
conversion of options, warrants or convertible securities granted or issued
by O&M and (b) 1,000,000 shares of cumulative Preferred Stock, $10.00 par
value (300,000 shares of which have been designated as Series A Participating
Preferred Stock issuable pursuant to O&M's Rights Agreement dated as of June
22, 1988 or otherwise by O&M's Board of Directors), none of which shares are
issued and outstanding. All such outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable and were
issued free of preemptive or similar rights that entitled any person to
acquire such shares.
(b) The authorized capital stock of O&M Holding consists of 100
shares of common stock, $2.00 par value, of which ten shares are issued and
outstanding. All such outstanding shares have been duly authorized and
validly issued and are fully paid and nonassessable and were issued free of
adverse claims, liens, options, encumbrances, judgments, or restrictions of
any kind, and preemptive or other rights that entitled any person to acquire
such shares. The shares of O&M Holding Preferred Stock to be issued to the
holders of SMI Common Stock in the SMI Exchange will be fully paid and
nonassessable and free of adverse claims, liens, options, encumbrances,
judgments, or restrictions of any kind, and preemptive or other rights that
entitle any person to acquire such shares.
5.05 Subsidiaries, Affiliated Companies and Investments. O&M owns,
directly or indirectly, each of the outstanding shares of capital stock of
each of the O&M Subsidiaries. Except for interests in the O&M Subsidiaries,
O&M does not own, directly or indirectly, of record or beneficially, any
capital stock or other equity or ownership or proprietary interest in any
corporation, partnership, association, trust, joint venture or other entity.
5.06 Financial Statements. The financial statements and schedules of
O&M contained in O&M's Annual Report on Form 10-K for the year ended December
31, 1992 and in O&M's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1993 (the "O&M Financial Statements") as filed with the
SEC, were prepared in accordance with GAAP, except as may be noted therein,
and fairly present the financial condition of O&M at the respective dates
thereof and the results of operations of O&M for the periods indicated
(subject, in the case of unaudited financial statements to normal, recurring
year-end adjustments that are not in the aggregate material.)
5.07 No Changes. Since September 30, 1993, the business of O&M and the
O&M Subsidiaries has been operated in the ordinary course consistent with
past practice, and there has not been (and to the Knowledge of O&M, no fact
or condition exists or is contemplated or threatened which might cause such
change in the future) (a) any material adverse change in the operations,
properties or condition (financial or otherwise) of O&M and the O&M
Subsidiaries or (b) any other change in the nature of, or in the manner of
conducting, the business of O&M and the O&M Subsidiaries, other than changes
which neither have had, nor reasonably may be expected to have, a material
adverse effect on the business of O&M and the O&M Subsidiaries considered as
a whole.
5.08 Books and Records. The books of accounts and records of O&M are
true, complete and correct in all material respects.
5.09 Governmental Authorization. The execution, delivery and
performance by O&M and O&M Holding of this Agreement and the consummation of
the transactions contemplated hereby by O&M and O&M Holding, require no
action by or in respect of, or filing with, any governmental body, agency,
official or authority other than fillings required to be made under the HSR
Act, filings required to be made under applicable federal and state
securities laws and filing of the O&M Articles of Exchange in connection with
the O&M Exchange.
5.10 Litigation. There is no action, suit, proceeding, claim or
investigation pending, or, to the Knowledge of O&M, threatened against or
affecting O&M or O&M Holding which could materially and adversely affect O&M
or which in any manner challenges or seeks to prevent, enjoin, alter or delay
any of the transactions contemplated by this Agreement; to the Knowledge of
O&M, there is no valid basis for any such action, proceeding or
investigation. Item 5.10 of the O&M Disclosure Schedule sets forth each
pending action, suit, proceeding, claim or investigation to which O&M or O&M
Holding is a party, as well as the forum, parties thereto, a brief
description of the subject matter thereof and the amount of damages claimed.
O&M Holding is not subject to any order, judgment, decree or obligation of
any court, arbitrator, governmental department, commission, board, bureau,
agency or instrumentality.
5.11 Liabilities. O&M has no outstanding claims, liabilities or
indebtedness, contingent or otherwise, except as set forth in the O&M
Financial Statements, other than liabilities incurred subsequent to September
30, 1993, in the ordinary course of business and consistent with past
practices. O&M is not in default in respect of the terms or conditions of
any indebtedness, regardless of whether O&M has received notice of the
existence of any such default.
5.12 Compliance with Laws. Except as disclosed on Item 5.12 of the O&M
Disclosure Schedule, O&M is in compliance in all material respects with all
Laws applicable to its operations. O&M holds all licenses, certificates and
permits from all regulatory authorities that are material to the conduct of
its business, all of which are valid and in full force and effect.
5.13 Disclosure. Neither this Agreement nor the O&M Financial
Statements contains any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they are made, not
misleading. To the Knowledge of O&M, there is no fact which materially and
adversely affects or could affect the business, prospects or financial
condition of O&M or O&M Holding or their respective properties or assets,
which has not been described in this Agreement, the SEC Reports or the O&M
Financial Statements.
5.14 Securities Reports. O&M has filed, and delivered to SMI complete
copies of, all forms, reports, statements and other documents required to be
filed with the SEC since January 1, 1990 by O&M including, without
limitation, (a) all Annual Reports on Form 10-K, (b) all Quarterly Reports on
Form 10-Q, (c) all proxy statements relating to meetings of shareholders
(whether annual or special), (d) all Current Reports on Form 8-K, (e) all
other reports or registration statements and (f) all amendments and
supplements to all such reports and registration statements (collectively
"SEC Reports"). The SEC Reports did not at the time they were filed 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 are made, not
misleading.
5.15 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of O&M is or will be entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any Affiliate of the
parties hereto, in connection with any of the transactions contemplated by
this Agreement except that O&M has retained J. P. Morgan as its financial
advisor.
ARTICLE VI
Conduct of Businesses and Certain Other Actions
Pending the Effective Time
6.01 Access to Information Concerning Properties and Records for Due
Diligence Review. Following the execution and delivery of this Agreement,
SMI shall give, and shall cause its officers, directors and agents to give,
to O&M and its counsel, accountants and other representatives, and O&M shall
give, and shall cause its officers, directors and agents to give, to SMI and
the Shareholders and their counsel, accountants and other representatives,
full access during normal business hours to all of the offices, properties,
books, contracts, commitments, records and affairs of SMI or O&M, as the case
may be, and will promptly furnish copies of all documents and information
concerning the business, operations, properties and affairs of O&M that SMI
or its representatives or of SMI that O&M and its representatives may
reasonably request. SMI, the Shareholders and O&M agree to jointly plan and
conduct such due diligence in a manner reasonably believed not to adversely
affect the relationship and good will of the employees, customers, vendors
and other business partners of SMI and O&M. Notwithstanding the foregoing,
SMI and O&M may restrict the access of the other to certain commercially
sensitive information with respect to pricing, margins and contractual terms
with specific vendors and customers prior to expiration of the waiting period
(and any extensions thereof) under the HSR Act, provided that reasonable
arrangements shall be made for the conduct of the review of such information
promptly following such expiration and the completion of such review before
the mailing of the Proxy Statement/Prospectus.
6.02 Obligations Concerning Confidentiality.
(a) SMI, the Shareholders and O&M and O&M Holding will treat all
such information obtained from the other in strict confidence and will take
all necessary or appropriate actions to prevent disclosure of such
confidential information to third parties without the prior consent of the
other party and will use all reasonable efforts to cause their Affiliates and
advisors to keep such information confidential; provided, however, that: (i)
any of such information obtained by a party hereto may be disclosed to the
directors, officers, employees, representatives, advisors and Affiliates of
such party solely in connection with this Agreement and the transactions
contemplated hereby (it being understood that such directors, officers,
employees, representatives and advisors shall be informed by such party of
the confidential nature of such information and shall be directed by such
party to treat such information confidentially); and (ii) any of such
information may be disclosed as, in the opinion of counsel to O&M, is
required to be disclosed in the Proxy Statement/Prospectus or in any report
or other filing made by O&M under the Securities Act or the Exchange Act or,
in the reasonable judgment of O&M, is necessary to be disclosed in connection
with obtaining the financing described in Section 8.14. The foregoing shall
not apply to any party with respect to information which:
(i) was at the time of disclosure generally available to
the public, other than by breach of this provision;
(ii) was in the possession of such party prior to
disclosure by the other party;
(iii) after such disclosure was acquired in good faith
from a third party, who did not obtain it directly or
indirectly from SMI, O&M, or any agent of any such party
unlawfully; or
(iv) was developed independently within the
organization of SMI or O&M, as the case may be, by personnel
not having access to such information.
(b) Notwithstanding anything in paragraph (a) of this Section
6.02, confidential information may be disclosed, if and only to the extent
legally required, in response to legal process or applicable governmental
regulations, provided that the party obligated to disclose such information
first notifies the other party of the obligation to disclose such
confidential information and the party so obligated fully cooperates with the
other party in taking such measures as shall be appropriate and to the extent
and in the manner permissible under applicable Law.
(c) If this Agreement should terminate for any reason, SMI and the
Shareholders will return to O&M all documents obtained by it or its agents
from O&M, containing non-public information concerning O&M and shall destroy
or cause to be destroyed any copies thereof made for SMI or any of its agents
or employees or the Shareholders, and O&M will return to SMI all documents
obtained by it or its agents from SMI or the Shareholders, containing non-
public information concerning SMI or the Shareholders, and shall destroy or
cause to be destroyed any copies thereof made for O&M or any of its agents or
employees.
6.03 Conduct of Business by SMI Pending the Effective Time. SMI
covenants and agrees that, from the date of this Agreement until the
Effective Time or the earlier termination of this Agreement for any reason,
SMI shall conduct its operations in the ordinary course and consistent with
past practices (except for entry into new product lines and markets), and
shall use its best efforts to (a) maintain and preserve its business
organization, (b) retain the services of its key employees and (c) maintain
relationships with customers, suppliers, and other third parties such that
their goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the period
from the date hereof until the Effective Time, SMI shall not, except as
otherwise expressly provided in this Agreement, without the prior written
consent of O&M:
(a) do or effect any of the following actions with respect to the
securities of SMI: (i) adjust, split, combine or reclassify its capital
stock; (ii) make, declare or pay any dividend or distribution on or directly
or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock (except with respect to
distributions aggregating (x) $3,000,000, plus (y) 45% of SMI's taxable
income for the period from January 1, 1993 through the Effective Time,
reduced by any distributions previously made with respect to such taxable
income); (iii) grant any person any right to acquire any shares of its
capital stock including rights under the Phantom Plans; (iv) issue, deliver
or sell or agree to issue, deliver or sell any additional shares of its
capital stock or any securities or obligations convertible into or
exchangeable or exercisable for any shares of its capital stock or such
securities; or (v) enter into any agreement, understanding or arrangement
with respect to the sale of capital stock;
(b) sell, transfer, pledge, mortgage, encumber or otherwise
dispose of any of its property or assets other than sales of inventory made
in the ordinary course of business;
(c) make or propose any changes in its Articles of Incorporation
or Bylaws;
(d) merge or consolidate with any other person or acquire a
significant amount of the assets or the capital stock of any other person
other than the Midwest Acquisition;
(e) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money other than in the ordinary course of business
and pursuant to the Midwest Acquisition in accordance with Section 6.18
hereof;
(f) create any subsidiaries;
(g) other than in the ordinary course of business, enter into or
modify any employment, severance, termination or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination pay to, any officer, director, consultant or employee;
(h) change any method or principle of accounting in a manner that
is inconsistent with past practice;
(i) make or revoke any tax election;
(j) settle any claims, litigation or actions, whether now pending
or hereafter made or brought, unless such settlement does not result in a
material adverse effect on the business or condition (financial or otherwise)
of SMI;
(k) forgive any indebtedness or other obligations of any Affiliate
of SMI or third party to SMI;
(l) make any commitments for capital expenditures other than in
the ordinary course of business; or
(m) agree to commit to do any of the foregoing.
6.04 HSR Act Filings. SMI and O&M agree to make their respective
filings promptly pursuant to the HSR Act, and to use their reasonable best
efforts (which shall not include the obligation of O&M to divest any business
or operations of SMI or O&M other than a divestiture of a de minimis amount
of such business or operations), and to cooperate with each other in their
efforts to effect compliance with the HSR Act. SMI and O&M will each supply
the other party with a draft notification prior to filing, and a copy of its
notification as filed, without exhibits.
6.05 No Shopping. Prior to the Effective Time or termination of this
Agreement pursuant to Section 10.01 hereof, neither SMI or the Shareholders
will, directly or indirectly, through any officer or director of SMI, any
agent or otherwise: (a) solicit, initiate, encourage the submission of,
respond to or discuss inquiries or proposals of offers from any person
relating to any acquisition or purchase of assets of, or any equity interest
in, SMI or the SMI Common Stock or any exchange offer, merger, consolidation,
business combination, sale of substantial assets or of a substantial amount
of assets, sale of securities, liquidation, dissolution or similar
transactions involving SMI or the Shareholders (a "Competing Transaction");
(b) enter into or participate in any discussions or negotiations regarding a
Competing Transaction, or furnish to any other person any information with
respect to the business, properties or assets of SMI; or (c) otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek a
Competing Transaction. SMI and the Shareholders shall immediately notify O&M
of any proposal relating to a Competing Transaction or if any inquiry or
contact with any person with respect thereto is made and shall immediately
deliver to O&M copies of any such written proposal or offer and any
communications made in response thereto.
6.06 Shareholders Meeting. SMI shall duly call a meeting of the holders
of SMI Common Stock to be held as soon as practicable (or arrange for action
by unanimous written consent) for the purpose of voting on adoption of the
SMI Plan of Exchange and approval of the transactions contemplated by this
Agreement. Each Shareholder covenants and agrees to vote, or cause to be
voted, all shares of SMI Common Stock owned by him in favor of approval of
the SMI Plan of Exchange and approval of the transactions contemplated by
this Agreement.
6.07 Certain Notices. After the date hereof and prior to the Effective
Time, SMI and the Shareholders shall give prompt notice to O&M of (a) any
notice of, or other communication received by SMI relating to, a default or
event which with notice or lapse of time or both would become a default under
its Articles of Incorporation or Bylaws, or any indenture, loan agreement or
other material agreement to which SMI is a party, by which it or any of its
properties is bound or to which it or any of its properties is subject, (b)
any notice or other communication from any third party received by SMI
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated hereby and (c) any matter
which, if it had occurred prior to the date hereof, would have made any of
SMI's and the Shareholders' representations and warranties incorrect,
incomplete or misleading.
6.08 Consents and Approvals. SMI and the Shareholders shall use its and
their respective 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 to
consummate and make effective the transactions contemplated by this
Agreement, to cooperate with O&M in connection with the foregoing and to
obtain all material consents, waivers, approvals, authorizations or orders
required for the authorization, execution and delivery of this Agreement and
the SMI Plan of Exchange by SMI and the consummation by SMI of the
transactions contemplated hereby and thereby prior to the Effective Time and
to furnish true, correct and complete copies of each thereof to O&M. Without
limiting the foregoing, SMI and each of the Shareholders shall use its and
their respective best efforts: (a) to obtain all waivers, consents and
approvals listed on Item 4.03 of the SMI Disclosure Schedule; (b) to obtain
all necessary consents, approvals and authorizations as are required to be
obtained under any Laws, to defend all lawsuits or other legal proceedings
challenging this Agreement or the Related Agreements or the consummation of
the transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby; and (c) to effect
all necessary registrations and filings and submissions of information
requested by governmental authorities.
6.09 Proxy Statement/Prospectus. SMI and the Shareholders, at the
Shareholders' sole expense, shall furnish to O&M and O&M Holding (a) as soon
as practicable, but in no event later than February 28, 1994, all financial
statements with respect to SMI and Midwest required to be included in the
Proxy Statement/Prospectus and (b) within 45 days after the date hereof, all
other information concerning SMI required for inclusion in the Proxy
Statement/Prospectus, or for any application or other filing to be made by
O&M or O&M Holding pursuant to this Agreement or pursuant to the rules and
regulations of any governmental body in connection with the transactions
contemplated by this Agreement, including without limitation all filings
required to be made under federal laws or state securities laws, and shall
otherwise cooperate with O&M and O&M Holding in connection therewith. SMI
represents and warrants that all information so furnished to O&M and O&M
Holding shall be correct in all material respects and shall not omit any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, and if SMI shall at any time discover that
any such information so furnished shall not be in compliance with the
foregoing, it will immediately notify O&M and O&M Holding of the same and
correct and supplement any such information to the extent that it is
necessary to do so. O&M represents and warrants that all information in the
Proxy Statement/Prospectus other than information furnished to O&M by SMI and
the Shareholders shall be correct in all material respects and shall not omit
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
6.10 Shareholders Meeting; Proxy Statement/Prospectus. O&M shall duly
call the O&M Shareholders' Meeting to be held as soon as practicable in
accordance with O&M's Bylaws and applicable Law for the purpose of approving
this Agreement and the transactions contemplated hereby, including the O&M
Plan of Exchange, and agrees to use its best efforts to obtain the necessary
adoption and approval thereof by the holders of O&M Common Stock. As
promptly as practicable following the execution and delivery of this
Agreement, O&M and O&M Holding shall prepare and file with the SEC the Proxy
Statement/Prospectus and form of proxy complying in all respects with the
proxy rules of the SEC and shall deliver the Proxy Statement/Prospectus and
form of proxy to its shareholders of record at the earliest practicable date
permitted under such rules for purposes of soliciting the proxies of the
holders of O&M Common Stock for the O&M Shareholders' Meeting.
6.11 Certain Notices. After the date hereof and prior to the Effective
Time, O&M shall give prompt notice to SMI and the Shareholders of (a) any
notice of, or other communication received by O&M relating to, a default or
event which with notice or lapse of time or both would become a default under
its Articles of Incorporation or Bylaws, or any indenture, loan agreement or
other material agreement to which O&M is a party, by which it or any of its
properties is bound or to which it or any of its properties is subject, (b)
any notice or other communication from any third party received by O&M
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated hereby and (c) any matter
which, if it had occurred prior to the date hereof, would have made any of
O&M's representations and warranties incorrect, incomplete or misleading.
6.12 Consents and Approvals. Each of O&M and O&M Holding shall use its
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 to consummate and make
effective the transactions contemplated by this Agreement, to cooperate with
SMI in connection with the foregoing and to obtain all consents, waivers,
approvals, authorizations or orders required for the authorization, execution
and delivery of this Agreement by O&M and the consummation by it of the
transactions contemplated hereby and thereby prior to the Effective Time and
to furnish true, correct and complete copies of each thereof to SMI. Without
limiting the foregoing, O&M shall use its best efforts: (a) to obtain all
waivers, consents and approvals listed on Item 5.03 of the O&M Disclosure
Schedule; (b) to obtain all necessary consents, approvals and authorizations
as are required to be obtained under any Laws, to defend all lawsuits or
other legal proceedings challenging this Agreement or the Related Agreements
or the consummation of the transactions contemplated hereby, to lift or
rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated hereby; and (c) to effect all necessary registrations and
filings and submissions of information requested by governmental authorities.
6.13 Severance Agreements. The Shareholders shall obtain from each
person who is a party to a Severance Agreement an agreement of satisfaction
and release of SMI, O&M and O&M Holding with respect thereto in a form
satisfactory to O&M Holding.
6.14 Phantom Stock Plans. SMI shall use its best efforts to obtain from
each participant in the Phantom Stock Plans an agreement of satisfaction and
release effective upon payment by SMI of $1,800,000 pursuant to Section 9.14
hereof in a form satisfactory to O&M.
6.15 SMI Funding.
(a) SMI will continue to sell all of its accounts receivable to
SMI Funding in accordance with the Sale and Administration Agreement through
the close of business on the day immediately preceding the Effective Time.
Before the Effective Time, SMI and SMI Funding will enter into an agreement
satisfactory to them and to O&M Holding providing for the termination, no
later than 150 days after the Effective Time, of the Sale and Administration
Agreement and any agreement relating thereto. Such agreement also will
provide, without limitation, that: (i) as of the close of business on the
day immediately preceding the Effective Time, SMI shall have no further
obligations to sell its receivables to SMI Funding and SMI Funding shall have
no further obligations to purchase such receivables; (ii) for a period not to
exceed 150 days after the Effective Time, SMI will continue to receive and
remit to SMI Funding the proceeds of all SMI receivables sold to SMI Funding
prior to the Effective Time; (iii) from and after the Effective Time, SMI
will have no obligations or liabilities whatsoever under the Sale and
Administration Agreement or any other agreement relating thereto; and (iv)
the following provisions will govern the application of payments received:
(x) all payments on accounts received or collected by SMI on or after the
Effective Time will be allocated among the receivables sold to SMI Funding
and the receivables of SMI arising on or after the Effective Time in the
manner specified in the remittance advice accompanying such payment; (y) if
such allocation is not so specified in any remittance advice, SMI will
contact the customer and request instructions as to how such payment should
be allocated and (z) if the customer then declines to give such instructions,
the amount of such payment shall be applied against the oldest outstanding
invoices.
(b) SMI will use its best efforts to sell all accounts receivable
purchased from Midwest in connection with the Midwest Acquisition to SMI
Funding pursuant to the terms of the Sale and Administration Agreement.
6.16 Supply Agreement. Prior to the Effective Time, SMI shall have
terminated its supply agreement with Pittsburgh International Medical Supply
and SMI shall have no further obligations under such agreement thereafter.
6.17 Servicing Agreements. Prior to the Effective Time, SMI and
Specialty shall have agreed in writing that (i) the Servicing Agreement
between them dated July 30, 1993 shall terminate no later than June 30, 1994
with respect to management information systems services and no later than the
Effective Time with respect to all other services provided thereunder and
(ii) the Warehousing Agreement between them dated July 30, 1993 shall
terminate no later than June 30, 1994.
6.18 Midwest Acquisition. SMI and O&M acknowledge that SMI has entered
into a letter of intent with respect to the Midwest Acquisition. The
Shareholders agree that they shall cause the Midwest Acquisition to be
consummated for an aggregate purchase price of not more than $12 million
(including the assumption of indebtedness and all payments to any person in
connection with such acquisition) no later than January 15, 1994.
6.19 Fixed Assets Inventory.
(a) On or before January 31, 1994, SMI shall permit O&M and its
representatives, together with SMI, to conduct an inventory of the fixed
assets of SMI of such scope as agreed upon between the parties. SMI agrees
to give O&M and its representatives access during normal business hours to
all of the offices, properties and relevant books and records of SMI in
accordance with the provisions of Section 6.01 hereof for purposes of
conducting any such fixed assets inventory.
(b) SMI shall use its reasonable best efforts to preserve its
fixed assets and prevent theft of its fixed assets, including personal
computers.
6.20 Specialty Obligations. Prior to the Effective Time, Specialty
shall have paid in full the Specialty Obligations, including accrued interest
thereon, if any, to the date of payment.
ARTICLE VII
Conditions Precedent to Obligations of SMI and the Shareholders
The obligations of SMI and the Shareholders under this Agreement are
subject, at the option of SMI and the Shareholders, to the fulfillment at or
prior to the Effective Time of each of the following conditions:
7.01 O&M Obligations. O&M shall have performed each obligation and
covenant to be performed by it hereunder on or prior to the Effective Time.
7.02 Accuracy of Representations and Warranties. The representations
and warranties of O&M set forth in this Agreement shall be true and correct
in all material respects at and as of the Effective Time as if made at and as
of such time, except (a) as explicitly permitted by this Agreement and (b) to
the extent that any such representation or warranty is made as of a specified
date, in which case such representation or warranty shall have been true and
correct as of such date.
7.03 Consents and Approvals. SMI shall have received, each in form and
substance satisfactory to SMI, all authorizations, consents, orders and
approvals of all governmental authorities and officials and all third party
consents listed on Item 4.03 of the SMI Disclosure Schedule and Item 5.03 of
the O&M Disclosure Schedule which SMI deems reasonably necessary for the
consummation of the transactions contemplated by this Agreement.
7.04 Court Orders. No preliminary or permanent injunction or other
order, decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission or statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority shall be in effect which would (a) make the Exchanges
or any of the transactions contemplated hereby illegal, (b) impose
limitations on the ability of SMI or O&M to operate their businesses
following the Exchanges other than a de minimus divestiture of SMI's or O&M's
business or operations as provided in Section 6.04 hereof or (c) otherwise
prevent the consummation of the Exchanges or the other transactions
contemplated hereby.
7.05 HSR Act. The waiting period (and any extensions thereof) under the
HSR Act applicable to the SMI Exchange shall have expired or terminated.
7.06 Actions and Proceedings. No suit, action or proceeding before any
court or any governmental or regulatory authority shall have been commenced
and be pending by any person against SMI, the Shareholders, O&M or O&M
Holding or any of their Affiliates, associates, officers or directors seeking
to restrain, prevent, change or delay in any respect the transactions
contemplated hereby, challenging any of the material terms or provisions of
this Agreement or seeking damages in connection with the transactions
contemplated hereby.
7.07 O&M Shareholder Vote. At O&M's Shareholders' Meeting, the holders
of more than two-thirds of the issued and outstanding shares of O&M Common
Stock shall have voted to approve this Agreement and the transactions
contemplated hereby, including the O&M Plan of Exchange.
7.08 Completion of Investigation. On or before the date the Proxy
Statement/Prospectus is mailed to the holders of O&M Common Stock, SMI and
the Shareholders shall have completed to their reasonable satisfaction, as
determined in good faith, a business and legal investigation of the matters
set forth in the O&M Disclosure Schedule. SMI, the Shareholders, O&M and O&M
Holding shall negotiate in good faith to resolve any issues disclosed in such
investigation.
7.09 Deliveries at Closing. O&M shall have delivered to SMI and the
Shareholders, each properly executed and dated as of the date of Closing:
(a) a certificate of the Chief Executive Officer and Chief
Financial Officer of O&M to the effect that, to their Knowledge, the
conditions specified in Section 7.01 and 7.02 hereof have been fulfilled;
(b) certified resolutions duly adopted by O&M's Board of Directors
approving the execution and delivery of this Agreement and consummation of
the transactions contemplated hereby and certified resolutions duly adopted
by the holders of O&M Common Stock approving this Agreement and the
transactions contemplated hereby, including the O&M Plan of Exchange;
(c) the opinion of Hunton & Williams, counsel to O&M,
substantially to the effect set forth in Exhibit E attached hereto, together
with such additional opinions as SMI may reasonably request and subject to
such assumptions and qualifications (including reliance on certificates of
officers of O&M and O&M Holding and governmental officials and opinions of
other counsel) as may be customary or reasonable under the circumstances;
(d) the Registration Rights Agreement; and
(e) a copy of the Amended and Restated Articles of Incorporation
of O&M Holding, in the form in which the same has been delivered to the
Commonwealth of Virginia State Corporation Commission for filing, which shall
reflect that the Series B Preferred Stock will be accorded substantially the
same relative seniority and priority, and will be entitled to substantially
the same rights, under such Amended and Restated Articles of Incorporation as
if the Series B Preferred Stock were to be issued as an additional series of
preferred stock of O&M under its articles of incorporation as in effect on
the date of this Agreement.
ARTICLE VIII
Conditions Precedent to the Obligations of O&M and O&M Holding
The obligations of O&M and O&M Holding under this Agreement are subject,
at the option of O&M and O&M Holding to the fulfillment at or prior to the
Effective Time of each of the following conditions:
8.01 SMI and Shareholders Obligations. Each of SMI and the Shareholders
shall have performed each obligation and covenant to be performed by each of
them hereunder on or prior to the Effective Time.
8.02 Accuracy of Representations and Warranties. The representations
and warranties of SMI and the Shareholders set forth in this Agreement shall
be true and correct in all material respects at and as of the Effective Time
as if made at and as of such time, except (a) as explicitly permitted by this
Agreement and (b) to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty
shall have been true and correct as of such date.
8.03 Consents and Approvals. O&M shall have received, each in form and
substance satisfactory to O&M, all authorizations, consents, orders and
approvals of all governmental authorities and officials and all third party
consents listed on Item 4.03 of the SMI Disclosure Schedule and Item 5.03 of
the O&M Disclosure Schedule which O&M deems reasonably necessary for the
consummation of the transactions contemplated by this Agreement, including
without limitation, the consent of each of O&M's lenders and VHA to the
transactions contemplated by this Agreement on terms reasonably satisfactory
to O&M.
8.04 Court Orders. No preliminary or permanent injunction or other
order, decree or filing issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission or statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority shall be in effect which would (a) make the Exchanges
or any of the transactions contemplated hereby illegal, (b) impose
limitations on the ability of SMI or O&M to operate their businesses
following the Exchanges other than a de minimus divestiture of SMI's or O&M's
business or operations as provided in Section 6.04 hereof or (c) otherwise
prevent the consummation of the Exchanges or the transactions contemplated
hereby.
8.05 HSR Act. The waiting period (and any extensions thereof) under the
HSR Act applicable to the SMI Exchange shall have expired or terminated.
8.06 Actions and Proceedings. No suit, action or proceeding before any
court or any governmental or regulatory authority shall have been commenced
and be pending by any person against SMI, the Shareholders, O&M or O&M
Holding or any of their Affiliates, associates, officers or directors seeking
to restrain, prevent, change or delay in any respect the transactions
contemplated hereby, challenging any of the material terms or provisions of
this Agreement or seeking damages in connection with the transactions
contemplated hereby.
8.07 O&M Shareholder Vote. At O&M's Shareholders' Meeting, the holders
of more than two-thirds of the issued and outstanding shares of O&M Common
Stock shall have voted to approve this Agreement and the transactions
contemplated hereby, including the O&M Plan of Exchange.
8.08 Opinion of J. P. Morgan. Before the Proxy Statement/Prospectus is
mailed to the holders of O&M Common Stock, the Board of Directors of O&M
shall have received from J. P. Morgan a written opinion addressed to it, in
form and substance reasonably satisfactory to the Board of Directors of O&M
and its counsel, for inclusion in the Proxy Statement/Prospectus, and dated
on or about the date thereof, substantially to the effect that the proposed
consideration to be paid by O&M Holding pursuant to the SMI Exchange is fair
to the holders of O&M Holding Common Stock and O&M Holding from a financial
point of view, and J. P. Morgan shall not have withdrawn such opinion before
the Effective Time.
8.09 Completion of Investigation. On or before the date the Proxy
Statement/Prospectus is mailed to the holders of O&M Common Stock, O&M shall
have completed to its reasonable satisfaction, as determined in good faith,
a business and legal investigation of the matters set forth in the SMI
Disclosure Schedule. SMI, the Shareholders, O&M and O&M Holding shall
negotiate in good faith to resolve any issues disclosed in such
investigation.
8.10 VHA. O&M shall have received assurances from VHA that it does not
intend to terminate or substantially reduce the volume of business under its
contracts with SMI or O&M.
8.11 Opinion Concerning Certain Tax Matters. O&M shall have received
the written opinion of Hunton & Williams to the effect that no gain will be
recognized for federal income tax purposes as a result of the Exchanges by
SMI, O&M Holding, O&M or the holders of O&M Common Stock, and that the basis
of holders of O&M Common Stock in the O&M Holding Common Stock received in
the O&M Exchange will be the same as the basis of the O&M Common Stock
exchanged therefor.
8.12 Title to Real Property. O&M shall have received evidence that SMI
has an owner's title insurance policy in an amount reasonably satisfactory to
O&M insuring that SMI has good and marketable title to the Real Property and
that the Real Property is free and clear of all liens, objections, charges,
pledges and other encumbrances other than Permitted Liens.
8.13 Environmental Matters. O&M shall have received a copy of an
environmental report prepared by environmental engineers or auditors selected
by O&M and at O&M's expense containing information consistent with good
commercial and engineering practices to the reasonable satisfaction of O&M
that no environmental noncompliance or conditions exist on or with respect to
the Real Property or the Leased Property that could result in liabilities in
excess of $250,000.
8.14 Refinancing of SMI Indebtedness; Additional O&M Indebtedness. O&M
Holding shall have received on or prior to the Effective Time proceeds of
financings that are adequate, in the reasonable opinion of O&M Holding, for
(a) the refinancing of SMI's indebtedness (other than any indebtedness
incurred to make the $3,000,000 distribution described in Section 6.03(a))
and (b) the refinancing of O&M's existing bank loans and all additional
financing necessary for the transactions contemplated hereby, all on terms
reasonably satisfactory to O&M Holding.
8.15 Registration Statement. The registration statement of which the
Proxy Statement/Prospectus constitutes a part shall have become effective and
shall not be subject to any stop order issued by the SEC, and no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, or shall have been
threatened and be unresolved.
8.16 Deliveries at Closing. SMI and the Shareholders shall have
delivered to O&M and O&M Holding, each properly executed and dated as of the
date of Closing:
(a) a certificate of the Chief Executive Officer and Chief
Financial Officer of SMI to the effect that, to their Knowledge, the
conditions specified in Sections 8.01 and 8.02 hereof have been fulfilled;
(b) a certificate from each of the Shareholders to the effect
that, to his Knowledge, the conditions specified in Sections 8.01 and 8.02
hereof have been fulfilled;
(c) certified resolutions duly adopted by SMI's Board of Directors
approving the execution and delivery of this Agreement and consummation of
the transactions contemplated hereby and certified resolutions duly adopted
by the Shareholders approving the SMI Plan of Exchange and the transactions
contemplated by this Agreement;
(d) the opinion of Cohen & Grigsby, P.C., counsel to SMI,
substantially to the effect set forth in Exhibit F attached hereto, together
with such additional opinions as O&M may reasonably request and subject to
such assumptions and qualifications (including reliance on certificates of
officers of SMI and governmental officials and opinions of other counsel) as
may be customary or reasonable under the circumstances;
(e) the opinion of H. Vaughan Blaxter, III, or Russell W. Ayres,
III, substantially to the effect set forth in Exhibit G attached hereto,
together with such additional opinions as O&M may reasonably request and
subject to such assumptions and qualifications (including reliance on
certificates of Shareholders and governmental officials and opinions of other
counsel) as may be customary or reasonable under the circumstances;
(f) the Registration Rights Agreement;
(g) releases executed by each of the Shareholders releasing SMI
from any claim he may have against SMI with respect to all matters and
dealings with SMI prior to the date of Closing;
(h) the releases referred to in Sections 6.13 and 6.14 hereof with
respect to the Severance Agreements and the Phantom Stock Plans,
respectively;
(i) the agreement between SMI and SMI Funding referred to in
Section 6.15 hereof;
(j) estoppel certificates in a form reasonably satisfactory to O&M
from each sublessee of Leased Property;
(k) an IRS Form W-9 completed and executed by each Shareholder;
and
(l) a statement executed by each Shareholder providing a good
faith estimate of his or her adjusted basis for federal income tax purposes
in the shares of SMI Common Stock owned by such Shareholder immediately
before the Effective Time.
ARTICLE IX
Indemnification and
Additional Agreements
9.01 The Shareholders' Indemnity.
(a) Each of the Shareholders hereby jointly and severally agrees
to indemnify and hold O&M's Indemnitees harmless from and against, and agrees
to defend promptly O&M's Indemnitees from and reimburse O&M's Indemnitees
for, any and all losses, damages, costs, expenses, liabilities, obligations
and claims of any kind, including, without limitation, reasonable attorneys'
fees and other legal costs and expenses (hereinafter referred to collectively
as "Losses"), that O&M's Indemnitees may at any time suffer or incur, or
become subject to, as a result of or in connection with: (i) any breach or
inaccuracy of any of the representations and warranties made by SMI or the
Shareholders in or pursuant to this Agreement; (ii) any failure of SMI or any
of the Shareholders to carry out, perform, satisfy and discharge any of its
or his covenants, agreements, undertakings, liabilities or obligations under
this Agreement or the Related Agreements or under any of the documents and
instruments delivered by the Shareholders or SMI pursuant to this Agreement;
(iii) the conduct of the business of SMI at any time before the Effective
Time to the extent such activities result in any loss or liability (including
tax obligations) that is not fully reflected on the Closing Balance Sheet or
(except for the Specialty Litigation) the SMI Disclosure Schedules; provided,
that, with respect to Losses related to the matters disclosed on Item 4.10A
of the SMI Disclosure Schedule, the Shareholders shall indemnify O&M's
Indemnitees for any amount by which the insurance deductible of SMI
applicable to such matter exceeds the deductible, if any, provided for under
O&M's insurance policy applicable to such a matter and in effect at the time
of the occurrence of the event from which such Loss arose; (iv) any Specialty
Litigation and any liability relating to or arising from the sale or other
disposition or operation of any separate line of business formerly (but not
now) conducted by SMI (whether as an unincorporated division or business
function or as a subsidiary, direct or indirect), including without
limitation Specialty and the former AIP division; (v) any Balance Sheet
Deficiency; (vi) any costs, expenses or other liabilities incurred by SMI,
O&M or O&M Holding resulting from the exercise by any holder of SMI Common
Stock of dissenters' rights in connection with the transactions contemplated
by this Agreement to the extent such costs, expenses or other liabilities
exceed the sum of the cash consideration and the aggregate par value of the
O&M Holding Preferred Stock to which such dissenting shareholder would have
been entitled to pursuant to the SMI Plan of Exchange; (vii) the matter
described on Item 4.10 of the SMI Disclosure Schedule with respect to the SMI
401(k) Plan, including but not limited to any costs of litigation with
respect to such matter and the failure of the SMI 401(k) Plan to qualify and
continue to qualify as a Qualified Pension Plan as a consequence of such
matter described on Item 4.10 of the SMI Disclosure Schedule or as a
consequence of any other matter occurring prior to the Effective Time; (viii)
any obligation under the Phantom Stock Plans in excess of the amount set
forth in Section 9.14 hereof; (ix) the Severance Agreements; and (x) any and
all obligations, expenses or liabilities incurred by SMI, O&M or O&M Holding
relating to or arising out of the Sale and Administration Agreement or any
other agreement relating thereto (other than the agreement to be entered into
by SMI and SMI Funding pursuant to Section 6.15 hereof); provided, however,
that O&M's Indemnitees shall have no right to be indemnified, held harmless
from, defended or reimbursed under Section 9.01(a)(i) unless such right is
asserted (whether or not such Losses have actually been incurred) within 24
months after the Effective Time, except there shall be no time limitation
with respect to the representations set forth in Sections 4.01, 4.02, 4.04
and 4.20 hereof, and the time limit with respect to any matter covered by
Section 4.21 hereof shall be 30 days after the expiration of the applicable
statute of limitations with respect to such matter; and provided, further,
that with respect to Losses related to item (vii) hereof, the term O&M's
Indemnitees shall also include the SMI 401(k) Plan, the SMI 401(k) Plan's
trust, and the participants, beneficiaries and alternate payees of the SMI
401(k) Plan (other than participants who have been trustees of the SMI 401(k)
Plan and beneficiaries and alternate payees of participants who have been
trustees of the SMI 401(k) Plan). Notwithstanding the foregoing, the
Shareholders shall not be required to indemnify O&M's Indemnitees under
Section 9.01(a)(i), (ii), (iii) and (v) unless and until the amount of all
Losses (without regard to any potential tax benefits) for which
indemnification is sought with respect thereto shall exceed $1,000,000 and
then only to the extent and in the amount of such excess.
(b) In the event a claim against O&M's Indemnitees arises that is
covered by the indemnity provisions of Section 9.01(a) hereof, notice shall
be given promptly by O&M Holding to the Shareholders' Representative.
Provided that the Shareholders' Representative admits in writing to O&M
Holding that such claim is covered by the indemnity provisions of Section
9.01(a) hereof, the Shareholders' Representative shall have the right to
contest and defend by all appropriate legal proceedings such claim and to
control all settlements (unless O&M Holding agrees to assume the cost of
settlement and to forgo such indemnity) and to select lead counsel to defend
any and all such claims at the sole cost and expense of the Shareholders;
provided, however, that the Shareholders' Representative may not effect any
settlement that could result in any cost, expense or liability to the O&M
Indemnities unless O&M Holding consents in writing to such settlement and the
Shareholders' Representative agrees to indemnify the O&M Indemnitees
therefor. O&M Holding may select counsel to participate in any defense
assumed by the Shareholders, in which event such counsel shall be at O&M
Holding's own cost and expense. In connection with any such claim, action or
proceeding, the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession.
9.02 O&M's Indemnity.
(a) Each of O&M Holding and O&M hereby agrees to indemnify and
hold Shareholders' Indemnitees harmless from and against, and agree to defend
promptly Shareholders' Indemnitees from and reimburse Shareholders'
Indemnitees for, any and all Losses that Shareholders' Indemnitees may at any
time suffer or incur, or become subject to, as a result of or in connection
with: (i) any breach or inaccuracy of any of the representations and
warranties made by O&M in or pursuant to this Agreement; (ii) any failure by
O&M to carry out, perform, satisfy and discharge any of its covenants,
agreements, undertakings, liabilities or obligations under this Agreement or
the Related Agreements and (iii) the conduct by SMI, O&M or O&M Holding of
the business of SMI after the Effective Time other than with respect to
facts, circumstances or conditions existing as of the Effective Time;
provided, however, that Shareholders' Indemnitees shall have no right to be
indemnified, held harmless from, defended or reimbursed under Section
9.02(a)(i) unless such right is asserted (whether or not such Losses have
actually been incurred) within 24 months after the Effective Time, except
there shall be no time limitation with respect to the representations set
forth in Sections 5.01 and 5.02 hereof. Notwithstanding the foregoing, O&M
and O&M Holding shall not be required to indemnify Shareholders' Indemnitees
under this Section 9.02 unless and until the amount of all Losses (without
regard to any potential tax benefits) for which indemnification is sought
with respect thereto shall exceed $1,000,000 and then only to the extent and
in the amount of such excess.
(b) In the event a claim against Shareholders' Indemnitees arises
that is covered by the indemnity provisions of Section 9.02(a) hereof, notice
shall be given promptly by the Shareholders' Representative to O&M Holding.
Provided that O&M Holding admits in writing to the Shareholders'
Representative that such claim is covered by the indemnity provisions of
Section 9.02(a) hereof, O&M Holding shall have the right to contest and
defend by all appropriate legal proceedings such claim and to control all
settlements (unless the Shareholders' Representative agrees to assume the
cost of settlement and to forgo such indemnity) and to select lead counsel to
defend any and all such claims at the sole cost and expense of O&M Holding;
provided, however, that O&M Holding may not effect any settlement that could
result in any cost, expense or liability to the Shareholders unless the
Shareholders' Representative consents in writing to such settlement and O&M
Holding agrees to indemnify the Shareholders therefor. The Shareholders'
Representative may select counsel to participate on behalf of the
Shareholders in any defense assumed by O&M Holding, in which event the
Shareholders' counsel shall be at their own cost and expense. In connection
with any such claim, action or proceeding, the parties shall cooperate with
each other and provide each other with access to relevant books and records
in their possession.
9.03 Acquisition for Investment; Transfer Limitations. Each of the
Shareholders represents and warrants to O&M Holding that he is an "accredited
investor", as defined in Rule 501 under the Securities Act, his respective
shares of O&M Holding Preferred Stock are being acquired in the SMI Exchange
for investment purposes and not with a view toward any resale or any
distribution thereof. No Shareholder may Transfer shares of the O&M Holding
Preferred Stock; provided, however, a Shareholder may Transfer O&M Holding
Preferred Stock (a) by a gift, (b) by descent or distribution, (c) to
beneficiaries pursuant to a trust existing as of the date hereof and (d) to
a Shareholder if, in any such case, the transferee (other than a charitable
institution holding less than 1% of the O&M Holding Common Stock) expressly
agrees in writing to be bound by the terms of Sections 9.03, 9.04, 9.05 and
9.06 hereof. Each Shareholder may only Transfer shares of O&M Holding Common
Stock in compliance with this Section and Section 9.04 hereof and the
Securities Act. Each Shareholder acknowledges that the shares of O&M Holding
Preferred Stock (and the shares of O&M Holding Common Stock received upon
conversion thereof) will be issued pursuant to an exemption from registration
under the Securities Act, and the certificates representing such shares will
bear a legend indicating that they have not been registered under the
Securities Act and may not be Transferred by such Shareholder, except, in the
case of the O&M Holding Common Stock, in compliance with this Agreement and
pursuant to an effective registration statement or pursuant to an exemption
from registration. In the event a Shareholder determines to Transfer any
shares of O&M Holding Common Stock pursuant to an exemption from registration
under the Securities Act, such Shareholder will, prior to Transferring such
shares, cause counsel selected by such Shareholder but satisfactory to O&M
Holding to deliver an opinion to O&M Holding to the effect that the Transfer
of such shares is exempt from the registration provisions of the Securities
Act or, in the case of a transfer permitted by Rule 144, such Shareholder
will provide evidence satisfactory to O&M Holding that the Transfer of such
shares is exempt from the registration provisions of the Securities Act.
9.04 Right of First Refusal.
(a) In the event that any Shareholder desires to Transfer to any
third party any shares of O&M Holding Common Stock as permitted by Section
9.03 hereof, he shall give O&M Holding notice ("Notice of Transfer") of his
bona fide intent to sell such shares of O&M Holding Common Stock, specifying
(i) the number of shares to be Transferred, (ii) the prospective purchasers
thereof, (iii) the minimum price and other terms and conditions of such
Transfer, and offering to Transfer such shares of O&M Holding Common Stock to
O&M or its designee(s) at such minimum price and on such terms and
conditions. The Notice of Transfer shall be accompanied by a copy of the
offer from such third party.
(b) If O&M Holding or its designee(s) shall not within 30 days
after receipt of the Notice of Transfer accept such offer in writing with
respect to all the shares of O&M Holding Common Stock specified in such
notice, then, subject to the provisions of paragraphs (c) and (e) hereof,
such Shareholder may Transfer such shares to the prospective purchasers
specified in such Notice of Transfer at a price equal to or above the minimum
price and on other terms and conditions no less favorable to such
Shareholder than those specified in the Notice of Transfer, at any time
within 60 days of the expiration of such 30-day period, but not otherwise.
(c) If such Shareholder shall not have consummated the proposed
Transfer within 60 days after the expiration of the 30-day period referred to
in paragraph (b) above, then he may not Transfer such shares of O&M Holding
Common Stock without again complying with the provisions of this Section
9.04.
(d) If O&M Holding or its designee(s) shall accept such offer
within 30 days after the receipt of the Notice of Transfer pursuant to
paragraph (b) above, then O&M Holding or its designee(s) shall purchase the
shares of O&M Holding Common Stock specified in such notice as promptly as is
reasonably practicable, but in no event later than 60 days following such
acceptance.
(e) Notwithstanding any other provision in this Section 9.04, each
Shareholder agrees that he will not, without the prior written consent of O&M
Holding, knowingly Transfer any shares of O&M Holding Common Stock to a
competitor of O&M Holding (including any officer, director, employee,
shareholder or Affiliate of such competitor) or to any person (including such
person's Affiliates and any person or entity which is, to his Knowledge after
inquiry of O&M Holding, part of any group which includes such transferee or
any of its Affiliates) that, after giving effect to such Transfer, would
beneficially own 5% or more of the issued and outstanding shares of O&M
Holding Common Stock unless the transferee agrees to be bound by Sections
9.03, 9.04, 9.05 and 9.06 hereof.
(f) Notwithstanding any provision to the contrary in this Section
9.04, a Shareholder may Transfer O&M Holding Common Stock without complying
with the provisions of this Section 9.04 (i) by a gift, (ii) by descent or
distribution, (iii) to beneficiaries pursuant to a trust existing as of the
date hereof, or (iv) to a Shareholder; provided, that, in any such case, the
transferee (other than a charitable institution holding less than 1% of the
O&M Holding Common Stock) expressly agrees in writing to be bound by the
terms of Sections 9.03, 9.04, 9.05 and 9.06 hereof and O&M is given prior
written notice of such Transfer.
9.05 Standstill. Each Shareholder agrees that so long as (i) he owns
any shares of O&M Holding Preferred Stock or (ii) the Shareholders,
collectively with their respective Affiliates, own 5% or more of the issued
and outstanding shares of O&M Holding Common Stock, without the prior written
consent of O&M Holding, he will not and will cause his Affiliates not to:
(a) acquire, offer to acquire or agree to acquire, directly or
indirectly, by purchase or otherwise, or initiate contact with any person
with the intent to advise, encourage or assist such or any other person to
purchase or acquire in any manner shares of any class of capital stock of O&M
Holding ("O&M Holding Capital Stock"), or participate with or provide
assistance to any person in the purchase or other acquisition of O&M Holding
Capital Stock;
(b) form, join or in any way participate in a "group" within the
meaning of Section 13(d)(3) of the Exchange Act with respect to O&M Holding
Capital Stock, except insofar as such group consists solely of the
Shareholders;
(c) "solicit" proxies with respect to O&M Holding Capital Stock
under any circumstance; or become a "participant" by taking a position
contrary to that of the Board of Directors of O&M Holding in any contest
relating to the election of directors of O&M Holding or any other matters
submitted to shareholders at an annual meeting or any special meeting (as
such defined terms are used in Regulation 14A under the Act); a Shareholder
shall be deemed to "solicit" or to be such a "participant" if he counsels or
advises or otherwise provides assistance to any person who undertakes or
makes such a "solicitation" or is such a "participant," but shall not, in any
event, be deemed to "solicit" or to be such a "participant" by reason of
exercise of his voting rights with respect to O&M Holding Capital Stock;
(d) deposit any O&M Holding Capital Stock, or any securities
convertible into O&M Holding Capital Stock, in a voting trust, or subject any
O&M Holding Capital Stock, or any securities convertible into O&M Holding
Capital Stock, to a voting or similar agreement, other than as required by
Section 9.06 hereof;
(e) directly or indirectly offer, sell, transfer, pledge or
otherwise dispose of or encumber any O&M Holding Capital Stock, or any
securities convertible into O&M Holding Capital Stock except, subject (in the
cases described in clauses (i) and (ii) below) to prior compliance with the
provisions of Section 9.04 hereof:
(i) sales of O&M Holding Capital Stock pursuant to an
underwritten distribution to the public, registered under the
Securities Act, in which the Shareholders use their best efforts
and direct the underwriters to use their best efforts to effect as
wide a distribution of such O&M Holding Capital Stock as reasonably
practicable and to prevent any one person or group from purchasing
through such offering a number of shares representing more than 2%
of the total number of shares of all O&M Holding Capital Stock;
(ii) sales of O&M Holding Capital Stock in open market
transactions pursuant to Rule 144 of the General Rules and
Regulations under the Securities Act (provided that any such sale
is in compliance with the requirements of paragraphs (c)(d)(e)(f)
and (g) of such rule notwithstanding the provisions of paragraph
(k) of such rule) and in accordance with Section 9.03 hereof;
(iii) a bona fide pledge of, or the granting of a security
interest in, such O&M Holding Capital Stock to an institutional
lender to secure a bona fide loan or guarantee, provided that the
lender acknowledges in writing that it has received a copy of this
Agreement and agrees that prior to making any offer to sell, sale,
transfer or other disposition of such O&M Holding Capital Stock,
whether upon foreclosure of such pledge or security interest or
otherwise, such lender will give O&M the opportunity to purchase
such O&M Holding Capital Stock in the manner specified in Section
9.04 hereof; or
(iv) sales of O&M Holding Capital Stock to O&M Holding or to
any person or group designated by O&M Holding; or
(f) initiate, commence or propose, or induce or attempt to induce
or give encouragement to any other person to initiate, commence or propose,
any tender or exchange offer for O&M Holding Capital Stock or any "affiliated
transaction" (as that term is defined in Section 13.1-725 of the Code of
Virginia, as in effect on the date of this Agreement, but with the phrase
"any other Person" substituted for the phrase "any interested shareholder").
9.06 Voting Agreement. Each Shareholder agrees that, so long as (a) he
owns any shares of O&M Holding Preferred Stock or (b) the Shareholders,
collectively with their respective Affiliates, own 5% or more of the issued
and outstanding shares of O&M Holding Common Stock, he shall vote all shares
of O&M Holding Preferred Stock or O&M Holding Common Stock, as the case may
be, with respect to each matter to be voted upon by the holders of such
shares, in the same proportion as the votes cast on such matter by all other
holders of the O&M Holding Common Stock (excluding for such purposes shares
held by any person or "group" within the meaning of Section 13(d)(3) of the
Exchange Act (other than any employee benefit plan of O&M Holding, O&M or the
O&M Subsidiaries or any person holding shares for or pursuant to the terms of
any such employee benefit plan) which beneficially owns 5% or more of the
issued and outstanding shares of O&M Holding Common Stock); provided,
however, that the provisions of this Section 9.06 shall not apply with
respect to (a) any matter to be voted upon by holders of O&M Holding Capital
Stock that would amend (i) the provisions of the Series B Preferred Stock or
(ii) any other provisions of the Articles of Incorporation or Bylaws of O&M
Holding if such amendment would affect adversely the relative rights or
preferences thereof and (b) the election of any director who may be elected
by the holders of O&M Holding Preferred Stock and any nominee to the Board of
Directors of O&M Holding designated by the Shareholders' Representative in
accordance with Section 9.09 hereof.
9.07 Noncompetition Covenant. Each of the Shareholders agrees that,
except for his ownership of shares of O&M Holding Preferred Stock or O&M
Holding Common Stock and without the prior written consent of O&M Holding,
for a period of three years after the Effective Time (the "Noncompete
Period"), he will not, directly or indirectly, either individually or as an
employee, agent, partner, investor, shareholder, consultant or in any other
capacity participate in or have a financial or other interest in any business
in the United States (the "Noncompete Area") which is competitive with the
business conducted by O&M, SMI or the O&M Subsidiaries as of the Effective
Time; provided, however, that the foregoing shall not preclude the
Shareholders or their respective Affiliates from owning in the aggregate,
directly or indirectly, up to 5% of the issued and outstanding shares of any
class of capital stock of a company, the stock of which is publicly traded on
a national securities exchange or in the over-the-counter market. The
parties acknowledge that the business conducted as of the date hereof by
Specialty is not competitive with the business conducted by O&M, the O&M
Subsidiaries or SMI.
If a judicial determination is made that any provision of this Section
9.07 constitutes an unreasonable or otherwise unenforceable restriction
against the Shareholders, the provisions of this Section 9.07 shall be
rendered void only to the extent that such judicial determination finds such
provisions to be unreasonable or otherwise unenforceable. In this regard,
the parties hereto hereby agree that any judicial authority construing this
provision shall be empowered to sever any portion of the Noncompete Area or
any prohibited business activity from the coverage of this Section 9.07 and
to apply the provisions of this Section 9.07 to the remaining portion of the
Noncompete Area or the remaining business activities not so severed by such
judicial authority.
The Shareholders hereby agree that any remedy at law for any breach of
the provisions contained in this Section 9.07 shall be inadequate and that
O&M Holding shall be entitled to injunctive relief in addition to any other
remedy it might have hereunder.
The running of the Noncompete Period shall be tolled during, and the
Noncompete Period shall be extended by, any period of time during which any
Shareholder violates the terms of this Section 9.07 as determined by a court
of competent jurisdiction.
9.08 Tax Returns.
(a) O&M Holding and the Shareholders acknowledge that the status
of SMI as an "S corporation" will be terminated by the SMI Exchange, that
SMI's taxable year will end at the close of the day before the Effective Time
(the "Last SMI Year"), that SMI's books shall be closed for income tax
purposes as of the close of the Last SMI Year, and that a new taxable year
for SMI will begin on the date of the Effective Time (the "First C Year").
The Shareholders shall cause to be prepared and timely filed (taking into
account permitted extensions of the due date) all income tax returns of SMI
for the Last SMI Year and, if not filed before the day of the Effective Time,
SMI's preceding taxable year (e.g., IRS Form 1120S, Schedule K-1(1120S) and
state income tax returns). A photocopy of each such tax return shall be
furnished to O&M Holding at least 30 days before the due date (including any
extensions) for filing the tax return. The Shareholders' Representative
shall deliver to O&M Holding, with the photocopy of the proposed IRS Form
1120S for the Last SMI Year, a schedule updating the tax basis information
provided by the Shareholders pursuant to Section 8.16(l) hereof. If O&M
Holding disagrees with the amount or treatment of any item on any such
return, O&M Holding shall notify the Shareholders' Representative, and O&M
Holding and the Shareholders' Representative shall proceed in good faith to
resolve any dispute regarding the return before the due date. All income tax
returns filed after the date of the Effective Time for taxable years of SMI
beginning before such date shall be based on the same tax accounting methods
and elections as used for its taxable year immediately preceding the year of
such return, except as otherwise required by law or as agreed upon by O&M
Holding and the Shareholders' Representative.
(b) The Shareholders, O&M Holding and SMI will cooperate with each
other to the extent reasonably required to facilitate the preparation and
timely filing of (i) any income tax return of SMI for its Last SMI Year, the
preceding taxable year, or its First C Year and (ii) any tax information
return, report, or statement with respect to the SMI Exchange.
9.09 Board Nominee. Commencing when and continuing for so long as the
Shareholders, collectively, have the right to vote at least 5% of the
outstanding shares of O&M Holding Common Stock, O&M Holding will exercise all
authority under applicable law (subject to the fiduciary obligations of the
Board of Directors of O&M Holding to O&M Holding's shareholders) to cause one
nominee designated by the Shareholders' Representative and reasonably
acceptable to the Board to be included in the slate of nominees recommended
by such Board to O&M Holding's shareholders for election as directors at each
annual meeting of shareholders of O&M Holding.
9.10 Financial Statements. The Shareholders shall cause E&Y to prepare
and deliver to O&M Holding by February 28, 1994 audited balance sheets as of
December 31, 1993 and 1992 and April 30, 1992 and 1991 and audited statements
of income and cash flow for the year ended December 31, 1993, the fiscal
years ended April 30, 1992 and 1991 and the eight months ended December 31,
1992 and any other financial statements of SMI and Midwest as may be required
by Rule 3-05(b) of Regulation S-X of the SEC audited by E&Y that have not
been delivered previously pursuant to Section 6.09 hereof.
9.11 Tax Status of Exchanges. O&M, O&M Holding, SMI and the
Shareholders acknowledge that the Exchanges are intended to qualify as a
transaction described in Section 351 of the Code and that the Exchanges are
intended to be pursuant to a single plan for purposes of Section 351 of the
Code and the regulations thereunder. O&M, O&M Holding, SMI and the
Shareholders covenant that they will report the Exchanges in accordance with
such intent for federal income tax purposes.
9.12 Shareholders' Representative. Each of the Shareholders hereby
appoints C. G. Grefenstette or his designee (as appointed in writing), as the
agent, proxy, and attorney-in-fact for the Shareholders for all purposes
under this Agreement (including without limitation full power and authority
to act on the Shareholders' behalf) (a) to consummate the transactions
contemplated under this Agreement, (b) in the event of such consummation, to
receive on behalf of the Shareholders each of such Shareholder's SMI Exchange
Consideration, (c) to pay in accordance with Section 11.01 hereof the
Shareholders' share of the transaction expenses, (d) to execute and deliver
the Certificates and such further instruments of assignment as O&M Holding
shall reasonably request, (e) to execute and deliver on behalf of the
Shareholders any amendment to this Agreement, provided that such amendment
does not change the definition or manner of calculating the SMI Exchange
Consideration to be received by the holders of the SMI Common Stock or does
not increase the Shareholders' liabilities in any material respect and does
not alter Article IV hereof in a manner adverse to the Shareholders, and (f)
to take all other actions to be taken by or on behalf of the Shareholders and
exercise any and all rights which the Shareholders are permitted or required
to do or exercise under this Agreement. The Shareholders' Representative
shall not be liable to the Shareholders for any error in judgment for any act
or step taken, or permitted to be taken, in good faith, or for doing anything
in connection herewith, except for his own willful misconduct or gross
negligence. As between themselves and the Shareholders' Representative, the
Shareholders, jointly and severally, agree to indemnify the Shareholders'
Representative against, and hold the Shareholders' Representative harmless
from, any and all losses, costs, damages, expenses, claims and attorneys'
fees suffered or incurred by the Shareholders' Representative as a result of,
in connection with, or arising from or out of, the acts or omissions of the
Shareholders Representative in performance of, or pursuant to, this
Agreement, except such acts or omissions as may result from the Shareholders'
Representative's willful misconduct or gross negligence.
9.13 Books and Records. O&M Holding agrees to cooperate with and make
available to the Shareholders during normal business hours, all books,
records and information relating to SMI that are necessary or useful in
connection with any tax inquiry, audit, investigation or dispute, any
litigation or investigation or any other matter. The Shareholder(s)
requesting any such books, records, information or employees shall bear all
of the out-of-pocket costs and expenses (including, without limitation,
attorneys' fees, but excluding reimbursement for salaries and employee
benefits) reasonably incurred in connection with providing such books,
records, information or employees.
9.14 Phantom Stock Plans. Immediately following the Effective Time, SMI
shall pay to the participants in the Phantom Stock Plans an aggregate of
$1,800,000 in satisfaction in full of SMI's obligations under such plan.
9.15 New York Stock Exchange Listing Application. O&M Holding agrees to
use its best efforts to cause the shares of O&M Holding Common Stock issuable
upon conversion of the O&M Preferred Stock to be listed on the New York Stock
Exchange.
9.16 Midwest Accounts Receivable Guarantee.
(a) SMI shall have the right, at any time after the 150th day
following the Effective Time, to assign to the Shareholders a face amount of
Midwest Receivables (the "Assigned Receivables") equal to the uncollected
portion of any Midwest Receivable included on the Closing Balance Sheet that
has not been collected by SMI within 150 days after the Effective Time;
provided, however, that prior to such reassignment, SMI shall use reasonable
and customary efforts to collect such Midwest Receivables (which shall not
require SMI to employ commercial collection agencies or file suit). SMI
shall deliver to the Shareholders' Representative all documents that relate
to the Assigned Receivables and any similar documents generated by SMI after
the Effective Time. Upon receipt of a document from SMI transferring the
Assigned Receivables to the Shareholders, the Shareholders shall have the
joint and several obligation to promptly pay to SMI the face amount of the
Assigned Receivables (less any reserve for the Midwest Receivables on the
Closing Balance Sheet). SMI shall cooperate with the Shareholders in any
reasonable collection efforts relating to the Assigned Receivables, including
remitting to the Shareholders' Representative any proceeds received by SMI
with respect to such Assigned Receivables.
(b) All payments on the relevant accounts received by SMI during
the period beginning at the Effective Time and ending on the 150th day
following the Effective Time shall be allocated among the Midwest Receivables
and the relevant accounts receivable arising after the Effective Time in the
manner specified in the remittance advice accompanying such payment. If such
allocation is not so specified in any remittance advice, SMI will contact the
customer and request instructions as to how such payment should be allocated.
If the customer then declines to give such instructions, the amount of such
payment shall be applied against the oldest outstanding invoices.
ARTICLE X
Termination, Amendment and Waiver
10.01 Termination. This Agreement may be terminated and the
Exchanges may be abandoned, by written notice promptly given to the other
parties hereto, at any time prior to the Effective Time:
(a) By mutual written consent of SMI, the Shareholders, O&M and
O&M Holding;
(b) By SMI and the Shareholders, if O&M enters into a definitive
agreement with respect to (i) any acquisition or purchase of assets of, or
any equity interest in, or any exchange offer, merger, consolidation,
business combination, sale of all or substantially all of the assets, sale of
securities, liquidation, dissolution or similar transactions involving O&M,
or (ii) any acquisition by O&M of another corporation or other entity, in any
such case in which the value of the aggregate consideration to be paid would
exceed $100,000,000;
(c) By SMI and the Shareholders, if O&M fails to perform in any
material respect any of its obligations under this Agreement;
(d) By SMI and the Shareholders, if there has been a material
breach by O&M of any representation and warranty contained in this Agreement;
(e) By O&M and O&M Holding if there has been a material breach by
SMI or the Shareholders of any representation and warranty contained in this
Agreement except to the extent the material breach of such representation or
warranty shall result in the indemnification therefor by the Shareholders
pursuant to Section 9.01(a)(vii);
(f) By O&M and O&M Holding, if SMI or any of the Shareholders
fails to perform in any material respect any of its obligations under this
Agreement;
(g) By O&M or the Shareholders, if the O&M Exchange is not
approved by the shareholders of O&M at the O&M Shareholders' Meeting; or
(h) By any of SMI, the Shareholders, O&M or O&M Holding, if the
Effective Time shall not have occurred on or before June 30, 1994.
10.02 Effect of Termination. In the event of the termination of
this Agreement as provided in Section 10.01, this Agreement shall forthwith
become void and there shall be no liability on the part of SMI, O&M or the
Shareholders except as set forth in Sections 6.02, 10.03 and 11.02. Nothing
herein shall relieve any party from liability for its breach of this
Agreement, except to the extent that Section 11.02 hereof limits the amount
of such liability under the circumstance specified therein.
10.03 Post-Termination Covenants.
(a) If this Agreement terminates for any reason pursuant to
Section 10.01, no party hereto will utilize the fact that this Agreement has
been terminated in order to disparage the commercial interests, including
without limitation the customer, vendor and employee relationships, of the
other. Each party agrees that, upon any breach of this covenant by either
party, the aggrieved party shall be entitled to injunctive relief as well as
damages.
(b) If this Agreement terminates for any reason pursuant to
Section 10.01, for one year after such termination, neither SMI nor O&M nor
any of their respective Affiliates shall solicit for employment any person
currently employed by the other as long as such employee remains in the
employ of the other party.
ARTICLE XI
General Provisions
11.01 Expenses. Except as provided below, the Shareholders each
shall be responsible for the fees and expenses of SMI's and their respective
counsel, accountants, and other expenses incident to the negotiation and
preparation of this Agreement and consummation of the transactions
contemplated hereby incurred after December 10, 1993. For purposes of this
Section 11.01, (a) the fees and expenses of Cohen & Grigsby, Steptoe &
Johnson or any other legal advisors to SMI or the Shareholders incident to
the negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby, and (b) any fees and expenses of E&Y or any
other accountants or financial advisors to SMI or the Shareholders, including
preparation of the Closing Balance Sheet and the financials required by
Sections 6.09 and 9.10 hereof (other than expenses up to a maximum of
$216,000 related to the ordinary 1993 year-end audit conducted in accordance
with GAAP which shall be borne by SMI) shall be the sole obligation of the
Shareholders. For purposes of this Section 11.01, the fees and expenses of
Hunton & Williams, KPMG, J.P. Morgan or any other legal or financial advisors
to O&M Holding and O&M shall be the sole obligation of O&M Holding and O&M.
11.02 Break-up Fee. If this Agreement is terminated by SMI or the
Shareholders pursuant to Section 10.01(d) hereof, then O&M shall pay to SMI
as liquidated damages within ten days after the date of such termination
$2,000,000 (by wire transfer of immediately available funds to an account
designated by SMI for such purpose).
If this Agreement is terminated by O&M or O&M Holding pursuant to
Section 10.01(e) hereof, then SMI shall pay to O&M as liquidated damages
within ten days after the date of such termination $2,000,000 (by wire
transfer of immediately available funds to an account designated by O&M for
such purpose).
11.03 Publicity. Except to the extent otherwise expressly required
by Law, prior to the Effective Time no party hereto shall make or cause to be
made any news release or other public statement, including communications to
employees, suppliers, distributors and customers of SMI or O&M, pertaining to
the matters contemplated by this Agreement unless approved by SMI and O&M,
which approval shall not be unreasonably withheld. Without limiting the
foregoing, in all announcements, press releases, notices to customers,
vendors, employees and other third parties, and in all other communications
in which this Agreement and the transactions contemplated hereby are
described by any party hereto, each of SMI and O&M will, and will instruct
their directors, officers, employees, agents and other representatives to,
characterize such transactions as a merger or a business combination of SMI
and O&M.
11.04 Further Assurances. SMI, the Shareholders, O&M and O&M
Holding each agree that at the request of the other parties hereto it will
execute and deliver all such further assignments, endorsements and other
documents and perform all such other acts and things as the other party may
reasonably request to evidence the consummation of the transactions
contemplated by this Agreement.
11.05 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by certified mail, overnight mail, telecopier or telex to
the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to SMI or the Shareholders:
C. G. Grefenstette
2000 Grant Building
Pittsburgh, PA 15219
(412) 338-3689
Telecopy: (412) 338-3696
with a copy to:
Cohen & Grigsby, P.C.
2900 CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222
(412) 391-3382
Attention: David J. Kalson
Telecopy: (412) 391-3382
(b) if to O&M or O&M Holding:
Owens & Minor, Inc.
4800 Cox Road
Glen Allen, VA 23060
(804) 747-9794
Attention: G. Gilmer Minor, III
Telecopy: (804) 747-9270
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219-4074
(804) 788-8200
Attention: C. Porter Vaughan, III
Telecopy: (804) 788-8218
11.06 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
11.07 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as provided in
Section 9.01(a) hereof, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
11.08 Severability. If any of the provisions of this Agreement
shall be declared by any court of competent jurisdiction illegal, void or
unenforceable, the other provisions shall not be affected, but shall remain
in full force and effect.
11.09 Miscellaneous. This Agreement (including the Schedules and
Exhibits hereto and the certificates of the parties delivered in connection
herewith and referred to herein) and the Related Agreements: (a) constitute
the entire agreement and supersede all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; (b) may not be assigned; and (c) shall
be governed in all respects, including validity, interpretation and effect,
by the internal laws of the Commonwealth of Virginia (other than the SMI Plan
of Exchange which shall be governed by the internal laws of the Commonwealth
of Pennsylvania), without giving effect to the principles of conflict of laws
thereof.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
11.11 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties hereto.
11.12 Waiver. At any time prior to the Effective Time, any party
hereto may extend the time for the performance of any of the obligations or
other acts of any other parties hereto or waive compliance with any of the
agreements of any other party or with any conditions to its own obligations.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.
11.13 Remedies. The Shareholders acknowledge and agree that O&M
would be irreparably damaged in the event any of the provisions of Sections
9.03 through 9.07 were violated or not performed by the Shareholders in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that O&M shall be entitled to an injunction or injunctions
to prevent breaches of such Sections and to specifically enforce such
Sections and the terms and provisions thereof in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which O&M may be entitled,
at law or in equity.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by SMI, O&M and the O&M Holding,
by their respective officers thereunto duly authorized, and by each of the
Shareholders.
STUART MEDICAL, INC.
By: __________________________
Mark J. Laskow
Title: Chairman of the Board
of Directors
OWENS & MINOR, INC.
By: __________________________
G. Gilmer Minor, III
Title: President and Chief
Executive Officer
OMI HOLDING, INC.
By: __________________________
G. Gilmer Minor, III
Title: President
Henry L. Hillman, Elsie H. Hillman and C. G.
Grefenstette, Trustees under the Henry L.
Hillman Trust under agreement of trust dated
November 18, 1985
By______________________________________
Trustee
______________________________________
Juliet Lea Hillman Simonds
______________________________________
Audrey Hillman Fisher
______________________________________
Henry L. Hillman, Jr.
______________________________________
William T. Hillman
______________________________________
Howard B. Hillman
______________________________________
Tatnall L. Hillman
Exhibit A
PLAN OF EXCHANGE OF
SHARES OF OWENS & MINOR, INC.
FOR SHARES OF OMI HOLDING, INC.
Section 1. Parties to the Exchange
The name of the corporation proposing to exchange its shares is Owens
& Minor, Inc. ("O&M"), a Virginia corporation. The name of the corporation
that is to acquire all outstanding shares of O&M is OMI HOLDING, INC.
("Holding Company"), a Virginia corporation.
Section 2. Exchange of Shares
Upon the effective time specified in Articles of Exchange filed with
respect to this Plan of Exchange with the State Corporation Commission of
Virginia (the "Effective Time"), by virtue of this Plan of Exchange and
without any action on the part of the holders thereof:
(a) Each outstanding share of common stock, $2 par value, of O&M
shall automatically be converted into and exchanged for one share
of common stock, $2 par value, of Holding Company;
(b) Each right outstanding to acquire a share of common stock, $2 par
value, of O&M, whether by stock option, conversion right or
otherwise, shall automatically be converted into and exchanged
for the right to acquire a share of common stock, $2 par value,
of Holding Company;
(c) Each right outstanding to acquire a share of Series A
Participating Preferred Stock, $10 par value, of O&M shall
automatically be converted into and exchanged for the right to
acquire a share of Series A Participating Preferred Stock, $100
par value, of Holding Company;
(d) Holding Company shall become the owner and holder of all
outstanding shares of common stock, $2 par value, of O&M; and
(e) Each outstanding share of common stock, $2 par value, of Holding
Company outstanding immediately prior to the Effective Time shall
be cancelled and converted into the right to receive $10 from
Holding Company.
Section 3. Certificates Representing Common Stock
At the Effective Time, each certificate evidencing ownership of
outstanding shares of common stock, $2 par value, of O&M shall
automatically and without any action on the part of the holder thereof be
deemed to evidence an identical number of shares of common stock, $2 par
value, of Holding Company.
Section 4. Amendment or Termination
With the approval of their respective Board of Directors, the parties
hereto may amend this Plan of Exchange before the Effective Time, provided
that any amendment made subsequent to the submission of this Plan of
Exchange to the shareholders of the parties hereto shall not:
(a) alter or change the amount or kind of shares, securities, cash,
property or rights to be received in exchange for or on conversion of all
or any of the shares of any class or series of such corporation;
(b) alter or change any of the terms and conditions of the plan if
such alteration or change would adversely affect the shares of any class or
series of such corporation; or
(c) alter or change any terms of the Articles of Incorporation of any
corporation whose shareholders must approve this Plan of Exchange.
This Plan of Exchange may be terminated before the Effective Time by
the affirmative vote of a majority of the members of O&M's Board of
Directors whether or not the holders of common stock, $2 par value, of O&M
have cast their votes with regard to the exchange.
Exhibit B
REGISTRATION RIGHTS AGREEMENT
Dated ________________, 1994
by and among
OMI HOLDING, INC.
and
Certain Former Shareholders of
STUART MEDICAL, INC.
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, entered into this ______ day of _______________, 1994,
by and among OMI Holding, Inc., a Virginia corporation (the "Company"), and
the Shareholders designated on the signature pages hereof (individually a
"Shareholder" and collectively the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Company, the Shareholders, Stuart Medical, Inc., a
Pennsylvania corporation ("SMI"), and Owens & Minor, Inc., a Virginia
corporation, have entered into an Agreement of Exchange, dated as of
December 22, 1993 (the "Agreement of Exchange"), pursuant to which shares
of Series B Preferred Stock, par value $100 per share, of the Company (the
"Preferred Stock") will be issued to the Shareholders pursuant to a plan of
exchange (the "Exchange");
WHEREAS, the shares of Preferred Stock, as a class, are convertible at
any time into shares of Common Stock, par value $2.00 per share, of the
Company (the "Common Stock"); and
WHEREAS, it is a condition to the obligations of the parties to the
Agreement of Exchange to consummate the transactions contemplated thereby
that each of the Shareholders and the Company execute and deliver this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual terms
and provisions hereof, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
have the following respective meanings, and any capitalized terms used
herein and not otherwise defined shall have the respective meanings given
to them in the Agreement of Exchange.
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
(b) "Demanding Person" shall have the meaning set forth in
Section 3 hereof.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute enacted hereafter, and the
rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time.
(d) "Holder" or "Holders" shall mean one or more of the
Shareholders (if the Shareholders hold Registrable Securities) and any
other person holding Registrable Securities to whom these registration
rights have been transferred pursuant to Section 12 of this Agreement;
provided, however, that any person who acquires any of the Common Stock or
Registrable Securities in a distribution pursuant to a registration
statement filed by the Company under the Act or pursuant to a sale under
Rule 144 under the Securities Act shall not be considered a Holder.
(e) "Option" shall have the meaning set forth in Section 4
hereof.
(f) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act and the declaration or order of
effectiveness of such registration statement by the Commission.
(g) "Registrable Securities" shall mean (i) the shares of Common
Stock into which the shares of Preferred Stock issued in the Exchange are
convertible and (ii) any Common Stock issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Common Stock. For purposes of this Agreement, any shares of Preferred
Stock, with respect to which such Holder has surrendered his certificates
and given notice, satisfactory to the Company, of conversion subject to (x)
the closing of an offering covered by a registration effected under this
Agreement or (y) a purchase pursuant to Section 4 hereof, shall be deemed
Registrable Securities.
(h) "Registration Period" shall mean the period commencing 18
months after the Effective Time and ending seven years after the Effective
Time.
(i) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute enacted hereafter, and the rules
and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
2. Demand Registration. Subject to the other provisions of this
Agreement, on two occasions during the Registration Period, if the Holders
of at least fifty percent of the Registrable Securities request in writing
to register under the Securities Act an offering of Registrable Securities,
the reasonably anticipated price to the public (based on contemporaneous
market prices of the Common Stock) of which equals or exceeds $50,000,000
(to be determined without reduction for any purchase of Registrable
Securities by the Company pursuant to Section 4 hereof), the Company shall
promptly notify in writing all other Holders of such request. Within 20
calendar days after such notice has been given by the Company, any other
Holder may give written notice to the Company of such Holder's request to
include his Registrable Securities in the registration. As soon as
practicable after the expiration of such 20-day period, subject to the
provisions of Sections 4 and 6 hereof, the Company will use all reasonable
efforts to cause the offering of all Registrable Securities that the
Holders have so requested to be registered under the Securities Act;
provided, however, that the Company shall not be required to effect a
registration under this Section 2 unless such registration may be effected
using Form S-3 (or other comparable short form registration statement that
is a successor to Form S-3). The Company shall use its best efforts to
meet the registrant requirements of Form S-3. If any registration
requested under this Section 2 is not completed because the Company shall
fail to comply in any material respect with any of its obligations in
Section 5 with respect to the requested registration, the Holder's request
to register the offering of Registrable Securities shall not be counted in
determining the number of registrations to which the Holders are entitled
pursuant to this Section 2.
3. Piggyback Registration. Subject to the other provisions of this
Agreement, if at any time during the Registration Period the Company
proposes to register any shares of Common Stock under the Securities Act
for its own account or the account of holders of Common Stock who are not
Holders (a "Demanding Person") in connection with the public offering of
such securities solely for cash on a registration form that would also
permit the registration of Registrable Securities (except pursuant to any
registration statement relating solely to or in connection with (a)
employee benefit plans of the Company or any of its affiliates, (b) an
offering by the Company exclusively to its existing shareholders or (c) a
Registration Statement on Form S-4 or other registration statement filed in
connection with a merger, share exchange or other business combination),
the Company shall, each such time, promptly give each Holder written notice
of such proposal. Subject to the provisions of Sections 4 and 6 hereof,
upon the written request of any Holder given within 20 days after such
notice has been given by the Company, the Company shall use all reasonable
efforts to cause to be included in such registration all Registrable
Securities that each such Holder has requested to be registered.
4. Right to Purchase Stock. In the event that any Holders submit a
request for Registration to the Company pursuant to Section 2 or 3 hereof,
the Company (or any person or persons designated by the Company) shall have
the right and option (an "Option") to purchase for cash all or any part of
the Registrable Securities the Holders requested to be registered. An
Option shall be exercised by the Company (or any person or persons
designated by the Company) by giving notice to the selling Holders, within
30 days after receipt by the Company of the initial request for
registration. The purchase price per share of Registrable Securities
purchased pursuant to the exercise of the Option shall be the average of
the closing prices of the Common Stock on the New York Stock Exchange on
the 30 consecutive trading days preceding the date on which the Company
exercises its Option to purchase the Registrable Securities. The closing
of any such purchase shall take place on such date as shall be agreed upon
by the parties but in no event later than 120 days after receipt by the
Company of the request for registration. Upon exercise of the Option, the
Company (or the person or persons designated by the Company) shall be
legally obligated to consummate the purchase contemplated thereby and the
registration request by the selling Holders pursuant to which the Company
exercised the Option shall be counted for purposes of determining the
number of registrations to which the Holders thereafter are entitled
pursuant to Section 2.
5. Company Obligation in Connection with the Registrations.
Whenever required by Sections 2 or 3 to use all reasonable efforts to
effect the registration of any Registrable Securities, the Company shall:
(a) prepare and file with the Commission a registration
statement on Form S-3 (or other comparable short form registration
statement that is a successor to Form S-3) with respect to such Registrable
Securities and use all reasonable efforts to cause such registration
statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement;
(c) furnish to the selling Holders or their underwriter such
number of copies of any prospectus (including any preliminary prospectus),
and any amendments or supplements thereto, as the selling Holders may
reasonably request in order to effect the offering and sale of the
Registrable Securities to be offered and sold by such selling Holders;
(d) use its best efforts to qualify the offering under
applicable blue sky laws or such other state securities laws as may be
reasonably requested by and necessary to enable the selling Holders to
offer and sell the Registrable Securities; provided, however, that the
Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then
qualified, to subject itself to taxation in any such jurisdiction or to
file any general consent to service of process;
(e) use its best efforts to cause the registration statement to
remain current until the earlier of (i) 120 days following its effective
date and (ii) the completion of the sale of the Registrable Securities
being sold;
(f) instruct the transfer agent (or agents) and the registrar
(or registrars) of the Company's securities to release any applicable stop
transfer orders with respect to the Registrable Securities being sold;
(g) notify each selling Holder of Registrable Securities and the
managing underwriter (i) when a prospectus or any prospectus supplement or
amendment to a prospectus has been filed and, with respect to a
registration statement or any post-effective amendment thereto, when the
same has become effective and (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of a registration statement or the
initiation of any proceedings for any such purpose; and
(h) promptly notify each selling Holder of such Registrable
Securities at any time when a prospectus relating thereto is required to be
delivered under the Securities Act upon the happening of any event as a
result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits any fact necessary
to make the statements therein not misleading, and the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a material fact or omit to state
any fact necessary to make the statements therein not misleading.
6. Limitations, Conditions and Qualifications to Obligations of the
Company. The obligations of the Company to use all reasonable efforts to
cause Registrable Securities owned by the selling Holders to be registered
are subject to each of the following limitations, conditions and
qualifications:
(a) The Company shall be entitled to postpone for a reasonable
period of time the filing of any registration statement otherwise required
to be prepared and filed by it pursuant to Section 2 above, as follows:
(i) if, in the reasonable judgment of the Company, a
registration at the time and on the terms requested would adversely affect
any securities offering by the Company that had been formally proposed by
the Company prior to the Company's receipt of notice by the Holders
requesting registration, the Company shall not be required to commence
using all reasonable efforts to effect a registration pursuant to Section 2
until the later of (A) 10 days after the completion or abandonment of such
securities offering and related distribution and (B) the termination of any
"black out", hold-out or lock-up period or the like, if any, required by
any underwriters in connection with such securities offering; provided,
however, that such delay shall not exceed 120 days; and provided further
that the Holders requesting registration will not unreasonably withhold
their consent to a request by the Company to extend such period; and
provided further that the Company may not invoke against any Holder the
suspension of commencement of reasonable efforts to effect a registration
pursuant to Section 2 by reason of a securities offering more than two
times in any 12-month period; and
(ii) if, while a request for registration pursuant to
Section 2 is pending, the Company determines in its reasonable judgment
that (A) the filing of a registration statement would require the
disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential, (B) that the Company would
be unable to comply with Commission requirements, or (C) the filing of a
registration statement would interfere with any material transaction of the
Company then pending, the Company shall not be required to commence using
all reasonable efforts to effect a registration pursuant to Section 2 until
the earlier of (x) 10 days after the date upon which such material
information is disclosed to the public or ceases to be material, the
Company becomes able to comply with Commission requirements, or such
registration would no longer interfere with a material transaction, as the
case may be, or (y) 120 days after the Company makes such good faith
determination; provided, however, that the Holders requesting registration
will not unreasonably withhold their consent to a request by the Company to
extend such period.
If the Company shall so postpone the filing of a registration
statement, the selling Holders shall have the right to withdraw the request
for registration by giving written notice to the Company within 30 days
after the Company's notice of postponement (and, in the event of such
withdrawal, such request shall not be counted for purposes of determining
the number of registrations to which the Holders are entitled pursuant to
Section 2).
(b) The selling Holders shall furnish to the Company such
information regarding them, the Registrable Securities held by them, and
the intended method of disposition of such securities as the Company shall
reasonably request and as shall be required under the Securities Act or
other applicable laws in connection with the action to be taken by the
Company.
(c) In the event the Holders request registration pursuant to
Section 2 above, (i) the offering or distribution of the Registrable
Securities shall be pursuant to a firm commitment underwriting, (ii) the
underwriter selected by the selling Holders shall be a nationally
recognized investment banking firm approved by the Company (which approval
shall not be unreasonably withheld) and (iii) the Company will, if
requested, enter into an underwriting agreement containing representations,
warranties and agreements (including an agreement with respect to
contribution) not substantially different from those customarily made as of
the date hereof by an issuer in underwriting agreements with respect to
secondary distributions; provided, however, that except for the inclusion
therein of an agreement with respect to contribution, the Company will not
be obligated to enter into an agreement with respect to indemnification of
the underwriters substantially different from that set forth in Section 8
below.
(d) In connection with any offering involving an underwriting of
shares being issued by the Company, the Company shall not be required under
Section 3 hereof to include any of the Holders' Registrable Securities in
such underwriting unless the Holders accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by the
Company, and then only in such quantity as will not, in the opinion of the
underwriters, materially impair the success of the offering by the Company.
If the total amount of Registrable Securities that all Holders request to
be included in such offering exceeds the amount of securities that the
managing underwriter believes compatible with the success of the offering,
the Company shall only be required to include in the offering so many of
the securities of the selling Holders and the securities to be offered for
the account of any other shareholders of the Company to be included in the
offering as the underwriters believe will not materially impair the success
of the offering (the securities so included to be apportioned pro rata
among the selling shareholders according to the total amount of securities
owned by such selling shareholders, or in such other proportions as shall
mutually be agreed to by such selling shareholders), provided that no such
reduction shall be made with respect to any securities offered by the
Company for its own account.
(e) In connection with any offering by a Demanding Person not
involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 3 hereof to include any of the
Holders' Registrable Securities in such underwriting unless the Holders
accept the terms of the underwriting as agreed upon between the Demanding
Person, the Company and the underwriters selected by the Company or such
Demanding Person and then only in such quantity as will not, in the opinion
of the underwriters, materially impair the success of the offering by the
Demanding Person. If the total amount of Registrable Securities that all
Holders request to be included in such offering exceeds the amount of
securities that the managing underwriter reasonably believes compatible
with the success of the offering, the Company and the Demanding Person
shall only be required to include in the offering so many of the securities
of the selling Holders and the securities to be offered for the account of
any other shareholders of the Company (other than the Demanding Person) to
be included in the offering as the underwriters believe will not materially
impair the success of the offering (the securities so included to be
apportioned pro rata among the selling shareholders (other than the
Demanding Person) according to the total amount of securities owned by such
selling shareholders, or in such other proportions as shall mutually be
agreed to by such selling shareholders), provided that no such reduction
shall be made with respect to any securities offered by the Demanding
Person.
7. Registration Expenses. (a) Except as required by the
Commission, any other federal or state regulatory authority or the New York
Stock Exchange, all expenses incurred in connection with a registration
pursuant to Section 2 hereof (excluding underwriters' discounts and
commissions), including without limitation all registration and
qualification fees, printers' and accounting fees, and fees and
disbursements of counsel for the Company shall be borne by the Company;
provided, however, that the Company shall not be required to pay the fees
and expenses of any separate counsel retained by the Holders; and provided,
further, that the Company shall not be required to pay for any expenses of
any registration proceeding begun pursuant to Section 2 hereof if the
registration request is subsequently withdrawn, unless the Holders agree to
forfeit one of their rights to a demand registration pursuant to Section 2
hereof.
(b) In the case of any registration effected pursuant to Section
3 hereof, the Holders of Registrable Securities shall bear any additional
registration and qualification fees and expenses (including underwriters'
discounts and commissions), and any additional costs and disbursements of
counsel for the Company that result from the inclusion of the Registrable
Securities in such registration, with such additional expenses of the
registration being borne by all selling Holders and other selling
shareholders participating in such registration pro rata on the basis of
the amount of securities so registered.
8. Indemnification.
(a) In the case of each registration effected by the Company
pursuant to Section 2 or 3, the Company agrees to indemnify and hold
harmless the selling Holders, their officers, directors, employees,
representatives and agents, each underwriter of the Registrable Securities
so registered and each person who controls any such person or underwriter
within the meaning of Section 15 of the Securities Act, against any and all
losses, claims, damages or liabilities to which they or any of them may
become subject under the Securities Act or any other statute or common law,
including any amount paid in settlement of any litigation, commenced or
threatened, if such settlement is effected with the written consent of the
Company, and to reimburse them for any reasonable legal or other expenses
incurred by them in connection with investigating any claims and defending
any actions, insofar as any such losses, claims, damages, liabilities or
actions arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement or prospectus relating to the sale of such Registrable
Securities, or any post-effective amendment thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (ii)
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, if used prior to the effective
date of such registration statement, or contained in the final prospectus
(as amended or supplemented if the Company shall have filed with the
Commission any amendment thereof or supplement thereto) if used within the
period during which the Company is required to keep the registration
statement to which such prospectus relates current pursuant to this
Agreement, or the omission or alleged omission to state therein (if so
used) a material fact necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading;
provided, however, that the indemnification agreement contained in this
Section 8(a) shall not (i) apply to such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company by a Holder or such
underwriter in writing specifically for use in connection with preparation
of the registration statement, any preliminary prospectus or final
prospectus contained in the registration statement, or any amendment or
supplement thereto, or (ii) inure to the benefit of any underwriter or any
person controlling such underwriter, if such underwriter failed to send or
give a copy of the final prospectus to the person asserting the claim at or
prior to the written confirmation of the sale of such Registrable
Securities to such person and if the untrue statement or omission concerned
had been corrected in such final prospectus.
(b) In the case of each registration effected by the Company
pursuant to Section 2 or 3 hereof, each selling Holder agrees, and each
underwriter of the Registrable Securities to be registered (each such party
and such underwriters being referred to severally in this subparagraph (b)
as the "indemnifying party") shall agree (in the case of the underwriters,
to the extent customary at the time) to indemnify and hold harmless the
Company, each person (if any) who controls the Company within the meaning
of Section 15 of the Securities Act, the directors of the Company and those
officers of the Company who shall have signed any such registration
statement, against any and all losses, claims, damages or liabilities to
which they or any of them may become subject under the Securities Act or
any other statute or common law, including any amount paid in settlement of
any litigation, commenced or threatened, if such settlement is effected
with the written consent of the indemnifying party, and to reimburse them
for any reasonable legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any
such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement or any post-effective
amendment thereto or any preliminary prospectus or final prospectus (as
amended or as supplemented, if amended or supplemented as aforesaid)
contained in such registration statement, if such statement or omission was
made in reliance upon and in conformity with information furnished to the
Company by such indemnifying party in writing specifically for use in
connection with the preparation of such registration statement or any
preliminary prospectus or final prospectus contained in such registration
statement or any such amendment or supplement thereto.
(c) Each indemnified party will, with reasonable promptness
after its receipt of written notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
from an indemnifying party on account of an indemnity agreement contained
herein, notify the indemnifying party in writing of the commencement
thereof. In case any such action shall be brought against any indemnified
party and it shall so notify an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and
to the extent it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof with counsel 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 will not be liable to such indemnified party under
this Section 8 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. The indemnity agreements in this
Section 8 shall be in addition to any liabilities which the indemnifying
parties may have pursuant to law.
9. Reports Under Exchange Act. With a view to making available to
the Holders of Registrable Securities the benefits of Rule 144 promulgated
under the Securities Act and any other comparable rule or regulation of the
Commission that is a successor to Rule 144 that may at any time permit a
Holder to sell Registrable Securities of the Company to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Exchange Act; and
(c) furnish upon request to any Holder, so long as such Holder
owns any of the Registrable Securities, a written statement by the Company
that it has complied with the reporting requirements of Rule 144, a copy of
the most recent annual or quarterly report of the Company filed as required
under the Exchange Act, and such other reports and documents so filed by
the Company as may be reasonably requested in availing any Holder of any
rule or regulation of the Commission permitting the sale of the Registrable
Securities without registration.
10. Lockup Agreement.
(a) In consideration for the Company agreeing to its obligations
under this Agreement, the Holders agree in connection with any registration
of the Company's securities, upon the request of the Company or the
underwriters managing any underwritten offering of the Company's
securities, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities (other
than Registrable Securities (i) included in the registration or (ii)
transferred by (A) a gift, (B) by descent or distribution, (C) to
beneficiaries pursuant to a trust existing as of the date of the Agreement
of Exchange, or (D) to a Shareholder; provided, that, in any such case, the
transferee (other than a charitable institution holding less than 1% of
outstanding shares of Common Stock) expressly agrees in writing to be bound
by the terms of this Section 10) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eighty (180) days) from the effective date of
such registration as the Company or the underwriters may specify.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into
or exchangeable for such securities, during the seven days prior to and
during the 180-day period (or such shorter period as the managing
underwriters may specify) beginning on the effective date of any
registration statement related to an underwritten offering pursuant to
which Registrable Securities are to be sold (except as part of such
underwritten registration or pursuant to employee benefit plans of the
Company or any of its affiliates, an offering by the Company exclusively to
its existing shareholders or a Registration Statement on Form S-4 or other
registration statement filed in connection with a merger, share exchange or
other business combination), unless the underwriters managing the
registered public offering otherwise agree and (ii) to use its best efforts
to cause each holder of at least 5% (on a fully diluted basis) of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, purchased from the Company at any time
after the date of this Agreement (other than a registered public offering)
to agree not to effect any sale or distribution of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered
public offering otherwise agree.
11. Certain Limitations in Connection with Future Grants of
Registration Rights.
(a) From and after the date of this Agreement, the Company shall
not enter into any agreement with any holder or prospective holder of any
securities of the Company providing for the granting to such holder of
registration rights unless such agreement:
(i) includes the equivalent of Section 10 as a term; and
(ii) includes a provision that, in the case of a public
offering involving an underwritten registered offering under Section 2
hereof, protects the Holders of Registrable Securities if marketing factors
require a limitation on the number of securities to be included in the
underwriting in the manner in which the Company is protected under
Section 6(d); and
(b) If at any time on or after the date of this Agreement the
Company shall enter into any agreement granting to any person rights to the
registration of equity securities of the Company, it will include terms
that preserve for the Holders the treatment provided in Sections 6(d) and
(e) hereof.
12. Transfer of Registration Rights. Except as provided below, the
registration rights provided by this Agreement may be assigned to a
Holder's transferee, provided that (a) any such Transfer is permitted under
the provisions of the Agreement of Exchange, (b) the Company is given
written notice by the Holder at the time of such Transfer stating the name
and address of the transferee and the number of Registrable Securities and
shares of Preferred Stock being Transferred, (c) the transferee has agreed
to be bound by the transfer restrictions set forth in the Agreement of
Exchange and (d) after the Transfer, the transferee holds at least 100,000
shares of Registrable Securities. Notwithstanding the foregoing, the
registration rights provided by this Agreement may not be assigned to any
transferee in a distribution pursuant to a registration statement filed by
the Company under the Securities Act or pursuant to a sale in accordance
with Rule 144 under the Securities Act.
13. Suspension of Disposition of Registrable Securities. Each
selling Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 5(h) hereof,
such Holder will forthwith discontinue disposition of Registrable
Securities until such Holder's receipt of copies of a supplemental or
amended prospectus contemplated by Section 5(h) hereof, or until it is
advised in writing (the "Advice") by the Company that the use of the
prospectus may be resumed and has received copies of any additional or
supplemental filings which are incorporated by reference in the prospectus,
and, if so directed by the Company, such Holder will deliver to the Company
(at the expense of the Company) all copies, other than permanent file
copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In
the event the Company shall give any such notice, the time period specified
in Section 5(e) hereof shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 5(h) hereof to and including the date when each selling Holder of
Registrable Securities shall have received the copies of the supplemented
or amended prospectus contemplated by Section 5(h) hereof or the Advice.
14. Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given unless the Company has obtained the written consent
of Holders of at least a majority of the Registrable Securities at the time
outstanding.
15. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
(a) if to a Holder, initially c/o C.G. Grefenstette, 2000 Grant
Building, Pittsburgh, PA 15219 and thereafter at such other address set
forth in a notice which is given in accordance with the provisions of this
Section 14; and
(b) if to the Company, initially at 4800 Cox Road, Glen Allen,
VA 23060, to the attention of its President, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 14.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
17. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
19. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
20. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the registration of the Registrable Securities. There
are no restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein with respect to the registration rights
granted by the Company with respect to the Registrable Securities. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
21. Parties Benefitted. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OMI HOLDING, INC.
By:
G. Gilmer Minor, III
Title: President
NAMES OF SHAREHOLDERS:
Henry L. Hillman, Elsie H. Hillman and C. G.
Grefenstette, Trustees under the Henry L. Hillman
Trust under agreement of trust dated November 18,
1985
By
Trustee
Juliet Lea Hillman Simonds
Audrey Hillman Fisher
Henry L. Hillman, Jr.
William T. Hillman
Howard B. Hillman
Tatnall L. Hillman
Exhibit C
PLAN OF SHARE EXCHANGE
OF SHARES OF SERIES B PREFERRED
STOCK OF OMI HOLDING, INC.
FOR
SHARES OF COMMON STOCK OF
STUART MEDICAL, INC.
This Plan of Share Exchange ("Plan of Exchange") by and between STUART
MEDICAL, INC., a Pennsylvania corporation ("SMI"), and OMI HOLDING, INC.
("OMI Holding"), a Virginia corporation.
RECITAL
1. Owens & Minor, Inc., OMI Holding, SMI and certain holders of the
issued and outstanding Common Stock, $.0025 par value per share, of SMI
("SMI Common Stock") are parties to an Agreement of Exchange dated as of
December 22, 1993 (the "Agreement of Exchange").
2. The respective Boards of Directors of SMI and OMI Holding have by
resolution duly approved the Agreement of Exchange and this Plan of
Exchange, and the Board of Directors of SMI has directed that this Plan of
Exchange be submitted to its shareholders for adoption.
ARTICLE I
EFFECTIVE TIME
After filing of Articles of Exchange with the Department of State of
the Commonwealth of Pennsylvania, at the effective time specified in such
Articles (the "Effective Time"), all of the issued and outstanding shares
of SMI Common Stock shall, by operation of law, be converted into and
exchanged for (the "Exchange") $40,200,000 in cash and 1,150,000 shares of
Series B Preferred Stock, $100 par value per share, of OMI Holding ("OMI
Holding Preferred Stock"), subject to adjustment for Dissenting Shares (as
defined in Section 3.06 hereof) and fractional shares, all pursuant to the
terms and conditions of this Plan of Exchange and of the Agreement of
Exchange.
ARTICLE II
GENERAL EFFECTS OF THE EXCHANGE
The Exchange shall have the effects set forth herein and in Section
1931 of the Pennsylvania Business Corporation Law (the "BCL"). Pursuant to
the Exchange, OMI Holding shall become the owner and holder of all of the
outstanding shares of SMI Common Stock.
ARTICLE III
MANNER AND BASIS OF CONVERTING
SHARES OF SMI; EXCHANGE PROCEDURES
Section 3.01 Effect on Shares. At the Effective Time, by virtue of
the Exchange and without any action on the part of OMI Holding, SMI or any
holder of capital stock of either of them:
(a) Exchange of Outstanding Shares. Each share of SMI Common
Stock outstanding immediately prior to the Effective Time (except for
Dissenting Shares) with respect to which an election to receive cash (a
"Cash Election") has been made and not revoked ("Electing Shares"), and
that has not been prorated pursuant to Section 3.03(c) hereof, shall be
converted into and shall represent the right to receive the Cash
Consideration (as defined in Section 3.02(b) hereof).
(b) Each share of SMI Common Stock outstanding immediately prior
to the Effective Time, except Dissenting Shares and Electing Shares ("Non-
Electing Shares"), shall be converted into and shall represent the right to
receive that fraction of a share of OMI Holding Preferred Stock having a
par value equal to the Preferred Stock Consideration (as defined in Section
3.02(c) hereof).
Section 3.02 Certain Definitions. (a) SMI shall obtain an opinion
as to the aggregate fair market value of the OMI Holding Preferred Stock
("Aggregate Fair Market Value") as of a day that is not more than ten
business days before the Effective Time. The term "Gross Valuation Amount"
shall mean the sum of the Aggregate Fair Market Value plus $40,200,000.
(b) The term "Cash Consideration" shall mean the quotient of the
Gross Valuation Amount divided by 2,000,000.
(c) The term "Preferred Stock Consideration" shall mean the
result of the following formula:
$115,000,000 divided by [2,000,000 - ($40,200,000/Cash Consideration)]
Section 3.03 Elections. (a) Any holder of shares of SMI Common
Stock may make a Cash Election for up to 75% of the outstanding shares of
SMI Common Stock held by such holder. A form of election (the "Form of
Election") shall be provided to each holder of SMI Common Stock as early as
practicable before the Effective Time. Any such shareholder's Cash
Election shall have been properly made only if OMI Holding shall have
received, no later than 5:00 p.m. Eastern Time on the last business day
before the Effective Time (the "Election Cutoff Time"), a Form of Election
properly completed and signed and accompanied by certificates for the
shares of SMI Common Stock to which such Form of Election relates, duly
endorsed in blank or otherwise in form acceptable for transfer on the books
of SMI.
(b) Any Form of Election may be revoked or amended only by
written notice from the appropriate holder received by OMI Holding no later
than the Election Cutoff Time.
(c) Anything in this Section 3.03 to the contrary
notwithstanding, in the implementation of this Article III, OMI Holding
shall make cash payments as nearly as practicable equal to but not less
than $40,200,000 in the aggregate (the "Aggregate Cash Consideration"). In
the event the product of the Cash Consideration multiplied by the number of
Electing Shares exceeds the Aggregate Cash Consideration by more than
$1,000, the Aggregate Cash Consideration shall be prorated among the number
of Electing Shares to the end that the cash payments made by OMI Holding
pursuant to Section 3.01 shall exceed by the smallest amount practicable
the Aggregate Cash Consideration, and the remaining shares (or portions
thereof) of Electing Shares shall be deemed to be shares (or portions
thereof) of Non-Electing Shares and shall be converted into shares of OMI
Holding Preferred Stock as provided in Section 3.01(b) hereof. In the
event the product of the Cash Consideration multiplied by the number of
Electing Shares is less than the Aggregate Cash Consideration, a number of
Non-Electing Shares (determined pro rata among the total Non-Electing
Shares) shall be deemed to be Electing Shares to the end that the cash
payments made by OMI Holding pursuant to Section 3.01 shall equal or exceed
by the smallest amount practicable the Aggregate Cash Consideration.
Section 3.04 Fractional Shares. No fractional shares of OMI Holding
Preferred Stock shall be issued in the Exchange. Instead the number of
shares of OMI Holding Preferred Stock that a holder of SMI Common Stock
receives as a result of the Exchange shall be rounded to the nearest full
share (with a fraction of .5 or greater being rounded to the next highest
full share).
Section 3.05 Treasury Shares. Each share of SMI Common Stock held
in the treasury of SMI immediately prior to the Effective Time shall be
automatically cancelled and retired and cease to exist, and no cash or
securities or other payment shall be paid or payable in respect thereof.
Section 3.06 Dissenting Shares. Notwithstanding anything in this
Plan of Exchange to the contrary, shares of SMI Common Stock issued and
outstanding immediately prior to the Effective Time that are held by a
shareholder who objects to the Exchange and complies with all provisions of
the BCL concerning the right of such holders to dissent from the Exchange
and demand appraisal rights of their shares (the "Dissenting Shares") shall
not be converted as described in Section 3.01 but shall from and after the
Effective Time represent only the right to receive such consideration as
may be determined to be due to such Dissenting Holder pursuant to the BCL;
provided, however, that all shares of SMI Common Stock outstanding
immediately prior to the Effective Time and held by a Dissenting Holder who
shall, after the Effective Time, withdraw his demand for appraisal or lose
his right of appraisal, in either case pursuant to the BCL, shall be deemed
to be converted, as of the Effective Time, into the right to receive shares
of OMI Holding Preferred Stock in the amount and otherwise as specified in
Section 3.01(b), without interest.
Section 3.07 Exchange Procedures. At the Effective Time, OMI
Holding shall make available to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represent
outstanding shares of SMI Common Stock (the "Certificates") whose shares
were converted into the right to receive the Cash Consideration or shares
of OMI Holding Preferred Stock, or both, pursuant to Section 3.01 hereof,
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to OMI Holding and shall be in such form
and have such other provisions as OMI Holding may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Cash Consideration, certificates representing shares of
OMI Holding Preferred Stock, or both, as the case may be. Upon surrender
of a Certificate for cancellation to OMI Holding, together with such letter
of transmittal, duly executed, and any other required documents, the holder
of such Certificate shall be entitled to receive (subject to deduction of
any required withholding tax) in exchange therefor a check in the amount of
any Cash Consideration that such holder has the right to receive pursuant
to this Article III and a certificate representing that number of shares of
OMI Holding Preferred Stock that such holder has the right to receive
pursuant to the provisions of this Article III, and the Certificates so
surrendered shall forthwith be cancelled. Until surrendered as
contemplated by this Section 3.07, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender any Cash Consideration and the certificate representing
shares of OMI Holding Preferred Stock as contemplated by this Section 3.07.
Section 3.08 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time
with respect to OMI Holding Preferred Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of OMI Holding Preferred Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender
of any such Certificate, there shall be paid (subject to deduction of any
required withholding tax) to the record holder of the certificates
representing shares of OMI Holding Preferred Stock issued in exchange
therefor, without interest, (i) any Cash Consideration to which such holder
is entitled, (ii) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such shares of OMI Holding Preferred Stock and (iii)
at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender, payable with respect
to such shares of OMI Holding Preferred Stock.
ARTICLE IV
TERMINATION
This Plan of Exchange may be terminated and the Exchange contemplated
hereby may be abandoned at any time (notwithstanding approval hereof by the
shareholders of SMI) prior to the Effective Time if the Agreement of
Exchange is terminated in accordance with its terms.
Exhibit D
6. Series B Preferred Stock. The second series of Cumulative
Preferred Stock shall be designated "Series B Cumulative Preferred
Stock" ("Series B Preferred Stock") and the number of shares
constituting such series shall be 1,150,000. The preferences,
limitations and relative rights of shares of Series B Preferred Stock
shall be as follows:
(a) Dividends and Distributions.
(1) The holders of shares of Series B Preferred Stock,
in preference to the holders of Common Stock and of any
other capital stock of the Corporation ranking junior to the
Series B Preferred Stock as to payment of dividends, shall
be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available therefor,
a per annum cash dividend of $4.50 per share, and no more,
payable in equal quarterly amounts of $1.125 each on the
last day of each January, April, July and October of each
year, beginning _____________, 1994 (each such date being
referred to herein as a "Quarterly Dividend Payment Date"),
to holders of record on the fifteenth day of each such
respective month, commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share of Series B
Preferred Stock.
(2) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series B Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series B Preferred Stock, unless the
date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of
Series B Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue
and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series B Preferred Stock in
an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
(b) Voting Rights. The holders of shares of Series B
Preferred Stock shall be entitled to vote on all matters
submitted to a vote of the shareholders of the Corporation,
voting together with the holders of shares of other series
of the Preferred Stock entitled to vote thereon and the
Common Stock as a single voting group. Each share of Series
B Preferred Stock shall entitle the holder thereof to a
number of votes equal to the number of shares of Common
Stock into which such Series B Preferred share could be
converted in accordance with Section 6(g) on the record date
for determining the shareholders entitled to vote; it being
understood that whenever the "Conversion Price" (as defined
in Section 6(g)(1)) is adjusted as provided in Section
6(g)(5) the number of votes to which each share of Series B
Preferred Stock is entitled shall also be similarly
adjusted.
(c) Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or
distributions payable on Series B Preferred Stock as
provided in Section 6(a) are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series B Preferred
Stock outstanding shall have been paid in full, or declared
and set apart for payment, the Corporation shall not:
(i) declare or pay or set apart for payment any
dividends (other than dividends payable in shares of
any class or classes of stock of the Corporation
ranking junior to Series B Preferred Stock as to
payment of dividends or warrants or rights to acquire
such stock) or make any other distributions on, any
class of stock of the Corporation ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to Series B Preferred Stock
("Junior Stock"), other than distributions of rights
("Rights") pursuant to the Rights Agreement, dated as
of June 22, 1988, between Owens & Minor, Inc. and the
rights agent thereunder, as heretofore amended and as
it may be further amended, in accordance with it terms,
or replaced from time to time (such agreement, as so
amended or replaced, being hereinafter referred to as
the "Rights Agreement"), and shall not redeem, purchase
or otherwise acquire, directly or indirectly, whether
voluntarily, for a sinking fund, or otherwise any
shares of Junior Stock, provided that, notwithstanding
the foregoing, the Corporation may at any time redeem,
purchase or otherwise acquire shares of Junior Stock in
exchange for, or out of the net cash proceeds from the
concurrent sale of, other shares of Junior Stock or
warrants or rights to acquire Junior Stock;
(ii) declare or pay dividends on or make any
other distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series B Preferred
Stock ("Parity Stock"), except dividends paid or
distributions made ratably on Series B Preferred Stock
and all such Parity Stock on which dividends are
payable or in arrears in proportion to the total
amounts of such dividends to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any Parity Stock, provided that
the Corporation may at any time redeem, purchase or
otherwise acquire shares of any Parity Stock in
exchange for shares of any Junior Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock,
or any shares of Parity Stock, except as permitted by
the Articles of Incorporation of the Corporation or in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the
Board of Directors, after consideration of the
respective annual dividend rates, the amount of
dividends in arrears and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and
equitable treatment among the respective series or
classes.
(2) Notwithstanding the foregoing, nothing in this
Section 6(c) shall prevent the Corporation from (i)
declaring a dividend or distribution of Rights or issuing
Rights in connection with the issuance of Series B Preferred
Stock, Junior Stock or Parity Stock, or (ii) redeeming
Rights at a price not to exceed $.01 per Right.
(3) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless
the Corporation could, under paragraph (1) of Section 6(c),
purchase or otherwise acquire such shares at such time and
in such manner.
(d) Reacquired Shares. Any shares of Series B Preferred
Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after
the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance
set forth herein.
(e) Liquidation, Dissolution or Winding Up.
(1) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock
ranking junior upon liquidation, dissolution or winding up
to Series B Preferred Stock unless, prior thereto, the
holders of shares of Series B Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and
unpaid dividends thereon, whether or not declared, to the
date of such payment, and no more (the "Series B Liquidation
Preference").
(2) In the event, however, that there are not
sufficient assets available to permit payment in full of the
Series B Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any,
then such remaining assets shall be distributed ratably to
the holders of all such shares in proportion to their
respective liquidation preferences.
(f) Redemption. The outstanding shares of Series B
Preferred Stock may be redeemed at the option of the Corporation
as a whole or in part at any time on or after April 30, 1997, or
from time to time thereafter, at a cash price per share equal to
(i) the par value thereof, plus (ii) all accrued and unpaid
dividends thereon, whether or not declared, to the redemption
date; provided, however, that: (i) any such redemption made
before April 30, 2004 may be made solely to the extent of the sum
of (x) the net proceeds from the sale or issuance by the
Corporation for cash from time to time after January 1, 1994 of
shares of capital stock of the Corporation or any other
securities convertible into, or exchangeable or exercisable for
such capital stock, plus (y) the fair market value (as determined
in good faith by the Board of Directors of the Corporation) of
all such capital stock or other securities sold or issued by the
Corporation from time to time after January 1, 1994 in exchange
for other property (including, without limitation, any thereof
issued in exchange for stock, securities or assets of other
corporations or other entities); and (ii) any redemption in part
may only be made if the aggregate market value (based on the
average of the closing prices of the Common Stock on the New York
Stock Exchange for the ten trading days immediately preceding the
date the Redemption Notice (as defined below) is given) of the
total number of shares of Common Stock into which the Series B
Preferred Stock to be redeemed are at the time convertible
pursuant to Section (g)(1) is at least $50,000,000.
Not less than 30 days nor more than 60 days prior to the
date fixed by the Corporation for redemption (the "Redemption
Date"), written notice (the "Redemption Notice") shall be mailed
by the Corporation, postage prepaid, to each holder of record of
the Series B Preferred Stock at such holder's address as it
appears on the stock transfer books of the Corporation. The
Redemption Notice shall state:
(i) the total number of shares of Series B Preferred Stock
to be redeemed;
(ii) the number of shares of Series B Preferred Stock held
by the holder which the Corporation will redeem;
(iii) the Redemption Date and the redemption price;
(iv) the fact that the holder's conversion rights will
continue until the close of business on the second business day
preceding the Redemption Date;
(v) that the holder is to surrender to the Corporation, in
the manner and at the place designated, his certificate or
certificates representing the shares of Series B Preferred Stock
to be redeemed; and
(vi) if the redemption is in part, the Corporation's
calculations showing compliance with clause (ii) of the proviso
in the first paragraph of this Section 6(f).
(g) Conversion.
(1) Subject to and upon compliance with the provisions
of this Section (g), the holders of a majority of the shares of
Series B Preferred Stock outstanding at the time shall have the
right, at such holders' option and upon written notice to the
Corporation, at any time to convert all of the outstanding shares
of Series B Preferred Stock into the number of fully paid and
nonassessable shares of Common Stock (calculated as to each
conversion, for the purpose of determining the amount of any cash
payments provided in Section (g)(4), to the nearest cent or to
the nearest .01 of a share of Common Stock, as the case may be,
with one-half cent and .005 of a share, respectively, being
rounded upward), obtained by dividing $100 by the Conversion
Price (as defined below) and multiplying such resulting number by
the number of shares of Series B Preferred Stock to be converted.
Such conversion shall be effective at the close of business on
the first business day following the Corporation's receipt of
such notice. Except as provided in paragraph (2), no shares of
Series B Preferred Stock may be converted unless all outstanding
shares of Series B Preferred Stock are surrendered for
conversion.
The term "Conversion Price" shall mean $24.735, as
adjusted in accordance with the provisions of this Section (g).
(2) Notwithstanding the requirement of conversion in
Section (g)(1), any shares of Series B Preferred Stock called for
redemption may be converted at any time before the close of
business on the second business day preceding the Redemption
Date, without causing the conversion of any other shares. Upon
any conversion pursuant to this Section (g)(2), the Corporation
shall pay to the holder of Series B Preferred Stock so converted
an amount in cash equal to all accrued and unpaid dividends on
such shares to and including the date of conversion, whether or
not declared (with such amount being pro rated with respect to
the then current dividend period).
(3) In order to exercise the conversion privilege in
the case of a conversion specified in Section (g)(2), or in order
to receive certificates evidencing Common Stock issuable upon a
conversion specified in Section (g)(1) or (g)(2), the holder of
each share of Series B Preferred Stock to be converted, or so
converted, as the case may be, shall surrender the certificate
representing such share at the office of any transfer agent for
the Common Stock and shall give written notice to the Corporation
at such office that such holder elects to convert the same,
specifying the name or names and denominations in which such
holder wishes the certificate or certificates for the Common
Stock to be issued (which notice may be in the form of a notice
of election to convert which may be printed on the reverse side
of the certificates for the shares of Series B Preferred Stock).
Unless the shares issuable on conversion are to be issued in the
same name as the name in which such share of Series B Preferred
Stock is registered, each certificate evidencing shares
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed
by the holder or his duly authorized attorney, and by an amount
in cash sufficient to pay any transfer or similar tax.
The holders of shares of Series B Preferred Stock at
the close of business on a Quarterly Dividend Payment Date shall
be entitled to receive any previously declared dividend payable
on such shares on such date notwithstanding the Corporation's
default in payment of the dividend due on such Quarterly Dividend
Payment Date. Except as provided in Section (g)(2) and above in
this Section (g)(3), and without limiting the effect of Section
(g)(5)(b), the Corporation shall not be obligated to make any
payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion, payable in respect of
any period before such conversion.
As promptly as practicable after the surrender of the
certificates for shares of Series B Preferred Stock as provided
above, the Corporation shall issue and shall deliver at the
office of any transfer agent for the Common Stock to such holder,
or on his written order, a certificate or certificates for the
number of full shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of
this Section (g), together with a certificate or certificates
representing any shares of Series B Preferred Stock that are not
to be converted but shall have constituted part of the shares of
Series B Preferred Stock represented by the certificate or
certificates so surrendered, and any fractional interest in
respect of a share of Common Stock arising upon such conversion
shall be settled as provided in Section (g)(4).
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which
the certificates for shares of Series B Preferred Stock shall
have been surrendered and such notice received by the Corporation
as provided above (or such later time as may be specified in such
notice), and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at
such time on such date, and such conversion shall be at the
Conversion Price in effect at such time on such date, unless the
stock transfer books of the Corporation shall be closed on such
date, in which event such person or persons shall be deemed to
have become such holder or holders of record at the close of
business on the next succeeding day on which such stock transfer
books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which such shares shall have
been surrendered and such notice received by the Corporation.
All shares of Common Stock delivered upon conversion of the
shares of Series B Preferred Stock will upon delivery be duly and
validly issued and fully paid and nonassessable, free of all
liens and charges and not subject to any preemptive rights.
(4) No fractional shares or scrip representing
fractions of shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. Instead of any
fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of a share of Series
B Preferred Stock, the Corporation shall pay to the holder of
such share of Series B Preferred Stock an amount in cash
(computed to the nearest cent, with one-half cent being rounded
upward) equal to the Conversion Price multiplied by the fraction
of a share of Common Stock represented by such fractional
interest. If more than one share of Series B Preferred Stock
shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the
aggregate Conversion Price of the shares of Series B Preferred
Stock so surrendered.
(5) The Conversion Price shall be adjusted (and the
other actions specified herein shall be taken) from time to time
as follows:
(a) In case the Corporation shall (x) pay a
dividend or make a distribution on the Common Stock in
shares of Common Stock, (y) subdivide the outstanding Common
Stock into a greater number of shares or (z) combine the
outstanding Common Stock into a smaller number of shares,
the Conversion Price shall be adjusted so that the holder of
any share of Series B Preferred Stock thereafter surrendered
for conversion shall be entitled to receive the number of
shares of Common Stock of the Corporation that he would have
been entitled to receive after the happening of any of the
events described above had such share been converted
immediately prior to the record date, in the case of a
dividend, or the effective date, in the case of subdivision
or combination. An adjustment made pursuant to this
subparagraph (a) shall become effective immediately after
the record date in the case of a dividend, and shall become
effective immediately after the effective date, in the case
of a subdivision or combination.
(b) In case the Corporation shall distribute to
holders of Common Stock generally any shares of capital
stock of the Corporation (other than Common Stock) or
evidences of its indebtedness or assets (excluding cash
dividends or distributions paid from retained earnings or
other legally permitted sources of the Corporation or
dividends payable in Common Stock, but including any
distribution of securities or other property pursuant to the
Rights Agreement) or rights or warrants to subscribe for or
purchase any of its securities including any rights issued
at any time under the Rights Agreement (any of the foregoing
being hereinafter in this subparagraph (b) called the
"Securities"), then, in each such case, the Corporation
shall make appropriate provisions to reserve an adequate
amount of such Securities for distribution to the holders of
the shares of Series B Preferred Stock upon the conversion
of the shares of Series B Preferred Stock so that any such
holder converting shares of Series B Preferred Stock will
receive upon such conversion, in addition to the shares of
Common Stock to which such holder is entitled, the amount
and kind of such Securities that such holder would have
received if such holder had, immediately prior to the record
date for the distribution of the Securities or the event
that required the distribution of the Securities, as the
case may be, converted its shares of Series B Preferred
Stock into Common Stock.
(c) Whenever the Conversion Price is adjusted as
herein provided, the Corporation shall prepare and retain at
its principal office a certificate, signed by the Chairman
of the Board, any Vice Chairman, the President, any Senior
Vice President or any Vice President of the Corporation,
setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment; provided, however, that the failure of the
Corporation to prepare and retain such officer's certificate
shall not invalidate any corporate action by the
Corporation.
(6) Whenever the Conversion Price is adjusted as
provided in subparagraph (c) of Section (g)(5), the Corporation
shall cause to be mailed to each holder of shares of Series B
Preferred Stock at his then registered address by first-class
mail, postage prepaid, a notice of such adjustment of the
Conversion Price setting forth such adjusted Conversion Price and
the effective date of such adjusted Conversion Price; provided,
however, that the failure of the Corporation to give such notice
shall not invalidate any corporate action by the Corporation.
(7) The Corporation covenants that it will at all
times reserve and keep available, free from preemptive rights,
out of the aggregate of its authorized but unissued shares of
Common Stock, for the purpose of effecting conversions of shares
of Series B Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all outstanding shares
of Series B Preferred Stock not theretofore converted. For
purposes of this Section (g)(7), the number of shares of Common
Stock that shall be deliverable upon the conversion of all
outstanding shares of Series B Preferred Stock shall be computed
as if at the time of computation all such outstanding shares were
held by a single holder.
(8) The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on conversions of
shares of Series B Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any
tax that may be payable in respect of any transfer involved in
the issue or delivery of shares of Common Stock in a name other
than that of the holder of shares of Series B Preferred Stock to
be converted and no such issue or delivery shall be made unless
and until the person requesting such issue or delivery has paid
to the Corporation the amount of any such tax or has established,
to the satisfaction of the Corporation, that such tax has been
paid.
(9) Notwithstanding any other provision herein to the
contrary, if any of the following events occur: (i) any
reclassification or change of outstanding shares of Common Stock
(other than a change in par value, or from par value to no par
value or from no par value to par value, or as a result of
subdivision or combination of the Common Stock), (ii) any
consolidation, merger or combination of the Corporation with or
into another corporation or a statutory share exchange as a
result of which holders of Common Stock shall be entitled to
receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock, or
(iii) any sale or conveyance of all or substantially all the
properties and assets of the Corporation as, or substantially as,
an entirety to any other entity as a result of which holders of
Common Stock shall be entitled to receive stock, securities or
other property or assets (including cash) with respect to or in
exchange for such Common Stock, then appropriate provision shall
be made so that the holder of each share of Series B Preferred
Stock then outstanding shall have the right to convert such share
into the kind and amount of shares of stock and other securities
and property or assets that would have been receivable upon such
reclassification, change, consolidation, merger, combination,
exchange, sale or conveyance by a holder of the number of shares
of Common Stock issuable upon conversion of such share of Series
B Preferred Stock immediately prior to such reclassification,
change, consolidation, merger, combination, exchange, sale or
conveyance. If, in the case of any such consolidation, merger,
combination, exchange, sale or conveyance, the stock or other
securities and property receivable thereupon by a holder of
shares of Common Stock includes shares of stock, securities or
other property or assets (including cash) of an entity other than
the successor or acquiring entity, as the case may be, in such
consolidation, merger, combination, exchange, sale or conveyance,
then the Corporation shall enter into an agreement with such
other entity for the benefit of the holders of Series B Preferred
Stock that shall contain such provisions to protect the interests
of such holders as the Board of Directors of the Corporation
shall reasonably consider necessary by reason of the foregoing.
(10) Upon any conversion of any shares of Series B
Preferred Stock, the shares of Series B Preferred Stock so
converted shall have the status of authorized and unissued shares
of Preferred Stock, without designation as to series, until such
shares are once more designated as part of a particular series by
the Board of Directors of the Corporation.
(h) Mandatory Conversion. Except as provided in Section
(g)(2), each share of Series B Preferred Stock shall be converted
automatically into the number of shares of Common Stock
determined as provided in Section (g)(1) immediately upon the
conversion of shares of Series B Preferred Stock pursuant to such
Section.
(i) Ranking. The Series B Preferred Stock shall rank on a
parity with all other series of Preferred Stock as to the payment
of dividends and the distribution of assets upon liquidation.
(j) Series B Director. (a) So long as any share of Series
B Preferred Stock remains outstanding, the Series B Preferred
Stock, voting as a separate voting group, shall be entitled to
elect one member of the Board of Directors of the Corporation.
Such director (the "Series B Director") shall be in addition to
the number of Directors of the Corporation otherwise prescribed
by the Articles of Incorporation or Bylaws. Such voting right of
the holders of Series B Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph
(2) of this Section 6(j) or at any annual meeting of
shareholders, and thereafter at annual meetings of shareholders,
(or by unanimous written consent in lieu of any such meeting)
provided that such voting right at any such meeting may not be
exercised unless the holders of ten percent (10%) in number of
shares of Series B Preferred Stock outstanding shall be present
in person or by proxy. The absence of a quorum of the holders of
Common Stock at any such meeting shall not affect the exercise by
the holders of Series B Preferred Stock of such voting right.
(b) Unless the holders of Series B Preferred Stock
shall have previously exercised their right to elect the Series B
Director, the Board of Directors may order, or any holder or
holders owning in the aggregate not less than ten percent (10%)
of the total number of shares of Series B Preferred Stock
outstanding, may request, the calling of a special meeting of the
holders of Series B Preferred Stock for the purpose of electing
the Series B Director, which meeting shall thereupon be called by
the Chairman, President, a Vice-President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to
this Section 6(j) shall be given to each holder of record of
Series B Preferred Stock by mailing a copy of such notice to him
at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier
than 10 days and not later than 60 days after such order or
request. In the event such meeting is not called within 60 days
after such order or request, such meeting may be called on
similar notice by any holder or holders owning in the aggregate
not less than ten percent (10%) of the total number of shares of
Series B Preferred Stock outstanding. Notwithstanding the
provisions of this 6(j), no such special meeting shall be called
during the period within 60 days immediately preceding the date
fixed for the next annual meeting of the holders.
Immediately upon the retirement (whether upon redemption,
conversion or otherwise), of all outstanding shares of the Series
B Preferred Stock, (x) the right of the holders of Preferred
Stock, as a separate voting group, to elect a Director shall
cease, (y) the term of the Series B Director shall terminate, and
(z) the number of Directors shall be such number as may then be
provided for in, or pursuant to, the Articles of Incorporation or
Bylaws.
(k) Amendment. The Articles of Incorporation shall not be
further amended in any manner that would (i) amend this Section 6
or (ii) adversely affect the preferences, rights or powers of
Series B Preferred Stock without the affirmative vote of the
holders of a majority of the outstanding shares of Series B
Preferred Stock, if any, voting separately as one voting group.
Exhibit E
Opinion of Hunton & Williams
(a) Each of OMI and Holding has been duly incorporated and is validly
existing and in good standing under the laws of the Commonwealth of
Virginia, with the corporate power and authority to own and to enter into
the transactions contemplated by the Agreement of Exchange, and in the case
of OMI Holding, the Agreement of Exchange and the Related Agreements to
which it is a party.
(b) Each of OMI and OMI Holding, to our knowledge, is qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification wherein it owns or
leases material properties except in such jurisdictions where the failure
to be so qualified and in good standing would not individually or in the
aggregate have a material adverse effect on the business, operations or
financial condition of OMI and OMI Holding taken as a whole.
(c) The Agreement of Exchange has been duly authorized by all
necessary corporate action and has been duly executed and delivered by OMI.
The Agreement of Exchange constitutes the valid and binding obligation of
OMI, enforceable against OMI in accordance with its terms, except as may be
limited or otherwise affected by bankruptcy, insolvency, reorganization,
fraudulent conveyance and other laws affecting the rights of creditors
generally and principles of equity, whether considered at law or in equity.
(d) The Agreement of Exchange and the Registration Rights Agreement
have been duly authorized by all necessary corporate action and has been
duly executed and delivered by OMI Holding. Each of such agreements
constitutes the valid and binding obligation of OMI Holding, enforceable
against OMI Holding in accordance with its terms, except as may be limited
or otherwise affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance and other laws affecting the rights of creditors generally and
principles of equity, whether considered at law or in equity.
(e) Other than the filing of articles of exchange with the State
Corporation Commission of Virginia, no further filing with or consent,
approval, authorization or order of any court or governmental agency or
body or official is required to be obtained on or prior to the date hereof
in connection with the execution, delivery and performance of the Agreement
of Exchange by OMI and OMI Holding, except that no opinion is expressed
herein with respect to compliance with state securities laws.
(f) The OMI Holding Preferred Stock to be issued pursuant to the OMI
Exchange has been duly authorized and when issued in accordance with the
terms of the OMI Plan of Exchange will be validly issued, fully paid and
nonassessable.
Exhibit F
Opinion of Cohen & Grigsby, P.C.
(g) SMI has been duly incorporated and is validly subsisting and in
good standing under the laws of the Commonwealth of Pennsylvania, with the
corporate power and authority to own its properties and conduct its
business and to enter into the transactions contemplated by the Agreement
of Exchange.
(h) To our knowledge, SMI is qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
which requires such qualification wherein it owns or leases material
properties except in such jurisdictions where the failure to be so
qualified and in good standing would not individually or in the aggregate
have a material adverse effect on the business, operations or financial
condition of SMI.
(i) The Agreement of Exchange has been duly authorized by all
necessary corporate action and has been duly executed and delivered by SMI.
Such agreement constitutes the valid and binding obligation of SMI,
enforceable against SMI in accordance with its terms, except as may be
limited or otherwise affected by bankruptcy, insolvency, reorganization,
fraudulent conveyance and other laws affecting the rights of creditors
generally and principles of equity, whether considered at law or in equity.
(j) Other than the filing of Articles of Exchange with the Secretary
of State of the Commonwealth of Pennsylvania, no further filing with or
consent, approval, authorization or order of any court or governmental
agency or body or official is required to be obtained on or prior to the
date hereof in connection with the execution, delivery and performance of
the Agreement of Exchange by SMI (except that no opinion is expressed
herein with respect to compliance with federal or state securities laws).
(k) The authorized capital stock of SMI consists of 10,000,000
shares of SMI Common Stock of which 2,000,000 shares are issued and
outstanding. Such shares of SMI Common Stock have been duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights.
Exhibit G
Opinion of Counsel to Shareholders
(1) The Agreement of Exchange has been duly authorized by all
necessary action and has been duly executed and delivered by each of the
Shareholders. Such agreement constitutes the valid and binding obligation
of each of the Shareholders, enforceable against each of the Shareholders
in accordance with its terms, except as may be limited or otherwise
affected by bankruptcy, insolvency, reorganization, fraudulent conveyance
and other laws affecting the rights of creditors generally and principles
of equity, whether considered at law or in equity.
(2) Other than the filing of Articles of Exchange with the Secretary
of State of the Commonwealth of Pennsylvania, no further filing with or
consent, approval, authorization or order of any court or governmental
agency or body or official is required to be obtained on or prior to the
date hereof in connection with the execution, delivery and performance of
the Agreement of Exchange by each of the Shareholders (except that no
opinion is expressed herein with respect to compliance with federal or
state securities laws).
The Disclosure Schedules set forth on page viii of this Agreement have
been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant
hereby undertakes to file supplementally with the Commission upon request a
copy of the omitted schedules.