EXHIBIT 99.3
EXECUTION COPY
================================================================================
PRE-MERGER AGREEMENT
among
LABORATORY CORPORATION OF AMERICA HOLDINGS,
3065619 NOVA SCOTIA COMPANY
and
DYNACARE INC.
Dated as of May 8, 2002
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS.............................................................................................5
SECTION 1.01 DEFINITIONS.....................................................................................5
ARTICLE II ARRANGEMENT...........................................................................................12
SECTION 2.01 IMPLEMENTATION STEPS BY THE COMPANY............................................................12
SECTION 2.02 INTERIM ORDER..................................................................................13
SECTION 2.03 ARTICLES OF ARRANGEMENT........................................................................13
SECTION 2.04 CIRCULAR.......................................................................................13
SECTION 2.05 SECURITIES COMPLIANCE..........................................................................14
SECTION 2.06 PREPARATION OF FILINGS.........................................................................14
SECTION 2.07 COMPANY ACTION.................................................................................15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................16
SECTION 3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES...................................................16
SECTION 3.02 CERTIFICATE OF INCORPORATION AND BY-LAWS.......................................................17
SECTION 3.03 AUTHORITY RELATIVE TO THIS AGREEMENT...........................................................17
SECTION 3.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.....................................................17
SECTION 3.05 CAPITALIZATION.................................................................................18
SECTION 3.06 SEC FILINGS; FINANCIAL STATEMENTS..............................................................19
SECTION 3.07 INFORMATION TO BE SUPPLIED.....................................................................20
SECTION 3.08 PERMITS; COMPLIANCE............................................................................20
SECTION 3.09 ABSENCE OF CERTAIN CHANGES OR EVENTS...........................................................23
SECTION 3.10 ABSENCE OF LITIGATION..........................................................................24
SECTION 3.11 MATERIAL CONTRACTS.............................................................................24
SECTION 3.12 EMPLOYEE BENEFIT PLANS.........................................................................25
SECTION 3.13 LABOR AND EMPLOYMENT MATTERS...................................................................27
SECTION 3.14 CUSTOMERS......................................................................................27
SECTION 3.15 PROPERTY AND LEASES............................................................................28
SECTION 3.16 INTELLECTUAL PROPERTY..........................................................................29
SECTION 3.17 TAXES..........................................................................................30
SECTION 3.18 ENVIRONMENTAL MATTERS..........................................................................31
SECTION 3.19 INSURANCE......................................................................................32
SECTION 3.20 BROKERS........................................................................................33
SECTION 3.21 BOARD APPROVAL; VOTE REQUIRED..................................................................33
SECTION 3.22 RELATED PARTY TRANSACTIONS.....................................................................33
SECTION 3.23 DISCLOSURE.....................................................................................33
SECTION 3.24 ABSENCE OF VIOLATION...........................................................................34
SECTION 3.25 TAKEOVER STATUTES.............................................................................34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER................................................34
SECTION 4.01 CORPORATE ORGANIZATION.........................................................................34
SECTION 4.02 CERTIFICATE OF INCORPORATION AND BY-LAWS.......................................................35
SECTION 4.03 AUTHORITY RELATIVE TO THIS AGREEMENT...........................................................35
SECTION 4.04 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.....................................................35
SECTION 4.05 CAPITALIZATION.................................................................................36
SECTION 4.06 SEC FILINGS; FINANCIAL STATEMENTS..............................................................37
SECTION 4.07 INFORMATION TO BE SUPPLIED.....................................................................38
SECTION 4.08 PERMITS; COMPLIANCE............................................................................38
SECTION 4.09 ABSENCE OF CERTAIN CHANGES OR EVENTS...........................................................41
SECTION 4.10 LITIGATION.....................................................................................41
SECTION 4.11 NO VOTE REQUIRED...............................................................................41
SECTION 4.12 OPERATIONS OF PURCHASER........................................................................41
SECTION 4.13 BROKERS........................................................................................42
SECTION 4.14 FINANCING......................................................................................42
SECTION 4.15 OWNERSHIP OF COMPANY COMMON STOCK..............................................................42
ARTICLE V CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE DATE........................................................42
SECTION 5.01 CONDUCT OF BUSINESS BY THE COMPANY.............................................................42
SECTION 5.02 CONDUCT OF BUSINESS BY PARENT..................................................................45
ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................45
SECTION 6.01 ACCESS TO INFORMATION; CONFIDENTIALITY.........................................................45
SECTION 6.02 NO SOLICITATION OF TRANSACTIONS................................................................46
SECTION 6.03 STOCKHOLDER MEETING............................................................................48
SECTION 6.04 EMPLOYEE BENEFITS MATTERS......................................................................48
SECTION 6.05 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.........................................49
SECTION 6.06 NOTIFICATION OF CERTAIN MATTERS................................................................49
SECTION 6.07 COMPANY AFFILIATES.............................................................................50
SECTION 6.08 FURTHER ACTION; REASONABLE EFFORTS.............................................................50
SECTION 6.09 PURCHASER......................................................................................51
SECTION 6.10 NYSE LISTING...................................................................................51
SECTION 6.11 PUBLIC ANNOUNCEMENTS...........................................................................51
SECTION 6.12 TRANSFER TAX...................................................................................52
SECTION 6.13 INDEBTEDNESS...................................................................................52
ARTICLE VII CONDITIONS...........................................................................................52
SECTION 7.01 CONDITIONS PRECEDENT TO EACH PARTY'S OBLIGATION TO EFFECT THE ARRANGEMENT......................52
SECTION 7.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT..................................................53
SECTION 7.03 CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS..............................................53
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...................................................................54
SECTION 8.01 TERMINATION BY MUTUAL CONSENT..................................................................54
SECTION 8.02 TERMINATION BY EITHER PARENT OR THE COMPANY....................................................54
SECTION 8.03 TERMINATION BY THE COMPANY.....................................................................54
SECTION 8.04 TERMINATION BY PARENT..........................................................................55
SECTION 8.05 EFFECT OF TERMINATION AND ABANDONMENT..........................................................56
ARTICLE IX GENERAL PROVISIONS....................................................................................57
SECTION 9.01 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................................................57
SECTION 9.02 AMENDMENTS, MODIFICATION AND WAIVER............................................................57
SECTION 9.03 NOTICES........................................................................................57
SECTION 9.04 SEVERABILITY...................................................................................59
SECTION 9.05 ENTIRE AGREEMENT; ASSIGNMENT...................................................................59
SECTION 9.06 PARTIES IN INTEREST............................................................................59
SECTION 9.07 INTERPRETATION.................................................................................59
SECTION 9.08 SPECIFIC PERFORMANCE...........................................................................60
SECTION 9.09 GOVERNING LAW..................................................................................60
SECTION 9.10 WAIVER OF JURY TRIAL...........................................................................60
SECTION 9.11 HEADINGS.......................................................................................60
SECTION 9.12 COUNTERPARTS...................................................................................60
SECTION 9.13 CURRENCY.......................................................................................61
2
ANNEX I [Form of arrangement resolution]
ANNEX II [form of PLAN OF ARRANGEMENT]
SCHEDULE 1
COMPANY DISCLOSURE SCHEDULES
PARENT DISCLOSURE SCHEDULES
3
PRE-MERGER AGREEMENT
--------------------
THIS PRE-MERGER AGREEMENT (this "Agreement") is made as of May
8, 2002, by and among Laboratory Corporation of America Holdings, a Delaware
corporation ("Parent"), 3065619 NOVA SCOTIA COMPANY, a Nova Scotia corporation
and an indirect wholly owned subsidiary of Parent ("Purchaser") and Dynacare
Inc., an Ontario corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Purchaser and the
Company have each approved the terms and conditions of a business combination of
the Company and the Purchaser upon the terms and subject to the conditions set
forth herein;
WHEREAS, the business combination of the Company and the
Purchaser shall be effected by the terms of this Agreement through a plan of
arrangement, pursuant to Section 182 of the Business Corporations Act (Ontario)
(the "OBCA"), of the Company and the Purchaser (the "Arrangement");
WHEREAS, the Arrangement is intended to provide holders of
Company Common Stock (as defined below) with the opportunity to dispose of their
shares in exchange for a combination of cash and shares of Parent Common Stock
(as defined below), all in accordance with the terms and conditions set forth in
this Agreement;
WHEREAS, the Board of Directors of the Company (the "Company
Board") has (i) determined that the Arrangement is fair to, and in the best
interests of, the Company and its stockholders and has approved this Agreement
and declared its advisability and approved the Arrangement and the other
transactions contemplated by this Agreement, and (ii) resolved to recommend
acceptance of the Arrangement and adoption of this Agreement by the Company's
stockholders; and
WHEREAS, as a condition and as an inducement to Parent's
willingness to enter into this Agreement, Parent, Purchaser and certain
stockholders of the Company (the "Stockholders") have entered into a
Stockholders Agreement, dated as of the date hereof (the "Stockholders
Agreement"), pursuant to which, among other things, the Stockholders have
irrevocably agreed to vote all shares of Company Common Stock beneficially owned
by them in favor of the Arrangement and against any competing proposals, and,
under certain circumstances, to sell the shares of Company Common Stock
beneficially owned by them to Parent.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, Parent, Purchaser and the Company hereby agree as follows:
4
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
(a) For purposes of this Agreement:
"Affiliate" of a specified Person means any other Person who,
directly or indirectly through one or more intermediaries, Controls, is
controlled by, or is under common Control with, such specified Person.
"Arrangement" means an arrangement under Section 182 of the
OBCA on the terms and subject to the conditions set out in the Plan of
Arrangement, subject to any amendments or variations thereto made in accordance
with Section 9.02 hereof or Article 5 of the Plan of Arrangement or made at the
direction of the Court in the Interim Order or the Final Order.
"Arrangement Resolution" means the special resolution of the
Company Securityholders, to be substantially in the form and content of Annex I
annexed hereto.
"Articles of Arrangement" means the articles of arrangement of
the Company in respect of the Arrangement that are required by the OBCA to be
sent to the Director after the Final Order is made.
"Beneficial Owner", with respect to any Company Common Stock,
has the meaning ascribed to such term under Rule 13d-3 of the Exchange Act.
"Business Day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York or in Toronto.
"Canadian Securities Laws" means all applicable securities
laws in the province of Ontario, all as now enacted or as the same as may from
time to time be amended, re-enacted or replaced, the respective regulations,
rules, orders and forms under such laws and the applicable published policy
statements of and any exempting orders issued by the Canadian Securities
Regulators.
"Canadian Securities Regulators" means the Ontario Securities
Commission.
"Certificate" means a certificate or certificates representing
shares of Company Common Stock.
"Circular" means the notice of the Company Meeting and
accompanying management information circular and proxy statement, including all
appendices thereto, to be sent to holders of Company Common Stock and Company
Stock Options in connection with the Company Meeting, as may be amended from
time to time.
5
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Company Common Stock" means the Company's common stock,
without par value.
"Company Material Adverse Effect" means any event,
circumstance, change, occurrence, fact or effect that, individually or in the
aggregate with all other events, circumstances, changes, occurrences, facts
and/or effects (i) is or is reasonably likely to be materially adverse to the
business, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole or (ii) is or is reasonably likely to prevent or
materially delay the Company from performing its obligations under this
Agreement; provided, however, that the definition set forth in clause (i) above
shall not include any event, circumstance, change, occurrence, fact or effect
resulting from or relating to (w) changes in general economic conditions in any
region in which the Company or its Subsidiaries operate unless those changes
have a materially disproportionate impact on the Company and its Subsidiaries,
taken as a whole, as compared to other companies in that region, (x) changes in
the United States or Canadian financial markets in general, (y) changes in the
industry in which the Company and its Subsidiaries operate unless those changes
have a materially disproportionate impact on the Company and its Subsidiaries,
taken as a whole, as compared to other companies in that industry, or (z) the
public announcement of this Agreement or the transactions contemplated hereby.
"Company Meeting" means the special meeting (or annual and
special meeting) of the Company Securityholders, including any adjournment
thereof, to be called and held in accordance with the Interim Order to consider
the Arrangement and for any other proper purpose as may be set out in the notice
for such meeting.
"Company Permit" means all franchises, grants, authorizations,
licenses, certifications, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for
each of the Company or the Company Subsidiaries to own, lease and operate its
properties or to carry on its business as it is now being conducted.
"Company Securityholders" means the holders of Company Common
Stock and Company Stock Options, collectively.
"Company Stock Options" means, at any time or times, the
options, whether or not exercisable and whether or not vested, granted under the
Company Stock Option Plans and being outstanding and unexercised, at such time
or times.
"Company Stock Option Plans" means each of the Company's
Amended and Restated Employee Stock Option Plan and the Company's Amended and
Restated Stock Option Incentive Plan, as amended to date and as they may be
further amended from time to time as expressly permitted by this Agreement.
"Continuance Resolution" means the special resolution of the
Company stockholders authorizing and approving the continuance of the Company as
a "company limited by shares" under the laws of the Province of Nova Scotia.
6
"Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.
"Court" means the Superior Court of Justice (Ontario).
"Director" means the Director appointed pursuant to Section
278 of the OBCA.
"Dissent Rights" means the rights of dissent in respect of the
Arrangement described in Section 3.1 of the Plan of Arrangement.
"Dissenting Shareholder" has the meaning ascribed thereto in
the Plan of Arrangement.
"Drop Dead Date" means October 31, 2002, or such later date as
may be mutually agreed by the parties to this Agreement.
"Effective Date" means the date shown on the certificate of
arrangement to be issued by the Director under the OBCA giving effect to the
Arrangement provided that such date occurs on or prior to the Drop Dead Date.
"Effective Time" has the meaning ascribed thereto in the Plan
of Arrangement.
"Environmental Laws" means any applicable Law relating to (i)
Hazardous Substances or materials containing Hazardous Substances; or (ii)
pollution or protection of the environment, human health or safety as a result
of exposure to Hazardous Substances, and shall include the following ("Specified
Environmental Laws"): the Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Clean Water Act, the Safe Drinking Water Act,
the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide Act
and the Clean Air Act, and all similar state, Canadian federal and provincial
laws.
"Exchange Consideration" has the meaning ascribed thereto in
the Plan of Arrangement.
"Final Order" means the final order of the Court approving the
Arrangement as such order may be amended by the Court at any time prior to the
Effective Date or, if appealed, then, unless such appeal is withdrawn or denied,
as affirmed.
"Hazardous Substances" means (i) those substances listed in,
defined in or regulated under Specified Environmental Laws; (ii) petroleum and
petroleum products, including crude oil and any fractions thereof; (iii) natural
gas, synthetic gas and any mixtures thereof; and (iv) polychlorinated biphenyls,
asbestos and radon.
"Indebtedness" means, as of a given time, (i) all indebtedness
for borrowed money or for the deferred purchase price of property or services in
respect of which the Company or any of its Subsidiaries is liable, contingently
7
or otherwise, as obligor or otherwise, and any commitment by which the Company
or any of its Subsidiaries assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (ii) all
indebtedness guaranteed in any manner by the Company or any of its Subsidiaries,
including a guarantee in the form of an agreement to repurchase or reimburse;
(iii) all obligations under capitalized leases in respect of which the Company
or any of its Subsidiaries is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations the Company or any of
its Subsidiaries assures a creditor against loss; and (iv) all interest,
prepayment penalties, premiums, fees and expenses (if any) thereon.
"Intellectual Property" means (i) United States and foreign
patents, patent applications and statutory invention registrations, (ii)
trademarks, service marks, trade dress, logos, trade names, corporate names and
other source identifiers, and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, and (iv) confidential and proprietary information, including trade
secrets and know-how.
"Interim Order" means the interim order of the Court, as the
same may be amended, in respect of the Arrangement, as contemplated by Section
2.02.
"Nasdaq" means the Nasdaq National Market.
"Noon Spot Rate" means, on any day, the Noon Spot Rate on such
day of the Bank of Canada for one US dollar expressed in Canadian dollars.
"NYSE" means the New York Stock Exchange.
"OBCA" means the Business Corporations Act (Ontario) as in
effect as of the date hereof and as may be amended from time to time prior to
the Effective Time.
"Parent Closing Price" means the closing on the NYSE of the
Parent Common Stock on the Business Day immediately preceding the Effective
Date.
"Parent Common Stock" means Parent's common stock, par value
$.10 per share.
"Parent Material Adverse Effect" means any event,
circumstance, change, occurrence, fact or effect that, individually or in the
aggregate with all other events, circumstances, changes, occurrences, facts
and/or effects (i) is or is reasonably likely to be materially adverse to the
business, financial condition or results of operations of Parent and its
Subsidiaries, taken as a whole or (ii) is or is reasonably likely to, prevent or
materially delay Parent from performing its obligations under this Agreement;
provided, however, that the definition set forth in clause (i) above shall not
include any event, circumstance, change, occurrence, fact or effect resulting
from or relating to (w) changes in general economic conditions in any region in
which Parent and its Subsidiaries operate unless those changes have a materially
disproportionate impact on Parent and its Subsidiaries, taken as a whole, as
compared to other companies in that region, (x) changes in the United States or
Canadian financial markets in general, (y) changes in the industry in which
Parent and its subsidiaries operate unless those changes have a materially
8
disproportionate impact on Parent and its Subsidiaries, taken as a whole, as
compared to other companies in that industry, or (z) the public announcement of
this Agreement or the transactions contemplated hereby. All references to Parent
Material Adverse Effect contained in this Agreement shall be deemed to refer
solely to the business, financial condition, assets, liabilities or results of
operations of Parent and its Subsidiaries, taken as a whole, without including
its ownership of the Company and its Subsidiaries after giving effect to the
Transaction.
"Parent Option Shares" has the meaning ascribed thereto in
Section 2.03(a).
"Person" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person, trust,
association or entity or government, political subdivision, agency or
instrumentality of a government.
"Plan of Arrangement" means the plan of arrangement
substantially in the form and content of Annex II annexed hereto and any
amendments or variations thereto made in accordance with Section 9.02 hereof or
Article 5 of the Plan of Arrangement or made at the direction of the Court in
the Final Order.
"Proxy Statement" means the proxy statement on Schedule 14A to
be filed with the SEC by the Company in connection with the solicitation of
votes of the Company Securityholders to approve the Transaction.
"Release" means any presence, emission, spill, seepage, leak,
escape, leaching, discharge, injection, pumping, pouring, emptying, dumping,
disposal, migration or release of Hazardous Substances from any source into or
upon the environment, including the air, soil, improvements, surface water,
groundwater, the sewer, septic system, storm drain, publicly owned treatment
works, or waste treatment, storage or disposal systems.
"Remediation" means any investigation, clean-up, removal
action, remedial action, restoration, repair, response action, corrective
action, monitoring, sampling, and analysis, installation, reclamation, closure
or post-closure in connection with the suspected, threatened or actual Release
of Hazardous Substances.
"Securities Legislation" means the Securities Act, the
Exchange Act, Blue Sky Laws, and the Canadian Securities Laws, all as now
enacted or as the same may from time to time be amended, re-enacted or replaced,
and the applicable rules, regulations, rulings, orders and forms made or
promulgated under such statutes and the published policies of the regulatory
authorities administering such statutes, as well as the rules, regulations,
by-laws and policies of the TSE, the NYSE and Nasdaq.
"Security Portion" has the meaning ascribed thereto in the
Plan of Arrangement.
"Stark Law" means Section 1877 of the Social Security Act (42
U.S.C. 1395 nn).
"Subsidiary" or "Subsidiaries" of the Parent means any
corporation, partnership, joint venture or other legal entity of which Parent
(a) owns, directly or indirectly, 50% or more of the outstanding common stock,
9
limited partnership or member interests or other equity interests or (b) is or
controls a general partner or other managing body of such legal entity and
"Subsidiary" or "Subsidiaries" of the Company means any corporation,
partnership, joint venture or other legal entity of which the Company (a) owns,
directly or indirectly, 35% or more of the outstanding common stock, limited
partnership or member interests or other equity interests or (b) is or controls
a general partner or other managing body of such legal entity.
"Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority or taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchise, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges.
"Transaction" means the transactions contemplated by this
Agreement, including the Arrangement.
"TSE" means the Toronto Stock Exchange.
"Vested Company Stock Option" means each Company Stock Option
that is vested or that will become vested as a result of the consummation of the
transactions contemplated hereunder.
(b) The following terms have the meanings set forth in the
Sections set forth below:
Defined Term Location of Definition
------------ ----------------------
Action............................................... Section 3.10
Agreement............................................ Preamble
Approvals ........................................... Section 3.08(a)
Board Recommendation ................................ Section 6.03
Blue Sky Laws........................................ Section 3.04(b)
Company.............................................. Preamble
Company Affiliate.................................... Section 6.07
Company Board........................................ Recitals
Company Disclosure Schedule.......................... ARTICLE III
Company Financial Advisor ........................... Section 2.08
Company Licensed Intellectual Property............... Section 3.16(a)
Company Owned Intellectual Property.................. Section 3.16(a)
Company Reports...................................... Section 3.06(a)
Company Subsidiary................................... Section 3.01(a)
Competing Transaction................................ Section 6.02(d)
Competition Act...................................... Section 3.04(b)
10
Defined Term Location of Definition
------------ ----------------------
Confidentiality Agreement............................ Section 6.01(b)
Customers............................................ Section 3.14
Environmental Permits................................ Section 3.18
ERISA................................................ Section 3.12(a)
Exchange Act......................................... Section 3.06(a)
Form S-8 ............................................ Section 2.06(b)
GAAP................................................. Section 3.06(b)
Governmental Authority............................... Section 3.04(b)
HSR Act.............................................. Section 3.04(b)
Indenture............................................ Section 6.13
IRS.................................................. Section 3.12(a)
Law.................................................. Section 3.04(a)
Leases............................................... Section 3.15(d)
Liens................................................ Section 3.15(b)
Management Letters................................... Section 3.06(d)
Material Contracts................................... Section 3.11(a)
Monthly CapEx Amount................................. Section 5.01(b)
Multiemployer Plan................................... Section 3.12(b)
Multiple Employer Plan............................... Section 3.12(b)
Newco ............................................... Section 2.03(a)
New US Holdco ....................................... Section 2.03(a)
Parent............................................... Preamble
Parent Disclosure Schedule........................... ARTICLE IV
Parent Option Shares ................................ Section 2.03(a)
Parent Preferred Stock............................... Section 4.05(a)
Parent Reports....................................... Section 4.06(a)
Parent Stock Option Plans............................ Section 4.05(a)
Permitted Liens...................................... Section 3.15(b)
Plans................................................ Section 3.12(a)
Purchaser............................................ Preamble
Recommendation....................................... Section 2.08
Related Party Agreement.............................. Section 3.11(a)
Replacement Option .................................. Annex II,
Section 2.2(e)
Representatives...................................... Section 6.02(a)
Restrictive Agreement................................ Section 3.11(a)
SEC.................................................. Section 3.06(a)
Securities Act....................................... Section 3.06(a)
Stockholders......................................... Recitals
Stockholders Agreement............................... Recitals
Superior Proposal ................................... Section 6.02(e)
Takeover Statute .................................... Section 3.25
Termination Date .................................... Section 8.02
Transfer Taxes....................................... Section 6.12
11
Defined Term Location of Definition
------------ ----------------------
US GAAP.............................................. Section 4.06(b)
ARTICLE II
ARRANGEMENT
Section 2.01 Implementation Steps by the Company.
Subject to the terms of this Agreement, the Company covenants in favor
of Parent and the Purchaser that the Company shall:
(a) As soon as reasonably practical after execution and
delivery of this Agreement, apply in a manner acceptable to the Parent and the
Purchaser, acting reasonably, under Section 182 of the OBCA for an order
approving the Interim Order, and thereafter proceed with and diligently seek the
Arrangement;
(b) Convene and hold the Company Meeting for the purpose of
considering the Arrangement Resolution and the Continuance Resolution (and for
any other proper purpose as may be set out in the notice for such meeting);
(c) Include in the Circular the unanimous recommendation of
the directors of the Company that the Company Securityholders vote in favor of
the Arrangement Resolution and the Continuance Resolution;
(d) Subject to obtaining the approvals as are required by the
Interim Order, proceed with and diligently pursue the application to the Court
for the Final Order;
(e) No more than five (5) Business Days prior to the Effective
Date, constitute a newly formed wholly-owned entity incorporated as a Nova
Scotia unlimited liability company pursuant to the laws of the Province of Nova
Scotia ("Newco") and transfer to Newco its one percent (1%) interest in Dynacare
Financing GP in exchange for additional shares of common stock of Newco;
(f) No more than five (5) Business Days prior to the Effective
Date, form a Delaware limited liability company with its mind and management in
Delaware ("New US Holdco");
(g) No more than five (5) Business Days prior to the Effective
Date, transfer all of the shares of Dynacare Laboratories Inc. to New US Holdco
for shares of New US Holdco;
(h) Subject to obtaining the Final Order and the satisfaction
or waiver of the other conditions herein contained in favor of each party, send
to the Director, for endorsement and filing by the Director, the Articles of
Arrangement and such other documents as may be required in connection therewith
under the OBCA to give effect to the Arrangement; and
(i) Use all reasonable best efforts in order that the Company
and The Dynacare Health Group Inc. shall be continued under the laws of the
Province of Nova Scotia.
12
Section 2.02 Interim Order.
The notice of motion for the application referred to in Section 2.01(a)
shall request that the Interim Order provide:
(a) For the class of Persons to whom notice is to be provided
in respect of the Arrangement and the Company Meeting and for the manner in
which such notice is to be provided;
(b) That the requisite approval for the Arrangement Resolution
shall be 66-2/3% of the votes cast on the Arrangement Resolution by the Company
Securityholders present in person or by proxy at the Company Meeting (such that
each holder of Company Common Stock is entitled to one vote for each share of
Company Common Stock held and each holder of a Company Stock Option is entitled
to one vote for each share of Company Common Stock such holder would have
received on a valid exercise of such Company Stock Option);
(c) That, in all other respects, the terms, restrictions and
conditions of the by-laws and articles of the Company, including quorum
requirements and all other matters, shall apply in respect of the Company
Meeting;
(d) For the grant of the Dissent Rights; and
(e) For the notice requirements respecting the presentation of
the application to the Court for a Final Order.
Section 2.03 Articles of Arrangement.
(a) The Articles of Arrangement shall, with such other matters
as are necessary to effect the Arrangement, and all as subject to the provisions
of the Plan of Arrangement, implement the Plan of Arrangement.
(b) In the event of any stock split, reverse stock split,
stock dividend, including any dividend or distribution of securities convertible
into capital stock or capital stock equivalents, of the Company or Parent, or
any recapitalization or other like change occurring after the date of this
Agreement with respect to the Company or Parent, including without limitation
Parent's planned two-for-one stock split on May 10, 2002, the Security Portion
of the Exchange Consideration shall be proportionately adjusted upward or
downward, as the case may be.
Section 2.04 Circular.
(a) As promptly as practicable after the execution and
delivery of this Agreement, Parent and the Company shall prepare the Circular
and the Proxy Statement together with any other documents required by Securities
Legislation, other applicable Laws or the Interim Order in connection with the
Arrangement, and as promptly as practicable after the date of execution of this
Agreement, the Company shall cause the Circular, the Proxy Statement and any
other documentation required in connection with the Company Meeting to be sent
to each holder of Company Common Stock and Company Stock Options and filed as
required by the Interim Order and applicable Securities Legislation.
13
(b) The Company and Parent each shall, upon request by the
other, furnish the other with all information concerning itself, its
Subsidiaries, directors, executive officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection with the
Circular, the Proxy Statement or any other statement, filing, notice or
application made by or on behalf of Parent, the Company or any of their
respective Subsidiaries to any third party and/or any Governmental Authority in
connection with the Arrangement and the transactions contemplated by this
Agreement.
Section 2.05 Securities Compliance.
(a) Parent shall use all reasonable best efforts to obtain,
prior to the Effective Time, all orders required from the Canadian Securities
Regulators to permit the issuance and first resale of (a) the shares of Parent
Common Stock issued pursuant to the Arrangement, and (b) the shares of Parent
Common Stock issued from time to time upon the exercise of the Replacement
Options, without qualification with or approval of or the filing of any
document, including any prospectus or similar document, or the taking of any
proceeding with, or the obtaining of any further order, ruling or consent from,
any Governmental Authority or regulatory authority under any Canadian federal,
provincial or territorial securities or other Laws or pursuant to the rules and
regulations of any regulatory authority administering such Laws, or the
fulfillment of any other legal requirement in any such jurisdiction (other than,
with respect to such first resales, any restrictions on transfer by reason of a
holder being a "control person" of Parent or Purchaser or the Company for
purposes of Canadian federal, provincial or territorial Securities Legislation).
(b) As promptly as practicable after the Effective Date,
Parent shall file a registration statement on Form S-8 (or other applicable
form) (the "Form S-8"), and take such actions as necessary to keep the
information therein current from time to time, in order to maintain the
effectiveness of the Form S-8 and to register under the Securities Act those
shares of Parent Common Stock to be issued from time to time after the Effective
Time upon the exercise of the Replacement Options.
Section 2.06 Preparation of Filings.
(a) Each of Parent, Purchaser and the Company shall cooperate
and use their reasonable best efforts in:
(i) the preparation and filing of any application for
the orders and the preparation of any required registration statements and any
other documents reasonably deemed by Parent or the Company to be necessary to
discharge their respective obligations under Securities Legislation in
connection with the Arrangement and the transactions contemplated hereby;
(ii) the taking of all such action as may be required
under any applicable Securities Legislation (including Blue Sky Laws) in
connection with the issuance of the shares of Parent Common Stock in connection
with the Arrangement or the exercise of the Replacement Options; provided,
14
however, that with respect to the Blue Sky Laws and Canadian provincial
qualifications, neither Parent nor the Company shall be required to register or
qualify as a foreign corporation or to take any action that would subject it to
service of process in any jurisdiction where such entity is not now so subject,
except as to matters and transactions arising solely from the offer and sale of
the shares of Parent Common Stock; and
(iii) the taking of all such action as may be required
under the OBCA in connection with the transactions contemplated by this
Agreement and the Plan of Arrangement.
(b) Each of Parent and the Company shall furnish to the other
all such information concerning it and its shareholders as may be required (and,
in the case of its shareholders, available to it) for the effectuation of the
actions described in Section 2.04 and Section 2.05 and the foregoing provisions
of this Section 2.06 and the obtaining of all regulatory approvals required by
Section 7.01(a), and each covenants that no information furnished by it (to its
knowledge in the case of information concerning its shareholders) in connection
with such actions or otherwise in connection with the consummation of the
Arrangement and the other transactions contemplated by this Agreement will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in any such document or necessary in order to make any
information so furnished for use in any such document not misleading in the
light of the circumstances in which it is furnished.
(c) Each of Parent and the Company shall promptly notify the
other if at any time before or after the Effective Time it becomes aware that
the Circular, the Proxy Statement or an application for an order contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements contained therein not
misleading in light of the circumstances in which they are made, or that
otherwise requires an amendment or supplement to the Circular, the Proxy
Statement or such application or registration statement. In any such event,
Parent and the Company shall cooperate in the preparation of a supplement or
amendment to the Circular, the Proxy Statement, the application for an order or
such other document, as required and as the case may be, and, if required, shall
cause the same to be distributed to the Company Securityholders and/or filed
with the relevant securities regulatory authorities.
Section 2.07 Company Action.
The Company hereby approves of and consents to the Arrangement and
represents that the Company Board, at a meeting duly called and held, has (i)
unanimously determined that this Agreement and the transactions contemplated
hereby, including the Arrangement are fair to and in the best interests of the
Company and its stockholders, (ii) approved and declared advisable this
Agreement and the transactions contemplated hereby, including the Arrangement
and (iii) resolved to recommend acceptance of the Arrangement and, as
applicable, adoption of this Agreement by the Company's Securityholders (the
"Recommendation") and, subject to Section 6.03, will use its best efforts to
obtain the necessary vote in favor of the Arrangement by the Company
Securityholders; provided, however, that the Company Board may withdraw,
qualify, modify or amend the Recommendation as and only to the extent permitted
by Section 6.03. The Company further represents that the Company Board has
received the opinion of UBS Warburg LLC (the "Company Financial Advisor") to the
15
effect that, as of the date of this Agreement, the Exchange Consideration to be
received by the holders of Company Common Stock (other than the Stockholders and
their respective Affiliates) in the Arrangement is fair, from a financial point
of view, to such holders, and a copy of the written opinion of the Company
Financial Advisor, promptly upon receipt thereof, will be delivered to Parent
solely for information purposes. The Company hereby consents to the inclusion in
the Circular and the Proxy Statement of the Recommendation of the Company Board
and the Company shall not withdraw, qualify, modify or amend the Recommendation
in any manner adverse to Parent or Purchaser except as and only to the extent
permitted by Section 6.02. The Company has been advised by its directors and
officers that they intend to vote all shares of Company Common Stock
beneficially owned by them in favor of the Arrangement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Purchaser to enter into this
Agreement, the Company, except as disclosed in the Company's disclosure schedule
delivered concurrently with the delivery of this Agreement (the "Company
Disclosure Schedule"), hereby represents and warrants to Parent and Purchaser as
follows:
Section 3.01 Organization and Qualification; Subsidiaries.
(a) Each of the Company and each Subsidiary of the Company,
together with each Person listed in Section 3.01(a) of the Company Disclosure
Schedule (each, a "Company Subsidiary") is a corporation or other Person duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, formation or organization and has the
requisite corporate, limited liability or partnership power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not reasonably be expected to have a
Company Material Adverse Effect. The Company and each Company Subsidiary is duly
qualified or licensed as a foreign corporation or other Person to do business,
and is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its business makes
such qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not reasonably be expected
to have a Company Material Adverse Effect.
(b) A true and complete list of all the Company Subsidiaries,
together with the jurisdiction of organization of each Company Subsidiary and
the percentage of the outstanding capital stock or other equity interests of
each Subsidiary owned by the Company and each other Company Subsidiary, is set
forth in Section 3.01(b) of the Company Disclosure Schedule. Except as disclosed
in Section 3.01(b) of the Company Disclosure Schedule or except where such
ownership would not reasonably be expected to have a Company Material Adverse
Effect, the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any corporation, partnership, joint venture
or other business association or entity. Section 3.02 Certificate of
Incorporation and By-Laws.
16
The Company has heretofore made available to Parent a complete and
correct copy of the certificate of incorporation or other constating document
and the by-laws or equivalent organizational documents, each as amended to date,
of the Company and each Company Subsidiary. Such certificates of incorporation,
constating documents, by-laws or equivalent organizational documents, as amended
to date, are in full force and effect. Neither the Company nor any Company
Subsidiary is in violation of any of the provisions of its certificate of
incorporation, constating document, by-laws or equivalent organizational
documents, except where such violation would not reasonably be expected to have
a Company Material Adverse Effect.
Section 3.03 Authority Relative to this Agreement.
The Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the Transaction. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the Transaction have been duly
and validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Transaction (other than obtaining the necessary approvals
or consents, including Company Securityholder approvals, and the filing and
recordation of appropriate documents as required by the OBCA). This Agreement
has been duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by each of the other parties
hereto and subject to the terms and conditions of this Agreement and the
requisite approval of the Arrangement Resolution by the Company's
Securityholders, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar Laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
The Company Board has duly and unanimously approved this Agreement and the
transactions contemplated hereby and has recommended adoption thereof by the
Company Securityholders.
Section 3.04 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
(i) conflict with or violate the certificate of incorporation or other
constating document or by-laws or any equivalent organizational documents, each
as amended to date, of the Company or any Company Subsidiary, (ii) assuming that
all consents, approvals, authorizations and other actions described in Section
3.04(b) have been obtained or made, conflict with or violate any United States
or non-United States statute, law, ordinance, regulation, rule, code, common
law, executive order, injunction, judgment, decree or other order, or lawful
Federal Health Care Program manual, issuance or instruction ("Law") applicable
to the Company or any Company Subsidiary or by which any property or asset of
the Company or any Company Subsidiary is bound or affected, or (iii) result in
any breach of or constitute a default (or an event which, with notice or lapse
of time or both, would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
17
creation of a lien or other encumbrance on any property or asset of the Company
or any Company Subsidiary pursuant to, or result in any payment under, any
Material Contract (as defined in Section 3.11), Company Permit or franchise,
except, with respect to clauses (ii) and (iii) as set out in Section 3.04(a) of
the Company Disclosure Schedule or for any such conflicts, violations, breaches,
defaults or other occurrences which would not reasonably be expected to have a
Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any United States federal, state, county, local or non-United
States government, governmental, regulatory or administrative authority, agency,
instrumentality or commission or any court, tribunal, judicial or arbitral body
or supranational authority (a "Governmental Authority"), except (i) for
applicable requirements, if any, of the Canadian Securities Laws, the Securities
Act, the Exchange Act, state securities or "blue sky" laws ("Blue Sky Laws") and
state takeover laws, the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Competition Act (Canada) (the "Competition Act"), the Investment
Canada Act and filing and recordation of appropriate documents as required by
the OBCA, (ii) as contemplated by Sections 2.01 and 2.02 and the Plan of
Arrangement, and (iii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications would not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.05 Capitalization.
(a) The authorized capital stock of the Company consists of an
unlimited number of shares of Company Common Stock. As of the close of business
on May 7, 2002, 19,329,946 shares of Company Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth above or in Section 3.05(a) of the Company
Disclosure Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Company Subsidiary. Section
3.05(a) of the Company Disclosure Schedule sets forth the following information
with respect to each Company Stock Option outstanding as of the date of this
Agreement: (i) the name and address of the optionee; (ii) the number of shares
of Company Common Stock subject to such Company Stock Option; (iii) the exercise
price of such Company Stock Option; (iv) the date on which such Company Stock
Option was granted; (v) the applicable vesting schedule; and (vi) the date on
which such Company Stock Option expires. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of any Company Subsidiary or, except as set forth in Section
3.05(a) of the Company Disclosure Schedule, to provide funds to, or make any
18
investment (in the form of a loan, capital contribution or otherwise) in, any
Company Subsidiary or any other Person.
(b) Each outstanding share of capital stock of or other
ownership interest in each Company Subsidiary is duly authorized, validly
issued, fully paid and nonassessable, and except as set forth in Section 3.05(b)
of the Company Disclosure Schedule, each such share is owned by the Company or
another Company Subsidiary free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
the Company's or any Company Subsidiary's voting rights, charges and other
encumbrances, except for limitations on transfer imposed by federal or state or
Canadian provincial securities Laws and except as set forth in Section 3.05(b)
of the Company Disclosure Schedule.
Section 3.06 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, statements,
schedules and other documents required to be filed by it with the Securities and
Exchange Commission (the "SEC") and the applicable Canadian Securities
Regulators since January 1, 2001 (such forms, reports, statements, schedules and
other documents, including any such forms, reports, statements, schedules and
other documents filed subsequent to the date hereof, being, collectively, the
"Company Reports"). The Company Reports (i) at the time they were filed or, if
amended, as of the date of such amendment, complied in all material respects,
and each report subsequently filed by the Company with the SEC or the applicable
Canadian Securities Regulators, as the case may be, will on the date filed
comply in all material respects, with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Canadian
Securities Laws, as the case may be, and the rules and regulations promulgated
thereunder, each as in effect on the date so filed, and (ii) did not or will
not, at the time they were or will be filed, or, if amended, as of the date of
such amendment, 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 made therein, in the light of the circumstances under which they were
made, not misleading. No Company Subsidiary is required to file any form, report
or other document with the SEC. Except as set forth in Section 3.06(a) of the
Company Disclosure Schedule, the Company has not received any non-routine
inquires or interrogatories, whether in writing or otherwise, from the SEC, any
Canadian Securities Regulator, the Nasdaq, the TSE or any other Governmental
Authority, or, to the knowledge of the Company, been the subject of any
investigation, audit, review or hearing by or in front of such persons, in each
case with respect to any of the Company Reports or any of the information
contained therein. True and complete copies of any such written inquires or
interrogatories have been furnished to Parent, and Parent has otherwise been
made aware of any such oral inquiries or interrogatories, investigations,
audits, reviews or hearings.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Company Reports was or will be
prepared in accordance with Canadian generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and each fairly presents or
will fairly present, in all material respects, the consolidated financial
position, results of operations and cash flows of the Company and its
19
consolidated Company Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments). Each of the
consolidated annual financial statements contained in the Company Reports
contains a reconciliation to United States generally accepted accounting
principles ("US GAAP") that fully complies with the requirements of law and US
GAAP.
(c) Except as and to the extent set forth in the Company
Reports, neither the Company nor any Company Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise),
in each case that is required by GAAP to be set forth on a consolidated balance
sheet of the Company or in the notes thereto, except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 2001 and which would not reasonably be expected to
have a Company Material Adverse Effect.
(d) True and complete copies of all "management letters" and
other similar letters relating to the Company's or any of its Subsidiaries'
internal controls and accounting practices that have been received by the
Company from its independent accountants since December 31, 1999 have been
provided to Parent.
Section 3.07 Information to be Supplied.
(a) The Circular, the Proxy Statement and the other documents
required to be filed by the Company with the Canadian Securities Regulators or
the SEC in connection with the Arrangement and the other transactions
contemplated hereby will comply as to form in all material respects with the
requirements of the Securities Legislation and the OBCA, as the case may be.
Each of the Circular, the Proxy Statement and the other documents required to be
filed by the Company with the Canadian Securities Regulators or the SEC in
connection with the Arrangement and the other transactions contemplated hereby
and any of the information supplied or to be supplied by the Company or its
Subsidiaries or their representatives for inclusion or incorporation by
reference in the Circular or the Proxy Statement will not, on the date of its
filing or mailing, on the date of the Company Meeting or at the Effective Date,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(b) Notwithstanding the foregoing provisions of this Section
3.07, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Circular or the Proxy
Statement based on information supplied by or on behalf of Parent or Purchaser
for inclusion or incorporation by reference therein or based on information
which is not made in or incorporated by reference in such documents but which
should have been disclosed pursuant to Section 4.07.
Section 3.08 Permits; Compliance.
(a) Except as set forth in Section 3.08(a) of the Company
Disclosure Schedule:
20
(i) the operations of the Company and its Subsidiaries
have been conducted in compliance with all Laws, including without limitation
all Laws relating to consumer protection, equal opportunity, health, health care
industry regulation, third party reimbursement (including Medicare, Medicaid,
any other Federal Health Care Program and workers compensation), fire, zoning
and building and occupational safety matters, except for noncompliance that does
not and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect;
(ii) neither the Company nor any of its Subsidiaries has
received written notice of any material violation (or of any investigation,
inspection, audit, or other proceeding by any Governmental Authority involving
allegations of any violation) of any Law, or is in material default with respect
to any Law, and to the knowledge of the Company, no investigation, inspection,
audit or other proceeding by any Governmental Authority involving allegations of
any material violation of any Law is threatened or contemplated;
(iii) each of the Company and its Subsidiaries has, and
to the knowledge of the Company all professional employees or agents of each of
the Company and its Subsidiaries have, all licenses, franchises, permits,
authorizations, certifications, easements, variances, exceptions, consents, and
orders, including approvals from all Governmental Authorities ("Approvals")
required for the conduct of the business of each of the Company and its
Subsidiaries, the job duties of each professional employee or agent and the
occupancy and operation, for its present uses, of the real and personal property
which each of the Company and its Subsidiaries owns or leases, except where the
failure to have such Approvals would not, individually or in the aggregate, have
a Company Material Adverse Effect, and neither the Company nor any of its
Subsidiaries or, to the knowledge of the Company, any of its respective
professional employees or agents is in violation of any such Approval or any
terms or conditions thereof, except for such violations as would not,
individually or in the aggregate, have a Company Material Adverse Effect;
(iv) all Approvals for the Company and each of its
Subsidiaries are in full force and effect, and, to the knowledge of the Company,
all such Approvals for its professional employees and agents are in full force
and effect, have been issued to and fully paid for by the holder thereof and, to
the knowledge of the Company, no suspension or cancellation thereof has been
threatened, except for such Approvals as would not, individually or in the
aggregate, have a Company Material Adverse Effect; and
(v) no Approvals for the Company and each of its
Subsidiaries will in any way be affected by, or terminate or lapse by reason of,
the transactions contemplated by this Agreement or any of the other agreements
contemplated hereunder or executed herewith, except for such Approvals as would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(b) Except as set forth in Section 3.08(b) of the Company
Disclosure Schedule, (i) neither the Company nor any of its Subsidiaries, nor
the officers or directors, nor, to the knowledge of the Company, employees or
agents of the Company or any of its Subsidiaries, have engaged in any activities
which are prohibited, or are cause for criminal or civil penalties or mandatory
21
or permissive exclusion from Medicare, Medicaid or any other Federal Health Care
Program, under ss.ss. 1320a-7, 1320a-7a, 1320a-7b, or 1395nn of Title 42 of the
United States Code, the Federal Employees Health Benefits program statute, or
the regulations promulgated pursuant to such statutes or regulations or related
state or local statutes or which are prohibited by any private accrediting
organization from which the Company or any of its Subsidiaries seeks
accreditation or by generally recognized professional standards of care or
conduct, including but not limited to the following activities: (A) knowingly
and willfully making or causing to be made a false statement or representation
of a material fact in any application for any benefit or payment;
(B) knowingly and willfully making or causing to be
made any false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(C) presenting or causing to be presented a claim for
reimbursement under Medicare, Medicaid or any other Federal Health Care Program
that is (1) for an item or service that the Person presenting or causing to be
presented knows or should know was not provided as claimed, or (2) for an item
or service that the Person presenting knows or should know that the claim is
false or fraudulent;
(D) knowingly and willfully offering, paying,
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind (1) in
return for referring, or to induce the referral of, an individual to a Person
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare, Medicaid or any other
Federal Health Care Program or (2) in return for, or to induce, the purchase,
lease or order, or the arranging for or recommending of the purchase, lease or
order, of any good, facility, service or item for which payment may be made in
whole or in part by Medicare, Medicaid or any other Federal Health Care Program;
or
(E) knowingly and willfully making or causing to be
made or inducing or seeking to induce the making of any false statement or
representation (or omitting to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading) of
a material fact with respect to (1) the conditions or operations of a facility
operated by the Company or any of its Subsidiaries in order that the facility
may qualify for Medicare, Medicaid or any other Federal Health Care Program
certification, or (2) information required to be provided under SSA ss. 1124A;
and
(ii) the Company has a compliance program that has been
implemented and, to the knowledge of the Company, the business of the Company
and its Subsidiaries has been conducted in all material respects in accordance
with the terms of the compliance program.
(c) Except as set forth in Section 3.08(c) of the Company
Disclosure Schedule, (i) neither the Company nor, to the knowledge of the
Company, any other Person who has a direct or indirect ownership interest (as
those terms are defined in 42 C.F.R. ss. 1001.1001(a)(2)) in the Company or any
22
of its Subsidiaries prior to the Effective Time, or who has an ownership or
control interest (as defined in SSA ss. 1124(a)(3) or any regulations
promulgated thereunder) in the Company or any of its Subsidiaries prior to the
Effective Time, or who is an officer, director, agent (as defined in 42 C.F.R.
ss. 1001.1001(a)(2)), or managing employee (as defined in SSA ss. 1126(b)) of
the Company or any of its Subsidiaries prior to the Effective Time, and (ii) to
the knowledge of the Company, no Person with any relationship with such entity
(including without limitation a parent company or shareholder of, or partner in,
a Subsidiary) who has an indirect ownership interest (as that term is defined in
42 C.F.R. ss. 1001.1001(a)(2)) in the Company or any of its Subsidiaries prior
to the Effective Time (A) has had a civil monetary penalty assessed against it
under SSA ss. 1128A; (B) has been excluded from participation under Medicare,
Medicaid or any other Federal Health Care Program; or (C) has been convicted (as
that term is defined in 42 C.F.R. ss. 1001.2) of any of the following categories
of offenses as described in SSA ss. 1128(a) and (b)(1), (2), (3):
(i) criminal offenses relating to the delivery of an
item or service under Medicare, Medicaid or any other Federal Health Care
Program;
(ii) criminal offenses under federal or state law
relating to patient neglect or abuse in connection with the delivery of a health
care item or service;
(iii) criminal offenses under federal or state law
relating to fraud, theft, embezzlement, breach of fiduciary responsibility or
other financial misconduct in connection with the delivery of a health care item
or service or with respect to any act or omission in a program operated by or
financed in whole or in part by any federal, state or local government agency.
(iv) federal or state laws relating to the interference
with or obstruction of any investigation into any criminal offense described in
(i) through (iii) above; or
(v) criminal offenses under federal or state law
relating to the unlawful manufacture, distribution, prescription or dispensing
of a controlled substance.
Section 3.09 Absence of Certain Changes or Events.
Since December 31, 2001, except (a) as expressly contemplated
by this Agreement, (b) as described in the Company Reports filed prior to the
date of this Agreement or (c) as disclosed in Section 3.09 of the Company
Disclosure Schedule: (i) the Company and the Company Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent with
past practice, (ii) there has not been any Company Material Adverse Effect, and
(iii) none of the Company or any Company Subsidiary has taken any action that,
if taken after the date of this Agreement, would constitute a breach of any of
the covenants set forth in Section 5.01, except where such action would not
reasonably be expected to have a Company Material Adverse Effect.
23
Section 3.10 Absence of Litigation.
Except as described in the Company Reports filed prior to the
date hereof, there is no litigation, suit, claim, action, proceeding or, to the
knowledge of the Company, investigation (an "Action") pending or, to the
knowledge of the Company, threatened against the Company or any Company
Subsidiary, or any property or asset of the Company or any Company Subsidiary,
before any Governmental Authority that (a) has had or would reasonably be
expected to have a Company Material Adverse Effect or (b) seeks to materially
delay or prevent the consummation of the Transaction. Neither the Company nor
any Company Subsidiary nor any property or asset of the Company or any Company
Subsidiary is subject to any continuing order of, consent decree, settlement
agreement or other similar written agreement with, or, to the knowledge of the
Company, continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority that would reasonably be expected to have a Company Material Adverse
Effect.
Section 3.11 Material Contracts.
(a) Subsections (i) through (vii) of Section 3.11(a) of the
Company Disclosure Schedule contain a complete list of the following contracts
and agreements, whether written or oral, to which the Company or any Company
Subsidiary is a party (such contracts and agreements, together with the Plans,
the Leases and the Company's permits, being "Material Contracts"): (i) each
contract, agreement or account involving aggregate annual payments to the
Company of more than $500,000, or aggregate annual payments by the Company of
more than $500,000; (ii) all contracts and agreements with any Governmental
Authority other than agreements related to the provision of clinical laboratory
services to a Governmental Authority, provider agreements and agreements related
to licensing of any facility entered into in the ordinary course of business;
(iii) all contracts and agreements that (A) limit or purport to limit the
ability of the Company or any Company Subsidiary or, to the Company's knowledge,
any key executives of the Company or any Company Subsidiary, to compete in any
line of business or with any Person or in any geographic area or during any
period of time, (B) require the Company or any Company Subsidiary to use any
supplier or third party for all or substantially all of the Company's or the
Company Subsidiaries' requirements or needs and that provides for services of
more than $500,000 or aggregate annual payments by the Company of more than
$500,000, (C) limit or purport to limit in any material respect the ability of
the Company or any Company Subsidiary to solicit any customers or clients of the
other parties thereto, (D) require the Company or any Company Subsidiary to
provide to the other parties thereto "most favored nations" pricing, or (E)
require the Company or any Company Subsidiary to market or co-market any
clinical laboratory services or anatomic pathology services or other products or
services of a third party (each of (A) through (E), a "Restrictive Agreement");
(iv) all contracts, agreements and arrangements between the Company or any of
its Subsidiaries, on the one hand, and any Stockholder or any of their
respective officers, directors or principals, on the other hand (each such
contract, a "Related Party Agreement"); (v) all joint venture contracts,
partnership arrangements or other agreements outside the ordinary course of
business involving a sharing of profits, losses, costs or liabilities by the
Company or any Company Subsidiary with any third party; (vi) all licenses under
CLIA or issued by any other Governmental Authority including, without
limitation, the identity of the respective licensees thereunder; and (vii) all
other contracts and agreements, including any sole source contracts with
24
suppliers and licensors, whether or not made in the ordinary course of business,
which are material to the Company or any Company Subsidiary, the conduct of
their respective businesses, or the absence of which would reasonably be
expected to have a Company Material Adverse Effect.
(b) Except as would not reasonably be expected to have a
Company Material Adverse Effect, (i) each Material Contract is valid and binding
on the Company or a Company Subsidiary, as the case may be, and, to the
knowledge of the Company, the other parties thereto, and is in full force and
effect against the Company or a Company Subsidiary except to the extent it has
expired in accordance with its terms and represents the entire agreement between
or among the parties thereto with respect to the subject matter thereof and (ii)
upon consummation of the transactions contemplated by this Agreement, shall,
except as disclosed in Section 3.11(b) of the Company Disclosure Schedule,
continue in full force and effect without penalty or other adverse consequence.
Except as disclosed in Section 3.11(b) of the Company Disclosure Schedule and
except where such breach or default would not reasonably be expected to have a
Company Material Adverse Effect, none of the Company or any Company Subsidiary
or, to the knowledge of the Company, as of the date of this Agreement, any other
party thereto, is in breach of, or default under, any Material Contract.
(c) The Company has made available to Parent a true, complete
and correct copy of each written Material Contract, together with all material
amendments, waivers or other changes thereto, and has been given a written
description of all oral contracts included in the Material Contracts.
Section 3.12 Employee Benefit Plans.
(a) Section 3.12(a) of the Company Disclosure Schedule lists
(i) all material employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all
material employee benefit plans for Canadian-based employees and all material
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other material benefit plans, programs or arrangements, and all
material employment, termination, severance or other contracts or agreements to
which the Company or any Company Subsidiary is a party, with respect to which
the Company or any Company Subsidiary has any material obligation or which are
maintained, contributed to or sponsored by the Company or any Company Subsidiary
for the benefit of any current or former employee, officer or director of the
Company or any Company Subsidiary, (ii) each employee benefit plan for which the
Company or any Company Subsidiary could incur liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated, (iii) any plan
in respect of which the Company or any Company Subsidiary could incur liability
under Section 4212(c) of ERISA, and (iv) any material contracts, arrangements or
understandings between the Company or any Company Subsidiary and any employee of
the Company or any Company Subsidiary including, without limitation, any
contracts, arrangements or understandings relating in any way to a sale of the
Company or any Company Subsidiary (collectively, the "Plans"). The Company has
provided to Parent a true and complete copy of each Plan and has made available
to Parent a true and complete copy of each material document, if any, prepared
in connection with each such Plan, including, without limitation, (i) a copy of
25
each trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed Internal
Revenue Service ("IRS") Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan.
Neither the Company nor any Company Subsidiary has any express or implied
commitment (i) to create, incur liability with respect to or cause to exist any
other employee benefit plan, program or arrangement, (ii) to enter into any
contract or agreement to provide compensation or benefits to any individual, or
(iii) to modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Code or as
contemplated by this Agreement.
(b) Except as set forth in Section 3.12(b) of the Company
Disclosure Schedule, none of the Plans is a multiemployer plan (within the
meaning of Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a
single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Company or any Company Subsidiary could incur liability
under Section 4063 or 4064 of ERISA (a "Multiple Employer Plan").
(c) Each Plan has been operated in all material respects in
accordance with its terms and the requirements of all applicable Laws including,
without limitation, ERISA and the Code, except as would not reasonably be
expected to have a Company Material Adverse Effect. The Company and the Company
Subsidiaries have performed all obligations required to be performed by them
under, are not in any respect in default under or in violation of, and have no
knowledge of any default or violation by any party to, any Plan. Except as would
not be reasonably be expected to have a Company Material Adverse Effect, no
Action is pending or, to the knowledge of the Company, threatened in writing
with respect to any Plan (other than claims for benefits in the ordinary course)
and, to the knowledge of the Company, no fact or event exists that could
reasonably be expected to give rise to any such Action.
(d) Each Plan that is intended to be qualified under Section
401(a) of the Code has timely received a favorable determination letter from the
IRS that the Plan is so qualified and, to the knowledge of the Company, no fact
or event has occurred since the date of such determination letter or letters
from the IRS to adversely affect the qualified status of any such Plan or the
exempt status of any such trust.
(e) To the knowledge of the Company, there has not been any
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan which would reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor any Company
Subsidiary has any material liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any material liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which could reasonably be expected to give rise to any
such material liability.
26
(f) All material contributions, premiums or payments required
to be made with respect to any Plan have been made on or before their due dates.
To the knowledge of the Company, all such contributions have been fully deducted
for income tax purposes and no such deduction has been challenged or disallowed
by any Governmental Authority and no fact or event exists which could reasonably
be expected to give rise to any such challenge or disallowance.
(g) No Plan provides death or medical benefits (whether or not
insured), with respect to current or former employees of the Company or any
Company Subsidiary beyond their retirement or other termination of service,
other than coverage mandated by applicable Law.
(h) As of the Effective Date, the net fair market value of the
assets of any Plan equals the actuarial accrued liabilities of such Plan
determined based upon reasonable actuarial assumptions that would apply if the
Plan were then terminated.
(i) Except as set forth in Section 3.12(i) of the Company
Disclosure Schedule, no amount required to be paid or payable with respect to
any employee or other service provider of the Company or any of its Subsidiaries
in connection with the transactions contemplated by this Agreement (either
solely as a result hereof or as a result of such transactions in conjunction
with any other event) will be an "excess parachute payment" within the meaning
of Section 280G of the Code. Neither the Company nor any of its Subsidiaries has
any agreement or obligation to pay or reimburse any employee for any tax imposed
by Section 4999 of the Code other than the obligation to deduct and withhold
such amounts from wages paid to such employee.
Section 3.13 Labor and Employment Matters.
There are no material controversies, charges of unlawful
harassment or discrimination, or complaints or allegations of unlawful
harassment or discrimination pending or, to the knowledge of the Company,
threatened between the Company or any Company Subsidiary and any of their
respective employees, which controversies would reasonably be expected to have a
Company Material Adverse Effect. Except as set forth on Section 3.13 of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any Company Subsidiary. Except
as set forth in Section 3.13 of the Company Disclosure Schedule, there are no
unfair labor practice complaints, grievances, or arbitration proceedings filed,
or to the knowledge of the Company, threatened against the Company or any
Company Subsidiary. There is no strike, slowdown, work stoppage or lockout, or,
to the knowledge of the Company, threat thereof, by or with respect to any
employees of the Company or any Company Subsidiary.
Section 3.14 Customers.
Section 3.14 of the Company Disclosure Schedule lists the 20
largest customers of the Company and the Company Subsidiaries by revenue during
the 12-month period ended December 31, 2001 (the "Customers") and the amount of
net revenue (that is, net of setoffs, chargebacks, credits, recoupments, refunds
and other contractual allowances) received by the Company and the Company
Subsidiaries as a result of orders by each of the Customers during such period.
27
Since January 1, 2001 through the date hereof, none of the Company, any Company
Subsidiary or any executive officer or director of the Company or a Company
Subsidiary has received any written notice, or, to the knowledge of the Company,
any other communication, from any Customer to the effect that any such Customer
intends to cease or materially reduce the amount of services requested of, or
size of orders placed with, the Company or any Company Subsidiary or otherwise
materially reduce the amount of business conducted with the Company or any
Company Subsidiary.
Section 3.15 Property and Leases.
(a) The Company and the Company Subsidiaries have good, valid
and marketable title to or, in the case of leased properties and assets, valid
leasehold interest in, all their properties and assets to conduct their
respective businesses as currently conducted or as currently contemplated by the
Company to be conducted, with only Permitted Liens or such exceptions as would
not reasonably be expected to have a Company Material Adverse Effect.
(b) Each parcel of real property owned by the Company or any
Company Subsidiary (i) is, except as set forth in Section 3.15(b)(i) of the
company Disclosure Schedule, owned free and clear of all mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind, including,
without limitation, any option, right of first refusal, or right of first offer
(collectively, "Liens"), other than (A) statutory liens for current Taxes and
assessments or other governmental charges with respect to the owned real
property not yet due and payable or the amount or validity of which is being
contested in good faith and for which a reserve has been established by the
Company on its books, and (B) mechanics', materialmen's, workmen's, repairmen's,
warehousemen's, carriers' liens and other similar statutory liens arising in the
ordinary course of business of the Company or such Company Subsidiary consistent
with past practice, (C) zoning, entitlement, building and other land use
regulations imposed by governmental agencies having jurisdiction over the real
property which are not violated by the current use and operation of the real
property, and (D) covenants, conditions, restrictions, easements and other
similar matters of record affecting title to the real property which do not
materially impair the occupancy or use of the real property for the purposes for
which it is currently used (collectively, "Permitted Liens"), and (ii) to the
knowledge of the Company, is neither subject to any governmental decree or order
to be sold nor is being condemned, expropriated or otherwise taken by any public
authority with or without payment of compensation therefor, nor has any such
condemnation, expropriation or taking been proposed.
(c) To the knowledge of the Company, all Leases are in full
force and effect and have not been modified or amended, and there exists no
default under any such lease by the Company or any Company Subsidiary, nor any
event which, with notice or lapse of time or both, would constitute a default
thereunder by the Company or any Company Subsidiary, except to the extent that
any such default would not reasonably be expected to have a Company Material
Adverse Effect.
(d) Section 3.15(d) of the Company Disclosure Schedule
discloses a full and complete list of all leases of real property by or for the
benefit of the Company and the Company Subsidiaries and all amendments and
28
modifications thereto, other than leases of specimen collection centers and
rapid response laboratories or other leases that provide for annual rental
payments of less than $500,000, (the "Leases") and the lessors thereof. The
Company has made available to Parent prior to the date of this Agreement
complete and accurate copies of each of the Leases, and none of the Leases has
been modified in any material respect.
(e) Section 3.15(e) of the Company Disclosure Schedule
discloses a full and complete list of all of the owned real property of the
Company or any Company Subsidiary.
Section 3.16 Intellectual Property.
(a) Except as disclosed in Section 3.16(a) of the Company
Disclosure Schedule or except as would not reasonably be expected to have a
Company Material Adverse Effect, (i) the conduct of the business of the Company
and the Company Subsidiaries as currently conducted does not infringe upon or
misappropriate the Intellectual Property rights of any third party, and no
written claim has been asserted to the Company that the conduct of the business
of the Company and the Company Subsidiaries as currently conducted infringes
upon or may infringe upon or misappropriates the Intellectual Property rights of
any third party; (ii) with respect to each item of Intellectual Property owned
by the Company or a Company Subsidiary and material to the business, financial
condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole ("Company Owned Intellectual Property"), the Company or a
Company Subsidiary is the owner of the entire right, title and interest in and
to such Company Owned Intellectual Property and is entitled to use such Company
Owned Intellectual Property in the continued operation of its respective
business; (iii) with respect to each item of Intellectual Property licensed to
the Company or a Company Subsidiary that is material to the business of the
Company and the Company Subsidiaries as currently conducted ("Company Licensed
Intellectual Property"), the Company or a Company Subsidiary has (assuming the
licensor has the right to license such property) the right to use such Company
Licensed Intellectual Property in the continued operation of its respective
business in accordance with the terms of the license agreement governing such
Company Licensed Intellectual Property and is not in breach thereof; (iv) to the
knowledge of the Company, the Company Owned Intellectual Property is valid and
enforceable, and has not been adjudged invalid or unenforceable in whole or in
part; (v) to the knowledge of the Company, no Person is engaging in any activity
that infringes upon the Company Owned Intellectual Property; (vi) to the
knowledge of the Company, each license of the Company Licensed Intellectual
Property is valid and enforceable, is binding on all parties to such license,
and is in full force and effect; and (vii) to the knowledge of the Company, no
party to any license of the Company Licensed Intellectual Property is in breach
thereof or default thereunder.
(b) Section 3.16(b) of the Company Disclosure Schedule sets
forth a true and complete list of all (i) patents and patent applications,
registered trademarks and trademark applications, registered copyrights and
copyright applications and software included in the Company Owned Intellectual
Property and (ii) licenses that are material to the Company's business, except
"shrink wrap", "click wrap" or similar licenses for commercially available
software.
29
(c) The Company has taken reasonable steps in accordance with
normal industry practice to maintain the confidentiality of its trade secrets
and its other confidential Intellectual Property. Except as disclosed in Section
3.16(c) of the Company Disclosure Schedule, or except as would not reasonably be
expected to have a Company Material Adverse Effect, to the knowledge of the
Company (i) there has been no misappropriation of any material trade secrets or
other Company Owned Intellectual Property by any Person, (ii) no employee,
independent contractor or agent of the Company or any Company Subsidiary has
misappropriated any trade secrets of any other Person in the course of such
performance as an employee, independent contractor or agent, and (iii) no
employee, independent contractor or agent of the Company or any Company
Subsidiary is in default or breach in any material respect of any term of any
employment agreement, non-disclosure agreement, assignment of invention
agreement or similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual Property.
Section 3.17 Taxes.
Except as set forth in Section 3.17 of the Company Disclosure
Schedule or as would not reasonably be expected to have a Company Material
Adverse Effect:
(a) the Company and each of its Subsidiaries have timely filed
(or have had filed on their behalf) all Tax returns and reports required to be
filed by each of them, and each has, within the time and in the manner
prescribed by Law, paid and discharged all Taxes that have become due and
payable, other than such payments as are being contested in good faith by
appropriate proceedings and for which adequate reserves have been taken, and all
such Tax returns and reports are true, accurate and complete;
(b) neither the IRS nor any other United States or non-United
States taxing authority or agency has asserted in writing or, to the knowledge
of the Company, has threatened to assert against the Company or any Company
Subsidiary any deficiency or claim for any Taxes or interest thereon or
penalties in connection therewith;
(c) neither the Company nor any Company Subsidiary has granted
any waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any Tax;
(d) neither the Company nor any Company Subsidiary has made an
election under Section 341(f) of the Code;
(e) to the knowledge of the Company, there are no Tax Liens
upon any property or assets of the Company or any of the Company Subsidiaries
except Liens for current Taxes not yet due;
(f) neither the Company nor any of the Company Subsidiaries is
a party to any agreement, understanding, or arrangement (with any Person other
than the Company and/or any of the Company Subsidiaries) relating to allocating
or sharing of any amount of Taxes;
30
(g) neither the Company nor any of the Company Subsidiaries
has any liability for any amount of Taxes of any Person other than the Company
or any of its Subsidiaries under Treasury Regulation Section 1.1502-6, as a
transferee or successor, or by contract;
(h) neither the Company nor any of the Company Subsidiaries
has been required to include in income any adjustment pursuant to Section 481 of
the Code by reason of a voluntary change in accounting method initiated by the
Company or any of the Company Subsidiaries, and the IRS has not initiated or
proposed any such adjustment or change in accounting method;
(i) neither the Company nor any Company Subsidiary has any
income reportable for a period ending after the Effective Time that is
attributable to any activity or a transaction occurring in, or a change in
accounting method made for, a period ending on or prior to the Effective Time
that resulted in a deferred reporting of income from such transaction or from
such change of accounting method or is inconsistent with the past practice of
the Company;
(j) neither the Company nor any Company Subsidiary has been a
"distributing corporation" or a "controlled corporation" in a distribution
intended to qualify under Section 355(e) of the Code within the past five years;
(k) each of the Company and the Company Subsidiaries has
withheld and paid all Taxes required to be withheld and paid in connection with
any amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party; and
(l) the unpaid Taxes of the Company and each of the Company
Subsidiaries (A) did not, as of the most recent fiscal month end of the Company
and each of the Company Subsidiaries, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the most
recent balance sheet of the Company and each of the Company Subsidiaries and (B)
do not exceed that reserve as adjusted for the passage of time through the
Effective Date in accordance with the past custom and practice of the Company
and each of the Company Subsidiaries in filing their Tax Returns. Since the date
of the most recent balance sheet of the Company and each of the Company
Subsidiaries, none of the Company and the Company Subsidiaries has incurred any
liability for Taxes arising from extraordinary gains or losses, as that term is
used in GAAP, outside the ordinary course of business, consistent with past
custom and practice.
Section 3.18 Environmental Matters.
Except as described in Section 3.18 of the Company Disclosure
Schedule, (a) neither the Company nor any Company Subsidiary is in violation of
or has violated, or has any liability under, any Environmental Law or has
received any written notice, demand, letter, claim, request for information or
other written communication alleging that the Company or such Company Subsidiary
may be in violation of or have any liability under any Environmental Law, except
as would not be reasonably likely to result in a Company Material Adverse
Effect; (b) there are no facts, circumstances, or conditions, existing,
initiated or occurring prior to the Effective Date which could result in
liability under Environmental Laws, except as would not be reasonably likely to
31
result in a Company Material Adverse Effect; (c) there has been no Release of
Hazardous Substances at, on, under or from any of the properties currently
owned, leased or operated by the Company or any Company Subsidiary (including,
without limitation, soils and surface and ground waters), except as would not be
reasonably likely to result in a Company Material Adverse Effect; (d) there has
been no Release of Hazardous Substances at, on, under or from any of the
properties formerly owned, leased or operated by the Company or any Company
Subsidiary (including, without limitation, soils and surface and ground waters)
during the period of the Company's or any Company Subsidiary's ownership,
tenancy or operation of such property, except as would not be reasonably likely
to result in a Company Material Adverse Effect; (e) neither the Company nor any
Company Subsidiary has received any notice, demand, claim or request for
information or any written communications alleging that the Company or any
Company Subsidiary is actually, potentially or allegedly liable under any
Environmental Law for Remediation of Hazardous Substances, except as would not
be reasonably likely to result in a Company Material Adverse Effect; (f) the
Company or a Company Subsidiary has promptly applied for and maintains all
permits, licenses, consents, approvals and other authorizations required under
any Environmental Law ("Environmental Permits") and the Company and such Company
Subsidiaries are in compliance in all material respects with the Environmental
Permits; (g) none of the real property currently owned, leased, or operated by
the Company or its Subsidiaries contains underground improvements, including but
not limited to treatment or storage tanks, or underground piping associated with
such tanks, used currently or in the past for the management of Hazardous
Substances, and no portion of such real property is or has been used as a dump
or landfill or consists of or contains filled in land or wetlands, except as
would not be reasonably likely to result in a Company Material Adverse Effect;
(h) neither PCB's, "toxic mold," nor asbestos-containing materials are present
on or in the real property currently owned, operated or leased or the
improvements thereon, except as would not be reasonably likely to result in a
Company Material Adverse Effect; (i) neither the Company nor any of its
Subsidiaries has arranged, by contract, agreement or otherwise, for the
transportation, disposal or treatment of Hazardous Substances at any location
such that it is or could be liable for Remediation of such location pursuant to
Environmental Laws, except as would not be reasonably likely to result in a
Company Material Adverse Effect, and no such location, nor any of the real
property currently owned, operated, or leased by the Company or any of its
Subsidiaries is listed on the National Priorities List, CERCLIS or any similar
governmental database of properties that may require Remediation; and (j) no
authorization, notification, recording, filing, consent, waiting period,
Remediation or approval is required under any Environmental Law in order to
consummate the Transaction contemplated by this Agreement.
Section 3.19 Insurance.
True and complete copies of all policies, or summaries
thereof, of material fire and casualty, general liability, business
interruption, directors' and officers' liability and workers' compensation and
other forms of insurance of any kind relating to the business and operations of
the Company or any Company Subsidiary have been made available to Parent, and
such policies are in full force and effect as of the date of this Agreement,
except to the extent that any failure to be in full force and effect would not
be reasonably expected to have a Company Material Adverse Effect. The Company or
the relevant Company Subsidiary has paid all premiums due under such policies
32
and none of the Company or any Company Subsidiary is in default in any material
respect with respect to its obligations thereunder.
Section 3.20 Brokers.
No broker, finder or investment banker (other than the Company
Financial Advisor) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transaction based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and the Company
Financial Advisor pursuant to which such firm would be entitled to any payment
related to the Transaction.
Section 3.21 Board Approval; Vote Required.
The Company Board, by resolutions duly adopted by a unanimous
vote of those voting at a meeting duly called and held, has duly (i) determined
that this Agreement and the transactions contemplated hereby and thereby,
including the Arrangement, are fair to and in the best interests of the Company
and its stockholders, (ii) approved and declared advisable this Agreement and
the transactions contemplated hereby and thereby, including the Arrangement, and
(iii) resolved to recommend adoption of this Agreement by the Company's
stockholders.
Section 3.22 Related Party Transactions.
Except as set forth in Section 3.22 of the Company Disclosure
Schedule and except as expressly contemplated by this Agreement, no executive
officer, director or Affiliate of the Company or any Company Subsidiary nor any
immediate family member or Affiliate of such executive officer or director is a
party to any agreement, contract, commitment, arrangement or transaction with
the Company or any Company Subsidiary or is entitled to any payment or transfer
of any assets from the Company or any Company Subsidiary or has any material
interest in any material property used by the Company or any Company Subsidiary
or has an interest in any customer or supplier of the Company or any Company
Subsidiary or provider of any services to the Company or any Company Subsidiary,
except in each case (i) employment, management or consulting arrangements listed
(or not required to be listed) in Section 3.11 or Section 3.12 of the Company
Disclosure Schedule and benefit programs and (ii) the ownership of less than 5%
of the outstanding stock of any publicly traded company.
Section 3.23 Disclosure.
True and complete copies of all documents listed in the
Company Disclosure Schedule have been made available or provided to Parent. The
books of account, stock record books and other financial and corporate records
of the Company and each Company Subsidiary, all of which have been made
available to Parent, are materially complete and correct and have been
maintained in accordance with good business practices, including the maintenance
of an adequate system of internal accounting controls, and such books and
records are accurately reflected in the consolidated financial statements in all
material respects. The minute books of the Company and each Company Subsidiary
contain accurate and complete records of all meetings held of, and corporate
action by, the stockholders and the board of directors (and committees thereof)
33
of the Company and each Company Subsidiary, and no meeting of any such
stockholders or board of directors (or committees thereof) has been held for
which minutes have not been prepared and are not contained in such minute books.
Section 3.24 Absence of Violation.
To the Company's knowledge, none of the Company or any Company
Subsidiary, or any of its officers, directors, employees or agents (or
stockholders, distributors, representatives or other persons acting on the
express, implied or apparent authority of any of the Company or any Company
Subsidiary) have paid, given or received or have offered or promised to pay,
give or receive, any bribe or other unlawful payment of money or other thing of
value, any unlawful extraordinary discount, or any other unlawful inducement, to
or from any person, business association or governmental official or entity in
the United States or elsewhere in connection with or in furtherance of the
business of the Company or any Company Subsidiary (including, without
limitation, any unlawful offer, payment or promise to pay money or other thing
of value (i) to any foreign official or political party (or official thereof)
for the purposes of influencing any act, decision or omission in order to assist
the Company or any Company Subsidiary in obtaining business for or with, or
directing business to, any person, or (ii) to any person, while knowing that all
or a portion of such money or other thing of value will be offered, given or
promised to any such official or party for such purposes). To the Company's
knowledge, the business of the Company and each Company Subsidiary is not in any
manner dependent upon the making or receipt of such unlawful payments, discounts
or other inducements.
Section 3.25 Takeover Statutes.
The Company Board has taken all necessary action so that no
restrictive provision of any "fair price", "moratorium", "control share" or
other similar anti-takeover statute or regulation (each a "Takeover Statute") or
restrictive provision of any applicable anti-takeover provision in the Company's
certificate of incorporation or bylaws or any shareholder rights or similar
plan, is, or at the Effective Time will be, applicable to the Company, the
Purchaser, the Exchange Consideration, the Arrangement or any transaction
contemplated by this Agreement or the Stockholder Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
As an inducement to the Company to enter into this Agreement,
Parent and Purchaser, except as disclosed in Parent's disclosure schedule
delivered concurrently with the delivery of this Agreement (the "Parent
Disclosure Schedule"), hereby, jointly and severally, represent and warrant to
the Company as follows:
Section 4.01 Corporate Organization.
Each of Parent, Purchaser and each subsidiary of Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite corporate power
34
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not reasonably be
expected to have a Parent Material Adverse Effect. Each of Parent, Purchaser and
each subsidiary of Parent is duly qualified or licensed as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not
reasonably be expected to have a Parent Material Adverse Effect.
Section 4.02 Certificate of Incorporation and By-Laws.
Parent has heretofore furnished to the Company a complete and
correct copy of the certificate of incorporation and the by-laws of Parent and
the certificate of incorporation and by-laws of Purchaser, each as amended to
date. Such certificates of incorporation and by-laws are in full force and
effect. Neither Parent nor Purchaser is in violation of any of the provisions of
its certificate of incorporation or by-laws, except where such violation would
not reasonably be expected to have a Parent Material Adverse Effect.
Section 4.03 Authority Relative to this Agreement.
Each of Parent and Purchaser has all necessary corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Transaction. The execution and delivery of this
Agreement by Parent and Purchaser and the consummation by Parent and Purchaser
of the Transaction have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of Parent or
Purchaser are necessary to authorize this Agreement or to consummate the
Transaction (other than any necessary approvals or consents and the filing and
recordation of appropriate documents as required by the OBCA). This Agreement
has been duly and validly executed and delivered by each of Parent and Purchaser
and, assuming due authorization, execution and delivery by each of the other
parties thereto, constitutes a legal, valid and binding obligation of each of
Parent and Purchaser, enforceable against each of Parent and Purchaser in
accordance with its terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar Laws affecting the enforcement of creditors' rights generally and by
general equitable principles. The Boards of Directors of Parent and Purchaser
have duly approved this Agreement and the transaction contemplated hereby.
Section 4.04 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of
Parent and Purchaser do not, and the performance of this Agreement by each of
Parent and Purchaser will not, (i) conflict with or violate the certificate of
incorporation or by-laws of either Parent or Purchaser in effect on the date of
this Agreement, (ii) assuming that all consents, approvals, authorizations and
other actions described in Section 4.04(b) have been obtained and all filings
and obligations described in Section 4.04(b) have been made, conflict with or
35
violate any Law applicable to Parent or Purchaser or by which any property or
asset of either of them is bound or affected, or (iii) result in any breach of,
or constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien or other encumbrance on any property or asset of Parent,
Purchaser or any subsidiary of Parent pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or Purchaser is a party or by which
Parent or Purchaser or any property or asset of either of them is bound or
affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not
reasonably be expected to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by each of
Parent and Purchaser do not, and the performance of this Agreement by each of
Parent and Purchaser will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, except
(i) for applicable requirements, if any, of the Canadian Securities Laws, the
Securities Act, the Exchange Act, Blue Sky Laws and state takeover laws, the HSR
Act, the Competition Act, the Investment Canada Act and filing and recordation
of appropriate documents as required by the OBCA, and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not reasonably be expected to have a Parent
Material Adverse Effect.
Section 4.05 Capitalization.
(a) The authorized capital stock of Parent consists of (i)
265,000,000 shares of Parent Common Stock and (ii) 30,000,000 shares of
preferred stock, par value $0.10 per share ("Parent Preferred Stock"). As of May
3, 2002, 71,315,938 shares of Parent Common Stock and no shares of Parent
Preferred Stock were issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable, and 2,765,259 shares of Parent
Common Stock were reserved for future issuance pursuant to outstanding stock
options that have been granted prior to the date hereof, and 4,988,817 shares of
Parent Common Stock were reserved for future issuance pursuant to liquid yield
option notes due in 2021. Except as set forth in this Section 4.05 and except
for stock options granted pursuant to the stock option plans of Parent (the
"Parent Stock Option Plans"), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Parent or Purchaser or obligating Parent or
Purchaser to issue or sell any shares of capital stock of, or other equity
interests in, Parent or Purchaser. All shares of Parent Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of Parent or Purchaser to repurchase, redeem or
otherwise acquire any shares of Parent Common Stock or any capital stock of
Purchaser.
(b) The authorized capital stock of Purchaser consists of (i)
1,000,000,000 shares of Common Stock without par value and (ii) 1,000,000,000
shares of preferred stock without par value, all of which are duly authorized,
validly issued, fully paid and nonassessable and free of any preemptive rights
36
in respect thereof and all of which are owned by Parent. Each outstanding share
of capital stock of Purchaser is duly authorized, validly issued, fully paid and
nonassessable and each such share is owned by Parent or Purchaser free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or Purchaser's voting rights,
charges and other encumbrances of any nature whatsoever, except where failure to
own such shares free and clear would not reasonably be expected to have a Parent
Material Adverse Effect.
(c) The shares of Parent Common Stock to be issued pursuant to
the Arrangement (i) will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, Parent's
certificate of incorporation or by-laws or any agreement to which Parent is a
party or is bound, (ii) will, when issued, be exempt under the Securities Act in
reliance on Section 3(a)(10) of the Securities Act, (iii) will not be subject to
any restrictions on transfer or resale under Canadian Securities Laws or under
the Securities Act, other than the volume and other limitations required by Rule
145 promulgated by the Securities Commission under the Securities Act and (iv)
will, when issued, be registered or exempt from registration under applicable
Blue Sky Laws and be exempt from prospectus and registration requirements under
Canadian Securities Laws.
Section 4.06 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports, statements, schedules
and other documents required to be filed by it with the SEC since January 1,
2001 (such forms, reports, statements, schedules and other documents, including
any such forms, reports, statements, schedules and other documents filed
subsequent to the date hereof, being, collectively, the "Parent Reports"). The
Parent Reports (i) at the time they were filed or, if amended, as of the date of
such amendment, complied in all material respects, and each report subsequently
filed by Parent with the SEC will comply in all material respects, with all
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and the rules and regulations promulgated thereunder, each as in effect
on the date so filed, and (ii) did not or will not, at the time they were or
will be filed, or, if amended, as of the date of such amendment, 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 made therein, in
the light of the circumstances under which they were made, not misleading. No
subsidiary of Parent is required to file any form, report or other document with
the SEC. Except as set forth in Section 4.06 of the Parent Disclosure Schedule,
Parent has not received any non-routine inquires or interrogatories, whether in
writing or otherwise, from the SEC, the NYSE or any other Governmental Authority
or, to the knowledge of Parent, been the subject of any investigation, audit,
review or hearing by or in front of such persons, in each case with respect to
any of the Parent Reports or any of the information contained therein. True and
complete copies of any such written inquires or interrogatories have been
furnished to the Company, and the Company has otherwise been made aware of any
such oral inquiries or interrogatories, investigations, audits, reviews or
hearings.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent Reports was or will be
prepared in accordance with US GAAP applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto or, in the
37
case of unaudited statements, as permitted by Form 10-Q of the SEC) and each
fairly presents or will fairly present, in all material respects, the
consolidated financial position, results of operations and cash flows of Parent
and its consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments).
(c) Except as and to the extent set forth in the Parent
Reports, none of Parent nor any of its subsidiaries has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise),
in each case that is required by US GAAP to be set forth on a consolidated
balance sheet of Parent or in the notes thereto, except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 2001, and would not reasonably be expected to have a
Parent Material Adverse Effect.
Section 4.07 Information to Be Supplied.
Any information supplied or to be supplied by Parent or its
subsidiaries or representatives for inclusion or incorporation by reference in
the Circular or the Proxy Statement will not, on the date the Circular is mailed
to stockholders of the Company, on the date of the Company Meeting and on the
Effective Date, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
Section 4.08 Permits; Compliance.
(a) Except as set forth in Section 4.08(a) of the Parent
Disclosure Schedule:
(i) the operations of Parent and its Subsidiaries have
been conducted in compliance with all Laws, including without limitation all
Laws relating to consumer protection, equal opportunity, health, health care
industry regulation, third party reimbursement (including Medicare, Medicaid,
any other Federal Health Care Program and workers compensation), fire, zoning
and building and occupational safety matters, except for noncompliance that does
not and would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect;
(ii) neither Parent nor any of its Subsidiaries has
received written notice of any material violation (or of any investigation,
inspection, audit, or other proceeding by any Governmental Authority involving
allegations of any violation) of any Law, or is in material default with respect
to any Law, and to the knowledge of Parent, no investigation, inspection, audit
or other proceeding by any Governmental Authority involving allegations of any
material violation of any Law is threatened or contemplated;
(iii) each of Parent and its Subsidiaries has, and to
the knowledge of Parent all professional employees or agents of each of Parent
and its Subsidiaries have, all Approvals required for the conduct of the
business of each of Parent and its Subsidiaries, the job duties of each
professional employee or agent and the occupancy and operation, for its present
uses, of the real and personal property which each of Parent and its
Subsidiaries owns or leases, except where the failure to have such Approvals
38
would not, individually or in the aggregate, have a Parent Material Adverse
Effect, and neither Parent nor any of its Subsidiaries or, to the knowledge of
Parent, any of its respective professional employees or agents is in violation
of any such Approval or any terms or conditions thereof, except for such
violations as would not, individually or in the aggregate, have a Parent
Material Adverse Effect;
(iv) all Approvals for Parent and each of its
Subsidiaries are in full force and effect, and, to the knowledge of Parent, all
such Approvals for its professional employees and agents are in full force and
effect, have been issued to and fully paid for by the holder thereof and, to the
knowledge of Parent, no suspension or cancellation thereof has been threatened,
except for such Approvals as would not, individually or in the aggregate, have a
Parent Material Adverse Effect; and
(v) no Approvals for Parent and each of its Subsidiaries
will in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement or any of the other agreements
contemplated hereunder or executed herewith, except for such Approvals as would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
(b) Except as set forth in Section 4.08(b) of the Parent
Disclosure Schedule, (i) neither Parent nor any of its Subsidiaries, nor the
officers or directors, nor, to the knowledge of the Company, employees or agents
of Parent or any of its Subsidiaries, have engaged in any activities which are
prohibited, or are cause for criminal or civil penalties or mandatory or
permissive exclusion from Medicare, Medicaid or any other Federal Health Care
Program, under ss.ss. 1320a-7, 1320a-7a, 1320a-7b, or 1395nn of Title 42 of the
United States Code, the Federal Employees Health Benefits program statute, or
the regulations promulgated pursuant to such statutes or regulations or related
state or local statutes or which are prohibited by any private accrediting
organization from which Parent or any of its Subsidiaries seeks accreditation or
by generally recognized professional standards of care or conduct, including but
not limited to the following activities:
(A) knowingly and willfully making or causing to be
made a false statement or representation of a material fact in any application
for any benefit or payment;
(B) knowingly and willfully making or causing to be
made any false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(C) presenting or causing to be presented a claim for
reimbursement under Medicare, Medicaid or any other Federal Health Care Program
that is (1) for an item or service that the Person presenting or causing to be
presented knows or should know was not provided as claimed, or (2) for an item
or service that the Person presenting knows or should know that the claim is
false or fraudulent;
(D) knowingly and willfully offering, paying,
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind (1) in
return for referring, or to induce the referral of, an individual to a Person
39
for the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare, Medicaid or any other
Federal Health Care Program or (2) in return for, or to induce, the purchase,
lease or order, or the arranging for or recommending of the purchase, lease or
order, of any good, facility, service or item for which payment may be made in
whole or in part by Medicare, Medicaid or any other Federal Health Care Program;
or
(E) knowingly and willfully making or causing to be
made or inducing or seeking to induce the making of any false statement or
representation (or omitting to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading) of
a material fact with respect to (1) the conditions or operations of a facility
operated by the Company or any of its Subsidiaries in order that the facility
may qualify for Medicare, Medicaid or any other Federal Health Care Program
certification, or (2) information required to be provided under SSA ss. 1124A;
and
(ii) Parent has a compliance program that has been
implemented and, to the knowledge of Parent, the business of Parent and its
Subsidiaries has been conducted in all material respects in accordance with the
terms of the compliance program.
(c) Except as set forth in Section 4.08(c) of the Parent
Disclosure Schedule, (i) neither Parent nor, to the knowledge of Parent, any
other Person who has a direct or indirect ownership interest (as those terms are
defined in 42 C.F.R. ss. 1001.1001(a)(2)) in Parent or any of its Subsidiaries
prior to the Effective Time, or who has an ownership or control interest (as
defined in SSA ss. 1124(a)(3) or any regulations promulgated thereunder) in
Parent or any of its Subsidiaries prior to the Effective Time, or who is an
officer, director, agent (as defined in 42 C.F.R. ss. 1001.1001(a)(2)), or
managing employee (as defined in SSA ss. 1126(b)) of Parent or any of its
Subsidiaries prior to the Effective Time, and (ii) to the knowledge of Parent,
no Person with any relationship with such entity (including without limitation a
parent company or shareholder of, or partner in, a Subsidiary) who has an
indirect ownership interest (as that term is defined in 42 C.F.R. ss.
1001.1001(a)(2)) in Parent or any of its Subsidiaries prior to the Effective
Time (A) has had a civil monetary penalty assessed against it under SSA ss.
1128A; (B) has been excluded from participation under Medicare, Medicaid or any
other Federal Health Care Program; or (C) has been convicted (as that term is
defined in 42 C.F.R. ss. 1001.2) of any of the following categories of offenses
as described in SSA ss. 1128(a) and (b)(1), (2), (3):
(i) criminal offenses relating to the delivery of an
item or service under Medicare, Medicaid or any other Federal Health Care
Program;
(ii) criminal offenses under federal or state law
relating to patient neglect or abuse in connection with the delivery of a health
care item or service;
(iii) criminal offenses under federal or state law
relating to fraud, theft, embezzlement, breach of fiduciary responsibility or
other financial misconduct in connection with the delivery of a health care item
or service or with respect to any act or omission in a program operated by or
financed in whole or in part by any federal, state or local government agency.
40
(iv) federal or state laws relating to the interference
with or obstruction of any investigation into any criminal offense described in
(i) through (iii) above; or
(v) criminal offenses under federal or state law
relating to the unlawful manufacture, distribution, prescription or dispensing
of a controlled substance.
Section 4.09 Absence of Certain Changes or Events.
Since December 31, 2001, except (a) as expressly contemplated
by this Agreement, or (b) as described in the Parent Reports filed prior to the
date hereof: (i) Parent and its Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice; (ii)
there has not been any Parent Material Adverse Effect; and (iii) Parent and its
subsidiaries have not taken any action that, if taken after the date of this
Agreement, would constitute a breach of the covenants set forth in Section 5.02,
except where such action would not reasonably be expected to have a Parent
Material Adverse Effect.
Section 4.10 Litigation.
Except as described in the Parent Reports filed prior to the
date hereof, there is no Action pending or, to the knowledge of Parent,
threatened against Parent or any of its subsidiaries, or any property or asset
of Parent or any such subsidiary, before any Governmental Authority that (a) has
had or would reasonably be expected to have a Parent Material Adverse Effect or
(b) seeks to materially delay or prevent the consummation of the Transaction.
Neither Parent nor any of its subsidiaries nor any property or asset of Parent
or any such subsidiary is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of Parent, continuing investigation by, any Governmental Authority, or
any order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority that would reasonably be expected to have a Parent
Material Adverse Effect.
Section 4.11 No Vote Required.
No vote of the stockholders of Parent is required by Law,
Parent's certificate of incorporation or by-laws or otherwise in order for
Parent and Purchaser to consummate the transactions contemplated hereby.
Section 4.12 Operations of Purchaser.
Purchaser is a direct, wholly owned subsidiary of Parent, was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
41
Section 4.13 Brokers.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transaction that will not be paid by or on behalf of Parent or Purchaser.
Section 4.14 Financing.
Parent has, and will have prior to the Effective Date,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to pay the cash consideration to be paid in
connection with the Arrangement and to pay all fees and expenses in connection
therewith.
Section 4.15 Ownership of Company Common Stock.
As of the date of this Agreement, none of Parent, any of its
subsidiaries or any of their respective controlled affiliates beneficially owns
any shares of Company Common Stock.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE DATE
Section 5.01 Conduct of Business by the Company.
(a) The Company agrees that, between the date of this
Agreement and the Effective Date, except as expressly contemplated by any other
provision of this Agreement, as set forth in Section 5.01 of the Company
Disclosure Schedule or as required by a Governmental Authority of competent
jurisdiction or as may be required in order for the Company and Parent to comply
with applicable Laws, unless Parent shall otherwise consent in writing, such
consent not to be unreasonably withheld or delayed:
(i) the businesses of the Company and its Subsidiaries
shall be conducted in all material respects only in, and the Company and its
Subsidiaries shall not take any material action except in, the ordinary course
of business and in a manner consistent with past practice; and
(ii) the Company shall maintain its existence and good
standing and use its best efforts to preserve substantially intact the business
organization of the Company and its Subsidiaries, to keep available the services
of the current officers, employees and consultants of the Company and its
Subsidiaries and to preserve the current relationships of the Company and its
Subsidiaries with customers, suppliers and other persons with which the Company
or any Company Subsidiary has significant business relations.
(b) By way of amplification and not limitation, except as
expressly contemplated by any other provision of this Agreement, as set forth in
Section 5.01 of the Company Disclosure Schedule or as required by a Governmental
Authority of competent jurisdiction or as may be required in order for the
Company and Parent to comply with applicable Laws, neither the Company nor any
Company Subsidiary shall, between the date of this Agreement and the Effective
42
Date, directly or indirectly, do any of the following without the prior written
consent of Parent, such consent not to be unreasonably withheld or delayed:
(i) amend or otherwise change its certificate of
incorporation or by-laws or equivalent organizational documents, except in the
case of any Company Subsidiary if such change is in the ordinary course of
business and in a manner consistent with past practice and would not reasonably
be expected to have a Company Material Adverse Effect;
(ii) issue, sell, pledge, dispose of, grant or encumber,
or authorize the issuance, sale, pledge, disposition, grant or encumbrance of,
(A) any shares of any class of capital stock of the Company or any Company
Subsidiary, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the Company
or any Company Subsidiary (except for the issuance of shares of Company Common
Stock issuable pursuant to Company Stock Options outstanding on the date hereof)
or (B) any assets of the Company or any Company Subsidiary, except in the
ordinary course of business and in a manner consistent with past practice;
(iii) waive any stock repurchase rights, accelerate,
amend or change the period of exercisability of options or restricted stock,
reprice options granted under any Company Stock Option Plan or authorize cash
payments in exchange for any options granted under any of such plans;
(iv) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except for dividends payable by a Subsidiary of the
Company to the Company or any other Company Subsidiary;
(v) reclassify, combine, split, subdivide or redeem, or
purchase or otherwise acquire, directly or indirectly, any of its capital stock
or other securities;
(vi) (A) acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof or any material amount of assets except in the ordinary course
of business and consistent with past practice; (B) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or endorse, or
otherwise become responsible for, the obligations of any person, or make any
loans or advances, or grant any security interest in any of its assets except in
the ordinary course of business and consistent with past practice; (C) enter
into any contract or agreement other than in the ordinary course of business and
consistent with past practice; (D) other than in the ordinary course of business
consistent with past practice, authorize, or make any commitment with respect to
capital expenditures which are, in the aggregate, in excess of $1,000,000 per
month (the "Monthly CapEx Amount") from the date hereof until the earlier of (x)
the Effective Time or (z) the termination of this Agreement pursuant to Section
7.01 (it being understood that any unused portion of the Monthly CapEx Amount
may be rolled forward and utilized in any subsequent month); or (E) enter into
43
or amend any contract, agreement, commitment or arrangement with respect to any
matter set forth in this Section 5.01(b)(vi);
(vii) sell, lease, license, mortgage, pledge, encumber
or dispose of in any manner any properties or assets which are material,
individually or in the aggregate, to the Company other than in the ordinary
course of business and in a manner consistent with past practice;
(viii) increase the compensation payable or to become
payable or the benefits provided to its directors, officers or employees, except
for increases in the ordinary course of business and consistent with past
practice in salaries or wages of employees of the Company or any Subsidiary who
are not directors or officers of the Company or any Company Subsidiary, or grant
any severance or termination pay to (except as required by the Company's
severance policy as of the date hereof or any labor or other employment
agreement), or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or of any Company Subsidiary,
or establish, adopt, enter into or amend (except as required by law or in the
ordinary course of business consistent with past practice) any bonus,
profit-sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
(ix) change in any material respect any of the
accounting principles used by it, other than as required by GAAP;
(x) (A) make or rescind any material Tax election,
settle or compromise any material liability for Taxes or change or revoke any of
its methods of Tax accounting, or (B) take any action with respect to the
computation of Taxes or the preparation of Tax returns that is in any material
respect inconsistent with past practice; provided, however, that, in the case of
this clause (x), Parent shall not unreasonably withhold its consent;
(xi) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than in the ordinary course of business and consistent with past practice
or claims, liabilities or obligations not exceeding $1,000,000 in the aggregate;
(xii) (A) amend, modify or consent to the termination of
any Material Contract, or amend, waive, modify or consent to the termination of
the Company's or any Company Subsidiary's rights thereunder except in the
ordinary course of business consistent with past practice, or (B) enter into any
material contract or agreement that would be a Restrictive Agreement or a
Related Party Agreement;
(xiii) except in the ordinary course of business and
consistent with past practice, (A) grant any license in respect of any material
Company Owned Intellectual Property, (B) develop any Intellectual Property
jointly with any third party, or (C) disclose any confidential Intellectual
Property or other confidential information of the Company or any Company
Subsidiary, unless such disclosure is made in the ordinary course of business
44
consistent with past practice or would not reasonably be expected to have a
Company Material Adverse Effect;
(xiv) commence or settle any material Action; or
(xv) announce an intention, enter into any formal or
informal agreement or otherwise make a commitment to do any of the foregoing or
take any action that would materially delay the consummation of the Arrangement.
Section 5.02 Conduct of Business by Parent.
(a) Parent agrees that, between the date of this Agreement and
the Effective Time, except as expressly contemplated by any other provision of
this Agreement, unless the Company shall otherwise consent in writing, such
consent not to be unreasonably withheld or delayed, Parent shall not:
(i) amend or otherwise change its certificate of
incorporation or by-laws in a manner adverse to the stockholders of the Company
as opposed to any other holders of Parent Common Stock;
(ii) unless proper provision is made to reflect the
value thereof in the Exchange Consideration, declare, set aside, make or pay any
dividend or other distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock, except for dividends payable by a
subsidiary of Parent to Parent or any other subsidiary; and
(iii) reclassify, combine, split or subdivide its
capital stock without appropriate adjustment being made to the Security Portion
payable to the holders of Company Common Stock pursuant to the Arrangement.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 Access to Information; Confidentiality.
(a) Except as otherwise prohibited by applicable Law or the
terms of any contract or agreement (provided that the Company shall use all
reasonable efforts to promptly obtain any consent required under any such
contract or agreement in order that it may comply with the terms of this Section
6.01), from the date of this Agreement until the Effective Time, the Company
shall, and shall cause its Subsidiaries to, (i) provide to Parent and Parent's
officers, directors, employees, accountants, consultants, legal counsel, agents
and other representatives access at reasonable times during normal business
hours upon prior notice to the officers, employees, agents, properties, offices
and other facilities of the Company and its Subsidiaries and to the books and
records thereof, and (ii) furnish promptly to Parent such information in the
Company's possession concerning the business, properties, contracts, assets,
liabilities, personnel and other aspects of the Company and its Subsidiaries as
Parent or its representatives may reasonably request.
45
(b) All information obtained by the parties pursuant to this
Section 6.01 shall be kept confidential in accordance with the confidentiality
agreement, dated March 12, 2002 (the "Confidentiality Agreement"), between
Parent and the Company.
(c) Any investigation pursuant to this Section 6.01 shall not
affect any representation or warranty of any party hereto or any condition to
the obligations of the parties hereto or unreasonably interfere with the conduct
of the business of the Company.
Section 6.02 No Solicitation of Transactions.
(a) The Company shall, and shall cause its Subsidiaries, and
its and their respective officers, directors, employees, subsidiaries, agents or
advisors or other representatives (including, without limitation, any investment
banker, attorney or accountant retained by it) ("Representatives") to,
immediately cease and cause to be terminated any discussions or negotiations
with third parties with respect to a Competing Transaction (as defined below).
The Company will not, directly or indirectly, and will instruct its
Representatives not to, directly or indirectly, solicit, initiate or, except as
and only to the extent permitted by Section 6.02(b), encourage (including by way
of furnishing nonpublic information), or take any other action to facilitate,
any inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) that constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as defined below),
or, except as and only to the extent permitted by Section 6.02(b), enter into or
maintain or continue discussions or negotiate with any Person in furtherance of
such inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any Representative of the Company
or any of its Subsidiaries to take any such action. The Company shall not
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which it is a party.
(b) Notwithstanding anything to the contrary in this Section
6.02, the Company Board may furnish information to, and enter into discussions
with, a Person who has made an unsolicited bona fide written proposal or offer
regarding a Competing Transaction (that did not result from a breach of this
Section 6.02), and with respect to which the Company Board has (i) determined,
in its good faith judgment (after consultation with a financial advisor of
internationally recognized reputation), that such proposal or offer constitutes
or is reasonably likely to result in or lead to a Superior Proposal (as defined
below), (ii) determined, in its good faith judgment after consultation with
outside legal counsel, that, in light of such Superior Proposal, the failure to
furnish such information or to enter into such discussions would result in a
breach of its fiduciary obligations under applicable Law, (iii) provided written
notice to Parent of its intent to furnish information or enter into discussions
with such Person at least two Business Days prior to taking any such action and
(iv) obtained from such Person an executed confidentiality agreement on terms no
less favorable to the Company than those contained in the Confidentiality
Agreement.
(c) The Company agrees that in addition to the obligations of
the Company set forth in paragraphs (a) and (b) of this Section 6.02, promptly
following receipt thereof, the Company shall advise Parent in writing of any
request for information or any Competing Transaction, or any inquiry,
discussions or negotiations with respect to any Competing Transaction and the
46
terms and conditions of such request for information, Competing Transaction,
inquiry, discussions or negotiations and the Company shall promptly provide to
Parent copies of any written materials received by the Company in connection
with any of the foregoing, and the identity of the Person or group making any
such request for information, Competing Transaction or inquiry or with whom any
discussions or negotiations may be taking place (as permitted by Section
6.02(b)). The Company agrees that it shall keep Parent informed of the status
and material details (including amendments or proposed amendments) of any such
request for information, Competing Transaction or inquiry and keep Parent
informed as to the material details of any information requested of or provided
by the Company (pursuant to Section 6.02(b)) and as to the status and material
terms of all substantive discussions or negotiations (permitted by Section
6.02(b)) with respect to any such request, Competing Transaction or inquiry. The
Company agrees that it shall simultaneously provide to Parent any non-public
information concerning the Company that may be provided (pursuant to Section
6.02(b)) to any other Person or group in connection with any Competing
Transaction which was not previously provided to Parent.
(d) A "Competing Transaction" means any of the following
(other than the Transaction): (i) any merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any material Subsidiary, (ii) any
sale, lease, exchange, transfer or other disposition of all or a substantial
part of the assets of the Company and its Subsidiaries, taken as a whole, (iii)
any sale, exchange, transfer or other disposition of 20% or more of any class of
equity securities of the Company and its Subsidiaries, taken as a whole or of
20% or more of the assets of the Company and its Subsidiaries, taken as a whole,
or (iv) any tender offer or exchange offer that, if consummated, would result in
any Person beneficially owning 20% or more of any class of equity securities of
the Company and its Subsidiaries, taken as a whole.
(e) A "Superior Proposal" means an unsolicited bona fide
written offer made by a third party to consummate any of the following
transactions: (i) a merger, consolidation, share exchange, business combination,
recapitalization or other similar transaction involving the Company pursuant to
which the stockholders of the Company immediately preceding such transaction
would hold less than 50% of the equity interest in the surviving or resulting
entity of such transaction, (ii) the sale, lease, exchange, transfer or other
disposition of at least 20% of the assets of the Company and its Subsidiaries,
taken as a whole, in a single or related series of transactions or (iii) the
acquisition by any Person or group (including by means of a tender offer or an
exchange offer or a two-step transaction involving a tender offer followed with
reasonable promptness by a merger or comparable transaction involving the
Company), directly or indirectly, of ownership of at least 20% of the then
outstanding shares of Company Common Stock, in each case, on terms (including
conditions to consummation of the contemplated transaction) that the Company
Board determines, in its good faith judgment (after consultation with a
financial advisor of internationally recognized reputation), to be more
favorable to the Company stockholders, from a financial point of view, than the
Arrangement and is reasonably capable of being consummated and which is fully
financed or is not contingent on the obtaining of financing.
47
Section 6.03 Stockholder Meeting.
Whether or not the Board of Directors of the Company shall
take any action permitted by the third sentence of this Section 6.03, the
Company shall cause the Company Meeting to be duly called and held as soon as
practicable after the date of this Agreement for the purpose of voting on the
Arrangement Resolution. The Board of Directors of the Company shall (i) include
in the Circular and the Proxy Statement prepared therefor its recommendation in
favor of the Arrangement Resolution (the "Board Recommendation") and (ii) use
its best efforts to obtain the necessary vote in favor of the Arrangement
Resolution by the Company Securityholders, subject, in each case, to the
fiduciary duties of the Board of Directors. The Board of Directors of the
Company shall not withdraw, amend, modify or qualify in a manner adverse to
Parent the Board Recommendation (or announce its intention to do so), except
that, prior to the receipt of the Company Securityholder approval, the Board of
Directors of the Company shall be permitted to withdraw, amend, modify or
materially qualify in a manner adverse to Parent the Board Recommendation,
following three Business Days' prior notice to Parent, but only if (A) the
Company has complied in all respects with Sections 6.02 and 6.03 of this
Agreement, and (B) after receiving advice of its outside legal counsel, the
Board of Directors determines in good faith that the Arrangement is not in the
best interests of the stockholders of the Company and that, therefore, it is
required to withdraw, amend or modify the Board Recommendation in order to
satisfy its fiduciary duties to the stockholders of the Company under applicable
law. Nothing herein shall prohibit the Board of Directors of the Company from
complying with Rules 14d-9 or 14e-2(a) of the Exchange Act or analogous
provisions of Canadian Securities Laws, or from making any other disclosures
required by Law.
Section 6.04 Employee Benefits Matters.
(a) From and after the Effective Date, Parent shall cause the
Company and its Subsidiaries and their successors and assigns to honor in
accordance with their terms, all contracts, agreements, arrangements, policies,
plans and commitments of the Company and the Subsidiaries as in effect
immediately prior to the Effective Date that are applicable to any current or
former employees or directors of the Company or any Subsidiary; provided,
however, that nothing contained herein shall prohibit Parent or the Company or
any of Parent's subsidiaries from amending, modifying or terminating any such
contracts, agreements, arrangements, policies, plans and commitments in
accordance with their terms. Employees of the Company or any Subsidiary shall
receive full credit for purposes of eligibility to participate and vesting (but
not for benefit accruals) under any employee benefit plan, program or
arrangement established or maintained by the Company or any of its subsidiaries
or their successors and assigns after the Effective Date for service accrued or
deemed accrued prior to the Effective Date with the Company or any Subsidiary;
provided, however, that such crediting of service shall not operate to duplicate
any benefit or the funding of any such benefit. In addition, Parent shall waive,
or cause to be waived, any limitations on benefits relating to any pre-existing
conditions to the same extent such limitations are waived under any comparable
plan of the Company or its subsidiaries and recognize, for purposes of annual
deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by employees of the Company and its
subsidiaries in the calendar year in which the Effective Date occurs.
48
(b) As soon as practicable after the execution of this
Agreement, the Company and Parent shall confer and work together in good faith
to agree upon mutually acceptable employee benefit and compensation
arrangements.
Section 6.05 Directors' and Officers' Indemnification and Insurance.
(a) Parent shall cause the Certificate of Incorporation and
By-Laws of the Company or its successors or assigns after the Effective Time to
contain provisions no less favorable with respect to indemnification for matters
occurring prior to the Effective Time than are set forth in the Company's
Certificate of Incorporation and By-Laws, as of the date hereof, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who, at or prior to the Effective Time, were
directors, officers, employees or agents of the Company, unless such
modification shall be required by Law.
(b) Parent shall cause the Company or its successor to
maintain in effect for six years from the Effective Time directors' and
officers' liability insurance covering those persons who are currently covered
on the date of this Agreement by the current directors' and officers' liability
insurance policies maintained by the Company (provided that Parent may
substitute therefor policies of at least the same dollar limit coverage
containing terms and conditions that are not, in the aggregate, less favorable)
with respect to matters occurring prior to the Effective Time; provided,
however, that in no event shall the Company or Parent be required to expend
annually pursuant to this Section 6.05(b) more than 300% of the amount per annum
the Company paid in its last full fiscal year; provided further, however, that,
if the amount of the annual premiums necessary to maintain or procure such
insurance coverage exceeds such maximum amount, the Company or Parent shall
maintain or procure, for such six-year period, the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to
that maximum amount.
(c) The obligation of the Parent or the Company (or its
successor) under this Section 6.05 shall not be terminated or modified in such a
manner as to adversely affect any Indemnitee to whom this Section 6.05 applies
without the consent of such Indemnitee (it being expressly agreed that the
Indemnitees to whom this Section 6.05 applies shall be third party beneficiaries
of this Section 6.05).
Section 6.06 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent, and Parent
or Purchaser shall give prompt notice to the Company, of (i) any representation
or warranty made by it contained in this Agreement becoming untrue or inaccurate
in any material respect and (ii) the failure by it to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; provided, however, that the delivery of
any such notification pursuant to this Section 6.06 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
(b) The Company shall give prompt notice to Parent, and Parent
or Purchaser shall give prompt notice to the Company, of: (i) any notice or
other communication from any Governmental Authority in connection with the
49
transactions contemplated by this Agreement, and (ii) any actions, suits,
claims, investigations or proceedings commenced or, to its knowledge, threatened
in writing against, relating to or involving or otherwise affecting it or any of
its subsidiaries which, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Article V and Article VI or
which relate to the consummation of the Transaction.
Section 6.07 Company Affiliates.
No later than five business days after the date of this
Agreement, the Company shall deliver to Parent a list of names and addresses of
those persons who were, in the Company's reasonable judgment, on such date,
affiliates (within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act (each such person being, a "Company
Affiliate")) of the Company. The Company shall provide Parent with such
information and documents as Parent shall reasonably request for purposes of
reviewing such list. The Company shall use its reasonable best efforts to
deliver or cause to be delivered to Parent, an affiliate letter in the form
attached hereto as Exhibit A, executed by each of the Company Affiliates
identified in the foregoing list and any person who shall, to the knowledge of
the Company, have become a Company Affiliate subsequent to the delivery of such
list.
Section 6.08 Further Action; Reasonable Efforts.
(a) Upon the terms and subject to the conditions of this
Agreement, (i) each of the parties hereto shall as promptly as practicable after
the date of this Agreement make its respective filings and supply as promptly as
practicable any additional information and documentary material that may be
reasonably requested pursuant to the HSR Act, the Competition Act, the
Investment Canada Act and any other Law the parties agree requires submission
with respect to the Arrangement; (ii) each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper and advisable under
applicable Laws or otherwise to consummate expeditiously and make effective the
Arrangement, including, without limitation, using its reasonable best efforts to
obtain all permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and parties to contracts with the Company and
the Subsidiaries as are necessary for the consummation of the Arrangement and to
fulfill the conditions to the Arrangement; and (iii) the Company shall and where
appropriate shall cause its subsidiaries to:
(A) Advise Parent as reasonably requested, as to the aggregate
tally of the proxies and votes received in respect of the Company Meeting and
all matters to be considered at such meeting; and
(B) Provide Parent with a copy of any purported exercise of
the Dissent Rights and written communications with such Company Shareholder
purportedly exercising the Dissent Rights; and not settle or compromise any
claim brought by any present, former or purported holder of any of its
securities in connection with the Arrangement.
50
Parent agrees that it shall not make any filings under the HSR
Act in respect of any prospective acquisitions of businesses other than those
related to the Transaction for a period ending on the earlier of (a) 60 days
following the first HSR filing Parent shall make in respect of the Arrangement
and (b) the termination of the HSR waiting period in respect of the Arrangement.
Notwithstanding the foregoing, nothing herein shall require Parent, in
connection with the receipt of any regulatory approval, to agree to sell or
divest any material assets or business or agree to restrict in any material way
any business conducted by or proposed to be conducted by Parent, any Parent
Subsidiary, the Company or any Company Subsidiary, or to litigate or formally
contest any proceeding relating to any regulatory approval process in connection
with the Arrangement.
(b) Each of the parties hereto shall use its reasonable
efforts to cause its respective officers, employees, agents, auditors and
representatives to cooperate with each other, prior to the Effective Date, to
ensure the orderly combination of the Company and the Subsidiaries with Parent
and its subsidiaries following the Effective Date and to minimize any disruption
to the respective businesses of Parent, the subsidiaries of Parent, the Company
and the Subsidiaries that might result from the Transaction.
Section 6.09 Purchaser.
Parent shall perform, and shall take all action necessary to
cause Purchaser to perform, its obligations under this Agreement (including
without limitation the Plan of Arrangement) and to consummate the Transaction on
the terms and subject to the conditions set forth in this Agreement.
Section 6.10 NYSE Listing.
Parent shall as promptly as practicable prepare and submit to
the NYSE a listing application covering the shares of Parent Common Stock to be
issued pursuant to the Arrangement, and shall use its reasonable efforts to
obtain, prior to the Effective Date, approval for the listing of Parent Common
Stock to be issued pursuant to the Arrangement, subject to official notice of
issuance to the NYSE, and the Company shall cooperate with Parent with respect
to such listing.
Section 6.11 Public Announcements.
The initial press release relating to this Agreement shall be
a joint press release the text of which has been agreed to by each of Parent and
the Company. Thereafter, unless otherwise required by applicable Law or the
requirements of the NYSE, Nasdaq or the TSE, each of Parent and the Company
shall use its reasonable best efforts to consult with each other before issuing
any press release or otherwise making any public statements with respect to this
Agreement or the Arrangement; provided, however, that this Section 6.11 shall
terminate in the event the Company Board withdraws the Recommendation.
51
Section 6.12 Transfer Tax.
The Company and Parent shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees and any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement (together with
any related interest, penalties or additions to Tax, "Transfer Taxes"). All
Transfer Taxes shall be paid by the Company and expressly shall not be a
liability of any holder of the Company Common Stock.
Section 6.13 Indebtedness.
From and after the Effective Time, Parent shall cause the
Purchaser and the Company to comply with all of their obligations under the
Indenture, dated as of January 26, 1996, and the First Supplemental Indenture,
dated as of February 3, 1999, and the Second Supplemental Indenture, dated as of
February 29, 2000, between the Company, as issuer, and The Chase Manhattan Bank,
as Trustee, relating to the Company's 10 3/4% Senior Notes due 2006 and 10 3/4%
Senior Notes due 2006, Series B (the "Indenture"). Without limiting the
generality of the foregoing, the Purchaser shall expressly assume as principal
obligor, by a supplemental indenture executed and delivered to the Trustee, in
form reasonably satisfactory to the Trustee, all of the obligations of the
company under the Securities (as defined in the Indenture) and the Indenture.
ARTICLE VII
CONDITIONS
Section 7.01 Conditions Precedent to Each Party's Obligation to Effect
the Arrangement.
The respective obligations of each party hereto to effect the
Arrangement shall be subject to the fulfillment or satisfaction, prior to or on
the Effective Date of the following conditions:
(a) Approvals. All authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by (including without limitation, expiration of any
waiting period under the HSR Act, the Competition Act (Canada) or the Investment
Canada Act), any governmental or regulatory authority, domestic or foreign,
which the failure to obtain, make or occur would have the effect of making the
Arrangement or any of the transactions contemplated hereby illegal or would have
a Parent Material Adverse Effect or a Company Material Adverse Effect, assuming
the Transaction had taken place, shall have been given or shall be in effect.
(b) No Injunction. No temporary restraining order, preliminary
or permanent injunction or other order from any court of competent jurisdiction
or other governmental or regulatory authority prohibiting or preventing the
consummation of the Transaction or any of the transactions contemplated
hereunder shall be in effect.
52
(c) Securityholder Approval. The Arrangement shall have been
duly approved by the Company Securityholders.
(d) New York Stock Exchange Listing. The Parent Common Stock
to be issued in the Arrangement shall have been approved for listing on the New
York Stock Exchange.
(e) Order. The Court shall have issued the Final Order.
Section 7.02 Conditions Precedent to Obligations of Parent.
The obligations of Parent to effect the Arrangement shall be
subject to the fulfillment or satisfaction, prior to or on the Effective Date,
of each of the following conditions precedent:
(a) Performance of Obligations; Representations and
Warranties; Dissent Rights.
(i) The Company shall have performed in all material
respects and complied in all material respects with all agreements and
conditions contained in this Agreement that are required to be performed or
complied with by it prior to or at the Effective Date. The Company's
representations and warranties in each Section of Article III of this Agreement
shall be true and correct in all respects as of the Effective Date with the same
effect as though such representations and warranties were made on and as of the
Effective Date (provided that any representation and warranty that addresses
matters only as of a certain date shall be true and correct as of that certain
date), except for changes permitted by this Agreement and except where the
failure of such representation and warranty to be true and correct in all
respects would not have or would not be reasonably likely to result in a Company
Material Adverse Effect. Parent shall have received a certificate dated the
Effective Date and signed by the Chairman, President or a Vice-President of the
Company, certifying that, the conditions specified in this Section 7.02(a) have
been satisfied; and
(ii) holders of shares of Company Common Stock
representing in excess of 10% of the issued and outstanding Company Common Stock
immediately prior to the Effective Date shall not have demanded or exercised
Dissent Rights.
(b) Affiliate Letters. Parent shall have received executed
letters in the form attached hereto as Exhibit A from each director and
executive officer of the Company and each such Affiliate Letter shall remain in
effect as of the Effective Date.
Section 7.03 Conditions Precedent to the Company's Obligations.
The obligations of the Company to effect the Transaction shall
be subject to the fulfillment or satisfaction, prior to or on the Effective
Date, of the following conditions precedent:
Performance of Obligations; Representations and Warranties.
Parent and the Purchaser shall have performed in all material respects and
complied in all material respects with all agreements and conditions contained
in this Agreement that are required to be performed or complied with by it prior
53
to or at the Effective Date. Each of the representations and warranties of
Parent and Purchaser in each Section of Article IV of this Agreement shall be
true and correct in all respects as of the Effective Date with the same effect
as though such representations and warranties were made on and as of the
Effective Date (provided that any representation and warranty that addresses
matters only as of a certain date shall be true and correct as of that certain
date), except for changes permitted by this Agreement and except where the
failure of such representation and warranty to be true and correct in all
respects would not have or would not be reasonably likely to result in a Parent
Material Adverse Effect, provided that the representation and warranty made in
Section 4.05(c) shall be true and correct without qualification as to
materiality. The Company shall have received a certificate dated the Effective
Date and signed by the Chairman, President or a Vice-President of Parent,
certifying that, the conditions specified in this Section 7.03 have been
satisfied.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01 Termination by Mutual Consent.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Date, whether before or after the
approval by the Company Securityholders referred to in Section 7.01(c), by
mutual written consent of the Company and Parent.
Section 8.02 Termination by Either Parent or the Company.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Date by action of the Board of
Directors of either Parent or the Company if (a) the Transaction shall not have
been completed by the Drop Dead Date, whether such date is before or after the
date of approval by the Company Securityholders (the "Termination Date"); (b)
the approval of the Company Securityholders required by Section 7.01(c) shall
not have been obtained at a meeting duly convened therefor or at any adjournment
or postponement thereof; or (c) any Order permanently restraining, enjoining or
otherwise prohibiting consummation of the Transaction shall become final and
non-appealable; provided, that the right to terminate this Agreement pursuant to
clause (a) or (b) above shall not be available to any party that has breached in
any material respect its obligations under this Agreement in any manner that
shall have caused the occurrence of the failure of the Transaction to be
consummated or the stockholder approval to be obtained.
Section 8.03 Termination by the Company.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the receipt of the approval of the Company's
Securityholders required by Section 7.01(c), by action of the Board of Directors
of the Company:
(a) if (i) the Company is not in material breach of any of the
terms of this Agreement, (ii) the Board of Directors of the Company authorizes
the Company, subject to complying with the terms of this Agreement, to enter
into a binding written agreement concerning a transaction that constitutes a
54
Superior Proposal and the Company notifies Parent in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice, (iii) Parent does not make, within three Business Days
of receipt of the Company's written notification of its intention to enter into
a binding agreement for a Superior Proposal, an offer that the Board of
Directors of the Company determines, in good faith after consultation with its
outside legal counsel and its financial advisors, is at least as favorable to
the stockholders of the Company as the Superior Proposal taking into account the
financial terms or, if applicable, the strategic benefit and long-term value to
stockholders of the revised Merger Consideration and the Superior Proposal, and
(iv) the Company prior to such termination pays to Parent in immediately
available funds the amounts required to be paid pursuant to Section 8.05(b). The
Company agrees (A) that it will not enter into a binding agreement referred to
in clause (iii) above until at least the fourth business day after it has
provided the notice to Parent required thereby and (B) that it will notify
Parent promptly if its intention to enter into a written agreement referred to
in its notification shall change at any time after giving such notification; or
(b) at any time prior to the Effective Date, if there is a
material breach by Parent of any representation, warranty, covenant or agreement
made by it contained in this Agreement or if any representation or warranty made
by Parent shall have become materially untrue, in either case such that the
conditions set forth in Section 7.03 would not be satisfied as of the time of
such breach or as of the time such representation or warranty shall have become
untrue, provided, that if such inaccuracy in Parent's representations and
warranties or breach by Parent is curable by Parent through the exercise of its
commercially reasonable efforts, the Company may not terminate this Agreement
under this Section 8.03(b) for 30 days after delivery of written notice from the
Company to Parent of such breach, provided that Parent continues to exercise
commercially reasonably efforts to cure such breach (it being understood that
the Company may not terminate this Agreement pursuant to this paragraph (b) if
such breach is cured during such 30-day period).
Section 8.04 Termination by Parent.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after the
receipt of the approval of the Company's Stockholders required by Section
7.01(c), by written notice given to the Company by Parent:
(a) if the Company or its Board of Directors shall have (i)
withdrawn, modified or amended in any respect adverse to Parent the Board
Recommendation or failed to reconfirm the Board Recommendation within five
Business Days after a written request made in good faith by Parent to do so,
(ii) approved, publicly recommended or entered into an agreement with respect
to, or consummated, or adopted a resolution to approve, publicly recommend,
enter into an agreement with respect to, or consummate, any Acquisition Proposal
from a person other than Parent or any of its Affiliates, (iii) in response to
the commencement of any tender offer or exchange offer for outstanding Company
Common Stock by a person unaffiliated with Parent, not publicly recommended
rejection of such tender offer or exchange offer within ten Business Days after
the commencement thereof (as such term is defined in Rule 14d-2 under the
Exchange Act); or
55
(b) at any time prior to the Effective Date, if there is a
material breach by the Company of any representation, warranty, covenant or
agreement made by it contained in this Agreement or if any representation or
warranty made by the Company shall have become materially untrue, in either case
such that the conditions set forth in Section 7.02(a) would not be satisfied as
of the time of such breach or as of the time such representation or warranty
shall have become materially untrue, provided, that if such inaccuracy in the
Company's representations and warranties or breach by the Company is curable by
the Company through the exercise of its commercially reasonable efforts, Parent
may not terminate this Agreement under this Section 8.04(b) for 30 days after
delivery of written notice from Parent to the Company of such breach, provided
that the Company continues to exercise commercially reasonably efforts to cure
such breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (b) if such breach is cured during such 30-day
period).
Section 8.05 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement by Parent or
Company, as provided in this Article VIII, this Agreement (other than as set
forth below) shall forthwith become void and there shall be no liability
hereunder on the part of the Company, Parent, or Purchaser or their respective
officers or directors (except that Sections 6.01(b), 8.05, 9.03, 9.09 and 9.10
shall survive the termination); provided, however, that nothing contained in
this Section 8.05 shall relieve any party from any liability for any willful or
intentional breach of this Agreement.
(b) In the event that this Agreement is terminated (i) by the
Company pursuant to Section 8.03(a) or (ii) by Parent pursuant to Section
8.04(a), then the Company shall (x) promptly, but in no event later than the
earlier of the date of such termination or date of entrance into an agreement
concerning an Acquisition Proposal or such earlier time as required by this
Agreement, pay to Parent a termination fee of $20 million payable by wire
transfer of same day funds and (y) in no event later than two business days
after Parent shall have requested payment of its charges and expenses incurred
in connection with the transactions contemplated hereby, pay to Parent the
amount of such charges and expenses up to a maximum of $5 million payable by
wire transfer of same day funds.
(c) In the event that this Agreement is terminated pursuant to
Section 8.02(b), and at or prior to the time of the Company Meeting any Person
other than Parent shall have made a public announcement of an Acquisition
Proposal or shall have publicly announced an intention (whether or not
conditional) to make an Acquisition Proposal, and if within 12 months of such
termination, the Company enters into an agreement with such Person concerning a
transaction that constitutes an Acquisition Proposal, the Company shall (x) at
the time of entering into such agreement, pay to Parent the termination fee of
$20 million payable by wire transfer of same day funds and (y) in no event later
than two business days after Parent shall have requested payment of its charges
and expenses incurred in connection with the transactions contemplated hereby,
pay to Parent the amount of such charges and expenses up to a maximum of $5
million payable by wire transfer of same day funds.
56
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Non-Survival of Representations and Warranties.
The representations and warranties in this Agreement and in
any certificate or instrument delivered pursuant hereto shall terminate on the
Effective Date or upon the termination of this Agreement pursuant to Section
8.01. This Section shall not limit any covenant or other obligation of the
parties hereto which shall survive in accordance with their terms.
Section 9.02 Amendments, Modification and Waiver.
(a) Except as may otherwise be provided herein, any provision
of this Agreement may be amended, modified or waived by the parties hereto, by
action taken by or authorized by their respective Board of Directors, prior to
the Effective Date if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company and Parent or, in the case
of a waiver, by the party against whom the waiver is to be effective; provided
that approval by the Company of any amendment or waiver to this Agreement after
the purchase by Parent or Purchaser of any shares of Company Common Stock
pursuant to the Arrangement shall be subject to the provisions of Section
2.03(a); provided further, however, that, after the approval of this Agreement
by the Company Securityholders, no such amendment shall be made except as
allowed under applicable Law.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
Section 9.03 Notices.
All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy,
by overnight delivery service or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.03):
if to Parent or Purchaser:
Laboratory Corporation of America Holdings
430 South Spring Street, 1st Floor
Burlington, North Carolina 27215
Facsimile No: (336) 226-3835
Attention: General Counsel
with copies to:
57
Hogan & Hartson L.L.P.
111 South Calvert Street
Baltimore, Maryland 21202
Facsimile No: (410) 539-6981
Attention: Michael J. Silver
Stikeman Elliot
1115 Rene-Levesque Blvd. West
Suite 4000
40th Floor
Montreal, Quebec Canada H3B 3V2
Attention: Pierre Raymond
if to the Company:
Dyncare Inc.
20 Eglinton Avenue West, Suite 1600
Toronto, Ontario M4R 2H1
Facsimile No: (416) 487-8769
Attention: Chief Executive Officer
with copies to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile: (312) 861-2200
Attention: Kevin R. Evanich and
Sanford E. Perl
Goodman and Carr LLP
200 King Street, West
Suite 2300
Toronto, Ontario M5H 3W5 Canada
Attention: Jeffrey J. Fineberg
or to such other person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
58
Section 9.04 Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of Law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
Transaction is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
Transaction be consummated as originally contemplated to the fullest extent
possible.
Section 9.05 Entire Agreement; Assignment.
This Agreement, together with the Annexes, Exhibits and
Schedules hereto and the Confidentiality Agreement, constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned (whether pursuant to a merger, by operation of
law or otherwise) without the prior written consent of each party hereto.
Section 9.06 Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
Section 6.05 (which is intended to be for the benefit of the persons covered
thereby and may be enforced by such persons).
Section 9.07 Interpretation.
References in this Agreement to "reasonable best efforts"
shall require a person obligated to use its reasonable best efforts to obtain
any consent of a third party and to make reasonable out-of-pocket expenditures,
including all expenditures incurred in connection with litigation. References
herein to the "knowledge of the Company" shall mean the actual knowledge of the
"officers" of the Company (as such term is defined in Rule 3b-2 promulgated
under the Exchange Act). References herein to the "knowledge of Parent" shall
mean the actual knowledge of the "officers" of Parent (as such term is defined
in Rule 3b-2 promulgated under the Exchange Act). Whenever the words "include",
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation". The phrase "made available" when
used in this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available. References to "hereof" shall mean this Agreement and references to
the "date hereof" shall mean the date of this Agreement. References in this
Agreement to satisfaction of any condition set forth in Article VII shall mean,
as of such date of determination, the absence of the event or circumstance
described in such condition. The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
59
drafting party shall not be employed in the interpretation of this Agreement or
any other agreement or document given pursuant to this Agreement.
Section 9.08 Specific Performance.
The parties hereto agree that irreparable damage would occur
in the event any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or in
equity.
Section 9.09 Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof,
except to the extent mandatorily governed by the law of another jurisdiction.
Each of the parties hereto (i) irrevocably consents to the exclusive
jurisdiction and venue of the Ontario Superior Court of Justice (Commercial
List), in connection with any matter based upon or arising out of this Agreement
or the matters contemplated herein, except as has otherwise been agreed to with
respect to the consideration and approval of the Arrangement by the Court
pursuant to Article II hereof and (ii) waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
venue.
Section 9.10 Waiver of Jury Trial.
Each of the parties hereto hereby waives to the fullest extent
permitted by applicable Law any right it may have to a trial by jury with
respect to any litigation directly or indirectly arising out of, under or in
connection with this Agreement or the Transaction. Each of the parties hereto
(a) certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce that foregoing waiver and (b) acknowledges
that it and the other parties hereto have been induced to enter into this
Agreement and the Transaction, as applicable, by, among other things, the mutual
waivers and certifications in this Section 9.10.
Section 9.11 Headings.
The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 9.12 Counterparts.
This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
60
Section 9.13 Currency.
For greater certainty, all dollar amounts expressed in this
Agreement (unless otherwise expressly provided for herein) or in the Company
Disclosure Schedule (unless otherwise expressly provided for therein) and in the
Parent Disclosure Schedule are in United States dollars.
SIGNATURE PAGE FOLLOWS
61
IN WITNESS WHEREOF, Parent, Purchaser and the Company have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
LABORATORY CORPORATION OF AMERICA HOLDINGS
By: /s/ Bradford T. Smith
Name: Bradford T. Smith
Title: Executive Vice President
3065619 NOVA SCOTIA COMPANY
By: /s/ Bradford T. Smith
Name: Bradford T. Smith
Title: Secretary
DYNACARE INC.
By: /s/ Harvey Shapiro
Name: Harvey Shapiro
Title: President and Chief Executive Officer
62
EXECUTION COPY
ANNEX II TO THE
PRE-MERGER AGREEMENT
PLAN OF ARRANGEMENT
UNDER SECTION 182
OF THE BUSINESS CORPORATIONS ACT (ONTARIO)
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions
In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below and grammatical variations of such terms shall
have corresponding meanings:
1.1 "Arrangement" means an arrangement under section 182 of the OBCA on the
terms and subject to the conditions set out in this Plan of
Arrangement, subject to any amendments or variations thereto made in
accordance with Section 9.02 of the Pre-Merger Agreement or this
Arrangement or made at the direction of the Court in the Final Order.
"Arrangement Resolution" means the special resolution of the Company
Securityholders approving the Plan of Arrangement as required by the
Interim Order and applicable law, to be substantially in the form
attached to the Circular.
"Articles of Arrangement" means the articles of arrangement of the
Company in respect of the Arrangement that are required by the OBCA to
be sent to the Director after the Final Order is made.
"Business Day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are
not required or authorized to close in The City of New York or in
Toronto.
"Certificate" means the certificate of arrangement giving effect to
the Arrangement, issued pursuant to Section 183(2) of the OBCA after
the Articles of Arrangement have been filed.
"Circular" means the notice of the Company Meeting and accompanying
management information circular and proxy statement, including all
appendices thereto, to be sent to the Company Securityholders in
connection with the Company Meeting, as may be amended from time to
time.
"Company" means Dynacare Inc., a corporation existing under the laws of
Ontario.
"Company Common Stock" means the Company's common shares without par
value.
"Company Meeting" means the special meeting of the Company
Securityholders, including any adjournment thereof, to be called and
held in accordance with the Interim Order to consider the Arrangement.
"Company Securityholders" means the holders of Company Common Stock and
Company Stock Options, collectively;
"Company Stock Option Plans" means each of the Company's Amended and
Restated Employee Stock Option Plan and the Company's Amended and
Restated Stock Option Incentive Plan, as amended to the date of the
Pre-Merger Agreement and as may be further amended from time to time as
permitted thereby.
"Company Stock Options" means, at any time or times, the options,
whether or not exercisable and whether or not vested, granted under the
Company Stock Option Plans and being outstanding and unexercised as at
such time or times.
"Court" means the Superior Court of Justice (Ontario);
"Depositary" means Mellon Investor Services, L.L.C. and CIBC Mellon
Trust Company at its offices located in New York, New York and Toronto,
Ontario respectively;
"Director" means the Director appointed pursuant to Section 278 of the
OBCA;
"Dissent Rights" has the meaning ascribed thereto in Section 3.1.
"Dissenting Shareholder" means a holder of the Company Common Stock who
dissents in respect of the Arrangement in strict compliance with the
Dissent Rights.
"Drop Dead Date" means October 31, 2002, or such later date as may be
mutually agreed by the parties to the Pre-Merger Agreement.
2
"Effective Date" means the date shown on the Certificate, provided that
such date occurs on or prior to the Drop Dead Date.
"Effective Time" means 12:01 a.m. (Toronto time) on the Effective Date.
"Exchange Consideration" has the meaning ascribed thereto in Section
2.3.
"Final Order" means the final order of the Court approving the
Arrangement as such order may be amended by the Court at any time prior
to the Effective Date or, if appealed, then, unless such appeal is
withdrawn or denied, as affirmed.
"Governmental Authority" means any (a) multinational, federal,
provincial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal,
arbitral body, commission, board, bureau or agency, domestic or
foreign, (b) any subdivision, agent, commission, board, or authority of
any of the foregoing, or (c) any quasi governmental or private body
exercising any regulatory, expropriation or taxing authority under or
for the account of any of the foregoing;
"holders" means the holders of Company Common Stock shown from time to
time in the register maintained by or on behalf of the Company in
respect of the Company Common Stock.
"Interim Order" means the interim order of the Court, as the same may
be amended, in respect of the Arrangement, as contemplated by Section
2.2 of the Pre-Merger Agreement.
"Meeting Date" means the date of the Company Meeting.
"Noon Spot Rate" means, on any day, the Noon Spot Rate on such day of
the Bank of Canada for one Canadian dollar expressed in U.S. dollars.
"NYSE" means the New York Stock Exchange.
"Non-Vested Company Stock Options" means, at any time or times, the
non-vested options granted under the Company Stock Option Plans and
being outstanding and unexercised as at such time or times.
"OBCA" means the Business Corporations Act (Ontario) as in effect as of
the date hereof and as may be amended from time to time prior to the
Effective Time.
3
"Parent" means Laboratory Corporation of America Holdings, a
corporation existing under the laws of the State of Delaware.
"Parent Closing Price" means the closing price on the NYSE of the
Parent Common Stock on the Business Day immediately preceding the
Effective Date.
"Parent Common Stock" means Parent's common stock, par value $.10 per
share.
"Parent Option Shares" has the meaning ascribed thereto in Section
2.2(e).
"Parent Trading Price" means the average of the closing prices of
Parent Common Stock on NYSE during a period of 20 consecutive trading
days ending on the Business Day immediately preceding the Effective
Date.
"Person" includes any individual, firm, partnership, joint venture,
venture capital fund, limited liability company, unlimited liability
company, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, Governmental Entity,
syndicate or other entity, whether or not having legal status.
"Pre-Merger Agreement" means the pre-merger agreement made as of the
8th day of May, 2002 among Parent, the Purchaser and the Company, as
amended, supplemented and/or restated in accordance therewith prior to
the Effective Date, providing for, among other things, the Arrangement.
"Purchaser" means 3065619 NOVA SCOTIA COMPANY, an unlimited liability
company existing under the laws of Nova Scotia.
"Replacement Option" has the meaning ascribed thereto in Section
2.2(e).
"Security Portion" has the meaning ascribed thereto in Section 2.3.
"Vested Company Stock Options" means, at any time or times, the vested
options granted under the Company Stock Option Plans and being
outstanding and unexercised as at such time or times.
Section 1.2 Sections and Headings
The division of this Plan of Arrangement into sections and the
insertion of headings are for reference purposes only and shall not affect the
interpretation of this Plan of Arrangement. Unless otherwise indicated, any
4
reference in this Plan of Arrangement to a section or an exhibit refers to the
specified section of or exhibit to this Plan of Arrangement.
Section 1.3 Number, Gender and Persons
In this Plan of Arrangement, unless the context otherwise requires,
words importing the singular number include the plural and vice versa and words
importing any gender include all genders.
Section 1.4 Currency
Except as expressly indicated otherwise, all sums of money referred to
in this Plan of Arrangement are expressed and shall be payable in United States
dollars.
Section 1.5 Time
Time shall be of the essence in each and every matter or thing herein
provided. Unless otherwise indicated, all times expressed herein are local time
in Toronto, Ontario.
Section 1.6 Date for any Action
If the date on which any action is required to be taken hereunder is
not a Business Day in the place where the action is required to be taken, such
action shall be required to be taken on the next succeeding day which is a
Business Day in such place.
ARTICLE 2
ARRANGEMENT
Section 2.1 Binding Effect
This Plan of Arrangement will become effective at, and be binding at
and after, the Effective Time on (i) the Company, (ii) Parent, the Purchaser,
(iii) all holders and all beneficial holders of the Company Common Stock and
(iv) all holders of the Company Stock Options.
Section 2.2 Arrangement
Commencing at the Effective Time, the following shall occur and shall
be deemed to occur in the following order without any further act or formality:
(a) each outstanding share of Company Common Stock that is not
held by a holder who has exercised its Dissent Rights and is
ultimately entitled to be paid the fair value of its shares of
Company Common Stock (other than shares of Company Common
5
Stock held by Parent or the Purchaser or any affiliate
thereof) will be transferred by the holder thereof to the
Purchaser in exchange for the Exchange Consideration;
(b) each share of Company Common Stock in respect of which Dissent
Rights have been exercised shall be and shall be deemed to be
transferred to the Purchaser with the Purchaser and the Parent
being jointly and severally obligated to pay therefor the
amount determined in accordance with Article 3 of this Plan of
Arrangement;
(c) with respect to each share of Company Common Stock acquired or
transferred in accordance with Section 2.2(a) or Section
2.2(b):
(i) the holder thereof shall cease to be the holder of
such share of Company Common Stock and the name of
such holder shall be removed from the register of
holders of Company Common Stock;
(ii) the certificate representing such share of Company
Common Stock shall be deemed to have been canceled as
of the Effective Time;
(iii) the holder thereof shall be deemed to have executed
and delivered all consents, releases, assignments and
waivers, statutory or otherwise, required to acquire
or transfer such shares in accordance with Section
2.2(a) or Section 2.2(b);
(iv) the Purchaser shall be and shall be deemed to be the
transferee of such share of Company Common Stock if
transferred in accordance with Section 2.2(a) or
Section 2.2(b) and shall be entered in the register
of registered holders of the Company as the legal
holder of such shares of Company Common Stock; and
(v) the names of the holders of the Company Common Stock
transferred to Parent pursuant hereto shall be added
to the applicable register of holders of Parent
Common Stock, and such holders shall be deemed to be
the legal and beneficial owners of Parent Common
Stock as of the Effective Time for those holders of
Company Common Stock who have surrendered the
certificates for their Company Common Stock at or
prior to the Effective Time and, for those holders of
Company Common Stock who surrender the certificates
for their Company Common Stock after the Effective
Time, as of the date of surrender.
6
(d) Purchaser shall pay to each holder of Vested Company Stock
Options under the Company Stock Option Plans, for each share
of Company Common Stock that such holder would be entitled to
purchase upon the exercise of such options, each component of
the Exchange Consideration, less an amount of cash which is
equal to (i) the exercise price per each share of Company
Common Stock covered by such options (if in Canadian dollars,
converted into its U.S. dollar equivalent based on the Noon
Spot Rate on the Business Day immediately prior to the
Effective Time) and (ii) any amounts required to be withheld
for payment of applicable withholding taxes, deducted from the
cash portion of the Exchange Consideration (provided that if
the cash portion is insufficient, after consideration of tax
withholding obligations, the excess amount shall be deducted
from the securities portion of the Exchange Consideration by
reducing the amount of Company Common Stock delivered to such
holder, the value of which shall be determined by using the
closing price of the Company Common Stock on the day prior to
the Effective Time), and all such options shall be cancelled
and the Company's Amended and Restated Stock Option Incentive
Plan shall be terminated;
(e) Parent shall assume the Company's Amended and Restated
Employee Stock Option Plan and each Non-Vested Company Stock
Option thereunder shall be assumed by Parent and shall be
amended so that such Non-Vested Company Stock Option under
such plan shall be converted into an option (a "Replacement
Option") to purchase that number of shares of Parent Common
Stock equal to the sum of (i) the Security Portion times the
number of shares of Company Common Stock subject to the
Non-Vested Company Stock Option; plus (ii) the quotient of (A)
$11.50 times the number of shares of Company Common Stock
subject to the Non-Vested Company Stock Option, divided by (B)
the Parent Closing Price ("Parent Option Shares"); the
exercise price per share of Parent Common Stock for each
Replacement Option shall be the quotient of (x) an aggregate
amount equal to the number of shares of Company Common Stock
subject to the Non-Vested Company Stock Option exchanged for
such Replacement Option times the original exercise price per
share of Company Common Stock pursuant to such Non-Vested
Company Stock Option, at the option of the holder (i)
converted into its U.S. dollar equivalent based on the Noon
Spot Rate on the Business Day immediately preceding the
Effective Date, or (ii) expressed in Canadian dollars, the
whole divided by (y) the Parent Option Shares subject to such
Replacement Option. Except as expressly contemplated by this
7
clause 2.2(e), the Arrangement shall not change any of the
terms or provisions contained in the Company's Amended and
Restated Employee Stock Option Plan or the Non-Vested Company
Stock Options granted thereunder.
Section 2.3 Exchange Consideration
For purposes hereof, "Exchange Consideration" means, with respect to
each share of Company Common Stock, the aggregate of US$ 11.50 payable in cash
(the "Cash Portion") plus 0.1164 Shares of Parent Common Stock (or 0.2328 Shares
of Parent Common Stock after the stock split of May 10, 2002) (the "Security
Portion").
Section 2.4 Adjustments to Consideration
The Security Portion of the Exchange Consideration and the conversion
formula for the Company Stock Options set forth in Section 2.2(e) shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or the Company Common Stock other than stock dividends paid
in lieu of ordinary course dividends), reorganization, recapitalization or other
like change with respect to Parent Common Stock or the Company Common Stock
occurring after the date of the Pre-Merger Agreement and prior to the Effective
Time.
ARTICLE 3
RIGHTS OF DISSENT
Section 3.1 Rights of Dissent
Holders of the Company Common Stock may exercise rights of dissent with
respect to such shares pursuant to and in the manner set forth in section 185 of
the OBCA and this Section 3.1 (the "Dissent Rights") in connection with the
Arrangement; provided that, notwithstanding subsection 185(6) of the OBCA, the
written objection to the Arrangement Resolution referred to in subsection 185(6)
of the OBCA must be received by the Company not later than 5:00 p.m. (Toronto
time) on the Business Day preceding the Company Meeting. Holders of the Company
Common Stock who duly exercise such rights of dissent and who:
(a) are ultimately determined to be entitled to be paid fair value
for their Company Common Stock shall be deemed to have
transferred such Company Common Stock to the Purchaser in
accordance with Section 2.2(b) hereof, to the extent the fair
value therefor is paid by the Purchaser; or
8
(b) are ultimately determined not to be entitled, for any reason,
to be paid fair value for their Company Common Stock shall be
deemed to have participated in the Arrangement on the same
basis as a non-dissenting holder of the Company Common Stock
and shall receive from the Purchaser the Exchange
Consideration on the basis determined in accordance with,
Section 2.2(a)
but in no case shall Parent, the Purchaser, the Company or any other Person be
required to recognize such holders as holders of Company Common Stock after the
Effective Time, and the names of such holders of Company Common Stock shall be
deleted from the registers of holders of Company Common Stock at the Effective
Time.
ARTICLE 4
CERTIFICATES, CHEQUES AND FRACTIONAL SHARES
Section 4.1 Exchange of Certificates for Parent Common Stock and Payment
in Cash
At or prior to the Effective Time, the Purchaser shall deposit with the
Depositary certificates representing that whole number of shares of Parent
Common Stock and the cash portion of the Exchange Consideration to be delivered
pursuant to Section 2.2 upon the exchange of shares of Company Common Stock.
Upon surrender to the Depositary for cancellation of a certificate which
immediately prior to the Effective Time represented outstanding Company Common
Stock that were exchanged for the Exchange Consideration under the Arrangement,
together with such other documents and instruments as would have been required
to effect the transfer of the shares formerly represented by such certificate
under the OBCA and the by-laws of the Company and such additional documents and
instruments as the Depositary may reasonably require, the holder of such
surrendered certificate shall be entitled to receive in exchange therefor, and
the Depositary shall deliver to such holder, a certificate representing that
number (rounded down to the nearest whole number) of shares of Parent Common
Stock and a cheque representing the cash portion of the Exchange Consideration
which such holder has the right to receive (together with any dividends or
distributions with respect thereto pursuant to Section 4.2 and any cash in lieu
of fractional shares of Parent Common Stock pursuant to Section 4.3), and the
certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of shares of Company Common Stock which is not registered
in the transfer records of shares of the Company, a certificate representing the
proper number of Parent Common Stock and a cheque representing the cash portion
of the Exchange Consideration may be issued to the transferee if the certificate
9
representing such shares of Company Common Stock is presented to the Depositary,
accompanied by all documents required to evidence and effect such transfer.
Until surrendered as contemplated by this Section 4.1, each certificate which
immediately prior to the Effective Time represented one or more outstanding
shares of Company Common Stock that were exchanged for the Exchange
Consideration shall be deemed at all times after the Effective Time to represent
only the right to receive upon such surrender (i) the certificate representing
shares of Parent Common Stock as contemplated by this Section 4.1, (ii) a cash
payment representing the cash portion of the Exchange Consideration, (iii) a
cash payment in lieu of any fractional shares of Parent Common Stock as
contemplated by Section 4.3 and (iv) any dividends or distributions with a
record date after the Effective Time theretofore paid or payable with respect to
shares of Parent Common Stock as contemplated by Section 4.2.
Section 4.2 Distributions with Respect to Unsurrendered Certificates
No dividends or other distributions declared or made after the
Effective Time with respect to shares of Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
certificate which immediately prior to the Effective Time represented
outstanding Company Common Stock that were exchanged pursuant to Section 2.2,
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 4.3 and no interest shall be earned or payable on
these proceeds, unless and until the holder of such certificate shall surrender
such certificate in accordance with Section 4.1 and, in such event, only for the
period commencing five (5) Business Days following such surrender. Subject to
applicable law, at the time of such surrender of any such certificate (or, in
the case of clause (iii) below, at the appropriate payment date), there shall be
paid to the holder of the certificates representing shares of Company Common
Stock, as the case may be, without interest, (i) the amount of any cash payable
in lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 4.3, (ii) the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to the shares of Parent Common Stock, as the case may be, to which such
holder is entitled pursuant hereto and (iii) on 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 Parent Common Stock, as the case may be.
Section 4.3 No Fractional Shares
No certificates representing fractional shares of Parent Common Stock
shall be issued upon the surrender for exchange of certificates pursuant to
Section 4.1. In lieu of any such fractional shares, each Person otherwise
entitled to a fractional interest in a share of Parent Common Stock will receive
a cash payment from the Depositary equal to the product of such fractional
10
interest and the Parent Trading Price. Parent shall from time to time as
necessary provide the Depositary with funds sufficient to satisfy these
obligations. On the sixth anniversary of the Effective Date, the aggregate
number of shares of Parent Common Stock for which no certificates were issued as
a result of the foregoing provisions of this Section 4.3 shall be deemed to have
been surrendered by the Depositary for no consideration to Parent, and the cash
portion of the Exchange Consideration shall be returned to the Depositary.
Section 4.4 Lost Certificates
In the event any certificate which immediately prior to the Effective
Time represented one or more outstanding shares of Company Common Stock that
were exchanged pursuant to Section 2.2 shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such certificate to be lost, stolen or destroyed, the Depositary will issue in
exchange for such lost, stolen or destroyed certificate, any cash pursuant to
Sections 2.2 and 4.3 and/or one or more certificates representing one or more
shares of Parent Common Stock (and any dividends or distributions with respect
thereto) deliverable in accordance with the terms of the Arrangement. When
authorizing such payment in exchange for any lost, stolen or destroyed
certificate, the Person to whom certificates representing shares of Parent
Common Stock and cheques representing the cash portion of the Exchange
Consideration are to be issued shall, as a condition precedent to the issuance
thereof, give a bond reasonably satisfactory to Parent and its transfer agent in
such sum as Purchaser or Parent may direct or otherwise indemnify Purchaser and
Parent in a manner reasonably satisfactory to Purchaser and Parent against any
claim that may be made against Purchaser or Parent with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4.5 Extinction of Rights
Subject to any applicable laws, any certificate which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
that were exchanged pursuant to Section 2.2 that is not deposited with all other
instruments required by Section 4.1 on or prior to the sixth anniversary of the
Effective Date shall cease to represent a claim or interest of any kind or
nature as a shareholder or creditor for the cash portion of the Exchange
Consideration of Purchaser or Parent. On such date, the shares of Parent Common
Stock (or cash in lieu of fractional interests therein, as provided in Section
4.3) and the cash portion of the Exchange Consideration to which the former
holder of the certificate referred to in the preceding sentence was ultimately
entitled shall be deemed to have been surrendered for no consideration to
Purchaser or Parent, as the case may be, together with all entitlements to
dividends, distributions and interest in respect thereof held for such former
11
holder. None of Parent, Purchaser or the Depositary shall be liable to any
person in respect of any shares of Parent Common Stock or payment in cash (or
dividends, distributions and interest in respect thereof) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 4.6 Withholding Rights
Purchaser, Parent and the Depositary shall be entitled to deduct and
withhold from any dividend or consideration otherwise payable to any holder of
Company Common Stock or Parent Common Stock such amounts as Purchaser, Parent or
the Depositary is required to deduct and withhold with respect to such payment
under the Income Tax Act (Canada), the United States Internal Revenue Code of
1986 or any provision of provincial, state, local or foreign tax law, in each
case, as amended. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes hereof as having been paid to the
holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required to be
deducted or withheld from any payment to a holder exceeds the cash portion of
the Exchange Consideration otherwise payable to the holder, Purchaser, Parent
and the Depositary are hereby authorized to sell or otherwise dispose of such
portion of the Exchange Consideration as is necessary to provide sufficient
funds to Purchaser, Parent or the Depositary, as the case may be, to enable it
to comply with such deduction or withholding requirement and Purchaser, Parent
or the Depositary shall notify the holder thereof and remit any unapplied
balance of the net proceeds of such sale.
ARTICLE 5
AMENDMENTS
Section 5.1 Amendments to Plan of Arrangement
(1) The Company reserves the right to amend, modify and/or supplement this
Plan of Arrangement at any time and from time to time prior to the
Effective Date, provided that each such amendment, modification and/or
supplement must be (i) set out in writing, (ii) approved by Parent,
(iii) filed with the Court and, if made following the Company Meeting,
approved by the Court and (iv) communicated to holders of Company
Common Stock or Company Stock Options.
12
(2) Any amendment, modification or supplement to this Plan of Arrangement
may be proposed by the Company at any time prior to the Company Meeting
(provided that Parent shall have consented thereto) with or without any
other prior notice or communication, and if so proposed and accepted by
the Persons voting at the Company Meeting (other than as may be
required under the Interim Order), shall become part of this Plan of
Arrangement for all purposes.
(3) Any amendment, modification or supplement to this Plan of Arrangement
that is approved by the Court following the Company Meeting shall be
effective only if (i) it is consented to by each of the Company and
Parent and (ii) if required by the Court, it is communicated to or
consented to by the Company Securityholders.
ARTICLE 6
FURTHER ASSURANCES
Section 6.1 Further Assurances
Notwithstanding that the transactions and events set out herein shall
occur and be deemed to occur in the order set out in this Plan of Arrangement
without any further act or formality, each of the parties to the Pre-Merger
Agreement shall make, do and execute, or cause to be made, done and executed,
all such further acts, deeds, agreements, transfers, assurances, instruments or
documents as may reasonably be required by any of them in order further to
document or evidence any of the transactions or events set out herein.
13