EXECUTION VERSION
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AGREEMENT AND PLAN OF MERGER
among
QUEST DIAGNOSTICS INCORPORATED,
QUEST DIAGNOSTICS NEWCO INCORPORATED
and
UNILAB CORPORATION
Dated as of April 2, 2002
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.......................................................2
ARTICLE II
THE OFFER
SECTION 2.01 The Offer.........................................................8
SECTION 2.02 Company Action...................................................12
SECTION 2.03 Directors........................................................13
SECTION 2.04 Exchange Fund; Distributions on Shares of Parent Common Stock....14
ARTICLE III
THE MERGER
SECTION 3.01 The Merger.......................................................14
SECTION 3.02 Effective Time; Closing..........................................15
SECTION 3.03 Effect of the Merger.............................................15
SECTION 3.04 Certificate of Incorporation; By-Laws............................15
SECTION 3.05 Directors and Officers...........................................16
ARTICLE IV
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 4.01 Conversion of Securities.........................................16
SECTION 4.02 Exchange of Certificates.........................................17
SECTION 4.03 Stock Transfer Books.............................................20
SECTION 4.04 Company Stock Options............................................20
SECTION 4.05 Appraisal Rights.................................................22
SECTION 4.06 Affiliates.......................................................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 5.01 Organization and Qualification; Subsidiaries.....................22
SECTION 5.02 Certificate of Incorporation and By-Laws.........................23
SECTION 5.03 Capitalization...................................................23
SECTION 5.04 Authority Relative to This Agreement.............................24
SECTION 5.05 No Conflict; Required Filings and Consents.......................24
SECTION 5.06 Permits; Compliance..............................................25
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SECTION 5.07 SEC Filings; Financial Statements................................27
SECTION 5.08 Information to Be Supplied.......................................28
SECTION 5.09 Absence of Certain Changes or Events.............................29
SECTION 5.10 Absence of Litigation............................................29
SECTION 5.11 Employee Benefit Plans...........................................29
SECTION 5.12 Labor and Employment Matters.....................................31
SECTION 5.13 Property and Leases..............................................32
SECTION 5.14 Intellectual Property............................................32
SECTION 5.15 Taxes............................................................33
SECTION 5.16 Environmental Matters............................................34
SECTION 5.17 Material Contracts...............................................35
SECTION 5.18 Insurance........................................................37
SECTION 5.19 Board Approval; Vote Required....................................37
SECTION 5.20 Related Party Transactions.......................................37
SECTION 5.21 Guarantee by Subsidiaries........................................38
SECTION 5.22 Customers........................................................38
SECTION 5.23 Receivables......................................................38
SECTION 5.24 Brokers..........................................................38
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 6.01 Corporate Organization...........................................39
SECTION 6.02 Certificate of Incorporation and By-Laws.........................39
SECTION 6.03 Capitalization...................................................39
SECTION 6.04 Authority Relative to this Agreement.............................40
SECTION 6.05 No Conflict; Required Filings and Consents.......................40
SECTION 6.06 SEC Filings; Financial Statements................................41
SECTION 6.07 Information to Be Supplied.......................................42
SECTION 6.08 No Vote Required.................................................42
SECTION 6.09 Operations of Merger Sub.........................................42
SECTION 6.10 Tax Matters......................................................43
SECTION 6.11 Brokers..........................................................43
SECTION 6.12 Employee Benefit Plans...........................................43
SECTION 6.13 Absence of Parent Material Adverse Effect........................43
SECTION 6.14 Litigation.......................................................44
SECTION 6.15 Permits; Compliance..............................................44
SECTION 6.16 Financing........................................................46
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.01 Conduct of Business by the Company Pending the Merger............46
SECTION 7.02 Conduct of Business by Parent Pending
Consummation of the Merger.......................................48
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ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01 Company Stockholder Meeting......................................50
SECTION 8.02 Preparation of Merger Registration Statement and
Proxy Statement/Prospectus.......................................50
SECTION 8.03 Access to Information; Confidentiality...........................51
SECTION 8.04 No Solicitation of Transactions..................................51
SECTION 8.05 Employee Benefits Matters........................................53
SECTION 8.06 Directors' and Officers' Indemnification and Insurance...........54
SECTION 8.07 Notification of Certain Matters..................................56
SECTION 8.08 Company Affiliates...............................................56
SECTION 8.09 Further Action; Reasonable Best Efforts..........................56
SECTION 8.10 Plan of Reorganization...........................................57
SECTION 8.11 Merger Sub.......................................................58
SECTION 8.12 Letters of Accountants...........................................58
SECTION 8.13 NYSE Listing.....................................................58
SECTION 8.14 Public Announcements.............................................59
SECTION 8.15 Transfer Tax.....................................................59
SECTION 8.16 Transaction Fees and Expenses....................................59
SECTION 8.17 Restrictions on Acquisition of Company Common Stock..............59
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01 Conditions to the Obligations of Each Party......................60
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01 Termination.....................................................60
SECTION 10.02 Effect of Termination...........................................61
SECTION 10.03 Payment of Certain Fees; Expenses...............................61
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Non-Survival of Representations and Warranties..................63
SECTION 11.02 Amendments, Modification and Waiver.............................63
SECTION 11.03 Notices.........................................................64
SECTION 11.04 Severability....................................................65
SECTION 11.05 Entire Agreement; Assignment....................................65
SECTION 11.06 Parties in Interest.............................................65
SECTION 11.07 Interpretation..................................................65
SECTION 11.08 Specific Performance............................................66
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SECTION 11.09 Governing Law...................................................66
SECTION 11.10 Waiver of Jury Trial............................................66
SECTION 11.11 Headings........................................................66
SECTION 11.12 Counterparts....................................................66
Annex I - Conditions of the Offer
Exhibit A - Form of Affiliate Letter
Exhibit 8.10(b) - Form of Quest Diagnostics Incorporated Tax Representation
Letter
Exhibit 8.10(c) - Form of Unilab Corporation Tax Representation Letter
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AGREEMENT AND PLAN OF MERGER, dated as of April 2, 2002 (this
"Agreement"), among QUEST DIAGNOSTICS INCORPORATED, a Delaware corporation
("Parent"), QUEST DIAGNOSTICS NEWCO INCORPORATED, a Delaware corporation and a
direct wholly owned subsidiary of Parent ("Merger Sub"), and UNILAB CORPORATION,
a Delaware corporation (the "Company").
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Parent, Merger Sub and the Company will enter into a
business combination transaction pursuant to which the Company will merge with
and into Merger Sub (the "Merger");
WHEREAS, in furtherance of such transaction, it is proposed that
Merger Sub shall make an offer (as such offer may be amended from time to time,
the "Offer") to acquire each issued and outstanding share of Company Common
Stock (as defined below) in exchange for, at the election of the holder thereof,
cash or shares of Parent Common Stock (as defined below) or a combination of
cash and shares of Parent Common Stock, 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 each of the Offer and the Merger 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 Offer and the Merger
and the other transactions contemplated by this Agreement, and (ii) resolved to
recommend acceptance of the Offer and adoption of this Agreement by the
Company's stockholders;
WHEREAS, as a condition and as an inducement to Parent's willingness
to enter into this Agreement, Parent, Merger Sub 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 agreed to validly tender and not withdraw
pursuant to the Offer all shares of Company Common Stock beneficially owned by
them, and, under certain circumstances, to sell the shares of Company Common
Stock beneficially owned by them to Parent;
WHEREAS, prior to the date hereof, Parent and certain key employees of
the Company have entered into employment agreements (the "Employment
Agreements") that are subject to, and effective upon, consummation of the Offer;
WHEREAS, for federal income tax purposes, the Offer and the Merger are
intended to qualify as a reorganization under the provisions of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement shall constitute a plan of reorganization;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. (a) For purposes of this Agreement:
"Acceptance Date" means the date on which Merger Sub accepts
for payment or exchange all shares of Company Common Stock validly
tendered and not withdrawn pursuant to the Offer.
"affiliate" of a specified person means a person who, directly
or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified person.
"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.
"Certificate" means a certificate or certificates representing
shares of Company Common Stock or Restricted Stock.
"Company Common Stock" means the Company's common stock, par
value $.01 per share.
"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, is or is reasonably likely to be
materially adverse to the business, condition (financial or otherwise),
assets, liabilities or results of operations of the Company and the
Subsidiaries, taken as a whole; provided, however, that the foregoing
shall not include any event, circumstance, change, occurrence, fact or
effect resulting from or relating to (w) changes in general United
States economic conditions, changes in United States financial markets
in general or changes in the general economic conditions in the
California markets in which the Company operates, in any case, provided
that the Company and its Subsidiaries are not disproportionately
affected by such changes relative to other companies in such markets,
(x) changes in the industry in which the Company and its Subsidiaries
operate or changes in the industry in the California markets in which
the Company and its Subsidiaries operate, in either case, provided that
the Company and its Subsidiaries are not disproportionately affected by
such changes relative to other companies in such markets, (y) changes
in any applicable Laws, or (z) the public announcement of this
Agreement or the transactions contemplated hereby.
"Company Stockholder Approval" means the adoption of this
Agreement at the Company Stockholder Meeting by a majority of all votes
entitled to be cast at the
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Company Stockholder Meeting in accordance with the DGCL and the
Company's Third Amended and Restated Certificate of Incorporation.
"Company Stock Options" means the options, whether or not
exercisable and whether or not vested, outstanding under the Company
Stock Option Plans.
"Company Stock Option Plans" means each of the Company's 2001
Stock Option Plan and the Company's Amended and Restated 2000 Executive
Stock Option Plan, as amended to date and as they may be further
amended from time to time as expressly permitted by this Agreement.
"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.
"Environmental Laws" means any United States federal, state,
local or non-United States law, regulation, ordinance, rule, code,
order or other requirement or rule of law now or hereafter in effect
and as amended, relating to (i) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances; (ii)
the manufacture, handling, transport, use, treatment, storage or
disposal of Hazardous Substances or materials containing Hazardous
Substances; or (iii) pollution or protection of the environment, human
health or safety as a result of exposure to Hazardous Substances.
"Hazardous Substances" means (i) those substances defined in
or regulated under the following United States federal statutes and
their state counterparts, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and
Liability 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; (ii) petroleum and petroleum products,
including crude oil and any fractions thereof; (iii) natural gas,
synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls, asbestos and radon; and (v) any substance, material or waste
defined or regulated as toxic or hazardous, a pollutant or a
contaminant pursuant to any Environmental Law.
"Intellectual Property" means (i) United States, non-United
States, and international 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)
copyrightable works, copyrights, and registrations and applications for
registration thereof, and (iv) confidential and proprietary
information, including trade secrets and know-how.
"LLC" means KEP VI, LLC.
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"LP" means Kelso Investment Associates VI, L.P.
"NYSE" means the New York Stock Exchange.
"Parent Common Stock" means Parent's common stock, par value
$.01 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, is or is reasonably likely to be
materially adverse to the business, condition (financial or otherwise),
assets, liabilities or results of operations of Parent and its
subsidiaries, taken as a whole; provided, however, that the foregoing
shall not include any event, circumstance, change, occurrence, fact or
effect resulting from or relating to (w) changes in general United
States economic conditions, changes in United States financial markets
in general or changes in the general economic conditions in the
California markets in which Parent and its subsidiaries operate, in any
case, provided that Parent and its subsidiaries are not
disproportionately affected by such changes relative to other companies
in such markets, (x) changes in the industry in which Parent and its
subsidiaries operate or changes in the industry in the California
markets in which Parent and its subsidiaries operate, in either case,
provided that Parent and its subsidiaries are not disproportionately
affected by such changes relative to other companies in such markets,
(y) changes in any applicable Laws, 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, condition (financial or
otherwise), 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 Merger.
"Parent Plans" means (i) all employee benefit plans (as
defined in Section 3(3) of ERISA) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other
benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements to which Parent
or any of its subsidiaries is a party, with respect to which Parent or
any such subsidiary has any obligation or which are maintained,
contributed to or sponsored by Parent or any such subsidiary for the
benefit of any current or former employee, officer or director of
Parent or any such subsidiary, (ii) each employee benefit plan for
which Parent or any of its subsidiaries could incur liability under
Section 4069 of ERISA in the event such plan has been or were to be
terminated, and (iii) any plan in respect of which Parent or any of its
subsidiaries could incur liability under Section 4212(c) of ERISA.
"Performance Based Company Stock Options" means each
outstanding Company Stock Option that is not a Service Based Company
Stock Option.
"person" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person
(including, without limitation, a "person" as
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defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality
of a government.
"Proxy Statement/Prospectus" means the proxy or information
statement/prospectus included in the Merger Registration Statement
relating to the Company Stockholder Meeting.
"Receivables" means any and all accounts receivable, notes and
other amounts receivable by the Company or any Subsidiary from third
parties, including, without limitation, customers, arising from the
conduct of the business of the Company and the Subsidiaries, whether or
not in the ordinary course, together with all unpaid financing charges
accrued thereon.
"Restricted Stock" means the 50,000 shares of restricted
Company Common Stock that were issued by the Company to FNA Clinics of
America, Inc. (and which shares were subsequently assigned to Ronald D.
Ferguson, Jr. and Laura Noack-Ferguson) pursuant to a letter agreement,
dated January 2, 2002, among Ronald D. Ferguson, Jr., Laura
Noack-Ferguson, FNA Clinics of America, Inc. and Unilab Acquisition
Corporation, a wholly owned subsidiary of the Company.
"Service Based Company Stock Options" means all outstanding
Class A options granted pursuant to the Company's Amended and Restated
2000 Executive Stock Option Plan, all outstanding options that were
assumed under the Company's Amended and Restated 2000 Executive Stock
Option Plan and all outstanding options granted pursuant to the
Company's 2001 Stock Option Plan.
"Stark Law" means Section 1877 of the Social Security Act
(42 U.S.C. 1395 nn).
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation or other
legal entity of which such person owns, directly or indirectly, 50% or
more of the outstanding common stock or other equity interests, the
holders of which are entitled to vote for the election of the board of
directors or other governing body of such corporation or other 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.
"Tendered Cash Election Shares" means all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer,
the holders of which have elected to receive the Cash Consideration in
the Offer.
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"Tendered Stock Election Shares" means all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer,
the holders of which have elected to receive the Stock Consideration in
the Offer.
"Trading Day" means any day on which securities are traded on
the NASDAQ National Market or the NYSE.
"Transaction" means the transactions contemplated by this
Agreement, including the Offer and the Merger.
"Vested Company Stock Option" means each outstanding Service
Based Company Stock Option and each outstanding Performance Based
Company Stock Option, except for the Company Stock Options identified
on Section 1.01 of the Company Disclosure Schedule.
(b) The following terms have the meanings set forth in the
Sections set forth below:
Defined Term Location of Definition
- ------------ ----------------------
Action.......................................... ss. 5.10
Acceptance Notice............................... ss. 2.01(b)
Advisors........................................ ss. 2.02(a)
Affected Employees.............................. ss. 8.05(b)
Agreement....................................... Preamble
Blue Sky Laws................................... ss. 5.05(b)
Cash Consideration.............................. ss. 2.01(a)
Cash Fraction................................... ss. 2.01(a)
Certificate of Merger........................... ss. 3.02
CLIA............................................ ss. 5.06(d)
Closing......................................... ss. 3.02
Code............................................ Recitals
Company......................................... Preamble
Company Affiliate............................... ss. 8.08
Company Board................................... Recitals
Company Disclosure Schedule..................... Article V
Company Licensed Intellectual Property.......... ss. 5.14(a)
Company Owned Intellectual Property............. ss. 5.14(a)
Company Permits................................. ss. 5.06(a)
Company Preferred Stock......................... ss. 5.03(a)
Company SEC Reports............................. ss. 5.07(a)
Company Stockholder Meeting..................... ss. 8.01(a)
Competing Transaction........................... ss. 8.04(e)
Confidentiality Agreement....................... ss. 8.03(b)
Continuing Directors............................ ss. 2.03(a)
Customers....................................... ss. 5.22
DGCL............................................ Recitals
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Effective Time.................................. ss. 3.02
Employment Agreements........................... Recitals
Environmental Permits........................... ss. 5.16
ERISA........................................... ss. 5.11(a)
Excess Amount................................... ss. 4.04(c)
Exchange Act.................................... ss. 5.07(a)
Exchange Agent.................................. ss. 4.02(a)
Exchange Fund................................... ss. 4.02(a)
Expenses........................................ ss. 10.03(e)
Exercise Price.................................. ss. 4.04(c)
Exercise Taxes.................................. ss. 4.04(c)
GAAP............................................ ss. 5.07(b)
Governmental Authority.......................... ss. 5.05(b)
HSR Act......................................... ss. 5.05(b)
Indemnitees..................................... ss. 8.06(c)
Indemnifiable Claim............................. ss. 8.06(c)
Independent Directors........................... ss. 8.17
IRS............................................. ss. 5.11(a)
Law............................................. ss. 5.05(a)
Leases.......................................... ss. 5.13(d)
Liens........................................... ss. 5.13(b)
Management Letters.............................. ss. 5.07(d)
Material Contracts.............................. ss. 5.17(a)
Maximum Cash Election Number.................... ss. 2.01(a)
Merger.......................................... Recitals
Merger Registration Statement................... ss. 6.07(a)
Merger Sub.................................... Preamble
Merger Sub Common Stock......................... ss. 4.01(c)
Minimum Condition............................... ss. 2.01(b)
Monthly CapEx Amount............................ ss. 7.01(b)
Multiemployer Plan.............................. ss. 5.11(b)
Multiple Employer Plan.......................... ss. 5.11(b)
Offer........................................... Recitals
Offer Consideration............................. ss. 2.01(a)
Offer Documents................................. ss. 2.01(d)
Offer Exchange Agent............................ ss. 2.04(a)
Offer Exchange Fund............................. ss. 2.04(a)
Offer Registration Statement.................... ss. 2.01(d)
Option Holder................................... ss. 4.04(b)
Option Shares................................... ss. 4.04(b)
Order........................................... ss. 9.01(c)
Parent.......................................... Preamble
Parent Disclosure Schedule...................... Article VI
Parent Option................................... ss. 4.04(a)
Parent Permits.................................. ss. 6.15(a)
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Parent Preferred Stock.......................... ss. 6.03(a)
Parent SEC Reports.............................. ss. 6.06(a)
Parent Stock Option Plans....................... ss. 6.03(a)
Park Avenue..................................... ss. 5.24
Permitted Liens................................. ss. 5.13(b)
Plans........................................... ss. 5.11(a)
Recommendation.................................. ss. 2.02(a)
Related Party Agreement......................... ss. 5.17(a)(viii)
Representation Letters.......................... ss. 8.10(b)
Representatives................................. ss. 8.04(a)
Restrictive Agreement........................... ss. 5.17(a)(vii)
Reverse Merger.................................. ss. 3.01
Schedule 14D-9.................................. ss. 2.02(b)
Schedule TO..................................... ss. 2.01(d)
SEC............................................. ss. 5.07(a)
Securities Act.................................. ss. 5.07(a)
Standstill Period............................... ss. 8.17
Stock Consideration............................. ss. 2.01(a)
Stock Value..................................... ss. 3.01
Stockholders.................................... Recitals
Stockholders Agreement.......................... Recitals
Subsidiary...................................... ss. 5.01(a)
Superior Proposal............................... ss. 8.04(f)
Surviving Corporation........................... ss. 3.01
Tax Opinions.................................... ss. 8.10(b)
Termination Date................................ ss. 10.01(d)
Termination Fee................................. ss. 10.03(a)
Third Party Acquisition Event................... ss. 10.03(d)
Transaction Fees................................ ss. 8.16
Transfer Taxes.................................. ss. 8.15
ARTICLE II
THE OFFER
SECTION 2.01 The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Article X and provided that none of the
events set forth in Annex I hereto shall have occurred and be continuing (and
shall not have been waived by Parent), unless otherwise agreed by Parent and the
Company, as promptly as reasonably practicable after the public announcement of
the execution of this Agreement, Parent shall cause Merger Sub to commence (as
defined in Rule 14d-2 promulgated under the Exchange Act) the Offer to purchase
each issued and outstanding share of Company Common Stock in exchange for, at
the election of the holder thereof, either: (i) a net amount of $26.50 in cash
(the "Cash Consideration"), or (ii) 0.3256 of a share of Parent Common Stock
(the "Stock Consideration" and, together with the Cash Consideration, the "Offer
Consideration"); provided, however, that if the number of
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Tendered Cash Election Shares exceeds 30% of the aggregate number of shares of
Company Common Stock issued and outstanding immediately prior to the Acceptance
Date (the "Maximum Cash Election Number"), then each Tendered Stock Election
Share shall be exchanged for the Stock Consideration and each Tendered Cash
Election Share shall be exchanged for (1) an amount in cash, without interest,
equal to the product of (x) the Cash Consideration and (y) a fraction (the "Cash
Fraction"), the numerator of which shall be the Maximum Cash Election Number and
the denominator of which shall be the total number of Tendered Cash Election
Shares, and (2) a number of shares of Parent Common Stock equal to the product
of (x) the Stock Consideration and (y) a fraction equal to one minus the Cash
Fraction. In the event the number of Tendered Cash Election Shares is equal to
or less than the Maximum Cash Election Number, all Tendered Cash Election Shares
shall be exchanged for the Cash Consideration and all Tendered Stock Election
Shares shall be exchanged for the Stock Consideration. Subject to the foregoing
provisions of this Section 2.01(a), stockholders of the Company shall be
permitted to elect to receive the Cash Consideration for a portion of their
shares of Company Common Stock and the Stock Consideration for another portion
of their shares of Company Common Stock. Stockholders who validly tender shares
of Company Common Stock but fail to make any election shall be deemed to have
elected to receive the Stock Consideration for all shares of Company Common
Stock validly tendered.
(b) The Offer shall be subject only to (1) the condition that there
shall be validly tendered in accordance with the terms of the Offer, prior to
the expiration of the Offer, and not withdrawn, a number of shares of Company
Common Stock that, together with the shares of Company Common Stock owned by
Parent and Merger Sub, represents at least 50.1% of the shares of Company Common
Stock outstanding on a fully diluted basis (the "Minimum Condition") and (2) the
other conditions set forth in Annex I hereto. Upon termination of the Merger
Agreement, the Offer shall immediately expire and terminate without any shares
of Company Common Stock being purchased thereunder. Merger Sub expressly
reserves the right to waive any of the conditions to the Offer and to make any
change in the terms of or conditions to the Offer; provided, however, that,
without the prior written consent of the Company, no change may be made by
Merger Sub that (i) decreases the consideration payable in the Offer; (ii)
changes the form of consideration payable in the Offer to a form other than cash
or shares of Parent Common Stock; (iii) decreases the aggregate amount of Cash
Consideration available in the Offer or changes the relative amount of Cash
Consideration available in the Offer; (iv) reduces the number of shares of
Company Common Stock sought in the Offer; (v) imposes conditions to the Offer in
addition to those set forth in Annex I; (vi) modifies or waives the Minimum
Condition; (vii) except as provided below, changes the date on which the Offer
is scheduled to expire; or (viii) makes any other change that is adverse to the
holders of Company Common Stock or to holders that have elected a particular
form of Offer Consideration. Notwithstanding the foregoing, unless the Company
otherwise consents prior thereto, Merger Sub shall (or, in the case of clause
(iii) below, shall at its option have the right to) extend the Offer for one or
more periods (not in excess of ten business days each) (i) beyond the scheduled
expiration date, which shall initially be 25 business days following the
commencement of the Offer, up to the Termination Date, if, at the scheduled or
extended expiration date of the Offer, any of the conditions to the Offer shall
not have been satisfied or, to the extent permitted, waived, until such
conditions are satisfied or, to the extent permitted, waived, (ii) for any
period required by any rule, regulation, interpretation or position of the SEC
or the staff thereof applicable to the Offer or any period required by
applicable Law, or (iii) for an aggregate period
9
of not more than 10 business days beyond the latest applicable date that would
otherwise be permitted under clause (i) or (ii) of this sentence, if, as of such
date, all of the conditions to the Offer have been satisfied or waived, but the
number of shares of Company Common Stock validly tendered and not withdrawn
pursuant to the Offer equals more than 80%, but less than 90% of the outstanding
shares of Company Common Stock on a fully diluted basis; provided, however, that
(x) Parent and Merger Sub shall not be obligated to extend the Offer pursuant to
clause (i) of this sentence (but may elect to do so in accordance with this
Section 2.01(b), provided that no such extension or series of extensions of more
than 10 business days in the aggregate may be made without the prior written
consent of the Company) if the Minimum Condition is not satisfied at the time
such extension would otherwise be required, so long as the conditions set forth
in clauses (ii), (iii) and (iv) of Annex I have been satisfied, and Parent has
publicly announced such fact and its intention not to extend the Offer at least
two business days prior to the date such extension would, but for this proviso,
otherwise have been required and (y) in the event Parent or Merger Sub elects to
extend the expiration date pursuant to clause (iii), Parent and Merger Sub shall
be deemed to have irrevocably waived all of the conditions to the Offer set
forth in paragraphs (a) through (g) of Annex I. Except as provided in clause
(iii) of the previous sentence, Parent and Merger Sub shall not be permitted to
extend the Offer without the prior written consent of the Company at the time
that all conditions to the Offer have been satisfied or, to the extent
permitted, waived. Parent and Merger Sub shall deliver written notice to the
Company (the "Acceptance Notice") of its intention to accept for payment shares
of Company Common Stock pursuant to the Offer one business day in advance of the
proposed Acceptance Date. Subject to the foregoing and clause (c) below, and
upon the terms and subject to the conditions of the Offer, Parent shall cause
Merger Sub to accept for payment or exchange, as promptly as practicable after
the expiration of the Offer, all shares of Company Common Stock validly tendered
and not withdrawn pursuant to the Offer. Notwithstanding anything to the
contrary contained in this Article II, no certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of shares of Company Common Stock pursuant to the Offer, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Parent. In lieu of any such fractional shares, the
Offer Exchange Agent shall, as soon as practicable after the Acceptance Date,
aggregate all such fractional shares and such fractional shares shall be sold by
the Offer Exchange Agent as agent for the holders of such fractional shares, at
the then prevailing price on the NYSE, all in the manner provided hereinafter.
Until the net proceeds of such sale or sales have been distributed to the
holders of fractional shares, the Offer Exchange Agent shall retain such
proceeds in trust for the benefit of such holders as part of the Offer Exchange
Fund. The sale of the fractional shares by the Offer Exchange Agent shall be
executed on the NYSE or through one or more member firms of the NYSE and will be
executed in round lots to the extent practicable. The Offer Exchange Agent will
determine the portion, if any, of the net proceeds of such sale to which each
holder of fractional shares is entitled by multiplying the amount of the
aggregate net proceeds of the sale of the fractional shares by a fraction the
numerator of which is the amount of fractional shares to which such holder is
entitled and the denominator of which is the aggregate amount of fractional
shares to which all holders of fractional shares are entitled. The Company shall
pay all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Offer Exchange Agent, incurred in
connection with such sale of shares of Parent Common Stock.
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(c) Notwithstanding anything else to the contrary contained in this
Agreement, and notwithstanding the satisfaction of the conditions set forth on
Annex I, Parent shall not (unless the Company notifies Parent otherwise) be
permitted to accept for payment or exchange any shares of Company Common Stock
pursuant to the Offer if, at such time, (i) Parent shall have breached or failed
to perform in any material respect its obligations, covenants or agreements
under the Agreement, (ii) the representations and warranties of Parent or Merger
Sub contained in the Agreement that are qualified by reference to a Parent
Material Adverse Effect shall not have been true and correct when made or as of
the Acceptance Date as if made at or at and as of such time (other than such
representations and warranties which by their terms address matters only as of
another specified date, which shall be true and correct only as of such date),
(iii) the representations and warranties of Parent or Merger Sub contained in
the Agreement that are not so qualified shall not have been true and correct
when made or as of the Acceptance Date as if made at or at and as of such time
(other than representations and warranties which by their terms address matters
only as of another specified date, which shall be true and correct only as of
such date), except, in the case of this clause (iii) only, for such inaccuracies
as have not resulted, or are not reasonably likely to result, in a Parent
Material Adverse Effect, or (iv) Parent shall have failed to deliver a
certificate signed by an executive officer of Parent, dated the Acceptance Date,
to the effect that, to such officer's knowledge, the conditions set forth in
clauses (i) through (iii) of this subsection (c) have been satisfied.
(d) As soon as reasonably practicable on the date of commencement of
the Offer, Parent shall, and Parent shall cause Merger Sub to, (i) file with the
SEC a Tender Offer Statement on Schedule TO relating to the Offer, which shall
include an offer to purchase and letter of transmittal/election form and such
other ancillary documents as shall be required by applicable Law (together with
any amendments or supplements thereto, the "Schedule TO"; and, together with the
Offer Registration Statement (as defined below) and such other documents
pursuant to which the Offer will be made, the "Offer Documents"), (ii) file with
the SEC a registration statement on Form S-4 to register the offer and sale of
Parent Common Stock pursuant to the Offer (the "Offer Registration Statement")
and (iii) disseminate the Offer Documents to holders of Company Common Stock.
Each of the Company and Parent shall use their reasonable efforts to have the
Offer Registration Statement declared effective under the Securities Act as
promptly as practicable after the filing thereof with the SEC and to keep the
Offer Registration Statement effective as long as necessary to complete the
Offer. Each of Parent, Merger Sub and the Company agree promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect. Parent shall, and Parent shall cause Merger Sub to, take all steps
necessary to cause the Schedule TO and the Offer Registration Statement as so
corrected to be filed with the SEC and the other Offer Documents as so corrected
to be, at such time as reasonably agreed by Parent and the Company, disseminated
to holders of shares of Company Common Stock, in each case as and to the extent
required by applicable federal securities Laws. The Company and its counsel
shall be given an opportunity to review and comment on the Offer Documents prior
to their being filed with the SEC or disseminated to the holders of shares of
Company Common Stock. Parent shall, and Parent shall cause Merger Sub to,
provide the Company and its counsel with any comments Parent and Merger Sub or
their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments and shall provide the
Company and its counsel an opportunity to participate in the response of Parent
or Merger Sub to such comments.
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SECTION 2.02 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that the Company Board, at a meeting duly
called and held, has (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, 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
Offer and the Merger, in accordance with the DGCL, and (iii) resolved to
recommend acceptance of the Offer and, as applicable, adoption of this Agreement
by the Company's stockholders (the "Recommendation"); provided, however, that
the Company Board may withdraw, qualify, modify or amend the Recommendation as
and only to the extent permitted by Section 8.04. The Company further represents
that the Company Board has received the opinion of each of Salomon Smith Barney
Inc. and Credit Suisse First Boston Corporation (the "Advisors") to the effect
that, as of the date of this Agreement, the consideration to be received by the
holders of Company Common Stock (other than Parent, the Stockholders and their
respective affiliates) in the Offer and the Merger is, taken together, fair from
a financial point of view to such holders, and a copy of such opinions, promptly
upon receipt thereof, will be delivered to Parent. The Company hereby consents
to the inclusion in the Offer Documents 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 Merger Sub except as and only
to the extent permitted by Section 8.04(d). The Company has been advised by its
directors and officers that they intend to tender all shares of Company Common
Stock beneficially owned by them into the Offer.
(b) The Company hereby agrees to file with the SEC contemporaneously
with the commencement of the Offer and disseminate to holders of shares of
Company Common Stock a Solicitation/Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "Schedule 14D-9")
that, subject to Section 8.04, shall reflect the Recommendation of the Company
Board referred to in Section 2.02(a) above. Parent and its counsel shall be
given an opportunity to review and comment on the Schedule 14D-9 prior to its
being filed with the SEC or disseminated to holders of shares of Company Common
Stock. The Company agrees to provide Parent and its counsel with any comments
that the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments and
shall provide Parent and its counsel with an opportunity to participate in the
response of the Company to such comments. Each of the Company and Parent agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that it shall have become false or misleading in any
material respect. The Company agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and to be, at such time
as reasonably agreed by Parent and the Company, disseminated to holders of
shares of Company Common Stock, in each case as and to the extent required by
applicable federal securities Laws.
(c) The Company shall promptly furnish Parent with mailing labels
containing the names and addresses of all record holders of shares of Company
Common Stock and with security position listings of shares of Company Common
Stock held in stock depositories, each as of a recent date, together with all
other available listings and computer files containing names, addresses and
security position listings of record holders and beneficial owners of shares of
Company Common Stock. The Company shall promptly furnish Parent with such
additional information, including, without limitation, updated listings and
computer files of
12
stockholders, mailing labels and security position listings, and such other
assistance in disseminating the Offer Documents to holders of shares of Company
Common Stock as Parent may reasonably request. Subject to the requirements of
applicable Law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Parent and Merger Sub shall hold in confidence the information contained
in such labels, listings and files, shall use such information only in
connection with the Transaction, and, if this Agreement shall be terminated in
accordance with Section 10.01, shall deliver to the Company all copies of such
information then in their possession.
SECTION 2.03 Directors. (a) Effective upon the acceptance for payment
or exchange of any shares of Company Common Stock pursuant to the Offer, Parent
shall be entitled to designate the number of directors, rounded up to the next
whole number, on the Company Board that equals the product of (i) the total
number of directors on the Company Board (giving effect to the election of any
additional directors pursuant to this Section 2.03) and (ii) the percentage that
the number of shares of Company Common Stock beneficially owned by Parent and/or
Merger Sub (including shares of Company Common Stock accepted for payment or
exchange) bears to the total number of shares of Company Common Stock
outstanding, and the Company shall take all action necessary to cause Parent's
designees to be elected or appointed to the Company Board, including increasing
the number of directors, and seeking and accepting resignations of incumbent
directors. At such time, the Company will also use its best efforts to cause
individuals designated by Parent to constitute the number of members, rounded up
to the next whole number, on (i) each committee of the Company Board and (ii)
each board of directors of each Subsidiary of the Company identified by Parent
(and each committee thereof) that represents the same percentage as such
individuals represent on the Company Board, in each case only to the extent
permitted by applicable Law. Notwithstanding the provisions of this Section
2.03, the parties hereto shall use their respective best efforts (including by
reducing the number of directors that Parent may designate pursuant to the first
sentence of this paragraph (a), but in no event to less than a majority of the
directors on the Company Board) to ensure that at least two of the members of
the Company Board shall, at all times prior to the Effective Time, be directors
of the Company who were directors of the Company on the date hereof (the
"Continuing Directors"); provided that if there shall be in office fewer than
two Continuing Directors for any reason, the Company Board shall cause a person
designated by the remaining Continuing Director to fill such vacancy who shall
be deemed to be a Continuing Director for all purposes of this Agreement, or if
no Continuing Directors then remain, the other directors of the Company then in
office shall designate two persons to fill such vacancies who will not be
officers or employees or affiliates of the Company, Parent or Merger Sub or any
of their respective subsidiaries and such persons shall be deemed to be
Continuing Directors for all purposes of this Agreement.
(b) The Company's obligations to appoint Parent's designees to the
Company Board shall be subject to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder. The Company shall promptly take all actions, and
shall include in the Schedule 14D-9 such information with respect to the Company
and its officers and directors, as Section 14(f) and Rule 14f-1 require in order
to fulfill its obligations under this Section, so long as Parent shall have
provided to the Company on a timely basis in writing and be solely
13
responsible for any information with respect to itself, Merger Sub and their
respective nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
(c) Following the election or appointment of Parent's designees
pursuant to Section 2.03(a) and until the Effective Time, the approval of a
majority of the Continuing Directors shall be required to authorize any
termination of this Agreement by the Company, any amendment of this Agreement
requiring action by the Company Board, any extension of time for performance of
any obligation or action hereunder by Parent or Merger Sub, any waiver of
compliance with any of the agreements or conditions contained herein for the
benefit of the Company, any amendment of the certificate of incorporation or
by-laws of the Company, and any other action of the Company hereunder which
adversely affects the holders of shares of Company Common Stock (other than
Parent or Merger Sub).
SECTION 2.04 Exchange Fund; Distributions on Shares of Parent Common
Stock. (a) Prior to the Acceptance Date, Parent shall deposit, or shall cause to
be deposited, with Computershare Investor Services, LLC or a bank or trust
company that may be designated by Parent and is reasonably satisfactory to the
Company (the "Offer Exchange Agent"), for the benefit of the holders of Company
Common Stock, for exchange in accordance with the terms of the Offer set forth
in Article II, (a) cash representing the Cash Consideration payable pursuant to
Section 2.01 and (b) certificates representing the shares of Parent Common Stock
issuable to holders of Company Common Stock in the Offer pursuant to Section
2.01 (such cash and certificates for shares of Parent Common Stock, together
with any dividends or distributions with respect thereto, being hereinafter
referred to as, the "Offer Exchange Fund"). The Offer Exchange Agent shall,
pursuant to irrevocable instructions, make cash payments and deliver the shares
of Parent Common Stock contemplated to be issued pursuant to Section 2.01 out of
the Offer Exchange Fund. Any cash and shares of Parent Common Stock remaining in
the Offer Exchange Fund seven business days following the Acceptance Date shall
be returned to Parent, which shall thereafter be responsible to make payments to
holders of Company Common Stock that have validly tendered their shares of
Company Common Stock pursuant to the Offer.
(b) For purposes of determining entitlement to dividends or other
distributions declared on shares of Parent Common Stock, holders of Company
Common Stock who have validly tendered and not withdrawn such shares pursuant to
the Offer shall be deemed to be record holders of Parent Common Stock as of the
Acceptance Date, notwithstanding the fact that certificates representing such
shares have not yet been issued or delivered to tendering stockholders (or, if
applicable, appropriate book-entries have not yet been made).
ARTICLE III
THE MERGER
SECTION 3.01 The Merger. At the Effective Time, upon the terms and
subject to the conditions of this Agreement and in accordance with the DGCL, the
Company shall be merged with and into Merger Sub. As a result of the Merger, the
separate corporate existence of the Company shall cease and Merger Sub shall
continue as the surviving corporation of the Merger; provided, however, that if
(i) the aggregate market value of all shares of Parent Common Stock payable to
holders of Company Common Stock upon consummation of the Offer
14
and the Merger, based upon the lower of the closing price of shares of Parent
Common Stock on the NYSE Composite Tape on the date immediately prior to the
Effective Time or the Acceptance Date (the "Stock Value"), would be less than
42% of the aggregate market value of all such shares of Parent Common Stock and
all cash (including the Cash Consideration and cash in lieu of fractional
shares) payable to holders of Company Common Stock upon consummation of the
Offer and the Merger, or (ii) Parent and/or the Company do not obtain the Tax
Opinions referred to at Section 8.10(b) and Section 8.10(c), then, at Parent's
discretion, the Merger may not be effected as described herein and may instead
be effected as a merger of Merger Sub with and into the Company in accordance
with the DGCL (the "Reverse Merger"). If the Reverse Merger is effected, then
the separate existence of Merger Sub shall cease and the Company shall become
the surviving corporation and shall continue its existence under the laws of the
State of Delaware as a wholly owned subsidiary of Parent. The surviving
corporation of the Merger or the Reverse Merger, as the case may be, shall be
herein referred to as the "Surviving Corporation". In the event Parent elects to
effect the Reverse Merger, all references to the "Merger" in this Agreement and
all other ancillary or related agreements, documents and instruments, except
where such references relate to the qualification of the transaction as a
tax-free reorganization under Section 368(a) of the Code, shall be deemed to be
references to the "Reverse Merger", and this Agreement and such other ancillary
agreements, documents and instruments shall be construed and interpreted
accordingly.
SECTION 3.02 Effective Time; Closing. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
Article IX, but in no event later than two business days after all such
conditions have been satisfied or waived, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger or certificate of
ownership and merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in such form as is required by, and executed in
accordance with, the relevant provisions of the DGCL (the date and time of such
filing of the Certificate of Merger (or such later time as may be agreed by each
of the parties hereto and specified in the Certificate of Merger) being, the
"Effective Time"). Immediately prior to such filing of the Certificate of
Merger, a closing of the Merger (the "Closing") shall be held at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022, or such
other place as the parties shall agree, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
Article IX.
SECTION 3.03 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all of the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 3.04 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and subject to Section 8.06(a) and Section 8.10 hereof, the
Certificate of Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation (but in the event the Reverse Merger is effected, then the
Certificate of Incorporation of the Company shall be the Certificate of
Incorporation of the
15
Surviving Corporation, but, by reason of the Merger, shall at the Effective Time
be amended and restated to read in its entirety as that of Merger Sub
immediately prior to the Effective Time), in either case until thereafter
amended as provided by Law and such Certificate of Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective Time,
and subject to Section 8.06(a) and Section 8.10 hereof, at the Effective Time,
the By-Laws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the By-Laws of the Surviving Corporation until thereafter amended as
provided by Law, the Certificate of Incorporation of the Surviving Corporation
and such By-Laws.
SECTION 3.05 Directors and Officers. At the Effective Time, the
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each such director to hold
office in accordance with the DGCL, the Certificate of Incorporation and By-Laws
of the Surviving Corporation, and the officers of the Company immediately prior
to the Effective Time shall, subject to the applicable provisions of the
Certificate of Incorporation and By-Laws of the Surviving Corporation, be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
ARTICLE IV
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 4.01 Conversion of Securities. (a) Conversion of Company
Common Stock. At the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, the Company or the holders of Company
Common Stock, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled in
accordance with Section 4.01(b) and dissenting shares, if any) shall be
converted into the Stock Consideration. As of the Effective Time, all such
shares of Company Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate or certificates representing any such shares of Company Common
Stock shall cease to have any rights with respect thereto, except the right to
receive the Stock Consideration.
(b) Cancellation of Treasury Stock and Company Common Stock Owned by
Parent and Merger Sub. At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Merger Sub, the Company or the holders
of Company Common Stock, all shares of Company Common Stock owned by the Company
as treasury stock and any shares of Company Common Stock owned by Parent, Merger
Sub or any direct or indirect wholly owned subsidiary of Parent or Merger Sub
immediately prior to the Effective Time shall, by virtue of the Merger, and
without any action on the part of the holder thereof, automatically be canceled
and retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Capital Stock of Merger Sub. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of Company Common Stock, each share of common stock, no par
value, of Merger Sub ("Merger Sub Common Stock") outstanding immediately prior
to the Effective Time shall remain
16
outstanding and be (or, in the case of the Reverse Merger, shall become) one
duly authorized, validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
(d) Conversion of Restricted Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of Restricted Stock, each share of Restricted Stock
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive the Stock Consideration, subject to the
identical vesting and forfeiture provisions that were applicable to such share
of Restricted Stock immediately prior to the Effective Time. As of the Effective
Time, all such shares of Restricted Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a Certificate representing any such shares of Restricted Stock shall
cease to have any rights with respect thereto, except the right to receive the
Stock Consideration subject to such vesting and forfeiture provisions.
SECTION 4.02 Exchange of Certificates. (a) Exchange Agent. From and
after the Effective Time, Parent shall deposit, or shall cause to be deposited,
with Computershare Investor Services, LLC or a bank or trust company that may be
designated by Parent and is reasonably satisfactory to the Company (the
"Exchange Agent"), for the benefit of the holders of Company Common Stock (other
than dissenting shares), for exchange in accordance with this Article IV through
the Exchange Agent, certificates representing the shares of Parent Common Stock
issuable to holders of Company Common Stock in the Merger pursuant to Section
4.01 (such certificates for shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as, the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the shares of Parent Common Stock contemplated to be
issued pursuant to Section 4.01 out of the Exchange Fund. Except as contemplated
by Section 4.02(f) hereof, the Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall instruct the Exchange Agent to mail to each holder
of a Certificate which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock: (i) a letter of transmittal (which
shall be in customary form and shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent) and (ii) instructions for
use in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Exchange Agent of a Certificate for
cancellation, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) a certificate
representing that number of whole shares of Parent Common Stock which such
holder has the right to receive, if any, in respect of the Company Common Stock
formerly represented by such Certificate (after taking into account all Company
Common Stock then held by such holder), (B) cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 4.02(e) and (C) any dividends or other distributions to which such
holder is entitled pursuant to Section 4.02(c), and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of Company Common Stock that is not registered in the transfer records
of the
17
Company, a certificate representing the proper number of shares of Parent
Common Stock, cash in lieu of any fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 4.02(e) and any dividends or
other distributions to which such holder is entitled pursuant to Section 4.02(c)
may be issued to a transferee if the Certificate representing such Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 4.02, each Certificate shall be deemed at all times
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock, cash in
lieu of any fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 4.02(e) and any dividends or other distributions to
which such holder is entitled pursuant to Section 4.02(c).
(c) Distributions with Respect to Unexchanged Shares of Parent Common
Stock. No dividends or other distributions declared or made after the Effective
Time with respect to the Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional shares shall be paid to any such holder
pursuant to Section 4.02(e), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) the amount of
any cash payable with respect to a fractional share of Parent Common Stock to
which such holder is entitled pursuant to Section 4.02(e) and the amount of
dividends or other distributions with a record date after the Effective Time and
theretofore paid with respect to such whole shares of Parent Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
(d) No Further Rights in Company Common Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
4.02(c) or (e)) shall be deemed to have been issued at the Effective Time in
full satisfaction of all rights pertaining to such Company Common Stock.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to Section 4.01, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent. In lieu of any such fractional shares, the Exchange Agent
shall, as soon as practicable after the Effective Time, aggregate all such
fractional shares and such fractional shares shall be sold by the Exchange Agent
as agent for the holders of such fractional shares, at the then prevailing price
on the NYSE, all in the manner provided hereinafter. Until the net proceeds of
such sale or sales have been distributed to the holders of fractional shares,
the Exchange Agent shall retain such proceeds in trust for the benefit of such
holders as part of the Exchange Fund. The sale of the fractional shares by the
Exchange Agent shall be executed on the NYSE or through one or more member firms
of the NYSE and
18
will be executed in round lots to the extent practicable. The Exchange Agent
will determine the portion, if any, of the net proceeds of such sale to which
each holder of fractional shares is entitled by multiplying the amount of the
aggregate net proceeds of the sale of the fractional shares by a fraction the
numerator of which is the amount of fractional shares to which such holder is
entitled and the denominator of which is the aggregate amount of fractional
shares to which all holders of fractional shares are entitled. The Company shall
pay all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of shares of Parent Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of the Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with this
Article IV shall thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 4.02(e) and any dividends or other
distributions with respect to the Parent Common Stock to which they are entitled
pursuant to Section 4.02(c). Any portion of the Exchange Fund remaining
unclaimed by holders of Company Common Stock five years after the Effective Time
(or such earlier date which is immediately prior to such time as such amounts
would otherwise escheat to or become property of any Governmental Authority)
shall, to the extent permitted by applicable Law, become the property of Parent
free and clear of any claims or interest of any person previously entitled
thereto.
(g) No Liability. Neither Parent nor the Surviving Corporation shall
be liable to any holder of Company Common Stock for any such Parent Common Stock
(or dividends or distributions with respect thereto) or cash delivered to a
public official pursuant to any abandoned property, escheat or similar Law.
(h) Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Company Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign Tax
Law. To the extent that amounts are so withheld by the Surviving Corporation or
Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Company
Common Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
(i) Lost, Stolen or Destroyed Certificates. If any Certificate 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
and, if required by Parent or the Surviving Corporation, the posting by such
person of a bond, in such reasonable amount as Parent or the Surviving
Corporation may direct, as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the whole number of shares of
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock to which the holders thereof are entitled pursuant to Section
19
4.02(e) and any dividends or other distributions to which the holders thereof
are entitled pursuant to Section 4.02(c).
SECTION 4.03 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
Certificates representing Company Common Stock or Restricted Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Company Common Stock or Restricted Stock, as the case may be,
except as otherwise provided in this Agreement or by Law. On or after the
Effective Time, any Certificates properly presented to the Exchange Agent or
Parent for any reason shall be cancelled and converted in accordance with the
terms of this Article IV.
SECTION 4.04 Company Stock Options. (a) At or immediately prior to the
Effective Time, each Company Stock Option that is not exercised prior to the
Effective Time (other than any Company Stock Option that will be cancelled
pursuant to the Employment Agreements) shall, by virtue of the Merger and
without any further action on the part of any holder thereof, be assumed by
Parent and deemed to constitute an option (each, a "Parent Option") to acquire,
on the same terms and conditions as were applicable under such Company Stock
Option (subject to Section 4.04(h)), the same number of shares of Parent Common
Stock as the holder of such Company Stock Option would have been entitled to
receive pursuant to Section 4.01 of this Agreement had such holder exercised
such Company Stock Option in full immediately prior to the Effective Time
(rounded to the nearest whole number), at a price per share (rounded down to the
nearest whole cent) equal to (x) the aggregate exercise price for the shares of
Company Common Stock otherwise purchasable pursuant to such Company Stock Option
divided by (y) the number of shares, or fraction thereof, of Parent Common Stock
purchasable pursuant to the Parent Option in accordance with the foregoing. The
other terms of each such Company Stock Option shall continue to apply in
accordance with their terms, except that the vesting price targets applicable to
each unvested Performance Based Company Stock Option that is outstanding
immediately prior to the Effective Time shall be equal to (i) the vesting price
targets applicable to such unvested Performance Based Company Stock Option
immediately prior to the Effective Time divided by (ii) the Stock Consideration.
(b) Subject to Sections 4.04(c) and 4.04(d) below, each holder (an
"Option Holder") of a Vested Company Stock Option may elect to exercise such
Vested Company Stock Option prior to the Acceptance Date (subject to
consummation of the Offer) for the purpose of tendering into the Offer all of
the shares of Company Common Stock (the "Option Shares") issuable to such person
upon exercise of the Vested Company Stock Option.
(c) An Option Holder that exercises a Vested Company Stock Option
between the date hereof and the Acceptance Date shall not be required to deliver
payment of the exercise price (the "Exercise Price") thereof to the Company
simultaneously upon exercise of such option if the Option Holder (1) notifies
the Company that such person intends to tender into the Offer in accordance with
its terms all of the Option Shares issuable upon such exercise, (2) instructs
the Company to deliver the Option Shares to the Offer Exchange Agent, and (3)
elects to receive the Cash Consideration in exchange for all, but not less than
all, of such tendered Option Shares. If an Option Holder has satisfied clauses
(1), (2) and (3) of this Section 4.04(c), the Company shall
20
cooperate with the Offer Exchange Agent in determining the aggregate amount of
withholding/payroll taxes (the "Exercise Taxes") that such Option Holder has
incurred or will incur in connection with the exercise of the Vested Company
Stock Option, and the Offer Exchange Agent shall deduct the sum of the Exercise
Price and the Exercise Taxes from the aggregate Offer Consideration otherwise
payable to the Option Holder in connection with the tender of such person's
Option Shares into the Offer. If the sum of the Exercise Price and the Exercise
Taxes exceeds the Cash Consideration that is payable to the Option Holder (the
"Excess Amount"), then the Offer Exchange Agent shall promptly notify the Option
Holder of the Excess Amount and, if applicable, shall not deliver any Stock
Consideration otherwise payable to such person until the Offer Exchange Agent,
on behalf of the Company, has received payment in full of the Excess Amount from
the Option Holder. Parent shall cause the Offer Exchange Agent to promptly
deliver to the Company any amounts received in connection with the payment by an
Option Holder of the Exercise Price and the Exercise Taxes.
(d) If an Option Holder (x) wishes to exercise a Vested Company Stock
Option for the purpose of tendering into the Offer all of the Option Shares
received thereby, and (y) does not wish to receive the Cash Consideration in
exchange for all, but not less than all, of such Option Shares, then (A)
simultaneously upon delivery of notice of exercise of such option, the Option
Holder must (1) notify the Company that such person intends to tender into the
Offer in accordance with its terms all of the Option Shares issuable upon
exercise of the Vested Company Stock Option, (2) instruct the Company to deliver
the Option Shares to the Offer Exchange Agent, and (3) notify the Company that
it will, prior to the Acceptance Date, deliver to the Offer Exchange Agent, on
behalf of the Company, payment of the Exercise Price in cash or by check
(provided that, if the Option Holder does not deliver the Exercise Price in full
to the Offer Exchange Agent prior to the Acceptance Date, then such person shall
be deemed not to have exercised the Vested Company Stock Option and not to have
tendered any Option Shares into the Offer); and (B) promptly following the
Acceptance Date, deliver to the Offer Exchange Agent, on behalf of the Company,
payment of the aggregate Exercise Taxes in cash or by certified check. The Offer
Exchange Agent shall not deliver to any such Option Holder any portion of the
Offer Consideration otherwise payable to such person in exchange for tendered
Option Shares until the Exercise Price and all Exercise Taxes have been paid in
full.
(e) If an Option Holder wishes to exercise a Vested Company Stock
Option between the date hereof and the Acceptance Date other than in accordance
with Section 4.04(c) or Section 4.04(d) hereof, the Option Holder may exercise
such Vested Company Stock Option only in accordance with the terms of such
option, including with respect to the timing of payment of the exercise price
thereof.
(f) Subject to the parenthetical contained in Section 4.04(d)(A)(3)
above, all Option Shares that are issued prior to the Acceptance Date in
connection with the exercise of any Vested Company Stock Options shall
constitute issued and outstanding shares of Company Common Stock for purposes of
Section 2.01, including, without limitation, for purposes of determining the
Maximum Cash Election Number.
(g) Prior to the commencement of the Offer, the Company shall be
permitted to amend each outstanding Company Stock Option Plan and each
outstanding Company Stock Option in accordance with Section 4.04(g) of the
Company Disclosure Schedule.
21
(h) At or prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Parent Options.
(i) At or prior to the Effective Time, Parent shall file with the SEC
a registration statement on Form S-8 (or any successor or other appropriate
form) with respect to the shares of Parent Common Stock subject to Parent
Options. Parent shall use reasonable best efforts to maintain the effectiveness
of such registration statement for as long as any Parent Options remain
outstanding. At or prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of Parent Options.
(j) Both Parent and the Company shall take such steps as may be
required to cause, to the extent possible, the transactions contemplated by this
Section 4.04 and any other dispositions of Company equity securities and/or
acquisitions of Parent equity securities (including, in each case, derivative
securities) in connection with this Agreement or the transactions contemplated
hereby by any individual who is a director or officer of the Company, to be
exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to be
taken in accordance with the interpretative letter, dated January 12, 1999,
issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
SECTION 4.05 Appraisal Rights. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of shares of Company
Common Stock in connection with the Offer or, other than pursuant to Section
262(b)(3) of the DGCL, the Merger.
SECTION 4.06 Affiliates. Notwithstanding anything to the contrary
herein, no Parent Common Stock shall be delivered to a person who may be deemed
an "affiliate" of the Company in accordance with Section 8.08 hereof for
purposes of Rule 145 under the Securities Act until such person has executed and
delivered to Parent an executed copy of the affiliate letter contemplated in
Section 8.08 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub 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 Merger Sub
as follows:
SECTION 5.01 Organization and Qualification; Subsidiaries. (a) Each of
the Company and each subsidiary of the Company (each, a "Subsidiary") 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
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 prevent or materially
delay
22
consummation of the Merger or the Transaction or otherwise prevent or materially
delay the Company from performing its obligations under this Agreement and would
not reasonably be expected to have a Company Material Adverse Effect. The
Company and each Subsidiary 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
prevent or materially delay consummation of the Merger or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement and would not reasonably be expected to have a Company Material
Adverse Effect.
(b) A true and complete list of all the Subsidiaries, together with
the jurisdiction of organization of each Subsidiary and the percentage of the
outstanding capital stock or other equity interests of each Subsidiary owned by
the Company and each other Subsidiary, is set forth in Section 5.01(b) of the
Company Disclosure Schedule. Except as disclosed in Section 5.01(b) of the
Company Disclosure Schedule, 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 5.02 Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of the certificate of
incorporation and the by-laws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such certificates of
incorporation, by-laws or equivalent organizational documents, as amended to
date, are in full force and effect. Neither the Company nor any Subsidiary is in
material violation of any of the provisions of its certificate of incorporation,
by-laws or equivalent organizational documents.
SECTION 5.03 Capitalization. (a) The authorized capital stock of the
Company consists of (i) 60,000,000 shares of Company Common Stock and (ii)
15,000,000 shares of preferred stock, par value $.01 per share ("Company
Preferred Stock"). As of the close of business on March 25, 2002, (i) 33,487,650
shares of Company Common Stock were issued and outstanding, all of which are
duly authorized, validly issued, fully paid and nonassessable, (ii) 50,000
shares of Restricted Stock were issued and outstanding, (iii) no shares of
Company Common Stock were held in the treasury of the Company, (iv) no shares of
Company Common Stock were held by the Subsidiaries, (v) 3,822,307 shares of
Company Common Stock were reserved for future issuance pursuant to outstanding
employee stock options granted pursuant to the Company Stock Option Plans and
(vi) no shares of Company Preferred Stock were issued and outstanding. Except as
set forth above or in Section 5.03 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 Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. Section 5.03(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
24
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 Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of any Subsidiary or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary or any other person.
(b) Each outstanding share of capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable, and each such share is
owned by the Company or another Subsidiary free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or any Subsidiary's voting rights, charges and
other encumbrances, except for limitations on transfer imposed by federal or
state securities Laws.
SECTION 5.04 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, subject, if applicable, to obtaining
the Company Stockholder Approval with respect to the Merger, 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, with respect to the Merger, obtaining
the Company Stockholder Approval if and to the extent required by applicable
Law, and the filing and recordation of appropriate merger documents as required
by the DGCL). 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, 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 approved this Agreement and the transactions
contemplated hereby. To the knowledge of the Company, no state takeover statute
is applicable to the Merger or the Transaction.
SECTION 5.05 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 by-laws or any equivalent
organizational documents, each as amended to date, of the Company or any
Subsidiary, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 5.05(b) have been made, conflict with or violate
any United States or non-United States statute, law, ordinance, regulation,
rule, code, executive order, injunction, judgment, decree or other order ("Law")
applicable to the Company or any Subsidiary or by which any property or asset of
the Company or any 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
creation of a lien or other encumbrance on any property or asset
24
of the Company or any Subsidiary pursuant to, or result in any payment under,
any Material Contract (as defined in Section 5.17), Company Permit (as defined
in Section 5.06) or franchise, except, with respect to clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other occurrences
which would not prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and 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 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"), and filing and recordation
of appropriate merger documents as required by the DGCL, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay
consummation of the Merger, or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement, and would not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 5.06 Permits; Compliance. (a) Each of the Company and the
Subsidiaries is in possession of 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 Subsidiaries to own, lease and operate its properties
or to carry on its business as it is now being conducted (the "Company
Permits"), except where the failure to have, or the suspension or cancellation
of, any of the Company Permits would not prevent or materially delay
consummation of the Merger or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement and would not reasonably be
expected to have a Company Material Adverse Effect. As of the date of this
Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company, threatened. Neither the Company nor
any Subsidiary is in conflict with, or in default, breach or violation of, (i)
any Law applicable to the Company or any Subsidiary or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license, Company Permit,
franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound, except in either case for
any such conflicts, defaults, breaches or violations that would not prevent or
materially delay the consummation of the Merger or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement and would not reasonably be expected to have a Company Material
Adverse Effect.
(b) None of the Company or any Subsidiary or any individual who is
currently an executive officer, director or, to the knowledge of the Company,
employee of the Company or any Subsidiary (i) has been convicted of, charged
with or, to the knowledge of the Company,
25
investigated for a Medicare, Medicaid or state health program-related offense,
(ii) since January 1, 1999, has been convicted of, charged with or, to the
knowledge of the Company, investigated for a violation of Law related to fraud,
theft, embezzlement, financial misconduct or obstruction of an investigation,
(iii) has been excluded or suspended from participation in Medicare, Medicaid or
any federal or state health program, or (iv) since January 1, 1999, has been
subject to any Order or any criminal or civil fine or penalty imposed by, any
Governmental Authority with respect to any such Medicare, Medicaid or any other
federal or state health care program.
(c) Except as disclosed in Section 5.06(c) of the Company Disclosure
Schedule, since January 1, 1999, there have been no written notices, citations
or decisions by any Governmental Authority that the Company or any Subsidiary
fails to meet any applicable standards promulgated by such Governmental
Authority for which a plan of correction has not been accepted, and the Company
does not know of any such failure or facts upon which such a failure could be
alleged except, in either case, as would not reasonably be expected to have a
Company Material Adverse Effect. Except as set forth in Section 5.06(c) of the
Company Disclosure Schedule, none of the Company or any Subsidiary has received
any notice of any potential deficiency in or violation of any applicable Law or
Order relating to the Company or any Subsidiary for which a plan of correction
has not been accepted except as would not reasonably be expected to have a
Company Material Adverse Effect. Except as disclosed in Section 5.06(c) of the
Company Disclosure Schedule, and except as would not reasonably be expected to
have a Company Material Adverse Effect, since January 1, 1996, the Company and
the Subsidiaries have complied in all material respects with all applicable Laws
with respect to the services provided and business operated by the Company and
the Subsidiaries.
(d) The Company has made available to Parent prior to the date of this
Agreement true and complete copies of (i) all material surveys, reports,
notices, inquiries, subpoenas and other correspondence related to any
certification, licensure or other inspections, and summaries of all proficiency
test results relating to the business of the Company and the Subsidiaries for
the period from January 1, 1999 (or, in the case of a Subsidiary, from the date
such entity became a Subsidiary) through the date hereof; (ii) all material
written inquiries, notices, requests for records, subpoenas and correspondence
received by the Company or any Subsidiary related to utilization, reimbursement
or other audits or investigations relating to the business of the Company and
the Subsidiaries for the period from January 1, 1999 (or, in the case of a
Subsidiary, from the date such entity became a Subsidiary) through the date
hereof; and (iii) all current licenses or certifications of the Company or any
Subsidiary under the Clinical Laboratory Improvement Act of 1988 and the
regulations promulgated thereunder ("CLIA").
(e) Except as disclosed in Section 5.06(e) of the Company Disclosure
Schedule, and except as would not reasonably be expected to have a Company
Material Adverse Effect, (i) none of the Company nor any Subsidiary has engaged
in any activities that are prohibited under or would violate Medicare and
Medicaid statutes, 42 U.S.C. Sections 1320a-7a and 7b, or the regulations
promulgated pursuant to such statutes, or comparable state or local Law or rules
of professional conduct; (ii) the Company and the Subsidiaries have timely and
accurately filed in all material respects all requisite claims and other reports
required to be filed in connection with all applicable state and federal
Medicare and Medicaid programs due on or before the date of this Agreement;
(iii) there is no arrangement providing for any rebates,
26
kickbacks or other forms of compensation that is unlawful to be paid to any
person or entity in return for the referral of business or for the arrangement
for recommendation of such referrals; and (iv) none of the Company nor any
Subsidiary has any financial arrangement which render any of its billings
unlawful pursuant to the Stark Law or comparable state Law.
(f) To the knowledge of the Company, all agreements of the Company and
the Subsidiaries with third-party payors were entered into by the Company or a
Subsidiary, as the case may be, in the ordinary course of business. The Company
and the Subsidiaries are in compliance with each of their respective third-party
payor agreements, and the Company and the Subsidiaries have properly charged and
billed in accordance with the terms of their respective third-party payor
agreements, including, where applicable, billing and collection of all
deductibles and co-payments, except for any such violations that would not
reasonably be expected to have a Company Material Adverse Effect.
(g) Except as disclosed in Section 5.06(g) of the Company Disclosure
Schedule, (i) no right of the Company or any Subsidiary to receive
reimbursements pursuant to any government program or private program has ever
been terminated or suspended as a result of any investigation or action whether
by any Governmental Authority or other third party, (ii) none of the Company nor
any Subsidiary has since January 1, 1999 received notice from any Governmental
Authority that it has been the subject of any inspection, investigation, survey,
audit, monitoring or other form of review by any Governmental Authority,
professional review organization, accrediting organization or certifying agency
for the purpose of any alleged improper activity on the part of such entity,
other than routine audits or inquiries and other than those which would not
reasonably be expected to have a Company Material Adverse Effect, (iii) none of
the Company nor any Subsidiary has received any written notice of deficiency
from a Governmental Authority in connection with its operations for which a plan
of correction has not been accepted, and (iv) none of the Company nor any
Subsidiary has received any written notice of any claim, requirement or demand
of any licensing, accrediting or certifying agency to rework or redesign their
operations or any part thereof.
SECTION 5.07 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") since
June 6, 2001 (such forms, reports, statements, schedules and other documents
being, collectively, the "Company SEC Reports"). The Company SEC Reports (i) at
the time they were filed or, if amended, as of the date of such amendment,
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
the rules and regulations promulgated thereunder, and (ii) did not, at the time
they were 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. The
Company is eligible to use Form S-3 in connection with the registration of
securities under the Securities Act. No Subsidiary is required to file any form,
report or other document with the SEC. Except as set forth in Section 5.07 of
the Company Disclosure Schedule, the Company has not received any non-routine
inquires or interrogatories, whether in writing or otherwise, from the SEC, the
NASDAQ National Market or any other Governmental Authority, or, to the knowledge
of the
27
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 SEC
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 SEC Reports was prepared in
accordance with United States 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, in all material
respects, the consolidated financial position, results of operations and cash
flows of the Company and its consolidated 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).
(c) Except as and to the extent set forth in Section 5.07(c) of the
Company Disclosure Schedule, neither the Company nor any 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 liabilities and
obligations which would not prevent or materially delay consummation of the
Transaction or otherwise be reasonably likely to prevent or materially delay the
Company from performing its obligations under this Agreement and would not
reasonably be expected to have a Company Material Adverse Effect.
(d) Section 5.07(d) of the Company Disclosure Schedule lists 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
(the "Management Letters"). True and complete copies of all Management Letters
have been furnished to Parent.
SECTION 5.08 Information to Be Supplied. (a) Each of the Schedule
14D-9 and the other documents required to be filed by the Company with the SEC
in connection with the Offer, the Merger and the other transactions contemplated
hereby will comply as to form in all material respects with the requirements of
the Exchange Act and the Securities Act, as the case may be. Each of the
Schedule 14D-9 and the other documents required to be filed by the Company with
the SEC in connection with the Offer, the Merger 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 Merger Registration Statement and the Offer
Documents will not, on the date of its filing or mailing or, in the case of the
Proxy Statement/Prospectus, at the time of the Company Stockholder Meeting or,
in the case of the Offer Documents, at the time the Offer is commenced or at the
Acceptance 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.
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(b) Notwithstanding the foregoing provisions of this Section 5.08, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Offer Documents, Merger Registration
Statement, the Proxy Statement/Prospectus or the Schedule 14D-9 based on
information supplied by or on behalf of Parent or Merger Sub 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 6.07.
SECTION 5.09 Absence of Certain Changes or Events. Since December 31,
2001, except (a) as set forth in Section 5.09 of the Company Disclosure
Schedule, or (b) as expressly contemplated by this Agreement: (i) the Company
and the 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 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 7.01.
SECTION 5.10 Absence of Litigation. Except as set forth in Section
5.10 of the Company Disclosure Schedule, 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 Subsidiary, or any property or asset of the Company or any
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 Subsidiary nor any property or asset of the Company or any
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 prevent or materially delay consummation of the Transaction
or otherwise prevent or materially delay the Company from performing its
obligations under this Agreement or would reasonably be expected to have a
Company Material Adverse Effect.
SECTION 5.11 Employee Benefit Plans. (a) Section 5.11(a) of the
Company Disclosure Schedule lists (i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary is a party, with respect to
which the Company or any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of the Company or any
Subsidiary, (ii) each employee benefit plan for which the Company or any
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 Subsidiary could incur liability under Section 4212(c) of ERISA,
and (iv) any contracts, arrangements or understandings between the Company or
any Subsidiary and any employee of the Company or any Subsidiary including,
without limitation, any contracts, arrangements or understandings relating in
any way to a sale of the Company or any Subsidiary (collectively, the "Plans").
Each
29
Plan is in writing and the Company has made available 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 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
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) 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 Subsidiary could incur liability under Section 4063 or
4064 of ERISA (a "Multiple Employer Plan"). None of the Plans (i) provides for
the payment of separation, severance, termination or similar-type benefits to
any person, or (ii) obligates the Company or any Subsidiary to pay separation,
severance, termination or similar-type benefits or any other amounts or benefits
to any person solely or partially as a result of any transaction contemplated by
this Agreement. Each of the Plans is subject only to the Laws of the United
States or a political subdivision thereof.
(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. The Company and the 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. 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 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 or Section 401(k) of the Code has timely received a favorable
determination letter from the IRS covering all of the provisions applicable to
the Plan for which determination letters are currently available that the Plan
is so qualified and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, 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. Neither the Company nor any Subsidiary has any
liability under, arising out of or by operation of Title IV of ERISA (other than
liability for premiums to the Pension Benefit
30
Guaranty Corporation arising in the ordinary course), including, without
limitation, any 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 liability.
(f) All 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 benefits, including death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any Subsidiary beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable Law, (ii) death benefits
or retirement benefits under any "employee pension benefit plan" (as such term
is defined in Section 3(2) of ERISA), (iii) deferred compensation benefits
accrued as liabilities on the books of the Company or (iv) benefits the full
cost of which is borne by the current or former employee (or his beneficiary).
(h) None of the Company nor any Subsidiary has any non-U.S. employees.
(i) Except as set forth on Section 5.11(i) of the Company Disclosure
Schedule, none of the employees of the Company or any Subsidiaries is currently
on short or long-term leave or temporary or permanent disability leave.
(j) As of the date hereof, the Company has no knowledge or no
reasonable basis to believe that any of the key employees of the Company or any
Subsidiary will terminate their contractual arrangements with the Company or any
Subsidiary as a result of the consummation of the transactions contemplated
hereby.
SECTION 5.12 Labor and Employment Matters. There are no controversies
pending or, to the knowledge of the Company, threatened between the Company or
any Subsidiary and any of their respective employees, which controversies would
prevent or materially delay consummation of the Merger or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement or would reasonably be expected to have a Company Material Adverse
Effect. Neither the Company nor any Subsidiary is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by the Company or any Subsidiary, nor, to the knowledge of the Company,
are there any activities or proceedings of any labor union to organize any such
employees. There are no unfair labor practice complaints pending against the
Company or any Subsidiary before the National Labor Relations Board or any
current union representation questions involving employees of the Company or any
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 Subsidiary.
31
SECTION 5.13 Property and Leases. (a) The Company and the 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 or leased by the Company or any
Subsidiary (i) is owned or leased 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 easement, right of way or other encumbrance to title, or
any option, right of first refusal, or right of first offer (collectively,
"Liens"), other than (A) Liens for current Taxes and assessments not yet due or
for Taxes 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 and carriers' Liens arising in the
ordinary course of business of the Company or such Subsidiary consistent with
past practice (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) 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 Subsidiary, nor any event which, with notice or lapse of time or both, would
constitute a default thereunder by the Company or any Subsidiary.
(d) Section 5.13(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 Subsidiaries and all amendments and modifications thereto
(the "Leases") and the lessors thereof, including whether, to the knowledge of
the Company, as of the date of this Agreement, any such lessor is a physician or
a family member of a physician. 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.
SECTION 5.14 Intellectual Property. (a) Except as disclosed in Section
5.14(a) of the Company Disclosure Schedule and 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 Subsidiaries as currently conducted does not
infringe upon or misappropriate the Intellectual Property rights of any third
party, and no claim has been asserted to the Company that the conduct of the
business of the Company and the 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 Subsidiary and material to the business, financial condition
or results of operations of the Company and the Subsidiaries, taken as a whole
("Company Owned Intellectual Property"), the Company or a 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
32
Property licensed to the Company or a Subsidiary that is material to the
business of the Company and the Subsidiaries as currently conducted ("Company
Licensed Intellectual Property"), the Company or a 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; (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 5.14(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.
(c) The Company has taken reasonable steps in accordance with normal
industry practice to maintain the confidentiality of its trade secrets and other
confidential Intellectual Property. Except as disclosed in Section 5.14(c) of
the Company Disclosure Schedule, and except as would not reasonably be expected
to have a Company Material Adverse Effect, (i) there has been no
misappropriation of any trade secrets or other Intellectual Property of the
Company or any Subsidiary by any person, (ii) no employee, independent
contractor or agent of the Company or any 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 Subsidiary is in default or breach 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 5.15 Taxes. 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. All
such Tax returns and reports are true, accurate and complete in all material
respects. 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 Subsidiary any
deficiency or claim for any Taxes or interest thereon or penalties in connection
therewith. Neither the Company nor any 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. Neither the Company nor any Subsidiary has made an
election under Section 341(f) of the Code. There are no Tax Liens upon any
property or assets of the Company or any of the Subsidiaries
33
except Liens for current Taxes not yet due. Neither the Company nor any of the
Subsidiaries is a party to any agreement, understanding, or arrangement (with
any person other than the Company and/or any of the Subsidiaries) relating to
allocating or sharing of any amount of Taxes that would reasonably be expected
to have a Company Material Adverse Effect. Neither the Company nor any of the
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 (or any similar provision of state, local or foreign Law), as a
transferee or successor, or by contract that would reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor any of the
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 Subsidiaries, and the IRS has not
initiated or proposed any such adjustment or change in accounting method, in
either case which adjustment or change would reasonably be expected to have a
Company Material Adverse Effect. Neither the Company nor any Subsidiary has any
income reportable for a period ending after the Acceptance Date 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 Acceptance Date
that resulted in a deferred reporting of income from such transaction or from
such change of accounting method, in either case which deferral would reasonably
be expected to have a Company Material Adverse Effect or is inconsistent with
the past practice of the Company. Neither the Company nor any 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. To the knowledge of the Company, neither the Company nor any of
its affiliates has taken or agreed to take any action that would prevent the
Offer and the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code. The Company is not aware of any agreement, plan or
other circumstance, except for a possible future change in the Stock Value, that
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
SECTION 5.16 Environmental Matters. Except as described in Section
5.16 of the Company Disclosure Schedule or as would not prevent or materially
delay consummation of the Merger or otherwise prevent or materially delay the
Company from performing its obligations under this Agreement and would not
reasonably be expected to have a Company Material Adverse Effect, (a) neither
the Company nor any Subsidiary is in violation of 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 Subsidiary may be
in violation of any Environmental Law; (b) none of the properties currently or
formerly owned, leased or operated by the Company or any Subsidiary (including,
without limitation, soils and surface and ground waters) are contaminated with
any Hazardous Substance in a quantity that is reasonably likely to lead to
cleanup or remediation of Hazardous Substances; (c) neither the Company nor any
Subsidiary has received any written notice, demand, claim or request for
information or other written communications alleging that the Company or any
Subsidiary is actually, potentially or allegedly liable under any Environmental
Law (including, without limitation, pending or threatened Liens) for cleanup or
remediation of Hazardous Substances; (d) the Company or a Subsidiary has all
permits, licenses and other authorizations required under any Environmental Law
("Environmental Permits") and the Company and such Subsidiaries are in
compliance with the Environmental Permits; (e) none of the properties owned or
leased by the Company or any Subsidiary is listed or, to the knowledge of the
Company and the Subsidiaries,
34
proposed for listing on the "National Priorities List" or the Comprehensive
Environmental Response, Compensation and Liability Information System under the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, or any similar state or foreign list of sites requiring investigation
or cleanup; (f) during the past three years, neither the Company nor any
Subsidiary has entered into or agreed to any consent decree or order and neither
the Company nor any Subsidiary is subject to any judgment, decree or judicial
order relating to compliance with Environmental Laws or the investigation,
sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous
Substances and, to the knowledge of the Company and the Subsidiaries, no
investigation, litigation or other proceeding is pending or threatened with
respect thereto; (g) neither the Company nor any Subsidiary is an indemnitor in
connection with any claim asserted in writing to the Company or a Subsidiary by
any third-party indemnitee for any liability under any Environmental Law or
relating to any Hazardous Substances; and (h) neither the execution of this
Agreement nor the consummation of the Transaction will require any investigation
or remediation of any Hazardous Substances.
SECTION 5.17 Material Contracts. (a) Subsections (i) through (xii) of
Section 5.17(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 Subsidiary is a party (such contracts and agreements, together
with the Plans, the Leases and the Company Permits, being "Material Contracts"):
(i) each contract, agreement or account involving aggregate annual
consideration payable to the Company for services of more than $1,000,000,
or aggregate annual payments by the Company of more than $1,000,000;
(ii) all contracts and agreements under which the Company or any
Subsidiary provides services other than routine or reference testing
services, such as laboratory management, laboratory directorship,
consulting or information technology;
(iii) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which the Company or any
Subsidiary is a party;
(iv) all contracts and agreements relating to indebtedness with a
principal amount in excess of $500,000 or any pledge of any asset of the
Company or any Subsidiary (other than capitalized leases involving less
than $500,000 in principal amount and other than the Company's senior
credit facility);
(v) all management contracts (excluding contracts for employment) and
contracts with other consultants, including any contracts involving the
payment of royalties or other amounts calculated based upon the revenues or
income of the Company or any Subsidiary or income or revenues related to
any product of the Company or any Subsidiary to which the Company or any
Subsidiary is a party;
(vi) all contracts and agreements with any Governmental Authority
other than agreements related to the provision of clinical laboratory
services to a Governmental
35
Authority, provider agreements and agreements related to licensing of any
facility entered into in the ordinary course of business;
(vii) all contracts and agreements that (A) limit or purport to limit
the ability of the Company or any Subsidiary or, to the Company's
knowledge, any key executives of the Company or any 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 Subsidiary to use
any supplier or third party for all or substantially all of the Company's
or the Subsidiaries' requirements or needs, (C) limit or purport to limit
in any material respect the ability of the Company or any Subsidiary to
solicit any customers or clients of the other parties thereto, (D) require
the Company or any Subsidiary to provide to the other parties thereto "most
favored nations" pricing, or (E) require the Company or any 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");
(viii) all contracts, agreements and arrangements between the Company
or any of its Subsidiaries, on the one hand, and LP, LLC or any of their
respective officers, directors or principals, on the other hand (each such
contract, a "Related Party Agreement");
(ix) 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 Subsidiary with
any third party;
(x) all licenses under CLIA or issued by any other Governmental
Authority including, without limitation, the identity of the respective
licensees thereunder;
(xi) all contracts, agreements and arrangements entered into since
November 1993 between the Company or any of its Subsidiaries and any other
party providing for the acquisition by the Company or such Subsidiary
(including, without limitation, by merger, consolidation, acquisition of
stock or assets or any other business combination) of any corporation,
partnership, other business organization or division thereof or any
material amount of assets, in each case, for an aggregate purchase price in
excess of $100,000 (provided that Section 5.17(a)(xi) of the Company
Disclosure Schedule shall also identify the amounts, if any, that are
payable or potentially payable to any other party under such contracts,
agreements and arrangements pursuant to any post-closing adjustment to the
purchase price (including without limitation under any "earn-out" or
other similar provision)); and
(xii) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company or any
Subsidiary, the conduct of their respective businesses, or the absence of
which would prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would reasonably be expected to have a
Company Material Adverse Effect.
36
(b) Except as would not prevent or materially delay consummation of
the Offer or the Merger or otherwise prevent or materially delay the Company
from performing its obligations under this Agreement and 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 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 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
continue in full force and effect without penalty or other adverse consequence.
Except as disclosed in Section 5.17(b) of the Disclosure Schedule, none of the
Company or any 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 all written Material Contracts, 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 5.18 Insurance. True and complete copies of all material fire
and casualty, general liability, business interruption and workers' compensation
insurance policies maintained by the Company or any Subsidiary have been made
available to Parent, and such policies are in full force and effect as of the
date of this Agreement. The Company or the relevant Subsidiary has paid all
premiums under such policies and none of the Company or any Subsidiary is in
default with respect to its obligations thereunder.
SECTION 5.19 Board Approval; Vote Required. (a) The Company Board, by
resolutions duly adopted by 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 Offer and the Merger, 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 Offer and the Merger, and in accordance with the DGCL,
and (iii) resolved to recommend acceptance of the Offer and the adoption of this
Agreement by the Company's stockholders at the Company Stockholder Meeting.
(b) The only vote of the holders of any class or series of capital
stock of the Company that may be necessary to adopt this Agreement and the
Transaction, including the Merger, is the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock in favor of the
adoption of this Agreement.
SECTION 5.20 Related Party Transactions. Except as set forth in
Section 5.20 of the Company Disclosure Schedule and except as expressly
contemplated by this Agreement, no executive officer, director or affiliate of
the Company or any 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 Subsidiary or is
entitled to any payment or transfer of any assets from the Company or any
Subsidiary or has any material interest in any material property used by the
Company or any Subsidiary or has an
37
interest in any customer or supplier of the Company or any Subsidiary or
provider of any services to the Company or any Subsidiary, except in each case
(i) employment, management or consulting arrangements listed in Section 5.11 or
Section 5.17 of the Company Disclosure Schedule and benefit programs and (ii)
the ownership of less than 3% of the outstanding stock of any publicly traded
company.
SECTION 5.21 Guarantee by Subsidiaries. Except as set forth in Section
5.21 of the Company Disclosure Schedule, and except as provided pursuant to the
terms of the Company's senior credit facility and issued and outstanding senior
subordinated notes, none of the Subsidiaries is prevented or prohibited by its
certificate of incorporation, by-laws or other equivalent organizational
documents, or by any contract, agreement or other instrument or obligation, from
guaranteeing all or any part of any indebtedness of Parent or any subsidiary of
Parent after the Effective Time.
SECTION 5.22 Customers. Section 5.22 of the Company Disclosure
Schedule lists the 20 largest customers of the Company and the Subsidiaries by
revenue during the 12-month period ended December 31, 2001 (the "Customers") and
the amount of gross revenue (net of setoffs, chargebacks and credits) received
by the Company and the Subsidiaries as a result of orders by each of the
Customers during such period. Since January 1, 2001 through the date hereof,
none of the Company, any Subsidiary or any officer, director, affiliate or agent
of the Company or a Subsidiary has received any written notice 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 Subsidiary or otherwise reduce the amount of business conducted with the
Company or any Subsidiary.
SECTION 5.23 Receivables. All Receivables that arose since December
31, 2001 arose from, and the Receivables existing on the Acceptance Date will
have arisen from, the sale of inventory or services to persons not affiliated
with the Company or any Subsidiary and in the ordinary course of business
consistent with past practice.
SECTION 5.24 Brokers. Except for Park Avenue Equity Management, LLC
("Park Avenue"), no broker, finder or investment banker (other than the
Advisors) 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 each of Park Avenue and
the Advisors pursuant to which such firms would be entitled to any payment
related to the Transaction.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to the Company to enter into this Agreement, Parent
and Merger Sub, 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:
38
SECTION 6.01 Corporate Organization. Each of Parent, Merger Sub and
each significant subsidiary (as defined in Rule 1-02 of Regulation S-X
promulgated by the SEC) of Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate 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 prevent or materially delay consummation of the Merger, or
otherwise prevent or materially delay Parent or Merger Sub from performing its
obligations under this Agreement and would not reasonably be expected to have a
Parent Material Adverse Effect. Each of Parent, Merger Sub and each significant
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 prevent or
materially delay consummation of the Merger, or otherwise prevent or materially
delay Parent or Merger Sub from performing its obligations under this Agreement
and would not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 6.02 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 Merger Sub, each as amended to date. Such
certificates of incorporation and by-laws are in full force and effect. Neither
Parent nor Merger Sub is in violation of any of the provisions of its
certificate of incorporation or by-laws.
SECTION 6.03 Capitalization. (a) The authorized capital stock of
Parent consists of (i) 300,000,000 shares of Parent Common Stock and (ii)
10,000,000 shares of preferred stock, par value $0.01 per share ("Parent
Preferred Stock"). As of March 20, 2002, 96,685,069 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
8,123,736 shares of Parent Common Stock were reserved for future issuance
pursuant to outstanding stock options that have been granted prior to the date
hereof. Except as set forth in this Section 6.03 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 Merger Sub or obligating Parent or Merger Sub to
issue or sell any shares of capital stock of, or other equity interests in,
Parent or Merger Sub. 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 Merger Sub to repurchase, redeem or
otherwise acquire any shares of Parent Common Stock or any capital stock of
Merger Sub.
(b) The authorized capital stock of Merger Sub consists of 1000 shares
of Merger Sub Common Stock, all of which are duly authorized, validly issued,
fully paid and nonassessable and free of any preemptive rights in respect
thereof and all of which are owned by Parent. Each outstanding share of capital
stock of Merger Sub is duly authorized, validly issued,
39
fully paid and nonassessable and each such share is owned by Parent or Merger
Sub free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on Parent's or Merger Sub'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
Offer and the Merger in accordance with Section 2.01 and Section 4.01 (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 and (ii)
will, when issued, be registered under the Securities Act and the Exchange Act
and registered or exempt from registration under applicable Blue Sky Laws.
SECTION 6.04 Authority Relative to this Agreement. Each of Parent and
Merger Sub 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
Merger Sub and the consummation by Parent and Merger Sub 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 Merger Sub are necessary to
authorize this Agreement or to consummate the Transaction (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by the DGCL). This Agreement has been duly and validly
executed and delivered by each of Parent and Merger Sub 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 Merger
Sub, enforceable against each of Parent and Merger Sub 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.
SECTION 6.05 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by each of Parent and Merger Sub do
not, and the performance of this Agreement by each of Parent and Merger Sub will
not, (i) conflict with or violate the certificate of incorporation or by-laws of
either Parent or Merger Sub in effect on the date of this Agreement, (ii)
assuming that all consents, approvals, authorizations and other actions
described in Section 6.05(b) have been obtained and all filings and obligations
described in Section 6.05(b) have been made, conflict with or violate any Law
applicable to Parent or Merger Sub 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, Merger Sub or any significant
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 Merger Sub is a party or by which Parent or Merger Sub 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 prevent or materially delay
consummation of the Merger or the Offer or otherwise prevent or
40
materially delay Parent and Merger Sub from performing their obligations under
this Agreement and 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
Merger Sub do not, and the performance of this Agreement by each of Parent and
Merger Sub 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 Securities Act, the Exchange Act, Blue
Sky Laws and state takeover laws, the HSR Act, and filing and recordation of
appropriate merger documents as required by the DGCL and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or materially delay consummation of
the Merger or the Offer or otherwise prevent Parent or Merger Sub from
performing its material obligations under this Agreement and would not
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 6.06 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 December 31, 1999 (such forms, reports,
statements, schedules and other documents being, collectively, the "Parent SEC
Reports"). The Parent SEC Reports (i) at the time they were filed or, if
amended, as of the date of such amendment, complied 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, and (ii)
did not, at the time they were 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 6.06 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 SEC 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 SEC Reports was prepared in
accordance with 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, 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 Section 6.06(c) of the
Parent Disclosure Schedule, 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 GAAP to be set forth on a
consolidated balance sheet of Parent or in the notes thereto, except for
41
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since December 31, 2001, and liabilities and
obligations which would not prevent or materially delay consummation of the
Transaction or otherwise be reasonably likely to prevent or materially delay
either Parent or Purchaser from performing its obligations under this Agreement
and would not reasonably be expected to have a Parent Material Adverse Effect.
(d) Section 6.06(d) of the Parent Disclosure Schedule lists all
"management letters" and other similar letters relating to Parent's or any of
its subsidiaries' internal controls and accounting practices that have been
received by Parent from its independent accountants since December 31, 1999.
True and complete copies of all such management letters have been furnished to
the Company.
SECTION 6.07 Information to Be Supplied. (a) Each of the registration
statement on Form S-4 to be filed with the SEC by Parent in connection with the
issuance of Parent Common Stock in the Merger, as amended or supplemented from
time to time (as so amended and supplemented, the "Merger Registration
Statement"), the Offer Documents and the other documents required to be filed by
Parent with the SEC in connection with the Offer, the Merger and the Transaction
will comply as to form, in all material respects, with the requirements of the
Exchange Act and the Securities Act, as the case may be. Each of the Merger
Registration Statement, the Offer Documents and the other documents required to
be filed by the Company with the SEC in connection with the Offer, the Merger
and the Transaction and any information supplied or to be supplied by Parent or
its subsidiaries or representatives for inclusion or incorporation by reference
in the Schedule 14D-9 or the Proxy Statement/Prospectus will not, on the date of
its filing or mailing or at the time they become effective under the Securities
Act or, in the case of the Offer Registration Statement, on the dates the Offer
Registration Statement is mailed to stockholders of the Company and on the
Acceptance Date and, in the case of the Merger Registration Statement, at the
time of the Company Stockholder Meeting, 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 6.07, no
representation or warranty is made by Parent with respect to statements made or
incorporated by reference in the Merger Registration Statement or the Offer
Documents based on information supplied by or on behalf of the Company and its
Subsidiaries 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 5.08.
SECTION 6.08 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 Merger Sub to consummate the Transactions.
SECTION 6.09 Operations of Merger Sub. Merger Sub 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.
42
SECTION 6.10 Tax Matters. To the knowledge of Parent, neither Parent
nor any of its affiliates has taken or agreed to take any action that would
prevent the Offer and the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. Parent is not aware of any agreement,
plan or other circumstance, except for a possible future change in the Stock
Value, that would prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
SECTION 6.11 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 Merger
Sub.
SECTION 6.12 Employee Benefit Plans. (a) None of the Parent Plans is a
Multiemployer Plan or a Multiple Employer Plan.
(b) Each Parent 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. Parent and the Subsidiaries have
performed all material obligations required to be performed by them under, are
not in any default under or in violation of, and have no knowledge of any
default or violation by any party to, any Parent Plan. Except as would not have
a Parent Material Adverse Effect, no Action is pending or threatened in writing
with respect to any Parent Plan (other than claims for benefits in the ordinary
course) and, to the knowledge of Parent, no fact or event exists that could
reasonably be expected to give rise to any such Action.
(c) Each Parent Plan that is intended to be qualified under Section
401(a) of the Code or Section 401(k) of the Code has timely received a favorable
determination letter from the IRS covering all of the provisions applicable to
the Parent Plan for which determination letters are currently available that the
Parent Plan is so qualified and each trust established in connection with any
Parent Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
it is so exempt, and, to the knowledge of Parent, 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 Parent Plan or the exempt status of any
such trust.
(d) To the knowledge of Parent, 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 Parent Plan. Neither Parent nor any Subsidiary has any
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 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 liability.
SECTION 6.13 Absence of Parent Material Adverse Effect. Since December
31, 2001, (a) there has not been a Parent Material Adverse Effect, and (b)
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 7.02.
43
SECTION 6.14 Litigation. Except as set forth in Section 6.14 of the
Parent Disclosure Schedule, 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 seeks to materially delay or prevent
the consummation of the Transaction or would prevent or materially delay Parent
from performing its obligations under this Agreement or would reasonably be
expected to have a Parent Material Adverse Effect.
SECTION 6.15 Permits; Compliance. (a) Each of Parent and its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, certifications, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for
each of Parent and such subsidiaries to own, lease and operate its properties or
to carry on its business as it is now being conducted (the "Parent Permits"),
except where the failure to have, or the suspension or cancellation of, any of
the Parent Permits would not prevent or materially delay consummation of the
Merger or otherwise prevent or materially delay Parent or Purchaser from
performing its obligations under this Agreement and would not reasonably be
expected to have a Parent Material Adverse Effect. As of the date of this
Agreement, no suspension or cancellation of any of the Parent Permits is pending
or, to the knowledge of Parent, threatened. None of Parent nor any of its
subsidiaries is in conflict with, or in default, breach or violation of, (a) any
Law applicable to Parent or any such subsidiary or by which any property or
asset of Parent or any such subsidiary is bound or affected, or (b) any note,
bond, mortgage, indenture, contract, agreement, lease, license, Parent Permit,
franchise or other instrument or obligation to which Parent or any such
subsidiary is a party or by which Parent or any such subsidiary or any property
or asset of Parent or any such subsidiary is bound, except in either case for
any such conflicts, defaults, breaches or violations that would not prevent or
materially delay the consummation of the Merger or otherwise prevent or
materially delay Parent or Purchaser from performing its obligations under this
Agreement and would not reasonably be expected to have a Parent Material Adverse
Effect.
(b) None of Parent nor any of its subsidiaries or any individual who
is currently an executive officer, director or, to the knowledge of Parent,
employee of Parent or any such subsidiary (i) has been convicted of, charged
with or, to the knowledge of Parent, investigated for a Medicare, Medicaid or
state health program-related offense, (ii) since January 1, 1999, has been
convicted of, charged with or, to the knowledge of Parent, investigated for a
violation of Law related to fraud, theft, embezzlement, financial misconduct or
obstruction of an investigation, (iii) has been excluded or suspended from
participation in Medicare, Medicaid or any federal or state health program or
(iv) since January 1, 1999, has been subject to any Order or any criminal or
civil fine imposed by any Governmental Authority with respect to any such
Medicare, Medicaid or any other federal or state health care program.
44
(c) Except as disclosed in Section 6.15(c) of the Parent Disclosure
Schedule, since January 1, 1999, there have been no written notices, citations
or decisions by any Governmental Authority that Parent or any of its
subsidiaries fails to meet any applicable standards promulgated by such
Governmental Authority for which a plan of correction has not been accepted, and
Parent does not know of any such failure or facts upon which such a failure
could be alleged except, in either case, as would not reasonably be expected to
have a Parent Material Adverse Effect. Except as set forth in Section 6.15(c) of
the Parent Disclosure Schedule, none of Parent or any of its subsidiaries has
received any notice of any potential deficiency in or violation of any
applicable Law or Order relating to Parent or any such subsidiary for which a
plan of correction has not been accepted except as would not reasonably be
expected to have a Parent Material Adverse Effect. Except as disclosed in
Section 6.15(c) of the Parent Disclosure Schedule, and except as would not
reasonably be expected to have a Parent Material Adverse Effect, since January
1, 1996, Parent has complied in all material respects with all applicable Laws
with respect to the services provided and business operated by Parent.
(d) Except as disclosed in Section 6.15(d) of the Parent Disclosure
Schedule, and except as would not have a Parent Material Adverse Effect, (i)
none of Parent nor any of its subsidiaries has engaged in any activities that
are prohibited under or would violate Medicare and Medicaid statutes, 42 U.S.C.
Section 1320a-7a and 7b, or the regulations promulgated pursuant to such
statutes, or comparable state or local Law or rules of professional conduct;
(ii) Parent and its subsidiaries have timely and accurately filed in all
material respects all requisite claims and other reports required to be filed in
connection with all applicable state and federal Medicare and Medicaid programs
due on or before the date of this Agreement; (iii) there is no arrangement
providing for any rebates, kickbacks or other forms of compensation that is
unlawful to be paid to any person or entity in return for the referral of
business or for the arrangement for recommendation of such referrals; and (iv)
none of Parent nor any of its subsidiaries has any financial arrangement which
renders any of its billings unlawful pursuant to the Stark Law or comparable
state Law.
(e) To the knowledge of Parent, all agreements of Parent and its
subsidiaries with third-party payors were entered into by Parent or any such
subsidiaries, as the case may be, in the ordinary course of business. Parent and
its subsidiaries are in compliance with each of their respective third-party
payor agreements, and Parent and its subsidiaries have properly charged and
billed in accordance with the terms of their respective third-party payor
agreements, including, where applicable, billing and collection of all
deductibles and co-payments, except for any such violations that would not
reasonably be expected to have a Parent Material Adverse Effect.
(f) Except as disclosed in Section 6.15(f) of the Parent Disclosure
Schedule, (i) no right of Parent or any of its subsidiaries to receive
reimbursements pursuant to any government program or private program has ever
been terminated or suspended as a result of any investigation or action whether
by any Governmental Authority or other third party, (ii) none of Parent nor any
of its subsidiaries has since January 1, 1999 received notice from any
Governmental Authority that it has been the subject of any inspection,
investigation, survey, audit, monitoring or other form of review by any
Governmental Authority, professional review organization, accrediting
organization or certifying agency for the purpose of any alleged improper
activity on the part of such entity, other than routine audits or inquiries and
other than
45
those that would not reasonably be expected to have a Parent Material Adverse
Effect, (iii) none of Parent nor any of its subsidiaries has received any
written notice of deficiency from a Governmental Authority in connection with
its operations for which a plan of correction has not been accepted, and (iv)
none of Parent nor any of its subsidiaries has received any written notice of
any claim, requirement or demand of any licensing, accrediting or certifying
agency to rework or redesign their operations or any part thereof.
SECTION 6.16 Financing. Parent has, or will have prior to the
Acceptance Date, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to pay the Cash Consideration for all
Tendered Cash Election Shares and to pay all fees and expenses in connection
therewith.
SECTION 6.17 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 VII
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 7.01 Conduct of Business by the Company Pending the Merger.
(a) The Company agrees that, between the date of this Agreement and the
Effective Time, except as expressly contemplated by any other provision of this
Agreement, as set forth in Section 7.01 of the Company Disclosure Schedule or as
required by a Governmental Authority of competent jurisdiction, unless Parent
shall otherwise consent in writing:
(i) the businesses of the Company and the Subsidiaries shall be
conducted in all material respects only in, and the Company and the
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 use its reasonable best efforts to preserve
substantially intact the business organization of the Company and the
Subsidiaries, to keep available the services of the current officers,
employees and consultants of the Company and the Subsidiaries and to
preserve the current relationships of the Company and the Subsidiaries with
customers, suppliers and other persons with which the Company or any
Subsidiary has significant business relations.
(b) By way of amplification and not limitation, except as expressly
contemplated by any other provision of this Agreement or as set forth in Section
7.01 of the Company Disclosure Schedule, neither the Company nor any Subsidiary
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or propose to do, any of the following without the prior written
consent of Parent:
(i) amend or otherwise change its certificate of incorporation or
by-laws or equivalent organizational documents;
46
(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 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 Subsidiary (except for the issuance of up to a maximum of
3,822,307 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 Subsidiary, except in the ordinary course of business and in a manner
consistent with past practice;
(iii) except as expressly set forth in, and permitted by, Section 4.04
of the Company Disclosure Schedule, 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 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; (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 (which shall be deemed to include borrowings
under its senior credit facility); (C) enter into any contract or agreement
other than in the ordinary course of business and consistent with past
practice; (D) authorize, or make any commitment with respect to, any single
capital expenditure which is in excess of $500,000 or capital expenditures
which are, in the aggregate, in excess of $500,000 per month
(the "Monthly CapEx Amount") from the date hereof until the earlier of (x)
the Acceptance Date or (z) the termination of this Agreement pursuant to
Section 10.01 (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 or amend any contract, agreement, commitment or
arrangement with respect to any matter set forth in this Section 7.01(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;
47
(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 Subsidiary, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the
Company or of any Subsidiary, or establish, adopt, enter into or amend 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 any of the accounting principals used by it, other than as
required by GAAP;
(x) (A) make or rescind any Tax election, settle or compromise any
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 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 $500,000 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 Subsidiary's rights thereunder, or (B) enter into any
contract or agreement that would be a Restrictive Agreement or a Related
Party Agreement;
(xiii) except with respect to trademarks in the ordinary course of
business and consistent with past practice, (A) grant any license in
respect of any material Intellectual Property of the Company or any
Subsidiary, (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 Subsidiary, unless such
disclosure is made in the ordinary course of business 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 Offer and
the Merger.
SECTION 7.02 Conduct of Business by Parent Pending Consummation of the
Merger. (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 or as set forth in
48
Section 7.02 of the Parent Disclosure Schedule, unless the Company shall
otherwise consent in writing, 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) issue, sell, or grant, or authorize the issuance, sale or grant
of, any shares of capital stock of Parent except at the market price or
upon the exercise of options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock which were
issued with an exercise or conversion price of not less than the market
price at the time of issuance; provided, however, that the foregoing shall
not prohibit issuances of capital stock, options or rights as part of
normal employee compensation in the ordinary course of business; and
provided further, however, that this clause (ii) shall not prohibit the
issuance of capital stock, options, warrants, convertible securities or
other rights in connection with the acquisition of another entity or
business if such acquisition is otherwise permitted by clause (v) below;
(iii) 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;
(iv) reclassify, combine, split or subdivide its capital stock without
appropriate adjustment being made to the Stock Consideration payable to the
holders of Company Common Stock in the Offer or the Merger;
(v) 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, unless such acquisition or the
entering into of a definitive agreement relating to the consummation of
such transaction would not, in the reasonable judgment of Parent at the
time of such determination, (A) impose any material delay in the obtaining
of, or materially increase the risk of not obtaining, any authorizations,
consents, orders, declarations or approvals of any Governmental Authority
necessary to consummate the Offer or the Merger or the expiration or
termination of any applicable waiting period under any antitrust or
competition Law, or (B) materially increase the risk of any Governmental
Authority entering an order prohibiting the consummation of the Offer or
the Merger or commencing any action seeking to achieve any of the effects
described in paragraph (a) of clause (v) of Annex I; or
(vi) 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 Offer
and the Merger.
49
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01 Company Stockholder Meeting. If required by applicable
Law, the Company, acting through the Company Board, shall, in accordance with
applicable Law, duly call, convene and hold a special meeting of the holders of
Company Common Stock (the "Company Stockholder Meeting"), as soon as reasonably
practicable after the acceptance for payment or exchange of shares of Company
Common Stock pursuant to the Offer, for the purpose of voting upon this
Agreement and the Merger, and the Company agrees that this Agreement shall be
submitted at such meeting. Subject to Section 8.04, the Company shall take all
action necessary to secure the vote of holders of Company Common Stock required
by applicable Law and the Company's Third Amended and Restated Certificate of
Incorporation and Third Amended and Restated By-Laws to obtain the approval for
this Agreement.
SECTION 8.02 Preparation of Merger Registration Statement and Proxy
Statement/Prospectus. (a) If required by applicable Law, promptly after the
acceptance for exchange or payment of shares of Company Common Stock pursuant to
the Offer, Parent and the Company shall prepare, and Parent shall file with the
SEC, the Merger Registration Statement, in which the Proxy Statement/Prospectus
will be included as Parent's prospectus. Parent shall provide the Company and
its counsel with any comments it may receive from the SEC or its staff with
respect to the Merger Registration Statement as promptly as practicable after
receipt of such comments and the parties shall cooperate to prepare appropriate
responses to the SEC to such comments and make such modifications to the Merger
Registration Statement as shall be reasonably appropriate. Each of the Company
and Parent shall use all reasonable efforts to have the Merger Registration
Statement declared effective under the Securities Act as promptly as practicable
after the acceptance for payment or exchange of shares of Company Common Stock
pursuant to the Offer and to keep the Merger Registration Statement effective as
long as is necessary to consummate the Merger. The Company shall furnish all
information concerning the Company as Parent may reasonably request in
connection with such action and preparation of the Merger Registration Statement
and Proxy Statement/Prospectus. If required by applicable Law, the Company shall
use its reasonable best efforts to mail the Proxy Statement/Prospectus to its
stockholders as promptly as practicable after the Merger Registration Statement
is declared effective under the Securities Act and, if necessary, after the
Proxy Statement/Prospectus shall have been so mailed, promptly circulate
amended, supplemental or supplemented proxy material, and, if required in
connection therewith, resolicit proxies. Parent shall take any action reasonably
required to be taken under applicable state securities or Blue Sky Laws in
connection with the issuance of Parent Common Stock in the Offer and the Merger.
No amendment or supplement to the Merger Registration Statement or Proxy
Statement/Prospectus will be made by Parent or the Company without the approval
of the other party, which will not be unreasonably withheld or delayed. Each
party will advise the other party promptly, after it receives notice thereof, of
the time when the Merger Registration Statement is declared effective or any
supplement or amendment thereto has been filed, of the issuance of any stop
order, of the suspension or qualification of Parent Common Stock issued in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC for amendment of the Proxy Statement/Prospectus or comments
thereon and responses thereto or requests by the SEC for additional information.
If, at any time prior to the Effective Time, the Company or Parent
50
discovers any information relating to either party, or any of their respective
affiliates, officers or directors, that should be set forth in an amendment to
the Proxy Statement/Prospectus so that such document would not contain any
misstatement of material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, the party that
discovers that information shall promptly notify the other party and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law or regulation,
disseminated to the stockholders of the Company.
(b) Notwithstanding the foregoing, if Parent or Merger Sub shall
acquire at least 90% of the outstanding shares of Company Common Stock pursuant
to the Offer or otherwise, the parties hereto agree, subject to the satisfaction
or (to the extent permitted hereunder) waiver of all conditions to the Merger,
to take, or cause to be taken, all necessary and appropriate action to cause the
Merger to be effective as soon as practicable after the acceptance for payment
or exchange of shares of Company Common Stock pursuant to the Offer without the
Company Stockholder Meeting.
SECTION 8.03 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 8.03), 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 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.
(b) All information obtained by the parties pursuant to this Section
8.03 shall be kept confidential in accordance with the confidentiality
agreement, dated November 20, 2001 (the "Confidentiality Agreement"), between
Parent and the Company.
(c) No investigation pursuant to this Section 8.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 8.04 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 8.04(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
51
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
8.04(b), enter into or maintain or continue discussions or negotiate with any
person or entity 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 8.04, 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
8.04), 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 8.04, 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
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
8.04(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 8.04(b)) and as to the status and material
terms of all substantive discussions or negotiations (permitted by Section
8.04(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
8.04(b)) to any other person or group in connection with any Competing
Transaction which was not previously provided to Parent.
(d) Except as otherwise set forth in this Section 8.04(d), the Company
Board shall not withdraw, qualify, modify or amend, or propose to withdraw,
qualify, modify or amend, in any manner adverse to Parent or Merger Sub, the
Recommendation of the Company Board, or take any action, or make any statement,
filing or release inconsistent with such
52
Recommendation; provided, however, that if, prior to consummation of the Offer,
the Company Board reasonably determines in good faith, after consultation with
outside legal counsel, that the failure of the Company Board to withdraw,
qualify, modify or amend the Recommendation would be a breach of its fiduciary
duties under applicable Law, the Company Board shall be permitted to withdraw,
qualify, modify or amend, in a manner adverse to Parent or Merger Sub, the
Company Recommendation. The Company Board shall promptly deliver to Parent
written notice advising Parent (i) that it has withdrawn, qualified, modified or
amended, in a manner adverse to Parent or Merger Sub, the Recommendation and
(ii) if applicable, the material terms and conditions of the Superior Proposal
received by the Company prior to such withdrawal, qualification, modification or
amendment and the identity of the person or persons making such Superior
Proposal. Nothing contained in this Section 8.04 shall prohibit the Company or
the Company Board from taking and disclosing to its stockholders a position with
respect to a tender or exchange offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act, or from making any disclosure
required by applicable Law; provided, however, that any withdrawal,
qualification, modification or amendment of the Recommendation shall be made as
and only to the extent permitted by Section 8.04(d).
(e) 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 Subsidiary, (ii) any sale, lease,
exchange, transfer or other disposition of all or a substantial part of the
assets of the Company or of any Subsidiary, (iii) any sale, exchange, transfer
or other disposition of 15% or more of any class of equity securities of the
Company or of any Subsidiary or of 15% or more of the assets of the Company or
of any Subsidiary, or (iv) any tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 15% or more of any
class of equity securities of the Company or of any Subsidiary.
(f) 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 50% 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 involving the Company), directly or indirectly, of
ownership of at least 50% 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 nationally recognized
reputation), to be more favorable to the Company stockholders than the Offer and
the Merger, is reasonably capable of being consummated and for which financing,
to the extent required, is reasonably likely, in the good faith judgment of the
Board (after consultation with a financial advisor of nationally recognized
reputation), to be obtained on a timely basis.
SECTION 8.05 Employee Benefits Matters. (a) From and after the
Effective Time, Parent shall cause the Surviving Corporation and its
subsidiaries to honor in accordance
53
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 Time 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 Surviving Corporation 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 Surviving Corporation or any of its
subsidiaries for service accrued or deemed accrued prior to the Effective Time
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 Parent 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 Time occurs.
(b) Except as contemplated by the Employment Agreements, following the
Effective Time, Parent shall continue to provide, or shall cause to be continued
to be provided, to individuals who are employed by the Surviving Corporation and
its subsidiaries as of the Effective Time and who remain employed with Parent or
any subsidiary of Parent ("Affected Employees"), for so long as such Affected
Employees remain employed by Parent or any subsidiary of Parent, employee
benefits (other than salary or incentive compensation) (i) pursuant to the
Company's or its Subsidiaries employee benefit plans, programs, policies and
arrangements as provided to such Affected Employees immediately prior to the
Effective Time or (ii) pursuant to employee benefit plans, programs, policies or
arrangements maintained by Parent or any subsidiary of Parent providing coverage
and benefits that, in the aggregate, are no less favorable than those provided
to employees of Parent or its subsidiaries in positions reasonably comparable to
the positions held by the Affected Employees.
SECTION 8.06 Directors' and Officers' Indemnification and Insurance.
(a) The Certificate of Incorporation of the Surviving Corporation shall (i)
contain provisions no less favorable with respect to indemnification for matters
occurring prior to the Effective Time than are set forth in the Third Amended
and Restated Certificate of Incorporation and Third Amended and Restated By-Laws
of the Company, 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, and
(ii) contain provisions no less favorable with respect to indemnification for
matters occurring from and after the Effective Time than are set forth in
Parent's Certificate of Incorporation, as of the date hereof.
(b) The Surviving Corporation shall 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 the Surviving Corporation or
54
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 Surviving Corporation or Parent be
required to expend pursuant to this Section 8.06(b) more than the annual amount
set forth on Section 8.06(b) of the Company Disclosure Schedule; provided
further, however, that, if the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds such maximum amount, the
Surviving Corporation 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) In addition to the other rights provided for in this Section 8.06
and not in limitation thereof (but without in any way limiting or modifying the
obligations of any insurance carrier contemplated by Section 8.06(b)), for six
years from and after the Effective Time, the Surviving Corporation shall, to the
fullest extent permitted by the DGCL (including Section 145(f) thereof) on the
date hereof, indemnify and hold harmless (and release from any liability to the
Surviving Corporation or any of their respective subsidiaries) the persons who,
at or prior to the Effective Time, were officers or directors of the Company or
served on behalf of the Company as an officer or director of any of the
Company's current or former Subsidiaries (the "Indemnitees") against all
expenses (including attorneys' fees), losses, claims, damages, judgments, fines
and amounts paid in settlement that are actually and reasonably incurred by the
person in connection with any threatened, pending or completed action, suit or
proceeding, whether criminal, civil, administrative or investigative, that
related to an event, act or omission which occurred prior to the Effective Time
by reason of the fact that such person was at or prior to the Effective Time a
director or officer of the Company or any of its current or former Subsidiaries
(collectively, an "Indemnifiable Claim"); provided, however, that the Surviving
Corporation shall not be responsible for any amounts paid in settlement of any
Indemnifiable Claim without the prior written consent of Parent or the Surviving
Corporation. In the event any Indemnifiable Claim is asserted or made within
such six-year period, all rights to indemnification shall continue until such
claim is disposed of or all judgments, orders, decrees or other rulings in
connection with such claim are fully satisfied.
(d) In addition to the other rights provided for in this Section 8.06,
and not in limitation thereof, the Surviving Corporation, Parent and the Company
agree that all contracts, agreements, arrangements or understandings between the
Company and any Indemnitees, as in effect on the date hereof (including without
limitation that certain Financial Advisory Agreement, dated November 23, 1999,
between the Company and Kelso & Company, L.P., to the extent in effect as of the
date of this Agreement, and including those contracts, agreements, arrangements
or understandings set forth in Section 5.17 or Section 5.20 of the Company
Disclosure Schedule), copies of which have been provided to Parent prior to the
date hereof, shall survive the Merger and continue in full force and effect in
accordance with their terms.
(e) In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or
55
the Surviving Corporation, as the case may be, or at Parent's option, Parent,
shall assume the obligations set forth in this Section 8.06.
(f) The obligation of the Surviving Corporation under this Section
8.06 shall not be terminated or modified in such a manner as to adversely affect
any Indemnitee to whom this Section 8.06 applies without the consent of such
Indemnitee (it being expressly agreed that the Indemnitees to whom this Section
8.06 applies shall be third party beneficiaries of this Section 8.06).
SECTION 8.07 Notification of Certain Matters. (a) The Company shall
give prompt notice to Parent, and Parent or Merger Sub 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 8.07 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
Merger Sub shall give prompt notice to the Company, of: (i) any notice or other
communication from any Governmental Authority in connection with the
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 8.08 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, prior to the initial expiration of
the Offer, 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 8.09 Further Action; Reasonable Best Efforts. (a) Upon the
terms and subject to the conditions of this Agreement, each of the parties
hereto shall promptly after the date of this Agreement (i) make its respective
filings, and thereafter make any other required submissions, under the HSR Act
with respect to the Transaction and (ii) 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 or advisable under applicable Laws or
otherwise to consummate and make effective the Transaction, including, without
limitation, using its reasonable best efforts to obtain all permits, consents,
approvals, authorizations, qualifications and orders of Governmental
56
Authorities and parties to contracts with the Company and the Subsidiaries as
are necessary for the consummation of the Transaction and to fulfill the
conditions to the Offer and the Merger; provided that neither Merger Sub nor
Parent will be required by this Section 8.09 to take any action, including
entering into any consent decree, hold separate orders or other arrangements,
that (A) requires the divestiture of any assets of any of Merger Sub, Parent,
the Company or any of their respective subsidiaries or (B) limits Parent's
freedom of action with respect to, or its ability to retain, the Company and the
Subsidiaries or any portion thereof or any of Parent's or its affiliates' other
assets or businesses.
(b) Each of the parties hereto shall use its reasonable best efforts
to cause its respective officers, employees, agents, auditors and
representatives to cooperate with each other, prior to the Effective Time, to
ensure the orderly combination of the Company and the Subsidiaries with Parent
and its subsidiaries following the Effective Time 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.
(c) The Company shall cooperate with Parent, and shall use its
reasonable best efforts to cause the Company's accountants to provide to Parent,
at Parent's expense, the requisite consents required to enable Parent to fulfill
any requirements imposed on it by the Exchange Act or the Securities Act, and
the Company shall cooperate with Parent in Parent's efforts to obtain extended
reporting coverage for certain liability insurance policies maintained by the
Company and the Subsidiaries as contemplated by Section 8.06(b) hereof.
SECTION 8.10 Plan of Reorganization. (a) This Agreement is intended to
constitute a "plan of reorganization" within the meaning of section 1.368-2(g)
of the income tax regulations promulgated under the Code. From and after the
date of this Agreement and until the Effective Time, each party hereto shall use
its reasonable best efforts to cause the Offer and the Merger to qualify, and
will not knowingly take any action, cause any action to be taken, fail to take
any action or cause any action to fail to be taken which action or failure to
act could prevent the Offer and the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code; provided, however, that Parent
may elect to effect the Reverse Merger as permitted by Section 3.01 of this
Agreement. Following the Effective Time, none of the Surviving Corporation,
Parent or any of their affiliates knowingly shall take any action, cause any
action to be taken, fail to take any action or cause any action to fail to be
taken, which action or failure to act could cause the Offer and the Merger to
fail to qualify as a reorganization within the meaning of Section 368(a) of the
Code.
(b) At or immediately prior to the Effective Time, Parent shall seek
to obtain an opinion of Shearman & Sterling, counsel to Parent, that the Offer
and the Merger will be treated as a reorganization within the meaning of Section
368(a) of the Code (together with the opinion referred to in Section 8.10(c)
below, the "Tax Opinions"). In connection therewith, both Parent (together with
Merger Sub) and the Company shall deliver to Shearman & Sterling representation
letters (together with the representation letters referred to in Section 8.10(c)
below, the "Representation Letters"), dated and executed as of the Effective
Time (and as of such other date or dates as reasonably requested by Shearman &
Sterling), substantially in the form attached hereto as Exhibit 8.10(b).
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(c) At or immediately prior to the Effective Time, the Company shall
seek to obtain an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel
to the Company, that the Offer and the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code (together with
the opinion referred to in Section 8.10(b) above, the "Tax Opinions"). In
connection therewith, both Parent (together with Merger Sub) and the Company
shall deliver to Skadden, Arps, Slate, Meagher & Flom LLP representation letters
(together with the representation letters referred to in Section 8.10(b) above,
the "Representation Letters"), dated and executed as of the Effective Time (and
as of such other date or dates as reasonably requested by Skadden, Arps, Slate,
Meagher & Flom LLP), substantially in the form attached hereto as Exhibit
8.10(c).
(d) As of the date hereof, the Company does not know of any reason (i)
why it would not be able to deliver the Representation Letters contemplated by
Sections 8.10(b) and 8.10(c) to enable such firms to deliver the Tax Opinions or
(ii) why counsel to Parent and the Company would not be able to deliver the Tax
Opinions contemplated by Sections 8.10(b) and 8.10(c).
(e) As of the date hereof, Parent does not know of any reason (i) why
it would not be able to deliver the Representation Letters contemplated by
Sections 8.10(b) and 8.10(c) to enable such firms to deliver the Tax Opinions or
(ii) why counsel to Parent and the Company would not be able to deliver the Tax
Opinions contemplated by Sections 8.10(b) and 8.10(c).
SECTION 8.11 Merger Sub. Parent shall take all action necessary to
cause Merger Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and subject to the conditions set forth in
this Agreement.
SECTION 8.12 Letters of Accountants. (a) Parent shall use its
reasonable best efforts to cause to be delivered to the Company "comfort"
letters of PricewaterhouseCoopers LLP, Parent's independent public accountants,
dated and delivered the date on which the Offer Registration Statement shall
become effective, the Acceptance Date, the date the Merger Registration
Statement shall become effective and as of the Effective Time, and addressed to
the Company, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
(b) The Company shall use its reasonable best efforts to cause to be
delivered to Parent "comfort" letters of Deloitte & Touche LLP, the Company's
independent public accountants, dated and delivered the date on which the Offer
Registration Statement shall become effective, the Acceptance Date, the date the
Merger Registration Statement shall become effective and as of the Effective
Time, and addressed to Parent, in form and substance reasonably satisfactory to
Parent and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement.
SECTION 8.13 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 in the Offer and the Merger, and shall use its
reasonable efforts to obtain, prior to the
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initial scheduled expiration date of the Offer (or as soon thereafter as
practicable) and prior to the Effective Time, approval for the listing of Parent
Common Stock to be issued in the Offer and the Merger, as the case may be,
subject to official notice of issuance to the NYSE, and the Company shall
cooperate with Parent with respect to such listing.
SECTION 8.14 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 or the NASDAQ
National Market, 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, the Offer or the
Merger; provided, however, that this Section 8.14 shall terminate in the event
the Company Board withdraws the Recommendation.
SECTION 8.15 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 8.16 Transaction Fees and Expenses. Notwithstanding anything
to the contrary contained in this Agreement, the Company shall not incur, or
cause to be incurred, aggregate Transaction Fees (as defined below) in excess of
$10,000,000. For purposes of this Section 8.16, "Transaction Fees" shall mean
the fees and disbursements of the Company's legal counsel and financial advisors
that are incurred in connection with the preparation, negotiation, execution,
delivery and performance of the Merger Agreement and the consummation of the
transactions contemplated hereby, except that any legal costs and expenses
incurred solely in connection with complying with the HSR Act (including,
without limitation, complying with any "second request" made thereunder) shall
be excluded from the calculation of such costs and expenses.
SECTION 8.17 Restrictions on Acquisition of Company Common Stock. From
and after the date of this Agreement and until the earlier to occur of (x) two
years following the purchase of any Stockholders' Shares pursuant to the
exercise of the Options (as such terms are defined in the Stockholders
Agreement) and (y) in the event Parent does not exercise the Options and
purchase any Stockholders' Shares pursuant thereto, the termination of the
Option Exercise Period (such period being, the "Standstill Period"), neither
Parent, nor any of its subsidiaries or controlled affiliates shall, and Parent
shall use its reasonable efforts to cause its affiliates not to, directly or
indirectly, acquire, announce an intention to acquire, offer to acquire, or
enter into any agreement, arrangement or undertaking of any kind the purpose of
which is to acquire, by purchase, exchange or otherwise, any shares of Company
Common Stock or options or rights to acquire shares of Company Common Stock,
except pursuant to (i) the Offer, (ii) the Merger, (iii) the exercise of the
Options, or (iv) a transaction made available to all holders of Company Common
Stock that is approved by a majority of the Independent Directors. For purposes
of this
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Section 8.17, the term "Independent Directors" shall mean the directors
on the Company Board who are not, at the time of such determination, directors,
officers, employees or affiliates of Parent or officers or employees of the
Company.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.01 Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver (where permissible) of the following
conditions:
(a) Merger Registration Statement. If required, the Merger
Registration Statement shall have been declared effective by the SEC under
the Securities Act and no stop order suspending the effectiveness of the
Merger Registration Statement shall have been issued by the SEC and no
proceeding for that purpose shall have been initiated by the SEC and not
concluded or withdrawn.
(b) Company Stockholder Approval. If required under the DGCL, this
Agreement shall have received Company Stockholder Approval.
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law, rule, regulation, judgment,
decree, executive order or award (an "Order") which is then in effect and
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(d) NYSE Listing. The shares of Parent Common Stock to be issued in
the Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(e) Offer. Merger Sub shall have purchased shares of Company Common
Stock pursuant to the Offer.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after the Company
Stockholder Approval:
(a) by mutual written consent of Parent and the Company; or
(b) by Parent if, at any time prior to the Acceptance Date, (i) the
Company has breached in any material respect any representation, warranty,
covenant or other agreement contained in this Agreement, which (A) would
give rise to the failure of a condition set forth in clause (e)(i), (ii) or
(iii) of Annex I, (B) cannot be or has not been cured prior to the
Termination Date (as defined below) and (C) has not been waived by Parent
pursuant to the provisions hereof; or (ii) the Company Board shall have (1)
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amended, qualified, withdrawn or modified, or proposed or resolved to do
so, in a manner adverse to Parent or Merger Sub, the Recommendation, or (2)
approved or recommended, or proposed to approve or recommend, any Competing
Transaction other than the Offer and the Merger, or the Company Board or
any committee thereof shall have resolved to do any of the foregoing; or
(c) by the Company if, at any time prior to the Acceptance Date,
Parent has breached or failed to perform in any material respect any
representation, warranty, covenant or other agreement contained in this
Agreement, which (A) would give rise to the failure of a condition set
forth in clause (i), (ii) or (iii) of Section 2.01(c), (B) cannot be or has
not been cured prior to the Termination Date and (C) has not been waived by
the Company pursuant to the provisions hereof; or
(d) by either Parent or the Company if (i) the Offer has not been
consummated on or before September 30, 2002 (the "Termination Date");
provided that the right to terminate this Agreement pursuant to this clause
(d)(i) shall not be available to any party whose willful or intentional
failure to fulfill any obligation of this Agreement or other willful or
intentional breach of this Agreement has resulted in the failure of any
condition to the Offer or the Merger not to be satisfied prior to such
date, (ii) the Offer shall have expired or been terminated in accordance
with the terms of this Agreement without Parent or Merger Sub having
accepted for exchange any shares of Company Common Stock pursuant to the
Offer; or (iii) any court of competent jurisdiction or any Governmental
Authority shall have issued an Order or taken any other action permanently
restricting, enjoining, restraining or otherwise prohibiting acceptance for
payment or exchange of shares of Company Common Stock pursuant to the Offer
or consummation of the Merger and such Order or other action shall have
become final and nonappealable.
SECTION 10.02 Effect of Termination. In the event of termination of
this Agreement by Parent or the Company, as provided in Section 10.01, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent or Merger Sub or their respective officers or
directors (except that Section 8.03, Section 8.17, this Section 10.02, Section
10.03 and Article XI shall survive the termination); provided, however, that
nothing contained in this Section 10.02 or in Section 10.03 shall relieve any
party hereto from any liability for any willful or intentional breach of this
Agreement.
SECTION 10.03 Payment of Certain Fees; Expenses. (a) If this Agreement
is terminated by Parent in accordance with Section 10.01(b)(ii), then the
Company shall pay to Parent in immediately available funds, all of Parent's
Expenses, up to a maximum of $4 million, plus a termination fee in an amount
equal to $35 million (the "Termination Fee"); provided, however, that the
Company shall not be required to pay the Termination Fee to Parent or to
reimburse Parent for all of Parent's Expenses pursuant to this Section 10.03(a)
if, at the time of the event giving rise to Parent's right to terminate this
Agreement pursuant to Section 10.01(b)(ii), a Parent Share Price Decrease (as
such term is defined in the Stockholders Agreement, but without giving effect to
the provisions of clause (3) of such definition for purposes hereof) shall have
occurred and be continuing.
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(b) If this Agreement is terminated by Parent pursuant to Section
10.01(b)(i), then the Company shall pay to Parent, within five business days
after submission of statements therefor, all of Parent's Expenses up to a
maximum of $5 million.
(c) If this Agreement is terminated by the Company pursuant to Section
10.01(c), then Parent shall pay to Company, within five business days after
submission of statements therefor, all of Company's Expenses (as defined in
paragraph (e) of this Section) up to a maximum of $5 million.
(d) If (x) this Agreement is terminated by Parent or the Company
pursuant to Section 10.01(b)(i), Section 10.01(d)(i) or Section 10.01(d)(ii),
(y) a proposal or offer for a Competing Transaction (replacing references to 15%
in the definition thereof with references to 50%) had been made and publicly
announced or communicated to the Company's stockholders after the date of this
Agreement and prior to the date of termination of this Agreement and (1) had not
been publicly withdrawn in a bona fide manner, (2) at the time of termination of
the Merger Agreement, provided for consideration that was more favorable to the
holders of Company Common Stock, from a financial point of view (taking into
account, among other things, the composition of such consideration compared to
the composition of the consideration being offered in the Offer and the Merger)
than the consideration payable to the holders of Company Common Stock in the
Offer and the Merger and (3) was reasonably capable of being consummated by the
party proposing it, and (z) concurrently with or within 18 months of the date of
such termination a Third Party Acquisition Event occurs, then, in addition to
any amount paid or payable pursuant to Section 10.03(b), the Company shall
within five business days of the occurrence of such Third Party Acquisition
Event pay to Parent the Termination Fee; provided, however, that the Company
shall not be required to pay the Termination Fee to Parent pursuant to this
Section 10.03(d) if the Merger Agreement was terminated pursuant to Section
10.01(d)(i) or on the Termination Date pursuant to Section 10.01(d)(ii), and if,
at the time of such termination, either (x) the condition contained in clause
(ii) of Annex I has not been satisfied or (y) the condition contained in
paragraph (d) of clause (v) of Annex I has not been satisfied or any litigation
of the type described in paragraph (a) of clause (v) of Annex I with respect to
antitrust or competition Laws shall have been instituted or commenced by any
Governmental Authority and be pending.
"Third Party Acquisition Event" shall mean the earlier of (i) the
consummation of a Competing Transaction involving the purchase of a majority of
either the equity securities of the Company or of the consolidated assets of the
Company and its Subsidiaries, taken as a whole, or any such transaction that, if
it had been proposed prior to the termination of this Agreement, would have
constituted a Competing Transaction (replacing references to 15% in the
definition thereof with references to 50%) or (ii) the entering into by the
Company or any of its Subsidiaries of a definitive agreement with respect to any
such transaction.
(e) Notwithstanding anything to the contrary contained in this Section
10.03, Parent shall not be entitled to receive the Termination Fee, and neither
Parent nor the Company shall be entitled to receive reimbursement for Expenses,
if, at the time of termination of this Agreement, in the case of Parent, the
Company is entitled to terminate this Agreement under Section 10.01(c), and, in
the case of the Company, Parent is entitled to terminate this Agreement under
Section 10.01(b)(i). Notwithstanding the applicability of more than one of the
foregoing
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subsections of this Section 10.03 or anything to the contrary in this Agreement,
Parent shall not be entitled to be paid more than one Termination Fee pursuant
to this Agreement.
Except as set forth in this Section 10.03, all Expenses (as defined
below) incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Offer or Merger or any other transaction is
consummated. "Expenses", as used in this Agreement, shall include all reasonable
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of
the Offer Documents and the Merger Registration Statement, the solicitation of
stockholder approvals, the filing of any required notices under the HSR Act or
other similar regulations and all other matters related to the closing of the
Merger and the other transactions contemplated by this Agreement.
(f) The Company and Parent acknowledge that the agreements contained
in this Section 10.03 are an integral part of the transactions contemplated by
this Agreement and that without these agreements Parent and the Company would
not enter into this Agreement. In the event that the Company shall fail to pay
any Termination Fee or Expenses when due, such Termination Fee or Expenses shall
be deemed to include the costs and expenses actually incurred or accrued by
Parent (including, without limitation, fees and expenses of counsel) in
connection with the collection under and enforcement of this Section 10.03,
together with interest on such unpaid Termination Fee or Expenses, commencing on
the date that such Termination Fee or Expenses became due, at a rate equal to
the rate of interest publicly announced by Citibank, N.A., from time to time, in
The City of New York, as such bank's prime rate plus 3.00%. Payment of the fees
and expenses described in this Section 10.03 shall not be in lieu of any damages
incurred in the event of willful or intentional breach of this Agreement.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement and in any certificate or
instrument delivered pursuant hereto shall terminate at the Effective Time or
upon the termination of this Agreement pursuant to Section 10.01. This Section
shall not limit any covenant or other obligation of the parties hereto which
shall survive in accordance with their terms.
SECTION 11.02 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 Time 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 Merger Sub of any shares of Company Common Stock in the Offer shall be
subject to the provisions of Section
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2.03(a); provided further, however, that, after the approval of this Agreement
by the stockholders of the Company, 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 11.03 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 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 11.03):
if to Parent or Merger Sub:
Quest Diagnostics Incorporated
One Malcolm Avenue
Teterboro, NJ 07608
Facsimile No: (201) 393-5289
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022-6069
Facsimile No: (212) 848-7179
Attention: Clare O'Brien, Esq.
if to the Company:
Unilab Corporation
18448 Oxnard Street
Tarzana, CA 91356
Facsimile No.: (818) 757-3807
Attention: Robert E. Whalen
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Facsimile: 212-735-2000
Attention: Lou R. Kling, Esq.
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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.
SECTION 11.04 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 11.05 Entire Agreement; Assignment. This Agreement 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), except that
Parent and Merger Sub may assign all or any of their rights and obligations
hereunder to any wholly owned subsidiary of Parent, provided that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations.
SECTION 11.06 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 8.06 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 11.07 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) after due inquiry of those
persons who would reasonably be expected to have knowledge of the subject matter
of the inquiry. 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 on Annex I shall mean, as of such date of determination, the
absence of the event or circumstance described in such condition.
65
SECTION 11.08 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 11.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that State (other than those
provisions set forth herein that are required to be governed by the DGCL). All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined exclusively in any New York state or federal court sitting
in the Borough of Manhattan of The City of New York. The parties hereto hereby
(a) submit to the exclusive jurisdiction of any state or federal court sitting
in the Borough of Manhattan of The City of New York for the purpose of any
action arising out of or relating to this Agreement brought by any party hereto,
and (b) irrevocably waive, and agree not to assert by way of motion, defense, or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the action is brought in an
inconvenient forum, that the venue of the action is improper, or that this
Agreement or the Transaction may not be enforced in or by any of the above-named
courts.
SECTION 11.10 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 11.10.
SECTION 11.11 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 11.12 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.
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
QUEST DIAGNOSTICS INCORPORATED
By /s/ Kenneth W. Freeman
------------------------------------
Name: Kenneth W. Freeman
Title: Chairman and
Chief Executive Officer
QUEST DIAGNOSTICS NEWCO INCORPORATED
By /s/ Kenneth W. Freema
------------------------------------
Name: Kenneth W. Freeman
Title: Chief Executive Officer
UNILAB CORPORATION
By /s/ Robert E. Whalen
------------------------------------
Name:Robert E. Whalen
Title:Chairman and Chief Executive
Officer
ANNEX I
-------
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, but subject to
compliance with the terms of the Agreement and any applicable rules and
regulations of the SEC, including Rule 14e-1(c) relating to Merger Sub's
obligation to exchange or return tendered shares after the termination of the
Offer, Merger Sub shall not be required to accept for exchange or exchange or
deliver any consideration for any shares of Company Common Stock tendered
pursuant to the Offer, and may terminate, extend or amend the Offer in
accordance with the Agreement, if (i) the Minimum Condition shall not have been
satisfied; (ii) the applicable waiting period under the HSR Act shall not have
expired or been terminated; (iii) the Offer Registration Statement shall not
have become effective under the Securities Act or shall be the subject of any
stop order or proceedings seeking a stop order; (iv) the Parent Common Stock to
be issued in the Offer and the Merger shall not have been approved for listing
on the NYSE, subject to official notice of issuance; or (v) on or after the date
of the Agreement and at or prior to the Acceptance Date, any of the following
events or circumstances occurs or exists and is continuing:
(a) there shall have been instituted, pending, or issued any
litigation, suit, claim, action or proceeding before any federal or state court
of the United States (other than any such action in which a motion for a
temporary restraining order, a preliminary injunction or a permanent injunction
shall have been denied or shall have expired, or a judicial order granting any
such temporary restraining order, preliminary injunction or permanent injunction
shall have been reversed on appeal and not reinstated) by any United States
federal government or governmental authority or agency or any of the several
states of the United States or any attorney general thereof (1) challenging or
seeking to make illegal or otherwise, directly or indirectly, restrain or
prohibit or make materially more costly, the making of the Offer, the acceptance
for exchange or payment of any shares of Company Common Stock by Parent, Merger
Sub or any other Subsidiary of Parent, or the consummation of the Offer or the
Merger, (2) seeking to obtain material damages or otherwise directly or
indirectly relating to the transactions contemplated by the Offer, the Merger or
the Agreement, (3) seeking to limit, restrain or prohibit Parent's or Merger
Sub's ownership or operation of all or any material portion of the business or
assets of the Company and the Subsidiaries, taken as a whole, or to compel
Parent or any of its affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company and the Subsidiaries,
taken as a whole, or (4) seeking to impose or confirm any limitation on the
ability of Parent or Merger Sub to effectively exercise full rights of ownership
of any shares of Company Common Stock to be accepted in the Offer on all matters
properly presented to the Company's stockholders, including, without limitation,
the approval and adoption of the Agreement and the transactions contemplated by
the Agreement;
(b) there shall have been (i) any Law enacted, promulgated, amended,
issued or deemed applicable to (1) Parent, the Company or any of their
respective subsidiaries or (2) any transaction contemplated by the Agreement or
(ii) entered, promulgated or enforced by any court or Governmental Authority,
any Order of any kind which prohibits, restrains, restricts or enjoins the
consummation of the Offer or has the effect of making the Offer illegal, in each
case, by any legislative body or Governmental Authority that would result,
directly or indirectly, in any of the consequences referred to in clauses (1)
through (4) of paragraph (a) above;
Annex I-1
(c) there shall have occurred (i) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, or (ii) any limitation (whether or not mandatory) by any Governmental
Authority on the extension of credit by banks or other lending institutions;
(d) other than with respect to any Order that is the subject of
paragraph (a) or (b) above, there shall have been enacted, entered, promulgated
or enforced by any court or Governmental Authority any Order which prohibits,
restrains, restricts or enjoins the consummation of the Offer or has the effect
of making the Offer illegal;
(e) (i) the Company shall have breached or failed to perform in any
material respect its obligations, covenants or agreements under the Agreement,
(ii) the representations and warranties of the Company contained in the
Agreement that are qualified by reference to a Company Material Adverse Effect
shall not have been true and correct when made or as of the Acceptance Date as
if made at or at and as of such time (other than representations and warranties
which by their terms address matters only as of another specified date, which
shall be true and correct only as of such date), or (iii) the representations
and warranties of the Company contained in the Agreement that are not so
qualified shall not have been true and correct when made or as of the Acceptance
Date as if made at or at and as of such time (other than representations and
warranties which by their terms address matters only as of another specified
date, which shall be true and correct only as of such date) except in the case
of this clause (iii) only, for such inaccuracies as have not resulted, or are
not reasonably likely to result, in a Company Material Adverse Effect;
(f) there shall have occurred or exist any events, circumstances,
changes, occurrences, facts or effects that have had or would reasonably be
expected to have a Company Material Adverse Effect; and
(g) the Agreement shall have been terminated in accordance with its
terms;
which, in the reasonable judgment of Parent in any such case, and regardless of
the circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for exchange or payment.
The foregoing conditions are for the sole benefit of Merger Sub and
Parent and may be asserted by Merger Sub or Parent regardless of the
circumstances giving rise to any such condition or, except in the case of the
Minimum Condition, may be waived by Merger Sub or Parent in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent
or Merger Sub at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
Annex I-2