Exhibit (a)(5)(A)
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AGREEMENT AND PLAN OF MERGER
by and among
OMNICARE, INC.,
NCS ACQUISITION CORP.
and
NCS HEALTHCARE, INC.
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Dated as of
August [___], 2002
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TABLE OF CONTENTS
Article I THE MERGER.........................................................................1
Section 1.1. The Merger.........................................................................1
Section 1.2. Closing............................................................................1
Section 1.3. Effective Time.....................................................................2
Section 1.4. Effects of the Merger..............................................................2
Section 1.5. Certificate of Incorporation and By-Laws...........................................2
Section 1.6. Directors and Officers of the Surviving Corporation................................2
Article II CONVERSION OF SECURITIES...........................................................2
Section 2.1. Conversion of Capital Stock........................................................2
Section 2.2. Exchange of Certificates...........................................................3
Section 2.3. Treatment of Stock Options.........................................................5
Section 2.4. Dissenting Shares..................................................................5
Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...................................6
Section 3.1. Organization and Standing..........................................................6
Section 3.2. Corporate Power and Authority......................................................6
Section 3.3. Capitalization of Parent and Sub...................................................6
Section 3.4. Conflicts; Consents and Approval...................................................7
Section 3.5. Parent SEC Documents...............................................................8
Section 3.6. Proxy Statement....................................................................9
Section 3.7. Compliance with Law................................................................9
Section 3.8. Litigation.........................................................................9
Section 3.9. Absence of Changes.................................................................9
Section 3.10. Sub's Operations..................................................................10
Section 3.11. Undisclosed Liabilities...........................................................10
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................10
Section 4.1. Organization and Standing.........................................................10
Section 4.2. Subsidiaries......................................................................11
Section 4.3. Corporate Power and Authority.....................................................11
Section 4.4. Capitalization of the Company.....................................................11
Section 4.5. Conflicts; Consents and Approvals.................................................11
Section 4.6. Brokerage and Finders' Fees; Expenses.............................................13
Section 4.7. Company SEC Documents.............................................................14
Section 4.8. Proxy Statement...................................................................14
Section 4.9. Compliance with Law...............................................................15
Section 4.10. Litigation........................................................................15
Section 4.11. Absence of Changes................................................................15
Section 4.12. Taxes.............................................................................15
Section 4.13. Intellectual Property.............................................................17
Section 4.14. Title to and Condition of Properties..............................................19
i
Section 4.15. Employee Benefit Plans............................................................20
Section 4.16. Contracts.........................................................................23
Section 4.17. Labor Matters.....................................................................26
Section 4.18. Undisclosed Liabilities...........................................................26
Section 4.19. Licenses; Permits; Compliance.....................................................26
Section 4.20. Institutional Pharmacy Business...................................................29
Section 4.21. Environmental Matters.............................................................29
Section 4.22. Accounts Receivable; Accounts Payable; Inventories and Cash.......................30
Section 4.23. Insurance.........................................................................31
Section 4.24. Opinion of Financial Advisor......................................................31
Section 4.25. Related Parties...................................................................31
Section 4.26. Board Recommendation; Required Vote...............................................31
Section 4.27. Section 203 of the DGCL; No Rights Agreement......................................32
Article V COVENANTS OF THE PARTIES..........................................................32
Section 5.1. Mutual Covenants..................................................................32
Section 5.2. Covenants of Parent...............................................................35
Section 5.3. Covenants of the Company..........................................................36
Article VI CONDITIONS........................................................................45
Section 6.1. Conditions to the Obligations of Each Party.......................................45
Section 6.2. Conditions to Obligations of the Company..........................................45
Section 6.3. Conditions to Obligations of Parent and Sub.......................................46
Article VII TERMINATION AND AMENDMENT.........................................................47
Section 7.1. Termination.......................................................................47
Section 7.2. Effect of Termination.............................................................49
Section 7.3. Amendment.........................................................................49
Section 7.4. Extension; Waiver.................................................................49
Article VIII MISCELLANEOUS.....................................................................50
Section 8.1. Survival of Representations and Warranties........................................50
Section 8.2. Notices...........................................................................50
Section 8.3. Interpretation....................................................................51
Section 8.4. Counterparts......................................................................51
Section 8.5. Entire Agreement..................................................................51
Section 8.6. Third-Party Beneficiaries.........................................................51
Section 8.7. Governing Law.....................................................................51
Section 8.8. Consent to Jurisdiction; Venue....................................................52
Section 8.9. Specific Performance..............................................................52
Section 8.10. Assignment........................................................................52
Section 8.11. Expenses..........................................................................52
Section 8.12. Certain Definitions...............................................................52
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SCHEDULES AND EXHIBITS
EXHIBIT A - CASH ON HAND
SCHEDULE 5.3(f) - INVENTORY PROCEDURES
PARENT DISCLOSURE SCHEDULE
COMPANY DISCLOSURE SCHEDULE
iii
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
Acquisition proposal............................................................................5.3(d)(vi)
Action.................................................................................................3.8
Affiliate..........................................................................................8.12(a)
Agreement.........................................................................................Preamble
Antitrust laws..................................................................................5.1(a)(ii)
Applicable laws........................................................................................3.7
Cash Determination..................................................................................5.3(g)
Cash on Hand.......................................................................................4.22(d)
Cash Test Date......................................................................................5.3(g)
Certificate.........................................................................................2.1(b)
Certificate of Merger..................................................................................1.3
Closing................................................................................................1.2
Closing Date...........................................................................................1.2
Code................................................................................................2.2(f)
Commission.............................................................................................3.5
Company...........................................................................................Preamble
Company Board Recommendation..........................................................................4.26
Company By-Laws........................................................................................4.1
Company Certificate of Incorporation...................................................................4.1
Company Class A Common Stock......................................................................Recitals
Company Class B Common Stock......................................................................Recitals
Company Common Stock..............................................................................Recitals
Company Disclosed Contracts........................................................................4.16(a)
Company Disclosure Schedule............................................................................4.1
Company Option.........................................................................................2.3
Company Permits....................................................................................4.19(a)
Company Recent Balance Sheet.......................................................................4.18(a)
Company SEC Agreements.............................................................................4.16(a)
Company SEC Documents..................................................................................4.7
Company Stockholders..............................................................................Recitals
Company Stockholders Meeting........................................................................5.3(a)
Company Treasury Shares.............................................................................2.1(c)
Contract...........................................................................................4.16(a)
Controlled Group Liability.........................................................................4.15(a)
Delaware Secretary of State............................................................................1.3
DGCL...................................................................................................1.1
Dissenting Shares......................................................................................2.4
Effective Time.........................................................................................1.3
Environmental Laws....................................................................................4.21
Environmental Permit..................................................................................4.21
ERISA..............................................................................................4.15(a)
ERISA Affiliate....................................................................................4.15(a)
Exchange Act...........................................................................................3.5
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FDA............................................................................................4.19(b)(ii)
Final Order........................................................................................8.12(b)
GAAP...................................................................................................3.5
Government Programs................................................................................4.19(c)
Governmental Authority.............................................................................8.12(c)
Hazardous Materials...................................................................................4.21
HSR Act.............................................................................................3.4(b)
Illinois Sub........................................................................................5.3(i)
Indenture........................................................................................5.1(d)(i)
Intellectual Property..............................................................................4.13(a)
Knowledge of the Company...........................................................................8.12(d)
Knowledge of Parent and Sub........................................................................8.12(e)
Lien...............................................................................................8.12(f)
Material Adverse Effect............................................................................8.12(g)
Material Company-Owned Software....................................................................4.13(e)
Measured Cash.......................................................................................5.3(g)
Medicare and Medicaid Programs.....................................................................4.19(c)
Merger............................................................................................Recitals
Merger Consideration................................................................................2.1(b)
Multiemployer Plan.................................................................................4.15(f)
Multiple Employer Plan.............................................................................4.15(f)
NOLs...............................................................................................4.12(e)
Notes..................................................................................................4.6
Order..............................................................................................8.12(h)
Other Filings....................................................................................5.3(b)(i)
Outside Date........................................................................................7.1(c)
Owned Real Property................................................................................4.14(b)
Parent............................................................................................Preamble
Parent By-laws.........................................................................................3.1
Parent Certificate of Incorporation....................................................................3.1
Parent Disclosure Schedule..........................................................................3.3(a)
Parent Recent Balance Sheet...........................................................................3.11
Parent SEC Documents...................................................................................3.5
Payment Agent.......................................................................................2.2(a)
Payment Fund........................................................................................2.2(a)
Permitted Encumbrances.............................................................................4.14(b)
Person.............................................................................................8.12(i)
Plans..............................................................................................4.15(a)
Private Programs...................................................................................4.19(c)
Proxy Statement........................................................................................3.6
Qualified Plan.....................................................................................4.15(c)
Required Company Stockholder Approval.................................................................4.26
Required Governmental Approvals.....................................................................3.4(b)
Section 4.15(i) Arrangements.......................................................................4.15(i)
Securities Act.........................................................................................3.5
Sub...............................................................................................Preamble
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Sub By-Laws............................................................................................1.5
Sub Certificate of Incorporation.......................................................................1.5
Sub Common Stock....................................................................................2.1(a)
Subsidiary.........................................................................................8.12(j)
Superior Proposal...............................................................................5.3(d)(vi)
Surviving Corporation..................................................................................1.1
Tax Returns........................................................................................4.12(g)
Taxes..............................................................................................4.12(h)
vi
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as
of August [__], 2002, is entered into by and among Omnicare, Inc., a Delaware
corporation ("PARENT"), NCS Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("SUB"), and NCS HealthCare, Inc., a Delaware
corporation (the "COMPANY").
WHEREAS, the Board of Directors of the Company has approved
this Agreement and deems it advisable and in the best interests of the Company's
stockholders (the "COMPANY STOCKHOLDERS") to consummate the merger of Sub with
and into the Company, wherein each share of Class A common stock of the Company,
par value $0.01 per share ("COMPANY CLASS A COMMON STOCK"), and each share of
Class B common stock of the Company, par value $0.01 per share ("COMPANY CLASS B
COMMON STOCK" and, together with the Company Class A Common Stock, the "COMPANY
COMMON STOCK"), issued and outstanding immediately prior to the Effective Time,
other than the Company Treasury Shares, the Dissenting Shares and shares of
Company Common Stock held by Parent, Sub or any other Subsidiary of Parent,
shall be converted into the right to receive $3.50 per share in cash, without
any interest thereon, on the terms set forth in this Agreement (the "MERGER");
and
WHEREAS, each of the Boards of Directors of Parent and Sub has
approved this Agreement and deemed it advisable and in the best interests of its
respective stockholders to consummate the Merger on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), Sub shall be merged with
and into the Company at the Effective Time. As a result of the Merger, the
separate corporate existence of Sub shall cease, and the Company shall continue
as the surviving corporation and as a wholly-owned subsidiary of Parent (in such
capacity, the Company is sometimes referred to as the "SURVIVING CORPORATION").
Section 1.2. Closing. Subject to the terms and conditions
hereof, the closing of the Merger and the transactions contemplated by this
Agreement (the "CLOSING") will take place on the fifth business day after the
satisfaction or waiver of the conditions set forth in Article VI (other than any
such conditions that by their terms cannot be satisfied until the Closing Date,
which conditions shall be required to be so satisfied or waived on the Closing
Date), unless another time or date is agreed to in writing by the parties
hereto, it being understood that the parties desire to cause the
Closing to occur on the first day of a calendar month, and that the parties
shall make reasonable efforts to accommodate such desire (the actual time and
date of the Closing, the "CLOSING DATE"). The Closing shall be held at the
offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New
York, unless another place is agreed to in writing by the parties hereto.
Section 1.3. Effective Time. As promptly as possible on the
Closing Date, the parties to this Agreement shall file with the Secretary of
State of the State of Delaware (the "DELAWARE SECRETARY OF STATE") a certificate
of merger (the "CERTIFICATE OF MERGER") in such form as is required by and
executed in accordance with Section 251 of the DGCL. The Merger shall become
effective when the Certificate of Merger has been filed with the Delaware
Secretary of State or at such subsequent time as Parent and the Company shall
agree and specify in the Certificate of Merger (the date and time that the
Merger becomes effective, the "EFFECTIVE TIME").
Section 1.4. Effects of the Merger. At and after the Effective
Time, the Merger shall have the effects as provided for in this Agreement and
the applicable provisions of the DGCL, including those set forth in Section 259
of the DGCL.
Section 1.5. Certificate of Incorporation and By-Laws. The
Certificate of Merger shall provide that, at the Effective Time, (a) the
certificate of incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Time shall be amended as of the Effective
Time so as to contain the provisions, and only the provisions, contained
immediately prior to the Effective Time in the certificate of incorporation of
Sub (the "SUB CERTIFICATE OF INCORPORATION"), except for Article I thereof,
which shall read "The name of the Corporation is 'NCS HealthCare, Inc.'"; and
(b) the by-laws of Sub (the "SUB BY-LAWS") in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation, in each case,
until thereafter changed or amended as provided therein or by Applicable Laws.
Section 1.6. Directors and Officers of the Surviving
Corporation. From and after the Effective Time, (a) the officers of Sub shall be
the officers of the Surviving Corporation; and (b) the directors of Sub as of
the Effective Time shall serve as directors of the Surviving Corporation, in
each case, until the earlier of their death, resignation or removal or otherwise
ceasing to be an officer or a director, as the case may be, or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1. Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of the Company,
Parent or Sub or their respective shareholders and stockholders, as applicable:
(a) Each share of common stock of Sub, par value $0.01 per
share ("SUB COMMON STOCK") issued and outstanding immediately prior to the
Effective
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Time shall be converted into one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation, par value $0.01 per share.
Such newly issued shares shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
(b) Subject to the other provisions of this Article II, each
share of Company Class A Common Stock and each share of Company Class B Common
Stock issued and outstanding immediately prior to the Effective Time (other than
the Company Treasury Shares and shares of Company Common Stock owned by Parent,
Sub or any other Subsidiary of Parent to be cancelled pursuant to Section 2.1(c)
and the Dissenting Shares) shall be converted into and represent the right to
receive an amount in cash equal to $3.50, without any interest thereon (the
"MERGER CONSIDERATION"), upon the surrender of a certificate (a "CERTIFICATE")
representing such shares of Company Common Stock as provided in Section 2.2
hereof.
(c) Each share of capital stock of the Company held in the
treasury of the Company (the "COMPANY TREASURY SHARES") or owned by Parent, Sub
or any other Subsidiary of Parent immediately prior to the Effective Time shall
be cancelled and retired, and no payment shall be made in respect thereof.
Section 2.2. Exchange of Certificates.
(a) Payment Agent. Promptly following the Effective Time,
Parent shall deposit with The Bank of New York or such other payment agent as
may be designated by Parent (the "PAYMENT AGENT"), for the benefit of the
Company Stockholders, an amount in cash sufficient to make the payments required
pursuant to this Article II in exchange for certificates formerly representing
shares of Company Common Stock outstanding immediately prior to the Effective
Time (such cash, the "PAYMENT FUND").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Payment Agent shall mail to each holder of record of a
Certificate or Certificates, (i) a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificate shall pass, only upon delivery of the Certificate to the
Payment Agent, and shall be in such form and have such other customary
provisions as Parent may reasonably specify) and (ii) instructions for effecting
the surrender of the Certificate in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Payment Agent, together with
a letter of transmittal, duly executed and completed in accordance with the
instructions thereto, Parent shall cause to be delivered to the person in whose
name such Certificate shall have been issued, or to such person as such person
shall direct in writing in the letter of transmittal, a check or wire transfer
representing the amount of cash which such holder has the right to receive in
respect of the Certificate surrendered pursuant to the provisions of Section
2.1, after giving effect to any required withholding tax, and the shares
represented by such Certificate shall be forthwith cancelled. No interest will
be paid or accrued on the Merger Consideration. In the event of a transfer of
ownership of shares of Company Common Stock that is not registered on the
transfer records of the Company,
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the Merger Consideration to be paid to such holder of Company Common Stock
pursuant to Section 2.1 hereof may be paid to such transferee if the Certificate
representing such Company Common Stock is presented to the Payment Agent
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable transfer or other Taxes have been paid or,
alternatively, payments of such Taxes to the Payment Agent. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed, at any time
after the Effective Time, to represent only the right to receive upon surrender
the Merger Consideration, as provided in this Article II. If any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming the Certificate to be lost, stolen or destroyed
and, if required by Parent, the posting by the Person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that may
be made against it with respect to the Certificate, the Payment Agent will issue
for the lost, stolen or destroyed Certificate, the Merger Consideration, with
respect to the shares of Company Common Stock formerly represented by such
Certificate as provided in this Article II.
(c) Termination of Payment Fund. Any portion of the Payment
Fund that remains undistributed to the Company Stockholders six months after the
date of the mailing required by Section 2.2(b) shall be delivered to Parent,
upon demand thereby, and holders of Certificates that have not theretofore
complied with this Section 2.2 shall thereafter look only to Parent for payment
of the Merger Consideration deliverable in respect of each share of Company
Common Stock such stockholder holds as determined pursuant to this Agreement.
(d) No Liability. None of Parent, the Surviving Corporation or
the Payment Agent shall be liable to any Person in respect of any shares of
Company Common Stock or cash from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificate shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which shares of
Company Common Stock in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Authority), any such shares in
respect of such Certificate shall, to the extent permitted by Applicable Laws,
become the property of Parent, free and clear of all claims or interest of any
Person previously entitled thereto.
(e) Investment of Payment Fund. The Payment Agent shall invest
any cash balances in the Payment Fund as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent upon termination of the Payment Fund pursuant to Section 2.2(c).
(f) 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 shares of Company Common
Stock such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended
(together with the rules and regulations thereunder, 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,
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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 shares of Company Common
Stock in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
Section 2.3. Treatment of Stock Options. Prior to the
Effective Time, Parent and the Company shall take all such actions as may be
necessary to cause each unexpired and unexercised outstanding option granted or
issued under the Company stock option or equity-incentive plans in effect on the
date of this Agreement (each, a "COMPANY OPTION") to be automatically converted
at the Effective Time into the right to receive an amount in cash (less any
required tax withholdings) determined by multiplying (i) the excess, if any, of
the Merger Consideration over the applicable exercise price of such Company
Option by (ii) the number of shares of Company Common Stock subject to such
Company Option. Prior to the Effective Time, the Company shall obtain any
consents from holders of the Company Options to make any amendments to the
terms of the applicable stock option plans or arrangements that are necessary
to give effect to the transactions contemplated by this Section 2.3.
Notwithstanding the foregoing provisions of this Section 2.3, payment may be
withheld in respect of any Company Option until the necessary consents are
obtained. The conversion of a Company Option into the right to receive the
payment provided by this Section 2.3 shall be deemed a cancellation of such
Company Option and a release of any and all rights the holder had or may have
had in respect of such Company Option.
Section 2.4. Dissenting Shares.
(a) Shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
Company Stockholder who (i) has not voted such shares in favor of the Merger,
(ii) shall have delivered a written demand for appraisal of such shares in the
manner provided for in the DGCL and (iii) shall not have effectively withdrawn
or lost such right to appraisal as of the Effective Time (the "DISSENTING
SHARES"), shall be entitled to such rights (but only such rights) as are granted
by Section 262 of the DGCL. Each holder of Dissenting Shares who becomes
entitled to payment for such Dissenting Shares pursuant to Section 262 of the
DGCL shall receive payment therefor from the Surviving Corporation in accordance
with the DGCL; provided, however, that (A) if any such holder of Dissenting
Shares shall have failed to establish such holder's entitlement to appraisal
rights as provided in Section 262 of the DGCL, (B) if any holder of Dissenting
Shares shall have effectively withdrawn his demand for appraisal of such
Dissenting Shares or lost his right to appraisal and payment for his Dissenting
Shares under Section 262 of the DGCL or (C) if neither any holder of Dissenting
Shares nor the Surviving Corporation shall have filed a petition demanding a
determination of the value of all Dissenting Shares within the time provided for
the filing of such petition in Section 262 of the DGCL, such holder shall
forfeit the right to appraisal of such Dissenting Shares, and the holder of each
such Dissenting Share shall be deemed to have been converted into, as of the
Effective Time, the right to receive the Merger Consideration pursuant to
Section 2.1 hereof, without any interest thereon, upon surrender, in the manner
provided in Section 2.2 hereof, of the Certificate or Certificates that formerly
evidenced such shares.
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(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by the Company
and (ii) the opportunity to lead all negotiations and proceedings with respect
to demands for appraisal under the DGCL (it being understood that the Company
shall be entitled to participate therein). The Company shall not, except with
the prior written consent of Parent, make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company as
follows:
Section 3.1. Organization and Standing. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation with full corporate power and authority to
own, lease, use and operate its properties and to conduct its business as and
where now owned, leased, used, operated and conducted. Each of Parent and Sub is
duly qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the property it owns, leases
or operates, requires it to so qualify, except where the failure to be so
qualified or in good standing in such jurisdiction, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
Parent. Parent is not in default in the performance, observance or fulfillment
of any provision of its certificate of incorporation, as amended (the "PARENT
CERTIFICATE OF INCORPORATION"), or its by-laws, as amended (the "PARENT
BY-LAWS"), and Sub is not in default in the performance, observance or
fulfillment of any provisions of the Sub Certificate of Incorporation or the Sub
By-Laws. Prior to the date of this Agreement, each of Parent and Sub has
furnished or made available to the Company complete and correct copies of its
respective certificate of incorporation and by-laws.
Section 3.2. Corporate Power and Authority. Each of Parent and
Sub has all requisite corporate power and authority to enter into and deliver
this Agreement, to perform its obligations under this Agreement and to
consummate the transactions contemplated by this Agreement, including the
Merger. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement, including the Merger,
by Parent and Sub have been duly authorized by all necessary corporate
action on the part of each of Parent and Sub. This Agreement has been duly
executed and delivered by each of Parent and Sub, and constitutes the legal,
valid and binding obligation of each of Sub and Parent enforceable against
each of them in accordance with its respective terms.
Section 3.3. Capitalization of Parent and Sub.
(a) As of August [__], 2002, Parent's authorized capital stock
consisted solely of (i) 200,000,000 shares of common stock, par value $1.00 per
share, of which
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(A) [_________] shares were issued and outstanding, (B) [_________] shares were
issued and held in treasury, and (C) [_________] shares were reserved for
issuance upon the exercise or conversion of options, warrants or convertible
securities granted or issuable by Parent; and (ii) 1,000,000 shares of preferred
stock, no par value, none of which were issued and outstanding. Except as set
forth in the first sentence of this Section 3.3(a) (or with respect to any
security set forth in the first sentence of this Section 3.3(a)) or in Section
3.3 to the disclosure schedule delivered by Parent to the Company and dated as
of the date of this Agreement (the "PARENT DISCLOSURE SCHEDULE"), as of the date
of this Agreement, there are no outstanding subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale, repurchase, transfer or registration
by Parent of any equity securities of Parent, nor are there outstanding any
securities that are convertible into or exchangeable for any shares of Parent
capital stock, and Parent has no obligation of any kind to issue any additional
securities. Except as set forth in Section 3.3 to the Parent Disclosure
Schedule, there are no outstanding stock-appreciation rights, security-based
performance units, "phantom" stock or other security rights or other agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any Person is or may be entitled to receive any payment or other value
based on the revenues, earnings or financial performance, stock price
performance or other attribute of the Parent or any of its Subsidiaries or
assets or calculated in accordance therewith (other than ordinary course
payments or commissions to sales representatives of the Parent).
(b) As of the date of this Agreement, Sub's authorized capital
stock consists solely of 1,000 shares of Sub Common Stock, of which 1,000 shares
were issued and outstanding and none were reserved for issuance or issued and
held in treasury. As of the date of this Agreement, Parent owns all of the
outstanding shares of Sub Common Stock free and clear of any Liens, claims or
encumbrances.
Section 3.4. Conflicts; Consents and Approval.
(a) The execution and delivery of this Agreement by Parent and
Sub does not, and the performance and consummation of this Agreement and the
transactions contemplated hereby will not:
(i) violate, or result in a breach of any provision of the
Parent Certificate of Incorporation, the Parent By-Laws, the Sub
Certificate of Incorporation or the Sub By-Laws;
(ii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the
giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any Person (with the giving of notice, the
passage of time or otherwise) to terminate, accelerate, modify or call
a default under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its Subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust,
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license, contract, undertaking, agreement, lease or other instrument or
obligation to which Parent or any of its Subsidiaries is a party; or
(iii) subject, with respect to consummation, to Section
3.4(b), violate any Applicable Laws relating to Parent or any of its
Subsidiaries or their respective properties or assets, except in the
case of clauses (ii) and (iii) above for any of the foregoing disclosed
in Section 3.4(a) to the Parent Disclosure Schedule or that would not,
individually or in the aggregate, have a Material Adverse Effect on
Parent.
(b) The execution and delivery of this Agreement by Parent and
Sub does not, and the performance and consummation of this Agreement and the
transactions contemplated hereby will not, require Parent or any of its
Subsidiaries to obtain any approval of any Person or approval of, observe any
waiting period imposed by, or make any filing with or notification to or seek
any approval or authorization from any Governmental Authority, other than (i)
actions required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (together with the rules and regulations thereunder, the "HSR ACT"),
(ii) the filing of the Certificate of Merger, and (iii) consents or approvals of
any Governmental Authority set forth in Section 3.4(b) to the Parent Disclosure
Schedule. The consents and approvals set forth in Section 3.4(b) to the Parent
Disclosure Schedule are referred to as the "REQUIRED GOVERNMENTAL APPROVALS".
Section 3.5. Parent SEC Documents. Parent has filed with the
Securities and Exchange Commission (the "COMMISSION") all forms, reports,
schedules, statements and other documents required to be filed by it since
December 31, 2001 under the Securities Exchange Act of 1934, as amended
(together with the rules and regulations thereunder, the "EXCHANGE ACT"), or the
Securities Act of 1933, as amended (together with the rules and regulations
thereunder, the "SECURITIES ACT") (such documents, as supplemented and amended
since the time of filing, collectively, the "PARENT SEC DOCUMENTS"). The Parent
SEC Documents, including any financial statements or schedules included in the
Parent SEC Documents, at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively, and, in the case of any Parent SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amending or superseding filing) (a) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (b) complied in
all material respects with the applicable requirements of the Exchange Act and
the Securities Act, as the case may be. The financial statements of Parent
included in the Parent SEC Documents at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively, and, in the case of any Parent SEC Document
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such amending or superseding filing) complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto, were prepared in
accordance with United States
-8-
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q of the
Commission), and fairly present in all material respects (subject, in the case
of unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of Parent and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.
Section 3.6. Proxy Statement. None of the information supplied
by Parent for inclusion in the proxy statement and form of proxies relating to
the vote of the Company Stockholders with respect to this Agreement (as amended,
supplemented or modified, the "PROXY STATEMENT"), at the date of mailing and at
the date of the Company Stockholders Meeting will contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 3.7. Compliance with Law. Except as set forth in
Section 3.7 to the Parent Disclosure Schedule or in the Parent SEC Documents
filed prior to the date hereof, Parent is in compliance with, and at all times
has been in compliance with, all applicable laws, statutes, orders, rules,
regulations, policies or guidelines promulgated, or judgments, decisions or
Orders entered by any Governmental Authority (collectively, "APPLICABLE LAWS")
relating to Parent, its securities, business or properties, except where the
failure to be in compliance with such Applicable Laws, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
Parent. Except as set forth in Section 3.7 to the Parent Disclosure Schedule or
in the Parent SEC Documents filed prior to the date hereof, no investigation or
review by any Governmental Authority with respect to Parent or its Subsidiaries
is pending, or, to the knowledge of Parent, threatened, nor has any Governmental
Authority indicated in writing an intention to conduct the same, other than
those the outcome of which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Parent.
Section 3.8. Litigation. Except as set forth in Section 3.8 to
the Parent Disclosure Schedule, (a) there is no suit, arbitration, inquiry,
prosecution, claim, action, proceeding, hearing, notice of violation, demand
letter or investigation by, of, in or before any Governmental Authority (an
"ACTION") pending, or, to the knowledge of Parent, threatened, against Parent or
any executive officer or director of Parent that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on
Parent, and (b) Parent is not subject to any outstanding Order that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Parent.
Section 3.9. Absence of Changes. Except as set forth in
Section 3.9 to the Parent Disclosure Schedule, and except for liabilities
incurred in connection with this Agreement and the transactions contemplated by
this Agreement, since December 31, 2001, there has been no change, event,
development, damage or circumstance affecting
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Parent or Sub that, individually or in the aggregate, has had, or could
reasonably be expected to have a Material Adverse Effect on Parent.
Section 3.10. Sub's Operations. Sub is a direct wholly-owned
subsidiary of Parent that was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has not (a) engaged in any
business activities, (b) conducted any operations other than in connection with
the transactions contemplated hereby or (c) incurred any liabilities other
than in connection with the transactions contemplated hereby. Parent, as Sub's
sole stockholder, has approved Sub's execution of this Agreement.
Section 3.11. Undisclosed Liabilities. Except (i) as and to
the extent disclosed or reserved against on the balance sheet of Parent at
March 31, 2002 included in Parent's Quarterly Report on Form 10-Q for the
three-month period ended March 31, 2002 (the "PARENT RECENT BALANCE SHEET"),
(ii) as set forth in Section 3.11 to the Parent Disclosure Schedule, (iii) as
incurred since the date of the Parent Recent Balance Sheet in the ordinary
course of business consistent with past practice or (iv) as arise in connection
with or as a result of the transactions contemplated by this Agreement or are
related to the performance by Parent or Sub of any of its obligations under
this Agreement, Parent does not have any liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent or otherwise
and whether due or to become due, that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on Parent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub
as follows:
Section 4.1. Organization and Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with full corporate power and authority to own, lease,
use and operate its properties and to conduct its business as and where now
owned, leased, used, operated and conducted. Each of the Company and each of its
Subsidiaries is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
that it owns, leases or operates requires it to so qualify, except where the
failure to be so qualified or in good standing in such jurisdiction,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company. The Company is not in default in the
performance, observance or fulfillment of any provision of its certificate of
incorporation, as amended (the "COMPANY CERTIFICATE OF INCORPORATION"), or its
by-laws, as in effect on the date of this Agreement (the "COMPANY BY-LAWS").
Prior to the date of this Agreement, the Company has furnished or made available
to Parent complete and correct copies of the Company Certificate of
Incorporation and the Company By-Laws. Listed in Section 4.1 to the disclosure
schedule, dated as of the date of this Agreement, delivered
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by the Company to Parent (the "COMPANY DISCLOSURE SCHEDULE"), is each
jurisdiction in which the Company or its Subsidiaries is qualified to do
business and whether the Company (or its Subsidiaries) is in good standing as of
the date of this Agreement in such jurisdictions.
Section 4.2. Subsidiaries. The Company does not own, directly
or indirectly, any equity or other ownership interest in any corporation,
partnership, limited liability company, joint venture or other entity or
enterprise, except for the entities set forth in Section 4.2 to the Company
Disclosure Schedule. Except as set forth in Section 4.2 to the Company
Disclosure Schedule, the Company is not subject to any obligation or requirement
to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such entity or any other Person. Except as set
forth in Section 4.2 to the Company Disclosure Schedule, the Company owns,
directly or indirectly, each of the outstanding shares of capital stock (or
other ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such Subsidiary) of each of the Company's Subsidiaries. Except as set forth in
Section 4.2 to the Company Disclosure Schedule, each of the outstanding shares
of capital stock of each of the Company's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances. The following information for each
subsidiary of the Company is set forth in Section 4.2 to the Company Disclosure
Schedule, as applicable: (i) its name and jurisdiction of incorporation or
organization; (ii) its authorized capital stock or share capital; and (iii) the
number of issued and outstanding shares of capital stock or share capital and
the record owner(s) thereof. Other than as set forth in Section 4.2 to the
Company Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale, purchase, repurchase or
transfer of any securities of any of the Company's Subsidiaries, nor are there
outstanding any securities that are convertible into or exchangeable for any
shares of capital stock of any of the Company's Subsidiaries, and neither the
Company nor any of its Subsidiaries has any obligation of any kind to issue any
additional securities of any of the Company's Subsidiaries.
Section 4.3. Corporate Power and Authority. The Company has
all requisite corporate power and authority to enter into and deliver this
Agreement, to perform its obligations under this Agreement, and, subject to
receipt of the Required Company Stockholder Approval, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company have been duly authorized by all necessary corporate
action on the part of the Company, subject to adoption by the Company
Stockholders of this Agreement and the transactions contemplated by this
Agreement. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms.
Section 4.4. Capitalization of the Company. As of July 28,
2002, the Company's authorized capital stock consisted solely of (i) 50,000,000
shares of Company Class A Common Stock, of which (A) 18,461,599 shares were
issued and outstanding,
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(B) no shares were issued and held in treasury, (C) 2,422,724 shares were
reserved for issuance upon the exercise of Company Options, and (D) 1,477,276
shares were reserved for future issuance under the existing plans of the Company
that provide for the issuance of Company Options; (ii) 20,000,000 shares of
Company Class B Common Stock, of which (X) 5,255,210 shares were issued and
outstanding and (Y) 94,858 shares were reserved for issuance upon the exercise
of Company Options; and (iii) 1,000,000 shares of preferred stock, par value
$0.01 per share, of which no shares were issued and outstanding. Each
outstanding share of Company capital stock is duly authorized, validly issued,
fully paid and nonassessable, and has not been issued in violation of any
preemptive or similar rights. The Company Class A Common Stock and the Company
Class B Common Stock are identical in all respects except that (I) each share of
Company Class A Common Stock is entitled to 1 vote per share, whereas each share
of Company Class B Common Stock is entitled to 10 votes per share; (II) the
Company Class A Common Stock is not convertible into another security, whereas
the Company Class B Common Stock is convertible into shares of Company Class A
Common Stock on a one-for-one basis; and (III) the Company Class B Common Stock
is subject to certain transfer restrictions to which the Company Class A Common
Stock is not subject. The Company has not taken any action or made any
determination, pursuant to Section 7(i) of the Company Certificate of
Incorporation, that the restrictions on transfer or other provisions set forth
in Section 7 of the Company Certificate of Incorporation have a material adverse
effect on liquidity, marketability or market value of the outstanding shares of
Company Class A Common Stock. Other than as set forth in the first sentence of
this Section 4.4 or in Section 4.4 to the Company Disclosure Schedule, there are
no outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale, repurchase or transfer of any securities of the Company, nor
are there outstanding any securities that are convertible into or exchangeable
for any shares of Company capital stock, and neither the Company nor any of its
subsidiaries has any obligation of any kind to issue any additional securities
or to pay for or repurchase any securities of the Company or its predecessors.
The issuance and sale of all of the shares of capital stock described in this
Section 4.4 have been in compliance in all material respects with United States
federal and state securities laws. Section 4.4 to the Company Disclosure
Schedule accurately sets forth the names of, and the number of shares of each
class (including the number of shares issuable upon exercise of Company Options
and the exercise price and vesting schedule with respect thereto) and the number
of options held by all holders of options to purchase Company capital stock.
Except as set forth in Section 4.4 to the Company Disclosure Schedule, the
Company has not agreed to register any securities under the Securities Act or
under any state securities law or granted registration rights to any Person;
complete and correct copies of any such agreements have previously been made
available to Parent. Except as set forth in Section 4.4 of the Company
Disclosure Schedule, there are no outstanding stock-appreciation rights,
security-based performance units, "phantom" stock or other security rights or
other agreements, arrangements or commitments of any character (contingent or
otherwise) pursuant to which any Person is or may be entitled to receive any
payment or other value based on the revenues, earnings or financial performance,
stock price performance or other attribute of the Company or
-12-
any of its Subsidiaries or assets or calculated in accordance therewith (other
than ordinary course payments or commissions to sales representatives of the
Company).
Section 4.5. Conflicts; Consents and Approvals.
(a) The execution and delivery of this Agreement by the
Company does not, and the performance and consummation of this Agreement and the
transactions contemplated hereby will not:
(i) violate, or result in a breach of any provision of, the
Company Certificate of Incorporation or the Company By-Laws;
(ii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the
giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any Person (with the giving of notice, the
passage of time or otherwise) to terminate, accelerate, modify or call
a default under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking, agreement,
lease or other instrument or obligation to which the Company or any of
its Subsidiaries is a party; or
(iii) violate any Applicable Laws relating to the Company, any
of its Subsidiaries or any of their respective properties or assets;
except, in the case of clauses (ii) and (iii) above, for any of the
foregoing disclosed in Section 4.5(a) to the Company Disclosure
Schedule or that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company.
(b) The execution and delivery by the Company of this
Agreement does not, and the performance and consummation of this Agreement and
the transactions contemplated hereby will not, require the Company or any of its
Subsidiaries to obtain any approval of any Person or approval of, observe any
waiting period imposed by, or make any filing with or notification to or seek
any approval or authorization from any Governmental Authority other than (i) the
Required Company Stockholders Approval, (ii) actions required by the HSR Act,
(iii) registrations or other actions required under United States federal and
state securities laws as are contemplated by this Agreement and (iv) consents or
approvals of any Governmental Authority set forth in Section 4.5(b) to the
Company Disclosure Schedule.
Section 4.6. Brokerage and Finders' Fees; Expenses. Except as
set forth in Section 4.6 to the Company Disclosure Schedule (copies of all
agreements relating to such matters disclosed thereon having previously been
provided to Parent), none of the Company, any of its Affiliates or any director,
officer or employee of the Company, has incurred or will incur on behalf of the
Company, any brokerage, finders', advisory or similar fees in connection with
the transactions contemplated by this Agreement. Section 4.6 to the Company
Disclosure Schedule discloses the maximum aggregate amount of all
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fees and expenses that will be paid or will be payable by the Company to all
brokers, finders, advisors, attorneys, accountants and investment bankers in
connection with this Agreement and the transactions contemplated hereby,
including fees and expenses payable by the Company in respect of the holders of
the 5-3/4% convertible subordinated debentures, due 2004, of the Company (the
"NOTES") as of the Closing Date or, thereafter, as a result of the Closing.
Section 4.7. Company SEC Documents. The Company has filed with
the Commission all forms, reports, schedules, statements and other documents
required to be filed by it since January 1, 2000 under the Exchange Act or the
Securities Act (such documents, as supplemented and amended since the time of
filing, collectively, the "COMPANY SEC DOCUMENTS"). The Company SEC Documents,
including any financial statements or schedules included in the Company SEC
Documents, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any Company SEC Document amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
amending or superseding filing) (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be. The financial statements of the Company included in the
Company SEC Documents at the time filed (and, in the case of registration
statements and proxy statements, on the dates of effectiveness and the dates of
mailing, respectively and, in the case of any the Company SEC Document amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such amending or superseding filing) complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, were prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the Commission), and fairly present in
all material respects (subject, in the case of unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the Company
and its consolidated Subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. None of
the Company's Subsidiaries is subject to the periodic reporting requirements of
the Exchange Act or required to file any form, report or other document with the
Commission, the Nasdaq, any stock exchange or any other comparable Governmental
Authority.
Section 4.8. Proxy Statement. None of the information supplied
by the Company for inclusion in the Proxy Statement, at the date of mailing and
at the date of the Company Stockholders Meeting, will 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 were made, not misleading. The Proxy
Statement, except for such portions thereof that relate only to Parent and its
Subsidiaries, will comply as to form in all material respects with the
provisions of the Exchange Act.
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Section 4.9. Compliance with Law. Except as set forth in
Section 4.9 to the Company Disclosure Schedule or in the Company SEC Documents
filed prior to the date hereof, the Company is in compliance and, at all times,
has been in compliance with Applicable Laws relating to the Company or its
business or properties, except where the failure to be in compliance with such
Applicable Laws, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company. Except as disclosed
in Section 4.9 to the Company Disclosure Schedule or in the Company SEC
Documents filed prior to the date hereof, no investigation or review by any
Governmental Authority with respect to the Company, to the knowledge of the
Company, is pending or threatened, nor has any Governmental Authority indicated
in writing to the Company an intention to conduct the same, other than those the
outcome of which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company. Without limiting the
foregoing, except as disclosed in Section 4.9 to the Company Disclosure
Schedule, the Company and each of its Subsidiaries is, and has been since July
1, 2001, in substantial compliance with the Company's policies (as in effect on
the date hereof) with respect to the recording and issuing of all credits due to
the Medicare and Medicaid programs, copies of which policies have been made
available prior to the date hereof.
Section 4.10. Litigation. Except as set forth in Section 4.10
to the Company Disclosure Schedule, (a) to the knowledge of the Company, there
is no Action pending or threatened against the Company or any executive officer
or director of the Company that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on the Company; and (b)
the Company is not subject to any outstanding Order that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Company.
Section 4.11. Absence of Changes. Except as set forth in
Section 4.11 to the Company Disclosure Schedule, since March 31, 2002, (a) the
Company has conducted its business only in the ordinary course of business
consistent with past practice; (b) there has been no change, event, development,
damage or circumstance affecting the Company or any of its Subsidiaries that,
individually or in the aggregate, has had, or could reasonably be expected to
have a Material Adverse Effect on the Company; and (c) there has not been any
material change by the Company in its accounting methods, principles or
practices, any revaluation by the Company of any of its assets, including
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business consistent with past practice.
Section 4.12. Taxes.
(a) Except as set forth in Section 4.12 to the Company
Disclosure Schedule, the Company and its Subsidiaries have filed all material
Tax Returns (including those filed on a consolidated, combined or unitary basis)
required to have been filed by the Company or its Subsidiaries. All of such Tax
Returns are true, complete and correct as to the amount of Tax shown to be due
thereon (except for such inaccuracies that are, individually or in the
aggregate, not material), and the Company and its Subsidiaries have within the
time and manner prescribed by Applicable Laws paid or,
-15-
prior to the Effective Time, will pay all Taxes shown to be due on such Tax
Returns. Except as disclosed in Section 4.12 to the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries has any material liability for
any Taxes in excess of the amounts paid (or reserved, in accordance with GAAP,
as reflected on the Company SEC Documents, as adjusted for operations in the
ordinary course of business since the date of such Company SEC Documents), and
neither the Company nor any of its Subsidiaries is delinquent in the payment of
any material Tax. Neither the Company nor any of its Subsidiaries has requested
or filed any document having the effect of causing any extension of time within
which to file any material Tax Returns in respect of any fiscal year that have
not since been filed. Except as set forth in Section 4.12 to the Company
Disclosure Schedule, no deficiencies for any material Tax have been proposed,
asserted or assessed (tentatively or definitely), in each case in writing, by
any Governmental Authority, against the Company or any of its Subsidiaries for
which there are not adequate reserves, in accordance with GAAP, as reflected on
the Company SEC Documents. Except as set forth in Section 4.12 to the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is the
subject of any currently ongoing Tax audit. Except as set forth in Section 4.12
to the Company Disclosure Schedule, there are no pending requests for waivers of
the time to assess any material Tax, other than those made in the ordinary
course and for which either payment has been made or there are adequate reserves
in accordance with GAAP as reflected on the Company SEC Documents. With respect
to any taxable period ended on or prior to June 30, 1996, all United States
federal income Tax Returns including the Company or any of its Subsidiaries have
been audited by the Internal Revenue Service or are closed by the applicable
statute of limitations. Except as set forth in Section 4.12 to the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a material Tax assessment or deficiency. There are no liens
with respect to Taxes upon any of the properties or assets, real or personal,
tangible or intangible of the Company or any of its Subsidiaries (other than
liens for Taxes not yet due). Except as set forth in Section 4.12 to the Company
Disclosure Schedule, no material claim (that is currently pending or that has
been made on or after June 30, 2000) has been made in writing by an authority in
a jurisdiction where the Company does not (or a Subsidiary does not) file Tax
Returns asserting that the Company (or such Subsidiary) is or may be subject to
taxation by that jurisdiction. The Company has not filed an election under
Section 341(f) of the Code to be treated as a consenting corporation.
(b) Except as set forth in Section 4.12 to the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is
obligated by any contract, agreement or other arrangement to indemnify any other
Person (other than the Company and its Subsidiaries) with respect to material
Taxes. Neither the Company nor any of its Subsidiaries are or were a party to or
bound by any agreement or arrangement (whether or not written and including any
arrangement required or permitted by law) that (i) requires the Company or any
of its Subsidiaries to make any Tax payment to or for the account of any Person
(other than the Company and its Subsidiaries), (ii) affords any other Person the
benefit of any net operating loss, net capital loss, investment Tax credit,
foreign Tax credit, charitable deduction or any other credit or Tax attribute
that could reduce Taxes (including deductions and credits related to alternative
minimum Taxes) of
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the Company or any of its Subsidiaries, or (iii) requires or permits the
transfer or assignment of income, revenues, receipts or gains to the Company or
any of its Subsidiaries, from any Person.
(c) The Company is not and has not been a United State real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period described in Section 897(c)(1)(A)(ii) of the Code.
(d) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code
(i) in the two years prior to the date of this Agreement (or will constitute
such a corporation in the two years prior to the Closing Date) or (ii) in a
distribution that otherwise constitutes part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in conjunction
with the Merger.
(e) The net operating loss carryforwards ("NOLS") for United
States federal income tax purposes of the consolidated group of which the
Company is the common parent as of June 30, 2001 are not less than $125,000,000,
and, except for limitations that may apply by reason of the Merger, such NOLs
are not subject to any material limitation under Section 382 of the Code,
Treasury Regulations Section 1.1502-15, -21 or otherwise.
(f) The Company and its Subsidiaries have withheld and paid
all material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(g) "TAX RETURNS" means returns, reports and forms required to
be filed with any Governmental Authority of the United States or any other
jurisdiction responsible for the imposition or collection of Taxes.
(h) "TAXES" means (i) all taxes (whether United States
federal, local, state or foreign) based upon or measured by income and any other
tax whatsoever, including gross receipts, profits, sales, use, occupation, value
added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, or real or personal property taxes, together with any interest or
penalties imposed with respect thereto and (ii) any obligations under any
agreements or arrangements with respect to any taxes described in clause (i)
above.
Section 4.13. Intellectual Property.
(a) The Company or a Subsidiary of the Company is licensed to
use or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights and mask works, any
applications for and registrations of such patents, trademarks, trade names,
service marks, copyrights and mask works, and all processes, formulae, methods,
schematics, technology, know-how, computer software
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programs or applications and tangible or intangible trade secrets, proprietary
information or material ("INTELLECTUAL PROPERTY") that are necessary to conduct
the business of the Company and its Subsidiaries as currently conducted, except
for such Intellectual Property the absence of which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company.
(b) The Company is not, nor will it as a result of the
execution and delivery of this Agreement or the performance of the Company's
obligations under this Agreement or otherwise be, in breach of or otherwise
cause the termination of or limit any license, sublicense or other agreement
relating to the Company's Intellectual Property, or any licenses, sublicenses
and other agreements as to which the Company or any of its Subsidiaries is a
party and pursuant to which the Company or any of its Subsidiaries is authorized
to use any third-party patents, trademarks or copyrights, including software
that is used by the Company or any of its Subsidiaries, except for those the
breach of which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
(c) To the knowledge of the Company, all patents, trademarks,
service marks (or any applications or registrations therefor) and copyrights
that are held by the Company or any of its Subsidiaries, and that are material
to the business of the Company and its Subsidiaries as such business is
presently conducted, and all Intellectual Property rights pertaining to the
Material Company-Owned Software, are current, in effect, valid and subsisting.
The Company (i) has not been party to any Action still pending that involves a
claim of infringement by the Company of any Intellectual Property right of any
third party; and (ii) has no knowledge that the marketing, licensing or sale of
its services infringes any Intellectual Property right of any third party,
except as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company.
(d) The Company has a policy of requiring all employees to
enter into appropriate confidentiality agreements in order to maintain the
secrecy and confidentiality of all of the Company's material Intellectual
Property (including the Material Company-Owned Software), and has done so in all
cases except where the failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(e) Except as set forth in Section 4.13(e) to the Company
Disclosure Schedule, the Company has good and marketable title to, has the full
right to use and owns solely and outright, all of the software products known as
ConcordDX, Long-Term Care Pharmacy (LTCP), eAstral, and iAstral, and all
modifications, revisions, versions, updates, releases, refinements, improvements
and enhancements of such products and all derivative works (as such term is used
in the U.S. copyright laws) based upon any of such products, whether
operational, under development, superseded or inactive, including all object
code, source code, system and database architecture, design features, technical
manuals, test scripts, user manuals and other documentation therefor, whether in
machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or
-18-
other media of any nature and any data bases necessary to operate any such
computer program, operating system, application system, firmware or software
(all of the foregoing is collectively referred to as the "MATERIAL COMPANY-OWNED
SOFTWARE"), as relating to the Company's and its Affiliates' respective
businesses as conducted by the Company and its Affiliates at all times on and
before the Effective Time, free and clear of any liens, licenses (other than
written license agreements with customers entered into by the Company in the
ordinary course of business and in the form provided by the Company to Parent)
or other encumbrances which would in any way limit or restrict the Company's
ability to market, license, sell, modify, update, and/or create derivative works
for, the Material Company-Owned Software. The Material Company-Owned Software
does not incorporate or embody any third-party Intellectual Property.
(f) Except as set forth in Section 4.13(f) to the Company
Disclosure Schedule, to the extent that any author or developer of any Material
Company-Owned Software was not a regular full-time employee of the Company or
its predecessors working within the scope of his or her employment with the
Company or its predecessors, at the time such Person contributed to the creation
or modification of any Material Company-Owned Software, such author or developer
has irrevocably assigned to the Company or its predecessors, as applicable, in
writing all copyrights, patent rights, trade secrets and other Intellectual
Property in such Person's work with respect to such Material Company-Owned
Software. None of the Material Company-Owned Software is owned by or registered
in the name of any current or former owner, shareholder, partner, director,
executive, officer, employee, salesman, agent, customer, representative or
contractor of the Company, any of its predecessors or any third Person, nor do
such have any interest therein or right thereto, including the right to royalty
payments.
(g) To the knowledge of the Company, none of the Material
Company-Owned Software or its respective past or current uses, including the
preparation, distribution, marketing or licensing thereof, has violated or
infringed upon, or is violating or infringing upon, any Intellectual Property of
any Person. To the knowledge of the Company, no Person is violating or
infringing upon, or has violated or infringed upon at any time, any of the
Material Company-Owned Software.
Section 4.14. Title to and Condition of Properties.
(a) The Company owns or holds under valid leases all real
property and all properties, assets and equipment necessary for the conduct of
the business of the Company as presently conducted, except where the failure to
own or hold such real property, properties, assets and equipment would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(b) Section 4.14(b) to the Company Disclosure Schedule sets
forth a complete and accurate list and description of all real property and
interests in real property owned in fee by the Company or its Subsidiaries (the
"OWNED REAL PROPERTY") and the address thereof. Except as set forth in Section
4.14(b) to the Company Disclosure Schedule, the Company or one of its
Subsidiaries holds good and marketable fee title to each of the Owned Real
Property, free and clear of any liens,
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mortgages, easements, rights-of-way, licenses, use restrictions, claims,
charges, options, title defects or encumbrances of any nature whatsoever, except
for the Permitted Encumbrances. All aspects of the Owned Real Property are in
compliance in all material respects with any and all restrictions and other
provisions included in the Permitted Encumbrances, and there are no matters that
create, or that with notice or the passage of time would create, a default under
any of the documents evidencing the Permitted Encumbrances. As used herein, the
term "PERMITTED ENCUMBRANCES" means (i) liens for Taxes not yet due and payable
or that are being contested in good faith and by appropriate proceedings; (ii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
liens arising in the ordinary course of business that are less than $10,000 in
amount; or (iii) easements, rights-of-way, encroachments, restrictions,
conditions and other similar encumbrances of record or incurred or suffered in
the ordinary course of business and that, individually or in the aggregate, (A)
are not substantial in amount in relation to the applicable Owned Real Property;
and (B) do not materially detract from the use, utility or value of the
applicable Owned Real Property or otherwise materially impair the Company's
present business operations at such location.
(c) All leases pursuant to which the Company or any of its
Subsidiaries leases real property are valid and effective and in accordance with
their respective terms, and there is not, under any such lease, any existing
default or event of default by the Company or its Subsidiaries (or event that,
with notice or lapse of time or both, would constitute a material default by the
Company or its Subsidiaries), except where such default could not reasonably be
expected to have a Material Adverse Effect on the Company. To the knowledge of
the Company, the Company has all permits or licenses necessary to use its leased
real property, except where the failure to obtain such permits or licenses could
not reasonably be expected to have a Material Adverse Effect on the Company.
Section 4.15. Employee Benefit Plans.
(a) The following terms have the definitions given below:
"CONTROLLED GROUP LIABILITY" means any and all liabilities (i)
under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections
412 and 4971 of the Code, (iv) resulting from a violation of the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code or the group health plan requirements of Sections 601 et seq. of the Code
and Section 601 et seq. of ERISA, and (v) under corresponding or similar
provisions of foreign laws or regulations, in each case, other than pursuant to
the Plans.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with the rules and regulations thereunder.
"ERISA AFFILIATE" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first
-20-
entity, trade or business, or that is a member of the same "controlled group" as
the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.
"PLANS" means all employee benefit plans, programs and other
arrangements providing benefits to any employee or former employee in respect of
services provided to the Company or any of its Subsidiaries or to any
beneficiary or dependent thereof, and whether covering one individual or more
than one individual, sponsored or maintained by the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries contributes or
is obligated to contribute. Without limiting the generality of the foregoing,
the term "Plans" includes any defined benefit or defined contribution pension
plan, profit sharing plan, stock ownership plan, deferred compensation agreement
or arrangement, vacation pay, sickness, disability or death benefit plan
(whether provided through insurance, on a funded or unfunded basis or
otherwise), employee stock option or stock purchase plan, bonus or incentive
plan or program, severance pay plan, agreement, arrangement or policy, practice
or agreement, employment agreement, consulting agreements, salary continuation
agreements, retiree medical benefits plan and each other employee benefit plan,
program or arrangement including each "employee benefit plan" (within the
meaning of Section 3(3) of ERISA).
(b) Section 4.15(b) to the Company Disclosure Schedule lists
all Plans. With respect to each Plan, the Company has made available to Parent a
true, correct and complete copy of the following (where applicable): (i) each
writing constituting a part of such Plan, including, without limitation, all
plan documents (including amendments), benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (ii) the three most recent
Annual Reports (Form 5500 Series) and accompanying schedules, if any; (iii) the
current summary plan description, if any; (iv) the most recent annual financial
report, if any; and (v) the most recent determination letter from the Internal
Revenue Service, if any. Except as specifically provided in the foregoing
documents provided to Parent and except as set forth in Section 4.15(b) to the
Company Disclosure Schedule, there are no amendments to any Plan that have been
adopted or approved nor has the Company or any of its Subsidiaries undertaken to
make any such amendments or to adopt or approve any new Plan.
(c) The Internal Revenue Service has issued a favorable
determination letter with respect to each Plan that is intended to be a
"qualified plan" (within the meaning of Section 401(a) of the Code) (a
"QUALIFIED PLAN"), and all applicable foreign qualifications or registration
requirements have been satisfied with respect to any Plan maintained outside the
United States. There are no existing circumstances nor any events that have
occurred that would be reasonably be expected to adversely affect the qualified
status of any Qualified Plan or the related trust or the qualified or registered
status of any Plan or trust maintained outside the United States, other than
qualification matters that can be corrected without material liability.
(d) All material contributions required to be made by the
Company or any of its Subsidiaries or any of their respective ERISA Affiliates
to any Plan by Applicable Laws or by any plan document or other contractual
undertaking, and all material premiums due or payable with respect to insurance
policies funding any Plan, for
-21-
any period through the date hereof have been made in a substantially timely
manner or paid in full and through the Closing Date will be made in a
substantially timely manner or paid in full. There are no Plans or related
trusts maintained outside the United States.
(e) Except as disclosed in Section 4.15(e) to the Company
Disclosure Schedule, the Company and its Subsidiaries and their respective ERISA
Affiliates have complied, and are now in compliance, in all material respects,
with all provisions of ERISA, the Code and all laws and regulations (including
any local Applicable Laws) applicable to the Plans. Each Plan has been operated
in material compliance with its terms. There is not now, and there are no
existing circumstances that would reasonably be expected to give rise to, any
requirement for the posting of security with respect to a Plan or the imposition
of any Lien on assets of the Company or any of its Subsidiaries or any of their
respective ERISA Affiliates under ERISA or the Code, or similar Applicable Laws
of foreign jurisdictions.
(f) No Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No Plan is a "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA) (a "MULTIEMPLOYER PLAN") or a plan that
has two or more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "MULTIPLE EMPLOYER
PLAN"), nor has the Company or any of its Subsidiaries or any of their
respective ERISA Affiliates, at any time within six years before the date of
this Agreement, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan.
(g) There does not now exist, and there are no existing
circumstances that would reasonably be expected to result in, any material
Controlled Group Liability that would be a liability of the Company or any of
its Subsidiaries following the Closing. Without limiting the generality of the
foregoing, neither the Company nor any of its Subsidiaries nor any of their
respective ERISA Affiliates has engaged in any transaction described in Section
4069 or Section 4204 of ERISA other than transactions that are not likely to
have a Material Adverse Effect on the Company or its Subsidiaries.
(h) Except as set forth in Section 4.15(h) of the Company
Disclosure Schedule, except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA or similar state laws,
neither the Company nor any of its Subsidiaries has any material liability for
life, health, medical or other welfare benefits to former employees or
beneficiaries or dependents thereof.
(i) Except as disclosed in Section 4.15(i) to the Company
Disclosure Schedule, neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement nor any
shareholder, board or other approval of such transactions will result in, cause
the accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee, officer, director or consultant of the
Company or any of its Subsidiaries (either alone or in conjunction with any
other event). Without limiting the generality of the foregoing, except as set
forth in Section 4.15(i) to the Company Disclosure Schedule, no amount paid or
payable by the Company or any of its Subsidiaries in connection with the
-22-
transactions contemplated by this Agreement, either solely as a result thereof
or as a result of such transactions in conjunction with any other events, will
be an "excess parachute payment" (within the meaning of Section 280G of the
Code). The maximum aggregate dollar value of all obligations of the Company and
its Subsidiaries with respect to their directors, officers, employees and
consultants pursuant to all employment, consulting, severance, salary
continuation, change in control, parachute or similar agreements or Plans (all
such arrangements, the "SECTION 4.15(i) ARRANGEMENTS"), excluding any
obligations of the Company with respect to continuation of specific retirement
and welfare benefits as provided for in the Section 4.15(i) Arrangements and
assuming in each case the consummation of the transactions contemplated by this
Agreement and, where relevant, the termination (or constructive termination, as
the case may be) of such directors, officers, employees or consultants effective
as of the Closing Date, does not exceed the amount set forth in Section 4.15(i)
to the Company Disclosure Schedule. The names of all such directors, officers,
employees or consultants who are parties to or beneficiaries of the Section
4.15(i) Arrangements (other than the broadbased Severance Benefit Plan,
effective February 20, 1998) are set forth in Section 4.15(i) to the Company
Disclosure Schedule.
(j) There are no pending or, to the knowledge of the Company,
threatened Actions (other than claims for benefits in the ordinary course) that
have been asserted or instituted against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the trusts under
any of the Plans that would reasonably be expected to result in any material
liability of the Company or any of its Subsidiaries to the Pension Benefit
Guaranty Corporation, the United States Department of Treasury, the United
States Department of Labor or any Multiemployer Plan, or to comparable entities
or Plans under Applicable Laws of jurisdictions outside the United States.
(k) No material disallowance of a deduction under Section
162(m) of the Code for employee reimbursement of any amount paid or payable by
the Company or any of its Subsidiaries has occurred or is reasonably expected to
occur.
Section 4.16. Contracts.
(a) All material contracts required to be filed prior to the
date hereof by the Company or any of its Subsidiaries pursuant to Regulation S-K
have been filed as exhibits to, or incorporated by reference in, a Company SEC
Document filed after December 31, 2001 and prior to the date hereof (such
agreements, the "COMPANY SEC AGREEMENTS"). Except as entered into after the date
hereof in compliance with the terms of this Agreement, Section 4.16 to the
Company Disclosure Schedule lists all written or oral contracts, agreements,
guarantees, leases and executory commitments other than Plans (each a
"CONTRACT"), other than any Contract that is a Company SEC Agreement, that fall
within any of the following categories:
(i) Contracts not entered into in the ordinary course of
business, other than those that are not material to the Company's
business,
(ii) joint venture, partnership and similar Contracts,
-23-
(iii) service Contracts or equipment leases involving payments
by the Company of more than $100,000 per year or $250,000 in the
aggregate,
(iv) Contracts that contain minimum purchase conditions in
excess of $250,000 or requirements or other terms that restrict or
limit the purchasing relationships of the Company or its Affiliates, or
any customer, licensee or lessee thereof,
(v) Contracts relating to any outstanding commitment for
capital expenditures in excess of $100,000 per Contract,
(vi) Contracts containing covenants purporting to limit the
freedom of the Company to compete in any line of business in any
geographic area or to hire any individual or group of individuals,
(vii) Contracts that, after the Effective Time, would have the
effect of limiting the freedom of Parent or its Subsidiaries (other
than the Company and its subsidiaries) to compete in any line of
business in any geographic area or to hire any individual or group of
individuals,
(viii) Contracts relating to the lease or sublease of or sale
or purchase of, or the servicing of, real or personal property
involving any annual expense or price in excess of $100,000,
(ix) Contracts with any labor organization or union,
(x) Contracts relating to indebtedness for borrowed money
(including guaranties) or to any sale-leaseback or leveraged lease or
that is an interest rate swap, equity swap or other swap or derivative
instrument, other than trade payables and accrued expenses arising in
the ordinary course of business consistent with past practices,
(xi) Indentures, mortgages, promissory notes, loan agreements,
guarantees of borrowed money, letters of credit or other Contracts or
instruments of the Company or any of its Subsidiaries or commitments
for the borrowing or the lending by the Company or any of its
Subsidiaries or providing for the creation of any charge, security
interest, encumbrance or lien upon any of the assets of the Company or
any of its Subsidiaries,
(xii) Contracts with the 10 largest customers of the Company
and its Subsidiaries on a consolidated basis, based on revenues derived
from such customers for the calendar month of May 2002 (provided that,
for purposes of this paragraph, any group of affiliated or commonly
owned or controlled customers shall be treated as a single customer),
(xiii) Contracts providing for "earn-outs," "savings
guarantees," "performance guarantees," or other contingent payments by
the Company in excess of $50,000 in the aggregate,
-24-
(xiv) Contracts with or for the benefit of any Affiliate of
the Company or immediate family member thereof (other than the
Company's Subsidiaries),
(xv) Contracts pursuant to which the Company or any of its
Subsidiaries obtains the right to use any Intellectual Property from
any Person other than the Company or any of the Company's Subsidiaries,
(xvi) Contracts giving any Person the right to require the
Company to register shares of capital stock or to participate in any
such registration,
(xvii) Contracts outside of the ordinary course of business
that contain material indemnification obligations of the Company or any
of its Subsidiaries to any Person,
(xviii) material Contracts under which there are, or have been
in the past six months, to the knowledge of the Company, any material
default by any party thereto, including the Company and its
Subsidiaries,
(xix) Contracts, or amendments or supplements, that
individually or in the aggregate, amount to a material change to the
terms of payment or payment practices with respect to existing
Contracts relating to a non-de minimis portion (by dollar value or
number of customers or number of suppliers) of the Company's accounts
receivable or accounts payable,
(xx) Contracts having the effect of limiting the freedom of
any Person to compete with the Company or any of its Subsidiaries in
any line of business in any geographic area or to hire any individual
or group of individuals employed by the Company or any of its
Subsidiaries, and
(xxi) Contracts outside the ordinary course of business with
respect to the sale, disposition or encumbrance of any assets or
businesses material to the business of the Company as presently
conducted.
The Company SEC Agreements, together with the Contracts
required to be disclosed in Section 4.16 of the Company Disclosure Schedule are
referred to herein as the "COMPANY DISCLOSED CONTRACTS". The Company has
previously made available to Parent true and complete copies of those Company
Disclosed Contracts requested by Parent.
(b) Each of the Company Disclosed Contracts is a valid and
binding obligation of the Company or one of its Subsidiaries and, to the
knowledge of the Company, the valid and binding obligation of each other party
thereto, except for such Company Disclosed Contract that, if not so valid and
binding, could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. Neither the Company nor any of
its Subsidiaries is or is alleged to be nor, to the knowledge of the Company, is
any other party thereto, in breach or violation of or in default in respect of,
nor has there occurred an event or condition, that with the passage of time or
giving of notice (or both), would constitute a material default under or permit
-25-
the termination of, or give rise to or accelerate the timing of any material
rights or penalties under, any Company Disclosed Contract.
Section 4.17. Labor Matters. Except as set forth in Section
4.17 to the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any labor contracts or collective bargaining
agreements. There is no labor strike, dispute or stoppage pending, or, to the
knowledge of the Company, threatened, against the Company, and neither the
Company nor any of its Subsidiaries has experienced any labor strike, dispute or
stoppage or other material labor difficulty involving its employees since
January 1, 2000. To the knowledge of the Company, since January 1, 2000, no
campaign or other attempt for recognition has been made by any labor
organization or employees with respect to employees of the Company or any of its
Subsidiaries.
Section 4.18. Undisclosed Liabilities.
(a) Except (i) as and to the extent disclosed or reserved
against on the balance sheet of the Company at March 31, 2002 included in the
Company's Quarterly Report on Form 10-Q for the three-month period ended March
31, 2002 (the "COMPANY RECENT BALANCE SHEET"), (ii) as incurred since the date
of the Company Recent Balance Sheet in the ordinary course of business
consistent with past practice or (iii) as set forth in Section 4.18(a) to the
Company Disclosure Schedule, the Company does not have any liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, that, individually or
in the aggregate, have had or could reasonably be expected to have a Material
Adverse Effect on the Company.
(b) Except as set forth in Section 4.18(b) to the Company
Disclosure Schedule, since March 31, 2002 through the date of this Agreement,
the Company has not engaged in any transaction that, if done after the execution
of this Agreement, would violate Section 5.3(b).
Section 4.19. Licenses; Permits; Compliance.
(a) To the knowledge of the Company, the Company and its
Subsidiaries are in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "COMPANY PERMITS"), and there is no Action, pending or, to
the knowledge of the Company, threatened, regarding any of the Company Permits.
The Company and its Subsidiaries are not in material conflict with, or in
material default or violation of, any of the Company Permits.
(b) Except as set forth in Section 4.19(b) to the Company
Disclosure Schedule or as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company:
(i) all necessary approvals from Governmental Authorities for
all drug and device products that are manufactured, distributed and/or
sold by the
-26-
Company and its Subsidiaries have, to the knowledge of the Company,
been obtained, and the Company and its Subsidiaries are in substantial
compliance with the most current form of each applicable approval with
respect to the manufacture, storage, transportation, distribution,
promotion and sale by the Company and its Subsidiaries of such
products;
(ii) to the knowledge of the Company, none of the Company, its
Subsidiaries, nor any officer, employee or agent of the Company or its
Subsidiaries (during the term of such individual's employment by the
Company or while acting as an agent of the Company) has made any untrue
statement of a material fact or fraudulent statement to the United
States Food and Drug Administration (the "FDA") or any other
Governmental Authorities, or failed to disclose a material fact
required to be disclosed to the FDA or other Governmental Authorities;
(iii) to the knowledge of the Company, no article of drug,
device, cosmetic or vitamin manufactured (directly or indirectly) or
distributed by the Company or any of its Subsidiaries is adulterated or
misbranded within the meaning of the Food, Drug and Cosmetic Act or
similar governmental act or law of any jurisdiction; and
(iv) to the knowledge of the Company, none of the Company, its
Subsidiaries, nor any officer, employee or agent of the Company (during
the term of such individual's employment by the Company or while acting
as an agent of the Company) nor its Subsidiaries or Affiliates has been
convicted of any crime, or engaged in any conduct, for which debarment
or similar punishment is mandated or permitted by any Applicable Laws.
(c) Except as set forth in Section 4.19(c) to the Company
Disclosure Schedule, to the extent necessary to operate the Company's business
as presently conducted, the Company and its Subsidiaries are certified for
participation and reimbursement under Titles XVIII and XIX of the Social
Security Act (the "MEDICARE AND MEDICAID PROGRAMS" and, together with such other
similar federal, state or local reimbursement or governmental programs for which
the Company and its Subsidiaries are eligible, the "GOVERNMENT PROGRAMS") and
have current provider agreements for such Government Programs and, to the
knowledge of the Company, except where the failure to so have could not,
individually or in the aggregate, reasonably be expected to result in Material
Adverse Effect on the Company, with such private non-governmental programs,
including any private insurance program under which they, directly or
indirectly, are presently receiving payments (such non-governmental programs,
the "PRIVATE PROGRAMS"). Set forth in Schedule 4.19(c) to the Company Disclosure
Schedule is a correct and complete list of such authorizations and provider
agreements under all of the Government Programs, complete and correct copies of
which have been provided to the Parent. True, complete and correct copies of all
surveys of the Company, its Subsidiaries or their respective predecessors in
interest conducted in connection with any of the Government Programs, the
Private Programs or
-27-
licensing or accrediting body during the past two years have been made available
to the Parent.
(d) Except as set forth in Section 4.19(d) to the Company
Disclosure Schedule, to the knowledge of the Company, there is no pending or
threatened Action by any Governmental Authority to revoke, cancel, suspend,
modify in any material respect or refuse to renew any of the Company Permits or
the items listed in Schedule 4.19(c) to the Company Disclosure Schedule. Neither
the Company nor any of its Subsidiaries has received any notice of any Action
pending or recommended by any Governmental Authority having jurisdiction over
any of the Company Permits or the items listed in Section 4.19(c) to the Company
Disclosure Schedule, either to revoke, withdraw or suspend any license, right or
authorization, or to terminate the participation of the Company or any of its
Subsidiaries in any of the Government Programs or the Private Programs. To the
knowledge of the Company, and except as could not, individually or in the
aggregate, reasonably be expected to prejudice the ability of Parent or any of
its Subsidiaries to obtain any necessary licenses or permits as of and after the
Closing or to materially interfere with or limit the business of Parent or any
of its Subsidiaries after the Closing on an ongoing basis, no event has occurred
that, with the giving of notice, the passage of time, or both, would constitute
grounds for a violation, order or deficiency with respect to any of the Company
Permits or the items listed in Section 4.19(c) to the Company Disclosure
Schedule, or to terminate or modify the participation of the Company or any of
its Subsidiaries in any of the Government Programs or the Private Programs.
Except as listed in Section 4.19(d) to the Company Disclosure Schedule, to the
knowledge of the Company, there has been no decision not to renew any provider
or third-party payor agreement of the Company or any of its Subsidiaries by any
Governmental Authority, and no consent or approval of, prior filing with or
notice to, or any Action by, any Governmental Authority or any other third party
in connection with the transfer or change of ownership of such Company Permit,
or the Government Programs or the Private Programs, by reason of the assignment
thereof to the Company upon consummation of the Merger.
(e) Except as set forth in Section 4.19(e) to the Company
Disclosure Schedule, each of the Company and its Subsidiaries has timely filed
all reports and billings required to be filed by it prior to the date hereof in
accordance with the Government Programs and the Private Programs, all fiscal
intermediaries and other insurance carriers and all such reports and billings
are complete and accurate in all material respects and have been prepared in
compliance with all Applicable Laws governing reimbursement and payment claims,
except for failures that could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company. True and complete
copies of such reports and billings for the most recent year have heretofore
been made available to Parent. Except as set forth in Section 4.19(e) to the
Company Disclosure Schedule, each of the Company and its Subsidiaries has paid
or caused to be paid all known and undisputed refunds, overpayments, discounts
or adjustments that have become due pursuant to such reports and billings and
has no unpaid liability under any of the Government Programs or the Private
Programs for any refund, overpayment, discount or adjustment, except for
failures to pay that could not, individually or in the aggregate, reasonably be
expected to have a
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Material Adverse Effect on the Company. Except as set forth in Section 4.19(e)
to the Company Disclosure Schedule, (i) there are no pending material Actions
relating to such prior reports or billings, and (ii) to the knowledge of the
Company, during the last two years, the Company and its Subsidiaries have not
been subject to any material audit or examination by any of the Government
Programs or the Private Programs. There are no other reports required to be
filed by Parent in order to be paid under any of the Government Programs or the
Private Programs for services rendered by the Company or its Subsidiaries,
except for reports not yet due and except for reports the failure of which to be
filed could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company.
Section 4.20. Institutional Pharmacy Business.
(a) Section 4.20 to the Company Disclosure Schedule lists each
Company pharmacy utilized by the Company or its Subsidiaries in connection with
its pharmacy business and indicates (i) the location of such pharmacy and (ii)
whether such pharmacy is owned or held pursuant to a leasehold interest. No
other Person has any beneficial ownership or interest in or to any such pharmacy
nor does any other Person have any right or option to acquire any beneficial
ownership or interest in or to any such pharmacy.
(b) Except as set forth in Section 4.20(b) to the Company
Disclosure Schedule, the Company and its Subsidiaries have not violated, and
are not now in violation of, 42 U.S.C. 'SS''SS' 1320a-7, 1320a-7a, 1320a-7b,
1395nn or 1396b.
(c) Except as could not, individually or in the aggregate,
reasonably be expected to prejudice the ability of Parent or any of its
Subsidiaries to obtain required licenses or permits as of and after the Closing
or to materially interfere with or limit the institutional pharmacy business of
Parent or any of its Subsidiaries after the Closing on an ongoing basis and,
except as set forth on Section 4.19(c) to the Company Disclosure Schedule, (i)
the Company and its Subsidiaries are duly licensed to provide pharmacy services
in all states in which they do business, and also are participants in the
Medicare program and the Medicaid programs of the states listed in Section 4.19
to the Company Disclosure Schedule and (ii) the Company and its Subsidiaries are
in compliance with all Applicable Laws affecting (A) such licenses and (B) the
participation by the Company's pharmacies in the Medicare and Medicaid programs.
Section 4.21. Environmental Matters. Except for matters
disclosed in Section 4.21 to the Company Disclosure Schedule, (a) to the
knowledge of the Company, the properties, operations and activities of the
Company and its Subsidiaries are in compliance in all material respects with all
applicable Environmental Laws and all past noncompliance of the Company or any
of its Subsidiaries with any Environmental Laws or Environmental Permits has
been resolved without any pending, ongoing or future material obligation, cost
or liability; (b) the Company and its Subsidiaries and the properties and
operations of the Company and its Subsidiaries are not subject to any existing,
pending, or, to the knowledge of the Company, threatened, Action under any
Environmental Law; (c) to the knowledge of the Company, there has been no
material
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release of any Hazardous Material into the environment by the Company or its
Subsidiaries in connection with their current or former properties or operations
in violation of applicable Environmental Laws; and (d) to the knowledge of the
Company, there has been no material exposure of any Person or property to any
Hazardous Material in connection with the current or former properties,
operations and activities of the Company and its Subsidiaries in violation of
applicable Environmental Laws. "ENVIRONMENTAL LAWS" means all United States
federal, state or local or foreign laws relating to pollution or protection of
human health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or industrial, toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder. "ENVIRONMENTAL PERMIT" means any
permit, approval, grant, consent, exemption, certificate order, easement,
variance, franchise, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
Section 4.22. Accounts Receivable; Accounts Payable;
Inventories and Cash.
(a) All accounts and notes receivable of the Company have
arisen in the ordinary course of business, and the accounts receivable reserve
reflected in the Company Recent Balance Sheet is, as of the date of the Company
Recent Balance Sheet, adequate and established in accordance with GAAP
consistently applied, subject to year-end adjustments and accruals in the
ordinary course of business and not material in amount. Since March 31, 2002,
there has been no event or occurrence that, when considered, individually or
together with all such other events or occurrences, would cause such accounts
receivable reserve to be inadequate, and that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Except as set forth in Section 4.22(b) to the Company
Disclosure Schedule, since January 1, 2002, neither the Company nor any of its
Subsidiaries has, with respect to any non-de minimus portion of its trade
accounts payable, (i) failed to pay its trade accounts payable in the ordinary
course, or (ii) extended the terms of payment, whether by contract, amendment,
act, deed, or course of dealing, of any trade account payable.
(c) The assets of the Company and its Subsidiaries that are
inventories (i) are in good and merchantable condition; (ii) to the knowledge of
the Company, have been purchased by the Company or its Subsidiaries directly
from the manufacturer thereof or from an authorized distributor of such products
in accordance with the Federal Prescription Drug Marketing Act, if applicable;
and (iii) are not past the manufacturer's expiration date or less than 30 days
from the manufacturer's expiration date, except for
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such failures as could not reasonably be expected to have a Material Adverse
Effect on the Company and do not involve, affect or relate to more than 5% of
such inventories by value.
(d) The amount of cash on hand of the Company and its
Subsidiaries on a consolidated basis (determined as set forth in Exhibit C) (the
"CASH ON HAND"), as of the date of this Agreement, is not less than $35,000,000.
Section 4.23. Insurance. Section 4.23 to the Company
Disclosure Schedule lists all insurance policies of the Company and its
Subsidiaries presently in effect, and (a) copies of each such policy, as well as
the loss run history under and premium for each such policy, has been made
available to Parent prior to the date hereof, or (b) with respect to such
policies as have not been made available to Parent prior to the date hereof,
such policies are in all material respects in amounts that are customary,
adequate and suitable in relation to the business, assets and liabilities of the
Company or its Subsidiaries, and are consistent with past practice.
Section 4.24. Opinion of Financial Advisor. The Board of
Directors of the Company has received the written opinion of Candlewood
Partners, LLC, the Company's financial advisor, to the effect that, as of the
date of this Agreement, the Merger Consideration is fair to the Company
Stockholders from a financial point of view. The Company has provided a copy of
such opinion to Parent, and such opinion has not been withdrawn or revoked or
otherwise modified in any material respect.
Section 4.25. Related Parties. Except as set forth in Section
4.25 to the Company Disclosure Schedule and except for transactions between the
Company and its directly or indirectly wholly-owned Subsidiaries or between two
or more directly or indirectly wholly-owned Subsidiaries of the Company, (i) no
Affiliate of the Company is a party with the Company or any of its Subsidiaries
to an agreement that will continue after the Closing Date; (ii) no Affiliate of
the Company owes any money to, nor is such Affiliate owed any money by, the
Company or any of its Subsidiaries, other than pursuant to Plans and other than
reimbursement for or advancement of routine expenses; (iii) neither the Company
nor any of its Subsidiaries has, directly or indirectly, guaranteed or assumed
any indebtedness for borrowed money or otherwise for the benefit of an Affiliate
of the Company; and (iv) since March 31, 2002, neither the Company nor any of
its Subsidiaries has made any payment to, or engaged in any transaction with, an
Affiliate of the Company, or any affiliate of any such Affiliate of the Company,
other than pursuant to Plans and other than reimbursement for or advancement of
routine expenses.
Section 4.26. Board Recommendation; Required Vote.
The Board of Directors of the Company, at a meeting duly
called and held, has, by unanimous vote of all of its members, (i) determined
that this Agreement and the transactions contemplated by this Agreement are
advisable and fair to and in the best interests of the Persons to whom the Board
of Directors of the Company owes fiduciary duties, and (ii) resolved to
recommend that the holders of shares of Company Class A Common Stock and the
holders of shares of Company Class B Common Stock approve
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and adopt this Agreement and the transactions contemplated by this Agreement,
including the Merger (the "COMPANY BOARD RECOMMENDATION"). The affirmative vote
of holders of a majority of the voting power of the outstanding shares of the
Company Common Stock, voting together as a single class (the "REQUIRED COMPANY
STOCKHOLDER APPROVAL"), is the only vote of the holders of any class or series
of stock of the Company necessary to adopt this Agreement and approve the
transactions contemplated by this Agreement.
Section 4.27. Section 203 of the DGCL; No Rights Agreement.
Prior to the date of this Agreement, the Board of Directors of the Company has
taken all action necessary to exempt under or make not subject to (a) the
provisions of Section 203 of the DGCL and (b) any other state takeover law or
state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares: (i) the execution of this Agreement, (ii) the
Merger and (iii) the transactions contemplated by this Agreement. The Company
does not have any stockholders or shareholder rights agreement or any similar
type of anti-takeover agreement.
ARTICLE V
COVENANTS OF THE PARTIES
The parties to this Agreement agree that:
Section 5.1. Mutual Covenants.
(a) HSR Act Filings; Reasonable Efforts; Notification.
(i) Each of Parent and the Company shall (A) make or cause to
be made the filings required of such party or any of its Subsidiaries
or Affiliates under the HSR Act with respect to the transactions
contemplated by this Agreement, as promptly as practicable and in any
event the initial filing with respect to this Agreement, if required,
shall be made within 10 business days after the date of this Agreement,
(B) comply at the earliest practicable date with any request under the
HSR Act for additional information, documents, or other materials
received by such party or any of its Subsidiaries from the United
States Federal Trade Commission or the United States Department of
Justice or any other Governmental Authority in respect of such filings
or such transactions, and (C) act in good faith and reasonably
cooperate with the other party in connection with any such filing
(including, with respect to the party making a filing, providing copies
of all such documents to the non-filing party and its advisors
reasonably prior to filing and, if requested, to accept all reasonable
additions, deletions or changes suggested in connection therewith) and
in connection with resolving any investigation or other inquiry of any
such agency or other Governmental Authority under any Antitrust Laws
with respect to any such filing or any such transaction. To the extent
not prohibited by Applicable Laws, each party to this Agreement shall
use all reasonable efforts to furnish to each other all information
required for any application or other filing to be made pursuant to any
Applicable
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Laws in connection with the transactions contemplated by this
Agreement. Each party to this Agreement shall give the other parties to
this Agreement reasonable prior notice of any communication with, and
any proposed understanding, undertaking, or agreement with, any
Governmental Authority regarding any such filings or any such
transaction. None of the parties to this Agreement shall independently
participate in any meeting, or engage in any substantive conversation,
with any Governmental Authority in respect of any such filings,
investigation, or other inquiry without giving the other parties to
this Agreement prior notice of the meeting and, to the extent permitted
by such Governmental Authority, the opportunity to attend and/or
participate. The parties to this Agreement will consult and cooperate
with one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party to this Agreement in
connection with proceedings under or relating to the HSR Act or other
Antitrust Laws.
(ii) Subject to Section 5.1(a)(iv), each of Parent and the
Company shall use all reasonable efforts to resolve such objections, if
any, as may be asserted by any Governmental Authority with respect to
the transaction contemplated by this Agreement, under the HSR Act, the
Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade
Commission Act, as amended, and any other United States federal or
state or foreign statues, rules, regulations, orders, decrees,
administrative or judicial doctrines or other laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "ANTITRUST LAWS").
In connection therewith and subject to Section 5.1(a)(iv), if any
Action is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as inconsistent with or
violative of any Antitrust Law, each of Parent and the Company shall
cooperate and use all reasonable efforts vigorously to contest and
resist such Action, and to have vacated, lifted, reversed, or
overturned any Order whether temporary, preliminary or permanent, that
is in effect and that prohibits, prevents, delays or restricts
consummation of the transactions contemplated by this Agreement,
including by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative
action, unless Parent determines that litigation is not in its best
interests. Subject to Section 5.1(a)(iv), each of Parent and the
Company shall use all reasonable efforts to take such action as may be
required to cause the expiration of the notice periods under the HSR
Act or other Antitrust Laws with respect to the transactions
contemplated by this Agreement as promptly as possible after the
execution of this Agreement.
(iii) Subject to Section 5.1(a)(iv) below, each of the parties
to this Agreement agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties to this Agreement in doing,
all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including (A) the obtaining of all
other necessary actions or nonactions, waivers, consents, licenses,
permits,
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authorizations, orders and approvals from Governmental Authorities and
the making of all other necessary registrations and filings (including
other filings with Governmental Authorities, if any), (B) the obtaining
of all consents, approvals or waivers from third parties related to or
required in connection with the Merger that are necessary to consummate
the transactions contemplated by this Agreement or required to prevent
a Material Adverse Effect on Parent or the Company from occurring prior
to or after the Effective Time, (C) the preparation of the Proxy
Statement, (D) the execution and delivery of any additional instruments
reasonably necessary to consummate the transaction contemplated by, and
to fully carry out the purposes of, this Agreement, and (E) the
providing of all such information concerning such party, its
Subsidiaries, its Affiliates and its Subsidiaries' and Affiliates'
officers, directors, employees and partners as may be reasonably
requested in connection with any of the matters set forth in this
paragraph (iii).
(iv) At the request of Parent, the Company and its
Subsidiaries shall agree to hold separate (including by trust or
otherwise) or to divest any of their respective businesses,
Subsidiaries or assets, or to take or agree to take any action with
respect to, or agree to any limitation on, any of their respective
businesses, Subsidiaries or assets, provided that any such action is
conditioned upon the consummation of the Merger. The Company agrees and
acknowledges that, notwithstanding anything to the contrary in this
Section 5.1(a), neither the Company nor any of its Subsidiaries shall,
without Parent's prior written consent, agree to hold separate
(including by trust or otherwise) or to divest any of their respective
businesses, Subsidiaries or assets, or to take or agree to take any
action with respect to, or agree to any limitation on, any of their
respective businesses, Subsidiaries or assets. Anything to the contrary
in this Agreement notwithstanding, Parent and its Subsidiaries shall
not be required to hold separate (including by trust or otherwise) or
to divest any of the respective businesses, Subsidiaries or assets of
Parent and any of its Subsidiaries and/or the Company and any of its
Subsidiaries, or to take or agree to take any action with respect to,
or agree to any limitation on, any of their respective businesses in
order to satisfy any of their respective obligations under this
Agreement, including under this Section 5.1.
(b) Public Announcements. The initial press release concerning
the transactions contemplated by this Agreement shall be a joint press release.
Unless otherwise required by Applicable Laws or by obligations pursuant to any
listing agreement with or rules of any securities exchange, the Company shall
consult with, and use all reasonable efforts to accommodate the comments
(including as to timing) of Parent, and the Parent shall consult with, and use
all reasonable efforts to accommodate the comments (including as to timing) of
the Company before issuing any press release or otherwise making any public
statement with respect to this Agreement or the transactions contemplated
hereby.
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(c) Notice of Breaches; Updates.
(i) Parent shall, promptly upon receiving knowledge thereof,
deliver to the Company written notice of any event or development that
would (A) render any statement, representation or warranty of Parent in
this Agreement (including the Parent Disclosure Schedule) inaccurate or
incomplete in any material respect or (B) constitute or result in a
breach by Parent of, or a failure by Parent to comply with, any
agreement or covenant in this Agreement. No such disclosure shall be
deemed to avoid or cure any such misrepresentation or breach.
(ii) The Company shall, promptly upon receiving knowledge
thereof, deliver to Parent written notice of any event or development
that would (A) render any statement, representation or warranty of the
Company in this Agreement (including the Company Disclosure Schedule)
inaccurate or incomplete in any material respect or (B) constitute or
result in a breach by the Company of, or a failure by the Company to
comply with, any agreement or covenant in this Agreement. No such
disclosure shall be deemed to avoid or cure any such misrepresentation
or breach.
(d) Outstanding Notes.
(i) Prior to the Closing, the Company shall take all such
actions as are required to be taken in advance of the Closing,
including, without limitation, providing any required notices on a
timely basis, in order to permit the Surviving Corporation to redeem
the Notes on the Closing Date in accordance with the terms of Article
Eleven of the Indenture, dated as of August 13, 1997, between the
Company and Wells Fargo, as successor trustee, relating to the Notes
(the "INDENTURE"), as if the Closing Date were the Redemption Date (as
defined in the Indenture).
(ii) Subject to the Company's compliance with the preceding
paragraph, Parent shall cause the Surviving Corporation to redeem the
Notes, in accordance with the terms of Article Eleven of the Indenture,
on the Closing Date concurrently with or promptly after the Effective
Time.
Section 5.2. Covenants of Parent.
(a) Conduct of Parent's Operations. During the period from the
date of this Agreement to the Effective Time, Parent shall use all reasonable
efforts to maintain and preserve its business organization and to retain the
services of its officers and key employees, and maintain relationships with
customers, suppliers and other third parties to the end that their goodwill and
ongoing business shall not be impaired in any material respect.
(b) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Parent shall cause the
Surviving Corporation to indemnify and hold harmless the present and
former officers and
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directors of the Company in respect of acts or omissions occurring
prior to the Effective Time to the extent provided under the Company
Certificate of Incorporation or the Company By-Laws as in effect as of
the date of this Agreement, and
(ii) Parent shall use all reasonable efforts to cause the
Surviving Corporation or Parent to maintain in effect the Company's
fully paid existing directors' or officers' liability insurance and, to
the extent the existing policy cannot be maintained, to obtain for a
period of six years after the Effective Time, policies of directors'
and officers' liability insurance at no cost to the beneficiaries
thereof with respect to acts or omissions occurring prior to the
Effective Time with substantially the same coverage and containing
substantially similar terms and conditions as existing policies;
provided, however, that neither the Surviving Corporation nor Parent
shall be required to pay an aggregate premium for such insurance
coverage in excess of 200% of the amount for such coverage set forth in
Section 4.23 to the Company Disclosure Schedule but in such case shall
purchase as much coverage as reasonably practicable for such amount.
(c) Employee Benefits. For a period of 12 months after the
Closing Date, Parent or the Surviving Corporation shall provide employees of the
Surviving Corporation with (i) wages or salaries, and commissions, as
applicable, and (ii) employee pension and welfare benefits, in each case, that
are substantially similar in the aggregate to those provided to such employees
immediately prior to the Closing Date or those provided to similarly situated
employees of the Parent and its Affiliates or their Subsidiaries at the sole
discretion of Parent. Subject to the preceding sentence, Parent and the
Surviving Corporation shall have the right to amend or terminate any benefit
plan, program or arrangement. Nothing contained in this Agreement shall prevent,
limit or restrict in any way Parent's or the Surviving Corporation's right to
terminate the employment or services of any Person at any time following the
Closing Date, nor shall it be construed as a guarantee of employment to any
Person.
(d) Maintenance of Operations at the Beachwood Location.
Parent shall cause the Surviving Corporation to maintain business operations at
the Beachwood, Ohio facility for a period of one year from the Closing Date.
Section 5.3. Covenants of the Company.
(a) The Company Stockholders Meeting. The Company shall take
all action in accordance with the United States federal securities laws, the
DGCL and the Company Certificate of Incorporation and the Company By-Laws
necessary to duly call, give notice of, convene and hold a special meeting of
the Company Stockholders, to be held on the earliest practicable date determined
in consultation with Parent, for the purpose of obtaining the Required Company
Stockholder Approval (the "COMPANY STOCKHOLDERS MEETING"). Once the Company
Stockholders Meeting has been called and noticed, the Company shall not postpone
or adjourn (other than for the absence of a quorum and then only to the next
possible future date) the Company Stockholders Meeting without Parent's consent.
The Board of Directors of the Company shall submit
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this Agreement to the Company Stockholders, whether or not the Board of
Directors of the Company at any time changes, withdraws or modifies the Company
Board Recommendation. The Company shall solicit from the Company Stockholders
proxies in favor of the Merger and shall take all other action necessary or
advisable to secure the vote or consent of the Company Stockholders required by
the DGCL and the Company Certificate of Incorporation and Company By-Laws to
authorize and adopt this Agreement and the Merger. Without limiting the
generality of the foregoing, (i) the Company agrees that its obligation to duly
call, give notice of, convene and hold a meeting of the holders of Company
Common Stock, as required by this Section 5.3, shall not be affected by the
withdrawal, amendment or modification of the Company Board Recommendation and
(ii) the Company agrees that its obligations pursuant to this Section 5.3 shall
not be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal or Superior Proposal.
(b) Proxy Statement; Other Filings; Board Recommendations.
(i) As promptly as practicable after the execution of this
Agreement, the Company will prepare and file with the Commission the
Proxy Statement. The Company will respond promptly to any comments of
the Commission and will cause the Proxy Statement to be mailed to the
Company Stockholders at the earliest practicable time after the date of
this Agreement. As promptly as practicable after the date of this
Agreement, each of the Company and Parent will prepare and file any
other documents required to be filed by it under the Exchange Act, the
Securities Act or any other federal, state, foreign or Blue Sky or
related laws relating to the Merger and the transactions contemplated
by this Agreement (the "OTHER FILINGS"). No amendment or supplement to
the Proxy Statement will be made by the Company without the prior
approval of the Parent except as required by Applicable Laws, and then
only to the extent necessary. The Company will notify Parent promptly
upon the receipt of any comments from the Commission or its staff or
any other government officials and of any request by the Commission or
its staff or any other government officials for amendments or
supplements to the Proxy Statement or any Other Filings or for
additional information and will supply the Parent with copies of all
correspondence between the Company or any of its representatives, on
the one hand, and the Commission, or its staff or any other government
officials, on the other hand, with respect to the Proxy Statement, the
Merger or any Other Filing. Whenever any event occurs that is required
to be set forth in an amendment or supplement to the Proxy Statement or
any Other Filing, the Company will promptly inform the Parent of such
occurrence and cooperate in filing with the Commission or its staff or
any other Governmental Authority, and/or mailing to the Company
Stockholders, such amendment or supplement.
(ii) The Company Board Recommendation shall be included in the
Proxy Statement, except that the Board of Directors of the Company may
withdraw or modify in a manner adverse to Parent such recommendation
only if the Board of Directors of the Company determines, in good
faith, after consultation with outside legal counsel, that such action
is required in order for
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the directors of the Company to comply with their fiduciary duties to
those Persons to whom the Board of Directors of the Company owes
fiduciary duties under Applicable Laws.
(c) Conduct of the Company's Operations. The Company shall
conduct its operations in the ordinary course consistent with past practice, and
shall use all commercially reasonable efforts to maintain and preserve its
business organization and its material rights and to retain the services of its
officers and key employees and maintain relationships with customers, suppliers,
lessees, licensees and other third parties, and to maintain all of its operating
assets in their current condition (normal wear and tear excepted), to the end
that their goodwill and ongoing business shall not be impaired in any material
respect (except as a result of the implementation of FAS142 as required by the
Financial Accounting Standards Board). Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company and each of its Subsidiaries shall not, except as otherwise
expressly contemplated by this Agreement or as set forth in Section 5.3(c) to
the Company Disclosure Schedule, without the prior written consent of Parent:
(i) do or effect any of the following actions with respect to
its securities: (A) adjust, split, combine or reclassify its capital
stock, (B) make, declare or pay any dividend or distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any
shares of its capital stock (other than dividends or distributions from
any directly or indirectly wholly-owned subsidiary of the Company to
the Company or another directly or indirectly wholly-owned subsidiary
of the Company) or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, (C) grant any person
any right or option to acquire any shares of its capital stock; (D)
issue, deliver or sell or agree to issue, deliver or sell any
additional shares of its capital stock or any securities or obligations
convertible into or exchangeable or exercisable for any shares of its
capital stock or such securities (except pursuant to the exercise of
Company Options that are outstanding as of the date of this Agreement),
or (E) enter into any agreement, understanding or arrangement with
respect to the sale, voting, registration or repurchase of the Company
capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any non-de minimis portion
of its property or assets other than in the ordinary course of business
consistent with past practice;
(iii) make or propose any changes in its certificate of
incorporation, by-laws or other similar governing documents;
(iv) merge or consolidate with any other Person or dissolve,
liquidate, restructure or otherwise alter the corporate structure of
the Company or any of its Subsidiaries;
(v) acquire a material amount of assets or capital stock of
any other Person;
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(vi) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for the
obligations of any other Person other than trade payables in the
ordinary course of business, consistent with past practice;
(vii) create any Subsidiaries;
(viii) enter into or modify any employment, severance,
termination or similar agreements or arrangements with, or grant any
bonuses, salary increases, severance or termination pay to, any
officer, director, consultant or employee other than in the ordinary
course of business consistent with past practice with respect to
non-officer employees of the Company (except for severance agreements,
which, in all cases, shall require the prior written consent of
Parent), or otherwise increase the compensation or benefits provided to
any officer, director, consultant or employee, except as may be
required by Applicable Laws or existing contractual arrangements
disclosed to Parent prior to the date hereof, or grant, reprice, or
accelerate the exercise or payment of any Company Options or other
equity-based awards;
(ix) enter into, adopt or amend any Plan, except as shall be
required by Applicable Laws;
(x) take any action that could give rise to severance benefits
(including payments under any Section 4.15(i) Arrangement) payable to
any Person set forth in Section 4.15(i) to the Company Disclosure
Schedule (including taking any action that could give rise to a claim
of "Good Reason" termination or similar claim by any such Person);
(xi) change any material method or principle of Tax or
financial accounting, except to the extent required by Applicable Laws
or GAAP as advised by the Company's regular independent accountants;
(xii) settle any Actions, whether now pending or made or
brought after the date of this Agreement involving, individually or in
the aggregate, an amount in excess of $250,000;
(xiii) modify, amend or terminate, or waive, release or assign
any material rights or claims, or fail to exercise a right of renewal,
with respect to, any Company Disclosed Contract, any other material
contract to which the Company or a Subsidiary is a party or any
confidentiality agreement to which the Company or a Subsidiary is a
party;
(xiv) enter into any confidentiality agreements or
arrangements other than in the ordinary course of business consistent
with past practice (other than as permitted, in each case, by Section
5.3(d));
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(xv) make any change to the terms of payment or payment
practices that, individually or in the aggregate, amounts to a material
change to the terms of payment or payment practices with respect to a
non-de minimis portion (by dollar value or number of customers or
number of suppliers) of the Company's accounts receivable or accounts
payable;
(xvi) incur, make or commit to any capital expenditures not
provided for in the Company's annual capital expenditures budget
provided to Parent on or prior to the date of this Agreement;
(xvii) fail to use all commercially reasonable efforts to
collect the Company's outstanding receivables;
(xviii) generate, create or allow any receivables other than
in the ordinary course of business consistent with past practice;
(xix) other than with respect to transactions between the
Company and its directly or indirectly wholly-owned Subsidiaries or
between two or more of the Company's directly or indirectly
wholly-owned Subsidiaries, make any payments in respect of policies of
directors' and officers' liability insurance (premiums or otherwise)
other than premiums paid in respect of its current policies not in
excess of the amount paid prior to the date of this Agreement;
(xx) make any payment to, or engage in any transaction with,
or guarantee or assume any obligation or indebtedness of, or relieve
any obligation to the Company or any of its Subsidiaries of, any
Affiliate of the Company, or any affiliate of any such Affiliate of the
Company, other than pursuant to Plans (to the extent permissible in
light of clause (viii) of this Section 5.3(c)) and other than
reimbursement for or advancement of routine expenses;
(xxi) incur, make or commit to any fees related to this
Agreement and the transactions contemplated hereby (including fees of
attorneys, accountants and investment bankers, including regular fees
and any success-based fees or fees contingent upon such transactions)
such that the aggregate of such fees payable as of the Closing Date or,
thereafter, as a result of the Closing exceeds the amounts set forth in
Section 4.6 to the Company Disclosure Schedule.
(xxii) enter into or carry out any other material transaction
other than in the ordinary and usual course of business;
(xxiii) except in the ordinary course of business consistent
with past practice (A) make, revoke or amend any material Tax election,
(B) settle or compromise any material claim or assessment with respect
to Taxes, but only if such settlement or compromise would either
individually result in a Tax liability in excess of $250,000 or in
combination with all other material Tax claims or assessments settled
or compromised since the date of this Agreement result in aggregate Tax
liabilities in excess of $250,000, (C) execute any consent to any
waivers extending the statutory period of limitations with respect to
the collection
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or assessment of any material Taxes, or (D) amend any material Tax
Returns except in connection with the settlement or compromise of a
claim or assessment that would not either individually result in a Tax
liability in excess of $250,000 or in combination with all other
material Tax claims or assessments settled or compromised since the
date of this Agreement result in aggregate Tax liabilities in excess of
$250,000;
(xxiv) other than pursuant to this Agreement, adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company
or any of its Subsidiaries that is inconsistent with the prompt
consummation of the transactions contemplated by this Agreement, or
could otherwise reasonably be expected to have a Material Adverse
Effect on the Company;
(xxv) make any payment or distribution to, on or in respect
of, or set aside any funds or establish any "sinking" or similar fund
for or in respect of the Notes, whether in respect of interest,
repayment of principal or otherwise;
(xxvi) take any action that could reasonably be expected to
result in the representations and warranties set forth in Article IV
becoming false or inaccurate in any material respect;
(xxvii) permit or cause any of its Subsidiaries to do any of
the foregoing or agree or commit to do any of the foregoing; or
(xxviii) agree in writing or otherwise to take any of the
foregoing actions.
(d) Acquisition Proposals.
(i) From and after the date of this Agreement until the
earlier of the Closing or the termination of this Agreement in
accordance with its terms, the Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall the Company authorize or permit
any of its officers, directors or employees to, and shall use all
reasonable efforts to cause any investment banker, financial advisor,
attorney, accountant, or other representatives retained by them or any
of their respective Subsidiaries not to: (i) solicit, initiate,
encourage (including by way of furnishing information), knowingly
facilitate or induce (directly or indirectly) any inquiry with respect
to, or the making, submission or announcement of, any proposal that
constitutes, or could reasonably be expected to result in, a proposal
or offer for an Acquisition Proposal, (ii) participate in any
discussions or negotiations regarding, or furnish to any Person any
nonpublic information with respect to, or take any other action to
knowingly facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, an Acquisition
Proposal, (iii) approve, endorse or, subject to Section 5.3(b)(ii),
recommend any Acquisition Proposal, or (iv) enter into any letter of
intent or similar document or any contract, agreement or commitment
contemplating or
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otherwise relating to any Acquisition Proposal or transaction
contemplated thereby.
(ii) Within two business days after receipt of an Acquisition
Proposal or any request for nonpublic information or inquiry that the
Company reasonably believes could lead to an Acquisition Proposal, the
Company shall provide Parent with oral and written notice of the
material terms and conditions of such Acquisition Proposal, request or
inquiry, and the identity of the Person making any such Acquisition
Proposal, request or inquiry and a copy of all written materials
provided in connection with such Acquisition Proposal, request or
inquiry. Upon receipt of the Acquisition Proposal, request or inquiry,
the Company shall provide Parent, as promptly as practicable, with oral
and written notice setting forth all such information as is reasonably
necessary to keep Parent informed in all material respects of the
status and details (including material amendments or proposed material
amendments) of any such Acquisition Proposal, request or inquiry, and
shall promptly provide to Parent a copy of all written materials
subsequently provided in connection with such Acquisition Proposal,
request or inquiry.
(iii) The Company shall, and shall cause its Subsidiaries to,
immediately cease and cause to be terminated, and cause its officers,
directors, employees, investment bankers, consultants, attorneys,
accountants, agents and other representatives to, immediately cease and
cause to be terminated, all discussions and negotiations, if any, that
have taken place prior to the date hereof with any Persons with respect
to any Acquisition Proposal and, upon request by Parent, shall request
the return or destruction of all confidential information provided to
any such Person.
(iv) The foregoing notwithstanding, the Company and Board of
Directors of the Company may, (A) prior to receipt of the Required
Company Stockholder Approval, furnish nonpublic information to, or
enter into discussions with, any Person in connection with an
unsolicited bona fide written Acquisition Proposal by such Person if
and only to the extent that (I) the Company is not then in breach of
its obligations under this Section 5.3(d); (II) the Company Board of
Directors believes in good faith (after consultation with its legal and
financial advisors) that such Acquisition Proposal is, or is likely to
result in, a Superior Proposal and (III) prior to furnishing such
nonpublic information to, or entering into discussions or negotiations
with, such Person, such Board of Directors receives from such Person an
executed confidentiality agreement or (B) comply with Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act with regard to an
Acquisition Proposal.
(v) The Company (A) agrees not to release any Person from, or
waive any provision of, or fail to enforce, any standstill agreement or
similar agreement to which it is a party related to, or that could
affect, an Acquisition Proposal and (B) acknowledges that the
provisions of clause (A) are an important and integral part of this
Agreement.
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(vi) "ACQUISITION PROPOSAL" means any offer or proposal for,
or any indication of interest in, any (A) direct or indirect
acquisition or purchase of the Company or any of its Subsidiaries that
constitutes 10% or more of the net revenues, net income or assets of
the Company and its Subsidiaries, taken as a whole; (B) direct or
indirect acquisition or purchase of 10% or more of any class of equity
securities, or 10% of the voting power, of the Company or any of its
Subsidiaries whose business constitutes 10% or more of the net
revenues, net income or assets of the Company and its Subsidiaries,
taken as a whole, or 40% or more of the face value of the Notes; (C)
tender offer or note exchange offer that, if consummated, would result
in any Person beneficially owning 10% or more of any class of equity
securities, or 10% of the voting power, of the Company or any of its
subsidiaries whose business constitutes 10% or more of the net
revenues, net income or assets of the Company and its Subsidiaries,
taken as a whole; (D) the direct or indirect repurchase, retirement,
exchange, refinancing or restructuring of 10% or more of the Company's
outstanding Notes; or (E) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries whose business
constitutes 10% or more of the net revenue, net income or assets of the
Company and its Subsidiaries, taken as a whole, other than the
transactions contemplated by this Agreement. "SUPERIOR PROPOSAL" means
any bona fide written Acquisition Proposal obtained not in breach of
this Section 5.3(d) for or in respect of all of the outstanding Company
capital stock and all of the outstanding Notes, on terms that the Board
of Directors of the Company determines in its good faith judgment
(after consultation with its financial advisors and taking into account
all the terms and conditions of the Acquisition Proposal and this
Agreement deemed relevant by such Board of Directors, including any
break-up fees, expense reimbursement provisions, conditions to and
expected timing and risks of consummation, and the ability of the party
making such proposal to obtain financing for such Acquisition Proposal
and taking into account all other legal, financial, regulatory and all
other aspects of such proposal) are more favorable to the persons to
whom it owes fiduciary duties under Applicable Laws than the Merger.
(e) Access. Subject to contractual restrictions existing as of
the date hereof and legal restrictions (including, without limitation, under
Antitrust Laws), upon reasonable notice throughout the period prior to the
earlier of the Effective Time or the Outside Date, the Company shall permit
representatives of Parent to have full access during normal business hours to
the Company's premises, properties, personnel (including senior executives),
books, records, contracts and documents; provided, however, that such access
shall be conducted in such a manner as to not unreasonably interfere with the
Company's business. Parent will keep the information obtained pursuant to this
Section 5.3(e) confidential and shall cause its directors, officers and
employees and representatives or advisors who receive any portion thereof to
keep all such information confidential. No investigation conducted pursuant to
this Section 5.3(e) shall affect or be deemed to modify any representation or
warranty made in this Agreement.
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(f) Closing Inventory. Parent, Sub and their representatives
(including their outside auditors) shall be permitted to monitor the Company's
regularly scheduled monthly inventories between the date hereof and the Closing.
The inventories shall be undertaken in accordance with the procedures in
Schedule 5.3(f), unless otherwise agreed by the parties. The Company shall
conduct (and Parent, Sub and their representatives (including their outside
auditors) shall be permitted to monitor) a physical inventory in conjunction
with the preparation of the Company's September monthly financial statement at
locations specified by Parent representing approximately 15% of the Company's
inventory balance (which locations shall be in addition to those locations
included in the Company's existing cycle count schedule, which Parent is
entitled to monitor pursuant to the first sentence of this paragraph), as well
as a physical inventory at the Vanguard packaging facility.
(g) Closing Cash on Hand. On the date that is two business
days prior to the Closing Date (the "CASH TEST DATE"), and in accordance with
the procedures set forth in Exhibit C, the Company's independent outside auditor
shall determine the amount of cash on hand of the Company and its Subsidiaries
on a consolidated basis as of the open of business on the Cash Test Date (the
"CASH DETERMINATION"). The Company and its representatives and Parent and Sub
and their representatives (including their outside auditors) shall be permitted
to monitor and comment upon the Cash Determination. At the Closing, an executive
officer of the Company shall deliver a certificate setting forth the amount of
Cash on Hand as of the Cash Test Date (the "MEASURED CASH"), signed by such
officer on behalf of the Company, certifying that the amount of the Cash on Hand
set forth in such certificate is materially accurate. From the date prior to the
Cash Test Date through and including the Effective Time, neither the Company nor
any of its Subsidiaries shall make (i) any payment that is outside of the
ordinary course consistent with past practice as to timing or amount to any
Affiliate of the Company or its Subsidiaries, nor (ii) any payment, whether in
respect of fees or expenses or otherwise, to any broker, finder, attorney,
accountant, investment banker or other advisor, nor (iii) any payment that is
outside of the ordinary course consistent with past practice as to timing or
amount to any supplier or vendor.
(h) Subsequent Financial Statements. The Company shall provide
Parent with its financial results for any period after the date of this
Agreement and prior to filing any Company SEC Documents after the date of this
Agreement.
(i) Disposal of Illinois Sub. If requested in writing by
Parent, the Company shall use all reasonable efforts to (and, if necessary,
shall use all reasonable efforts to cause any relevant Subsidiary to) sell or
dispose of all of its right, title and interest in NCS Healthcare of Illinois,
Inc. (the "ILLINOIS SUB"), including all shares of the capital stock and any
other debt or equity interests in the Illinois Sub, on such terms and conditions
as Parent may so specify in writing, including as to the retention of liability,
it being understood that, for purposes of this Section 5.3(i), the concept of
all reasonable efforts shall be understood in light of the terms and conditions
imposed by Parent and the time available between the date Parent delivers its
written request and the Closing Date.
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(j) Lease Consents. Prior to the Closing Date, the Company or
its relevant Subsidiary shall obtain any consent necessary as a result of the
execution, delivery, performance or consummation of this Agreement and the
transactions contemplated hereby with respect to the leases set forth in Section
4.5(a) to the Company Disclosure Schedule.
ARTICLE VI
CONDITIONS
Section 6.1. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Sub to consummate the Merger shall be
subject to the satisfaction (or to the extent legally permissible, waiver) of
the following conditions:
(a) The Required Company Stockholder Approval shall have been
received.
(b) Any applicable waiting periods under the HSR Act relating
to the Merger and the transactions contemplated by this Agreement shall have
expired or been terminated.
(c) No proceeding with respect to the Proxy Statement shall
be pending before or threatened by the Commission or any state securities
administration.
Section 6.2. Conditions to Obligations of the Company. The
obligations of the Company to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver
by the Company) of the following conditions:
(a) Each of the representations and warranties of each of
Parent and Sub set forth in Article III that is qualified by "materiality,"
"Material Adverse Effect" or similar qualifier shall be true and correct in all
respects, and each of such representations and warranties that is not so
qualified shall be true and correct in all material respects, in each case, on
the date of this Agreement and on and as of the Closing Date as though made on
and as of the Closing Date (except for representations and warranties made as of
a specified date, the accuracy of which will be determined only as of the
specified date).
(b) Each of Parent and Sub shall have performed or complied
with in all material respects each obligation, agreement and covenant to be
performed or complied with by it under this Agreement at or prior to the
Effective Time.
(c) Each of Parent and Sub shall have furnished the Company
with a certificate dated the Closing Date signed on behalf of it by a duly
authorized officer to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied.
(d) No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or
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other Order (whether temporary, preliminary or permanent) that is in effect and
which has the effect of prohibiting or making illegal consummation of the
Merger.
(e) Subject to compliance by the Company prior to the
Effective Time of its obligations pursuant to Section 5.1(d)(i), Parent shall
have provided evidence (which may be a certificate signed by an officer of
Parent) to the Company that the Note redemption described in Section 5.1(d)
shall be capable of completion on the Closing Date concurrently with or promptly
after the Effective Time in accordance with the terms of Article Eleven of the
Indenture.
Section 6.3. Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
(or waiver by Parent) of the following conditions:
(a) Each of the representations and warranties of the Company
set forth in Article IV that is qualified by "materiality," "Material Adverse
Effect" or similar qualifier, and each of the representations and warranties
contained in Section 4.4, shall be true and correct in all respects, and each of
such representations and warranties that is not so qualified (other than those
set forth in Section 4.4) shall be true and correct in all material respects, in
each case, on the date of this Agreement and on and as of the Closing Date as
though made on and as of the Closing Date (except for representations and
warranties made as of a specified date, the accuracy of which will be determined
only as of the specified date).
(b) The Company shall have performed or complied with in all
material respects each obligation, agreement and covenant to be performed or
complied with by it (except that the covenant contained in the last sentence of
Section 5.3(g) shall have been complied with in all respects) under this
Agreement at or prior to the Effective Time.
(c) The Measured Cash shall not be less than $35,000,000.
(d) The Company shall have furnished Parent with a certificate
dated the Closing Date signed on its behalf by a duly authorized officer to the
effect that the conditions set forth in Sections 6.3(a), 6.3(b) and 6.3(c) have
been satisfied.
(e) Since the date of this Agreement, there shall not have
been any change, event, occurrence or development that has had or could
reasonably be expected to have a Material Adverse Effect on the Company.
(f) No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other Order (whether temporary, preliminary or permanent)
that is in effect and which has the effect of prohibiting or making illegal
consummation of the Merger.
(g) There shall not be pending any Action by a Governmental
Authority (i) challenging or seeking to restrain or prohibit the consummation of
the Merger or any of the other transactions contemplated by this Agreement, (ii)
seeking to impose any
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prohibition or limitation, or to require any divestiture, disposal or other
action, that Parent would not be required to accept or do under Section
5.1(a)(iv), (iii) seeking to impose limitations on the ability of Parent to
acquire or hold, or exercise full rights of ownership of, any shares of the
Surviving Corporation capital stock or (iv) seeking to prohibit Parent or any of
its subsidiaries from effectively controlling in any material respect the
business or operations of Parent or any of its Subsidiaries.
(h) Parent, the Company and their respective Subsidiaries, as
applicable, shall have obtained the consent or approval of any Person (excluding
any Governmental Authority) whose consent or approval shall be required under
any agreement or instrument in order to permit the consummation of the Merger or
any of the other transactions contemplated by this Agreement, except those that
the failure to obtain, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company or Parent if the
Closing were to occur.
(i) All Required Governmental Approvals shall have been
obtained pursuant to Final Orders, free of any conditions that Parent would not
be required to accept pursuant to Section 5.1(a), and all other consents,
approval, authorizations or filings the absence of which could reasonably be
expected to have a Material Adverse Effect on the Company, or on Parent if the
Closing were to occur, shall have been obtained or made.
(j) The Dissenting Shares shall not represent more than 15% of
the voting power of the outstanding Company capital stock.
(k) The Company shall have complied in all respects with its
agreements and obligations set forth in Section 5.3(i).
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the Company Stockholders):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if there shall be any law
or regulation that makes consummation of the Merger illegal or otherwise
prohibited, or if any Order of a court or other competent Governmental Authority
enjoining Parent or the Company from consummating the Merger shall have been
entered and such Order shall have become a Final Order;
(c) by either Parent or the Company, if the Closing shall not
have occurred on or before January 31, 2003 (the "OUTSIDE DATE"); provided,
however, that, if the Merger shall not have been consummated by such date solely
due to the waiting period (or any extension thereof) or approvals under the HSR
Act or any
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Required Governmental Approval not having been received, then such date shall be
extended to April 30, 2003; provided, further, that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any party to this
Agreement whose failure or whose Affiliate's failure to perform any material
covenant or obligation under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date;
(d) by the Company, if Parent shall have breached in any
material respect any of its representations or warranties or failed to perform
in any material respect any of its covenants or other agreements contained in
this Agreement, which breach or failure to perform would render unsatisfied any
condition contained in Section 6.1 or 6.2 and (i) is incapable of being cured or
(ii) if capable of being cured is not cured prior to the earlier of (A) the
business day prior to the Outside Date or (B) the date that is 30 days from the
date that Parent is notified of such breach;
(e) by Parent, if the Company shall have breached in any
material respect any of its representations or warranties or failed to perform
in any material respect any of its covenants or other agreements contained in
this Agreement, which breach or failure to perform would render unsatisfied any
condition contained in Section 6.1 or 6.3 and (i) is incapable of being cured or
(ii) if capable of being cured is not cured prior to the earlier of (A) the
business day prior to the Outside Date or (B) the date that is 30 days from the
date that the Company is notified of such breach;
(f) by the Company or Parent, upon written notice to the other
party, if a Governmental Authority of competent jurisdiction shall have issued
an Order or taken any other action (which Order or other action the party
seeking to terminate shall have used all reasonable efforts to resist, resolve
or lift, as applicable, subject to the provisions of Section 5.1(a)) enjoining
or otherwise prohibiting the consummation of the transactions contemplated by
this Agreement, and such Order shall have become a Final Order;
(g) by Parent, if (i) the Board of Directors of the Company
shall have withdrawn or changed or modified the Company Board Recommendation in
a manner adverse to Parent; (ii) the Board of Directors of the Company shall
have approved, or determined to recommend to the Company Stockholders that they
approve an Acquisition Proposal other than that contemplated by this Agreement;
(iii) for any reason the Company fails to call or hold the Company Stockholders
Meeting within four months of the date hereof;
(h) by Parent or the Company, if, at the Company Stockholders
Meeting (including any adjournment or postponement thereof), the Required
Company Stockholder Approval shall not have been obtained;
(i) by Parent, if there shall have been a Material Adverse
Effect on the Company; or
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(j) by the Company, if (i) the Board of Directors of the
Company has received a Superior Proposal and (ii) the Board of Directors of the
Company determines in good faith, after consultation with outside legal counsel,
that such action is consistent with the fiduciary duties of the Board of
Directors of the Company to the persons to whom it owes fiduciary duties under
Applicable Laws; provided, however, that the Board of Directors of the Company
shall only be able to terminate this Agreement pursuant to this Section 7.1(j)
after three business days following Parent's receipt of written notice advising
Parent that the Board of Directors of the Company is prepared to do so, and only
if, during such three business day period, the Company and its advisors will
have negotiated in good faith with Parent to make such adjustments in the terms
and conditions of this Agreement as would enable the parties to proceed with the
transactions contemplated herein on such adjusted terms.
Section 7.2. Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 7.1, this Agreement, except
for the provisions of this Section 7.2 and Section 8.11, shall become void and
have no effect, without any liability on the part of any party to this Agreement
or their respective directors, officers, or stockholders or shareholders, as the
case may be. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for willful breach; provided,
however, that, if it shall be judicially determined that termination of this
Agreement was caused by a willful breach of this Agreement, then, in addition to
other remedies at law or equity for breach of this Agreement, the party to this
Agreement found to have intentionally breached this Agreement shall indemnify
and hold harmless the other parties to this Agreement for their respective
out-of-pocket costs, fees and expenses of their counsel, accountants, financial
advisors and other experts and advisors as well as fees and expenses incident to
negotiation, preparation and execution of this Agreement and related
documentation and stockholders' meetings and consents.
Section 7.3. Amendment. This Agreement may be amended by the
parties to this Agreement, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of this Agreement by
the Company Stockholders, but, after any such approval, no amendment shall be
made that by law requires further approval or authorization by the Company
Stockholders without such further approval or authorization. Notwithstanding the
foregoing, this Agreement may not be amended, except by an instrument in writing
signed on behalf of each of the parties to this Agreement.
Section 7.4. Extension; Waiver. At any time prior to the
Effective Time, Parent (with respect to the Company) and the Company (with
respect to Parent and Sub) by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of such party to this
Agreement, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to this
Agreement to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party to this Agreement.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Representations and Warranties. The
representations and warranties made in this Agreement by the parties to this
Agreement shall not survive the Effective Time. This Section 8.1 shall not limit
any covenant or agreement of the parties to this Agreement, which by its terms
contemplates performance after the Effective Time or after the termination of
this Agreement.
Section 8.2. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or dispatched by a nationally
recognized overnight courier service to the parties to this Agreement at the
following addresses (or at such other address for a party to this Agreement as
shall be specified by like notice):
(a) if to Parent or Sub:
Omnicare, Inc.
100 East RiverCenter Blvd.
Covington, Kentucky 41011
Telecopy No.: (859) 392-3360
Attention: Joel F. Gemunder
with a copy to
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 259-6333
Attention: Morton A. Pierce, Esq.
(b) if to the Company:
NCS HealthCare, Inc.
3201 Enterprise Parkway, Suite 220
Beachwood, Ohio 44122
Telecopy No.: (216) 464-1194
Attention: Jon H. Outcalt
with a copy to
Benesch, Friedlander, Coplan & Aronoff, LLP
2300 BP Tower
200 Public Square
Cleveland, Ohio 44114
Telecopy No.: (216) 363-4588
Attention: H. Jeffrey Schwartz, Esq.
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Section 8.3. Interpretation.
(a) When a reference is made in this Agreement to an Article
or Section, such reference shall be to an Article or Section of this Agreement
unless otherwise indicated. The headings, the table of contents and the index of
defined terms contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes," or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." When a reference is made in this Agreement to the Company, such
reference shall be deemed to include any and all of the Company's Subsidiaries,
individually and in the aggregate. Nothing set forth on any Company Disclosure
Schedule shall be deemed or otherwise construed as an admission of liability or
wrongdoing. If the end date for any time period or deadline set in this
Agreement shall fall on a weekend or legal holiday, then such end date or
deadline shall be deemed to fall on the next business day following such weekend
or holiday.
(b) Information to be disclosed in any section of the Parent
Disclosure Schedule or Company Disclosure Schedule, as applicable, shall be
deemed to be disclosed for purposes of any other section of such disclosure
schedule so long as the applicability or relevance to such other section is
reasonably apparent on the face of such disclosure. Capitalized terms used in
the Parent Disclosure Schedule or Company Disclosure Schedule not otherwise
defined therein have the meaning given them in this Agreement. The foregoing
notwithstanding, each of Sections 3.5 and 3.9 of this Agreement may be modified
only by the information set forth in Sections 3.5 and 3.9, respectively, to the
Parent Disclosure Schedule, and each of Sections 4.7 and 4.11 of this Agreement
may only be modified by the information set forth in Sections 4.7 and 4.11,
respectively, to the Company Disclosure Schedule.
Section 8.4. Counterparts. This Agreement may be executed in
counterparts, which together shall constitute one and the same Agreement. The
parties to this Agreement may execute more than one copy of this Agreement, each
of which shall constitute an original.
Section 8.5. Entire Agreement. This Agreement (including the
documents and the instruments relating to the Merger referred to in this
Agreement) constitutes the entire agreement among the parties to this Agreement
and supersede all prior agreements and understandings, agreements or
representations by or among the parties to this Agreement, written and oral,
with respect to the subject matter of this Agreement and thereof.
Section 8.6. Third-Party Beneficiaries. Nothing in this
Agreement, express or implied, is intended or shall be construed to create any
third-party beneficiaries.
Section 8.7. Governing Law. Except to the extent that the laws
of the jurisdiction of organization of any party to this Agreement, or any other
jurisdiction, are mandatorily applicable to the Merger or to matters arising
under or in connection with
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this Agreement, this Agreement shall be governed by the laws of the State of
Delaware without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of Delaware or any other jurisdictions) that would
cause application of the laws of any jurisdiction other than the State of
Delaware. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in any state or federal court sitting in
the State of Delaware.
Section 8.8. Consent to Jurisdiction; Venue.
(a) Each of the parties to this Agreement irrevocably submits
to the exclusive jurisdiction of the state courts of Delaware and to the
jurisdiction of the United States District Court for the District of Delaware,
for the purpose of any action or proceeding arising out of or relating to this
Agreement and each of the parties to this Agreement irrevocably agrees that all
claims in respect to such action or proceeding may be heard and determined
exclusively in any Delaware state or federal court sitting in the State of
Delaware. Each of the parties to this Agreement agrees that a final judgment in
any action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties to this Agreement irrevocably consents
to the service of any summons and complaint and any other process in any other
action or proceeding relating to the Merger, on behalf of itself or its
property, by the personal delivery of copies of such process to such party to
this Agreement. Nothing in this Section 8.8 shall affect the right of any party
to this Agreement to serve legal process in any other manner permitted by law.
Section 8.9. Specific Performance. The transactions
contemplated by this Agreement are unique. Accordingly, each of the parties to
this Agreement acknowledges and agrees that, in addition to all other remedies
to which it may be entitled, each of the parties to this Agreement is entitled
to a decree of specific performance, provided that such party to this Agreement
is not in material default hereunder.
Section 8.10. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned by
any of the parties to this Agreement (whether by operation of law or otherwise)
without the prior written consent of the other parties to this Agreement.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties to this Agreement and their
respective successors and assigns.
Section 8.11. Expenses. Subject to the provisions of Section
7.2, all costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party to this
Agreement incurring such costs and expenses.
Section 8.12. Certain Definitions. The following terms have
the definitions given below:
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(a) "AFFILIATE" means a Person that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first-mentioned Person, and shall, without limitation,
include any director or officer of the relevant Person;
(b) "FINAL ORDER" means an Order that has been granted by the
relevant Governmental Authority as to which (i) no request for a stay or similar
request is pending, no stay is in effect, the Order has not been vacated,
reversed, set aside, annulled or suspended and any deadline for filing such
request that may be designated by statute or regulation has passed, (ii) no
petition for rehearing or reconsideration or application for review is pending
and the time for the filing of any such petition or application has passed,
(iii) the relevant Governmental Authority does not have the Order under
reconsideration on its own motion and the time within which it may effect such
reconsideration has passed and (iv) no appeal is pending, including other
administrative or judicial review, or in effect and any deadline for filing any
such appeal that may be designated by statute or rule has passed;
(c) "GOVERNMENTAL AUTHORITY" means any nation or government,
any state or other political subdivision thereof or any entity (including a
court) exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government;
(d) "KNOWLEDGE OF THE COMPANY" means the actual knowledge of
the executive officers of the Company;
(e) "KNOWLEDGE OF PARENT AND SUB" means the actual knowledge
of the executive officers of Parent and Sub;
(f) "LIEN" means any mortgage, pledge, security interest,
attachment, encumbrance, lien (statutory or otherwise), option, conditional sale
agreement, right of first refusal, first offer, termination, participation or
purchase or charge of any kind (including any agreement to give any of the
foregoing); provided, however, that the term "Lien" shall not include (i)
statutory liens for Taxes that are not yet due and payable or are being
contested in good faith by appropriate proceedings, (ii) statutory or common law
liens to secure landlords, lessors or renters under leases or rental agreements
confined to the premises rented, (iii) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment insurance,
old age pension or other social security programs mandated under Applicable
Laws, (iv) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens, and (v) restrictions on transfer of securities imposed by
applicable federal and state securities laws;
(g) "MATERIAL ADVERSE EFFECT" means, with respect to any
Person, any change, event, occurrence, effect or state of facts that,
individually or aggregated with other such matters, (i) is materially adverse to
the business, assets (including intangible assets), properties, financial
condition or results of operations of such Person and its Subsidiaries, taken as
a whole, (ii) materially impairs the ability of
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such Person to perform its respective obligations under this Agreement or
ability to consummate the Merger; provided, however, that none of the following
shall be considered in determining whether a Material Adverse Effect has
occurred: (A) with respect to the Company, any adverse change in the stock price
of Company, and with respect to Parent, any adverse change in the stock price of
Parent; (B) with respect to either party, any adverse change, event,
circumstance, development or effect resulting from a change in general economic,
industry or financial market conditions (including a change in general economic,
industry or financial market conditions resulting from any acts of terrorism or
war) to the extent that such adverse change, event, circumstance, development or
effect does not disproportionately affect the relevant party and its
Subsidiaries; (C) with respect to either party, any adverse change, event,
circumstance, development or effect resulting from a breach of this Agreement by
the other party and (D) with respect to either party, any adverse change, event,
circumstance, development or effect directly resulting from the announcement or
pendency of the Merger, including the loss by such party or any of its
Subsidiaries of any of such party's customers.
(h) "ORDER" means, as to any Person, any judgment, order,
writ, injunction, ruling or decree of, or any settlement under the jurisdiction
of, any arbitrator, court or Governmental Authority, in each case applicable to
or binding upon such Person or any of its property or to which such Person or
any of its property or assets is subject;
(i) "PERSON" includes an individual, corporation, partnership,
association, trust, unincorporated organization, limited liability company,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act); and
(j) "SUBSIDIARY" means, with respect to any Person, any
corporation, partnership, joint venture, limited liability company or other
legal entity of which such Person (either alone or through or together with any
other Subsidiary) owns, directly or indirectly, 50% or more of the economic
interests in, or voting rights with respect to the election of the board of
directors or other governing body of, such corporation or other legal entity.
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IN WITNESS WHEREOF, Parent, Sub and the Company have signed
this Agreement as of the date first written above.
OMNICARE, INC.
By:
--------------------------
Name: Joel F. Gemunder
Title: President and Chief
Executive Officer
NCS ACQUISITION CORP.
By:
--------------------------
Name: David W. Froesel, Jr.
Title: Vice President and Chief
Financial Officer
NCS HEALTHCARE, INC.
By:
--------------------------
Name: Jon H. Outcalt
Title: Chairman of the Board
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ................................. 'SS'