EXECUTION COPY
QUINTILES TRANSNATIONAL CORP.,
PHARMA SERVICES HOLDING, INC.
and
PHARMA SERVICES ACQUISITION CORP.
------------------------
AGREEMENT AND PLAN OF MERGER
------------------------
Dated as of April 10, 2003
================================================================================
TABLE OF CONTENTS
ARTICLE I. GENERAL......................................................1
SECTION 1.1. Defined Term Index......................................1
ARTICLE II. THE MERGER...................................................3
SECTION 2.1. The Merger..............................................3
SECTION 2.2. Closing.................................................4
SECTION 2.3. Effective Time..........................................4
SECTION 2.4. Effect of the Merger....................................4
SECTION 2.5. Subsequent Actions......................................4
SECTION 2.6. Articles of Incorporation; Bylaws; Directors and
Officers................................................4
SECTION 2.7. Conversion of Securities................................5
SECTION 2.8. Surrender of Shares; Stock Transfer Books...............5
SECTION 2.9. Option Plans; Stock Purchase Plans......................7
SECTION 2.10. Dissenters' Rights......................................8
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......9
SECTION 3.1. Corporate Organization..................................9
SECTION 3.2. Ownership of Merger Sub.................................9
SECTION 3.3. Authority Relative to this Agreement....................9
SECTION 3.4. No Conflict; Required Filings and Consents..............9
SECTION 3.5. Financing Arrangements.................................10
SECTION 3.6. Solvency...............................................11
SECTION 3.7. Legal Proceedings......................................11
SECTION 3.8. Status as a Control Person.............................12
SECTION 3.9. No Prior Activities....................................12
SECTION 3.10. Brokers................................................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............12
SECTION 4.1. Organization and Qualification; Subsidiaries...........12
SECTION 4.2. Capitalization.........................................13
SECTION 4.3. Investments............................................14
SECTION 4.4. Subsidiaries...........................................14
SECTION 4.5. Authority Relative to this Agreement...................15
SECTION 4.6. No Conflict; Required Filings and Consents.............15
SECTION 4.7. SEC Filings; Financial Statements......................16
SECTION 4.8. Absence of Certain Changes or Events...................17
SECTION 4.9. Litigation.............................................18
SECTION 4.10. Employee Benefit Plans; ERISA..........................18
SECTION 4.11. Owned Real Property....................................20
SECTION 4.12. Leases.................................................20
SECTION 4.13. Intellectual Property..................................20
SECTION 4.14. Insurance..............................................21
SECTION 4.15. Environmental..........................................21
SECTION 4.16. Material Contracts.....................................22
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SECTION 4.17. Compliance with Laws/Permits...........................22
SECTION 4.18. Taxes..................................................23
SECTION 4.19. Rights Agreement.......................................24
SECTION 4.20. State Takeover Statutes................................24
SECTION 4.21. Brokers................................................24
SECTION 4.22. Recommendation of Special Committee and Board of
Directors Opinion of Financial Advisor.................24
SECTION 4.23. No Undisclosed Liabilities.............................25
SECTION 4.24. Required Company Vote..................................25
SECTION 4.25. Customers..............................................25
SECTION 4.26. Related Party Transactions.............................25
SECTION 4.27. Employees; Labor Relations.............................25
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER......................25
SECTION 5.1. Conduct of Business by the Company Pending the
Effective Time.........................................25
SECTION 5.2. No Solicitation........................................27
ARTICLE VI. ADDITIONAL AGREEMENTS.......................................29
SECTION 6.1. Shareholders Meeting; Proxy Statement..................29
SECTION 6.2. Access to Information; Confidentiality.................30
SECTION 6.3. Public Announcements...................................31
SECTION 6.4. Approvals and Consents; Reasonable Best Efforts;
Cooperation............................................31
SECTION 6.5. Agreement to Defend and Indemnify; Insurance...........33
SECTION 6.6. Employee Benefit Matters...............................34
SECTION 6.7. Financing..............................................34
ARTICLE VII. CONDITIONS PRECEDENT........................................35
SECTION 7.1. Conditions to Each Party's Obligations to
Effect the Merger......................................35
SECTION 7.2. Conditions for Obligations of the Company..............35
SECTION 7.3. Conditions for Obligations of Parent and Merger Sub....36
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER...........................36
SECTION 8.1. Termination............................................36
SECTION 8.2. Effect of Termination..................................38
ARTICLE IX. GENERAL PROVISIONS..........................................39
SECTION 9.1. Non-Survival of Representations, Warranties and
Agreements.............................................39
SECTION 9.2. Specific Performance...................................39
SECTION 9.3. Notices................................................39
SECTION 9.4. Expenses...............................................41
SECTION 9.5. Certain Definitions....................................41
SECTION 9.6. Headings...............................................42
SECTION 9.7. Severability...........................................42
SECTION 9.8. Entire Agreement; No Third-Party Beneficiaries.........42
SECTION 9.9. Assignment.............................................43
SECTION 9.10. Governing Law..........................................43
SECTION 9.11. Amendment..............................................43
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SECTION 9.12. Waiver.................................................43
SECTION 9.13. Disclosure Letters, Schedules and Exhibits.............43
SECTION 9.14. Counterparts...........................................43
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 10, 2003 (this
"Agreement"), by and among Quintiles Transnational Corp., a North Carolina
corporation (the "Company"), Pharma Services Holding, Inc., a Delaware
corporation ("Parent"), and Pharma Services Acquisition Corp., a North Carolina
corporation and wholly owned subsidiary of Parent ("Merger Sub").
WITNESSETH:
WHEREAS, the board of directors of the Company (the "Board of
Directors") has determined that it is in the best interests of the Company's
shareholders for Merger Sub to merge with and into the Company (the "Merger") in
accordance with the North Carolina Business Corporation Act, as amended (the
"North Carolina Act"), and upon the terms of and subject to the conditions set
forth herein; and
WHEREAS, the Board of Directors, based on the unanimous recommendation
of a special committee (the "Special Committee") of the Board of Directors
formed for the purpose of representing the Company in connection with the
transactions contemplated hereby, has adopted this Agreement and has determined
that the consideration to be paid for each share of Company Common Stock (as
defined in Section 4.2(a)) upon consummation of the Merger is fair to the
holders of such shares and has recommended that the holders of Company Common
Stock approve this Agreement and the transactions contemplated hereby; and
WHEREAS, the boards of directors of Parent and Merger Sub have adopted
this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent and Merger Sub hereby agree as follows:
ARTICLE I.
GENERAL
SECTION 1.1. Defined Term Index
Term Reference
- ---- ---------
Acquisition Proposal................................. Section 5.2
Actions.............................................. Section 3.7
Affiliate............................................ Section 9.5
Agreement............................................ Preamble
Articles of Merger................................... Section 2.3
Board of Directors................................... Recitals
Change of Law........................................ Section 4.1
Citigroup............................................ Section 3.5
Closing.............................................. Section 2.2
Term Reference
- ---- ---------
Closing Date......................................... Section 2.2
Code................................................. Section 4.10
Company.............................................. Preamble
Company Acquisition Agreement........................ Section 5.2
Company Benefit Plans................................ Section 4.10
Company Common Stock................................. Section 4.2
Company Disclosure Letter............................ Preamble to Article IV
Company Financial Statements......................... Section 4.7
Company Material Contract............................ Section 4.16
Company Permits...................................... Section 4.17
Company Preferred Stock.............................. Section 4.2
Company Representatives.............................. Section 5.2
Company Shareholders' Meeting........................ Section 6.1
Company Stock........................................ Section 4.2
Company Stock Options................................ Section 2.9
Company Superior Proposal............................ Section 5.2
Confidentiality Agreement............................ Section 6.2
Contract............................................. Section 9.5
control.............................................. Section 9.5
Debt Commitment Letter............................... Section 3.5
Debt Financing....................................... Section 3.5
Dissenting Shareholder............................... Section 2.10
Effective Time....................................... Section 2.3
Environmental Law.................................... Section 4.15
Equity Commitment Letter............................. Section 3.5
Equity Financing..................................... Section 3.5
ERISA................................................ Section 4.10
Exchange Act......................................... Section 3.4
Exchange Agent....................................... Section 2.8
Filing Date.......................................... Section 6.4
Governmental Entity.................................. Section 3.4
Hazardous Substances................................. Section 4.15
HSR Act.............................................. Section 3.4
Indebtedness......................................... Section 9.5
Indemnified Parties.................................. Section 6.5
Intellectual Property................................ Section 4.13
IRS.................................................. Section 4.10
knowledge............................................ Section 9.5
Laws................................................. Section 9.5
Lease................................................ Section 4.12
Leased Real Property................................. Section 4.12
Liability............................................ Section 9.5
Material Adverse Effect.............................. Section 4.1
Material Company Benefit Plans....................... Section 4.10
Merger............................................... Recitals
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Term Reference
- ---- ---------
Merger Sub........................................... Preamble
Morgan Stanley....................................... Section 4.21
North Carolina Act................................... Recitals
OEP.................................................. Section 3.5
Options.............................................. Section 4.2
Option Plans......................................... Section 2.9
Order................................................ Section 7.1
Outside Date......................................... Section 8.1
Owned Real Property.................................. Section 4.11
Parent............................................... Preamble
Parent and Merger Sub Disclosure Letter.............. Preamble to Article III
Parent and Merger Sub Information.................... Section 6.1
Per Share Amount..................................... Section 2.7
Person............................................... Section 9.5
Proxy Statement...................................... Section 6.1
Required Governmental Consents....................... Section 4.6
Required Parent Consents............................. Section 3.4
Restated Articles.................................... Section 6.1
Restated Bylaws...................................... Section 6.1
Rights............................................... Section 4.2
Rights Agreement..................................... Section 4.2
Rollover Agreements.................................. Section 9.5
SEC.................................................. Section 3.8
SEC Reports.......................................... Section 4.7
Securities Act....................................... Section 3.4
Shares............................................... Section 2.7
Significant Subsidiary............................... Section 4.4
Special Committee.................................... Recitals
Subsequent SEC Filings............................... Section 4.7
Subsidiary........................................... Section 4.1
Surviving Corporation................................ Section 2.1
Tax Returns.......................................... Section 4.18
Taxes................................................ Section 4.18
Third Party.......................................... Section 5.2
ARTICLE II.
THE MERGER
SECTION 2.1. The Merger. At the Effective Time (as defined in Section
2.3), upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the North Carolina Act, Merger Sub shall be merged with
and into the Company, the separate corporate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation under the
name "Quintiles Transnational Corp." and shall succeed to and assume all
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the rights and obligations of Merger Sub in accordance with the North Carolina
Act. The Company as the surviving corporation after the Merger is sometimes
referred to herein as the "Surviving Corporation."
SECTION 2.2. Closing. Unless this Agreement has been terminated and the
transactions herein contemplated have been abandoned pursuant to Article VIII,
and subject to the satisfaction or waiver of the conditions set forth in Article
VII, the closing of the Merger (the "Closing") will take place at 12:00 noon on
the first business day after satisfaction or waiver of the conditions set forth
in Article VII, at the offices of Morgan, Lewis & Bockius LLP, located at 101
Park Avenue, New York, New York 10178 (or such other place or time as Parent and
the Company may jointly designate). The date that the Closing actually occurs is
referred to as the "Closing Date."
SECTION 2.3. Effective Time. On the Closing Date, the parties hereto
shall cause the Merger to be consummated by filing articles of merger (the
"Articles of Merger"), including a plan of merger, in accordance with Section
55-11-05 of the North Carolina Act, with the Secretary of State of the State of
North Carolina, in such form as required by, and executed in accordance with the
relevant provisions of, the North Carolina Act. Article II of this Agreement
shall constitute a "plan of merger" under Section 55-11-05 of the North Carolina
Act. The Merger shall become effective at the time of such filing, or such other
time as is agreed upon by the parties and specified in the Articles of Merger
(the time of such filing, or such other time so specified, being the "Effective
Time").
SECTION 2.4. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the North
Carolina Act. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.5. Subsequent Actions. If, at any time at or after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Merger Sub acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Merger Sub, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
in the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 2.6. Articles of Incorporation; Bylaws; Directors and Officers.
(a) At the Effective Time, the articles of incorporation of the Surviving
Corporation shall be the Articles of Incorporation of the Company as amended and
restated as set forth in Exhibit A
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attached hereto which is incorporated herein by reference, until thereafter
amended as provided by Law and such articles of incorporation.
(b) The Bylaws of Merger Sub, as in effect immediately before
the Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by Law, the articles of incorporation of the
Surviving Corporation and such bylaws.
(c) The directors of Merger Sub immediately before the
Effective Time will continue as the directors of the Surviving Corporation, and,
except as Merger Sub may otherwise notify the Company in writing prior to the
Effective Time, the officers of the Company immediately before the Effective
Time will be the initial officers of the Surviving Corporation, in each case
until their successors are elected or appointed and qualified. If, at the
Effective Time, a vacancy shall exist on the board of directors or in any office
of the Surviving Corporation, such vacancy may thereafter be filled in the
manner provided by Law.
SECTION 2.7. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of the Company, Parent, Merger
Sub or the holder of any of the following securities:
(a) Except as provided in clause (b) below, each share of
Company Common Stock issued and outstanding immediately before the Effective
Time and any Rights associated therewith (such shares of Company Common Stock
and associated Rights are hereinafter referred to, together, as the "Shares")
(other than Shares held by Dissenting Shareholders (as defined in Section 2.10),
if any) shall be converted into the right to receive $14.50 (the "Per Share
Amount") in cash payable to the holder thereof, without interest, upon surrender
of the certificate representing such Share or an affidavit with respect thereto,
in each case in accordance with Section 2.8. As of the Effective Time, all
Shares so converted shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
or certificates representing any such Shares shall cease to have any rights with
respect thereto, except to receive the aggregate Per Share Amount applicable
thereto, in accordance with Section 2.8.
(b) Each share of Company Common Stock that is owned by any
Subsidiary of the Company or held by Parent or Merger Sub immediately before the
Effective Time (including, without limitation, any Shares acquired by Parent
pursuant to the Rollover Agreements) shall automatically be canceled and
extinguished and shall cease to exist, and no cash, Company Common Stock or
other consideration shall be delivered or deliverable in exchange therefor.
(c) Each share of common stock, $0.01 par value per share, of
Merger Sub issued and outstanding immediately before the Effective Time shall
automatically be canceled and extinguished and shall be converted into and
become 1,250,000 fully paid and nonassessable shares of common stock, $0.01 par
value per share, of the Surviving Corporation.
SECTION 2.8. Surrender of Shares; Stock Transfer Books. (a) Before the
Effective Time, Merger Sub shall enter into an agreement with a bank or trust
company reasonably satisfactory to the Company (the "Exchange Agent") to receive
the funds necessary
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to make the payments contemplated by Section 2.7(a). The Surviving Corporation
shall, at the Effective Time, deposit, or cause to be deposited, with the
Exchange Agent, for the benefit of holders of Shares immediately prior to the
Effective Time, funds in an amount sufficient for the payments under Section
2.8(b) to which such holders shall be entitled at the Effective Time pursuant to
Section 2.7(a). Such funds shall be invested by the Exchange Agent as directed
by the Surviving Corporation, provided however that such funds may only be
invested in (i) obligations of or guaranteed by the United States, (ii)
commercial paper rated A-1, P-1 or A-2, P-2 and (iii) time deposits with,
including certificates of deposits issued by, any office located in the United
States of any bank or trust company organized under Federal Law or under the Law
of any state of the United States or of the District of Columbia and that has
capital, surplus and undivided profits of at least $500,000,000. Any net profits
resulting from, or interest or income produced by, such investments shall be
payable to the Surviving Corporation.
(b) The Surviving Corporation agrees that as soon as
practicable after the Effective Time it shall cause the Exchange Agent to
distribute to holders of record of Shares immediately prior to the Effective
Time a form of letter of transmittal and instructions for its use in effecting
the surrender of the certificates representing the Shares in exchange for the
aggregate Per Share Amount relating thereto in customary form to be agreed to by
Parent and the Company prior to the Effective Time. Upon the surrender of
certificates representing the Shares together with a properly executed letter of
transmittal, the Surviving Corporation shall cause the Exchange Agent to pay the
holder of such certificates in exchange therefor cash in an amount equal to the
Per Share Amount multiplied by the number of Shares represented by such
certificate or certificates. Until so surrendered, each such certificate (other
than certificates representing shares of Company Common Stock held by the
Company or held by Parent or Merger Sub) shall represent solely the right to
receive the aggregate Per Share Amount relating thereto.
(c) If payment of cash in respect of canceled Shares is to be
made to a Person other than the Person in whose name a surrendered certificate
or instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other Taxes required by reason of such
payment in a name other than that of the registered holder of the certificate or
instrument surrendered or shall have established to the satisfaction of the
Surviving Corporation or the Exchange Agent that such Tax either has been paid
or is not payable.
(d) If any certificate or certificates representing Shares
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such certificate or certificates to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such Person of a bond in such reasonable amount as the Surviving Corporation
may require as indemnity against any claim that may be made against it with
respect to such certificate or certificates, the Exchange Agent will pay in
exchange for such lost, stolen or destroyed certificate or certificates the Per
Share Amount multiplied by the number of Shares represented by such certificate
or certificates payable pursuant to this Agreement.
(e) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further registration of
transfers of any shares of capital
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stock thereafter on the records of the Company. If, after the Effective Time,
certificates for Shares are presented to the Surviving Corporation, they shall
be canceled and exchanged for cash as provided in Section 2.7(a). No interest
shall accrue or be paid on any cash payable upon the surrender of a certificate
or certificates which immediately before the Effective Time represented
outstanding Shares.
(f) Promptly following the date which is twelve months after
the Effective Time, the Surviving Corporation may cause the Exchange Agent to
deliver to the Surviving Corporation all cash, certificates and other documents
in its possession relating to the transactions contemplated hereby, and any
holder of a certificate or certificates representing Shares who has not
theretofore complied with this Section 2.8 shall thereafter look only to the
Surviving Corporation for payment of the Per Share Amount multiplied by the
number of Shares represented by such certificate or certificates, subject to any
applicable abandoned property, escheat or similar Law. Thereafter, each holder
of a certificate or certificates formerly representing Shares that did not
receive the aggregate Per Share Amount relating thereto may surrender such
certificate or certificates to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar Laws) receive in
consideration thereof the Per Share Amount multiplied by the number of Shares
represented by such certificate or certificates, without any interest or
dividends thereon.
(g) None of the Company, the Surviving Corporation or the
Exchange Agent, or any employee, officer, director, agent or Affiliate thereof,
shall be liable to any Person in respect of cash delivered by the Exchange Agent
to a public official pursuant to any applicable abandoned property, escheat or
similar Law.
(h) All cash paid upon the surrender for exchange of a
certificate or certificates representing Shares in accordance with the terms of
this Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares exchanged for cash theretofore represented by
such certificate or certificates.
(i) The Per Share Amount paid in the Merger shall be net to
the holder of Shares in cash, subject to reduction only for any applicable
back-up withholding or, as set forth in Section 2.8(c), stock transfer Taxes
payable by such holder.
(j) The Surviving Corporation shall pay all charges and
expenses of the Exchange Agent.
SECTION 2.9. Option Plans; Stock Purchase Plans. (a) Immediately prior
to the Effective Time, the Company shall take all actions necessary so that all
options then outstanding to purchase shares of Company Common Stock (the
"Company Stock Options") heretofore granted under any plan, arrangement or
agreement (collectively, the "Option Plans") shall become fully vested and
exercisable (whether or not currently exercisable) and, at the Effective Time,
each Company Stock Option not theretofore exercised shall be canceled. Except as
provided in a Rollover Agreement, and subject to the following sentence and
Section 2.9(b), each holder of a Company Stock Option that is canceled pursuant
to the preceding sentence shall, in respect of each Company Stock Option, be
entitled to a cash payment by the Surviving Corporation in an amount equal to
(i) the excess, if any, of (x) the Per Share Amount over (y) the
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applicable exercise price per share of Company Common Stock subject to such
Company Stock Option, multiplied by (ii) the number of shares of Company Common
Stock for which such Company Stock Option was exercisable immediately prior to
such cancellation. The foregoing cash payment shall be made by the Surviving
Corporation upon or as soon as practicable after (A) such holder's surrender of
all Company Stock Options held by such holder or (B) delivery by such holder of
such holder's written agreement or acknowledgement that all Company Stock
Options held by such holder have been cancelled as a result of the Merger in
exchange for such cash payment.
(b) The Surviving Corporation shall be entitled to deduct and
withhold from the amounts otherwise payable pursuant to this Section 2.9 to any
holder of Company Stock Options such amounts as the Surviving Corporation is
required to deduct and withhold with respect to the making of such payment under
the Code (as defined in Section 4.10(c)), or any provision of state, local or
foreign tax law. To the extent that amounts are so deducted and withheld by the
Surviving Corporation, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Company Stock Options
in respect of which such deduction and withholding was made by the Surviving
Corporation.
(c) The Company's stock purchase plans, including without
limitation, the Company's 1999 Employee Stock Purchase Plan, shall be modified,
terminated and/or suspended so that no purchase of Company Common Stock shall
occur after the date hereof. With respect to the Company's 1999 Employee Stock
Purchase Plan, the rights of participants thereunder with respect to any
offering period then underway shall be determined by shortening the offering
period so that the last day of such offering period shall be the last day of the
Company's last full payroll period on or before the date hereof and by making
such other appropriate adjustments as may be necessary to reflect the shortened
offering period and otherwise treating such shortened offering period as a fully
effective and completed offering period for all purposes under such plan.
(d) Prior to the Effective Time, the Company shall take all
actions that are necessary or appropriate to give effect to the transactions
contemplated by Section 2.9(c).
SECTION 2.10. Dissenters' Rights. Any Dissenting Shareholder which
perfects its appraisal rights pursuant to Article 13 of the North Carolina Act
shall have the right to receive payment as provided in such Article for its
Shares. If any Dissenting Shareholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, all Shares held by such
Dissenting Shareholder shall thereupon be treated as though such Shares had been
converted into the Per Share Amount multiplied by the number of Shares held by
such Dissenting Shareholder pursuant to Section 2.7(a) hereof, without interest
or dividends thereon. As used herein, "Dissenting Shareholders" means holders of
Shares exercising appraisal rights pursuant to Article 13 of the North Carolina
Act. As long as the Company Common Stock is traded on a national securities
exchange or the Nasdaq Stock Market as of the record date for the Company
Shareholders' Meeting, then no holders of Shares shall be entitled to rights of
dissent and appraisal pursuant to Article 13 of the North Carolina Act.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure letter from Parent and Merger Sub
delivered by Parent to the Company on the date of this Agreement (the "Parent
and Merger Sub Disclosure Letter"), which exceptions shall apply to each of the
following representations and warranties (to the extent the matters set forth in
such disclosure letter would be reasonably likely to apprise the Company that
such matters be excepted from such representation and warranty), Parent and
Merger Sub, jointly and severally, hereby represent and warrant to the Company,
as follows:
SECTION 3.1. Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized and validly existing and in good standing under the
Laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority to carry on its business as it is now being conducted.
SECTION 3.2. Ownership of Merger Sub. The authorized capital stock of
Merger Sub consists of one hundred (100) shares of common stock, par value $0.01
per share. All of the issued and outstanding shares of Merger Sub are owned by
Parent.
SECTION 3.3. Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to enter into this
Agreement and to carry out its respective obligations hereunder. The execution
and delivery of this Agreement by each of Parent and Merger Sub and the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each of Parent and Merger Sub, as applicable, and no other corporate or other
proceeding is necessary for the execution and delivery of this Agreement by each
of Parent and Merger Sub, the performance by each of Parent and Merger Sub of
its respective obligations hereunder and the consummation by each of Parent and
Merger Sub of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a
legal, valid and binding obligation of such Person, enforceable against it in
accordance with its terms, subject to (i) Laws of general application relating
to bankruptcy, insolvency and the relief of debtors and (ii) rules of Law
governing specific performance, injunctive relief and other equitable remedies.
SECTION 3.4. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by each of Parent and Merger Sub does
not, and the performance of this Agreement and the transactions contemplated
hereby by each of Parent and Merger Sub will not, (i) conflict with or violate
any Law or Order applicable to Parent or Merger Sub or by which any of their
respective properties or assets is bound or affected, (ii) violate or conflict
with the articles of incorporation or bylaws or other organizational documents
of Parent or Merger Sub, or (iii) result in any breach of or constitute a
default (or an event which, with notice or lapse of time or both would become a
default) under, or give to others any rights of termination or cancellation of,
or result in the creation of a lien or encumbrance on any of the property or
assets of any of Parent or Merger Sub pursuant to, any contract, instrument,
permit, license or franchise to which any of Parent or Merger Sub is a party or
by which any of Parent or Merger Sub or any
9
of their respective property or assets is bound or affected, except for
conflicts, violations, breaches, defaults, losses or liens which, individually
or in the aggregate, would not prevent or materially delay the consummation of
any transactions contemplated by this Agreement.
(b) Except for (i) applicable requirements, if any, of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), and the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act"), (ii) the requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the requirements of any relevant
foreign antitrust authority and (iii) the filing and recordation of appropriate
merger documents as required by the North Carolina Act (the filings and
authorizations referred to in clauses (i) through (iii) being referred to
collectively as the "Required Parent Consents"), neither Parent nor Merger Sub
is required to submit any notice, report or other filing with any Federal, state
or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), in connection with the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby. Except for the Required Parent Consents, no waiver,
consent, approval or authorization of any Governmental Entity is required to be
obtained or made by either Parent or Merger Sub in connection with its
respective execution, delivery or performance of this Agreement, except where
the failure to obtain such waiver, consent, approval or authorization would not,
individually or in the aggregate, prevent or materially delay the consummation
of the transactions contemplated by this Agreement.
SECTION 3.5. Financing Arrangements. (a) Parent has delivered to the
Company a true and complete copy of the commitment letter, dated April 10, 2003,
addressed to Parent (the "Debt Commitment Letter") from Citicorp North America,
Inc. and Citigroup Global Markets Inc. (collectively, "Citigroup") pursuant to
which Citigroup has indicated that it is committed to provide $875,000,000 in
debt financing (the "Debt Financing"), subject to the terms and conditions
therein, for purposes of consummating the transactions contemplated hereby. As
of the date hereof, the Debt Commitment Letter has not been amended, modified or
withdrawn and is in full force and effect. All commitment fees required to be
paid thereunder have been paid in full or will be duly paid in full when due,
and, to the knowledge of Parent, no event has occurred that (with or without
notice, lapse of time or both) would constitute a default thereunder on the part
of Parent, Merger Sub or Citigroup, as the case may be. As of the date hereof,
Citigroup has not advised Parent or Merger Sub of any facts or circumstances
and, assuming the accuracy of the representations and warranties of the Company
contained in Article IV, as of the date hereof, Parent or Merger Sub know of no
facts or circumstances, that cause them to believe the financings contemplated
by the Debt Commitment Letter will not be consummated substantially in
accordance with the terms thereof.
(b) Parent has delivered to the Company a true and complete
copy of the commitment letter, dated April 10, 2003, addressed to Parent from
One Equity Partners LLC ("OEP") pursuant to which OEP has committed to provide
an aggregate of $415,700,000 (the "Equity Financing"), subject to the terms and
conditions therein, for purposes of consummating the transactions contemplated
hereby (collectively, the "Equity Commitment Letter"). As of the date hereof,
the Equity Commitment Letter has not been amended, modified or withdrawn and is
in full force and effect. As of the date hereof, OEP has not advised Parent or
Merger Sub of any
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facts or circumstances and, assuming the accuracy of the representations and
warranties of the Company contained in Article IV, as of the date hereof, Parent
or Merger Sub know of no facts or circumstances that cause them to believe the
financing contemplated by the Equity Commitment Letter will not be consummated
substantially in accordance with the terms thereof.
(c) The aggregate proceeds of the financings contemplated by
the Debt Commitment Letter and Equity Commitment Letter, when taken together and
provided the Company has unrestricted cash available to be used by the Surviving
Corporation to pay a portion of the aggregate Per Share Amount at the Effective
Time, after giving effect to any Taxes paid or payable in connection with the
Company's making such cash available for such payment, of not less than
$585,900,000, are sufficient to pay the aggregate Per Share Amount for the
Shares pursuant to Article II, to pay all amounts required to be paid to holders
of Company Stock Options hereunder, to refinance any Indebtedness of the Company
and its Subsidiaries outstanding as of the date of this Agreement that may
become due as a result of the transactions contemplated by this Agreement and to
pay all related fees and expenses.
SECTION 3.6. Solvency. Each of Parent and Merger Sub is able to pay its
debts generally as they become due and is solvent and will not be, nor will the
Surviving Corporation be, as of the Effective Time, rendered insolvent as a
result of the transactions contemplated hereby, including the Merger, the Debt
Financing and the Equity Financing. Neither Parent nor Merger Sub has, either
voluntarily or involuntarily, (i) admitted in writing that it is or may become
unable to pay its debts generally as they become due, (ii) filed or consented to
the filing against it of a petition in bankruptcy or a petition to take
advantage of an insolvency act, (iii) made an assignment for the benefit of its
creditors, (iv) consented to the appointment of a receiver for itself or for the
whole or any substantial part of its property, (v) had a petition in bankruptcy
filed against it, (vi) been adjudged as bankrupt or filed a petition or answer
seeking reorganization or arrangement under the Federal bankruptcy Laws or any
Law or statute of the United States of America or any other jurisdiction, or
(vii) incurred or reasonably should have believed it would incur, debts that are
or will be beyond its ability to pay as such debts mature. Parent and Merger Sub
are not engaged, nor currently contemplate being engaged, in a business or
transaction for which any property remaining with them would be insufficient to
continue to operate their businesses or to pay their debts generally as they
come due.
SECTION 3.7. Legal Proceedings. (a) As of the date hereof, there are no
claims, actions, suits, proceedings or investigations (collectively, "Actions")
pending (or, to the knowledge of Parent, threatened) against Parent or Merger
Sub that would materially and adversely affect Parent's or Merger Sub's ability
to consummate any of the transactions contemplated by this Agreement.
(b) As of the date hereof, there is no order, writ, injunction
or judgment to which Parent or Merger Sub is subject that would materially and
adversely affect Parent's or Merger Sub's ability to consummate any of the
transactions contemplated by this Agreement.
(c) To the knowledge of Parent, as of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
Parent, Merger Sub or any other Affiliate of Parent is pending or threatened,
other than any investigation or review that
11
would not materially and adversely affect Parent's or Merger Sub's ability to
consummate any of the transactions contemplated by this Agreement.
SECTION 3.8. Status as a Control Person. Neither Parent nor Merger Sub,
together with their respective Affiliates, beneficially owns (as that term is
defined by the rules of the U.S. Securities and Exchange Commission (the "SEC")
under either Section 13(d) or 16 of the Exchange Act) 10% or more of the shares
of any class of equity or convertible securities of the Company.
SECTION 3.9. No Prior Activities. Except for Liabilities incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
including, without limitation, the Debt Financing and Equity Financing, neither
Parent nor Merger Sub has incurred any Liabilities, and neither Parent nor
Merger Sub has engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person or
entity.
SECTION 3.10. Brokers. No broker, finder, investment banker or other
Person is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Merger Sub.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 or in the exhibits thereto or incorporated
therein, or in the disclosure letter delivered by the Company to Parent on the
date of this Agreement (the "Company Disclosure Letter"), which exceptions shall
apply to each of the following representations and warranties (to the extent the
matters set forth in such Annual Report, exhibits or Company Disclosure Letter
would be reasonably likely to apprise Parent and Merger Sub that such matters be
excepted from such representation and warranty), the Company hereby represents
and warrants to Parent and Merger Sub as follows:
SECTION 4.1. Organization and Qualification; Subsidiaries. (a) The
Company is duly organized and validly existing under the Laws of the
jurisdiction of its formation and has the requisite corporate power and
authority to carry on its business as it is now being conducted. The Company is
qualified to transact business and, where applicable, is in good standing in
each jurisdiction in which the properties owned or leased by it or the nature of
the business conducted by it makes such qualification necessary, except where
the failure to be so qualified or in good standing does not have, individually
or in the aggregate, a Material Adverse Effect (as defined in Section 4.1(b)).
The Company has heretofore furnished to Parent complete and correct copies of
the articles of incorporation and the bylaws (or comparable organization
documents, as applicable), each as amended to date, of the Company and its
Significant Subsidiaries. Such articles of incorporation and bylaws (or
comparable organizational documents, as applicable) are in full force and
effect. Each of the Company and its Significant Subsidiaries is not in material
12
violation of any of the provisions of its respective articles of incorporation
or bylaws (or comparable organization documents, as applicable).
(b) For purposes of this Agreement, the term "Material Adverse
Effect" shall mean any change, event or effect that is or would reasonably be
expected to be materially adverse to the business, operations, financial
condition or results of operations of the Company (including, for purposes of
this definition, the Surviving Corporation) and its Subsidiaries, taken as a
whole and as currently conducted, except for any such change, event or effect
constituting, resulting from or arising out of (i) changes, events or
developments in or affecting the pharmaceutical, biotechnology, healthcare,
contract research, contract sales, drug development and healthcare informatics
industries generally, including changes in the use, adoption or non-adoption of
technologies or industry standards, which, in each case, do not have a
materially disproportionate effect on the Company and its Subsidiaries, taken as
a whole, (ii) any failure by the Company to meet analysts' published revenue or
earnings predictions for any period ending (or for which revenues or earnings
are released) on or after the date of this Agreement which would not otherwise
be the result of a Material Adverse Effect (it being understood that the
changes, events or developments giving rise or contributing to such failure may
be taken into account in determining whether there has been, or will be, a
Material Adverse Effect), (iii) changes, events or developments in the financial
or securities markets generally, or the economy in general, which, in each case,
do not have a materially disproportionate effect on the Company and its
Subsidiaries, taken as a whole, (iv) any Change of Law (as defined below), (v)
changes in foreign currency rates, (vi) any adverse change relating to changes
in generally accepted accounting principles as in effect on the date hereof in
the United States, (vii) the negotiation, announcement, execution, delivery,
performance, consummation or anticipation of the transactions contemplated by,
or compliance with this Agreement and the transactions contemplated hereby, or
(viii) any Actions or Orders which in any manner challenge, seek to prevent,
enjoin, alter or delay, or seek damages as a result of or in connection with,
the transactions contemplated hereby.
For purposes of this Agreement, "Subsidiary" means, with respect to any
Person, any corporation or other legal entity of which such Person (either alone
or through or together with any other Subsidiary) (i) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity, (ii) in the
case of a limited liability company or a partnership, serves as managing member
or general partner, as the case may be, or owns a majority of the equity
interests, or (iii) otherwise has the ability to elect a majority of the
directors, trustees or managing members thereof.
"Change of Law" shall mean the adoption, implementation, promulgation,
repeal, modification, reinterpretation or proposal of any Law, rule, regulation,
ordinance, order, protocol, practice or measure or any other requirement of Law
of or by any Federal, state, county or local government, governmental agency,
court, commission, department or similar organization or other such entity which
occurs subsequent to the date hereof.
SECTION 4.2. Capitalization. (a) The authorized capital stock of the
Company consists of 25,000,000 shares of Preferred Stock, $0.01 par value per
share, of which 1,000,000 shares are designated as Series A Preferred Stock (the
"Company Preferred Stock"), and
13
500,000,000 shares of common stock, $0.01 par value per share (the "Company
Common Stock" and, together with the Company Preferred Stock, the "Company
Stock"). As of April 9, 2003, 118,297,470 shares of Company Common Stock were
issued and outstanding, all of which shares of Company Common Stock were validly
issued and are fully paid, nonassessable and free of preemptive rights. As of
the date hereof, no shares of Company Preferred Stock were issued and
outstanding.
(b) As of the date hereof, (i) 36,856,302 shares of Company
Common Stock were authorized for issuance under the terms of the Option Plans of
which, as of April 9, 2003, Company Stock Options to purchase 34,286,088 shares
of Company Common Stock were granted and are currently outstanding and (ii)
there were outstanding rights (the "Rights") with respect to each outstanding
share of Company Common Stock under the Amended and Restated Rights Agreement
(the "Rights Agreement"), dated as of November 5, 1999, and amended and restated
as of May 4, 2000, between the Company and First Union National Bank.
(c) As of the date hereof, there are no outstanding
subscriptions, options, contracts, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating the Company or any Subsidiary of the Company to issue
additional shares of Company Stock (collectively, "Options"). Except for the
Rights Agreement, there are no outstanding share appreciation rights, phantom
share rights or similar rights with respect to the Company or any of its
Subsidiaries. There are no voting trusts, irrevocable proxies or other
agreements or understandings to which the Company or any Subsidiary of the
Company is a party or is bound with respect to the voting of any shares of
Company Stock.
SECTION 4.3. Investments. Except for the capital stock or other
ownership interests of its Subsidiaries, the Company does not own, directly or
indirectly, any shares of outstanding capital stock or securities convertible
into or exchangeable for capital stock of any other corporation or any equity or
other participating interest in the revenues or profits of any Person. There are
no restrictions of any kind which prevent or restrict the payment of dividends
by the Company or any of the Subsidiaries (other than statutory Laws of general
applicability).
SECTION 4.4. Subsidiaries. Each direct and indirect Significant
Subsidiary of the Company is listed on Schedule 4.4 of the Company Disclosure
Letter. Each Significant Subsidiary is duly organized and validly existing under
the Laws of its jurisdiction of organization and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each Significant Subsidiary of the
Company is qualified to transact business, and, where applicable, is in good
standing, in each jurisdiction in which the properties owned or leased by it or
the nature of the business conducted by it makes such qualification necessary,
except in all cases where the failure to be so qualified or in good standing
does not have, individually or in the aggregate, a Material Adverse Effect. All
of the outstanding capital shares or other equity interests of each Significant
Subsidiary of the Company are validly issued, and where such Significant
Subsidiary is a corporation, fully paid and nonassessable and are owned directly
or indirectly by the Company. There are no subscriptions, options, warrants,
voting trusts, proxies or other commitments, understandings, restrictions or
arrangements to which the Company or any of its Significant Subsidiaries is a
party relating to the issuance, sale, voting or transfer of any capital shares
or
14
other interests of any Significant Subsidiary of the Company, including any
right of conversion or exchange under any outstanding security, instrument or
agreement. For purposes of this Agreement, "Significant Subsidiary" shall have
the meaning set forth for the term "Significant Subsidiary" in Rule 1-02(w) of
Regulation S-X promulgated pursuant to the Securities Act.
SECTION 4.5. Authority Relative to this Agreement. The Company has the
necessary corporate power and corporate authority to enter into this Agreement
and, subject to obtaining any necessary shareholder approval for the Merger, to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company (including, without limitation, the unanimous
approval of the Special Committee), subject to the approval of this Agreement by
the Company's shareholders in accordance with the North Carolina Act. This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Merger Sub and Parent, constitutes
a legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to (i) Laws of general application relating
to bankruptcy, insolvency and the relief of debtors and (ii) rules of Law
governing specific performance, injunctive relief and other equitable remedies.
SECTION 4.6. No Conflict; Required Filings and Consents. (a) Assuming
that all Required Governmental Consents (as defined below) are obtained, the
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement and the transactions contemplated hereby by the
Company will not, (i) conflict with or violate any Law or Order applicable to
the Company or any of its Subsidiaries or by which its or any of their
respective properties or assets is bound or affected, (ii) assuming the accuracy
of the representations and warranties of Parent and Merger Sub contained in
Section 3.8, violate or conflict with the Restated Articles, or (iii) result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or result in any, or give rise to
any rights of termination, cancellation or acceleration of any obligations or
any loss of any material benefit under or, result in the creation of a lien or
encumbrance on any of the properties or assets (whether owned or leased) of the
Company or any of its Subsidiaries pursuant to, any Company Material Contract
(as defined in Section 4.16) or Lease (as defined in Section 4.12), except in
the case of clauses (i) and (iii) for conflicts, violations, breaches, defaults,
losses or liens which, individually or in the aggregate, do not have a Material
Adverse Effect.
(b) Except for (i) applicable requirements, if any, of the
Exchange Act and the Securities Act, (ii) the requirements of the HSR Act and
the requirements of any relevant foreign antitrust authority, (iii) the filing
and recordation of appropriate merger documents as required by the North
Carolina Act, (iv) the filing and recordation of appropriate documents with the
relevant authorities of other states or jurisdictions in which the Company or
any its Subsidiaries is qualified to do business, (v) applicable requirements of
the Nasdaq National Market and (vi) compliance with any applicable state
securities or blue sky Laws or state takeover Laws (the filings and
authorizations referred to in clauses (i) through (vi) being referred to
collectively as the "Required Governmental Consents"), to the knowledge of the
Company, the Company is not required to submit any notice, report or other
filing with any Governmental Entity in connection with the execution, delivery
or performance of this Agreement or the
15
consummation of the transactions contemplated hereby. Except for the Required
Governmental Consents, no waiver, consent, approval or authorization of any
Governmental Entity is required to be obtained or made by the Company in
connection with its execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby, except where the failure
to obtain such waiver, consent, approval or authorization does not have a
Material Adverse Effect.
SECTION 4.7. SEC Filings; Financial Statements. (a) The Company has
made available to Parent prior to the date hereof true and complete copies of
(i) its Annual Reports on Form 10-K for the fiscal years ended December 31, 2001
and 2002, as filed with the SEC, (ii) its proxy statements relating to all of
the meetings of shareholders (whether annual or special) of the Company since
January 1, 2001, as filed with the SEC, and (iii) all other reports, statements
and registration statements and amendments thereto (including, without
limitation, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K)
filed by the Company with the SEC since December 31, 2002 (collectively, the
"SEC Reports"). The SEC Reports (i) at the time filed or if amended or
superseded by a later filing, as of the date of the last such amendment or
filing, complied as to form in all material respects with the requirements of
the Securities Act, or the Exchange Act, as the case may be, and (ii) did not at
the time they were declared effective or filed, as the case may be, or if
amended or superseded by a later filing, as of the date of the last such
amendment or such filing, 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 the light of the circumstances under
which they were made, not misleading.
(b) The audited consolidated financial statements of the
Company for the fiscal year ended December 31, 2002 and as at December 31, 2002
included in its Annual Report on Form 10-K for the fiscal year ended December
31, 2002 (collectively, the "Company Financial Statements") were prepared in
accordance with generally accepted accounting principles as in effect in the
United States on the date of such report applied on a consistent basis
throughout the periods involved (except as may be indicated therein or in the
notes thereto) and fairly present, in all material respects, the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations and changes in
financial position of the Company and its Subsidiaries for the periods
indicated.
(c) The Company will deliver to Parent or make available to
Parent via the SEC's Electronic Data Gathering, Analysis, and Retrieval system
as soon as they become available true and complete copies of any forms, reports,
schedules, statements and other documents required to be filed by the Company
with the SEC under the Securities Act or Exchange Act subsequent to the date
hereof and prior to the Effective Time (collectively, the "Subsequent SEC
Filings"). As of its filing date, each Subsequent SEC Filing will comply as to
form in all material respects with all applicable requirements of the Securities
Act and the Exchange Act. No Subsequent SEC Filing, as of its filing date, will
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, when taken as a whole
and in light of the circumstances under which they are made, not misleading. No
Subsidiary of the Company is required to file any forms, reports or other
documents with the SEC.
16
SECTION 4.8. Absence of Certain Changes or Events. From December 31,
2002 to the date hereof, there has not been:
(a) any declaration, payment or setting aside of any dividend
or other distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Stock, other than (i) dividends or
distributions by any wholly owned Subsidiary of the Company to the Company or a
wholly owned Subsidiary of the Company, or (ii) a direct or indirect redemption,
purchase or other acquisition of or offer for any shares of capital stock or
other securities of the Company or any Subsidiary thereof;
(b) (i) any creation, incurrence or assumption of any debt in
excess of $10,000,000 in the aggregate, except for refinancings of existing
obligations on terms that are no less favorable to the Company or its
Subsidiaries than the existing terms, (ii) other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection,
any assumption, guarantee, endorsement or other liability or responsibility
(whether direct, indirect, contingent or otherwise) for the obligations of any
Person in amounts in excess of $10,000,000 in the aggregate, (iii) any making of
any capital expenditures or any making of any loans, advances or capital
contributions to, or investments in, any other Person (other than (w) to the
Company or a wholly owned Subsidiary thereof, (x) customary travel, relocation
or business advances to employees, (y) such as are included in the Company's
capital budget for 2003, a copy of which has been provided to Parent, and (z)
such other items as do not exceed $10,000,000 in the aggregate), (iv) any
acquisition of all or substantially all of the stock or assets of, or any merger
or consolidation with, any other Person for an amount that exceeds $10,000,000
individually or $50,000,000 in the aggregate, (v) any settlement of any claim,
action, litigation, or other judicial or administrative proceeding, directly or
indirectly, against the Company or any of its Subsidiaries in amounts in excess
of $2,000,000 in the aggregate, or (vi) any sale, transfer, mortgage, pledge or
other disposition of (or permission of any of the foregoing), or encumbrance on,
any assets or properties, real, personal or mixed, material to the Company and
its Subsidiaries taken as a whole other than to secure debt permitted under
subpart (i) of this Section 4.8(b);
(c) any increase in any manner of the compensation of any of
the Company's or any of its Subsidiaries' officers or employees, or entrance
into, establishment, amendment or termination of any employment, consulting,
retention, change in control, collective bargaining, bonus or other incentive
compensation, profit sharing, health or other welfare, stock option or other
equity, pension, retirement, vacation, severance, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or arrangement
with, for or in respect of, any shareholder, officer, director, or employee of
the Company or any Subsidiary thereof other than pursuant to the terms of
agreements in effect prior to the date of this Agreement or in the ordinary
course of business consistent with past practice;
(d) to the knowledge of the Company, any cancellation,
amendment, modification, termination, or grant of waiver of any Company Material
Contract or any written or express and unambiguous oral notification to the
Company or any Subsidiary thereof party to such Company Material Contract that
any party to any such Company Material Contract intends to cancel or not renew
such Company Material Contract beyond its expiration date as in effect on
17
the date hereof, which cancellation, amendment, modification, termination, grant
of waiver, or notification, individually or in the aggregate, has or had a
Material Adverse Effect;
(e) any change in the Tax elections made by the Company or any
Subsidiary thereof or in any accounting method used by the Company or any
Subsidiary thereof for Tax purposes, where such Tax election or change in
accounting method has or had, individually or in the aggregate, a Material
Adverse Effect, for any period or periods, or the settlement or compromise of
any material income Tax Liability of the Company and its Subsidiaries;
(f) the entering into of any agreement or commitment to do any
of the foregoing; or
(g) any other change, event, or development that, individually
or in the aggregate, has or had a Material Adverse Effect.
SECTION 4.9. Litigation. There are no Actions pending or, to the
knowledge of the Company, threatened in writing, or Orders entered, against or
involving the Company or any of its Subsidiaries, or any properties or rights of
the Company or any of its Subsidiaries, (a) which if adversely determined would
have a Material Adverse Effect or (b) which as of the date hereof in any manner
challenge, seek to prevent, enjoin, alter or delay, or seek damages as a result
of or in connection with, the transactions contemplated hereby. To the knowledge
of the Company, as of the date hereof, no officer or director of the Company or
any of its Subsidiaries is a defendant in any Action commenced by any
shareholder of the Company or any of its Subsidiaries with respect to the
performance of his or her duties as an officer or a director of the Company or
any such Subsidiary under any applicable Law.
SECTION 4.10. Employee Benefit Plans; ERISA. (a) Schedule 4.10 of the
Company Disclosure Letter includes a complete list of each Company Benefit Plan
that is material to the Company and its Subsidiaries, taken as a whole
(collectively, the "Material Company Benefit Plans").
"Company Benefit Plans" shall mean, collectively, (i) each employee
benefit plan, program or policy of the Company or any of its Subsidiaries
providing benefits to any current or former employee, officer or director (or
any beneficiary or dependent thereof), or any agent or independent contractor of
the Company or any of its Subsidiaries, including without limitation any
employee welfare benefit plan within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
promulgated thereunder ("ERISA") (whether or not such plan is subject to ERISA),
any employee pension benefit plan within the meaning of Section 3(2) of ERISA
(whether or not such plan is subject to ERISA) and any bonus, incentive,
deferred compensation, vacation, stock purchase, stock option, severance, or
fringe benefit arrangement, plan, program or policy and (ii) each agreement of
the Company or any of its Subsidiaries providing annual base salary in excess of
$250,000 (or its equivalent in foreign currency as of the date hereof) to an
employee of the Company or any of its Subsidiaries.
18
(b) With respect to each Material Company Benefit Plan, the
Company has delivered or made available to Parent a true, correct and complete
copy of: (i) all plan documents and trust agreements; (ii) the most recent
Annual Report (e.g., Form 5500 Series) and accompanying schedule, if any; (iii)
the current summary plan description, if any; (iv) the most recent actuarial
report or valuation, if any; and (v) the most recent determination letter from
the United States Internal Revenue Service (the "IRS"), if any.
(c) Except as does not have a Material Adverse Effect, the IRS
has issued a favorable determination letter with respect to each Company Benefit
Plan that is intended to be qualified within the meaning of Section 401(a) of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code") and its related trust that has not been
revoked, and, to the knowledge of the Company, there are no circumstances or
events that have occurred that would reasonably be expected to result in a
revocation of such letter, which cannot be cured without the occurrence of a
Material Adverse Effect.
(d) Except as does not, individually or in the aggregate, have
a Material Adverse Effect: (i) the Company and its Subsidiaries have complied,
and are now in compliance, with all provisions of ERISA, the Code and all Laws
and regulations applicable to the Company Benefit Plans and each Company Benefit
Plan has been administered in all respects in accordance with its terms, and
(ii) there are no pending or, to the knowledge of the Company, threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Company Benefit
Plans which could reasonably be expected to result in any liability of the
Company or any of its Subsidiaries to any Company Benefit Plan participant, to
the Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor, any Multiemployer Plan (as defined in Section 3(37) of
ERISA) or any Company Benefit Plan.
(e) Except as does not have, individually or in the aggregate,
a Material Adverse Effect or as otherwise provided in Section 2.9(a) hereof,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, either alone or in conjunction with another
event (e.g., termination of employment) will result in, cause the accelerated
vesting, funding or delivery of, or increase the amount or value of, any
material payment or material benefit to any employee, officer or director of the
Company under any Company Benefit Plan.
(f) No Material Company Benefit Plan (i) is a "defined benefit
plan" within the meaning of Section 3(35) of ERISA, (ii) is described in
401(a)(1) of ERISA, (iii) provides post-retirement health or death benefit
coverage (other than as required under Part 6 of Subtitle B of Title I of ERISA
or Section 4980B of the Code or other applicable Law), or (iv) is a plan
described in Section 413(a) or 413(c) of the Code or Section 3(40) of ERISA.
(g) The Company is not a member of any controlled group,
within the meaning of Section 412(n)(6)(B) of the Code with any entity other
than any of its Subsidiaries, and there are no circumstances pursuant to which
the Company or any Subsidiary thereof could be liable (either directly,
secondarily, jointly or contingently) under Title IV of ERISA or Sections 4971
through 4980E of the Code or under Section 502(i) or (1) of ERISA.
19
(h) No Material Company Benefit Plan holds Company Common
Stock, and the terms of such plans will not in any way prevent the completion of
the Merger.
(i) Except as does not have, individually or in the aggregate,
a Material Adverse Effect, with respect to any Company Benefit Plan established
or maintained outside the United States of America that is not subject to ERISA,
(i) neither the Company nor any of its Subsidiaries has incurred any material
obligation in connection with the termination or withdrawal from any such
Company Benefit Plan, and (ii) the present value of the accrued benefit
liabilities (whether or not vested) under each such plan which is funded,
determined as of the end of the most recently ended fiscal year of the Company
on the basis of reasonable actuarial assumptions, did not exceed the current
value of the assets of such plan, and for each such plan which is not funded,
the obligations thereunder have been accrued in accordance with generally
accepted accounting principles as in effect in the United States as of the end
of the most recently ended fiscal year of the Company.
SECTION 4.11. Owned Real Property. Schedule 4.11 sets forth a complete
and accurate list of the real property owned by the Company or any of its
Subsidiaries (the "Owned Real Property"). The Company or one of its Subsidiaries
has good fee simple title (or other similar title in jurisdictions outside the
United States) to the Owned Real Property free and clear of any liens, security
interests, encumbrances or defects, except for such liens, security interests,
encumbrances or defects as, individually or in the aggregate, do not have a
Material Adverse Effect.
SECTION 4.12. Leases. (a) Schedule 4.12 sets forth a list of all
material leases, subleases and occupancy agreements, together with all
amendments and supplements thereto, with respect to all real properties in which
the Company or any of its Subsidiaries has a leasehold interest, whether as
lessor or lessee (each, a "Lease" and collectively, the "Leases"; the property
covered by Leases under which the Company or such Subsidiary is a lessee is
referred to herein as the "Leased Real Property").
(b) Each Lease is in full force and effect. Neither the
Company nor any of its Subsidiaries is in default under any Lease and, to the
actual knowledge of the Company, without independent inquiry or investigation,
no other party to a Lease is in default, except for such defaults of the Company
or any other party which, individually or in the aggregate, do not have a
Material Adverse Effect.
SECTION 4.13. Intellectual Property. The Company or its Subsidiaries
own, or are licensed or otherwise possess legal enforceable rights to use all
patents, trademarks, trade names, service marks, copyrights and any applications
therefor, technology, know-how, trade secrets, computer software programs or
applications, domain names and tangible or intangible proprietary information or
materials that are used in the respective businesses of the Company and its
Subsidiaries as currently conducted (collectively, the "Intellectual Property"),
except for any such failures to own, be licensed or possess that do not,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Company, all material patents, trademarks, trade names, service
marks and copyrights held by the Company or its Subsidiaries are valid and
subsisting. The Company and its Subsidiaries are not infringing any intellectual
property rights of any other Person, except for such infringements which do not,
individually or
20
in the aggregate, have a Material Adverse Effect. No claim is pending or, to the
knowledge of the Company, threatened with respect to the ownership, validity,
license or use of, or any infringement resulting from, the Intellectual
Property, which if adversely determined would, individually or in the aggregate,
have a Material Adverse Effect. To the knowledge of the Company, the
Intellectual Property is not being infringed by any other Person except for any
such infringements which do not, individually or in the aggregate, have a
Material Adverse Effect. There are no restrictions on the direct or indirect
transfer of any Intellectual Property that would be triggered by the
transactions contemplated hereby other than such restrictions which do not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.14. Insurance. Except as, individually or in the aggregate,
do not have a Material Adverse Effect:
(a) all material insurance policies carried by or covering the
Company and its Subsidiaries with respect to their business, assets and
properties are in full force and effect, and, to the knowledge of the Company,
no notice of cancellation has been given with respect to any such policy;
(b) all material insurance policies of the Company will be in
full force and effect as of the Effective Time;
(c) neither the Company nor any of its Subsidiaries has
assigned, pledged or transferred any rights under any such insurance policies;
(d) there are no claims by the Company or any Subsidiary under
any such policy or instrument as to which any insurance company is denying
Liability or defending under a reservation of rights clause (other than a
customary reservation of rights clause); and
(e) all necessary notifications of claims have been made to
insurance carriers.
SECTION 4.15. Environmental. (a)(i) The Company and its Subsidiaries
are in compliance with all, and have no Liability under, any applicable
Environmental Laws, except where failure to be in compliance does not have a
Material Adverse Effect.
(ii) There is no claim with respect to Environmental
Laws pending or, or the knowledge of the Company, threatened against the Company
and, to the knowledge of the Company, there are no facts or circumstances which
could give rise to such a claim that has, individually or in the aggregate, a
Material Adverse Effect.
(iii) Neither the Company nor any of its Subsidiaries
has, either expressly or by operation of Law, assumed or undertaken, or agreed
to assume or undertake, responsibility for any Liability or obligation of any
other Person, arising under or relating to Environmental Laws, including but not
limited to, any obligation for investigation, corrective or remedial action,
which in each case has a Material Adverse Effect.
(b) As used in this Agreement, the following terms have the
meanings set forth below:
21
(i) "Environmental Law" means any Federal, state,
local, provincial, foreign, civil and criminal Law, statute, ordinances, common
Law, rules, regulations, policies and guidance documents with the effect of Law,
now in effect and as amended, and any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, relating to pollution, health, worker health and safety or protection
of the environment, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release, exposure or
discharge of Hazardous Substances.
(ii) "Hazardous Substances" means (a) petroleum and
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (b) any other
chemicals, materials or substances regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any applicable Environmental Law.
SECTION 4.16. Material Contracts. All Contracts of the Company or any
Subsidiary of the Company that (a) have been filed as an exhibit to any SEC
Report in compliance with Item 601(a)(10) of Regulation S-K promulgated under
the Securities Act, (b) relate to any Indebtedness in excess of $10,000,000, (c)
provide for aggregate payments to or from the Company or any of its Subsidiaries
in excess of $10,000,000, have an unexpired term exceeding one year and can not
be terminated without penalty upon 60 or less days prior written notice, or (d)
materially limit the freedom of the Company or any of its Subsidiaries to
compete in any line of business or with any Person or in any geographical area
or which would so materially limit the freedom of the Company or any of its
Subsidiaries so to compete after the Effective Time (collectively, the "Company
Material Contracts") are valid and binding and are in full force and effect and
enforceable against the Company or such Subsidiary, as the case may be, in
accordance with their respective terms, except as to the effect, if any, of (i)
applicable bankruptcy or other similar Laws affecting the rights of creditors
generally (ii) rules of Law governing specific performance, injunctive relief
and other equitable remedies and (iii) to the extent applicable, the
enforceability of provisions regarding indemnification in connection with the
sale or issuance of securities. The Company Material Contracts, other than those
filed as an exhibit or incorporated by reference to any SEC Report, are listed
on Schedule 4.16 of the Company Disclosure Letter; provided, however, that with
respect to any Company Material Contract described in clause (d) above, in the
case of agreements of any Subsidiary of the Company, such agreements that do not
have a Material Adverse Effect are not required to be listed on Schedule 4.16 of
the Company Disclosure Letter. Neither the Company nor any of its Subsidiaries,
nor, to the knowledge of the Company, any other party thereto, is in violation
or breach of or default under any such Company Material Contract where such
violation, breach or default, individually or in the aggregate, has a Material
Adverse Effect.
SECTION 4.17. Compliance with Laws/Permits. (a) Neither the Company nor
any of its Significant Subsidiaries has violated, is in violation of, or has
been given written notice of any violation of any applicable provisions of any
Laws applicable thereto, except for any violations which do not have a Material
Adverse Effect.
(b) The Company and its Significant Subsidiaries have all
permits, licenses, approvals and other authorizations from applicable
Governmental Entities required in
22
connection with the operation of their respective businesses or the ownership of
their respective properties (collectively, "Company Permits"), except those the
absence of which do not have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 4.18. Taxes. (a) The Company and each of its Subsidiaries has
timely filed, or caused to be timely filed, all Tax Returns (as defined in
Section 4.18(b)) required to be filed by it, and has paid, collected or
withheld, or caused to be paid, collected or withheld, all Taxes (as defined in
Section 4.18(b)) required to be paid by them (whether or not shown on such Tax
Returns as being required to be paid, collected or withheld), other than such
Taxes for which specific reserves in the Company Financial Statements have been
established or which are being contested in good faith, except where a failure
to so file, pay, collect or withhold does not in the aggregate have a Material
Adverse Effect. There are no claims or assessments pending against the Company
or any of its Subsidiaries for any alleged deficiency in any Tax, and the
Company has not been notified in writing of any proposed Tax claims or
assessments against the Company or any of its Subsidiaries (other than, in each
case, claims or assessments for which adequate reserves in the Company Financial
Statements have been established or which are being contested in good faith and
set forth on Schedule 4.18 of the Company Disclosure Letter or are immaterial in
amount), except for claims or assessments which if successfully asserted would
not, individually or in the aggregate, be a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has any waivers or extensions of any
applicable statute of limitations to assess any material amount of Taxes. There
are no outstanding requests by the Company or any of its Subsidiaries for any
extension of time within which to file any material Tax Return or within which
to pay any material amounts of Taxes shown to be due on any Tax Return. There
are no material Liens for Taxes upon the assets of the Company or any of its
Subsidiaries, other than Liens for current Taxes not yet due and payable and
Liens for Taxes that are being contested in good faith. None of the Company or
any Subsidiary thereof is a party to any agreement or arrangement that would
reasonably be expected to result, separately or in the aggregate, in the actual
or deemed payment (including any payment made pursuant to Section 2.9 of this
Agreement) by the Company or any Subsidiary thereof of any "excess parachute
payments" within the meaning of Section 280G of the Code or that would be
nondeductible under Section 162(m) of the Code. None of the Company or any
Subsidiary thereof has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code. All Taxes required to be
withheld, collected or deposited by or with respect to the Company and its
Subsidiaries have been timely withheld, collected or deposited, as the case may
be, and, to the extent required, have been paid to the relevant taxing
authority, except, in each case, to the extent that failing to withhold,
collect, deposit or pay does not have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Section 481 (a) of the Code (or any similar provision of
Law or regulations) by reason of a change in accounting method.
(b) For purposes of this Agreement, "Taxes" shall mean all
Federal, foreign, state or local income, gross receipts, windfall profits, value
added, severance, property, production, transfer sales, use, license, excise,
franchise, employment, withholding, value added, unemployment, disability,
occupancy or other taxes, duty, tax related assessment of any kind whatsoever
together with any associated interest, additions, fines, additional amounts or
penalties with respect thereto and any interest in respect of such additions or
penalties, and "Tax Returns"
23
shall mean all reports and returns (including elections, claims, declarations,
disclosures, schedules, computations and information returns) required to be
filed with respect to Taxes.
SECTION 4.19. Rights Agreement. The execution of this Agreement and the
consummation of the Merger will not result in a "Triggering Event," a
"Distribution Date" or a "Stock Acquisition Date" under the Rights Agreement.
The execution of this Agreement and the consummation of the Merger will not
result in Parent or Merger Sub or any of their respective Affiliates being an
"Acquiring Person" under the Rights Agreement or otherwise result in the ability
of any Person to exercise any Rights or enable or require the Rights to separate
from the shares of Company Common Stock to which they are attached
SECTION 4.20. State Takeover Statutes. Articles 9 and 9A of the North
Carolina Act are not applicable to the Merger and, to the knowledge of the
Company, no other "moratorium," "control share," "fair price," "affiliate
transaction," "business combination" or other anti-takeover Laws applicable to
the Company are applicable to the Merger.
SECTION 4.21. Brokers. No broker, finder, investment banker or other
Person (other than Morgan Stanley & Co., Incorporated ("Morgan Stanley")) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of the Company or any of its Subsidiaries. The Company has
furnished to Parent true, correct and complete copies of all agreements with
Morgan Stanley and there have been no amendments or revisions to such
agreements.
SECTION 4.22. Recommendation of Special Committee and Board of
Directors Opinion of Financial Advisor. (a) The Special Committee, at a meeting
duly called and held, unanimously (i) determined that this Agreement and the
transactions contemplated by this Agreement are fair to, and in the best
interests of, the shareholders of the Company other than Dennis B. Gillings,
Ph.D. and his Affiliates and certain other shareholders of the Company who may
exchange their equity securities of the Company for equity of Parent or its
Affiliates, and (ii) resolved to recommend approval and adoption of this
Agreement and the Merger by the Board of the Directors.
(b) The Board of Directors, at a meeting duly called and held
and acting on the unanimous recommendation of the Special Committee, (i)
determined that this Agreement and the transactions contemplated hereby are fair
to, and in the best interests of, the shareholders of the Company, (ii) approved
this Agreement and transactions contemplated hereby, and (iii) resolved to
recommend approval and adoption of this Agreement and the Merger by the
shareholders of the Company.
(c) Morgan Stanley has rendered to the Special Committee a
written opinion, dated as of the date of this Agreement, to the effect that,
subject to the assumptions and limitations set forth therein, the Per Share
Amount to be received by the shareholders of the Company is fair from a
financial point of view to such holders other than the holders of Excluded
Shares (as defined in such opinion), a complete and correct written copy of
which has been delivered to Parent. The Company has received the approval of
Morgan Stanley to permit
24
the inclusion of a copy of its written opinion in its entirety in the Proxy
Statement, subject to Morgan Stanley's review of the Proxy Statement.
SECTION 4.23. No Undisclosed Liabilities. Except (a) for Liabilities
incurred in the ordinary course of business consistent with past practice and
(b) as and to the extent disclosed in the Company Financial Statements, the SEC
Reports or on the Company Disclosure Letter, neither the Company nor any
Subsidiary thereof has any Liabilities which, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 4.24. Required Company Vote. Assuming the accuracy of the
representations and warranties of Parent and Merger Sub contained in Section
3.8, the affirmative vote of a majority of the Shares outstanding as of the
record date for the Company Shareholders' Meeting is the only vote of the
holders of any class or series of the Company's securities necessary to approve
this Agreement and the transactions contemplated hereby.
SECTION 4.25. Customers. Since January 1, 2003, neither the Company nor
any Subsidiary thereof has received written notice that any customer intends to
cancel, terminate or otherwise modify any relationship with the Company or any
of its Subsidiaries, which cancellation, termination or modification,
individually or in the aggregate, has or had a Material Adverse Effect.
SECTION 4.26. Related Party Transactions. Since January 1, 2002, the
Company has not entered into any relationship or transaction of the sort that
would be required to be disclosed by the Company pursuant to Item 404 of
Regulation S-K of the Securities Act.
SECTION 4.27. Employees; Labor Relations. (a) Neither the Company nor
any of its Subsidiaries is a party to, or bound by, any collective bargaining
agreement or other contract or understanding with a labor union or labor
organization; and (b) except as does not, individually or in the aggregate, have
a Material Adverse Effect, there is no (i) unfair labor practice, labor dispute
(other than routine individual grievances) or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, (ii) to the knowledge of the Company, activity or
proceeding by a labor union or representative thereof to organize any employees
of the Company or any of its Subsidiaries, or (iii) lockouts, strikes,
slowdowns, work stoppages or to the knowledge of the Company threats thereof by
or with respect to such employees.
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1. Conduct of Business by the Company Pending the Effective
Time. Except as otherwise contemplated by this Agreement, required by Law,
disclosed in Schedule 5.1 of the Company Disclosure Letter or consented to by
Parent (which consent shall not be unreasonably withheld or delayed), during the
period from the date of this Agreement to the Effective Time, (i) the Company
shall conduct its businesses in the ordinary course consistent with past
practice and (ii) without limiting the generality of the foregoing, neither the
Company nor any of its Subsidiaries will take any of the following actions:
25
(a) amend their respective articles of incorporation or bylaws
(or comparable governing instruments) or the Rights Agreement in any material
respect or redeem the Rights or otherwise take any action which would render the
Rights Agreement inapplicable to any Acquisition Proposal other than the
transactions contemplated by this Agreement;
(b) authorize for issuance, issue, grant, sell, pledge or
dispose of any shares of, or any options, warrants, commitments, subscriptions
or rights of any kind to acquire or sell any shares of, the capital stock or
other securities of the Company or any of its Subsidiaries including, but not
limited to, any securities convertible into or exchangeable for shares of stock
of any class of the Company or any of its Subsidiaries, except for (i) the
issuance of Shares (including the associated Rights) upon the exercise of
Company Stock Options outstanding on the date of this Agreement in accordance
with their present terms, and (ii) issuances in accordance with the Rights
Agreement except for the Merger;
(c) split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its capital
stock, other than dividends or distributions by any wholly owned Subsidiary of
the Company to the Company or a wholly owned Subsidiary of the Company, or
directly or indirectly redeem, purchase or otherwise acquire or offer to acquire
any shares of capital stock or other securities of the Company or any of its
Subsidiaries,
(d) except for transactions between or among the Company and
any of its wholly owned Subsidiaries, (i) create, incur or assume any
Indebtedness in excess of $10,000,000 in the aggregate, except refinancings of
existing obligations on terms that are no less favorable to the Company or its
Subsidiaries than the existing terms, (ii) other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection,
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, indirectly, contingently or otherwise) for the obligations of any
Person in amounts in excess of $10,000,000 in the aggregate, (iii) make any
capital expenditures or make any loans, advances or capital contributions to, or
investments in, any other Person (other than (w) to the Company or a wholly
owned Subsidiary of the Company, (x) customary travel, relocation or business
advances to employees, (y) such as are included in the Company's capital budget
for 2003, a copy of which has been provided to Parent, and (z) such other items
as do not exceed $10,000,000 individually or $50,000,000 in the aggregate), (iv)
acquire all or substantially all of the stock or assets of, or merge or
consolidate with, any other Person for an amount that exceeds $10,000,000
individually or $50,000,000 in the aggregate, (v) settle any claim, action,
litigation, or other judicial or administrative proceeding, directly or
indirectly, against the Company or any of its Subsidiaries in amounts in excess
of $10,000,000 in the aggregate (excluding any amounts that are covered by
insurance policies of the Company or its Subsidiaries, as applicable), or (vi)
sell, transfer, mortgage, pledge or otherwise dispose of (or permit any of the
foregoing), or encumber, any assets or properties, real, personal or mixed,
material to the Company and its Subsidiaries taken as a whole other than to
secure debt permitted under subpart (i) of this clause (d);
(e) increase in any manner the compensation of any of the
Company's or any of its Subsidiaries' officers or employees, or enter into,
establish, amend or terminate any employment, consulting, retention, change in
control, collective bargaining, bonus or other
26
incentive compensation, profit sharing, health or other welfare, stock option or
other equity, pension, retirement, vacation, severance, deferred compensation or
other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, officer, director, or
employee of the Company or any Subsidiary thereof other than pursuant to the
terms of agreements in effect on the date of this Agreement or in the ordinary
course of business consistent with past practice;
(f) cancel, amend, modify, terminate, or waive any Company
Material Contract which cancellation, modification, termination, or grant of
waiver, individually or in the aggregate, has a Material Adverse Effect;
(g) make any change in the Tax elections made by the Company
or any Subsidiary thereof or in any accounting method used by the Company or any
Subsidiary thereof for Tax purposes, where such Tax election or change in
accounting method has, individually or in the aggregate, a Material Adverse
Effect, for any period or periods, or the settlement or compromise of any
material income Tax Liability of the Company and its Subsidiaries;
(h) adopt any new shareholder rights or similar plans;
(i) take any action that would cause the Company Common Stock,
at the record date for determining the holders of shares of Company Common Stock
who are entitled to receive notice and to vote at the Company Shareholders'
Meeting, not to be listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc.; or
(j) agree in writing or otherwise to take any of the actions
described in Sections 5.1 (a) through (i) above.
SECTION 5.2. No Solicitation. (a) Upon execution of this Agreement, the
Company shall, and shall cause the Company Representatives (as defined in
Section 5.2 (b)) to, immediately cease any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal (as defined in Section 5.2 (c)).
(b) The Company shall not, and it shall cause its Subsidiaries
and the officers, directors, employees, agents, advisors and representatives of
the Company and its Subsidiaries (collectively, the "Company Representatives")
not to, (i) solicit, initiate, knowingly encourage, or take any other action to
knowingly facilitate any inquiries regarding, or the submission of, any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information or data with respect to, or
take any other action to knowingly facilitate the making of, any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
Notwithstanding the foregoing, if, at any time prior to the Effective Time, the
Board of Directors or the Special Committee determines in good faith, after
consulting with and considering advice from its financial advisors and outside
counsel, that the failure to do so would create a reasonable likelihood of a
breach of their duties as directors to the Company's shareholders under
applicable Law, the Company may, in response to an unsolicited bona fide
Acquisition Proposal from a Third Party that the Board of
27
Directors or the Special Committee concludes is reasonably likely to result in a
Company Superior Proposal, and subject to compliance with Section 5.2(d), (x)
furnish information with respect to the Company to such Third Party pursuant to
a confidentiality agreement not more favorable to such Third Party than the
Confidentiality Agreement is to Parent (as determined by the Special Committee
after consultation with its outside counsel) and (y) participate in negotiations
regarding such Acquisition Proposal.
(c) As used in this Agreement, the following terms have the
meanings set forth below:
(i) "Acquisition Proposal" means any inquiry,
proposal or offer, whether in writing or otherwise, pursuant to which a Third
Party acquires or would acquire, directly or indirectly, beneficial ownership
(as defined under Rule 13(d) of the Exchange Act) of 10% or more of the assets
of the Company and its Subsidiaries (taken as a whole) or 10% or more of any
class of equity securities of the Company pursuant to a merger, consolidation or
other business combination, sale of shares of capital stock, sale of assets,
tender offer, exchange offer or similar transaction with respect to the Company,
including any single or multi-step transaction or series of related
transactions, which is structured to permit such Third Party to acquire
beneficial ownership of 10% or more of the assets of the Company and its
Subsidiaries (taken as a whole), or 10% or more of the equity interest in the
Company.
(ii) "Third Party" means any Person or group other
than Parent or Merger Sub.
(d) Except as permitted by this Section 5.2 and to the extent
applicable, subject to the provisions of Article VIII, neither the Board of
Directors nor the Special Committee shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or Merger Sub, the
approval or recommendation by the Board of Directors or the Special Committee of
this Agreement or the transactions contemplated hereby, including the Merger,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal or (iii) enter into any agreement with respect to any
Acquisition Proposal (any such agreement, a "Company Acquisition Agreement").
Notwithstanding the foregoing or any other provision contained in this
Agreement, in the event that prior to the Effective Time, the Company receives a
Company Superior Proposal and the Board of Directors or the Special Committee
determines in good faith, after consulting with and considering advice from its
financial advisors and outside counsel, that the failure to do so would create a
reasonable likelihood of a breach of their duties as directors to the Company's
shareholders under applicable Law, the Board of Directors or the Special
Committee may (subject to this and the following sentences) (x) withdraw or
modify its approval or recommendation of this Agreement or the Merger or (y)
approve or recommend a Company Superior Proposal (as hereinafter defined), but
in each case, only at a time that is at least 72 hours following delivery to
Parent (and all Persons to whom copies of notices are required to be given
pursuant to the means set forth in Section 9.3(i)) of a written notice advising
Parent that the Board of Directors has received a Company Superior Proposal,
specifying the material terms and conditions of such Company Superior Proposal
and identifying the Person making such Company Superior Proposal and during
which 72 hour period the Company will in good faith cooperate and negotiate with
Parent, on a non-
28
exclusive basis, with the intent of enabling the parties hereto to agree to a
modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be consummated. For purposes of this
Agreement, a "Company Superior Proposal" means any Acquisition Proposal (but
changing references to the 10% amounts in the definition thereof to 51%) on
terms which the Board of Directors and the Special Committee determine in their
good faith judgment (after consultation with their advisors) is reasonably
likely to be consummated and would, if consummated, be more favorable to the
Company's shareholders entitled to receive the Per Share Amount than the Merger
(taking into account any factors relating to such proposed transaction deemed
relevant by the Board of Directors and the Special Committee, including, without
limitation, the financing thereof and all other conditions thereto).
(e) In addition to the obligations of the Company set forth in
paragraphs (a), (b) and (d) of this Section 5.2, the Company (i) shall promptly,
but in no event no later than 24 hours after the receipt thereof, advise Parent
orally and in writing of any Acquisition Proposal, the material terms and
conditions of such Acquisition Proposal and the identity of the Person making
such Acquisition Proposal, (ii) promptly, but in no event later than 24 hours
after receipt thereof, provide to Parent (and all notice parties of Parent) any
non-public information provided to such Third Party that was not previously
provided to Parent and (iii) keep Parent informed on a prompt basis of any
material developments relating to any Acquisition Proposal no later than 24
hours after such development.
(f) Nothing contained in this Section 5.2 or any other
provision hereof shall prohibit the Company or the Board of Directors or the
Special Committee from (i) taking and disclosing to the Company's shareholders a
position contemplated by Rule 14e-2 promulgated under the Exchange Act
(provided, that no such position shall be a favorable recommendation of such
transaction if it does not constitute a Company Superior Proposal) or (ii)
making such disclosure to the Company's shareholders as, in the good faith
judgment of the Board of Directors, after consultation with outside counsel, is
required under applicable Law.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1. Shareholders Meeting; Proxy Statement. (a) In accordance
with the Company's Amended and Restated Articles of Incorporation ("Restated
Articles") and Amended and Restated Bylaws ("Restated Bylaws"), the Company
shall call and hold a meeting of its shareholders as promptly as practicable for
the purpose of voting upon the approval of the Merger and this Agreement, and
the Company shall use its best efforts to hold such shareholder meeting as
promptly as practicable after the date on which the Proxy Statement (as defined
below) is cleared by the SEC. As promptly as practicable after the date of this
Agreement, the Company, Parent and Merger Sub shall cooperate and prepare and
file with the SEC, and shall use all commercially reasonable efforts to have
cleared by the SEC, and promptly thereafter shall mail to shareholders, a proxy
statement meeting the requirements of Schedule 14A and Rule 13e-3 under the
Exchange Act (including any preliminary versions thereof, any amendments thereto
and any schedules required to be filed in connection therewith) (the "Proxy
Statement") in connection with the meeting of the Company's shareholders to
consider the Merger (the "Company Shareholders' Meeting"). The Company, Parent
and Merger Sub each will promptly
29
and timely provide all information relating to its respective businesses or
operations necessary for inclusion in the Proxy Statement to satisfy all
requirements of applicable state and Federal securities Laws. The Company and
Parent (with respect to Parent and Merger Sub) each shall be solely responsible
for any statement, information or omission in the Proxy Statement relating to it
(and Merger Sub with respect to Parent) or its Affiliates based upon written
information furnished by it (or Merger Sub with respect to Parent) for inclusion
in the Proxy Statement.
(b) The Company agrees that the Proxy Statement will not, at
the time the Proxy Statement (or any amendment or supplement thereto) is filed
with the SEC or first sent to shareholders, at the time of the Company
Shareholders' Meeting or at the Effective Time, 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, taken as a whole and in
light of the circumstances under which they were made, not misleading, except
that no representation, warranty or covenant is hereby made, or will be made, by
the Company with respect to Parent and Merger Sub Information (as defined in
Section 6.1(c)) or any information supplied by Dennis B. Gillings, Ph.D. that
relates to him or that is required to be included in the Proxy Statement as a
result of his status as an affiliate under Rule 13e-3 under the Exchange Act.
(c) Each of Parent and Merger Sub agrees that none of the
information supplied by Parent or Merger Sub, or any of their respective
officers, directors, representatives, agents or employees (the "Parent and
Merger Sub Information"), for inclusion in the Proxy Statement, or in any
amendments thereof or supplements thereto, at the time the Proxy Statement (or
any amendment or supplement thereto) is filed with the SEC or first sent to
shareholders, at the time of the Company Shareholders' Meeting or at the
Effective Time, 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, taken as a whole and in light of the circumstances
under which they were made, not misleading, except that no representation,
warranty or covenant is hereby made, or will be made, by Parent or Merger Sub
with respect to information supplied by the Company or any of its officers,
directors, representatives, agents or employees.
SECTION 6.2. Access to Information; Confidentiality. The Company shall,
and shall use its commercially reasonable efforts to cause its Subsidiaries to,
afford to Parent and its accountants, counsel, financial advisors and other
representatives reasonable access during normal business hours and upon
reasonable notice throughout the period prior to the Effective Time to their
respective properties, books, contracts, commitments and records and, during
such period, shall furnish such information concerning its businesses,
properties and personnel as Parent shall reasonably request; provided, however,
such access shall not unreasonably disrupt the Company's or its Subsidiaries'
respective operations and must be conducted in accordance with the procedures
established by the Company. All nonpublic information provided to, or obtained
by, Parent or Merger Sub in connection with the transactions contemplated hereby
shall be subject to the confidentiality obligations under that certain
Confidentiality Agreement, dated August 6, 2002, by and between the Company and
GF Management Company, LLC (the "Confidentiality Agreement"), the terms of which
shall survive the termination of this Agreement and continue in full force and
effect. Notwithstanding the foregoing, the Company shall not be required to
provide any information which it reasonably believes it may not provide to
Parent by reason of applicable Law, rules or regulations, which constitutes
information
30
protected by attorney/client privilege, or which the Company or any of its
Subsidiaries is required to keep confidential by reason of contract, agreement
or other obligation to third parties. Notwithstanding anything else in this
Agreement to the contrary, each party hereto (and each employee, representative
or other agent of any party) may disclose to any and all persons, without
limitation of any kind, the Tax treatment and Tax structure of any and all
transactions contemplated herein and all materials of any kind (including
opinions or other Tax analyses) that are or have been provided to any party (or
to any employee, representative or other agent of any party) relating to such
Tax treatment or Tax structure, provided, however, that this authorization of
disclosure shall not apply to restrictions reasonably necessary to comply with
securities Laws. If Parent or Merger Sub discovers any breach of any
representation or warranty contained in this Agreement, the nature of which
would cause the condition to the obligations of the Company relating to
representations and warranties set forth in Section 7.2 to not be satisfied, or
any circumstance or condition that upon the Effective Time would constitute such
a breach, Parent and Merger Sub covenant that they will promptly so inform the
Company. If the Company discovers any breach of any representation or warranty
contained in this Agreement, the nature of which would cause the condition to
the obligations of Parent and Merger Sub relating to representations and
warranties set forth in Section 7.3 to not be satisfied, or any circumstance or
condition that upon the Effective Time would constitute such a breach, the
Company covenants that it will promptly so inform Parent.
SECTION 6.3. Public Announcements. The parties shall issue a joint
initial press release announcing the execution of this Agreement as may be
mutually agreed. Thereafter, the parties will consult with one another prior to
issuing any press release or otherwise making any public communications in
connection with the Merger or the other transactions contemplated by this
Agreement and will provide each other with a meaningful opportunity to review
and comment upon, any such press releases or other public communications, and
prior to making any filings with any third party and/or any Governmental Entity
with respect to the Merger or the other transactions contemplated by this
Agreement, the parties will consult with one another prior to making such
filings and will provide each other with a meaningful opportunity to review and
comment upon, such filings, except as may be required by Law, court process or
by obligations pursuant to any listing agreement with or rules of any national
securities exchange or interdealer quotation service.
SECTION 6.4. Approvals and Consents; Reasonable Best Efforts;
Cooperation. (a) From the date hereof until the Effective Time, each of the
Company, Parent and Merger Sub shall (i) promptly apply for, diligently pursue
through to completion, and use their respective reasonable best efforts to
obtain prior to Effective Time all consents, approvals, authorizations and
clearances of Governmental Entities and third parties required of it to
consummate the Merger, (ii) provide such information and communications to
Governmental Entities as such Persons may reasonably request, and (iii) assist
and cooperate with the other parties hereto to obtain all permits and clearances
of Governmental Entities that are reasonably necessary, and to prepare any
document or other information reasonably required of it by any such Persons to
consummate the Merger.
(b) In addition to the other obligations set forth in this
Agreement, including, without limitation, this Section 6.4 and Section 6.7, from
and after the date hereof until the Effective Time, each of the Company, Parent
and Merger Sub shall use its reasonable
31
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable under applicable Laws,
regulations or otherwise to consummate and make effective as expeditiously as
practicable, the Merger and the other transactions contemplated by this
Agreement, including without limitation, (i) filing as soon as practicable after
the date hereof (the "Filing Date") a Notification and Report Form under the HSR
Act with the United States Federal Trade Commission and the Antitrust Division
of the United States Department of Justice (and filing as soon as practicable
any form or report required by any other Governmental Entity relating to
antitrust, competition, or trade regulation matters, including without
limitation, any relevant foreign antitrust authority), (ii) promptly applying
for, diligently pursuing through to completion, and using reasonable best
efforts to obtain prior to the Effective Time all consents, approvals,
authorizations, permits and clearances of Governmental Entities and third
parties required of it to consummate the Merger, (iii) providing such
information and communications to Governmental Entities as they may reasonably
request, (iv) effecting all necessary registrations, filings and submissions and
using reasonable best efforts to have lifted any injunction, order or decree of
a court or other Governmental Entity of competent jurisdiction or other legal
bar to consummation of the Merger or otherwise restraining or prohibiting the
consummation thereof (and, in such case, proceeding with the consummation of the
Merger as expeditiously as practicable), including through all possible appeals,
unless waived by the Company and Parent, (v) assisting and cooperating with each
other to obtain all permits and clearances of Governmental Entities that are
necessary, and preparing any document or other information reasonably required
of it to consummate the Merger, and (vi) executing and delivering any additional
certificates, agreements, instruments, reports, schedules, statements, consents,
documents and information necessary to consummate the Merger, and fully carrying
out the purposes of, this Agreement. Each of the Company, Parent and Merger Sub
agrees that, except as otherwise expressly contemplated by this Agreement, they
will not take any action that would reasonably be expected to materially
adversely affect or materially delay the Effective Time or the ability of any of
the parties to satisfy any of the conditions to the Effective Time or to
consummate the Merger.
(c) In furtherance of and without limitation of the foregoing,
each of the Company, Parent and Merger Sub shall (i) respond as promptly as
practicable to any reasonable inquiries or requests received from any
Governmental Entity for additional information or documentation; (ii) promptly
notify the other parties hereto of any written communication to that party or
its Affiliates from any Governmental Entity and, subject to applicable Law,
permit the other parties to review in advance any proposed written communication
to any of the foregoing (and consider in good faith the views of the other
parties in connection therewith); and (iii) furnish the other parties with
copies of all material correspondence, filings, and communications (and
memoranda setting forth the substance thereof) between them and their Affiliates
and their respective representatives on the one hand, and any Governmental
Entity of their respective staffs on the other hand, with respect to this
Agreement and the Merger; all with a view towards the prompt completion of the
Merger and the transactions contemplated by this Agreement; provided, however,
that nothing contained in this Section 6.4 shall obligate any party to disclose
to another party any information or documentation that would constitute, in the
reasonable belief of the disclosing party, competitively sensitive confidential
information or documentation.
32
(d) Each of Parent and Merger Sub shall divest and/or agree to
divest assets to an entity or entities satisfactory to any relevant concerned
Governmental Entity, in order to permit the consummation of the Merger at its
own expense, and with no reduction in the aggregate Per Share Amount payable for
the Shares hereunder. Parent shall pay any filing fees required to be paid in
connection with the HSR Act and any relevant foreign antitrust authority.
(e) In addition to the other obligations set forth in this
Agreement, the Company will cooperate with Parent and Merger Sub in connection
with their arrangement of, and negotiation of agreements with respect to, the
Debt Financing (and any substitutions or replacements thereof) or any
alternative debt financing or alternative equity financing contemplated by
Section 6.7 hereof, including by making available to Parent and Merger Sub and
such financing sources and their representatives, personnel (including for
participation in road shows), documents and information of the Company and its
Subsidiaries as may reasonably be requested by Parent or Merger Sub or such
financing sources and, if applicable, by similarly cooperating with financing
sources in connection with the offering and/or syndication of any such
financing.
SECTION 6.5. Agreement to Defend and Indemnify; Insurance. (a) It is
understood and agreed that, subject to the limitations on indemnification
contained in the North Carolina Act and the Restated Articles, the Company
shall, to the fullest extent permitted under applicable Law and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and after the
Effective Time, the Surviving Corporation shall for a period of six years
following the Effective Time, to the fullest extent permitted under applicable
Law, indemnify and hold harmless, each director, officer, employee, fiduciary
and agent of the Company or any Subsidiary (and, without limiting the generality
of the foregoing, any members of any committee of the Board of Directors,
including the Special Committee) on the date hereof or at the Effective Time
(collectively, the "Indemnified Parties") from and against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
Action arising out of or pertaining to the transactions contemplated hereby,
including without limitation liabilities arising under the Securities Act or the
Exchange Act in connection with the Merger, and in the event of any such Action
(whether arising before or after the Effective Time), (i) the Company or the
Surviving Corporation shall pay the reasonable fees and expenses of one counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, promptly as statements
therefor are received, and (ii) the Company and the Surviving Corporation will
cooperate in the defense of any such matter; provided, however, that neither the
Company nor the Surviving Corporation shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed). For a period of six years following the
Effective Time, the Surviving Corporation shall maintain or obtain officers' and
directors' liability insurance covering the Indemnified Parties who currently or
at the Effective Time are covered by the Company's officers and directors
liability insurance policies on terms not less favorable than those in effect on
the date hereof in terms of coverage and amounts; provided, however, that if the
aggregate annual premiums for such insurance at any time during such period
exceed 300% of the premium paid by the Company for such insurance as of the date
of this Agreement, then the Surviving Corporation shall provide the maximum
coverage that will then be available at an annual premium equal to 300% of such
per annum rate as of the date of this Agreement. The Surviving Corporation shall
continue in effect the indemnification
33
provisions currently provided by the Restated Articles and the Restated Bylaws
for a period of not less than six years following the Effective Time. This
Section 6.5 shall survive consummation of the Merger. This covenant shall
survive any termination of this Agreement pursuant to Section 8.1.
Notwithstanding Section 9.8, this Section 6.5 is intended to be for the benefit
of and to grant third-party rights to the Indemnified Parties whether or not
they are parties to this Agreement, and each of the Indemnified Parties shall be
entitled to enforce the covenants contained in this Section 6.5.
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any Person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 6.5.
(c) Following the Effective Time, Parent and the Surviving
Corporation jointly and severally agree to pay all reasonable expenses,
including reasonable attorney fees, that may be incurred by the Indemnified
Parties in enforcing the indemnity and other obligations provided for in this
Section 6.5.
SECTION 6.6. Employee Benefit Matters. From and after the Effective
Time, Parent or its Affiliates shall be solely responsible for and shall honor
and satisfy all liabilities with respect to the Company Benefit Plans pursuant
to the terms of such plans, Section 2.9 hereof and applicable Law. Until the
first anniversary of the Effective Time, Parent or its Affiliates shall provide
the employees of the Surviving Corporation and their dependents with an employee
benefit program providing welfare and pension benefits that in the aggregate are
substantially comparable to the welfare and pension benefits provided to such
persons immediately prior to the Effective Time under the applicable terms of
the Company Benefit Plans. Subject to the foregoing, Parent and its Affiliates
may amend or terminate any of the Company Benefit Plans after the Effective
Time, subject to their terms and applicable Law.
SECTION 6.7. Financing. (a) In the event that the Debt Commitment
Letter or Equity Commitment Letter is terminated under circumstances where the
conditions set forth in Sections 7.1 and 7.3 are otherwise satisfied (other than
conditions that can only be satisfied at Closing), each of Parent and Merger Sub
shall use its commercially reasonable efforts to obtain alternative debt funding
in an amount equal to the amount to be provided pursuant to the Debt Commitment
Letter and alternative equity funding in an amount equal to the amount to be
provided pursuant to the Equity Commitment Letter, in each case, on terms and
conditions substantially comparable to those provided in the Debt Commitment
Letter and the Equity Commitment Letter, as applicable.
(b) Following the date hereof, any amendment, modification,
termination or cancellation of the Debt Financing or the Equity Financing, or
any information (other than information which is known generally in the
financial markets) which becomes known to Parent, Merger Sub, OEP or any of
their respective officers or directors which makes any such Person reasonably
believe that it will be unlikely that the Debt Financing or the Equity Financing
will be obtained on the terms set forth in the Debt Financing Letter or the
Equity
34
Financing Letter, respectively, shall be promptly disclosed by Parent or Merger
Sub to the Special Committee. None of Parent, Merger Sub or any of their
respective officers or directors will knowingly attempt, directly or indirectly,
to induce or encourage Citigroup or OEP or any other applicable entity not to
fund any of the financing provided for in the Debt Financing Letter or the
Equity Financing Letter, as applicable.
ARTICLE VII.
CONDITIONS PRECEDENT
SECTION 7.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Effective Time of the following
conditions:
(a) This Agreement shall have been approved by the requisite
vote of the shareholders of the Company, as required by the North Carolina Act
and the Restated Articles.
(b) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and the
requirements of any relevant foreign antitrust authority shall have been
satisfied. Other than the filing of the Articles of Merger provided for in
Section 2.3, all other Required Governmental Consents required to be made or
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries in connection with the execution and delivery of this
Agreement, and the consummation of the Merger and the other transactions
contemplated by this Agreement shall have been made or obtained, except where
the failure to make any such filings or obtain any such Required Governmental
Consents does not, individually or in the aggregate, have a Material Adverse
Effect or a material adverse effect on Parent in the event such Required
Governmental Consents are not obtained.
(c) No court or Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any Law or writ,
judgment, decree, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and restrains, enjoins or otherwise prohibits
consummation of the Merger (collectively, an "Order") and no Governmental Entity
shall have instituted any proceeding which continues to be pending seeking any
such Order.
SECTION 7.2. Conditions for Obligations of the Company. The obligations
of the Company to effect the Merger shall be further subject to the satisfaction
on or prior to the Effective Time of the following additional conditions
precedent:
Parent and Merger Sub shall have performed in all material respects and
complied in all material respects with all agreements and covenants contained in
this Agreement that are required to be performed or complied with by them prior
to or at the Closing. Except for any inaccuracy that has not caused, is not
causing and would not reasonably be expected to cause, individually or in the
aggregate, a material adverse effect on the ability of Parent or Merger Sub to
perform their respective obligations under this Agreement, the representations
and warranties
35
of Parent and Merger Sub set forth in Article III of this Agreement, shall be
true and correct in all respects as of the Closing with the same effect as
though such representations and warranties were made on and as of the Closing,
except for changes permitted by this Agreement and except that any such
representation and warranty which is itself qualified as to materiality shall
not be deemed so qualified for purposes of this condition and any representation
and warranty that addresses matters only as of a certain date shall be true and
correct as of that certain date. The Company shall have received certificates
dated the Closing Date and signed by the Chairman, President or an Executive
Vice-President of each of Parent and Merger Sub, certifying that the conditions
specified in this Section 7.2 have been satisfied.
SECTION 7.3. Conditions for Obligations of Parent and Merger Sub. The
obligations of each of Parent and Merger Sub to effect the Merger shall be
further subject to the satisfaction on or prior to the Effective Time of the
following additional conditions precedent:
(a) The Company shall have performed in all material respects
and complied in all material respects with all agreements and covenants
contained in this Agreement that are required to be performed or complied with
by it prior to or at the Closing. Each of the Company's representations and
warranties contained in Article IV of this Agreement shall be true and correct
in all respects as of the Closing with the same effect as though such
representations and warranties were made on and as of the Closing, except for
changes permitted by this Agreement and except where the failure of such
representation and warranty to be true and correct in all respects does not
have, individually or in the aggregate, a Material Adverse Effect; provided,
that any such representation and warranty which is itself qualified as to
materiality or Material Adverse Effect shall not be deemed so qualified for
purposes of this condition and any representation and warranty that addresses
matters only as of a certain date shall be true and correct as of that certain
date; and provided, further that notwithstanding the foregoing, the
representations and warranties contained in Sections 4.2, 4.5, 4.19, 4.20, 4.22
and 4.24 hereof shall be true and correct in all material respects and the
representation and warranty contained and as written in Section 4.8(g) hereof
shall be true and correct in all respects. Parent shall have received a
certificate dated the Closing Date and signed by the Chairman, President or a
Vice-President of the Company, certifying that the conditions specified in this
Section 7.3 have been satisfied.
(b) Parent and Merger Sub shall have received the proceeds of
the Debt Financing and Equity Financing contemplated by the Debt Commitment
Letter and Equity Commitment Letter (or alternative financing in accordance with
Section 6.7).
(c) Since the date hereof, there shall not have occurred any
Material Adverse Effect.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval of
36
matters presented in connection with the Merger by the shareholders of the
Company by written notice by Parent to the Company and the Company to Parent and
Merger Sub, as follows:
(a) By the mutual written consent of the Company and each of
Parent and Merger Sub.
(b) By any of Parent, Merger Sub or the Company if any
Governmental Entity shall have issued an Order or taken any other action (which
Order each party hereto shall use its reasonable best efforts to have lifted,
vacated or reversed, including through all possible appeals), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such Order shall have become final and
non-appealable.
(c) By any of Parent, Merger Sub or the Company, if the
shareholders of the Company fail to approve the Merger upon the taking of a vote
at the Company Shareholders' Meeting or any adjournment thereof; provided,
however, that the right to terminate this Agreement under this Section 8.1(c)
shall not be available to any party whose action, failure to act or breach of
any provision of this Agreement has been a principal cause of or resulted in the
failure of the shareholders of the Company to approve the Merger.
(d) By any of Parent, Merger Sub or the Company, if the Merger
shall not have been consummated by October 30, 2003 (the "Outside Date") for any
reason; provided, however, that the right to terminate this Agreement under this
Section 8.1 (d) shall not be available to any party whose action or failure to
act has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date.
(e) By the Company, if (i) any of the representations and
warranties of Parent and Merger Sub contained in this Agreement shall fail to be
true and correct such that the condition set forth in Section 7.2 with respect
to representations and warranties would not be satisfied, or (ii) Parent or
Merger Sub shall have breached or failed to comply with any of their respective
obligations under this Agreement such that the condition set forth in Section
7.2 with respect to agreements and conditions would not be satisfied (in either
case other than as a result of a material breach by the Company of any of its
obligations under this Agreement) and such failure or breach with respect to any
such representation, warranty or obligation cannot be cured or, if curable,
shall continue unremedied for a period of forty-five days after Parent has
received written notice from the Company of the occurrence of such failure or
breach (provided that in no event shall such forty-five day period extend beyond
the second day preceding the Outside Date).
(f) By Parent or Merger Sub, if (i) any of the representations
and warranties of the Company contained in this Agreement shall fail to be true
and correct such that the condition set forth in Section 7.3 with respect to
representations and warranties would not be satisfied, or (ii) the Company shall
have breached or failed to comply with any of its obligations under this
Agreement such that the condition set forth in Section 7.3 with respect to
agreements and conditions would not be satisfied (in either case other than as a
result of a material breach by Parent or Merger Sub of any of their respective
obligations under this Agreement) and such failure or breach with respect to any
such representation, warranty or obligation cannot be cured
37
or, if curable, shall continue unremedied for a period of forty-five days after
the Company has received written notice from Parent of the occurrence of such
failure or breach (provided that in no event shall such forty-five day period
extend beyond the second day preceding the Outside Date).
(g) By Parent or Merger Sub, if (i) the Board of Directors or
the Special Committee (w) withdraws or modifies in a manner adverse to Parent
and Merger Sub its approval or recommendation of this Agreement or the Merger or
states publicly its intent to do so, (x) approves or recommends any Company
Superior Proposal to the shareholders of the Company or states publicly its
intent to do so, (y) fails to recommend against the acceptance of any tender or
exchange offer that constitutes an Acquisition Proposal within ten business days
from the commencement thereof (including, without limitation, by means of taking
no position with respect to the acceptance thereof by the shareholders), or (z)
resolves to take any of the foregoing actions, or (ii) the Company enters into a
Company Acquisition Agreement with respect to any Company Superior Proposal or
is specifically authorized to do so by the Board of Directors or the Special
Committee.
(h) By the Company, if the Board of Directors or the Special
Committee authorizes the Company to enter into a Company Acquisition Agreement
with respect to any Company Superior Proposal; provided, however, that the
Company may only exercise its right to terminate this Agreement pursuant to this
Section 8.1(h) if the Company has complied with its obligations under Section
5.2(d).
SECTION 8.2. Effect of Termination. (a) In the event of termination of
this Agreement by any of the Company, Parent or Merger Sub as provided in
Section 8.1, this Agreement shall forthwith become null and void and have no
further force effect, without any liability or obligation on the part of the
Company, Parent or Merger Sub or any of the officers, directors, shareholders,
affiliates, employees, agents, consultants or representatives of any of them,
other than the second sentence of Section 6.2, the provisions of Section 8.2 and
Article IX and those provisions of this Agreement that expressly survive
termination hereof and except that nothing herein shall relieve any party for
breach of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
(b) If this Agreement is terminated:
(i) by Parent or Merger Sub in accordance with
(x) Section 8.1(c) or Section 8.1(f) and (A) prior to such termination the
Company or the Special Committee shall have received, or there shall have been
publicly announced, an Acquisition Proposal (but changing references to the 10%
amounts in the definition thereof to 51%) and (B) within twelve (12) months of
such termination, the Company enters into an agreement with respect to any
Acquisition Proposal (but changing references to the 10% amounts in the
definition thereof to 51%) or any such Acquisition Proposal is consummated
within twelve (12) months of such termination, or (y) Section 8.1(g); or
(ii) by the Company in accordance with
(x) Section 8.1(c) or Section 8.1(d) and (A) prior to such termination the
Company or the Special Committee shall have received, or there shall have been
publicly announced, an Acquisition Proposal (but
38
changing references to the 10% amounts in the definition thereof to 51%) and (B)
within twelve (12) months of such termination, the Company enters into an
agreement with respect to any Acquisition Proposal (but changing references to
the 10% amounts in the definition thereof to 51%) or any such Acquisition
Proposal is consummated within twelve (12) months of such termination, or (y)
Section 8.1(h);
then the Company shall (A) in the case of clause (i)(y) or clause
(ii)(y), on the day next succeeding the date of such termination, or
(B) in the case of clause (i)(x) or clause (ii)(x), on the date of
consummation of such Acquisition Proposal, (I) pay to Parent in
immediately available funds the amount of all out-of-pocket costs, fees
and expenses of Parent and Merger Sub paid or payable in connection
with this Agreement including, without limitation, the reasonable fees
and disbursements of banks, investment banks, accountants and legal
counsel and expenses of any litigation incurred in connection with
collecting the fees and other amounts provided for in this Section 8.1
(b) to the extent not previously paid by the Company to Parent,
provided, however, that with respect to such cost, fees and expenses,
in no event shall the Company be required to pay in excess of an
aggregate of $5,000,000 (including any amounts previously paid by the
Company to the Parent) and (II) pay to Parent in immediately available
funds an amount equal to $52,000,000.
(c) The prevailing party in any legal action undertaken to
enforce this Agreement or any provision hereof shall be entitled to recover from
the other party the costs and expenses (including attorneys' and expert witness
fees) incurred in connection with such action.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 8.1, as the case may be, except as provided in Section
8.2(a) and except that the agreements set forth in Article II and Sections 6.5
and 8.2(b) shall survive the Effective Time indefinitely.
SECTION 9.2. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof in addition to any other
remedy at Law or equity.
SECTION 9.3. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date and time delivered or sent by facsimile if
delivered personally or by facsimile (and if by facsimile, confirmation of
receipt is obtained), and (ii) on the fifth business day after deposit in the
U.S. mail, if mailed by registered or certified mail (postage prepaid, return
receipt requested), in each case to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice, except
that notices of changes of address shall be effective upon receipt):
39
(a) if to Parent or Merger Sub:
Pharma Services Holding, Inc.
c/o One Equity Partners LLC
320 Park Avenue
New York, New York 10022
Facsimile: (212) 277-1533
Attention: Richard M. Cashin, Jr.
and
GF Management Company, LLC
4825 Creekstone Drive, Suite 130
Durham, North Carolina 27703
Facsimile: (919) 474-3082
Attention: Dr. Dennis B. Gillings
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Facsimile: (212) 309-6273
Attention: Ira White, Esq.
and
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 354-8113
Attention: John M. Reiss, Esq.
Oliver C. Brahmst, Esq.
(b) if to the Company:
Dr. Robert Bishop
Chairman, Special Committee of the
Board of Directors of
Quintiles Transnational Corp.
1199 Madia Street
Pasadena, CA 91103
Facsimile: (626) 792-1236
With a copy to:
Willkie Farr & Gallagher
40
787 Seventh Avenue
New York, New York 10019
Facsimile: (212) 728-8111 and (212) 728-9267
---
Attention: Michael A. Schwartz, Esq.
and
Smith, Anderson, Blount, Dorsett, Mitchell
& Jernigan, L.L.P.
2500 First Union Capitol Center
Raleigh, North Carolina 27601
Facsimile: (919) 821-6800
Attention: Gerald F. Roach, Esq.
SECTION 9.4. Expenses. Except as set forth in Section 8.2(b) and
(c), all fees, costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
fees, costs and expenses.
SECTION 9.5. Certain Definitions. For purposes of this Agreement, the
term:
(a) "Affiliate" of a Person 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;
(b) "Contract" means, with respect to any Person, any
agreement, contract, obligation, note, bond, mortgage, indenture, option, lease
or other instrument;
(c) "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise;
(d) "Indebtedness" means, as to any Person, without
duplication: (i) all obligations, whether or not contingent, of such Person for
borrowed money (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (ii) all obligations of such Person
evidenced by notes, bonds, debentures, capitalized leases or similar
instruments, (iii) all obligations of such Person representing the balance of
deferred purchase price of property or services, except trade accounts payable
and accrued commercial or trade liabilities arising in the ordinary course of
business, (iv) all interest rate and currency swaps, caps, collars and similar
agreements or hedging devices under which payments are obligated to be made by
such Person, whether periodically or upon the happening of a contingency, (v)
all Indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (vi)
all Indebtedness secured by any lien, security interest or other encumbrance on
any property or asset owned or held by that Person regardless of whether the
Indebtedness secured thereby shall have been
41
assumed by that Person or is non-recourse to the credit of that Person, and
(vii) all Indebtedness of any other Person referred to in clauses (i) through
(vi) above, guaranteed, directly or indirectly, by the Person initially referred
to in this definition;
(e) "knowledge" shall be interpreted for the purposes of this
Agreement so that a matter will be deemed to be within the "knowledge" of a
particular Person if such matter is, as of the applicable date, actually known
to any of the officers of such Person and, in the case of the Company, any
member of the Special Committee, provided, however that in the case of the
Company or any of its Subsidiaries, Dr. Dennis B. Gillings, James L. Bierman and
John S. Russell shall be deemed not to be officers of the Company or any of its
Subsidiaries for such purposes;
(f) "Laws" means all laws, statutes, rules, regulations,
ordinances, resolutions, orders, determinations, writs, injunctions, awards
(including without limitation, awards of any arbitrator), judgments, decrees and
other pronouncements and judicial decisions and interpretations having the
effect of law of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision of any Governmental
Entity;
(g) "Liability" means all Indebtedness, obligations and other
liabilities and contingencies of a Person, whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due;
(h) "Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other entity; and
(i) "Rollover Agreements" means any agreement between Parent
and a holder of shares of Company Common Stock or Company Stock Options pursuant
to which such holder acquires securities of Parent.
SECTION 9.6. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the maximum extent possible.
SECTION 9.8. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the Schedules hereto) and the Confidentiality Agreement
constitute the entire agreement and supersede any and all other prior agreements
and undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement is not intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder,
except as otherwise provided in Sections 2.8, 2.9 and 6.5.
42
SECTION 9.9. Assignment. This Agreement shall not be assigned by the
parties hereto whether by operation of Law or otherwise.
SECTION 9.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of North Carolina applicable
to contracts executed in and to be performed entirely within that State without
regard to principles of conflicts of Laws therein.
SECTION 9.11. Amendment. This Agreement may be amended by the parties
hereto by action taken by each of Parent, Merger Sub and the Company (with the
consent of the Special Committee) at any time before the Effective Time but not
thereafter; provided, however, that, after approval of the Merger by the
shareholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each Share will be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 9.12. Waiver. At any time before the Effective Time, any party
hereto may (with the consent of the Special Committee in the case of the
Company) (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties hereto contained herein or
in any document delivered pursuant hereto and (c) waive compliance by the other
parties hereto with any of their agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only as against such party and only if set forth in an instrument in
writing signed by such party. The failure of any party hereto to assert any of
its rights under this Agreement or otherwise shall not constitute a waiver of
those rights. All interpretations of or actions by the Company in respect of
this Agreement shall be under the direction of, and shall require the approval
of, the Special Committee.
SECTION 9.13. Disclosure Letters, Schedules and Exhibits. Each of the
Parent and Merger Sub Disclosure Letter, the Company Disclosure Letter, and all
Schedules and Exhibits referred to herein are intended to be and hereby are
specifically made a part of this Agreement.
SECTION 9.14. Counterparts. This Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an original
but all of which shall constitute one and the same agreement.
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
QUINTILES TRANSNATIONAL CORP.
By: /s/ Pamela J. Kirby
------------------------------
Name: Pamela J. Kirby
Title: Chief Executive Officer
PHARMA SERVICES HOLDING, INC.
By: /s/ Dennis B. Gillings
------------------------------
Name: Dennis B. Gillings
Title:
PHARMA SERVICES ACQUISITION CORP.
By: /s/ Dennis B. Gillings
------------------------------
Name: Dennis B. Gillings
Title:
44