Exhibit 2.1
===============================================================================
AGREEMENT AND PLAN OF MERGER
among
QUEST DIAGNOSTICS INCORPORATED,
FOUNTAIN, INC.
and
LABONE, INC.
Dated as of August 8, 2005
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Table of Contents
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions..........................................1
ARTICLE II
THE MERGER
SECTION 2.01 The Merger...........................................7
SECTION 2.02 Effective Time; Closing..............................7
SECTION 2.03 Effect of the Merger.................................7
SECTION 2.04 Articles of Incorporation; Bylaws....................7
SECTION 2.05 Directors and Officers...............................7
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.01 Conversion of Securities.............................8
SECTION 3.02 Employee Stock Options...............................8
SECTION 3.03 Dissent Rights.......................................9
SECTION 3.04 Surrender of Shares; Stock Transfer Books........... 9
SECTION 3.05 Withholding Rights..................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Organization and Qualification; Subsidiaries........11
SECTION 4.02 Articles of Incorporation and Bylaws................11
SECTION 4.03 Capitalization......................................12
SECTION 4.04 Authority Relative to this Agreement................13
SECTION 4.05 No Conflict; Required Filings and Consents..........14
SECTION 4.06 Permits; Compliance.................................15
SECTION 4.07 SEC Filings; Financial Statements...................16
SECTION 4.08 Absence of Certain Changes or Events................18
SECTION 4.09 Absence of Litigation...............................18
SECTION 4.10 Employee Benefit Plans..............................18
SECTION 4.11 Labor and Employment Matters........................20
SECTION 4.12 Information Supplied................................20
SECTION 4.13 Real Property; Title to Assets......................21
SECTION 4.14 Intellectual Property...............................22
SECTION 4.15 Taxes...............................................22
SECTION 4.16 Environmental Matters...............................23
SECTION 4.17 Rights Agreement....................................24
SECTION 4.18 Listed Contracts....................................24
SECTION 4.19 Insurance...........................................25
SECTION 4.20 Interested Party Transactions.......................26
SECTION 4.21 Customers and Suppliers.............................26
SECTION 4.22 Brokers.............................................26
SECTION 4.23 Opinion of Financial Advisor........................26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 5.01 Corporate Organization..............................27
SECTION 5.02 Authority Relative to This Agreement................27
SECTION 5.03 No Conflict; Required Filings and Consents..........27
SECTION 5.04 Information Supplied................................28
SECTION 5.05 Financing...........................................28
SECTION 5.06 Brokers.............................................28
SECTION 5.07 Ownership of Shares.................................28
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01 Conduct of Business by the Company Pending the
Merger..............................................28
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Company Shareholders Meeting........................31
SECTION 7.02 Proxy Statement.....................................31
SECTION 7.03 Access to Information; Confidentiality..............32
SECTION 7.04 No Solicitation of Transactions.....................32
SECTION 7.05 Employee Benefits Matters...........................35
SECTION 7.06 Directors' and Officers' Indemnification and
Insurance...........................................36
SECTION 7.07 Notification of Certain Matters.....................37
SECTION 7.08 Further Action; Reasonable Efforts..................37
SECTION 7.09 Obligations of Purchaser............................39
SECTION 7.10 Public Announcements................................39
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Parent, Purchaser
and the Company....................................40
SECTION 8.02 Conditions to the Obligations of the Company........40
SECTION 8.03 Conditions to the Obligations of Parent and
Purchaser...........................................41
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination.........................................41
SECTION 9.02 Effect of Termination...............................42
SECTION 9.03 Fees and Expenses...................................42
SECTION 9.04 Amendment and Waiver................................43
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Non-Survival of Representations and Warranties.....44
SECTION 10.02 Notices............................................44
SECTION 10.03 Severability.......................................45
SECTION 10.04 Entire Agreement; Assignment.......................45
SECTION 10.05 Parties in Interest................................45
SECTION 10.06 Specific Performance...............................45
SECTION 10.07 Governing Law; Jurisdiction........................46
SECTION 10.08 Waiver of Jury Trial...............................46
SECTION 10.09 Headings...........................................46
SECTION 10.10 Counterparts.......................................46
AGREEMENT AND PLAN OF MERGER, dated as of August 8, 2005 (this
"Agreement"), among QUEST DIAGNOSTICS INCORPORATED, a Delaware corporation
("Parent"), FOUNTAIN, INC., a Missouri corporation and a wholly owned subsidiary
of Parent ("Purchaser"), and LABONE, INC., a Missouri corporation (the
"Company").
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General and Business Corporation Law of the
State of Missouri (the "MGBCL"), Parent, Purchaser and the Company desire to
effect a business combination transaction pursuant to which Purchaser will merge
with and into the Company (the "Merger");
WHEREAS, the board of directors of the Company (the "Company Board")
has approved this Agreement and resolved to direct the submission of this
Agreement to a vote at a meeting of its shareholders;
WHEREAS, the respective boards of directors of each of Parent and
Purchaser deem it in the best interests of their respective stockholders and
shareholders, as the case may be, for Purchaser to be merged with and into the
Company upon the terms and subject to the conditions set forth herein, whereby
each issued and outstanding share of common stock, par value $0.01 per share, of
the Company, together with each associated Right (as hereinafter defined) under
the Rights Agreement (as hereinafter defined) (a "Share") not owned by Parent,
Purchaser, the Company or a Subsidiary shall be converted into the right to
receive the Merger Consideration (as hereinafter defined); and
WHEREAS, certain employees of the Company have executed and delivered
employment agreements with the Company, and which shall become effective upon
consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. (a) For purposes of this Agreement:
"affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, such specified person.
"business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day (other than a Saturday
or Sunday) on which banks are not required or authorized to close in The
City of New York or Kansas City, Missouri.
"Cincinnati Facility" means the laboratory facility that is located
at 6700 Steger Road, Cincinnati, Ohio.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"Company Stock Option Plans" means the 2001 Long-Term Incentive Plan,
as amended, the 1997 Long-Term Incentive Plan, as amended, and the 1987
Long-Term Incentive Plan, as amended.
"Competing Transaction" means any of the following: (i) any merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or other similar transaction involving the
Company; (ii) any sale, lease, exchange, transfer or other disposition of
all of the consolidated assets of the Company and the Subsidiaries, taken
as a whole, or a portion thereof having an aggregate value equal to 15% or
more of the market capitalization of the Company or generating 15% or more
of the consolidated revenue of the Company and its Subsidiaries, taken as
a whole, for the fiscal year ended December 31, 2004; (iii) any sale,
exchange, transfer or other disposition of 15% or more of any class of
equity securities of the Company; or (iv) any tender offer or exchange
offer that, if consummated, would result in any person beneficially owning
15% or more of any class of equity securities of the Company.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise.
"Disclosure Schedule" shall mean the disclosure schedule delivered by
the Company to Parent at the time of the execution of this Agreement.
"Environmental Laws" means any United States federal, state, or local
statute, rule or regulation relating to Hazardous Substances or the
protection of the environment, including the following United States
federal statutes and their state counterparts, as each may be amended from
time to time, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" means all reasonable out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants,
financial advisors, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation of the documents related to
the Merger, the filing of any required notices under the HSR Act or other
similar regulations and all other matters related to the closing of the
Merger and the other transactions contemplated by this Agreement.
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"Fee" means an amount equal to $26,500,000.
"Hazardous Substances" means (i) those substances defined in or
regulated under the following United States federal statutes and their
state counterparts, as each may be amended from time to time, and all
regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe
Drinking Water Act, the Atomic Energy Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Clean Air Act; (ii) petroleum and
petroleum products, including crude oil and any fractions thereof; (iii)
natural gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls, asbestos and radon; and (v) any other contaminant, substance,
material or waste regulated by any Governmental Authority pursuant to any
Environmental Law.
"Healthcare Business Segment" means clinical laboratories, healthcare
services and the substance abuse testing business segment of the Company
and its Subsidiaries.
"HSR Act" means the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" means, with respect to any person, (a) all
indebtedness of such person, whether or not contingent, for borrowed
money, (b) all obligations of such person for the deferred purchase price
of property (other than in the ordinary course of such person's business),
(c) all obligations of such person evidenced by notes, bonds, debentures
or other similar instruments, (d) 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), (e) all obligations of
such person as lessee under leases that have been or should be, in
accordance with GAAP, recorded as capital leases, (f) all obligations,
contingent or otherwise, of such person under acceptance, letter of credit
or similar facilities, (g) all obligations of such person to purchase,
redeem, retire, defease or otherwise acquire for value any capital stock
of such person or any warrants, rights or options to acquire such capital
stock, valued, in the case of redeemable preferred stock, at the greater
of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (h) all Indebtedness of others referred to in clauses
(a) through (g) above guaranteed directly or indirectly in any manner by
such person and (i) all Indebtedness referred to in clauses (a) through
(g) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any encumbrance
on property (including accounts and contract rights) owned by such person,
even though such person has not assumed or become liable for the payment
of such Indebtedness.
"knowledge of the Company" or "Company's knowledge" means the actual
knowledge of the individuals listed on Schedule 1.01(a) hereto.
"Law" means any United States or non-United States federal, national,
supranational, state, provincial, municipal or local statute, law,
ordinance, regulation,
3
rule, code, executive order, injunction, judgment, decree or other order
of a Governmental Authority.
"Material Adverse Effect" means any event, circumstance or change
that, individually or in the aggregate with all other events,
circumstances or changes, has, or is reasonably likely to (i) have a
materially adverse effect on the business, condition (financial or
otherwise) or results of operations of the Company and the Subsidiaries,
taken as a whole, or (ii) prevent or materially delay the ability of the
Company to consummate the transactions contemplated by this Agreement;
provided, however, that the definition of "Material Adverse Effect" shall
not include any event, circumstance, change or effect resulting from or
relating to (A) changes in general United States economic conditions or
changes in the general economic conditions in the geographic areas in
which the Company or any Subsidiary operates, so long as in any such case
the Company and its Subsidiaries, taken as a whole, are not materially
disproportionately affected relative to other entities that operate in
such geographic areas, (B) changes affecting the industries within which
the Company and the Subsidiaries operate, so long as in any such case the
Company and its Subsidiaries, taken as a whole, are not materially
disproportionately affected relative to other industry participants, (C)
changes in any applicable Law, (D) the execution or public announcement of
this Agreement or the transactions contemplated hereby, (E) actions
expressly required to be taken by the Company pursuant to the terms of
this Agreement, or (F) any act of terrorism or war (whether or not
threatened, pending or declared).
"Ohio Minority Holders" means Vincent DeRisio, Marie Zurieck,
Joanne Griffith, Rick Margraf and Kenneth W. Clarke.
"Order" means any executive order, injunction, judgment, decree or
other order of a Governmental Authority.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Specified Amount" means an amount equal to or in excess of two and
one-half percent (2.5%) of the consolidated revenues of the Company for
its fiscal year ended December 31, 2004.
"State Farm Master Agreement" means the Revised Master Agreement for
Outsourcing Services between State Farm and the Company, dated October 27,
2000.
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means an affiliate controlled by
such person, directly or indirectly through one or more intermediaries.
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"Superior Proposal" means an unsolicited written bona fide offer made
by a third party to consummate any Competing Transaction (i) that is on
terms that the Company Board determines in its good faith judgment (after
consultation with its financial advisor and after taking into account all
the terms and conditions of the contemplated transaction) are more
favorable to the Company's shareholders (in their capacity as
shareholders) from a financial point of view than this Agreement (taking
into account any alterations to this Agreement agreed to in writing by
Purchaser in response thereto in accordance with Section 7.04), (ii) that
is not conditioned upon receipt of requisite financing or for which
financing, to the extent required, is then committed and (iii) that the
Company Board determines in good faith (after consultation with its
financial advisor and outside legal counsel (who may be the Company's
regularly engaged independent legal counsel)) is reasonably capable of
being consummated; provided, however, that for purposes of this definition
the reference to "15%" in clauses (ii), (iii) and (iv) of the definition
of Competing Transaction shall be deemed to be a reference to "50%."
"Tax Return" shall mean any return, report, declaration, election,
estimate, claim for refund, information return, statement, form or other
document filed or required to be filed with any Governmental Authority, in
connection with the determination, assessment or collection of any Tax or
the administration of any Laws relating to any Tax, and including any
schedule or attachment thereto and any amendment thereof.
"Taxes" shall mean (a) any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority or taxing
authority, including, without limitation: taxes or other charges on or
with respect to income, franchise, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, severance, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customers' duties, tariffs and
similar charges, and (b) any liability for the payment of any Tax (i) as a
result of being a member of a consolidated, combined, unitary or
affiliated group that includes any other person, (ii) by reason of any
obligation to indemnify or otherwise assume or succeed to the liability of
any other person for Taxes, including, without limitation, a tax sharing,
tax indemnity or similar agreement and (iii) by reason of transferee or
successor liability, whether imposed by Law, contractual arrangement or
otherwise.
(b) The following terms have the meaning set forth in the Sections
set forth below:
Location of
Defined Term Definition
------------ -----------
"Action"................................ ss. 4.09
"Agreement"............................. Preamble
"Balance Sheet"......................... ss. 4.07(c)
"Certificates".......................... ss. 3.04(b)
"Change in the Company Recommendation".. ss. 7.04(c)
"CLIA".................................. ss. 4.06(d)
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Location of
Defined Term Definition
------------ -----------
"Closing"............................... ss. 2.02
"Company"............................... Preamble
"Company Board"......................... Preamble
"Company Employees"..................... ss. 7.05(a)
"Company Preferred Stock"............... ss. 4.03(a)
"Company Shareholders Meeting".......... ss. 7.01
"Company Stock Awards".................. ss. 4.03(a)
"Confidentiality Agreement"............. ss. 7.03(b)
"Credit Agreement"...................... ss. 4.03(d)
"Debentures"............................ ss. 4.03(b)
"Disclosure Schedule"................... ss. 4.01(b)
"Dissent Shares"........................ ss. 3.03(a)
"DOJ"................................... ss. 7.08(b)
"Effective Time"........................ ss. 2.02
"Enforceability Exceptions"............. ss. 4.04(a)
"Environmental Permits"................. ss. 4.16
"ERISA"................................. ss. 4.10(a)
"FTC"................................... ss. 7.08(b)
"GAAP".................................. ss. 4.07(b)
"Governmental Authority"................ ss. 4.05(b)
"HSR Filing"............................ ss. 7.08(b)
"Indemnifiable Claim"................... ss. 7.06(c)
"Indemnitees"........................... ss. 7.06(c)
"Intellectual Property"................. ss. 4.14(b)
"IRS"................................... ss. 4.10(a)
"Lease Documents"....................... ss. 4.13(b)
"Liens"................................. ss. 4.17(a)
"Listed Contracts"...................... ss. 4.18(a)
"Management Letters".................... ss. 4.07(d)
"Merger"................................ Recitals
"Merger Consideration".................. ss. 3.01(a)
"MGBCL"................................. Recitals
"Multiemployer Plan".................... ss. 4.10(b)
"Multiple Employer Plan"................ ss. 4.10(b)
"Outside Date".......................... ss. 9.01(b)
"Parent"................................ Preamble
"Paying Agent".......................... ss. 3.04(a)
"Plans"................................. ss. 4.10(a)
"Pre-Closing Service"................... ss. 7.05(a)
"Proxy Statement"....................... ss. 4.05(b)
"Purchaser"............................. Preamble
"Requisite Shareholder Approval"........ ss. 4.04(c)
"Rights"................................ ss. 4.03(b)
"Rights Agreement"...................... ss. 4.03(b)
"SEC Reports"........................... ss. 4.07(a)
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Location of
Defined Term Definition
------------ -----------
"Share"................................. Recitals
"Stock Option".......................... ss. 3.02
"Subsidiary"............................ ss. 4.01(a)
"Surviving Corporation"................. ss. 2.01
"Third Party"........................... ss. 7.04(b)
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
set forth in Article VIII, and in accordance with the MGBCL, at the Effective
Time (as defined in Section 2.02), Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 2.02 Effective Time; Closing. As promptly as practicable after
the satisfaction or, if permissible, waiver of the conditions set forth in
Article VIII, but in no event later than five business days after all such
conditions have been satisfied or waived, the parties hereto shall cause the
Merger to be consummated by filing articles of merger complying with the
requirements of the MGBCL with the Secretary of State of the State of Missouri.
The Merger shall become effective at the time of the issuance of the certificate
of merger by the Secretary of State of the State of Missouri (the "Effective
Time"). Immediately prior to the filing of the articles of merger, a closing
("Closing") shall be held at the offices of Shearman & Sterling LLP, 599
Lexington Avenue, New York, New York 10022, or such other place as the parties
shall agree, for the purpose of confirming the satisfaction or waiver, as the
case may be, of the conditions set forth in Article VIII.
SECTION 2.03 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the MGBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all of the property, rights, privileges, powers and franchises
of the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04 Articles of Incorporation; Bylaws. (a) At the Effective
Time, and subject to Section 7.06(a), the Articles of Incorporation of the
Company shall be the Articles of Incorporation of the Surviving Corporation
until thereafter amended as provided by Law and such Articles of Incorporation.
(b) At the Effective Time, and subject to Section 7.06(a), the Bylaws
of the Company 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.
SECTION 2.05 Directors and Officers. At the Effective Time, the
directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving
7
Corporation, each to hold office in accordance with the MGBCL, the Articles of
Incorporation and the Bylaws of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified or until their earlier
death, resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.01 Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Purchaser,
the Company or the holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than the Shares cancelled in accordance with Section
3.01(b) and Dissent Shares (as hereinafter defined), if any) shall be
cancelled and shall be converted automatically into the right to receive
from the Surviving Corporation $43.90 per share in cash, without interest
(the "Merger Consideration"), payable to the holder thereof upon surrender,
in the manner provided in Section 3.04 of the certificate or certificates
which immediately prior to the Effective Time evidenced such Shares.
(b) Each Share that is held by the Company as treasury stock or by any
of its Subsidiaries and any Shares owned by Parent or Purchaser immediately
prior to the Effective Time shall be cancelled and retired and shall cease
to exist, and no Merger Consideration shall be delivered in exchange
therefor.
(c) Each share of common stock, par value $0.01 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
SECTION 3.02 Employee Stock Options. The Company shall (i) use its
reasonable best efforts to, effective as of the Effective Time, terminate the
Company Stock Option Plans, as amended through the date of this Agreement, (ii)
use its reasonable best efforts to cause, effective at or prior to the Effective
Time, each outstanding option to purchase Shares (each, a "Stock Option")
granted under the 1987 Long-Term Incentive Plan that is outstanding and
unexercised prior to the Effective Time, to either (A) be exercised or
terminated prior to the Effective Time or (B) be cancelled as of the Effective
Time to the extent in effect immediately prior to the Effective Time (subject to
the obligations of the Surviving Corporation in the immediately following
sentence), (iii) cause each Stock Option that is outstanding and unexercised
prior to the Effective Time under the 1997 Long-Term Incentive Plan to become
fully vested and exercisable prior to the Effective Time and be cancelled as of
the Effective Time to the extent in effect immediately prior to the Effective
Time (subject to the obligations of the Surviving Corporation in the immediately
following sentence) and (iv) cause each Stock Option that is outstanding and
unexercised prior to the Effective Time under the 2001 Long-Term Incentive Plan
to become fully vested and exercisable prior to the Effective Time and either
(A) be exercised or terminated prior to the Effective Time or (B) be cancelled
as of the Effective
8
Time to the extent in effect immediately prior to the Effective Time (subject to
the obligations of the Surviving Corporation in the immediately following
sentence). Each holder of a Stock Option that is outstanding and unexercised
immediately prior to the Effective Time and that has an exercise price per share
that is less than the per share Merger Consideration applicable to the Shares
issuable to the holder of such Stock Option upon exercise shall be entitled
(subject to the provisions of the last sentence of this Section 3.02) to be paid
by the Surviving Corporation immediately after the Effective Time, in exchange
for the cancellation of such Stock Option, an amount in cash, with respect to
each Share subject to the Stock Option, equal to the excess of the applicable
per share Merger Consideration payable with respect to such Share over the
applicable per share exercise price of such Stock Option. Any payments made
pursuant to this Section 3.02 shall be subject to all applicable federal, state
and local Tax withholding requirements.
SECTION 3.03 Dissent Rights. (a) Notwithstanding any provision of this
Agreement to the contrary, to the extent permitted by the MGBCL, Shares that are
outstanding immediately prior to the Effective Time and that are held by any
person who is entitled to demand and properly demands payment of the fair value
of such Shares pursuant to, and who complies in all respects with, Section
351.455 of the MGBCL (collectively, the "Dissent Shares") shall not be converted
into, or represent the right to receive, the Merger Consideration. Such
shareholders shall be entitled to payment of the fair value of such Dissent
Shares in accordance with and subject to Section 351.455 of the MGBCL; provided,
however, that if any holder of Dissent Shares shall have failed to perfect or
effectively shall have withdrawn or lost their right to be paid fair value under
Section 351.455 of the MGBCL, then the right of such holder to be paid fair
value for such Dissent Shares shall cease and such Dissent Shares shall
thereupon be deemed to have been converted into, and to have become exchangeable
for, as of the Effective Time, the right to receive the Merger Consideration,
without any interest thereon, upon surrender of the certificate or certificates
that formerly evidenced such Shares, in the manner provided in Section 3.04.
(b) The Company shall give Parent (i) prompt notice of any demands for
payment of the fair value of any Shares received by the Company, withdrawals of
such demands, and any other related instruments served pursuant to the MGBCL and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for payment of fair value under the MGBCL.
The Company shall not, except with the prior written consent of Parent, make any
payment with respect to any demands for payment of fair value or offer to settle
or settle any such demands.
SECTION 3.04 Surrender of Shares; Stock Transfer Books. (a) Prior to
the Effective Time, Purchaser shall designate a bank or trust company reasonably
satisfactory to the Company to act as agent (the "Paying Agent") for the holders
of Shares to receive the funds to which holders of Shares shall become entitled
pursuant to Section 3.01(a). Immediately after the Effective Time, Parent shall,
or shall cause Purchaser to, transfer such funds to the Paying Agent by wire
transfer of immediately available funds. Such funds shall be invested by the
Paying Agent as directed by Parent; provided, however, that such investments
shall be in obligations of or guaranteed by the United States of America or any
agency or instrumentality thereof and backed by the full faith and credit of the
United States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moody's Investors Service, Inc. or Standard & Poor's
9
Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding $1
billion. Any net profit resulting from, or interest income produced by, such
investments shall be payable to Parent.
(b) Promptly after the Effective Time, but in no event later than
three business days thereafter, the Surviving Corporation shall cause to be
mailed to each person who was, at the Effective Time, a holder of record of
Shares entitled to receive the Merger Consideration pursuant to Section 3.01(a)
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates evidencing such Shares
(the "Certificates") shall pass, only upon proper delivery of the Certificates,
to the Paying Agent and which shall be in such form and with such additional
provisions as the Surviving Corporation may reasonably specify) and instructions
for use in effecting the surrender of the Certificates pursuant to such letter
of transmittal. Upon surrender to the Paying Agent of a Certificate, together
with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration for each Share
formerly evidenced by such Certificate, and such Certificate shall then be
canceled. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of any Certificate for the benefit of the holder of
such Certificate. If the payment equal to the Merger Consideration is to be made
to a person other than the person in whose name the surrendered Certificate
formerly evidencing Shares is registered on the stock transfer books of the
Company, it shall be a condition of payment that the Certificate so surrendered
shall be endorsed properly or otherwise be in proper form for transfer and that
the person requesting such payment shall have paid all transfer and other Taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered, or shall have
established to the satisfaction of Purchaser that such Taxes either have been
paid or are not applicable. If any holder of Shares is unable to surrender such
holder's Certificates because such Certificates have been lost, mutilated or
destroyed, such holder may deliver in lieu thereof an affidavit and, if required
by the Surviving Corporation, indemnity bond in form and substance and with
surety reasonably satisfactory to the Surviving Corporation.
(c) At any time following the nine-month anniversary of the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds that had been made available to the Paying Agent and not
disbursed to holders of Shares (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made available
to it), and, thereafter, such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat and other similar Laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Share for any Merger Consideration delivered in
respect of such Share to a public official pursuant to any abandoned property,
escheat or other similar Law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the
10
holders of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable Law.
SECTION 3.05 Withholding Rights. Each of Parent, Purchaser, the
Surviving Corporation and the Paying Agent shall be entitled to deduct and
withhold from any amounts otherwise payable pursuant to this Agreement such
amount as it is required to deduct and withhold with respect to the making of
such payment under the Code or any Law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for purposes of this Agreement
as having been paid to the holder of the Shares in respect of which such
deduction and withholding was made.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Purchaser to enter into this
Agreement, except as set forth in the Disclosure Schedule or specifically
disclosed in the SEC Reports filed prior to the date of this Agreement, the
Company hereby represents and warrants to Parent and Purchaser as follows:
SECTION 4.01 Organization and Qualification; Subsidiaries. (a) The
Company is duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its organization and has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Each subsidiary of the Company (each a
"Subsidiary") is duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its organization and has the requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not have a Material Adverse Effect. The Company and each Subsidiary is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not have a Material Adverse Effect.
(b) A true and complete list of all the Subsidiaries, together with
the jurisdiction of organization of each Subsidiary, the percentage of the
outstanding capital stock of each Subsidiary owned by the Company and each other
Subsidiary, is set forth in Section 4.01(b) of the Disclosure Schedule. The
Company does not directly or indirectly own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for any equity
or similar interest in, any corporation, partnership, joint venture or other
business association or entity.
SECTION 4.02 Articles of Incorporation and Bylaws. The Company has
heretofore furnished to Parent a complete and correct copy of the Articles of
Incorporation and the Bylaws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Articles of
Incorporation, Bylaws or equivalent organizational documents, as amended to
date, are in full force and effect. Neither the Company nor any
11
Subsidiary is in violation of any of the provisions of its Articles of
Incorporation, Bylaws or equivalent organizational documents.
SECTION 4.03 Capitalization. (a) The authorized capital stock of the
Company consists of 40,000,000 Shares and 3,000,000 shares of preferred stock,
par value $0.01 per share ("Company Preferred Stock"). As of the date of this
Agreement, (i) 17,489,058 Shares are issued and outstanding (excluding Shares
held in the treasury of the Company), all of which are duly authorized, validly
issued, fully paid and nonassessable and were issued free of preemptive (or
similar) rights, (ii) 538,671 Shares are held in the treasury of the Company,
(iii) no Shares are held by the Subsidiaries and (iv) 1,621,920 Shares are
reserved for future issuance pursuant to outstanding Company Stock Options and
other purchase rights (the "Company Stock Awards") granted pursuant to the
Company Stock Option Plans. As of the date of this Agreement, no shares of
Company Preferred Stock are issued and outstanding. Section 4.03(a)(i) of the
Disclosure Schedule sets forth the following information with respect to each
Company Stock Award outstanding on the date of this Agreement: (i) the name of
the Company Stock Award recipient; (ii) the particular plan pursuant to which
such Company Stock Award was granted; (iii) the number of Shares subject to such
Company Stock Award; (iv) the exercise or purchase price of such Company Stock
Award; (v) the date on which such Company Stock Award was granted; (vi) the
applicable vesting schedule; and (vii) the date on which such Company Stock
Award expires. All Shares subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
(b) Except (i) as set forth in Section 4.03(a) of this Agreement, (ii)
for the rights (the "Rights") issued pursuant to the Rights Agreement, dated as
of February 11, 2000, as amended by Amendment No. 1 to Rights Agreement, dated
as of August 31, 2001, and Amendment No. 2 to Rights Agreement, dated as of
April 20, 2005 (as so amended, and as further amended from time to time, the
"Rights Agreement"), between the Company and American Stock Transfer & Trust
Company, as rights agent, in respect of which no Distribution Date (as defined
in the Rights Agreement) has occurred, (iii) for the 3.50% Convertible Senior
Debentures Due 2034 (the "Debentures") issued pursuant to the Indenture, dated
as of June 25, 2004, between the Company and Wells Fargo Bank, National
Association, as trustee and (iv) for the 1,398 shares of voting common stock,
par value $0.01, of LabOne of Ohio, Inc., a Delaware corporation, owned by the
Ohio Minority Holders, there are no (A) subscriptions, calls, contracts,
options, warrants or other rights, agreements, arrangements, understandings,
restrictions or commitments of any character to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound
relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, other equity interests in or debt securities of, the
Company or any Subsidiary, (B) securities of the Company or securities
convertible, exchangeable or exercisable for shares of capital stock or voting
securities of the Company, or (C) equity equivalents, stock appreciation rights,
phantom stock, ownership interests in the Company or any Subsidiary or similar
rights. All Shares subject to issuance as set forth in Section 4.03(a) of this
Agreement, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable and free of preemptive (or similar)
rights. Except for the Debentures, there are no outstanding contractual
obligations of the Company or any Subsidiary to repurchase, redeem or otherwise
12
acquire any outstanding securities of the Company or any Subsidiary, to vote or
to dispose of any Shares or any capital stock of any Subsidiary or to make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary or any other person. None of the Company or any Subsidiary is a party
to any shareholders' agreement, voting trust agreement or registration rights
agreement relating to any equity securities of the Company or any Subsidiary or
any other Contract relating to disposition, voting or dividends with respect to
any equity securities of the Company or of any Subsidiary, other than the
registration rights agreement entered into in connection with the Debentures. No
dividends on the Shares have been declared or have accrued since December 31,
2004. All of the Shares have been issued by the Company in compliance with
applicable federal securities Laws.
(c) Each outstanding share of capital stock (or other equity interest)
of each Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and was issued free of preemptive (or similar) rights, and other
than the shares of LabOne of Ohio, Inc. owned by the Ohio Minority Holders, each
such share is owned by the Company or another Subsidiary free and clear of all
options, rights of first refusal, agreements, limitations on the Company's or
any Subsidiary's voting, dividend or transfer rights, charges and other
encumbrances or liens of any nature whatsoever.
(d) The only principal amount of outstanding indebtedness for borrowed
money of the Company and the Subsidiaries (not including intercompany amounts,
capital leases, purchase price obligations with respect to acquisitions or the
Debentures) is (i) $9,000,000 in aggregate principal amount of City of Lenexa,
Kansas Taxable Industrial Revenue Bonds due September 1, 2009, (ii) borrowings
that would be permitted under Section 6.01(e) of this Agreement if incurred
after the date hereof and (iii) CDN$1,000,000 (one-million Canadian dollars)
outstanding as of the date hereof under the Company's $175,000,000 Amended and
Restated Credit Agreement, dated as of August 11, 2004, among the Company, the
lenders named therein and JPMorgan Chase Bank, as Administrative Agent and
Collateral Agent (the "Credit Agreement").
SECTION 4.04 Authority Relative to this Agreement. (a) The Company has
all necessary corporate power and corporate authority to execute and deliver
this Agreement, to perform its obligations hereunder and, subject to obtaining
the Requisite Shareholder Approval, to consummate the Merger. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Merger have been duly and validly authorized by all necessary corporate
action on the part of the Company, and no other corporate proceedings on the
part of the Company or its holders of Shares are necessary to authorize this
Agreement or to consummate the Merger (other than, with respect to the Merger,
(i) obtaining the Requisite Shareholder Approval and (ii) filing and recording
appropriate merger documents as required by the MGBCL). This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Purchaser, constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms subject to the effect of any applicable
bankruptcy, insolvency (including all Laws relating to fraudulent transfers),
reorganization, moratorium or similar Laws affecting creditors' rights generally
and subject to the effect of general principles of equity (collectively, the
"Enforceability Exceptions"). The Company Board has unanimously
13
approved this Agreement and no restrictions on business combinations set forth
in the MGBCL shall apply to the Merger.
(b) The Company Board, at a meeting duly called and held, duly and
unanimously adopted resolutions (i) approving this Agreement and the Merger
contemplated by this Agreement and directing the submission of this Agreement to
a vote at a meeting of shareholders of the Company, (ii) determining that the
terms of the Merger are fair to and in the best interests of the Company and its
shareholders and (iii) subject to the terms of this Agreement, recommending that
the Company's shareholders approve this Agreement. Such resolutions are the only
resolutions necessary in order for the Merger to comply with Article Ten and
Article Twelve of the Company's Articles of Incorporation. In addition, based
upon the representations made in Section 5.07 hereof, the Company Board has
taken all action necessary to render (A) Section 351.407 of the MGBCL and (B)
Section 351.459 of the MGBCL inapplicable to this Agreement, the Merger, and to
Parent and Purchaser to the extent of this Agreement, or the Merger. No other
state takeover statute or regulation is applicable to Company with respect to
this Agreement or the Merger.
(c) The only vote of holders of any class or series of capital stock
of the Company necessary to approve this Agreement and the Merger is the
approval of this Agreement by the holders of two-thirds or more of the
outstanding Shares (the "Requisite Shareholder Approval").
SECTION 4.05 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the Merger by the Company
will not, (i) conflict with or violate the Articles or the Bylaws or the
articles of incorporation or bylaws (or any equivalent organizational documents)
of any Subsidiary, (ii) assuming that all consents, approvals and other
authorizations described in Section 4.05(b) of this Agreement have been obtained
and that all filings and other actions described in Section 4.05(b) of this
Agreement have been made or taken, conflict with or violate any Law applicable
to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) except with respect to
the Debentures, result in any breach of or constitute a default (or an event
which, with notice or lapse of time or both, would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property or
asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Subsidiary is a party or by
which the Company or a Subsidiary or any property or asset of the Company or any
Subsidiary is bound or affected, except with respect to clause (ii) or (iii),
for any such conflicts, violations, breaches, defaults or other occurrences that
would not have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement and the consummation by the Company
of the Merger will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any United States or non-United States
supranational, national, federal, state, provincial, municipal or local
government, governmental, regulatory or administrative authority, agency,
instrumentality or commission or any court, tribunal, or judicial or arbitral
body (a
14
"Governmental Authority"), except for (i) applicable requirements, if any, of
the Exchange Act or state securities Laws, (ii) the pre-merger notification
requirements of the HSR Act, (iii) the filing with the SEC of a proxy statement
relating to the approval of this Agreement by the Company's shareholders (as
amended or supplemented from time to time, the "Proxy Statement"), (iv) any
required filing with, and any approvals required under, the rules and
regulations of the NASDAQ National Market, (v) the filing and recordation of
appropriate merger documents as required by the MGBCL, and (vi) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not have a Material Adverse Effect.
SECTION 4.06 Permits; Compliance. (a) The Company and each Subsidiary
is in compliance with all Laws applicable to the Company or any Subsidiary or by
which its or any of their respective properties or assets are bound, except for
any such failure to be in compliance which would not have a Material Adverse
Effect. The Company and the Subsidiaries have all permits, licenses,
authorizations, exemptions, orders, consents, approvals and franchises from any
Governmental Authority required to own, lease and operate their respective
properties or conduct their respective businesses as now being conducted, except
for any such permit, license, authorization, exemption, order, consent, approval
or franchise the absence of which would not have a Material Adverse Effect.
(b) None of the Company or any Subsidiary or any individual who is
currently an executive officer, director or, to the knowledge of the Company,
employee of the Company or any Subsidiary (i) has been convicted of, or to the
knowledge of the Company, charged with a Medicare, Medicaid or state health
program-related offense, (ii) since December 31, 2002, has been convicted of, or
to the knowledge of the Company, investigated for or charged with a violation of
Law related to fraud, theft, embezzlement, financial misconduct or obstruction
of an investigation, (iii) has been excluded or suspended from participation in
Medicare, Medicaid or any federal or state health program, or (iv) since
December 31, 2002, has been subject to any Order of, or any criminal or civil
fine or penalty imposed by, any Governmental Authority with respect to any such
Medicare, Medicaid or any other federal or state health care program.
(c) The Company has made available to Parent prior to the date of this
Agreement true and complete copies of (i) all material surveys, reports,
notices, inquiries, subpoenas and other correspondence related to any
certification, licensure or other inspections directly or indirectly impacting
the Healthcare Business Segment, and summaries of all proficiency test results
relating to the Healthcare Business Segment for the period from December 31,
2002 (or, if later than such date, in the case of a Subsidiary, from the date
such entity became a Subsidiary) through the date hereof, (ii) all material
written inquiries, notices, requests for records, subpoenas and correspondence
received by the Company or any Subsidiary related to utilization, reimbursement
or other material audits or investigations relating to the Healthcare Business
Segment for the period from December 31, 2002 (or, if later than such date, in
the case of a Subsidiary, from the date such entity became a Subsidiary) through
the date hereof, (iii) filings made by the Company or any Subsidiary pursuant to
Section 1887 of the Social Security Act (42 U.S.C. Section 1395nn), and (iv) all
current licenses or certifications of the Company or any Subsidiary under the
Clinical Laboratory Improvement Act of 1988 and the regulations promulgated
thereunder ("CLIA").
15
(d) Except as would not be material to the Company and the
Subsidiaries, taken as a whole, (i) none of the Company nor any Subsidiary has
engaged in any activities that are prohibited under or would violate Medicare
and Medicaid statutes, 42 U.S.C. Sections 1320a 7a and 7b, or the regulations
promulgated pursuant to such statutes, or comparable state or local Law or rules
of professional conduct, (ii) the Company and the Subsidiaries have timely and
accurately filed all requisite claims and other reports required to be filed in
connection with all applicable state and federal Medicare and Medicaid programs
due on or before the date of this Agreement, (iii) there is no arrangement
providing for any rebates, kickbacks or other forms of compensation that is
unlawful to be paid to any person or entity in return for the referral of
business or for the arrangement for recommendation of such referrals, and (iv)
none of the Company nor any Subsidiary has any financial arrangement which
renders any of its billings unlawful pursuant to any Law.
(e) To the knowledge of the Company, all agreements of the Company and
the Subsidiaries with third party healthcare payors were entered into by the
Company or a Subsidiary, as the case may be, in the ordinary course of business.
The Company and the Subsidiaries are in compliance with each of their respective
third party healthcare payor agreements, and the Company and the Subsidiaries
have properly charged and billed in accordance with the terms of their
respective third party healthcare payor agreements, including, where applicable,
billing and collection of all deductibles and co-payments, except for any such
failure to comply or to properly charge and bill that would not have a Material
Adverse Effect.
(f) Neither the Company nor any Subsidiary has since December 31, 2002
(or, if later than such date, in the case of a Subsidiary, from the date such
entity became a Subsidiary) received written notice from any Governmental
Authority that it has been the subject of any inspection, investigation, survey,
audit, monitoring or other form of review by any Governmental Authority,
professional review organization, accrediting organization or certifying agency
for the purpose of any alleged improper activity on the part of such entity,
other than routine audits or inquiries and other than those that would not have
a Material Adverse Effect.
SECTION 4.07 SEC Filings; Financial Statements. (a) The Company has
filed or otherwise transmitted all forms, reports, statements, schedules,
registration statements and other documents required to be filed by it with the
SEC since December 31, 2002 (such forms, reports, statements, schedules,
registration statements and other documents being collectively, the "SEC
Reports"). Each SEC Report (i) at the time it was filed or, if amended, as of
the date of such amendment, complied in all material respects and was prepared
in all material respects in accordance with the applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, each in effect on the date so filed, and
(ii) did not, at the time it was filed, or, if amended, as of the date of such
amendment, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary is required to file any form, report or
other document with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any notes thereto) contained in the SEC Reports was prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the
16
periods indicated (except as may be indicated in such statements or the notes
thereto) and each fairly presents, in all material respects, the consolidated
financial position, results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein except as otherwise noted therein
(including, in each case, in any notes thereto, and subject, in the case of
unaudited statements, to normal period-end adjustments).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries as of December 31, 2004,
including the notes thereto (the "Balance Sheet"), neither the Company nor any
Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), in each case that is required by GAAP to be
set forth in a consolidated balance sheet of the Company or disclosed in the
notes thereto, except for liabilities and obligations (including purchasing
obligations) (i) incurred in the ordinary course of business since December 31,
2004, or (ii) that would not be material to the Company and its Subsidiaries
taken as a whole.
(d) Section 4.07(d) of the Disclosure Schedule lists all "management
letters" and other similar letters relating to the Company's or any of its
Subsidiaries' internal controls and accounting practices that have been received
by the Company from its independent accountants since January 1, 2002 (the
"Management Letters"). True and complete copies of all Management Letters have
been made available to Parent.
(e) The Company conducted an assessment of its internal control over
financial reporting as of December 31, 2004 pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002 and found it to be effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP and, since
such time, to the knowledge of the persons listed on Schedule 1.01(a) hereto,
the Company has obtained no knowledge of any material weaknesses or significant
deficiencies in internal control over financial reporting. The management of the
Company has (x) implemented disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act) to ensure that material information relating
to the Company, including its consolidated Subsidiaries, is made known to the
management of the Company by others within those entities and such controls are
effective to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with GAAP, and (y) disclosed on a timely basis, based on its most
recent evaluation, to the Company's outside auditors and the audit committee of
the Company Board (A) all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting (as defined
in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely
affect the Company's ability to record, process, summarize and report financial
data and (B) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal control
over financial reporting.
(f) Since December 31, 2002, neither the Company, any Subsidiary nor,
to the Company's knowledge, any director, officer, employee, auditor, accountant
or representative of the Company or any Subsidiary, has received or otherwise
had or obtained knowledge of any material complaint, allegation, assertion or
claim, whether written or oral, regarding the
17
accounting or auditing practices, procedures, methodologies or methods of the
Company or any Subsidiary or their respective internal accounting controls or
any complaint, allegation, assertion or claim that the Company or any Subsidiary
has engaged in questionable accounting or auditing practices. To the knowledge
of the Company, no attorney representing the Company or any Subsidiary, whether
or not employed by the Company or any Subsidiary, has reported evidence of a
material violation of securities Laws, breach of fiduciary duty or similar
violation by the Company or any of its officers, directors, employees or agents
to the Company Board or any committee thereof or to any director or officer of
the Company. Since December 31, 2002, there have been no internal investigations
regarding accounting or financial reporting discussed with, reviewed by or
initiated at the direction of the chief executive officer, chief financial
officer, general counsel, the Company Board or any committee thereof.
SECTION 4.08 Absence of Certain Changes or Events. Since March 31,
2005, except as expressly contemplated by this Agreement, (a) the Company and
the Subsidiaries have conducted their businesses in all material respects only
in the ordinary course of business and in a manner consistent with past
practice, and (b) there has not been any Material Adverse Effect, and none of
the Company or any Subsidiary has taken any action that, if taken after the date
of this Agreement, would constitute a breach of the covenants set forth in
Section 6.01(a), (c), (d), (e), (g), (h) or (j) hereto.
SECTION 4.09 Absence of Litigation. There is no material litigation,
suit, claim, action, proceeding or, to the knowledge of the Company,
investigation (an "Action") pending or, to the knowledge of the Company,
threatened in writing against the Company or any Subsidiary, by or before any
Governmental Authority. Neither the Company nor any Subsidiary is subject to any
continuing order of, consent decree, settlement agreement or similar written
agreement with, or, to the knowledge of the Company, continuing investigation
by, any Governmental Authority, or any continuing order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority that
would have a Material Adverse Effect.
SECTION 4.10 Employee Benefit Plans. (a) Section 4.10(a) of the
Disclosure Schedule lists (i) all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements, to which the Company or any Subsidiary is a party, with respect to
which the Company or any Subsidiary has any obligation or which are maintained,
contributed to or sponsored by the Company or any Subsidiary for the benefit of
any current or former employee, officer or director of, or any current or former
consultant to, the Company or any Subsidiary, (ii) each employee benefit plan
for which the Company or any Subsidiary could incur material liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated,
(iii) any material plan in respect of which the Company or any Subsidiary could
incur liability under Section 4212(c) of ERISA, and (iv) any material contracts,
arrangements or understandings between the Company or any Subsidiary, on the one
hand, and any employee of the Company or any Subsidiary, on the other hand,
relating to employee benefits or to the sale of the Company or any Subsidiary
(collectively, the "Plans"). Each Plan is in writing and the Company has made
available to Parent a true and
18
complete copy of each Plan and has made available to Parent a true and complete
copy of each of the following, if any, prepared in connection with each such
Plan: (i) a copy of each trust or other funding arrangement, (ii) each summary
plan description and summary of material modifications, (iii) the most recently
filed Internal Revenue Service ("IRS") Form 5500, (iv) the most recently
received IRS determination letter for each such Plan, and (v) the most recently
prepared financial statement in connection with each such Plan. Neither the
Company nor any Subsidiary has any express or implied commitment (i) to create,
incur liability with respect to or cause to exist any other employee benefit
plan, program or arrangement, (ii) to enter into any contract or agreement to
provide compensation or benefits to any individual, or (iii) to modify, change
or terminate any Plan, other than with respect to a modification, change or
termination required by applicable Law, including ERISA or the Code, or as
contemplated by this Agreement.
(b) None of the Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which the Company or any Subsidiary could incur liability under Section 4063 or
4064 of ERISA (a "Multiple Employer Plan"). None of the Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company or any Subsidiary. Each
of the Plans is subject only to the Laws of the United States or a political
subdivision thereof.
(c) Each Plan is now and always has been operated in all material
respects in accordance with its terms and the requirements of all applicable
Laws including, without limitation, ERISA and the Code. The Company and the
Subsidiaries have performed in all material respects the obligations to be
performed by them under, and are not in any material respect in default under or
in violation of, any Plan.
(d) For each Plan that is intended to be qualified under Section
401(a) or Section 401(k) of the Code, the IRS has issued a favorable "GUST"
determination letter (taking into account the changes in the qualification
requirements made by the Uruguay Round Agreements Act, the Small Business Job
Protection Act of 1996, the Tax Reform Act of 1997, the IRS Restructuring and
Reform Act of 1998 and the Community Renewal Relief Act of 2000) that has not
been revoked, and no events have occurred that would have or that would
reasonably be expected to have a Material Adverse Effect on the qualified status
of such Plans or a loss of the tax-exempt status of the related trust. The
Company has timely adopted all amendments to the Company's 401(k) Plan required
by the Code (and the applicable rulings and final regulations thereunder), ERISA
or other applicable law, including, without limitation, amendments required by
the Economic Growth and Tax Relief Reconciliation Act of 2001 and Section
401(a)(9) of the Code and the applicable rulings and final regulations
thereunder. To the knowledge of the Company, no fact or event has occurred since
the date of such determination letter or letters from the IRS to adversely
affect the qualified status of any such Plan or the exempt status of any such
trust.
(e) There has not been any prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.
Neither the Company nor any Subsidiary has incurred any material liability
under, arising out of or by operation of Title IV of ERISA, including any
liability in connection with (i) the termination or
19
reorganization of any employee benefit plan subject to Title IV of ERISA or (ii)
the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and to the
knowledge of the Company no fact or event exists that could give rise to any
such liability.
(f) All contributions, premiums or payments required to be made prior
to the date hereof with respect to any Plan have been made in all material
respects on or before their due dates. No deduction with respect to any Plan for
income Tax purposes has been challenged or disallowed by any Governmental
Authority and no fact or event exists which could reasonably give rise to any
such challenge or disallowance, except for any failure that would not have a
Material Adverse Effect.
(g) Except as provided in Section 3.02, (i) neither the execution of
this Agreement, shareholder approval of the principal terms of this Agreement
nor the consummation of the transactions contemplated hereby will (A) entitle
any employees of the Company or any Subsidiary to severance pay or any increase
in severance pay upon any termination of employment after the date hereof, or
(B) accelerate the time of payment or vesting or trigger any payment or funding
(through a grantor trust or otherwise) of compensation or benefits under, or
increase the amount payable or trigger any other material obligation pursuant
to, any of the Plans and (ii) none of the Plans in effect on the date of this
Agreement would result separately or in the aggregate (including as a result of
this Agreement or the transactions contemplated hereby) in the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code.
(h) The Company and each Subsidiary has timely given any and all
notices and taken any other actions required with respect to the Worker
Adjustment and Retraining Notification Act of 1988, as amended, or other similar
Laws of any state or other jurisdiction.
SECTION 4.11 Labor and Employment Matters. There are no controversies
pending or, to the knowledge of the Company, threatened between the Company or
any Subsidiary, on the one hand, and any of their respective employees, on the
other hand, which controversies would have a Material Adverse Effect. Neither
the Company nor any Subsidiary is a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by the Company or
any Subsidiary, nor, to the knowledge of the Company, are there any activities
or proceedings of any labor union to organize any such employees. There are no
unfair labor practice complaints pending against the Company or any Subsidiary
before the National Labor Relations Board or any current union representation
questions involving employees of the Company or any Subsidiary. There is no
strike, slowdown, work stoppage or lockout, or, to the knowledge of the Company,
threat thereof, by or with respect to any employees of the Company or any
Subsidiary. All individuals classified by the Company or any Subsidiary as
independent contractors have been properly classified as non-employees for
purposes of applicable Laws, except as would not be material to the Company and
its Subsidiaries taken as a whole.
SECTION 4.12 Information Supplied. The Proxy Statement that will be
mailed to shareholders of the Company in connection with the Company
Shareholders Meeting (as defined in Section 7.01) shall not, on the date the
Proxy Statement (or any amendment or supplement thereto) is first mailed or
otherwise disseminated to shareholders of the Company and at the time of the
Company Shareholders Meeting, contain any untrue statement of a material
20
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, at the time and in light of
the circumstances under which they were made, not false or misleading, or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Shareholders Meeting which shall
have become false or misleading. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information supplied by
Parent, Purchaser or any of Parent's or Purchaser's representatives for
inclusion in the foregoing documents. The Proxy Statement shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 4.13 Real Property; Title to Assets. (a) Section 4.13(a) of
the Disclosure Schedule lists each parcel of real property owned by the Company
or any Subsidiary and the location of such real property. Each parcel of real
property owned by the Company or any Subsidiary (i) is owned free and clear of
all mortgages, pledges, liens, security interests, conditional and installment
sale agreements, encumbrances, charges or other claims of third parties of any
kind, including, without limitation, any lease, license, occupancy agreement,
easement, right of way or other encumbrance to title, or any option, right of
first refusal, or right of first offer (collectively, "Liens"), other than (A)
Liens for current Taxes and assessments not yet due for which adequate reserves
have been established in accordance with GAAP, (B) inchoate Liens imposed for
construction work in progress, including mechanics' liens, workers' or
repairmen's liens, (C) Liens securing obligations under the Credit Agreement, or
(D) Liens that do not adversely affect in any material respect the use or
operation of the applicable property owned by the Company or such Subsidiary,
and (ii) is neither subject to any Order to be sold nor is being condemned,
expropriated or otherwise taken by any Governmental Authority with or without
payment of compensation therefor, nor, to the knowledge of the Company, has any
such condemnation, expropriation or taking been proposed, except as would not
have materially adversely affected the value or use of the applicable property
owned by the Company or such Subsidiary.
(b) Section 4.13(b) of the Disclosure Schedule lists each parcel of
real property currently leased or subleased by the Company or any Subsidiary
that involves consideration in excess of $100,000 per calendar year or $500,000
in the aggregate for the remaining term of such lease or sublease (without
renewal of such lease or sublease), and the location of such real property, with
the name of the lessor and the date of the lease, sublease, assignment of the
lease, any guaranty given or leasing commissions payable by the Company or any
Subsidiary in connection therewith and each amendment to any of the foregoing
(collectively, the "Lease Documents"). True, correct and complete copies of all
Lease Documents have been made available to Parent. All such current leases and
subleases are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing material default or event of default (or event which, with notice or
lapse of time, or both, would constitute a default or event of default) by the
Company or any Subsidiary or, to the Company's knowledge, by the other party to
such lease or sublease, or person in the chain of title to such leased premises,
and, to the knowledge of the Company, neither tenant nor landlord has exercised
any right to terminate such leases and subleases as a result of a default under
such leases and subleases by either tenant or landlord.
21
(c) Except as would not materially adversely affect the value or use
of the applicable property owned by the Company or such Subsidiary, (i) there
are no contractual or legal restrictions that preclude or restrict the ability
to use any real property owned by the Company or any Subsidiary or leased by the
Company or any Subsidiary pursuant to a sale-leaseback transaction for the
purposes for which it is currently being used, and (ii) there are no latent
defects or adverse physical conditions affecting the real property owned by the
Company or any Subsidiary, and improvements thereon, owned by the Company or any
Subsidiary or leased by the Company or any Subsidiary pursuant to a
sale-leaseback transaction.
SECTION 4.14 Intellectual Property. (a) Section 4.14(a) of the
Disclosure Schedule sets forth a true and complete list of all patents, patent
application, copyright registrations and applications, trademark registrations
and applications and domain name registrations that are owned by the Company
and/or the Subsidiaries as of the date of this Agreement. The Company and/or the
Subsidiaries exclusively own each such item free and clear of encumbrances, and,
to the knowledge of the Company, each is subsisting, valid and enforceable, and
is not subject to any outstanding judgment, order or license adversely affecting
in any material respect the Company's and/or the Subsidiaries' use thereof in
the ordinary course of the Company's and/or the Subsidiaries' respective
businesses or its/their rights thereto.
(b) The Company and the Subsidiaries own or have the rights to use all
patents, inventions, copyrights, software, trademarks, service marks, domain
names, trade dress, trade secrets and all other intellectual property rights of
any kind or nature ("Intellectual Property") used in their business as currently
conducted, which rights shall survive the execution of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby,
except as would not have a Material Adverse Effect. To the knowledge of the
Company, such Intellectual Property is not being infringed by any third party.
To the knowledge of the Company, neither the conduct of the Company nor any of
the Subsidiaries infringes Intellectual Property of any third party.
(c) The Company and the Subsidiaries have taken reasonable steps in
accordance with normal industry practice to maintain the confidentiality of
their trade secrets and other confidential Intellectual Property. To the
Company's knowledge, there has been no misappropriation of any trade secret or
other confidential information of the Company or the Subsidiaries.
SECTION 4.15 Taxes. Except as would not have a Material Adverse
Effect, (i) the Company and each of its Subsidiaries have timely filed (or have
had filed on their behalf) all Tax Returns they were required to file, and have
paid all Taxes that have become due and payable, except such Taxes that are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in the relevant financial statements in accordance
with GAAP; (ii) all such Tax Returns are true, accurate and complete; (iii)
adequate reserves have been provided in the relevant financial statements as
required by GAAP for all Taxes not yet due and payable; (iv) neither the IRS nor
any other United States or non-United States taxing authority or agency has
asserted in writing or, to the knowledge of the Company, has threatened to
assert against the Company or any Subsidiary any deficiency or claim for any
Taxes; (v) there are no pending or, to the knowledge of the Company, threatened
actions, investigations, suits, Governmental Authority proceedings or audits for
the assessment or
22
collection of Taxes against the Company or any Subsidiary; (vi) neither the
Company nor any Subsidiary has granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any Tax;
(vii) neither the Company nor any Subsidiary has made an election under Section
341(f) of the Code; (viii) there are no Tax Liens upon any property or assets of
the Company or any of the Subsidiaries except Liens for current Taxes not yet
due; (ix) neither the Company nor any of the Subsidiaries is a party to any
agreement, understanding, or arrangement (with any person other than the Company
and/or any of the Subsidiaries) relating to allocating or sharing of any amount
of Taxes; (x) neither the Company nor any of the Subsidiaries has any liability
for any amount of Taxes of any person other than the Company or any of its
Subsidiaries under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law), as a transferee or successor, or by
contract; (xi) neither the Company nor any Subsidiary has been a "distributing
corporation" or a "controlled corporation" in a distribution intended to qualify
under Section 355 of the Code within the past five years; (xii) neither the
Company nor any Subsidiary will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Effective Time as a result of any transaction
occurring in, or a change in accounting method made for, a taxable period ending
on or before the Effective Time; (xiii) there is no material intercompany income
or gain which may in the future become taxable to the Company or any Subsidiary,
whether on disposition of particular Subsidiaries or otherwise; and (xiv)
neither the Company nor any Subsidiary has participated in "listed transactions"
or "reportable transactions" or "tax shelters" within the meaning of the Code
requiring it to file, register, prepare, produce or maintain any disclosure,
report, list or any other statement or document under Section 6111 or 6112 of
the Code, except as set forth on Section 4.15 of the Disclosure Schedule, in
which case the Company or the relevant Subsidiary has filed all disclosures and
properly registered or maintained all lists, reports and other similar documents
in compliance and as required by Section 6011, 6111, or 6112 of the Code and the
Treasury regulations issued thereunder.
SECTION 4.16 Environmental Matters. Except as would not have a
Material Adverse Effect, (a) neither the Company nor any of the Subsidiaries has
violated or is in violation of any Environmental Law; (b) neither the Company
nor any of the Subsidiaries has received written notice of liability or is aware
of facts or circumstances reasonably likely to result in written notice of
liability, for any off-site contamination by Hazardous Substances; except, with
respect to any such notification, to the extent that such matter has been
resolved with the appropriate foreign, federal, state or local regulatory
authority or otherwise; (c) neither the Company nor any of the Subsidiaries has
received written notice of liability or is aware of facts or circumstances
reasonably likely to result in written notice of liability, under any
Environmental Law (including, without limitation, pending or threatened liens)
except, with respect to any such notification, to the extent that such matter
has been resolved with the appropriate foreign, federal, state or local
regulatory authority or otherwise; (d) each of the Company and each Subsidiary
has all permits, licenses and other authorizations required under any
Environmental Law ("Environmental Permits"); (e) each of the Company and each
Subsidiary is in compliance with its Environmental Permits; and (f) neither the
execution of this Agreement nor the consummation of the Merger will require any
investigation, remediation or other action pursuant to any applicable
Environmental Law or Environmental Permit with respect to any real property
owned or leased by the Company or any of the Subsidiaries.
23
SECTION 4.17 Rights Agreement. The Company Board has taken all action
necessary so that none of the execution or delivery of this Agreement and the
consummation of the Merger will result in (i) the occurrence of the "flip-in
event" described under Section 11(a)(ii) of the Rights Agreement, (ii) the
occurrence of the "flip-over event" described in Section 13 of the Rights
Agreement, or (iii) the rights becoming evidenced by, and transferable pursuant
to, certificates separate from the certificates representing Shares.
SECTION 4.18 Listed Contracts. (a) Except for any default that would
not, individually or in the aggregate with any other defaults, have a Material
Adverse Effect (i) neither the Company nor any of the Subsidiaries is in default
under any Listed Contract to which the Company or any of the Subsidiaries is a
party or by which it or any of its respective properties or assets are bound
nor, to the knowledge of the Company, is any other party thereto in default
thereunder, and (ii) no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default under any such Listed
Contract by the Company or any of the Subsidiaries or, to the knowledge of the
Company, any other party. No party to any such Listed Contract has given written
notice to the Company or any of the Subsidiaries of, or made a claim against the
Company or any of the Subsidiaries with respect to, any breach or default under
any such Listed Contract, in any such case, where such breach or default would
have a Material Adverse Effect. Assuming the Listed Contracts have been duly
authorized, executed and delivered by the respective other parties thereto,
except as would not have a Material Adverse Effect, the Listed Contracts are
valid, binding and enforceable obligations of the Company, the Subsidiaries and
the other parties thereto, subject to the Enforceability Exceptions. Schedule
4.18 of the Disclosure Schedule sets forth the following contracts and
agreements (the "Listed Contracts"):
(i) each contract and agreement (other than (A) contracts and
agreements otherwise made available or otherwise disclosed to Parent
pursuant to the terms of this Agreement and (B) supplier and vendor
contracts), whether or not made in the ordinary course of business, that
contemplates an exchange of consideration with a value of more than
$1,000,000 in the aggregate, on an annual basis, in each case determined by
the revenue received under each such contract during the 12-month period
ended June 30, 2005 (except for insurance services group customer
contracts, which are based upon revenue received under each contract during
the fiscal year ended December 31, 2004);
(ii) all contracts and agreements under which the Company or any
Subsidiary provides or receives laboratory management services or specimen
collection services;
(iii) all contracts and agreements with group purchasing
organizations, managed care companies, and third party payors (except for
contracts with LabCard(R) customers which shall be set forth in Section
4.18(a) of the Disclosure Schedule pursuant to clause (i) of this Section
4.18(a) to the extent required to be listed pursuant to such clause);
(iv) contracts and agreements with each of the Company's top 10
substance abuse testing customers determined by the revenue received from
such customers during the 12-month period ended June 30, 2005;
24
(v) each of the top ten supply agreements determined by the amounts
paid by the Company during the 12-month period ended June 30, 2005;
(vi) all contracts and agreements under which the Company or any
Subsidiary referred specimens to a third party for testing that involved
payments made in excess of $1,000,000 during the fiscal year ending
December 31, 2004;
(vii) all contracts and agreements evidencing Indebtedness;
(viii) any contract that would be required to be filed by the Company
as a material contract pursuant to Item 601(b)(10) of Regulation S-K under
the Securities Act;
(ix) all partnership and joint venture agreements;
(x) all contracts and agreements that (A) limit or purport to limit
the ability of the Company or any Subsidiary or, to the Company's
knowledge, any key executives of the Company or any Subsidiary, to compete
in any line of business or with any person or in any geographic area or
during any period of time (except with respect to the use of information
pursuant to any confidentiality or non-disclosure agreement), (B) require
the Company or any Subsidiary to use any supplier or third party for all or
substantially all of the Company's or the Subsidiaries' requirements or
needs, (C) limit or purport to limit the ability of the Company or any
Subsidiary to solicit any customers or clients of the other parties
thereto, (D) require the Company or any Subsidiary to provide to the other
parties thereto "most favored nations" pricing, (E) require the Company or
any Subsidiary to market or co-market any clinical laboratory services or
other products or services of a third party, or (F) any "take-or-pay"
contract or other similar agreement or arrangement requiring the Company or
any Subsidiary to make a minimum payment for goods or services from third
party suppliers irrespective of usage;
(xi) all executory contracts, agreements and arrangements between the
Company or any of its Subsidiaries and any other party relating to the
acquisition or disposition by the Company or such Subsidiary (including,
without limitation, by merger, consolidation, acquisition of stock or
assets or any other business combination) of any corporation, partnership,
other business organization or division thereof, in each case since
December 31, 2002 and for an aggregate purchase price in excess of
$5,000,000; and
(xii) each of the top ten contracts or arrangements between the
Company or any Subsidiary and any paramedical examination company
determined by the revenue received under such contracts during the 12-month
period ended June 30, 2005.
(b) The Company has furnished or made available to Parent a true,
complete and correct copy of all written Listed Contracts, together with all
amendments, waivers or other changes thereto, and has given a written
description of all oral contracts included in the Listed Contracts.
SECTION 4.19 Insurance. The Company maintains insurance coverage with
reputable insurers, or maintains self-insurance practices, in such amounts and
covering such risks
25
as are in accordance with normal industry practice for companies engaged in
businesses similar to that of the Company and its Subsidiaries taken as a whole.
The Company has not received any notice of cancellation or termination with
respect to any such insurance policy. Each such insurance policy is in full
force and effect and the premiums due thereunder have been paid as they became
due and payable. Section 4.19 of the Disclosure Schedule sets forth the premiums
paid by the Company with respect to directors' and officers' liability insurance
policies as of the date of this Agreement.
SECTION 4.20 Interested Party Transactions. To the knowledge of the
Company, no director, officer or other affiliate of the Company or any
Subsidiary has (i) an economic interest in any person that furnishes or sells
services or products that the Company or any Subsidiary furnishes or sells; (ii)
an economic interest in any person that purchases from or sells or furnishes to
the Company, or any Subsidiary, any goods or services; (iii) a beneficial
interest in any party (other than the Company or any Subsidiary) to any Listed
Contract; or (iv) any contractual or other arrangement with the Company or any
Subsidiary (excluding employment, director, management or consulting
arrangements and benefit programs); provided, however, that ownership of no more
than two percent (2%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any person" for
purposes of this Section 4.20.
SECTION 4.21 Customers and Suppliers. Section 4.21 of the Disclosure
Schedule sets forth a true and complete list of the Company's top ten customers
of each of the risk assessment, healthcare and substance abuse testing business
segments (based on the revenue from such customers during the 12-month period
ended June 30, 2005). As of the date of this Agreement, none of the Company's
customers listed in Section 4.21 of the Disclosure Schedule accounted for more
than three percent (3%) of the Company's consolidated revenues during the
12-month period ended June 30, 2005, other than pursuant to the State Farm
Master Agreement, and since June 30, 2004, none of such customers and no
material supplier of the Company and its Subsidiaries (i) has cancelled or
otherwise terminated any contract with the Company or any Subsidiary prior to
the expiration of the contract term or (ii) to the Company's knowledge, as of
the date of this Agreement, has threatened, or indicated its intention in
writing, to cancel or otherwise terminate its relationship with the Company or
its Subsidiaries or to reduce substantially its purchase from or sale to the
Company or any Subsidiary of any products, goods or services.
SECTION 4.22 Brokers. No broker, finder or investment banker (other
than J.P. Morgan Securities Inc.) is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Parent a complete and correct copy of all agreements between the Company and
J.P. Morgan Securities Inc. pursuant to which such firm would be entitled to any
payment relating to the Merger.
SECTION 4.23 Opinion of Financial Advisor. The Company has received
the written opinion of J.P. Morgan Securities Inc., dated as of the date of this
Agreement, to the effect that, as of such date, the consideration to be received
by the shareholders of the Company in the Merger is fair from a financial point
of view to such shareholders.
26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
As an inducement to the Company to enter into this Agreement, Parent
and Purchaser hereby, jointly and severally, represent and warrant to the
Company as follows:
SECTION 5.01 Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its incorporation and has the requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, prohibit or materially delay consummation of the Merger or
otherwise prevent Parent or Purchaser from performing its obligations under this
Agreement.
SECTION 5.02 Authority Relative to This Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Merger. The execution and delivery of this Agreement by Parent and Purchaser and
the consummation by Parent and Purchaser of the Merger have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Purchaser, and no other corporate proceedings on the part of Parent or Purchaser
are necessary to authorize this Agreement or to consummate the Merger (other
than, with respect to the Merger, the filing and recordation of appropriate
merger documents as required by the MGBCL). This Agreement has been duly and
validly executed and delivered by Parent and Purchaser and, assuming due
authorization, execution and delivery by the Company constitutes a legal, valid
and binding obligation of each of Parent and Purchaser enforceable against each
of Parent and Purchaser in accordance with its terms.
SECTION 5.03 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, and the
consummation of the Merger by Parent and Purchaser will not (i) conflict with or
violate the Certificate of Incorporation or By-laws of Parent or the Articles of
Incorporation or Bylaws of Purchaser, (ii) assuming that all consents, approvals
and other authorizations described in Section 5.03(b) have been obtained and
that all filings and other actions described in Section 5.03(b) have been made
or taken, conflict with or violate any Law applicable to Parent or Purchaser or
by which any property or asset of either of them is bound or affected, or (iii)
result in any breach of, or constitute a default (or an event which, with notice
or lapse of time or both, would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any property or asset of Parent or Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Purchaser
is a party or by which Parent or Purchaser or any property or asset of either of
them is bound or affected, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences that
would not, individually or in the aggregate, prohibit or materially delay
consummation of the Merger or otherwise prevent Parent or Purchaser from
performing its obligations under this Agreement.
27
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Authority, except for (i) applicable
requirements, if any, of the Exchange Act or state securities Laws, (ii) the
pre-merger notification requirements of the HSR Act, (iii) the filing and
recordation of appropriate merger documents as required by the MGBCL, and (iv)
where the failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, would not, individually or in the
aggregate, prohibit or materially delay consummation of the Merger, or otherwise
prevent Parent or Purchaser from performing its obligations under this
Agreement.
SECTION 5.04 Information Supplied. The information supplied by Parent
for inclusion in the Proxy Statement shall not, at the date the Proxy Statement
(or any amendment or supplement thereto) is first mailed or otherwise
disseminated to shareholders of the Company, 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, in light of the
circumstances under which they were made, not false or misleading, or necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Shareholders Meeting which shall have
become false or misleading. Notwithstanding the foregoing, Parent and Purchaser
make no representation or warranty with respect to any information supplied by
the Company or any of its representatives for inclusion in any of the foregoing
documents. The information supplied by Parent for inclusion in the Proxy
Statement shall comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
SECTION 5.05 Financing. At the Effective Time, Parent will have
sufficient funds to permit Purchaser to consummate the Merger and pay the Merger
Consideration and the amounts payable to the holders of Stock Options pursuant
to Section 3.02.
SECTION 5.06 Brokers. No broker, finder or investment banker (other
than Merrill Lynch & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of Parent or Purchaser.
SECTION 5.07 Ownership of Shares. None of Parent, any of its
subsidiaries or any of their respective controlled affiliates beneficially owns
any Shares.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01 Conduct of Business by the Company Pending the Merger.
The Company agrees that, between the date of this Agreement and the Effective
Time, except as required by Law, as otherwise specifically contemplated by this
Agreement or as set forth in the Disclosure Schedule, unless Parent shall
otherwise agree in writing (which agreement shall not be unreasonably withheld
or delayed), the businesses of the Company and the Subsidiaries shall be
conducted in all material respects only in the ordinary course of business and
in a manner
28
consistent with past practice; and the Company shall use its reasonable best
efforts to preserve substantially intact the business organization of the
Company and the Subsidiaries, to keep available the services of the current
officers, employees and consultants of the Company and the Subsidiaries and to
preserve the current relationships of the Company and the Subsidiaries with
customers, suppliers and other persons with which the Company or any Subsidiary
has significant business relations. By way of amplification and not limitation,
except as expressly contemplated by this Agreement and Section 6.01 of the
Disclosure Schedule, neither the Company nor any Subsidiary shall, between the
date of this Agreement and the Effective Time, directly or indirectly, do, or
propose to do, any of the following without the prior written consent of Parent
(which consent shall not be unreasonably withheld or delayed):
(a) amend or otherwise change its Articles of Incorporation or Bylaws;
(b) (i) issue, sell, pledge, dispose of, grant or encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance of,
any shares of capital stock of the Company or any Subsidiary, or any
Company Stock Options or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or
any other ownership interest (including, without limitation, any phantom
interest) of the Company or any Subsidiary (except for the issuance of
shares of Common Stock upon exercise of outstanding Company Stock Options
or upon conversion of the Debentures) or (ii) sell, pledge, dispose of,
encumber, or authorize the sale, pledge, disposition or encumbrance of, any
assets of the Company or any Subsidiary, except (x) immaterial assets in
the ordinary course of business and in a manner consistent with past
practice or (y) assets held for resale;
(c) authorize, declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except for dividends by any direct or wholly
owned Subsidiary to the Company or any other Subsidiary;
(d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock or that
of any Subsidiary, other than in connection with the exercise of employee
stock options or the purchase of stock of LabOne of Ohio, Inc. from the
Ohio Minority Holders pursuant to the terms of existing agreements with the
Ohio Minority Holders;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any business, corporation, partnership, other business
organization or any division thereof ; (ii) repurchase, repay, cancel or
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for, the
obligations of any person, or make any loans or advances or grant any
security interest in any of its assets, except for the incurrence of any
indebtedness that does not exceed $1,000,000 individually or $1,500,000 in
the aggregate and that arises in the ordinary course of business and is
consistent with past practice (which shall be deemed to include the renewal
of and borrowings and repayments under the Credit Agreement); (iii) enter
into any contract or agreement that requires the payment of more than
$1,500,000 during
29
the term of such contract or agreement other than contracts or agreements
that are terminable pursuant to the terms of such contract upon not more
than 90 days' notice without penalty (it being agreed and understood that
retroactive price increases permitted under the terms of such agreement
shall not be considered for purposes of determining the aggregate payments
required under any such contract or agreement or constitute a penalty under
any such contract or agreement); (iv) (x) with respect to fiscal year 2005,
authorize, or make any commitment with respect to, capital expenditures
outside of the Company's fiscal year 2005 capital expenditure budget,
attached hereto as Schedule 6.01(e), other than any individual capital
expenditure in excess of $500,000 or aggregate capital expenditures in
excess of $1,500,000 for the Company and its Subsidiaries, taken as a
whole, and (y) with respect to fiscal year 2006, authorize, or make any
commitment with respect to, capital expenditures, which in the case of any
individual capital expenditure is in excess of $1,500,000 or which in the
case of aggregate capital expenditures is in excess of $5,000,000 for the
Company and the Subsidiaries, taken as a whole, in any fiscal quarter; or
(v) enter into or amend any contract, agreement, commitment or arrangement
with respect to any matter set forth in this Section 6.01(e); except in
each case as may reasonably be required in connection with the construction
of the Cincinnati Facility as disclosed in Section 6.01(e) of the
Disclosure Schedule;
(f) except in each case as required to comply with any Plan, written
policy or agreement in effect on the date of this Agreement that has been
previously disclosed in writing to Parent, increase the compensation
payable or to become payable or the benefits provided to its directors,
officers or employees, except for increases in the ordinary course of
business and consistent with past practice in salaries or wages of
employees of the Company or any Subsidiary who are not directors or
officers of the Company or any Subsidiary, or grant any severance or
termination pay to, or enter into any employment or severance agreement
with (other than employment offer letters which do not provide for
severance on termination provisions), any director, officer or other
employee of the Company or of any Subsidiary, or establish, adopt, enter
into or amend any collective bargaining, bonus, profit-sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer
or employee;
(g) change any of the accounting principles, policies or procedures
used by it other than as required by GAAP or applicable Law, which Law
shall have been enacted or effective after the date hereof;
(h) make, revoke or change any express or deemed Tax election or
method of Tax accounting, settle or compromise any material liability with
respect to Taxes, consent to any material claim or material assessment
relating to Taxes or waive the statute of limitations for any such claim or
assessment;
(i) subject to Section 6.01(e)(ii), pay, discharge or satisfy any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business and
consistent with past practice;
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(j) amend or modify in any material respect or consent to the
termination of any Listed Contract, or waive in any material respect any
rights of the Company or any Subsidiary thereunder, other than in the
ordinary course of business and consistent with past practice;
(k) settle any material Action;
(l) sell, transfer, or grant any license or sublicense of, or execute
any agreement with respect to, any right under or with respect to any
material Intellectual Property held by the Company or any of its
Subsidiaries or disclose any Intellectual Property held by the Company or
any of its Subsidiaries in the form of confidential information to any
third party, except in the ordinary course of business and consistent with
past practice; or
(m) announce an intention, enter into any formal or informal
agreement, or otherwise make a commitment, to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Company Shareholders Meeting. The Company shall duly
call, give notice of, convene and hold a meeting of its shareholders, as
promptly as reasonably practicable following the execution of this Agreement for
the purpose of approving this Agreement (the "Company Shareholders Meeting").
Subject to Section 7.04(c), the Company shall (i) include in the Proxy
Statement, and not subsequently withdraw or modify in any manner adverse to
Purchaser or Parent, the recommendation of the Company Board that the
shareholders of the Company approve this Agreement, and (ii) use its reasonable
best efforts to obtain the Requisite Shareholder Approval, including, without
limitation, to the extent permitted under applicable Law, postponing or
adjourning the Company Shareholders Meeting to obtain a quorum or to solicit
additional proxies.
SECTION 7.02 Proxy Statement. The Company shall, as promptly as
reasonably practicable following the execution of this Agreement (but in any
event within 30 days thereafter unless the parties shall otherwise agree), file
the Proxy Statement with the SEC under the Exchange Act, and shall use its
reasonable best efforts to have the Proxy Statement cleared by the SEC as
promptly as practicable. Parent, Purchaser and the Company shall cooperate with
each other in the preparation of the Proxy Statement, and the Company shall
notify Parent of the receipt of any comments of the SEC with respect to the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information and shall provide to Parent promptly
copies of all correspondence between the Company or any representative of the
Company and the SEC with respect thereto. The Company shall give Parent and its
counsel a reasonable opportunity to review and comment on the Proxy Statement,
including all amendments and supplements thereto, prior to such documents being
filed with the SEC or disseminated to holders of Shares and shall give Parent
and its counsel a reasonable opportunity to review and comment on all responses
to requests for additional information and replies to comments prior to their
being filed with, or sent to, the SEC. If at any time prior to the Company
Shareholders Meeting, there shall occur any event with respect to the Company,
Parent
31
or any of their Subsidiaries, or with respect to any information provided by the
Company or Parent for inclusion in the Proxy Statement, which event is required
by applicable Law to be described in an amendment or supplement to the Proxy
Statement, such amendment or supplement shall be promptly filed with the SEC, as
required by applicable Law, and disseminated to holders of Shares, as
applicable. Each of the Company, Parent and Purchaser agrees to use its
reasonable best efforts, after consultation with the other parties hereto, to
respond promptly to all such comments of and requests by the SEC and to cause
the Proxy Statement and all required amendments and supplements thereto to be
mailed, as may be required, to the holders of Shares entitled to vote at the
Company Shareholders Meeting at the earliest practicable time.
SECTION 7.03 Access to Information; Confidentiality. (a) Except as
prohibited by applicable Law and subject to any applicable privileges (including
the attorney-client privilege), from the date hereof until the Effective Time,
upon reasonable prior notice, the Company shall, and shall cause the
Subsidiaries and the officers, directors, employees, auditors and agents of the
Company and the Subsidiaries to, afford the officers, employees and agents of
Parent and Purchaser reasonable access during normal business hours to the
officers, employees, agents, properties, offices, plants and other facilities,
books and records of the Company and each Subsidiary, and the Company shall
furnish Parent and Purchaser with such financial, operating and other data and
information as Parent or Purchaser, through its officers, employees or agents,
may reasonably request; provided that such investigation shall not unreasonably
interfere with the business or operations of the Company or any Subsidiary.
(b) All information obtained by Parent or Purchaser pursuant to this
Section 7.03 shall be kept confidential in accordance with the confidentiality
agreement, dated April 13, 2005, and Supplement to Confidentiality Agreement,
dated July 14, 2005 (the "Confidentiality Agreement"), between Parent and the
Company.
(c) No investigation pursuant to this Section 7.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 7.04 No Solicitation of Transactions. (a) The Company agrees
that neither it nor any Subsidiary nor any of the directors, officers or
employees of it or any Subsidiary will, and that it will instruct and use its
reasonable best efforts to cause its and its Subsidiaries' directors, officers,
employees, agents, advisors and other representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
Subsidiary) not to, directly or indirectly, (i) solicit, initiate or knowingly
encourage (including by way of furnishing nonpublic information), or take any
other action to knowingly facilitate, any inquiries or the making of any
proposal or offer (including any proposal or offer to its shareholders) that
constitutes, or may reasonably be expected to lead to, any Competing
Transaction, or (ii) enter into or maintain or continue discussions or
negotiations with any person or entity in furtherance of such inquiries or to
obtain a proposal or offer for a Competing Transaction, or (iii) agree to,
approve, endorse or recommend any Competing Transaction or enter into any letter
of intent or other contract, agreement or commitment contemplating or otherwise
relating to any Competing Transaction, or (iv) authorize or permit any of the
officers, directors or employees of the Company or any of its Subsidiaries, or
any investment banker,
32
financial advisor, attorney, accountant or other representative retained by the
Company or any of its Subsidiaries, to take any such action. The Company shall
notify Parent as promptly as practicable (and in any event within one business
day after the Company attains knowledge thereof), orally and in writing, if any
proposal or offer, or any inquiry or contact with any person with respect
thereto, regarding a Competing Transaction is made, specifying the material
terms and conditions thereof and the identity of the party making such proposal
or offer or inquiry or contact (including material amendments or proposed
material amendments). The Company shall, and shall direct or cause its and its
Subsidiaries' directors, officers, employees, representatives and agents to,
immediately cease and terminate any discussions or negotiations with any parties
that may have been conducted heretofore with respect to a Competing Transaction.
The Company shall not release any third party from, or waive any provision of,
any confidentiality or standstill agreement to which it is a party and the
Company also agrees to promptly request each person that has heretofore executed
a confidentiality agreement in connection with its consideration of acquiring
(whether by merger, acquisition of stock or assets or otherwise) the Company or
any Subsidiary, if any, to return (or if permitted by the applicable
confidentiality agreement, destroy) all confidential information heretofore
furnished to such person by or on behalf of the Company or any Subsidiary and,
if requested by Parent, to use its reasonable best efforts to enforce such
person's obligation to do so. The Company shall not take any action to make the
provisions of Section 351.407, Section 351.015 or Section 351.459 of the MGBCL
and Article X of the Company's Articles of Incorporation inapplicable to any
transaction other the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, (x)
neither the Company nor the Company Board shall be prohibited from taking and
disclosing to its shareholders a position contemplated by Rule 14d-9 and Rule
14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act
(or any similar communication to shareholders in connection with the making or
amendment of a tender offer or exchange offer) or from making any disclosure
required under applicable Law or the rules of the Nasdaq National Market, and
(y) any "stop-look-and-listen" communication by the Company or the Company Board
to the shareholders of the Company pursuant to Rule 14d-9(f) promulgated under
the Exchange Act (or similar communication to the shareholders of the Company in
connection with the making or amendment of a tender offer or exchange offer
containing the substance of a "stop-look-and-listen" communication pursuant to
such Rule 14d-9(f)) shall not be considered a Change in the Company
Recommendation (as hereinafter defined) or an approval, recommendation or
proposal to approve or recommend any Competing Transaction.
(b) Notwithstanding anything to the contrary in this Section 7.04,
prior to obtaining the Requisite Shareholder Approval, in the event a person (a
"Third Party") makes an unsolicited, written, bona fide proposal or offer
regarding a Competing Transaction, (A) the Company and its Subsidiaries,
directors, officers, employees, agents, advisors and other representatives
(including, without limitation, any investment broker, attorney or accountant
retained by the Company or any Subsidiary) may furnish information to such Third
Party (it being understood that any such information furnished to a Third Party
not previously furnished to Parent shall be contemporaneously furnished to
Parent), and enter into and conduct discussions and negotiations with such Third
Party, regarding such proposal or offer, and (B) the Company may release the
Third Party from, or waive any provision of, any confidentiality or standstill
agreement to which it is a party to the extent reasonably necessary to permit
the Third Party to make and pursue the proposal or offer; provided, however,
that, prior to furnishing any
33
such information, conducting any such discussions and negotiations or releasing
or waiving any such provisions, the Company Board shall have (i) determined, in
its good faith judgment (after having received the advice of its financial
advisor and outside legal counsel (who may be the Company's regularly engaged
independent legal counsel)), that such proposal or offer constitutes or may be
reasonably expected to lead to a Superior Proposal, (ii) determined, in its good
faith judgment after consultation with independent legal counsel (that may be
the Company's regularly engaged independent legal counsel), that a failure to
furnish such information, enter into such discussions and negotiations or
release or waive such provisions would be inconsistent with its fiduciary duties
to the Company or its shareholders under applicable Law, (iii) provided prior
written notice to Parent of its intent to furnish information to, or enter into
discussions with, the Third Party, and (iv) obtained from the Third Party an
executed confidentiality agreement on terms no less favorable to the Company in
all material respects than those contained in the Confidentiality Agreement (it
being understood that such confidentiality agreement and any related agreements
shall not include any provision calling for any exclusive right to negotiate
with such party or having the effect of prohibiting the Company from satisfying
its obligations under this Agreement).
(c) Except as set forth in this Section 7.04(c), neither the Company
Board nor any committee thereof shall withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation by the Company Board or any such committee of this Agreement and
the Merger (a "Change in the Company Recommendation") or approve or recommend,
or cause or permit the Company to enter into any letter of intent, agreement or
obligation with respect to, any Competing Transaction. Notwithstanding the
foregoing or anything else to the contrary in this Section 7.04(c), prior to
obtaining the Requisite Shareholder Approval, if the Company Board has
determined, in its good faith judgment (after having received the advice of its
financial advisor and outside legal counsel (who may be the Company's regularly
engaged independent legal counsel)), that an unsolicited, written, bona fide
offer from a Third Party constitutes a Superior Proposal, then the Company may
terminate this Agreement pursuant to Section 9.01(h) and enter into a definitive
agreement with respect to such Superior Proposal; provided, however, that, (x)
prior to taking any such action contemplated by this Section 7.04(c), the
Company Board shall have determined in its good faith judgment after
consultation with independent legal counsel (who may be the Company's regularly
engaged independent legal counsel), that a failure to take any such action would
be inconsistent with its fiduciary duties to the Company or its shareholders
under applicable Law; (y) prior to entering into a definitive agreement for such
a Superior Proposal (excluding a confidentiality agreement of the type
referenced in Section 7.04(b)), the Company notifies Parent, in writing at least
three business days prior to doing so, of its intention to enter into such
definitive agreement, specifying the material terms of such proposed definitive
agreement and identifying the person making such Superior Proposal, and Parent
does not make, within three business days of receipt of such written
notification, an offer that the Company Board determines in good faith (after
having received the advice of its financial advisor and outside legal counsel
(who may be the Company's regularly engaged independent legal counsel)) is at
least as favorable from a financial point of view to the shareholders of the
Company as such Superior Proposal, it being understood that the Company shall
not enter into any definitive agreement with respect to such Superior Proposal
prior to the expiration of such three business day period; and (z) the Company
shall pay the Fee required under Section 9.03(a)(ii) of this Agreement to Parent
simultaneously with any termination of this Agreement in accordance with
34
the terms of this Section 7.04(c). In addition, notwithstanding the foregoing or
anything else to the contrary in this Section 7.04, the Company Board may make a
Change in the Company Recommendation if it determines, in its good faith
judgment after consultation with independent legal counsel (who may be the
Company's regularly engaged independent legal counsel), that to do otherwise
would be inconsistent with its fiduciary duties to the Company or its
shareholders under applicable Law.
SECTION 7.05 Employee Benefits Matters. (a) For a period of one year
from and after the Effective Time, Parent shall cause the Surviving Corporation
and its subsidiaries to honor in accordance with their terms (without amendment
or modification in a manner adverse to the participants therein) all contracts,
agreements, arrangements, policies, plans and commitments of the Company and the
Subsidiaries as in effect immediately prior to the Effective Time that are
applicable to any current or former employees or directors of the Company or any
Subsidiary; provided, however, that Parent and the Surviving Corporation shall
not be required to provide an employer stock fund in any defined contribution
plan, or to make any matching or other contributions to such plans in stock;
provided, further, that after the first anniversary of the Effective Time,
Parent and the Surviving Corporation or any of Parent's subsidiaries shall not
be prohibited from amending, modifying or terminating any such contracts,
agreements, arrangements, policies, plans and commitments in accordance with
their terms. Employees of the Company or any Subsidiary (the "Company
Employees") shall receive credit for service accrued prior to the Effective Time
with the Company or any Subsidiary ("Pre-Closing Service") for purposes of
eligibility to participate and vesting (but not for benefit accruals) under any
employee benefit plan, program or arrangement established or maintained by
Parent or any of its subsidiaries (including the Surviving Corporation) that is
extended to the Company Employees; provided, however, that such crediting of
service shall not operate to duplicate any benefit or the funding of any such
benefit. In addition, Parent and the Surviving Corporation shall waive, or cause
to be waived, any limitations on benefits relating to any pre-existing
conditions to the same extent such limitations are waived under any comparable
plan of Parent or its subsidiaries and recognize, for purposes of annual
deductible, co-payment and out-of-pocket limits under its medical and dental
plans, deductible, co-payment and out-of-pocket expenses paid by employees of
the Company and its Subsidiaries in the respective plan year in which the
Effective Time occurs; and provided, further, however, that (i) all Pre-Closing
Service shall be counted for purposes of determining the level of benefits under
any vacation or severance plan following the Effective Time established or
maintained by Parent or any of its subsidiaries (including the Surviving
Corporation) that is extended to Company Employees and (ii) following the
Effective Time, all employees of the Company and the Subsidiaries shall be
entitled to all unused vacation time accrued as of the Effective Time.
Notwithstanding any of the foregoing to the contrary, during the one-year period
following the Effective Time, Parent may cause the Surviving Corporation and the
other subsidiaries of Parent to provide to certain employees of the Company and
the Subsidiaries all employee benefit plans, programs or arrangements of Parent
or any of its subsidiaries available to similarly situated employees of Parent
and its subsidiaries; provided that the employees of the Company and the
Subsidiaries receive benefits under such employee benefit plans, programs or
arrangements that are not less favorable than the benefits provided to similarly
situated employees of Parent and its subsidiaries, in lieu of the employee
benefit plans, programs or arrangements of the Company and the Surviving
Corporation.
35
(b) Section 7.05 of the Disclosure Schedule sets forth, with respect
to certain executive officers of the Company, the cash severance payment that
would be due to such executive officer under such person's employment agreement
with the Company upon the termination of such person's employment with the
Company after a Change of Control (as defined therein). At the Effective Time,
without limiting the rights of such executive officer under such person's
agreements with the Company, the Surviving Corporation will pay to such
executive officer, pursuant to the employment agreement between the Company and
such executive officer, the amount of the cash severance payment set forth
opposite such person's name in Section 7.05 of the Disclosure Schedule.
SECTION 7.06 Directors' and Officers' Indemnification and Insurance.
(a) The Articles of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than those
set forth in the Company's Articles of Incorporation and Bylaws, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would affect adversely the
rights thereunder of individuals who, at or prior to the Effective Time, were
directors, officers, employees, fiduciaries or agents of the Company, unless
such modification shall be required by Law.
(b) Parent shall maintain in effect for six years from the Effective
Time directors' and officers' liability insurance covering those persons who are
currently covered on the date of this Agreement by the current directors' and
officers' liability insurance policies maintained by the Company (provided that
Parent may substitute therefor policies of at least the same coverage containing
terms and conditions that are not, in the aggregate, less favorable to any
beneficiary thereof) with respect to matters existing or occurring prior to the
Effective Time; provided, however, that in no event shall Parent be required to
expend pursuant to this Section 7.06(b) more than an amount equal to 300% of
current annual premiums paid by the Company for such insurance; provided
further, however, that, if the amount of premium necessary to maintain or
procure such insurance coverage exceeds such maximum amount, Parent shall
maintain or procure, for such six-year period, the most advantageous policies of
directors' and officers' insurance obtainable for a premium equal to that
maximum amount. Nothing contained in this Section 7.06(b) or otherwise in this
Agreement is intended to or shall relieve any of the Company's existing
insurance carriers from any obligations that such carriers now have or may in
the future have relating to the Company, its Subsidiaries and any of their
respective officers and directors.
(c) In addition to the other rights provided for in this Section 7.06
and not in limitation thereof (but without in any way limiting or modifying the
obligations of any insurance carrier contemplated by Section 7.06(b) of this
Agreement), for six years from and after the Effective Time, Parent shall, to
the fullest extent permitted by the MGBCL as of the date hereof (assuming the
MGBCL were applicable), indemnify and hold harmless (and release from any
liability to the Surviving Corporation or any of their respective subsidiaries)
the persons who, at or prior to the Effective Time, were officers or directors
of the Company or any Subsidiary or served at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (the "Indemnitees") against all expenses
(including reimbursement for reasonable fees and expenses incurred in advance of
the final disposition of any action, suit or proceeding), losses, claims,
damages, judgments, fines and
36
amounts paid in settlement that are actually and reasonably incurred by the
Indemnitee in connection with any threatened, pending or completed action, suit
or proceeding, whether criminal, civil, administrative or investigative, that
related to an event, act or omission which occurred prior to the Effective Time
by reason of the fact that such person was at or prior to the Effective Time a
director or officer of the Company or any of its current or former Subsidiaries
(collectively, an "Indemnifiable Claim"). In the event any Indemnifiable Claim
is asserted or made within such six-year period, all rights to indemnification
shall continue until such claim is disposed of or all judgments, orders, decrees
or other rulings in connection with such claim are fully satisfied.
(d) In addition to the other rights provided for in this Section 7.06,
and not in limitation thereof, the Surviving Corporation, Parent and the Company
agree that all individual indemnity agreements between the Company and any
Indemnitees, as in effect on the date hereof, set forth in Section 4.18 or
Section 4.20 of the Disclosure Schedule, copies of which have been provided to
Parent prior to the date hereof, shall survive the Effective Time and continue
in full force and effect in accordance with their terms.
(e) The provisions of this Section 7.06 will survive the Effective
Time and are intended for the benefit of, and will be enforceable by, each
Indemnitee and his or her heirs and representatives. Parent will pay or cause to
be paid all expenses, including reasonable fees and expenses of legal counsel,
that an Indemnitee may incur in enforcing the indemnity and other obligations
provided for in this Section 7.06 (subject to reimbursement if the Indemnitee is
subsequently determined not to be entitled to indemnification under Section
7.06).
(f) In the event Parent 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 Parent shall assume the obligations set forth in this
Section 7.06.
SECTION 7.07 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which reasonably could be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, (b) any failure of the Company, Parent or
Purchaser, as the case may be, to comply with or satisfy any covenant or
agreement to be complied with or satisfied by it hereunder and (c) any other
material development relating to the Company or the Subsidiaries; provided,
however, that the delivery of any notice pursuant to this Section 7.07 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice; provided further, however, that a failure to comply with
this Section 7.07 will not constitute the failure of any condition set forth in
Article VIII or Article IX to be satisfied unless the underlying event would
independently result in the failure of a condition set forth in Article VIII or
Article IX to be satisfied.
SECTION 7.08 Further Action; Reasonable Efforts. (a) Upon the terms
and subject to the conditions of this Agreement (i) each of the parties hereto
shall make promptly its respective filings, and thereafter make any other
required submissions, under the HSR Act with
37
respect to the Merger and (ii) each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable Laws to consummate and make effective the Merger as
promptly as practicable, including, without limitation, using its reasonable
best efforts to obtain all Permits, consents, approvals, authorizations,
qualifications and Orders of Governmental Authorities as are necessary for the
consummation of the Merger.
(b) Without limiting the generality of the foregoing, each of the
Company and Parent shall, in no event later than ten business days following the
date hereof, file with the United States Federal Trade Commission (the "FTC")
and the United States Department of Justice (the "DOJ") the notification and
report form ("HSR Filing") pursuant to the HSR Act, required for the
transactions contemplated hereby. Each party's HSR Filing shall comply in all
material respects with the requirements of the HSR Act, and the Company and
Parent shall request early termination of the waiting period required by the HSR
Act. Each of the Company and Parent shall, as promptly as practicable, provide
to the FTC, DOJ and each and every federal, state, local or foreign governmental
entity with jurisdiction over enforcement of any applicable antitrust or
competition laws all non-privileged information and documents requested by such
Governmental Authority or that is reasonably necessary or advisable to permit
consummation of the transactions. Subject to applicable Law, each of the Company
and Parent shall inform the other promptly of any communication made by or on
behalf of such party to (including permitting the other party to review such
communication in advance), or received from, any Governmental Authority relating
to this Agreement or the transactions contemplated hereby and shall furnish to
the other such information and assistance as the other may reasonably request in
connection with its preparation of any filing, submission or other act that is
necessary or advisable to permit consummation of the transactions under
applicable Law. Subject to applicable Law, each party shall furnish the other
party with copies of all substantive or otherwise material correspondence,
filings, and written communications between such party and its affiliates and
their respective representatives on the one hand, and any Governmental Authority
on the other hand, with respect to this Agreement and the transactions
contemplated hereby. Neither the Company nor Parent or Purchaser shall agree to
participate in any meeting with any Governmental Authority in respect of any
filings, investigation or other inquiry relating to this Agreement or the
transactions contemplated hereby unless it consults with the other party in
advance, and to the extent permitted by such Governmental Authority, gives the
other party the opportunity to attend and participate thereat. The Company and
Parent shall keep each other timely apprised of the status of any communications
with, and any inquiries or requests for additional information from, any
Governmental Authority relating to this Agreement or the transactions
contemplated hereby.
(c) Parent agrees to use its reasonable best efforts to avoid, resolve
or eliminate each and every objection raised by the FTC, DOJ or any state
antitrust Governmental Authority to the Merger asserted, or suit challenging the
Merger instituted, or other impediment to the Merger under any antitrust or
competition Law, so as to enable the parties to consummate the Merger as
promptly as practicable. For purposes of this Section 7.08, "reasonable best
efforts" shall include Parent committing to and effecting as promptly as
practicable, by consent decree, hold separate orders, or otherwise, the sale,
divestiture or disposition of such of its and its affiliates' assets or
operations, and/or of the assets or operations to be acquired by it pursuant to
the Merger, as is required to be sold, divested or disposed of, including
entering into any
38
agreements required to be entered into by any Governmental Authority in
connection therewith, in order to obtain any required regulatory approval or to
avoid the commencement of any suit or proceeding seeking, and/or to avoid entry
of, and/or to effect the dissolution of, any decree, Order, judgment,
injunction, temporary restraining order or other Order that would have the
effect of materially delaying or prohibiting the consummation of the Merger;
provided that, anything herein to the contrary notwithstanding, in no event
shall Parent be required to hold separate, sell, divest or dispose of any assets
or operations owned by Parent or its affiliates or by the Company or its
affiliates, which individually or collectively produced aggregate revenues in
calendar year 2004 in excess of the Specified Amount or hold separate, sell,
divest or dispose of any full service laboratory.
(d) Without limiting the Company's rights under Section 7.04, neither
party shall or shall permit its subsidiaries to consummate another transaction
or enter into an agreement with respect to another transaction or take any other
action if the intent or reasonably likely anticipated consequence of such
transaction or action is, or would be, to cause any Governmental Authority to
delay or not grant approval of, or to take legal action to seek to prevent, the
consummation, in whole or in part, of the transactions contemplated by this
Agreement.
(e) Parent's and the Company's obligations under this Section 7.08
shall include the obligation to use their respective reasonable best efforts to
defend any lawsuits or other legal proceedings, whether judicial or
administrative, challenging the consummation of the Merger or the other
transactions contemplated hereby, including using their respective reasonable
best efforts to seek to have any stay or other injunctive relief which would
prohibit or materially delay or impair the consummation of the transactions
contemplated by this Agreement entered by any court or other Governmental
Authority reversed on appeal or vacated.
(f) Each of the parties shall use its reasonable best efforts to take,
or cause to be taken, all appropriate action, and to do, or cause to be done,
all things reasonably necessary, proper or advisable to obtain all consents or
approvals required from third parties other than Governmental Authorities in
order to consummate the transactions contemplated hereby as promptly as
practicable.
SECTION 7.09 Obligations of Purchaser. Parent shall take all action
necessary to cause Purchaser to perform its obligations under this Agreement and
to consummate the Merger on the terms and subject to the conditions set forth in
this Agreement. Parent unconditionally guarantees the full and complete
performance by Purchaser or the Surviving Corporation, as applicable, of its
respective obligations under this Agreement and shall be jointly and severally
liable with Purchaser for any breach of any covenant or obligation of Purchaser
or the Surviving Corporation, as applicable, under this Agreement.
SECTION 7.10 Public Announcements. The initial press release relating
to this Agreement shall be a joint press release the text of which has been
agreed to by each of Parent and the Company. Thereafter, unless otherwise
required by applicable Law or the requirements of the New York Stock Exchange or
the NASDAQ National Market, each of Parent and the Company shall use its
reasonable best efforts to consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the Merger;
39
provided, however, that this Section 7.10 shall terminate in the event the
Company Board shall have effected a Change in the Company Recommendation.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Parent, Purchaser and
the Company. The obligations of Parent, Purchaser and the Company to consummate
the Merger shall be subject to the satisfaction, at or prior to the Effective
Time, of the following conditions:
(a) Shareholder Approval. This Agreement shall have been approved by
the requisite affirmative vote of the shareholders of the Company in
accordance with the MGBCL and the Company's Articles of Incorporation.
(b) Antitrust Waiting Period. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated.
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law or Order that is then in effect
and has the effect of making consummation of the Merger illegal or
otherwise prohibiting consummation of the Merger.
SECTION 8.02 Conditions to the Obligations of the Company. The
obligations of the Company to effect the Merger shall be subject to the
satisfaction or written waiver, at or prior to the Effective Time, of the
following conditions:
Representations and Warranties. (i) (x) Each of the representations
and warranties of Parent and Purchaser contained in this Agreement that is
not qualified as to "materiality" (other than the representation and
warranty contained in Section 5.05 of this Agreement) shall be true and
correct in all material respects as of the date of this Agreement and as
of the Effective Time, except to the extent that such representations and
warranties are made as of another date, in which case such representations
and warranties shall be true and correct in all material respects as of
such other date; and (y) each of the representations and warranties of
Parent and Purchaser that is qualified as to "materiality" shall be true
and correct in all respects as of the date of this Agreement and as of the
Effective Time, except to the extent such representations and warranties
are made as of another date, in which case such representations and
warranties shall be true and correct as of such other date, except in the
case of either (x) or (y), where any failure of such representations and
warranties to be true and correct would not, individually or in the
aggregate, prohibit or materially delay consummation of the Merger or
otherwise prevent Parent or Purchaser from performing their obligations
under this Agreement; (ii) the representation and warranty contained in
Section 5.05 of this Agreement shall be true and correct as of the
Effective Time; (iii) the covenants and agreements contained in this
Agreement to be complied with by Parent and Purchaser on or before the
Effective Time shall have been complied with in all material respects; and
(iv) the Company shall have
40
received a certificate from a duly authorized officer of Parent and
Purchaser to the foregoing effect.
SECTION 8.03 Conditions to the Obligations of Parent and Purchaser.
The obligations of Parent and Purchaser to effect the Merger shall be subject to
the satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties. (i) (x) Each of the
representations and warranties of the Company contained in this Agreement
that is qualified by reference to "materiality" or Material Adverse Effect
shall be true and correct as of the date of this Agreement and as of the
Effective Time, except to the extent such representations and warranties
are made as of another date, in which case such representations and
warranties shall be so true and correct as of such other date; and (y) each
of the representations and warranties of the Company that is not qualified
by reference to "materiality" or Material Adverse Effect shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time, except, to the extent such representations and
warranties are made as of another date, in which case such representations
and warranties shall be so true and correct as of such other date, except
in the case of either (x) or (y) where any failure of such representations
and warranties to be true and correct either individually or in the
aggregate would not have a Material Adverse Effect; (ii) the covenants and
agreements contained in this Agreement to be complied with by the Company
on or before the Effective Time shall have been complied with in all
material respects; and (iii) Parent shall have received a certificate from
a duly authorized officer of the Company to the foregoing effect.
(b) Dissent Shares. A demand for fair value of the Shares under
Section 351.455 of the MGBCL shall not have been perfected, asserted or
demanded with respect to more than 10% of the aggregate number of Shares.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time:
(a) By mutual written consent of each of Parent and the Company;
(b) By either Parent or the Company if the Effective Time shall not
have occurred on or before April 7, 2006 (the "Outside Date"); provided
that such date may be extended until August 8, 2006 by either Parent or the
Company if all of the conditions to Closing set forth in Article VIII
(other than conditions with respect to actions the respective parties will
take at the Closing itself) have been satisfied as of the Outside Date,
except that (1) all applicable waiting periods under the HSR Act have not
expired or been terminated or (2) an Order (whether preliminary or
permanent) has been entered by a Governmental Authority which had the
effect of enjoining the consummation of the Merger (other than a final and
nonappealable Order); provided that the right to extend the Outside Date or
terminate this Agreement under this Section 9.01(b) shall not be
41
available to (A) Parent if its failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date or (B) the Company if the
failure of the Company to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date;
(c) By either Parent or the Company if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any Law or
Order prohibiting consummation of the Merger, and such Order shall have
become final and nonappealable;
(d) By Parent, in the event of a breach by the Company of any
representation, warranty or covenant that would cause any condition
contained in Section 8.03(a) not to be satisfied, which breach, if capable
of cure, shall not have been cured within ten business days of receipt by
the Company of written notice from Parent specifying such breach;
(e) By the Company, in the event of a breach by Parent or Purchaser of
any representation, warranty or covenant that would cause any condition
contained in Section 8.02 not to be satisfied, which breach, if capable of
cure, shall not have been cured within ten business days of receipt by
Parent or Purchaser, as applicable, of written notice from the Company
specifying such breach;
(f) Subject to clause (y) of the last sentence of Section 7.04(a) of
this Agreement, by Parent if, at any time prior to the date of the Company
Shareholders Meeting, the Company Board shall have (i) effected a Change in
the Company Recommendation or (ii) approved or recommended, or proposed to
approve or recommend, any Competing Transaction;
(g) By the Company or Parent if, upon a vote taken thereon at the
Company Shareholders Meeting or any postponement or adjournment thereof,
the Requisite Shareholder Approval is not obtained; or
(h) By the Company, at any time prior to obtaining the Requisite
Shareholder Approval of this Agreement, in accordance with Section 7.04(c)
in order to enter into a definitive agreement with respect to a Superior
Proposal.
SECTION 9.02 Effect of Termination. In the event of the termination of
this Agreement by either Parent or the Company pursuant to Section 9.01, this
Agreement shall forthwith become void, and there shall be no liability on the
part of any party hereto or their respective officers, directors, employees,
agents, advisors or other representatives, except that (a) Section 7.03(b), this
Section 9.02, Section 9.03 and Article X shall survive termination and (b)
nothing herein shall relieve any party from liability or damages arising out of
any intentional or willful breach of any covenant in this Agreement prior to
such termination.
SECTION 9.03 Fees and Expenses. (a) In the event that:
(i) this Agreement shall be terminated by Parent pursuant to clause
(i) of Section 9.01(f), or any person (including, without limitation, the
Company or any affiliate
42
thereof) pursuant to Section 9.01(g), and (A) in the case of termination
pursuant to Section 9.01(g), prior to the vote by the Company's
shareholders on this Agreement, a Competing Transaction shall have been
publicly announced and not withdrawn, or has otherwise become publicly
known after the date of this Agreement, and (B) in the case of termination
pursuant to either clause (i) of Section 9.01(f) or Section 9.01(g), the
Company enters into a definitive agreement, within 12 months after such
termination, relating to a Competing Transaction and such transaction is
thereafter consummated, the Company shall pay the Fee to Parent on the date
of completion of such transaction less any Expenses paid to Parent pursuant
to Section 9.03(b);
(ii) this Agreement is terminated pursuant to Section 9.01(h), the
Company shall pay the Fee to Parent on the date of such termination; or
(iii) this Agreement is terminated by Parent pursuant to clause (ii)
of Section 9.01(f), the Company shall pay the Fee to Parent within five
business days of the date of such termination.
(b) If this Agreement is terminated by Parent pursuant to Section
9.01(d) or 9.01(f)(i) of this Agreement, then the Company shall pay to Parent,
within five business days after receipt by the Company of reasonable
documentation with respect to such expenses, Expenses incurred by Parent through
the date of termination of this Agreement up to a maximum of $3,500,000.
(c) Except as set forth in this Section 9.03, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such costs and expenses,
whether or not the Merger is consummated.
(d) All amounts payable under this Section 9.03 shall be paid in
immediately available funds to an account specified by Parent.
(e) The Company acknowledges that the agreements contained in this
Section 9.03 are an integral part of the transactions contemplated by this
Agreement and that without these agreements Parent would not enter in this
Agreement. In the event that the Company shall fail to pay the Fee or Expenses,
such Fee or Expenses shall be deemed to include the costs and expenses actually
incurred or accrued by Parent or Purchaser (including, without limitation, fees
and expenses of counsel) in connection with the collection under and enforcement
of this Section 9.03, together with interest on such unpaid Fee or Expenses,
commencing on the date that such Fee or Expenses became due, at a rate equal to
the rate of interest publicly announced by Citibank, N.A. from time to time, in
the City of New York, as such bank's base rate. Payment of the fees and expenses
described in this Section 9.03 shall not be in lieu of any damages incurred in
the event of a willful breach or intentional breach of any covenant in this
Agreement prior to such termination.
SECTION 9.04 Amendment and Waiver. Except as may otherwise be provided
herein, any provision of this Agreement may be amended, modified or waived by
the parties hereto, by action taken by or authorized by their respective Board
of Directors, prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of
43
an amendment, by the Company and Parent or, in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
approval of this Agreement by the shareholders of the Company, no such amendment
shall be made except as allowed under applicable Law. Any waiver of any term
shall not be construed as a waiver of any subsequent breach or a subsequent
waiver of the same term or condition, or a waiver of any other term or condition
of this Agreement.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Non-Survival of Representations and Warranties. The
representations, warranties, covenants and agreements contained in this
Agreement and in any certificate or instrument delivered pursuant hereto shall
terminate at the Effective Time or upon the termination of this Agreement,
except for Section 7.06 and those other covenants or obligations that by their
terms apply or are to be performed in whole or in part after the Effective Time.
SECTION 10.02 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
overnight courier, by facsimile or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.02):
if to Parent or Purchaser:
Quest Diagnostics, Inc.
1290 Wall Street West
Lyndhurst, New Jersey 07071
Facsimile No: (201) 559-2255
Attention: General Counsel
with a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
Facsimile No: (212) 848-7179
Attention:Clare O'Brien, Esq.
Stephen Besen, Esq.
if to the Company:
LabOne, Inc.
10101 Renner Boulevard
Lenexa, Kansas 66219
Facsimile No: 913 859-6832
Attn: General Counsel
44
with a copy to:
Stinson Morrison Hecker LLP
1201 Walnut, Suite 2800
Kansas City, Missouri 64106
Facsimile No: (816) 691-3495
Attn: John A. Granda, Esq.
with an additional copy to:
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, New York 10004
Facsimile No: (212) 859-4000
Attn: Jeffrey Bagner, Esq.
SECTION 10.03 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
SECTION 10.04 Entire Agreement; Assignment. This Agreement and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. This Agreement shall not be assigned by
any party hereto, except that Parent and Purchaser may assign all or any of
their rights and obligations hereunder to any affiliate of Parent (who in the
case of Purchaser is a corporation incorporated under Chapter 351 of the MGBCL),
provided that no such assignment shall relieve the assigning party of its
obligations hereunder if such assignee does not perform such obligations.
SECTION 10.05 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, expressed or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 7.06 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 10.06 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to seek specific performance of the terms hereof, in addition to any
other remedy at Law or equity.
45
SECTION 10.07 Governing Law; Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the Laws of the State of New York
applicable to contracts executed in and to be performed in that State (other
than those provisions set forth herein that are required to be governed by the
MGBCL). All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined exclusively in a federal court sitting in the
State of Delaware. The parties hereto hereby (a) submit to the exclusive
jurisdiction of any federal court sitting in the State of Delaware for the
purpose of any Action arising out of or relating to this Agreement brought by
any party hereto, and (b) irrevocably waive, and agree not to assert by way of
motion, defense, or otherwise, in any such Action, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the Action is
brought in an inconvenient forum, that the venue of the Action is improper, or
that this Agreement or the Merger may not be enforced in or by any of the
above-named courts.
SECTION 10.08 Waiver of Jury Trial. Each of the parties hereto hereby
waives to the fullest extent permitted by applicable Law any right it may have
to a trial by jury with respect to any litigation directly or indirectly arising
out of, under or in connection with this Agreement or the Merger. Each of the
parties hereto (a) certifies that no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce that foregoing waiver and (b)
acknowledges that it and the other hereto have been induced to enter into this
Agreement and the Merger, as applicable, by, among other things, the mutual
waivers and certifications in this Section 10.08.
SECTION 10.09 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.10 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
46
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused
this Agreement to be executed as of the date first written above.
QUEST DIAGNOSTICS INCORPORATED
By /s/ Surya N. Mohaparta, Ph. D.
--------------------------------
Name: Surya N. Mohapatra, Ph. D.
Title: Chairman, President and
Chief Executive Officer
FOUNTAIN, INC.
By /s/ Surya N. Mohaparta, Ph. D.
--------------------------------
Name: Surya N. Mohapatra, Ph. D.
Title: President
LABONE, INC.
By /s/ W. Thomas Grant, II
--------------------------------
Name: W. Thomas Grant, II
Title: Chairman and Chief Executive Officer