Agreement and Plan of Merger among Walgreen co., Bison Acquisition Sub. Inc. and option care, inc. Dated as of July 2, 2007
Exhibit 2.1
EXECUTION COPY
among
Walgreen co.,
Bison Acquisition Sub. Inc.
and
option care, inc.
Dated as of July 2, 2007
Table of Contents
Page | ||||||||
ARTICLE I | THE OFFER AND THE MERGER | 2 | ||||||
1.1 | The Offer | 2 | ||||||
1.2 | The Merger | 7 | ||||||
ARTICLE II | CONVERSION OF SECURITIES | 8 | ||||||
2.1 | Conversion of Capital Stock | 8 | ||||||
2.2 | Exchange of Certificates | 9 | ||||||
2.3 | Company Stock Plans | 11 | ||||||
2.4 | Dissenting Shares | 12 | ||||||
2.5 | Short-Form Merger | 12 | ||||||
ARTICLE III | REPRESENTATIONS AND WARRANTIES OF THE COMPANY | 12 | ||||||
3.1 | Organization, Standing and Power | 13 | ||||||
3.2 | Capitalization | 14 | ||||||
3.3 | Subsidiaries | 16 | ||||||
3.4 | Authority; No Conflict; Required Filings and Consents | 17 | ||||||
3.5 | SEC Filings; Financial Statements; Information Provided | 19 | ||||||
3.6 | No Undisclosed Liabilities | 20 | ||||||
3.7 | Absence of Certain Changes or Events | 20 | ||||||
3.8 | Taxes | 21 | ||||||
3.9 | Real Property | 22 | ||||||
3.10 | Intellectual Property | 23 | ||||||
3.11 | Contracts | 24 | ||||||
3.12 | Litigation; Investigations | 26 | ||||||
3.13 | Environmental Matters | 26 | ||||||
3.14 | Employee Benefit Plans | 27 | ||||||
3.15 | Compliance with Laws | 30 | ||||||
3.16 | Permits | 30 | ||||||
3.17 | Labor Matters | 31 | ||||||
3.18 | Insurance | 31 | ||||||
3.19 | Opinion of Financial Advisor | 31 | ||||||
3.20 | Brokers | 32 | ||||||
3.21 | Compliance with Laws; Payment Programs | 32 | ||||||
3.22 | Controlled Substances | 34 | ||||||
3.23 | Inventories; Suppliers | 34 | ||||||
3.24 | Absence of Certain Business Practices | 34 | ||||||
3.25 | Franchise Matters | 35 | ||||||
ARTICLE IV | REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE ACQUISITION SUB | 37 | ||||||
4.1 | Organization, Standing and Power | 37 | ||||||
4.2 | Authority; No Conflict; Required Filings and Consents | 38 |
i
Page | ||||||||
4.3 | Schedule TO; Information Provided | 39 | ||||||
4.4 | No Undisclosed Liabilities | 39 | ||||||
4.5 | Litigation | 39 | ||||||
4.6 | Operations of Acquisition Sub | 39 | ||||||
4.7 | Financing | 39 | ||||||
4.8 | Ownership of Company Common Stock | 40 | ||||||
ARTICLE V | CONDUCT OF BUSINESS | 40 | ||||||
5.1 | Covenants of the Company | 40 | ||||||
5.2 | Confidentiality | 43 | ||||||
ARTICLE VI | ADDITIONAL AGREEMENTS | 43 | ||||||
6.1 | No Solicitation | 43 | ||||||
6.2 | Company Stockholder Approval; Proxy Statement | 47 | ||||||
6.3 | Access to Information | 48 | ||||||
6.4 | Reasonable Best Efforts | 48 | ||||||
6.5 | Public Disclosure | 50 | ||||||
6.6 | Indemnification | 51 | ||||||
6.7 | Notification of Certain Matters | 52 | ||||||
6.8 | Employee Benefits and Service Credit | 52 | ||||||
6.9 | Approval of Compensation Arrangements | 54 | ||||||
6.10 | Takeover Statute | 54 | ||||||
6.11 | Stockholder Litigation | 54 | ||||||
6.12 | Alteration of Transaction Structure | 54 | ||||||
ARTICLE VII | CONDITIONS TO MERGER | 55 | ||||||
7.1 | Conditions to Each Party’s Obligations to Effect the Merger | 55 | ||||||
ARTICLE VIII | TERMINATION AND AMENDMENT | 55 | ||||||
8.1 | Termination | 55 | ||||||
8.2 | Effect of Termination | 57 | ||||||
8.3 | Fees and Expenses | 58 | ||||||
8.4 | Amendment | 60 | ||||||
8.5 | Extension; Waiver | 60 | ||||||
ARTICLE IX | MISCELLANEOUS | 60 | ||||||
9.1 | Nonsurvival of Representations, Warranties, Covenants and Agreements | 60 | ||||||
9.2 | Notices | 60 | ||||||
9.3 | Entire Agreement | 62 | ||||||
9.4 | No Third-Party Beneficiaries | 62 | ||||||
9.5 | Assignment | 62 | ||||||
9.6 | Severability | 62 | ||||||
9.7 | Counterparts and Signature | 63 | ||||||
9.8 | Interpretation | 63 | ||||||
9.9 | Headings | 63 | ||||||
9.10 | Governing Law | 63 | ||||||
9.11 | Remedies | 64 |
ii
Page | ||||||||
9.12 | Submission to Jurisdiction | 64 | ||||||
9.13 | Waiver of Jury Trial | 64 | ||||||
9.14 | Disclosure Letter | 64 | ||||||
9.15 | Company’s Knowledge | 64 | ||||||
9.16 | Obligation of the Buyer | 65 | ||||||
ANNEX I | CONDITIONS OF THE OFFER | I-1 |
iii
Table of Defined Terms
Terms | Section | |
Acceptance Date
|
1.1(d) | |
Acceptance Time
|
1.1(g)(i) | |
Acquisition Proposal
|
6.1(f) | |
Acquisition Sub
|
Preamble | |
Affiliate
|
3.2(c) | |
Affiliate Transaction
|
3.11(c) | |
Agreement
|
Preamble | |
Alternative Acquisition Agreement
|
6.1(a)(iv) | |
Antitrust Authorities
|
6.4(b)(iv) | |
Antitrust Laws
|
6.4(b)(i) | |
Antitrust Order
|
6.4(b)(ii) | |
Applicable Laws
|
3.21(a) | |
Arrangements
|
3.14(j) | |
Bankruptcy and Equity Exception
|
3.4(a) | |
Business Day
|
1.2(b) | |
Buyer
|
Preamble | |
Buyer Designees
|
1.1(g)(i) | |
Buyer Employee Plan
|
6.8(a) | |
Buyer Material Adverse Effect
|
4.1 | |
Buyer SEC Reports
|
4.4 | |
Cancelled Shares
|
2.1(b) | |
Certificate
|
2.2(b) | |
Certificate of Merger
|
1.2(a) | |
Change of Recommendation
|
6.1(b)(x) | |
Closing
|
1.2(b) | |
Closing Date
|
1.2(b) | |
Code
|
1.1(e) | |
Company
|
Preamble | |
Company Balance Sheet
|
3.5(b) | |
Company Board
|
Recitals | |
Company Common Stock
|
Recitals | |
Company Disclosure Letter
|
ARTICLE III | |
Company Employee Plans
|
3.14(a) | |
Company ESPP
|
2.3(d) | |
Company Intellectual Property
|
3.10(b)(i) | |
Company Leases
|
3.9(b) | |
Company Material Adverse Effect
|
3.1 | |
Company Material Contract
|
3.11(a) | |
Company Meeting
|
3.4(d) | |
Company Payment Programs
|
3.21(c) | |
Company Permits
|
3.16 | |
Company Preferred Stock
|
3.2(a) | |
Company SEC Reports
|
3.5(a) |
iv
Terms | Section | |
Company Stock Options
|
2.3(a) | |
Company Stock Plan
|
2.3(c) | |
Company Stockholders Meeting
|
6.2(a) | |
Company Voting Proposal
|
3.4(a) | |
Confidentiality Agreement
|
5.2 | |
Continuing Director
|
1.1(g)(ii)(D) | |
Continuing Employees
|
6.8(a) | |
Contracts
|
3.11(a) | |
Convertible Senior Notes
|
3.2(c) | |
Covered Securityholders
|
3.14(j) | |
Current D&O Insurance
|
6.6(c) | |
DGCL
|
Recitals | |
Dissenting Shares
|
2.4(a) | |
DOJ
|
6.4(b)(i) | |
Effective Time
|
1.2(a) | |
Employee Benefit Plan
|
3.14(a)(i) | |
Employment Agreement
|
3.14(a)(iv) | |
Environmental Law
|
3.13(b) | |
ERISA
|
3.14(a)(ii) | |
ERISA Affiliate
|
3.14(a)(iii) | |
Exchange Act
|
1.1(a) | |
Exchange Fund
|
2.2(a) | |
Expenses
|
8.3(c) | |
Expiration Date
|
1.1(b) | |
Final Offering Period
|
2.3(d) | |
Franchise Agreement
|
3.25(a) | |
FTC
|
6.4(b)(i) | |
GAAP
|
3.5(b)(ii) | |
Governmental Entity
|
3.4(c) | |
Governmental Programs
|
3.21(a) | |
Hazardous Substance
|
3.13(c) | |
HSR Act
|
3.4(c) | |
Indemnified Parties
|
6.6(a) | |
Intellectual Property
|
3.10(a) | |
Interim Period
|
5.1 | |
IRS
|
3.8(b) | |
Knowledge
|
9.15 | |
Law
|
3.4(b) | |
Leased Real Property
|
3.9(b) | |
Letter of Transmittal
|
1.1(c) | |
Lien
|
3.4(b) | |
Lien Instrument
|
3.4(b) | |
Material Employment Agreement
|
3.14(a)(v) | |
Material Leases
|
3.9(b) | |
Material Supplier
|
3.23 | |
Maximum Premium
|
6.6(c) |
v
Terms | Section | |
Merger
|
Recitals | |
Merger Consideration
|
2.1(c) | |
Minimum Condition
|
Annex I | |
Notice Period
|
6.1(b)(i) | |
Offer
|
Recitals | |
Offer Consideration
|
1.1(a) | |
Offer Documents
|
1.1(c) | |
Offer to Purchase
|
Article I | |
One Step Merger
|
6.12 | |
Ordinary Course of Business
|
3.7 | |
Outside Date
|
8.1(b) | |
Paying Agent
|
2.2(a) | |
Person
|
2.2(b) | |
Private Programs
|
3.21(c) | |
Proxy Statement
|
3.5(c) | |
Qualifying Transaction
|
8.3(b) | |
Recommendation
|
1.1(f)(i)(3) | |
Reporting Tail Endorsement
|
6.6(c) | |
Representatives
|
6.1(a) | |
Required Company Stockholder Vote
|
3.4(d) | |
Xxxxxxxx-Xxxxx Act
|
3.5(a)(i) | |
Schedule 14D-9
|
1.1(f)(ii) | |
Schedule TO
|
1.1(c) | |
SEC
|
1.1(b)(ii) | |
Second Request
|
6.4(b)(i) | |
Securities Act
|
3.2(c) | |
Shares
|
Recitals | |
Significant Required Governmental Approval
|
Annex I(2) | |
Specified Time
|
6.1(a) | |
Subsidiary
|
3.3(a) | |
Superior Proposal
|
6.1(f) | |
Support Agreements
|
Recitals | |
Surviving Corporation
|
1.2(a) | |
Surviving Corporation Stock
|
2.1(a) | |
Takeover Laws
|
1.1(f)(i)(5) | |
Tax
|
3.8(a)(y) | |
Tax Returns
|
3.8(a)(z) | |
Taxes
|
3.8(a)(y) | |
Termination Fee
|
8.3(b) | |
Territorial Rights
|
3.25(c) | |
Third-Party Intellectual Property
|
3.10(b) | |
Transaction Alteration Notice
|
6.12 | |
UBS
|
3.19 |
vi
This Agreement and Plan of Merger (this “Agreement”) is dated as of July 2, 2007,
among Walgreen Co., an Illinois corporation (the “Buyer”), Bison Acquisition Sub Inc., a
Delaware corporation and a wholly owned subsidiary of the Buyer (“Acquisition Sub”), and
Option Care, Inc., a Delaware corporation (the “Company”).
Recitals
WHEREAS, the respective Boards of Directors of the Buyer, the Acquisition Sub and the Company
have unanimously approved the acquisition of the Company on the terms and subject to the conditions
set forth in this Agreement.
WHEREAS, in furtherance of such acquisition, the Acquisition Sub will make a cash tender offer
(as it may be amended from time to time as permitted under this Agreement, the “Offer”) to
purchase all of the issued and outstanding shares of common stock, par value $0.01 per share of the
Company (the “Company Common Stock” or the “Shares”), at a price of $19.50 per
Share, net to the sellers in cash, without interest thereon, on the terms and subject to the
conditions set forth in this Agreement.
WHEREAS, to effectuate the acquisition of the Company, following consummation of the Offer, on
the terms and subject to the conditions set forth in this Agreement, the Acquisition Sub will be
merged with and into the Company, with the Company continuing as the surviving corporation in such
merger (the “Merger”).
WHEREAS, the current Board of Directors of the Company as of the date hereof (the “Company
Board”) has (i) determined that the Offer, the Merger and the other transactions contemplated
by this Agreement are fair to, and in the best interest of, the Company and its stockholders; (ii)
approved this Agreement and the transactions contemplated hereby, including the Offer and the
Merger, in accordance with the General Corporation Law of the State of Delaware (the
“DGCL”); (iii) declared the advisability of this Agreement; and (iv) resolved to recommend
that the holders of the Shares tender their Shares in the Offer and adopt this Agreement.
WHEREAS, simultaneously with the execution of this Agreement and in furtherance of the
transactions contemplated hereby, certain stockholders of the Company are entering into support
agreements (the “Support Agreements”) with the Buyer and the Acquisition Sub providing that
such stockholders shall, among other things, tender their Shares in the Offer and otherwise support
the Offer, the Merger and the other transactions contemplated hereby, on the terms and subject to
the conditions set forth in the Support Agreements.
WHEREAS, Buyer, Acquisition Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Offer and the Merger and to prescribe
certain conditions to the Offer and the Merger.
NOW THEREFORE, in consideration of the premises, and the representations, warranties,
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the Buyer, the Acquisition Sub and the Company agree as follows:
ARTICLE I
THE OFFER AND THE MERGER
1.1 The Offer.
(a) Commencement of the Offer; Acceptance of Shares. On the terms and subject to the
conditions set forth in this Agreement, as soon as practicable (and in any event within ten (10)
Business Days) after the date of this Agreement, the Buyer shall cause the Acquisition Sub to
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
(and including the rules and regulations promulgated thereunder, the “Exchange Act”)) the
Offer to purchase any and all outstanding Shares at a price of $19.50 per Share, net to the sellers
in cash, without interest thereon (the “Offer Consideration”). On the terms and subject to
the prior satisfaction or waiver of the conditions of the Offer, the Acquisition Sub shall (and the
Buyer shall cause the Acquisition Sub to) (i) accept for payment, at the earliest date permitted
under applicable Law following the satisfaction or waiver of the conditions in Annex I, all
Shares validly tendered and not properly withdrawn pursuant to the Offer and (ii) pay for all such
Shares promptly after acceptance. The obligation of the Buyer and the Acquisition Sub to accept
for payment and pay for Shares validly tendered in the Offer and not properly withdrawn shall be
subject only to the conditions set forth in Annex I and to no other conditions.
(b) Expiration Date; Extensions and Amendments; Subsequent Offering Period. The
initial expiration date of the Offer shall be the twentieth (20th) Business Day after commencement
of the Offer (determined in accordance with Rule 14d-1(g)(3) under the Exchange Act) (such date, or
such subsequent date to which the expiration of the Offer is extended pursuant to and in accordance
with the terms of this Agreement, the “Expiration Date”). Without the prior written
consent of the Company, the Buyer and the Acquisition Sub shall not:
(i) change the form of consideration payable in the Offer, decrease the Offer
Consideration or decrease the number of Shares sought to be acquired pursuant to the Offer;
(ii) extend or otherwise change the Expiration Date except (A) as required by
applicable Law (including for any period required by any rule, regulation, interpretation or
position of the United States Securities and Exchange Commission (the “SEC”) or the
staff thereof), (B) that if, immediately prior to the scheduled Expiration Date (as it may
be extended), any condition to the Offer has not been satisfied or waived, the Buyer and the
Acquisition Sub shall extend the Expiration Date for one or more periods (each in the
reasonable judgment of the Buyer for the minimum period of time reasonably expected by the
Buyer to be required to satisfy such conditions but in any event not in excess of twenty
(20) Business Days each) but in no event beyond the
2
Outside Date, or (C) in connection with an increase in the consideration to be paid
pursuant to the Offer so as to comply with applicable rules and regulations of the SEC;
(iii) waive the Minimum Condition;
(iv) amend or modify any term or condition of the Offer in any manner adverse to (or
adversely affecting) holders of Shares; or
(v) impose any condition to the Offer not set forth in Annex I.
Notwithstanding the foregoing, the Buyer and the Acquisition Sub may, without the consent of the
Company, and shall, if requested by the Company, elect to provide a subsequent offering period for
the Offer in accordance with Rule 14d-11 of the Exchange Act following their acceptance for payment
of Shares in the Offer.
(c) Schedule TO and Offer Documents. On the date of commencement of the Offer, the
Buyer and the Acquisition Sub shall file with the SEC a tender offer statement on Schedule TO
(together with all amendments and supplements thereto, the “Schedule TO”) with respect to
the Offer. The Schedule TO shall contain an offer to purchase (the “Offer to Purchase”), a
form of the related letter of transmittal (the “Letter of Transmittal”), and ancillary
documents and instruments pursuant to which the Offer will be made (collectively, together with any
supplements or amendments thereto, the “Offer Documents”). The Buyer and the Acquisition
Sub agree that the Offer Documents shall comply in all material respects with the requirements of
applicable U.S. federal securities laws and, on the date first filed with the SEC and on the date
first published, sent or given to the Company’s stockholders, and on the Acceptance Date (as
hereinafter defined) shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, except that no covenant,
agreement, representation or warranty is made by the Buyer or the Acquisition Sub with respect to
information supplied by the Company or any of its stockholders for inclusion or incorporation by
reference in the Offer Documents. The Buyer and the Acquisition Sub shall cause the Offer
Documents to be disseminated to holders of Shares, as and to the extent required by applicable U.S.
federal securities laws. Each of the Buyer, the Acquisition Sub and the Company shall promptly
correct any information provided by it for use in the Schedule TO or the Offer Documents if and to
the extent that such information shall have become false or misleading in any material respect, and
the Buyer and the Acquisition Sub shall take all steps necessary to amend or supplement the
Schedule TO and, as applicable, the Offer Documents and to cause the Schedule TO as so amended and
supplemented to be filed with the SEC and the Offer Documents as so amended and supplemented to be
disseminated to holders of Shares, in each case as and to the extent required by applicable U.S.
federal securities laws. The Company and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents and any amendments thereto prior to the filing thereof
with the SEC or dissemination to the stockholders of the Company, and the Buyer and the Acquisition
Sub shall give reasonable and good faith consideration to any comments made by the Company and its
counsel. The Buyer and the Acquisition Sub shall (i) provide the Company and its counsel with a
copy of any written comments or telephonic notification of any oral comments the Buyer, the
Acquisition Sub or their counsel may receive from the SEC or its staff with respect to the
3
Offer promptly after the receipt thereof, (ii) consult in good faith with the Company and its
counsel prior to responding to any such comments, and (iii) provide the Company and its counsel
with a copy of any written responses thereto and telephonic notification of any oral responses
thereto of the Buyer or the Acquisition Sub or their counsel.
(d) Provisions of Funds by the Buyer. Subject solely to the satisfaction or waiver of
the conditions set forth in Annex I, the Acquisition Sub shall, and the Buyer shall cause
the Acquisition Sub to, as soon as possible after the expiration of the Offer, accept for payment
and pay for Shares validly tendered and not withdrawn pursuant to the Offer (the date of acceptance
for payment, the “Acceptance Date”). The Buyer shall provide or cause to be provided to
the Acquisition Sub on a timely basis the funds necessary to purchase any and all Shares that the
Acquisition Sub becomes obligated to purchase pursuant to the Offer.
(e) Tax Withholding. The Acquisition Sub shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to the Offer any such amounts as are required to
be deducted and withheld with respect to the making of such payment under the Internal Revenue Code
of 1986, as amended (the “Code”), or any other applicable state, local or foreign Tax Law.
(f) Company Actions.
(i) Approval and Consent. The Company Board, at a meeting duly called and held, has
unanimously adopted resolutions: (A) determining that the terms of the Offer, the Merger and the
other transactions contemplated by this Agreement are fair and in the best interests of the Company
and its stockholders, and declaring it advisable, to enter into this Agreement; (B) approving the
execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby, including the Offer and the Merger; (C) recommending that the stockholders of
the Company tender their Shares in the Offer or otherwise approve the adoption of this Agreement
(the “Recommendation”); (D) rendering the limitations on business combinations contained in
Section 203 of the DGCL inapplicable to the Offer, this Agreement and the transactions contemplated
hereby; and (E) electing that the Offer and the Merger, to the extent of the Company Board’s power
and authority and to the extent permitted by Law, not be subject to any “moratorium,” “control
share acquisition,” “business combination,” “fair price,” or other form of anti-takeover laws and
regulations (collectively, “Takeover Laws”) of any jurisdiction that may purport to be
applicable to this Agreement or any of the transactions contemplated hereby.
(ii) Schedule 14D-9. As soon as practicable on the date that the Schedule TO is filed
with the SEC, and subject to the remainder of this sub-section (ii), the Company shall file with
the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer
(together with all amendments and supplements thereto, the “Schedule 14D-9”) and
disseminate the Schedule 14D-9, to the extent required by Rule 14d-9 promulgated under the Exchange
Act and any other applicable laws, to the stockholders of the Company. Except as permitted by
Section 6.1, the Offer Documents and the Schedule 14D-9 shall contain the Recommendation,
and the Company hereby consents to the inclusion of the Recommendation in the Offer Documents. The
Company agrees that the Schedule 14D-9 shall comply in all material respects with the requirements
of applicable U.S. federal securities laws
4
and on the date first filed with the SEC and on the date first published, sent or given to the
Company’s stockholders, and on the Acceptance Date, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading, except that no covenant, agreement, representation or warranty is made by the Company
with respect to information supplied by the Buyer or the Acquisition Sub for inclusion or
incorporation by reference in the Schedule 14D-9. Each of the Company, the Buyer and the
Acquisition Sub each shall promptly correct any information provided by it for use in the Schedule
14D-9 if and to the extent that such information shall have become false or misleading in any
material respect, and the Company shall take all steps necessary to amend or supplement the
Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the
SEC and disseminated to the Company’s stockholders, in each case as and to the extent required by
applicable U.S. federal securities laws. The Buyer and its counsel shall be given reasonable
opportunity to review and comment upon the Schedule 14D-9 and any amendments thereto prior to the
filing thereof with the SEC or dissemination to stockholders of the Company and the Company shall
give reasonable and good faith consideration to any comments made by the Buyer and the Acquisition
Sub and their counsel. The Company shall provide the Buyer and its counsel with a copy of any
written comments or telephonic notification of any oral comments the Company or its counsel may
receive from the SEC or its staff with respect to the Offer promptly after the receipt thereof, and
shall consult in good faith with the Buyer and its counsel prior to responding to any such
comments, and shall provide the Buyer and its counsel with a copy of any written responses thereto
and telephonic notification of any oral responses thereto of the Company or its counsel.
(iii) Provision of Information for Offer Documents. Promptly following the date of
this Agreement, the Company shall supply to the Buyer and the Acquisition Sub, in writing, for
inclusion in the Offer Documents, all information concerning the Company, and the Buyer and the
Acquisition Sub shall supply to the Company, in writing, for inclusion in the Schedule 14D-9, all
information concerning the Buyer and the Acquisition Sub, in each case, required under applicable
U.S. federal securities laws to be included in the Offer Documents or the Schedule 14D-9 that may
reasonably be requested by the Buyer and the Acquisition Sub or the Company, as applicable, in
connection with the preparation of the Offer Documents or the Schedule 14D-9, as applicable.
(iv) Stockholder Lists. In connection with the Offer and the Merger, the Company
shall as soon as reasonably practicable furnish the Acquisition Sub or its designated agent with
mailing labels, security position listings, any available non-objecting beneficial owner lists and
any available listing or computer list containing the names and addresses of the record holders of
the Shares as of the most recent practicable date, and shall furnish to the Acquisition Sub such
information and assistance (including updated lists and information) as the Acquisition Sub may
reasonably request for the purpose of communicating the Offer to the Company’s stockholders.
Subject to the requirements of applicable laws and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate the Offer, the
Merger and the other transactions contemplated by this Agreement, the Buyer and the Acquisition Sub
shall, until consummation of the Offer, hold in confidence the information contained in any of such
labels and lists, and shall use such information only in connection with the communication of the
Offer to the
5
Company’s stockholders and the dissemination to the Company’s stockholders of any proxy or
information statement relating to the Merger and the other transactions contemplated by this
Agreement. If this Agreement shall be terminated in accordance with Article VIII, the
Buyer and the Acquisition Sub shall, upon request, deliver to the Company all copies of such
information then in their possession or under their control.
(g) Directors.
(i) Election of Buyer Designees. From and after the time the Acquisition Sub accepts
Shares tendered pursuant to the Offer (the “Acceptance Time”), the Buyer shall be entitled
to designate such number of members of the Company Board (the “Buyer Designees”), rounded
up to the nearest whole number, as will give the Buyer representation on the Company Board equal to
the product of the total number of members of the Company Board (after giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that the number of Shares
beneficially owned by the Buyer or the Acquisition Sub at such time (including Shares so accepted
for payment) bears to the total number of Shares then outstanding; provided, that in no event shall
Buyer have the right to designate any member of the Company Board unless and until Buyer has
accepted for payment Shares tendered pursuant to the Offer representing a majority of the total
outstanding voting power of the Company on a fully diluted basis (and therefore, at such time as
the Buyer has the right to designate any Buyer Designees, the Buyer shall have the right to
designate no less than a majority of the members of the Company Board). Subject to applicable Law,
the Company shall take all actions necessary, including by increasing the size of the Company Board
or securing the resignations of such number of the Company’s incumbent directors, or both, to
enable the Buyer Designees to be so elected or appointed to the Company Board and to cause the
Buyer Designees to be so elected or appointed.
(ii) Continuing Directors. At all times prior to the Effective Time (as defined in
Section 1.2), the Company Board shall always have at least two Continuing Directors (as
defined below). Subject to applicable Law, the Company shall promptly take all action necessary
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 1.1(g)(ii) and shall include in the Schedule
14D-9 mailed to stockholders such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 1.1(g)(ii). The Buyer will supply the Company any information with
respect to itself and its nominees, officers, directors and affiliates required by Section 14(f)
and Rule 14f-1. Following the election or appointment of the Buyer Designees to the Company Board
pursuant to this section, and until the Effective Time, the approval of a majority of the
Continuing Directors shall be required to authorize: (A) any amendment to or termination of this
Agreement on behalf of the Company; (B) any extension of time for the performance of any of the
obligations or other acts of the Buyer or the Acquisition Sub; (C) any waiver of compliance with
any covenant or obligation of the Buyer or the Acquisition Sub or any condition to any obligation
of the Company or any waiver of any right of the Company under this Agreement; and (D) any other
action by the Company in connection with this Agreement or the transactions contemplated hereby
required to be taken by the Company Board. “Continuing Director” shall mean (1) any member
of the Company Board, while such person is a member of the Company Board, who is not an Affiliate,
representative or designee of the Buyer or the
Acquisition Sub and who was a
6
member of the Company Board prior to the date of the Agreement, and (2) any successor of a Continuing Director while such successor is a member of the Company
Board, who is not an Affiliate, representative or designee of the Buyer or the Acquisition Sub and
was recommended or elected to succeed such Continuing Director by a majority of Continuing
Directors.
1.2 The Merger.
(a) On the terms and subject to the conditions set forth in this Agreement and in accordance
with the DGCL, at the Effective Time, the Acquisition Sub shall be merged with and into the
Company, and the separate corporate existence of the Acquisition Sub shall thereupon cease. The
Company will be the surviving corporation in the Merger and continue its existence as a wholly
owned subsidiary of the Buyer (the Company following the Merger is sometimes referred to herein as
the “Surviving Corporation”). On the terms and subject to the provisions of this
Agreement, at the Closing, the Company will cause a certificate of merger in a form jointly
prepared by the Buyer and the Company prior to the Closing (the “Certificate of Merger”) to
be executed, acknowledged and filed with the Secretary of State of the State of Delaware in
accordance with Section 251 of the DGCL (or to the extent provided in Section 2.5, Section
253 of the DGCL). The Merger will become effective at such time as the Certificate of Merger has
been duly filed with the Secretary of State of Delaware or at such later date or time as may be
agreed by the Buyer and the Company and specified in the Certificate of Merger in accordance with
the DGCL (the effective time of the Merger being hereinafter referred to as the “Effective
Time”). The Merger shall have the effects set forth in Section 259 of the DGCL.
(b) Closing of the Merger. The closing of the Merger (the “Closing”) shall
take place at 12 noon, Eastern time, on a date to be specified by the Buyer and the Company (the
“Closing Date”), which shall be no later than the second Business Day after satisfaction or
waiver of the conditions set forth in Article VII (other than delivery of items to be
delivered at the Closing and other than satisfaction of those conditions that by their nature are
to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain
subject to the delivery of such items and the satisfaction or waiver of such conditions at the
Closing), at the offices of Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX, unless
another date, place or time is agreed to in writing by the Buyer and the Company. “Business
Day” shall be any day other than (i) a Saturday or Sunday or (ii) a day on which banking
institutions located in New York, New York are permitted or required by Law to remain closed. At
the Closing, each party shall deliver the agreements, certificates, opinions and instruments
required by the terms of this Agreement to be delivered by it, and the Company shall cause the
Certificate of Merger to be filed with the Secretary of State of the State of Delaware and shall
make all other filings or recordings required under the DGCL to effect the Merger.
(c) Certificate of Incorporation and By-Laws. At the Effective Time (a) the
certificate of incorporation of the Company as in effect on the date of this Agreement shall be
amended in its entirety to read as set forth on Exhibit A, until further amended in accordance with
the DGCL. In addition, subject to Section 6.6(b), the Buyer shall cause the bylaws of the
Surviving Corporation to be amended and restated in their entirety so that, immediately following
the Effective Time, they are identical to the bylaws of the Acquisition Sub as in effect
immediately prior to the Effective Time, except that all references to the name of the
Acquisition Sub therein shall be changed to refer to the name of the Company, and, as so
7
amended and restated, such bylaws shall be the bylaws of the Surviving Corporation, until further
amended in accordance with the DGCL.
(d) Directors of the Surviving Corporation. The directors of the Acquisition Sub
immediately prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of
the Surviving Corporation.
(e) Officers of the Surviving Corporation. The officers of the Company immediately
prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to
hold office until their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of the capital stock of the Company
or capital stock of the Acquisition Sub:
(a) Capital Stock of the Acquisition Sub. Each share of the common stock of
the Acquisition Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common stock, $0.01 par
value per share, of the Surviving Corporation (“Surviving Corporation Stock”).
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares of
Company Common Stock that are owned by the Company as treasury stock and any shares of
Company Common Stock owned by the Buyer or the Acquisition Sub immediately prior to the
Effective Time (other than Shares held on behalf of third parties) (“Cancelled
Shares”) shall be cancelled and shall cease to exist and no consideration shall be
delivered in exchange therefor. Each share of Company Common Stock held by any wholly owned
Subsidiary of the Company or any wholly owned Subsidiary of the Buyer (other than the
Acquisition Sub) immediately prior to the Effective Time shall be converted into such number
of fully paid and nonassessable shares (or fractions thereof) of Surviving Corporation Stock
that preserves the relative ownership interest represented by such share of Company Common
Stock immediately prior to the Merger.
(c) Merger Consideration for Company Common Stock. Subject to Section
2.2, each share of Company Common Stock (other than shares to be cancelled or to be
converted into Surviving Corporation Stock in accordance with Section 2.1(b) and
Dissenting Shares (as defined in Section 2.4(a) below)) issued and outstanding
immediately prior to the Effective Time shall be automatically converted into the right to
receive $19.50 in cash per share or such greater amount as may have been paid to any holder
of Shares pursuant to the Offer (the “Merger Consideration”). As of the Effective
Time, all such shares of Company Common Stock shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to have any
rights
8
with respect thereto, except the right to receive the Merger Consideration pursuant
to this Section 2.1(c) upon the surrender of such certificate in accordance with
Section 2.2, without interest.
(d) Adjustments to Merger Consideration. The Merger Consideration shall be
equitably adjusted to reflect fully the effect of any reclassification, stock split, reverse
split, stock dividend (including any dividend or distribution of securities convertible into
Company Common Stock), reorganization, recapitalization or other like change with respect to
Company Common Stock occurring (or for which a record date is established) after the date
hereof and prior to the Effective Time.
2.2 Exchange of Certificates. The procedures for exchanging outstanding shares of
Company Common Stock for the Merger Consideration pursuant to the Merger are as follows:
(a) Exchange Agent. At or prior to the Effective Time, the Buyer shall deposit
with a bank or trust company reasonably acceptable to the Company (the “Paying
Agent”), for the benefit of the holders of shares of Company Common Stock outstanding
immediately prior to the Effective Time, for payment through the Paying Agent in accordance
with this Section 2.2, cash in an amount sufficient to make payment of the Merger
Consideration in exchange for all of the outstanding shares of Company Common Stock that are
converted pursuant to Section 2.1(c) (the “Exchange Fund”). The Exchange
Fund shall not be used for any other purpose. The Exchange Fund shall be invested by the
Paying Agent as directed by the Buyer; provided, however, that such investments shall be in
obligations of or guaranteed by the United States of America, in commercial paper
obligations rated A-1 or P-1 or better by Xxxxx’x Investors Service, Inc. or Standard &
Poor’s Corporation, respectively, or in certificates of deposit, bank repurchase agreements
or banker’s acceptances of commercial banks with capital exceeding $1 billion (based on the
most recent financial statements of such bank which are then publicly available).
(b) Exchange Procedures. Promptly (and in any event within five (5) Business
Days) after the Effective Time, the Buyer shall cause the Paying Agent to mail to each
holder of record of a certificate which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (each, a “Certificate”) (i) a letter of
transmittal in customary form and (ii) instructions for effecting the surrender of the
Certificates in exchange for the Merger Consideration payable with respect thereto. Upon
surrender of a Certificate for cancellation to the Paying Agent, together with such letter
of transmittal, duly completed and validly executed and such other documents as may
reasonably be requested by the Paying Agent, the holder of such Certificate shall be paid
promptly in exchange therefor cash in an amount equal to the Merger Consideration that such
holder has the right to receive pursuant to the provisions of this Article II, and
the Certificate so surrendered shall immediately be cancelled. No interest will be paid or
accrued on the cash payable upon the surrender of such Certificate or Certificates. In the
event of a transfer of ownership of Company Common Stock which is not registered in
the transfer records of the Company, the Merger Consideration may be paid to a Person
(as defined in this Section 2.2(b)) other than the Person in whose name the
Certificate so surrendered is registered, if such Certificate is presented to the Paying
Agent,
9
accompanied by all documents required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender the Merger
Consideration as contemplated by this Section 2.2. As used in this Agreement,
“Person” means any individual, corporation, partnership, limited liability company,
joint venture, association, trust, Governmental Entity, unincorporated organization or other
entity.
(c) No Further Ownership Rights in Company Common Stock. All Merger
Consideration paid upon the surrender of Certificates in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock formerly represented by such Certificates, and from and after
the Effective Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent for any reason,
they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for one (1) year after the
Effective Time shall be delivered to the Buyer or the Surviving Corporation, as directed by
the Buyer, upon demand, and any holder of Company Common Stock who has not previously
complied with this Section 2.2 shall be entitled to receive only from the Buyer
payment of its claim for Merger Consideration, without interest.
(e) No Liability. To the extent permitted by applicable Law, none of the
Buyer, the Acquisition Sub, the Company, the Surviving Corporation or the Paying Agent shall
be liable to any holder of shares of Company Common Stock delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
(f) Withholding Rights. Each of the Buyer, the Acquisition Sub, the Surviving
Corporation and the Paying Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock, Company Stock Options or any rights under a Company Stock Plan such
amounts as it is required to deduct and withhold with respect to the making of such payment
under the Code, or any other applicable state, local or foreign Tax Law. To the extent that
amounts are so withheld by the Surviving Corporation, the Buyer or the Paying Agent, as the
case may be, such withheld amounts (i) shall be remitted by the Buyer, the Surviving
Corporation or the Paying Agent, as the case may be, to the applicable Governmental Entity
and (ii) shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock, Company Stock Options or rights under a
Company Stock Plan in respect of which such deduction and withholding was made.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed, the Paying Agent shall pay, in exchange for
10
such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect
of the shares of Company Common Stock formerly represented thereby pursuant to this
Agreement.
(h) Expenses. The Buyer or the Acquisition Sub shall bear and pay all charges
and expenses, including those of the Paying Agent, incurred in connection with the payment
for the shares of Company Common Stock.
2.3 Company Stock Plans.
(a) Cash-Out of Company Stock Options. At the Effective Time, each outstanding option
to purchase shares of Company Common Stock (“Company Stock Options”) whether or not then
vested or exercisable, shall without any action on the part of the Company or the holder of such
option, automatically be cancelled and exchanged for a cash payment by the Buyer, the Acquisition
Sub or the Surviving Corporation (which shall be made promptly after the Effective Time) in an
amount equal to (i) the excess, if any, of (x) the Merger Consideration per share of Company Common
Stock over (y) the exercise price per share of Company Common Stock subject to such Company Stock
Option, multiplied by (ii) the number of shares of Company Common Stock for which such Company
Stock Option is exercisable immediately prior to the Effective Time.
(b) No Continuing Interest. The parties agree that, following the Effective Time, no
holder of a Company Stock Option or any participant in any Company Stock Plan or other Company
Employee Plan or employee benefit arrangement of the Company or under any Employment Agreement
shall have any right thereunder to acquire any equity interest (including any “phantom” stock or
stock appreciation rights) in the Company, any Subsidiary of the Company or the Surviving
Corporation.
(c) Action by the Company. With respect to each stock plan or other equity-related or
equity-based plan of the Company or a Subsidiary, including, without limitation, any plan or
arrangement which provides for Company Stock Options, restricted stock, restricted stock units,
phantom stock, stock appreciation rights or stock purchase rights (each, a “Company Stock
Plan”), as soon as reasonably practicable following the date of this Agreement and in any event
prior to the Effective Time, the Company Board (or, if appropriate, any committee administering the
Company Stock Plans) shall adopt such resolutions or take such other actions as are required to
adjust the terms of the Company Stock Plans to permit the foregoing.
(d) Termination of Company ESPP. The Company (i) modified the Option Care, Inc. 2001
Employee Stock Purchase Plan, as amended (the “Company ESPP”), so that the offering period
beginning January 1, 2007 and scheduled to end December 31, 2007 shall instead end June 30, 2007
(the “Final Offering Period”), contingent upon consummation of the Merger, and Shares will
be purchased under the Company ESPP with respect to such Final Offering Period based on
contributions made by participants through June 30, 2007, and
(ii) amended the Company ESPP to terminate such plan, in accordance with its terms,
immediately prior to the Effective Time.
11
2.4 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this Agreement, shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time (other than Cancelled
Shares or Shares to be converted into Surviving Corporation Stock in accordance with Section
2.1(b)) that are held by a holder who has not voted in favor of the adoption of this Agreement
or consented thereto in writing and who is entitled to demand and has properly exercised appraisal
rights of such shares of Company Common Stock in accordance with Section 262 of the DGCL (any such
shares being referred to as “Dissenting Shares” until such time as such holder fails to
perfect or otherwise loses such holder’s appraisal rights under the DGCL with respect to such
shares) shall not be converted into or represent the right to receive Merger Consideration in
accordance with Section 2.1, but shall be entitled only to receive payment of the appraised
value of such Dissenting Shares in accordance with Section 262 of the DGCL unless and until such
holder fails to perfect or effectively withdraws or loses its rights to appraisal and payment under
the DGCL.
(b) If any Dissenting Shares shall lose their status as such (through failure to perfect or
otherwise), then, as of the later of the Effective Time or the date of loss of such status, such
shares shall automatically be converted into and shall represent only the right to receive Merger
Consideration in accordance with Section 2.1, without interest thereon, upon surrender of
the Certificate formerly representing such shares.
(c) The Company shall give the Buyer: (i) prompt notice of any written demand for appraisal
received by the Company prior to the Effective Time pursuant to the DGCL, any withdrawal of any
such demand and any other demand, notice or instrument delivered to the Company prior to the
Effective Time pursuant to the DGCL that relate to such demand; and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such demand, notice or
instrument. The Company shall not make any payment or settlement offer prior to the Effective Time
with respect to any such demand, notice or instrument unless the Buyer shall have given its written
consent to such payment or settlement offer.
2.5 Short-Form Merger. Notwithstanding anything to the contrary contained in this
Agreement, if, at any time after the purchase of Shares pursuant to the Offer by the Buyer or the
Acquisition Sub, the Shares beneficially owned by the Buyer or the Acquisition Sub, together with
any Shares beneficially owned by the Buyer’s other Affiliates, shall collectively represent at
least ninety percent (90%) of the outstanding Shares, then the Buyer and the Acquisition Sub shall
take all actions necessary and appropriate to cause the Merger to become effective as soon as
practicable without a meeting of the Company’s stockholders in accordance with Section 253 of the
DGCL.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and Acquisition Sub that the statements
contained in this Article III are true and correct, except (a) as disclosed in the
12
Company
SEC Reports filed after January 1, 2006 and prior to the date of this Agreement (excluding any
disclosures set forth in any risk factor section thereof, or in any section relating to
forward-looking statements, and any other disclosures included therein, in each case, to the extent
that they are cautionary, predictive or forward looking in nature, and excluding any generic
disclosures) or (b) as set forth herein or in the disclosure letter delivered by the Company to the
Buyer and Acquisition Sub in connection with the execution of this Agreement and dated as of the
date hereof (the “Company Disclosure Letter”).
3.1 Organization, Standing and Power. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted and is duly qualified to do business and, where
applicable as a legal concept, is in good standing as a foreign corporation in each jurisdiction in
which the character of the properties it owns, operates or leases or the nature of its activities
makes such qualification necessary, except for such failures to be so organized, qualified or in
good standing, individually or in the aggregate, that would not reasonably be expected to have a
Company Material Adverse Effect. For purposes of this Agreement, the term “Company Material
Adverse Effect” means any fact, change, event, circumstance, effect or development that has or
would be reasonably likely to have a material adverse effect on (i) the business, financial
condition, assets, liabilities, or results of operations of the Company and its Subsidiaries, taken
as a whole, or (ii) the ability of the Company to consummate the transactions contemplated by this
Agreement; provided, however, that none of the following, and no fact, change, event, circumstance,
effect, or development resulting or arising from any of the following, shall constitute, or shall
be considered in determining whether there has occurred, a Company Material Adverse Effect:
(a) economic factors generally affecting the national, regional or world economy;
(b) factors generally affecting the industries or markets in which either the Company
or any of its Subsidiaries operates;
(c) any change in Law;
(d) any change in generally accepted accounting principles or the interpretation
thereof;
(e) any action taken pursuant to or in accordance with this Agreement (including
Section 6.4) or at the request of the Buyer;
(f) any fees or expenses incurred in connection with the negotiations leading to, or
the transactions contemplated by, this Agreement, to the extent identified to the Buyer
prior to the date hereof;
(g) any failure by the Company to meet any projections during any period ending (or for
which results are released) on or after the date hereof, provided that the underlying cause
of such failure and its impact on the business, financial condition, assets, liabilities or
results of operations of the Company and its Subsidiaries taken as a
13
whole may be considered
in determining whether a Company Material Adverse Effect has occurred;
(h) any stockholder litigation arising from or relating to the Offer or the Merger;
(i) any decline in the price of the Company Common Stock, provided that the underlying
cause of the decline in the price of the Company Common Stock and its impact on the
business, financial condition, assets, liabilities or results of operations of the Company
and its Subsidiaries taken as a whole may be considered in determining whether a Company
Material Adverse Effect has occurred;
(j) any act of war, terrorism or armed conflict; or
(k) any required repurchase or conversion of the Convertible Senior Notes as a result
of (i) the transaction contemplated hereunder, or (ii) the satisfaction of the trading price
condition, in each case pursuant to the indenture governing the Convertible Senior Notes;
in the case of clauses (a), (b), (c), (d) or (j), to the extent not disproportionately impacting
the Company relative to other industry participants.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of 60,000,000 shares of Company
Common Stock and 30,000,000 shares of preferred stock, par value $0.01 per share (the “Company
Preferred Stock”). The rights and privileges of the Company Common Stock and the Company
Preferred Stock are as set forth in the Company’s certificate of incorporation, a true and complete
copy of which has been provided to Buyer. At the close of business on June 27, 2007, 34,577,307
shares of Company Common Stock were issued and outstanding and zero shares of Company Preferred
Stock were issued and outstanding. No Subsidiary of the Company owns any shares of Company Common
Stock.
(b) Section 3.2(b) of the Company Disclosure Letter sets forth: (i) as of April 30,
2007, a true, complete and accurate list of all Company Stock Plans, indicating for each Company
Stock Plan, as of such date, the number of shares of Company Common Stock issued under such Company
Stock Plan, the number of shares of Company Common Stock subject to outstanding options under such
Company Stock Plan and the number of shares of Company Common Stock reserved for future issuance
under such Company Stock Plan and, as of the date hereof, with respect to the Company ESPP, the
approximate number of shares that will be purchased with respect to the Final Offering Period under
the Company ESPP; (ii) as of May 31,
2007, a true, complete and accurate list of all outstanding
Company Stock Options, indicating with respect to each such Company Stock Option the name of the
holder thereof, the Company Stock Plan under which it was granted, the number of shares of Company
Common Stock
subject to such Company Stock Option, the exercise price, the reported date of grant, and the
vesting schedule, including whether (and to what extent) the vesting will be accelerated in any way
by the Merger or by termination of employment or change in position following consummation of the
Merger. No Company Stock Options have been granted since May 31,
14
2007. The Company has made
available to the Buyer complete and accurate copies of all forms of stock option agreements
evidencing Company Stock Options. Each outstanding Company Stock Option was granted at fair market
value determined in accordance with the terms of the applicable Company Stock Plan and applicable
law.
(c) Except (i) for the Company’s 2.25% convertible senior notes due 2024 (the “Convertible
Senior Notes”), or (ii) as set forth in Section 3.2 and as reserved for future grants
under Company Stock Plans as set forth in Section 3.2(b) of the Company Disclosure Letter,
as of the date of this Agreement, (A) there are no equity securities of any class of the Company,
or any security exchangeable into or exercisable for such equity securities, issued, reserved for
issuance or outstanding and (B) there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound obligating the Company or any of
its Subsidiaries to issue, exchange, transfer, deliver or sell, or cause to be issued, exchanged,
transferred, delivered or sold, additional shares of capital stock or other equity interests of the
Company or any security or rights convertible into or exchangeable or exercisable for any such
shares or other equity interests, or obligating the Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of, otherwise modify or amend or enter into any such option,
warrant, equity security, call, right, commitment or agreement. The Company does not have any
outstanding restricted stock subject to vesting or other lapse restrictions, stock appreciation
rights, phantom stock, restricted stock units, other equity-related or equity based compensation,
performance based rights or similar rights or obligations other than Company Stock Options or stock
purchase rights pursuant to the Company ESPP. Neither the Company nor any of its Affiliates is a
party to or is bound by any agreements or understandings with respect to the voting (including
voting trusts and proxies) or sale or transfer (including agreements imposing transfer
restrictions) of any shares of capital stock or other equity interests of the Company. For all
purposes of this Agreement, except for Section 4.6, the term “Affiliate” when used
with respect to any Person means any other Person who is an “affiliate” of that first Person within
the meaning of Rule 405 promulgated under the Securities Act of 1933, as amended (the
“Securities Act”). Except as set forth as set forth in Section 3.2(c) of the
Company Disclosure Letter there are no registration rights, and there is no rights agreement,
“poison pill” anti-takeover plan or other similar agreement or understanding to which the Company
or any of its Subsidiaries is a party or by which it or any of them is bound with respect to any
equity security of any class of the Company.
(d) All outstanding shares of Company Common Stock are, and all shares of Company Common Stock
subject to issuance as specified in Section 3.2(b), 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 not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right, subscription right
or any similar right under any provision of the DGCL, the Company’s certificate of incorporation or
bylaws or any agreement to which the Company is a party or is otherwise bound.
(e) Except as described in Section 3.2(e) of the Company Disclosure Letter, there are
no obligations, contingent or otherwise, of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of Company Common Stock or the capital
15
stock of the Company
or any of its Subsidiaries or to provide funds to the Company or any Subsidiary of the Company.
3.3 Subsidiaries.
(a) Section 3.3(a) of the Company Disclosure Letter sets forth, as of the date of this
Agreement, a true, complete and accurate list of all of the Company’s Subsidiaries and for each
Subsidiary of the Company: (i) its name and form of organization; (ii) the number and type of
outstanding equity securities and a list of the holders thereof; and (iii) the jurisdiction of
organization. For purposes of this Agreement, the term “Subsidiary” means, with respect to
any party, any corporation, partnership, trust, limited liability company or other non-corporate
business enterprise in which such party (or another Subsidiary of such party) holds stock or other
ownership interests representing (A) fifty percent (50%) or more of the voting power of all
outstanding stock or ownership interests of such entity or (B) the right to receive fifty percent
(50%) or more of the net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution of such entity.
(b) Each Subsidiary of the Company is a business entity duly organized, validly existing and
in good standing (to the extent such concepts are applicable) under the laws of the jurisdiction of
its organization, has all requisite company power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted, and is duly qualified to
do business and is in good standing as a foreign corporation or other business entity (to the
extent such concepts are applicable) in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such qualification necessary,
except for such failures to be so organized, qualified or in good standing, individually or in the
aggregate, as would not reasonably be expected to have a Company Material Adverse Effect. All of
the outstanding shares of capital stock and other equity securities or interests of each Subsidiary
of the Company are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights and, except as described in Section 3.3(b) of the Company Disclosure
Letter, all such shares are owned, of record and beneficially, by the Company or another of its
Subsidiaries free and clear of all security interests, liens, claims, pledges, agreements,
limitations in the Company’s voting rights, charges or other encumbrances. Except as described in
Section 3.3(b) of the Company Disclosure Letter, there are no outstanding or authorized
options, warrants, rights, agreements or commitments to which the Company or any of its
Subsidiaries is a party or which are binding on any of them providing for the issuance, disposition
or acquisition of any capital stock or equity of any Subsidiary of the Company. There are no
outstanding stock appreciation, phantom stock or similar rights with respect to any Subsidiary of
the Company. To the Company’s Knowledge there are no voting trusts, proxies or other agreements or
understandings with respect to the Company’s voting of any capital stock of any Subsidiary of the
Company.
(c) The Company has made available to the Buyer complete and accurate copies of the charter,
bylaws or other organizational documents of each Subsidiary.
(d) Except as described in Section 3.3(d) of the Company Disclosure Letter, the
Company does not control directly or indirectly or have any direct or indirect equity participation
or similar interest in any corporation, partnership, limited liability company, joint
16
venture,
trust or other business association or entity which is not a Subsidiary of the Company, other than
securities in a publicly traded company held for investment by the Company or any of its
Subsidiaries and consisting of less than five percent (5%) of the outstanding capital stock of such
company.
3.4 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and authority to enter into this Agreement
and, subject to the adoption of this Agreement (the “Company Voting Proposal”) by the
Required Company Stockholder Vote, to consummate the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, the Company Board, at a meeting duly called and
held, (i) determined that the Offer, the Merger and the other transactions contemplated by this
Agreement are fair and in the best interests of the Company and its stockholders, (ii) approved the
execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby, including the Offer and the Merger and declared its advisability in accordance
with the provisions of the DGCL, (iii) directed that this Agreement be submitted to the
stockholders of the Company for their adoption if required by the DGCL and resolved to make the
Recommendation, and (iv) adopted a resolution rendering the limitations on business combinations
contained in Section 203 of the DGCL inapplicable to the Offer, this Agreement and the other
transactions contemplated hereby and electing that the Offer and the Merger, to the extent of the
Company Board’s power and authority and to the extent permitted by Law, not be subject to any
Takeover Laws that may purport to be applicable to this Agreement or any of the transactions
contemplated hereby. Assuming the accuracy of the representations and warranties of Buyer and
Acquisition Sub in Section 4.6, the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company, subject only to the
required receipt of the Required Company Stockholder Vote. This Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors’ rights and to general equity principles (the “Bankruptcy and Equity
Exception”).
(b) Except as set forth on Section 3.4(b) of the Company Disclosure Letter, the
execution, delivery and performance of this Agreement by the Company do not, and the consummation
by the Company of the transactions contemplated by this Agreement do not and shall not, (i)
contravene or conflict with, or result in any violation or breach of, any provision of the
certificate of incorporation or bylaws of the Company or of the charter, bylaws, or other
organizational document of any Subsidiary of the Company, (ii) conflict with, or result in any
violation or breach of, or constitute (with or without notice or lapse of time, or both) a default
under, or give rise to a right of termination, recapture, cancellation or acceleration of any
obligation or loss of a material benefit, require a consent or waiver under or require the payment
of a penalty under any loan, guarantee of indebtedness or credit agreement, note, bond,
mortgage, indenture, Material Lease, agreement, contract, instrument, permit, concession,
franchise, right or license binding upon the Company or any of its Subsidiaries, or result in the
creation of any mortgage, deeds of trust, lien (statutory or other), pledge, security interest,
claim,
17
covenant, condition, declaration, restriction, option, rights of first offer or refusal,
charge, easement, rights-of-way, encroachment, third party right or other encumbrance or title
defect of any kind or nature (each, a “Lien,” and each document, agreement or instrument
forming the basis of, creating or imposing any Lien, a “Lien Instrument”) upon any of the
properties or assets of the Company or any of its Subsidiaries, or (iii) subject to obtaining the
Required Company Stockholder Vote and compliance with the requirements specified in Section
3.4(c), conflict with or violate any Law applicable to the Company or any of its Subsidiaries
or any of its or their respective properties or assets, except in the case of clauses (ii) and
(iii) of this Section 3.4(b) for any such violations, defaults, terminations, recaptures,
cancellations, acceleration, losses, Liens, or conflicts and for any consents or waivers not
obtained, that, individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. “Law” means any statute, law, ordinance, rule,
regulation, order, writ, judgment, decree, agency requirement, stipulation, determination, award or
requirement of a Governmental Entity.
(c) Except as described in Section 3.4(c) of the Company Disclosure Letter, no
consent, approval, license, permit, order or authorization of, or registration, declaration, notice
or filing with, any foreign, federal, state or local government or subdivision thereof, or
governmental, judicial, legislative, executive, administrative or regulatory authority, agency,
commission, tribunal, body or instrumentality (a “Governmental Entity”) or any stock market
or stock exchange on which shares of Company Common Stock are listed for trading is required by or
with respect to the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the pre-merger notification requirements under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended and the rules and regulations
promulgated thereunder (the “HSR Act”), (ii) the filing of the Certificate of Merger with
the Delaware Secretary of State, (iii) the filing of the Proxy Statement with the SEC in accordance
with the Exchange Act, (iv) the filing of such reports, schedules or materials under the Exchange
Act as may be required in connection with this Agreement and the transactions contemplated hereby,
(v) such consents, approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable state securities laws, and (vi) such other consents, approvals,
licenses, permits, orders, authorizations, registrations, declarations, notices and filings the
absence of which would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect.
(d) The affirmative vote for adoption of the Company Voting Proposal by the holders of at
least a majority of the outstanding shares of Company Common Stock on the record date for the
meeting of the Company’s stockholders (the “Company Meeting”) to consider the Company
Voting Proposal (the “Required Company Stockholder Vote”) is the only vote of the holders
of any class or series of the Company’s capital stock or other securities necessary for the
adoption of this Agreement and for the consummation by the Company of the other transactions
contemplated by this Agreement. There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders of the Company
may vote.
18
3.5 SEC Filings; Financial Statements; Information Provided.
(a) Except as described in Section 3.5(a) of the Company Disclosure Letter, the
Company has timely filed all registration statements, forms, reports and other documents required
to be filed or furnished by the Company with the SEC since January 1, 2004 (the forms, reports and
other documents required to be filed or furnished by the Company with the SEC since January 1, 2004
and those filed with the SEC subsequent to the date of this Agreement, if any, including any
amendments thereto filed prior to the date hereof the “Company SEC Reports”). As of their
respective dates, the Company SEC Reports (i) complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder and the Xxxxxxxx-Xxxxx Act of 2002 and the rules and regulations
promulgated thereunder (the “Xxxxxxxx-Xxxxx Act”), in each case, as applicable to such
Company SEC Reports, and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated in such Company SEC Reports or necessary in order to
make the statements in such Company SEC Reports, in the light of the circumstances under which they
were made, not misleading. The Company is in compliance in all material respects with the
applicable provisions of the Xxxxxxxx-Xxxxx Act. No executive officer of the Company has failed in
any respect to make the certifications required of him or her under Section 302 or 906 of the
Xxxxxxxx-Xxxxx Act with respect to any Company SEC Report. The Company has made available to the
Buyer true, correct and complete copies of all material written correspondence between the SEC, on
the one hand, and the Company and any of its Subsidiaries, on the other hand. As of the date of
this Agreement, there are no outstanding or unresolved comments in comment letters received from
the SEC staff with respect to the Company SEC Reports. To the Knowledge of the Company, none of
the Company SEC Reports is the subject of ongoing SEC review or outstanding SEC comment. None of
the Company’s Subsidiaries is required to file periodic reports with the SEC pursuant to the
Exchange Act.
(b) Each of the consolidated financial statements (including, in each case, any related notes
and schedules) contained or to be contained in the Company SEC Reports (i) complied as to form in
all material respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) was prepared in accordance with United States
generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes to such financial statements or, in
the case of unaudited interim financial statements, as permitted by the SEC on Form 10-Q under the
Exchange Act), and (iii) fairly presented in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the dates indicated and the consolidated results
of their operations and cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end adjustments as indicated
in the notes thereto. The consolidated unaudited balance sheet of the Company as of March 30, 2007
is referred to herein as the “Company Balance Sheet.”
(c) The Schedule 14D-9 to be filed by the Company in connection with the Offer will comply in
all material respects with the requirements of the Exchange Act. The Schedule 14D-9 and the
information supplied by or on behalf of the Company for inclusion in the Schedule TO, on the
respective dates they are filed with the Commission and on the date they are first published, sent
or given to stockholders of the Company, shall not contain any
19
untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading;
provided, that the Company makes no representation or warranty concerning any information supplied
by the Buyer or the Acquisition Sub for inclusion in the Schedule 14D-9. The proxy statement to be
sent to the stockholders of the Company (the “Proxy Statement”) in connection with the
Company Meeting shall not, at the relevant times, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the statements made in
the Proxy Statement not false or misleading in light of the circumstances under which they were or
shall be made; or omit to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company Meeting which has become
false or misleading. If at any time prior to the Company Meeting any fact or event relating to the
Company or any of its Affiliates which should be set forth in a supplement to the Proxy Statement
should be discovered by the Company or should occur, the Company shall, promptly after becoming
aware thereof, inform the Buyer of such fact or event and shall provide Company stockholders with
such supplement.
(d) The Company has established and maintains disclosure controls and procedures and internal
controls over financial reporting (as such terms are defined in paragraphs (e) and (f),
respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange
Act. The Company’s disclosure controls and procedures are effective to ensure that all material
information required to be disclosed by the Company in the reports that it files or furnishes under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that all such material information is accumulated and
communicated to the Company’s management as appropriate to allow timely decisions regarding
required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the
Xxxxxxxx-Xxxxx Act. The Company’s management has completed an assessment of the effectiveness of
the Company’s internal controls over financial reporting in compliance with the requirements of
Section 404 of the Xxxxxxxx-Xxxxx Act for the year ended December 31, 2006, and such assessment
concluded that such controls were effective. The Company has disclosed, based on its most recent
evaluations, to the Company’s outside auditors and the audit committee of the Company (A) all
significant deficiencies and material weaknesses in the design or operation of internal controls
over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably
likely to adversely affect in any material respect 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 controls over
financial reporting.
3.6 No Undisclosed Liabilities. Except as reflected or reserved against in the
Company Balance Sheet, the Company and its
Subsidiaries do not have any liabilities of any nature that, individually or in the aggregate,
would reasonably be expected to have a Company Material Adverse Effect.
3.7 Absence of Certain Changes or Events. Since the date of the Company Balance
Sheet, there has not been a Company Material Adverse Effect. Except as described in
20
Section
3.7 of the Company Disclosure Letter, from the date of the Company Balance Sheet until the date
of this Agreement, (a) the Company and its Subsidiaries have conducted their respective businesses
only in the Ordinary Course of Business and (b) there has not been any action or event that would
have required the consent of the Buyer under Section 5.1 of this Agreement had such action
or event occurred after the date of this Agreement. As used in this Agreement, the “Ordinary
Course of Business” means the ordinary course of business consistent with past practice.
3.8 Taxes.
(a) Except as would not reasonably be expected, individually or in the aggregate, to have a
Company Material Adverse Effect: (i) the Company and each of its Subsidiaries has timely filed
all Tax Returns required to be filed; (ii) all such Tax Returns are true, correct and complete;
(iii) the Company and each of its Subsidiaries has timely paid all Taxes of or attributable to the
Company and its Subsidiaries that were due and payable; (iv) the Company has made adequate
provision, in accordance with GAAP, in the consolidated financial statements included in the
Company SEC Reports for the payment of all Taxes for which the Company or any of its Subsidiaries
may be liable for the periods covered thereby; (v) there is no audit, investigation, claim or
assessment in respect of Taxes pending or threatened in writing against the Company or any of its
Subsidiaries; (vi) there are no Contracts in effect to extend the period of limitations for the
assessment or collection of any Tax for which the Company or any of its Subsidiaries may be liable,
and there is no currently effective “closing agreement” pursuant to Section 7121 of the Code (or
any similar provision of foreign, state or local Law); (vii) no claim has been made within the last
three years by any Governmental Entity in a jurisdiction where either the Company or any of its
Subsidiaries has not filed income Tax returns that the Company or any Subsidiary is or may be
subject to income taxation by that jurisdiction; (viii) the Company and each of its Subsidiaries
has withheld from all payments to employees, independent contractors, creditors, shareholders and
any other persons (and timely paid to the appropriate Governmental Entity) all amounts required to
be withheld with respect to such payments in compliance with all Applicable Laws; and (ix) there
are no Liens for Taxes upon the assets of the Company or any of its Subsidiaries, other than Liens
for Taxes not yet due and payable. For purposes of this Agreement, (y) “Taxes” means all
taxes, charges, levies, fees, imposts, duties, and other assessments, including income, gross
receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use,
services, transfer, withholding, employment, worker’s compensation, unemployment insurance, payroll
and franchise taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax (and “Tax”
has a correlative meaning), and (z) “Tax Returns” means all reports, returns, declarations,
statements or other information supplied or required to be supplied to a taxing authority in
connection with Taxes, including information returns, documents with respect to or accompanying
payments of estimated Taxes, and any amendments thereto.
(b) The Company has made available to the Buyer correct and complete copies of all federal
income Tax Returns and any associated examination reports and statements of deficiencies assessed
against or agreed to by the Company or any of its Subsidiaries since January 1, 2004. The federal
income Tax Returns of the Company and each of its Subsidiaries
21
have been audited by the Internal
Revenue Service (the “IRS”) or are closed by the applicable statute of limitations for all
taxable years through the taxable year specified in Section 3.8(b) of the Company
Disclosure Letter.
(c) Neither the Company nor any of its Subsidiaries: (i) has made any payments, is obligated
to make any payments, or is a party to any agreement that could obligate it to make any payments
that will be treated as an “excess parachute payment” under Section 280G of the Code, including in
connection with the transactions contemplated hereby; (ii) joins or has joined in the filing of any
affiliated, aggregate, consolidated, combined or unitary federal, state, local or foreign income
Tax Return other than the federal income Tax Return for the consolidated group of which the Company
is the common parent, except as set forth on Section 3.8(c) of the Company Disclosure
Letter, (iii) has any actual or potential liability for any Taxes of any Person (other than the
Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision
of Law in any jurisdiction), as a transferee or successor, by contract or otherwise, except as set
forth on Section 3.8(c) of the Company Disclosure Letter, (iv) is a party to or bound by
any Tax sharing agreement or Tax indemnity agreement, arrangement or practice, (v) has participated
in a “listed transaction” (as defined in Treasury Regulation Section 1.6011-4), or (vi) has
constituted either a “distributing corporation” or a “controlled corporation” in a distribution of
stock qualifying or intended to qualify for tax-free treatment under Section 355 of the Code in the
two years prior to the date of this Agreement.
3.9 Real Property.
(a) None of the Company or any of its Subsidiaries owns any real property or has any options
or rights or obligations to purchase, rights of first refusal, rights of first negotiation or
rights of first offer to purchase, any real property.
(b) Section 3.9(b) of the Company Disclosure Letter sets forth a complete and accurate
list as of the date of this Agreement of all real property (collectively, “Leased Real
Property”) leased, subleased or licensed by the Company or any of its Subsidiaries (as lessor,
sublessor or licensor, or lessee, sublessee or licensee, as the case may be) (all leases, subleases
and sublicenses (including all amendments, modifications and extensions relating thereto) pursuant
to which the Company or its Subsidiaries (and all of its sublessees and licensees) occupies the
Leased Real Property, collectively, “Company Leases”, and all Company Leases indicated as
“Material Company Leases” on Section 3.9(b) of the Company Disclosure Letter (collectively
“Material Leases”)). Except as would not reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect: (i) each Company Lease is a valid and
binding obligation of the Company or one its Subsidiaries and is in full force and effect, and the
Company or one of its Subsidiaries has a valid leasehold title thereto, free and clear of any Lien
or Lien Instrument (other than any Lien or Lien Instrument which has been incurred by the owner of
the fee title or holder of a superior leasehold interest of or in the real property and which does
not interfere with the use or operation of the property in the Business);
and (ii) with respect to each Company Lease, the Company or one of its applicable Subsidiaries
has performed each term, covenant and condition of each of the Company Leases that is to be
performed by it. Neither the Company nor any Subsidiaries have received any written communication
from, or given any written communication to, any other party to the Company
22
Lease or any lender,
alleging that the Company or any of its Subsidiaries or such other party, as the case may be, is in
default (or that an event has occurred or circumstances exist that may (with notice, a lapse of
time or both) constitute or result in such a default), and no such default exists on the part of
the Company or any of its Subsidiaries (nor, to their Knowledge, does any default exist on the part
of any other party) or indicating that such party intends to cancel, terminate or exercise any
option to accelerate or recapture (A) under or with respect to any Material Lease, and (B) under or
with respect to any other Company Leases except where the existence of such defaults, individually
or in the aggregate, under any such other Company Lease does not and would not reasonably be
expected to have a Company Material Adverse Effect. With respect to all Material Leases, all
buildings, improvements and fixtures and equipment located within, on or under the Leased Real
Property and used in the Business (w) are in good operating condition and repair (ordinary wear and
tear excepted); and (x) are in material compliance with zoning and other applicable land use
regulations for their current uses. With respect to each Leased Real Property that is the subject
of a Material Lease, each such property is fit for the continued use of such facilities in the
manner appropriate for the purposes for which it is presently devoted. The Company has made
available to the Buyer true, complete and accurate copies of all Company Leases, and, to the
Knowledge of the Company, there are no material oral agreements, promises or understandings with
respect to any Leased Real Property.
3.10 Intellectual Property.
(a) Except as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, the Company and its Subsidiaries own, license, sublicense or
otherwise possess legally enforceable rights to use all Intellectual Property necessary to conduct
the business of the Company and its Subsidiaries, taken as a whole, as currently conducted. For
purposes of this Agreement, the term “Intellectual Property” means (i) patents, trademarks,
service marks, trade names, domain names, copyrights, designs and trade secrets, (ii) applications
for and registrations of such patents, trademarks, service marks, trade names, domain names,
copyrights and designs, (iii) processes, formulae, methods, schematics, technology, know-how,
computer software programs and applications, and (iv) other tangible or intangible proprietary or
confidential information and materials.
(b) Except as would not be reasonably expected to have a Company Material Adverse Effect, the
execution and delivery of this Agreement by the Company and the consummation by the Company of the
Merger will not result in the breach of, or create on behalf of any third party the right to
terminate or modify, (i) any license, sublicense or other agreement relating to any Intellectual
Property owned by the Company (the “Company Intellectual Property”), or (ii) any license,
sublicense and other agreement as to which the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is authorized to use any third-party
Intellectual Property (the “Third-Party Intellectual Property”).
(c) All patents and registrations for trademarks, service marks and copyrights which are held
by the Company or any of its Subsidiaries and which are material to the business of the Company and
its Subsidiaries, taken as a whole, as currently conducted, are subsisting and, since the date that
is one year prior to the date of this Agreement, have not expired or been cancelled.
23
(d) Except as would not have, individually or in the aggregate, reasonably be expected to have
a Company Material Adverse Effect, (i) there are no pending or, to the Knowledge of the Company,
threatened claims by any person alleging infringement, violation or misappropriation by the Company
or any of its Subsidiaries for their use of the Intellectual Property of the Company or any of its
Subsidiaries, (ii) the conduct of the business of the Company and its Subsidiaries as currently
conducted does not infringe, violate or misappropriate any Intellectual Property rights of any
person, (iii) neither the Company nor any of its Subsidiaries has made any claim of a violation,
infringement or misappropriation by others of its rights to or in connection with the Intellectual
Property of the Company or any of its Subsidiaries and (iv) to the Knowledge of the Company, no
person is infringing, violating or infringing any Intellectual Property of the Company or any of
its Subsidiaries. Since January 1, 2004, neither the Company nor any of its Subsidiaries has
received any written claim or notice alleging any such infringement, violation or misappropriation.
3.11 Contracts.
(a) The Company has made available to the Buyer a true, correct and complete copy of each
Company Material Contract (including all amendments and modifications thereto) in effect on the
date of this Agreement. As used in this Agreement, “Company Material Contract” means all
agreements, contracts, commitments, licenses (or sublicenses), notes, bonds, mortgages, indentures,
leases (or subleases) or other instruments or obligations, whether written or oral
(“Contracts”) to which the Company or any of its Subsidiaries is a party or by which the
Company, any of its Subsidiaries or any of their respective properties or assets is bound that:
(i) are or 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 or disclosed by the
Company on a Current Report on Form 8-K;
(ii) with respect to a joint venture, partnership, limited liability or other similar
agreement or arrangement, relate to the formation, creation, operation, management or
control of any partnership or joint venture that is material to the business of the Company
and the Subsidiaries, taken as a whole;
(iii) relate to Indebtedness and having an outstanding principal amount, individually
or in the aggregate, in excess of $2,000,000;
(iv) were entered into after December 31, 2006 or not yet consummated, and involve the
acquisition from another person or disposition to another Person, directly or indirectly (by
merger or otherwise), of assets or capital stock or other equity interests of another Person
for aggregate consideration under such Contract (or
series of related Contracts), individually or in the aggregate, in excess of $2,000,000
(other than acquisitions or dispositions of inventory in the Ordinary Course of Business);
(v) relate to an acquisition, divestiture, merger or similar transaction that contains
representations, covenants, indemnities or other obligations (including indemnification,
“earn-out” or other contingent obligations), that are still in effect and,
24
individually or
in the aggregate, could reasonably be expected to result in payments in excess of
$2,000,000;
(vi) other than an acquisition subject to clause (v) above, obligate the Company to
make any capital commitment or capital expenditure, other than acquisitions of inventory,
(including pursuant to any joint venture), individually or in the aggregate, in excess of
$3,000,000;
(vii) are guaranties, indemnities, surety bonds, commitments, and other similar
primary, direct or contingent financial obligations whereby the Company or its Subsidiaries
may be liable or obligated for a debt or obligation of another (including without limitation
all guaranties with respect to Company Leases);
(viii) are license agreements that are material to the business of the Company and its
Subsidiaries, taken as a whole, pursuant to which the Company or any of its Subsidiaries is
a party and licenses in Intellectual Property or licenses out Intellectual Property owned by
the Company or its Subsidiaries, other than license agreements for software that is
generally commercially available;
(ix) are standard forms of the Company’s or any Subsidiary of the Company’s franchise
agreement currently in effect or that is a franchise agreement of the Company or any of its
Subsidiaries and contains terms deviating in any material respect from the terms of such
standard forms;
(x) provide for aggregate commitments by the Company and/or its Subsidiaries of more
than $2,000,000 over the remaining term of such contract; or
(xi) relate to an Affiliate Transaction.
(b) Each Company Material Contract is valid and binding on the Company and any of its
Subsidiaries to the extent such Subsidiary is a party thereto, as applicable, and to the Knowledge
of the Company, each other party thereto, and is in full force and effect and enforceable in
accordance with its terms, except where the failure to be valid, binding, enforceable and in full
force and effect, individually or in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries nor, to the
Company’s Knowledge, any other party to any Company Material Contract is in violation of or in
default under (nor does there exist any condition which, upon the passage of time or the giving of
notice or both, would cause such a violation of or default under) or has failed to perform under
any Company Material Contract, except for violations, defaults and failures to perform that,
individually or in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect.
(c) Except for employment-related Contracts filed or incorporated by reference as an exhibit
to a Company SEC Document filed prior to the date hereof or Company Employee Plans, Section
3.11(c) of the Company Disclosure Letter sets forth a correct and complete list of the
Contracts that are in existence as of the date of this Agreement under which the Company has any
existing or future material liabilities between the Company or any of its Subsidiaries, on the one
hand, and, on the other hand, any (i) present officer or director of either
25
the Company or any of
its Subsidiaries or any person that has served as such an officer or director or any of such
officer’s or director’s immediate family members (excluding any person that served as a director or
officer of any Subsidiary prior to its acquisition by the Company, and such person’s immediate
family members, provided that such Person did not continue to serve as a director or officer after
the date of such acquisition), (ii) record or beneficial owner of more than 5% of the Shares as of
the date hereof, or (iii) to the Knowledge of the Company, any Affiliate of any such officer,
director or owner (other than the Company or any of its Subsidiaries) (each, an “Affiliate
Transaction”). The Company has provided to Buyer true, correct and complete copies of each
Contract or other relevant documentation (including any amendments or modifications thereto)
providing for each Affiliate Transaction.
3.12 Litigation; Investigations. There are no investigations or proceedings pending
or, to the Knowledge of the Company, threatened by any Governmental Entity with respect to the
Company or any of its Subsidiaries or any of their properties or assets. There are no (i) actions,
suits, proceedings, claims, or arbitrations pending or, to the Company’s Knowledge, threatened
against the Company or any of its Subsidiaries or any of their respective properties or assets, at
Law or in equity, or (ii) judgments, orders or decrees outstanding against the Company or any of
its Subsidiaries, which, in the case of clauses (i) – (ii), individually or in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect.
3.13 Environmental Matters.
(a) Except for matters that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect:
(i) the Company and its Subsidiaries have each conducted their respective businesses in
compliance with all, and have not violated any, applicable Environmental Laws;
(ii) neither the Company nor its Subsidiaries has received any written notice alleging
any of them has not complied with applicable Environmental Laws;
(iii) to the Company’s Knowledge, the properties currently owned or operated by the
Company and its Subsidiaries (including, without limitation, soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous Substances;
(iv) to the Company’s Knowledge, the properties formerly owned or operated by the
Company or any of its Subsidiaries were not contaminated with Hazardous Substances in an
amount or concentration that would give rise to an obligation
to act or disclose that condition under any Environmental Law during the period of
ownership or operation by the Company or any of its Subsidiaries;
(v) neither the Company nor any of its Subsidiaries has received a written notice that
it is subject to liability in respect of any Hazardous Substance in violation of any
Environmental Law;
26
(vi) neither the Company nor any of its Subsidiaries have disposed of, released or
transported in violation of any applicable Environmental Law any Hazardous Substance except
in compliance with applicable Law;
(vii) neither the Company nor any of its Subsidiaries has received any written notice,
demand, claim or request for information alleging that the Company or any of its
Subsidiaries may be in violation of, liable under or have obligations under any
Environmental Law; and
(viii) neither the Company nor any of its Subsidiaries is subject to or are threatened
in writing to be subject to, any liabilities relating to any suit, settlement, court order,
administrative order, regulatory requirement, judgment or written claim asserted or arising
under any Environmental Law or any agreement relating to environmental liabilities.
(b) For purposes of this Agreement, the term “Environmental Law” means any Law
relating to: (i) the protection, preservation, investigation or restoration of the environment,
human health and safety, or natural resources, (ii) the handling, use, storage, treatment,
transport, disposal, release or threatened release of any Hazardous Substance or (iii) noise, odor
or wetlands protection.
(c) For purposes of this Agreement, the term “Hazardous Substance” means: (i) any
substance that is regulated or which falls within the definition of a “hazardous substance,”
“hazardous waste” or “hazardous material” pursuant to any Environmental Law; or (ii) any petroleum
product or by-product, asbestos or asbestos-containing material, polychlorinated biphenyls,
radioactive materials or radon.
(d) The parties agree that the only representations and warranties of the Company in this
Agreement as to any environmental matters or any other obligation or liability with respect to
Hazardous Substances or materials of environmental concern are those contained in this Section
3.13. Without limiting the generality of the foregoing, the Buyer specifically acknowledges
that the representations and warranties contained in Sections 3.15 and 3.16 do not
relate to environmental matters.
3.14 Employee Benefit Plans.
(a) Section 3.14(a) of the Company Disclosure Letter sets forth a true, complete and
accurate list, as of the date of this Agreement, of all Employee Benefit Plans maintained, or
contributed to, by the Company, any of the Company’s Subsidiaries or any of their ERISA Affiliates
(together, the “Company Employee Plans”) and each Material Employment Agreement. For
purposes of this Agreement, the following terms shall have the
following meanings: (i) “Employee Benefit Plan” means any “employee pension benefit
plan” (as defined in Section 3(2) of ERISA), whether or not subject to ERISA, any “employee welfare
benefit plan” (as defined in Section 3(1) of ERISA), whether or not subject to ERISA, and any other
written or oral plan, agreement or arrangement involving direct or indirect compensation, including
the Company Stock Plans, and any vacation, change in control, fringe benefit, insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses,
27
stock options, stock
purchase, phantom stock, stock appreciation or other forms of cash, equity or other incentive
compensation or post-retirement compensation and all unexpired severance agreements, for the
benefit of, or relating to, any current or former employee, independent contractor or director of
the Company or any of its Subsidiaries or an ERISA Affiliate; (ii) “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended; (iii) “ERISA Affiliate” means
any entity which is a member of (A) a controlled group of corporations (as defined in Section
414(b) of the Code), (B) a group of trades or businesses under common control (as defined in
Section 414(c) of the Code), or (C) an affiliated service group (as defined under Section 414(m) of
the Code or the regulations under Section 414(o) of the Code), any of which includes or included
the Company or a Subsidiary of the Company; (iv) “Employment Agreement” means any contract,
offer letter or agreement of the Company or any of its Subsidiaries with or addressed to any
individual who is rendering or has rendered services thereto as an employee or consultant pursuant
to which the Company or any of its Subsidiaries has any actual or contingent liability or
obligation to provide compensation and/or benefits in consideration for past, present or future
services pursuant to which the Company or any of its subsidiaries has or could have any obligation
to provide compensation and/or benefits (including without limitation severance pay or benefits);
and (v) “Material Employment Agreement” means any Employment Agreement pursuant to which
the Company or any of its Subsidiaries has or could have any obligation to provide compensation
and/or benefits (including without limitation severance pay or benefits) in an amount or having a
value in excess of $100,000 in any year.
(b) With respect to each Company Employee Plan, the Company has made available to the Buyer a
true, complete and accurate copy of (i) such Company Employee Plan (or a written description of any
unwritten Company Employee Plan), (ii) the most recent annual report (Form 5500, including related
audited financial and actuarial reports) filed with the IRS and (iii) each trust agreement, group
annuity contract and summary plan description and summary of material modifications, if any,
relating to such Company Employee Plan. The Company has made available to the Buyer a true,
complete and accurate copy of each Material Employment Agreement.
(c) Each Company Employee Plan is being administered in all material respects in accordance
with ERISA, the Code and all other applicable laws and the regulations thereunder and in accordance
with its terms. There is not now, nor do any circumstances exist that could give rise to, any
requirement for the posting of security with respect to a Company Employee Plan or the imposition
of any Lien on the assets of the Company or any of its Subsidiaries under ERISA or the Code. Each
Company Employee Plan that is a “nonqualified deferred compensation plan” within the meaning of
Section 409A(d)(1) of the Code and any award thereunder, in each case that is subject to Section
409A of the Code, has been operated in good faith compliance in all material respects with Section
409A of the Code since January 1,
2005, the proposed regulations issued thereunder and the Internal Revenue Service Notice
2005-1.
(d) With respect to each Company Employee Plan, there are no benefit obligations for which
contributions have not been made or properly accrued to the extent required by GAAP on the
Company’s financial statements. The assets of each Company
28
Employee Plan which is funded are
reported at their fair market value on the books and records of such Employee Benefit Plan and, if
applicable, the Company’s financial statements.
(e) All the Company Employee Plans that are intended to be qualified under Section 401(a) of
the Code have received determination letters from the IRS to the effect that such Company Employee
Plans are qualified and the plans and trusts related thereto are exempt from federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been
revoked and revocation has not been threatened, and no such Employee Benefit Plan has been amended
or operated since the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its qualification or
materially increase its cost.
(f) Neither the Company, any of the Company’s Subsidiaries nor any of their ERISA Affiliates
has (i) ever maintained a Company Employee Plan which was ever subject to Section 412 of the Code
or Title IV of ERISA; (ii) ever been obligated to contribute to a “multiemployer plan” (as defined
in Section 4001(a)(3) of ERISA); or (iii) ever maintained a Company Employee Plan which was ever
subject to the laws of any jurisdiction outside of the United States.
(g) Neither the Company nor any of its Subsidiaries is a party to any oral or written (i)
Company Employee Plan, Employment Agreement or other agreement with any stockholders, director or
executive officer of the Company or any of its Subsidiaries (A) the benefits of which are
contingent, or the terms of which are materially altered, or cause the accelerated vesting, funding
or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer
or director of the Company or any of its Subsidiaries, or could limit the right of the Company or
any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets, upon the
occurrence of a transaction involving the Company or any of its Subsidiaries of the nature of any
of the transactions contemplated by this Agreement (either alone or in conjunction with any other
event), (B) providing any term of employment or compensation guarantee, or (C) providing severance
benefits or other benefits after the termination of employment of such director, executive officer
or key employee; or (ii) Company Employee Plan, Employment Agreement or other agreement or plan
binding the Company or any of its Subsidiaries, including any stock option plan, stock appreciation
right plan, restricted stock plan, stock purchase plan or severance benefit plan, any of the
benefits of which shall be increased, or the vesting of the benefits of which shall be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement (either alone or in
conjunction with any other event) or the value of any of the benefits of which shall be calculated
on the basis of any of the transactions contemplated by this Agreement (either alone or in
conjunction with any other event).
(h) None of the Company, any Subsidiary, or any Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, except as required by applicable
Law and there has been no communication to employees by the Company or any of its Subsidiaries
which could reasonably be interpreted to promise or guarantee such employees retiree health or life
insurance or other retiree death benefits on a permanent basis.
29
(i) There are no pending or threatened claims (other than claims for benefits in the ordinary
course), lawsuits or arbitrations which have been asserted or instituted, and, to Company’s
Knowledge, no set of circumstances exists which may reasonably give rise to a claim or lawsuit,
against the Company Employee Plans, any fiduciaries thereof with respect to their duties to the
Company Employee Plans or the assets of any of the trusts under any of the Plans which could
reasonably be expected to result in any material liability of the Company or any of its
Subsidiaries to the Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor, any Company Employee Plan, any participant in a Company Employee Plan, or any
other party.
(j) The parties acknowledge that certain payments have been made or are to be made and certain
benefits have been granted or are to be granted according to employment compensation, severance and
other employee benefit plans of the Company and its Subsidiaries, including the Company Employee
Plans and the Employment Agreements (collectively, the “Arrangements”) to certain holders
of Company Common Stock and other securities of the Company (the “Covered
Securityholders”). The Company represents and warrants that all such amounts payable under the
Arrangements (i) are being paid or granted as compensation for past services performed, future
services to be performed, or future services to be refrained from performing, by the Covered
Securityholders (and matters incidental thereto) and (ii) are not calculated based on the number of
Shares tendered or to be tendered into the Offer by the applicable Covered Securityholder. The
Company also represents and warrants that (A) the adoption, approval, amendment or modification of
each Arrangement since the discussions relating to the transactions contemplated hereby between the
Company and the Buyer began has been approved as an employment compensation, severance or other
employee benefit arrangement solely by independent directors of the Company in accordance with the
requirements of Rule 14d-10(d)(2) under the Exchange Act and the instructions thereto and (B) the
“safe harbor” provided pursuant to Rule 14d-10(d)(2) is otherwise applicable thereto as a result of
the taking prior to the execution of this Agreement of all necessary actions by the Company Board,
the Executive Compensation Committee of the Company Board or its independent directors. A true and
complete copy of any resolutions of any committee of the Company Board reflecting any approvals and
actions referred to in the preceding sentence and taken prior to the date of this Agreement has
been provided to the Buyer prior to the execution of this Agreement.
3.15 Compliance with Laws. The Company and each of its Subsidiaries is and has been
since December 31, 2001, in compliance with, and is not in violation of or default under, any
applicable Law, except for failures to comply or violations or defaults that, individually or in
the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
3.16 Permits. The Company and each of its Subsidiaries have all franchises, tariffs,
grants, authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the Company and its
Subsidiaries to own, lease and operate their properties and assets or to carry on their businesses
as they are now being conducted (the “Company Permits”), except for where the failure to
have any of the Company Permits, individually or in the aggregate, would not reasonably be expected
to have a Company Material Adverse Effect. The Company Permits are in full force and effect,
except for any failures to be in full force and effect that, individually or in the aggregate,
would not
30
reasonably be expected to have a Company Material Adverse Effect. The Company and each
of its Subsidiaries are in compliance with the terms of the Company Permits, except for such
failures to comply that, individually or in the aggregate, would not reasonably be expected to have
a Company Material Adverse Effect.
3.17 Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is a party to, or bound by, any collective
bargaining agreement or other Contract with a labor union or labor organization nor is any labor
organization or group of employees of the Company or any of its Subsidiaries made a pending demand
for recognition or certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or threatened to be brought or
filed, with the National Labor Relations Board or any other labor relations tribunal or authority
is seeking to compel it to bargain with any labor union or labor organization. Neither the Company
nor any of its Subsidiaries is the subject of any proceeding asserting that the Company or any of
its Subsidiaries has committed an unfair labor practice that, individually or in the aggregate,
would reasonably be expected to have a Company Material Adverse Effect. There are no pending or,
to the Company’s Knowledge, threatened labor strikes, disputes, walkouts, work stoppages,
slow-downs or lockouts, material arbitrations or material grievances, or other material labor
disputes pending or threatened against or involving the Company or any of its subsidiaries
involving the Company or any of its Subsidiaries that, individually or in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect.
(b) Each of the Company and its subsidiaries is in material compliance with all applicable
Laws respecting employment and employment practices, terms and conditions of employment, wages and
hours and occupational safety and health and the Worker Adjustment and Retraining Notification Act
and all similar state and local Laws.
3.18 Insurance. Section 3.18 of the Company Disclosure Letter contains a list
of all insurance policies applicable to the Company and its Subsidiaries that is currently in
effect, including policy type (e.g., whether such policy is occurrence-based), policy
numbers, applicable deductible levels, policy periods, available limits of coverage, and
information regarding any settlement or commutation of same. The Company and its Subsidiaries
maintain, or are entitled to the benefits of, insurance with reputable insurance carriers against
risks of a character and in such amounts that are customary for businesses of their type. Except
as would not have, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, none of the Company or its Subsidiaries has received notice from any
insurer or agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance, and all such insurance
is outstanding and duly in force.
3.19 Opinion of Financial Advisor. The Company Board has received from the Company’s
financial advisor, UBS Securities LLC (“UBS”), an opinion, to the effect that, as of the
date of this Agreement, the $19.50 per share consideration to be received in the Offer and the
Merger, taken together, by the holders of Company Common Stock (other than the Buyer, Acquisition
Sub, the stockholders that are party to the Support Agreements and their respective Affiliates) is
fair, from a financial point of view, to such holders.
31
3.20 Brokers. No agent, broker, investment banker, financial advisor or other firm or
Person is or shall be entitled, as a result of any action, agreement or commitment of the Company
or any of its Affiliates, to any broker’s, finder’s, financial advisor’s or other similar fee or
commission in connection with any of the transactions contemplated by this Agreement, except UBS,
the fees and expenses of which shall be paid in full by the Company as of the Closing Date of the
Merger.
3.21 Compliance with Laws; Payment Programs.
(a) The Company and each of its Subsidiaries is, and has been, in compliance in all material
respects with the terms and provisions of all Laws to which it and its properties and assets are
subject (collectively, “Applicable Laws”), including, without limitation, all rules and
regulations of the Medicare program (Title XVIII of the Social Security Act), the Medicaid program
(Title XIX of the Social Security Act), the TRICARE program (10 U.S.C. §§ 1071, et
seq.) and any other federal, state or local governmental health care program in which the
Company or any of its Subsidiaries participates (hereinafter referred to collectively as the
“Governmental Programs”), including any manual provisions, program integrity manuals,
policies, procedures and administrative guidance interpreting such rules and regulations.
(b) Neither the Company, nor any Subsidiary, nor any shareholder owning five percent (5%) or
more of any class of securities, officer or director thereof, nor to the Knowledge of the Company,
any current or former employee of the Company, or any persons and entities providing professional
services in connection with the Company’s or any Subsidiary’s business: (i) has at any time been
suspended or excluded or, to the Knowledge of the Company, threatened to be suspended or excluded
from participation in any Governmental Program; (ii) has engaged in any activities which are
prohibited under 42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b and 1395nn, and 42 C.F.R. § 411.351
et seq., 31 U.S.C. §§ 3729 to 3733 (or other federal or state statutes, rules or
regulations related to any false or fraudulent claims, health care fraud and abuse or anti-self
referral) or the regulations promulgated pursuant to such statutes, or related state statutes or
regulations, including but not limited to the following as applicable to any particular Government
Program: knowingly and willfully making or causing to be made a false statement or representation
of fact in any application for any benefit or payment; knowingly and willfully making or causing to
be made any false statement or representation of fact for use in determining rights to any benefit
or payment; failing to disclose knowledge by a claimant of the occurrence of any event affecting
the initial or continued right to
any benefit or payment on its own behalf or on behalf of another, with intent to fraudulently
secure such benefit or payment; and knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration (A) in return for
referring an individual to a person for the furnishing or arranging for the furnishing of any item
of service for which payment may be made in whole or in part by any Governmental Program, or (B) in
return for purchasing, leasing, or ordering or arranging for or recommending purchasing, leasing,
or ordering any good, facility, service or item for which payment may be made in whole or in part
by any Governmental Program.
(c) The Company and each Subsidiary has duly and timely filed with the proper authorities all
reports and other information required by any Governmental Entity. The
32
Company and each Subsidiary
has paid or caused to be paid all known and undisputed refunds, overpayments, discounts or
adjustments. Except as set forth on Section 3.21(c) of the Company Disclosure Letter: (i)
there are no material pending appeals, adjustments, challenges, audits, inquiries, litigations or
notices of intent to audit with respect to prior reports or xxxxxxxx; (ii) during the last two
years neither the Company nor any Subsidiary has been audited, or otherwise examined by any Company
Payment Program resulting in an undisputed liability or payment due and payable in excess of Fifty
Thousand Dollars ($50,000); and (iii) there are no reports required to be filed by the Company or
any Subsidiary in order to be paid under any Company Payment Program for services rendered, except
for reports not yet due. “Private Programs” shall mean any non-Governmental Program third
party payor with which the Company or any Subsidiary has a Contract to provide services and to
receive payment therefor and which in calendar year 2006 generated or which is expected in calendar
year 2007 to generate revenue for the Company and its Subsidiaries in excess of One Hundred
Thousand Dollars ($100,000). Collectively, Governmental Programs and Private Programs shall be
referred to as “Company Payment Programs.”
(d) Section 3.21(d) of the Company Disclosure Letter sets forth a true, complete and
accurate list of all provider numbers, supplier numbers or other authorizations to xxxx pursuant to
Governmental Programs that have been issued to the Company or any Subsidiary, and all provider,
supplier and other participating provider agreements under all Private Programs to which the
Company or any Subsidiary is a party. The Company and each Subsidiary meet the conditions for
participation in, and are in good standing with respect to, each Company Payment Program. There is
no pending, concluded or, to the Knowledge of Company, threatened: (i) investigation, audit, claim
review, or other action pending or threatened which is likely to result in a revocation,
suspension, termination, probation, restriction, limitation, or non-renewal of any Company Payment
Program provider/supplier number, participation agreement or authorization, or result in Company’s
or any Subsidiary’s exclusion or debarment from any Company Payment Program; (ii) validation
review, program integrity review or reimbursement audit other than those conducted in the Ordinary
Course of Business; (iii) voluntary disclosure by Company or any Subsidiary to the Office of the
Inspector General of the United States Department of Health and Human Services, a Medicare fiscal
intermediary, a State Medicaid program or any other Governmental Entity of a potential overpayment
matter other than refunds processed in the Ordinary Course of Business; or (iv) health care survey
report related to licensure or certification (including, without limitation, an annual or biannual
Medicare or Medicaid certification survey report) which includes any
statement of material deficiencies pertaining to Company or any Subsidiary which will not be
fully corrected prior to Closing.
(e) Neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any
of their respective, directors, officers, employees or agents, during the past three years: (i)
has been assessed a civil money penalty under Section 1128A of the Social Security Act or any
regulations promulgated thereunder; (ii) has been convicted of any criminal offense relating to the
delivery of any item or service under a Governmental Program, including but not limited to
convictions relating to the unlawful manufacture, distribution, prescription, or dispensing of a
prescription drug or a controlled substance; (iii) has been convicted under any Law of a criminal
offense relating to neglect or abuse of patients in connection with the delivery
33
of a health care
item or service; or (iv) is a party to or subject to any action or proceeding concerning any of the
matters described above in clauses (i) through (iii) above.
3.22 Controlled Substances.
(a) Neither the Company nor any Subsidiary of the Company, nor, to the Knowledge of the
Company, any of their respective officers, directors, employees, or agents or persons who provide
professional services to the Company or any Subsidiary, has, in connection with activities directly
or indirectly related to the Company or such Subsidiary, engaged in any activities which are
prohibited under the Federal Controlled Substances Act, 21 U.S.C. §§ 801, et seq.
or the regulations promulgated pursuant to such statute or any related state or local statutes or
regulations concerning the dispensing and sale of controlled substances.
(b) The Company and each of its Subsidiaries: (i) is in material compliance with all
Applicable Laws and any other applicable guidance relating to the operation of pharmacies, the
repackaging of drug products, the wholesale distribution of prescription drugs or controlled
substances, and the dispensing of prescription drugs or controlled substances; (ii) is in
compliance with all Applicable Laws and any other applicable guidance relating to the labeling,
packaging, advertising, or adulteration of prescription drugs or controlled substances; and (iii)
is not subject to any sanction or other adverse action by any Governmental Entity for the matters
described above in clauses (i) and (ii).
3.23 Inventories; Suppliers. The inventory of the Company and its Subsidiaries
consists, and will consist at the Closing of items of a quality and quantity usable and saleable in
the Ordinary Course of Business. The amount and quality of the inventory of the Company and its
Subsidiaries is consistent with normal operating levels maintained by the Company and its
Subsidiaries in the Ordinary Course of Business. Section 3.23 of the Company Disclosure
Letter sets forth a list of all of the Material Suppliers of the Company and its Subsidiaries,
taken as a whole, as well as a list of all Contracts related to such Material Suppliers, a true,
complete and correct copy of each has been previously provided to the Buyer. Except as set forth
in Section 3.23 of the Disclosure Schedule, since December 31, 2006, no Material Supplier
has either terminated its relationship with the Company or its Subsidiaries or materially reduced
the aggregate value of its annual transactions with the Company or its Subsidiaries, taken as a
whole, nor has any Material Supplier given formal written notice to the Company or any of its
Subsidiaries of its intention to do so. “Material Supplier” means the 10 largest suppliers
of the Company
and its Subsidiaries, taken as a whole, in each case, measured in terms of annual expenditures
by the Company and its Subsidiaries, taken as a whole, for the year ended December 31, 2006.
3.24 Absence of Certain Business Practices.
(a) Neither the Company nor its Subsidiaries, nor, to the Knowledge of the Company, any
officer, director, employee or agent of the Company or its Subsidiaries, nor any other person or
entity acting on behalf of the Company or its Subsidiaries, acting alone or together, has (i)
received, directly or indirectly, any rebates, payments, commissions, promotional allowances or any
other economic benefits, regardless of their nature or type, from any customer, employee or
official of any Governmental Entity or other person or entity with
34
whom the Company or such
Subsidiary has done business, directly or indirectly, or (ii) directly or indirectly, given or
agreed to give any gift or similar benefit to any customer, employee or official of any
Governmental Entity or other person or entity who is or may be in a position to help or hinder the
Company or any Subsidiary (or assist the Company or any Subsidiary in connection with any actual or
proposed transaction) which, in the case of either clause (i) or clause (ii) above, would
reasonably be expected to subject the Company or its Subsidiaries to any material damage or penalty
in any civil, criminal, administrative or regulatory proceeding. Neither the Company nor its
Subsidiaries, nor, to the Knowledge of the Company, any officer, director, employee or agent
thereof has used any funds for unlawful contributions, gifts, entertainment or other expenses
relating to political activity or otherwise, or has made any direct or indirect unlawful payment to
officials or employees of a Governmental Entity from the entities’ funds or been reimbursed from
the entities’ funds for any such payment, or is aware that any other person associated with or
acting on behalf of the Company or any Subsidiary has engaged in any such activities.
(b) The Company and each of its Subsidiaries are in compliance with all Applicable Laws
relating to patient or individual health care information, including, without limitation, the
Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104–191, as amended, and
any rules or regulations promulgated thereunder, except for failures to comply that, individually
or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.
3.25 Franchise Matters.
(a) Since June 30, 2003, the Company and its Subsidiaries (i) have maintained records of all
franchise activities in which full, true, and complete entries have been made of all material
dealings and transactions in relation to their franchise activities, including all offering
circulars, Franchise Agreements (as defined below), correspondence with franchisees, written
complaints by franchisees, and government audits, (ii) have complied in all material respects with
all applicable Laws regarding franchise activities and other franchise-related matters, (iii) have
complied with all franchise agreements and other agreements by which the Company or its
Subsidiaries directly or indirectly grant any third party franchise rights (whether not such
agreement was entered into before or after June 30, 2002, each, a “Franchise Agreement”),
(iv) have obtained and maintained in place franchisee agreements which contain provisions requiring
the franchisee to (A) indemnify the Company or any
Subsidiary, as applicable, with respect to claims relating to the franchisee’s business and
(B) to obtain insurance from financially sound and respectable insurers to cover such indemnity,
naming the Company as additional insured and loss payee, (v) have timely filed with the applicable
Governmental Entities all Uniform Franchise Offering Circulars and other required filings, (vi)
each Uniform Franchise Offering Circular delivered to any franchisee, prospective franchisee, or
Governmental Entity by the Company or any Subsidiary complied in all material respects as of the
date delivered with all requirements of applicable Law, and, when delivered, did not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (vii) the Company and its Subsidiaries have accounted for and
administered in accordance with the Franchise Agreements and applicable franchise laws all
advertising and marketing funds and cooperatives, if any, which the Company
35
and its Subsidiaries
administer and into which monies are paid by their franchisees. Section 3.25(a) of the
Company Disclosure Letter sets forth a complete and accurate list, as of the date hereof, of all
currently effective Franchise Agreements, including the name of the franchisee and the date and
expiration date of the applicable Franchise Agreement. The Company has provided the Buyer with
true, complete and correct copies of all currently effective Franchise Agreements, including any
amendments or modifications thereto, as of the date hereof, and there are no oral agreements,
promises or understandings with respect to any currently effective Franchise Agreements.
(b) Except as set forth in Section 3.25(b) of the Company Disclosure Letter:
(i) the royalty rates and required advertising contributions specified in each
currently effective Franchise Agreement remain in effect, are being paid when due and have
not been reduced, modified, waived, or otherwise affected by any Franchise Agreement “side
letter,” modification, amendment, waiver, or suspension, in whole or in part and each
currently effective Franchise Agreement is in full force and effect;
(ii) all franchise registrations remain in full force and effect and are not the
subject of any existing or threatened action by a Governmental Entity or otherwise intended,
in whole or in part, to result in the termination, revocation, modification, suspension,
conditioning, or dissolution of any such franchise registration and/or any other
circumstance which might or would impair, impede or preclude the Company’s ability routinely
to renew or amend (as the case may be) any such franchise registration and/or enter into
Franchise Agreements in any jurisdiction;
(iii) there are no written, or to the Knowledge of the Company, threatened, franchisee
complaints, threats to initiate litigation or arbitration, or threats to file complaints
with a Governmental Entity, whether such threats have been filed either with the Company or
any Subsidiary and/or any third party (including any Governmental Entity);
(iv) there exists no extant formal or, to the Knowledge of the Company, informal,
complaint, inquiry, investigation, or judicial or administrative action or proceeding,
communicated or commenced (as the case may be) by any Governmental Entity, to or against the
Company or any Subsidiary regarding its offer and sale of
franchises; the administration of its franchise network; advancing or referring to any
complaint received from any franchisee; inquiring of or contesting any element of the
Company’s franchise program or franchise relationships (including antitrust issues such as
predatory pricing or monopolization); and/or, otherwise related to the Company’s or any
Subsidiary’s compliance with any franchise Law;
(v) there exists no litigation or other claims asserted by any third party against any
of the Company’s franchisees in which the Company or any Subsidiary is a party thereto under
any theory, including negligence or “vicarious liability”;
(vi) no supply Contract to which the Company or any Subsidiary is a party may be
unilaterally terminated by the subject supplier as a result of this Agreement,
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the Offer,
the Merger or any of the other transactions contemplated by this Agreement, if that supply
contract is material to the operation of the Company’s network of franchisees, taken as a
whole;
(vii) since December 31, 2004, neither the Company, nor any of its Subsidiaries has
refused to renew any Franchise Agreement;
(viii) to the Company’s Knowledge, no franchisee of the Company or any of its
Subsidiaries is currently in default in any material respect under any Franchise Agreement;
(ix) since December 31, 2004, neither the Company nor any of its Subsidiaries has
terminated any Franchise Agreement; and
(x) the Company may enter into this Agreement and consummate the transactions
contemplated hereby without the consent of any Franchisee.
(c) Exclusivity Arrangements. Except as set forth in Section 3.25(c) of the
Company Disclosure Letter, no franchisee of the Company has a protected territory, exclusive
territory, covenant not to compete, right of first refusal, option to acquire additional
territories or other similar arrangement with the Company or any of its affiliates which in any
case would be material to the Company and its Subsidiaries, taken as a whole (collectively, the
“Territorial Rights”), pursuant to which the Company is restricted in any way in its right
to own or operate, or license others to own or operate, any business or line of business. Except
as set forth in Section 3.25(c) of the Company Disclosure Letter, no Franchisee’s
Territorial Rights conflict with the Territorial Rights of any other Franchisee.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE ACQUISITION SUB
AND THE ACQUISITION SUB
The Buyer and the Acquisition Sub jointly and severally represent and warrant to the Company
that the statements contained in this Article IV are true and correct.
4.1 Organization, Standing and Power. Each of the Buyer and the Acquisition Sub is a
corporation duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as now being conducted, and is
duly qualified to do business and, where applicable as a legal concept, is in good standing as a
foreign corporation in each jurisdiction in which the character of the properties it owns, operates
or leases or the nature of its activities makes such qualification necessary, except for such
failures to be so organized, qualified or in good standing, individually or in the aggregate, that
would not reasonably be expected to have a Buyer Material Adverse Effect. For purposes of this
Agreement, the term “Buyer Material Adverse Effect” means any material adverse effect on
the ability of the Buyer or Acquisition Sub to consummate the transactions contemplated by this
Agreement.
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4.2 Authority; No Conflict; Required Filings and Consents.
(a) Each of the Buyer and the Acquisition Sub has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by this Agreement.
The execution and delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement by the Buyer and the Acquisition Sub have been duly authorized by all necessary
corporate action on the part of each of the Buyer and the Acquisition Sub. This Agreement has been
duly executed and delivered by each of the Buyer and the Acquisition Sub and constitutes the valid
and binding obligation of each of the Buyer and the Acquisition Sub, enforceable against each of
them in accordance with its terms, subject to the Bankruptcy and Equity Exception.
(b) The execution and delivery of this Agreement by each of the Buyer and the Acquisition Sub
do not, and the consummation by the Buyer and the Acquisition Sub of the transactions contemplated
by this Agreement shall not, (i) conflict with, or result in any violation or breach of, any
provision of the certificate of incorporation or bylaws of the Buyer or the Acquisition Sub, (ii)
conflict with, or result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, require a consent or waiver
under, constitute a change in control under, require the payment of a penalty under or result in
the imposition of any Lien on the Buyer’s or the Acquisition Sub’s assets under, any of the terms,
conditions or provisions of any lease, license, contract or other agreement, instrument or
obligation to which the Buyer or the Acquisition Sub is a party or by which any of them or any of
their properties or assets may be bound, or (iii) subject to compliance with the requirements
specified in clauses (i) and (ii) of Section 4.2(c), conflict with or violate any permit,
concession, franchise, license, judgment, injunction, order, decree, statute, law, ordinance, rule
or regulation applicable to the Buyer or the Acquisition Sub or any of its or their respective
properties or assets, except in the case of clauses (ii) and (iii) of this Section 4.2(b)
for any such conflicts, violations, breaches, defaults, terminations, cancellations, accelerations,
losses, penalties or Liens, and for any consents or waivers not obtained, that, individually or in
the aggregate, would not reasonably be expected to have a Buyer Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of, or registration,
declaration, notice or filing with, any Governmental Entity or any stock market or stock exchange
on which shares of common stock of Buyer are listed for trading is required by or with respect to
the Buyer or the Acquisition Sub in connection with the execution and delivery of this Agreement by
the Buyer or the Acquisition Sub or the consummation by the Buyer or the Acquisition Sub of the
transactions contemplated by this Agreement, except for (i) the pre-merger notification
requirements under the HSR Act, and (ii) the filing of the Certificate of Merger with the Delaware
Secretary of State and appropriate corresponding documents with the appropriate authorities of
other states in which the Company is qualified as a foreign corporation to transact business.
(d) No vote of the holders of any class or series of the Buyer’s capital stock or other
securities is necessary for the consummation by the Buyer of the transactions contemplated by this
Agreement.
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4.3 Schedule TO; Information Provided. The Schedule TO to be filed by the Buyer and
the Acquisition Sub in connection with the Offer and the other transactions contemplated by this
Agreement and the other Offer Documents will comply in all material respects with the requirements
of the Exchange Act. The Schedule TO and the other Offer Documents, and the information supplied
by or on behalf of the Buyer or the Acquisition Sub for inclusion in the Schedule 14D-9, on the
respective dates that the Schedule TO and the other Offer Documents and the Schedule 14D-9 are
filed with the Commission, and on the dates they are first published, sent or given to stockholders
of the Company, shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading. The information to be
supplied by or on behalf of the Buyer for inclusion in the Proxy Statement to be sent to the
stockholders of the Company in connection with the Company Meeting shall not, on the date the Proxy
Statement is first mailed to stockholders of the Company, at the time of the Company Meeting, or at
the Effective Time, contain any statement which, at such time and in light of the circumstances
under which it shall be made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the Proxy Statement not
false or misleading, or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the Company Meeting which has
become false or misleading. If at any time prior to the Company Meeting any fact or event relating
to the Buyer or any of its Affiliates which should be set forth in a supplement to the Proxy
Statement should be discovered by the Buyer or should occur, the Buyer shall, promptly after
becoming aware thereof, inform the Company of such fact or event.
4.4 No Undisclosed Liabilities. Except as disclosed in the registration statements, forms,
reports and other documents required to be filed with the SEC since January 1, 2004 (the “Buyer
SEC Reports”), and except for liabilities incurred in the Ordinary Course of Business between
the date of the Buyer’s most recent Form 10-K and the date of this Agreement, the Buyer and its
Subsidiaries do not have any liabilities of any nature required by GAAP to be reflected on an
audited consolidated balance
sheet or the notes thereto of the Buyer and its Subsidiaries that, individually or in the
aggregate, would reasonably be expected to have a Buyer Material Adverse Effect.
4.5 Litigation. As of the date of this Agreement, there is no action, suit, proceeding,
claim, arbitration or investigation pending and of which the Buyer or the Acquisition Sub has been
notified or, to the Buyer’s knowledge, threatened against the Buyer or any of its Subsidiaries, in
each case that, individually or in the aggregate, would reasonably be expected to have a Buyer
Material Adverse Effect.
4.6 Operations of Acquisition Sub. Acquisition Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement and has engaged in no business
activities other than incident to this Agreement and the transactions contemplated hereby.
4.7 Financing. At the expiration of the Offer and at the Effective Time, the Buyer
and the Acquisition Sub will have available all the funds necessary to purchase all the Shares
39
pursuant to the Offer and the Merger and to pay all fees and expenses payable by the Buyer or the
Acquisition Sub related to the transactions contemplated by this Agreement.
4.8 Ownership of Company Common Stock. Neither the Buyer nor any of the Buyer’s
“Affiliates” or “associates” (a) is an “interested stockholder” of the Company or (b) directly or
indirectly (other than on behalf of third parties) “owns,” or at any time during the three-year
period prior to the date of this Agreement, has owned, whether directly or indirectly, (i) any
shares of Company Common Stock, whether beneficially, of record or otherwise, or (ii) any
securities, contracts or obligations convertible into or exercisable for such stock, taking the
terms in quotation marks in the meanings defined in Section 203 of the DGCL.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided or permitted herein, set
forth in Section 5.1 of the Company Disclosure Letter or as consented to in writing by the
Buyer (which consent shall not be unreasonably withheld, conditioned or delayed, provided
that the Buyer shall be given at least 3 Business Days’ advance notice), during the period
commencing on the date of this Agreement and ending at the earlier of the Effective Time or the
date on which the Buyer Designees constitute a majority of the Company Board or such earlier date
as this Agreement is terminated in accordance with its terms (the “Interim Period”), the
Company shall, and shall cause each of its Subsidiaries to, use commercially reasonable efforts to
(x) act and carry on its business in the Ordinary Course of Business, (y) maintain and preserve
intact its business organization and business relationships, and (z) to retain the services of its
key officers and employees. Without limiting the generality of the foregoing, except as expressly
provided or permitted herein or as
set forth in Section 5.1 of the Company Disclosure Letter, during the Interim Period
the Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, do
any of the following without the prior written consent of the Buyer (which consent shall not be
unreasonably withheld, conditioned or delayed, provided that the Buyer shall be given at
least 3 Business Days’ advance notice):
(a) (i) declare, set aside or pay any dividends on, or make any other distributions
(whether in cash, securities or other property) in respect of, any of its capital stock
(other than dividends and distributions by a direct or indirect wholly owned Subsidiary of
the Company to its parent), (ii) adjust, split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock or any of its other securities; or (iii)
purchase, redeem or otherwise acquire any shares of its capital stock or any other of its
securities or any rights, warrants or options to acquire any such shares or other
securities, except, in the case of this clause (iii), for the acquisition of shares of
Company Common Stock (A) from holders of Company Stock Options in full or partial payment of
the exercise price payable by such holder upon exercise of Company Stock Options to the
extent required or permitted under the terms of such Company Stock Options, (B) from former
employees, directors and consultants in accordance with agreements providing for the
repurchase of shares at their original issuance price in connection with any termination of
services to the Company or any of its Subsidiaries a true, complete and
40
correct list and
description of each such arrangement is set forth in Section 5.1(a)(i) of the
Company Disclosure Letter, or (C) upon the conversion of, or a required repurchase of, the
Convertible Senior Notes, in each case pursuant to the indenture for such security;
(b) except as permitted by Section 5.1(j), issue, deliver, sell, grant, pledge
or otherwise dispose of or encumber any shares of its capital stock, any other voting
securities or any securities convertible into or exchangeable for, or any rights, warrants
or options to acquire, any such shares, voting securities or convertible or exchangeable
securities, in each case other than the issuance of shares of Company Common Stock (i) upon
the exercise of Company Stock Options outstanding on the date of this Agreement, (ii)
pursuant to the Company ESPP with respect to the Final Offering Period, or (iii) upon the
conversion of the Convertible Senior Notes;
(c) purchase, sell, lease, license, transfer, mortgage, abandon or vacate, encumber or
otherwise subject to a Lien or otherwise acquire or dispose of, in whole or in part, any (i)
Material Leases, or (ii) properties, rights or assets (including any leases of real property
with respect to which the Company or any Subsidiary has or may have or incur liabilities or
obligations) having a value in excess of $2,000,000 individually or $5,000,000 in the
aggregate, other than purchases and sales of inventory in the Ordinary Course of Business;
(d) amend its certificate of incorporation, bylaws or other comparable charter or
organizational documents;
(e) acquire any material amount of assets or capital stock of any Person or any
division thereof by merging or consolidating with, or by purchasing the assets or capital
stock of, or by any other manner, except purchases of inventory and raw materials in
the Ordinary Course of Business;
(f) sell, lease, license, pledge, or otherwise dispose of or encumber any material
properties or material assets of the Company or of any of its Subsidiaries other than in the
Ordinary Course of Business;
(g) (i) incur any indebtedness for borrowed money or guarantee any such indebtedness of
another Person (other than letters of credit or similar arrangements issued to or for the
benefit of suppliers and manufacturers in the Ordinary Course of Business), (ii) issue, sell
or amend any debt securities or warrants or other rights to acquire any debt securities of
the Company or any of its Subsidiaries, guarantee any debt securities of another Person,
enter into any “keep well” or other agreement to maintain any financial statement condition
of another Person or enter into any arrangement having the economic effect of any of the
foregoing, or (iii) make any loans, advances (other than routine advances to employees of
the Company and its Subsidiaries in the Ordinary Course of Business and in accordance with
applicable Law) or capital contributions to, or investment in, any other Person, other than
the Company or any of its direct or indirect wholly owned Subsidiaries;
41
(h) make any capital expenditures or other expenditures with respect to property, plant
or equipment, in excess of $500,000 in the aggregate for the Company and its Subsidiaries,
taken as a whole other than as set forth in the Company’s budget for capital expenditures
previously made available to the Buyer;
(i) implement or adopt any material changes in financial accounting methods, principles
or practices or any of its methods of reporting income, deductions or other material items
for financial accounting purposes, except insofar as may have been required by a change in
GAAP;
(j) except as required to comply with applicable law or agreements, plans or
arrangements existing on the date hereof, (i) adopt, enter into, terminate or materially
amend any employment, severance or similar agreement or material benefit plan for the
benefit or welfare of any current or former director, officer or employee or any collective
bargaining agreement (except in the Ordinary Course of Business and only if such arrangement
is non-material), (ii) increase in any material respect the compensation or fringe benefits
of, or pay any bonus to, any director, officer or employee (except for annual increases of
salaries in the Ordinary Course of Business), (iii) accelerate the payment, right to payment
or vesting of any material compensation or benefits, including any outstanding options or
restricted stock awards, other than as contemplated by this Agreement, (iv) grant any stock
options, stock appreciation rights, stock based or stock related awards, performance units,
restricted stock or other equity based compensation, or (v) take any action other than in
the Ordinary Course of Business to fund or in any other way secure the payment of
compensation or benefits under any Company Employee Plan or Employment Agreement; or
(k) except in the Ordinary Course of Business and on terms not materially adverse to
the Company and its Subsidiaries, taken as a whole, (i) enter into, renew, fail to renew,
extend, materially amend, cancel or terminate any Material Lease, or any Company Material
Contract or Contract which if entered into prior to the date hereof would be a Company
Material Contract, or (ii) enter into, agree to enter into, or exercise any renewal or
extension option or rights of first refusal or right to expand under, any new lease,
sublease or license for the use or occupancy of real property having an annual rental and
additional rental obligation in excess of $50,000 per annum or an initial term in excess of
three (3) years;
(l) (i) compromise, settle or agree to settle any suit, action, claim, proceeding or
investigation (including any suit, action, claim, proceeding or investigation relating to
this Agreement or the transactions contemplated hereby), or consent to the same, other than
compromises, settlements or agreements not in excess of $250,000 individually or $1,000,000
in the aggregate without the imposition of material equitable relief on, or the admission of
wrongdoing by, the Company or any of its Subsidiaries or (ii) waive any claims or rights of
substantial value;
(m) enter into any “non-compete” or similar agreement that would by its terms restrict
the businesses of the Surviving Corporation or its Subsidiaries or Affiliates following the
Effective Time;
42
(n) enter into any new line of business outside of its existing business;
(o) adopt or enter into a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of such entity;
(p) make, change or revoke any material Tax election, change any material method of Tax
accounting, enter into any closing agreement, settle or compromise any material liability
for Taxes, file any material amended Tax Return, surrender any claim for a material refund
of Taxes, or execute or consent to any waivers extending the statutory period of limitations
with respect to the collection or assessment of material Taxes;
(q) take any material action with respect to an Affiliate of the Company (other than
amount wholly owned Subsidiaries of the Company) that is outside of the Ordinary Course of
Business); or
(r) authorize any of, or commit or agree, in writing or otherwise, to take any of, the
foregoing actions.
5.2 Confidentiality. The parties acknowledge that the Buyer and the Company have
previously executed a Mutual Nondisclosure Agreement, dated as of February 14, 2007 (the
“Confidentiality Agreement”), which Confidentiality Agreement shall continue in full force
and effect in accordance with its terms, except as expressly modified herein.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
(a) No Solicitation or Negotiation. Except as set forth in this Section 6.1,
until the earlier of the Acceptance Time and the termination of this Agreement in accordance with
the terms hereof (the “Specified Time”), neither the Company nor any of its Subsidiaries
shall, and the Company shall direct its directors, officers, employees, investment bankers,
attorneys, accountants and other advisors or representatives (such directors, officers, employees,
investment bankers, attorneys, accountants, other advisors and representatives, collectively,
“Representatives”) not to, directly or indirectly: (i) solicit, initiate or knowingly
encourage (including by providing information) any inquiries, proposals or offers with respect to,
or the making or completion of, any proposal or offer that constitutes, or would reasonably be
expected to lead to, any Acquisition Proposal, (ii) enter into, continue or otherwise engage or
participate in any discussions or negotiations regarding, or furnish to any Person any non-public
information or data relating to the Company or any of its Subsidiaries in connection with, or have
any discussions with any Person relating to, an actual or proposed Acquisition Proposal, or
otherwise knowingly encourage or facilitate any effort or attempt to make or implement an
Acquisition Proposal, (iii) approve, endorse or recommend, or propose publicly to approve, endorse
or recommend, any Acquisition Proposal, or (iv) approve, endorse or recommend, or publicly announce
an intention to approve, endorse or recommend, or enter into, any letter of
43
intent, agreement in
principle, merger agreement, acquisition agreement, option agreement or other similar agreement
relating to any Acquisition Proposal (an “Alternative Acquisition Agreement”). Without
limiting the foregoing, prior to the Specified Time, it is understood that any violation of the
foregoing restrictions by any Subsidiary of the Company or Representatives of the Company or any of
its Subsidiaries shall be deemed to be a breach of this Section 6.1 by the Company.
Notwithstanding anything to the contrary set forth in this Agreement, prior to the Specified Time,
the Company may, in response to unsolicited and bona fide Acquisition Proposal received after the
date hereof that did not result from or arise from a breach (or than any such breach that is
unintentional and immaterial in effect) of this Section 6.1 and that the Company Board
determines (x) in good faith after consultation with outside counsel and the Company’s financial
advisor that such Acquisition Proposal is, or could reasonably be expected to lead to, a Superior
Proposal, and (y) after consultation with its outside counsel that the failure to do so would be
inconsistent with its fiduciary duties under applicable Law (A) furnish information with respect to
the Company to the Person (and the Representatives of such Person) making such Acquisition Proposal
(provided, that such Person has entered into a confidentiality agreement with the Company
substantially similar to and no less favorable to the Company than the Confidentiality Agreement,
and (B) engage in discussions or negotiations (including solicitation of revised Acquisition
Proposals) with such Person and its Representatives regarding any such Acquisition Proposal;
provided, however, that the Company shall provide or make available to the Buyer any non-public
information concerning the Company or any of its Subsidiaries that is provided to the Person making
such Acquisition Proposal or its Representatives which was not previously provided or made
available to the Buyer prior to or concurrently with providing such information to such other
Person.
(b) No Change in Recommendation or Alternative Acquisition Agreement. Prior to the
Specified Time: (i) the Company Board shall not, except as permitted by this Section 6.1,
withhold, withdraw or modify, or publicly propose to withhold, withdraw or modify, in a manner
adverse to the Buyer, the Recommendation; (ii) the Company shall not approve or recommend or enter
into any Alternative Acquisition Agreement that is intended to be or would reasonably be likely to
result in, any Acquisition Proposal (other than a confidentiality agreement referred to in
Section 6.1(a) entered into in the circumstances referred to in Section 6.1(a) and
except as otherwise permitted by this Section 6.1); and (iii) the Company Board shall not,
except as set forth in this Section 6.1, approve, endorse, adopt or recommend, or publicly
propose to approve, endorse, adopt or recommend, any Acquisition Proposal. Notwithstanding
anything to the contrary set forth in this Agreement, if, prior to the Specified Time, the Company
Board determines in good faith, after consultation with outside counsel, that such action is
reasonably necessary to comply with its fiduciary duties under applicable Law, the Company Board
may (x) withhold, withdraw or modify, or propose publicly to withhold, withdraw or modify, in a
manner adverse to the Buyer or the Acquisition Sub, the Recommendation (a “Change of
Recommendation”) and/or (y) if the Company receives an unsolicited bona fide written
Acquisition Proposal which the Company Board determines in good faith, after consultation with
outside counsel and its financial advisors, constitutes a Superior Proposal, after considering all
of the adjustments to the terms of this Agreement which may be offered by the Buyer including
pursuant to clause (ii) below, terminate this Agreement and enter into a definitive agreement with
respect to such Superior Proposal (provided that in the event of such a termination, the Company
substantially concurrently enters into such definitive agreement); provided,
however, that (A) the Company shall not terminate this Agreement
44
pursuant to the foregoing
clause (y), and any purported termination pursuant to the foregoing clause (y) shall be void and of
no force or effect, unless, concurrently with such termination the Company pays the Termination Fee
pursuant to Section 8.3(b), and otherwise complies with the provisions of Section
8.1(g), (B) the Company shall not have breached this Section 6.01, and (C):
(1) the Company shall have provided prior written notice to the Buyer, at least five
Business days in advance (the “Notice Period”), of its intention to take such action
with respect to such Superior Proposal, which notice shall specify the material terms and
conditions of any such Superior Proposal (including the identity of the party making such
Superior Proposal); and
(2) prior to effecting such Change of Recommendation or terminating this Agreement
pursuant to Section 8.1(g), the Company shall, and shall cause its financial and
legal advisors to, during the Notice Period, negotiate with the Buyer in good faith to make
such adjustments in the terms and conditions of this Agreement so that such Acquisition
Proposal ceases to constitute a Superior Proposal, if the Buyer, in its discretion, proposes
to make such adjustments. In the event of any material revisions to a Superior Proposal
(including, without limitation, any revision in price), the Notice Period shall be extended,
if applicable, to ensure that at least 2 Business Days remain in the Notice Period
subsequent to the time the Company notifies the Buyer of any such material revision (it
being understood that there may be multiple extensions); and
(3) the Buyer does not, within the Notice Period, make an offer that the Company Board
determines in good faith to be as favorable to the Company’s stockholders as such Superior
Proposal.
(c) Notices to the Buyer. The Company promptly (and in any event within 24 hours)
shall advise the Buyer orally and in writing of (i) any inquiries, proposals or offers that would
reasonably be expected to lead to an Acquisition Proposal, (ii) any request for information
relating to the Company or its Subsidiaries, other than requests for information not reasonably
expected to be related or lead to an Acquisition Proposal, and (iii) any inquiry or request for
discussion or negotiation regarding or that would reasonably be expected to result in an
Acquisition Proposal, including in each case the identity of the person making any such Acquisition
Proposal or indication or inquiry or offer or request and the material terms and conditions of any
such Acquisition Proposal or indication or inquiry or offer. The Company shall keep the Buyer
reasonably informed on a reasonably current basis of the status (including any material changes to
the terms thereof) of any such discussions or negotiations regarding any such Acquisition Proposal
or indication or inquiry or offer or any material developments relating thereto (the Company
agreeing that it shall not, and shall cause its Subsidiaries not to, enter into any confidentiality
agreement with any person subsequent to the date of this Agreement which prohibits the Company from
providing such information to the Buyer). The Company agrees that neither it nor any of its
Subsidiaries shall terminate, waive, amend, release or modify any provision of any existing
standstill or confidentiality or similar agreement to which it or one of its Affiliates or
Representatives is a party and that the Company and its Subsidiaries shall enforce the provisions
of any such agreement, except to the extent, after consultation with
45
outside counsel, the Company
Board determines that the failure to take such action would be inconsistent with its fiduciary
duties under applicable Law.
(d) Certain Permitted Disclosure. Nothing contained in this Agreement shall prohibit
the Company from (i) taking and disclosing to its stockholders a position with respect to any
tender offer contemplated by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act (or any
similar communication to stockholders) or (ii) making any required disclosure to the Company’s
stockholders if, in the good faith judgment of the Company Board, after consultation with outside
counsel, it is required to do so under applicable Law or the failure to do so would be inconsistent
with its fiduciary duties under applicable Law, provided, however, that in no event
shall this Section 6.1(d) affect the obligations of the Company specified in Sections
6.1(b) or (c); and provided, further that any such disclosure (other
than a “stop, look and listen” communication or similar communication of the type contemplated by
Section 14d-9(f) under the Exchange Act) shall be deemed to be a Change of Recommendation unless
the Company Board expressly publicly reaffirms its Recommendation (x) in such communication or (y)
within 2 Business Days after requested to do so by the Buyer.
(e) Cessation of Ongoing Discussions. The Company shall, and shall direct its
Representatives to, cease immediately all discussions, solicitations or negotiations with any
Person (other than the parties hereto) that commenced prior to the date of this Agreement regarding
any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal.
(f) Definitions. For purposes of this Agreement:
“Acquisition Proposal” means (i) any inquiry, proposal or offer from any Person or
group of Persons other than the Buyer or one of its Subsidiaries for a merger, reorganization,
share exchange, joint venture, consolidation, business combination, recapitalization, dissolution,
liquidation, or similar transaction involving the Company (or any Subsidiary or Subsidiaries of the
Company the business of which constitutes twenty percent (20%) or more of the net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole), (ii) any proposal for the
issuance by the Company of over twenty percent (20%) of its equity securities or (iii) any proposal
or offer to acquire in any manner, directly or indirectly, over twenty percent (20%) of the equity
securities or consolidated total assets of the Company and its Subsidiaries, in each case other
than the Offer or the Merger.
“Superior Proposal” means any bona fide written Acquisition Proposal on terms which
(i) the Company Board determines in good faith, after consultation with the Company’s outside legal
counsel and financial advisors, to be more favorable to the holders of Shares from a financial
point of view than the Offer and the Merger, taking into account all the terms and conditions of
such proposal and this Agreement (including any changes to the terms of this Agreement proposed by
the Buyer in good faith to the Company in response to such proposal or otherwise) and (ii) that the
Board of Directors (or Special Committee) believes is reasonably capable of being completed, taking
into account all financial, regulatory, legal and other aspects of such proposal; provided,
however, that for purposes of the definition of “Superior Proposal,” the references to “twenty
percent (20%)” in the definitions of Acquisition Proposal shall be deemed to be references to
“fifty percent (50%).”
46
6.2 Company Stockholder Approval; Proxy Statement.
(a) Company Stockholder Meeting. If the adoption of this Agreement by the
stockholders of the Company is required under the DGCL in order to consummate the Merger, the
Company, in cooperation with the Buyer and acting through the Company Board, shall, promptly
following the Acceptance Date, take all actions in accordance with applicable Law, its certificate
of incorporation and bylaws and the rules of The Nasdaq Stock Market to promptly and duly call,
give notice of, convene and hold a meeting of its stockholders (the “Company Stockholders
Meeting”) for the purpose of considering and voting upon the Company Voting Proposal. Subject
to Section 6.1, the Company Board shall make the Recommendation and include the
Recommendation in the Proxy Statement. Subject to Section 6.1, the Company shall take all
action that is both reasonable and lawful to solicit from its stockholders proxies in favor of the
Company Voting Proposal and shall take all other action reasonably necessary or advisable to secure
the vote or consent of the stockholders of the Company required by the rules of The Nasdaq Stock
Market or the DGCL to obtain such approvals.
(b) Proxy Statement. If the adoption of this Agreement by the stockholders of the
Company is required under the DGCL in order to consummate the Merger, the Company, in cooperation
with the Buyer, shall, promptly following the Acceptance Date, prepare and file with the SEC the
Proxy Statement. The Company shall respond to any comments of the SEC or its staff and shall cause
the Proxy Statement to be mailed to its stockholders as promptly as
reasonably practicable after the resolution of any such comments. The Company shall notify
the Buyer promptly upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other government officials
for amendments or supplements to the Proxy Statement and shall supply the Buyer with copies of all
correspondence between the Company or any of its representatives, on the one hand, and the SEC, or
its staff or any other government officials, on the other hand, with respect to the Proxy
Statement. The Company shall cooperate and provide the Buyer with a reasonable opportunity to
review and comment on the draft of the Proxy Statement (including each amendment or supplement
thereto). The Company and the Buyer shall use commercially reasonable efforts to cause all
documents that the Company is responsible for filing with the SEC or other regulatory authorities
under this Section 6.2 to comply in all material respects with all applicable requirements
of law and the rules and regulations promulgated thereunder. If at any time prior to the Effective
Time, any information should be discovered by any party hereto which should be set forth in an
amendment or supplement to the Proxy Statement so that the Proxy Statement would not include any
misstatement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly notify the other
parties hereto and, to the extent required by applicable Law, an appropriate amendment or
supplement describing such information shall be promptly filed by the Company with the SEC and
disseminated by the Company to the stockholders of the Company.
(c) Voting of Shares. The Buyer shall cause all shares of Company Common Stock
purchased by the Buyer or the Acquisition Sub pursuant to the Offer and all other shares of Company
Common Stock owned by the Buyer or the Acquisition Sub to be voted in favor of the adoption of this
Agreement. The Buyer and the Acquisition Sub shall not, and they shall
47
cause their direct and
indirect subsidiaries not to, sell, transfer, assign, encumber or otherwise dispose of the Shares
beneficially owned by the Buyer or the Acquisition Sub as of the date of this Agreement or acquired
pursuant to the Offer or otherwise prior to the Company Stockholders Meeting, if any is required.
6.3 Access to Information. During the Interim Period, the Company shall (and shall
cause each of its Subsidiaries to) afford to the Buyer’s officers, employees, accountants, counsel
and other representatives, reasonable access, upon reasonable notice, during normal business hours
and in a manner that does not unduly disrupt or interfere with business operations, to all of its
properties, books, contracts, commitments, personnel and records as the Buyer shall reasonably
request, and, during such period, the Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to the Buyer (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements of federal or
state securities laws and (b) all other information concerning its business, properties, assets and
personnel as the Buyer may reasonably request. The Buyer will hold any such information which is
nonpublic in confidence in accordance with the Confidentiality Agreement. Notwithstanding the
foregoing and notwithstanding any other provision of this Agreement to the contrary, the Company
shall not be required to permit any inspection or other access, or to disclose any information or
documents, that in the reasonable good faith judgment of the Company would: (i) result in the
disclosure of any trade secrets of third parties; (ii) violate any obligation of the Company with
respect to confidentiality (including any documents and information described in the Company
Disclosure Letter whose disclosure is prohibited by the terms of a confidentiality agreement with a
third party in effect on the date of this Agreement); (iii) jeopardize protections afforded the
Company under the attorney-client privilege or the attorney work product doctrine; (iv) violate any
legal requirement; or (v) unduly interfere with the conduct of the Company’s business. All
information obtained by the Buyer and its representatives pursuant to this Section 6.3
shall be treated as “Disclosure Material” for purposes of the Confidentiality Agreement.
6.4 Reasonable Best Efforts.
(a) Subject to the terms and conditions hereof, including Section 6.1, Section
6.4(b), and Section 6.4(c), each of the Company, the Buyer and the Acquisition Sub
shall use its reasonable best efforts to take, or cause to be taken, all actions, and do, or cause
to be done, and to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective the transactions contemplated hereby as
promptly as practicable including:
(i) obtaining from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, clearances, or orders required to be
obtained or made by the Company, the Buyer or any of their respective Subsidiaries
(including the Acquisition Sub) in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby;
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(ii) making all necessary filings, and thereafter making any other required
submissions, with respect to this Agreement and the Merger required under the Exchange Act,
and any other applicable federal or state securities laws;
(iii) filing within 10 Business Days following the date of this Agreement, a
Notification and Report Form as required under the HSR Act with respect to the transactions
contemplated by this Agreement; and
(iv) executing and delivering any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this Agreement.
In connection with these duties, the Company, the Buyer and the Acquisition Sub shall cooperate
with each other, including by providing copies of all such documents to outside counsel for the
non-filing party prior to filing and, if requested, accepting reasonable additions, deletions or
changes suggested in connection therewith. The Company, the Buyer and the Acquisition Sub shall
use their respective reasonable best efforts to furnish to each other all information required for
any application or other filing to be made pursuant to the rules and regulations of any applicable
law in connection with the transactions contemplated by this Agreement.
(b) Subject to the terms hereof, the Company, the Buyer and the Acquisition Sub agree, and
shall cause each of their respective Subsidiaries, to cooperate and to use their respective
reasonable best efforts to obtain any government clearances or approvals required
under the HSR Act. Without limiting the generality of the foregoing, the Company, the Buyer
and the Acquisition Sub agree as follows:
(i) to use their reasonable best efforts to achieve substantial compliance, as promptly
as practicable, with any request for additional information and documentary material
(“Second Request”) issued by the Antitrust Division of the U.S. Department of
Justice (“DOJ”) or the Federal Trade Commission (“FTC”), and to any other
government requests for information under any federal or state law, regulation or decree
designed to prohibit, restrict or regulate actions taken for the purpose or with the effect
of monopolizing or restraining trade (collectively, “Antitrust Laws”);
(ii) to contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order (whether temporary, preliminary or permanent) (an “Antitrust
Order”) that restricts, prevents or prohibits the consummation of the Merger or any
other transactions contemplated by this Agreement under any Antitrust Law;
(iii) to consult and cooperate with one another, and consider in good faith the views
of one another, in connection with, and provide to outside counsel for the other parties in
advance, any analyses, presentations, memoranda, briefs, arguments, opinions and proposals
to be made or submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any Antitrust Law; and
49
(iv) to keep counsel for the other party informed of any and all substantive
communications with the DOJ, FTC or any other U.S. or state governmental entity
(collectively, “Antitrust Authorities”) that pertain to the review or approval of
the Merger under any Antitrust Laws, and to allow the other party to participate, to the
extent permissible under applicable laws and regulations, in any meetings with the Antitrust
Authorities.
(c) In addition to the foregoing, the Buyer and the Acquisition Sub agree to propose,
negotiate, offer to commit and effect (and if such offer is accepted, commit to and effect), by
consent decree, hold separate order or otherwise, the sale, divestiture or disposition of such
assets or businesses of the Buyer or, effective as of the Effective Time, the Surviving
Corporation, or their respective Subsidiaries, or otherwise offer to take or offer to commit to
take any action which it is capable of taking and if the offer is accepted, take or commit to take
such action that limits its freedom of action with respect to, or its ability to retain, any of the
businesses, services or assets of the Buyer, the Surviving Corporation or their respective
Subsidiaries, in order to avoid the entry of, or to effect the dissolution of, any Antitrust Order,
which would have the effect of preventing or delaying the Effective Time beyond the Outside Date.
For the avoidance of doubt, the Buyer shall take any and all actions necessary in order to ensure
that (i) no requirement for a waiver, consent or approval of the Antitrust Authorities or other
Governmental Entity, (ii) no decree, judgment, injunction, temporary restraining order or any other
order in any suit or proceeding, and (iii) no other matter relating to any Antitrust Law or
regulation would preclude consummation of the Merger by the Outside Date. Notwithstanding anything
to the contrary in this Agreement, the Buyer and the Acquisition Sub
shall not be required to (and the Company shall not) become subject to, or consent or agree to
or otherwise take any action with respect to, any requirement, condition, understanding, agreement
or order of a Governmental Entity to sell, to divest, to hold separate or otherwise dispose of, or
to conduct, restrict, operate, invest or otherwise change assets or businesses of the Company, the
Buyer, or any of their subsidiaries if such actions would result in, or would be reasonably likely
to result in, individually or in the aggregate, a Company Material Adverse Effect; provided that
any requirement to sell, to divest, to hold separate or otherwise dispose of, or to conduct,
restrict, operate, invest or otherwise change assets or businesses of the Buyer or its Subsidiaries
shall be deemed to result in a Company Material Adverse Effect for purposes of this Section
6.4(c) if such action with respect to a comparable amount of assets or businesses of the
Company and its Subsidiaries would be reasonably likely, in the aggregate, to have a Company
Material Adverse Effect.
(d) Each of the Company, the Buyer and the Acquisition Sub shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and cause their respective
Subsidiaries to use, their commercially reasonable efforts to obtain any third-party consents.
6.5 Public Disclosure. Except as may be required by applicable Law or stock market
regulations, (a) the press release announcing the execution of this Agreement shall be issued in
such form as shall be mutually agreed upon by the Company and the Buyer and (b) the Buyer and the
Acquisition Sub and (except in furtherance of actions permitted by Section 6.1 or as
required by applicable Law) the Company shall each use its commercially reasonable efforts to
50
consult with the other party before issuing any other press release or otherwise making any public
statement with respect to the Merger or this Agreement.
6.6 Indemnification.
(a) From and after the Effective Time, the Surviving Corporation shall, and the Buyer shall
cause the Surviving Corporation to indemnify and hold harmless each person who is now, or has been
at any time prior to the date hereof, or who becomes prior to the Effective Time, a director or
officer of the Company or any of its Subsidiaries (the “Indemnified Parties”), against all
claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses,
including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative, legislative or investigative
(whether internal or external), arising out of or pertaining to the fact that the Indemnified Party
is or was an officer or director of the Company or any of its Subsidiaries, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent not prohibited by law.
Each Indemnified Party will be entitled to advancement of expenses incurred in the defense of any
such claim, action, suit, proceeding or investigation from each of the Buyer and the Surviving
Corporation within ten (10) Business Days of receipt by the Buyer or the Surviving Corporation from
the Indemnified Party of a request therefor, provided that any such Indemnified Party provides an
undertaking to repay such advancement if it is ultimately determined that the Indemnified Party is
not entitled to be indemnified.
(b) From and after the Effective Time, the Surviving Corporation will, and the Buyer will
cause the Surviving Corporation and its Subsidiaries to, fulfill and honor in all
respects the obligations of the Company and its Subsidiaries pursuant to: (i) each
indemnification agreement in effect between the Company or any of its Subsidiaries and any
Indemnified Party (a true, complete and accurate list of which is set forth in Section
6.6(b) of the Company Disclosure Letter); and (ii) any indemnification provision and any
exculpation provision set forth in the certificate of incorporation, bylaws or other charter or
organizational documents of the Company or any of its Subsidiaries as in effect on the date of this
Agreement. From the Effective Time through the sixth anniversary of the date on which the
Effective Time occurs, the certificate of incorporation and bylaws of the Surviving Corporation
shall contain, and Buyer shall cause the certificate of incorporation and bylaws of the Surviving
Corporation to so contain, provisions no less favorable with respect to indemnification,
advancement of expenses and exculpation of present and former directors and officers of the Company
and its Subsidiaries than are presently set forth in the certificate of incorporation and bylaws of
the Company, and such provisions shall not be amended, repealed, or otherwise modified in any
manner that could adversely affect the rights thereunder of any person benefited by such
provisions. If, at any time prior to the sixth anniversary of the Effective Time, any Indemnified
Party delivers to the Company, the Surviving Corporation or the Buyer, as applicable, a written
notice asserting a claim for indemnification under this section, then the claim asserted in such
notice shall survive the sixth anniversary of the Effective Time until such time as such claim is
fully and finally resolved.
(c) Subject to the next sentence, the Surviving Corporation shall either (i) maintain, and the
Buyer shall cause the Surviving Corporation to maintain, at no expense to the beneficiaries, in
effect for six (6) years from and after the Effective Time the current policies
51
of the directors’
and officers’ liability insurance maintained by the Company (the “Current D&O Insurance”)
with respect to matters existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), so long as the annual premium therefor would not be
in excess of three hundred percent (300%) of the last annual premium paid prior to the Effective
Time (such 300%, the “Maximum Premium”), or (ii) purchase a six (6)- year extended
reporting period endorsement with respect to the Current D&O Insurance (a “Reporting Tail
Endorsement”) and maintain such endorsement in full force and effect for its full term. If the
Company’s existing insurance expires, is terminated or cancelled during such six-year period or
exceeds the Maximum Premium, the Surviving Corporation shall obtain, and Buyer shall cause the
Surviving Corporation to obtain, as much directors’ and officers’ liability insurance as can be
obtained for the remainder of such period for an annualized premium not in excess of the Maximum
Premium, on terms and conditions no less advantageous to the Indemnified Parties than the Company’s
existing directors’ and officers’ liability insurance. Notwithstanding anything to the contrary in
this Agreement, the Company may, with the Buyer’s prior written consent, prior to the Effective
Time, purchase a Reporting Tail Endorsement, provided that the Company does not pay more than six
(6) times the Maximum Premium for such Reporting Tail Endorsement, in which case, the Surviving
Corporation shall, and the Buyer shall cause the Surviving Corporation to maintain such Reporting
Tail Endorsement in full force and effect for its full term, the Buyer shall be relieved from its
obligations under the preceding two sentences of this Section 6.6(c).
(d) The Buyer shall pay all expenses, including reasonable attorneys’ fees, that may be
incurred by the persons referred to in this Section 6.6 in connection with their
enforcement of their rights provided in this Section 6.6.
(e) The provisions of this Section 6.6 are intended to be in addition to the rights
otherwise available to the current officers and directors of the Company by Law, charter, statute,
bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
6.7 Notification of Certain Matters. During the Interim Period, the Buyer and the
Acquisition Sub shall give prompt notice to the Company, and the Company shall give prompt notice
to the Buyer and the Acquisition Sub, of (a) the occurrence, or failure to occur, of any event,
which occurrence or failure to occur is reasonably likely to cause any representation or warranty
of such party contained in this Agreement to be untrue or inaccurate in any material respect, in
each case at any time from and after the date of this Agreement until the Effective Time, or (b)
any material failure of the Buyer and Acquisition Sub or the Company, as the case may be, or of any
officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement. Notwithstanding the above,
the delivery of any notice pursuant to this Section 6.7 will not limit or otherwise affect
the remedies available hereunder to the party receiving such notice or the conditions to such
party’s obligation to consummate the Merger.
6.8 Employee Benefits and Service Credit.
(a) For a period of twelve months following the Effective Time, the Buyer shall, or shall
cause the Surviving Corporation and its Subsidiaries to, provide the employees of
52
the Buyer or the
Surviving Corporation or their respective Subsidiaries who shall have been employees of the Company
or any of its Subsidiaries immediately prior to the Effective Time (“Continuing
Employees”), while such Continuing Employees remain so employed, health welfare, pension and
retirement benefits that are no less favorable, in the aggregate, than either (i) those provided by
the Company and its Subsidiaries immediately prior to the Effective Time, or (ii) those provided to
similarly situated employees of the Buyer and its Subsidiaries under the Buyer Employee Plans (as
defined below). Following the Effective Time, the Buyer will give each Continuing Employee full
credit for prior service with the Company or its Subsidiaries to the extent such service would be
recognized if it had been performed as an employee of Buyer for purposes of (w) eligibility and
vesting under any Buyer Employee Plans, (x) unless covered under another arrangement with or of the
Buyer or the Surviving Corporation, determination of benefit levels under any Buyer Employee Plan
or policy of general application relating to vacation or severance, and (y) determination of
“retiree” status under any Buyer Employee Plan, in each case for which the Continuing Employees are
otherwise prospectively eligible and in which the Continuing Employees are offered participation,
but except where such credit would result in a duplication of benefits. For the avoidance of
doubt, no Continuing Employee shall be retroactively eligible for any Buyer Employee Plan,
including any such Buyer Employee Plan that was frozen prior to the Effective Time. In addition,
the Buyer shall waive, or cause to be waived, any limitations on benefits relating to pre-existing
conditions to the same extent such limitations are waived under any comparable medical and dental
plan of the Buyer and recognize for purposes of annual deductible and out-of-pocket limits under
its medical and dental plans, deductible and out-of-pocket expenses paid by Continuing Employees in
the calendar year in which the Effective Time occurs. For purposes of this Agreement, the term
“Buyer Employee Plan” means any “employee pension benefit plan” (as defined in Section
3(2) of ERISA), “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and any
other written or oral plan, agreement or arrangement, including insurance coverage, severance
benefits, disability benefits, deferred compensation, bonuses and severance benefits (but excluding
equity-based compensation plans and any contract, offer letter or agreement of the Buyer or any of
its Subsidiaries with or addressed to an individual), for the benefit of, or relating to, the
current employees of the Buyer or its Subsidiaries and with respect to which eligibility has not
been frozen.
(b) Nothing contained herein shall be construed as requiring, and the Company shall take no
action that would have the effect of requiring, Buyer or the Surviving Corporation to continue any
specific employee benefit plans or to continue the employment of any specific person. The
provisions of this Section 6.8 are for the sole benefit of the parties to this Agreement
and nothing herein, expressed or implied, is intended or shall be construed to (i) constitute an
amendment to any of the compensation and benefits plans maintained for or provided to Continuing
Employees prior to or following the Effective Time or (ii) confer upon or give to any person
(including for the avoidance of doubt any current or former employees, directors, or independent
contractors of the Company or any of its Subsidiaries, or on or after the Effective Time, the
Surviving Corporation or any of its subsidiaries), other than the parties hereto and their
respective permitted successors and assigns, any legal or equitable or other rights or remedies
(with respect to the matters provided for in this Section 6.8) under or by reason of any
provision of this Agreement.
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6.9 Approval of Compensation Arrangements. If the Company or any of its Subsidiaries
enters into, adopts, amends, modifies or terminates any Arrangements to Covered Securityholders,
all such amounts payable under such Arrangements shall (a) be paid or granted as compensation for
past services performed, future services to be performed, or future services to be refrained from
performing, by the Covered Securityholders (and matters incidental thereto) and (b) shall not be
calculated based on the number of Shares tendered or to be tendered into the Offer by the
applicable Covered Securityholder. Moreover, the Company (acting through the Executive
Compensation Committee of the Company Board) shall take such steps as may be required so that,
prior to the Expiration Date: (i) the adoption, approval, amendment or modification of each such
Arrangement shall be approved as an employment compensation, severance or other employee benefit
arrangement solely by independent directors of the Company in accordance with the requirements of
Rule 14d-10(d)(2) under the Exchange Act and the instructions thereto and (ii) the “safe harbor”
provided pursuant to Rule 14d-10(d)(2) is otherwise applicable thereto as a result of the taking
prior to the Expiration Date all necessary actions by the Company Board, the Executive Compensation
Committee of the Company Board or its independent directors.
6.10 Takeover Statute. If any Takeover Law shall become applicable to the Offer, the
Merger or the other transactions contemplated hereby, each of the Company, the Buyer and the
Acquisition Sub and their respective Boards of Directors shall grant such approvals and take such
actions as are reasonably necessary so that the transactions contemplated hereby may be consummated
as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such Takeover Law.
6.11 Stockholder Litigation. The Company shall give the Buyer the opportunity to
participate, subject to a customary joint defense agreement, in, but not control, the defense or
settlement of any stockholder litigation against the Company or its directors or officers relating
to the Offer, the Merger or any other transactions contemplated hereby; provided, however, that no
such settlement shall be agreed to without the Buyer’s consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
6.12 Alteration of Transaction Structure. In the event that any Significant Required
Governmental Approval has not been obtained within 45 days after the date hereof, or if in the
parties’ reasonable good faith judgment any such approval is not reasonably likely to be obtained
within 75 days after the date hereof, the Buyer shall be permitted to deliver a written notice to
the Company (the “Transaction Alteration Notice”) electing to alter the structure of the
acquisition of the Company by the Buyer to provide for the merger of the Acquisition Sub with and
into the Company, with the Company surviving the merger as a wholly owned subsidiary of the Buyer
(the “One Step Merger”). The One Step Merger shall be effected upon the terms set forth in
Section 1.2 and Article II hereof. Following the delivery of the Transaction
Alteration Notice, the Buyer and the Acquisition Sub shall terminate the Tender Offer and the
parties hereto shall take all actions necessary to call and hold a meeting of the Company’s
stockholders for purposes of adopting this Agreement, as so modified pursuant to this Section
6.12, as promptly as reasonable practicable, including, without limitation, the filing by the
Company of the Proxy Statement relating to such meeting with the SEC. Subject to Section
6.1, which shall remain in effect notwithstanding the change in transaction structure (except
that all references to the Acceptance Time shall be deemed to refer to the effective time of the
Merger and all references
54
to Acceptance Date shall be deemed to refer to the date on which the
closing of the One Step Merger shall occur), the Proxy Statement will contain the Recommendation,
as so modified to take into account the alteration in transaction structure. The conditions to the
parties’ obligations to complete the One Step Merger shall be the same as those conditions
applicable to the Buyer and the Acquisition Sub’s conditions to accept Shares for payment in the
Tender Offer as set forth in Annex I (except that the Minimum Condition shall be replaced
with a condition that this Agreement be adopted by the Required Company Stockholder Vote, and the
references in Annex I to the Expiration Date and the Acceptance Time shall be deemed
references to the Effective Time of the merger), and the conditions to the parties obligations to
complete the Merger (other than Section 7.1(b), although, for the avoidance of doubt, item
6 set forth in Annex 1 shall be a condition to the completion of the One Step Merger).
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party’s Obligations to Effect the Merger. The respective
obligations of each party to effect the Merger shall be subject to the fulfillment (or waiver by
the Buyer and the Company) at or prior to the Effective Time of only the following conditions:
(a) Stockholder Approval. Unless the Merger is consummated pursuant to Section
253 of the DGCL, the Company Voting Proposal shall have been adopted at the Company Meeting
by the Required Company Stockholder Vote.
(b) No Injunction. No Governmental Entity of competent jurisdiction shall have
enacted, issued or entered any restraining order, preliminary or permanent injunction or
similar order or legal restraint or prohibition which remains in effect that enjoins or
otherwise prohibits consummation of the Merger.
(c) Completion of the Offer. Unless the Offer has been converted to a One Step
Merger pursuant to Section 6.12, the Acquisition Sub shall have accepted for
purchase the Shares tendered pursuant to the Offer in accordance with the terms hereof and
thereof.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Offer or the Merger may be abandoned at
any time prior to the Effective Time (with respect to Sections 8.1(b) through
8.1(j), by written notice by the terminating party to the other party), whether before or
after adoption of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the Buyer and the Company at any time prior to the
Acceptance Time;
55
(b) by either the Buyer or the Company if the Acceptance Date shall not have occurred
by the six month anniversary of the date of this Agreement (subject to possible adjustment
as provided below, the “Outside Date”), provided that:
(i) if the condition to the completion of the Offer set forth in item 2 of
Annex I has not been satisfied by the four month anniversary of the date of
this Agreement, the Outside Date shall be such four month anniversary, provided that
if the Buyer delivers written notice to the Company on or prior to such four month
anniversary that in the Buyer’s good faith judgment, it is reasonably probable that
the condition set forth in such item 2 will be satisfied on or prior to the six
month anniversary of this Agreement, the Outside Date shall be the six month
anniversary of the date of this Agreement; and
(ii) if the condition to the completion of the Offer set forth in item 1 of
Annex I shall not have been satisfied by the sixth month anniversary of the
date of this Agreement, but all other conditions set forth on Annex I would
be satisfied if the Acceptance Date were to occur on such date, the Buyer shall be
entitled to extend the Outside Date by up to three additional one-month periods by
written notice to the Company if in the Buyer’s good faith judgment, it is
reasonably probable that the condition set forth in such item 1 will be satisfied
during such
three month period; it being understood that in no event shall the Buyer be
entitled to extend the Outside Date to a date that is later than the nine-month
anniversary of this Agreement;
provided, that the right to terminate this Agreement under this Section 8.1(b) shall
not be available to any party whose failure (or whose subsidiary’s failure) to fulfill
any obligation under this Agreement resulted in the failure of the milestones set forth
in each of clauses (i) or (ii) above to occur on or before the Outside Date, and
provided further, that the passage of such period shall be tolled for any part thereof
during which any party shall be subject to a non-final order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the consummation of the Offer;
(c) by either the Buyer or the Company at any time prior to the Acceptance Date if a
Governmental Entity of competent jurisdiction shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the Offer or the
Merger, provided that the party seeking to terminate this Agreement pursuant to this
Section 8.1(c) shall have used such efforts as may be required by Section
6.5 to prevent, oppose or remove such injunction;
(d) by the Company, if the Buyer or the Acquisition Sub shall have failed to commence
the Offer within ten (10) Business Days after the date of this Agreement; provided that at
such time, the Company has filed or is then prepared to file the Schedule 14D-9 with the
SEC;
(e) by the Buyer or the Company, if, due to the failure of one or more conditions set
forth in Annex I, the Offer shall have terminated or expired in accordance
56
with its
terms without the Buyer or the Acquisition Sub having purchased any Shares pursuant to the
Offer (provided, however, that the right to terminate this Agreement pursuant to this
Section 8.1(e) shall not be available to any party whose failure (or whose
Subsidiary’s failure) to fulfill any of its obligations under this Agreement results in the
failure of any such condition or if the failure of such condition results from facts or
circumstances involving any intentional misrepresentation or any breach of any
representation, warranty, covenant or agreement under this Agreement by such party or any of
its Subsidiaries);
(f) by the Buyer at any time prior to the Acceptance Date, if: (i) the Company Board
shall have failed to recommend the Offer in the Schedule 14D-9 or shall have undertaken a
Change of Recommendation; (ii) the Company Board shall have approved, endorsed or
recommended to the stockholders of the Company an Acquisition Proposal; or (iii) in the case
of an Acquisition Proposal made by means of a tender offer or exchange offer for outstanding shares of Company Common Stock, the tender offer or exchange offer constituting the
Acquisition Proposal shall have been commenced and the Company Board shall have recommended
that the stockholders of the Company tender their shares in such tender or exchange offer
or, within ten (10) Business Days after the commencement of such tender or exchange offer,
the Company Board shall have failed to recommend against acceptance of such offer;
(g) by the Company, at any time prior to the Acceptance Date, in order to enter into a
transaction that is a Superior Proposal in accordance with Section 6.1(b), and prior
to or concurrently with such termination, the Company pays the fee due under Section
8.3(b);
(h) by the Buyer at any time prior to the Acceptance Date if the Company shall have
breached or failed to perform any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform (i) would result
in a failure of a condition set forth in section 3 or 4 of Annex I or Section
7.1 to be satisfied and (ii) cannot be cured by the Outside Date, provided that the
Buyer shall have given the Company written notice, delivered at least thirty (30) days prior
to such termination, stating the Buyer’s intention to terminate this Agreement pursuant to
this Section 8.1(h) and the basis for such termination; or
(i) by the Company, if the Buyer or the Acquisition Sub shall have breached or failed
to perform any of its representations, warranties, covenants or other agreements contained
in this Agreement, which breach or failure to perform (A) would give rise to a Buyer
Material Adverse Effect or would result in a failure of a condition set forth in Section
7.1 or Annex I to be satisfied or the failure of the Acceptance Date or the
Closing to occur and (B) cannot be cured by the Outside Date, provided that the Company
shall have given the Buyer written notice, delivered at least thirty (30) days prior to such
termination, stating the Company’s intention to terminate this Agreement pursuant to this
Section 8.1(i) and the basis for such termination.
8.2 Effect of Termination. In the event of termination of this Agreement as provided
in Section 8.1, this Agreement shall immediately become void and there shall be no
liability or
57
obligation on the part of the Company, the Buyer, the Acquisition Sub or their
respective officers, directors, stockholders or Affiliates; provided, that (a) any such termination
shall not relieve any party from liability for any willful breach of this Agreement and (b) the
provisions of Sections 5.2 (Confidentiality) and 8.3 (Fees and Expenses), this
Section 8.2 (Effect of Termination) and Article IX (Miscellaneous) of this
Agreement and the Confidentiality Agreement shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, and except for any HSR filing fees, which
shall be paid by the Buyer, all fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such fees and expenses,
whether or not the Merger is consummated.
(b) The Company shall pay the Buyer a termination fee of $25,800,000 (the “Termination
Fee”) if this Agreement is terminated (i) by the Company pursuant to Section
8.1(g); (ii) by the Buyer pursuant to Section 8.1(f), or (iii) either the Buyer or
the Company pursuant to Section 8.1(b) or Section 8.1(e) or by the Buyer pursuant
to Section 8.1(h) if, (A) before the date of such termination, an Acquisition Proposal
shall have been publicly announced and not withdrawn and (B) within twelve (12) months after the
date of termination,
the Company enters into a definitive agreement with respect to, or consummates, a transaction
contemplated by an Acquisition Proposal; provided, however, that, for purposes of this Section
8.3(b), all references (whether in words or numerals) to “twenty percent (20)%” in the
definition of “Acquisition Proposal” shall be deemed to be references to “forty percent (40)%” (a
“Qualifying Transaction”). Any fee due under Section 8.3(b)(i) shall be paid to
the Buyer prior to or concurrently with the termination of this Agreement by the Company by wire
transfer of same-day funds. Any fee due under Section 8.3(b)(ii) shall be paid to the
Buyer by wire transfer of same-day funds within two Business Days after the date of termination of
this Agreement. Any fee due under Section 8.3(b)(iii) shall be paid to the Buyer by wire
transfer of same-day funds within two Business Days after the earlier of the entering into of such
definitive agreement or the consummation of such transaction.
(c) In the event that a proposal regarding a Qualifying Transaction shall have been made known
to the public or to the Company Board or shall have been made directly to the stockholders of the
Company generally or any Person shall have publicly announced an intention (whether or not
conditional or withdrawn) to make a proposal regarding a Qualifying Transaction that reasonably
appears to be bona fide and thereafter this Agreement is terminated under any of the circumstances
referred to in Section 8.3(b)(iii) (disregarding the requirements of (A) and (B) of such
clause and except for a termination pursuant to Section 8.1(b) or a termination by the
Company pursuant to Section 8.1(e)) and no Termination Fee is yet payable in respect
thereof pursuant to such Section, then the Company shall pay to the Buyer all of the Expenses (as
hereinafter defined) of the Buyer and the Acquisition Sub and thereafter if the Company becomes
obligated to pay to the Buyer the Termination Fee pursuant to Section 8.3(b)(iii) such
payment obligation shall be reduced by the amount of Expenses previously actually paid to the Buyer
pursuant to this sentence. As used herein, “Expenses” shall mean all out-of-pocket fees
and expenses (including all reasonable fees and expenses of counsel, accountants, consultants,
financial advisors and investment bankers of the Buyer and its
58
Affiliates), incurred by the Buyer
and the Acquisition Sub or on their behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and all other matters related
to the Offer and the Merger; provided that such fees and expenses shall not in any case exceed $5
million in the aggregate. In circumstances in which Expenses are payable pursuant to this
Section 8.3(c), such payment shall be made to the Buyer not later than two Business Days
after delivery to the Company of an itemization setting forth in reasonable detail all Expenses
(which itemization may be supplemented and updated from time to time by the Buyer until the 45th
day after the Buyer delivers such notice of demand for payment), and all such payments shall be
made by wire transfer of immediately available funds to an account to be designated by the Buyer.
(d) In the event that the Agreement is terminated by the Company pursuant to Section
8.1(i) then the Buyer shall pay to the Company all out-of-pocket fees and expenses (including
reasonable fees and expenses of counsel, accountants, consultants, financial advisors and
investment bankers of the Company), incurred by the Company or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and performance of this Agreement
and all other matters relating to the Offer and the Merger; provided that such fees and expenses
shall not in any case exceed $5 million in the aggregate. In circumstances in which the above
expenses are payable, such payment shall be made to the Company not later than two Business Days
after delivery to the Buyer of an itemization setting
forth in reasonable detail all such expenses (which itemization may be supplemented and
updated from time to time by the Company until the 45th day after the Company delivers such notice
of demand for payment), and all such payments shall be made by wire transfer of immediately
available funds to an account to be designated by the Company.
(e) In the event that the Company or the Buyer shall fail to pay the Termination Fee and/or
Expenses or expenses payable to the Company required pursuant to this Section 8.3 when due,
such Termination Fee and/or Expenses or expenses payable to the Company, as the case may be, shall
accrue interest for the period commencing on the date such fee became past due, at a rate equal to
the rate of interest publicly announced by Citibank, in the City of New York from time to time
during such period, as such bank’s Prime Lending Rate. In addition, if the Company shall fail to
pay the Termination Fee and/or Expenses or the Buyer shall fail to pay expenses payable to the
Company, as the case may be, when due, the Company or the Buyer, as applicable, shall also pay to
the Buyer or the Company, as applicable, all of the Buyer’s or the Company, as applicable, costs
and expenses (including reasonable attorneys’ fees) in connection with efforts to collect such
Termination Fee and/or Expenses or expenses payable to the Company, as the case may be. The
parties acknowledge that the agreements contained in this Section 8.3 are an integral part
of the transactions contemplated by this Agreement, and that, without these agreements, the parties
would not enter into this Agreement and that the Termination Fee is not a penalty, but rather is
liquidated damages in a reasonable amount that will compensate the Buyer for the efforts and
resources expended and opportunities foregone while negotiating this Agreement and in reliance on
this Agreement and on the expectation of the consummation of the transactions contemplated hereby,
which amount would otherwise be impossible to calculate with precision. Payment of the fees and
expenses described in this Section 8.3 shall not be in lieu of damages incurred in the
event of a willful material breach of this Agreement described in Section 8.2(a), but
otherwise shall constitute the sole and exclusive remedy of the parties in connection with any
termination of this Agreement.
59
8.4 Amendment. Subject to the provisions of Section 1.1(g)(ii) relating to
matters requiring approval by the Continuing Directors, this Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger by the stockholders
of any party, but, after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. Subject to the provisions of Section 1.1(g)(ii)
relating to matters requiring approval by the Continuing Directors, at any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. Such extension or waiver shall not apply to any
time for performance, inaccuracy in any
representation or warranty, or noncompliance with any agreement or condition, as the case may
be, other than that which is specified in the extension or waiver. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations, Warranties, Covenants and Agreements. None of the
representations and warranties of the Company contained in this Agreement, or contained in any
certificate delivered pursuant to this Agreement or in connection with any of the transactions
contemplated by this Agreement, shall survive the Acceptance Date. None of the covenants or
agreements of the Company in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time.
9.2 Notices. All notices and other communications hereunder shall be in writing and
shall be deemed duly delivered (i) four (4) Business Days after being sent by registered or
certified mail, return receipt requested, postage prepaid, (ii) one (1) Business Day after being
sent for next Business Day delivery, fees prepaid, via a reputable nationwide overnight courier
service, or (iii) on the date of confirmation of receipt (or, the first Business Day following such
receipt if the date of such receipt is not a Business Day) of transmission by facsimile, in each
case to the intended recipient as set forth below:
60
(a) | if to the Buyer or Acquisition Sub, to: | ||
Walgreen Co. 0000 Xxxxxx Xxxx Xxxxxxxxx, XX 00000 Attn.: Xxxxxx X. Xxxxxxxxx, Vice President Telecopy: (000) 000-0000 |
|||
and | |||
Walgreen Co. – Law Department 104 Xxxxxx Road, MS 1425 Xxxxxxxxx, XX 00000 Attn.: Xxxx X. Xxxxx, Senior Vice President, General Counsel and Corporate Secretary Telecopy: (000) 000-0000 |
|||
with a copy to: | |||
Wachtell, Lipton, Xxxxx & Xxxx 00 Xxxx 00xx Xxxxxx Xxx Xxxx, XX 00000 Attn: Xxxxxx X. Xxxxxxxxxx, Esq. Telecopy: (000) 000-0000 |
|||
(b) | if to the Company, to | ||
Option Care, Inc. 000 Xxxx Xxx Xxxx Xxxxxxx Xxxxx, XX 00000 Attn.: Xxxxxx X. Xxxxxxxxxx, Senior Vice President and General Counsel Telecopy: (000) 000-0000 |
|||
with a copy to: | |||
Xxxxx Xxxx LLP 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 Xxxxxxx, XX 00000-0000 Attn.: Xxxxxx X. Xxxxxxxx Telecopy: 000-000-0000 |
Any party to this Agreement may give any notice or other communication hereunder using any
other means (including personal delivery, messenger service, telex, ordinary mail or electronic
mail), but no such notice or other communication shall be deemed to have been duly given unless and
until it actually is received by the party for whom it is intended. Any party to this Agreement
may change the address to which notices and other communications hereunder
61
are to be delivered by
giving the other parties to this Agreement notice in the manner herein set forth.
9.3 Entire Agreement. This Agreement (including the Schedules and Exhibits hereto and
the documents and instruments referred to herein that are to be delivered at the Closing)
constitutes the entire agreement among the parties to this Agreement and supersedes any prior
understandings, agreements or representations by or among the parties hereto, or any of them,
written or oral, with respect to the subject matter hereof, and the parties hereto specifically
disclaim reliance on any such prior understandings,
agreements or representations to the extent not embodied in this Agreement. Without limiting
the generality of the foregoing: (a) the Buyer and the Acquisition Sub acknowledge that the
Company has not made and is not making any representation or warranty whatsoever regarding the
subject matter of this Agreement, express or implied, except as set forth in Section 1.1
and Article III, and that neither the Buyer nor the Acquisition Sub is relying or has
relied on any representations or warranties whatsoever regarding the subject matter of this
Agreement, express or implied, except those set forth in Section 1.1 and Article
III; and (b) the Company acknowledges that the Buyer and the Acquisition Sub have not made and
are not making any representations or warranties whatsoever regarding the subject matter of this
Agreement, express or implied, except as set forth in Section 1.1 and Article IV,
and that it is not relying and has not relied on any representations or warranties whatsoever
regarding the subject matter of this Agreement, express or implied, except as set forth in
Section 1.1 and Article IV. Notwithstanding the foregoing, the Confidentiality
Agreement shall remain in effect in accordance with its terms.
9.4 No Third-Party Beneficiaries. Except as provided in Section 6.6 (with
respect to which the Indemnified Parties shall be third-party beneficiaries), this Agreement is not
intended, and shall not be deemed, to confer any rights or remedies upon any Person other than the
parties hereto and their respective successors and permitted assigns, to create any agreement of
employment with any Person or to otherwise create any third-party beneficiary hereto.
9.5 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of
law or otherwise by any of the parties hereto without the prior written consent of the other
parties, and any such assignment without such prior written consent shall be null and void.
Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the parties hereto and their respective successors and permitted assigns.
Notwithstanding the foregoing, the Buyer may designate, by written notice to the Company, another
Subsidiary of the Buyer to be a constituent corporation in lieu of Acquisition Sub, whereupon all
references to Acquisition Sub shall be deemed references to such other Subsidiary, except that all
representations and warranties made herein with respect to Acquisition Sub as of the date of this
Agreement shall be deemed representations and warranties made with respect to such other Subsidiary
as of the date of such designation.
9.6 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the
62
parties hereto agree that the court making such determination shall have the
power to limit the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto agree to replace
such invalid or unenforceable term or provision with a valid and enforceable
term or provision that will achieve, to the extent possible, the economic, business and other
purposes of such invalid or unenforceable term.
9.7 Counterparts and Signatures. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which together shall be
considered one and the same agreement and shall become effective when counterparts have been signed
by each of the parties hereto and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to an Article or a
Section, such reference shall be to an Article or Section of this Agreement, unless otherwise
indicated. The table of contents, table of defined terms and headings contained in this Agreement
are for convenience of reference only and shall not affect in any way the meaning or interpretation
of this Agreement. The language used in this Agreement shall be deemed to be the language chosen
by the parties hereto to express their mutual intent, and no rule of strict construction shall be
applied against any party. The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered pursuant thereto unless
otherwise defined therein. Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns
and pronouns shall include the plural, and vice versa. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by the words “without
limitation.” No summary of this Agreement prepared by any party shall affect the meaning or
interpretation of this Agreement.
9.9 Headings. Headings of the Articles and Sections of this Agreement are for
convenience of the parties only and shall be given no substantive or interpretive effect
whatsoever. The table of contents to this Agreement is for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
9.10 Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware without giving effect to any choice or conflict of
law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdictions other than those of the State of Delaware.
63
9.11 Remedies. Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties hereto agree that
irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the
terms and provisions of this Agreement, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.12 Submission to Jurisdiction. Each of the parties to this Agreement (a) consents
to submit itself to the personal jurisdiction of the Court of Chancery of the State of Delaware or
of any federal court sitting in Wilmington, Delaware in any action or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that all claims in respect of such action or proceeding shall be heard and determined in any such
court, (c) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (d) agrees not to bring any action or
proceeding arising out of or relating to this Agreement or any of the transaction contemplated by
this Agreement in any other court. Each of the parties hereto waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any bond, surety or
other security that might be required of any other party with respect thereto. Any party hereto
may make service on another party by sending or delivering a copy of the process to the party to be
served at the address and in the manner provided for the giving of notices in Section 9.2.
Nothing in this Section 9.12, however, shall affect the right of any party to serve legal
process in any other manner permitted by law.
9.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
9.14 Disclosure Letter. Sections of the Company Disclosure Letter shall each be
arranged in Sections corresponding to the numbered sections contained in this Agreement, and the
disclosure in any section of the Company Disclosure Letter shall qualify (a) the corresponding
section of this Agreement and (b) the other sections of this Agreement, to the extent that it is
reasonably apparent on its face from a reading of such disclosure that it also qualifies or applies
to such other sections, notwithstanding the omission of a reference or cross-reference thereto.
The inclusion of any information in the Company Disclosure Letter shall not be deemed to be an
admission or acknowledgment, in and of itself, that such information is required by the terms
hereof to be disclosed, is material, has resulted in or would result in a Company Material Adverse
Effect or is outside the Ordinary Course of Business.
9.15 Company’s Knowledge. For purposes of this Agreement, the term
“Knowledge” and similar terms when used with respect to the Company mean the actual
knowledge after reasonable inquiry as of the date hereof of the individuals identified in
Section 9.15 of the Company Disclosure Letter.
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9.16 Obligation of the Buyer. The Buyer shall ensure that each of the Acquisition Sub
and the Surviving Corporation duly
performs, satisfies and discharges on a timely basis each of the covenants, obligations and
liabilities of the Acquisition Sub and the Surviving Corporation under this Agreement, and the
Buyer shall be jointly and severally liable with the Acquisition Sub and the Surviving Corporation
for the due and timely performance and satisfaction of each of said covenants, obligations and
liabilities.
[Remainder of Page Intentionally Left Blank.]
65
The Buyer, Acquisition Sub and the Company have executed this Agreement as of the date set
forth in the initial caption of this Agreement.
WALGREEN CO. |
||||
By: | /s/ Xxxxxxx X. Xxxx | |||
Name: | Xxxxxxx X. Xxxx | |||
Title: | CEO | |||
BISON ACQUISITION SUB INC. |
||||
By: | /s/ Xxxxxxx X. Xxxx | |||
Name: | Xxxxxxx X. Xxxx | |||
Title: | CEO | |||
OPTION CARE, INC. |
||||
By: | /s/ Xxxxxx Xxxxxxxxxx | |||
Name: | Xxxxxx Xxxxxxxxxx | |||
Title: | Secretary | |||
ANNEX I
CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Acquisition Sub shall not be obligated
to accept for payment or, subject to any applicable rules and regulations of the SEC, pay for, and
(subject to any such rules or regulations) may, to the extent expressly permitted by this
Agreement, delay the acceptance for payment of any tendered Shares if (i) there shall not have been
validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which
represents more than one-half of the number of Shares outstanding on a fully diluted basis (which
shall mean, for purposes of this Annex I, as of any time, the number of Shares then
outstanding, together with all Shares then issuable pursuant to outstanding Company Stock Options
and issuance upon conversion of the Convertible Senior Notes (the “Minimum Condition”) or
(ii) at any time after the date of this Agreement and before the Acceptance Time, any of the
following events shall occur and be continuing:
(1) | The waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall not have expired or otherwise been terminated. | ||
(2) | Any Significant Required Governmental Approval (as defined below) shall not have been obtained. “Significant Required Governmental Approval” shall mean any approval or clearance (other than the approval or clearance set forth in Section I of the Company Disclosure Letter) required to be obtained by the Buyer, the Acquisition Sub or the Company from any Governmental Entity in order to permit the acceptance for payment of Shares tendered pursuant to the Offer or the ownership and operation of the Company by the Buyer; provided, however, that any such approval or clearance shall not be deemed to be a “Significant Required Governmental Approval” unless the acceptance for payment of Shares tendered pursuant to the Offer or the ownership and operation of the Company by the Buyer without first obtaining such approval or clearance would have or would be reasonably expected to have, individually or in the aggregate, a Buyer Material Adverse Effect or a Company Material Adverse Effect. | ||
(3) | (i) any of the representations and warranties of the Company set forth in the first two sentences in Section 3.1(a), Section 3.2, Section 3.4(a), the first sentence of Section 3.4(d) and the first sentence of Section 3.7 shall not be true and correct in all respects (except, in the case of Sections 3.2, for such inaccuracies as are de minimis in the aggregate), in each case at and as of the date of this Agreement and at and as of immediately prior to the Acceptance Time as though made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date); or (ii) any of the other representations and warranties of the Company set forth herein (without giving effect to any “materiality” or “Company Material Adverse Effect” qualifiers set forth therein) shall not be true and correct in each case at and as of the date of this Agreement and at and as of immediately prior to the Acceptance Time as though made at and as of such time (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true |
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and correct would not have, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. | |||
(4) | The Company shall not have in all material respects performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by it immediately prior to the Acceptance Time, and such failure to perform shall not have been cured prior to such time. | ||
(5) | A Governmental Entity of competent jurisdiction shall have enacted issued or entered any restraining order, preliminary or permanent injunction or similar order or legal restraint or prohibition which remains in effect that enjoins or otherwise prohibits consummation of the Offer or the Merger. | ||
(6) | There shall have been enacted since the date of the Agreement, and there shall remain in effect, any Law that prohibits the acceptance for payment of Shares tendered pursuant to the Offer or that prohibits the consummation of the Merger, and the violation of such Law that would occur if Shares were accepted for payment or if the Merger were consummated would have a Buyer Material Adverse Effect or Company Material Adverse Effect. | ||
(7) | There shall be pending before any court of competent jurisdiction any action commenced by a Governmental Entity against the Company or the Buyer or the Acquisition Sub that seeks to prohibit the acceptance for payment of Shares tendered pursuant to the Offer or to prohibit the consummation of the Merger that would have a Company Material Effect or a Buyer Material Adverse Effect. | ||
(8) | The Agreement shall have been validly terminated in accordance with Article VIII of the Agreement. |
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