1
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of March 23, 1998
Among
Cognizant Corporation,
New Sierra Acquisition Corp.
And
Pharmaceutical Marketing Services Inc.
2
TABLE OF CONTENTS
Page
ARTICLE I
The Merger............................... 2
SECTION 1.01. The Merger.................................................. 2
SECTION 1.02. Closing..................................................... 2
SECTION 1.03. Effective Time of the Merger................................ 2
SECTION 1.04. Effects of the Merger....................................... 2
SECTION 1.05. Certificate of Incorporation; By-Laws....................... 3
SECTION 1.06. Directors................................................... 3
SECTION 1.07. Officers.................................................... 3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations........................ 3
SECTION 2.01. Effect on Capital Stock..................................... 3
SECTION 2.02. Exchange of Certificates.................................... 4
SECTION 2.03. Treatment of Options........................................ 6
SECTION 2.04. Treatment of Debt Securities................................ 7
ARTICLE III
Representations and Warranties..................... 8
SECTION 3.01. Representations and Warranties of the Company............... 8
SECTION 3.02. Representations and Warranties of Parent and Sub............ 23
ARTICLE IV
Covenants Relating to Conduct of Business Prior to Merger........ 28
-i-
3
SECTION 4.01. Conduct of Business......................................... 28
ARTICLE V
Additional Agreements......................... 32
SECTION 5.01. Preparation of Form S-4 and Proxy Statement;
Stockholder Meeting ........................................ 32
SECTION 5.02. Access to Information; Confidentiality...................... 33
SECTION 5.03. Reasonable Efforts.......................................... 33
SECTION 5.04. Indemnification............................................. 34
SECTION 5.05. Public Announcements........................................ 35
SECTION 5.06. No Solicitation............................................. 35
SECTION 5.07. Benefit Matters............................................. 37
SECTION 5.08. Stock Exchange Listing...................................... 37
SECTION 5.9. Letters of the Company's Accountants........................ 37
SECTION 5.10. Letters of Parent's Accountants............................. 37
SECTION 5.11. Termination of Certain Obligations.......................... 38
SECTION 5.12. Takeover Statute............................................ 38
ARTICLE VI
Conditions Precedent.......................... 38
SECTION 6.01. Conditions to Obligations of Each Party to Effect the Merger 38
SECTION 6.02. Additional Conditions to Obligations of Parent and Sub...... 39
SECTION 6.03. Additional Conditions to Obligations of the Company......... 40
ARTICLE VII
Termination, Amendment and Waiver................... 41
SECTION 7.01. Termination................................................. 41
SECTION 7.02. Effect of Termination....................................... 42
-ii-
4
SECTION 7.03. Amendment................................................... 42
SECTION 7.04. Extension; Waiver........................................... 43
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver... 43
ARTICLE VIII
General Provisions........................... 43
SECTION 8.01. Nonsurvival of Representations and Warranties............... 43
SECTION 8.02. Fees and Expenses........................................... 43
SECTION 8.03. Notices..................................................... 44
SECTION 8.04. Definitions................................................. 45
SECTION 8.05. Interpretation.............................................. 49
SECTION 8.06. Counterparts................................................ 49
SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries.............. 49
SECTION 8.08. GOVERNING LAW............................................... 49
SECTION 8.09. Assignment.................................................. 50
SECTION 8.10. Enforcement................................................. 51
-iii-
5
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
EXHIBITS
Exhibit A Form of Stock Option Agreement
Exhibit B Parent Exchange Ratios
Exhibit C IMS Representations
Exhibit D IMS Exchange Ratio
Exhibit E IMS Exchange Ratio
6
AGREEMENT AND PLAN OF MERGER, dated as of March 23, 1998, among
Cognizant Corporation, a Delaware corporation ("Parent"), New Sierra Acquisition
Corp., a Delaware corporation and a direct wholly owned subsidiary of Parent
("Sub"), and Pharmaceutical Marketing Services Inc., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have determined that the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair and in the best interests of their respective
stockholders;
WHEREAS, such Boards of Directors have approved the Merger, pursuant to
which each share of common stock, par value $.01 per share, of the Company (the
"Company Common Stock", which term also refers to and includes, unless the
context otherwise requires, the associated Rights, as defined in Section 8.04)
issued and outstanding immediately prior to the Effective Time of the Merger (as
defined in Section 1.03), other than shares owned, directly or indirectly, by
the Company or any subsidiary (as defined in Section 8.04) of the Company or by
Parent, Sub or any subsidiary of Parent, will be converted into the right to
receive the Merger Consideration (as defined in Section 2.01(c));
WHEREAS, the Merger and this Agreement require the vote of the holders
of a majority of the outstanding shares of the Company Common Stock for the
approval thereof (the "Company Stockholder Approval");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition of Parent's willingness to enter into this Agreement, Parent
and the Company are entering into a stock option agreement, dated as of the date
hereof, in the Form of Exhibit A hereto (the "Stock Option Agreement"), pursuant
to which the Company is granting Parent an option to purchase shares of Company
Common Stock;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and the Stock Option
Agreement, the parties agree as follows:
7
2
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at
the Effective Time of the Merger. At the Effective Time of the Merger, the
separate existence of Sub shall cease, and the Company shall continue as the
surviving corporation.
SECTION 1.02. Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.01, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the first business day after satisfaction of the conditions set
forth in Section 6.01 (or as soon as practicable thereafter following
satisfaction or waiver of the conditions set forth in Sections 6.02 and 6.03)
(the "Closing Date"), at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date, time or place
is agreed to in writing by the parties hereto. Notwithstanding the foregoing, in
the event that the Closing Date otherwise would occur during the period
beginning on the record date (the "Distribution Record Date") for the
determination of holders of common stock, par value $.01 per share, of Parent
("Parent Common Stock") entitled to receive shares of common stock, par value
$0.01 per share ("IMS Common Stock" and, together with the Parent Common Stock,
the "Merger Stock"), of IMS Health Incorporated, a Delaware corporation ("IMS"),
in the proposed dividend of IMS Common Stock to Parent's stockholders (the
"Parent Transaction") and ending on the date that is 17 trading days following
the date of commencement of "regular way" trading in the IMS Common Stock on the
New York Stock Exchange ("NYSE"), the Closing Date shall be deferred (upon the
terms and subject to the conditions herein, which shall remain in effect) to the
date that is 18 trading days following the date of commencement of "regular way"
trading in the IMS Common Stock on the NYSE.
SECTION 1.03. Effective Time of the Merger. Upon the Closing, the
parties shall file with the Secretary of State of the State of Delaware a
certificate of merger (the "Certificate of Merger") executed in accordance with
the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time on the Closing Date as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such other time on the
Closing Date as is permissible in accordance with the DGCL and as Sub and the
Company shall agree should be specified in the Certificate of Merger (the time
the Merger becomes effective being the "Effective Time of the Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the DGCL. As used herein, "Surviving
Corporation" shall mean and refer to the Company, at and after the Effective
Time of the Merger, as the surviving corporation in the Merger.
8
3
SECTION 1.05. Certificate of Incorporation; By-Laws. (a) At the
Effective Time of the Merger, and without any further action on the part of the
Company or Sub, the certificate of incorporation of the Company as in effect
immediately prior to the Effective Time of the Merger shall be the certificate
of incorporation of the Surviving Corporation at the Effective Time of the
Merger until thereafter amended as provided therein or by applicable law.
(b) At the Effective Time of the Merger, and without any further action
on the part of the Company or Sub, the by-laws of Sub as in effect immediately
prior to the Effective Time of the Merger shall be the by-laws of the Surviving
Corporation at the Effective Time of the Merger until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving Corporation
at the Effective Time of the Merger, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
SECTION 1.07. Officers. The officers of Sub immediately prior to the
Effective Time of the Merger shall be the officers of the Surviving Corporation
at the Effective Time of the Merger, until the earlier of their resignation or
removal or until their respective successors are duly elected or appointed and
qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations
SECTION 2.01. Effect on Capital Stock. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the
Company, Sub or any holder of any shares of Company Common Stock or any shares
of capital stock of Sub:
(a) Common Stock of Sub. Each share of common stock of Sub issued and
outstanding immediately prior to the Effective Time of the Merger shall be
converted into one share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Company Common
Stock. Each share of Company Common Stock that is owned by the Company and each
share of Company Common Stock that is owned by Parent, Sub or any other
subsidiary of Parent shall automatically be cancelled and retired and shall
cease to exist, and no cash, Merger Stock or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Section 2.02(e),
each issued and outstanding share of Company Common Stock (other than shares
cancelled pursuant to Section 2.01(b)) shall be converted into: (i) if the
Effective Time of the Merger occurs prior to the Distribution Record Date, a
fraction of a share of Parent Common Stock equal to the Parent Exchange Ratio
(as defined in Section 8.04); and (ii) if the Effective Time of the Merger
occurs
9
4
after the Distribution Record Date, a fraction of a share of IMS Common Stock
equal to the IMS Exchange Ratio (as defined in Section 8.04). The amount of
Merger Stock into which each such share of Company Common Stock is converted is
referred to herein as the "Merger Consideration."
(d) Cancellation and Retirement of Company Common Stock. As of the
Effective Time of the Merger, all shares of Company Common Stock and the
associated Rights issued and outstanding immediately prior to the Effective Time
of the Merger shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock (collectively, the
"Certificates") shall, to the extent such Certificate represents such shares,
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration (and cash in lieu of fractional shares) to be issued or
paid in consideration therefor upon surrender of such certificate in accordance
with Section 2.02.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time of the Merger, Parent shall enter into an agreement with such
bank or trust company as may be designated by Parent (the "Exchange Agent")
which shall provide that Parent shall deposit, or cause to be deposited, with
the Exchange Agent, for the benefit of holders of the Certificates, for exchange
in accordance with this Article II, certificates representing the shares of
Merger Stock (such shares of Merger Stock, together with any dividends or
distributions with respect thereto with a record date on or after the Effective
Time of the Merger and any cash payable in lieu of any fractional shares of
Parent Common Stock, being hereinafter referred to as the "Exchange Fund"),
issuable pursuant to Section 2.01 in exchange for outstanding shares of Company
Common Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time of the Merger, the Exchange Agent shall mail to each holder of
record of Certificates immediately prior to the Effective Time of the Merger
whose shares were converted into shares of Merger Stock pursuant to Section
2.01, (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, and which shall be in such
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Merger Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Merger Stock which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of this Article II (after
taking into account all shares of Company Common Stock then held by such holder)
and cash in lieu of any fractional shares of Merger Stock as contemplated by
Section 2.02(e), and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Merger Stock may be
issued to a transferee if the Certificate is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this
10
5
Section 2.02, each Certificate shall be deemed at any time after the Effective
Time of the Merger to represent only the Merger Stock into which the shares of
Company Common Stock represented by such Certificate have been converted as
provided in this Article II and the right to receive upon such surrender cash in
lieu of any fractional shares of Merger Stock as contemplated by this Section
2.02.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Merger Stock with a record date on or after
the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Merger Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.02(e), in each case until the surrender of
such Certificate in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate there also shall be
paid to the holder of the certificate representing whole shares of Merger Stock
issued in exchange therefor without interest (i) at the time of such surrender,
the amount of any cash payable in lieu of a fractional share of Merger Stock to
which such holder is entitled pursuant to Section 2.02(e) and the amount of any
dividends or other distributions with a record date on or after the Effective
Time of the Merger theretofore paid (but withheld pursuant to the immediately
preceding sentence) with respect to such whole shares of Merger Stock, and (ii)
at the appropriate payment date, the amount of any dividends or other
distributions with a record date on or after the Effective Time of the Merger
but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of Merger Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Merger Stock issued upon conversion of shares of Company Common Stock in
accordance with the terms hereof, and all cash paid pursuant to Sections 2.02(c)
and 2.02(e), shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock (including with respect
to the Rights), and 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 prior to the Effective Time of the Merger.
If, after the Effective Time of the Merger, Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Merger Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent. In lieu
of such issuance of fractional shares, Parent shall pay each holder of
Certificates an amount in cash equal to the product obtained by multiplying (a)
the fractional share interest to which such holder (after taking into account
all shares of Company Common Stock held immediately prior to the Effective Time
of the Merger by such holder) would otherwise be entitled by (b) the average of
the closing sale prices for a share of Merger Stock on the NYSE Composite
Transaction Tape for the five trading days immediately preceding the Effective
Time of the Merger.
(ii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Certificates with respect to any
fractional share interests, the
11
6
Exchange Agent shall make available such amounts to such holders of
Certificates, subject to and in accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
deposited with the Exchange Agent pursuant to this Section 2.02 which remains
undistributed to the holders of the Certificates for six months after the
Effective Time of the Merger shall be delivered to Parent, upon demand, and any
holders of Certificates prior to the Merger who have not theretofore complied
with this Article II shall thereafter look only to Parent and only as general
creditors thereof for payment of their claim for Merger Stock, cash in lieu of
fractional shares of Merger Stock and any dividends or distributions with
respect to Merger Stock to which such holders may be entitled.
(g) No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any shares of Merger Stock (or
dividends or distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have been surrendered
prior to three years after the Effective Time of the Merger, or immediately
prior to such earlier date on which any Merger Consideration, any cash in lieu
of fractional shares of Merger Stock or any dividends or distributions with
respect to Merger Stock would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.01(d)), any such Merger
Consideration or cash shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Parent on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
SECTION 2.03. Treatment of Options. At the Effective Time of the
Merger, each outstanding option to purchase Company Common Stock (a "Company
Stock Option") issued pursuant to the Company's Non-Employee Directors' Stock
Option Plan (the "Director Plan") or the Company's Stock Option and Restricted
Stock Purchase Plan (the "Option Plan" and, collectively with the Director Plan,
the "Company Stock Plans"), whether vested or unvested, shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under such Company Stock Option, those shares which the holder of
such Company Stock Option would have been entitled to receive pursuant to the
Merger if such holder had exercised such option in full immediately prior to the
Effective Time of the Merger (utilizing the Parent Exchange Ratio or IMS
Exchange Ratio, as the case may be), at a price per share equal to (y) the
aggregate exercise price for the shares of Company Common Stock purchasable
pursuant to such Company Stock Option (reduced, in the case of Company Stock
Options held by Continuing Employees, by $3.00 per share of Company Common Stock
purchasable pursuant thereto) divided by (z) the number of full shares of Merger
Stock deemed purchasable pursuant to such Company Stock Option (a "Converted
Option"); provided, however, that in the case of any option to which Section 421
of the Code applies by reason of its qualification under Section 422 of the Code
("incentive stock options"), the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be
12
7
determined in order to comply with Section 424(a) of the Code; provided,
further, that if the Closing Date occurs prior to the Distribution Record Date,
each Converted Option shall be adjusted or substituted, as the case may be,
pursuant to the Parent Transaction.
(b) As soon as practicable after the Effective Time of the Merger,
Parent shall deliver to the holders of Company Stock Options appropriate notices
setting forth such holders' rights pursuant to the Company Stock Plans and the
agreements evidencing the grants of such Company Stock Options shall continue in
effect on the same terms and conditions (subject to adjustments required by this
Section 2.03 after giving effect to the Merger and the provisions set forth
above and until otherwise determined). If necessary, Parent shall comply with
the terms of the Company Stock Plans and ensure, to the extent required by, and
subject to the provisions of, the Company Stock Plans, that Company Stock
Options that qualified as incentive stock options prior to the Effective Time of
the Merger continue to qualify as incentive stock options after the Effective
Time of the Merger.
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Merger Stock for delivery upon
exercise of Company Stock Options. As soon as practicable after the Effective
Time of the Merger, Parent shall file a registration statement on Form S-3 or
Form S-8, as the case may be (or any successor or other appropriate forms), or
another appropriate form, with respect to the shares of Merger Stock subject to
such options and shall use its reasonable efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements under
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), where applicable, Parent shall administer the Company Stock Plans in a
manner that complies with Rule 16b-3 promulgated under the Exchange Act to the
extent the Company Stock Plans complied with such rule prior to the Merger.
SECTION 2.04. Treatment of Debt Securities. (a) All debt securities of
the Company that are outstanding as of the Effective Time of the Merger shall
remain outstanding after the Effective Time of the Merger in accordance with
their respective terms and provisions. Pursuant to Sections 7.1 and 8.1 of the
Indenture dated as of February 1, 1993 (the "Company Indenture") between the
Company and Xxxxxx Trust Company of New York, as trustee, relating to the
Company's 6 1/4% Convertible Subordinated Debentures due 2003 (the
"Debentures"), prior to the Effective Time of the Merger, the Company and Parent
shall enter into a supplemental indenture providing that each holder of
Debentures outstanding at the Effective Time of the Merger shall have the right
to convert such Debentures into the number of shares of Merger Stock which would
be receivable at the Effective Time of the Merger by a holder of the number of
shares of Company Common Stock deliverable upon conversion of such Debentures
immediately prior to the Effective Time of the Merger, and subject to future
adjustments of the conversion price of the Debentures as provided for in Section
12.4 of the Company Indenture.
(b) Parent shall take (or cause to be taken) all corporate action
necessary to reserve for issuance a sufficient number of shares of Merger Stock
for delivery upon conversion of the Debentures.
13
8
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company. The
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the Company and
each of its Subsidiaries (as defined in Section 3.01(b)) is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of the Company and each of
its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction (domestic or foreign) in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) could not reasonably
be expected to have a Material Adverse Effect (as defined in Section 8.04) with
respect to the Company. Attached as Section 3.01(a) of the disclosure schedule
delivered by the Company to Parent and Sub at the time of execution of this
Agreement (the "Company Disclosure Schedule") are complete and correct copies of
the Company's Amended Certificate of Incorporation, as amended (the "Certificate
of Incorporation"), and the Company's Amended and Restated By-laws, as amended
(the "By-Laws"), as currently in effect. The Company has made available to
Parent and Sub complete and correct copies of the certificates of incorporation
and by-laws (or other organizational documents) of each of the Company's
Subsidiaries, in each case as amended to the date of this Agreement.
(b) Subsidiaries. The only direct or indirect subsidiaries (as defined
in Section 8.04) of the Company are those listed in Section 3.01(b) of the
Company Disclosure Schedule (collectively, the "Subsidiaries"). All of the
outstanding shares of capital stock of each subsidiary of the Company have been
validly issued and are fully paid and nonassessable and, except as disclosed in
Section 3.01(b) of the Company Disclosure Schedule, are owned (of record and
beneficially) by the Company, by another wholly owned subsidiary of the Company
or by the Company and another such wholly owned subsidiary, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens"). Except for the ownership
interests set forth in Section 3.01(b) of the Company Disclosure Schedule, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, limited liability company,
business association, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 25,000,000 shares of Company Common Stock, par value $.01 per share,
and 5,000,000 shares of preferred stock, par value $.01 per share ("Company
Preferred Stock"). As of the close of business on March 18, 1998, there were:
(i) 12,373,827 shares of Company Common Stock issued and outstanding; (ii)
918,254 shares of Company Common Stock held in the treasury of the Company or
held by Subsidiaries; (iii) 2,670,000 shares of Company Common Stock reserved
for issuance upon exercise of Company Stock Options available for grant pursuant
to
14
9
the Company Stock Plans; (iv) 4,124,609 shares of Company Common Stock issuable
pursuant to the Rights Agreement (as defined in Section 8.04); and (v) 3,450,000
shares of Company Common Stock issuable upon conversion of currently outstanding
Debentures. As of the close of business on January 31, 1998, there were
2,083,400 shares of Company Common Stock issuable upon exercise of awarded but
unexercised Company Stock Options, with an exercise price per each awarded but
unexercised Company Stock Option as is set forth in Section 3.01(c)(iv) of the
Company Disclosure Schedule. Except as set forth above, as of the close of
business on March 18, 1998, there were no shares of capital stock or other
equity securities of the Company issued, reserved for issuance or outstanding.
All outstanding shares of capital stock of the Company are, and all shares which
may be issued pursuant to the Company Stock Plans and the Debentures will be,
when issued, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. All securities issued by the Company were
issued in compliance in all material respects with all applicable federal and
state securities laws and all applicable rules and regulations promulgated
thereunder. Other than the Debentures, there are no outstanding bonds,
debentures, notes or other indebtedness or debt securities 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
(collectively, "Voting Debt"). Except as set forth above and except pursuant to
the Stock Option Agreement, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of the Company or
of any of its Subsidiaries or obligating the Company or any of its Subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. Other than the Stock
Option Agreement and except as disclosed in Section 3.01(c) of the Company
Disclosure Schedule, (i) there are no outstanding contractual obligations,
commitments, understandings or arrangements of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock of the Company or any of its Subsidiaries
and (ii) to the knowledge of the Company, there are no irrevocable proxies with
respect to shares of capital stock of the Company or any of its Subsidiaries.
Except as set forth in Section 3.01(c) of the Company Disclosure Schedule, there
are no agreements or arrangements pursuant to which the Company is or could be
required to register shares of Company Common Stock or other securities of the
Company or any of its Subsidiaries under the Securities Act of 1933, as amended
(the "Securities Act"), or other agreements or arrangements with or, to the
knowledge of the Company, among any securityholders of the Company or any of its
Subsidiaries with respect to securities of the Company or any of its
Subsidiaries.
Since June 30, 1997, except as disclosed in Section 3.01(c) of the
Company Disclosure Schedule, the Company has not (A) issued or permitted to be
issued any shares of capital stock, or securities exercisable for or convertible
into shares of capital stock, of the Company or any of its Subsidiaries, other
than (1) pursuant to the Stock Option Agreement, (2) the grant of any employee
stock options prior to the date of this Agreement pursuant to the Company Stock
Plans, (3) the issuance of Company Common Stock upon exercise of the options
granted pursuant to the Company Stock Plans prior to the date of this Agreement
and (4) upon conversion of Debentures outstanding on such date; (B) repurchased,
redeemed or otherwise
15
10
acquired, directly or indirectly through one or more Subsidiaries, any shares of
capital stock of the Company or any of its Subsidiaries; or (C) declared, set
aside, made or paid to the stockholders of the Company or any of its
Subsidiaries dividends or other distributions on the outstanding shares of
capital stock of the Company or any of its Subsidiaries (excluding dividends
declared, set aside, made or paid by wholly owned Subsidiaries to the Company or
any wholly owned Subsidiaries).
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into each of this Agreement and the Stock
Option Agreement and, subject to the Company Stockholder Approval in the case of
this Agreement, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of each of this Agreement and the Stock Option
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of this
Agreement, to the Company Stockholder Approval. This Agreement and the Stock
Option Agreement have been duly executed and delivered by the Company and
(assuming due authorization, execution and delivery by Parent and Sub)
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. No holder of capital stock of
the Company will be entitled to appraisal rights under the DGCL or otherwise as
a result of the execution and delivery of this Agreement or the consummation of
any of the transactions contemplated hereby. Except as set forth in Section
3.01(d) of the Company Disclosure Schedule (and except for the "Repurchase
Rights" of holders of Debentures, as defined in the Company Indenture), the
execution and delivery of each of this Agreement and the Stock Option Agreement
does not, and the consummation by the Company of the transactions contemplated
by each of this Agreement and the Stock Option Agreement and compliance by the
Company with the provisions hereof and thereof will not, conflict with, or
result in any breach or violation of, or any default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of, or a "put" right with respect to any obligation
under, or to a loss of a material benefit under, or result in the creation of
any Lien under, (i) the Certificate of Incorporation or By-laws or the
comparable charter or organizational documents of any of the Company's
Subsidiaries, (ii) any loan or credit agreement, note, note purchase agreement,
bond, mortgage, indenture, lease or any other contract, agreement, instrument,
permit, concession, franchise or license to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties or assets are bound or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule, regulation or
arbitration award applicable to the Company or any of its Subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect with respect to the Company. No consent,
approval, order or authorization of, or registration, declaration or filing
with, or notice to, any international organization, the government of the United
States of America, any other nation or any political subdivision thereof,
whether state, provincial, local or
16
11
otherwise, or any court, administrative agency or commission or other
governmental authority, regulatory body or agency, domestic or foreign (a
"Governmental Entity"), or any other third party is required by or with respect
to the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement and the Stock Option Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby and thereby
or the performance by the Company of its obligations hereunder or thereunder,
except for (i) the filing of a premerger notification and report form by the
Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the filing of such applications or notices by the
Company as may be required pursuant to merger control, antitrust, foreign
investment or similar laws or regulations in effect in Belgium, Germany or any
political subdivision thereof, (ii) the filing with the Securities and Exchange
Commission (the "SEC") and the National Association of Securities Dealers (the
"NASD") of (A) a proxy statement relating to the Company Stockholder Approval
(such proxy statement as amended or supplemented from time to time, the "Proxy
Statement") and (B) such reports under the Exchange Act as may be required in
connection with this Agreement and the Stock Option Agreement and the
transactions contemplated hereby and thereby, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or notices the
failure of which to make or obtain, individually or in the aggregate, could not
reasonably be expected to (x) prevent or materially delay consummation of the
Merger or the transactions contemplated hereby or performance of the Company's
obligations hereunder or under the Stock Option Agreement or (y) have a Material
Adverse Effect with respect to the Company.
(e) SEC Documents; Undisclosed Liabilities. The Company has filed with
the SEC all reports, schedules, forms, statements and other documents required
pursuant to the Securities Act and the Exchange Act since July 1, 1995
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "SEC Documents"). As of their
respective dates, the SEC Documents complied as to form in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such SEC Documents. As of their respective dates, (i) none of the SEC
Documents (including any and all financial statements included therein) filed
pursuant to the Securities Act or any rule or regulation thereunder contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and (ii) none of the SEC Documents (including any and all
financial statements included therein) filed pursuant to the Exchange Act or any
rule or regulation thereunder contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Except to the extent that information
contained in any SEC Document has been revised or superseded by a later filed
SEC Document, none of the SEC Documents (including any and all financial
statements included therein) contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The consolidated financial statements of
the Company included in all SEC Documents filed since July 1, 1995 (the "SEC
17
12
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly financial statements, as permitted by Form 10-Q of the SEC), applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto). The SEC Financial Statements fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited quarterly
statements, to normal recurring audit adjustments). Except as disclosed in
Section 3.01(e) of the Company Disclosure Schedule, as of the date hereof,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be recognized or
disclosed on a consolidated balance sheet of the Company and its Subsidiaries or
in the notes thereto, except (i) liabilities reflected in the audited
consolidated balance sheet of the Company as of June 30, 1997 or the notes
thereto (the "1997 Balance Sheet") included in the SEC Documents, (ii)
liabilities disclosed in any Recent SEC Document and (iii) liabilities incurred
since June 30, 1997 in the ordinary course of business consistent with past
practice.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC in connection with
the issuance of Merger Stock in the Merger (the "Form S-4") will, at the time
the Form S-4 is filed with the SEC, at any time it is amended or supplemented or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Stockholders Meeting (as defined in Section
5.01(c)), 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 the light of the circumstances under which they are made,
not misleading. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied in writing by Parent or Sub specifically for inclusion or
incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in
Section 3.01(g) of the Company Disclosure Schedule or in the Recent SEC
Documents (as defined in Section 8.04), during the period from June 30, 1997
through and including the date hereof, each of the Company and each of its
Subsidiaries has conducted its business only in the ordinary course consistent
with past practice, and there is not and has not been since June 30, 1997: (i)
any Material Adverse Change (as defined in Section 8.04) with respect to the
Company; (ii) any condition, event or occurrence which, as of the date of this
Agreement, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect with respect to the Company or give rise to a
Material Adverse Change with respect to the Company; (iii) any action or failure
to act which, if it had been taken or not taken after the execution of this
Agreement, would have required the consent of Parent pursuant to this Agreement;
or (iv) any condition,
18
13
event or occurrence which, individually or in the aggregate, could reasonably be
expected to prevent or materially delay the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement or
perform its obligations hereunder or thereunder.
(h) Litigation; Labor Matters; Compliance with Laws. (i) Except as
disclosed in Section 3.01(h)(i) of the Company Disclosure Schedule or in the
Recent SEC Documents, as of the date hereof there is (1) no suit, action,
arbitration or proceeding pending, and (2) to the knowledge of the Company, no
suit, action, arbitration or proceeding threatened against or investigation
pending, in each case with respect to the Company or any of its Subsidiaries
that, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect with respect to the Company or prevent or materially
delay the ability of the Company to consummate the transactions contemplated by
this Agreement or the Stock Option Agreement or to perform its obligations
hereunder or thereunder, nor is there any judgment, decree, citation,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries which, individually or in the
aggregate, has or could reasonably be expected to have a Material Adverse Effect
with respect to the Company or prevent or materially delay the ability of the
Company to consummate the transactions contemplated by this Agreement or the
Stock Option Agreement or to perform its obligations hereunder or thereunder. To
the knowledge of the Company, except as disclosed in Section 3.01(h)(i) of the
Company Disclosure Schedule or in the Recent SEC Documents, as of the date
hereof there is no reasonable basis for any action, suit, arbitration or
proceeding that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect with respect to the Company or prevent or
materially delay the ability of the Company to consummate the transactions
contemplated by this Agreement or the Stock Option Agreement or to perform its
obligations hereunder or thereunder.
(ii) Except as disclosed in Section 3.01(h)(ii) of the Company
Disclosure Schedule or in the Recent SEC Documents, (1) neither the Company nor
any of its Subsidiaries is a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization; (2) as of the date hereof, to the knowledge of the Company,
neither the Company nor any of its Subsidiaries is the subject of any proceeding
asserting that it or any of its Subsidiaries has committed an unfair labor
practice or seeking to compel it to bargain with any labor organization as to
wages or conditions of employment; (3) as of the date hereof, there is no
strike, work stoppage or other similar labor dispute involving it or any of its
Subsidiaries pending or, to its knowledge, threatened; (4) as of the date
hereof, no grievance is pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect with
respect to the Company; (5) to the knowledge of the Company, the Company and
each of its Subsidiaries is in compliance with all applicable laws (domestic and
foreign), agreements, contracts, and policies relating to employment, employment
practices, wages, hours and terms and conditions of employment except for
failures so to comply, if any, that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect with respect to the
Company; (6) the Company and each of its Subsidiaries has complied in all
material respects with its payment obligations to all employees of the Company
and its Subsidiaries in respect of all wages, salaries, commissions,
19
14
bonuses, benefits and other compensation due and payable to such employees under
any policy, practice, agreement, plan, program of the Company or any of its
Subsidiaries or any statute or other law; (7) neither the Company nor any of its
Subsidiaries is liable for any severance pay or other payments to any employee
or former employee arising from the termination of employment under any benefit
or severance policy, practice, agreement, plan, or program of the Company or any
of its Subsidiaries, nor to the knowledge of the Company will the Company or any
of its Subsidiaries have any liability which exists or arises, or may be deemed
to exist or arise, under any applicable law or otherwise, as a result of or in
connection with the transactions contemplated hereunder or as a result of the
termination by the Company or any of its Subsidiaries of any persons employed by
the Company or any of its Subsidiaries on or prior to the Effective Time of the
Merger, excluding any such payment or liability which does not exceed $50,000
(or does exceed $50,000 solely as a result of statutory regulations governing
severance payments) individually or $500,000 in the aggregate with all such
other payments not disclosed in Section 3.01(h)(ii) of the Company Disclosure
Schedule; and (8) the Company and each of its Subsidiaries is in compliance with
its obligations pursuant to the Worker Adjustment and Retraining Notification
Act of 1988 ("WARN"), to the extent applicable, and all other employee
notification and bargaining obligations arising under any collective bargaining
agreement or statute.
(iii) Each of the Company and each of its Subsidiaries holds all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of the businesses of
the Company and its Subsidiaries, taken as a whole (the "Company Permits"). The
Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply, individually or in the
aggregate, would not have a Material Adverse Effect with respect to the Company.
Except as disclosed in Section 3.01(h)(iii) of the Company Disclosure Schedule,
the businesses of the Company and its Subsidiaries are not being conducted in
violation of any law (domestic or foreign), ordinance or regulation of any
Governmental Entity, except for possible violations which, individually or in
the aggregate, do not and could not reasonably be expected to have a Material
Adverse Effect with respect to the Company.
(iv) Except as disclosed in Section 3.01(h)(iv) of the Company
Disclosure Schedule, each of the Company and each of its Subsidiaries have in
the past duly complied, and are presently duly complying, with all applicable
laws (whether statutory or otherwise), rules, regulations, orders, judgments or
decrees (the "Laws") of all Governmental Entities, including, without
limitation, privacy and data protection Laws of any Governmental Entity, except
where the failure to have so complied or to be presently complying would neither
have a Material Adverse Effect with respect to the Company nor constitute
violations of criminal laws that could subject the Company or any Subsidiary to
criminal liability. Neither the Company nor any Subsidiary has received any
notification of or has any knowledge of any asserted material failure by it to
comply with any of such Laws.
(i) Employee Benefit Plans. (i) Section 3.01(i) of the Company
Disclosure Schedule contains a true and complete list of each "employee benefit
plan" (within the meaning of section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), governmental plan or
government-mandated plan
20
15
or arrangement providing for retirement or health or other employee benefits for
which contributions are required under any applicable Law ("Governmental
Plans"), stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, collective bargaining, bonus, incentive, deferred compensation
and all other employee benefit plans, agreements, programs, policies or other
arrangements relating to employment, benefits or entitlements, whether or not
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transactions contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not under which any employee or former employee of the Company or any
of its Subsidiaries has any present or future right to benefits or under which
the Company or any of its Subsidiaries has any present or future liability. All
such plans, agreements, programs, policies and arrangements are herein
collectively referred to as the "Company Plans."
(ii) With respect to each Company Plan, the Company has delivered to
Parent a current, accurate and complete copy (or, to the extent no such copy
exists, an accurate description) thereof and, to the extent applicable, (A) any
related trust agreement, annuity contract or other funding instrument; (B) the
most recent determination letter; (C) the current summary plan description and
other written communications by the Company to its employees concerning the
extent of the benefits provided under a Company Plan; and (D) for the most
recent year (I) the Form 5500 and attached schedules; (II) audited financial
statements; (III) actuarial valuation reports; and (IV) attorney's response to
an auditor's request for information.
(iii) (A) Each Company Plan has been established and administered in
material compliance with its terms and with the applicable provisions of ERISA,
the Code and other applicable laws, rules and regulations (including the
applicable laws, rules and regulations of any foreign jurisdiction); (B) each
Company Plan which is intended to be qualified within the meaning of Section
401(a) of the Code is so qualified and, except for the Xxxxx-Xxxxx 401(k) and
Profit Sharing Plan, has received a favorable determination letter as to its
qualification and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification; (C) with respect to any
Company Plan, no actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or, to the knowledge of the
Company, threatened, no facts or circumstances exist which could give rise to
any such actions, suits or claims and the Company will promptly notify Parent in
writing of any pending claims or, to the knowledge of the Company, any
threatened claims arising between the date hereof and the Effective Time of the
Merger; (D) neither the Company nor, to the knowledge of the Company, any other
party has engaged in a prohibited transaction, as such term is defined under
Section 4975 of the Code or ERISA Section 406, which would subject the Company
or Parent or its Subsidiaries to any material taxes, penalties or other
liabilities under the Code or ERISA; (E) no event has occurred and no condition
exists that would subject the Company, either directly or by reason of its
affiliation with any member of its "Controlled Group" (defined as any
organization which is a member of a controlled group of organizations within the
meaning of Sections 414(b), (c), (m) or (o) of the Code), to any material tax,
fine or penalty imposed by ERISA, the Code or other applicable laws, rules and
regulations (including the applicable laws, rules and regulations of any foreign
jurisdiction); (F) all insurance premiums required to be paid and all
contributions required to be made under the terms of any Company Plan, the Code,
21
16
ERISA or other applicable laws, rules and regulations (including the applicable
laws, rules and regulations of any foreign jurisdiction) as of the Effective
Time of the Merger have been or will be timely paid or made prior thereto and
adequate reserves have been provided for on the Company's balance sheet for any
premiums (or portions thereof) and for all benefits attributable to service on
or prior to the Effective Time of the Merger; (G) except for the Source
Informatics America, PMSI Xxxxx-Xxxxx and Xxxxx America 401(k) Retirement Plan,
each Company Plan with respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the most recent Form
since the date thereof; and (H) no Company Plan provides for an increase in
benefits on or after the Effective Time of the Merger.
(iv) No Company Plan is subject to Title IV of ERISA, and no Company
Plan is a multiemployer plan as defined in Section 4001(A)(3) of ERISA. The
Company has never been required to contribute to or sponsored any multiemployer
plan or any plan subject to Title IV of ERISA.
(v) Except as set forth in Section 3.01(i)(v) of the Company Disclosure
Schedule, no Company Plan exists which could result in the payment to any
Company employee of any money or other property or rights or accelerate or
provide any other rights or benefits to any Company employee as a result of the
transactions contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Section 280G of the Code.
(vi) (i) Each Company Plan which is intended to meet the requirements
for tax-favored treatment under Subchapter B of Chapter 1 of Subtitle A of the
Code meets such requirements; and (ii) the Company has received a favorable
determination from the Internal Revenue Service with respect to any trust
intended to be qualified within the meaning of Section 501(c)(9) of the Code.
(vii) Except as provided in Section 3.01(i)(vii) of the Company
Disclosure Schedule, no independent contractor or other contract employee has
participated or is entitled to participate in any Company Plan.
(viii) The Employee Stock Purchase Plan approved by the Board of
Directors of the Company on December 30, 1997 (the "Employee Stock Purchase
Plan") has not been put into effect and no person, including any employee of the
Company or any of its Subsidiaries, has purchased or has any right to purchase
any shares of capital stock of the Company thereunder.
(j) Taxes. Except as disclosed in Section 3.01(j) of the Company
Disclosure Schedule: (i) the Company and each of its Subsidiaries, and any
consolidated, combined, unitary or aggregate group of which the Company or any
of its Subsidiaries is or has been a member has timely filed all Tax Returns
required to be filed by it, or requests for extensions to file such Tax Returns
have been timely filed, granted and have not expired; (ii) all such Tax Returns
are complete and correct in all material respects; (iii) the Company and each of
its Subsidiaries, and any consolidated, combined, unitary or aggregate group of
which the Company or any of it Subsidiaries is or has been a member, has paid
all Taxes due or has provided adequate reserves in its financial statements
(other than in respect of deferred taxes) for any Taxes that have not been
22
17
paid; (iv) no material claim for unpaid Taxes has been asserted by a Tax
authority or has become a lien against the property of the Company or any of its
Subsidiaries (other than with respect to Taxes not yet due and payable) or is
being asserted against the Company or any of its Subsidiaries; (v) no audit or
other proceeding with respect to any Taxes due from or with respect to the
Company or any of its Subsidiaries or any Tax Return filed by the Company or any
of its Subsidiaries is being conducted by any governmental or Tax authority and
the Company and its Subsidiaries have not received notification in writing that
any such audit or other proceeding with respect to Taxes or any Tax Return is
pending; (vi) no extension of the statute of limitations on the assessment of
any Taxes has been granted by the Company or any of its Subsidiaries; and (vii)
neither the Company nor any of its Subsidiaries is subject to liability for
Taxes of any Person (other than the Company or its Subsidiaries), including,
without limitation, liability arising from the application of Treasury
Regulation section 1.1502-6 or any analogous provision of state, local or
foreign law, or as a transferee or successor, by contract, or otherwise. As used
herein, "Taxes" shall mean all taxes of any kind, including, without limitation,
those on or measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, social
security, transfer, net worth, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign. As used herein, "Tax Return" shall
mean any return, report or statement required to be filed with any governmental
authority with respect to Taxes.
(k) Properties. Except as disclosed in Section 3.01(k) of the Company
Disclosure Schedule, the Company or one of its Subsidiaries (i) has good and
marketable title to all the properties and assets (A) reflected in the 1997
Balance Sheet as being owned by the Company or one of its Subsidiaries (other
than any such properties or assets sold or disposed of since June 30, 1997 in
the ordinary course of business consistent with past practice) and (B) acquired
after June 30, 1997 which are material to the Company's business on a
consolidated basis, in each case free and clear of all Liens, except statutory
Liens securing payments not yet due and such Liens as do not materially affect
the use of the properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such properties and (ii) is
the lessee of all leasehold estates (x) reflected in the 1997 Balance Sheet and
(y) acquired after June 30, 1997 which are material to its business on a
consolidated basis (except for leases that have expired by their terms since the
date thereof) and is in possession of the properties purported to be leased
thereunder, and each such lease is in full force and effect and constitutes a
legal, valid and binding obligation of, and is legally enforceable against, the
respective parties thereto (except as affected by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing), and there is no default
thereunder by the lessee or, to the Company's knowledge, as of the date hereof,
the lessor that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect with respect to the Company. As of the date
hereof, the Company has not received written notice and does not otherwise have
knowledge of any pending, threatened or contemplated condemnation proceeding
affecting any premises owned or leased by the Company or any of its Subsidiaries
or any part thereof or of any
23
18
sale or other disposition of any such owned or leased premises or any part
thereof in lieu of condemnation.
(l) Environmental Matters. Except as could not reasonably be expected
to result in any liability under or relating to Environmental Laws (as defined
in Section 8.04) to the Company or any of its Subsidiaries which, individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect with respect to the Company:
(i) each of the Company and each of its Subsidiaries holds and is, and
has been, in compliance with all Environmental Permits (as defined in
Section 8.04), and each of the Company and each of its Subsidiaries is, and
has been, otherwise in compliance with all Environmental Laws and, to the
knowledge of the Company, there are no conditions that might prevent or
interfere with such compliance in the future;
(ii) neither the Company nor any of its Subsidiaries has received any
written Environmental Claim or has knowledge of any other Environmental
Claim or threatened Environmental Claim;
(iii) neither the Company nor any of its Subsidiaries has entered into
any consent decree, order or agreement under or relating to any
Environmental Law;
(iv) there are no past (including, without limitation, with respect to
assets or businesses formerly owned, leased or operated by the Company or
any of its Subsidiaries) or present actions, activities, events, conditions
or circumstances, including without limitation the release, threatened
release, emission, discharge, generation, treatment, storage or disposal of
Hazardous Materials, that could reasonably be expected to give rise to
liability of the Company or any of its Subsidiaries under any Environmental
Laws; and
(v) no modification, revocation, reissuance, alteration, transfer, or
amendment of the Environmental Permits, or any review by, or approval of,
any third party of the Environmental Permits is required in connection with
the execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby or the continuation of the business of the
Company or any of its Subsidiaries following such consummation.
(m) Contracts; Debt Instruments. (i) Neither the Company nor any of its
Subsidiaries is, or has received any notice or has any knowledge that any other
party, as of the date hereof, is, or by virtue of the transactions contemplated
hereby, will be, in default in any respect under any contract, agreement,
commitment, arrangement, lease, policy or other instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any such
subsidiary is bound, except for those defaults which could not reasonably be
expected, either individually or in the aggregate, to have a Material Adverse
Effect with respect to the Company; and, to the knowledge of the Company, there
has not occurred any event, nor will this transaction by its terms cause the
occurrence of any event, that with the lapse of time or the giving of notice or
both would constitute such a default.
24
19
(ii) The Company has made available to Parent (x) true and correct
copies (or accurate English translations) of all loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements and instruments
pursuant to which any indebtedness (as defined in section 8.04) of the Company
or any of its Subsidiaries in an aggregate principal amount in excess of $
500,000 is outstanding or may be incurred and (y) accurate information regarding
the respective principal amounts currently outstanding thereunder.
(iii) Except as set forth in Section 3.01(m)(iii) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any agreement nor is there any judgment, decree, injunction, rule
or order of any Governmental Authority or arbitrator outstanding against the
Company or any of its Subsidiaries, that, following the Effective Time of the
Merger, would impose any material restriction on the ability of Parent or any of
its Subsidiaries (including the Surviving Corporation and its Subsidiaries) to
conduct any of the businesses currently conducted by any of them.
(iv) Except as set forth in Section 3.01(m)(iv) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any agreement which, pursuant to the requirements of Form 10-K
under the Exchange Act, would be required to be filed as an exhibit to an Annual
Report on Form 10-K of the Company, except agreements included or incorporated
by reference as exhibits to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1997 or any Recent SEC Document.
(v) Set forth in Section 3.01(m)(v) of the Company Disclosure Schedule
are all: (a) (i) data supply and data processing contracts involving payments by
the Company and its Subsidiaries in excess of $100,000, (ii) customer contracts
between the Company or any of its Subsidiaries, other than PMSI Xxxxx-Xxxxx,
Inc. ("SLI") and third parties and (iii) customer contracts between SLI and
third parties involving payments by customers exceeding $100,000 per annum; (b)
contracts between the Company or any of its Subsidiaries, on the one hand, and
any of their respective directors, officers, employees or affiliates or any
former directors, officers, employees or affiliates, on the other hand; (c)
joint venture and/or agreements and development agreements to which the Company
or any of its Subsidiaries is a party; and (d) contracts between the Company or
any of its Subsidiaries, on the one hand, and either National Data Corporation
or Source Informatics Inc., on the other hand.
(vi) Section 3.01(m)(vi) of the Company Disclosure Schedule lists all
charter client and partner client agreements to or by which the Company or any
of its Subsidiaries is a party or bound.
(vii) With respect to each of its current customers, except as
disclosed in Section 3.01(m)(vii) of the Company Disclosure Schedule, as of the
date of this Agreement, the Company has no knowledge that any such customer
intends to terminate or otherwise modify its relationship with the Company or
its Subsidiaries or to decrease or limit the services rendered or products sold
by the Company or its Subsidiaries.
(n) Brokers. Except as disclosed in Section 3.01(n) of the Company
Disclosure Schedule, no broker, investment banker, financial advisor or other
person, other than Cowen &
25
20
Company, the fees and expenses of which will be paid by the Company (pursuant to
fee agreements, copies of which have been provided to Parent), is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement or the Stock
Option Agreement based upon arrangements made by or on behalf of the Company.
The Company agrees to indemnify Parent and Sub and to hold Parent and Sub
harmless from and against any and all claims, liabilities or obligations with
respect to any other fee, commission or expense asserted by any person on the
basis of any act or statement alleged to have been made by the Company or any of
its affiliates.
(o) Opinion of Financial Advisor. The Company has received as of the
date of this Agreement the opinion of Xxxxx & Company to the effect that, as of
such date, the Merger Consideration is fair, from a financial point of view, to
the holders of Company Common Stock (other than Parent and its affiliates).
(p) Board Recommendation; State Antitakeover Law. The Board of
Directors of the Company, at a meeting duly called and held, has by unanimous
vote of those directors present (i) determined that this Agreement and the Stock
Option Agreement and the transactions contemplated hereby and thereby, including
the Merger, taken together, are fair to and in the best interests of the
stockholders of the Company and has taken all actions necessary on the part of
the Company to render the restrictions on business combinations contained in
Section 203 of the DGCL inapplicable to this Agreement, the Merger and the Stock
Option Agreement and (ii) resolved to recommend that the holders of the shares
of Company Common Stock approve this Agreement and the transactions contemplated
herein, including the Merger.
(q) Required Company Vote. The Company Stockholder Approval, being the
affirmative vote of a majority of the outstanding shares of the Company Common
Stock, is the only vote of the holders of any class or series of the Company's
securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby. There is no vote of the holders of any class
or series of the Company's securities necessary to approve the Stock Option
Agreement.
(r) Intellectual Property. (i) Except as otherwise noted in Section
3.01(r)(i) of the Company Disclosure Schedule, the Company or one of its
Subsidiaries owns or has the right to use all Intellectual Property material to
the operation of the business of the Company and its Subsidiaries as currently
conducted or to products or services currently under development by the Company
or any of its Subsidiaries (collectively, "Material Intellectual Property"), and
has the right to use, license, sublicense or assign the same without liability
to, or any requirement of consent from, any other person or party; in this
regard, to the knowledge of the Company as of the date hereof, no facts or
circumstances exist which would affect the validity, subsistence or existence of
any Material Intellectual Property. Except as set forth in Section 3.01(r)(i) of
the Company Disclosure Schedule, all Material Intellectual Property is either
owned by the Company or its Subsidiaries free and clear of all Liens or is used
pursuant to an agreement or license and each such agreement or license is valid
and enforceable and in full force and effect and neither the Company nor any of
its Subsidiaries is in default under or in breach of any such license or
agreement and, to the knowledge of the Company as of the date hereof, none of
the licensors is in default under or in breach of any such license or agreement.
Unless otherwise
26
21
noted in Section 3.01(r)(i) of the Company Disclosure Schedule, (i) none of the
Material Intellectual Property infringes or otherwise conflicts with any
proprietary or other right of any person or party; (ii) as of the date hereof,
there is no pending or threatened litigation, adversarial proceeding,
administrative action or other challenge or claim relating to any of the
Material Intellectual Property; (iii) there is no outstanding judgment, order,
writ, injunction or decree relating to any of the Material Intellectual
Property; (iv) as of the date hereof, there is currently no infringement by any
third party of any of the Material Intellectual Property; and (v) the Material
Intellectual Property owned, used or possessed by the Company or its
Subsidiaries is sufficient and adequate to conduct the business of the Company
and its Subsidiaries to the full extent as such business is currently conducted.
(ii) Each of the Company and each of its Subsidiaries has taken
reasonable steps to protect, maintain and safeguard their Material Intellectual
Property, including any Material Intellectual Property for which improper or
unauthorized disclosure would impair its value or validity, and has executed
appropriate nondisclosure agreements and made appropriate filings and
registrations in connection with the foregoing.
(iii) The Company or one of its Subsidiaries is the sole and exclusive
owner of all Software (which term includes, without limitation, all computer
programs, whether in source code or object code form, algorithms, edit controls,
methodologies, applications, flow charts and any and all systems documentation
(including, but not limited to, data entry and data processing procedures,
report generation and quality control procedures), logic and designs for all
programs, and file layouts and written narratives of all procedures used in the
coding or maintenance of the foregoing) that is required to conduct the
businesses of the Company and its Subsidiaries to the full extent such
businesses are currently conducted. Except as set forth in Section
3.01(r)(iii)(b) of the Company Disclosure Schedule, all of the Software owned by
the Company or any of its Subsidiaries is Year 2000 Compliant (as defined in
Section 8.04). Notwithstanding anything to the contrary set forth in this
Section 3.01(r)(iii), the term "Software" does not include any software used or
held for use by the Company or its Subsidiaries and not owned by the Company or
its Subsidiaries, including but not limited to any software licensed or leased
by third parties to the Company or its Subsidiaries and commonly available
"shrink wrap" software copyrighted by third parties (collectively, the "Third
Party Software"). All of the Third Party Software required to conduct the
businesses of the Company and its Subsidiaries to the full extent such
businesses are currently conducted is used pursuant to an agreement or license
and each such agreement or license is valid and enforceable and in full force
and effect and neither the Company nor any of its Subsidiaries is in default
under or in breach of any such license or agreement and, to the knowledge of the
Company as of the date hereof, none of the licensors is in default under or in
breach of any such license or agreement. To the Company's knowledge as of the
date hereof, except as set forth in Section 3.01(r)(iii)(c) of the Company
Disclosure Schedule, all of the Third Party Software is Year 2000 Compliant.
(iv) The Company or one of its Subsidiaries is the sole and exclusive
owner of all Databases (which term includes, without limitation, all databases,
documentation and written narratives of all procedures used in connection with
the collection, processing and distribution of data contained in the databases)
that are required to conduct the businesses of the Company and its Subsidiaries
to the full extent such businesses are currently conducted. The Databases,
27
22
together with the Third Party Databases (as defined below), contain that data
heretofore used by the Company and its Subsidiaries in the operation of their
respective businesses. Except as set forth in Section 3.01(r)(iv)(b) of the
Company Disclosure Schedule, the Databases are Year 2000 Compliant.
Notwithstanding anything to the contrary set forth in this Section 3.1(r)(iv),
the term "Databases" does not include any databases used or held for use by the
Company and its Subsidiaries and not owned by the Company and its Subsidiaries,
including, but not limited to, any databases licensed or leased by third parties
to the Company and databases generally available to the public (collectively,
the "Third Party Databases"). All of the Third Party Databases required to
conduct the businesses of the Company and its Subsidiaries to the full extent
such businesses are currently conducted are used pursuant to an agreement or
license and each such agreement or license is valid and enforceable and in full
force and effect and neither the Company nor any of its Subsidiaries is in
default under or in breach of any such license or agreement and, to the
knowledge of the Company as of the date hereof, none of the licensors is in
default under or in breach of any such license or agreement. To the Company's
knowledge as of the date hereof, except as set forth in Section 3.01(r)(iv)(d)
of the Company Disclosure Schedule, all of the Third Party Databases are Year
2000 Compliant.
(v) Except as set forth in Section 3.01(r)(v) of the Company Disclosure
Schedule, to the knowledge of the Company, no confidential or trade secret
information of the Company or any of its Subsidiaries has been provided to any
party except subject to written confidentiality agreements.
(s) Ownership of Parent Common Stock. Neither the Company nor, to its
knowledge, any of its affiliates or associates (as such terms are defined under
the Exchange Act), (i) beneficially owns, directly or indirectly, or (ii) is a
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of Parent which in the aggregate represent 5% or more of the outstanding
shares of such capital stock.
(t) Rights Agreement. (i) The Rights Agreement has been amended so as
to provide that neither Parent nor Sub will become an "Acquiring Person" or a
"Principal Party" and that no "Triggering Event", "Section 14 Event," "Shares
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Agreement) will occur as a result of the approval, execution or delivery
of this Agreement or the Stock Option Agreement or the consummation of the
Merger or the acquisition of shares of Company Common Stock by Parent pursuant
to the Stock Option Agreement.
(ii) The Company has taken all actions necessary with respect to all of
the outstanding Rights so that, immediately prior to the Effective Time of the
Merger, (A) neither Company nor Parent will have any obligations under the
Rights or the Rights Agreement and (B) the holders of the Rights will have no
rights under the Rights or the Rights Agreement.
SECTION 3.02. Representations and Warranties of Parent and Sub. Parent
and Sub represent and warrant to the Company as follows:
28
23
(a) Organization, Standing and Corporate Power. Each of Parent, Sub
and each of Parent's "significant subsidiaries" (within the meaning of Rule 1-02
of Regulation S-X of the SEC) (collectively, the "Parent Subsidiaries") is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of Parent, Sub
and each of the Parent Subsidiaries is duly qualified or licensed to do business
and is in good standing in each jurisdiction (domestic or foreign) in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) could
not reasonably be expected to have a Material Adverse Effect with respect to
Parent. Parent has made available to the Company complete and correct copies of
its articles of incorporation and by-laws and the certificate of incorporation
and by-laws of Sub.
(b) Capital Structure. (i) As of the date of this Agreement, the
authorized capital stock of Parent consists of 400,000,000 shares of Parent
Common Stock, 10,000,000 shares of Series Common Stock, $.01 per share, of
Parent ("Series Stock") and 10,000,000 shares of preferred stock, par value $.01
per share, of Parent (the "Parent Preferred Stock"). As of the close of business
on March 10, 1998, there were: (i) 171,120,069 shares of Parent Common Stock
issued and outstanding; (ii) 7,702,009 shares of Parent Common Stock held in the
treasury of Parent; (iii) 12,189,852 shares of Parent Common Stock reserved for
issuance pursuant to Parent's stock option and stock purchase plans (such plans,
collectively, the "Parent Stock Plans"); (iv) 15,002,581 shares of Parent Common
Stock issuable upon exercise of awarded but unexercised stock options; and (v)
no shares of Series Stock or Parent Preferred Stock outstanding. Except as set
forth above and except for shares of junior participating preferred stock
issuable pursuant to the Rights Agreement, dated as of October 15, 1996, between
Parent and First Chicago Trust Company of New York, as of the close of business
on March 10, 1998 there were no shares of capital stock or other equity
securities of Parent issued, reserved for issuance or outstanding. All
outstanding shares of capital stock of Parent are, and all shares which may be
issued as described above will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights. There are no
outstanding bonds, debentures, notes or other indebtedness or debt securities of
Parent having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
Parent may vote. Except as set forth above or in Section 3.02(b) of the
disclosure schedule delivered by Parent and Sub to the Company at the time of
the execution of this Agreement (the "Parent Disclosure Schedule"), there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Parent is a party
or by which it is bound obligating Parent to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other equity
or voting securities of Parent or obligating Parent to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding contractual
obligations, commitments, understandings or arrangements of Parent to
repurchase, redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of Parent.
(ii) During the period from March 10, 1998 through the date of this
Agreement, except as set forth in Section 3.02(b) of the Parent Disclosure
Schedule, Parent did not (A) issue
29
24
or permit to be issued any shares of capital stock, or securities exercisable
for or convertible into shares of capital stock, of Parent, other than pursuant
to or as permitted by the terms of the Parent Stock Plans; (B) repurchase,
redeem or otherwise acquire, directly or indirectly through one or more
subsidiaries, any shares of capital stock of Parent; or (C) declare, set aside,
make or pay to the stockholders of Parent dividends or other distributions on
the outstanding shares of capital stock of Parent (other than regular quarterly
cash dividends on the Parent Common Stock).
(iii) As of the date hereof, the authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $.01 per share, all of which
have been validly issued, are fully paid and nonassessable and are owned by
Parent, free and clear of any Lien.
(iv) As of the Closing Date, all the issued and outstanding shares of
the common stock of Sub will be owned by Parent free and clear of any Lien.
(c) Authority; Noncontravention. Parent and Sub have all requisite
corporate power and authority to enter into each of this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of each of this Agreement and the Stock
Option Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Parent and Sub. This Agreement
and the Stock Option Agreement have been duly executed and delivered by
each of Parent and Sub and (assuming due authorization, execution and
delivery by the Company) constitute valid and binding obligations of Parent
and Sub, enforceable against them in accordance with their terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity
or at law) and an implied covenant of good faith and fair dealing. The
execution and delivery of each of this Agreement and the Stock Option
Agreement does not, and the consummation by Parent and Sub of the
transactions contemplated by this Agreement and compliance by Parent and Sub
with the provisions of this Agreement and the Stock Option Agreement will not,
conflict with, or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of, or a "put" right with respect to
any obligation under, or to a loss of a material benefit under, or result in the
creation of any Lien under, (i) the certificate of incorporation or by-laws of
Parent, Sub or any other subsidiary of Parent, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or any other contract,
agreement, instrument, permit, concession, franchise or license to which Parent,
Sub or any other subsidiary of Parent is a party or by which any of their
respective properties or assets are bound or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to Parent, Sub or any other subsidiary of Parent or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect with respect to Parent. No consent, approval, order or
authorization of, or registration, declaration or filing with, or notice to, any
Governmental Entity or any other third party is required by or with respect to
Parent or Sub in connection with the execution and delivery of this Agreement or
the Stock Option Agreement by Parent and Sub or the consummation by Parent and
Sub of any of the transactions contemplated
30
25
hereby or thereby, except for (i) the filing of a premerger notification
and report form under the HSR Act and the filing of such applications
or notices by Parent and Sub as may be required pursuant to merger control,
antitrust, foreign investment or similar laws or regulations in effect
in Belgium, Germany or any political subdivision thereof, (ii) the
filing with the SEC and the NYSE of (A) the Form S-4 and (B) such reports
under the Exchange Act as may be required in connection with this
Agreement, the Stock Option Agreement and the transactions contemplated hereby
and thereby, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iv) such other consents, approvals, orders, authorizations, registrations,
declarations, filings or notices as may be required under the "takeover" or
"blue sky" laws of various states and (v) such other consents, approvals,
orders, authorizations, registrations, declarations, filings or notices the
failure of which to make or obtain, individually or in the aggregate, could not
reasonably be expected to (x) prevent or materially delay consummation of the
Merger or the other transactions contemplated hereby or performance of Parent's
and Sub's obligations hereunder and under the Stock Option Agreement or (y) have
a Material Adverse Effect with respect to Parent.
(d) Parent SEC Documents; Undisclosed Liabilities. Parent has filed
with the SEC all reports, schedules, forms, statements and other documents
required to be filed by it pursuant to the Securities Act and the Exchange Act
since November 1, 1996 (collectively, and in each case including all exhibits
and schedules thereto and documents incorporated by reference therein, the
"Parent SEC Documents"). Except as set forth in Section 3.02(d) of the
Parent Disclosure Schedule, as of their respective dates, the Parent SEC
Documents complied as to form in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents (including any and
all financial statements included therein) as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except as
set forth in Section 3.02(d) of the Parent Disclosure Schedule, except to the
extent that information contained in any Parent SEC Document has been revised or
superseded by a later filed Parent SEC Document, none of the Parent SEC
Documents (including any and all financial statements included therein) contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Except as disclosed in Section 3.02(d) of the Parent Disclosure
Schedule, the consolidated financial statements of Parent included in all Parent
SEC Documents filed since November 1, 1996 (the "Parent SEC Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited consolidated quarterly
financial statements, as permitted by Form 10-Q of the SEC), applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Parent
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited quarterly statements, to normal recurring year-end
audit adjustments). Except as disclosed in Section
31
26
3.02(d) of the Parent Disclosure Schedule, as of the date hereof, neither Parent
nor any of its subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be recognized or disclosed on a consolidated
balance sheet of Parent and its consolidated subsidiaries or in the notes
thereto, except (i) liabilities reflected in the audited consolidated balance
sheet of Parent as of December 31, 1997, (ii) liabilities disclosed in any SEC
Document filed by Parent prior to the date of this Agreement with respect to any
period ending, or date occurring, after December 31, 1997 and (iii) liabilities
incurred since December 31, 1997 in the ordinary course of business consistent
with past practice.
(e) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in (i) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or (ii) the Proxy Statement will, at the date it is first
mailed to the Company's stockholders or at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations promulgated
thereunder, except that no representation is made by Parent or Sub with respect
to statements made or incorporated by reference therein based on information
supplied in writing by the Company specifically for inclusion or incorporation
by reference therein.
(f) Absence of Certain Changes or Events. Except as disclosed in
Section 3.02(f) of the Parent Disclosure Schedule, during the period from
December 31, 1997 through and including the date hereof, there is not and has
not been: (i) any Material Adverse Change with respect to Parent; (ii) any
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or give rise to a
Material Adverse Change with respect to Parent; (iii) any action or failure to
act which, if it had been taken or not taken after the execution of this
Agreement, would have required the consent of the Company pursuant to this
Agreement; or (iv) any condition, event or occurrence which, individually or in
the aggregate, could reasonably be expected to prevent or materially delay the
ability of Parent and Sub to consummate the transactions contemplated by this
Agreement or perform its obligations hereunder or under the Stock Option
Agreement.
(g) Litigation; Compliance with Laws. (i) Except as disclosed in
Section 3.02(g)(i) of the Parent Disclosure Schedule or in the Parent SEC
Documents, as of the date hereof there is (1) no suit, action, arbitration or
proceeding pending, and (2) to the knowledge of Parent, no suit, action,
arbitration or proceeding threatened against or investigation pending, in each
case with respect to Parent or any of its subsidiaries that, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect
with respect to Parent or prevent or materially delay the ability of Parent and
Sub to consummate the transactions contemplated by this Agreement or to perform
their obligations hereunder and under the Stock Option Agreement nor is there
any judgment, decree, citation, injunction, rule or order of any Governmental
Entity
32
27
or arbitrator outstanding against Parent or any of its subsidiaries which,
individually or in the aggregate, has or could reasonably be expected to have a
Material Adverse Effect with respect to the Company or prevent or materially
delay the ability of the Company to consummate the transactions contemplated by
this Agreement or the Stock Option Agreement or to perform its obligations
hereunder or thereunder. To the knowledge of Parent, except as disclosed in
Section 3.02(g)(i) of the Parent Disclosure Schedule or in any SEC Document
filed by Parent prior to the date of this Agreement with respect to any period
ending, or date occurring, after December 31, 1997, as of the date hereof there
is no reasonable basis for any action, suit, arbitration or proceeding that,
individually or in the aggregate, could reasonable be expected to have a
Material Adverse Effect with respect to Parent or prevent or materially delay
the ability of Parent or Sub to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement or to perform their obligations
hereunder or thereunder.
(ii) Except as disclosed in Section 3.02(g)(ii) of the Parent
Disclosure Schedule, the businesses of Parent and its subsidiaries are not being
conducted in violation of any law (domestic or foreign), ordinance or regulation
of any Governmental Entity, except for possible violations which, individually
or in the aggregate, do not and could not reasonably be expected to have a
Material Adverse Effect with respect to Parent.
(h) Brokers. No broker, investment banker, financial advisor or other
person, other than Xxxxxxx, Xxxxx & Co., the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent or Sub.
Parent agrees to indemnify the Company and to hold the Company harmless from and
against any and all claims, liabilities or obligations with respect to any other
fee, commission or expense asserted by any person on the basis of any act or
statement alleged to have been made by Parent or its affiliates.
(i) Interim Operations of Sub. Sub was formed on March 16, 1998 solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
(j) Required Vote. This Agreement has been approved by Parent, as the
sole stockholder of Sub. No other vote of holders of any class or series of
securities of Parent or Sub is necessary to approve this Agreement, the Merger,
the Stock Option Agreement and the transactions contemplated hereby and thereby.
(k) Ownership of Company Common Stock. Neither Parent nor, to its
knowledge, any of its affiliates or associates (as such terms are defined under
the Exchange Act), (i) beneficially owns, directly or indirectly, or (ii) is a
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of capital
stock of the Company, which in the aggregate represent 5% or more of the
outstanding shares of such capital stock.
33
28
ARTICLE IV
Covenants Relating to Conduct of Business Prior to Merger.
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective Time
of the Merger (except as otherwise expressly contemplated by the terms of this
Agreement), and except as approved by Parent, the Company shall, and shall cause
each of its Subsidiaries to, act and carry on its and their respective
businesses in the ordinary course of business consistent with past practice and
use its and their respective reasonable efforts to preserve substantially intact
its and their current business organizations, keep available the services of its
and their current officers and employees and preserve its and their
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having significant business dealings with its and them.
Without limiting the generality of the foregoing, during the period from the
date of this Agreement to the Effective Time of the Merger, the Company shall
not, and shall not permit any of its Subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly owned domestic
Subsidiary to its parent, (y) split, combine or reclassify any capital
stock of the Company or any of its Subsidiaries or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of the Company or any of its
Subsidiaries, or (z) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) authorize for issuance, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities or any other securities or equity equivalents (including without
limitation stock appreciation rights), other than the issuance of Company
Common Stock upon (i) the conversion of Debentures outstanding on the date
of this Agreement in accordance with their present terms and (ii) the
exercise of Company Stock Options awarded prior to the date of this
Agreement but unexercised on the date of this Agreement in accordance with
their present terms;
(iii) (A) amend the Certificate of Incorporation or
By-Laws or comparable charter or organizational documents of any
Subsidiary, or (B) amend or terminate the Rights Agreement;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof;
34
29
(v) other than as set forth in Section 4.01(a)(v) of the Company
Disclosure Schedule with respect to the sale of certain assets at not less
than the fair market value thereof, sell, lease, license, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of any of
its properties or assets other than any such properties or assets the value
of which do not exceed $100,000 individually and $500,000 in the aggregate,
except sales of inventory in the ordinary course of business consistent
with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell 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, except for
short-term borrowings incurred in the ordinary course of business
consistent with past practice and intercompany indebtedness between the
Company and its wholly-owned Subsidiaries or between such wholly owned
Subsidiaries, or (B) make any loans, advances or capital contributions to,
or investments in, any other person, other than to the Company or any
direct or indirect wholly owned Subsidiary;
(vii) acquire or agree to acquire any assets, other than
inventory in the ordinary course of business consistent with past practice,
or make or agree to make any capital expenditures, except capital
expenditures that either are contemplated (with respect to both nature and
amount) by the Company's capital budget for the fiscal year ending June 30,
1998 (a true and correct copy of which is included in Schedule 4.01(a)(vii)
of the Company Disclosure Schedule) or do not exceed $100,000 in the
aggregate;
(viii) pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction of (x) liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as
in effect on the date hereof and other liabilities and obligations not
exceeding $100,000 individually or $500,000 in the aggregate, or (y) claims
settled or compromised to the extent permitted by Section 4.01(a)(xii), or
waive, release, grant, or transfer any rights of material value or modify
or change in any material respect any existing material license, lease,
contract or other document, other than in the ordinary course of business
consistent with past practice; (ix) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation
or a dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(x) enter into or amend any collective bargaining agreement;
35
30
(xi) change any material accounting principle used by it, except
as required by generally accepted accounting principles;
(xii) settle or compromise any litigation or claim (whether or
not commenced prior to the date of this Agreement), other than settlements
or compromises of litigation or claims that neither provide for injunctive
or similar relief that could be material to the business or operations of
the Company or any of its Subsidiaries nor require payments (after giving
effect to insurance proceeds actually received or reasonably believed by
management of the Company to be receivable) in settlement or compromise
exceeding $50,000, provided that the aggregate amount paid in connection
with the settlement or compromise of all such litigation matters shall not
exceed $200,000;
(xiii) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any
of the Company's affiliates, including, without limitation, any
transactions, agreements, arrangements or understandings with any affiliate
or other Person covered under Item 404 of SEC Regulation S-K that would be
required to be disclosed under such Item 404, other than such transactions
of the same general nature, scope and magnitude as are disclosed in the
Company SEC Documents;
(xiv) transfer to any person or entity any rights to its
Intellectual Property, other than the provision of data or the granting of
end-user licenses in the ordinary course of business consistent with past
practice to customers of the Company or its Subsidiaries;
(xv) enter into or amend any agreement pursuant to which any
other party is granted exclusive marketing or other exclusive rights of any
type or scope with respect to any of its products or technology; or
(xvi) authorize, or commit or agree to take, any of the foregoing
actions.
(b) Conduct of Business by Parent. During the period from the date of
this Agreement to the Effective Time of the Merger, Parent shall not:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than (1)
in connection with the Parent Transaction and (2) regular quarterly cash
dividends (in an amount determined in a manner consistent with Parent's
past practice) with customary record and payment dates, or (y) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in lieu of or in substitution for shares
of its capital stock;
(ii) amend Parent's articles of incorporation or by-laws in a
manner that would be materially adverse to the holders of Merger Stock (it
being understood that an amendment to the articles of incorporation of
Parent increasing the number of authorized shares of Parent Common Stock or
other capital stock of Parent shall not be deemed to be materially adverse
to the holders of Merger Stock); or
36
31
(iii) authorize, or commit or agree to take, any of the foregoing
actions.
(c) Changes in Employment Arrangements. Neither the Company nor any of
its Subsidiaries shall (i) adopt or amend (except as may be required by law) any
Company Plan for the benefit or welfare of any employee, officer, director or
former director, officer or employee, (ii) other than increases for individuals
(other than executive officers and directors) in the ordinary course of business
consistent with past practice, increase the compensation or fringe benefits of
any director, officer, employee or former director, officer or employee or pay
any benefit not required by any existing plan, arrangement or agreement or (iii)
take any action to implement the Employee Stock Purchase Plan; provided that the
foregoing shall not prohibit the Company from entering into commitments with
respect to the payment of "stay bonuses" and similar incentive compensation not
exceeding $100,000 with respect to any individual employee or $2.3 million in
the aggregate.
(d) Severance. Except as contemplated by the proviso to the immediately
preceding paragraph (c), neither the Company nor any of its Subsidiaries shall
grant any new or modified severance or termination arrangement or increase or
accelerate any benefits payable under its severance or termination pay policies
in effect on the date hereof.
(e) WARN. Neither the Company nor any of its Subsidiaries shall
effectuate a "plant closing" or "mass layoff," as those terms are defined in
WARN, or similar restructuring affecting in whole or in part any site of
employment, facility, operating unit or employee of the Company or any of its
Subsidiaries, without notifying Sub or its affiliates in advance and without
complying with the notice requirements and other provisions of WARN or any
applicable foreign laws or regulations.
(f) Tax Elections. Except as consistent with past practice, neither the
Company nor any of its Subsidiaries shall make any tax election or settle or
compromise any federal, state, local or foreign tax liability.
(g) Tax-Free Reorganization Treatment. No party shall, and none shall
permit any of its subsidiaries to, intentionally take or cause to be taken any
action which would disqualify the Merger as a "reorganization" within the
meaning of Section 368(a) of the Code; provided that the foregoing shall not be
construed to restrict Parent from completing the Parent Transaction.
(h) Nominee Shares. The Company shall cause any person who owns any
shares of capital stock of any of the Company's Subsidiaries, whether in trust
or pursuant to any other nominee arrangement with the Company or any of its
Subsidiaries, to transfer, effective not later than the Effective Time of the
Merger, all right, title and interest in and to such shares to Parent or any
person designated by Parent.
(i) Other Actions. Neither the Company nor Parent shall, or shall
permit any of their respective subsidiaries to, (i) intentionally take any
action or fail to take any action that, if taken or not taken on or prior to the
date of this Agreement, would have resulted in any of its representations and
warranties set forth in this Agreement being untrue in any material respect, or
37
32
(ii) intentionally take any action that would or reasonably might be expected to
result in any of the conditions to the Merger set forth in Article VI not being
satisfied or in a violation of any provision of the Stock Option Agreement. The
Company and Parent shall promptly advise the other party orally and in writing
of (x) any action or failure to act of the type set forth in clause (i) above,
(y) the failure by such party to comply with any covenant, condition or
agreement hereunder or under the Stock Option Agreement and (z) any event which
could reasonably be expected to cause the conditions set forth in Article VI not
being satisfied; provided, however, that no such notice shall affect the
representations, warranties, covenants and agreement of the parties or the
conditions to their obligations hereunder.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of Form S-4 and Proxy Statement; Stockholder
Meeting. (a) Promptly following the date of this Agreement, the Company shall
prepare the Proxy Statement, and Parent shall prepare and file (or cause to be
prepared and filed) with the SEC the Form S-4 in which the Proxy Statement will
be included. Parent and the Company shall each use its reasonable efforts to
have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use its reasonable efforts to
cause the Proxy Statement to be mailed to the Company's stockholders as promptly
as practicable after the Form S-4 is declared effective under the Securities
Act. Parent shall also take any action (other than qualifying to do business in
any state in which it is not now so qualified or filing a general consent to
service of process) required to be taken under any applicable state securities
laws in connection with the registration and qualification of the Merger Stock
to be issued in the Merger, and the Company shall furnish all information
relating to the Company and its stockholders as may be reasonably requested in
connection with any such action. The information provided and to be provided by
Parent, Sub and the Company, respectively, (i) for use in the Form S-4, at the
time the Form S-4 becomes effective, shall be true and accurate in all material
respects and shall not omit to state a material fact required to be stated
therein or necessary to make such information not misleading and (ii) for use in
the Proxy Statement, on the date the Proxy Statement is mailed to the Company's
stockholders and on the date of the Stockholders Meeting referred to below,
shall be true and correct in all material respects and shall not omit to state
any material fact required to be stated therein or necessary in order to make
such information, in the light of the circumstances under which the statements
therein were made, not misleading, and the Company and Parent each agree to
correct any information provided by it for use in the Form S-4 and/or the Proxy
Statement which shall have become false or misleading.
(b) All mailings to the Company's stockholders in connection with the
Merger, including the Proxy Statement, shall be subject to the prior review,
comment and approval of Parent (such approval not to be unreasonably withheld or
delayed).
(c) The Company will, as promptly as practicable following the date of
this Agreement and in consultation with Parent, duly call, give notice of,
convene and hold a meeting
38
33
of its stockholders (the "Stockholders Meeting") for the purpose of approving
this Agreement and the transactions contemplated by this Agreement to the extent
required by the DGCL. The Company will, through its Board of Directors,
recommend to its stockholders approval of the foregoing matters, as set forth in
Section 3.01(p); provided, however, that the Board of Directors of the Company
may fail to make or withdraw or modify such recommendation, but only to the
extent that the Board of Directors of the Company shall have concluded in good
faith on the basis of written advice from outside counsel that the failure to
take such action would be contrary to the fiduciary duties of the Board of
Directors of the Company to the stockholders of the Company under applicable
law. Any such recommendation, together with a copy of the opinion referred to in
Section 3.01(o), shall be included in the Proxy Statement. The Company will use
its best efforts to hold such meeting as soon as practicable after the Form S-4
shall have been declared effective.
SECTION 5.02. Access to Information; Confidentiality. (a) Each of the
Company and Parent shall, and shall cause its respective subsidiaries, officers,
employees, counsel, financial advisors and other representatives to, afford to
the other party and its representatives reasonable access during normal business
hours, during the period prior to the Effective Time of the Merger, to its
properties, books, contracts, commitments, personnel and records, and, during
such period, each of the Company and Parent shall, and shall cause its
respective subsidiaries, officers, employees and representatives to, furnish
promptly to the other party (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Federal or state securities laws and (ii) all other information
concerning its business, properties, financial condition, operations and
personnel as such other party may from time to time reasonably request. Each of
the Company and Parent will hold, and will cause its respective directors,
officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information in confidence
to the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated January 14, 1998, between Parent and the
Company (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect following the execution and delivery of this
Agreement.
(b) No investigation pursuant to this Section 5.02 or otherwise shall
affect any representations or warranties of the parties herein or the conditions
to the obligations of the parties hereto.
SECTION 5.03. Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this Agreement, including
(i) obtaining all consents, approvals, waivers, licenses, permits or
authorizations as are required to be obtained (or, which if not obtained, would
result in an event of default, termination or acceleration of any agreement or
any put right under any agreement) under any applicable law or regulation or
from any Governmental Entities or third parties in connection with the
transactions contemplated by this Agreement, (ii) defending any lawsuits or
other proceedings challenging this Agreement and
39
34
(iii) accepting and delivering additional instruments necessary to consummate
the transactions contemplated by this Agreement. The parties agree that each of
Parent and Sub, on the one hand, and the Company, on the other hand, shall have
the opportunity to negotiate and consult directly with all applicable
Governmental Entities and third parties in connection with their consideration
of the transactions contemplated by this Agreement. Notwithstanding anything in
this Section 5.03 to the contrary, neither party shall be required to: (i)
expend material sums of money or grant material financial or other
accommodations to any party, (ii) divest any material operations or (iii) set
aside any material assets in order to satisfy the terms of this Section 5.03.
SECTION 5.04. Indemnification. (a) From and after the Effective Time of
the Merger, Parent and the Surviving Corporation shall indemnify, defend 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 of the Merger, eligible for
indemnification pursuant to the Certificate of Incorporation and By-Laws or the
constituent organizational documents of any Subsidiary (the "Indemnified
Parties") against (i) all losses, claims, damages, costs, expenses, liabilities
or judgments or amounts that are paid in settlement of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Company or any of its Subsidiaries,
pertaining to any matter existing or occurring at or prior to the Effective Time
of the Merger, whether asserted or claimed prior to, or at or after, the
Effective Time of the Merger (the "Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the extent the Company or such Subsidiary would have
been permitted under the Certificate of Incorporation and By-laws, or such other
constituent organizational documents, as the case may be, to indemnify such
person. Nothing contained herein shall limit any rights to indemnification which
any Indemnified Party may have under any indemnification agreement or the
Certificate of Incorporation or By-Laws or the constituent organizational
documents of any Subsidiary. In the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Parties (whether
arising before or after the Effective Time of the Merger), (i) any counsel
retained by the Indemnified Parties for any period after the Effective Time of
the Merger shall be reasonably satisfactory to Parent and the Surviving
Corporation (it being understood that Reboul, MacMurray, Xxxxxx, Xxxxxxx &
Kristol is acceptable to Parent and the Surviving Corporation); (ii) after the
Effective Time of the Merger, Parent or the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (iii) after the Effective Time
of the Merger, the Surviving Corporation will cooperate in the defense of any
such matter, provided that the Surviving Corporation shall not be liable for any
settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 5.04, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Parent and the Surviving
Corporation (but the failure so to notify Parent or the Surviving Corporation
shall not relieve them from any liability which they may have under this Section
5.04 except to the extent such failure materially prejudices Parent and the
Surviving Corporation), and shall deliver to Parent and the Surviving
Corporation the undertaking, if any, required by Section 145(e) of the DGCL.
Parent and the Surviving Corporation shall be liable for the fees and expenses
hereunder with respect to only one law firm to represent the Indemnified Parties
as a group with respect to
40
35
each such matter unless there is, under applicable standards of professional
conduct, a conflict between the positions of any two or more Indemnified Parties
that would preclude or render inadvisable joint or multiple representation of
such parties.
(b) Parent shall cause to be maintained in effect for six years from
the Effective Time of the Merger directors' and officers' liability insurance
coverage covering persons who are directors and officers of the Company on the
date of this Agreement, with respect to matters occurring prior to the Effective
Time of the Merger, and containing terms and conditions which are not less
advantageous to such persons than the policies of the Company in effect on the
date hereof (the "Company Insurance"); provided that Parent shall not be
required to spend annually in excess of 150% of the annual premium for the
Company Insurance paid by the Company as of the date of this Agreement (the
"Current Premium"), which Current Premium the Company represents is $208,000 per
annum; provided, further, that if Parent would be required to spend annually in
excess of 150% of the Current Premium to obtain insurance having terms not less
advantageous than the Company Insurance, the Surviving Corporation will be
required to spend up to such amount to maintain or procure as much insurance
coverage as can be procured for such premium.
SECTION 5.05. Public Announcements. Neither Parent and Sub, on the one
hand, nor the Company, on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement and
the Stock Option Agreement, including the Merger, without the other party's
prior consent (such consent not to be unreasonably withheld or delayed), except
as may be required by applicable law, court process or by obligations pursuant
to any agreement with any securities exchange or quotation system on which
securities of the disclosing party are listed or quoted. In addition to the
foregoing, Parent, Sub and the Company will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
such press release or other public statements with respect to such transactions.
The parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
SECTION 5.06. No Solicitation. Neither the Company nor any of its
Subsidiaries shall (whether directly or indirectly through advisors, agents or
other intermediaries), nor shall the Company or any of its Subsidiaries
authorize or permit any of its or their officers, directors, agents,
representatives or advisors to, (a) solicit, initiate or take any action
knowingly to encourage or facilitate the submission of inquiries, proposals or
offers from any person (other than Sub or Parent) relating to (i) any
acquisition or purchase of 15% or more of the consolidated assets of the Company
and its Subsidiaries or of over 15% of any class of equity securities of the
Company or (other than as described in Section 4.01(a)(v) of the Company
Disclosure Schedule) any of its Subsidiaries, (ii) any tender offer (including a
self tender offer) or exchange offer that if consummated would result in any
Person (as defined in Section 8.02) beneficially owning 15% or more of any class
of equity securities of the Company or any of its significant Subsidiaries,
(iii) any merger, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries whose assets, individually or
in the aggregate, constitute more than 15% of the consolidated assets of the
Company other than the transactions
41
36
contemplated by this Agreement, or (iv) any other transaction the consummation
of which would or could reasonably be expected to impede, interfere with,
prevent or delay the Merger (collectively, "Transaction Proposals"), or agree to
or endorse any Transaction Proposal, or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties or assets
or any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person (other than Sub or Parent) to do or seek any of the foregoing; provided,
however, that the foregoing shall not prohibit the Company (either directly or
indirectly through advisors, agents or other intermediaries) from (i) furnishing
information pursuant to an appropriate confidentiality letter (which letter
shall not be less favorable to the Company in any material respect than the
Confidentiality Agreement) concerning the Company and its businesses, properties
or assets to a third party who has made an unsolicited bona fide written
Transaction Proposal, (ii) engaging in discussions or negotiations with such a
third party who has made an unsolicited bona fide written Transaction Proposal,
(iii) following receipt of an unsolicited bona fide written Transaction
Proposal, taking and disclosing to its stockholders a position contemplated by
Rule 14d-9 or Rule 14e-2(a) under the Exchange Act or otherwise making
disclosure to its stockholders, (iv) following receipt of an unsolicited bona
fide written Transaction Proposal, failing to make or withdrawing, modifying or
amending its recommendation referred to in Section 3.01(p), and/or (v) taking
any action required to be taken by the Company pursuant to an order by any court
of competent jurisdiction (other than an order that has been reversed, withdrawn
or stayed), but in each case referred to in the foregoing clauses (i) through
(v) only to the extent that the Board of Directors of the Company shall have
concluded in good faith on the basis of written advice from outside counsel that
the failure to take such action would be contrary to the fiduciary duties of the
Board of Directors of the Company to the stockholders of the Company under
applicable law; provided, further, that, to the extent that it may do so without
acting in a manner contrary to its fiduciary duties under applicable law, the
Board of Directors of the Company shall advise Parent promptly with respect to
the taking of any such action and, in addition, if the Board of Directors of the
Company receives a Transaction Proposal, then the Company shall promptly inform
Parent of the material terms and conditions of such proposal and the identity of
the person making it. The Company will immediately cease and cause its advisors,
agents and other intermediaries to cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing, and shall use its reasonable efforts to cause any such
parties in possession of confidential information about the Company that was
furnished by or on behalf of the Company to return or destroy all such
information in the possession of any such party or in the possession of any
agent or advisor of any such party.
SECTION 5.07. Benefit Matters. (a) Parent shall cause the Surviving Corporation
to maintain employee benefit plans (as defined in Section 3(3) of ERISA) for the
benefit of employees of the Company or its Subsidiaries, which are, in the
aggregate, no less favorable than those that cover similarly situated employees
of Parent.
(b) Parent will cause the Surviving Corporation to (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the employees
of the Company and its Subsidiaries under any Parent welfare plan that such
employees may be eligible to participate in after the Effective Time of the
42
37
Merger and (ii) provide each employee of the Company and its Subsidiaries with
credit for any co-payments and deductibles paid prior to the Effective Time of
the Merger in satisfying any applicable deductible or out-of-pocket requirements
under any Parent welfare plans that such employees are eligible to participate
in after the Effective Time of the Merger.
(c) Prior to the Closing Date, Parent (or IMS if the Closing Date
occurs after the Distribution Record Date) shall establish an employee stock
option plan, having terms and conditions comparable to Parent's 1996 Key
Employees Stock Incentive Plan, pursuant to which it will offer to grant, as of
the Effective Time of the Merger, options to purchase an aggregate of 480,000
shares of Parent Common Stock (or the appropriate corollary number of shares of
IMS Common Stock in light of the Parent and IMS Exchange Ratios if the Closing
Date occurs after the Distribution Record Date) at fair market value, as of the
Closing Date, to certain employees of the Company and its Subsidiaries who are
expected to be Continuing Employees; the names of such employees and the number
of options to be offered to each shall be set forth in a letter to be delivered
by Parent (or IMS if the Closing Date occurs after the Distribution Record Date)
to the Company prior to the Closing Date.
SECTION 5.08. Stock Exchange Listing. Parent shall use all reasonable
efforts to cause the shares of Merger Stock to be issued in the Merger and the
shares of Merger Stock to be reserved for issuance upon exercise or conversion
of Company Stock Options and Debentures to be approved for listing on the NYSE,
subject to official notice of issuance.
SECTION 5.9. Letters of the Company's Accountants. The Company shall
use its reasonable efforts to cause to be delivered to Parent a letter of
Coopers & Xxxxxxx, L.L.P., the Company's independent public accountants, dated a
date within two business days before the Form S-4 shall become effective and a
letter of Coopers & Xxxxxxx, L.L.P., dated a date within two business days
before the Closing Date, each addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 5.10. Letters of Parent's Accountants. Parent shall use its
reasonable efforts to cause to be delivered to the Company a letter of Coopers &
Xxxxxxx, L.L.P., Parent's independent public accountants, dated a date within
two business days before the Form S-4 shall become effective and a letter of
Coopers & Xxxxxxx, L.L.P. dated a date within two business days before the
Closing Date, each addressed to the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
SECTION 5.11. Termination of Certain Obligations. The Company hereby
agrees that, effective upon the consummation of the merger (the "WII Merger")
provided for in the Agreement and Plan of Merger, dated the date hereof, among
Parent, WAC Inc. and Xxxxx International Inc. ("WII"), all obligations of WII or
any of its subsidiaries to the Company or any of its Subsidiaries shall no
longer be in force and shall have no further force or effect. The Company
further agrees that, prior to the consummation of the WII Merger, it will cause
each of
43
38
its Subsidiaries to execute and deliver to WII such Subsidiary's
agreement that all obligations of WII or any of its subsidiaries to such
Subsidiary shall, at and after the consummation of the WII Merger, no longer be
in force or have any force or effect. Notwithstanding the foregoing, (i) the
Pharbase License Agreement, dated as of July 1, 1997 (the "Pharbase Agreement"),
by and between WII and the Company shall not be terminated by reason of the
consummation of the WII Merger and (ii) any obligations of the Company or any of
its Subsidiaries to WII or any of its subsidiaries pursuant to leases and
sub-leases shall not be affected by reason of the consummation of the WII
Merger.
SECTION 5.12. Takeover Statute. If any "fair price", "moratorium",
"control share acquisition", "interested shareholder" or other similar
anti-takeover statute or regulation is or may become applicable to the Merger or
the other transactions contemplated by this Agreement or the Stock Option
Agreement, each of Parent and the Company and their respective boards of
directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement or the Stock Option Agreement, as the case
may be, or the Merger and otherwise act to eliminate or minimize the effects of
such statute or regulation on such transactions.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:
(a) Effectiveness of Form S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or Parent, threatened by the SEC. Any material "blue sky" and other
state securities laws applicable to the registration and qualification of the
Merger Stock issuable or required to be reserved for issuance pursuant to this
Agreement shall have been complied with.
(b) Stockholder Approval. The Company Stockholder Approval shall have
been obtained.
(c) No Order. No Governmental Entity or federal, state or foreign court
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the Merger or
any transaction contemplated by this Agreement; provided,
44
39
however, that the parties shall use all reasonable efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted.
(d) HSR Act and Other Waiting Periods. The applicable waiting period
under the HSR Act shall have expired or been terminated and all other waiting
periods specified under applicable laws, and all extensions thereof, the passing
of which is legally required prior to the consummation of the Merger, shall have
expired or been terminated.
(e) NYSE Listing. The shares of Merger Stock issuable to stockholders
of the Company in accordance with this Agreement shall have been authorized for
listing on the NYSE upon official notice of issuance.
(f) Other Approvals. Other than the filing of merger documents in
accordance with Delaware Law, all authorizations, consents, waivers, orders or
approvals required to be obtained, and all filings, notices or declarations
required to be made, by the Company and Parent prior to the consummation of the
Merger and the other transactions contemplated hereunder shall have been
obtained from, and made with, all required Governmental Entities except for such
authorizations, consents, waivers, orders, approvals, filings, notices or
declarations the failure to obtain or make which would not have a Material
Adverse Effect with respect to Parent.
SECTION 6.02. Additional Conditions to Obligations of Parent and Sub.
The obligations of Parent and Sub to effect the Merger and the transactions
contemplated in this Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement that is qualified as to
"materiality," "Material Adverse Change" or "Material Adverse Effect" shall be
true and correct, and each of the other representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects, in each case as of the Closing Date as though made on and as of the
Closing Date, except (i) for changes specifically permitted by this Agreement
and (ii) that those representations and warranties which address matters only as
of a particular date shall have been true and correct as of such date. Parent
shall have received a certificate of the chief executive officer and chief
financial officer of the Company to such effect.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date. Parent shall have received a certificate of the chief executive officer
and chief financial officer of the Company to that effect.
(c) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding (i) challenging or seeking to
restrain or prohibit the consummation of the Merger or any other transaction
contemplated by this Agreement or the Stock Option Agreement or seeking to
obtain from the Company, Sub or Parent or any of their respective affiliates any
material amount of damages, (ii) seeking to prohibit or limit the ownership or
operation by Parent or the Company or any of their respective affiliates of any
material portion of their business or assets or to dispose of or hold separate
any material portion
45
40
of their business or assets, as a result of the Merger or any other transaction
contemplated by this Agreement or the Stock Option Agreement, (iii) seeking to
impose limitations on the ability of Parent to acquire or hold, or exercise full
rights of ownership of, any shares of the common stock of the Surviving
Corporation, including, without limitation, the right to vote such common stock
on all matters properly presented to the stockholders of the surviving
corporation or (iv) seeking to prohibit Parent or any of its Subsidiaries from
effectively controlling in any material respect the business or operations of
the Company and its Subsidiaries taken as a whole. No suit, action or proceeding
by any other person shall be pending that seeks any of the relief or remedies
described in clauses (i) through (iv) of the immediately preceding sentence as
to which there is a reasonable possibility of success or that otherwise could
reasonably be expected to have a Material Adverse Effect with respect to Parent
or the Company.
(d) Third Party Approvals. All consents, waivers or approvals required
to be obtained from third parties under contracts, agreements or similar
instruments to which the Company or any of its Subsidiaries is a party, or by
which any of them is bound, in connection with the Merger and the other
transactions contemplated hereby shall have been obtained, except to the extent
that the failure to obtain such consents, waivers or approvals would not, in the
aggregate, result in violations, defaults (with or without notice or lapse of
time or both), rights of termination, cancellation or acceleration, or losses of
benefit that would have a Material Adverse Effect with respect to Parent.
(e) Rights Agreement. None of the events described in Section 8 or 14
of the Rights Agreement shall have occurred, and the Rights shall not have
become nonredeemable and shall not become nonredeemable upon consummation of the
Merger.
(f) Certain Agreements. The Company shall have obtained a waiver from
each Continuing Employee who is a holder of a Company Stock Option that would
otherwise immediately vest as a result of the Merger, such waiver to provide
that, for purposes of the vesting of such option, the Merger shall not
constitute a change in control (as defined in the applicable option or
employment agreement).
SECTION 6.03. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Sub contained in this Agreement that is qualified as to
"materiality," "Material Adverse Change" or "Material Adverse Effect" shall be
true and correct, and each of the other representations and warranties of Parent
and Sub contained in this Agreement shall be true and correct in all material
respects, in each case as of the Closing Date as though made on and as of the
Closing Date, except (i) for changes specifically permitted by this Agreement
and (ii) that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date. The Company
shall have received a certificate of a duly authorized officer of Parent and Sub
to such effect.
46
41
(b) Agreements and Covenants. Parent and Sub shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date. The Company shall have received a certificate of a duly authorized
officer of Parent and Sub to that effect.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated and
abandoned at any time prior to the Effective Time of the Merger, whether before
or after the Company Stockholder Approval:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; or
(c) by the Company if the Merger shall not have been consummated on or
before October 31, 1998 (other than due to the failure of the Company to perform
its obligations under this Agreement required to be performed at or prior to the
Effective Time of the Merger), or by Parent if the Merger shall not have been
consummated on or before December 31, 1998 (other than due to the failure of
Parent to perform its obligations under this Agreement required to be performed
at or prior to the Effective Time of the Merger); or
(d) by either Parent or the Company if at the duly held meeting of the
stockholders of the Company (including any adjournment thereof) held for the
purpose of voting on the Merger, this Agreement and the consummation of the
transactions contemplated hereby, the holders of a majority of the outstanding
shares of Company Common Stock shall not have approved the Merger, this
Agreement and the consummation of the transactions contemplated hereby; or
(e) by Parent, if the Company or its Board of Directors shall have (1)
withdrawn, modified or amended in any respect adverse to Parent its approval or
recommendation of this Agreement or any of the transactions contemplated herein
(it being understood that a communication by the Company that contains only the
information described in Rule 14d-9(e) under the Exchange Act shall not be
deemed to be such a modification or amendment or an action described in clause
(5) below), (2) failed as promptly as practicable after the Form S-4 is declared
effective to mail the Proxy Statement to its stockholders or failed to include
in such statement such recommendation, (3) recommended any Transaction Proposal
from a person other than Parent or any of its affiliates, (4) resolved to do any
of the foregoing or (5) in response to the commencement of any tender offer or
exchange offer for more than 15% of the outstanding
47
42
shares of Company Common Stock, not recommended rejection of such tender offer
or exchange offer; or
(f) by the Company, if, pursuant to and in compliance with Section 5.07
hereof, the Board of Directors of the Company concludes in good faith, based on
written advice from outside counsel, that in order to avoid acting in a manner
contrary to the fiduciary duties of the Board of Directors of the Company to the
stockholders of the Company under the DGCL, the Board of Directors must not make
or must withdraw or modify its recommendation referred to in Section 3.01(p) and
the Board of Directors does not make or withdraws or modifies such
recommendation; or
(g) by the Company, if the Parent Common Stock is less than $37.50;
provided that the Company shall not be entitled to terminate this Agreement
pursuant to this paragraph (g) if, within twenty-four hours after the Company
notifies Parent in writing of any such proposed termination, Parent agrees in
writing that the Parent Exchange Ratio shall be equal to $12.505 divided by the
Parent Common Stock Price; or
(h) by the Company, if the IMS Common Stock Price is less than $37.50
multiplied by the IMS Fraction; provided that the Company shall not be entitled
to terminate this Agreement pursuant to this paragraph (h) if, within
twenty-four hours after the Company notifies IMS of any such proposed
termination, IMS agrees in writing that the IMS Exchange Ratio shall be equal to
$12.505 divided by the IMS Common Stock Price.
SECTION 7.02. Effect of Termination. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.01(n), Section 3.02(h), the last sentence of Section
5.02(a) (and the provisions of the Confidentiality Agreement referred to
therein), Section 5.12, this Section 7.02, Section 8.02, Section 8.07 and
Section 8.08. Nothing contained in this Section shall relieve any party for any
breach of the representations, warranties, covenants or agreements set forth in
this Agreement (including, without limitation, liability for damages as a result
of any such breach that gives rise to an inability to satisfy any of the
conditions to Closing set forth in Article VI).
SECTION 7.03. Amendment. This Agreement may be amended by the parties
hereto at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 7.04. Extension; Waiver. At any time prior to the Effective
Time of the Merger, the parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.03, waive compliance with any of the
48
43
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. 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. No single or partial
exercise of any right, remedy, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. Any waiver shall be effective only in the specific instance
and for the specific purpose for which given and shall not constitute a waiver
to any subsequent or other exercise of any right, remedy, power or privilege
hereunder.
SECTION 7.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.01, an amendment
of this Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require in the case of Parent, Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time of the
Merger and all such representations and warranties will be extinguished on
consummation of the Merger and neither the Company, Parent, Sub, nor any
officer, director or employee or stockholder of any of them shall be under any
liability whatsoever with respect to any such representation or warranty after
such time. This Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time of
the Merger.
SECTION 8.02. Fees and Expenses. (a) (i) If this Agreement shall have
been terminated in accordance with its terms (except pursuant to Section
7.01(b)) and either of the following shall have occurred: (A) prior to such
termination, any corporation (including the Company or any of its Subsidiaries
or affiliates), partnership, person, other entity or "group" (as referred to in
Section 13(d)(3) of the Exchange Act) other than Parent, Sub or any of their
respective affiliates (collectively, "Persons"), shall have become the
beneficial owner of more than 15% of the outstanding shares of Company Common
Stock; or (B)(x) prior to such termination, any Person shall have made, or
proposed, communicated or disclosed in a manner which is or otherwise becomes
public a bona fide intention to make a Transaction Proposal (including by making
such a Transaction Proposal) and (y) on or prior to March 23, 1999, the Company
either consummates with a Person a transaction the proposal of which would
otherwise qualify as a Transaction Proposal under Section 5.06 or enters into a
definitive agreement with a Person with respect to a transaction the proposal of
which would otherwise qualify as a Transaction Proposal under Section 5.06
(whether or not such Person is the Person referred to in clause (x) above); or
49
44
(ii) if this Agreement is terminated pursuant to Section 7.01(e)
or Section 7.01(f);
then the Company shall, (1) in the case of clauses (a)(i)(A) and (a)(ii) above,
promptly, but in no event later than one business day after the termination of
this Agreement and (2) in the case of clause (a)(i)(B) above, promptly, but in
no event later than one business day after an event specified in subclause (y)
thereof shall have occurred, pay Parent a fee of $5,500,000 in cash which fee
shall be payable in same day funds. No termination of this Agreement at a time
when a fee is reasonably expected to be payable pursuant to this Section 8.02(a)
following termination of this Agreement shall be effective until such fee is
paid.
(b) In addition, in any case in which a fee is payable pursuant to
paragraph (a) above, the Company shall promptly reimburse Parent and Sub for
documented reasonable out-of-pocket expenses incurred by either of them in
connection with this Agreement and the Stock Option Agreement, including
reasonable accounting, investment banking and legal fees and expenses; provided
that the amount of such reimbursement shall not exceed $1,000,000 in the
aggregate.
(c) Except as provided otherwise in paragraphs (a) and (b) above, all
costs and expenses incurred in connection with this Agreement and the Stock
Option Agreement and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expenses, except that the cost of filing,
printing and distributing the Proxy Statement and the Form S-4 shall be borne
equally by Parent and the Company.
SECTION 8.03. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) or transmitted by confirmed facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Cognizant Corporation
000 Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
Fax Number: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
50
45
Fax Number: (000) 000-0000
(b) if to the Company, to
Pharmaceutical Marketing Services Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Fax Number: (000) 000-0000
with a copy to:
Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax Number: (000) 000-0000
SECTION 8.04. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "Base Price" means $51.792 multiplied by the IMS Fraction;
(c) "Continuing Employees" means all persons who are actively employed
on a full-time basis by the Company or its Subsidiaries immediately following
the Effective Time of the Merger, other than such persons, if any, as may be
identified in writing by Parent to the Company not less than five business days
prior to the Closing Date;
(d) "Environmental Claim" means any written or oral notice, claim,
demand, action, suit, complaint, proceeding or other communication by any person
alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based on or resulting
from (A) the presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, whether or not owned, leased or operated by
the Company or any of its Subsidiaries, (B) circumstances forming the basis of
any violation or alleged violation of any Environmental Law or Environmental
Permit or (C) otherwise relating to obligations or liabilities under any
Environmental Laws;
(e) "Environmental Laws" means all applicable foreign, federal, state,
provincial and local statutes, rules, regulations, ordinances, orders, decrees
and common or civil law
51
46
relating in any manner to contamination, pollution or protection of human health
or the environment, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act, the Solid Waste Disposal Act, the
Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state and foreign laws;
(f) "Environmental Permits" means all permits, licenses, registrations
and other governmental authorizations required under Environmental Laws for the
Company and its Subsidiaries to conduct their operations and businesses;
(g) "First Threshold" means $5.00 multiplied by the IMS Fraction;
(h) "Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, friable asbestos and asbestos-containing
materials, pollutants, contaminants and all other materials, and substances
regulated pursuant to, or that could reasonably be expected to provide the basis
of liability under, any Environmental Law;
(i) "IMS Adjustment Factor" means a fraction, the numerator of which is
the sum of the IMS Reference Price and the NMR Reference Price, and the
denominator of which is the IMS Reference Price;
(j) "IMS Common Stock Price" means the average of the closing sales
prices of IMS Common Stock on the NYSE Composite Transactions Tape on the 10
consecutive trading days immediately preceding the second trading day prior to
the Closing Date;
(k) "IMS Exchange Ratio" means a fraction of a share of IMS Common
Stock (rounded to the nearest 1/1,000th) equal to: (1) the product of 0.2800
multiplied by the IMS Adjustment Factor if the IMS Common Stock Price is at
least equal to the Base Price minus the First Threshold but is not more than the
Base Price plus the First Threshold; (2) $15.90 divided by the IMS Common Stock
Price (rounded to the nearest 1/10,000th) if the IMS Common Stock Price is more
than the sum of the Base Price plus the First Threshold but not more than the
sum of the Base Price plus the Second Threshold; (3) $13.10 divided by the IMS
Common Stock Price if the IMS Common Stock Price (rounded to the nearest
1/10,000th)is less than the Base Price minus the First Threshold but not less
than the Base Price minus the Second Threshold; (4) the fraction determined in
accordance with Exhibit D hereto if the IMS Common Stock Price is more than the
Base Price plus the Second Threshold (or determined on the same basis as the
fractions indicated in Exhibit D if such excess exceeds $ 20 per share of IMS
Common Stock); and (5) the fraction determined in accordance with Exhibit E
hereto if the IMS Common Stock Price is less than the Base Price minus the
Second Threshold (or determined on the same basis as the fractions indicated in
Exhibit E if such shortage exceeds $ 20 per share of IMS Common Stock);
52
47
(l) "IMS Fraction" means a fraction, the numerator of which is the IMS
Reference Price and the denominator of which is the sum of the IMS Reference
Price and the NMR Reference Price;
(m) "IMS Reference Price" means the average of the closing sales prices
of IMS Common Stock on the NYSE Composite Transactions Tape on the 10
consecutive trading days commencing on the sixth trading day following the date
on which "regular way" trading in the IMS Common Stock begins on the NYSE;
(n) "indebtedness" means, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (B) all obligations
of such person evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations of such person under conditional sale or other title retention
agreements relating to property purchased by such person, (D) all obligations of
such person issued or assumed as the deferred purchase price of property or
services (excluding obligations of such person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of such
person's business), (E) all capitalized lease obligations of such person, (F)
all obligations of others secured by any Lien on property or assets owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (G) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof), (H) all letters
of credit issued for the account of such person and (I) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person;
(o) "Intellectual Property" means all rights, privileges and priorities
provided under federal, state, foreign and multinational law relating to
intellectual property, whether registered or unregistered, including, without
limitation, all (i) (a) inventions, discoveries, processes, formulae, designs,
methods, techniques, procedures, concepts, developments, technology, and
confidential information, new and useful improvements thereof and know-how
relating thereto, whether or not patented or eligible for patent protection; (b)
copyrights and copyrightable works, including computer applications, programs,
Software, Databases and related items; (c) trademarks, service marks, trade
names, brand names, product names, corporate names, logos and trade dress, the
goodwill of any business symbolized thereby, and all common-law rights relating
thereto; and (d) trade secrets, data and other confidential information; and
(ii) all registrations, applications, recordings, and licenses or other similar
agreements related to the foregoing;
(p) "knowledge" means, with respect to any matter, (i) in the case of
Parent, the knowledge of any director, executive officer or the General Counsel
of Parent after due inquiry into such matter and (ii) in the case of the
Company, the knowledge of Messrs. Turner, Evans, Davies and Xxxxxx after due
inquiry into such matter;
(q) "Material Adverse Change" means, when used with respect to the
Company or Parent, any change that, either individually or in the aggregate with
all other such changes, is materially adverse to the Company or Parent, as the
case may be, and their respective subsidiaries taken as a whole;
53
48
(r) "Material Adverse Effect" means, when used with respect to the
Company or Parent, any change, effect, event or occurrence that, either
individually or in the aggregate with all other such changes, effects, events
and occurrences, either (a) is materially adverse to the business, properties,
financial condition or results of operations of the Company or Parent, as the
case may be, and their respective subsidiaries taken as a whole, or (b) will be
materially adverse to the business, properties, financial condition or results
of operations of Parent and its Subsidiaries (including the Surviving
Corporation) taken as a whole following the Effective Time of the Merger;
(s) "NMR Reference Price" means the average of the closing sales prices
of Parent Common Stock on the NYSE Composite Transactions Tape on the 10
consecutive trading days commencing on the sixth trading day following the date
on which "regular way" trading in Parent Common Stock begins under the name
"Xxxxxxx Media Research, Inc." on the NYSE;
(t) "Parent" shall have the meaning specified in the first paragraph of
this Agreement; provided that in the event of an assignment of this Agreement as
provided in Section 8.09(b), the term "Parent" thereafter shall have the meaning
specified in such Section;
(u) "Parent Common Stock Price" means the average of the closing sales
prices of Parent Common Stock on the New York Stock Exchange Composite
Transactions Tape on each of the 15 consecutive trading days immediately
preceding the second trading day prior to the Effective Time of the Merger;
(v) "Parent Exchange Ratio" means a fraction of a share of Parent
Common Stock (rounded to the nearest 1/1,000th) equal to: (1) 0.2800 if the
Parent Common Stock Price is equal to at least $46.792 but not more than
$56.792; (2) $15.90 divided by the Parent Common Stock Price (rounded to the
nearest 1/10,000th) if the Parent Common Stock Price is more than $56.792 but
not more than $62.792; (3) $13.10 divided by the Parent Common Stock Price
(rounded to the nearest 1/10,000th) if the Parent Common Stock Price is less
than $46.792 but not less than $40.792; (4) the indicated fraction of a share of
Parent Common Stock set forth opposite the applicable Parent Common Stock Price
in Exhibit B hereto if the Parent Common Stock Price is either more than $62.792
but not more than $82.792 or less than $40.792 but not less than $20.792; or (5)
a fraction of a share of Parent Common Stock determined on the same basis as the
fractions set forth in Exhibit B hereto if the Parent Common Stock Price is more
than $82.792 or less than $20.792;
(w) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(x) "Recent SEC Documents" means any SEC Documents filed by the Company
prior to the date of this Agreement with respect to any period ending, or any
date occurring, on or after June 30, 1997; and
(y) "Rights" means the rights to acquire one-third of a share of
Company Common Stock pursuant to the Rights Agreement;
54
49
(z) "Rights Agreement" means the Rights Agreement dated as of January
28, 1998 between the Company and Xxxxxx Trust Company of New York;
(aa) "Second Threshold" means $11.00 multiplied by the IMS Fraction;
(bb) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person; and
(cc) "Year 2000 Compliant" means, when used with respect to any
software or database, that such software or database will operate accurately
and, without interruption, accept, possess and in all manner retain full
functionality when referring to, or involving, any year or date in the twentieth
or twenty-first centuries.
SECTION 8.05. Interpretation. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 8.06. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other agreements referred to herein constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement. This Agreement, other than Section 5.04, is not intended to confer
upon any person other than the parties any rights or remedies.
SECTION 8.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND ANY RELATED DOCUMENTS TO WHICH IT IS A
PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO
THE NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW
55
50
YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS, AND WAIVES TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO
PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE PARTY AT ITS
ADDRESS SET FORTH IN SECTION 8.03 OR AT SUCH OTHER ADDRESS OR TO THE ATTENTION
OF SUCH OTHER PERSON , AS ANY PARTY SHALL HAVE SPECIFIED BY NOTICE IN WRITING TO
THE OTHER PARTIES;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO XXX IN ANY OTHER JURISDICTION; AND
(v) WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO
IN PARAGRAPH (i) ABOVE.
SECTION 8.09. Assignment. (a) Except as provided in paragraph (b)
below, neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, 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 hereto. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
(b) If the Closing Date shall not have occurred prior to the
Distribution Record Date, then, on the Distribution Record Date: (i) Parent
shall cause all of the outstanding capital stock of Sub to be transferred to
IMS; (ii) all of Parent's rights and obligations hereunder and under the Stock
Option Agreement shall be assigned and delegated to IMS; and (iii) Parent shall
cause IMS to execute and deliver to the Company a written instrument, in form
and substance reasonably satisfactory to the Company, evidencing such assignment
and assumption. In the event of such assignment and assumption, all references
herein to "Parent" (other than in Sections 3.02(b)(ii) and (iii) and Sections
3.02(f) through (k)) shall thereafter be deemed to be references to IMS and, for
purposes of this Agreement (including, without limitation, paragraph (a) of
Section 6.03), the provisions of Section 3.02 (other than Sections 3.02(b)(ii)
and (iii) and Sections 3.02(f) through (k)) shall be deemed amended in their
entirety to read substantially as set forth in Exhibit C.
56
51
SECTION 8.10. Enforcement. The parties 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.
57
52
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
COGNIZANT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President, General
Counsel and Secretary
NEW SIERRA ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
PHARMACEUTICAL MARKETING SERVICES
INC.
By: /s/ Xxxxxx X.X. Xxxxxx
-------------------------------------
Name: Xxxxxx X.X. Xxxxxx
Title: Chief Executive Officer
58
Exhibit B
Parent Exchange Ratios
----------------------
Parent Common Stock Price Parent Exchange Ratio*
------------------------- ----------------------
$ 19.792 0.4030
20.792 0.3990
21.792 0.3950
22.792 0.3910
23.792 0.3871
24.792 0.3831
25.792 0.3791
26.792 0.3752
27.792 0.3712
28.792 0.3673
29.792 0.3634
30.792 0.3595
31.792 0.3555
32.792 0.3516
33.792 0.3478
34.792 0.3439
35.792 0.3400
36.792 0.3362
37.792 0.3323
38.792 0.3286
39.792 0.3248
40.792 0.3212
62.792 0.2532
63.792 0.2510
64.792 0.2489
65.792 0.2467
66.792 0.2447
67.792 0.2426
68.792 0.2405
69.792 0.2385
70.792 0.2364
71.792 0.2344
72.792 0.2324
73.792 0.2304
74.792 0.2284
75.792 0.2264
76.792 0.2244
77.792 0.2224
78.792 0.2204
79.792 0.2184
80.792 0.2164
--------
* Parent Exchange Ratio to be calculated on the basis of straight line
interpolation if Parent Common Stock Price is between any two amounts set
forth herein.
59
2
81.792 0.2144
82.792 0.2125
60
EXHIBIT C
IMS Representations
SECTION 3.02. Representations and Warranties of IMS. IMS represents and
warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of IMS and each of
IMS's "significant subsidiaries" (within the meaning of Rule 1-02 of Regulation
S-X of the SEC) (collectively, the "IMS Subsidiaries") is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of IMS and each of the IMS
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction (domestic or foreign) in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) could not reasonably
be expected to have a Material Adverse Effect with respect to IMS. IMS has made
available to the Company complete and correct copies of its articles of
incorporation and by-laws.
(b) Capital Structure. As of the Distribution Record Date, [relevant
number of shares of IMS capital stock as of such date to be inserted below] the
authorized capital stock of IMS consists of ___________ shares of IMS Common
Stock, __________ shares of Series Common Stock, $.01 per share, of IMS ("IMS
Series Stock") and __________ shares of preferred stock, par value $.01 per
share, of IMS ("IMS Preferred Stock"). As of the close of business on the
Distribution Record Date, [relevant numbers of shares of IMS capital stock as of
such date to be inserted below] there were: (i) _______________ shares of IMS
Common Stock issued and outstanding; (ii) ____________ shares of IMS Common
Stock held in the treasury of IMS; (iii) ___________ shares of IMS Common Stock
reserved for issuance pursuant to IMS's stock option and stock purchase plans
(such plans, collectively, the "IMS Stock Plans"); (iv) __________ shares of IMS
Common Stock issuable upon exercise of awarded but unexercised stock options;
and (v) ___________ shares of IMS Series Stock or IMS Preferred Stock
outstanding. Except as set forth above and except for shares of junior
participating preferred stock issuable pursuant to the Rights Agreement, dated
as of _______ __, 1998, between IMS and First Chicago Trust Company of New York,
as of the close of business on the Distribution Record Date, there were no
shares of capital stock or other equity securities of IMS issued, reserved for
issuance or outstanding. All outstanding shares of capital stock of IMS are, and
all shares which may be issued as described above will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no outstanding bonds, debentures, notes or other
indebtedness or debt securities of IMS 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 IMS may vote. Except as set forth above or in the
disclosure schedule delivered by IMS to the Company as of the Record
Distribution Date (the "IMS Disclosure Schedule"), there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which IMS is a party or by which it
is bound obligating IMS to issue, deliver or sell, or cause to be issued,
delivered or
61
2
sold, additional shares of capital stock or other equity or voting securities of
IMS or obligating IMS to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding contractual obligations, commitments, understandings or
arrangements of IMS to repurchase, redeem or otherwise acquire or make any
payment in respect of any shares of capital stock of IMS.
As of the Closing Date, all of the issued and outstanding shares of
common stock of Sub will be owned by IMS free and clear of any lien.
(c) Authority; Noncontravention. IMS has all requisite corporate power
and authority to assume all of the rights and obligations of Parent under
Agreement and the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby. The assumption by IMS of all the rights and
obligations of Parent under each of this Agreement and the Stock Option
Agreement by IMS and the consummation by IMS of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of IMS. This Agreement and the Stock Option Agreement (assuming due
authorization, execution and delivery by the Company) constitute valid and
binding obligations of IMS, enforceable against it in accordance with their
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing. The
assumption by IMS of all the rights and obligations of Parent under each of this
Agreement and the Stock Option Agreement does not, and the consummation by IMS
of the transactions contemplated by this Agreement and compliance by IMS with
the provisions of this Agreement and the Stock Option Agreement will not,
conflict with, or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of, or a "put" right with respect to
any obligation under, or to a loss of a material benefit under, or result in the
creation of any Lien under, (i) the certificate of incorporation or by-laws of
IMS or any subsidiary of IMS, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or any other contract, agreement, instrument, permit,
concession, franchise or license to which IMS or any subsidiary of IMS is a
party or by which any of their respective properties or assets are bound or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule,
regulation or arbitration award applicable to IMS or any subsidiary of IMS or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, breaches, violations, defaults, rights, losses or
Liens that individually or in the aggregate could not reasonably be expected to
have a Material Adverse Effect with respect to IMS. No consent, approval, order
or authorization of, or registration, declaration or filing with, or notice to,
any Governmental Entity or any other third party is required by or with respect
to IMS in connection with the assumption by IMS of all of the rights and
obligations of Parent under this Agreement or the Stock Option Agreement by IMS
or the consummation by IMS of any of the transactions contemplated hereby or
thereby, except for (i) the filing of a premerger notification and report form
under the HSR Act and the filing of such applications or notices by IMS as may
be required pursuant to merger control, antitrust, foreign investment or similar
laws or regulations in effect in Canada, Germany or Sweden or any political
subdivision thereof, (ii) the filing with the SEC and the NYSE of (A) the Form
S-4 and (B) such reports under the
62
3
Exchange Act as may be required in connection with this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby, (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, (iv) such other consents,
approvals, orders, authorizations, registrations, declarations, filings or
notices as may be required under the "takeover" or "blue sky" laws of various
states and (v) such other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices the failure of which to make or
obtain, individually or in the aggregate, could not reasonably be expected to
(x) prevent or materially delay consummation of the Merger or the other
transactions contemplated hereby or performance of IMS's obligations hereunder
and under the Stock Option Agreement or (y) have a Material Adverse Effect with
respect to IMS.
(d) IMS SEC Documents. IMS has filed with the SEC all reports,
schedules, forms, statements and other documents required to be filed by it
pursuant to the Securities Act and the Exchange Act (collectively, and in each
case including all exhibits and schedules thereto and documents incorporated by
reference therein, the "IMS SEC Documents"). As of their respective dates, the
IMS SEC Documents complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
IMS SEC Documents, and none of the IMS SEC Documents (including any and all
financial statements included therein) as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. Except to
the extent that information contained in any IMS SEC Document has been revised
or superseded by a later filed IMS SEC Document, none of the IMS SEC Documents
(including any and all financial statements included therein) contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(e) Information Supplied. None of the information supplied or to be
supplied by IMS for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, at any time it is amended
or supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) the Proxy Statement will, at the date it is first mailed
to the Company's stockholders or at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations promulgated
thereunder, except that no representation is made by IMS with respect to
statements made or incorporated by reference therein based on information
supplied in writing by the Company specifically for inclusion or incorporation
by reference therein.
63
Exhibit D
IMS Exchange Ratio
If the IMS Common Stock Price is above the Base Price plus the Second
Threshold, the IMS Exchange Ratio shall be .2532 multiplied by the IMS
Adjustment Factor, subject to a downward adjustment (the "Excess Ratio
Adjustment") for each dollar (or portion thereof) by which the IMS Common Stock
Price exceeds the Base Price plus the Second Threshold (the "Excess"). The
Excess Ratio Adjustment shall be as specified opposite the applicable Excess in
the table below (subject to straight line interpolation (rounded to the nearest
1/10,000th) between the nearest two indicated Excess amounts to give effect to
fractions of a dollar).
Excess Excess Ratio Adjustment
------ -----------------------
1.00 -.0022
2.00 -.0044
3.00 -.0065
4.00 -.0086
5.00 -.0107
6.00 -.0127
7.00 -.0148
8.00 -.0168
9.00 -.0188
10.00 -.0209
11.00 -.0229
12.00 -.0249
13.00 -.0269
14.00 -.0289
15.00 -.0309
16.00 -.0329
17.00 -.0349
18.00 -.0368
19.00 -.0388
20.00 -.0408
64
4
By way of illustrating the foregoing, if the IMS Adjustment Factor is
1.1111 and the Excess is $10.50, then the IMS Exchange Ratio would be 0.2570,
calculated as follows: (x) 0.2532 multiplied by 1.1111, plus (y) one half of the
product obtained by multiplying 1.1111 by -0.0438 (i.e. the sum of -0.0209 and
-0.0229).
65
Exhibit E
IMS Exchange Ratio
If the IMS Common Stock Price is below the Base Price minus the Second
Threshold, the IMS Exchange Ratio shall be .3212 multiplied by the IMS
Adjustment Factor, subject to an upward adjustment (the "Shortfall Ratio
Adjustment") for each dollar (or portion thereof) by which the Base Price minus
the Second Threshold exceeds the IMS Common Stock Price (the "Shortfall"). The
Shortfall Ratio Adjustment shall be as specified opposite the applicable
Shortfall in the table below (subject to straight line interpolation (rounded to
the nearest 1/10,000th) between the nearest two indicated Shortfall amounts to
give effect to fractions of a dollar).
Shortfall Shortfall Ratio Adjustment
--------- --------------------------
1.00 .0036
2.00 .0074
3.00 .0112
4.00 .0150
5.00 .0188
6.00 .0227
7.00 .0266
8.00 .0305
9.00 .0344
10.00 .0383
11.00 .0422
12.00 .0461
13.00 .0501
14.00 .0540
15.00 .0580
16.00 .0619
17.00 .0659
18.00 .0698
19.00 .0738
20.00 .0778
66
By way of illustrating the foregoing, if the IMS Adjustment Factor is
1.1111 and the Shortfall is $5.50, then the IMS Exchange Ratio would be 0.3799,
calculated as follows: (x) 0.3212 multiplied by 1.1111, plus (y) one half of the
product obtained by multiplying 1.1111 by 0.0415 (i.e. the sum of 0.0227 and
0.0188).
