Exhibit 2.1
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MERGER AGREEMENT
Dated as of December 14, 1998
by and among
QUINTILES TRANSNATIONAL CORP.,
QTRN ACQUISITION CORP.,
and
PHARMACEUTICAL MARKETING SERVICES INC.
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MERGER AGREEMENT, dated as of December 14, 1998, by and among
Quintiles Transnational Corp., a North Carolina corporation ("Parent"), QTRN
Acquisition Corp., a North Carolina 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 the Company with and into Sub (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 by the Company,
Parent or Sub, will be converted into the right to receive, at the election of
each holder of Company Common Stock, either (i) common stock, par value $.01 per
share, of Parent ("Parent Common Stock") or (ii) Parent Common Stock and a
Contingent Value Payment (individually a "CVP" and collectively the "CVPs"),
pursuant to the terms and conditions of the CVPs as described in Exhibit A
hereto;
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 B 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;
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:
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 North Carolina Business
Corporation Act (the "NCBA") and the Delaware General Corporation Law (the
"DGCL"), the Company shall be merged with and into Sub at the Effective Time of
the Merger. At the Effective Time of the Merger, the separate existence of the
Company shall cease, and the Sub 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 Article VI (or as soon as practicable thereafter
following satisfaction or waiver of the conditions set forth in Article VI) (the
"Closing Date"), at the offices of Smith, Anderson, Blount, Dorsett, Xxxxxxxx &
Xxxxxxxx, L.L.P., 0000 Xxxxx Xxxxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxx Xxxxxxxx
00000, unless another date, time or place is agreed to in writing by the parties
hereto.
SECTION 1.03. Effective Time of the Merger. Upon the Closing, the
parties shall file with the Secretary of State of the State of North Carolina
and the Secretary of State of the State of Delaware articles (or certificate in
Delaware) of merger (the "Articles of Merger") executed in accordance with the
relevant provisions of the NCBCA and the DGCL and shall make all other filings
or recordings required under the NCBCA and the DGCL. The Merger shall become
effective at such time on the Closing Date as the Articles of Merger are duly
filed with the Secretary of State of the State of North Carolina and 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 NCBCA and the DGCL and as
Sub and the Company shall agree should be specified in the Articles 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 NCBCA and the DGCL. As used
herein, "Surviving Corporation" shall mean and refer to the Sub, at and after
the Effective Time of the Merger, as the surviving corporation in the Merger.
SECTION 1.05. Articles 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 articles of incorporation of Sub
as in effect immediately prior to the Effective Time of the Merger shall be the
articles of incorporation of the Surviving Corporation at the Effective Time of
the Merger until thereafter amended as provided therein or by applicable law,
except that the name of Sub in such articles of incorporation will be changed to
be Quintiles Xxxxx-Xxxxx, Inc.
(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) Cancellation of Treasury Stock and Parent-Owned Company Common
Stock. Each share of Company Common Stock that is owned by the Company, Parent
or Sub shall automatically be cancelled and retired and shall cease to exist,
and no cash, Parent Common Stock, CVPs or other consideration shall be delivered
or deliverable in exchange therefor.
(b) 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(a)) shall be converted into the right to
receive, at the election of the holder thereof, either (i) on the Closing Date,
that fraction of a fully paid and nonassessable share of Parent Common Stock
determined by dividing Fifteen Dollars and Forty Cents ($15.40) by the "Average
Trading Price" (the "Exchange Ratio") or (ii) (A) on the Closing Date, that
fraction of a fully paid and nonassessable share of Parent Common Stock
determined by dividing the Exchange Ratio in half and (B) at any time on or
prior to the Maturity Date (as defined in Exhibit A), as specified by such
holder, that fraction of a fully paid and nonassessable share of Parent Common
Stock determined by dividing the Exchange Ratio in half and (C) on the Maturity
Date, on the terms but subject to the further conditions described in Exhibit A
and the following two sentences, a CVP (the consideration described in each of
subparagraphs 2.01(b)(i) and 2.01(b)(ii) herein is individually referred to as
the "Per Share Merger Consideration"). For each share of Parent Common Stock
received by a former holder of Company Common Stock on the Maturity Date, Parent
shall pay to such holder, on the terms but subject to the further conditions set
forth in Exhibit A, cash equal to the amount, if any, as determined by Parent,
by which the Average Trading Price exceeds the CVP Average Trading Price (as
defined in Exhibit A). Shares of Parent Common Stock received by a former holder
of Company Common Stock prior to the Maturity Date shall not give rise to any
entitlement to a CVP. For purposes of this Agreement, "Average Trading Price"
shall mean the average of the closing prices per share of the Parent Common
Stock on the Nasdaq National Market (or such United States exchange on which the
Parent Common Stock is then listed) for the aggregate of ten (10) trading days
ending on the day which is two (2) days immediately preceding the Closing Date.
(c) Cancellation and Retirement of Company Common Stock. As of the
Effective Time of the Merger, all shares of Company Common Stock 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 Parent Common Stock and CVPs (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 a bank or trust company organized under the
laws of the United States or any state thereof with capital, surplus and
undivided profits of at least Five Hundred Million Dollars ($500,000,000) as may
be designated by Parent (and acceptable to the Company) (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
Parent Common Stock (such certificates for shares of Parent Common 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. Parent shall use commercially reasonable
efforts to cause the Exchange Agent to mail, as soon as reasonably practicable
after the Effective Time of the Merger, to each holder of record of Certificates
immediately prior to the Effective Time of the Merger whose shares were
converted pursuant to Section 2.01(b), (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, at the election of such holder, either (A)
certificates representing all of the shares of Parent Common Stock issuable
immediately to such holder or (B) certificates representing half of the shares
of Parent Common Stock issuable immediately to such holder, with certificates
representing the remaining half of the shares of Parent Common Stock issuable to
such holder and the CVPs to be issued or paid, as the case may be, on or prior
to the Maturity Date. The Letter of Transmittal shall also include instructions
for former holders of Certificates who elect to receive Per Share Merger
Consideration in accordance with Section 2.01(b)(ii) to specify the time of
issuance of Parent Common Stock pursuant to Section 2.01(b)(ii)(B). Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such Certificate, in
accordance with its election, shall be entitled to receive in exchange therefor
either (x) a certificate representing that number of whole shares of Parent
Common 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 Parent Common Stock as contemplated
by Section 2.02(e) (such certificate and cash in lieu of any fractional shares
to be issued and paid immediately) or (y) (A) a certificate representing half of
that number of whole shares of Parent Common Stock which such holder has a 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 Parent
Common Stock as contemplated by Section 2.02(e), (B) a certificate representing
the remaining whole shares of Parent Common Stock which such holder has a right
to receive (such certificate to be issued at the time or times specified by such
holder) and (C) a CVP, 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 Parent Common 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 Section 2.02, each Certificate shall be
deemed at any time after the Effective Time of the Merger to represent only the
Parent Common Stock and CVPs 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 Parent Common Stock as contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Parent Common 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 Parent Common 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
Parent Common 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 Parent Common 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 Parent Common 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 Parent
Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock and CVPs issued and made 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
Parent Common 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 Trading Price.
(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 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 Parent Common Stock, cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common 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 Parent Common
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 Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock or any dividends or
distributions with respect to Parent Common Stock would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 3.01(d)),
any such Parent Common Stock 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. The Exchange Fund may be invested by the Exchange Agent, as directed by
Parent, in (i) obligations of or guaranteed by the United States, (ii)
commercial paper rated A-1, P-1 or A-2, P-2, and (iii) time deposits with,
including certificates of deposits issued by, any office located in the United
States of any bank or trust company organized under Federal law or under the law
of any state of the United States or of the District of Columbia and that has
capital, surplus and undivided profits of at least Five Hundred Million Dollars
($500,000,000), and any net earnings with respect thereto shall be paid to
Parent as and when requested by Parent. If for any reason (including losses) the
Exchange Fund is inadequate to pay the amounts to which holders of shares of
Company Common Stock shall be entitled, Parent shall be liable for and shall
deposit in the Exchange Fund sufficient funds to make the required payments.
SECTION 2.03. Treatment of Options.
(a) 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 of Parent Common Stock and CVPs 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 Exchange Ratio as set forth in Section 2.01 of this
Agreement), 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 divided by (z) the number of full shares of Parent Common 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 of Parent
Common Stock purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code. If the relevant Company Stock Option is not exercised prior
to the Maturity Date (as defined in Exhibit A), any CVPs due pursuant thereto
shall terminate and become null and void. If the relevant Company Stock Option
is exercised, in whole or in part prior to the Maturity Date (as defined in
Exhibit A), upon the sale of any shares of Parent Common Stock received upon the
exercise of the relevant Company Stock Option, the CVPs due pursuant to such
shares sold shall terminate and become null and void.
(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 Parent Common Stock for delivery upon
exercise of Company Stock Options. At the Effective Time of the Merger, Parent
shall file a registration statement on 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 Parent Common Stock and CVPs 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) Provided that this Agreement shall not have been terminated in
accordance with Section 7.01 hereof, the Company shall issue a notice of
redemption for all of the Company's outstanding 6 1/4% Convertible Subordinated
Debentures due 2003 (the "Debentures") at such price and on such other terms and
conditions as are specified for the redemption of all of the Debentures under
the indenture (the "Indenture) in effect therefor (the "Debt Redemption"), with
the Debt Redemption to occur on February 1, 1999 (the "Redemption Date"). Prior
to the Effective Time and in any event not later than one business day prior to
the Redemption Date, the Company shall deposit with the Trustee (as defined in
the Indenture) an amount in cash sufficient to redeem the Debentures in full,
together with interest accrued thereon to the Redemption Date. The Company
covenants and agrees that, subject to the terms and conditions of this
Agreement, including but not limited to the conditions in the Debt Redemption,
it will redeem the Debentures on the Redemption Date.
(b) All mailings to the holders of the Debentures in connection with
the Debt Redemption shall be subject to the prior review, comment and approval
of Parent (which approval shall not be unreasonably withheld or delayed).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company. Except as
set forth in the disclosure schedule (each section of which qualifies the
correspondingly numbered representation and warranty only) of the Company
attached hereto (the "Company Disclosure Schedule"), 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. The Company has made available to Parent 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 and identified on
Section 3.01(a) of the Company Disclosure Schedule. 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 September 30, 1998, there
were: (i) 12,396,721 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) 2,370,000 shares of Company Common Stock reserved
for issuance upon exercise of Company Stock Options available for grant pursuant
to the Company Stock Plans; and (iv) 2,450,000 shares of Company Common Stock
issuable upon conversion of currently outstanding Debentures. As of the close of
business on September 30, 1998, there were 1,993,900 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)(iii) of the Company Disclosure Schedule. Except
as set forth above, as of the close of business on September 30, 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 September 30, 1998, 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 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. Except as set forth in Section
3.01(d) of the Company Disclosure Schedule (and except for the "Repurchase
Rights" of holders of the Debentures), 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 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) such filings,
if any, in connection with or compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the National Association
of Securities Dealers (the "NASD"), the provisions of the DGCL, the provisions
of the NCBCA, the Securities Act of 1933, as amended (the "Securities Act"),
Section 4043 of ERISA and 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 Articles of Merger with the
Secretary of State of the State of North Carolina and 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 Securities and Exchange Commission (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"). Except as set forth in Section 3.01(e)
of the Company Disclosure Schedule, 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 Financial Statements") and the
unaudited consolidated quarterly financial statements for the period ending
September 30, 1998 which have been provided to Parent (the "Interim 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 and the Interim 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, 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 unaudited
consolidated balance sheet of the Company as of September 30, 1998 or the notes
thereto set forth in the Interim Financial Statements (the "Interim Balance
Sheet"), (ii) liabilities disclosed in any Recent SEC Document and (iii)
liabilities incurred since September 30, 1998 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 of Parent on Form S-4 to be filed with the SEC in
connection with the issuance of Parent securities 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), since June 30, 1998, 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, 1998: (i) any Material Adverse Change (as defined in Section 8.04) with
respect to the Company; (ii) any material change by the Company in its
accounting methods, principles or practices, except as required by concurrent
changes in generally accepted accounting principles, (iii) any material
reevaluation by the Company of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course, (iv) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to any of the Company's capital stock, (v) any
condition, event or occurrence which 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;
(vi) 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 (vii) any condition, 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, 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, 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) Section 3.01(h)(ii) of the Company Disclosure Schedule
contains an accurate list of all of the Company's and each Subsidiary's
employees, showing for each his or her department and 1998 and 1999 annual
salary and bonus. 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) 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) 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) 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 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, retention bonus or other payments to any employee
or former employee arising from the transactions contemplated hereunder,
termination of employment or otherwise under any compensation, 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 $25,000
(or does exceed $25,000 solely as a result of statutory regulations governing
severance payments) individually or $250,000 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 or arrangement providing
for pension or welfare 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,
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.
(i) Except as disclosed in Section 3.01(j) of the Company
Disclosure Schedule: (A) 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; (B) all such Tax Returns
are complete and correct in all material respects; (C) 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 paid;
(D) 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; (E) 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; (F) 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 (G) 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.
(ii) Except as disclosed in Section 3.01(j)(ii) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries holds any
indebtedness of Parent or any of its Subsidiaries.
(iii) Except as disclosed in Section 3.01(j)(iii) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries nor any
other Person on behalf of the Company or any of its Subsidiaries has agreed to
or is required to make (or has pending any application to make) any adjustments
pursuant to Section 481(a) of the Code or any similar provision of state, local
or foreign law by reason of a change in accounting method initiated by the
Company or any of its Subsidiaries.
(iv) Except as set forth in Section 3.01(j)(iv) of the Company
Disclosure Schedule, none of the assets of the Company of any of its
Subsidiaries is (i) property required to be treated as being owned by another
person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986, or (ii) "tax-exempt use property" within the meaning of
Section 168(h)(1) of the Code.
(v) None of the issued and outstanding Company Common Stock is
subject to a "substantial risk of forfeiture" within the meaning of Section 83
of the Code.
(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 Interim
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 September 30, 1998
in the ordinary course of business consistent with past practice) and (B)
acquired after September 30, 1998 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
Interim Balance Sheet and (y) acquired after September 30, 1998 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, the
lessor that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect with respect to the Company. 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 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 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.
(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 non-competition agreement or any other 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, now or
hereafter acquired, (including the Company and its Subsidiaries) to conduct any
of the businesses currently conducted by any of them or which purports to limit
or restrict in any material respect the manner in which, or the geographic area
in which, Parent or any of its subsidiaries (including the Company and its
Subsidiaries) is entitled to conduct all or any material portion of the business
of Parent, the Company or any of their subsidiaries.
(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, 1998 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 $250,000 on an
annualized basis, (ii) customer contracts between the Company or any of its
Subsidiaries and third parties involving payments by customers exceeding
$250,000 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 involving payments in excess of $75,000 per annum;
(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 any of National Data
Corporation, IMS Health Incorporated, 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 was a party or bound immediately prior to August 5,
1998, all of which have been transferred to IMS Health Incorporated.
(vii) As of the date hereof, with respect to each of its current
customers, and as of the date of the Effective Time of the Merger with respect
to at least all of its current customers who accounted for at least 90% of the
Company's revenue for the quarter ended September 30, 1998, except as disclosed
in Section 3.01(m)(vii) of the Company Disclosure Schedule, 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, whose fees and expenses will be paid by the Company (pursuant to fee
agreements 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 XX Xxxxx Securities Corporation to the
effect that, as of such date, the Per Share 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, approved the Stock Option Agreement for the
purposes of Section 203(a)(i) of the DGCL and has taken all other 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
declare the Merger "advisable" and to recommend that the holders of the shares
of Company Common Stock adopt 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, 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, none of the licensors is in default under or in breach
of any such license or agreement. Unless otherwise 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) 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) 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) Except as otherwise noted in Section 3.01(r)(ii) of the
Company Disclosure Schedule, 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. Set forth in Section 3.01(r)(iii)(a) of the
Company Disclosure Schedule is a true and complete list of all Software owned by
the Company or any of its Subsidiaries. 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, none of the licensors is in default under or in breach of any such
license or agreement. To the Company's knowledge, 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, 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. Set forth in Section 3.01(r)(iv)(a) of the
Company Disclosure Schedule is a true and complete list of all Databases owned
by the Company or any of its Subsidiaries. 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, none of the licensors is in default under or in breach
of any such license or agreement. To the Company's knowledge, 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 public announcement of or approval, execution or
delivery of this Agreement or the Stock Option Agreement or the public
announcement of or consummation of the Merger or the acquisition of shares of
Company Common Stock by Parent pursuant to the Stock Option Agreement.
(ii) The Board of Directors of the Company has not exercised its
option to exchange the Rights for shares of Company Common Stock as set forth in
Section 25 of the Rights Agreement.
(iii) The Company has taken all actions necessary with respect to
all of the outstanding Rights so that, immediately prior to and after the
Effective Time of the Merger, (A) neither Company nor Parent or Sub 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,
including without limitation the right to exercise the Rights set forth in
Section 8 of the Rights Agreement.
(u) Investment Company Act of 1940. The Company is not and prior to
the Effective Time of the Merger will not be an "investment company", "unit
investment trust", "management company", "closed-end company", "open-end
company", "face-amount certificate company" or an entity "controlled" by an
"investment company" that is required to be registered under Section 8 of the
United States Investment Company Act of 1940, as amended.
SECTION 3.02. Representations and Warranties of Parent and Sub. Parent
and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and Sub
is duly organized, validly existing and in good standing under the laws of the
State of North Carolina and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of Parent and Sub 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 the articles of
incorporation and by-laws of Parent and of Sub.
(b) Capital Structure.
(i) As of the date of this Agreement, the authorized capital
stock of Parent consists of 200,000,000 shares of Parent Common Stock,
25,000,000 shares of preferred stock, par value $.01 per share, of Parent (the
"Parent Preferred Stock"). As of the close of business on June 30, 1998, there
were: (i) 75,612,627 shares of Parent Common Stock issued and outstanding; (ii)
2,435,843 shares of Parent Common Stock reserved for issuance upon exercise of
stock options available for grant pursuant to Parent's stock option and stock
purchase plans (such plans, collectively, the "Parent Stock Plans"); (iii)
5,152,560 shares of Parent Common Stock issuable upon exercise of awarded but
unexercised stock options; (iv) 3,474,250 shares of Parent Common Stock issuable
upon conversion of outstanding 4 1/4% Convertible Subordinated Notes due 2000
(the "Parent Notes") and (v) no shares of Parent Preferred Stock outstanding.
Except as set forth above, as of the close of business on June 30, 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. Except for the Parent Notes, at the time of the
execution of this Agreement, 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) From June 30, 1998 to the date of this Agreement, except as
set forth in Section 3.02(b) of the Parent Disclosure Schedule, Parent did not
(A) issue 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.
(iii) 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, as applicable, and (assuming due authorization, execution and delivery
by the Company) constitute valid and binding obligations of Parent and Sub, as
applicable, 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, as applicable, 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 articles 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, as applicable, or the consummation by Parent and Sub of any of
the transactions contemplated hereby or thereby, except for (i) such filings, if
any in connection with or compliance with the HSR Act, the NASD, the provisions
of the DGCL, the provisions of the NCBCA, the Securities Act, Section 4043 of
ERISA and the Exchange Act as may be required in connection with this Agreement,
the Stock Option Agreement and the transactions contemplated hereby and thereby,
(ii) 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 (iii) 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 or under the Stock Option Agreement or (y) have
a Material Adverse Effect with respect to Parent.
(d) Parent SEC Documents; Undisclosed Liabilities. Except as set forth
in Section 3.02(d) of the Parent Disclosure Schedule, 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).
(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, since December 31, 1997,
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; or (iii) 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 the Stock
Option Agreement or perform its obligations hereunder or thereunder.
(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, 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 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
Parent or prevent or materially delay the ability of the Parent to consummate
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, 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 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 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 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 November 4, 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. Except as contemplated by the
Stock Option Agreement, 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.
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 it 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 (other than the Debentures as
contemplated by Section 2.04) 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 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;
(v) other than as set forth in Section 4.01(a)(v) of the Company
Disclosure Schedule with respect to the disposition of certain assets, 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
$250,000 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, or (C) invest or hold cash or cash equivalents
in instruments with a maturity date exceeding 90 days, (D) or use any cash
outside the ordinary course of the PMSI Xxxxx-Xxxxx, Inc. business except as set
forth on Schedule 4.01(a)(vi).
(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, 1999 (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) other than as set forth in Section 4.01(c)(viii) of the
Company Disclosure Schedule, 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 $250,000 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;
(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 $250,000;
(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) other than as set forth in Section 4.01(a)(xiv) of the
Company Disclosure Schedule, 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) Changes in Employment Arrangements. Other than as set forth in
Section 4.01(b) of the Company Disclosure Schedule, 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 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 (ii)
take any action to implement the Employee Stock Purchase Plan.
(c) Severance. Except as contemplated by the proviso to the
immediately preceding paragraph (b), 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.
(d) 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 Parent and Sub in advance and without complying
with the notice requirements and other provisions of WARN or any applicable
foreign laws or regulations.
(e) Tax Elections. Other than as set forth in Section 4.01(e) of the
Company Disclosure Schedule, 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.
(f) 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.
(g) 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.
(h) 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
other than the possible issuance of securities by Parent after the date of this
Agreement, or (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 Parent
securities 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 of its stockholders (the "Stockholders Meeting") for
the purpose of adopting 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 October 13, 1998, between
Parent and the Company (the "Confidentiality Agreement"), which Confidentiality
Agreement (except for Section 2 thereof) 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 (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 of the Company or the comparable
charter or 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 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 three 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 Two Hundred
Eight Thousand Dollars ($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.
(a) 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 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 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 prior 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 and each of its Subsidiaries will immediately
cease and cause its officers, directors, employees, affiliates, 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.
(b) Except as set forth in this Section 5.06(b), the Board of
Directors of the Company shall not (i) fail to make or withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation of the Merger and this Agreement by the Board of Directors of the
Company, (ii) approve or recommend, or propose to approve or recommend, any
Transaction Proposal or (iii) cause the Company to enter into any agreement
(including, without limitation, any letter of intent) with respect to any
Transaction Proposal. Notwithstanding the foregoing, if the Board of Directors
of the Company, after consultation with and based upon the written advice of
outside legal counsel, determine in good faith that it is necessary to do so in
order to comply with its fiduciary duties to the stockholders of the Company
under applicable law, the Board of Directors of the Company may approve or
recommend a Superior Proposal (as defined below) or cause the Company to enter
into an agreement with respect to a Superior Proposal, but in each case only (i)
after providing reasonable written notice to Parent (a "Notice of Superior
Proposal") advising Parent that the Board of Directors of the Company has
received a Superior Proposal, specifying the terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal and
(ii) if Parent does not make within three business days of Parent's receipt of
the Notice of Superior Proposal, an offer which the Board of Directors of the
Company, after consultation with its financial advisors, determines is superior
to such Superior Proposal. The term "Superior Proposal" means any Transaction
Proposal that the Board of Directors of the Company determines in its good faith
judgment (after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the Merger,
including as part of such determination, that, as to any cash consideration to
be paid pursuant to the Superior Proposal, the person making the Superior
Proposal has all requisite funds on hand or has provided customary financing
commitments for the requisite funds.
SECTION 5.07. Benefit Matters. From and after the Effective Time of
the Merger, Parent shall accord to all employees of the Company and its
Subsidiaries that become Continuing Employees benefits that Parent normally
makes available to its employees under Parent employee benefit plans (as defined
in Section 3(3) of ERISA), in each case as if such Continuing Employee had been
employed by Parent for the length of time such Continuing Employee has been
employed by the Company (provided no such amount of time shall be credited for
purposes of the vesting or other provisions of any option, other than Converted
Options, granted to any such Continuing Employee to purchase shares of Parent
Common Stock).
SECTION 5.08. NASDAQ Listing. Parent shall use all reasonable efforts
to cause the shares of Parent Common Stock to be issued in the Merger and the
shares of Parent Common Stock to be reserved for issuance upon exercise or
conversion of Company Stock Options to be approved for listing on the Nasdaq
National Market System, subject to official notice of issuance.
SECTION 5.09. 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.
SECTION 5.10. Supplemental Disclosure. The Company shall give prompt
written notice to Parent, and Parent shall give prompt written notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or nonoccurrence, of which would be likely to cause (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (y) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of the Company or Parent, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.10 shall not have any effect for the
purpose of determining the satisfaction of the conditions set forth in Article
VI of this Agreement or otherwise limit or affect the remedies available
hereunder to any party.
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
Parent securities 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, 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) NASDAQ Listing. The shares of Parent Common Stock issuable to
stockholders of the Company in accordance with this Agreement shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
(f) Other Approvals. Other than the filing of merger documents in
accordance with the NCBCA and DGCL, 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, each of the other representations and warranties of the
Company contained in this Agreement shall be true and correct in all material
respects and the Company Disclosure Schedule and each of the schedules attached
to 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 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 the Company or
Parent.
(e) Rights Agreement. None of the events described in Section 8,
Section 14 or Section 25, or the second sentence of Section 3(a) of the Rights
Agreement shall have occurred. The right of the Board of Directors of the
Company to redeem the Rights pursuant to Section 24 of the Rights Agreement
shall be in effect and the Rights shall not have become nonredeemable and shall
not become nonredeemable upon consummation of the Merger.
(f) Employment Agreements. The Employment Agreements identified on
Schedule 6.02(f), substantially in the form of Exhibit C attached hereto
(collectively, the "Employment Agreements") shall have been executed and
delivered to Parent.
(g) Tax Opinion. Parent shall have received an opinion of Smith,
Anderson, Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.C., counsel to Parent, in
form and substance reasonably satisfactory to Parent, to the effect that the
Merger will qualify as a reorganization within the meaning of Section 368 of the
Code. The issuance of such opinion shall be conditioned on the receipt by such
counsel of representation letters from each of Parent, Sub and the Company and
in each case, in form and substance reasonably satisfactory to Smith, Anderson,
Blount, Dorsett, Xxxxxxxx & Xxxxxxxx, L.L.C. The specific provisions of each
such representation letter shall be in form and substance reasonably
satisfactory to such counsel, and each such representation letter shall be dated
on or before the date of such opinion and shall not have been withdrawn or
modified in any material respect.
(h) Key Man Life Insurance. The Company shall have obtained and
maintain in full force and effect key man life insurance on the life of Xxx
Xxxxx, in form and substance reasonably satisfactory to Parent, in the amount of
Five Million Dollars ($5,000,000) with all proceeds payable to the Company.
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.
(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.
(c) Tax Opinion. The Company shall have received an opinion of Reboul,
MacMurray, Xxxxxx, Xxxxxxx & Kristol, counsel to the Company, in form and
substance reasonably satisfactory to the Company, to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368 of the Code.
The issuance of such opinion shall be conditioned on the receipt by such counsel
of representation letters from each of Parent, Sub, and the Company, in each
case, in form and substance reasonably satisfactory to Reboul, MacMurray,
Xxxxxx, Xxxxxxx & Kristol. The specific provisions of each such representation
letter shall be in form and substance reasonably satisfactory to such counsel,
and each such representation letter shall be dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect.
(d) Bringdown Opinion of Financial Advisor. The Company shall have
received a bringdown of the XX Xxxxx Securities Corporation opinion dated as of
December 14, 1998, to the effect that as of a date within ten (10) days prior to
the mailing of the Company's Proxy Statement to the Company's stockholders in
connection with the Merger, the Per Share Merger Consideration is fair, from a
financial point of view, to the holders of Company Common Stock (other than
Parent and its affiliates).
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 May 15, 1999 (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 May 15, 1999 (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 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
5.06 hereof, the Board of Directors of the Company has approved or recommended a
Superior Proposal; or
(g) by the Company upon written notice to the Parent prior to 10:00
a.m. on the day scheduled for the Stockholders Meeting set forth in the proxy
material mailed to the Company's stockholders, if the Average Trading Price is
more than $62.325; provided that the Company shall not be entitled to terminate
this Agreement pursuant to this paragraph (g) if, within twenty-four (24) hours
after the Company notifies Parent in writing of any such proposed termination,
Parent agrees in writing that the Exchange Ratio shall be equal to 0.247091857;
or
(h) by Parent upon written notice to the Company prior to 10:00 a.m.
on the day scheduled for the Stockholders Meeting set forth in the proxy
material mailed to the Company's stockholders, if the Average Trading Price is
less than $41.55; provided that Parent shall not be entitled to terminate this
Agreement pursuant to this paragraph (h) if, within twenty-four (24) hours after
the Parent notifies the Company of any such proposed termination, the Company
agrees in writing that the Exchange Ratio shall be equal to 0.370637786.
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, other than Section 2 thereof), 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, including the Schedules
hereto, may be amended at the sole discretion and agreement of all of 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, including the Schedules
hereto, 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 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 September 15, 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 (ii) if this Agreement is terminated
pursuant to (A) Section 7.01(e) or (B) Section 7.01(f); then the Company shall,
(1) in the case of clauses (a)(i)(A) and (a)(ii)(A) above, promptly, but in no
event later than one business day after the termination of this Agreement, (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, and (3) in the case of clause (a)(ii)(B) above, prior to (and as a
precondition to) termination under Section 7.01(f) pay Parent a fee of
$8,000,000 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
Quintiles Transnational Corp.
0000 Xxxxxxxxxx Xxxxx
Riverbirch Building, Suite 200
Durham, North Carolina 27703
Attention: General Counsel
Fax Number: (000) 000-0000
with a copy to:
Smith, Anderson, Blount, Dorsett,
Xxxxxxxx & Xxxxxxxx, L.L.P.
0000 Xxxxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax Number: (000) 000-0000
(b) if to the Company, to
Pharmaceutical Marketing Services Inc.
00 Xxxxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 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) "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 who are actively
employed on a full-time basis by the Company or any of its Subsidiaries other
than PMSI Xxxxx-Xxxxx, Inc., if any, as may be identified in writing by Parent
to the Company not less than five business days prior to the Closing Date;
(c) "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;
(d) "Environmental Laws" means all applicable foreign, federal, state,
provincial and local statutes, rules, regulations, ordinances, orders, decrees
and common or civil law 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;
(e) "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;
(f) "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;
(g) "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;
(h) "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;
(i) "knowledge" means, with respect to any matter, (i) in the case of
Parent, the knowledge of any director or executive officer of Parent after due
inquiry into such matter and (ii) in the case of the Company, the knowledge of
Messrs. Turner, Davies, Xxxxxx and Xx. Xxxxx after due inquiry into such matter;
(j) "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;
(k) "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;
(l) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity;
(m) "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, 1998; and
(n) "Rights" means the rights to acquire one-third of a share of
Company Common Stock pursuant to the Rights Agreement;
(o) "Rights Agreement" means the Rights Agreement dated as of January
28, 1998 between the Company and Xxxxxx Trust Company of New York;
(p) 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
(q) "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. All exhibits and schedules referred to in this Agreement, including
without limitation the Company Disclosure Schedule, are intended to be and
hereby are specifically made a part 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. The interpretation and construction of
this Agreement, and all matters relating hereto, shall be governed by, and
construed in accordance with, the laws of the State of North Carolina, without
regard to the choice of law principles thereof.
SECTION 8.09. Assignment. 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.
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.
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.
QUINTILES TRANSNATIONAL CORP.
By:
/s/Xxxxx X. Xxxxxxx--------
Name: Xxxxx X. Xxxxxxx
Title: Sr. Vice President
QTRN ACQUISITION CORP.
By:
/s/Xxxxx X. Xxxxxxx--------
Name: Xxxxx X. Xxxxxxx
Title: Sr. Vice President
PHARMACEUTICAL MARKETING SERVICES INC.
By:
/s/Xxxxxx X. Xxxxxx--------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
