EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
CARDINAL HEALTH, INC.
("Cardinal"),
OWL MERGER CORP.
a wholly owned direct subsidiary of Cardinal
("Subcorp"),
and
XXXX HEALTHCARE, INC.
("Xxxx")
November 27, 1996
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TABLE OF CONTENTS
PAGE
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AGREEMENT AND PLAN OF MERGER 1
PRELIMINARY STATEMENTS 1
AGREEMENT 1
ARTICLE I: THE MERGER 2
1.1 The Merger 2
1.2 Effective Time 2
1.3 Effects of the Merger 2
1.4 Certificate of Incorporation and Bylaws 2
1.5 Directors and Officers 2
1.6 Additional Actions 2
ARTICLE II: CONVERSION OF SECURITIES 3
2.1 Conversion of Capital Stock 3
2.2 Exchange Ratio; Fractional Shares 3
2.3 Exchange of Certificates
(a) Exchange Agent 4
(b) Exchange Procedures 4
(c) Distributions with Respect to Unexchanged Shares 5
(d) No Further Ownership Rights in Xxxx Common Stock 5
(e) Termination of Exchange Fund 5
(f) No Liability 6
(g) Investment of Exchange Fund 6
2.4 Treatment of Stock Options 6
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF
CARDINAL AND SUBCORP 7
3.1 Organization and Standing 7
3.2 Corporate Power and Authority 7
3.3 Capitalization of Cardinal and Subcorp 7
3.4 Conflicts; Consents and Approval 8
3.5 Brokerage and Finder's Fees 9
3.6 Accounting Matters; Reorganization 9
3.7 Cardinal SEC Documents 9
3.8 Registration Statement 10
3.9 No Material Adverse Change 10
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF
XXXX 10
4.1 Organization and Standing 10
4.2 Subsidiaries 11
4.3 Corporate Power and Authority 11
4.4 Capitalization of Xxxx 11
4.5 Conflicts; Consents and Approvals 12
4.6 No Material Adverse Change 12
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4.7 Xxxx SEC Documents 13
4.8 Taxes 13
4.9 Compliance with Law 14
4.10 Intellectual Property 15
4.11 Title to and Condition of Properties 16
4.12 Registration Statement; Proxy Statement 16
4.13 Litigation 17
4.14 Brokerage and Finder's Fees; Expenses 17
4.15 Accounting Matters; Reorganization 17
4.16 Employee Benefit Plans 17
4.17 Contracts 20
4.18 Labor Matters 21
4.19 Operation of Xxxx'x Business; Relationships 21
4.20 Permits; Compliance 21
4.21 Product Warranties and Liabilities 21
4.22 Environmental Matters 21
4.23 Opinion of Financial Advisors 22
4.24 Board Recommendation 22
4.25 State Takeover Laws 22
4.26 Lease Arrangements 22
ARTICLE V: COVENANTS OF THE PARTIES 23
5.1 Mutual Covenants 23
(a) General 23
(b) XXX Xxx 00
(x) Xxxxx Xxxxxxxxxxxx Xxxxxxx 00
(x) Pooling-of-Interests 24
(e) Tax-Free Treatment 24
(f) Public Announcements 24
5.2 Covenants of Cardinal 25
(a) Preparation of Registration Statement 25
(b) Indemnification 25
(c) Insurance 25
(d) Employee Benefits 25
(e) Notification of Certain Matters 25
(f) Pooling Press Release 26
(g) Merger Sub 26
(h) NYSE Listing 26
(i) Affiliates of Cardinal 26
(j) Access 26
5.3 Covenants of Xxxx 26
(a) Xxxx Shareholders Meeting 26
(b) Information for the Registration Statement
and Preparation of Proxy Statement 26
(c) Conduct of Xxxx'x Operations 27
(d) Intellectual Property Matters 28
(e) No Solicitation 29
(f) Termination Right 30
(g) Affiliates of Xxxx 30
(h) Access 30
(i) Notification of Certain Matters 31
(j) Subsequent Financial Statements 31
ARTICLE VI: CONDITIONS 31
6.1 Mutual Conditions 31
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6.2 Conditions to Obligations of Xxxx 32
6.3 Conditions to Obligations of Cardinal and
Subcorp 32
ARTICLE VII: TERMINATION AND AMENDMENT 33
7.1 Termination 33
7.2 Effect of Termination 34
7.3 Amendment 35
7.4 Extension; Waiver 35
ARTICLE VIII: MISCELLANEOUS 35
8.1 Survival of Representations and Warranties 35
8.2 Notices 35
8.3 Interpretation 36
8.4 Counterparts 37
8.5 Entire Agreement 37
8.6 Third Party Beneficiaries 37
8.7 Governing Law 37
8.8 Consent to Jurisdiction; Venue 37
8.9 Specific Performance 37
8.10 Assignment 38
8.11 Expenses 38
Exhibit A-1 - Form of Xxxx Affiliate Letter
Exhibit A-2 - Form of Cardinal Affiliate Letter
Exhibit B - Form of Opinion of Cardinal and Subcorp's Counsel
Exhibit C - Form of Opinion of Xxxx'x Counsel
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of the 27th day of November, 1996, by and among Cardinal Health,
Inc., an Ohio corporation ("Cardinal"), Owl Merger Corp., a Texas corporation
and a wholly owned subsidiary of Cardinal ("Subcorp") and Xxxx Healthcare, Inc.,
a Texas corporation ("Xxxx").
PRELIMINARY STATEMENTS
A. Cardinal desires to acquire the pharmacy management services
business, the automated medication management business and other businesses
operated by Xxxx through the merger of Subcorp with and into Xxxx, with Xxxx as
the surviving corporation (the "Merger"), pursuant to which each share of Xxxx
Common Stock (as defined in Section 4.4) outstanding at the Effective Time (as
defined in Section 1.2) will be converted into the right to receive Cardinal
Common Shares (as defined in Section 3.3) as more fully provided herein.
B. The Board of Directors of Xxxx has determined that the Merger
is consistent with and in furtherance of the long-term business strategy of Xxxx
and Xxxx desires to combine its pharmacy management services, automated
medication management and other businesses with the healthcare service
businesses operated by Cardinal and for the holders of shares of Xxxx Common
Stock ("Xxxx Shareholders") to have a continuing equity interest in the combined
Cardinal/Xxxx businesses.
C. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of Section 368(a)(2)(E)
thereof.
D. The parties intend that the Merger be accounted
for as a pooling-of-interests for financial reporting purposes.
E. The respective Boards of Directors of Cardinal, Subcorp and
Xxxx have determined the Merger in the manner contemplated herein to be
desirable and in the best interests of their respective shareholders and, by
resolutions duly adopted, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual
and dependent promises hereinafter set forth, the parties hereto agree as
follows:
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ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of the Texas Business Corporation
Act (the "TBCA"), Subcorp shall be merged with and into Xxxx at the Effective
Time. As a result of the Merger, the separate corporate existence of Subcorp
shall cease and Xxxx shall continue its existence under the laws of the State of
Texas. Xxxx, in its capacity as the corporation surviving the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 EFFECTIVE TIME. As promptly as possible on the Closing Date
(as defined below), the parties shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Texas (the "Texas Secretary
of State") articles of merger (the "Articles of Merger") in such form as is
required by and executed in accordance with Article 5.04 of the TBCA. The Merger
shall become effective (the "Effective Time") when the Articles of Merger has
been filed with the Texas Secretary of State or at such later time as shall be
agreed upon by Cardinal and Xxxx and specified in the Articles of Merger. Prior
to the filing referred to in this Section 1.2, a closing (the "Closing") shall
be held at the offices of Cardinal, 0000 Xxxxxxx Xxxxx, Xxxxxx, Xxxx 00000, or
such other place as the parties may agree as soon as practicable (but in any
event within three business days) following the date upon which all conditions
set forth in Article VI hereof have been satisfied or waived, or at such other
date as Cardinal and Xxxx may agree; PROVIDED, that the conditions set forth in
Article VI have been satisfied or waived at or prior to such date. The date on
which the Closing takes place is referred to herein as the "Closing Date." For
all tax purposes, the Closing shall be effective at the end of the day on the
Closing Date.
1.3 EFFECTS OF THE MERGER. From and after the Effective Time,
the Merger shall have the effects set forth in Article 5.06A of the TBCA.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. The Articles of
Merger shall provide that at the Effective Time (i) the Certificate of
Incorporation of the Surviving Corporation as in effect immediately prior to the
Effective Time shall be amended as of the Effective Time so as to contain the
provisions, and only the provisions, contained immediately prior thereto in the
Certificate of Incorporation of Subcorp, except for Article I thereof which
shall continue to read "The name of the corporation is 'Xxxx Healthcare, Inc.'",
and (ii) the Bylaws of Subcorp in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation; in each case until amended in
accordance with applicable law.
1.5 DIRECTORS AND OFFICERS. From and after the Effective Time,
the officers of Xxxx shall be the officers of the
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Surviving Corporation and the directors of Subcorp shall be the directors of the
Surviving Corporation, in each case until their respective successors are duly
elected and qualified. On or prior to the Closing Date, Xxxx shall deliver to
Cardinal evidence satisfactory to Cardinal of the resignations of the directors
of Xxxx, such resignations to be effective as of the Effective Time.
1.6 ADDITIONAL ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Xxxx, or (b) otherwise carry out the provisions of this
Agreement, Xxxx and its officers and directors shall be deemed to have granted
to the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such deeds, assignments or assurances in law and to take all acts
necessary, proper or desirable to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the provisions of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of Xxxx or
otherwise to take any and all such action.
ARTICLE II
CONVERSION OF SECURITIES
2.1 CONVERSION OF CAPITAL STOCK. At the Effective
Time, by virtue of the Merger and without any action on the part
of Cardinal, Subcorp or Xxxx or their respective shareholders:
(a) Each share of common stock, $0.01 par value, of Subcorp
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock, $0.01 par value, of the
Surviving Corporation. Such newly issued shares shall thereafter
constitute all of the issued and outstanding capital stock of the
Surviving Corporation.
(b) Subject to the other provisions of this Article II, each
share of Xxxx Common Stock issued and outstanding immediately prior to
the Effective Time shall be converted into and represent a number of
Cardinal Common Shares equal to the Exchange Ratio (as defined below).
(c) Each share of capital stock of Xxxx held in the treasury of
Xxxx shall be cancelled and retired and no payment shall be made in
respect thereof.
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2.2 EXCHANGE RATIO; FRACTIONAL SHARES. The "Exchange Ratio"
(rounded to the nearest ten-thousandth of a share) shall be equal to (a) the
quotient obtained by dividing (x) $27.25 by (y) the average of the closing
prices per share (or, if the Cardinal Common Shares should not trade on any
trading day, the average of the bid and asked prices therefor on such day), of
the Cardinal Common Shares as reported on the New York Stock Exchange ("NYSE")
Composite Tape ("NYSE Composite Tape") on each of the last ten trading days
ending on the sixth trading day prior to the meeting of Xxxx Shareholders at
which the vote to approve the Merger occurs (the "Average Share Price");
PROVIDED, HOWEVER, that (i) if the Average Share Price is less than $82.175,
then the Exchange Ratio shall be equal to 0.3316, or (ii) if the Average Share
Price is greater than $90.825, then the Exchange Ratio shall be equal to 0.3000;
or (b) if Cardinal has made an Adjustment Election (as defined in Section 7.1),
then the product of (x) 0.3316 and (y) the quotient obtained by dividing $69.20
by the Average Share Price. No certificates for fractional Cardinal Common
Shares shall be issued as a result of the conversion provided for in Section
2.1(b). In lieu of any such fractional shares, the holder of a certificate
previously evidencing Xxxx Common Stock, upon presentation of such fractional
interest represented by an appropriate certificate for Xxxx Common Stock to the
Exchange Agent pursuant to Section 2.3, shall be entitled to receive a cash
payment therefor in an amount equal to the value (determined with reference to
the closing price of Cardinal Common Shares as reported on the NYSE Composite
Tape on the last full trading day immediately prior to the Effective Time) of
such fractional interest. Such payment with respect to fractional shares is
merely intended to provide a mechanical rounding off of, and is not a separately
bargained for, consideration. If more than one certificate representing shares
of Xxxx Common Stock shall be surrendered for the account of the same holder,
the number of Cardinal Common Shares for which certificates have been
surrendered shall be computed on the basis of the aggregate number of shares
represented by the certificates so surrendered. In the event that prior to the
Effective Time Cardinal shall declare a stock dividend or other distribution
payable in Cardinal Common Shares or securities convertible into Cardinal Common
Shares, or effect a stock split, reclassification, combination or other change
with respect to Cardinal Common Shares (including, without limitation, the
previously announced split of three Cardinal Common Shares for every two
Cardinal Common Shares currently outstanding, payable December 16, 1996 to
holders of record of Cardinal Common Shares at the close of business on December
2, 1996), the Exchange Ratio set forth in this Section 2.2 shall be adjusted to
reflect such dividend, distribution, stock split, reclassification, combination
or other change.
2.3 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Promptly following the Effective Time,
Cardinal shall deposit with Boatmen's Trust Company or such other exchange agent
as may be designated by Cardinal and reasonably acceptable to Xxxx (the
"Exchange Agent"), for the
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benefit of Xxxx Shareholders, for exchange in accordance with this Section 2.3,
certificates representing Cardinal Common Shares issuable pursuant to Section
2.1 in exchange for outstanding shares of Xxxx Common Stock and shall from
time-to-time deposit cash in an amount reasonably expected to be paid pursuant
to Section 2.2 (such Cardinal Common Shares and cash, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Xxxx Common Stock whose shares
were converted into the right to receive Cardinal Common Shares pursuant to
Section 2.1(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 shall be in
such form and have such other customary provisions as Cardinal may reasonably
specify) and (ii) instructions for effecting the surrender of the Certificates
in exchange for certificates representing Cardinal Common Shares. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together
with a duly executed letter of transmittal, the holder of such Certificate
shall be entitled to receive in exchange therefor (x) a certificate or
certificates representing that whole number of Cardinal Common Shares which such
holder has the right to receive pursuant to Section 2.1 in such denominations
and registered in such names as such holder may request and (y) a check
representing the amount of cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, which such holder has the right to receive
pursuant to the provisions of this Article II, after giving effect to any
required withholding tax. The shares represented by the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, payable to holders of shares of Xxxx Common Stock. In the
event of a transfer of ownership of shares of Xxxx Common Stock which is not
registered on the transfer records of Xxxx, a certificate representing the
proper number of Cardinal Common Shares, together with a check for the cash to
be paid in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, may be issued to such transferee if the Certificate
representing such shares of Xxxx Common Stock held by such transferee is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.3, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon surrender a certificate representing
Cardinal Common Shares and cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, as provided in this Article II.
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(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to Cardinal
Common Shares having a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate, and no cash payment in lieu of
fractional shares shall be paid to any such holder, until the holder shall
surrender such Certificate as provided in this Section 2.3. Subject to the
effect of Applicable Laws (as defined in Section 4.9), following surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole Cardinal Common Shares issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole Cardinal Common Shares and not paid, less the amount
of any withholding taxes which may be required thereon, and (ii) at the
appropriate payment date subsequent to surrender, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Cardinal Common Shares, less the amount of any withholding taxes
which may be required thereon.
(d) NO FURTHER OWNERSHIP RIGHTS IN XXXX COMMON STOCK. All
Cardinal Common Shares issued upon surrender of Certificates in accordance with
the terms hereof (including any cash paid pursuant to this Article II) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Xxxx Common Stock represented thereby, and there shall be no further
registration of transfers on the stock transfer books of Xxxx of shares of Xxxx
Common Stock outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Section 2.3.
Certificates surrendered for exchange by any person constituting an "affiliate"
of Xxxx for purposes of Rule 145(c) under the Securities Act of 1933, as amended
(the "Securities Act"), shall not be exchanged until Cardinal has received
written undertakings from such person in the form attached hereto as Exhibit
A-1.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to Xxxx Shareholders six months after the date
of the mailing required by Section 2.3(b) shall be delivered to Cardinal, upon
demand thereby, and holders of Certificates previously representing shares of
Xxxx Common Stock who have not theretofore complied with this Section 2.3 shall
thereafter look only to Cardinal for payment of any claim to Cardinal Common
Shares, cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) NO LIABILITY. None of Cardinal, the Surviving Corporation or
the Exchange Agent shall be liable to any person in respect of any shares of
Xxxx Common Stock (or dividends or
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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 seven
years after the Effective Time of the Merger (or immediately prior to such
earlier date on which any cash, any cash in lieu of fractional shares or any
dividends or distributions with respect to whole shares of Xxxx Common Stock in
respect of such Certificate would otherwise escheat to or become the property of
any Governmental Authority (as defined in Section 3.4)), any such cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by Applicable Laws, become the property of Cardinal, free and clear of
all claims or interest of any person previously entitled thereto.
(g) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Cardinal, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Cardinal upon termination of the Exchange Fund pursuant to Section
2.3(e).
2.4 TREATMENT OF STOCK OPTIONS.
(a) Prior to the Effective Time, Cardinal and Xxxx shall take all
such actions as may be necessary to cause each unexpired and unexercised option
under stock option plans of Xxxx in effect on the date hereof which has been
granted to current or former directors, officers or key employees of Xxxx by
Xxxx (each, an "Xxxx Option") to be automatically converted at the Effective
Time into an option (a "Cardinal Exchange Option") to purchase that number of
Cardinal Common Shares equal to the number of shares of Xxxx Common Stock
issuable immediately prior to the Effective Time upon exercise of the Xxxx
Option (without regard to actual restrictions on exercisability) multiplied by
the Exchange Ratio, with an exercise price equal to the exercise price which
existed under the corresponding Xxxx Option divided by the Exchange Ratio, and
with other terms and conditions that are the same as the terms and conditions of
such Xxxx Option immediately before the Effective Time; provided that with
respect to any Xxxx Option that is an "incentive stock option" within the
meaning of Section 422 of the Code, the foregoing conversion shall be carried
out in a manner satisfying the requirements of Section 424(a) of the Code. In
connection with the issuance of Cardinal Exchange Options, Cardinal shall (i)
reserve for issuance the number of Cardinal Common Shares that will become
subject to Cardinal Exchange Options pursuant to this Section 2.4 and (ii) from
and after the Effective Time, upon exercise of Cardinal Exchange Options, make
available for issuance all Cardinal Common Shares covered thereby, subject to
the terms and conditions applicable thereto.
(b) Xxxx agrees to issue treasury shares of Xxxx, to the extent
available, upon the exercise of Xxxx Options prior to the Effective Time.
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(c) Cardinal agrees to use its reasonable efforts to file with
the Securities and Exchange Commission (the "Commission") within ten business
days after the Closing Date a registration statement on Form S-8 or other
appropriate form under the Securities Act to register Cardinal Common Shares
issuable upon exercise of the Cardinal Exchange Options and use its reasonable
efforts to cause such registration statement to remain effective until the
exercise or expiration of such options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP
In order to induce Xxxx to enter into this Agreement, Cardinal
and Subcorp hereby represent and warrant to Xxxx that the statements contained
in this Article III are true, correct and complete.
3.1 ORGANIZATION AND STANDING. Each of Cardinal and Subcorp is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation with full corporate power and authority to own,
lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Each of Cardinal and Subcorp
is duly qualified to do business and in good standing in each jurisdiction in
which the nature of the business conducted by it or the property it owns,
leases or operates, makes such qualification necessary, except where the
failure to be so qualified or in good standing in such jurisdiction would not
have a Material Adverse Effect (as defined in Section 8.3) on Cardinal. Cardinal
is not in default in the performance, observance or fulfillment of any provision
of its Articles of Incorporation, as amended and restated (the "Cardinal
Articles"), or Code of Regulations, as amended and restated (the "Cardinal Code
of Regulations"), and Subcorp is not in default in the performance, observance
or fulfillment of any provisions of its Articles of Incorporation or Bylaws.
Cardinal has heretofore furnished to Xxxx a complete and correct copy of the
Cardinal Articles and Cardinal Code of Regulations.
3.2 CORPORATE POWER AND AUTHORITY. Each of Cardinal and Subcorp
has all requisite corporate power and authority to enter into and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of each of
Cardinal and Subcorp. This Agreement has been duly executed and delivered by
each of Cardinal and Subcorp, and constitutes the legal, valid and binding
obligation of each of Subcorp and Cardinal enforceable against each of them in
accordance with its terms.
3.3 CAPITALIZATION OF CARDINAL AND SUBCORP.
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(a) As of November 22, 1996, Cardinal's authorized capital stock
consisted solely of (a) 150,000,000 common shares, without par value ("Cardinal
Common Shares"), of which (i) 66,815,619 shares were issued and outstanding,
(ii) 228,631 shares were issued and held in treasury (which does not include the
shares reserved for issuance as set forth in clause (a)(iii) below) and (iii)
4,356,571 shares were reserved for issuance upon the exercise or conversion of
options, warrants or convertible securities granted or issuable by Cardinal, (b)
5,000,000 Class B common shares, without par value, none of which was issued and
outstanding or reserved for issuance, and (c) 500,000 Non-Voting Preferred
Shares, without par value, none of which was issued and outstanding or reserved
for issuance. Each outstanding share of Cardinal capital stock is, and all
Cardinal Common Shares to be issued in connection with the Merger will be, duly
authorized and validly issued, fully paid and nonassessable, and each
outstanding share of Cardinal capital stock has not been, and all Cardinal
Common Shares to be issued in connection with the Merger will not be, issued in
violation of any preemptive or similar rights. As of the date hereof, other than
as set forth in the first sentence hereof or in Section 3.3 to the disclosure
schedule delivered by Cardinal to Xxxx and dated the date hereof (the "Cardinal
Disclosure Schedule"), there are no outstanding subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale, transfer or registration
by Cardinal of any equity securities of Cardinal, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of Cardinal and Cardinal has no obligation of any kind to issue any
additional securities. The Cardinal Common Shares (including those shares to be
issued in the Merger) are registered under the Securities Exchange Act of 1934,
as amended (together with the rules and regulations thereunder, the "Exchange
Act").
(b) Subcorp's authorized capital stock consists solely of 1,000
shares of Common Stock, par value $.01 per share ("Subcorp Common Stock"), of
which, as of the date hereof, 100 were issued and outstanding and none were
reserved for issuance. As of the date hereof, all of the outstanding shares of
Subcorp Common Stock are owned free and clear of any liens, claims or
encumbrances by Cardinal.
3.4 CONFLICTS; CONSENTS AND APPROVAL. Neither the
execution and delivery of this Agreement by Cardinal or Subcorp
nor the consummation of the transactions contemplated hereby
will:
(a) conflict with, or result in a breach of any provision of the
Cardinal Articles or Cardinal Code of Regulations or the Articles of
Incorporation or Bylaws of Subcorp;
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(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the
giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any party (with the giving of notice, the
passage of time or otherwise) to terminate, accelerate, modify or call a
default under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Cardinal or any of its subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust,
license, contract, undertaking, agreement, lease or other instrument or
obligation to which Cardinal or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Cardinal or any of its subsidiaries or their
respective properties or assets; or
(d) require any action or consent or approval of, or review by,
or registration or filing by Cardinal or any of its affiliates with, any
third party or any local, domestic, foreign or multi-national court,
arbitral tribunal, administrative agency or commission or other
governmental or regulatory body, agency, instrumentality or authority (a
"Governmental Authority"), other than (i) authorization for inclusion of
the Cardinal Common Shares to be issued in the Merger and the
transactions contemplated hereby on the NYSE, subject to official notice
of issuance, (ii) actions required by the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), (iii) registrations or other
actions required under federal and state securities laws as are
contemplated by this Agreement, or (iv) consents or approvals of any
Governmental Authority set forth in Section 3.4 to the Cardinal
Disclosure Schedule;
except in the case of (b), (c) and (d) for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect on Cardinal or
upon the ability of the parties to consummate the transactions contemplated
hereby.
3.5 BROKERAGE AND FINDER'S FEES. Except for Cardinal's obligation
to Xxxxxxxxxx Securities ("Xxxxxxxxxx"), neither Cardinal nor any shareholder,
director, officer or em ployee thereof has incurred or will incur on behalf of
Cardinal any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement.
3.6 ACCOUNTING MATTERS; REORGANIZATION. Neither Cardinal nor any
of its affiliates has taken or agreed to take any action that (without giving
effect to any actions taken or agreed to be taken by Xxxx or any of its
affiliates) would (a) prevent Cardinal from accounting for the business
combination to be effected by the Merger as a pooling-of-interests for fi-
10
nancial reporting purposes or (b) prevent the Merger from constituting a
reorganization qualifying under the provisions of Section 368(a) of the Code.
3.7 CARDINAL SEC DOCUMENTS. Cardinal has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1993 under the Exchange Act or
the Securities Act (such documents, as supplemented and amended since the time
of filing, collectively, the "Cardinal SEC Documents"). The Cardinal SEC
Documents, including, without limitation, any financial statements or schedules
included therein, at the time filed (and, in the case of registration statements
and proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The financial statements of Cardinal included in the Cardinal SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements to normal, recurring audit
adjustments) the consolidated financial position of Cardinal and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
3.8 REGISTRATION STATEMENT. None of the information provided by
Cardinal in writing for inclusion in the registration statement on Form S-4
(such registration statement as amended, supplemented or modified, the
"Registration Statement") to be filed with the Commission by Cardinal under the
Securities Act, including the prospectus relating to Cardinal Common Shares to
be issued in the Merger (as amended, supplemented or modified, the "Prospectus")
and the proxy statement and form of proxy relating to the vote of Xxxx
Shareholders with respect to the Merger (as amended, supplemented or modified,
the "Proxy Statement") at the time the Registration Statement becomes effective
or, in the case of the Proxy Statement, at the date of mailing and at the date
of the Xxxx Shareholders Meeting (as hereinafter defined) to consider the
Merger, will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
11
which they are made, not misleading. Each of the Registration Statement and
Proxy Statement, except for such portions thereof that relate only to Xxxx, will
comply as to form in all material respects with the provisions of the Securities
Act and Exchange Act.
3.9 NO MATERIAL ADVERSE CHANGE. Except as set forth in Section
3.9 to the Cardinal Disclosure Schedule, as contemplated by or resulting from
the execution of this Agreement or as disclosed in the Cardinal SEC Documents,
since September 30, 1996, there has been no material adverse change in the
assets, liabilities, results of operations, business or financial condition of
Cardinal taken as a whole or any event, occurrence or development which may
reasonably be expected to have such a change or a material adverse effect on the
ability of Cardinal to consummate the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF XXXX
In order to induce Subcorp and Cardinal to enter into this
Agreement, Xxxx hereby represents and warrants to Cardinal and Subcorp that the
statements contained in this Article IV are true, correct and complete.
4.1 ORGANIZATION AND STANDING. Xxxx is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Xxxx is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the property it owns, leases or operates requires it to so qualify, except
where the failure to be so qualified or in good standing in such jurisdiction
would not have a Material Adverse Effect on Xxxx. Xxxx is not in default in the
performance, observance or fulfillment of any provision of its Articles of
Incorporation, as amended and restated (the "Xxxx Articles"), or its Bylaws, as
in effect on the date hereof (the "Xxxx Bylaws"). Xxxx has heretofore furnished
to Cardinal a complete and correct copy of the Xxxx Articles and the Xxxx
Bylaws. Listed in Section 4.1 to the disclosure schedule delivered by Xxxx to
Cardinal and dated the date hereof (the "Xxxx Disclosure Schedule") is each
jurisdiction in which Xxxx is qualified to do business and in good standing as
of the date of the Agreement.
4.2 SUBSIDIARIES. Xxxx does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the subsidiaries set forth in
Section 4.2 to the Xxxx Disclosure Schedule. Except as set forth in Section 4.2
to the Xxxx Disclosure Schedule, Xxxx is not subject to any obligation or
requirement to provide funds to or make any
12
investment (in the form of a loan, capital contribution or otherwise) in any
such entity. Xxxx owns directly or indirectly each of the outstanding shares of
capital stock (or other ownership interests having by their terms ordinary
voting power to elect a majority of directors or others performing similar
functions with respect to such subsidiary) of each of Xxxx'x subsidiaries. Each
of the outstanding shares of capital stock of each of Xxxx'x subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by Xxxx free and clear of all liens, pledges, security
interests, claims or other encumbrances. The following information for each
subsidiary of Xxxx is set forth in Section 4.2 to the Xxxx Disclosure Schedule,
as applicable: (i) its name and jurisdiction of incorporation or organization;
(ii) its authorized capital stock or share capital; and (iii) the number of
issued and outstanding shares of capital stock or share capital and the record
owner(s) thereof. Other than as set forth in Section 4.2 to the Xxxx Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer of any securities of any
subsidiary of Xxxx, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of any
subsidiary of Xxxx, and no subsidiary of Xxxx has any obligation of any kind to
issue any additional securities or to pay for securities of any subsidiary of
Xxxx or any predecessor thereof.
4.3 CORPORATE POWER AND AUTHORITY. Xxxx has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and, subject to authorization of the Merger
and the transactions contemplated hereby by Xxxx Shareholders, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Xxxx have been duly authorized by all necessary corporate action on
the part of Xxxx, subject to authorization of the Merger and the transactions
contemplated hereby by Xxxx Shareholders. This Agreement has been duly executed
and delivered by Xxxx and constitutes the legal, valid and binding obligation of
Xxxx enforceable against it in accordance with its terms.
4.4 CAPITALIZATION OF XXXX. As of November 27, 1996, Xxxx'x
authorized capital stock consisted solely of (a) 40,000,000 shares of common
stock, without par value ("Xxxx Common Stock"), of which (i) 17,069,094 shares
were issued and outstanding, (ii) 1,776,654 shares were issued and held in
treasury (which does not include the shares reserved for issuance set forth in
clause (iii) below) and (iii) 1,586,213 shares were reserved for issuance upon
the exercise or conversion of outstanding options granted or issued by Xxxx and
(b) 1,000,000 shares of preferred stock, $0.01 par value per share ("Xxxx
Preferred Stock"), none of which was issued and outstanding or reserved for
issuance. Each outstanding share of Xxxx capital stock is duly authorized and
validly issued, fully paid and
13
nonassessable, and has not been issued in violation of any preemptive or similar
rights. Other than as set forth in the first sentence hereof, in Section 4.4 to
the Xxxx Disclosure Schedule or as contemplated by the Xxxx Stock Option
Agreement (as defined in Section 4.26), there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale or transfer of
any securities of Xxxx, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of Xxxx, and
Xxxx has no obligation of any kind to issue any additional securities or to pay
for securities of Xxxx or any predecessor. The issuance and sale of all of the
shares of capital stock described in this Section 4.4 have been in compliance
with federal and state securities laws. The Xxxx Disclosure Schedule accurately
sets forth the names of, and the number of shares of each class (including the
number of shares issuable upon exercise of Xxxx Options and the exercise price
with respect thereto) and the number of options held by, all holders of options
to purchase Xxxx capital stock. Except as set forth in Section 4.4 to the Xxxx
Disclosure Schedule, Xxxx has not agreed to register any securities under the
Securities Act or under any state securities law or granted registration rights
to any person or entity.
4.5 CONFLICTS; CONSENTS AND APPROVALS. Neither the execution and
delivery of this Agreement by Xxxx, nor the consummation of the transactions
contemplated hereby will:
(a) conflict with, or result in a breach of any provision of,
the Xxxx Articles or the Xxxx Bylaws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the
giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any party (with the giving of notice, the
passage of time or otherwise) to terminate, accelerate, modify or call a
default under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of
Xxxx under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which
Xxxx or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Xxxx or any of its subsidiaries or any of their
respective properties or assets; or
(d) require any action or consent or approval of, or review by,
or registration or filing by Xxxx or any of its affiliates with, any
third party or any Governmental Authority, other than (i) authorization
of the Merger and the transactions contemplated hereby by Xxxx
Shareholders, (ii) actions required by the HSR Act, (iii) registrations
14
or other actions required under federal and state securities laws as are
contemplated by this Agreement and (iv) consents or approvals of any
Governmental Authority set forth in Section 4.5 to the Xxxx Disclosure
Schedule;
except in the case of (b) for any of the foregoing that are set forth in Section
4.5 of the Xxxx Disclosure Schedule and in the case of (b), (c) and (d) for any
of the foregoing that would not, individually or in the aggregate, have a
Material Adverse Effect on Xxxx.
4.6 NO MATERIAL ADVERSE CHANGE. Except as set forth in Section
4.6 to the Xxxx Disclosure Schedule as contemplated by or resulting from the
execution of this Agreement or disclosed in the Xxxx SEC Documents (as defined
in Section 4.7 hereof), since August 31, 1996, there has been no material
adverse change in the assets, liabilities, results of operations, business or
financial condition of Xxxx and its subsidiaries taken as a whole or any event,
occurrence or development which may reasonably be expected to have such a change
or a material adverse effect on the ability of Xxxx to consummate the
transactions contemplated hereby.
4.7 XXXX SEC DOCUMENTS. Xxxx has timely filed with the Commission
all forms, reports, schedules, statements and other documents required to be
filed by it since November 30, 1993 under the Exchange Act or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Xxxx SEC Documents"). The Xxxx SEC Documents, including,
without limitation, any financial statements or schedules included therein, at
the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The financial statements of Xxxx included in the Xxxx SEC Documents
at the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements to normal, recurring audit
adjustments) the consolidated financial position of Xxxx and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
15
4.8 TAXES.
(a) Xxxx and its subsidiaries have duly filed all material
federal, state, local and foreign income, franchise, excise, real and personal
property and other Tax Returns and reports (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by Xxxx or its subsidiaries prior to the date hereof. All of the foregoing Tax
Returns and reports are true and correct (except for such inaccuracies which are
individually, or in the aggregate, not material), and Xxxx and its subsidiaries
have within the time and manner prescribed by Applicable Law paid or, prior to
the Effective Time, will pay all Taxes, interest and penalties required to be
paid in respect of the periods covered by such returns or reports or otherwise
due to any federal, state, foreign, local or other taxing authority. Except as
disclosed on Schedule 4.8 to the Xxxx Disclosure Schedule, neither Xxxx nor any
of its subsidiaries have any material liability for any Taxes in excess of the
amounts so paid or reserves so established and neither Xxxx nor any of its
subsidiaries is delinquent in the payment of any material Tax. None of them has
requested or filed any document having the effect of causing any extension of
time within which to file any returns in respect of any fiscal year which have
not since been filed. No deficiencies for any material Tax have been proposed in
writing, asserted or assessed (tentatively or definitely), in each case, by any
taxing authority, against Xxxx or any of its subsidiaries for which there are
not adequate reserves. Except as set forth in Section 4.8 to the Xxxx Disclosure
Schedule, neither Xxxx nor any of its subsidiaries is the subject of any
currently ongoing Tax audit. As of the date of this Agreement, there are no
pending requests for waivers of the time to assess any material Tax, other than
those made in the ordinary course and for which payment has been made or there
are adequate reserves. With respect to any taxable period ended prior to May
1992, all federal income Tax Returns including Xxxx or any of its subsidiaries
have been audited by the Internal Revenue Service or are closed by the
applicable statute of limitations. Neither Xxxx nor any of its subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency. There are no liens with
respect to Taxes upon any of the properties or assets, real or personal,
tangible or intangible of Xxxx or any of its subsidiaries (other than liens for
Taxes not yet due). No claim has ever been made in writing by an authority in a
jurisdiction where none of Xxxx and its subsidiaries files Tax Returns that Xxxx
or any of its subsidiaries is or may be subject to taxation by that
jurisdiction. Xxxx has not filed an election under Section 341(f) of the Code to
be treated as a consenting corporation.
(b) Neither Xxxx nor any of its subsidiaries is obligated by any
contract, agreement or other arrangement to indemnify any other person with
respect to material Taxes. Neither Xxxx nor any of its subsidiaries are now or
have ever been a party to or bound by any agreement or arrangement (whether or
not written and including, without limitation, any arrangement
16
required or permitted by law) binding Xxxx or any of its subsidiaries which (i)
requires Xxxx or any of its subsidiaries to make any Tax payment to or for the
account of any other person, (ii) affords any other person the benefit of any
net operating loss, net capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes) of Xxxx or any of its subsidiaries, or (iii) requires
or permits the transfer or assignment of income, revenues, receipts or gains to
Xxxx or any of its subsidiaries, from any other person.
(c) Xxxx and its subsidiaries have withheld and paid all material
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or other
third party.
(d) "Tax Returns" means returns, reports and forms required to be
filed with any Governmental Authority of the United States or any other
jurisdiction responsible for the imposition or collection of Taxes.
(e) "Taxes" means (i) all Taxes (whether federal, state, local or
foreign) based upon or measured by income and any other Tax whatsoever,
including, without limitation, gross receipts, profits, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, or property Taxes, together with any interest or penalties imposed with
respect thereto and (ii) any obligations under any agreements or arrangements
with respect to any Taxes described in clause (i) above.
4.9 COMPLIANCE WITH LAW.
(a) Except as set forth in Section 4.9 to the Xxxx Disclosure
Schedule, Xxxx is in compliance with all applicable laws, statutes, orders,
rules, regulations, policies or guidelines promulgated, or judgments, decisions
or orders entered by any Governmental Authority (collectively, "Applicable
Laws") relating to Xxxx or its business or properties, including, without
limitation, laws regarding the provision of insurance, third party
administration and primary health care services, the Prescription Drug Marketing
Act, the Federal Controlled Substances Act of 1970, the Food, Drug and Cosmetic
Act, any federal or state pharmacy practice acts, the Good Manufacturing
Practices standards of the Food and Drug Administration, federal Medicare and
Medicaid statutes, including, without limitation, 42 U.S.C. Section 1320a-7b and
42 U.S.C. Section 1395nn or related state or local statutes or regulations,
applicable state laws regulating pharmacy practice, the Occupational Safety and
Health Act and the regulations promulgated thereunder and all rules of
professional conduct applicable to Xxxx or by which any of its properties are
bound or subject, except where the failure to be in compliance with such
Applicable Laws (individually or in the aggregate) could not reasonably be
expected to have a
17
Material Adverse Effect on Xxxx. Except as disclosed in Section 4.9 to the Xxxx
Disclosure Schedule, no investigation or review by any Governmental Authority,
including, without limitation, applicable state insurance and health
commissions, with respect to Xxxx is pending, or, to the knowledge of Xxxx,
threatened, nor has any Governmental Authority, including, without limitation,
applicable state insurance and health commissions, indicated in writing an
intention to conduct the same, other than those the outcome of which could not
reasonably be expected to have a Material Adverse Effect on Xxxx.
4.10 INTELLECTUAL PROPERTY.
(a) As set forth in Section 4.10 to the Xxxx Disclosure Schedule
is a true and complete list of (i) all of Xxxx'x foreign and domestic material
patents, patent applications, invention disclosures, trademarks, service marks,
tradenames (and any registrations or applications for registration for any of
the foregoing trademarks, service marks and tradenames) and all material
copyright applications and registrations and (ii) all agreements to which Xxxx
is a party which concern any of the material Intellectual Property
("Intellectual Property" shall mean all intellectual property or other
proprietary rights of every kind, including, all domestic or foreign patents,
domestic or foreign patent applications, inventions (whether or not patentable),
processes, products, technologies, discoveries, copyrightable and copyrighted
works, apparatus, trade secrets, trademarks and trademark registration and
trademark registration applications, service marks and service xxxx
registrations and service xxxx registration applications, tradenames, trade
dress, copyright registrations, customer lists, marketing and customer
information, mask works rights, know-how, licenses, technical information
(whether confidential or otherwise), software, and all documentation thereof).
Other than the Intellectual Property set forth in Section 4.10 of the Xxxx
Disclosure Schedule, no name, patent, invention, tradesecret, proprietary right,
computer software, trademark, tradename, service xxxx, logo, copyright,
franchise, license, sublicense, or other such right is necessary for the
operation of the business of Xxxx in substantially the same manner as such
business is presently conducted. Except as set forth in Section 4.10 to the Xxxx
Disclosure Schedule (i) Xxxx owns, free and clear of any liens, claims or
encumbrances, the material Intellectual Property listed thereon; (ii) no claim
of invalidity of the patents, trademark registrations, service xxxx
registrations, and copyright registrations included in the Intellectual Property
has been made by a third party; (iii) no claim of infringement of any now
existing domestic or foreign patent, trademark, service xxxx, tradename,
copyright or design right has been made by any third party; (iv) no person or
entity has asserted that, with respect to the material Intellectual Property,
Xxxx or a licensee of Xxxx is infringing or has infringed any domestic or
foreign patent, trademark, service xxxx, tradename, or copyright or design
right, or has misappropriated or improperly used or disclosed any trade secret,
confidential information or know-how; (v) to Xxxx'x knowledge none of the
Intellectual Property, its use or operation infringe any foreign or domestic
patent,
18
trademark, service xxxx, tradename or copyright of any entity or have involved
the misappropriation or improper use or disclosure of any trade secrets,
confidential information or know-how of any entity; (vi) to Xxxx'x knowledge all
fees, annuities, and other payments which are due from Xxxx on or before the
effective date of this Agreement for any of the Intellectual Property have been
paid; (vii) the making, using, selling, manufacturing, marketing, licensing,
reproduction, distribution, or publishing of any process, machine, manufacture,
composition of matter, or material pursuant to any part of the Intellectual
Property, does not and will not infringe any domestic or foreign patent,
trademark, service xxxx, tradename, copyright or other intellectual property
right; (viii) no unexpired foreign or domestic patents or patent applications
exist that are adverse to the material interests of Xxxx; (ix) the Intellectual
Property is not the subject to any pending Action; (x) to Xxxx'x knowledge there
exists no (a) prior act that would void or invalidate any of the Intellectual
Property or (b) conduct or use by Xxxx or any third party that would void or
invalidate any of the Intellectual Property; (xi) the execution, delivery and
performance of this Agreement by Xxxx, and the consummation of the transactions
contemplated thereby, will not breach, violate or conflict with any instrument
or agreement governing or contained within any of the Intellectual Property,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any of the Intellectual Property or in any way
impair the right of Red or Subcorp to use, sell, license or dispose of, or to
bring any action for the infringement of, any Intellectual Property; (xii) there
are no royalties, honoraria, fees or other payments payable to any third party
by reason of the ownership, use, license, sale or disposition of the
Intellectual Property; (xiii) no substantial part of the source or object code,
algorithms or structure included in any of the Intellectual Property is copied
from, based upon or derived from any source or object code, algorithm or
structure included in any computer software product owned by any third party nor
does any substantial similarity of any of such source or object code, algorithms
or structure being copied from, based upon or derived from any computer software
product owned by any third party.
(a) Xxxx has taken reasonable and appropriate steps to safeguard
and maintain the secrecy and confidentiality of all material trade secrets,
copyrights and patents contained in the Intellectual Property (including,
entering into appropriate confidentiality, nondisclosure and noncompetition
agreements with all officers, directors, employees and third-party consultants
of Xxxx).
4.11 TITLE TO AND CONDITION OF PROPERTIES. Xxxx owns or holds
under valid leases all real property, plants, machinery and equipment necessary
for the conduct of the business of Xxxx as presently conducted, except where the
failure to own or hold
19
such property, plants, machinery and equipment would not have a Material Adverse
Effect on Xxxx.
4.12 REGISTRATION STATEMENT; PROXY STATEMENT. None of the
information provided in writing by Xxxx for inclusion in the Registration
Statement at the time it becomes effective or, in the case of the Proxy
Statement, at the date of mailing and at the date of the meeting of the Xxxx
Shareholders to consider the Merger, will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Registration Statement and Proxy
Statement, except for such portions thereof that relate only to Cardinal and its
subsidiaries, will each comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
4.13 LITIGATION. Except as set forth in Section 4.13 to the Xxxx
Disclosure Schedule, there is no suit, claim, action, proceeding or, to the
knowledge of Xxxx, investigation (an "Action") pending or, to the knowledge of
Xxxx (or its executive officers or directors), threatened against Xxxx or any
executive officer or director of Xxxx which, individually or in the aggregate,
if adversely determined, would have a Material Adverse Effect on Xxxx or a
Material Adverse Effect on the ability of Xxxx to consummate the transactions
contemplated hereby. Xxxx is not subject to any outstanding order, writ,
injunction or decree which, individually or in the aggregate, insofar as can be
reasonably foreseen, could have a Material Adverse Effect on Xxxx or a material
adverse effect on the ability of Xxxx to consummate the transactions
contemplated hereby. Except as set forth in Section 4.13 to the Xxxx Disclosure
Schedule, since November 30, 1993, Xxxx has not been subject to any outstanding
order, writ, injunction or decree relating to Xxxx'x method of doing business or
its relationship with past, existing or future customers, lessees, users,
purchasers or licensees of any Intellectual Property, goods or services of Xxxx.
4.14 BROKERAGE AND FINDER'S FEES; EXPENSES. Except for Xxxx'x
obligations to Xxxxx Xxxxxx Inc. ("Xxxxx Xxxxxx") and to Xxxxxxxx Xxxxxx
Refsnes, Inc. ("RPR") (copies of the written agreements relating to such
obligations having previously been provided to Cardinal), neither Xxxx nor any
stockholder, director, officer or employee thereof, has incurred or will incur
on behalf of Xxxx, any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement. Section 4.14 to the Xxxx Disclosure
Schedule discloses the maximum aggregate amount of all fees and expenses which
will be paid or will be payable by Xxxx to all attorneys, accountants and
investment bankers in connection with the Merger ("Merger Fees").
4.15 ACCOUNTING MATTERS; REORGANIZATION. Neither Xxxx nor any of
its affiliates has taken or agreed to take any
20
action that (without giving effect to any actions taken or agreed to be taken by
Cardinal or any of its affiliates) would (a) prevent Cardinal from accounting
for the business combination to be effected by the Merger as a
pooling-of-interests for financial reporting purposes or (b) prevent the Merger
from constituting a reorganization qualifying under the provisions of Section
368(a) of the Code.
4.16 EMPLOYEE BENEFIT PLANS.
(a) For purposes of this Section 4.16, the following terms have
the definitions given below:
"Controlled Group Liability" means any and all liabilities under
(i) Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and
4971 of the Code, (iv) the continuation coverage requirements of section
601 et seq. of ERISA and section 4980B of the Code, and (v)
corresponding or similar provisions of foreign laws or regulations, in
each case other than pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a
group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or
business, or that is a member of the same "controlled group" as the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
"Plans" means all employee benefit plans, programs and other
arrangements providing benefits to any employee or former employee in
respect of services provided to Xxxx or beneficiary or dependent
thereof, and whether covering one person or more than one person,
sponsored or maintained by Xxxx or any of its subsidiaries or to which
Xxxx or any of its subsidiaries contributes or is obligated to
contribute. Without limiting the generality of the foregoing, the term
"Plans" includes all employee welfare benefit plans within the meaning
of Section 3(1) of ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer
Plan, as those terms are defined in Part I of Subtitle E of Title IV of
ERISA.
(b) Section 4.16 to the Xxxx Disclosure Schedule lists all Plans.
With respect to each Plan, Xxxx has made available to Cardinal a true, correct
and complete copy of the following (where applicable): (i) each writing
constituting a part of such Plan, including without limitation all plan
21
documents, benefit schedules, trust agreements, and insurance contracts and
other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series)
and accompanying schedule, if any; (iii) the current summary plan description,
if any; (iv) the most recent annual financial report, if any; and (v) the most
recent determination letter from the Internal Revenue Service, if any.
(c) The Internal Revenue Service has issued a favorable
determination letter with respect to each Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code (a "Qualified
Plan") and to the knowledge of Xxxx there are no existing circumstances nor any
events that have occurred that could adversely affect the qualified status of
any Qualified Plan or the related trust.
(d) All contributions required to be made to any Plan by
Applicable Laws or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any Plan,
for any period through the date hereof have been timely made or paid in full and
through the Closing Date will be timely made or paid in full.
(e) Xxxx and its subsidiaries have complied, and are now in
compliance, in all material respects, with all provisions of ERISA, the Code and
all laws and regulations applicable to the Plans. Each Plan has been operated in
material compliance with its terms. There is not now, and to the knowledge of
Xxxx there are no existing circumstances that could reasonably be expected to
give rise to, any requirement for the posting of security with respect to a Plan
or the imposition of any lien on the assets of Xxxx or any of its subsidiaries
under ERISA or the Code.
(f) No Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code. No Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that
has two or more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple Employer
Plan"), nor has Xxxx or any of its subsidiaries or any of their respective ERISA
Affiliates, at any time within five years before the date hereof, contributed to
or been obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan. With respect to each Multiemployer Plan: (i) Neither Xxxx nor any of its
ERISA Affiliates has incurred any Withdrawal Liability that has not been
satisfied in full; (ii) if Xxxx or any of its ERISA Affiliates were to
experience a withdrawal or partial withdrawal from such plan, no Withdrawal
Liability would be incurred; and (iii) neither Xxxx nor any ERISA Affiliate has
received any notification, nor has any reason to believe, that any such plan is
in reorganization, has been terminated, or may reasonably be expected to be in
reorganization or to be terminated.
(g) There does not now exist, and to the knowledge of Xxxx there
are no existing circumstances that could reasonably
22
be expected to result in any material Controlled Group Liability that would be a
liability of Xxxx or any of its subsidiaries following the Closing. Without
limiting the generality of the foregoing, neither Xxxx nor any of its
subsidiaries nor any of their respective ERISA Affiliates has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(h) Except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA, neither Xxxx nor any of
its subsidiaries has any material liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof.
(i) Except with respect to the acceleration of the non-employee
director options granted under the 1992 Non-Employee Director Stock Option
Plan, neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will result in, cause the accelerated
vesting or delivery of, or increase the amount or value of, any payment or
benefit to any employee, officer, director or consultant of Xxxx or any of its
subsidiaries. Without limiting the generality of the foregoing, no amount paid
or payable by Xxxx or any of its subsidiaries in connection with the
transactions contemplated hereby either solely as a result thereof or as a
result of such transactions in conjunction with any other events will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(j) Except as disclosed in Section 4.16(j) to the Xxxx Disclosure
Schedule, there are no pending or to the knowledge of Xxxx threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans or the assets of
any of the trusts under any of the Plans which could reasonably be expected to
result in any material liability of Xxxx or any of its subsidiaries to the
Pension Benefit Guaranty Corporation, the Department of Treasury, the
Department of Labor or any Multiemployer Plan.
(k) Section 4.16(k) to the Xxxx Disclosure Schedule sets forth
the names of all directors and officers of Xxxx, the total salary, bonus, fringe
benefits and perquisites each will receive in the fiscal year ending November
30, 1996, and any changes to the foregoing which will occur subsequent to
November 30, 1996; Section 4.16(k) to the Xxxx Disclosure Schedule also lists
and describes the current compensation of any other employee of Xxxx whose total
current salary and maximum bonus opportunity exceeds $100,000 annually. Except
as disclosed in Section 4.16(k) to the Xxxx Disclosure Schedule, there are no
other material forms of compensation paid to any such director, officer or
employee of Xxxx. Except as set forth in Section 4.16(k) to the Xxxx Disclosure
Schedule, no officer, director, or employee of Xxxx or any other affiliate of
Xxxx, or any immediate family member of any of the foregoing, provides or
23
causes to be provided to Xxxx any material assets, services or facilities and
Xxxx does not provide or cause to be provided to any such officer, director,
employee or affiliate, or any immediate family member of any of the foregoing,
any material assets, services or facilities.
4.17 CONTRACTS. Section 4.17 to the Xxxx Disclosure Schedule
lists as of the date hereof all written or oral contracts, agreements,
guarantees, leases and executory commitments other than Plans (each a
"Contract") to which Xxxx is a party and which fall within any of the following
categories: (a) Contracts not entered into in the ordinary course of Xxxx'x
business other than those that are not material to the business of Xxxx, (b)
joint venture, partnership and like agreements, (c) Contracts which are service
contracts or equipment leases involving payments by Xxxx of more than $100,000
per year, (d) Contracts containing covenants purporting to limit the freedom of
Xxxx to compete in any line of business in any geographic area or to hire any
individual or group of individuals except for confidentiality agreements
executed in connection with potential business combination or sale of any
business division with such covenants consistent with the Confidentiality
Agreement (as defined in Section 5.2(j), (e) Contracts which after the
Effective Time would have the effect of limiting the freedom of Cardinal or its
subsidiaries (other than Xxxx and its subsidiaries) to compete in any line of
business in any geographic area or to hire any individual or group of
individuals, except for confidentiality agreements executed in connection with
potential business combination or sale of any business division with such
covenants consistent with the Confidentiality Agreement (f) Contracts which
contain minimum purchase conditions (other than such Contracts with
manufacturers of pharmaceutical products) in excess of $100,000 or requirements
or other terms that restrict or limit the purchasing relationships of Xxxx or
its affiliates, or any customer, licensee or lessee thereof, (g) Contracts
relating to any outstanding commitment for capital expenditures in excess of
$300,000, (h) Contracts relating to the lease or sublease of or sale or purchase
of real or personal property involving any annual expense or price in excess of
$250,000 and not cancellable by Xxxx (without premium or penalty) within one
month, (i) Contracts with any labor organization, (j) indentures, mortgages,
promissory notes, loan agreements, guarantees of borrowed money in excess of
$50,000, letters of credit or other agreements or instruments of Xxxx or
commitments for the borrowing or the lending of amounts in excess of $50,000 by
Xxxx or providing for the creation of any charge, security interest, encumbrance
or lien upon any of the assets of Xxxx, (k) Contracts involving annual revenues
or expenditures to the business of Xxxx in excess of 2.5% of Xxxx'x annual
revenues, (l) Contracts providing for "earn-outs" or other contingent payments
by Xxxx involving more than $20,000 over the term of the Contract and (m)
Contracts with or for the benefit of any affiliate of Xxxx or immediate family
member thereof (other than subsidiaries of Xxxx) involving more than $60,000 in
the aggregate per affiliate. All such Contracts are valid and binding
obligations of Xxxx and, to the knowledge of Xxxx, the valid and binding
obligation of each other party
24
thereto except such Contracts which if not so valid and binding would not,
individually or in the aggregate, have a Material Adverse Effect on Xxxx.
Neither Xxxx nor, to the knowledge of Xxxx, any other party thereto is in
violation of or in default in respect of, nor has there occurred an event or
condition which with the passage of time or giving of notice (or both) would
constitute a default under or permit the termination of, any such Contract
except for payment defaults by client hospitals in the ordinary course of
business except such violations or defaults under or terminations which,
individually or in the aggregate, would not have a Material Adverse Effect on
Xxxx.
4.18 LABOR MATTERS. Except as set forth in Section 4.18 to the
Xxxx Disclosure Schedule, neither Xxxx nor any of its subsidiaries has any labor
contracts, collective bargaining agreements or employment or consulting
agreements with any persons employed by Xxxx or any persons otherwise
performing services primarily for Xxxx or any of its subsidiaries (the "Xxxx
Business Personnel"). There is no labor strike, dispute or stoppage pending or,
to the knowledge of Xxxx, threatened against Xxxx or any of its subsidiaries,
and neither Xxxx nor any of its subsidiaries has experienced any labor strike,
dispute or stoppage or other material labor difficulty involving its employees
since November 30, 1993.
4.19 OPERATION OF XXXX'X BUSINESS; RELATIONSHIPS.
(a) Since August 31, 1996 through the date of this Agreement,
neither Xxxx nor its subsidiaries has engaged in any transaction which, if done
after execution of this Agreement, would violate Section 5.3(c) hereof except as
set forth in Section 4.20 to the Xxxx Disclosure Schedule.
(b) The relationships of Xxxx with its customers and suppliers
are satisfactory as of the date of this Agreement.
(c) No product produced by Xxxx or produced for Xxxx by a third
party and bearing an Xxxx trademark or other Proprietary Right of Xxxx has been
recalled voluntarily or involuntarily since November 30, 1995, no such recall
is being considered by Xxxx, and, to the knowledge of Xxxx, no such recall is
being considered by or has been requested or ordered by any Governmental
Authority.
4.20 PERMITS; COMPLIANCE. Xxxx is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Xxxx Permits"), and there is no Action pending
or, to the knowledge of Xxxx, threatened regarding any of the Xxxx Permits. Xxxx
is not in conflict with, or in default or violation of any of the Xxxx Permits,
except for any such conflicts, defaults or violations which, individually or in
25
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Xxxx.
4.21 PRODUCT WARRANTIES AND LIABILITIES. Except as listed in
Section 4.21 to the Xxxx Disclosure Schedule, Xxxx has no forms of warranties or
guarantees of its products and services that are in effect or proposed to be
used by it.
4.22 ENVIRONMENTAL MATTERS. Except for matters disclosed in
Schedule 4.22 of the Xxxx Disclosure Schedule, (a) the properties, operations
and activities of Xxxx and its subsidiaries are in compliance in all material
respects with all applicable Environmental Laws (as defined below); (b) Xxxx and
its subsidiaries and the properties and operations of Xxxx and its subsidiaries
are not subject to any existing, pending or, to the knowledge of Xxxx,
threatened action, suit, investigation, inquiry or proceeding by or before any
court or governmental authority under any Environmental Law; (c) there has been
no material release of any hazardous substance, pollutant or contaminant into
the environment by Xxxx or its subsidiaries or in connection with their
properties or operations; (d) there has been no material exposure of any person
or property to any hazardous substance, pollutant or contaminant in connection
with the properties, operations and activities of Xxxx and its subsidiaries; and
(e) Xxxx and its subsidiaries or their counsel have made available to the
Purchaser all internal and external audits (in each case relevant to Xxxx or any
of its subsidiaries) in the possession of Xxxx or its subsidiaries or their
counsel. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
4.23 OPINION OF FINANCIAL ADVISORS. Xxxx has received the
opinion of each of Xxxxx Xxxxxx and RPR, its financial advisors, to the effect
that, as of the date of this Agreement, the Exchange Ratio is fair to the Xxxx
Shareholders from a financial point of view, Xxxx has heretofore provided copies
of such opinions to Cardinal and neither of such opinions have been withdrawn or
revoked or modified in any material respect.
4.24 BOARD RECOMMENDATION. The Board of Directors of Xxxx, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted 100% of the
26
directors then in office) (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, and the Xxxx Stock
Option Agreement and the transactions contemplated thereby, taken together, are
fair to and in the best interests of the Xxxx Shareholders, and (ii) resolved to
recommend that the holders of the shares of Xxxx Common Stock approve this
Agreement and the transactions contemplated herein, including the Merger (the
"Xxxx Board Recommendation").
4.25 STATE TAKEOVER LAWS. No state takeover law or other state
law (including, without limitation, under the TBCA) that purports to limit or
restrict business combinations or the ability to acquire or vote shares nor the
provisions of Article 10 of the Xxxx Articles are applicable to: (i) the
execution of this Agreement, the Stock Option Agreement dated November 27, 1996
between Cardinal and Xxxx (the "Xxxx Stock Option Agreement") and the
Support/Voting Agreements dated as of November 27, 1996 between Cardinal and
certain Xxxx Shareholders (collectively, the "Support Agreements"), (ii) the
Merger and (iii) the transactions contemplated hereby and by the Xxxx Stock
Option Agreement and the Support Agreements.
4.26 LEASE ARRANGEMENTS.
(a) Except as set forth in Section 4.26 to the Xxxx Disclosure
Schedule, there are no lessees ("Master Lessees") who have been granted the
right to use, purchase, lease or license Intellectual Property, goods or
services from Xxxx and to provide, resell, sublease or relicense same to other
authorized lessees or third parties. The identity of each Master Lessee and a
description of all lessees and third parties to whom such Master Lessee is
entitled to provide, resell, sublease or relicense Intellectual Property, goods
and services of Xxxx are set forth in Section 4.26 to the Xxxx Disclosure
Schedule. There are no material agreements between Xxxx and any Master Lessee
other than those in writing that are set forth in Section 4.26 to the Xxxx
Disclosure Schedule.
(b) The relationships of Xxxx with its lessees and licensees are
satisfactory as of the date of this Agreement.
(c) Xxxx is not a party to any vendor financing arrangement
which (i) requires Xxxx to use such financing for any particular transaction, or
(ii) cannot be terminated (without premium or penalty) upon less than one
month's notice. Any Meditrol unit that is subject to any vendor financing
arrangement shall, upon expiration of the term of such financing arrangement
(assuming all Xxxx'x obligations thereunder have been met), be owned by Xxxx
free and clear of any liens, security interests, encumbrances and restrictions
of any kind.
27
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period
from and after the execution of this Agreement.
5.1 MUTUAL COVENANTS.
(a) GENERAL. Each of the parties shall use its reasonable
efforts to take all action and to do all things necessary, proper or advisable
to consummate the Merger and the transactions contemplated by this Agreement
(including, without limitation, using its reasonable efforts to cause the
conditions set forth in Article VI for which they are responsible to be
satisfied as soon as reasonably practicable and to prepare, execute and deliver
such further instruments and take or cause to be taken such other and further
action as any other party hereto shall reasonably request).
(b) HSR ACT. As soon as practicable, and in any event no later
than fifteen business days after the date hereof, each of the parties hereto
will file any Notification and Report Forms and related material required to be
filed by it with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the HSR Act with respect to the
Merger, will use its reasonable efforts to obtain an early termination of the
applicable waiting period, and shall promptly make any further filings pursuant
thereto that may be necessary, proper or advisable. Cardinal and Xxxx agree to
cooperate with respect to, and shall cause each of their respective subsidiaries
to cooperate with respect to, and agree to use all reasonable efforts to contest
and resist, any Action, including legislative, administrative or judicial
Action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Order") of any Governmental Authority that is in effect and
that restricts, prevents or prohibits the consummation of the Merger or any
other transactions contemplated by this Agreement, including, without
limitation, by pursuing all available avenues of administrative and judicial
appeal and all available legislative action. Upon the terms and subject to the
conditions set forth in this Agreement, in connection with the HSR Act, each of
Xxxx and Cardinal agrees 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 to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
Governmental Authorities and the making of all necessary registrations and
filings (including filings with Governmental Authorities, if any) and the taking
of all reasonable steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Authority;
PROVIDED, HOWEVER, that a party shall not be obligated to take any action
pursuant to the foregoing if the taking of such action or the obtaining
28
of any waiver, consent, approval or exemption is reasonably likely (x) to impact
in a materially adverse manner the economic or business benefits of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Merger or (y) to result in an Order (i) prohibiting or
limiting the ownership or operation by Cardinal of any material portion of the
business or assets of Xxxx or compelling Cardinal to dispose of or hold separate
any of the business or assets of Cardinal or any material portion of the
business or assets of Xxxx as a result of the Merger or any of the other
transactions contemplated by this Agreement, (ii) imposing limitations on the
ability of Cardinal to acquire or hold, or exercise full rights of ownership of,
any shares of capital stock of Xxxx, including, without limitation, the right to
vote such capital stock on all matters properly presented to the Xxxx
Shareholders, or (iii) prohibiting Cardinal from effectively controlling in any
material respect the business or operations of Xxxx.
(c) OTHER GOVERNMENTAL MATTERS. Each of the parties shall use its
reasonable efforts to take any additional action that may be necessary, proper
or advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of any Governmental Authority that it may
be required to give, make or obtain.
(d) POOLING-OF-INTERESTS. Each of the parties shall use its best
efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment for financial reporting purposes, including without limitation,
appropriate representation letters to Cardinal's accountants.
(e) TAX-FREE TREATMENT. Each of the parties shall
use its best efforts to cause the Merger to constitute a tax-
free "reorganization" under Section 368(a) of the Code and to
permit Xxxxxx & Xxxxxx L.L.P. and Wachtell, Lipton, Xxxxx & Xxxx
to issue their opinions provided herein.
(f) PUBLIC ANNOUNCEMENTS. Unless otherwise required by Applicable
Laws or requirements of the NYSE (and in that event only if time does not
permit), at all times prior to the earlier of the Effective Time or termination
of this Agreement pursuant to Section 7.1, Cardinal and Xxxx shall consult with
each other before issuing any press release with respect to the Merger and shall
not issue any such press release prior to such consultation.
5.2 COVENANTS OF CARDINAL.
(a) PREPARATION OF REGISTRATION STATEMENT. Cardinal shall, as
soon as is reasonably practicable, prepare the Proxy Statement for filing by
Xxxx with the Commission on a confidential basis. Cardinal shall prepare and
file the Registration Statement with the Commission as soon as is reasonably
practicable following clearance of the Proxy Statement by the Commission and
shall use all reasonable efforts to have the Xxxxxxxx-
00
tion Statement declared effective by the Commission as promptly as practicable
and to maintain the effectiveness of the Registration Statement through the
Effective Time. If, at any time prior to the Effective Time, Cardinal shall
obtain knowledge of any information pertaining to Cardinal contained in or
omitted from the Registration Statement that would require an amendment or
supplement to the Registration Statement or the Proxy Statement, Cardinal will
so advise Xxxx in writing and will promptly take such action as shall be
required to amend or supplement the Registration Statement. Cardinal shall
promptly furnish to Xxxx all information concerning it as may be required for
supplementing the Proxy Statement. Cardinal shall cooperate with Xxxx in the
preparation of the Proxy Statement in a timely fashion and shall use all
reasonable efforts to assist Xxxx in clearing the Proxy Statement with the Staff
of the Commission. Cardinal also shall take such other reasonable actions (other
than qualifying to do business in any jurisdiction in which it is not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Cardinal Common Shares in the Merger.
(b) INDEMNIFICATION. From and after the Effective Time, Cardinal
shall cause (including, providing adequate funding), the Surviving Corporation
to indemnify and hold harmless the present and former officers and directors of
Xxxx in respect of acts or omissions occurring prior to the Effective Time to
the extent provided under the Xxxx Certificate of Incorporation, as amended and
restated, and Bylaws in effect on the date hereof.
(c) INSURANCE. From and after this Effective Time Cardinal shall
maintain the current policies of directors' and officers' liability insurance
through the remainder of its term which ends in June 1997.
(d) EMPLOYEE BENEFITS. Cardinal covenants and agrees that, for a
period of one year from and after the Effective Time, it will cause the
Surviving Corporation to provide for the benefit of employees of the Surviving
Corporation benefits that are no less favorable, in the aggregate, than those
provided to employees of Xxxx immediately prior to the date of this Agreement.
In the event Cardinal satisfies its obligations under this Section 5.2(c) by
adding employees of Xxxx to Cardinal's medical plan (the "Cardinal Medical
Plan"), then eligibility of such employees for medical benefits under the
Cardinal Medical Plan will not be subject to standard exclusions for
pre-existing conditions.
(e) NOTIFICATION OF CERTAIN MATTERS. Cardinal shall give prompt
notice to Xxxx of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any Cardinal or Subcorp
representation or warranty contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time in any material respect and (ii)
any material failure of Cardinal to comply with or
30
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 5.2(d) shall not limit or otherwise affect the remedies available
hereunder to Xxxx.
(f) POOLING PRESS RELEASE. Cardinal shall use its best efforts to
prepare and publicly release as soon as practicable (but in any event within
fifteen days) following the end of the first full calendar month completed after
the Effective Time, a report in the form of a quarterly earnings report,
registration statement filed with the Commission, a report filed with the
Commission on Form 10-K, 10-Q or 8-K or any other pub lic filing, statement or
announcement which includes the combined financial results (including combined
sales and net income) of Cardinal and Xxxx for a period of at least 30 days of
combined operations of Cardinal and Xxxx following the Effective Time.
(g) MERGER SUB. Prior to the Effective Time, Subcorp shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a de
minimis amount of cash paid to Subcorp for the issuance of its stock to
Cardinal) or any material liabilities.
(h) NYSE LISTING. Cardinal shall use its reasonable efforts to
cause the Cardinal Common Shares issuable pursuant to the Merger to be approved
for listing on the NYSE, subject to official notice of issuance, prior to the
Effective Time.
(i) AFFILIATES OF CARDINAL. Cardinal shall cause each such person
who may be at the Effective Time or was on the date hereof an "affiliate" of
Cardinal for purposes of Rule 145 under the Securities Act, to execute and
deliver to Cardinal no less than 30 days prior to the date of the Xxxx
Shareholders Meeting, the written undertakings in the form attached hereto as
Exhibit A-2.
(j) ACCESS. Cardinal shall permit representatives of Xxxx to have
appropriate access at all reasonable times to Cardinal's premises, properties,
books, records, contracts, tax records, documents, customers and suppliers.
Information obtained by Xxxx pursuant to this Section 5.2(i) shall be subject
to the provisions of the confidentiality agreement between Cardinal and Xxxx
dated November 12, 1996 (the "Confidentiality Agreement"), which agreement
remains in full force and effect.
5.3 COVENANTS OF XXXX.
(a) XXXX SHAREHOLDERS MEETING. Xxxx shall take all action in
accordance with the federal securities laws, the TBCA and the Xxxx Articles and
the Xxxx Bylaws necessary to convene a special meeting of Xxxx Shareholders to
be held on the earliest practicable date (the "Xxxx Shareholders Meeting") to
31
consider and vote upon approval of the Merger, this Agreement and the
transactions contemplated hereby.
(b) INFORMATION FOR THE REGISTRATION STATEMENT AND PREPARATION OF
PROXY STATEMENT. Xxxx shall promptly furnish Cardinal with all information
concerning it as may be required for inclusion in the Registration Statement.
Xxxx shall cooperate with Cardinal in the preparation of the Registration
Statement in a timely fashion and shall use all reasonable efforts to assist
Cardinal in having the Registration Statement declared effective by the
Commission as promptly as practicable. If, at any time prior to the Effective
Time, Xxxx obtains knowledge of any information pertaining to Xxxx that would
require any amendment or supplement to the Registration Statement or the Proxy
Statement, Xxxx shall so advise Cardinal and shall promptly furnish Cardinal
with all information as shall be required for such amendment or supplement and
shall promptly supplement the Proxy Statement. Xxxx shall use all reasonable
efforts to cooperate with Cardinal in the preparation and filing of the Proxy
Statement with the Commission on a confidential basis. Xxxx shall use all
reasonable efforts to mail at the earliest practicable date to Xxxx Shareholders
the Proxy Statement, which shall include all information required under
Applicable Law to be furnished to Xxxx Shareholders in connection with the
Merger and the transactions contemplated thereby and shall include the Xxxx
Board Recommendation to the extent not previously withdrawn in compliance with
Section 5.3(e).
(c) CONDUCT OF XXXX'X OPERATIONS. Xxxx shall conduct its
operations in the ordinary course except as expressly contemplated by this
Agreement and the transactions contemplated hereby and shall use its reasonable
best efforts to maintain and preserve its business organization and its material
rights and franchises and to retain the services of its officers and key
employees and maintain relationships with customers, suppliers, lessees,
licensees and other third parties, and to maintain all of its operating assets
in their current condition (normal wear and tear excepted), to the end that
their goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, Xxxx shall not, except as
otherwise expressly contemplated by this Agreement and the transactions
contemplated hereby or as set forth in Section 5.3(c) to the Xxxx Disclosure
Schedule, without the prior written consent of Cardinal:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, (C) grant any person
any right or option to acquire any shares of its capital stock, (D)
issue, deliver or sell or agree to issue, deliver or sell any additional
shares of
32
its capital stock or any securities or obligations convertible into or
exchangeable or exercisable for any shares of its capital stock or such
securities (except pursuant to the exercise of Xxxx Options which are
outstanding as of the date hereof), or (E) enter into any agreement,
understanding or arrangement with respect to the sale or voting of its
capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property or assets
other than in the ordinary course of business;
(iii) make or propose any changes in the Xxxx Articles
or the Xxxx Bylaws;
(iv) merge or consolidate with any other person or acquire a
material amount of assets or capital stock of any other person (other
than as permitted, in each case, by Section 5.3(e));
(v) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for the
obligations of any other individual, corporation or other entity, other
than in the ordinary course of business, consistent with past practice
not in excess of $8 million in the aggregate;
(vi) create any subsidiaries;
(vii) enter into or modify any employment, severance, termination
or similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee other than in the ordinary course of business
consistent with past practice, or otherwise increase the compensation or
benefits provided to any officer, director, consultant or employee
except as may be required by Applicable Law or in the ordinary course of
business consistent with past practice;
(viii) enter into, adopt or amend any employee benefit
or similar plan except as may be required by Applicable
Law;
(ix) change any method or principle of accounting in a manner that
is inconsistent with past practice except to the extent required by
generally accepted accounting principles;
(x) settle any Actions, whether now pending or hereafter made or
brought involving, individually or in the aggregate, an amount in excess
of $500,000;
33
(xi) write up, write down or write off the book value of any
assets, individually or in the aggregate, in excess of $250,000 except
for depreciation and amortization in accordance with generally accepted
accounting principles consistently applied;
(xii) incur or commit to any capital expenditures, obligations or
liabilities in respect thereof which in the aggregate exceed or would
exceed $3 million;
(xiii) pay (or agree to become obligated to pay) any Merger Fees in
excess of the amount set forth in Section 4.14 to the Xxxx Disclosure
Schedule;
(xiv) take any action to exempt or make not subject to the
provisions of Article 10 of the Xxxx Articles any per son or entity
(other than Cardinal or its subsidiaries) or any action taken thereby,
which person, entity or action would have otherwise been subject to such
restrictive provisions and not exempt therefrom;
(xv) take any action that could likely result in the
representations and warranties set forth in Article IV becoming false or
inaccurate in any material respect;
(xvi) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing; or
(xvii) agree in writing or otherwise to take any of the
foregoing actions.
(d) INTELLECTUAL PROPERTY MATTERS. Xxxx shall use
its reasonable efforts consistent with its past practices to
preserve its ownership rights to the Intellectual Property free
and clear of any liens, claims or encumbrances.
(e) NO SOLICITATION. Xxxx agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate,
encourage or fa cilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
Xxxx, or acquisition of any capital stock (other than upon exercise of Xxxx
Options which are outstanding as of the date hereof) or any material portion of
the assets (except for acquisition of assets in the ordinary course of business
consistent with past practice) of Xxxx, or any combination of the foregoing (a
"Competing Transaction"), or negotiate, explore or otherwise engage in
discussions with any person (other than Cardinal, Subcorp or their respective
directors, officers, employees, agents and representatives) with respect to any
Competing Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by this Agreement; PROVIDED that, at any time prior
34
to the approval of the Merger by the Xxxx Shareholders, Xxxx may furnish
information to, and negotiate or otherwise engage in discussions with, any party
who delivers a written proposal for a Competing Transaction which was not
solicited or encouraged after the date of this Agreement if and so long as the
Board of Directors of Xxxx determines in good faith by a majority vote, based
upon consultation and advice from its outside legal counsel that failing to take
such action is reasonably likely to constitute a breach of the fiduciary duties
of the Board of Directors of Xxxx under Applicable Law and determines that such
a proposal is, after consulting with Xxxxx Xxxxxx or RPR (or any other
nationally recognized investment banking firm), more favorable to Xxxx'x
Stockholders from a financial point of view than the transactions contemplated
by this Agreement (including any adjustment to the terms and conditions proposed
by Cardinal in response to such Competing Transaction). Xxxx will immediately
cease all existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any proposal for a Competing Transaction.
In the event that prior to the approval of the Merger by the Xxxx Shareholders
the Board of Directors of Xxxx receives advice of outside legal counsel that
failure to do so is reasonably like to result in breach of the fiduciary duties
of the Xxxx Board of Directors under Applicable Law, the Board of Directors of
Xxxx may (subject to this and the following sentences) withdraw or modify the
Xxxx Board Recommendation and/or comply with Rule 14e-2 promulgated under the
Exchange Act with respect to a Competing Transaction, provided that it gives
Cardinal two business days prior written notice of its intention to do so
(provided that the foregoing shall no way limit or otherwise affect Cardinal's
right to terminate this Agreement pursuant to Section 7.1(d)). Any such
withdrawal or modification of the Xxxx Board Recommendation shall not change the
approval of the Board of Directors of Xxxx for purposes of causing either the
provisions of Article 10 of the Xxxx Articles or any state takeover statute or
other state law to be inapplicable to the transactions contemplated hereby,
including the Merger, the Xxxx Stock Option Agreement or the Support Agreements
or change the obligation of Xxxx to present the Merger for approval at a duly
called Xxxx Shareholders Meeting on the earliest practicable date. From and
after the execution of this Agreement, Xxxx shall immediately advise Cardinal in
writing of the receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Competing Transaction (including the
specific terms thereof and the identity of the other party or parties involved)
and promptly furnish to Cardinal a copy of any such written proposal in addition
to any information provided to or by any third party relating thereto.
(f) TERMINATION RIGHT. If prior to the approval of the Merger by
the Xxxx Shareholders the Board of Directors of Xxxx shall determine in good
faith, after consultation with its financial and legal advisors, that any
written proposal from a third party for a Competing Transaction received after
the date hereof that was not solicited or encouraged by Xxxx or any of its
35
subsidiaries or affiliates in violation of this Agreement is more favorable to
the Xxxx Shareholders from a financial point of view than the transactions
contemplated by this Agreement (including any adjustment to the terms and
conditions of such transaction proposed in writing by Cardinal in response to
such Competing Transaction) and is in the best interest of the Xxxx Shareholders
and Xxxx has received (x) advice of its outside legal counsel that failure to
enter into such a Competing Transaction is reasonably likely to constitute a
breach of the Board of Directors' fiduciary duties under Applicable Law and (y)
a written opinion (a copy of which has been delivered to Cardinal) from Xxxxx
Xxxxxx or RPR that the Competing Transaction is more favorable from a financial
point of view to the Xxxx Shareholders than the transactions contemplated by
this Agreement (including any adjustment to the terms and conditions of such
transaction proposed in writing by Cardinal), Xxxx may terminate this Agreement
and enter into a letter of intent, agreement-in-principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") with respect to
such Competing Transaction provided that, prior to any such termination, (i)
Xxxx has provided Cardinal written notice that it intends to terminate this
Agreement pursuant to this Section 5.3(f), identifying the Competing Transaction
then determined to be more favorable and the parties thereto and delivering a
copy of the Acquisition Agreement for such Competing Transaction in the form to
be entered into, and (ii) at least two full business days after Xxxx has
provided the notice referred to in clause (i) above (provided that the opinions
referred to in clauses (x) and (y) above shall continue in effect without
revision or modification), Xxxx delivers to Cardinal (A) a written notice of
termination of this Agreement pursuant to this Section 5.3(f), (B) a check in
the amount of Cardinal's Costs (as defined in Section 7.2) as the same may have
been estimated by Cardinal in good faith prior to the date of such delivery
(subject to an adjustment payment between the parties upon Cardinal's definitive
determination of such Costs), plus the amount of the termination fee as
provided in Section 7.2, (C) a written acknowledgment from Xxxx that (x) the
termination of this Agreement and the entry into the Acquisition Agreement for
the Competing Transaction will be a "Purchase Event" as defined in the Xxxx
Stock Option Agreement and (y) the Xxxx Stock Option Agreement shall be honored
in accordance with its terms and (D) a written acknowledgment from each other
party to such Competing Transaction that it is aware of the substance of Xxxx'x
acknowledgment under clause (C) above and waives any right it may have to
contest the matters thus acknowledged by Xxxx.
(g) AFFILIATES OF XXXX. Xxxx shall cause each such person who may
be at the Effective Time or was on the date hereof an "affiliate" of Xxxx for
purposes of Rule 145 under the Securities Act, to execute and deliver to
Cardinal no less than 30 days prior to the date of the Xxxx Shareholders
Meeting, the written undertakings in the form attached hereto as Exhibit A-1. On
or prior to such date, Xxxx, after consultation with its outside counsel, shall
provide Cardinal with a letter (reasonably satisfactory to counsel to Cardinal)
specifying all
36
of the persons or entities who, in Xxxx'x view, may be deemed to be "affiliates"
of Xxxx under the preceding sentence.
(h) ACCESS. Xxxx shall permit representatives of Cardinal to have
appropriate access at all reasonable times to Xxxx'x premises, properties,
books, records, contracts, tax records, documents, customers and suppliers.
Proprietary information obtained by Cardinal pursuant to this Section 5.3(h)
shall be subject to the provisions of the Confidentiality Agreement, which
agreement remains in full force and effect.
(i) NOTIFICATION OF CERTAIN MATTERS. Xxxx shall give prompt
notice to Cardinal of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any Xxxx representation or
warranty contained in this Agreement to be untrue or inaccurate at or prior to
the Effective Time in any material respect and (ii) any material failure of Xxxx
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 5.3(h) shall not limit or otherwise affect the
remedies available hereunder to Cardinal.
(j) SUBSEQUENT FINANCIAL STATEMENTS. Xxxx shall
consult with Cardinal prior to making publicly available its
financial results for any period.
ARTICLE VI
CONDITIONS
6.1 MUTUAL CONDITIONS. The obligations of the parties hereto
to consummate the Merger shall be subject to fulfillment of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of
the Merger shall have been issued and remain in effect, and no statute,
rule or regulation shall have been enacted by any Governmental Authority
which prevents the consummation of the Merger.
(b) All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) The Merger and the transactions contemplated hereby shall
have been approved by the Xxxx Shareholders in the manner required by
any Applicable Law.
(d) The Commission shall have declared the Cardinal Registration
Statement effective. On the Closing Date and at the Effective Time, no
stop order or similar restraining order shall have been entered by the
Commission or
37
proceeding for that purpose initiated or any state securities
administrator prohibiting the Merger.
(e) No Action shall be instituted by any Governmental Authority
which seeks to prevent consummation of the Merger or seeking material
damages in connection with the transactions contemplated hereby which
continues to be outstanding.
(f) Cardinal shall have received a letter, in form and substance
reasonably satisfactory to Cardinal, from Deloitte & Touche L.L.P. dated
the date of the Proxy Statement and confirmed in writing at the
Effective Time stating that the Merger will qualify as a pooling of
interests transaction under Opinion 16 of the Accounting Principles
Board.
6.2 CONDITIONS TO OBLIGATIONS OF XXXX. The obligations of Xxxx
to consummate the Merger and the transactions contemplated hereby shall be
subject to the fulfillment of the following conditions unless waived by Xxxx:
(a) The representations and warranties of each of Cardinal and
Subcorp set forth in Article III shall be true and correct on the date
hereof and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a
specified date, which need be true and correct only as of the specified
date), except for such inaccuracies which have not had and could not
reasonably be expected to have in the reasonably foreseeable future a
Material Adverse Effect on Cardinal.
(b) Each of Cardinal and Subcorp shall have performed in all
material respects each obligation and agreement and shall have complied
in all material respects with each covenant to be performed and complied
with by it hereunder at or prior to the Effective Time.
(c) Each of Cardinal and Subcorp shall have furnished Xxxx with a
certificate dated the Closing Date signed on behalf of it by the
Chairman, President or any Vice President to the effect that the
conditions set forth in Sections 6.2(a) and (b) have been satisfied.
(d) Xxxx shall have received the legal opinions, dated the
Closing Date, of Wachtell, Lipton, Xxxxx & Xxxx in substantially the
form attached hereto as Exhibit B.
(e) The Cardinal Common Shares to be issued in the Merger and the
transactions contemplated hereby shall have been authorized for
inclusion on the NYSE, subject to official notice of issuance.
(f) Xxxx shall have received the opinion of Xxxxxx & Xxxxxx LLP,
dated on or prior to the effective date of the Registration Statement,
to the effect that (i) the Merger
38
will constitute a reorganization under section 368(a) of the Code, (ii)
Xxxx, Cardinal and Subcorp will each be a party to that reorganization,
and (iii) no gain or loss will be recognized by the shareholders of Xxxx
upon the receipt of Cardinal Common Shares in exchange for shares of
Xxxx Common Stock pursuant to the Merger except with respect to cash
received in lieu of fractional share interests in Cardinal Common
Shares.
6.3 CONDITIONS TO OBLIGATIONS OF CARDINAL AND SUBCORP. The
obligations of Cardinal to consummate the Merger and the other transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by Cardinal:
(a) The representations and warranties of Xxxx set forth in
Article IV shall be true and correct on the date hereof and on and as of
the Closing Date as though made on and as of the Closing Date (except
for representations and warranties made as of a specified date, which
need be true and correct only as of the specified date), except for such
inaccuracies which have not had and could not reasonably be expected to
have in the reasonably foreseeable future a Material Adverse Effect on
Xxxx.
(b) Xxxx shall have performed in all material respects each
obligation and agreement and shall have complied in all material
respects with each covenant to be performed and complied with by it
hereunder at or prior to the Effective Time.
(c) Xxxx shall have furnished Cardinal with a certificate dated
the Closing Date signed on its behalf by its Chairman, President or any
Vice President to the effect that the conditions set forth in Sections
6.3(a) and (b) have been satisfied.
(d) Cardinal shall have received the legal opinion, dated the
Closing Date, of Xxxxxx & Xxxxxx, substantially in the form attached
hereto as Exhibit C.
(e) Cardinal shall have received the opinion of Wachtell, Lipton,
Xxxxx & Xxxx, dated on or prior to the effective date of the
Registration Statement, to the effect that (i) the Merger will
constitute a reorganization under section 368(a) of the Code, (ii)
Cardinal, Subcorp and Xxxx will each be a party to that reorganization,
and (iii) no gain or loss will be recognized by Cardinal, Subcorp or
Xxxx by reason of the Merger.
(f) There shall not have been a breach of the Xxxx
Stock Option Agreement.
ARTICLE VII
39
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval and adoption of
this Agreement by Xxxx Shareholders:
(a) by mutual consent of Cardinal and Xxxx;
(b) by either Cardinal or Xxxx if any permanent injunction or
other order of a court or other competent Governmental Authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(c) by either Cardinal or Xxxx if the Merger shall not have been
consummated before May 31, 1997, unless extended by the Boards of
Directors of both Cardinal and Xxxx (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure to perform any material covenant or
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date);
(d) by Cardinal if the Board of Directors of Xxxx shall withdraw,
modify or change the Xxxx Board Recommendation in a manner adverse to
Cardinal, or if the Board of Directors of Xxxx shall have refused to
affirm the Xxxx Board Recommendation within two business days of any
written request from Cardinal;
(e) by Cardinal or Xxxx if at the Xxxx Shareholders Meeting
(including any adjournment or postponement thereof) the requisite vote
of the Xxxx Shareholders to approve the Merger and the transactions
contemplated hereby shall not have been obtained;
(f) by Xxxx, pursuant to Section 5.3(f);
(g) by Xxxx, no earlier than the fifth trading day or later than
the third full trading day immediately preceding the date of the Xxxx
Stockholders Meeting at which the vote to approve the Merger will be
taken, if the Average Share Price is less than $69.20, provided that
Xxxx will have no right to terminate pursuant to this paragraph (g)
unless (x) Xxxx shall have given, during the three trading day period
referred to above, one full trading day's prior written notice of its
intention to terminate pursuant to this Section 7.1(g) and (y) Cardinal
during such one full trading day notice period shall not have given
written notice (an "Adjustment Election") to Xxxx that the Exchange
Ratio shall be calculated pursuant to clause (b) of Section 2.2;
(h) by Cardinal if Xxxx shall have breached any of its
obligations under the Xxxx Stock Option Agreement or if Xxxx X. Xxxx
shall have breached any of her obligations under the Support Agreement
with Cardinal;
40
7.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of the last sentence of each of Section 5.2(j) and Section 5.3(h) and
the provisions of Sections 7.2 and 8.11, shall become void and have no effect,
without any liability on the part of any party or its directors, officers or
stockholders. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for a material breach of any
provision of this Agreement and provided, further, however, that if it shall be
judicially determined that termination of this Agreement was caused by an
intentional breach of this Agreement, then, in addition to other remedies at law
or equity for breach of this Agreement, the party so found to have intentionally
breached this Agreement shall indemnify and hold harmless the other parties for
their respective out-of-pocket costs, fees and expenses of their counsel,
accountants, financial advisors and other experts and advisors as well as fees
and expenses incident to negotiation, preparation and execution of this
Agreement and related documentation and shareholders' meetings and consents
("Costs"). If this Agreement is terminated for any reason pursuant to Section
7.1 (other than a termination pursuant to Section 7.1(a) (prior to the public
announcement of a Competing Transaction), 7.1(b), 7.1(c) (other than a
termination by Cardinal pursuant to Section 7.1(c) if Xxxx'x failure to perform
any material covenant or obligation under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before May 31, 1997),
7.1(e), 7.1(g)) or this Agreement is terminated pursuant to Section 7.1(e) and
within 12 months after the date of termination Xxxx enters into an Acquisition
Agreement for a Business Combination (as defined herein) or consummates a
Business Combination Xxxx will, in the case of a termination by Cardinal, within
three business days following any such termination or, in the case of a
termination by Xxxx, (except in each case, if the termination is pursuant to
Section 7.1(e), then, prior to consummation of a Business Combination herein) or
execution of the definitive agreement with respect thereto) concurrently with
such termination, pay to Cardinal in cash by wire transfer in immediately
available funds to an account designated by Cardinal (i) in reimbursement for
Cardinal's expenses an amount in cash equal to the aggregate amount of
Cardinal's Costs incurred in connection with pursuing the transactions
contemplated by this Agreement, including, without limitation, legal,
accounting and investment banking fees, up to but not in excess of an amount
equal to $1.8 million in the aggregate and (ii) a termination fee in an amount
equal to $13 million. For the purposes of this Section 7.2, "Business
Combination" means (i) a merger, consolidation, share exchange, business
combination or similar transaction involving Xxxx as a result of which the Xxxx
Shareholders prior to such transaction in the aggregate cease to own at least a
majority of the voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (ii) a sale, lease,
exchange, transfer or other disposition of more than 50% of the assets of Xxxx
and its subsidiaries, taken as a
41
whole, in a single transaction or a series of related transactions, or (iii) the
acquisition, by a person (other than Cardinal or any affiliate thereof) or group
(as such term is defined under Section 13(d) of the Exchange Act and the rules
and regulations thereunder) of beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of the Xxxx Common Stock whether by
tender or exchange offer or otherwise.
7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after adoption of this Agreement by Xxxx Shareholders, but
after any such approval, no amendment shall be made which by law requires
further approval or authorization by the Xxxx Shareholders without such further
approval or authorization. Notwithstanding the foregoing, this Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
Cardinal (with respect to Xxxx) and Xxxx (with respect to Cardinal and Subcorp)
by action taken or authorized by their respective Boards of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section 8.1 shall not limit any covenant or
agreement of the parties hereto, which by its terms contemplates performance
after the Effective Time or after the termination of this Agreement.
8.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or dispatched by a nationally recognized overnight courier
service 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 Cardinal or Subcorp:
Cardinal Health, Inc.
0000 Xxxxxxx Xxxxx
00
Xxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to
Xxxxx X. Xxxx
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
(b) if to Xxxx:
Xxxx Healthcare, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxx Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to
Xxxxxxx X. Xxxxx
Xxxxxx & Xxxxxx L.L.P.
1001 Xxxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Telecopy No.: (000) 000-0000
8.3 INTERPRETATION. When a reference is made in this Agreement to
an Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings and the table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When a reference is
made in this Agreement to Xxxx, such reference shall be deemed to include any
and all subsidiaries of Xxxx, individually and in the aggregate, except for
Sections 4.1, 4.2, 4.3, 4.4, 4.6, 4.8, 4.16, 4.19 and 4.23. For the purposes of
any provision of this Agreement, a "Material Adverse Effect" with respect to any
party shall be deemed to occur if (i) in any individual representation or
warranty in this Agreement, if the aggregate consequences of breaches and
inaccuracies of such representation and warranty would have a material adverse
effect on the assets, liabilities, business, results of operations or financial
condition of such party and its subsidiaries taken as a whole, and (ii)
elsewhere in the Agreement, the aggregate consequences of all breaches and
inaccuracies of covenants and representations of such party under this
Agreement, when read without any exception or qualification for a material
adverse effect, would have a material adverse effect on the assets, liabilities,
business, results of operations or financial condition of such party and its
subsidiaries taken as a whole. For purposes of this Agreement, a "subsidiary"
of any person means another person, an amount of
43
the voting securities or 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 securities or interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person.
8.4 COUNTERPARTS. This Agreement may be executed in counterparts,
which together shall constitute one and the same Agreement. The parties may
execute more than one copy of the Agreement, each of which shall constitute an
original.
8.5 ENTIRE AGREEMENT. This Agreement (including the documents and
the instruments referred to herein), the Support Agreements, the Xxxx Stock
Option Agreement and the Confidentiality Agreement constitute the entire
agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
8.6 THIRD PARTY BENEFICIARIES. Except for the agreements set
forth in Section 5.2(b) and 5.2(c) nothing in this Agreement, express or
implied, is intended or shall be construed to create any third party
beneficiaries.
8.7 GOVERNING LAW. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of Delaware. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any Delaware state or federal
court sitting in the City of Wilmington.
8.8 CONSENT TO JURISDICTION; VENUE.
(a) Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the state courts of Delaware and to the jurisdiction
of the United States District Court for the District of Delaware, for the
purpose of any action or proceeding arising out of or relating to this Agreement
and each of the parties hereto irrevocably agrees that all claims in respect to
such action or proceeding may be heard and determined exclusively in any
Delaware state or federal court sitting in the City of Wilmington. Each of the
parties hereto agrees that a final judgment in any action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each of the parties hereto irrevocably consents
to the service of any summons and complaint and any other process in any
other action or proceeding relating to the Merger, on behalf of itself or its
property, by the personal delivery of copies of such process to such party.
Nothing in
44
this Section 8.8 shall affect the right of any party hereto to serve legal
process in any other manner permitted by law.
8.9 SPECIFIC PERFORMANCE. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance, provided such
party is not in material default hereunder.
8.10 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the
parties and their respective successors and assigns.
8.11 EXPENSES. Subject to the provisions of Section 7.2 and the
Xxxx Stock Option Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expenses, except that those expenses incurred
in connection with filing, printing and mailing the Registration Statement and
the Proxy Statement (including filing fees related thereto) will be shared
equally by Cardinal and Xxxx.
45
IN WITNESS WHEREOF, Cardinal, Subcorp and Xxxx have signed this
Agreement as of the date first written above.
CARDINAL HEALTH, INC.
By:/s/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Chairman
OWL MERGER CORP.
By:/s/ XXXXXX X. XXXXXX
Name: Xxxxxx X. Xxxxxx
Title: Chairman
XXXX HEALTHCARE, INC.
By:/s/ XXXX X. XXXXXX
Name: Xxxx X. Xxxxxx
Title: President and CEO
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