EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
D&K HEALTHCARE RESOURCES, INC.,
D&K ACQUISITION CORP.
AND
XXXXX HEALTHCARE SOLUTIONS, INC.
Dated as of October 21, 2003
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ARTICLE I THE MERGER............................................................................................. 1
SECTION 1.1 ACQUISITION OF MEMBERSHIP INTEREST..................................................................... 1
SECTION 1.2 THE MERGER............................................................................................. 1
SECTION 1.3 EFFECTIVE TIME OF THE MERGER........................................................................... 2
SECTION 1.4 EFFECTS OF THE MERGER.................................................................................. 2
SECTION 1.5 ARTICLES OF INCORPORATION; BYLAWS...................................................................... 2
SECTION 1.6 DIRECTORS AND OFFICERS................................................................................. 2
SECTION 1.7 CONSIDERATION.......................................................................................... 2
SECTION 1.8 MERGER CONSIDERATION ADJUSTMENT........................................................................ 4
SECTION 1.9 CLOSING................................................................................................ 6
SECTION 1.10 CLOSING DELIVERIES..................................................................................... 7
SECTION 1.11 DISSENTING SHARES...................................................................................... 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET CORPORATION................................................... 8
SECTION 2.1 INCORPORATION AND QUALIFICATION........................................................................ 8
SECTION 2.2 TARGET CORPORATION'S CAPITALIZATION.................................................................... 9
SECTION 2.3 BOOKS AND RECORDS...................................................................................... 9
SECTION 2.4 AUTHORITY RELATIVE TO THE AGREEMENT.................................................................... 10
SECTION 2.5 NO VIOLATION........................................................................................... 10
SECTION 2.6 CONSENTS AND APPROVALS................................................................................. 10
SECTION 2.7 FINANCIAL STATEMENTS................................................................................... 11
SECTION 2.8 ABSENCE OF CHANGES..................................................................................... 11
SECTION 2.9 LITIGATION............................................................................................. 12
SECTION 2.10 TAX MATTERS............................................................................................ 12
SECTION 2.11 EMPLOYEE BENEFIT PLANS................................................................................. 13
SECTION 2.12 EMPLOYMENT MATTERS..................................................................................... 14
SECTION 2.13 PATENTS, TRADEMARKS AND COPYRIGHTS..................................................................... 14
SECTION 2.14 ENVIRONMENTAL COMPLIANCE............................................................................... 15
SECTION 2.15 TITLE TO PROPERTIES; ENCUMBRANCES...................................................................... 16
SECTION 2.16 PERMITS................................................................................................ 16
SECTION 2.17 AGREEMENTS, CONTRACTS AND COMMITMENTS.................................................................. 17
SECTION 2.18 UNDISCLOSED LIABILITIES................................................................................ 17
SECTION 2.19 NOTES AND ACCOUNTS RECEIVABLE.......................................................................... 18
SECTION 2.20 REAL PROPERTY.......................................................................................... 18
SECTION 2.21 CONDITION OF TANGIBLE ASSETS........................................................................... 19
SECTION 2.22 INVENTORY.............................................................................................. 19
SECTION 2.23 INSURANCE.............................................................................................. 19
SECTION 2.24 GUARANTIES............................................................................................. 20
SECTION 2.25 BUSINESS RELATIONSHIPS................................................................................. 20
SECTION 2.26 CHARGEBACKS............................................................................................ 20
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SECTION 2.27 DISCLOSURE............................................................................................. 20
SECTION 2.28 DISCLAIMER OF ADDITIONAL AND IMPLIED WARRANTIES........................................................ 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIRING CORPORATION AND NEWCO...................................... 20
SECTION 3.1 ORGANIZATION AND AUTHORITY............................................................................. 21
SECTION 3.2 AUTHORITY RELATIVE TO AGREEMENT........................................................................ 21
SECTION 3.3 NO VIOLATION........................................................................................... 21
SECTION 3.4 CONSENTS AND APPROVALS................................................................................. 22
SECTION 3.5 INVESTMENT INTENT...................................................................................... 22
SECTION 3.6 FINANCING.............................................................................................. 23
SECTION 3.7 DISCLOSURE............................................................................................. 23
SECTION 3.8 DISCLAIMER OF ADDITIONAL AND IMPLIED WARRANTIES........................................................ 23
ARTICLE IV COVENANTS OF TARGET CORPORATION........................................................................ 23
SECTION 4.1 MEETING OF TARGET CORPORATION SHAREHOLDERS............................................................. 23
SECTION 4.2 FURTHER AFFIRMATIVE COVENANTS OF TARGET CORPORATION.................................................... 23
SECTION 4.3 NEGATIVE COVENANTS OF TARGET CORPORATION............................................................... 25
ARTICLE V ADDITIONAL AGREEMENTS.................................................................................. 26
SECTION 5.1 CERTAIN TAXES.......................................................................................... 26
SECTION 5.2 ACCESS TO, AND INFORMATION CONCERNING, PROPERTIES AND RECORDS.......................................... 27
SECTION 5.3 GOOD FAITH EFFORTS TO CONSUMMATE TRANSACTIONS.......................................................... 29
SECTION 5.4 NO SOLICITATION........................................................................................ 29
SECTION 5.5 HSR NOTIFICATIONS...................................................................................... 31
SECTION 5.6 EMPLOYEE MATTERS....................................................................................... 31
SECTION 5.7 INDEMNIFICATION OF OFFICERS AND DIRECTORS.............................................................. 32
SECTION 5.8 VOTING AGREEMENT....................................................................................... 33
SECTION 5.9 LICENSES............................................................................................... 33
ARTICLE VI CONDITIONS TO CLOSING.................................................................................. 33
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER............................................. 33
SECTION 6.2 CONDITIONS TO THE OBLIGATIONS OF ACQUIRING CORPORATION AND NEWCO TO EFFECT THE MERGER.................. 34
SECTION 6.3 CONDITIONS TO THE OBLIGATIONS OF TARGET CORPORATION TO EFFECT THE MERGER............................... 35
ARTICLE VII TERMINATION; AMENDMENT; WAIVER......................................................................... 35
SECTION 7.1 TERMINATION............................................................................................ 35
SECTION 7.2 EFFECT OF TERMINATION.................................................................................. 36
SECTION 7.3 AMENDMENT.............................................................................................. 37
SECTION 7.4 EXTENSION; WAIVER...................................................................................... 37
ARTICLE VIII REMEDIES............................................................................................... 37
SECTION 8.1 EXCLUSIVE RIGHTS AND REMEDIES PRIOR TO CLOSING DATE.................................................... 37
SECTION 8.2 INDEMNIFICATION BY SHAREHOLDERS OF TARGET CORPORATION.................................................. 37
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SECTION 8.3 INDEMNIFICATION BY ACQUIRING CORPORATION AND NEWCO..................................................... 38
SECTION 8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS............................................................... 39
SECTION 8.5 LIMITATIONS OF LIABILITY............................................................................... 39
SECTION 8.6 EXCLUSIVE REMEDIES..................................................................................... 41
SECTION 8.7 TAX EFFECT OF INDEMNIFICATION PAYMENTS................................................................. 42
SECTION 8.8 COOPERATION............................................................................................ 42
SECTION 8.9 SHAREHOLDER REPRESENTATIVE............................................................................. 42
SECTION 8.10 MATTERS RELATED TO XXXXXX DISPUTE...................................................................... 43
ARTICLE IX SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.................................................. 45
SECTION 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; XXXXXX DISPUTE............................................. 45
SECTION 9.2 SURVIVAL OF COVENANTS.................................................................................. 45
ARTICLE X MISCELLANEOUS.......................................................................................... 45
SECTION 10.1 EXPENSES............................................................................................... 45
SECTION 10.2 PUBLIC ANNOUNCEMENTS................................................................................... 46
SECTION 10.3 BROKERS AND FINDERS.................................................................................... 46
SECTION 10.4 ENTIRE AGREEMENT; ASSIGNMENT........................................................................... 46
SECTION 10.5 AMENDMENT AND MODIFICATION............................................................................. 47
SECTION 10.6 WAIVER; CONSENTS....................................................................................... 47
SECTION 10.7 FURTHER ASSURANCES..................................................................................... 47
SECTION 10.8 SEVERABILITY........................................................................................... 47
SECTION 10.9 NOTICES................................................................................................ 47
SECTION 10.10 GOVERNING LAW.......................................................................................... 48
SECTION 10.11 SERVICE OF PROCESS; JURISDICTION AND VENUE............................................................. 48
SECTION 10.12 DESCRIPTIVE HEADINGS; INTERPRETATION................................................................... 49
SECTION 10.13 CONSTRUCTION........................................................................................... 49
SECTION 10.14 PARTIES IN INTEREST; NO THIRD-PARTY BENEFICIARY........................................................ 49
SECTION 10.15 COUNTERPARTS........................................................................................... 49
SECTION 10.16 INCORPORATION BY REFERENCE............................................................................. 50
SECTION 10.17 CERTAIN DEFINITIONS.................................................................................... 50
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EXHIBITS
Exhibit A - Membership Interest Purchase Agreement
Exhibit B - Articles of Incorporation
Exhibit C - Bylaws
Exhibit D - Articles of Merger
Exhibit E - Escrow Agreement
Exhibit F - Noncompetition Agreement
Exhibit G - Opinion of Target Corporation's Counsel
Exhibit H - Intentionally Omitted
Exhibit I - Release of Claims
Exhibit J - Voting Agreement
Exhibit K - Environmental Laws
SCHEDULES
Schedule 1.7(a) - Indebtedness
Schedule 1.7(c) - Merger Consideration
Schedule 1.8(a) - Net Working Capital
Schedule 2.1(a) - Qualification
Schedule 2.1(b) - Subsidiaries
Schedule 2.2 - Capitalization
Schedule 2.5 - No Violation
Schedule 2.6 - Consents and Approvals
Schedule 2.7 - Target Corporation's Financial Statements
Schedule 2.8 - Absence of Changes
Schedule 2.9 - Litigation
Schedule 2.10 - Tax Matters
Schedule 2.11 - Employee Benefit Plans
Schedule 2.12 - Employment Matters
Schedule 2.13(a) - Patents, Trademarks and Copyrights
Schedule 2.13(b) - Patent, Trademark and Copyright Infringements
Schedule 2.13(d) - Protection of Patents, Trademarks and Copyrights
Schedule 2.14 - Environmental Compliance
Schedule 2.15 - Titled Properties and Encumbrances
Schedule 2.16 - Permits
Schedule 2.17 - Agreements, Contracts and Commitments
Schedule 2.18 - Undisclosed Liabilities
Schedule 2.19 - Notes and Accounts Receivable
Schedule 2.20 - Real Property
Schedule 2.22 - Inventory
Schedule 2.23 - Insurance
Schedule 2.24 - Guaranties
Schedule 2.26 - Chargebacks
Schedule 3.4 - Consents and Approvals
Schedule 6.2(f) - Required Consents
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
October 21, 2003, by and among D&K Healthcare Resources, Inc., a Delaware
corporation ("Acquiring Corporation"), D&K Acquisition Corp., an Arkansas
corporation ("Newco"), and Xxxxx HealthCare Solutions, Inc., an Arkansas
corporation ("Target Corporation").
RECITALS
WHEREAS, Acquiring Corporation desires to acquire Target Corporation, and
Target Corporation desires to be acquired by Acquiring Corporation, in the
manner provided in this Agreement;
WHEREAS, Acquiring Corporation and Target Corporation believe that the
Merger (as defined herein) of Newco, a wholly-owned subsidiary of Acquiring
Corporation, with and into Target Corporation in the manner provided by, and
subject to the terms and conditions set forth in this Agreement, and all
exhibits and schedules hereto, is desirable and in the best interests of their
respective corporations and shareholders;
WHEREAS, the respective Boards of Directors of Acquiring Corporation,
Newco and Target Corporation have approved this Agreement and the proposed
transactions substantially on the terms and conditions set forth in this
Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in Section 10.17.
NOW, THEREFORE, in consideration of the recitals and the respective
representations, warranties, covenants and indemnities contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and intending to be legally bound hereby, the parties hereby
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Acquisition of Membership Interest. Immediately prior to
consummation of the Merger (as defined herein) in accordance with this Article
I, Target Corporation shall acquire all right, title and interest in and to the
membership interest in Xxxxx Heartland L.L.C., an Arkansas limited liability
company, owned by Heartland Pharmacy Alliance LLC ("HPA"), under the terms of a
Membership Interest Purchase Agreement by and between Target Corporation and HPA
in substantially the form attached hereto as Exhibit A, which shall not be
entered into without the prior written consent of Acquiring Corporation.
Section 1.2 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Arkansas Business Corporation Act, as amended
("ABCA"), Newco shall be
merged with and into Target Corporation (the "Merger") at the Effective Time (as
defined herein). Following the Effective Time, Target Corporation shall continue
as the surviving corporation (sometimes referred to herein as the "Surviving
Corporation") and the separate corporate existence of Newco shall cease.
Section 1.3 Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") as the articles of merger relating
to the Merger substantially in the form attached hereto as Exhibit D ("Articles
of Merger") filed with the Arkansas Secretary of State take effect in accordance
with the relevant provisions of the ABCA (the "Merger Filing"). The Merger
Filing shall be made simultaneously with or as soon as practicable after the
Closing (as defined herein) in accordance with this Article I. The parties agree
to use commercially reasonable efforts to consummate the Merger as soon as
practicable after the date hereof, and in any event the Merger shall be
consummated within five (5) business days after the satisfaction or waiver in
writing of all conditions set forth in Article VI or at such other time and
place as the parties shall mutually agree, subject to the terms and conditions
hereof.
Section 1.4 Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in this Agreement, the Articles of
Merger and the applicable provisions of the ABCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all of
the property, rights, privileges, powers and franchises of Newco and Target
Corporation (the "Constituent Corporations") shall vest in the Surviving
Corporation, including, but not limited to, all right, title and interest of
Target Corporation or any of its Subsidiaries in and to any and all tradenames
used at any time by any of them including the names "Xxxxx HealthCare Solutions,
Inc.", "Xxxxx Heartland L.L.C." and any derivatives of any of the foregoing and
all debts, liabilities and duties of the Constituent Corporations shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.5 Articles of Incorporation; Bylaws. At the Effective Time, the
Articles of Incorporation of Target Corporation, as in effect immediately prior
to the Effective Time, shall be amended in their entirety to read as set forth
in the form attached hereto as Exhibit B. At the Effective Time, the Bylaws of
Target Corporation, as in effect immediately prior to the Effective Time, shall
be amended in their entirety to read as set forth in the form attached hereto as
Exhibit C.
Section 1.6 Directors and Officers. The directors and officers of Newco
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
Section 1.7 Consideration.
(a) Subject to the provisions of this Section 1.7, the aggregate
amount payable with respect to the Common Stock (as defined herein) of
Target Corporation (the "Merger Consideration") shall be equal to (i)
$99,250,000 less (ii) all outstanding indebtedness (including accrued
interest thereon) of Target Corporation as of the Closing
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Date, as set forth on Schedule 1.7(a) (the "Indebtedness"). In addition,
the Merger Consideration shall be adjusted both on and after the Closing
Date in accordance with Section 1.8 (the Merger Consideration as adjusted
pursuant to Section 1.8 on the Closing Date shall be referred to as the
"Closing Adjusted Merger Consideration" and the Merger Consideration as
adjusted pursuant to Section 1.8 after the Closing Date shall be referred
to as the "Post-Closing Adjusted Merger Consideration").
(b) The Closing Adjusted Merger Consideration, other than the Escrow
Funds which will be placed in escrow in accordance with Section 1.7(e),
shall be paid by wire transfer of immediately available funds at the
Closing (as defined herein) to an account designated in writing by each
holder of Common Stock (as defined below). At the Closing, Acquiring
Corporation shall fund, and cause the Surviving Corporation to pay in
full, all outstanding Indebtedness (including any accrued interest
thereon).
(c) Subject to the terms of Section 1.7(e), each share of Target
Corporation's common stock, par value $100.00 per share ("Common Stock"),
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares as defined in Section 1.11), shall, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into and represent the right to receive an amount of cash
determined by dividing (i) the Closing Adjusted Merger Consideration by
(ii) 750, without interest thereon, upon surrender of the certificate
representing such share. The percentage of the Closing Adjusted Merger
Consideration and the Post-Closing Adjusted Merger Consideration payable
to each holder of Common Stock is set forth opposite such holder's name on
Schedule 1.7(c).
(d) Each share of common stock, $0.01 par value per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one newly and validly issued, fully paid
and non-assessable share of common stock of the Surviving Corporation.
(e) The Closing Adjusted Merger Consideration shall be paid in full
by wire transfer of immediately available funds at the Closing; provided,
however, that $5,000,000 (the "Escrow Funds") shall be deposited in escrow
with JPMorgan Chase (the "Escrow Agent") pursuant to a mutually acceptable
Escrow Agreement in substantially the form attached hereto as Exhibit E
(the "Escrow Agreement") for the purpose of satisfying claims, if any, of
Acquiring Corporation or Newco under Article VIII hereof and paying the
reasonable attorneys' fees incurred by the Shareholder Representative (as
defined herein) under this Agreement and the Escrow Agreement in
connection with any third-party claim governed by Section 8.4. Among other
mutually agreed upon terms, the Escrow Agreement shall provide that (i)
the Escrow Funds shall be disbursed in the percentages set forth on
Schedule 1.7(c) upon the expiration of one year from the Closing Date (as
defined herein) unless Acquiring Corporation or Newco shall have exercised
its rights under Article VIII with respect to any claims under such
Article, and (ii) the Escrow Agent shall invest the Escrow Funds in a
money market fund or similar investment specified by the Shareholder
Representative, and the investment income earned on the Escrow Funds shall
be disbursed to the shareholders of Target Corporation
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and to Acquiring Corporation or Newco in the percentages that the Escrow
Funds are distributed under the terms of this Agreement and the Escrow
Agreement. The Escrow Agreement will provide that Xxxxxxx Xxxxxxx Xxxxxx
Xxxxxx will be appointed attorney-in-fact for the shareholders of Target
Corporation (the "Shareholder Representative") for the purpose of the
operation of the Escrow Agreement and this Agreement.
(f) At the Effective Time, the stock transfer books of Target
Corporation shall be closed, and there shall be no further registration of
transfers of the Common Stock thereafter on the records of Target
Corporation. The Closing Adjusted Merger Consideration delivered upon the
surrender for exchange of shares of Common Stock in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Common Stock, and there shall be
no further registration of transfers on the records of the Surviving
Corporation of shares of Common Stock which were outstanding immediately
prior to the Effective Time. Until surrendered as contemplated by this
Agreement, each certificate representing shares of Common Stock shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the appropriate portion of the Closing
Adjusted Merger Consideration and the Post-Closing Adjusted Merger
Consideration, if any, each without interest thereon. Furthermore, each
share of Common Stock held in the treasury of Target Corporation and each
share of Common Stock held by any direct or indirect wholly-owned
Subsidiary of Target Corporation, if any, immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, cease to be outstanding, be canceled and
retired without payment of any consideration therefor and cease to exist.
Section 1.8 Merger Consideration Adjustment.
(a) For the purpose of this Section 1.8, Target Corporation's "Net
Working Capital", shall mean Target Corporation's current assets
(excluding, except to the extent of any cash collections prior to Closing,
the Amerisource Receivable and the Cardizem Receivable, which shall be
governed by Section 1.8(d)) less current liabilities (excluding (i) all
Indebtedness (as defined in Section 1.7(a)), including, without
limitation, the current portion of all long-term Indebtedness and all
accrued interest thereon and (ii) all amounts due under any capital lease,
including, without limitation, the current portion of such amounts)
calculated on a consolidated basis and, except as expressly stated herein,
in conformity with GAAP applied on a basis consistent with Target
Corporation's balance sheet dated as of April 30, 2003 (including without
limitation, in accordance with, to the extent in conformity with GAAP, all
accounting policies, practices, procedures and valuation methods
(collectively, "Accounting Practices") applied to such balance sheet; it
being understood and agreed that, to the full extent of any conflict of
any nature whatsoever between the Accounting Practices of Target
Corporation on the one hand, and the Accounting Practices of Acquiring
Corporation on the other hand (an "Accounting Conflict"), (i) the
Accounting Practices of Target Corporation shall control and (ii) to the
extent of any Accounting Conflict, the Accounting Practices of Acquiring
Corporation shall not apply, for purposes of the preparation of the
Closing Balance Sheet (as defined below) and for purposes of
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calculating Target Corporation's Net Working Capital pursuant to this
Section 1.8). For purposes of calculating Net Working Capital, Acquiring
Corporation and Target Corporation acknowledge and agree that the amount
of all items included in the calculation of Net Working Capital will be
taken into account only once, and no such amounts will be taken into
account more than once, including, without limitation, the items
specifically identified in this Agreement as a deduction to Net Working
Capital. For purposes of illustration, the calculation of Net Working
Capital as of April 30, 2003 and June 30, 2003, is set forth on Schedule
1.8(a).
(b) Not more than ten (10), but not less than five (5), business
days prior to the scheduled Closing, Target Corporation will deliver to
Acquiring Corporation an estimate of Target Corporation's Net Working
Capital as of the close of business on the Closing Date, prepared in
accordance with Section 1.8(a) (the "Estimated Net Working Capital"). If
the Estimated Net Working Capital is less than $75,295,519, then such
shortfall shall be deducted from the Merger Consideration at Closing on a
dollar-for-dollar basis. If the Estimated Net Working Capital is greater
than $75,295,519, then such excess shall be added to the Merger
Consideration at Closing on a dollar-for-dollar basis.
(c) Within sixty (60) days after the Closing Date, Acquiring
Corporation, at its sole expense, shall cause to be prepared and delivered
to the Shareholder Representative a final balance sheet of Target
Corporation as of the close of business on the Closing Date (the "Proposed
Closing Balance Sheet"), together with its proposed final calculation of
Net Working Capital based on the Proposed Closing Balance Sheet (the
"Proposed Closing Net Working Capital") and its proposed adjustment, if
any, to the Merger Consideration based on the difference between the
Proposed Closing Net Working Capital and the Estimated Net Working Capital
(the "Proposed Adjustment"), each prepared in accordance with Section
1.8(a). The Proposed Closing Net Working Capital and Proposed Adjustment
shall be accompanied by any supporting documentation or other materials
reasonably necessary to determine such calculation or adjustment. In the
event that the Shareholder Representative does not object in writing to
the Proposed Closing Net Working Capital and/or the Proposed Adjustment
within thirty (30) days after receipt of same, then the Proposed Closing
Net Working Capital and Proposed Adjustment shall be deemed to have been
accepted by the Shareholder Representative and all of Target Corporation's
former shareholders and shall become final and binding. In the event that
the Shareholder Representative timely objects in writing to the Proposed
Closing Net Working Capital and/or Proposed Adjustment, then Acquiring
Corporation and the Shareholder Representative shall use commercially
reasonable efforts to resolve the dispute within thirty (30) days. If
Acquiring Corporation and the Shareholder Representative are unable to
reach an agreement within such thirty (30) day period, then they shall
submit the dispute to a nationally recognized accounting firm, mutually
agreeable to Acquiring Corporation and the Shareholder Representative,
whose determination of the working capital adjustment, if any, to the
Merger Consideration shall be made in accordance with this Section 1.8 and
shall be final and binding. The Acquiring Corporation and Target
Corporation's former shareholders shall jointly share the fees and
expenses of such accounting firm. The xxxxx
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balance sheet of Target Corporation as of the close of business on the
Closing Date, as finally determined in accordance with this Section 1.8,
shall be referred to as the "Closing Balance Sheet," and the amount of any
adjustments to the Merger Consideration determined pursuant to this
subparagraph shall be referred to as the "Final Working Capital
Adjustment." Any amounts owing as a result thereof shall be paid to
Acquiring Corporation or Target Corporation's former shareholders, pro
rata, as the case may be, in cash within five (5) days of the final
determination of any Final Working Capital Adjustment as provided herein,
with simple interest thereon from the Closing Date through the date of
payment at the rate of eight percent (8%) per annum.
(d) Acquiring Corporation shall, and shall cause Surviving
Corporation to, use good faith commercially reasonable efforts, including,
without limitation, utilizing existing legal counsel and incurring all
reasonably necessary costs, expenses and attorney's fees, to collect
promptly all amounts due to Surviving Corporation related to or arising
out of the Amerisource Litigation and the Cardizem Settlement (the
"Amerisource/Cardizem Funds"). The Shareholder Representative shall have
the right to monitor the prosecution of the collection of the
Amerisource/Cardizem Funds, including, without limitation, the right to
discuss such collection efforts with existing counsel, participate in
and/or attend conferences, hearings or other meetings relating to such
collection efforts, and review and comment upon any correspondence,
briefs, filings or other documents related to such collection efforts. The
Shareholder Representative may assume the prosecution of such collection
efforts if the Shareholder Representative determines, in the Shareholder
Representative's sole reasonable discretion, that Acquiring Corporation
and/or Surviving Corporation are not satisfactorily fulfilling their
obligations under this Section 1.8(d). Any Amerisource/Cardizem Funds
collected or otherwise received by Acquiring Corporation or Surviving
Corporation after the Closing less (i) the amount of any unreimbursed
post-Closing costs, expenses or attorney's fees incurred by Acquiring
Corporation or Surviving Corporation in connection with the collection or
receipt of such funds (the "Post-Closing Collection Expenses") and (ii)
any amounts legally or contractually payable to The X. Xxxxxx Company and
Xxxxx Xxxxxx Southeast L.L.C. or any of their assignees out of such funds
(the "Xxxxxx Portion") (the "Net Amerisource/Cardizem Funds") shall be
added to the Post-Closing Adjusted Merger Consideration on a
dollar-for-dollar basis and paid to the Shareholder Representative, as
agent for the shareholders of Target Corporation, by wire transfer of
immediately available funds to an account designated in writing by the
Shareholder Representative. Such payment of any Net Amerisource/Cardizem
Funds received by the Acquiring Corporation or the Surviving Corporation
shall be made within five (5) business days of the receipt thereof,
together with the delivery to the Shareholder Representative of
documentation (including, without limitation, final judgments or orders,
settlement documents, wire transfer receipts, invoices, bills and other
similar documentation) evidencing the Amerisource/Cardizem Funds collected
or received, the Xxxxxx Portion remitted to The X. Xxxxxx Company, Xxxxx
Xxxxxx Southeast L.L.C. or their assignees, as applicable, and the
Post-Closing Collection Expenses incurred.
Section 1.9 Closing. Subject to the terms hereof, Target Corporation and
Newco shall execute in the manner required by the ABCA and deliver duly executed
and verified Articles of
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Merger substantially in the form attached hereto as Exhibit D, and the parties
hereto shall take all such other and further actions as may be required by law
to make the Merger effective. The consummation of the transactions provided for
in this Agreement (the "Closing") shall take place at the offices of Xxxxx
Liddell & Xxxx LLP, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx, within five (5)
business days following the date on which the last of the conditions set forth
in Article VI is fulfilled or waived in writing, or at such other time and place
as the parties shall mutually agree. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date".
Section 1.10 Closing Deliveries. Acquiring Corporation, Newco and Target
Corporation will deliver, or cause to be delivered, on the Closing Date the
following instruments (collectively, the "Transaction Documents") to which they
are a party:
(a) Other than with respect to Dissenting Shares, letters of
transmittal in a form satisfactory to the parties, executed by
shareholders of Target Corporation, together with certificates
representing the Common Stock or affidavits of lost stock certificates in
lieu thereof and any bonds (or other documentation relating to ownership
of Common Stock) that may be required in connection therewith, in the
reasonable discretion of Acquiring Corporation;
(b) Other than with respect to Dissenting Shares, powers of
attorney, in a form satisfactory to the parties, executed by shareholders
of Target Corporation acknowledging their obligations under this Agreement
and appointing the Shareholder Representative as their attorney-in-fact;
(c) A Noncompetition Agreement between Acquiring Corporation or
Surviving Corporation and each of Xxxxxxx Xxxxxxx Xxxxxx Xxxxxx, Xxx
Xxxxxx and Xxxxxx Xxxxxxx Xxxxxx in substantially the form attached hereto
as Exhibit F (the "Noncompetition Agreement");
(d) An Opinion of Counsel of Target Corporation in substantially the
form attached hereto as Exhibit G;
(e) A Mutual Release of Claims in substantially the form attached
hereto as Exhibit I (the "Release of Claims") executed immediately prior
to the Merger by Target Corporation and each of the officers and directors
of Target Corporation;
(f) The Escrow Agreement in the form attached hereto as Exhibit E;
(g) A power of attorney of Target Corporation and its Subsidiaries
as provided for in Section 6.2(g); and
(h) Such additional information or documents as Acquiring
Corporation, Newco or Target Corporation shall have reasonably required to
evidence the consummation of the transactions contemplated by this
Agreement.
7
Section 1.11 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Common Stock issued and outstanding immediately prior
to the Effective Time that are held by shareholders of Target Corporation who
shall not have voted such shares in favor of adoption and approval of the Merger
and this Agreement and who, prior to the taking of a vote of the shareholders on
the adoption and approval of the Merger and this Agreement, shall have delivered
to Target Corporation a written notice of their intent to demand payment for
their shares in the manner provided in Section 4-27-1321 of the ABCA and who
shall have delivered a written demand for payment for such shares in the manner
provided in Section 4-27-1323 of the ABCA ("Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration, but the holders
thereof shall be entitled to payment of the fair value of such shares in
accordance with the provisions of Section 4-27-1325 and Section 4-27-1328 of the
ABCA; provided, however, that (i) if any holder of Dissenting Shares shall
subsequently vote such holder's shares in favor of the Merger and this Agreement
or otherwise waive such holder's rights to dissent to the Merger under the ABCA,
or (ii) if any holder fails to establish such holder's entitlement to appraisal
rights as provided in Section 4-27-1321 and Section 4-27-1323 of the ABCA, or
fails strictly to comply with any other applicable provision of the ABCA, such
holder or holders (as the case may be) shall forfeit the right to payment for
such Dissenting Shares and such Dissenting Shares shall thereupon be deemed to
have been converted into the right to receive the Merger Consideration as
provided in Section 1.7 hereof and shall have only such rights as provided under
the ABCA.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET CORPORATION
Target Corporation makes the representations and warranties set forth in
this Article II to Acquiring Corporation and Newco. Target Corporation has
delivered to Acquiring Corporation and Newco the schedules to this Agreement
(the "Schedules"), including those referred to in this Article II, on the date
hereof and such Schedules have been reviewed and accepted by Acquiring
Corporation and Newco. Target Corporation shall, from time to time through the
Closing Date, promptly advise Acquiring Corporation and Newco as to any change,
amendment or supplement to the Schedules which is necessary to reflect changes
in the subject matter thereof occurring through the Closing Date. Acquiring
Corporation and Newco must notify Target Corporation in writing within ten (10)
business days after receipt of any change, amendment or supplement to the
Schedules of its election to terminate this Agreement in accordance with Section
7.1(b). If Acquiring Corporation and Newco fail to notify Target Corporation as
required, they shall be deemed to have waived their right to terminate this
Agreement based on such change, amendment or supplement to the Schedules.
Section 2.1 Incorporation and Qualification.
(a) Target Corporation is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Arkansas.
Target Corporation has all requisite corporate power and authority to
carry on its business as it is now being conducted, and to own, lease and
operate its properties and assets, and to perform all its obligations
under the agreements and instruments to which it is a party or by which it
is bound. Except as set forth on Schedule 2.1(a), Target Corporation is
duly
8
qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which the properties
and assets owned, leased or operated by it or the nature of the business
conducted by it make such qualification necessary, except in such
jurisdictions where the failure to be duly qualified or in good standing
does not and would not result in a Material Adverse Effect. Each such
jurisdiction in which Target Corporation is so qualified is listed on
Schedule 2.1(a).
(b) Schedule 2.1(b) contains a list of all of the Subsidiaries of
Target Corporation, indicating in each case the name, type of entity,
jurisdiction of incorporation and other jurisdictions in which it is
qualified to do business. Except as otherwise noted on Schedule 2.1(b),
each Subsidiary is wholly-owned either directly or indirectly by Target
Corporation. Each Subsidiary is duly incorporated, validly existing and in
good standing under the laws of the state or jurisdiction of its
incorporation and has all requisite corporate power and authority to carry
on its business as it is now being conducted, to own, lease and operate
its properties and assets, and to perform all its obligations under the
agreements and instruments to which it is a party or by which it is bound.
Except as set forth on Schedule 2.1(b), each Subsidiary of Target
Corporation is duly qualified to do business as a foreign corporation or
other business entity and is in good standing under the laws of each state
or other jurisdiction in which the properties and assets owned, leased or
operated by it or the nature of the business conducted by it make such
qualification necessary, except in such jurisdictions where the failure to
be duly qualified or in good standing does not and would not result in a
Material Adverse Effect.
Section 2.2 Target Corporation's Capitalization. The authorized and
outstanding capital stock of Target Corporation is set forth on Schedule 2.2.
Except as set forth on Schedule 2.2, there are no outstanding or authorized
subscriptions, options, convertible securities, rights, warrants, calls,
irrevocable proxies, purchase rights, exchange rights or other agreements or
commitments of any kind directly or indirectly obligating Target Corporation or
any Subsidiary of Target Corporation to sell, issue, transfer or dispose of, now
or at any time in the future any security of or equity interest in Target
Corporation or any Subsidiary of Target Corporation, or irrevocable proxies or
any agreements restricting the transfer of or otherwise relating to any security
or equity interest in Target Corporation or any Subsidiary of Target
Corporation. All of the shares of Target Corporation and all outstanding shares
of capital stock or membership interests of each Subsidiary have been duly
authorized, validly issued and are fully paid and non-assessable, and are free
of preemptive rights. Except as set forth on Schedule 2.2, all dividends by
Target Corporation or any subsidiary of Target Corporation declared prior to the
date hereof have been paid. Except as set forth on Schedule 2.2, there are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to Target Corporation or any Subsidiary of Target
Corporation. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any Subsidiary
of Target Corporation.
Section 2.3 Books and Records. The minute books (containing the records of
meetings of the shareholders, the board of directors, and any committees of the
board of
9
directors), the stock certificate books, and the stock record books of Target
Corporation and each Subsidiary of Target Corporation are correct and complete
in all material respects.
Section 2.4 Authority Relative to the Agreement. Target Corporation has
full corporate power and authority to execute and deliver this Agreement, and
except for the approval by Target Corporation's shareholders, no further
corporate proceedings on the part of Target Corporation are necessary to
consummate the transactions contemplated hereby, which have been duly and
validly authorized and approved by its Board of Directors. This Agreement has
been duly and validly executed and delivered by Target Corporation, and this
Agreement constitutes the valid and binding obligation of Target Corporation
enforceable against Target Corporation in accordance with its terms, subject to
the effect of applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws relating to creditors' rights generally and general equitable
principles and subject to the approval by Target Corporation's shareholders and
the applicable approval requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
Section 2.5 No Violation. Except as set forth on Schedule 2.5, neither the
execution, delivery nor performance of this Agreement nor the consummation of
the transactions contemplated hereby, (i) violates ("Target's Violation") in any
material respect any law, order, writ, judgment, injunction, award, decree,
statute, or regulation applicable to Target Corporation or any Subsidiary of
Target Corporation, (ii) is in conflict with, results in a breach or termination
of any provision of, causes the acceleration of the maturity of any debt or
obligation pursuant to, constitutes a default (or gives rise to any right of
termination, cancellation or acceleration) under, or results in the creation of
any security interest, lien, charge or other encumbrance upon any property or
interest of Target Corporation or any Subsidiary of Target Corporation pursuant
to, any terms, conditions or provisions of any note, license, instrument,
indenture, mortgage, deed of trust or other agreement or understanding or any
other restriction of any kind or character, to which Target Corporation or any
Subsidiary of Target Corporation is a party or by which any property of Target
Corporation or any Subsidiary of Target Corporation is subject or bound
(collectively, "Target's Default"), or (iii) conflicts ("Target's Conflict")
with or results in any breach of any provision of the Certificate or Articles of
Incorporation or Organization or Bylaws or Operating Agreement or other similar
agreement of Target Corporation or any Subsidiary of Target Corporation. Each of
Target Corporation and its Subsidiaries has complied with all applicable laws
(including rules, regulations, codes, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state and local governments (and
all agencies thereof) except where the failure to comply would not result in a
Material Adverse Effect, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply.
Section 2.6 Consents and Approvals. Except as described on Schedule 2.6
hereto, and except for filing a Notification and Report Form pursuant to the
applicable requirements of the HSR Act, no prior consent, approval or
authorization of, or declaration, filing or registration with any person, entity
or authority, domestic or foreign, is required of or by Target Corporation or
any Subsidiary of Target Corporation in connection with the execution, delivery
and performance by Target Corporation and of this Agreement and the transactions
contemplated hereby.
10
Section 2.7 Financial Statements. Schedule 2.7 contains copies of (i) the
audited consolidated balance sheets of Target Corporation and its Subsidiaries
as of April 30, 2003 and April 30, 2002, and the related audited consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
years ended April 30, 2003 and April 30, 2002, and (ii) the unaudited
consolidated balance sheet of Target Corporation and its Subsidiaries as of
August 31, 2003, and the related unaudited consolidated statement of operations
for the four months ended August 31, 2003 (the "Interim Financial Statements")
(all of the foregoing consolidated balance sheets and consolidated statements of
operations, shareholder's equity and cash flows of Target Corporation are
collectively referred to as "Target Corporation's Financial Statements"). Except
as set forth on Schedule 2.7, Target Corporation's Financial Statements present
fairly, in all material respects, the financial position of Target Corporation
as of the dates indicated and the results of its operations and its cash flows
for the periods indicated in conformity with GAAP, consistently applied;
provided, however, that the Interim Financial Statements are subject to normal
year-end adjustments, in accordance with past practice, and do not include all
the disclosures required by GAAP. For purposes of this Agreement, the "Balance
Sheet Date" shall be April 30, 2003, and the "Interim Balance Sheet Date" shall
be August 31, 2003. The parties acknowledge and agree that (i) to the extent of
any Accounting Conflict, the Accounting Practices of Target Corporation shall
control, (ii) to the extent of any Accounting Conflict, the Accounting Practices
of Acquiring Corporation shall not apply to the preparation of Target
Corporation's Financial Statements, including the related notes, and (iii) to
the extent of any Accounting Conflict, the failure to apply Acquiring
Corporation's Accounting Practices shall not constitute a breach of, or
inaccuracy in, any of the representations or warranties of Target Corporation
contained in this Agreement.
Section 2.8 Absence of Changes. Except as set forth on Schedule 2.8, since
the Balance Sheet Date, neither Target Corporation nor any Subsidiary of Target
Corporation has, directly or indirectly:
(a) made or authorized any amendment to its Certificate or Articles
of Incorporation or Organization or Bylaws or Operating Agreement or other
similar agreement, or changed the character or operations of its business
in any material manner;
(b) suffered any Material Adverse Effect;
(c) entered into or amended any material agreement, commitment or
transaction, except in connection with the transactions contemplated by
this Agreement;
(d) managed its working capital, except in the ordinary course of
business in accordance with the past custom and practice of Target
Corporation and its Subsidiaries;
(e) cancelled, compromised, waived, or released any right or claim
(or series of related rights and claims) either (i) involving more than
$50,000 individually or $200,000 in the aggregate or (ii) outside the
ordinary course of business;
11
(f) entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
(g) made any loan to, or entered into any other transaction with,
any of its directors, officers, and employees, excluding payment of
salaries, benefits and reimbursement of business expenses in the ordinary
course of business;
(h) granted any increase in the base compensation of any of its
directors, officers, and employees outside the ordinary course of business
or made any other change in employment terms for any of its directors,
officers, and employees outside the ordinary course of business;
(i) adopted, amended, modified or terminated any bonus,
profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and
employees; or
(j) committed to any of the foregoing.
Section 2.9 Litigation. Except as set forth on Schedule 2.9, there are no
actions, suits, or other proceedings pending or, to the Knowledge of Target
Corporation, threatened against Target Corporation or any Subsidiary of Target
Corporation or involving any of the properties or assets of Target Corporation
or any Subsidiary of Target Corporation, at law or in equity or before or by any
foreign, federal, state, municipal, or other governmental court, department,
commission, board, bureau, agency, or other instrumentality or person or any
board of arbitration or similar entity. Except as set forth on Schedule 2.9, to
Target Corporation's Knowledge, there are no facts or circumstances that would
cause a reasonable person to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against any of Target
Corporation and its Subsidiaries.
Section 2.10 Tax Matters. Except as set forth on Schedule 2.10, each of
Target Corporation and its Subsidiaries has filed all Tax Returns that it was
required to file, and has paid or set up a reserve on its books for all Taxes
shown thereon as owing, except where the failure to file Tax Returns or to pay
Taxes would not have a Material Adverse Effect on the financial condition of
Target Corporation and its Subsidiaries taken as a whole. All such Tax Returns
were accurate, complete and true in all material respects. Schedule 2.10 lists
all federal and state income Tax Returns filed with respect to any of Target
Corporation and its Subsidiaries for taxable periods ended on or after April 30,
1997, indicates those federal income Tax Returns that have been audited and
indicates those federal income Tax Returns that currently are the subject of
audit. None of the directors or officers of Target Corporation and its
Subsidiaries has Knowledge of any proposed, threatened or expected audits,
examination claims or assessments with respect to such Tax Returns that are not
currently the subject of audit. Target Corporation has delivered to Acquiring
Corporation correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by any of Target Corporation and its Subsidiaries since April 30, 1997. None
of Target Corporation and its Subsidiaries has waived any statute of limitations
in respect of Taxes or agreed to any
12
extension of time with respect to Tax assessment or deficiency. The unpaid Taxes
of the Target Corporation and its Subsidiaries (A) did not, as of the Balance
Sheet Date, exceed the reserve for liability for Taxes (rather than any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income) and (B) do not exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Target Corporation and its Subsidiaries in filing their Tax Returns. No
claim has ever been made by an authority in a jurisdiction where any of the
Target Corporation and its Subsidiaries does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. None of Target Corporation or
its Subsidiaries has filed a consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). None of Target Corporation and
its Subsidiaries has made any material payments, is obligated to make any
material payments, or is party to any agreement that could obligate it to make
any material payments that would not be deductible under Section 280G of the
Code. None of Target Corporation and its Subsidiaries has been a U.S. real
property holding corporation within the meaning of Section 897 of the Code.
Except as disclosed in the federal income Tax Returns delivered to Acquiring
Corporation, none of Target Corporation and its Subsidiaries is a party to any
Tax allocation or sharing agreement. To the Knowledge of Target Corporation,
none of Target Corporation and its Subsidiaries has been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Target Corporation) or has any liability
for Taxes of any Person (other than any of Target Corporation and its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision of
federal, state, local or foreign law), as a transferee, successor, by contract
or otherwise. Each of the Target Corporation and its Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
Section 2.11 Employee Benefit Plans. Target Corporation has delivered to
Acquiring Corporation copies of the health, dental, life insurance plans, bonus,
deferred compensation, pension, profit sharing, retirement and vacation plans
and all other material employee benefit plans, programs or arrangements
providing benefits for employees of Target Corporation (the "Benefit Plans");
the three most recent annual reports (Form 5500) filed with the Internal Revenue
Service (the "IRS") with respect to each Benefit Plan (if any such report was
required); and the most recent determination letter, if any, issued by the IRS
with respect to any Benefit Plan intended to be qualified under Section 401 of
the Code. Except as set forth on Schedule 2.11, each of the Benefit Plans has
been administered and maintained in material compliance with its terms and the
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and, if applicable, the Code and all other applicable laws. The
Target Corporation does not contribute to any "multi-employer plan" (within the
meaning of Section 3(37) of ERISA) and neither Target Corporation nor any entity
that, together with Target Corporation, is treated as a single employer under
Code Section 414(b), (c), (m) or (o) ("Controlled Entity") has incurred any
withdrawal liability with respect to any multi-employer plan. Neither Target
Corporation nor any Controlled Entity maintains or sponsors or has any liability
under any pension benefit plan which is a defined benefit plan which is or has
been subject to Title IV of ERISA. All contributions required to be made by
Target Corporation with respect to any Benefit Plan due as of any date through
and including the Closing Date have been made, or will be made, when due. Except
as set forth on Schedule 2.11, there are no pending or, to the Knowledge of
Target Corporation, threatened claims by or on behalf of the Benefit Plans,
13
the United States Department of Labor, the Internal Revenue Service, or by any
current or former employee of Target Corporation alleging a breach of any
fiduciary duties or a violation of applicable state or federal law which could
result in a material liability on the part of Target Corporation or a Benefit
Plan under ERISA or any other law (other than benefit claims and funding
obligations in the ordinary course of business).
Section 2.12 Employment Matters. Except as disclosed on Schedule 2.12,
neither Target Corporation nor any Subsidiary of Target Corporation is a party
to any contracts or agreements granting benefits or rights to employees or
consultants, or any conciliation agreement with the Department of Labor, the
Equal Employment Opportunity Commission or any federal, state or local agency
which requires equal employment opportunities or affirmative action in
employment. Except as disclosed on Schedule 2.12, there are no unfair labor
practice complaints pending against Target Corporation or any Subsidiary of
Target Corporation before the National Labor Relations Board and no similar
claims pending before any similar state, local or foreign agency. There are no
strikes, slowdowns, work stoppages, lockouts, or to the Knowledge of Target
Corporation, threats thereof, by or with respect to any such employees. Except
as set forth on Schedule 2.12, Target Corporation has not received written
notice from any executive or managerial employee that such person intends to
terminate employment with Target Corporation or its Subsidiaries. None of Target
Corporation and its Subsidiaries is a party to or bound by any collective
bargaining agreement. To the Knowledge of Target Corporation, none of Target
Corporation and its Subsidiaries has committed any unfair labor practice. To the
Knowledge of Target Corporation, no organizational effort is presently being
made or threatened by or on behalf of any labor union with respect to employees
of any of Target Corporation and its Subsidiaries.
Section 2.13 Patents, Trademarks and Copyrights.
(a) Schedule 2.13(a) sets forth all patents, patent applications,
trademarks and service marks, trademark and service xxxx applications, and
copyrights (whether registered or unregistered) (collectively, the
"Intellectual Property") owned or used pursuant to a license, sublicense,
agreement or other permission by Target Corporation and any Subsidiary of
Target Corporation in its businesses and operations. Except as otherwise
indicated on Schedule 2.13(a), neither Target Corporation nor any
Subsidiary of Target Corporation has granted to any other person any
license to use any Intellectual Property.
(b) Neither Target Corporation nor any Subsidiary of Target
Corporation has ever received any charge, complaint, demand or notice
alleging any interference, infringement, misappropriation or violation of,
and to the Knowledge of Target Corporation, is interfering with,
infringing upon, misappropriating or violating the intellectual property
rights of any other person or entity in any Intellectual Property. Except
as set forth on Schedule 2.13(b), to the Knowledge of Target Corporation,
no other person or entity is interfering with, infringing upon,
misappropriating or violating any intellectual property rights of Target
Corporation or any of its Subsidiaries with respect to the Intellectual
Property.
14
(c) Neither Target Corporation nor any of its Subsidiaries has
undertaken or omitted to undertake any acts that would invalidate, reduce,
or eliminate, in whole or in part, the enforceability or scope of any
Intellectual Property owned by Target Corporation or its Subsidiaries.
(d) Target Corporation and its Subsidiaries own or have the right to
use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of the businesses of
Target Corporation and its Subsidiaries as presently conducted. To the
Knowledge of Target Corporation, each item of Intellectual Property owned
or used by any of Target Corporation and its Subsidiaries immediately
prior to the Closing hereunder will be owned or available for use by
Acquiring Corporation or the Surviving Corporation on identical terms and
conditions immediately subsequent to the Closing hereunder. Except as set
forth on Schedule 2.13(d), to the Knowledge of Target Corporation, each of
Target Corporation and its Subsidiaries has taken all necessary action to
maintain and protect each item of Intellectual Property that it owns or
uses.
Section 2.14 Environmental Compliance. Except as set forth on Schedule
2.14, to the Knowledge of Target Corporation, without investigation or inquiry
and without any obligation to conduct the same, as of the date of this
Agreement:
(a) No Hazardous Substances exist on the Real Property (as defined
herein) in quantities which violate, and would require reporting to
Governmental Authorities and cleanup under, applicable Environmental Laws;
(b) Neither Target Corporation nor any of its Subsidiaries has
received written notice from any Governmental Authority or unaffiliated
third party alleging a violation of applicable Environmental Laws which if
successfully prosecuted against Target Corporation would have a Material
Adverse Effect on the financial condition of Target Corporation or any of
its Subsidiaries, taken individually or as a whole;
(c) Each of Target Corporation, its Subsidiaries, and their
respective predecessors and Affiliates has complied with all Environmental
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply, other than those violations
which would not have a Material Adverse Effect on Target Corporation on
any of its Subsidiaries, individually or taken as a whole. Without
limiting the generality of the preceding sentence, each of Target
Corporation, its Subsidiaries, and their respective predecessors and
Affiliates has obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are
required under, and has complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables which are contained in, all Environmental Laws, other than
those violations which would not have a Material Adverse Effect on Target
Corporation or any of its Subsidiaries, individually or taken as a whole;
and
15
(d) None of Target Corporation and its Subsidiaries has any
Liability, and, to the Knowledge of Target Corporation, no circumstance
exists that could form the basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand
against Target Corporation and any of its Subsidiaries giving rise to any
Liability, for: (i) any damage to any site, location or body of water
(surface or subsurface) under any Environmental Law, (ii) any illness of
or personal injury to any employee or other individual directly related to
a release of a Hazardous Substance existing on the Real Property in a
quantity which violates, and would require reporting to Governmental
Authorities and clean up under, any applicable Environmental Law, or (iii)
any other reason under any Environmental Law, in each case, other than
those Liabilities which would not have a Material Adverse Effect on Target
Corporation or any of its Subsidiaries, individually or taken as a whole.
Section 2.15 Title to Properties; Encumbrances. Except as set forth on
Schedule 2.15: (a) Target Corporation or a Subsidiary of Target Corporation has
good and marketable title to all of the assets reflected in the balance sheet
dated as of April 30, 2003, other than any assets therein reflected that (x)
have been sold or otherwise disposed of in the ordinary course of business since
the date thereof or (y) are not, individually or in the aggregate, material to
Target Corporation or any Subsidiary of Target Corporation, free and clear of
liens, claims and encumbrances other than (i) liens, mortgages, pledges,
security interests or other encumbrances securing indebtedness shown on Target
Corporation's Financial Statements, (ii) liens for current taxes, payments of
which are not yet delinquent or that are being contested in good faith by
appropriate proceedings, (iii) liens in respect of pledges or deposits under
workers' compensation laws or similar legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent or are being contested in good
faith by appropriate proceedings, (iv) liens relating to accounts payable
incurred in the ordinary course of business and consistent with past practice,
and (v) such imperfections of title which do not materially detract from the
value of the assets of Target Corporation and any Subsidiary of Target
Corporation individually or in the aggregate (collectively, the "Permitted
Liens"); and (b) Target Corporation and each Subsidiary of Target Corporation
owns, or holds under valid lease agreements, all real and personal properties
necessary to operate its business as currently conducted and with respect to the
leased properties, enjoy peaceful and undisturbed possession of such properties
under such leases, other than any leased properties that, individually or in the
aggregate, are not material to Target Corporation and any Subsidiary of Target
Corporation.
Section 2.16 Permits. Except as set forth in Schedule 2.16, Target
Corporation and each Subsidiary of Target Corporation have all permits,
licenses, certificates, approvals, and other authorizations issued by
Governmental Authorities (collectively, the "Permits") that are necessary for
the operation of the business of Target Corporation as currently being
conducted, except where the failure to possess any such permit would not have a
Material Adverse Effect on Target Corporation and its Subsidiaries individually
or taken as a whole. Except as set forth in Schedule 2.16, the consummation of
the transactions contemplated by this Agreement will not result in a default
under, termination of, or a breach or violation of any Permit. Such Permits are
in full force and effect and neither Target Corporation nor any Subsidiary of
Target Corporation has received any notice that any Governmental Authority
intends to suspend, revoke, terminate
16
or not renew any such Permit under which Target Corporation or any of its
Subsidiaries is currently operating. Except as set forth in Schedule 2.16,
Target Corporation or each Subsidiary of Target Corporation are conducting their
operations in compliance with the terms, requirements, criteria, standards and
conditions set forth in the Permits, except for any failure to comply which
would not result in a Material Adverse Effect.
Section 2.17 Agreements, Contracts and Commitments. Except as described in
Schedule 2.17, neither Target Corporation nor any Subsidiary of Target
Corporation is a party to or is bound by (i) any written or oral contract,
agreement or commitment which involves or may involve aggregate future payments
(whether in payment of a debt, as a result of a guarantee or indemnification,
for goods or services or otherwise) by or to Target Corporation of $100,000 or
more and which is not, by its terms, terminable by Target Corporation or one or
more of its Subsidiaries without penalty or payment on 30 days notice or less,
other than purchase orders for the purchase or sale of goods and/or services
entered into by Target Corporation in the ordinary course of business, or (ii)
any employment agreement, non-competition agreement, any loan or credit
agreement, security agreement, indenture, mortgage, pledge or other instrument
evidencing indebtedness (other than equipment purchases or lease agreements
entered into in the ordinary course of business), or any sales representative,
alliance, partnership, joint venture, joint operating or similar agreement. The
Target Corporation has delivered to Acquiring Corporation a correct and complete
copy of each written agreement listed in Schedule 2.17 (as amended to date) and
a written summary setting forth the terms and conditions of each oral agreement
referred to in Schedule 2.17. With respect to each such agreement: (A) the
agreement is Enforceable against Target Corporation or its Subsidiaries, as the
case may be; (B) to the Knowledge of Target Corporation, the agreement will
continue to be Enforceable against the other parties thereto following the
consummation of the transactions contemplated hereby; (C) neither Target
Corporation nor any Subsidiary of Target Corporation is in breach under any
material provision of or is not in default in any material respect under the
terms of, any such contract, agreement or commitment described in Schedule 2.17,
and to the Knowledge of Target Corporation, no event has occurred and no
condition exists which, after notice or lapse of time or both, would constitute
such a material breach or default by Target Corporation or its Subsidiaries, or
permit termination, modification, or acceleration, under any such contract,
agreement or commitment; (D) to the Knowledge of Target Corporation, no third
party is in breach of or in default under the terms of any such contract,
agreement or commitment, or permit termination, modification, or acceleration,
under the agreement; and (E) to the Knowledge of Target Corporation, no party
has repudiated any provision of any such contract, agreement or commitment.
Section 2.18 Undisclosed Liabilities. Except as set forth on Schedule
2.18, to Target Corporation's Knowledge, Target Corporation and its Subsidiaries
have no Liabilities except for Liabilities (i) reflected or reserved for in the
Target Corporation's Financial Statements, (ii) that have arisen since the
Interim Balance Sheet Date in the ordinary course of business consistent with
past practice, (iii) contemplated by this Agreement or described in the
Schedules hereto, (iv) under contracts, agreements or leases not required to be
disclosed on the Schedules hereto or (v) for performance obligations after the
Closing under contracts, agreements or leases whether or not such contracts,
agreements or leases are required to be disclosed on the Schedules hereto.
17
Section 2.19 Notes and Accounts Receivable. Except as set forth in
Schedule 2.19, all notes and accounts receivable of Target Corporation and its
Subsidiaries reflected on their books and records represent valid obligations
arising from sales actually made in the ordinary course of business, subject
only to returns in the ordinary course of business and the reserve for bad debts
set forth on the Closing Balance Sheet. The parties acknowledge and agree that
(i) to the extent of any Accounting Conflict, the Accounting Practices of Target
Corporation shall control, (ii) to the extent of any Accounting Conflict, the
Accounting Practices of Acquiring Corporation shall not apply to the Target
Corporation's notes and accounts receivable (or other relevant matters), and
(iii) to the extent of any Accounting Conflict, the failure to apply Acquiring
Corporation's Accounting Practices shall not constitute a breach of, or
inaccuracy in, any of the representations or warranties of Target Corporation
contained in this Agreement.
Section 2.20 Real Property. Schedule 2.20 lists and describes briefly all
real property that any of Target Corporation and its Subsidiaries owns or
leases.
(a) Except as set forth on Schedule 2.20, with respect to each such
parcel of owned real property: (i) the identified owner has good and
marketable title to the parcel of real property, free and clear of any
liens, claims and encumbrances other than Permitted Liens; (ii) there are
no pending or, to the Knowledge of Target Corporation, threatened
condemnation proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting adversely the current use,
occupancy, or value thereof; (iii) to the Knowledge of Target Corporation,
without any investigation or inquiry, the legal description for the parcel
contained in the deed thereof describes such parcel fully and adequately,
the buildings and improvements are located within the boundary lines of
the described parcels of land, are not in violation of applicable setback
requirements, zoning laws, and ordinances (and none of the properties or
buildings or improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications), and do not
encroach on any easement which may burden the land, and the land does not
serve any adjoining property for any purpose inconsistent with the use of
the land, and the property is not located within any flood plain or
subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained; (iv) all facilities
have received all approvals of governmental authorities (including
licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations, except where the failure of which
would not have a Material Adverse Effect on Target Corporation and its
Subsidiaries individually or taken as a whole; (iv) there are no leases,
subleases, licenses, concessions, or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any
portion of the parcel of real property; (v) there are no outstanding
options or rights of first refusal to purchase the parcel of real
property, or any portion thereof or interest therein; and (vi) all
facilities located on the parcel of real property are supplied with
utilities and other services necessary for the operation of such
facilities as presently used.
(b) Except as set forth on Schedule 2.20, with respect to each such
parcel of leased or subleased property: (i) the lease or sublease is
Enforceable against
18
Target Corporation or its Subsidiaries, as the case may be; (ii) to the
Knowledge of Target Corporation, the lease or sublease will continue to be
Enforceable against the other parties thereto following consummation of
the transactions contemplated hereby; (iii) none of Target Corporation and
its Subsidiaries is in breach of or in default under any lease or sublease
and, to the Knowledge of Target Corporation, no other party to the lease
or sublease is in breach or default, and to the Knowledge of Target
Corporation, no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination, modification,
or acceleration thereunder; (iv) none of Target Corporation and its
subsidiaries has repudiated any provision of an lease or sublease and, to
the Knowledge of Target Corporation, no other party to the lease or
sublease has repudiated any provision thereof; (v) there are no disputes,
oral agreements, or forbearance programs in effect as to the lease or
sublease; (vi) none of Target Corporation and its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold or subleasehold; (vii) all facilities leased
or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with
the operation thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations, except where the failure of
which would not have a Material Adverse Effect on Target Corporation and
its Subsidiaries individually or taken as a whole; and (viii) all
facilities leased or subleased thereunder are supplied with utilities and
other services necessary for the operation of said facilities as presently
used.
Section 2.21 Condition of Tangible Assets. Target Corporation and its
Subsidiaries own or lease, all buildings, machinery, equipment, and other
tangible assets necessary for the conduct of their businesses as currently
conducted and such assets are in good operating condition and repair (subject to
normal wear and tear), and are suitable for the purposes for which they
presently are used.
Section 2.22 Inventory. Except as set forth on Schedule 2.22, the
inventory of Target Corporation and its Subsidiaries can be sold to customers or
returned to the applicable manufacturer or supplier for a credit, subject only
to the inventory reserve set forth on the Closing Balance Sheet. The parties
acknowledge and agree that (i) to the extent of any Accounting Conflict, the
Accounting Practices of Target Corporation shall control, (ii) to the extent of
any Accounting Conflict, the Accounting Practices of Acquiring Corporation shall
not apply to the Target Corporation's inventory (or other relevant matters), and
(iii) to the extent of any Accounting Conflict, the failure to apply Acquiring
Corporation's Accounting Practices shall not constitute a breach of, or
inaccuracy in, any of the representations or warranties of Target Corporation
contained in this Agreement.
Section 2.23 Insurance. Schedule 2.23 sets forth the following information
with respect to each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which any of Target Corporation and its Subsidiaries has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
during the period beginning May 1, 2001 and ending on the date hereof: (i) the
name, address, and telephone number of the agent; (ii) the name of the insurer,
the name of the policyholder, and the name of each covered insured; (iii) the
policy number and the period
19
of coverage; (iv) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and (v) a description of any retroactive premium adjustments or other
loss-sharing arrangements. With respect to each such insurance policy: (A)
neither any of Target Corporation and its Subsidiaries nor to the Knowledge of
Target Corporation any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and to the Knowledge of Target Corporation no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; (B) to the
Knowledge of Target Corporation, no party to the policy has repudiated any
provision thereof; and (C) to the Knowledge of Target Corporation, no notices
have been received indicating that the insurance policy is not currently in
effect.
Section 2.24 Guaranties. Except as set forth on Schedule 2.24, none of the
Target Corporation and its Subsidiaries is contractually liable, or has
otherwise agreed in writing to be liable, for (i) any indebtedness for borrowed
money of a third party or (ii) any other contractual obligation of a third
party.
Section 2.25 Business Relationships. None of the shareholders of Target
Corporation and their Affiliates has been involved in any business arrangement
or relationship with any of Target Corporation and its Subsidiaries within the
past 12 months, and none of the shareholders of Target Corporation and their
Affiliates owns any asset, tangible or intangible, which is used in the business
of any of Target Corporation and its Subsidiaries.
Section 2.26 Chargebacks. Except as set forth on Schedule 2.26, none of
Target Corporation and its Subsidiaries has any Liability arising out of any
chargebacks (as the term is commonly understood within the industry of Target
Corporation) to manufacturers or suppliers of products sold, leased, delivered
or distributed by any of Target Corporation and its Subsidiaries, subject to the
reserve for chargebacks set forth on the Closing Balance Sheet as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of Target Corporation and its Subsidiaries.
Section 2.27 Disclosure. To the Knowledge of Target Corporation, the
representations and warranties set forth in Article II of this Agreement do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the representations and warranties set forth in
Article II, in light of the circumstances under which such representations and
warranties were made, not misleading.
Section 2.28 Disclaimer of Additional and Implied Warranties. Target
Corporation is making no representations or warranties, express or implied, of
any nature whatsoever except as specifically set forth in Article II of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
ACQUIRING CORPORATION AND NEWCO
20
Acquiring Corporation and Newco hereby jointly and severally make the
representations and warranties set forth in this Article III to Target
Corporation.
Section 3.1 Organization and Authority.
(a) Acquiring Corporation is a Delaware corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and Newco is an Arkansas corporation duly organized, validly
existing and in good standing under the laws of the State of Arkansas.
Each of Acquiring Corporation and Newco has all requisite corporate power
and authority to carry on its business as it is now being conducted, and
to own, lease and operate its properties and assets, and to perform all
its obligations under the agreements and instruments to which it is a
party or by which it is bound. Each of Acquiring Corporation and Newco is
duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which the
properties and assets owned, leased or operated by it or the nature of the
business conducted by it make such qualification necessary, except in such
jurisdictions where the failure to be duly qualified or in good standing
does not and would not result in a Material Adverse Effect.
(b) True, correct and complete copies of the Certificate or Articles
of Incorporation and Bylaws of Acquiring Corporation and Newco, with all
amendments thereto through the date of this Agreement, have been delivered
by Acquiring Corporation to Target Corporation.
Section 3.2 Authority Relative to Agreement. Acquiring Corporation and
Newco both have full corporate power and authority to execute and deliver this
Agreement, and no further corporate proceedings on the part of Acquiring
Corporation or Newco are necessary to consummate the transactions contemplated
hereby, which have been duly and validly authorized by the Board of Directors of
Acquiring Corporation and the Board of Directors and shareholders of Newco,
respectively. This Agreement has been duly and validly executed and delivered by
Acquiring Corporation and Newco, and this Agreement constitutes the valid and
binding obligation of Acquiring Corporation and Newco enforceable jointly and
severally against Acquiring Corporation and Newco in accordance with its terms,
subject to the effect of bankruptcy, insolvency, reorganization, moratorium, or
other similar laws relating to creditors' rights generally and general equitable
principles, and subject to such approval of regulatory agencies as may be
required, and subject to the regulatory requirements of the HSR Act.
Section 3.3 No Violation. Neither the execution, delivery nor performance
of this Agreement, in its entirety, nor the consummation of the transactions
contemplated hereby, as of the Closing Date, (i) to the Knowledge of Acquiring
Corporation or Newco, violates ("Violation") in any material respect any law,
order, writ, judgment, injunction, award, decree, rule, statute, ordinance or
regulation applicable to Acquiring Corporation or Newco, (ii) is in conflict
with, results in a breach or termination of any provision of, causes the
acceleration of the maturity of any debt or obligation pursuant to, constitutes
a default (or gives rise to any right of termination, cancellation or
acceleration) under, or results in the creation of any security interest, lien,
charge or other encumbrance upon any currently owned property of Acquiring
Corporation or Newco pursuant to, any terms, conditions or provisions of any
note, license, instrument,
21
indenture, mortgage, deed of trust or other agreement or understanding or any
other restriction of any kind or character, to which Acquiring Corporation or
Newco is a party or by which any currently owned property of Acquiring
Corporation or Newco is subject or bound (collectively, "Default"), or (iii)
conflicts ("Conflict") with or results in any breach of any provision of the
Certificate or Articles of Incorporation or Bylaws of Acquiring Corporation or
Newco, which Violation, Default or Conflict could reasonably be expected to have
a Material Adverse Effect on Acquiring Corporation or Newco, collectively.
Section 3.4 Consents and Approvals. Except as set forth on Schedule 3.4
and except for filing a Notification and Report Form pursuant to the applicable
requirements of the HSR Act, no prior consent, approval or authorization of, or
declaration, filing or registration with any person, entity or authority,
domestic or foreign, is required of or by Acquiring Corporation or Newco in
connection with the execution, delivery and performance by Acquiring Corporation
and Newco of this Agreement and the transactions contemplated hereby.
Section 3.5 Investment Intent.
(a) Acquiring Corporation is acquiring the shares of Common Stock of
Target Corporation (for purposes of this Section, "Target Shares") as
contemplated by this Agreement for its own account for investment and not
with a view toward resale or redistribution in a manner which would
require registration under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and Acquiring
Corporation does not presently have any reason to anticipate any change in
its circumstances or other particular occasion or event which would cause
it to sell Target Shares or any part thereof or interest therein.
Acquiring Corporation has not offered or sold Target Shares or any part
thereof or interest therein, and has no present intention of dividing
Target Shares with others or of reselling or otherwise disposing of Target
Shares or any part thereof or interest therein either currently or after
the passage of a fixed or determinable period of time or upon the
occurrence or nonoccurrence of any predetermined event or circumstance.
(b) The Acquiring Corporation acknowledges that (i) its investment
in Target Corporation involves a high degree of risk and (ii) it
understands that the purchase of Target Shares is an illiquid investment.
(c) Each of Acquiring Corporation and Newco acknowledges that Target
Corporation has made available to each of Acquiring Corporation and Newco
the opportunity to evaluate the merits and risks associated with ownership
of Target Shares, including information related to the financial position
and results of operations of Target Corporation. Specifically, each of
Acquiring Corporation and Newco acknowledges receipt of Target
Corporation's Financial Statements and each of Acquiring Corporation and
Newco has had access to officers of Target Corporation to make such
further inquiry as each of Acquiring Corporation and Newco has deemed
appropriate. Each of Acquiring Corporation and Newco further acknowledges
that there can be no assurance that the future results of Target
Corporation's operations or the operations of any Subsidiary of Target
Corporation will be as contained in any of the historical information
22
provided to each of Acquiring Corporation and Newco. Each of Acquiring
Corporation and Newco represents that it has made other investments of a
similar nature or, by reason of each of Acquiring Corporation's and
Newco's business and financial experience and of the business and
financial experience of those persons it has retained to advise it with
respect to its purchase and ownership of Target Shares, it is a
sophisticated, well-informed investor and has acquired the capacity to
protect its own interest in investments of this nature. In reaching the
conclusion that it desires to acquire Target Shares, each of Acquiring
Corporation and Newco has carefully evaluated its financial resources and
investment position, and the risks associated with this investment and
acknowledges that it is able to bear the economic risks of this
investment.
Section 3.6 Financing. Acquiring Corporation and Newco have, or will have
at Closing, sufficient capital resources to enable Acquiring Corporation and
Newco to pay the Merger Consideration (as adjusted in Section 1.8) and the
Indebtedness, in each case in accordance with Section 1.7, and to effect the
other transactions contemplated by this Agreement on the Closing Date.
Section 3.7 Disclosure. To the Knowledge of Acquiring Corporation and
Newco, the representations and warranties set forth in Article III of this
Agreement do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the representations and
warranties set forth in Article III, in light of the circumstances under which
such representations and warranties were made, not misleading.
Section 3.8 Disclaimer of Additional and Implied Warranties. Each of
Acquiring Corporation and Newco is making no representations or warranties,
express or implied, of any nature whatsoever except as specifically set forth in
Article III of this Agreement.
ARTICLE IV
COVENANTS OF TARGET CORPORATION
Section 4.1 Meeting of Target Corporation Shareholders. Target Corporation
shall duly call a meeting of its shareholders in compliance with the ABCA and
the applicable provisions of Target Corporation's Articles of Incorporation and
Bylaws, such shareholders' meeting to be held not later than thirty (30) days
after the date hereof for the purpose of voting upon this Agreement, the
transactions contemplated hereunder and such other matters relating to this
Agreement, if any, as shall be necessary or advisable in the reasonable opinion
of Target Corporation, and Target Corporation shall, through its board of
directors, recommend to its shareholders approval (and not withdraw such
recommendation) of such matters, subject to the provisions of Section 5.4.
Section 4.2 Further Affirmative Covenants of Target Corporation. For so
long as this Agreement is in effect, Target Corporation, from the date of this
Agreement to the Closing, except as specifically contemplated by this Agreement
or as otherwise agreed to in writing by Acquiring Corporation and Newco, shall:
(a) comply with all material contractual obligations applicable to
it;
23
(b) comply in all material respects with all laws, statutes and
regulations applicable to it and the conduct of its business, including
the timely payment of all taxes (except for those being contested in good
faith);
(c) maintain all of its assets in good repair, order and condition,
reasonable wear and tear excepted, and maintain its insurance coverages in
effect before the date hereof or obtain comparable insurance coverages
from reputable insurers which, in respect to amounts, types and risks
insured, are consistent with its coverages in effect before the date
hereof;
(d) promptly notify Acquiring Corporation and Newco in writing upon
obtaining Knowledge of any default, event of default or condition which
with the passage of time or giving of notice would constitute an
additional default or event of default under any of Target Corporation's
contractual obligations, which default, event of default or condition
could have a Material Adverse Effect on the financial condition of Target
Corporation or any Subsidiary, taken individually or as a whole;
(e) promptly notify Acquiring Corporation and Newco in writing upon
obtaining Knowledge of any material pending or threatened litigation
against Target Corporation or any of its Subsidiaries;
(f) maintain and preserve intact its corporate existence, business
organization, assets, licenses, permits, authorizations and business
opportunities;
(g) use commercially reasonable efforts to maintain and retain its
employees and customer relationships, provided that Target Corporation and
its Subsidiaries shall not be required to incur any costs or expenses to
satisfy its obligations under this Section 4.2(g) outside of the ordinary
course of business consistent with past practice;
(h) maintain good accounting practices;
(i) promptly notify Acquiring Corporation and Newco in writing upon
Target Corporation's obtaining Knowledge (i) of any condition or event
which constitutes a material breach of any of the representation,
warranties, covenants or agreements set forth in this Agreement,
specifying the nature and period of existence of any such condition or
event and what action Target Corporation has taken, is taking or proposes
to take with respect thereto or (ii) of any condition or event which could
have a Material Adverse Effect;
(j) in good faith and in a timely manner (i) cooperate with
Acquiring Corporation and Newco in satisfying the conditions in this
Agreement, (ii) assist Acquiring Corporation and Newco in obtaining as
promptly as possible all consents, approvals, authorizations and rulings,
whether regulatory, corporate or otherwise, as are reasonably necessary
for Acquiring Corporation, Newco and Target Corporation (or any of them)
to carry out and consummate the transactions contemplated by this
Agreement, (iii) furnish information concerning Target Corporation not
previously provided to
24
Acquiring Corporation and Newco necessary or desirable for inclusion in
any required filings or applications, and (iv) perform all of its
obligations hereunder including, but not limited to, giving any required
notices to third parties and Governmental Authorities, using its
commercially reasonable efforts to obtain from any third party or any
Governmental Authority any consents, authorizations or approvals that are
reasonably necessary in connection with consummation of the Merger; and
(k) hold a shareholder's meeting in accordance with Section 4.1 for
the purpose of approving the Merger and related items in compliance with
the ABCA and the applicable provisions of Target Corporation's Articles of
Incorporation and Bylaws.
Section 4.3 Negative Covenants of Target Corporation. For so long as this
Agreement is in effect, Target Corporation shall not, and shall cause each of
its Subsidiaries to not, from the date of this Agreement to the Closing, except
as specifically contemplated by this Agreement, as disclosed in the Schedules to
this Agreement or as otherwise agreed to in writing by Acquiring Corporation and
Newco:
(a) make any amendments to its Articles of Incorporation or Bylaws
or any other charter document;
(b) make any capital expenditures not in the ordinary course of
business, except for any capital expenditure not in excess of $25,000 or
in the aggregate of $75,000;
(c) enter into any contract or transaction outside the ordinary
course of business or with any Affiliate of Target Corporation except for
(i) the Transaction Documents to which Target Corporation is a party, (ii)
other contracts entered into pursuant to this Agreement, (iii) agreements
entered into in connection with, or amendments to, the Target
Corporation's Stock Appreciation Incentive Plan, and (iv) transaction
bonus agreements or a transaction bonus plan related to the Merger,
provided that any payments required under any document described in
clauses (iii) and (iv) shall be obligations of the Target Corporation to
be paid by Target Corporation in accordance with the terms of such
document, and such payments will be included in the calculation of Net
Working Capital for purposes of the working capital adjustment to the
Merger Consideration under Section 1.8;
(d) contract to create any mortgage, pledge, lien, security interest
or encumbrance, restriction, or charge of any kind on its assets (other
than liens existing as of the date hereof, or liens created in the
ordinary course of business);
(e) incur any indebtedness for borrowed money not in the ordinary
course of business;
(f) issue any equity security; or
25
(g) settle or compromise any claim for dissenters' rights in respect
of the Merger prior to the Effective Time without the prior written
consent of Acquiring Corporation.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Certain Taxes.
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes (other than income taxes) and fees (including any
penalties and interest), if any, incurred in connection with this
Agreement shall be paid by Acquiring Corporation. The shareholders of
Target Corporation will, at their own expense, prepare and file all
necessary Tax Returns and other documentation with respect to and pay when
due, all such transfer, documentary, sales, use, stamp, registration and
other Taxes and fees, and, if required by applicable law, Acquiring
Corporation will, and will cause its Affiliates to, join in the execution
of any such Tax Returns and other documentation.
(b) Without the prior written consent of Acquiring Corporation,
neither Target Corporation nor any of its Subsidiaries shall make or
change any election, change an annual accounting period, adopt or change
any accounting method, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment relating to Target
Corporation or any of its Subsidiaries, surrender any right to claim a
refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to Target or any
of its Subsidiaries, or take any other similar action relating to the
filing of any Tax Return or the payment of any Tax, if such election,
adoption, change, amendment, agreement, settlement, surrender, consent or
other action would have the effect of increasing the Tax liability of
Target Corporation or any of its Subsidiaries for any period ending after
the Closing Date or decreasing any Tax attribute of Target or any of its
Subsidiaries existing on the Closing Date.
(c) In the case of any taxable period that includes (but does not
end on) the Closing Date (a "Straddle Period"), the amount of any Taxes
based on or measured by income or receipts of Target Corporation and its
Subsidiaries for the pre-Closing tax period shall be determined based on
an interim closing of the books as of the close of business on the Closing
Date (and for such purpose, the taxable period of any partnership or other
pass-through entity in which Target Corporation or any of its Subsidiaries
holds a beneficial interest shall be deemed to terminate at such time) and
the amount of other Taxes of Target Corporation and its Subsidiaries for a
Straddle Period which relate to the pre-Closing tax period shall be deemed
to be the amount of such Tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days in the taxable
period ending on the Closing Date and the denominator of which is the
number of days in such Straddle Period.
26
(d) Acquiring Corporation shall prepare or caused to be prepared and
file or caused to be filed all Tax Returns for Target Corporation and its
Subsidiaries which are filed after the Closing Date. At least thirty (30)
days before the due date for any Tax Return described in the preceding
sentence that includes any pre-Closing Tax period, Acquiring Corporation
shall submit a copy of the Tax Return to the Shareholder Representative
for its review. Without the prior written consent of the Shareholder
Representative, which consent may not be unreasonably withheld, the
Acquiring Corporation may not file or amend any Tax Return that may
increase either the Tax Liabilities of the shareholders of Target
Corporation or such shareholders' obligations under this Agreement.
Acquiring Corporation, Target Corporation and its Subsidiaries, and the
shareholders of Target Corporation shall reasonably cooperate, as and to
the extent reasonably requested by the other Party, in connection with the
filing of Tax Returns pursuant to this paragraph and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other Party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Target Corporation and its
Subsidiaries and the shareholders of Target Corporation agree (A) to
retain all books and records with respect to Tax matters pertinent to
Target Corporation and its Subsidiaries relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Acquiring Corporation or the
shareholders of Target Corporation, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the
other Party reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if the other Party so requests,
Target Corporation and its Subsidiaries or the shareholders of Target
Corporation, as the case may be, shall allow the other Party to take
possession of such books and records.
(e) Acquiring Corporation and the shareholders of Target Corporation
further agree, upon request, to use reasonable efforts to obtain any
certificate or other document from any governmental authority or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
Section 5.2 Access To, and Information Concerning, Properties and Records.
(a) During the pendency of the transactions contemplated hereby,
Target Corporation shall, to the extent not prohibited by law or contract
existing prior to the date hereof, give to Acquiring Corporation and
Newco, their legal counsel, accountants and other representatives full
access, upon reasonable request and at reasonable times, throughout the
period prior to the Closing, to all of Target Corporation's and each
Subsidiary's properties, books, contracts, commitments and records, permit
Acquiring Corporation, Newco and such representatives to make such
inspections (including, without limitation, with regard to currently owned
properties and certain properties leased by Target Corporation or any
Subsidiary of Target Corporation
27
(collectively, the "Real Property"), physical inspection of the surface
and subsurface thereof as they may reasonably require and furnish to
Acquiring Corporation, Newco and such representatives during such period
all such information concerning Target Corporation, its Subsidiaries and
their respective affairs as Acquiring Corporation and Newco may reasonably
request.
(b) All information disclosed by Target Corporation to Acquiring
Corporation and Newco and their respective directors, officers, advisors,
representatives or agents (collectively, "Representatives"), including
without limitation, information reasonably requested concerning the
facilities, assets, records, legal compliance, financial condition, and
results of operations of Target Corporation (referred to herein as
"Evaluation Material"), shall be held strictly confidential by Acquiring
Corporation and Newco and their Representatives, shall be used solely for
purposes of evaluating the transactions contemplated hereby, and shall not
be disclosed to any third party, except where such disclosure may be
required by applicable law, regulation or court order. The term
"Evaluation Material" shall also include all reports, analyses, notes or
other information, regardless of the form in which communicated or
maintained, that are based on, contain or reflect any Evaluation Material;
provided, however, that Evaluation Material shall not include the
following:
(i) information that is or becomes generally available to the public
other than as a result of a disclosure by Acquiring Corporation, Newco, or their
Representatives;
(ii) information that was in the possession of Acquiring
Corporation, Newco or their Representatives prior to disclosure by Target
Corporation, its representatives or its agents; or
(iii) information that is or becomes available to Acquiring
Corporation, Newco or their Representatives on a non-confidential basis from a
source other than Target Corporation, its representatives or its agents.
(c) Without the express written consent of Target Corporation,
Acquiring Corporation and Newco each agrees to maintain in strict
confidence and not disclose to any other person or entity any Evaluation
Material other than disclosures required to obtain the approvals for the
transactions contemplated hereby, disclosures to those Representatives who
have a need to know, or any other disclosure required by applicable law,
regulation or court order, provided that each of Acquiring Corporation and
Newco agrees to provide Target Corporation with prompt prior written
notice of any disclosure required by applicable law, regulation or court
order so that an appropriate protective order may be sought by Target
Corporation. Each of Acquiring Corporation and Newco shall be responsible
for any breach of this Section 5.2(c) by any of Acquiring Corporation's or
Newco's Representatives. In the event this Agreement is terminated
pursuant to the provisions of Article VII, upon the written request of
Target Corporation, each of Acquiring Corporation and Newco agrees to
return to Target Corporation all copies of the Evaluation Material,
together with all extracts or other reproductions thereof in the
possession of Acquiring Corporation, Newco or their Representatives.
28
(d) Notwithstanding anything set forth herein to the contrary
(including the confidentiality provisions set forth in Sections 5.2(b) and
5.2(c)) or in any other agreement to which a party hereto is bound, the
parties hereto (and any employee, representative or other agent of any of
the parties) are hereby expressly authorized to disclose the "tax
treatment" and "tax structure" (as those terms are defined in Treas.
Reg. Sections 1.6011-4(c)(8) and (9) respectively) of the Merger and all
materials of any kind (including opinions or other tax analyses) that are
provided to the parties relating to such "tax treatment" or "tax
structure" of the Merger; provided, however, that (a) such disclosure
shall not be made until the earlier of (i) the date of the public
announcement of discussions relating to the transaction, (ii) the date of
the public announcement of the transaction, or (iii) the date of the
execution of an agreement to enter into the transaction, (b) "tax
treatment" and "tax structure" shall not include the identity of any
existing or future party (or any Affiliate thereof) to this Agreement, and
(c) this provision shall not permit disclosure to the extent that
nondisclosure is required to comply with any applicable federal or state
securities laws.
Section 5.3 Good Faith Efforts to Consummate Transactions. Subject to the
terms and conditions of this Agreement, all parties hereto agree to use
reasonable good faith efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper, or advisable under this
Agreement and applicable laws and regulations, to consummate and make effective,
as soon as practicable after the date hereof, the transactions contemplated by
this Agreement, including, without limitation, securing all third-party or
regulatory approvals necessary to consummate the transactions provided herein,
to satisfy the other conditions to Closing contained herein, and to finalize the
ancillary documents related to the acquisition by Target Corporation of HPA's
50% ownership of the outstanding equity of Xxxxx Heartland L.L.C., each as soon
as reasonably practicable. Each party agrees to make copies of its respective
regulatory filings and related correspondence to regulatory agencies relating to
the transactions contemplated hereunder available to the other parties.
Section 5.4 No Solicitation.
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to its terms, Target Corporation
agrees that it will not and will not permit any of its Subsidiaries, or
any of its or their officers, directors, employees, representatives,
agents, or Affiliates, including, without limitation, any investment
banker, attorney or accountant retained by Target Corporation or any of
its Subsidiaries (collectively, "Target's Representatives") to, directly
or indirectly, (i) initiate, solicit, encourage or otherwise facilitate
(including by way of furnishing information), any inquiries or the making
of any proposal or offer that constitutes, or may reasonably be expected
to lead to an Acquisition Proposal (as defined below), or (ii) enter into
or maintain or continue discussions or negotiate with any Person in
furtherance of such inquiries or to obtain an Acquisition Proposal, or
(iii) agree to, approve, recommend, or endorse any Acquisition Proposal,
or authorize or permit any of its or their Subsidiaries or Target's
Representatives to take any such action and Target Corporation shall
promptly notify Acquiring Corporation in writing of any such proposals
received by Target Corporation or any of its Subsidiaries or Target's
29
Representatives, relating to any of such matters; provided, however, that
nothing contained in this Agreement shall prohibit the Board of Directors
of Target Corporation from (A) furnishing information to, or engaging in
discussions or negotiations with, any Person in response to an unsolicited
bona fide written Acquisition Proposal, or (B) recommending such an
unsolicited bona fide written Acquisition Proposal to the shareholders of
Target Corporation, if and only to the extent that (i) the Board of
Directors of Target Corporation concludes in good faith (after
consultation with its financial advisors) that such Acquisition Proposal
would constitute a Superior Proposal (as hereinafter defined), and (ii)
the Board of Directors of Target Corporation determines in good faith
(after consultation with outside legal counsel) that the failure to take
such action would result in a breach by the Board of Directors of Target
Corporation of its fiduciary duties to Target Corporation's shareholders
under applicable law, and (iii) prior to furnishing such information to,
or entering into discussions or negotiations with, such Person, Target
Corporation provides prompt written notice to Acquiring Corporation to the
effect that it is furnishing information to, or entering into discussions
or negotiations with, such Person (which notice shall identify the nature
and material terms of the proposal), and (iv) prior to providing any
information or data to any Person in connection with an Acquisition
Proposal by any such Person, the Board of Directors of Target Corporation
receives from such Person an executed confidentiality agreement with
provisions no less favorable to Target Corporation than the
confidentiality agreement previously entered into between Target
Corporation and Acquiring Corporation in connection with its consideration
of the Merger. Target Corporation agrees that it will, effective as of the
date of this Agreement, immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties
regarding any Acquisition Proposal. Target Corporation agrees to keep
Acquiring Corporation fully and timely informed of the status of any
discussions, negotiations, furnishing of non-public information, or other
activities relating to an Acquisition Proposal.
(b) For purposes of this Agreement, "Acquisition Proposal" means an
inquiry, offer or proposal regarding any of the following (other than the
transactions contemplated by this Agreement) involving Target Corporation
or its Subsidiaries (other than (i) any acquisition proposal submitted by
a Person who also submitted an acquisition proposal pursuant to the terms
of that certain letter of X.X. Xxxxxx Securities Inc. dated August 6, 2003
soliciting acquisition proposals, except to the extent that Target
Corporation is required by applicable law to consider an acquisition
proposal from any such Person, and (ii) any prior acquisition proposal
submitted by any Person prior to the date hereof pursuant to the terms of
that certain letter of X.X. Xxxxxx Securities Inc. dated August 6, 2003
soliciting acquisition proposals): (i) any merger, reorganization,
consolidation, share exchange, recapitalization, business combination,
liquidation, dissolution, or other similar transaction involving, or any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of,
all or any significant portion of the assets or 10% or more of the equity
securities of, Target Corporation or any of its Subsidiaries, in a single
transaction or series of related transactions which could reasonably be
expected to interfere with the completion of the Merger; (ii) any tender
offer or exchange offer for 20 percent or more of the outstanding shares
of capital stock of Target Corporation or the filing of a registration
statement under the Securities Act in connection therewith; or (iii)
30
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(c) For purposes of this Agreement, "Superior Proposal" means a bona
fide Acquisition Proposal made by a third Person that the Board of
Directors of Target Corporation determines in its good faith judgment
(after consultation with its financial advisors) to be more favorable to
Target Corporation's shareholders than the Merger and for which financing,
to the extent required, is then committed or which, in the good faith
judgment of the Board of Directors of Target Corporation (after
consultation with its financial advisors) is reasonably capable of being
obtained by such third Person.
(d) Nothing contained in this Section 5.4 shall prohibit Target
Corporation from making any disclosure to Target Corporation's
shareholders which, in the good faith judgment of the Board of Directors
of Target Corporation based on the advice of outside counsel, is required
under applicable law; provided that Target Corporation does not withdraw
or modify, or propose to withdraw or modify, its position with respect to
the Merger or approve or recommend, or propose to approve or recommend, an
Acquisition Proposal unless Target Corporation and its Board of Directors
have complied with all the provisions of this Section 5.4.
(e) In the event that this Agreement is terminated pursuant to
Section 7.1(f), then Target Corporation shall pay to Acquiring Corporation
a termination fee of $2,000,000 in cash, payable within ten (10) days
following the termination of this Agreement.
(f) Nothing in this Agreement shall prohibit Target Corporation and
Target Corporation's Representatives from initiating or maintaining
negotiations with respect to, or agreeing to, approving or entering into,
an agreement related to the sale of the equity or assets of RxDirect;
provided, however, that Target Corporation shall not enter into any
definitive agreement related to any such sale without first obtaining the
approval of Acquiring Corporation, which approval shall not be
unreasonably withheld.
Section 5.5 HSR Notifications. Acquiring Corporation, Newco and Target
Corporation hereby agree to file the Notification and Report Form pursuant to
the applicable provisions of the HSR Act, in a timely manner. Acquiring
Corporation shall pay any filing fee associated with such filing; provided,
however, that Target Corporation shall reimburse Acquiring Corporation for fifty
percent (50%) of any such fee in the event this Agreement is terminated pursuant
to Section 7.1(b) hereof.
Section 5.6 Employee Matters. Acquiring Corporation shall honor the
obligations of Target Corporation under the provisions of Target Corporation's
Benefit Plans and those agreements with employees listed on Schedule 2.12. For a
period of one (1) year after the Effective Time, Acquiring Corporation further
agrees to maintain and provide to the employees of Target Corporation who remain
employees of the Surviving Corporation after the Effective Time employee
benefits substantially similar to those provided to Acquiring Corporation's
similarly situated employees.
31
Section 5.7 Indemnification of Officers and Directors.
(a) The Articles of Incorporation and Bylaws of the Surviving
Corporation shall contain at the Effective Time the provisions with
respect to indemnification and exculpation of present and former officers,
directors and employees of Target Corporation (the "Indemnified
Personnel") set forth in the Articles of Incorporation and Bylaws of the
Surviving Corporation attached as Exhibit B and Exhibit C, respectively,
which provisions shall not be amended, repealed or otherwise modified for
a period of four (4) years after the Effective Time in any manner that
would adversely affect the rights thereunder of persons who at any time
prior to the Effective Time were identified as prospective indemnitees
under the Articles of Incorporation or Bylaws of Target Corporation in
respect of actions or omissions occurring at or prior to the Effective
Time (including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by applicable law (it
being understood and agreed that the Surviving Corporation's
indemnification obligations shall continue indefinitely with respect to
any indemnity claim for which notice is given within such four (4) year
period). In addition to the indemnification and exculpation obligations
set forth in the Articles of Incorporation and Bylaws, in the event any
claim, action, suit, proceeding or investigation is brought against any
Indemnified Personnel (whether arising before or after the Effective
Time), (i) the Indemnified Personnel may retain counsel satisfactory to
such Indemnified Personnel and Surviving Corporation, and Surviving
Corporation shall pay all reasonable fees and expenses of such counsel
promptly as statements therefor are received and otherwise advance to such
Indemnified Personnel upon request reimbursement of reasonable documented
expenses incurred, in either case, to fullest extent and in the manner
permitted by applicable law, and (ii) Surviving Corporation will use all
reasonable efforts to assist in the vigorous defense of any such claim,
action, suit, proceeding or investigation, including, but not limited to,
making available its personnel, and provide such testimony and access to
its books and records as shall be reasonably necessary to such defense.
Acquiring Corporation shall cause the Surviving Corporation to fulfill
such indemnification and exculpation obligations.
(b) Notwithstanding any contrary provision of this Agreement, on or
before the Closing Date, Acquiring Corporation shall purchase insurance
coverage extending for a period of two (2) years the directors' and
officers' liability insurance coverage of Target Corporation (covering
past or future claims with respect to periods prior to and including the
Closing Date); provided that (i) such insurance coverage shall be
effective as of the Closing Date, and Acquiring Corporation shall have no
obligation hereunder in the event that the Merger is not consummated, and
(ii) the annual premium payable for such insurance shall not exceed the
last annual premium paid by Target Corporation for such coverage (but in
such case the Surviving Company shall purchase as much coverage as
possible within such price limits).
(c) This Section 5.7 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Personnel referred to herein, their
heirs and personal
32
representatives and shall be binding on Acquiring Corporation and the
Surviving Corporation and their respective successors and assigns.
Section 5.8 Voting Agreement. Concurrent with the execution of this
Agreement or as soon as reasonably practicable thereafter, Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxx and Hibernia, or X.X. Xxxxxx, as successor trustee, shall execute
and deliver to Acquiring Corporation a voting agreement, substantially in the
form of Exhibit J to this Agreement ("Voting Agreement"), whereby Xxxxxxx
Xxxxxxx Xxxxxx Xxxxxx agrees to vote all shares of voting capital stock of
Target Corporation registered in her name or beneficially owned by her as of the
date hereof and any and all other securities of Target Corporation legally or
beneficially acquired by her after the date hereof (hereinafter collectively
referred to as the "Xxxxxx Shares") and Hibernia, as trustee of the Xxxxx
Xxxxxxx Stock Trust No. 2, or X.X. Xxxxxx, as successor trustee, agrees to vote
all shares of voting capital stock of Target Corporation registered in the name
of such trust or beneficially owned by such trust as of the date hereof and any
and all other securities of Target Corporation legally or beneficially acquired
by such trust after the date hereof, each in favor of approval and adoption of
this Agreement and the Merger; provided, however, the Voting Agreement shall
terminate in accordance with its terms if this Agreement is terminated in
accordance with Section 7.1(f).
Section 5.9 Licenses. Prior to Closing and within ninety (90) days
thereafter, Acquiring Corporation shall, or shall cause Surviving Corporation
and/or its subsidiaries to, take all necessary action (including, the
preparation, execution and delivery of any required applications or notices) to
obtain all Licenses (as defined herein) required as a result of the Merger.
Prior to Closing, the Target Corporation and its Subsidiaries, and after
Closing, the Shareholder Representative, shall reasonably cooperate with
Acquiring Corporation or Surviving Corporation, as the case may be, in the
preparation of any required applications or notices in connection with any
License, and take such other actions as may be reasonably requested by Acquiring
Corporation in connection with any License.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or, if permitted by applicable law, waiver of the following
conditions prior to the Closing:
(a) the receipt of regulatory approvals required by applicable law
for the consummation of the transactions contemplated by this Agreement
and the expiration or termination of any applicable waiting period with
respect thereto; provided that this Section 6.1(a) shall not apply to any
License (it being understood and agreed that the condition related to
Licenses is set forth in Section 6.2(g));
(b) the consummation of the Merger will not violate any injunction,
order or decree of any court or governmental body having competent
jurisdiction;
33
(c) the approval of the Merger by Target Corporation's shareholders
entitled to vote thereon in accordance with the ABCA;
(d) the acquisition by Target Corporation of HPA's 50% ownership of
the outstanding equity of Xxxxx Heartland L.L.C. such that Xxxxx Heartland
L.L.C. is a wholly-owned subsidiary of Target Corporation shall have been
consummated substantially in accordance with the terms of Exhibit A
attached hereto; and
(e) each required party shall have executed and delivered the Escrow
Agreement.
Section 6.2 Conditions to the Obligations of Acquiring Corporation and
Newco to Effect the Merger. The obligations of Acquiring Corporation and Newco
to effect the Merger are subject to the satisfaction or waiver of the following
conditions prior to the Closing:
(a) all representations and warranties of Target Corporation
contained herein, as modified by any related disclosures or exceptions
identified on the Schedules hereto, shall be true and correct as of the
date hereof (subject to Target Corporation's right to cure, prior to the
Closing Date, any inaccuracy or breach of any representation or warranty
set forth herein) and at and as of the Closing Date, with the same force
and effect as though made on and as of the Closing Date, except when any
failure of a representation or warranty to be true and correct would not
result in a Material Adverse Effect;
(b) Target Corporation shall have performed all obligations and
agreements and complied with all covenants and conditions contained in
this Agreement to be performed or complied with by it prior to the Closing
Date, except when any failure to so perform or comply would not result in
a Material Adverse Effect;
(c) Acquiring Corporation and Newco shall have received an opinion,
dated as of the Closing Date, from Xxxxx Xxxxxxx & Xxxx LLP, counsel for
Target Corporation, in substantially the form attached hereto as Exhibit
G;
(d) Acquiring Corporation or Surviving Corporation and each of
Xxxxxxx Xxxxxxx Xxxxxx Xxxxxx, Xxx Xxxxxx and Xxxxxx Xxxxxxx Xxxxxx shall
have entered into a Noncompetition Agreement in substantially the form
attached hereto as Exhibit F;
(e) the holders of not more than ten percent (10%) of the
outstanding shares of Common Stock shall have given notice of their intent
to exercise dissenters' rights under the ABCA, and a certificate to the
foregoing effect dated the Closing Date and signed by the chief executive
officer of Target Corporation shall have been delivered to Acquiring
Corporation;
(f) all consents, authorizations and approvals of third parties and
Governmental Authorities set forth on Schedule 6.2(f) shall have been
obtained; and
34
(g) Acquiring Corporation shall have received from the Target
Corporation and its Subsidiaries a power of attorney permitting Acquiring
Corporation to operate under the Target Corporation's and its
Subsidiaries': (i) Drug Enforcement Administration controlled substances
registration and (ii) various state level controlled substance
registrations and wholesale distributor licenses (the items in (i) and
(ii) shall be referred to collectively as the "Licenses"), such power of
attorney to expire upon the earlier of (x) ninety (90) days after the
Closing Date and (y) the date on which Acquiring Corporation obtains all
Licenses required as a result of the Merger.
Section 6.3 Conditions to the Obligations of Target Corporation to Effect
the Merger. The obligations of Target Corporation to effect the Merger are
subject to the satisfaction or waiver of the following conditions on or prior to
the Closing:
(a) all representations and warranties of each of Acquiring
Corporation and Newco contained herein, as modified by any related
disclosures or exceptions identified on the Schedules hereto, shall be
true and correct as of the date hereof (subject to the right of Acquiring
Corporation and Newco to cure, prior to the Closing Date, any inaccuracy
or breach of any representation or warranty set forth herein) and at and
as of the Closing Date, with the same force and effect as though made on
and as of the Closing Date, except when any failure of a representation or
warranty to be true and correct would not result in a Material Adverse
Effect; and
(b) each of Acquiring Corporation and Newco shall have performed all
obligations and agreements and complied with all covenants contained in
this Agreement to be performed or complied with by it prior to the Closing
Date, except when any failure to so perform or comply would not result in
a Material Adverse Effect.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual written consent executed by the parties and duly
authorized by the Boards of Directors of Acquiring Corporation, Newco and
Target Corporation;
(b) by Acquiring Corporation if there is an inaccuracy or breach of
any representation, warranty or covenant of Target Corporation set forth
in this Agreement which breach has not been cured within fifteen (15) days
following receipt by Target Corporation of notice of such breach and which
breach results in a Material Adverse Effect; provided, however, that
Acquiring Corporation's right to terminate this Agreement in accordance
with this Section 7.1(b) is subject to the waiver provisions set forth in
the first paragraph of Article II;
(c) by Target Corporation if there is an inaccuracy or breach of any
35
representation, warranty or covenant of Acquiring Corporation or Newco set
forth in this Agreement which breach has not been cured within fifteen
(15) days following receipt by Acquiring Corporation or Newco, as
applicable, of written notice of such breach and which breach results in a
Material Adverse Effect;
(d) (i) by Acquiring Corporation or Newco upon written notice to
Target Corporation if any of the conditions in Section 6.1 and Section 6.2
have not been satisfied within sixty (60) days of the date hereof, or such
later date agreed to in writing by Target Corporation, Acquiring
Corporation and Newco, (other than through the failure of Acquiring
Corporation or Newco to comply with its obligations under this Agreement)
and neither Acquiring Corporation nor Newco has waived such condition in
writing on or before the expiration of such sixty (60) day period (or such
later date agreed to in writing by Target Corporation, Acquiring
Corporation and Newco); or (ii) by Target Corporation upon written notice
to Acquiring Corporation and Newco if any of the conditions in Section 6.1
and Section 6.3 has not been satisfied within sixty (60) days of the date
hereof, or such later date agreed to in writing by Target Corporation,
Acquiring Corporation and Newco, (other than through the failure of Target
Corporation to comply with its obligations under this Agreement) and
Target Corporation has not waived such condition in writing on or before
the expiration of such sixty (60) day period (or such later date agreed to
in writing by Acquiring Corporation, Newco and Target Corporation);
provided, however, that, subject to Acquiring Corporation's right of
termination set forth in Section 7.1(g), in the case of either clause (i)
or (ii) above, such sixty (60) day period (or such later date agreed to in
writing by Acquiring Corporation, Newco and Target Corporation) shall
automatically be extended for a period of sixty (60) days, if the delay in
the Effective Time relates to the Notification and Report Form filed
pursuant to the HSR Act;
(e) by Acquiring Corporation, Newco and Target Corporation if any
court of competent jurisdiction in the United States of America or other
(federal or state) governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have been final and
nonappealable;
(f) by Target Corporation, prior to the consummation of the
transactions contemplated hereby, for the purpose of entering into an
agreement with a Person that has made a Superior Proposal; or
(g) by Acquiring Corporation on January 31, 2004 or thereafter, (i)
if Acquiring Corporation has in good faith used commercially reasonable
efforts to obtain at least a thirty (30) day extension of its lenders'
approval necessary for consummation of the Merger (which approval is
currently in effect and is not a condition to the consummation of the
Merger) and (ii) such an extension has not been granted.
Section 7.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1 hereof, this Agreement
shall thereafter become null and
36
void and have no effect, without any liability on the part of any party or its
directors, officers or shareholders, other than the provisions of this Section
7.2, Section 5.2, Section 5.4, Section 8.1 and Article X; provided, however,
that nothing contained in this Section 7.2 shall relieve any party from
liability for any breach or violation of this Agreement, subject to Article VIII
hereof.
Section 7.3 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Board of
Directors of Target Corporation at any time before or after adoption of this
Agreement by the shareholders of Target Corporation but, after any submission of
this Agreement to such shareholders for approval, no amendment shall be made
which reduces the Merger Consideration or which materially and adversely affects
the rights of Target Corporation's shareholders hereunder without any required
approval of such shareholders; provided, however, this Agreement may not be
amended except by an instrument in writing signed on behalf of all the parties.
Section 7.4 Extension; Waiver. At any time prior to the Closing Date, the
parties may (i) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document, certificate
or writing delivered pursuant hereto, or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by or on behalf of such party.
ARTICLE VIII
REMEDIES
Section 8.1 Exclusive Rights and Remedies Prior to Closing Date. Upon
execution of this Agreement and prior to the Closing Date, the exclusive remedy
for any material inaccuracy or breach of any representation, warranty or
covenant in this Agreement by Target Corporation shall be termination of this
Agreement by Acquiring Corporation and Newco in accordance with and subject to
Article VII. This Section 8.1 shall not apply to any breach by Target
Corporation of its obligations under Section 5.4 of this Agreement.
Section 8.2 Indemnification by Shareholders of Target Corporation. Except
as otherwise expressly provided in this Agreement, and subject to Section 8.1
and the other limitations stated in this Article VIII and Article IX, each of
the shareholders of Target Corporation agrees to and shall defend, indemnify and
hold harmless Acquiring Corporation and Newco and their respective affiliates,
for any losses, damages, liabilities, claims, demands, judgments, settlements,
costs or expenses (including reasonable attorneys' fees) ("Losses") relating to,
resulting from or arising out of, directly or indirectly or any allegation by
any third party of, the following:
(a) any inaccuracy in any representation or warranty of Target
Corporation set forth in this Agreement; or
(b) any breach or nonfulfillment of any covenant, agreement or other
obligation of Target Corporation set forth in this Agreement.
37
With respect to matters involving any judicial, administrative, arbitration, or
investigatory proceeding or other proceeding, claim or controversy
(collectively, a "Proceeding") not brought or asserted by third parties, within
ten (10) days after notification from Acquiring Corporation or Newco supported
by reasonable documentation setting forth the nature of the circumstances
entitling Acquiring Corporation or Newco or their respective Affiliates to
indemnity hereunder, the Shareholder Representative shall diligently commence
resolution of such matters in a manner reasonably acceptable to Acquiring
Corporation (or Newco, as applicable) and shall diligently and timely prosecute
such resolution to completion. With respect to those claims that may be
satisfied by payment of a liquidated sum of money, including, without
limitation, claims for reimbursement of expenses incurred in connection with any
circumstances entitling Acquiring Corporation or Newco or their respective
Affiliates to indemnity hereunder, Acquiring Corporation and the Shareholder
Representative shall instruct the Escrow Agent to pay the full amount so claimed
to the extent supported by reasonable documentation within fifteen (15) days of
such resolution. If the Shareholder Representative disputes the right to
indemnity of Acquiring Corporation or Newco or their respective Affiliates in
connection with such claim, the parties shall instruct the Escrow Agent to pay
any undisputed part of such claim, and Acquiring Corporation (or Newco, as
applicable) and the Shareholder Representative shall timely resolve any
remaining dispute. If litigation or any other Proceeding is commenced or
threatened by any third party for which Acquiring Corporation or Newco or their
respective Affiliate is entitled to indemnification under this Section 8.2, the
provisions of Section 8.4 shall control.
Section 8.3 Indemnification by Acquiring Corporation and Newco. Except as
otherwise expressly provided in this Article VIII, beginning on the Closing
Date, each of Acquiring Corporation and Surviving Corporation, jointly and
severally, agrees to and shall defend, indemnify and hold harmless the
shareholders of Target Corporation from and against, and shall reimburse the
shareholders of Target Corporation, for any Losses relating to, resulting from
or arising out of, directly or indirectly, or any allegation by any third party
of, the following:
(a) any inaccuracy in any representation or warranty of Acquiring
Corporation or Newco set forth in this Agreement; or
(b) any breach or nonfulfillment of any covenant, agreement or other
obligation of Acquiring Corporation or Newco set forth in this Agreement.
With respect to a Proceeding not brought or asserted by third parties, within
ten (10) days after notification from Target Corporation, the shareholders of
Target Corporation or the Shareholder Representative on behalf of the
shareholders, supported by reasonable documentation setting forth the nature of
the circumstances entitling such party to indemnity hereunder, Acquiring
Corporation and Newco shall diligently commence resolution of such matters in a
manner reasonably acceptable to such party and shall diligently and timely
prosecute such resolution to completion. With respect to those claims that may
be satisfied by payment of a liquidated sum of money, including, without
limitation, claims for reimbursement of expenses incurred in connection with any
circumstances entitling such party to indemnity hereunder, Acquiring Corporation
and Newco shall pay the full amount so claimed to the extent supported by
reasonable documentation within fifteen (15) days of such resolution. If
Acquiring Corporation
38
(or Newco, as applicable) disputes the right to indemnity of such party in
connection with such claim, it shall pay any undisputed part of such claim, and
Acquiring Corporation (or Newco, as applicable), and such party shall timely
resolve any remaining dispute. If litigation or any other Proceeding is
commenced or threatened by any third party for which Target Corporation or the
shareholders of Target Corporation are entitled to indemnification under this
Section 8.3, the provisions of Section 8.4 shall control.
Section 8.4 Notice and Defense of Third Party Claims. If any Proceeding
shall be brought or asserted by a third party under this Article against an
indemnified party or any successor thereto (the "Indemnified Person") in respect
of which indemnity may be sought under this Article from an indemnifying person
or any successor thereto (the "Indemnifying Person") pursuant to any Proceeding,
the Indemnified Person shall give prompt written notice of such Proceeding to
the Indemnifying Person who shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Person and the
payment of all reasonable expenses; provided, that any delay or failure so to
notify the Indemnifying Person shall relieve the Indemnifying Person of its
obligations hereunder only to the extent, if at all, that it is prejudiced by
reason of such delay or failure. In no event shall any Indemnified Person be
required to make any expenditure or bring any cause of action to enforce the
Indemnifying Person's obligations and liability under and pursuant to the
indemnifications set forth in this Article. The Indemnified Person shall have
the right to employ separate counsel in any of the foregoing Proceedings and to
participate in the defense thereof, but the reasonable fees and expenses of such
counsel shall be at the expense of the Indemnified Person unless the Indemnified
Person shall in good faith determine that there exist actual or potential
conflicts of interest which make representation by the same counsel
inappropriate. The Indemnified Person's right to participate in the defense or
response to any Proceeding should not be deemed to limit or otherwise modify its
obligations under this Article. In the event that the Indemnifying Person,
within twenty (20) days after notice of any such Proceeding, fails to assume the
defense thereof, the Indemnified Person shall have the right to undertake the
defense, compromise or settlement of such Proceeding for the account of and at
the expense of the Indemnifying Person, subject to the right of the Indemnifying
Person to assume the defense of such Proceeding with counsel reasonably
satisfactory to the Indemnified Person at any time prior to the settlement,
compromise or final determination thereof. Notwithstanding anything in this
Article to the contrary, the Indemnifying Person shall not, without the
Indemnified Person's prior written consent (which consent shall not be
unreasonably withheld or delayed), settle or compromise any Proceeding or
consent to the entry of any judgment with respect to any Proceeding. For
purposes of this Section 8.4, the term "Indemnifying Person" shall refer to the
Shareholder Representative with respect to any third-party claim for which
Acquiring Corporation and Newco are entitled to indemnification under Section
8.2, subject in all respects to Section 8.9.
Section 8.5 Limitations of Liability.
(a) Neither Acquiring Corporation, Newco or their respective
Affiliates shall be entitled to indemnification under this Article VIII
unless written notice of a claim for indemnity, or written notice of
specific facts as to which an indemnifiable Loss is expected to be
incurred, shall have been given within eighteen (18) months after the
Closing Date, except with respect for claims for indemnity arising in
connection with
39
(i) the representations and warranties contained in Section 2.10 (Tax
Matters), Section 2.14 (Environmental Matters) and Section 2.26
(Chargebacks), or (ii) the Xxxxxx Dispute (as provided for in Section
8.10), in which case notice of a specific claim for indemnity may be given
at any time during the applicable survival period set forth in Section
9.1.
(b) No reimbursement or other payment in respect of any Losses shall
be made by any shareholder of Target Corporation other than pursuant to
this Article VIII, and, except with respect to the Xxxxxx Dispute as
expressly set forth in Section 8.10, Acquiring Corporation, Newco and
their respective Affiliates collectively shall not recover any Losses
pursuant to this Article VIII, and the aggregate liability of the
shareholders of Target Corporation for all Losses for which the Acquiring
Corporation, Newco and their respective Affiliates are entitled to
indemnity hereunder shall not be, in excess of: (i) seventy-five percent
(75%) of the Post-Closing Adjusted Merger Consideration less (ii) the
amount of all other Losses recovered by Acquiring Corporation, Newco or
their respective Affiliates from the shareholders of Target Corporation
pursuant to Section 8.10; provided, however, that no shareholder of Target
Corporation shall be liable for any Losses in excess of: (i) seventy-five
percent (75%) of their pro rata share (as set forth on Schedule 1.7(c)) of
the Post-Closing Adjusted Merger Consideration less (ii) any amounts paid
by such shareholder to Acquiring Corporation, Newco or their respective
Affiliates pursuant to Section 8.10.
(c) Acquiring Corporation, Newco and their respective Affiliates
shall be entitled to indemnification under this Article VIII only to the
extent that the amount of any indemnifiable Loss, individually or in the
aggregate with all other such Losses covered by this Agreement, exceeds
$250,000 (the "Basket"), whereupon Acquiring Corporation, Newco and their
respective Affiliates shall be entitled to indemnification under this
Article VIII for all Losses in excess of $125,000.
(d) In calculating the amount of any Loss for which Acquiring
Corporation, Newco or their respective Affiliates shall be entitled to
indemnification under this Article, there shall be taken into
consideration (i) the value of any federal or state income tax benefits,
and (ii) the amount of any insurance recoveries, excluding any amounts
which are in effect self-insured whether through retention amounts or
otherwise, Acquiring Corporation, Newco or their respective Affiliates in
fact receives as a direct consequence of the circumstances to which the
Losses related or from which the Losses resulted or arose.
(e) Acquiring Corporation, Newco and their respective Affiliates
shall use commercially reasonable efforts to mitigate any Losses suffered,
incurred or sustained by Acquiring Corporation, Newco or their respective
Affiliates arising out of any matter for which Acquiring Corporation,
Newco or their respective Affiliates is entitled to indemnification
herein, upon Acquiring Corporation, Newco or their respective Affiliates
having obtained actual Knowledge of such breach by Target Corporation. In
the event that Acquiring Corporation, Newco or their respective Affiliates
shall fail to make such commercially reasonable efforts to mitigate such
40
Losses, then notwithstanding anything else to the contrary contained
herein, Acquiring Corporation, Newco and their respective Affiliates shall
not be entitled to indemnity for any Losses that could have been avoided
had Acquiring Corporation, Newco or their respective Affiliates made such
efforts.
(f) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER
ACQUIRING CORPORATION, NEWCO, SURVIVING CORPORATION OR THEIR RESPECTIVE
AFFILIATES, ON ONE HAND, NOR TARGET CORPORATION OR ITS SUBSIDIARIES, ON
THE OTHER HAND, SHALL BE ENTITLED TO ANY TREBLE, EXEMPLARY OR PUNITIVE
DAMAGES OF ANY TYPE UNDER ANY CIRCUMSTANCES REGARDLESS OF WHETHER SUCH
DAMAGES MAY BE AVAILABLE UNDER TEXAS LAW, THE LAW OF ANY OTHER STATE, OR
FEDERAL LAW.
Section 8.6 Exclusive Remedies.
(a) The remedies of Acquiring Corporation, Newco and their
respective Affiliates specifically provided for by this Article shall be
the sole and exclusive remedies of Acquiring Corporation, Newco and their
respective Affiliates for (i) any breach or inaccuracy of the
representations and warranties contained in this Agreement, the Schedules,
any Transaction Document or in any certificate, agreement or document
furnished or delivered pursuant hereto, (ii) the failure to perform any
covenants, agreements or obligations contained in this Agreement, any
Transaction Document or in any other agreement or document furnished or
delivered pursuant hereto, (iii) any Loss, relating to, resulting from or
arising out of any transaction or matter relating in any manner whatsoever
to the operation of Target Corporation prior to Closing (including the
Xxxxxx Dispute), this Agreement or to any document furnished or delivered
pursuant hereto, or (iv) ANY LIABILITY OR LOSS UNDER ANY ENVIRONMENTAL
LAW; provided, however, that the sole and exclusive remedy in respect of
the Final Working Capital Adjustment shall be as specified in Section 1.8.
(b) Each of the parties hereto acknowledge and agree that, due to
the nature of the business of Target Corporation and its Subsidiaries,
including the unique nature of their customer relationships, Target
Corporation and its Subsidiaries would be damaged irreparably if Acquiring
Corporation or Newco materially breach their obligations to consummate the
Merger as required under Article I of this Agreement, provided that all of
the conditions to Closing set forth in Section 6.1 and Section 6.2 shall
have been satisfied. Accordingly, in the event of any such breach of
Acquiring Corporation's or Newco's obligations to consummate the Merger,
provided that all of the conditions to Closing set forth in Section 6.1
and Section 6.2 shall have been satisfied, Acquiring Corporation shall pay
to Target Corporation, within five (5) business days of such breach, the
sum of $3,000,000 in immediately available funds (the "Nonperformance
Fee"). Furthermore, Acquiring Corporation shall indemnify Target
Corporation for any additional Losses in excess of the Nonperformance Fee
incurred by Target Corporation (or its shareholders) as a result of such
breach of Acquiring Corporation's or Newco's obligations to consummate the
Merger, without any limitation
41
or restriction. Notwithstanding anything to the contrary in this
Agreement, in addition to the remedies provided by this Agreement and
applicable law, the parties acknowledge and agree that, in the event
Acquiring Corporation does not timely pay the Nonperformance Fee, and in
recognition of the fact that Target Corporation and its Subsidiaries would
be damaged irreparably if Acquiring Corporation or Newco materially breach
their obligations to consummate the Merger as required under Article I of
this Agreement, Target Corporation shall be entitled, at its election, to
specifically enforce the performance of Acquiring Corporation's and
Newco's obligations to consummate the Merger as required under Article I
of this Agreement in any action, including a proceeding for injunctive
relief, instituted in any court of the United States or any state thereof
having jurisdiction over the parties and the matter.
Section 8.7 Tax Effect of Indemnification Payments. All indemnity payments
made pursuant to this Agreement shall be treated for all Tax purposes as
adjustments to the Post-Closing Adjusted Merger Consideration.
Section 8.8 Cooperation. Surviving Corporation will use all reasonable
efforts to assist the parties hereto in the resolution of any Proceeding subject
to this Article VIII, including, but not limited to, making available its
personnel, and providing such testimony and access to its books and records as
shall be reasonably necessary to effect such resolution.
Section 8.9 Shareholder Representative. By virtue of their approval of
this Agreement, the shareholders of Target Corporation will be deemed to have
irrevocably constituted and appointed, effective as of the Closing, the
Shareholder Representative as the representative and attorney-in-fact for and on
behalf of the shareholders, and to the taking by the Shareholder Representative
of any and all actions and the making of any decisions required or permitted to
be taken by her under this Agreement or the Escrow Agreement, including, without
limitation, the exercise of the power to (i) execute the Escrow Agreement, (ii)
agree to, negotiate, enter into settlements and compromises of and comply with
orders of courts and awards of arbitrators with respect to any indemnification
claim, (iii) resolve any indemnification claim, including claims relating to the
Xxxxxx Dispute and (iv) take all actions necessary in the judgment of the
Shareholder Representative for the accomplishment of the foregoing and all of
the other terms, conditions and limitations of this Agreement and the Escrow
Agreement. Accordingly, the Shareholder Representative has unlimited authority
and power to act on behalf of each shareholder of Target Corporation with
respect to this Agreement and the Escrow Agreement and the disposition,
settlement or other handling of all indemnification claims, rights or
obligations arising from and taken pursuant to this Agreement. The shareholders
of Target Corporation will be bound by all actions taken by the Shareholder
Representative in connection with this Agreement, and Acquiring Corporation and
Newco shall be entitled to rely on any action or decision of the Shareholder
Representative. The Shareholder Representative will incur no liability with
respect to any action taken or suffered by her in reliance upon any notice,
direction, instruction, consent, statement or other document believed by her to
be genuine and to have been signed by the proper person (and shall have no
responsibility to determine the authenticity thereof), nor for any other action
or inaction, except her own willful misconduct or bad faith. In all questions
arising under this Agreement or the Escrow Agreement, the Shareholder
Representative may rely on the advice of counsel, and the Shareholder
42
Representative will not be liable to anyone for anything done, omitted or
suffered in good faith by the Shareholder Representative based on such advice.
Except as expressly provided herein, the Shareholder Representative will not be
required to take any action involving any expense, other than as required by
this Agreement or the Escrow Agreement.
Section 8.10 Matters Related to Xxxxxx Dispute.
(a) The "Xxxxxx Dispute" shall mean any Losses relating to,
resulting from or arising out of, directly or indirectly, the sale by
Target Corporation of its membership interest in Xxxxx Xxxxxx Southeast
L.L.C. ("WDS") to The X. Xxxxxx Company ("Xxxxxx") under the terms of that
certain Purchase Agreement for LLC interest dated as of November 8, 2002
among Target Corporation, Xxxxxx, American Pharmacy Cooperative, Inc.
("APCI") and WDS (and under any related documents executed and delivered
in connection therewith, including, without limitation, the Services
Agreement (as defined below) and the License Agreements (as defined
below)). The parties understand and agree that the term Xxxxxx Dispute
shall not include any Losses to the extent directly relating to, resulting
from or arising out of: (i) the Acquiring Corporation's, or any of its
Affiliates', acquisition, if any, or attempted acquisition, of WDS from
Xxxxxx (whether by a direct or indirect purchase of Xxxxxx'x membership
interest, an asset sale, a merger or consolidation of WDS or Xxxxxx, or
any other similar business combination) (a "WDS Acquisition") or (ii) any
action or conduct by Acquiring Corporation or its Affiliates intended to
obtain business from customers of WDS or Xxxxxx or that Acquiring
Corporation or its Affiliates should have reasonably known would result in
obtaining business from customers of WDS or Xxxxxx (collectively, the
"Excluded Xxxxxx Losses"). The parties further understand and agree that
the Target Corporation and the shareholders of Target Corporation shall
have no liability related to the Excluded Xxxxxx Losses. "Services
Agreement" shall mean that certain Restated Operating Services Agreement
by and between Target Corporation and WDS effective as of November 8,
2002. "License Agreements" shall mean (i) that certain License Agreement
between WDS and Target Corporation for Technology Used to Perform Services
effective November 8, 2002, and (ii) that certain License Agreement
between Xxxxxx and Target Corporation for Technology Used to Perform
Services effective November 8, 2002.
(b) In the event that Acquiring Corporation or its Affiliates at any
time consummate any WDS Acquisition within three (3) years after the
Closing Date: (i) all amounts due to Target Corporation from WDS relating
to or arising out of the Xxxxxx Dispute, as reflected on the Closing
Balance Sheet, shall be deemed collected by Target Corporation or
Surviving Corporation, as the case may be, for purposes of this Agreement
and the transactions contemplated hereby, and the shareholders of Target
Corporation shall have no further liability with respect thereto, and (ii)
Acquiring Corporation and, if applicable, Surviving Corporation shall in
good faith, using commercially reasonable efforts, attempt to secure a
full release of all other claims for all Losses relating to, resulting
from or arising out of the Xxxxxx Dispute (the "Residual Xxxxxx
Liability"); provided, however, that if such a release is not obtained,
the shareholders of Target Corporation will share any unreleased Residual
Xxxxxx Liability
43
with Acquiring Corporation such that the shareholders of Target
Corporation shall defend, indemnify and hold harmless Acquiring
Corporation, Newco and their respective Affiliates for seventy-five
percent (75%) of any Residual Xxxxxx Liability, and Acquiring Corporation
and the Surviving Corporation shall retain and be responsible for
twenty-five percent (25%) of any such Residual Xxxxxx Liability; provided
further, however, that notwithstanding the foregoing, the obligation of
the shareholders of Target Corporation pursuant to this Section
8.10(b)(ii) shall be subject to all limitations of liability set forth in
Section 8.5 of this Agreement. If and when this Section 8.10(b) becomes
operative, any and all amounts otherwise previously paid by the
shareholders of Target Corporation pursuant to Sections 8.10(c) and (d)
shall be recalculated based on the provisions of this Section 8.10(b) and
any difference shall be credited against any future obligation of the
shareholders of Target Corporation pursuant to this Section 8.10(b).
(c) If a WDS Acquisition has not been consummated, but Acquiring
Corporation establishes a contractual relationship with APCI or any of its
members such that at any time within one year after the Closing Date at
least fifty percent (50%) of APCI's members, as of the Closing Date, are
purchasing at least seventy-five percent (75%) of their pharmaceutical
products from Acquiring Corporation or its Affiliates, the shareholders of
Target Corporation will share with Acquiring Corporation any Losses
related to the Xxxxxx Dispute such that the shareholders of Target
Corporation shall defend, indemnify and hold harmless Acquiring
Corporation, Newco and their respective Affiliates for ninety percent
(90%) of any such Losses, and Acquiring Corporation and the Surviving
Corporation shall retain and be responsible for ten percent (10%) of any
such Losses; provided, however, that notwithstanding the foregoing, the
obligation of the shareholders of Target Corporation pursuant to this
Section 8.10(c) shall be subject to all limitations of liability set forth
in Section 8.10(e) and Section 8.5 (other than Section 8.5(b)) of this
Agreement. If and when this Section 8.10(c) becomes operative, any and all
amounts otherwise previously paid by the shareholders of Target
Corporation pursuant to Section 8.10(d) shall be recalculated based on the
provisions of this Section 8.10(c) and any difference shall be credited
against any future obligation of the shareholders of Target Corporation
pursuant to this Section 8.10(c).
(d) If Section 8.10(b) and Section 8.10(c) do not apply, then the
shareholders of Target Corporation shall defend, indemnify and hold
harmless Acquiring Corporation, Newco and their respective Affiliates for
any Losses relating to the Xxxxxx Dispute, provided, however, that
notwithstanding the foregoing, the obligation of the shareholders of
Target Corporation pursuant to this Section 8.10(d) shall be subject to
all limitations of liability set forth in Section 8.10(e) and Section 8.5
(other than Section 8.5(b)).
(e) Acquiring Corporation, Newco and their respective Affiliates
collectively shall not recover any Losses pursuant to Section 8.10(c) or
Section 8.10(d), and the aggregate liability of the shareholders of Target
Corporation for all Losses for which Acquiring Corporation, Newco and
their respective Affiliates are entitled to indemnity under Section
8.10(c) and Section 8.10(d) shall not be, in excess of: (i) eighty-
44
five percent (85%) of the Post-Closing Adjusted Merger Consideration less
(ii) the amount of all other Losses recovered by Acquiring Corporation,
Newco or their respective Affiliates from the shareholders of Target
Corporation pursuant to this Article VIII which are subject to the
liability cap in Section 8.5(b), including any such losses arising under
Section 8.10(b); provided, however, that no shareholder of Target
Corporation shall be liable for any Losses in excess of: (i) eighty-five
percent (85%) of their pro rata share (as set forth on Schedule 1.7(c)) of
the Post-Closing Adjusted Merger Consideration less (ii) any amounts paid
by such shareholder to Acquiring Corporation, Newco or their respective
Affiliates pursuant to this Article VIII which are subject to the
liability cap in Section 8.5(b), including any such losses arising under
Section 8.10(b).
(f) Prior to Closing, Target Corporation shall have the right to
manage the resolution of the Xxxxxx Dispute, including defense of the
current arbitration proceeding referenced in Schedule 2.9, in its
reasonable discretion. After Closing, the Shareholder Representative shall
have the right to manage the resolution of the Xxxxxx Dispute, including
defense of such current arbitration proceeding, in its reasonable
discretion; provided that any additional claims arising out of or related
to the Xxxxxx Dispute shall be subject to provisions of Section 8.4.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 9.1 Survival of Representations and Warranties; Xxxxxx Dispute.
The representations and warranties of the parties hereto contained in this
Agreement shall survive the Closing and any investigation by the other party
with respect thereto but shall terminate and be of no further force or effect
upon the expiration of eighteen (18) months after the Closing Date.
Notwithstanding the foregoing, (A) the representations and warranties contained
in (i) Section 2.10 (Tax Matters) shall survive for the applicable statute of
limitations, period plus sixty (60) days, (ii) Section 2.14 (Environmental
Matters) shall survive until the expiration of three (3) years after the Closing
Date and (iii) Section 2.26 (Chargebacks) shall survive until the expiration of
two (2) years after the Closing Date, and (B) the indemnification obligations of
the shareholders of Target Corporation contained in Section 8.10 related to the
Xxxxxx Dispute shall survive the Closing but shall terminate and be of no
further force or effect upon the expiration of three (3) years after the Closing
Date.
Section 9.2 Survival of Covenants. The covenants and agreements of the
parties hereto, including, but not limited to, the indemnification obligations,
contained in this Agreement shall survive the Closing and any investigation by
Acquiring Corporation or Newco with respect thereto; provided, however, that
such covenants and agreements shall survive only for the period specified, if
any, by this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1 Expenses. All costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such costs and
45
expenses, provided that all such costs and expenses of Target Corporation shall
(i) be paid by Target Corporation and (ii) be a deduction, without duplication,
in the calculation of Net Working Capital under Section 1.8, whether paid by
Target Corporation before or after the end of the business day immediately
preceding the Closing Date; provided, however, that all costs and expenses up to
$100,000 actually paid by Target Corporation related to its acquisition of all
right, title and interest in and to HPA's membership interest in Xxxxx Heartland
L.L.C. ("Heartland Acquisition Expenses"), as described in Section 1.1, shall be
borne by Acquiring Corporation and such Heartland Acquisition Expenses shall be
deemed to be cash for purposes of calculating Estimated Net Working Capital and
Net Working Capital; provided, however, that Acquiring Corporation shall not be
responsible for any Heartland Acquisition expenses resulting, directly or
indirectly, from fees payable to X.X. Xxxxxx.
Section 10.2 Public Announcements. Except as otherwise required by law,
any press release or similar public announcement with respect to this Agreement
or the transactions contemplated hereby shall be issued, if at all, at such time
and in such manner as Acquiring Corporation, Newco and Target Corporation shall
jointly determine. The substance, form and timing of any written or oral
communication to Target Corporation's employees, customers and suppliers and
others having dealings with Target Corporation regarding the transactions
contemplated hereby shall be approved by Target Corporation and Acquiring
Corporation, which approval shall not be unreasonably withheld, and Acquiring
Corporation and Newco shall have the right to be present for any such
communication.
Section 10.3 Brokers and Finders. Except for X.X. Xxxxxx Securities Inc.
("X.X. Xxxxxx") (whose fees and expenses shall (i) be borne by Target
Corporation and (ii) be a deduction, without duplication, in the calculation of
Net Working Capital under Section 1.8, whether paid by Target Corporation before
or after the end of the business day immediately preceding the Closing Date),
all negotiations on behalf of Acquiring Corporation, Newco and Target
Corporation relating to this Agreement and the transactions contemplated by this
Agreement have been carried on by the parties hereto and their respective agents
directly without the intervention of any other Person in such manner as to give
rise to any claim against Acquiring Corporation, Newco or Target Corporation for
financial advisory fees, brokerage or commission fees, finder's fees or other
like payment in connection with the consummation of the transactions
contemplated hereby.
Section 10.4 Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter hereof
(other than the confidentiality agreement executed by X.X. Xxxxxx on behalf of
Target Corporation and Acquiring Corporation on May 8, 2003 (the
"Confidentiality Agreement") which shall remain in full force and effect), and
(b) shall not be assigned by operation of law or otherwise, provided that
Acquiring Corporation may assign its rights and obligations or those of Newco to
any direct or indirect wholly-owned subsidiary of Acquiring Corporation, but no
such assignment shall relieve Acquiring Corporation or Newco of its obligations
hereunder, and Target Corporation shall be entitled to look to Acquiring
Corporation and Newco for the performance of all obligations hereunder in the
same manner as if Acquiring Corporation or Newco, as applicable, had not so
assigned any of its obligations.
46
Section 10.5 Amendment and Modification. Subject to Section 7.3, this
Agreement may be amended, modified, terminated, rescinded or supplemented only
by written agreement of the parties hereto.
Section 10.6 Waiver; Consents. Any failure of a party to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
affected thereby only by a written instrument signed by the party granting such
waiver. No waiver, or failure to insist upon strict compliance, by any party of
any condition or any breach of any obligation, term, covenant, representation,
warranty or agreement contained in this Agreement, in any one or more instances,
shall be construed to be a waiver of, or estoppel with respect to, any other
condition or any other breach of the same or any other obligation, term,
covenant, representation, warranty or agreement. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver.
Section 10.7 Further Assurances. From time to time as and when requested
by Acquiring Corporation, or its successors or assigns, Target Corporation and
the officers and directors of Target Corporation shall, and if necessary use
commercially reasonable efforts to cause the shareholders of Target Corporation
to, execute and deliver such further agreements, documents, deeds, certificates
and other instruments and shall take or cause to be taken such other actions,
including those as shall be reasonably necessary to vest or perfect in or to
confirm of record or otherwise Target Corporation's title to and possession of,
all of its property, interests, assets, rights, privileges, immunities, powers,
franchises and authority, as shall be reasonably necessary or advisable to carry
out the purposes of and effect the transactions contemplated by this Agreement.
Section 10.8 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 10.9 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by cable, telecopy or telex, or by
registered or certified mail (postage prepaid, return receipt requested), to the
respective parties as follows:
if to Acquiring Corporation or Newco:
D&K Healthcare Resources, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy No. (000) 000-0000
47
with a copy (which shall not constitute notice) to:
Xxxxxxxxx Xxxxxxxx LLP
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy No. (000) 000-0000
if to Target Corporation:
Xxxxx HealthCare Solutions, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
Telecopy No. (000) 000-0000
and
Xx. Xxxxxxx Xxxxxxx Xxxxxx Xxxxxx
0000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxx 00000
with a copy (which shall not constitute notice) to:
Xxxxx Liddell & Xxxx LLP
3400 Chase Tower
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx and Xxxx X. Xxxxxx
Telecopy No. (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above;
provided that notice of any change of address shall be effective only upon
receipt thereof.
Section 10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof; provided, however, that the Merger and the rights of any holder of
Dissenting Shares shall be governed by the ABCA.
Section 10.11 Service of Process; Jurisdiction and Venue.
(a) Any process against Acquiring Corporation, Newco or Target
Corporation in, or in connection with, any suit, action or proceeding
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement
48
may be served personally or by certified mail at the address set forth in
Section 10.9 with the same effect as though served on it personally.
(b) Before the Closing, any suit, action or proceeding arising out
of or relating to this Agreement or any of the transactions contemplated
by this Agreement shall be brought in, and Acquiring Corporation, Newco
and Target Corporation hereby irrevocably submit to the exclusive
jurisdiction and venue of, the United States District Court for the
Northern District of Texas or the Eastern District of Missouri or any
court of the State of Texas located in Dallas County or the State of
Missouri located in St. Louis County and irrevocably waive any and all
objections to jurisdiction and review or venue that each may have under
the laws of Texas, Missouri or the United States.
(c) After the Closing, any suit, action or proceeding arising out of
or relating to this Agreement or any of the transactions contemplated by
this Agreement shall be brought in, and Acquiring Corporation, Newco and
Target Corporation hereby irrevocably submit to the exclusive jurisdiction
and venue of, the United States District Court for the Northern District
of Texas or any court of the State of Texas located in Dallas County and
irrevocably waive any and all objections to jurisdiction and review or
venue that each may have under the laws of Texas or the United States.
Section 10.12 Descriptive Headings; Interpretation. The descriptive
headings are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
Section 10.13 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party because of the authorship of any provision of
this Agreement. Any reference to any federal, state, local, or foreign law shall
be deemed also to refer to law as amended and all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means "including without limitation." The parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty, or covenant.
Section 10.14 Parties in Interest; No Third-Party Beneficiary. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 10.15 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
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Section 10.16 Incorporation by Reference. Any and all Schedules, exhibits,
annexes, statements, reports, certificates or other documents or instruments
referred to herein or attached hereto are incorporated herein by reference
hereto as though fully set forth at the point referred to in the Agreement.
Section 10.17 Certain Definitions. For the purposes of this Agreement, the
following terms shall have the meanings specified or referred to below whether
or not capitalized when used in this Agreement.
(a) "ABCA " has the meaning set forth in Section 1.2.
(b) "Accounting Conflict" has the meaning set forth in Section
1.8(a).
(c) "Accounting Practices" has the meaning set forth in Section
1.8(a).
(d) "Acquiring Corporation " has the meaning set forth in the first
paragraph hereof.
(e) "Acquisition Proposal " has the meaning set forth in Section
5.4(b).
(f) "Agreement " has the meaning set forth in the first paragraph
hereof.
(g) "Affiliate " means, with respect to any person or other entity,
any person or other entity that, directly or indirectly, controls, is
controlled by, or is under common control with, such person or other
entity in question. For the purposes of this definition and the definition
of Subsidiary, "control" (including "controlling," "controlled by" and
"under common control with") as used with respect to any person or other
entity, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
person or other entity, whether through the ownership of voting
securities, by contract or otherwise.
(h) "Affiliated Group" means any affiliated group within the meaning
of Section 1504(a) of the Code.
(i) "Amerisource Litigation" means that certain litigation styled
Xxxxx Healthcare Solutions, Inc. v. Amerisource Corporation, in the United
States District Court, Eastern District of Texas, in which the trial court
entered judgment for Target Corporation on or about August 9, 2002,
awarding damages in the amount of $404,481 plus costs, interest and
attorney's fees.
(j) "Amerisource Receivable" means the $420,000 receivable reflected
in Target Corporation's Financial Statements related to the Amerisource
Litigation.
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(k) "Amerisource/Cardizem Funds" has the meaning set forth in
Section 1.8(d).
(l) "APCI" has the meaning set forth in Section 8.10(a).
(m) "Articles of Merger" has the meaning set forth in Section 1.3.
(n) "Balance Sheet Date" has the meaning set forth in Section 2.7.
(o) "Basket" has the meaning set forth in Section 8.5(c).
(p) "Benefit Plans" has the meaning set forth in Section 2.11.
(q) "Cardizem Receivable" means the $300,000 receivable reflected in
the Target Corporation's Financial Statements related to the Cardizem
Settlement.
(r) "Cardizem Settlement" means that certain class action settlement
regarding various antitrust violations related to the sale of Cardizem CD
and generic Cardizem CD in which the Target Corporation was awarded a net
settlement of $1,472,000.
(s) "Closing" has the meaning set forth in Section 1.9.
(t) "Closing Adjusted Merger Consideration" has the meaning set
forth in Section 1.7(a).
(u) "Closing Balance Sheet" has the meaning set forth in Section
1.8(c).
(v) "Closing Date" has the meaning set forth in Section 1.9.
(w) "Code" has the meaning set forth in Section 2.10.
(x) "Common Stock" has the meaning set forth in Section 1.7(c).
(y) "Confidentiality Agreement" has the meaning set forth in Section
10.4.
(z) "Conflict" has the meaning set forth in Section 3.3.
(aa) "Constituent Corporations" has the meaning set forth in Section
1.4.
(bb) "Controlled Entity" has the meaning set forth in Section 2.11.
(cc) "Default" has the meaning set forth in Section 3.3.
(dd) "Xxxxxx" has the meaning set forth in Section 8.10(a).
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(ee) "Xxxxxx Dispute" has the meaning set forth in Section 8.10(a).
(ff) "Xxxxxx Portion" has the meaning set forth in Section 1.8(d).
(gg) "Dissenting Shares" has the meaning set forth in Section 1.11.
(hh) "Effective Time" has the meaning set forth in Section 1.3.
(ii) "Enforceable" shall mean that a contract or agreement is legal,
valid, binding and in full force and effect so that such contract or
agreement, taken as a whole, contains adequate provisions for its
enforcement and for the practical realization of the rights and benefits
afforded thereby, except for the economic consequences of any delay
relating thereto, subject to (i) the qualification that certain provisions
of such contract or agreement regarding restrictions on competition,
choice of law, severability, notice or waiver, and available remedies, are
or may be unenforceable under applicable law, (ii) the effects of
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and (iii)
general principles of equity.
(jj) "Environmental Laws" shall mean the laws listed on attached
Exhibit K, and any state analogue of the same, all as in effect on the
date of this Agreement.
(kk) "ERISA" has the meaning set forth in Section 2.11.
(ll) "Escrow Agent" has the meaning set forth in Section 1.7(e).
(mm) "Escrow Agreement" has the meaning set forth in Section 1.7(e).
(nn) "Escrow Funds" has the meaning set forth in Section 1.7(e).
(oo) "Estimated Net Working Capital" has the meaning set forth in
Section 1.8(b).
(pp) "Evaluation Material" has the meaning set forth in Section
5.2(b).
(qq) "Excluded Xxxxxx Losses" has the meaning set forth in Section
8.10(a).
(rr) "Final Working Capital Adjustment" has the meaning set forth in
Section 1.8(c).
(ss) "GAAP" means generally accepted United States accounting
principles.
52
(tt) "Governmental Authority" means any federal, state, or local
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or
quasi-governmental authority.
(uu) "Hazardous Substances" shall mean substances listed under 40
C.F.R. 302.4 as of the date of this Agreement.
(vv) "Heartland Acquisition Expenses" has the meaning set forth in
Section 10.1.
(ww) "HPA" has the meaning set forth in Section 1.1.
(xx) "HSR Act" has the meaning set forth in Section 2.4.
(yy) "Indemnified Person" has the meaning set forth in Section 8.4.
(zz) "Indemnified Personnel" has the meaning set forth in Section 5.7(a).
(aaa) "Indemnifying Person" has the meaning set forth in Section
8.4.
(bbb) "Indebtedness" has the meaning set forth in Section 1.7(a).
(ccc) "Intellectual Property" has the meaning set forth in Section
2.13(a).
(ddd) "Interim Balance Sheet Date" has the meaning set forth in
Section 2.7.
(eee) "Interim Financial Statements" has the meaning set forth in
Section 2.7.
(fff) "IRS" has the meaning set forth in Section 2.11.
(ggg) "X.X. Xxxxxx" has the meaning set forth in Section 10.3.
(hhh) "Knowledge" or "known" means (i) when used with reference to
Target Corporation, that Target Corporation shall be deemed to have
"knowledge" of or to have "known" a particular fact or other matter if
Xxxxxxx Xxxxxxx Xxxxxx Xxxxxx, Xxxx Xxxxx, Xxx Xxxxx and Xxxx Xxxxx has
actual knowledge, after reasonable inquiry (including inquiry of the
appropriate individual(s) having supervisory responsibility for the
relevant subject matter), of such fact or other matter, and (ii) when used
with reference to Acquiring Corporation or Newco, that Acquiring
Corporation or Newco, as applicable, shall be deemed to have "knowledge"
of or to have "known" a particular fact or other matter if any executive
officer or director of Acquiring Corporation or Newco has actual Knowledge
of such fact or other matter.
53
(iii) "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due
or to become due), including any liability for Taxes.
(jjj) "License Agreement" has the meaning set forth in Section
8.10(a).
(kkk) "Licenses" has the meaning set forth in Section 6.2(g).
(lll) "Losses" has the meaning set forth in Section 8.2.
(mmm) "Material Adverse Effect" or "material" means (i) any material
adverse change in the financial condition, results of operations or
business of Target Corporation (and its Subsidiaries) or Acquiring
Corporation and Newco (and their Subsidiaries), as the case may be, taken
individually or as a whole or (ii) any material adverse change in the
ability of Target Corporation or Acquiring Corporation and Newco, as the
case may be, to perform their respective obligations pursuant to this
Agreement; provided, however, that for purposes of determining whether
there shall have been any such material adverse change as described in
either clause (i) or clause (ii) above, (a) any adverse change resulting
from or relating to the announcement, disclosure or pendency of the
transactions contemplated by this Agreement shall be disregarded, and (b)
any adverse change resulting from or relating to the taking of any action
contemplated by this Agreement shall be disregarded. For purposes of
Articles VI and Article VII of this Agreement, the term Material Adverse
Effect shall not include any individual material adverse change in the
financial condition, results of operations or business of RxDirect or
Myhca except to the extent that such adverse change results in a Material
Adverse Effect to the Target Corporation taken as a whole.
(nnn) "Merger" has the meaning set forth in Section 1.2.
(ooo) "Merger Consideration" has the meaning set forth in Section
1.7(a).
(ppp) "Merger Filing" has the meaning set forth in Section 1.3.
(qqq) "Myhca" means Myhca, Inc., a Texas corporation.
(rrr) "Xxxxxx Shares" has the meaning set forth in Section 5.8.
(sss) "Net Amerisource/Cardizem Funds" has the meaning set forth in
Section 1.8(d).
(ttt) "Net Working Capital" has the meaning set forth in Section
1.8(a).
(uuu) "Newco" has the meaning set forth in the first paragraph
hereof.
54
(vvv) "Noncompetition Agreement" has the meaning set forth in
Section 1.10(c).
(www) "Nonperformance Fee" has the meaning set forth in Section
8.6(b).
(xxx) "Permits" has the meaning set forth in Section 2.16.
(yyy) "Permitted Liens" has the meaning set forth in Section 2.15.
(zzz) "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
(aaaa) "Post-Closing Adjusted Merger Consideration" has the meaning
set forth in Section 1.7(a).
(bbbb) "Post-Closing Collection Expenses" has the meaning set forth
in Section 1.8(d).
(cccc) "Proceeding" has the meaning set forth in Section 8.2.
(dddd) "Proposed Adjustment" has the meaning set forth in Section
1.8(c).
(eeee) "Proposed Closing Balance Sheet" has the meaning set forth in
Section 1.8(c).
(ffff) "Proposed Closing Net Working Capital" has the meaning set
forth in Section 1.8(c).
(gggg) "Real Property" has the meaning set forth in Section 5.2(a).
(hhhh) "Release of Claims" has the meaning set forth in Section
1.10(e).
(iiii) "Representatives" has the meaning set forth in Section
5.2(b).
(jjjj) "Residual Xxxxxx Liability" has the meaning set forth in
Section 8.10(b).
(kkkk) "RxDirect" means RxDirect, Inc., a Texas corporation.
(llll) "Schedules" has the meaning set forth in the preamble to
Article II.
(mmmm) "Securities Act" has the meaning set forth in Section 3.5(a).
(nnnn) "Services Agreement" has the meaning set forth in Section
8.10(a).
55
(oooo) "Shareholder Representative" has the meaning set forth in
Section 1.7(e).
(pppp) "Straddle Period" has the meaning set forth in Section
5.1(c).
(qqqq) "Subsidiary" means, when used with reference to an entity,
any corporation, partnership or limited liability company, a majority of
the outstanding voting securities, partnership interests or membership
interests of which are owned directly or indirectly by such entity or any
partnership, joint venture or other enterprise in which such entity
currently has, directly or indirectly, any controlling equity interest.
For purposes of this Agreement, except as otherwise noted, the term
Subsidiary, as it applies to Target Corporation, shall include Xxxxx
Heartland, L.L.C.
(rrrr) "Superior Proposal" has the meaning set forth in Section
5.4(c).
(ssss) "Surviving Corporation" has the meaning set forth in Section
1.2.
(tttt) "Target Corporation" has the meaning set forth in the first
paragraph hereof.
(uuuu) "Target Corporation's Financial Statements" has the meaning
set forth in Section 2.7.
(vvvv) "Target Shares" has the meaning set forth in Section 3.5(a).
(wwww) "Target's Conflict" has the meaning set forth in Section 2.5.
(xxxx) "Target's Default" has the meaning set forth in Section 2.5.
(yyyy) "Target's Representatives" has the meaning set forth in
Section 5.4(a).
(zzzz) "Target's Violation" has the meaning set forth in Section
2.5.
(aaaaa) "Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
(bbbbb) "Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
56
(ccccc) "Transaction Documents" has the meaning set forth in Section
1.10.
(ddddd) "Violation" has the meaning set forth in Section 3.3.
(eeeee) "Voting Agreement" has the meaning set forth in Section 5.8.
(fffff) "WDS" has the meaning set forth in Section 8.10(a).
(ggggg) "WDS Acquisition" has the meaning set forth in Section
8.10(a).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.
ACQUIRING CORPORATION
D&K Healthcare Resources, Inc.
By:
___________________________________
Name:
_________________________________
Title:
________________________________
NEWCO
D&K ACQUISITION CORP.
By:
___________________________________
Name:
_________________________________
Title:
________________________________
TARGET CORPORATION
XXXXX HEALTHCARE SOLUTIONS, INC.
By:
___________________________________
Name:
_________________________________
Title:
________________________________
SHAREHOLDER REPRESENTATIVE
______________________________________
Xxxxxxx Xxxxxxx Xxxxxx Xxxxxx,
solely in her capacity as a
shareholder and the Shareholder
Representative and only with respect
to Sections 1.7(e), 1.8(c), 1.8(d),
and 5.1(d) and Article VIII of this
Agreement.
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