EXHIBIT 99.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
among
MEDPLUS, INC.,
QUEST DIAGNOSTICS INCORPORATED
and
Q-M MERGER SUB, INC.
Dated as of April 25, 2001
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AGREEMENT AND PLAN OF MERGER, dated as of April 25, 2001 (this
"Agreement"), among MEDPLUS, INC., an Ohio corporation (the "Company"), QUEST
DIAGNOSTICS INCORPORATED, a Delaware corporation ("Parent"), and Q-M MERGER SUB,
INC., an Ohio corporation and a wholly owned subsidiary of Parent ("Merger
Sub").
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of Ohio (the "Ohio
Law"), Parent, Merger Sub and the Company will consummate a business combination
transaction pursuant to which Merger Sub will merge with and into the Company
(the "Merger");
WHEREAS, the Board of Directors of the Company (i) has
determined that the Merger is consistent with and in furtherance of the
long-term business strategy of the Company and fair to, and in the best
interests of, the Company and its shareholders and has approved this Agreement,
the Merger and the other transactions contemplated by this Agreement and (ii)
has recommended the adoption of this Agreement by the shareholders of the
Company;
WHEREAS, certain Significant Shareholders have, on the date
hereof, entered into a voting agreement attached hereto as Exhibit A (the
"Voting Agreement") pursuant to which they have, among other things, granted to
Parent an irrevocable proxy with respect to the Shares and the Preferred Shares
for purposes of signing a written consent or voting at any meeting to adopt this
Agreement;
WHEREAS, certain employees of the Company have received offer
letters from Parent with respect to their employment by the Company or Parent,
copies of which are attached hereto as Exhibit B (the agreements to be entered
into reflecting the terms of such letters, the "Employment Agreements"); and
WHEREAS, simultaneously with the execution by the Company,
Parent and Merger Sub of this Agreement, Parent, as lender, and the Company, as
borrower, are entering into a senior revolving credit agreement (the "Credit
Agreement") secured by all of the tangible and intangible assets of the Company
pursuant to the terms of and subject to the conditions of which the Company
shall have the right to borrow up to $5,000,000.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein set forth, and intending to be legally
bound hereby, the Company, Parent and Merger Sub hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"Acquisition Proposal" means any inquiry, offer or proposal
(whether written or oral) relating to, or any indication of interest
in, any (i) direct or indirect acquisition or purchase of all or any
portion of the business, assets or properties of the Company or any
of the Company Subsidiaries (other than purchases of the Company's
inventory or other assets in the ordinary course of business consistent
with past practice); (ii) direct or indirect acquisition or purchase of
20% or more of any class of equity securities of the Company or any of
the Company Subsidiaries; (iii) tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 20% or more
of any class of equity securities of the Company; or (iv) merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of the
Company Subsidiaries, other than the transactions contemplated by this
Agreement.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"affiliate" of a specified person means a person that
directly, or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such specified
person.
"business day" means any day on which banks are not required
or authorized to close in The City of New York.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Accountants" means KPMG, LLP.
"Company Material Adverse Effect" means any event,
circumstance, change or effect that, individually or in the aggregate
with all other events, circumstances, changes or effects, is or is
reasonably likely to be materially adverse to the business, operations,
assets or liabilities, results of operations or prospects of the
Company and the Company Subsidiaries taken as a whole.
"control" (including the terms "controlling", "controlled by"
and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto, dated as of the date hereof, and forming a part of this
Agreement.
"Encumbrance" means any security interest, pledge, mortgage,
lien (including, without limitation, environmental and tax liens),
charge, encumbrance, adverse claim, preferential arrangement or
restriction of any kind, including, without limitation, any restriction
on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"Environmental Claims" means any and all actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, notices of liability or potential liability, investigations,
proceedings, consent orders or consent agreements
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relating in any way to any Environmental Law, any Environmental Permit
or any Hazardous Materials.
"Environmental Law" means any Law and any legally binding
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating
to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any applicable Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Governmental Authority" means any United States federal,
state or local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal,
or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.
"Hazardous Material" means (a) petroleum and petroleum
products, by-products or breakdown products, radioactive materials,
radon, asbestos-containing materials and polychlorinated biphenyls and
(b) any other chemicals, materials or substances defined or regulated
as toxic or hazardous or as a pollutant, contaminant or waste under any
applicable Environmental Law.
"Indebtedness" means (a) indebtedness for borrowed money, (b)
obligations evidenced by bonds, notes, debentures or other similar
instruments or by letters of credit, including purchase money
obligations or other obligations relating to the deferred purchase
price of property (other than trade payables incurred in the ordinary
course of business), (c) obligations as lessee under leases that have
been or should have been, in accordance with U.S. GAAP, recorded as
capital leases, (d) obligations under direct or indirect guaranties in
respect of Liabilities of others, (e) obligations in respect of
outstanding or unpaid checks or drafts or overdraft obligations and (f)
accrued interest, if any, on and all other amounts owed in respect of
any of the foregoing.
"Intellectual Property" means: (i) United States,
international and foreign patents, patent applications and statutory
invention registrations, (ii) trademarks, service marks, domain names,
trade dress, logos and other source identifiers, including
registrations and applications for registration thereof, (iii)
copyrights, including registrations and applications for registration
thereof, (iv) computer software, data, databases and related
documentation and (v) confidential and proprietary information,
including trade secrets and know-how.
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"Inventories" means all inventory, merchandise, finished
goods, raw materials, packaging, labels, supplies and other personal
property of the Company or any Company Subsidiary and maintained, held
or stored by or for the Company or any Company Subsidiary, and any
prepaid deposits for any of the same.
"January 2001 Balance Sheet" means the unaudited consolidated
balance sheet (including the related notes thereto) of the Company and
the Company Subsidiaries, dated as of January 31, 2001.
"knowledge" by the Company of a particular fact or other
matter means that any executive officer or director is actually aware,
or should be aware, after making reasonable inquiries, of such fact or
other matter.
"Law" means any United States federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, Governmental Order or
other requirement or rule of law.
"Leased Real Property" means the real property and interests
in real property leased or subleased by the Company or any Company
Subsidiary, as tenant, together with, to the extent leased by the
Company or any Company Subsidiary, all buildings and other structures,
facilities or improvements currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of the
Company or any Company Subsidiary attached or appurtenant thereto, and
all easements, licenses, rights and appurtenances relating to the
foregoing.
"Letter Agreement" means the letter agreement, dated April 1,
2001, between the Company and Parent.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured
or unmatured or determined or determinable, including, without
limitation, those arising under any Law, Action or Governmental Order,
and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual
Property and Software licensed to or by the Company pursuant to the
Licenses and material to the business of the Company and the Company
Subsidiaries.
"Licenses" means all (i) licenses of Intellectual Property by
the Company or any Company Subsidiary to third parties, (ii) licenses
of Intellectual Property by third parties to the Company or any Company
Subsidiary and (iii) agreements between the Company and third parties
relating to the development or use of Intellectual Property, the
development or transmission of data, or the use, modification, framing,
linking advertisement, or other practices with respect to Internet web
sites.
"NASDAQ" means the Nasdaq National Market.
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"Owned Intellectual Property" means all Intellectual Property
and Software owned by the Company or any Company Subsidiary and
material to the business of the Company and the Company Subsidiaries.
"Owned Real Property" means the real property and interests in
real property owned in fee by the Company or any Company Subsidiary,
together with all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures,
systems, equipment and items of personal property of the Company or any
Company Subsidiary attached or appurtenant thereto and all easements,
licenses, rights and appurtenances relating to the foregoing.
"Parent Material Adverse Effect" means any event,
circumstance, change or effect that, individually or in the aggregate
with all other events, circumstances, changes or effects, is or is
reasonably likely to be materially adverse to the business, operations,
assets or liabilities or results of operations of Parent and Parent
Subsidiaries taken as a whole.
"Permitted Encumbrances" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced: (a) liens for taxes, assessments
and governmental charges or levies not yet due and payable which are
not in excess of the amount accrued therefor on the January 2001
Balance Sheet; (b) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing
obligations that (i) are not overdue for a period of more than 30 days
and (ii) are not in excess of $1,000 in the case of a single property
or $5,000 in the aggregate at any time; (c) pledges or deposits to
secure obligations under worker's compensation laws or similar
legislation or to secure public or statutory obligations; and (d) minor
survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in
connection with any Indebtedness, (ii) do not render title to the
property encumbered thereby unmarketable and (iii) do not, individually
or in the aggregate, materially adversely affect the value or use of
such property for its current and anticipated purposes.
"person" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, group,
trust, association or other organization or entity or government,
political subdivision, agency or instrumentality of a government.
"Receivables" means any and all accounts receivable, notes and
other amounts receivable by the Company or any Company Subsidiary from
third parties, including, without limitation, customers, arising from
the conduct of the business of the Company and the Company Subsidiaries
or otherwise before the Closing Date, whether or not in the ordinary
course, together with all unpaid financing charges accrued thereon.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing and the like into or upon any land or water or air or otherwise
entering into the environment.
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"Remedial Action" means all action to (i) clean up, remove,
treat or handle in any other way Hazardous Materials in the
environment; (ii) restore or reclaim the environment or natural
resources; (iii) prevent the Release of Hazardous Materials so that
they do not migrate, endanger or threaten to endanger public health or
the environment; or (iv) perform remedial investigations, feasibility
studies, corrective actions, closures and post-remedial or post-closure
studies, investigations, operations, maintenance and monitoring on,
about or in any Leased Real Property.
"SEC" means the United States Securities and Exchange
Commission.
"Significant Shareholders" means Xxxxxx, Xxxxxxx Strategic
Partners Fund, LP, Strategic Associates, LP, Xxxxxxx X. Xxxxxxx, The
Keys Irrevocable Trust, The Keys Plus Irrevocable Trust and Xxxxxx X.
Present II.
"Software" means all computer software (i) material to the
business of the Company and the Company Subsidiaries or (ii)
distributed, sold, licensed or marketed by the Company or any Company
Subsidiary.
"subsidiary" of any person has the meaning set forth in Rule
405 promulgated under the Securities Act.
"Superior Proposal" means any bona fide written Acquisition
Proposal, obtained not in breach of Section 7.04, the terms of which
the Board of Directors of the Company determines in good faith (upon
receiving the advice of a financial advisor of nationally recognized
reputation and taking into account all the terms and conditions of the
Acquisition Proposal, including any break-up fees, expense
reimbursement provisions, availability of financing, conditions to and
expected timing and risks of consummation of, the Acquisition Proposal
and taking into account all other legal, financial, regulatory and all
other aspects of such Acquisition Proposal) to be more favorable from a
financial point of view to its shareholders than the Merger and which
has a reasonable likelihood of being consummated.
"Tax" or "Taxes" means any federal, state, local or foreign
net or gross income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium (including taxes under
Code 'SS' 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, gains,
registration, value-added, alternative or add-on minimum, estimated or
other tax, governmental fee or like assessment or charge of any kind
whatsoever, including any interest, penalty or addition thereto,
whether disputed or not, imposed by any Governmental Authority or other
Tax authority or arising under any Tax law or agreement, including,
without limitation, any joint venture or partnership agreement.
"Tax Return" shall mean any return, declaration, report, claim
for refund, form, or information or return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendments thereof.
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"U.S. GAAP" means United States generally accepted accounting
principles and practices applied consistently throughout the periods
involved.
SECTION 1.02. Additional Defined Terms. The following terms
have the meanings set forth in the Sections set forth below:
Definition Location
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Agreement Preamble
Amendment 'SS' 4.04
Audited Financial Statements 'SS' 6.03
Blue Sky Laws 'SS' 5.03(c)
Xxxxxx Warrants 'SS' 3.07(b)
Certificate 'SS' 3.04(b)(i)
Certificate of Merger 'SS' 2.02
Certificates 'SS' 3.04(b)(i)
Closing 'SS' 3.01
Closing Date 'SS' 3.01
Company Preamble
Company Articles of Incorporation 'SS' 2.04(a)
Company Common Stock 'SS' 3.03(a)
Company Options 'SS' 3.06(a)
Company Permits 'SS' 4.08(a)
Company Preferred Stock 'SS' 3.03(a)
Company Regulations 'SS' 4.01
Company Representatives 'SS' 7.04(a)
Company Shareholders' Meeting 'SS' 7.03
Company Stock Option Plans 'SS' 3.06(a)
Company Subsidiary 'SS' 4.02
Company Warrants 'SS' 3.07
Credit Agreement Recitals
Customers 'SS' 4.12
Dissenting Shares 'SS' 3.08(a)
Effective Time 'SS' 2.02
Employment Agreements Recitals
Fee 'SS' 9.05(a)
Indemnified Officers and Directors 'SS' 7.06(a)
IRS 'SS' 4.13(a)
Leases 'SS' 4.07(b)
Material Contracts 'SS' 4.09(a)
Merger Recitals
Merger Consideration 'SS' 3.03(a)
Merger Sub Preamble
NYSE 'SS' 5.03(c)
Ohio Law Recitals
Parent Preamble
Parent Subsidiary 'SS' 5.01
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Paying Agent 'SS' 3.04(a)
Plans 'SS' 4.13(a)
Preferred Shares 'SS' 3.03(a)
Proxy Statement 'SS' 7.02(a)
Quest Agreement 'SS' 4.20
Requisite Shareholder Approval 'SS' 4.03(a)
Restrictive Agreement 'SS' 4.09(e)
SEC Reports 'SS' 4.05(a)
Securities Act 'SS' 4.05(a)
Shares 'SS' 3.03(a)
Surviving Corporation 'SS' 2.01
Unaudited Financial Statements 'SS' 4.05(b)
Voting Agreement Recitals
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the
conditions set forth in Article VIII, and in accordance with the Ohio Law, at
the Effective Time, Merger Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
SECTION 2.02. Effective Time. The Merger shall become
effective on such date and on such time as a certificate of merger (the
"Certificate of Merger") is duly filed with the Secretary of State of the State
of Ohio or such later time as may be agreed in writing by each of the parties
hereto and specified in the Certificate of Merger (the "Effective Time"), in
such form as is required by, and executed in accordance with, the relevant
provisions of the Ohio Law.
SECTION 2.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
Ohio Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of each of the Company and Merger Sub shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation.
SECTION 2.04. Articles of Incorporation; Code of Regulations.
(a) At the Effective Time, the Amended Articles of Incorporation of the Company
(the "Company Articles of Incorporation"), as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Incorporation.
(b) At the Effective Time, the Code of Regulations of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Code of
Regulations of the Surviving
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Corporation until thereafter amended as provided by law, the Articles of
Incorporation of the Surviving Corporation and such Code of Regulations.
SECTION 2.05. Directors and Officers. The directors of Merger
Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and Code of Regulations of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
ARTICLE III
CLOSING; SURRENDER OF SECURITIES
SECTION 3.01. Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Shearman & Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m.
on the third business day following satisfaction or waiver of all of the closing
conditions set forth in Article VIII hereof (other than those conditions that
will be satisfied at the Closing) or on such other date as may be mutually
agreed by Parent and the Company. The date and time of the Closing are herein
referred to as the "Closing Date".
SECTION 3.02. Closing Transactions. At the Closing,
(a) the Company and Merger Sub shall cause the Certificate of
Merger to be executed, acknowledged and filed with the Secretary of
State of the State of Ohio in such form and such manner as is required
by the relevant provisions of the Ohio Law and make all other filings
or recordings required by the Ohio Law in connection with the Merger;
(b) Parent and the Company shall deliver to each other the
certificates required by Article VIII and, unless delivered prior to
Closing, other documents required to be delivered hereunder prior to
the Effective Time; and
(c) the Significant Shareholders shall deliver, or in the case
of Shares held in a 401(k) plan, use their reasonable best efforts to
cause to be delivered, to Parent the stock certificates representing
the Shares and the Preferred Shares held by the Significant
Shareholders.
SECTION 3.03. Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holders of any of the following securities:
(a) each share of common stock, no par value (the "Company
Common Stock"; all issued and outstanding shares of the Company Common
Stock being collectively referred to as the "Shares"), and the Series A
convertible preferred stock (the "Company Preferred Stock"; all issued
and outstanding shares of the Company Preferred Stock being
collectively referred to as the "Preferred Shares"), of the Company
issued and outstanding
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immediately prior to the Effective Time, other than any Shares or
Preferred Shares to be cancelled pursuant to Section 3.03(b) and other
than any Dissenting Shares, shall be cancelled and shall be converted
automatically into the right to receive an amount equal to $2.00 in
cash (the "Merger Consideration") payable without interest to the
holder of such Share or Preferred Share, upon surrender, in the manner
provided in Section 3.04 hereof, of the Certificate that formerly
evidenced such Share or Preferred Share. All such Shares and Preferred
Shares when so converted shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and
each holder of a Certificate representing any such Shares or Preferred
Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor upon the surrender
of such Certificate in accordance with Section 3.04 hereof, without
interest;
(b) each Share and each Preferred Share held in the treasury
of the Company and each Share and each Preferred Share owned by Parent
or any direct or indirect wholly owned subsidiary of Parent or of the
Company immediately prior to the Effective Time shall be cancelled and
retired and shall cease to exist without any conversion thereof and no
payment or distribution shall be made with respect thereto; and
(c) each share of common stock, par value $0.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, no par value, of
the Surviving Corporation.
SECTION 3.04. Surrender of Stock Certificates. (a) When and as
needed, Parent shall deposit or cause to be deposited (and Parent shall provide
all necessary funds and otherwise cause Merger Sub to deposit), with a bank or
trust company designated by Parent or Merger Sub (and reasonably acceptable to
the Company) to act as agent (the "Paying Agent") for the holders of Shares and
Preferred Shares, the funds to which holders of Shares and Preferred Shares
shall become entitled pursuant to Section 3.03(a) or Section 3.03(b), as the
case may be. Such funds shall be invested by the Paying Agent as directed by
Parent or the Surviving Corporation.
(b) (i) Promptly after the Effective Time, but in no event
more than three business days thereafter, Parent shall cause to be mailed to
each person who was, at the Effective Time, a holder of record of Shares or
Preferred Shares entitled to receive the Merger Consideration pursuant to
Section 3.03(a) a form of a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares or Preferred Shares, as the case may be (a "Certificate"
or the "Certificates"), shall pass, only upon proper delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
provisions as Parent and the Surviving Corporation may reasonably specify) and
instructions for use in effecting the surrender of the Certificates pursuant to
such letter of transmittal. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Share or Preferred Share, as the case may be, formerly
evidenced by such Certificate, and
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such Certificate shall then be cancelled. No interest shall accrue or be paid on
the Merger Consideration payable upon the surrender of any Certificate for the
benefit of the holder of such Certificate. If the payment equal to the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate formerly evidencing Shares or Preferred Shares is
registered on the stock transfer books of the Company, it shall be a condition
of payment that the Certificate so surrendered shall be endorsed properly or
otherwise be in proper form for transfer and that the person requesting such
payment shall have paid all transfer and other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
of the Certificate surrendered, or shall have established to the satisfaction of
the Surviving Corporation that such taxes either have been paid or are not
applicable.
(ii) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Paying Agent
shall deliver in exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration deliverable in respect thereof as determined in accordance
with this Article III, provided that the person to whom the Merger Consideration
is paid shall, as a condition precedent to the payment thereof, indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
(c) At any time following the sixth month after the Effective
Time, the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and, thereafter, such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share or Preferred Share for any Merger
Consideration delivered in respect of such Share or such Preferred Share to a
public official pursuant to any abandoned property, escheat or other similar
law.
(d) Parent, Merger Sub, the Surviving Corporation and the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable to a holder of Shares or Preferred Shares pursuant to the
Merger such amounts as Parent, Merger Sub, the Surviving Corporation or the
Paying Agent is required to deduct and withhold with respect to the making of
such payment under the Code or any provision of state, local or foreign tax law.
To the extent amounts are so withheld by Parent, Merger Sub, the Surviving
Corporation or the Paying Agent, the withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares or
Preferred Shares in respect of which the deduction and withholding was made.
SECTION 3.05. Stock Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of Shares or Preferred Shares thereafter on
the records of the Company. From and after the Effective Time, the holders of
Certificates representing Shares and Preferred Shares outstanding
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immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares and Preferred Shares, except as otherwise provided in
this Agreement or by Law. On or after the Effective Time, any Certificates
presented to Parent for any reason shall be converted into the Merger
Consideration to which the holders thereof are entitled pursuant to Section
3.03(a).
SECTION 3.06. Company Options and Restricted Shares. (a) The
Company shall take all necessary action to ensure that each outstanding stock
option ("Company Options"), whether or not exercisable and whether or not
vested, under the Company's 1994 Stock Incentive Plan, Directors'
Nondiscretionary Stock Option Plan, or any stock option agreement or employment
agreement (the "Company Stock Option Plans") shall be cancelled by the Company
immediately prior to the Effective Time, and each holder of a cancelled Company
Option shall be entitled to receive at the Effective Time or as soon as
practicable thereafter from the Company in consideration for the cancellation of
such Company Options an amount to be paid in cash equal to the product of (i)
the number of shares of the Company Common Stock previously subject to such
Company Options and (ii) the excess, if any, of (A) the Merger Consideration
over (B) the exercise price per share of Company Common Stock previously subject
to the Company Options so cancelled. Any amounts, if any, payable with respect
to such cancelled Company Options shall be reduced for applicable tax
withholding. Prior to the Effective Time, the Company shall take all necessary
action to approve the disposition of the Company Options and the Shares in
connection with the Merger and other transactions contemplated by this Agreement
to the extent necessary to exempt such dispositions under Rule 16b-3 of the
Exchange Act.
(b) All outstanding shares of Company Common Stock issued
pursuant to the Company Stock Option Plans or otherwise and subject to any right
of repurchase or other forfeiture restriction related to the performance of
services to the Company shall become free of any such restriction immediately
prior to the Effective Time.
SECTION 3.07. Company Warrants. (a) At, or following, the
Effective Time, the holder of each issued and outstanding warrant of the Company
(the "Company Warrants") (other than Company Warrants held by Parent and the
Xxxxxx Warrants) that is exercisable prior to the Effective Time shall be
entitled to receive in settlement and cancellation thereof, upon exercise of
such Company Warrant in accordance with its terms and upon delivery thereof to
Parent, an amount in cash equal to the product of (i) the number of shares of
the Company Common Stock or Company Preferred Stock issuable upon exercise of
such Company Warrant and (ii) the Merger Consideration.
(b) At the Effective Time, the warrants issued by the Company
on June 25, 1999 to Xxxxxx, Xxxxxxx Strategic Partners Fund, L.P. for the rights
to purchase 668,905 shares of Company Preferred Stock and 266,377 shares of
Company Preferred Stock, the warrants issued by the Company on June 25, 1999 to
Strategic Associates, L.P. for the rights to purchase 37,064 shares of Company
Preferred Stock and 14,760 shares of Company Preferred Stock and the warrant
issued by the Company to Double Black Diamond II, LLC for the right to purchase
15,733 shares of Company Preferred Stock (collectively, the "Xxxxxx Warrants"),
upon delivery thereof to Parent, shall be cancelled and shall be converted
automatically into the right to receive an amount equal to the product of (i)
the number of shares of Company Preferred Stock subject
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to the Xxxxxx Warrants and (ii) the excess of the Merger Consideration over the
exercise price per share of Company Preferred Stock previously subject to such
Xxxxxx Warrants; provided, that such exercise price per share of Company
Preferred Stock shall be $1.66.
SECTION 3.08. Dissenting Shares. (a) Notwithstanding any
provision of this Agreement to the contrary, Shares that are outstanding
immediately prior to the Effective Time and which are held by shareholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such Shares in
accordance with Section 1701.84 and Section 1701.85 of the Ohio Law
(collectively, the "Dissenting Shares") shall not be converted into or represent
the right to receive the Merger Consideration. Such shareholders shall be
entitled to receive payment of the appraised value of such Shares held by them
in accordance with the provisions of such Section 1701.84 and Section 1701.85,
except that all Dissenting Shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such Shares under such Section 1701.84 and Section 1701.85 shall
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Merger Consideration
without any interest thereon, upon surrender, in the manner provided in Section
3.04, of the Certificate or Certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments delivered pursuant to the Ohio Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal, or otherwise, under the Ohio Law. The Company
shall not, except with the prior written consent of Parent, make any payment
with respect to any demands for appraisal or offer to settle or settle any such
demands.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent to enter into this Agreement, the
Company represents and warrants to Parent and Merger Sub as follows:
SECTION 4.01. Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Ohio and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Company is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary or desirable, except for such
failures to be so qualified or licensed and in good standing that would not have
a Company Material Adverse Effect. The Company has heretofore furnished to
Parent a complete and correct copy of the Company Articles of Incorporation and
the Code of Regulations of the Company (the "Company Regulations"). Such Company
Articles of Incorporation and Company Regulations are in full
13
force and effect. The Company is not in violation of any of the provisions of
the Company Articles of Incorporation or the Company Regulations.
SECTION 4.02. Subsidiaries. Section 4.02 of the Disclosure
Schedule lists each subsidiary of the Company (each, a "Company Subsidiary").
Except for the Company Subsidiaries, and except as set forth in Section 4.02 of
the Disclosure Schedule, neither the Company nor any Company Subsidiary owns, or
holds the right to acquire, any stock, partnership interest, joint venture
interest or other equity interest in any other person. Each Company Subsidiary
is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority and all necessary approvals of Governmental
Authorities to own, lease and operate its properties and to carry on its
business as it is now being conducted. Each Company Subsidiary is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing as would not have a Company Material Adverse Effect. Except as
set forth in Section 4.02 of the Disclosure Schedule, none of the Company
Subsidiaries has any assets or conducts any business or operations. Each
Articles of Incorporation of a Company Subsidiary and its Code of Regulations
(or equivalent documents) are in full force and effect. The Company Subsidiaries
are not in violation of any of the provisions of their respective Articles of
Incorporation or Code of Regulations (or equivalent documents).
SECTION 4.03. Authority; No Conflict; Required Filings and
Consents. (a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the Merger and the other transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the Merger
and the other transactions contemplated by this Agreement (other than, with
respect to the Merger, (i) (A) the adoption of this Agreement by the affirmative
vote of the holders of a majority of the then outstanding Company Common Stock
and Company Preferred Stock (voting as a single class) and (B) the approval of
this Agreement, the Merger and the other transactions contemplated by this
Agreement by the affirmative vote of the holders of two-thirds of the then
outstanding Company Preferred Stock, in each case entitled to vote on such
matter (the "Requisite Shareholder Approval") and (ii) the filing and
recordation of such appropriate merger documents as required by the Ohio Law).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Parent and the
Merger Sub, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company shall not,
(i) conflict with or violate the Company Articles of Incorporation or Company
Regulations or any equivalent organizational documents of any Company
Subsidiary, (ii) assuming that all consents, approvals, authorizations
14
and other actions described in Section 4.03(c) have been obtained and all
filings and obligations described in Section 4.03(c) have been made, conflict
with or violate any Law applicable to the Company or any Company Subsidiary or
by which any property or asset of the Company or any Company Subsidiary is bound
or affected, or (iii) except as disclosed in Section 4.03 of the Disclosure
Schedule, result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of any Encumbrance on any property or asset of the
Company or any Company Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except, with respect to clause (ii) and this clause
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences that would not have a Company Material Adverse Effect, and that
could not reasonably be expected to prevent or materially delay the consummation
of the transactions contemplated by this Agreement.
(c) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company shall not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority, except for the filing and
recordation of appropriate merger documents as required by the Ohio Law.
SECTION 4.04. Capitalization. The authorized capital stock of
the Company consists of (a) 15,000,000 shares of Company Common Stock and (b)
5,000,000 shares of Company Preferred Stock which are designated as Series A
Convertible Preferred Stock. The shareholders of the Company, at a meeting held
on July 25, 2000, approved in accordance with applicable Law an amendment to the
Company Articles of Incorporation (the "Amendment"), which when and if filed
with the Ohio Secretary of State, would increase the number of authorized shares
of Company Common Stock to 25,000,000 and would authorize the issuance of
5,000,000 shares of Company Preferred Stock to be designated as Series B
Preferred Stock; to date such amendment has not been filed with the Ohio
Secretary of State and therefore has not become effective. As of the date
hereof, (i) 8,175,267 shares of Company Common Stock and 2,371,815 shares of
Company Preferred Stock are issued and outstanding, all of which are validly
issued, fully paid and nonassessable and are owned of record and beneficially by
the shareholders, free and clear of any Encumbrances, in the amounts set forth
in Section 4.04 of the Disclosure Schedule, (ii) 200,000 shares of Company
Common Stock are held in the treasury of the Company or by the Company
Subsidiaries, (iii) 346,249 shares of Company Common Stock are reserved for
future issuance in respect of all presently "in-the-money" Company Options and
(iv) 4,112,352 shares of Company Common Stock and Company Preferred Stock are
reserved for future issuance upon exercise of the Company Warrants. Company
Options to purchase an additional 1,383,165 shares of Company Common Stock,
which Company Options are not presently "in-the-money", are also outstanding;
such shares shall be made available for reservation, if necessary, through
proper filing of the Amendment with the Ohio Secretary of State. Except for the
Shares, the Preferred Shares, the Company Options and the Company Warrants,
there are no other shares of capital stock or securities convertible into or
exercisable for shares of capital stock of the Company issued and outstanding.
Except for the Company Options granted pursuant to the Company Stock Option
Plans or pursuant to agreements or arrangements described in Section 4.04 of the
Disclosure Schedule and the Company Warrants granted pursuant to agreements or
arrangements described in Section 4.04 of the Disclosure Schedule, there are no
options, warrants, convertible securities or other rights, agreements,
15
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Company Subsidiary or obligating the Company
or any Company Subsidiary to issue or sell any shares of capital stock, options,
warrants or convertible securities of, or other equity interests in, the Company
or any Company Subsidiary. Section 4.04 of the Disclosure Schedule contains a
full and complete list of all holders of the Company Options and the Company
Warrants, and with respect to each such holder sets forth the number of the
Company Options and the Company Warrants held as of the date hereof by each such
holder, the date when the Company Options or the Company Warrants were issued,
the exercise price thereof, whether such Company Options or Company Warrants are
vested and whether they are exercisable. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any Company Subsidiary. Except as set forth in Section 4.04 of the
Disclosure Schedule, each outstanding share of capital stock of each Company
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or another Company Subsidiary is free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Company's or such other Company
Subsidiary's voting rights, charges and other Encumbrances of any nature
whatsoever. Section 4.04 of the Disclosure Schedule sets forth with respect to
each Significant Shareholder the number of Shares, Preferred Shares, Company
Options and Company Warrants held as of the date hereof by such Significant
Shareholder. There are no material outstanding contractual obligations of the
Company or any Company Subsidiary to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any Company
Subsidiary or any other person.
SECTION 4.05. SEC Filings; Financial Statements. (a) The
Company has filed all forms, reports and documents required to be filed by it
with the SEC since January 1, 1998 (collectively, including any exhibits or
schedules thereto, and documents incorporated by reference therein, the "SEC
Reports"). As of their respective dates, the SEC Reports (i) were prepared in
all material respects in accordance with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the Exchange Act, as the case
may be, and the rules and regulations promulgated thereunder, and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Company Subsidiary is required to file any form, report or other
document with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the SEC Reports and the January
2001 Balance Sheet and each of the related unaudited consolidated statements of
income, retained earnings, shareholders' equity and cash flows of the Company
and the Company Subsidiaries (together with the January 2001 Balance Sheet, the
"Unaudited Financial Statements"), copies of which are set forth in Section 4.05
of the Disclosure Schedule, complies as to form in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto and was prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each fairly presents, in all
16
material respects, the consolidated financial position, results of operations
and cash flows of the Company and its consolidated Company Subsidiaries as at
the respective dates thereof and for the respective periods indicated therein
(except as otherwise noted therein and subject, in the case of unaudited
statements, to normal and recurring year-end adjustments).
(c) There are no Liabilities of the Company or any Company
Subsidiary other than Liabilities (i) reflected or reserved against on the
January 2001 Balance Sheet, (ii) disclosed in Section 4.05 of the Disclosure
Schedule or (iii) incurred since January 31, 2001 in the ordinary course of
business consistent with past practice that would not be material to the Company
and the Company Subsidiaries, taken as a whole.
SECTION 4.06. Absence of Certain Changes or Events. Since
January 31, 2001, except as set forth in Section 4.06 of the Disclosure
Schedule, the Company and the Company Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice. As amplification and not limitation of the foregoing, except as set
forth in Section 4.06 of the Disclosure Schedule, since January 31, 2001, there
has not been (a) any Company Material Adverse Effect, (b) any change by the
Company in its accounting methods, principles or practices, (c) any declaration,
setting aside or payment of any dividend or distribution in respect of the
Shares or any redemption, purchase or other acquisition of any of the Company's
securities, or (d) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of the
Company or any Company Subsidiary, except in the ordinary course of business
consistent with past practice. Since January 31, 2001, except as set forth in
Section 4.06 of the Disclosure Schedule, neither the Company nor any Company
Subsidiary has taken any action that, if taken after the date of this Agreement,
would constitute a breach of any of the covenants set forth in Section 6.01.
SECTION 4.07. Properties. (a) Except as disclosed on Schedule
4.07(a), the Company owns good, valid and marketable title to all of the
personal property shown on the January 2001 Balance Sheet and thereafter
acquired, free and clear of all Encumbrances, except for Permitted Encumbrances.
(b) Section 4.07(b) of the Disclosure Schedule contains a full
and complete list of the Leased Real Property. The leases for the Leased Real
Property listed in Section 4.07(b) of the Disclosure Schedule (the "Leases") are
in full force and effect, and the Company or a Company Subsidiary holds a good
and valid and existing leasehold interest under each of the Leases for the term
set forth in Section 4.07(b) of the Disclosure Schedule. The Company has
delivered to Parent complete and accurate copies of each of the Leases, and none
of the Leases has been modified in any material respect. Neither the Company nor
any Company Subsidiary is in default in any material respect under any of the
Leases.
(c) Neither the Company nor any of the Company Subsidiaries as
of the date hereof owns, or at any time prior to the date hereof, owned any
Owned Real Property.
17
(d) Except as disclosed on Section 4.07(d) of the Disclosure
Schedule, the plants, buildings, structures and equipment of the Company have no
material defects, and are in all material respects in good operating condition
and repair (ordinary wear and tear excepted), and adequate and suitable for
conduct of the business of the Company as it is presently conducted or is
expected to be conducted.
SECTION 4.08. Permits; Compliance. (a) Except as disclosed in
Section 4.08(a) of the Disclosure Schedule, each of the Company and the Company
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, certifications, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for
the Company or any Company Subsidiary to own, lease and operate its properties
or to carry on its business as it is now being conducted (the "Company
Permits"), and no suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company, threatened, except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits would not have a Company Material Adverse Effect.
(b) Except as disclosed in Section 4.08(b) of the Disclosure
Schedule, neither the Company nor any Company Subsidiary is in conflict with, or
in default or violation of, (i) any Law (including, without limitation, any Law
related to export of products or technology) applicable to the Company or any
Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any property or asset
of the Company or any Company Subsidiary is bound or affected or (iii) any
Company Permits, except in the case of each of clauses (i), (ii) and (iii), for
any such conflicts, defaults or violations that would not have a Company
Material Adverse Effect.
(c) Except as disclosed in Section 4.08(c) of the Disclosure
Schedule, since January 1, 1998, there have been no written notices, citations
or decisions by any Governmental Authority that the Company or any Company
Subsidiary fails to meet any applicable standards promulgated by any such
Governmental Authority, and the Company does not know of any such failure.
Except as disclosed in Section 4.08(c) of the Disclosure Schedule, the Company
and the Company Subsidiaries have complied in all material respects with the
Laws, regulations, policies, procedures and specifications applicable to the
Company and the Company Subsidiaries with respect to the services provided and
the business operated by the Company and any Company Subsidiary.
SECTION 4.09. Contracts and Commitments. (a) Section 4.09(a)
of the Disclosure Schedule lists each of the following contracts and agreements,
whether written or oral, to which the Company or any Company Subsidiary is a
party (such contracts and agreements, together with the Leases, the Licenses and
the Restrictive Agreements, being "Material Contracts"):
(i) all contracts and agreements which (A) are likely to
involve consideration in excess of $2,500 during the fiscal year ending
January 31, 2002 or (B) are likely to
18
involve consideration in excess of $5,000 over the remaining term of
such contract or agreement;
(ii) all management contracts and agreements and contracts and
agreements with independent contractors or consultants (or similar
arrangements), including, without limitation, distributors or resellers
of the Company's products, that are not cancelable without penalty or
further payment and without more than 30 days' notice;
(iii) all contracts and agreements relating to Indebtedness;
and
(iv) all contracts and agreements with any Governmental
Authority.
(b) Except as disclosed in Section 4.09(b) of the Disclosure
Schedule, each Material Contract: (i) is valid and binding on the Company or a
Company Subsidiary, as the case may be, and, to the knowledge of the Company,
the other parties thereto, and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement shall continue
in full force and effect without penalty or other adverse consequence. Except as
disclosed in Section 4.09(b) of the Disclosure Schedule, none of the Company or
any Company Subsidiary or, to the knowledge of the Company, any other party
thereto is in material breach of, or material default under (nor does there
exist any condition which upon the passage of time or the giving of notice would
cause such a breach of or default under), any Material Contract.
(c) Parent has been supplied with a true and correct copy of
all written Material Contracts, together with all material amendments, waivers
or other changes thereto, and has been given a written description of all oral
contracts.
(d) Section 4.09(d) of the Disclosure Schedule contains a full
and complete list of all Licenses (including, without limitation, all Licenses
related to ChartMaxx, EMaxx and OptiMaxx), and the Company has delivered to
Parent correct and complete copies of all such Licenses. With respect to each
such License:
(i) such License is valid and binding and in full force and
effect and represents the entire agreement between the respective
licensor and licensee with respect to the subject matter of such
License;
(ii) such License will not cease to be valid and binding and
in full force and effect on terms identical to those currently in
effect as a result of the consummation of the transactions contemplated
by this Agreement, nor will the consummation of the transactions
contemplated by this Agreement constitute a breach of or default under
such License or otherwise give the licensor a right to terminate such
License;
(iii) neither the Company nor any Company Subsidiary has (A)
received any notice of termination or cancellation under such License,
(B) received any notice of breach of or default under such License,
which breach or default has not been cured, and (C) granted to any
other third party any rights, adverse or otherwise, under such License
that would constitute a breach of such License; and
19
(iv) neither the Company nor any Company Subsidiary, nor, to
the Company's knowledge, any other party to such License, is in breach
thereof or default thereunder in any material respect, and no event has
occurred that, with notice or lapse of time, would constitute such a
breach or default or permit termination, modification or acceleration
under such license.
(e) Section 4.09(e) of the Disclosure Schedule contains a full
and complete list of all contracts and agreements that limit or purport to limit
the ability of the Company or any Company Subsidiary, or, to the Company's
knowledge, any key executives of the Company or any Company Subsidiary, to
compete in any line of business or with any person or in any geographic area or
during any period of time or require the Company or any Company Subsidiary to
use any supplier or third party for all or substantially all of the Company's
and the Company Subsidiaries' requirements or needs (each, a "Restrictive
Agreement"). None of the Company or any Company Subsidiary is in breach or
default under (nor does there exist any condition which upon the passage of time
or the giving of notice would cause such a breach of or default under) any
Restrictive Agreement.
SECTION 4.10. Intellectual Property. (a) Section 4.10(a) of
the Disclosure Schedule sets forth a true and complete list of all (i) patents
and patent applications, registered trademarks and trademark applications,
registered copyrights and copyright applications and Software included in the
Owned Intellectual Property, and (ii) Licenses.
(b) Except as set forth in Section 4.10(b) of the Disclosure
Schedule, to the knowledge of the Company, the operation of the business of the
Company and the Company Subsidiaries, and the use of the Owned Intellectual
Property and Licensed Intellectual Property in connection therewith, do not
conflict with or infringe the Intellectual Property of any third party, and no
claim is pending or threatened asserting that the operation of such business, or
such use of the Owned Intellectual Property or Licensed Intellectual Property,
does or may conflict with or infringe the Intellectual Property of any third
party.
(c) The Company or a Company Subsidiary is the exclusive owner
of the entire and unencumbered right, title and interest in and to the Owned
Intellectual Property and Licenses, and is entitled to use the Owned
Intellectual Property and Licensed Intellectual Property in the ordinary course
of the business of the Company and the Company Subsidiaries as presently
conducted. The Owned Intellectual Property and, to the knowledge of the Company,
the Licensed Intellectual Property, is subsisting, valid and enforceable, and
has not been adjudged invalid or unenforceable in whole or in part.
(d) No Action has been asserted, or is pending or threatened,
against the Company or any Company Subsidiary (i) based upon or challenging or
seeking to deny or restrict the use by the Company or any Company Subsidiary of
any of the Owned Intellectual Property or Licensed Intellectual Property, or
(ii) alleging that the Licensed Intellectual Property is being licensed or
sublicensed in conflict with the terms of any license or other agreement. None
of the Owned Intellectual Property is subject to any outstanding decree, order,
injunction, judgment or ruling restricting the use thereof or that would impair
the validity or enforceability thereof.
20
(e) To the knowledge of the Company, no person is infringing
the Owned Intellectual Property or Licensed Intellectual Property. Except as set
forth in Section 4.10(e) of the Disclosure Schedule, the Company has not granted
any license or other right to any third party with respect to the Owned
Intellectual Property or Licensed Intellectual Property.
(f) The Software is free of all material known viruses, worms,
trojan horses and other material known contaminants and does not contain any
bugs, errors, or problems of a material nature that could disrupt its operation
or have an adverse impact on the operation of other software programs or
operating systems. The Company has obtained all approvals necessary for
exporting the Software outside the United States and importing the Software into
any country in which the Software is now sold or licensed for use, and all such
export and import approvals are valid, current, outstanding and in full force
and effect. No rights in the Software have been transferred to any third party
except to the customers of the Company or the Company Subsidiaries to whom the
Company has licensed such Software in the ordinary course of business. Except as
disclosed in Section 4.10(f) of the Disclosure Schedule, none of the Software is
licensed pursuant to an "open source" or "GNU" license or incorporates or is
based on any computer software that is licensed pursuant to an "open source" or
"GNU" license.
(g) The Company has taken reasonable steps in accordance with
normal industry practice to maintain the confidentiality of its trade secrets
and other confidential Intellectual Property, including, without limitation, the
source code of all of the Company's Software and all documentation related
thereto, which are kept in a secure location at the Company's main offices, with
the only copies thereof held by an escrow agent if required by contracts with
Customers in accordance with industry practice. To the knowledge of the Company,
(i) there has been no misappropriation of any material trade secrets or other
material Intellectual Property of the Company or any Company Subsidiary by any
person, (ii) no employee, independent contractor or agent of the Company or any
Company Subsidiary has misappropriated any trade secrets of any other person in
the course of such performance as an employee, independent contractor or agent,
and (iii) no employee, independent contractor or agent of the Company or any
Company Subsidiary is in default or breach of any term of any employment
agreement, non-disclosure agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
SECTION 4.11. Absence of Litigation. Except as disclosed in
Section 4.11 of the Disclosure Schedule, there is no Action pending or, to the
knowledge of the Company, threatened against the Company or any Company
Subsidiary, or any property or asset of the Company or any Company Subsidiary,
before any Governmental Authority. Neither the Company nor any Company
Subsidiary nor any material property or asset of the Company or any Company
Subsidiary is subject to any Governmental Order or any continuing order of,
consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of the Company, continuing investigation by, any
Governmental Authority.
SECTION 4.12. Customers. Section 4.12 of the Disclosure
Schedule lists all of the customers of the Company and the Company Subsidiaries
from which the Company or any Company Subsidiary received revenue since January
31, 2000 through March 31, 2001 and all persons with whom the Company or any
Company Subsidiary executed written binding
21
agreements during the period between February 1, 2000 and the date hereof for
delivery of products or services of the Company or any Company Subsidiary (the
"Customers"), and for each Customer the amount of gross revenue (net of setoffs,
chargebacks and credits) received by the Company and the Company Subsidiaries
from such Customer during the 12-month period ended January 31, 2001, as well as
the amount of gross revenues that the Company and the Company Subsidiaries
expect to receive from such Customer each year pursuant to an existing written
binding agreement during the remaining term of such agreement with such
Customer. No Customer has notified any of the Company, any affiliate of the
Company or any officer, director, affiliate or agent of the Company that such
Customer may cease or materially reduce the amount of business conducted with
the Company or any Company Subsidiary or otherwise reduce the amount of business
conducted with the Company or any Company Subsidiary.
SECTION 4.13. Employee Benefit Plans; Labor Matters. (a)
Section 4.13(a) of the Disclosure Schedule contains a list of each employee
benefit plan, program, arrangement or contract (including, without limitation,
any "employee benefit plan", as defined in section 3(3) of ERISA) maintained or
contributed to by the Company or any Subsidiary, or with respect to which the
Company or any Company Subsidiary could incur liability under section 4069, 4201
or 4212(c) of ERISA (the "Plans"). The Company has delivered to Parent a true
and correct copy of (i) the most recent annual report (Form 5500) filed by the
Company for each Plan, (ii) a complete copy of each such Plan, (iii) each trust
agreement relating to each such Plan, (iv) the most recent summary plan
description for each Plan for which a summary plan description is required, (v)
the most recent actuarial report or valuation relating to each Plan subject to
Title IV of ERISA, if any, and (vi) the most recent determination letter, if
any, issued by the Internal Revenue Service ("IRS") with respect to any Plan
qualified under section 401(a) of the Code.
(b) With respect to the Plans, except as disclosed in Section
4.13(b) of the Disclosure Schedule, no event has occurred and there exists no
condition or set of circumstances in connection with which the Company could be
subject to any material liability under the terms of such Plans, ERISA, the Code
or any other applicable law. Each of the Plans has been operated and
administered in all material respects in accordance with applicable Laws and
administrative or governmental rules and regulations, including, but not limited
to, ERISA and the Code. Each Plan intended to be "qualified" within the meaning
of section 401(a) of the Code has received a favorable determination letter as
to such qualification from the IRS, and no event has occurred, either by reason
of any action or failure to act, which would cause the loss of any such
qualification. The Company has no actual or contingent material liability under
Title IV of ERISA (other than the payment of premiums to the Pension Benefit
Guaranty Corporation in the ordinary course).
(c) The Company is not a party to any collective bargaining or
other labor union contract applicable to persons employed by the Company or any
Company Subsidiary, and no collective bargaining agreement is being negotiated
by the Company or any Company Subsidiary. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage against the Company or any
Company Subsidiary pending or threatened in writing which may interfere with the
respective business activities of the Company or any Company Subsidiary. As of
the date of this Agreement, to the knowledge of the Company, neither the
Company, any Company Subsidiary, nor its representatives or employees, has
committed any unfair labor practices in connection with the operation of the
businesses of the Company or any Company
22
Subsidiary, and there is no charge or complaint against the Company or any
Company Subsidiary by the National Labor Relations Board or any comparable state
agency pending or threatened in writing.
(d) Section 4.13(d) of the Disclosure Schedule contains a full
and complete list of the following documents and instruments, copies of which
the Company has delivered to Parent prior to the date of this Agreement: (i) all
employment agreements with officers or employees of the Company and the Company
Subsidiaries; (ii) all severance agreements, programs and policies of the
Company and the Company Subsidiaries with or relating to its employees; (iii)
all plans, programs, agreements and other arrangements of the Company and the
Company Subsidiaries with or relating to its employees which contain change of
control provisions; and (iv) all arrangements pursuant to which the Company or
any Company Subsidiary made any loans to any of its employees and the amounts
outstanding as of the date hereof under such arrangements. Except as expressly
provided in this Agreement, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any material payment (including, without limitation, severance, unemployment
compensation, "golden parachute" or otherwise) becoming due to any director,
officer or employee of the Company or any Company Subsidiary under any of the
Plans or otherwise, (ii) materially increase any benefits otherwise payable
under any of the Plans or (iii) result in any acceleration of the time of
payment or vesting of any material benefits. None of the Plans in effect on the
date hereof would result, separately or in the aggregate (including, without
limitation, as a result of this Agreement or the transactions contemplated
hereby), in the payment of any "excess parachute payment" within the meaning of
section 280G of the Code.
(e) No Plan provides benefits, including, without limitation,
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company or any Company Subsidiary beyond their
retirement or other termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement benefits under any "employee
pension benefit plan" (as such term is defined in section 3(2) of ERISA), (iii)
deferred compensation benefits accrued as liabilities on the books of the
Company or (iv) benefits the full cost of which is borne by the current or
former employee (or his beneficiary).
(f) Neither the Company nor any Company Subsidiary has (i) any
non-U.S. employees or (ii) any Plan that is not subject to the Laws of the
United States of America.
(g) Except of as set forth in Section 4.13(g) of the
Disclosure Schedule, none of the Company's or the Company Subsidiaries'
employees is on a short term or long term leave or a temporary or permanent
disability leave.
SECTION 4.14. Insurance. (a) Section 4.14 of the Disclosure
Schedule lists each material insurance policy maintained by the Company and the
Company Subsidiaries. All material insurable risks of the Company and the
Company Subsidiaries in respect of the businesses of each are covered by such
insurance policies, and the types and amounts of coverage provided therein are
usual and customary in the context of the businesses and operations in which the
Company and the Company Subsidiaries are engaged.
23
(b) With respect to each such insurance policy: (i) the policy
is legal, valid, binding and enforceable in accordance with its terms and,
except for policies that have expired under their terms in the ordinary course,
is in full force and effect; (ii) neither the Company nor any Company Subsidiary
is in material breach or default (including any such breach or default with
respect to the payment of premiums or the giving of notice), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination or modification, under the policy; and (iii)
to the knowledge of the Company, no insurer on the policy has been declared
insolvent or placed in receivership, conservatorship or liquidation.
(c) At no time subsequent to January 1, 1998 has the Company
or any Company Subsidiary (i) been denied any insurance or indemnity bond
coverage which it has requested, (ii) made any material reduction in the scope
or amount of its insurance coverage, or (iii) received notice from any of its
insurance carriers that any insurance premiums shall be subject to increase in
an amount materially disproportionate to the amount of the increases with
respect thereto (or with respect to similar insurance) in prior years or that
any insurance coverage listed in Section 4.14 of the Disclosure Schedule shall
not be available in the future substantially on the same terms as are now in
effect.
SECTION 4.15. Taxes. (a) Except as would not have a Company
Material Adverse Effect, (i) the Company, each of the Company Subsidiaries, and
any affiliated group, within the meaning of section 1504(a) of the Code, of
which the Company or such Company Subsidiary is or has been a member, has filed
or caused to be filed in a timely manner (within any applicable extension
periods) all Tax Returns required to be filed by the Code or by applicable
state, local or foreign Tax laws for any and all periods ending on or before the
Closing Date; (ii) all Taxes shown to be due on such Tax Returns have been
timely paid in full or will be timely paid in full by the due date thereof or
the Company has provided adequate reserves (in accordance with GAAP) for any
taxes that have not been or will not be timely paid in full by the due date
thereof; (iii) all such Tax Returns are true, correct and complete; (iv) there
are no proposed adjustments or pending or threatened Actions for the assessment
or collection of Taxes against the Company or any Company Subsidiary; (v)
neither the Company nor any Company Subsidiary has been at any time a member of
any partnership or joint venture reported as a partnership for federal income
Tax purposes for any period for which the statute of limitations for any Tax has
not expired; (vi) there are no proposed reassessments by Tax authorities of any
real property owned by the Company or any Company Subsidiary that could increase
any Tax to which the Company or any Company Subsidiary would be subject; (vii)
neither the Company nor any Company Subsidiary is a party to, is bound by, or
has any obligation under any Tax sharing or allocation agreement or similar
agreement; and (viii) neither the Company nor any Company Subsidiary has any
liability for the Taxes of any corporation (other than members of the affiliated
group of which the Company is the common parent) under Treasury Regulations
section 1.1502-6 (or any similar provision of state, local or foreign law), or
as a transferee or successor.
(b) Except as set forth in Section 4.15(b) of the Disclosure
Schedule, (i) neither the Company nor any Company Subsidiary has made any
consent under section 341 of the Code and none of the Company and the Company
Subsidiaries is a corporation described in section 341(b) of the Code; (ii)
neither the Company nor any Company Subsidiary (A) is or was
24
a "controlled foreign corporation" or a "United States Shareholder" as defined
in the Code, (B) has an unrecaptured overall foreign loss within the meaning of
section 904(f) of the Code or (C) files, has filed or is required to file Tax
Returns in jurisdictions outside the United States; (iii) neither the Company
nor any Company Subsidiary has any income reportable for a period ending after
the Closing Date that is attributable to an activity or a transaction (e.g., an
installment sale) occurring in, or a change in accounting method made for, a
period ending on or prior to the Closing Date that resulted in a deferred
reporting of income from such transaction or from such change in accounting
method; and (iv) no material Tax liens exist or have been filed on any assets of
the Company or any Company Subsidiary (other than liens for Taxes not yet due
and payable).
(c) Neither the Shares nor the Preferred Shares are United
States real property interests within the meaning of Code section 897(c). There
are no outstanding agreements or waivers extending the statutory period of
limitation for assessment or collection of Tax applicable to any material Tax
Returns required to be filed with respect to the Company or any Company
Subsidiary and none of the Company, the Company Subsidiaries, or any affiliated
group, within the meaning of section 1504(a) of the Code, of which the Company
or any Company Subsidiary is or has been a member, has requested any extension
of time within which to file any material Tax Return, which return has not yet
been filed.
(d) The Company has delivered to Parent correct and complete
copies of all material federal, state, local and foreign income and franchise
Tax Returns of the Company and the Company Subsidiaries for 1997 and thereafter
and IRS Revenue Agent Reports and similar reports issued by any state, local or
foreign Tax authority for such returns, and statements of material Tax
deficiencies assessed against or agreed to by the Company or any Company
Subsidiary since 1997.
SECTION 4.16. Environmental Matters. (a) Except as disclosed
in Section 4.16 of the Disclosure Schedule:
(i) The Company and the Company Subsidiaries are in compliance
with, and for the past three years have been in compliance, in all
material respects, with, all applicable material Environmental Laws and
all material Environmental Permits. All past noncompliance with
Environmental Laws or Environmental Permits has been resolved without
any pending, ongoing or future material obligation, cost or liability,
and there is no requirement proposed for adoption or implementation
under any Environmental Law or Environmental Permit that is material to
the Company.
(ii) There are no underground or aboveground storage tanks or
any surface impoundments, septic tanks, pits, sumps or lagoons in which
Hazardous Materials are being or, to the knowledge of the Company, have
been treated, stored or disposed of on any of the Leased Real Property
or, to the Company's knowledge, on any property formerly owned, leased,
used or occupied by the Company or any Company Subsidiary.
(iii) There has been no Release of Hazardous Materials on any
of the Leased Real Property or, during the Company's or any Company
Subsidiary's ownership, lease,
25
use or occupancy of such property, on any property formerly owned,
leased, used or occupied by the Company or any Company Subsidiary.
(iv) The Company or any Company Subsidiary is not conducting,
and has not undertaken or completed, any material Remedial Action
relating to any Release or threatened Release at the Leased Real
Property or at any other site, location or operation, either
voluntarily or pursuant to the order of any Governmental Authority or
the requirements of any Environmental Law or Environmental Permit.
(v) There is no asbestos or asbestos-containing material on
any of the Leased Real Property.
(vi) There are no material Environmental Claims pending or, to
the knowledge of the Company, threatened against the Company or any
Company Subsidiary, their business or the Leased Real Property, and, to
the knowledge of the Company, there are no circumstances that could
reasonably be expected to form the basis of any such material
Environmental Claim, including, without limitation, with respect to any
off-site disposal location presently or formerly used by the Company,
any Company Subsidiary or any of its predecessors or with respect to
any previously owned or operated facilities.
(vii) The Company and the Company Subsidiaries can maintain
present production levels or any planned expansion of production levels
upon which financial projections provided to Parent have been based in
compliance with material applicable Environmental Laws without a
material increase in capital or operating expenditures and without
modifying any Environmental Permits or obtaining any additional
Environmental Permits.
(b) The Company has provided Parent with copies of (i) any
environmental assessment or audit reports or other similar studies or analyses
relating to the Leased Real Property, the Company, the Company Subsidiaries and
their business and (ii) all insurance policies issued at any time that may
provide coverage to the Company or any Company Subsidiary or their business for
environmental matters.
SECTION 4.17. Related Party Transactions. Except as set forth
in Section 4.17 of the Disclosure Schedule, no officer, director, shareholder
that is a beneficial owner (as determined in accordance with Rule 13d-3 under
the Exchange Act) of five percent or more of the Company Common Stock or the
Company Preferred Stock, or affiliate of the Company or any Company Subsidiary
nor any relative or affiliate of such officer, director or shareholder is a
party to any agreement, contract, commitment, arrangement or transaction with
the Company or any Company Subsidiary or is entitled to any payment or transfer
of any assets from the Company or any Company Subsidiary or has any material
interest in any material property used by the Company or any Company Subsidiary
or has an interest in any Customer, supplier of the Company or any Company
Subsidiary or provider of any services to the Company or any Company Subsidiary.
SECTION 4.18. Receivables. Except to the extent, if any,
reserved for on the January 2001 Balance Sheet, all Receivables reflected on the
January 2001 Balance Sheet, and
26
all Receivables that arose thereafter, arose from, and the Receivables existing
on the Closing Date will have arisen from, the sale of inventory or services to
persons not affiliated with the Company or any Company Subsidiary and in the
ordinary course of business consistent with past practice and, except as
reserved for on the January 2001 Balance Sheet, constitute or, with respect to
the Receivables existing on the Closing Date, will constitute, as the case may
be, only valid, undisputed claims of the Company or a Company Subsidiary.
SECTION 4.19. Inventories. Subject to amounts reserved
therefor on the January 2001 Balance Sheet, the values at which all Inventories
are carried on the January 2001 Balance Sheet reflect the historical inventory
valuation policy of the Company and the Company Subsidiaries of stating such
Inventories at the lower of cost (determined on the average cost method) or
market value and all Inventories are valued such that the Company and the
Company Subsidiaries will earn their customary gross margins thereon. Except as
set forth in Section 4.19(a) of the Disclosure Schedule, the Company or a
Company Subsidiary, as the case may be, has good and marketable title to the
Inventories free and clear of all Encumbrances. The Inventories do not consist
of, in any material amount, items that are obsolete, damaged or slow-moving.
Neither the Company nor any Company Subsidiary has acquired or committed to
acquire or manufacture Inventory for sale which is not of a quality and quantity
usable in the ordinary course of business within a reasonable period of time and
consistent with past practice, nor has the Company or any Company Subsidiary
changed the price of any Inventory. The Inventories are in good and merchantable
condition in all material respects, are suitable and usable for the purposes for
which they are intended and are in a condition such that they can be sold in the
ordinary course of the business consistent with past practice.
SECTION 4.20. Shareholder Approval. Except for the Requisite
Shareholder Approval, no other approval of the holders of any class or series of
capital stock of the Company is necessary to approve this Agreement, the Merger
and the other transactions contemplated by this Agreement. If Parent were to
exercise the proxy that the Significant Shareholders have granted to Parent
pursuant to the Voting Agreement, Parent would have, on a fully diluted basis, a
sufficient number of votes to obtain the Requisite Shareholder Approval without
the vote of any other holder of Shares or Preferred Shares.
SECTION 4.21. State Takeover Statutes; Standstill Provision.
The Board of Directors of the Company has taken prior to the date hereof and had
taken prior to entering into the Stock Subscription Agreement, dated June 19,
2000, between the Company and Quest Diagnostics Ventures LLC (the "Quest
Agreement") all action necessary to ensure that the restrictions contained in
the applicable provisions of the Ohio Law and the Quest Agreement will not apply
to the Merger and the other transactions contemplated by this Agreement and the
Voting Agreement, and all requirements of the Ohio Law applicable to the Merger
and the other transactions contemplated by this Agreement and the Voting
Agreement have been, and will be, complied with.
SECTION 4.22. Opinion of Financial Advisor. The Board of
Directors of the Company has received the written opinion of KPMG Consulting
Inc. to the effect that, as of the date of this Agreement, the Merger
Consideration is fair, from a financial point of view, to the shareholders of
the Company (other than Parent and its affiliates), a copy of which opinion has
been delivered to Parent.
27
SECTION 4.23. Brokers. No broker, finder, investment banker
(other than KPMG Consulting Inc.) nor any affiliate of the Company is entitled
to any brokerage, finder's, consulting or other fee or commission in connection
with the Merger or the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company. The Company has delivered
to Parent all agreements and informed Parent of all arrangements pursuant to
which any person may be entitled to any fees or other compensation in connection
with the Merger and the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
As an inducement to the Company to enter into this Agreement,
Parent represents and warrants to the Company as follows:
SECTION 5.01. Organization and Qualification. Each of Parent,
Merger Sub and each Significant Subsidiary (as defined in Rule 405 promulgated
under the Securities Act) of Parent (each, a "Parent Subsidiary") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Each of Parent and Parent Subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not have a Parent Material Adverse Effect.
SECTION 5.02. Merger Sub. Merger Sub is a direct, wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement.
SECTION 5.03. Authority; No Conflict; Required Filings and
Consents. (a) Each of Parent and Merger Sub has all necessary corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the Merger and the other transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Merger and the other transactions contemplated by this Agreement have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent and Merger Sub are necessary to authorize this
Agreement or to consummate the Merger and the other transactions contemplated by
this Agreement (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the Ohio Law). This
Agreement has been duly and validly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms.
28
(b) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance of this Agreement by Parent and Merger
Sub will not, (i) conflict with or violate the Certificate of Incorporation of
Parent, the Articles of Incorporation of the Merger Sub, the By-laws of Parent
or the Code of Regulations of Merger Sub, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 5.03(c) have
been obtained and all filings and obligations described in Section 5.03(c) have
been made, conflict with or violate any Law applicable to either Parent or
Merger Sub or by which any property or asset of Parent is bound or affected, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any right of termination, amendment, acceleration or cancellation of, or result
in the creation of any Encumbrance on any property or asset of Parent pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation, except, with respect to
clause (ii) and this clause (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not have a Parent Material Adverse
Effect and that could not reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
(c) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance of this Agreement by Parent and Merger
Sub will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, except (i) for
applicable requirements, if any, of state securities or "blue sky" laws ("Blue
Sky Laws"), the New York Stock Exchange ("NYSE") and the filing and recordation
of appropriate merger documents as required by the Ohio Law and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not have a Parent Material Adverse
Effect and could not reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
SECTION 5.04. Financing. Parent has, or as of the Closing
Date will have, the funds necessary to consummate the Merger.
SECTION 5.05. Brokers. No broker, finder, investment banker or
any affiliate of Parent is entitled to any brokerage, finder's, consulting or
other fee or commission in connection with the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
ARTICLE VI
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 6.01. Conduct of Business by the Company Pending the
Merger.
(a) The Company agrees that, between the date of this
Agreement and the Effective Time, except as set forth in Section 6.01 of the
Disclosure Schedule or as expressly contemplated by any other provision of this
Agreement, unless Parent shall otherwise consent in writing:
29
(i) the businesses of the Company and the Company Subsidiaries
shall be conducted only in, and the Company and the Company
Subsidiaries shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice and in
compliance with Law;
(ii) the Company shall use its reasonable best efforts to
preserve substantially intact its business organization, to keep
available the services of the current officers, employees and
consultants of the Company and the Company Subsidiaries and to preserve
the current relationships of the Company and the Company Subsidiaries
with customers, suppliers and other persons with which the Company or
any Company Subsidiary has significant business relations; and
(iii) the Company shall perform or comply with all covenants
and agreements contained in the Credit Agreement.
(b) By way of amplification and not limitation of Section
6.01(a), except as contemplated by this Agreement or as set forth in Section
6.01 of the Disclosure Schedule, neither the Company nor any Company Subsidiary
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or propose to do, any of the following without the prior written
consent of Parent:
(i) amend or otherwise change the Company Articles of
Incorporation or the Company Regulations or equivalent organizational
documents;
(ii) issue, sell, pledge, dispose of, grant, create an
Encumbrance on, or authorize the issuance, sale, pledge, disposition,
grant or creation of an Encumbrance on, (i) any shares of its capital
stock of any class, or any options (including, without limitation, the
issuance of any options under the employment agreement, dated October
31, 1995, between the Company and Xxxxxxx X. Xxxxxxx, with respect to
which issuance Xx. Xxxxxxx has waived any rights pursuant to the Voting
Agreement), warrants, convertible securities or other rights of any
kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom
interest), of the Company or any Company Subsidiary, except for the
issuance of shares of Company Common Stock or Company Preferred Stock
upon exercise of the Company Options or Company Warrants listed in
Section 4.04 of the Disclosure Schedule to the extent that such Company
Options and Company Warrants are vested and exercisable, or (ii) any
material assets of the Company or any Company Subsidiary, except for
sales of inventory in the ordinary course of business and in a manner
consistent with past practice;
(iii) authorize, declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise,
with respect to any of its capital stock;
(iv) reclassify, combine, split, subdivide or redeem, change
material terms, purchase or otherwise acquire, directly or indirectly,
any of its capital stock or any security exercisable for or convertible
into any of its capital stock;
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(v) (A) (1) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or any division
thereof or (2) acquire any assets, other than purchases of Inventory,
supplies and other similar assets in the ordinary course of business
consistent with past practice;
(B) incur any Indebtedness or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or
advances, except for borrowings under the Credit Agreement;
(C) enter into any contract or agreement that would have been
a Material Contract if it had been entered into prior to the date of
this Agreement, or modify, amend or terminate any Material Contract,
other than modification, amendments or terminations in the ordinary
course of business, consistent with past practice; or
(D) authorize any capital expenditure in excess of $5,000
individually or $75,000 in the aggregate for the Company and the
Company Subsidiaries taken as a whole;
(vi) increase the compensation payable or to become payable to
its officers or employees, pay any bonus (other than sales commissions
in the ordinary course of business consistent with past practice or
other than pursuant to agreements in existence on the date hereof,
copies of which have been provided to Parent, for bonus payments not in
the aggregate in excess of the total amount set forth on Section 4.06
of the Disclosure Schedule) or grant any severance or termination pay
to, or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or any Company
Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any director, officer or
employee;
(vii) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice,
with respect to accounting policies or procedures;
(viii) except with respect to trademarks in the ordinary
course of business and consistent with past practice, (A) grant any
license in respect of any Intellectual Property of the Company or any
Company Subsidiary, (B) develop any Intellectual Property jointly with
any third party, or (C) disclose any confidential Intellectual Property
or other confidential information of the Company or any Company
Subsidiary, unless such disclosure is made in the ordinary course of
business consistent with past practice and the disclosed confidential
Intellectual Property or other confidential information is subject to a
confidentiality agreement prohibiting any further disclosure and
unauthorized use thereof;
31
(ix) waive any stock repurchase or acceleration rights, amend
or change the terms of any options or restricted stock, or reprice
options granted under the Company Stock Option Plans or authorize cash
payments in exchange for any options granted under any such plans;
(x) settle any material Action;
(xi) take any action that would, or is reasonably likely to,
result in any of the representations and warranties of the Company in
this Agreement becoming untrue, or in any of the conditions to the
Merger set forth in Article VIII not being satisfied;
(xii) make or revoke any material Tax election, change any tax
accounting methods, or settle or compromise any material federal,
state, local or foreign Tax liability or take any action with respect
to the computation of Taxes or the preparation of Tax Returns that is
inconsistent with past practice; or
(xiii) enter into or amend any contract, agreement, commitment
or arrangement that, if fully performed, would not be permitted under
this Section 6.01(b).
SECTION 6.02. Notification of Certain Matters. Parent shall
give prompt notice to the Company, and the Company shall give prompt notice to
Parent, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which would be likely to cause (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (y) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of Parent or the Company, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 6.02 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
SECTION 6.03. Delivery of Audited Financial Statements. As
promptly as practicable after the date hereof, but in no event later than seven
business days after the date hereof, the Company shall deliver to Parent an
audited consolidated balance sheet (including the related notes thereto) of the
Company and the Company Subsidiaries, dated as of January 31, 2001, and each of
the related audited consolidated statements of income, retained earnings,
shareholders' equity and cash flows of the Company and the Company Subsidiaries
(including, in each case, any notes thereto) (collectively, the "Audited
Financial Statements"), together with an unqualified opinion of the Company
Accountants with respect to such Audited Financial Statements.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01. Access to Information. From the date hereof
until the Closing, upon reasonable notice, the Company shall cause its
affiliates, officers, directors, employees, agents, representatives, accountants
and counsel, and shall cause each Company Subsidiary and its officers,
directors, employees, agents, representatives, accountants and counsel, to: (i)
afford
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the officers, employees, agents, accountants, counsel, financial advisors and
other representatives of Parent reasonable access, during normal business hours,
to the offices, properties, facilities, books and records of the Company and the
Company Subsidiaries and to those officers, directors, employees, agents,
accountants and counsel of the Company and of each Company Subsidiary who have
any knowledge relating to the Company or any Company Subsidiary, (ii) furnish to
the officers, employees, agents, accountants, counsel, financial advisors and
other representatives of Parent such additional financial and operating data and
other information regarding the assets, employees, properties, liabilities and
goodwill of the Company and the Company Subsidiaries (or legible copies thereof)
as Parent may from time to time reasonably request and (iii) cooperate in such
other way as may be necessary for the consummation of the transactions
contemplated hereby.
SECTION 7.02. Proxy Statement. (a) The Company shall file with
the SEC, as promptly as practicable after the date hereof, the proxy statement
under the Exchange Act to be sent to the shareholders of the Company in
connection with the Company Shareholders' Meeting containing all information
required by the applicable Law (the "Proxy Statement"), and shall use its best
efforts to have the Proxy Statement cleared by the SEC promptly. The Company
shall cooperate with Parent and its legal counsel in the preparation of the
Proxy Statement and shall notify Parent and its legal counsel of the receipt of
any comments of the SEC with respect to the Proxy Statement and of any requests
by the SEC for any amendment or supplement thereto or for additional information
and shall promptly provide Parent and its legal counsel with copies of all
correspondence between the Company and any of the Company Representatives and
the SEC. The Company shall give Parent and its legal counsel the opportunity to
review the Proxy Statement, including all amendments and supplements thereto,
and shall incorporate comments of Parent and its legal counsel with respect
thereto, prior to its being filed with the SEC and shall give Parent and its
legal counsel the opportunity to review all responses to requests for additional
information and replies to comments, and shall incorporate comments of Parent
and its legal counsel with respect thereto, prior to their being filed with, or
sent to, the SEC. The Company agrees to use its reasonable best efforts, after
consultation with Parent and Merger Sub, to respond promptly to all such
comments of and requests by the SEC and to cause the Proxy Statement and all
required amendments and supplements thereto to be mailed to the shareholders of
the Company entitled to vote at the Company Stockholders' Meeting at the
earliest practicable time.
(b) The information supplied by the Company for inclusion in
the Proxy Statement shall not, at (i) the time the Proxy Statement or any
amendment or supplement thereto is first mailed to shareholders of the Company
and (ii) the time of the Company Shareholders' Meeting, contain any untrue
statement of a material fact or fail to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If, at any time
prior to the Effective Time, any event or circumstance relating to the Company
or any Company Subsidiary or their respective officers or directors, shall be
discovered by the Company which should be set forth in an amendment or
supplement to the Proxy Statement, the Company shall promptly inform Parent. All
documents that the Company is responsible for filing with the SEC in connection
with the Merger or the other transactions contemplated by this Agreement will
comply as to form and substance in all material aspects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder.
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(c) The information supplied by Parent for inclusion in the
Proxy Statement shall not, at (i) the time the Proxy Statement or any amendment
or supplement thereto is first mailed to shareholders of the Company and (ii)
the time of the Company Shareholders' Meeting, contain any untrue statement of a
material fact or fail to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If, at any time prior
to the Effective Time, any event or circumstance relating to Parent or its
officers or directors shall be discovered by Parent which should be set forth in
an amendment or supplement to the Proxy Statement, Parent shall promptly inform
the Company. All documents that Parent is responsible for filing with the SEC in
connection with the Merger or the other transactions contemplated by this
Agreement will comply as to form and substance in all material aspects with the
applicable requirements of the Exchange Act and the rules and regulations
thereunder.
(d) The Board of Directors of the Company shall include in the
Proxy Statement, and not subsequently withdraw or modify, or propose to withdraw
or modify, in any manner adverse to Parent or Merger Sub, except as set forth in
this Section 7.02(d), the recommendation of the Board of Directors of the
Company (in the form necessary for compliance with the applicable provisions of
the Ohio Law) that the shareholders of the Company give the Requisite
Shareholder Approval. In the event that the Board of Directors of the Company
determines in good faith, after receiving the advice of outside legal counsel,
that the Board of Directors is required by its fiduciary duties under the Ohio
Law to withdraw or modify its recommendation, the Board of Directors of the
Company shall be permitted to withdraw or modify in a manner adverse to Parent
and Merger Sub its recommendation to its shareholders that they give the
Requisite Shareholder Approval. Notwithstanding such Board of Directors'
withdrawal or modification of its recommendation, the Company shall convene and
hold the Company Shareholders' Meeting in accordance with Section 7.03.
SECTION 7.03. Shareholders' Meeting. The Company shall take,
in accordance with applicable Law, the Company Articles of Incorporation and the
Company Regulations, all action necessary to convene and hold an annual or
special meeting of its shareholders (the "Company Shareholders' Meeting") as
promptly as practicable for the purpose of obtaining the Requisite Shareholder
Approval. The Company shall (a) use its reasonable best efforts to solicit from
its shareholders proxies in favor of the adoption of this Agreement and (b) take
all other action necessary or advisable to secure the vote or consent of its
shareholders as required by the Company Articles of Incorporation, the Company
Regulations, the applicable Law, the rules of NASDAQ or otherwise to obtain the
Requisite Shareholder Approval.
SECTION 7.04. No Solicitation of Transactions.
(a) The Company shall not, and shall cause its affiliates and
its and its affiliates' officers, directors, employees, financial advisors,
consultants, attorneys, accountants, agents and other representatives (the
"Company Representatives") not to, directly or indirectly, take any action to
solicit, initiate, encourage or facilitate the making of any Acquisition
Proposal or any inquiry with respect thereto or engage in discussions or
negotiations with any person with respect thereto or in connection with any
Acquisition Proposal or potential Acquisition Proposal, disclose any nonpublic
information relating to it or the Company Subsidiaries or afford access to the
properties, books or records of it or the Company Subsidiaries to any person
that has made,
34
or to such party's knowledge, is considering making, any Acquisition Proposal,
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal or approve or recommend, or propose to approve or recommend, or execute
or enter into, any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement or propose to
do any of the foregoing; provided, however, that, in the event that (x) the
Company shall receive an Acquisition Proposal that the Board of Directors of the
Company concludes in good faith could result in a Superior Proposal that was not
solicited by it and did not otherwise result from a breach of this Section 7.04,
(y) prior to receipt of the Requisite Shareholder Approval, the Board of
Directors of the Company determines in good faith, after receiving the advice of
outside legal counsel, that, in light of this Acquisition Proposal, the Board of
Directors is required by its fiduciary duties under the Ohio Law to authorize
the Company to participate in such discussions or negotiations with, or provide
such information to, the party making the Acquisition Proposal, and (z) the
Company gives Parent written notice of its intention to do so, the Company may
(i) furnish information with respect to it and the Company Subsidiaries to the
person making such Acquisition Proposal pursuant to a customary confidentiality
agreement on terms no less favorable to the Company than those contained in the
Letter Agreement and (ii) participate in discussions regarding such Acquisition
Proposal. Any violation of the foregoing restrictions by the Company
Representatives, whether or not such person is so authorized and whether or not
any such person is purporting to act on behalf of the Company or otherwise,
shall be deemed to be a breach of this Agreement by the Company.
(b) Upon receiving an Acquisition Proposal, the Company will
promptly (and in no event later than 24 hours after receipt of any Acquisition
Proposal) notify Parent, after receipt of any Acquisition Proposal or any
amendment or change in any previously received Acquisition Proposal, or any
request for nonpublic information relating to the Company or any Company
Subsidiary or for access to the properties, books or records of the Company or
any Company Subsidiary by any person that has made, or to such party's knowledge
may be considering making, an Acquisition Proposal, and shall promptly provide
copies of any proposals, indications of interest, draft agreements and
correspondence relating to such Acquisition Proposal. The Company shall, and
shall cause the Company Representatives to, immediately cease and cause to be
terminated all discussions and negotiations, if any, that have taken place prior
to the date hereof with any persons (other than Parent) with respect to any
Acquisition Proposal and shall request the return or destruction of all
confidential information provided to any such person. The Company agrees not to
release any third party from the confidentiality and standstill provisions of
any agreement to which the Company is a party.
(c) The Company agrees that it will take the necessary steps
promptly to inform the Company Representatives of the obligations undertaken in
this Section 7.04.
SECTION 7.05. Employee Benefits Matters. (a) From and after
the Effective Time, Parent shall cause the Surviving Corporation to honor all
Plans to which the Company and/or any Company Subsidiary is a party as in effect
on the date hereof, to the extent such Plans are binding obligations of the
Company or any Company Subsidiary. Nothing herein is intended to restrict the
Surviving Corporation's right to terminate or amend any Plan in accordance with
the terms thereof.
35
(b) To the extent service is relevant for purposes of
eligibility, participation or vesting under any employee benefit plan, program
or arrangement established or maintained by Parent or the Surviving Corporation
for the benefit of employees of the Surviving Corporation, the employees of the
Surviving Corporation shall be credited for service accrued prior to the
Effective Time with the Company or the Company Subsidiary, and, with respect to
any welfare benefit plans to which such employee may become eligible, Parent or
the Surviving Corporation shall cause such plans to provide credit for the year
2001 co-payments or deductibles and maximum out-of-pocket payments by such
employees and waive all pre-existing condition exclusions and waiting periods,
other than limitations or waiting periods that had not been satisfied under any
welfare plans maintained by the Company and the Company Subsidiaries prior to
the Effective Time.
SECTION 7.06. Directors' and Officers' Indemnification. (a)
The Code of Regulations of the Surviving Corporation shall contain the
provisions set forth, as of the date of this Agreement, in Article VI of the
Company Regulations, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
or at any time prior to the Effective Time were directors or officers of the
Company ("Indemnified Officers and Directors"), it being the intent of the
parties that the Indemnified Officers and Directors shall continue to be
entitled to such exculpation and indemnification to the fullest extent permitted
by law.
(b) For a period of six years following the Effective Date,
Parent shall either (i) cause the Surviving Corporation to maintain in effect
directors' and officers' liability insurance policies providing at least the
same coverage and containing terms and conditions that are not materially less
favorable then the coverage in place prior to the Effective Date or (ii) assume
the indemnification obligations of the Surviving Corporation described in
Section 7.06(a).
(c) If Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation, as the case may be, shall assume
the obligations set forth in this Section 7.06.
SECTION 7.07. Obligations of Merger Sub. Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
SECTION 7.08. Further Action; Consents; Filings. Upon the
terms and subject to the conditions hereof, each of the parties hereto shall use
its reasonable best efforts to (a) take, or cause to be taken, all appropriate
action and do, or cause to be done, all things necessary, proper or advisable
under applicable Law or otherwise to consummate and make effective the Merger
and the other transactions contemplated by this Agreement, (b) obtain from
Governmental Authorities and third parties any consents, licenses, permits,
waivers, approvals,
36
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement and (c) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement, the Merger and the other transactions contemplated by this
Agreement required under any other applicable Law. The parties hereto shall
cooperate with each other in connection with the making of all such filings,
including by providing copies of all such documents to the nonfiling party and
its advisors prior to filing and, if requested, by accepting all reasonable
additions, deletions or changes suggested in connection therewith.
SECTION 7.09. Public Announcements. Neither the Company nor
the Parent shall make any public announcement or disclosure with respect to this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement without the other party's prior written consent, unless such
disclosure is required by Law, rules and regulations of the SEC or other
regulatory requirements or rules of securities exchanges. The Company and the
Parent shall consult with each other prior to making any public announcement or
disclosure with respect to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement, and the content of any such
announcement or disclosure shall be approved by the non-disclosing party.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver of the following conditions:
(a) no Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Governmental Order which is then
in effect and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; and
(b) the Requisite Shareholder Approval shall have been
obtained.
SECTION 8.02. Conditions to the Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to consummate the Merger
are subject to the satisfaction or waiver of the following additional
conditions:
(a) each of the representations and warranties of the Company
contained in this Agreement shall be true and correct when made and
shall be true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date, except that those
representations and warranties that are qualified by materiality or
Company Material Adverse Effect shall be true and correct as of the
Closing Date as though made on and as of the Closing Date, and except
that those representations and warranties which address matters only as
of a particular date shall be so true and correct as of such date, and
Parent shall have received a certificate of the Company to such effect
signed by the Chief Executive Officer of the Company;
37
(b) the Company shall have performed or complied, in all
material respects, with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Closing Date, and Parent shall have received a certificate of the
Company to that effect signed by the Chief Executive Officer of the
Company;
(c) Parent shall have received in form and substance
reasonably satisfactory to Parent all consents, approvals and
authorizations of Governmental Authorities necessary to consummate the
Merger and all consents and waivers of third parties set forth on
Section 8.02(c) of the Disclosure Schedule;
(d) no Company Material Adverse Effect shall have occurred;
(e) except for travel advances to employees in the ordinary
course of business consistent with past practice that are not, in the
aggregate, in excess of $10,000, any shareholder or other affiliate of
the Company (other than the Company Subsidiaries) that has any loans or
other Indebtedness to the Company or any Company Subsidiary outstanding
shall have repaid prior to the Closing Date such loans or other
Indebtedness or cancelled guaranties given by the Company or any
Company Subsidiary for the benefit of such shareholder or other
affiliate and Parent shall have received a certificate of the Company
to such effect signed by the Chief Executive Officer of the Company;
(f) appraisal rights under the Ohio Law shall not have been
perfected, asserted or demanded with respect to more than 7% of the
aggregate number of Shares and Preferred Shares;
(g) the documents and instruments contemplated to be delivered
by the Company or the Significant Shareholders pursuant to Section 3.02
shall have been delivered;
(h) Parent shall have received the Employment Agreements duly
executed by each of the parties thereto;
(i) Parent shall have received from Xxxxxxxx & Shohl LLP, a
legal opinion, addressed to Parent and dated the Closing Date
substantially in the form of Exhibit 8.02(i);
(j) Parent shall have received from Xxxxxx, Xxxxxx &
Xxxxxxxxx, a legal opinion, addressed to Parent and dated the Closing
Date substantially in the form of Exhibit 8.02(j); and
(k) Parent shall have received from each of the executive
officers and directors of the Company and each Significant Shareholder
a release, in the form of Exhibit 8.02(k).
SECTION 8.03. Conditions to the Obligations of the Company.
The obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver of the following additional conditions:
38
(a) each of the representations and warranties of Parent and
Merger Sub contained in this Agreement shall be true and correct when
made and shall be true and correct in all material respects as of the
Closing Date, as though made on and as of the Closing Date, except that
those representations and warranties that are qualified by materiality
or Parent Material Adverse Effect shall be true and correct as of the
Closing Date as though made on and as of the Closing Date, and except
that those representations and warranties which address matters only as
of a particular date shall be true and correct as of such date, and the
Company shall have received a certificate of Parent to such effect
signed by a duly authorized officer thereof;
(b) each of Parent and Merger Sub shall have performed or
complied, in all material respects, with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Closing Date, and the Company shall have received a
certificate of Parent to that effect signed by a duly authorized
officer thereof; and
(c) the documents and instruments contemplated to be delivered
by Parent pursuant to Section 3.02 shall have been delivered.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated
and the Merger and the other transactions contemplated by this Agreement may be
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time
shall not have occurred on or before October 15, 2001; provided,
however, that the right to terminate this Agreement under this Section
9.01(b) shall not be available to any party whose failure to fulfill
any obligation or condition under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before
such date;
(c) if there shall be any Governmental Order that is final and
nonappealable having the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger;
(d) by Parent upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall
have become untrue, in either case such that the conditions set forth
in Section 8.02(a) and Section 8.02(b) would not be satisfied, if such
breach is not cured within 20 business days from the date of notice
thereof;
(e) by the Company upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or
39
warranty of Parent shall have become untrue, in either case such that
the conditions set forth in Section 8.03(a) and Section 8.03(b) would
not be satisfied, if such breach is not cured within 20 business days
from the date of notice thereof;
(f) by either Parent or Company if this Agreement and the
Merger fail to receive the Requisite Shareholder Approval; provided,
however, that the right to terminate this Agreement by the Company
under this Section 9.01(f) shall not be available to the Company where
the failure to obtain such Requisite Shareholder Approval shall have
been caused by or related in any way to the Company's breach of this
Agreement;
(g) by Parent, if the Audited Financial Statements are not
similar in all material respects as to form and content to the
Unaudited Financial Statements, or are not accompanied by an
unqualified opinion of the Company Accountants with respect thereto; or
(h) by Parent, if the Board of Directors of the Company or any
committee thereof shall have failed to recommend or withdrawn or
modified or changed, in a manner adverse to Parent or Merger Sub, its
approval or recommendation of this Agreement or the Merger, whether or
not permitted by the terms hereof, or shall have failed to call the
Company Shareholders' Meeting in accordance with Section 7.03 (or the
Board of Directors of the Company or any committee thereof shall
resolve to do any of the foregoing).
SECTION 9.02. Effect of Termination. In the event of
termination of this Agreement pursuant to Section 9.01, this Agreement shall
forthwith become void, there shall be no liability under this Agreement on the
part of Parent, Merger Sub or the Company or any of their respective officers or
directors, and all rights and obligations of each party hereto shall cease;
provided, however, that nothing herein shall relieve any party from liability
for the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement; and provided further that Section 10.01
shall survive termination of this Agreement.
SECTION 9.03. Amendment. This Agreement may not be amended
except by (a) an instrument in writing signed by each of the parties hereto or
(b) a waiver in accordance with Section 9.04.
SECTION 9.04. Waiver. Any party hereto may (a) extend the time
for the performance of any obligation or other act of any other party hereto,
(b) waive any inaccuracy in the representations and warranties contained herein
or in any document delivered pursuant hereto and (c) waive compliance with any
agreement or condition contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party to be
bound thereby. Any waiver of any term or condition shall not be construed as a
waiver of any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition of this Agreement.
SECTION 9.05. Fees and Expenses. (a) In the event that:
40
(i) this Agreement shall be terminated by either party
pursuant to Section 9.01 (other than Sections 9.01(a), (b), (c) or
(e)), and the Company consummates, within 18 months after such
termination, a transaction described in clauses (i) through (iv) of the
definition of "Acquisition Proposal"; or
(ii) this Agreement is terminated pursuant to Section 9.01(g);
then, in any such event, the Company shall pay Parent promptly (but in no event
later than two business days after the first of such events shall have occurred)
a fee of $1,000,000 (the "Fee"), which amount shall be payable in immediately
available funds; provided that, in the event of a termination by the Company,
such Fee shall be paid prior to or simultaneously with such termination.
(b) In the event that the Company shall fail to pay the Fee
when due, the Fee shall be deemed to include the costs and expenses actually
incurred or accrued by Parent (including, without limitation, fees and expenses
of counsel) in connection with the collection under and enforcement of this
Section 9.05, together with interest on such unpaid Fee, commencing on the date
that the Fee became due, at a rate equal to the rate of interest publicly
announced by Citibank, N.A., from time to time, in the City of New York, as such
bank's Base Rate plus 5.00%.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. Except as otherwise expressly
provided in this Agreement, all costs and expenses (including, without
limitation, all fees and disbursements of counsel, accountants, financial
advisors, experts and consultants to a party hereto and its affiliates) incurred
by a party hereto or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, any filing fees and all
other matters related to the closing of the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger or any other transaction is consummated.
SECTION 10.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by overnight courier service, by telecopy or by registered
or certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):
(a) if to Parent or Merger Sub:
Quest Diagnostics Incorporated
Xxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
41
Attention: General Counsel
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X'Xxxxx, Esq.
(b) if to the Company:
MedPlus, Inc.
0000 Xxxxxxxx'x Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxxxxx & Shohl LLP
1900 Chemed Center
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Xx., Esq.
SECTION 10.03. Third-Party Beneficiaries. Except for the
provisions contained in Section 7.06, nothing in this Agreement shall be
construed as giving any person other than the parties hereto any legal or
equitable right, remedy or claim under or with respect to this Agreement.
SECTION 10.04. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
Law or public policy, all other terms, conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated by this Agreement
is not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.05. Assignment; Binding Effect. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
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SECTION 10.06. Incorporation of Exhibits. The Disclosure
Schedule and all Exhibits and Schedules attached hereto and referred to herein
are hereby incorporated herein by reference and made a part of this Agreement
for all purposes as if fully set forth herein.
SECTION 10.07. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
SECTION 10.08. Governing Law; Jurisdiction. (a) Except to the
extent that the Merger may be mandatorily required to be governed by the laws of
the State of Ohio, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
executed in and to be performed in that State.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each of the parties hereto
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to this
Agreement in any New York State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
SECTION 10.09. Waiver of Jury Trial. Each of the parties
hereto hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement.
SECTION 10.10. Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 10.11. Counterparts. This Agreement may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 10.12. Entire Agreement. This Agreement (including the
Exhibits and the Disclosure Schedule), the Letter Agreement and the Voting
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto.
43
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
MEDPLUS, INC.
By:
--------------------------------------
Name:
Title:
QUEST DIAGNOSTICS INCORPORATED
By:
--------------------------------------
Name:
Title:
Q-M MERGER SUB, INC.
By:
-------------------------------------
Name:
Title:
EXHIBITS
Exhibit A Voting Agreement
Exhibit B Offer Letters from Parent with Respect to Employment
Exhibit 8.02(i) Form of Opinion of Xxxxxxxx & Shohl LLP
Exhibit 8.02(j) Form of Opinion of Xxxxxx, Xxxxxx & Xxxxxxxxx
Exhibit 8.02(k) Form of Release of Claims Agreement
iv
DISCLOSURE SCHEDULE
The Disclosure Schedule shall include the following Sections:
4.02 Company Subsidiaries
4.03 Authority; No Conflict; Required Filings and Consents
4.04 Capitalization
4.05 Financial Statements
4.06 Absence of Certain Events and Developments
4.07 Title to Properties
4.08 Permits; Compliance
4.09 Contracts and Commitments
4.10 Intellectual Property
4.11 Litigation
4.12 Customers
4.13 Employee Benefit Plans; Labor Matters
4.14 Insurance
4.15 Taxes
4.16 Environmental Compliance and Condition
4.17 Related Party Transactions
4.19 Inventories
6.01 Conduct of Business by the Company Pending the Merger
8.02 Matters with Respect to Which Executive Officers, Directors or Significant
Shareholders May Have Claims Against the Company or Company Subsidiaries
v
