Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
SXC HEALTH SOLUTIONS, INC.,
COMET MERGER CORPORATION
and
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
Dated as of February 25, 2008
TABLE OF CONTENTS
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Section 1. The Offer |
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2 |
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Section 1.1 The Offer |
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2 |
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Section 1.2 Company Actions |
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5 |
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Section 1.3 Directors |
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6 |
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Section 1.4 Top-Up Option |
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Section 1.5 Change in Structure Event |
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Section 2. The Merger |
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Section 2.1 The Merger; Effects of the Merger |
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Section 2.2 Closing |
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10 |
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Section 2.3 Directors and Officers of the Surviving Corporation |
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10 |
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Section 3. Conversion of Securities |
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Section 3.1 Conversion of Securities |
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Section 3.2 Dissenting Shares |
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Section 3.3 Company Options and Restricted Shares |
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11 |
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Section 3.4 Exchange Procedures; |
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Section 3.5 Withholding |
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Section 3.6 Transfer Taxes |
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Section 3.7 Adjustments to Prevent Dilution |
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Section 3.8 No Fractional Shares |
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Section 3.9 Tax Treatment |
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Section 4. Representations and Warranties of the Company |
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Section 4.1 Organization and Qualification |
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15 |
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Section 4.2 Authority |
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16 |
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Section 4.3 Capitalization |
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Section 4.4 Company Subsidiaries |
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19 |
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Section 4.5 SEC Filings; Financial Statements; Undisclosed Liabilities |
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19 |
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Section 4.6 Absence of Certain Changes or Events |
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21 |
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Section 4.7 Compliance with Laws |
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Section 4.8 Claims, Actions and Proceedings |
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22 |
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Section 4.9 Contracts and Other Agreements |
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22 |
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Section 4.10 Intellectual Property |
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23 |
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Section 4.11 Property |
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Section 4.12 Insurance |
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Section 4.13 Tax Matters |
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Section 4.14 Employee Benefit Plans |
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Section 4.15 Labor Matters |
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Section 4.16 Environmental Matters |
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Section 4.17 No Breach |
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29 |
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Section 4.18 Financial Advisor |
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Section 4.19 Disclosure Documents |
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Section 4.20 Affiliate Transactions |
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Section 4.21 Customers and Suppliers |
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30 |
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Section 4.22 State Takeover Statutes |
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Section 4.23 No Other Representations or Warranties; Investigation by Parent and Merger Sub |
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31 |
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Section 4.24 Good Faith |
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31 |
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Section 5. Representations and Warranties of Parent, US Corp. and Merger Sub |
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Section 5.1 Organization |
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Section 5.2 Authority to Execute and Perform Agreement |
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Section 5.3 Capitalization |
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Section 5.4 Parent Subsidiaries |
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Section 5.5 No Conflict; Required Filings and Consents |
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33 |
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Section 5.6 SEC Filings; Financial Statements |
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34 |
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Section 5.7 Absence of Certain Changes or Events |
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Section 5.8 Compliance with Laws |
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Section 5.9 Claims, Actions and Proceedings |
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36 |
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Section 5.10 Contracts and Other Agreements |
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36 |
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Section 5.11 Intellectual Property |
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Section 5.12 Tax Matters |
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Section 5.13 Disclosure Documents |
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38 |
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Section 5.14 Brokers |
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Section 5.15 Parent and Merger Sub |
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Section 5.16 Solvency |
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Section 5.17 Financing |
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Section 5.18 No Other Representations or Warranties; Investigation by the Company |
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Section 5.19 Good Faith |
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41 |
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Section 6. Conduct of Business Pending the Merger; No Solicitation; Employee Matters |
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Section 6.1 Conduct of Business |
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Section 6.2 No Solicitation |
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Section 6.3 Employee Matters |
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Section 7. Additional Agreements |
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Section 7.1 Proxy Statement; Registration Statement |
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Section 7.2 Company Stockholders Meeting |
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Section 7.3 Access to Information; Confidentiality |
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Section 7.4 Regulatory Filings; Reasonable Best Efforts |
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Section 7.5 Directors and Officers Indemnification and Insurance |
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Section 7.6 Conduct of Parent’s Business |
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Section 7.7 Public Disclosure |
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Section 7.8 Registration Rights Agreement and other Affiliate Agreements |
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Section 7.9 Financing |
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56 |
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Section 7.10 Stock Exchange Listing |
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Section 7.11 Takeover Laws |
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Section 7.12 Notification of Certain Matters |
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Section 7.13 Certificate of Amendment |
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58 |
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Section 8. Conditions Precedent to the Obligation of the Parties to Consummate the Merger |
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Section 8.1 Conditions to Each Party’s Obligations to Effect the Merger |
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Section 8.2 Conditions to the Obligations of the Company to Effect the One Step Merger |
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Section 8.3 Conditions to the Obligations of Parent, US Corp. and Merger Sub to Effect
the One Step Merger |
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Section 8.4 Frustration of Closing Conditions |
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Section 9. Termination, Amendment and Waiver |
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Section 9.1 Termination |
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Section 9.2 Effect of Termination |
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Section 9.3 Fees and Expenses |
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Section 9.4 Amendment |
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Section 9.5 Waiver |
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Section 10. Miscellaneous |
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Section 10.1 Entire Agreement |
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Section 10.2 No Survival |
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Section 10.3 Parent Guarantee |
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Section 10.4 Notices |
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Section 10.5 Binding Effect; No Assignment; No Third-Party Beneficiaries |
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Section 10.6 Severability |
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Section 10.7 Governing Law |
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Section 10.8 Submission to Jurisdiction; Waiver |
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Section 10.9 Specific Enforcement |
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Section 10.10 Interpretation |
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Section 10.11 No Waiver of Rights |
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Section 10.12 Counterparts; Facsimile Signatures |
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Section 10.13 Obligations of Subsidiaries |
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69 |
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Index of Defined Terms |
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Annex A |
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Conditions of Offer |
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Annex B |
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Form of Stockholders Agreement |
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Annex C |
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Certificate of Amendment |
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Annex D |
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this “
Agreement”), dated as of February 25, 2008,
is by and among
SXC Health Solutions Corp. (“
Parent”), a corporation organized under the
laws of Yukon Territory, Canada, SXC Health Solutions, Inc., a Texas corporation and wholly-owned
subsidiary of Parent (“
US Corp.”), Comet Merger Corporation (“
Merger Sub”), a
newly-formed
Delaware corporation that is wholly-owned by US Corp. and is an indirect, wholly-owned
subsidiary of Parent, and National Medical Health Card Systems, Inc. (the “
Company”), a
Delaware corporation.
WHEREAS, following the consummation of the Offer, the parties intend that, in accordance with
the Delaware General Corporation Law (the “
DGCL”), Merger Sub and the Company shall
consummate a merger pursuant to which Merger Sub shall be merged with and into the Company (the
“
Second Step Merger”), and the Company shall continue as the surviving corporation
of the Second Step Merger, and each share of Company Common Stock that is not validly tendered and
accepted pursuant to the Offer will thereupon be cancelled and converted into the right to receive
the Offer Price, on the terms and subject to the conditions set forth herein;
Section 1. The Offer.
Section 1.1 The Offer
(a) Provided that the Company shall have complied with its applicable obligations under
Section 1.2 (other than clause (e)), Parent shall use its reasonable best efforts to cause Merger
Sub to commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer at the Offer
Price no later than March 24, 2008 (and in any event as promptly as practicable after the date
hereof). For the avoidance of doubt, Parent may consummate the Offer through Merger Sub, its
indirect wholly-owned Subsidiary.
(b) The obligation of Merger Sub (and Parent’s obligation to cause Merger Sub) to accept for
exchange, and exchange the Offer Price for, any shares of Company Common Stock tendered pursuant to
the Offer shall be subject only to (i) the condition that there shall be validly tendered in
accordance with the terms of the Offer (other than shares of Company Common Stock tendered by
guaranteed delivery where actual delivery has not occurred), prior to the scheduled expiration of
the Offer (as it may be extended hereunder) and not withdrawn, a number of shares of Company Common
Stock that, together with any shares of Company Common Stock then directly or indirectly owned by
Merger Sub, represents more than 9,600,000 shares of Company Common Stock (the “Minimum
Condition”) and (ii) the other conditions set forth in Annex B (the Minimum Condition and such
other conditions collectively referred to herein as the “Offer Conditions”). Parent, US
Corp. and Merger Sub expressly reserve the right in their sole and absolute discretion to waive any
of the Offer Conditions and to modify the terms of the Offer; provided, that unless previously
approved in writing by the Company in the Company’s sole and absolute discretion, (i) the Minimum
Condition may not be amended nor may it be waived if such waiver would result in Merger Sub
purchasing less than a majority of the outstanding shares of Company Common Stock (for purposes of
this clause (i) treating each share of the Company’s Series A 7% Convertible Preferred Stock, par
value $0.10 per share (“Company Convertible Preferred Stock” and, together with the Company
Common Stock, the “Company Stock”), as having been converted into a share of Company Common
Stock pursuant to the Certificate of Designations), (ii) no change may be made that changes the
form of consideration to be paid pursuant to the Offer or reduces the ratio of cash to Parent
Common Stock, decreases the Offer Price or the number of shares of Company Common Stock sought in
the Offer, amends or adds to the Offer Conditions, or otherwise modifies the Offer in any manner
adverse to the stockholders of the Company, and (iii) except as set forth in Section 1.1(c), the
Offer may not be extended nor may any change be made to the Offer that would require an extension
of or delay in the then current expiration date of the Offer. Holders of shares of Company Common
Stock will not be able to tender such shares by guaranteed delivery unless Merger Sub otherwise
elects in its sole and absolute discretion to permit guaranteed delivery. For purposes of this
Agreement, including for purposes of determining whether the Minimum Condition has been met, the
shares of Company Common Stock issuable upon conversion of the Company Convertible Preferred Stock
shall be deemed to have been validly tendered in the Offer and not withdrawn if the Tender
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Documents referred to in Section 2.1 of each of the Stockholder Agreements are delivered to
the depositary for the Offer in accordance with such Section 2.1 and not withdrawn.
(c) Unless extended pursuant to and in accordance with the terms of this Agreement, the Offer
shall expire at 10:00 a.m., New York City time, on the twenty-first (21st) business day (for this
purpose calculated in accordance with Rule 14d-1(g)(3) under the Exchange Act) after the date that
the Offer is commenced (the “Initial Offer Period”). Subject to the provisions of Section
1.5, and subject to the parties’ respective termination rights under Section 9 (if applicable), (i)
if, at the scheduled or extended expiration date of the Offer, any Offer Condition has not been
satisfied in Parent’s reasonable discretion or waived (if such waiver is permitted hereunder),
Merger Sub shall extend the Offer until the earlier to occur of (x) the satisfaction or waiver of
all of the Offer Conditions and (y) the End Date, and (ii) Merger Sub shall extend the Offer for
any period required by any rule, regulation, interpretation or position of the Securities and
Exchange Commission (the “SEC”) or its staff or the Nasdaq Market (including any successor
exchange, “Nasdaq”) applicable to the Offer or any period required by applicable Law.
Following the expiration of the Offer, Merger Sub may elect to provide one or more subsequent
offering periods (each, a “Subsequent Offering Period”) in accordance with Rule 14d-11 of
the Exchange Act and in compliance with all other provisions of applicable Law. Subject to the
foregoing, including the requirements of Rule 14d-11 of the Exchange Act, and upon the terms and
subject to the conditions of the Offer, Merger Sub shall as promptly as practicable following
expiration of the Offer accept for payment and pay for all shares of Company Common Stock (A)
validly tendered and not withdrawn pursuant to the Offer and/or (B) validly tendered in any such
Subsequent Offering Period. The Offer Price payable in respect of each share of Company Common
Stock validly tendered and not withdrawn pursuant to the Offer or validly tendered in any
Subsequent Offering Period shall be paid net to the holder thereof in cash and shares of Parent
Common Stock, subject to reduction for any applicable withholding Taxes.
(d) Subject to the foregoing and applicable Law and upon the terms of and subject to the
conditions of the Offer, Merger Sub shall accept for payment, as promptly as permitted under
applicable securities Law, and pay for (after giving effect to any required withholding Tax), as
promptly as practicable after the date on which Merger Sub first accepts shares of Company Common
Stock for payment pursuant to the Offer (the date and time of such first acceptance, regardless of
whether Parent and Merger Sub elect to provide for one or more Subsequent Offering Periods pursuant
to Rule 14d-11 of the Exchange Act, the “Acceptance Date”), all shares of Company Common
Stock validly tendered and not withdrawn pursuant to the Offer.
(e) No fraction of a share of Parent Common Stock shall be issued in connection with the
Offer, no dividends or other distributions with respect to Parent Common Stock shall be payable on
or with respect to any such fractional share interest and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of Parent. In lieu
thereof, each tendering stockholder who would otherwise be entitled to a fractional share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock that otherwise would
have been received by such stockholder) shall, upon surrender of his or her Certificate or
Certificates or Book-Entry Shares (each as defined below), be entitled to receive an amount of cash
(without interest) rounded to the nearest whole cent determined by multiplying (i) the closing
price of a share of Parent Common Stock as reported on the Nasdaq on the Acceptance Date by (ii)
the fractional share interest to which such holder would otherwise be entitled. The parties
acknowledge that payment of the cash consideration in lieu of issuing fractional shares was not
separately bargained for consideration, but merely represents a mechanical rounding off for
purposes of simplifying the corporate and accounting complexities that would otherwise be caused by
the issuance of fractional shares.
(f) The Company agrees that no shares of Company Common Stock held by the Company or any of
its Subsidiaries will be tendered pursuant to the Offer.
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(g) On the date of commencement of the Offer, Parent and Merger Sub shall file with the SEC
(i) a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments
and supplements thereto and including exhibits thereto, the “Schedule TO”) that shall
contain the Preliminary Prospectus, an offer to exchange, a form of related letter of transmittal
and summary advertisement in respect of the Offer (collectively, together with any amendments or
supplements thereto, the Registration Statement and such other ancillary documents as may be
required, the “Offer Documents”) and (ii) a registration statement on Form F-4 (or Form
S-4) to register the offer and sale of Parent Common Stock pursuant to the Offer and the Merger
(the “Registration Statement”). The Registration Statement will include a preliminary
prospectus containing the information required under Rule 14d-4(b) of the Exchange Act (the
“Preliminary Prospectus”). Parent and Merger Sub agree to take all steps necessary to
cause the Offer Documents to be disseminated to the Company’s stockholders as and to the extent
required by applicable federal securities Laws. The Company shall promptly furnish to Parent and
Merger Sub all information concerning the Company, its directors, officers and affiliates as may be
required by applicable securities Law or reasonably requested by Parent or Merger Sub for inclusion
in the Schedule TO, the Registration Statement or the other Offer Documents. Parent and Merger Sub
shall use their reasonable best efforts to cause the Schedule TO, the Registration Statement and
the other Offer Documents to comply in all material respects with applicable securities laws and to
have the Registration Statement declared effective under the Securities Act as promptly as
practicable after it is filed with the SEC and to keep the Registration Statement effective as long
as necessary to complete the Offer and the Merger. Following the time the Registration Statement
is declared effective, Parent shall file the final prospectus included therein under Rule 424(b)
promulgated pursuant to the Securities Act. Each of Parent, Merger Sub and the Company agrees
promptly to correct any information provided by it for use in the Schedule TO, the Registration
Statement and the other Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect. Parent and Merger Sub agree to take all steps
necessary to cause the Schedule TO and the Registration Statement as so corrected to be filed with
the SEC and the Offer Documents as so corrected to be disseminated to the Company’s stockholders,
in each case, as and to the extent required by applicable federal securities Law. The Company and
its counsel shall be given a reasonable opportunity to review and comment on the Schedule TO, the
Registration Statement and the other Offer Documents each time before any such document is filed
with the SEC or disseminated to the Company’s stockholders, and Parent and Merger Sub shall give
reasonable and good faith consideration to any comments made by the Company and its counsel.
Parent and Merger Sub shall provide the Company and its counsel with (i) any comments or other
communications, whether written or oral, that Parent, Merger Sub or their counsel may receive from
time to time from the SEC or its staff with respect to the Schedule TO, the Registration Statement
or the other Offer Documents promptly after receipt of such comments or other communications, and
(ii) a reasonable opportunity to provide comments on that response (to which reasonable and good
faith consideration shall be given).
(h) Parent and/or US Corp. shall provide or cause to be provided to Merger Sub on a timely
basis the funds and shares of Parent Common Stock necessary to accept for payment, and pay for, any
shares of Company Common Stock that Merger Sub becomes obligated to accept for payment, and pay
for, pursuant to the Offer.
(i) If, between the date hereof and the date on which any share of Company Common Stock is
accepted for payment and paid for pursuant to the Offer, the outstanding shares of Company Stock
are changed (or a record date for such change occurs) into a different number or class of shares by
reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or other similar transaction, then the
Offer Price shall be appropriately and proportionately adjusted, taking into account the record and
payment or effective dates, as the case may be, for such transaction.
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(j) If, between the date hereof and the date on which any share of Company Common Stock is
accepted for payment and paid for pursuant to the Offer, the outstanding shares of Parent Common
Stock are changed (or a record date for such change occurs) into a different number or class of
shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse
stock split, consolidation of shares, reclassification, recapitalization or other similar
transaction, then the Offer Price shall be appropriately and proportionately adjusted, taking into
account the record and payment or effective dates, as the case may be, for such transaction.
(k) Subject to Section 1.5, unless this Agreement is terminated pursuant to Section 9, Merger
Sub shall not terminate or withdraw the Offer prior to any scheduled expiration date without the
prior written consent of the Company in its sole and absolute discretion, except that in the event
this Agreement is terminated pursuant to Section 9, Merger Sub shall promptly (and in any event
within twenty-four (24) hours) following such termination irrevocably and unconditionally terminate
the Offer and shall not acquire any shares of Company Common Stock pursuant thereto. If the Offer
is terminated in accordance with this Agreement prior to the purchase of shares of Company Common
Stock in the Offer, Merger Sub shall promptly return, or cause any depositary acting on behalf of
Merger Sub to return, all tendered shares of Company Stock to the tendering stockholders.
Section 1.2 Company Actions.
(a) The Company hereby represents and warrants that the Company Board of Directors, at a
meeting duly called and held prior to the execution of this Agreement at which all directors of the
Company were present, duly and unanimously adopted resolutions (i) declaring that this Agreement
and the transactions contemplated hereby, including the Offer and the Merger, are advisable to and
in the best interests of the Company and its stockholders, (ii) approving this Agreement, the
Stockholder Agreements and the transactions contemplated hereby, including the Offer and the
Merger, and (iii) recommending that the Company’s stockholders accept the Offer, tender their
shares of Company Common Stock in the Offer and, if required by applicable Law in order to
consummate the Merger or in connection with the One Step Merger, adopt this Agreement (such
recommendation, the “Company Recommendation”).
(b) Provided that no Change in Recommendation shall have occurred in accordance with Section
6.2(c) or 6.2(d), the Company hereby consents to the inclusion of the Company Recommendation in the
Offer Documents in a form and manner reasonably determined by the Company to be acceptable. The
Company shall instruct its transfer agent to promptly furnish Parent with a true and correct list,
as of the most recent practicable date, of the Company’s stockholders and their addresses, as well
as mailing labels containing such names and addresses, and shall provide to Parent such additional
information (including updated lists of stockholders, mailing labels and lists of securities
positions) and such other assistance as Parent may reasonably request for purposes of communicating
the Offer to the Company’s stockholders. Parent and Merger Sub shall hold all information
furnished in accordance with this Section 1.2(b) in confidence in accordance with the terms and
conditions of the confidentiality agreement, dated as of October 18, 2007, as amended or
supplemented, between Parent and the Company (the “Confidentiality Agreement”), and shall
use such information solely in connection with the communication and implementation of the Offer.
(c) On the date the Schedule TO is first filed with the SEC, the Company shall file with the
SEC and disseminate to the Company’s stockholders a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the “Schedule 14D-9”)
that, unless a Change in Recommendation in accordance with Section 6.2(c) or 6.2(d) shall have
occurred, shall contain the Company Recommendation. Each of Parent and Merger Sub shall promptly
furnish to the Company in writing all information concerning Parent and Merger Sub that may be
required by applicable Law or reasonably requested by the Company for inclusion in the Schedule
14D-9. Each of the Company, Parent and Merger Sub agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become
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false or misleading in any material respect. The Company agrees to take all steps necessary
to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the
Company’s stockholders, in each case, as and to the extent required by applicable federal
securities Laws. Parent, Merger Sub and their counsel shall be given a reasonable opportunity to
review and comment on the Schedule 14D-9 each time before it is filed with the SEC, and the Company
shall give reasonable and good faith consideration to any comments made by Parent, Merger Sub and
their counsel. The Company shall promptly provide Parent, Merger Sub and their counsel with (i)
any comments or other communications, whether written or oral, that the Company or its counsel may
receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly
after receipt of those comments or other communications, and (ii) a reasonable opportunity to
provide comments on that response (to which reasonable and good faith consideration shall be
given).
(d) The Company agrees (i) to promptly upon Parent’s request provide all information about the
Company required to be disclosed in the Offer Documents, (ii) to use reasonable best efforts to
cause the Company’s accountants to promptly deliver to Parent a duly executed consent of the
Company’s accountants to allow Parent to include in the Registration Statement the Company’s
financial statements and such accountants’ report thereon, (iii) that all information provided by
the Company for inclusion or incorporation by reference in the Offer Documents will not (at the
respective times such materials, or any amendments or supplements thereto, are filed with the SEC,
first published, sent or given to stockholders of the Company, the Offer expires or shares of
Parent Common Stock are delivered in connection with the Offer, or at the Effective Time, as the
case may be) contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (iv) to promptly correct any
information provided by the Company for the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect.
(e) Prior to the Acceptance Date, to the extent necessary, the Company (acting through the
entire Company Board of Directors or a special committee of the Company Board of Directors
comprised solely of “independent directors” determined in accordance with Rule 14d-10(d)(2) of the
Exchange Act) will take all steps that may be necessary or reasonably advisable to cause any
employee agreement, plan or arrangement (whether in existence prior to or after the date hereof)
pursuant to which consideration is or becomes payable to any officer, director or employee to be
unanimously approved by the entire Company Board of Directors (or by such special committee) as an
“employment compensation, severance or other employee benefit arrangement” within the meaning of
Rule 14d-10(d)(2) of the Exchange Act and to take all actions otherwise necessary to satisfy the
requirements of the non-exclusive safe harbor set forth in Rule 14d-10(d) of the Exchange Act.
Section 1.3 Directors.
(a) Effective upon the acceptance for payment of shares of Company Common Stock pursuant to
the Offer, Parent shall be entitled to designate the number of directors, rounded up to the next
whole number, on the Company Board of Directors that equals the product of (x) the total number of
directors on the Company Board of Directors (giving effect to the election of any additional
directors pursuant to this Section 1.3(a)), and (y) a fraction having a numerator equal to the
aggregate number of shares of Company Common Stock beneficially owned by Merger Sub (including
shares of Company Common Stock purchased pursuant to the Offer) and a denominator equal to the
total number of shares of Company Common Stock then outstanding. At Parent’s request on or after
the Acceptance Date, the Company shall cause Parent’s designees to be elected or appointed to the
Company Board of Directors as promptly as possible, including increasing the number of directors
and seeking and accepting resignations of incumbent directors. In connection with the designation
by Parent of individuals to serve on the Company Board of Directors, the Company shall, at Parent’s
request, cause individuals designated by Parent to constitute the number of members, rounded up to
the next whole number, on (i) each committee of the
6
Company Board of Directors and (ii) each board of directors of each Subsidiary of the Company
(and each committee thereof) that represents the same percentage as such individuals represent on
the Company Board of Directors, in each case subject to any limitation imposed by applicable Law
(including Nasdaq rules).
(b) The Company’s obligations to appoint Parent’s designees to the Company Board of Directors
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The
Company shall promptly take all actions, and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors, as Section 14(f) and Rule 14f-1 require
in order to fulfill its obligations under this Section 1.3, so long as Parent has timely provided
to the Company in writing any information with respect to itself and its nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1. Parent shall promptly supply to
the Company in writing, and shall be solely responsible for the accuracy and completeness of, all
such information.
(c) In the event that Parent’s designees are elected or appointed to the Company Board of
Directors pursuant to Section 1.3(a), until the Effective Time, the Company Board of Directors
shall have at least three (3) directors who are directors of the Company on the date hereof and who
are neither officers of the Company nor stockholders, Affiliates, or associates (within the meaning
of the federal securities Law) of Parent (“Continuing Directors”); provided that in such
event, if the number of Continuing Directors shall be reduced below three (3), the remaining
Continuing Director(s) shall be entitled to designate persons to fill such vacancies who shall be
deemed to be Continuing Directors for purposes of this Agreement or, if no other Continuing
Director then remains, the other directors shall be entitled to (and shall be directed by Parent
to) designate directors to fill such vacancies who shall not be officers of the Company or
stockholders, Affiliates or associates of Parent, and such Persons shall be deemed to be Continuing
Directors for purposes of this Agreement.
(d) Notwithstanding anything in this Agreement to the contrary, following the election or
appointment of Parent’s designees to the Company Board of Directors pursuant to Section 1.3(a) and
until the Effective Time, any termination of this Agreement by the Company, any amendment of this
Agreement, any extension of time for performance of any obligation or action hereunder by Parent or
Merger Sub, any waiver of compliance with any of the agreements or conditions contained herein for
the benefit of the Company or its stockholders (other than Parent, Merger Sub or their Affiliates),
officers, directors or employees, or of any right of the Company under this Agreement, any
amendment of the Company’s certificate of incorporation or bylaws, any amendment or change to or
any other consent or action by the Company Board of Directors with respect to this Agreement, the
Offer or the Merger or any other transaction contemplated hereby or in connection herewith shall
only be effected if there are in office one or more Continuing Directors and such action is
approved by a majority of the Continuing Directors then in office (or by the sole Continuing
Director if there shall be only one Continuing Director). The Continuing Directors shall have the
authority to retain such counsel (which may include current counsel to the Company) and other
advisors at the expense of the Company as determined by the Continuing Directors and shall have the
authority to institute any action on behalf of the Company to enforce performance of this
Agreement.
Section 1.4 Top-Up Option.
(a) The Company hereby grants to Merger Sub an irrevocable option (the “Top Up
Option”), exercisable only upon the terms and conditions set forth in this Section 1.4, to
purchase that number of shares of Company Common Stock (the “Top Up Option Shares”) equal
to the lowest number of shares of Company Common Stock that, when added to the aggregate number of
shares of Company Common Stock owned by Merger Sub at the time of such exercise, shall constitute
one (1) share of Company Common Stock more than ninety percent (90%) of the outstanding shares of
Company Common Stock immediately prior to the filing of the
7
certificate of ownership and merger to effect the Second Step Merger (giving effect to the
issuance of the Top Up Option Shares), at a price per share equal to $11.00.
(b) Merger Sub may exercise the Top Up Option, in whole but not in part, at any time on or
following the Acceptance Date and prior to the tenth (10th) business day after the later
of (i) the Acceptance Date or (ii) the expiration of the Subsequent Offering Period; provided,
however, that Merger Sub agrees that it will exercise the Top Up Option if doing so would allow it
to consummate the Merger pursuant to Section 253 of the DGCL. The obligation of Merger Sub to
exercise the Top Up Option and of the Company to deliver the Top Up Option Shares on the exercise
of the Top Up Option is subject to the conditions that (i) immediately prior to the filing of the
certificate of ownership and merger to effect the Second Step Merger, the aggregate number of
shares owned directly or indirectly by Merger Sub will constitute one (1) share of Company Common
Stock more than ninety percent (90%) of the outstanding shares of Company Common Stock at such time
(giving effect to the issuance of the Top Up Option Shares) and (ii) the number of Top Up Option
Shares issued pursuant to the Top Up Option does not exceed the aggregate number of shares of
Company Common Stock that are then authorized and unissued or held as treasury shares by the
Company.
(c) In the event Merger Sub wishes to exercise the Top Up Option, Merger Sub shall so notify
the Company in writing, and shall set forth in such notice (the “Top-Up Exercise Notice”):
(i) the aggregate number of outstanding shares of Company Common Stock that will be owned by Merger
Sub immediately preceding the purchase of the Top Up Option Shares (provided the Company has
provided Merger Sub with the number of outstanding shares of Company Common Stock as of the
applicable date), and (ii) the place and time for the closing of the purchase of the Top Up Option
Shares, which may be the same day as, but shall not be more than five (5) business days after,
delivery of such notice (the “Top Up Closing”). At the Top Up Closing, Merger Sub shall
pay the Company the aggregate purchase price for the Top Up Option Shares (calculated by
multiplying the number of such Top Up Option Shares by $11.00) by wire transfer of same day funds
to a bank designated by the Company in an amount equal to the aggregate par value of the Top Up
Option Shares and a promissory note, bearing interest at a rate of five percent (5%) per annum, for
the balance of the purchase price, and the Company shall cause to be issued to Merger Sub a
certificate representing such Top Up Option Shares.
(d) Parent and Merger Sub acknowledge that the Top Up Option Shares will not be registered
under the Securities Act and will be issued in reliance upon an exemption thereunder for
transactions not involving a public offering. Merger Sub agrees that the Top Up Option and the Top
Up Option Shares to be acquired upon exercise of the Top Up Option are being and will be acquired
by Merger Sub for the purpose of investment and not with a view to, or for resale in connection
with, any distribution thereof (within the meaning of the Securities Act).
(e) Upon the delivery by Merger Sub to the Company of the Top-Up Exercise Notice, and the
tender of the consideration described in Section 1.4(c), Merger Sub shall be deemed to be the
holder of record of the Top-Up Option Shares issuable upon that exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates representing those
Top-Up Option Shares shall not then be actually delivered to Merger Sub or the Company shall have
failed or refused to designate the bank account described in Section 1.4(c).
Section 1.5 Change in Structure Event. At the earlier to occur of (a) the parties so
agreeing in writing or (b) unless a Change in Recommendation shall have occurred, the date ten (10)
business days after the expiration of the Initial Offer Period (or such later date as the parties
agree in writing) if the Minimum Condition or the Short Form Condition is not then satisfied (a
“Change in Structure Event”), (i) Merger Sub shall promptly (and in any event within
twenty-four (24) hours) following such Change in Structure Event irrevocably and unconditionally
terminate the Offer and shall not acquire any shares of Company Common Stock pursuant thereto, (ii)
Parent shall
8
promptly amend the Registration Statement to reflect the Change in Structure Event and file as
soon as practicable with the SEC the amended Registration Statement, (iii) the Company shall
promptly prepare the Proxy Statement and file as soon as practicable with the SEC the Proxy
Statement and (iv) the parties shall otherwise, upon the conditions and subject to the conditions
of this Agreement, proceed to consummate a One Step Merger as contemplated by this Agreement. If
the Offer is terminated in accordance with this Section 1.5 prior to the purchase of shares of
Company Common Stock in the Offer, Merger Sub shall promptly return, or cause any depositary acting
on behalf of Merger Sub to return, all tendered shares of Company Stock to the tendering
stockholders.
Section 2. The Merger.
The Merger described in this Section 2 shall govern the Second Step Merger or, if a Change in
Structure Event has occurred, the One Step Merger. The parties acknowledge that in the event of a
Second Step Merger, the Company Convertible Preferred Stock shall have been converted into shares
of Company Common Stock no later than immediately prior to the Acceptance Date and such shares of
Company Common Stock, if the Stockholder Parties comply with the tendering procedures set forth in
the Stockholder Agreements, shall have been validly tendered and not withdrawn in connection with
the Offer. Notwithstanding anything in this Agreement to the contrary, if following the Offer and
any Subsequent Offering Period and the exercise, if any, of the Top Up Option, the requirements of
Section 253 of the DGCL are satisfied such that the Merger may be effected without a vote of
stockholders of the Company, the parties hereto shall take all necessary and appropriate actions to
cause the Merger to become effective as soon as practicable on such basis and in any event within
one (1) business day after the Acceptance Date.
Section 2.1 The Merger; Effects of the Merger
(a) At the Closing, upon the terms and subject to the conditions of this Agreement, and in
accordance with the DGCL and other applicable
Delaware Law, the Company and Merger Sub shall file a
certificate of merger or certificate of ownership and merger, as the case may be, in such form as
required by, and executed and acknowledged by the necessary parties in accordance with, the
relevant provisions of the DGCL (the “
Certificate of Merger”). The Merger shall become
effective at the time and date on which the Certificate of Merger has been duly filed with the
Secretary of State of the State of
Delaware or such later time and date as is agreed to by the
parties hereto and specified in the Certificate of Merger, such time referred to herein as the
“
Effective Time.” Parent, Merger Sub and the Company shall make all other filings or
recordings required under the DGCL or other applicable
Delaware Law in connection with the Merger.
(b) The Merger shall have the effects set forth in the Certificate of Merger and in the
applicable provisions of the DGCL and this Agreement. The Company shall be the surviving
corporation of the Merger (sometimes hereinafter referred to as the “
Surviving
Corporation”). Without limiting the generality of the foregoing, at the Effective Time: (i)
Merger Sub shall be merged with and into the Company, and the separate corporate existence of
Merger Sub shall thereupon cease; (ii) the Surviving Corporation shall continue to be governed by
the laws of the State of
Delaware; (iii) the corporate existence of the Surviving Corporation with
all its property, rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger; and (iv) all the property, rights, privileges, immunities, powers and franchises of
the Company and Merger Sub shall be vested in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
(c) The certificate of incorporation of the Company immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended in
accordance with the provisions thereof and as provided by the DGCL or other applicable Law.
9
(d) The bylaws of Merger Sub as in effect immediately prior to the Effective Time shall be the
bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable
Law; provided, however, that such bylaws shall be amended as necessary to comply with the
obligations of the Surviving Corporation set forth in Section 7.5.
Section 2.2 Closing. The closing of the Merger (the “Closing”) will take
place at 10:00 a.m. (New York City time) on a date to be specified by the parties, such date to be
no later than the second business day (or in the case of a Second Step Merger, one business day or
such earlier time as determined by Parent) after satisfaction or waiver of all of the conditions
set forth in Section 8 (other than those conditions that by their terms are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions), at the offices of Sidley
Austin LLP, Xxx Xxxxx Xxxxxxxx Xx., Xxxxxxx, Xxxxxxxx 00000, unless another time, date and/or place
is agreed to in writing by the parties hereto. The date on which the Closing occurs is referred to
in this Agreement as the “Closing Date.”
Section 2.3 Directors and Officers of the Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation, and the officers of Merger Sub immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of the Surviving
Corporation, in each case until their respective successors shall have been duly elected,
designated or qualified, or until their earlier death, resignation or removal in accordance with
the Surviving Corporation’s certificate of incorporation and bylaws.
Section 3.1
Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of Parent, the Company, Merger Sub or the holders of any shares
of outstanding Company Common Stock and Company Convertible Preferred Stock, the following shall
occur:
(a)
Conversion of Shares of Company Stock. Each issued and outstanding share of
Company Stock (other than shares of Company Stock to be cancelled in accordance with Section 3.1(c)
and Dissenting Shares (collectively, “
Excluded Shares”)) shall be cancelled and converted
into the right to receive (i) $7.70 in cash (the “
Cash Consideration”) and (ii) 0.217 (the
“
Exchange Ratio”) of a validly issued, fully paid and nonassessable share of Parent Common
Stock (the “
Stock Consideration” and together with the Cash Consideration, the “
Merger
Consideration” provided that if the Offer Price is changed and shares of Company Common Stock
are accepted for purchase pursuant to the Offer, a corresponding change shall be made to the Merger
Consideration).
(b)
Merger Sub Common Stock. Each share of common stock, $0.01 par value per share,
of Merger Sub issued and outstanding immediately prior to the Effective Time shall remain
outstanding and shall constitute the only issued and outstanding capital stock of the Surviving
Corporation.
(c)
Cancellation of Treasury Stock and Parent-Owned Stock. All shares of Company
Common Stock and Company Convertible Preferred Stock that are owned by the Company as treasury
stock and any shares of Company Common Stock owned by Parent, the Company, or Merger Sub or any of
their Subsidiaries immediately prior to the Effective Time shall automatically be cancelled and
shall cease to exist, and no consideration shall be delivered in exchange therefor.
(a) Notwithstanding anything in this Agreement to the contrary, shares of Company Stock that
are issued and outstanding immediately prior to the Effective Time and which are held by holders of
shares of
10
Company Stock who are entitled to demand and who have properly demanded and perfected
their rights to be paid the fair value of such shares in accordance with Section 262 of the DGCL
(the “Dissenting Shares”) shall not be converted into the right to receive the Merger
Consideration and the holders thereof shall be entitled to only such rights as are granted by
Section 262 of the DGCL; provided, however, that if any such holder shall fail to perfect or shall
effectively waive, withdraw or lose such holder’s rights under Section 262 of the DGCL, such
holder’s shares of Company Stock shall thereupon be deemed to have been converted, at the Effective
Time, into the right to receive, subject to Section 3.5 and Section 3.6, the Merger Consideration
as set forth in this Section 3.
(b) The Company shall give Parent (i) prompt notice of any appraisal demands received by the
Company, withdrawals thereof and any other instruments served pursuant to Section 262 of the DGCL
and received by the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to the exercise of appraisal rights under Section 262 of the DGCL. Prior
to the Effective Time, the Company shall not, without the prior written consent of Parent,
voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or
agree to do any of the foregoing.
(a) The Company shall use reasonable best efforts to ensure that, (i) immediately prior to the
Effective Time, each outstanding option to acquire shares of Company Common Stock (“Company
Options”) granted under the Company’s 1999 Stock Option Plan, as amended, and the Amended and
Restated 2000 Restricted Stock Grant Plan (collectively, the “Equity Incentive Plans”),
shall become fully vested and exercisable (without regard to whether the Company Options are then
vested or exercisable) and (ii) at the Effective Time, all Company Options not theretofore
exercised shall be cancelled and, in exchange therefor, converted into the right to receive a
payment of the Merger Consideration calculated as follows: The excess, if any, of (A) the sum of
(x) the Cash Consideration and (y) an amount equal to the Exchange Ratio multiplied by the closing
price of a share of Parent Common Stock as reported on the Nasdaq on the last trading day
immediately prior to the Effective Time (such sum, the “Company Share Value”) over (B) the
exercise price of a Company Option will be multiplied by the number of shares subject to such
Company Option and such product will be divided by the Company Share Value. Such quotient, rounded
to the nearest whole number, is referred to herein as the “Option Share Equivalent.” Each
Option Share Equivalent shall be entitled to receive the Merger Consideration. Any Company Option
with an exercise price equal to or greater than the Company Share Value shall not receive any
Merger Consideration.
(b) The Company shall use reasonable best efforts to ensure that, immediately prior to the
Effective Time, each share of Company Common Stock subject to vesting or other lapse restrictions
pursuant to any Equity Incentive Plan (collectively, “Restricted Shares”) which was granted
prior to the date hereof and is outstanding immediately prior to the Effective Time shall vest and
become free of such restrictions.
(c) The Company shall use reasonable best efforts to ensure that, as of the Effective Time,
(i) the Equity Incentive Plans remain in full force and effect and (ii) no person shall have any
right under the Equity Incentive Plans, except as set forth herein.
(d) At or promptly after the Effective Time, the Surviving Corporation shall, and Parent shall
cause the Surviving Corporation to, deliver the applicable Merger Consideration to holders of
Company Options without interest. Parent shall, and shall cause the Surviving Corporation to, at
all times from and after the Effective
Time maintain sufficient funds and shares of Parent Common Stock to satisfy its obligations to
holders of Company Options in respect of the amounts payable pursuant to this Section 3.3.
11
(a) Not less than three (3) business days prior to the earlier of the Acceptance Date and the
Closing Date, Parent shall appoint a bank or trust company reasonably acceptable to the Company to
act as exchange agent (the “Exchange Agent”) for the purpose of exchanging certificates
which immediately prior to the Effective Time represented shares of Company Stock (the
“Certificates”) or shares of Company Stock represented by book-entry (“Book-Entry
Shares”) for the Merger Consideration.
(b)
Exchange Fund. At or immediately following the Effective Time, Parent and US
Corp. shall or shall cause Merger Sub to deposit with the Exchange Agent, pursuant to an agreement
providing for the matters set forth in this Section 3.4 and such other matters as may be
appropriate and the terms of which shall be reasonably acceptable to Parent and the Company, an
amount in cash and certificates representing shares of Parent Common Stock sufficient to effect the
conversion of each share of the Company Stock (other than Excluded Shares) into the Merger
Consideration. In addition, Parent and US Corp. shall or shall cause Merger Sub to deposit with
the Exchange Agent, as necessary, cash in an amount sufficient for payment in lieu of fractional
shares pursuant to Section 3.8 and any dividends or distributions to which holders of Company Stock
become entitled pursuant to Section 3.4(d). All cash and shares of Parent Common Stock deposited
with the Exchange Agent shall hereinafter be referred to as the “
Exchange Fund”. The cash
portion of the Exchange Fund shall be invested by the Exchange Agent as directed by Parent;
provided however, that such investments shall be in obligations of or guaranteed by the United
States of America or any agency or instrumentality thereof and backed by the full faith and credit
of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by
Xxxxx’x Investors Service, Inc. or Standard & Poor’s Corporation, respectively, or in certificates
of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital
exceeding $1 billion (based on the most recent financial statements of such bank which are then
publicly available). Any net profit resulting from, or interest or income produced by, such
investments shall be payable to the Surviving Corporation. If for any reason the Exchange Fund is
inadequate to pay the amounts to which holders of shares of Company Stock shall be entitled under
this Section 3, Parent shall, or shall cause the Surviving Corporation to, promptly deposit
additional cash and certificates with the Exchange Agent sufficient to make all payments of Merger
Consideration, and Parent and the Surviving Corporation shall in any event be liable for payment
thereof.
(c)
Exchange of Certificates. As soon as reasonably practicable after the Effective
Time, the Surviving Corporation shall cause to be mailed to each (i) record holder, as of the
Effective Time, of an outstanding Certificate or (ii) holder, as of the Effective Time, of
Book-Entry Shares, a form of letter of transmittal (which shall be in customary form and agreed to
by Parent and the Company prior to the Effective Time, shall contain instructions for wire transfer
at the expense of such holder of the cash portion of the Merger Consideration, and shall specify
that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the duly executed transmittal materials, such other documents as may
customarily be required by the Exchange Agent and, as applicable, any Certificates to the Exchange
Agent). Upon surrender to the Exchange Agent of a Certificate or Book-Entry Shares for
cancellation, together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may customarily be required
by the Exchange Agent, the holder of such Certificate or Book-Entry Shares shall be entitled to
receive in exchange therefor the Merger Consideration for each share formerly represented by such
Certificate or Book-Entry Shares and such Certificate or applicable book-entry shall then be
cancelled. No interest shall be paid or accrued for the benefit of holders of the Certificates or
Book-Entry Shares on the Merger Consideration payable in respect of the
Certificates or Book-Entry Shares. Until surrendered for cancellation as contemplated by this
Section 3.4(c), each Certificate and each Book-Entry Share shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the Merger Consideration
as contemplated by this Section 3.
12
to the holder of any unsurrendered Certificates or Book-Entry Shares
until those Certificates or Book-Entry Shares are surrendered as provided in this Section 3. Upon
surrender, there shall be issued and/or paid to the holder of the shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of surrender, the dividends or other
distributions payable with respect to those shares of Parent Common Stock with a record date on or
after the date of the Effective Time and a payment date on or prior to the date of this surrender
and not previously paid and (ii) at the appropriate payment date, the dividends or other
distributions payable with respect to those shares of Parent Common Stock with a record date on or
after the date of the Effective Time but with a payment date subsequent to surrender.
(e)
Lost Certificates. If any Certificate has been lost, stolen, defaced or
destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen, defaced or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate (subject to the provisions of Section 3.2) the Merger Consideration
with respect thereto without interest.
(f)
Transfer Books; No Further Ownership Rights in Shares of Company Stock. At the
Effective Time, the stock transfer books of the Company with respect to the Company Common Stock
and Company Convertible Preferred Stock will be closed and thereafter there will be no further
registration of transfers of shares of Company Common Stock or Company Convertible Preferred Stock
on the records of the Company. From and after the Effective Time, the holders of Certificates
evidencing ownership of shares of Company Common Stock and Company Convertible Preferred Stock
outstanding immediately prior to the Effective Time shall cease to have any rights with respect to
such shares, except as otherwise provided for herein or by applicable Law. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason, they shall (subject
to the provisions of Section 3.2) be cancelled against delivery of the Merger Consideration as
provided in this Section 3 without interest.
(g)
Termination of Exchange Fund. At any time following the date that is one (1) year
after the Effective Time, the Surviving Corporation shall be entitled to require the Exchange Agent
to deliver to it any funds (including any interest received with respect thereto) made available to
the Exchange Agent and not disbursed (or for which disbursement is pending subject only to the
Exchange Agent’s routine administrative procedures) to holders of Certificates or Book-Entry
Shares, and thereafter such holders shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat or similar Laws) only as general creditors thereof with
respect to the Merger Consideration, cash in lieu of fractional shares and any dividends or
distributions payable upon due surrender of their Certificates or Book-Entry Shares, without any
interest thereon.
(h)
No Liability. None of Parent, US Corp., the Surviving Corporation or the Exchange
Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
Section 3.5
Withholding. Each of Parent, US Corp., and the Surviving Corporation is
entitled to deduct and withhold, or cause the Exchange Agent to deduct and withhold, from any
amounts payable or otherwise deliverable pursuant to this Agreement to any holder or former holder
of shares of Company Stock (including Restricted Shares) or Company Options such amounts as are
required to be deducted or withheld therefrom under the Internal Revenue Code of 1986, as amended
(the “
Code”), or any provision of state, local or
foreign Tax Law or under any other applicable legal requirement. To the extent such amounts
are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the person to whom such amounts would otherwise have been paid.
Section 3.6
Transfer Taxes. If payment of the Merger Consideration payable to a
holder of shares of Company Stock pursuant to the Merger is to be made to a person other than the
person in whose name the
13
surrendered Certificate is registered, it shall be a condition of payment
that the Certificate so surrendered shall be properly endorsed or shall be otherwise 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 reasonable
satisfaction of Parent that such Tax either has been paid or is not applicable).
(a) In the event that the Company changes (or establishes a record date for changing) the
number of shares of Company Stock issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend, recapitalization, subdivision, reclassification, combination,
exchange of shares or similar transaction with respect to the outstanding shares of Company Stock
at any time during the period from the date hereof to the Effective Time, then the Merger
Consideration shall be appropriately adjusted, taking into account the record and payment or
effective dates, as the case may be, for such transaction.
(b) In the event that Parent changes (or establishes a record date for changing) the number of
shares of Parent Common Stock issued and outstanding prior to the Effective Time as a result of a
stock split, stock dividend, recapitalization, subdivision, reclassification, combination, exchange
of shares or similar transaction with respect to the outstanding shares of Parent Common Stock at
any time during the period from the date hereof to the Effective Time, then the Merger
Consideration shall be appropriately adjusted, taking into account the record and payment or
effective dates, as the case may be, for such transaction.
Section 3.8
No Fractional Shares. No fractional shares of Parent Common Stock shall
be issued in respect of shares of Company Stock that are to be converted in the Merger into the
right to receive the Merger Consideration. Each holder of a Certificate (other than holders of
Certificates representing Excluded Shares) or Book-Entry Share shall be entitled to receive in lieu
of any fractional share of Parent Common Stock to which such holder would otherwise have been
entitled pursuant to Section 3.1 an amount in cash (without interest), rounded to the nearest whole
cent, equal to the fractional share interest to which such holder would otherwise be entitled by
the closing price on the Nasdaq for a share of Parent Common Stock on the last trading day
immediately preceding the Effective Time.
The parties agree that the Merger, together with (if applicable) the acceptance of Company
Stock pursuant to the Offer, shall be treated for U.S. federal income tax purposes, and for
applicable state, local, foreign and other income tax purposes, as a taxable purchase by US Corp.
of the Company Stock converted in the Merger or accepted pursuant to the Offer, in exchange for the
Merger Consideration or the Offer Price, as applicable. The separate corporate existence of Merger
Sub, the promissory note delivered as consideration for the Top Up Option Shares and the Top Up
Option Shares, for such purposes shall be disregarded. Each of the parties shall not, and shall
not cause or permit its respective Affiliates to, take any tax position inconsistent with the
treatment described in this Section 3.9.
The Company hereby makes the representations and warranties to Parent, US Corp. and Merger Sub
set forth in this Section 4, except (i) as set forth in the disclosure schedule delivered by the
Company to Parent on the date hereof (the “Company Disclosure Schedule”); provided,
however, that disclosure of any item in any section or subsection of the Company Disclosure
Schedule shall be deemed disclosure with respect to any other section or subsection only if the
relevance of such item is reasonably apparent on the face of such disclosure, or (ii)
14
as disclosed
in any Company SEC Report filed prior to the date hereof and available on the Electronic Data
Gathering, Analysis and Retrieval System of the SEC; provided, however, that all disclosures under
“Business – Government Regulation,” “Risk Factors” and “Forward-Looking Statements” and similar
forward looking disclosure shall not be deemed to qualify the representations and warranties in
this Section 4; provided, further, that any disclosures in such Company SEC Reports that are not
the subject of the first proviso of this clause (ii) shall only be deemed to qualify a
representation or warranty if the relevance of such disclosure to such representation or warranty
is reasonably apparent on the face of such disclosure; provided, further, that the disclosures in
the Company SEC Reports shall not be deemed to qualify any representations or warranties made in
Section 4.3.
(a) Each of the Company and each subsidiary of the Company (collectively, the “Company
Subsidiaries”) is a corporation or other legal entity duly organized, validly existing and in
good standing (with respect to jurisdictions that recognize the concept of good standing) under the
Laws of its jurisdiction of organization and has the requisite corporate or similar power and
authority to own, lease and operate its properties and assets it purports to own and to carry on
its business as now being conducted, except as would not, individually or in the aggregate, have a
Company Material Adverse Effect. The Company and each Company Subsidiary are qualified or
otherwise authorized to transact business as a foreign corporation or other organization in all
jurisdictions where the nature of their business or the ownership, leasing or operation of their
properties make such qualification or authorization necessary, except for jurisdictions in which
the failure to be so qualified or authorized would not, individually or in the aggregate, have a
Company Material Adverse Effect. “Company Material Adverse Effect” shall mean any event,
circumstance, development, change or effect that, individually or in the aggregate with all other
events, circumstances, developments, changes and effects, is, or would be, materially adverse to
the business, assets, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole; provided, however, that none of the following shall constitute, or
shall be considered in determining whether there has occurred, and no event, circumstance, change
or effect resulting from or arising out of any of the following shall constitute, a Company
Material Adverse Effect: (A) the announcement of the execution of this Agreement (including the
threatened or actual impact on relationships with customers, vendors, suppliers, distributors,
landlords or employees (including the threatened or actual loss, termination, suspension,
modification or reduction of, or adverse change in, such relationships) but only, in each case, to
the extent caused by the announcement of the execution of this Agreement) or any litigation brought
by any holder of Company Stock (other than any Stockholder Party) arising or resulting therefrom,
(B) changes in the national or world economy or national or foreign securities, credit or financial
markets or changes in general economic conditions that affect the industries in which the Company
and its Subsidiaries, or their customers, conduct their business (but only, in each case, to the
extent that such changes do not disproportionately affect the Company, its Subsidiaries or their
customers as compared to other companies in the industries in which the Company and its
Subsidiaries operate), (C) any change in applicable Law or GAAP or interpretation thereof (but
only, in each case, to the extent that such changes do not disproportionately affect the Company or
its Subsidiaries as compared to other companies in the industries in which the Company and its
Subsidiaries operate), (D) any failure by the Company to meet any published or internally prepared
budgets or estimates of revenues, earnings or financial projections prepared prior to the date of
this Agreement (it being understood and agreed that any events, circumstances, developments,
changes and effects which cause the failure to
meet such budgets, estimates or projections may, except as provided in subsections (A), (B),
(C), (E), (F), (G), (H) or (I) of this definition, constitute or be taken into account in
determining whether there has been or would be a Company Material Adverse Effect), (E) any outbreak
or escalation of war or hostilities, any occurrence or threats of terrorist acts or any armed
hostilities associated therewith and any national or international calamity, disaster or emergency
or any escalation thereof (but only if, in each case, such matters do not disproportionately affect
the Company
15
or its Subsidiaries as compared to other companies in their industries), (F) any
earthquake, hurricane or natural disaster (but only, in each case, to the extent that such changes
do not disproportionately affect the Company or its Subsidiaries as compared to other companies in
such industries), (G) a decline in the price, or a change in the trading volume, of the Company
Common Stock on the Nasdaq (it being understood and agreed that any events, circumstances,
developments, changes and effects which cause such decline or change may, except as provided in
subsections (A), (B), (C), (D), (E), (F), (H) or (I) of this definition, constitute or be taken
into account in determining whether there has been or would be a Company Material Adverse Effect),
(H) taking or not taking any actions with the prior written consent of Parent or (I) compliance
with the terms of, and taking any action required by, this Agreement (other than with respect to
Section 4.17, the lead in to Section 6.1 and Section 6.1(a)). For purposes of this Agreement, (i)
“Laws” means any federal, state, local or foreign laws, statutes, rules, orders, decrees or
regulations of any Governmental Entity and (ii) “Governmental Entity” means any nation,
government (foreign, supranational or domestic), state or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory or administrative functions of,
or pertaining to, government or any self regulating authority.
(b) The Company has made available to Parent true, correct and complete copies of the
certificate of incorporation and bylaws, or other organizational documents, of the Company and each
Company Subsidiary. The Company is not in violation of its certificate of incorporation or bylaws.
The Company Subsidiaries are not in violation, in any material respect, of their respective
certificates of incorporation or bylaws or other organizational documents.
Section 4.2
Authority. On or prior to the date hereof, the Company Board of Directors
has unanimously (a) declared this Agreement, the Offer and the Merger advisable and fair to and in
the best interests of the Company and its stockholders, (b) approved and adopted this Agreement and
the Stockholder Agreements in accordance with the DGCL, (c) made the Company Recommendation and (d)
approved this Agreement, the Stockholder Agreements and the Offer and the Merger and the other
transactions contemplated hereby and thereby for purposes of Section 203 of the DGCL such that no
stockholder approval (other than, if Parent and Merger Sub do not own ninety percent (90%) of the
outstanding shares of Company Common Stock immediately prior to the Merger, the Company Stockholder
Approval) shall be required to consummate the Merger or the other transactions contemplated by this
Agreement and the Stockholder Agreements or to permit the Company and the Stockholder Parties to
perform their respective obligations hereunder and thereunder, which resolutions have not (unless
the Company Board of Directors or a committee thereof has made a Change in Recommendation in
accordance with Section 6.2(c) or 6.2(d)) been subsequently rescinded, modified or withdrawn in any
way. The Company has all necessary corporate power and authority to enter into, execute and
deliver this Agreement, the Stockholder Agreements and each instrument required hereby or thereby
to be executed and delivered by it at the Closing and to perform its obligations hereunder and
thereunder and consummate the transactions contemplated hereby, including the Offer and the Merger,
subject in the case of performing the Merger if Parent and Merger Sub do not own ninety percent
(90%) of the outstanding shares of Company Common Stock immediately prior to the Merger, to
obtaining the approval and adoption of this Agreement by the requisite vote of the Company Common
Stock and Company Convertible Preferred Stock by the Company Requisite Vote (the “
Company
Stockholder Approval”). The execution, delivery and performance of this Agreement, the
Stockholder Agreements and each instrument required hereby or thereby to be executed and delivered
at the Closing by the Company and the consummation by the Company of the Offer and Merger and the
other transactions contemplated hereby and thereby 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 the Stockholder Agreements or to
consummate the Offer and the Merger and the other transactions contemplated hereby (other than with
respect to the Merger, the Company Stockholder Approval (if Parent and Merger Sub do not own ninety
percent (90%) of the outstanding shares of Company Common Stock immediately prior to the Merger)
and the filing with the Secretary of State of the State of
Delaware of the Certificate of Merger as
required by the DGCL) or thereby. This Agreement and the Stockholder Agreements have been duly and
validly executed and delivered by the Company and, assuming the due
16
authorization, execution and
delivery hereof by the other parties thereto, constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except to the extent that
enforcement of the rights and remedies created hereby is subject to bankruptcy, insolvency,
reorganization, moratorium and other similar Laws of general application affecting the rights and
remedies of creditors and to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at Law). The affirmative vote of a majority of outstanding
Company Common Stock and Company Convertible Preferred Stock (with each share of Company
Convertible Preferred Stock deemed to represent 0.8364 of a share of Company Common Stock) voting
together as a single class (collectively, the “Company Requisite Vote”) is required to
approve and adopt this Agreement if Parent and Merger Sub do not own ninety percent (90%) of the
outstanding shares of Company Common Stock immediately prior to the Merger. No other vote of the
holders of any securities of the Company or any of the Company Subsidiaries is required by Law, the
terms of such securities, the by-laws of the Company, or the certificate of incorporation of the
Company for the Company to consummate the Offer or the Merger and the other transactions
contemplated hereby. On or prior to the date hereof, the Company Board of Directors and the
holders of the Company Convertible Preferred Stock have adopted and approved the Amendment to the
Certificate of Designations, Preferences and Rights of the Company Convertible Preferred Stock as
set forth on Annex D hereto (the “Certificate of Amendment”).
(a) The authorized capital stock of the Company consists of (i) 35,000,000 shares of Company
Common Stock, of which, as of the close of business on February 25, 2008, 5,863,713 shares
(including an aggregate of 304,842 Restricted Shares for which the restrictions have not lapsed)
were issued and outstanding and 4,639,900 shares were held in the treasury of the Company, and (ii)
15,000,000 shares of preferred stock of the Company, of which, as of the close of business on
February 25, 2008, 6,956,522 were designated Company Convertible Preferred Stock, 6,956,522 shares
of which were issued and outstanding and no shares of which were held in the treasury of the
Company. All of the issued and outstanding shares of such Company Common Stock and Company
Convertible Preferred Stock are duly authorized, validly issued, fully paid and nonassessable, and,
other than as set forth in the Company’s certificate of incorporation (including the Designations,
Preferences and Rights of the Company Convertible Preferred Stock, as amended (the “Certificate
of Designations”)), were issued free of any preemptive (or similar) rights. No shares of
Company Stock have been issued in violation of any preemptive (or similar) rights.
(b) As of the close of business on February 25, 2008, the Company has reserved 5,550,000
shares of Company Common Stock for issuance pursuant to all of the Equity Incentive Plans, of which
Company Options to purchase 881,357 shares of Company Common Stock were outstanding as of February
25, 2008, and 1,727,805 shares remained available for grant as of such date. Section 4.3(b) of the
Company Disclosure Schedule contains a true, complete and accurate list as of the date of this
Agreement of (i) each outstanding Company Option, including the holder, date of grant, exercise
price, number of shares of Company Common Stock subject thereto and vesting schedule and (ii) each
Restricted Share award, including the holder, date of grant, number of shares of Company Common
Stock subject thereto and vesting schedule. All shares of Company Common Stock reserved for
issuance as specified above shall be, upon issuance on the terms and conditions specified in the
instruments
pursuant to which they are issuable, duly authorized, validly issued, fully paid and
nonassessable and will not be issued subject to any preemptive (or similar) rights. The Equity
Incentive Plans are the only Plans under which securities of the Company or any Company Subsidiary
may be issued.
(c) Except for (i) shares of Company Common Stock indicated in Section 4.3(a) as issued and
outstanding as of February 25, 2008, and (ii) shares issued upon the exercise of Company Options
indicated in Section 4.3(b) as outstanding as of the close of business on February 25, 2008 or upon
the conversion of the
17
Company Convertible Preferred Stock outstanding as of the close of business
on February 25, 2008, as of the date hereof there are not any shares of Company Stock or other
equity or voting securities of the Company issued and outstanding, reserved for issuance pursuant
to outstanding equity or other awards or, except for the shares of Company Common Stock indicated
in Section 4.3(b) as being reserved for issuance pursuant to Equity Incentive Plans, reserved for
issuance. Except for (i) shares of Company Common Stock (including Restricted Shares) indicated in
Section 4.3(a) as issued and outstanding as of February 25, 2008, (ii) Restricted Stock Units of
the Company under its Equity Incentive Plans which will be granted by the Company in accordance
with Section 6.1(b), and (iii) shares issued upon the exercise of Company Options indicated in
Section 4.3(b) as outstanding as of the close of business on February 25, 2008 or upon the
conversion of the Company Convertible Preferred Stock outstanding as of the close of business on
February 25, 2008, as of immediately prior to the Effective Time there will not be any shares of
Company Stock or other equity or voting securities of the Company issued and outstanding or
reserved for issuance. No Company Options or Restricted Shares or other equity awards of the
Company have been issued since the close of business on February 25, 2008 to the date hereof.
(d) Except as set forth in this Section 4.3, there are not authorized or outstanding any
subscriptions, options, conversion or exchange rights, warrants, calls, repurchase or redemption
agreements, or other agreements, instruments, contracts, claims or commitments obligating the
Company or any Company Subsidiary to issue, transfer, deliver, sell, repurchase or redeem, or cause
to be issued, transferred, delivered, sold, repurchased or redeemed, additional shares of the
Company Common Stock or other securities of the Company or to make payments with respect to the
value of any of the foregoing or obligating the Company or any Company Subsidiary to grant, extend
or enter into any such agreement or commitment. There are no stockholder agreements, voting
trusts, proxies or other agreements or instruments with respect to the voting of the capital stock
of the Company to which the Company is a party and, to the knowledge of the Company, no other
person is a party to any stockholder agreements, voting trusts, proxies or other agreements or
instruments with respect to the voting of the capital stock of the Company.
(e) Neither the Company nor any Company Subsidiary has any outstanding bonds, debentures,
notes or other indebtedness that have the right to vote (or which are convertible into, or
exchangeable for, securities having the right to vote) on any matters on which stockholders may
vote or is obligated to issues any such instruments.
(f) The Company Common Stock constitutes the only class of securities of the Company
registered under the Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the “Exchange Act”).
(g) As of the date of this Agreement, neither the Company nor any Company Subsidiary has any
outstanding indebtedness for borrowed money.
(h) As of the date of this Agreement, security holders whose last address as shown on the
books of the Company is in Canada hold less than 10 percent of the outstanding (i) shares of
Company Common Stock and (ii) shares of Company Convertible Preferred Stock and the Company
reasonably believes that security
holders in Canada beneficially own less than 10 percent of the outstanding (A) shares of
Company Common Stock and (B) shares of Company Convertible Preferred Stock.
(i) Each of (i) the Loan and Security Agreement, dated as of January 29, 2002, as amended,
between NMHC Funding, LLC, a
Delaware limited liability company, and HFG Healthco-4 LLC, a
Delaware
limited liability company and (ii) the Receivables Purchase and Transfer Agreement, dated as of
January 29, 2002, as amended, between the Company, the other providers named therein and NMHC
Funding, LLC, as purchaser, has
18
been terminated and is no longer in full force and effect and there
are no outstanding liabilities or other obligations of the Company or any of its Affiliates
thereunder.
(j) As of December 31, 2007, the amount of accrued and unpaid dividends on the Company
Convertible Preferred Stock was $2,847,918.09.
(k) As of the date hereof and as of immediately prior to the earlier of the Acceptance Date or
the Closing Date, the aggregate amount owed by the Company and its Subsidiaries pursuant to the
Contract set forth on Section 4.3(k) of the Company Disclosure Schedule is and shall be less than
the amount set forth in Section 4.3(k) of the Company Disclosure Schedule.
(a) Section 4.4(a) of the Company Disclosure Schedule sets forth a complete list of the name
and jurisdiction of organization of each Company Subsidiary. All issued and outstanding shares or
other equity interests of each Company Subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and are owned directly or indirectly by the Company free and clear of
any pledges, charges, liens, encumbrances, restrictions on transfer, voting or dividend rights,
rights of first offer or first refusal, security interests or adverse rights or claims
(“Liens”), except for Permitted Liens. None of the Company Subsidiaries own any shares of
Company Common Stock or Company Convertible Preferred Stock.
(b) There are no authorized or outstanding subscriptions, options, conversion or exchange
rights, warrants, calls, repurchase or redemption agreements, or other agreements, instruments,
claims, contracts or commitments obligating the Company or any Company Subsidiary to issue,
transfer, deliver, sell, register, repurchase or redeem, or cause to be issued, transferred,
delivered, sold, repurchased or redeemed, shares of the capital stock or other securities of any
Company Subsidiary or to make payments with respect to the value of any of the foregoing or
obligating the Company or any Company Subsidiary to grant, extend or enter into any such agreement.
(c) Except for the Company Subsidiaries, neither the Company nor any Company Subsidiary owns
any capital stock or equity interest in any other Person.
(a) The Company has filed all forms, reports, registrations, statements, certifications and
other documents required to be filed by it with, or furnished by the Company to, the SEC for all
periods beginning on or after July 1, 2004 (the “Company SEC Reports”). The Company SEC
Reports complied in all material respects with the requirements of, and were prepared in accordance
with, the applicable requirements of the Exchange Act and the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the “Securities Act”), and
did not, as of their respective filing dates, contain any untrue statement of a material fact or
omit to state a material fact required to be stated or incorporated by reference therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading. As of the
date of this Agreement, there are no outstanding or unresolved comments in comment letters
received from the SEC. To the knowledge of the Company, as of the date hereof, none of the Company
or any Company SEC Reports is the subject of ongoing SEC review. No Company Subsidiary is required
to file or furnish any form, report, registration, statement or other document with the SEC.
(b) The consolidated financial statements contained in the Company SEC Reports (including the
related notes, where applicable) (the “Financial Statements”) (i) present fairly, in all
material respects, the
19
consolidated financial condition and results of operations and cash flows
and statements of stockholders equity of the Company and its consolidated Subsidiaries as of and
for the periods presented therein (subject, in the case of unaudited quarterly financial
statements, to normal year-end adjustments), (ii) have been prepared in all material respects in
accordance with United States generally accepted accounting principles (“GAAP”) applied on
a consistent basis throughout the periods involved, except as otherwise indicated therein or, in
the case of the unaudited quarterly financial statements, as permitted by Form 10-Q, and (iii) when
filed complied as to form in all material respects with the rules and regulations of the SEC with
respect thereto. Since June 30, 2007, there has been no material change in the Company’s
accounting methods or principles that would be required to be disclosed in the Company’s Financial
Statements in accordance with GAAP. The management of the Company has implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure
that material information relating to the Company, including the consolidated Company Subsidiaries,
is made known to the chief executive officer and the chief financial officer of the Company by
others within those entities, and the Company’s principal executive officer and principal financial
officer have disclosed, based on their most recent evaluation of internal control over financial
reporting, to the Company’s auditors and the audit committee of the Company Board of Directors (or
persons performing the equivalent functions): (A) all significant deficiencies and material
weaknesses within their knowledge in the design or operation of internal control over financial
reporting which are reasonably likely to materially adversely affect the Company’s ability to
record, process, summarize and report financial information; and (B) any fraud that involves
management or other employees who have a significant role in the Company’s internal control over
financial reporting. The Company and its Subsidiaries have designed and maintain a system of
internal controls over financial reporting (as defined in Rules 13a, 15(f) and 15d, 15(f) of the
Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with
GAAP. The Company’s principal executive officer and principal financial officer have made, with
respect to the Company SEC Reports, all certifications required by the Xxxxxxxx-Xxxxx Act of 2002
and any related rules and regulations promulgated by the SEC. As of the date hereof, the Company
has not identified any material weaknesses in the design or operation of the internal controls over
financial reporting. As of the date hereof, neither the Company nor any of the Company
Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors
or executive officers of the Company within the meaning of Section 402 of the Xxxxxxxx-Xxxxx Act of
2002.
(c) Neither the Company nor any Company Subsidiary has any liabilities, whether accrued,
absolute, contingent or otherwise, that would be required by GAAP to be reflected on a balance
sheet, other than liabilities and obligations (i) to the extent reflected or reserved against on
the consolidated balance sheet of the Company and its consolidated Subsidiaries as of June 30, 2007
(including the notes thereto) included in the Company’s Annual Report on Form 10-K for the fiscal
year ended June 30, 2007, (ii) incurred in connection with the transactions expressly contemplated
herein that, individually or in the aggregate, would not have a Company Material Adverse Effect or
(iii) incurred since June 30, 2007 in the ordinary course of business that, individually or in the
aggregate, have not had and would not have a Company Material Adverse Effect.
(d) Neither the Company nor any Company Subsidiary is a party to, or has a legally binding
commitment to enter into, any joint venture, off balance sheet partnership or any similar contract
(including any contract or arrangement relating to any transaction or relationship between or among
the Company or the Company
Subsidiary, on the one hand, and any unconsolidated affiliate, including any structured
finance, special purpose or limited purpose entity or person, on the other hand, or any “off
balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the Exchange Act)),
where the purpose or intended effect of such contract or arrangement is to avoid disclosure of any
material transaction involving, or material liabilities of, the Company or any Company Subsidiary
in the Company’s published financial statements or other Company SEC Reports.
20
Section 4.6
Absence of Certain Changes or Events. Since June 30, 2007, there have not
been any events, circumstances, developments, changes or effects of which the Company has knowledge
that, individually or in the aggregate, has had or would have a Company Material Adverse Effect.
Since June 30, 2007 through the date hereof, (i) the Company and each Company Subsidiary have
conducted their respective businesses in the ordinary course of business in all material respects
and (ii) neither the Company or any Company Subsidiary has taken any action that if taken after the
date hereof would be prohibited by Section 6.1(b)(iv), (b)(vii), (b)(viii), (b)(xiii) or (b)(xiv)
nor have any of them resolved to, agreed to or otherwise obligated any of them to take any such
actions.
(a) The Company and the Company Subsidiaries have each federal, state, local or foreign
governmental consent, license, permit, registration, order, grant or other authorization of a
Governmental Entity (collectively referred to herein as, the “Permits”) that is required
for the operation of the business of the Company or any of the Company Subsidiaries or the
ownership or leasing of any interest in any of their respective properties, except where the
failure to have, or the suspension or cancellation of, any such Permit would not, individually or
in the aggregate, have a Company Material Adverse Effect. Except as would not, individually or in
the aggregate, have a Company Material Adverse Effect, (i) all of such Permits are valid and in
full force and effect and neither the Company nor any Company Subsidiary has violated the terms of
such Permits, and (ii) no proceeding is pending or, to the knowledge of the Company, threatened in
writing to revoke, suspend, cancel, terminate, or adversely modify any such Permit.
(b) The Company and the Company Subsidiaries are, and since July 1, 2004, have been, in
compliance with all applicable Laws, including, to the extent applicable, (i) rules and regulations
of the Medicare and Medicaid programs; and any other federal health care program; (ii) federal and
state Laws relating to health care fraud and abuse; (iii) state Laws relating to Medicaid or any
other state health care or health insurance programs; (iv) federal or state Laws relating to
billing or claims for reimbursement submitted to any third-party payor; (v) any other federal or
state Laws relating to fraudulent, abusive or unlawful practices connected in any way with the
provision of health care items or services, or the billing for or claims for reimbursement for such
items or services provided to a beneficiary of any state, federal or other governmental health care
or health insurance program or any private payor; (vi) state Laws relating to insurance and risk
sharing products, services and arrangements; and (vii) Laws with respect to matters relating to
patient or individual health care information, including, without limitation, the Health Insurance
Portability and Accountability Act of 1996, as amended, and any rules or regulations promulgated
thereunder, except where any failure to be in compliance, individually or in the aggregate, would
not have a Company Material Adverse Effect. Since July 1, 2004, no third-party payment program has
imposed a fine, penalty or other sanction on the Company or the Company Subsidiaries, except where
any such imposition would not have, individually or in the aggregate, a Company Material Adverse
Effect.
(c) Since January 1, 2006 and, to the knowledge of the Company, at any time from January 1,
2001 and prior to January 1, 2006, neither the Company, any Company Subsidiary, nor any director or
executive officer of the Company or any Company Subsidiary with respect to actions taken on behalf
of the Company or any Company Subsidiary, (i) has been assessed a civil money penalty under Section
1128A of the Social Security Act or any regulations promulgated thereunder, (ii) has been excluded
from participation in any federal health care program
or state health care program (as such terms are defined by the Social Security Act), or (iii)
has been convicted of any criminal offense relating to the delivery of any item or service under a
federal health care program relating to the unlawful manufacture, distribution, prescription, or
dispensing of a prescription drug or a controlled substance.
(d) The Company has made available to Parent a summary of all material complaints or concerns
made since July 1, 2006 through the Company’s whistleblower hot-line or equivalent system for
receipt of
21
employee concerns regarding possible violations of Law. No attorney representing the
Company or any of its Subsidiaries, whether or not employed by the Company or any of its
Subsidiaries, has reported evidence of a violation of securities laws, breach of fiduciary duty or
similar violation by the Company or any of its officers, directors, employees or agents to the
Company’s chief legal officer, audit committee (or other committee designated for the purpose) of
the Company Board of Directors or the Company Board of Directors pursuant to the rules adopted
pursuant to Section 307 of the Xxxxxxxx-Xxxxx Act or in any Company policy contemplating such
reporting, including in instances not required by those rules.
Section 4.8
Claims, Actions and Proceedings. There are no outstanding orders, writs,
judgments, injunctions, decrees or other requirements of any Governmental Entity against the
Company, any Company Subsidiary or any of their securities, assets or properties (“
Existing
Orders”) that, individually or in the aggregate, would have a Company Material Adverse Effect
or prevent or materially delay the consummation of the Offer or the Merger or the other
transactions contemplated by this Agreement. There are no actions, suits, claims, arbitrations,
investigations or proceedings (collectively, “
Actions”) or, to the knowledge of the
Company, any governmental investigations or inquiries pending or overtly threatened against the
Company or any Company Subsidiary or any of their assets or properties that, individually or in the
aggregate, would have a Company Material Adverse Effect or would prevent or materially delay the
consummation of the Offer or the Merger or the other transactions contemplated by this Agreement
(provided that no representation or warranty is being made in this Agreement as to any Existing
Orders issued, or any Actions commenced, after the date hereof challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit the Offer or the Merger).
(a) Except for this Agreement, none of the Company nor any Company Subsidiary is a party to or
bound by any note, bond, mortgage, indenture, contract, agreement, arrangement, understanding,
Permit, lease or other instrument or obligation (each, a “Contract”): (i) that would be
required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act or disclosed on Form 8-K; (ii) that would obligate the
Company or any Company Subsidiary to file a registration statement under the Securities Act, which
filing has not yet been made; (iii) relating to (A) indebtedness for borrowed money, guarantees of
indebtedness for borrowed money, lines of credit (whether or not drawn), letters of credit or (B)
capitalized leases or surety bonds having an outstanding principal amount in excess of $500,000 in
the aggregate; (iv) that involves the acquisition or disposition, directly or indirectly (by merger
or otherwise), of assets or capital stock or other voting securities or equity interests of another
person or the Company that involves continuing or contingent obligations of the Company or the
Company Subsidiaries; (v) under which the Company or any Company Subsidiary has advanced or loaned
any funds in excess of $500,000 or has guaranteed any obligations of another Person in excess of
$500,000, other than extensions of credit to customers or vendors in the ordinary course of
business consistent with past practice, (vi) that relates to any single or series of related
capital expenditures by the Company in excess of $500,000 (other than purchase orders for the
purchase of inventory or real property leases in the ordinary course of business consistent with
past practice); (vii) evidencing the formation of a general or limited partnership, a limited
liability company or a joint venture (whether limited liability or other organizational form) or
alliance or similar arrangement that is material to the business of the Company and the Company
Subsidiaries, taken as a whole; (viii) that (1) materially limits or restricts where the Company or
any of its Affiliates may conduct business or the right of
the Company or any of its Affiliates to sell or distribute any products or services to any
Person, (2) (A) individually or in the aggregate with all other Contracts of the type described in
this clause (2) (x) is material to the operations or the business of the Company or any Company
Subsidiary and/or (y) may subject the Company or any Company Subsidiary to a material claim, action
or lawsuit if a breach or default occurred thereunder and (B) contains any covenant or provision
prohibiting the Company or any of its Affiliates from engaging in any line or type of business, (3)
(A) individually or in the aggregate with all other Contracts of the type described in this clause
(3) (x) is material
22
to the operations or the business of the Company or any Company Subsidiary
and/or (y) may subject the Company or any Company Subsidiary to a material claim, action or lawsuit
if a breach or default occurred thereunder and (B) grants any exclusive rights to make, sell or
distribute the Company’s or any of its Affiliates’ products or services, (4) (A) individually or in
the aggregate with all other Contracts of the type described in this clause (4) (x) is material to
the operations or the business of the Company or any Company Subsidiary and/or (y) may subject the
Company or any Company Subsidiary to a material claim, action or lawsuit if a breach or default
occurred thereunder and (B) grants “most favored nation” status to any other Person, (5) contains
“requirements” provisions or other provisions obligating the Company or any Company Subsidiary to
purchase or obtain a minimum or specified amount of any product or service from any Person in
excess of $500,000 in any fiscal year, (6) contains minimum sales or volume provisions in excess of
$500,000 in any fiscal year; or (ix) that involves the obligation or potential obligation of the
Company or any Company Subsidiary to make any “earn-out” or similar payments to any Person. Each
Contract required to be described in any of clauses (i) through (ix) or any Contract with a Person
referenced in the letter referred to in Section 4.21 is referred to herein as a “Material
Contract.”
(b) Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect, each of the Material Contracts is in full force and effect and is valid and binding on the
Company and each Company Subsidiary party thereto and, to the knowledge of the Company, each other
party thereto, enforceable against such parties in accordance with their terms, except to the
extent that enforcement of the rights and remedies created thereby is subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general application affecting the
rights and remedies of creditors and to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at Law).
(c) Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect, (i) neither the Company nor any Company Subsidiary has breached, is in default under, or
has received written notice of any breach of or default under, any Material Contract, and no event
has occurred that with the lapse of time or the giving of notice or both would constitute a default
thereunder by the Company or any Company Subsidiary, and (ii) to the Company’s knowledge, no other
party to any Material Contract to which the Company or any Company Subsidiary is a party is in
breach or violation of, or default under, such Material Contract. A complete and correct copy of
each Material Contract has previously been made available by the Company to Parent or filed by the
Company with the SEC.
Section 4.10
Intellectual Property. “
Intellectual Property” means all U.S.
and foreign (i) patents and all patent applications, (ii) trademarks, service marks, trade names,
trade dress, domain names, brand names, certification marks, corporate names and other indications
of origin, together with all goodwill related to the foregoing, (iii) copyrights and designs and
all rights associated therewith and the underlying works of authorship, (iv) inventions, trade
secrets, processes, formulae, methods, schematics, drawings, blue prints, technology, know-how,
software, discoveries, ideas and improvements, (v) registrations of any of the foregoing and
applications therefor, and (vi) other proprietary rights and confidential information and
materials. Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect: (a) either the Company or a Company Subsidiary owns, or is licensed or otherwise possesses
legally enforceable and adequate rights to use, all Intellectual Property used in their respective
businesses as currently conducted (the “
Company Intellectual Property”), (b) the execution
and delivery of this Agreement by the Company and the consummation of the transactions contemplated
by this Agreement will not alter, encumber, impair or extinguish any Company Intellectual
Property or any of the Company’s and the Company Subsidiaries’ rights therein, (c) except for
Company Intellectual Property that is licensed to the Company or any Company Subsidiary by a third
party, there are no restrictions on the disclosure, use, license or transfer by the Company or any
Company Subsidiary of the Company Intellectual Property (d) there are no claims, actions, suits,
investigations or proceedings pending or, to the knowledge of the Company, overtly threatened by
any person alleging infringement, misappropriation or violation by the Company or any of the
23
Company Subsidiaries for their use of Intellectual Property, (e) the conduct of the business of the
Company and the Company Subsidiaries does not infringe, misappropriate or violate any Intellectual
Property of any person, and (f) neither the Company nor any of the Company Subsidiaries has made
any written claim of infringement, misappropriation or violation by others of its rights to or in
connection with the Company Intellectual Property in the last three (3) years. To the knowledge of
the Company, no person is infringing, misappropriating or violating any Intellectual Property owned
by or licensed exclusively to the Company or any of the Company Subsidiaries. The Company and the
Company Subsidiaries take commercially reasonable actions to protect the confidentiality of the
Company Intellectual Property and the security of their software, systems and networks. Except as
would not, individually or in the aggregate, have a Company Material Adverse Effect, the Company
and the Company Subsidiaries have commercially reasonable procedures in place designed to provide
that all Intellectual Property conceived by their employees as a result of performing their duties
for the Company and the Company Subsidiaries and third parties performing research and development
for them have been assigned or are required to be assigned to the Company or any of the Company
Subsidiaries. To the knowledge of the Company, the Company and the Company Subsidiaries are in
compliance in all material respects with all confidentiality agreements and other protective
agreements to which they are a party that protect the Intellectual Property of third parties.
Section 4.11
Property. Except as would not, individually or in the aggregate, have a
Company Material Adverse Effect, the Company or a Company Subsidiary owns and has good title to all
its personal property and has valid leasehold interests in all of its leased properties, sufficient
to conduct their respective businesses as currently conducted, free and clear of all Liens (other
than (i) Liens for current Taxes not yet past due or being contested in good faith, (ii) inchoate
Liens for construction in progress, (iii) mechanics’, materialmen’s, workmen’s, repairmen’s,
warehousemen’s and carriers’ Liens arising in the ordinary course of business of the Company or
such Company Subsidiary for sums not yet delinquent or being contested in good faith by appropriate
proceedings, (iv) Liens imposed or granted pursuant to or in connection with the Company’s existing
credit facilities or other indebtedness, (v) Liens with respect to tenant personal property,
fixtures and/or leasehold improvements at the subject premises arising under state statutes and/or
principles of common law and Liens otherwise imposed by applicable Law and (vi) Liens that would
not have, individually or in the aggregate, a Company Material Adverse Effect (collectively,
“
Permitted Liens”)).
Section 4.12
Insurance. Except as would not have, individually or in the aggregate, a
Company Material Adverse Effect, (i) the Company and the Company Subsidiaries maintain insurance in
such amounts and against such risks as is sufficient to comply with applicable Law, (ii) all
policies or binders of material fire, liability, product liability, workers’ compensation,
vehicular, directors’ and officers’ and other material insurance held by or on behalf of the
Company and the Company Subsidiaries (collectively, the “
Company Insurance Policies”) are
(a) except for policies that have expired under their terms, in full force and effect, and (b) to
the knowledge of the Company, valid and enforceable in accordance with their terms, (iii) neither
the Company nor any Company Subsidiary is in breach or default with respect to any provision
contained in any such policy or binder and (iv) neither the Company nor any Company Subsidiary has
(a) received notice of actual or threatened modification or termination of any material Company
Insurance Policy, or (b) received notice of cancellation or non-renewal of any such Company
Insurance Policy, other than in connection with ordinary renewals.
Section 4.13
Tax Matters. For purposes of this Agreement, the term “
Tax”
(and, with correlative meaning, “
Taxes” and “
Taxable”) means all federal, state and
local, and all foreign, income, profits, franchise, gross receipts, payroll, transfer, sales,
employment, social security, unemployment insurance, workers’ compensation, use, property, excise,
value added, ad valorem, stamp, alternative or add-on minimum, recapture, environmental, capital
gain, withholding taxes and any other taxes, fees, assessments, levies, charges, customs, duties,
tariffs, impositions or assessments in the nature of taxes, together with all interest, penalties,
fines and additions imposed on or with respect to such amounts. “
Tax Return” (and, with
correlative meaning, “
Tax
24
Returns”) means any return, declaration, report, claim for refund
or information return or similar statement filed or required to be filed with any taxing authority
or any other Governmental Entity in connection with Taxes, including any attachments thereto and
any amendments thereof.
(a) Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect:
(i) All Tax Returns required to be filed by or with respect to the Company and the
Company Subsidiaries have been or will be timely filed with the appropriate Tax
authority. All such Tax Returns are true, correct and complete and all Taxes owed by
the Company or the Company Subsidiaries, whether or not shown on any Tax Return, have
been timely paid except for Taxes being contested in good faith and for which adequate
reserves have been established on the Financial Statements, in accordance with GAAP, or,
if arising after the date of the most recent Financial Statements, on the Company’s or
the appropriate Company Subsidiary’s books and records.
(ii) There are no Liens with respect to Taxes upon any of the assets or properties
of the Company or the Company Subsidiaries, other than Permitted Liens.
(iii) No audit, assessment, examination, dispute, investigation or judicial or
administrative proceeding is currently pending with respect to any Taxes of the Company
or, to the Company’s knowledge, the Company Subsidiaries with respect to which the
Company or a Company Subsidiary has been notified in writing. No deficiency for any
Taxes has been proposed or assessed in writing against the Company or the Company
Subsidiaries, except for deficiencies which have been paid, settled or withdrawn or
which are being contested in good faith and for which adequate reserves have been
established on the Financial Statements, in accordance with GAAP, or if arising after
the date of the most recent Financial Statements, on the Company’s or the appropriate
Company Subsidiary’s books and records.
(iv) Neither the Company nor any of the Company Subsidiaries is a party to any
indemnification, allocation, sharing or similar agreement with respect to Taxes that
would give rise to a material payment or indemnification obligation, other than
agreements among the Company and the Company Subsidiaries, customary Tax indemnities
contained in credit or other commercial agreements the primary purpose of which do not
relate to Taxes and agreements with customers, vendors, lessors or similar persons
entered into in the ordinary course of business.
(b) There are no material outstanding requests, agreements, waivers or arrangements extending
the statutory period of limitation applicable to any claim for, or the period for the collection or
assessment of, Taxes due from or with respect to the Company or the Company Subsidiaries for any
taxable period.
(c) All withholding and payroll Tax requirements required to be complied with by the Company
and the Company Subsidiaries (including requirements to deduct, withhold and pay over amounts to
any
Tax authority and to comply with associated reporting and record keeping requirements) have
been satisfied or accrued.
(d) Neither the Company nor any Company Subsidiary has any liability for the Taxes of any
other person (other than the Company and the Company Subsidiaries) under Treasury Regulation
1.1502-6 (or any similar provision of Law) or as a transferee or successor.
25
(e) Neither the Company nor any Company Subsidiary has participated in a “listed transaction”
that has given rise to a disclosure obligation under Section 6011 of the Code and Treasury
Regulations promulgated thereunder and that has not been disclosed in the relevant Tax Return of
the Company or relevant Company Subsidiary.
(f) The Company has delivered or made available to Parent complete copies of all material Tax
Returns of the Company and the Company Subsidiaries with respect to the Company’s tax years ended
June 30, 2005 and June 30, 2006.
(g) Neither the Company nor any Company Subsidiary has distributed the stock of another
company in a transaction that was purported or intended to be governed by Section 355(a)(1)(A) or
Section 361 of the Code in a transaction occurring within the past five years.
(a) With respect to each pension, savings, profit sharing, retirement, deferred compensation,
employment, welfare, fringe benefit, insurance, short and long term disability, medical, death
benefit, incentive, bonus, stock, other equity-based, vacation pay, severance pay, cafeteria plan
and other material plan, program or arrangement for the benefit of any current or former employee,
director or officer of the Company or any Company Subsidiary, or their beneficiaries, including
each “employee benefit plan” (as that term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”)), that is sponsored or maintained by
Company and/or by one or more Company Subsidiaries or to which the Company and/or one or more
Company Subsidiaries has any present or future liability or contingent liability (each, a
“Plan”), the Company has delivered or made available to Parent current, accurate and
complete copies of each of the following together with, when applicable, all amendments: (i) the
Plan, or, if the Plan has not been reduced to writing, a written summary of its material terms,
(ii) if the Plan is subject to the disclosure requirement of Title I of ERISA, the summary plan
description, and in the case of each other Plan, any similar employee summary, (iii) if the Plan is
intended to be qualified under Section 401(a) of the Code, the most recent determination letter (or
opinion letter upon which the Company is entitled to rely) issued by the Internal Revenue Service
(“IRS”), (iv) if the Plan is subject to the requirement that a Form 5500 series annual
report/return be filed, the three most recently filed annual reports/returns, (v) all related trust
agreements, group annuity contracts and administrative services agreements, (vi) for each Plan that
is funded, the three most recent financial statements and actuarial reports for each such Plan, and
(vii) any correspondence with the IRS, the Department of Labor or any governmental entity with
respect to any audit or examination of any Plan since June 30, 2005. The Company Disclosure
Schedule sets forth a list of all material Plans.
(b) Except as would not, individually or in the aggregate, have a Company Material Adverse
Effect, (i) each Plan has been established and administered in accordance with its terms and the
provisions of applicable Law, including ERISA and the Code (and the rules and regulations
thereunder), (ii) none of the Plans is currently under examination by the IRS or the U.S.
Department of Labor, (iii) all contributions, premiums and expenses, if any, due under each Plan
have been timely made, (iv) each Plan intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter (or opinion letter upon which the Company may
rely) from the IRS that it is so qualified, and to the knowledge of the Company nothing has
occurred since the date of such letter that adversely affected the qualified status of such Plan,
(v) each trust created under any such Plan is exempt from tax under Section 501(a) of the Code,
(vi) no Plan nor any other plan maintained by a member of the Company’s “Controlled Group”
(defined as any organization that is a member of a controlled group of organizations within the
meaning of Sections 414 (b), (c), (m) or (o) of the Code) is or has been subject to Section 302 of
ERISA or Section 412 of the Code, and (vii) to the knowledge of the Company, no event has occurred
and no condition exists that would subject the Company or any Company Subsidiary, either directly
or by reason of their
26
affiliation with any member of their Controlled Group, to any Tax or other
liability imposed by ERISA, the Code or other applicable Laws.
(c) Except for continuation of health coverage described in Section 4980B of the Code or
Section 601 et seq. of ERISA, no Plan provides for medical, dental, life insurance coverage or any
other welfare benefits after termination of employment or for other post-employment welfare
benefits.
(d) No Action (other than routine claims for benefits in the ordinary course) is pending or,
to the knowledge of the Company, overtly threatened against any Plan (including any audit or other
administrative proceeding by the U.S. Department of Labor, the IRS or other governmental agencies),
except as would not have, individually or in the aggregate, a Company Material Adverse Effect.
(e) Neither the Company nor any member of the Company’s Controlled Group has ever maintained,
sponsored, contributed to, been required to contribute to, or incurred any liability under any
defined benefit pension plan subject to Title IV of ERISA, including without limitation any
multi-employer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA or any multiple
employer plan as defined in Section 413(c) of the Code, or any plan that has two (2) or more
contributing sponsors at least two (2) of whom are not under common control, within the meaning of
Section 4063(a) of ERISA.
(f) Neither the Company nor any Company Subsidiary, nor, to the knowledge of the Company, any
other “disqualified person” or “party in interest” (as defined in Section 4975(e)(2) of the Code
and Section 3(14) of ERISA, respectively) has engaged in any transactions in connection with any
Plan that would result in the imposition on the Company of a penalty pursuant to Section 502 of
ERISA, damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975 of the Code,
which would have, individually or in the aggregate, a Company Material Adverse Effect.
(g) Except as required by applicable Law, no Plan exists that, as a result of the execution of
this Agreement, stockholder approval of this Agreement, or the transactions contemplated by this
Agreement, would (i) result in severance pay or any increase in severance pay upon any termination
of employment after the date of this Agreement, (ii) except as contemplated by Section 3.3 with
respect to Company Options and Restricted Shares, accelerate the time of payment or vesting or
result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits
under, or increase the amount payable or result in any other material obligation pursuant to, any
Plan, or (iii) limit or restrict the right of the Company to merge, amend or terminate any of the
Plans. Neither the Company nor any Company Subsidiary is a party to any agreement, contract or
arrangement that could result, separately or in the aggregate, in the payment of any “parachute
payments” within the meaning of Section 280G of the Code.
(h) The Company has delivered to Parent a letter dated the date hereof and identified as being
the letter referred to in this Section 4.14(h), which letter contains a list as of the date hereof
of each employee of the Company and the Company Subsidiaries, his or her name, start date and
present salary.
Section 4.15
Labor Matters. The Company and each Company Subsidiary are in compliance
with all applicable Laws respecting employment and employment practices, terms and conditions of
employment and wages and hours and have not engaged, and are not engaging, in any unfair labor
practice with respect to employees of the Company or any of the Company Subsidiaries except in each
case where the failure to be in compliance would not have,
individually or in the aggregate, a
Company Material Adverse Effect. Neither the Company nor any of the Company Subsidiaries is a
party to, or bound by, any collective bargaining agreement or other similar agreement or
understanding with a labor union or labor organization. Neither the Company nor any of the Company
Subsidiaries is subject to a dispute, strike or work stoppage except as would not, individually or
in the
27
aggregate, have a Company Material Adverse Effect. To the knowledge of the Company, there
are no organizational efforts with respect to the formation of a collective bargaining unit
presently being made or threatened involving employees of the Company or any of the Company
Subsidiaries. Since July 1, 2006, there have been no material labor or employment claims or
proceedings between the Company or any of the Company Subsidiaries and any of such applicable
entity’s employees.
(a) Except as would not have, individually or in the aggregate, a Company Material Adverse
Effect, (i) none of the Company or any of the Company Subsidiaries is in violation of any
Environmental Law, (ii) to the knowledge of the Company, there is and has been no Release by the
Company or any Company Subsidiary of Hazardous Substances that requires response action under
applicable Environmental Law at, on or under any of the properties currently owned, leased or
operated by the Company or any of the Company Subsidiaries or, during the period of the Company’s
or the Company Subsidiaries’ ownership, lease or operation thereof, that would reasonably be
expected to result in a liability to the Company or any of the Company Subsidiaries; (iii) the
Company and the Company Subsidiaries possess and are in compliance with all required Environmental
Permits; and (iv) there are no actions, orders, written claims or written notices pending or, to
the knowledge of the Company, issued to or threatened against the Company or any of the Company
Subsidiaries alleging violations of or liability under any Environmental Law or otherwise
concerning the Release or management of Hazardous Substances.
(b) For purposes of this Agreement:
(i) “Environmental Laws” means any Laws (including common law) of the
United States federal, state, local, non-United States, or any other Governmental
Entity, relating to (A) Releases or threatened Releases of Hazardous Substances or
materials containing Hazardous Substances; (B) the manufacture, handling, transport,
use, treatment, storage, emission, discharge, or disposal of Hazardous Substances or
materials containing Hazardous Substances; or (C) pollution or protection of the
environment or of human health and safety as such is affected by Hazardous Substances or
materials containing Hazardous Substances.
(ii) “Environmental Permits” means any permit, consent, license,
registration, approval, notification or any other authorization pursuant to
Environmental Law.
(iii) “Hazardous Substances” means (A) those substances, materials or
wastes defined as toxic, hazardous, acutely hazardous, pollutants or contaminants, in,
or regulated under, the following United States federal statutes and any analogous
foreign or state statutes, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Water Act, the Safe
Drinking Water Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act and the Clean Air Act; (B) petroleum and petroleum products, including
crude oil and any fractions thereof; (C) natural gas, synthetic gas, and any mixtures
thereof; and (D) polychlorinated
biphenyls, asbestos, molds that would reasonably be expected to have an adverse
effect on human health and urea formaldehyde foam insulation.
(iv) “Release” means any release, spilling, leaking, pumping, pouring,
discharging, emitting, emptying, escaping, leaching, injecting, dumping, disposing or
migrating into or through the indoor or outdoor environment.
28
Section 4.17
No Breach. The execution, delivery and performance by the Company of
this Agreement, the Stockholder Agreements and the consummation by the Company of the transactions
contemplated hereby and thereby and compliance with the terms hereof do not and will not (whether
with or without notice or lapse of time, or both) (i) violate any provision of the certificate of
incorporation or bylaws of the Company or the comparable organizational documents of any Company
Subsidiary, (ii) violate, conflict with or result in the breach of any of the terms or conditions
of, result in any (or the right to make any) modification of or the cancellation or loss of a
benefit under, require any notice, consent or action under, or otherwise give any other contracting
party the right to terminate, accelerate obligations under or receive payment or additional rights
under, or constitute a default under, any Contract, (iii) violate any Law applicable to the Company
or the Company Subsidiaries or by which any of the Company’s or the Company Subsidiaries’ assets or
properties is bound or (iv) except for (a) compliance with any applicable requirements of the
Securities Act, the Exchange Act and any other applicable state or federal securities laws, (b)
filings pursuant to the DGCL as contemplated herein, (c) the filing of a pre-merger notification
report under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the “
HSR
Act”) and (d) filings and approvals required by the Nasdaq rules and regulations, require any
registration or filing with, notice to, or Permit, order, authorization, consent or approval of,
any Governmental Entity, excluding in the case of clause (ii), violations, conflicts, breaches,
accelerations, rights or entitlements, and defaults which would not, individually or in the
aggregate, have a Company Material Adverse Effect or prevent or materially delay the Offer or the
Merger or the consummation of the other transactions contemplated by this Agreement.
(a) The Company Board of Directors has received the oral opinion of X.X. Xxxxxx Securities
Inc. substantially to the effect that, as of the date hereof, and based upon and subject to the
factors and assumptions set forth therein, the consideration to be received in the Offer and the
Merger by the holders of shares of Company Common Stock pursuant to this Agreement is fair from a
financial point of view to such holders. A signed copy of the written opinion will be delivered to
the Company and a copy thereof will be shown to Parent promptly after it is available following the
date hereof. It is agreed and understood that such opinion is for the benefit of the Company Board
of Directors and may not be relied on by Parent or Merger Sub.
(b) Other than X.X. Xxxxxx Securities Inc., whose engagement letter has been provided to
Parent, no broker, investment banker, financial advisor, finder, agent or similar intermediary has
acted on behalf of the Company or any Company Subsidiary in connection with this Agreement or the
transactions contemplated hereby, and there are no other brokerage commissions, finders’ fees,
financial advisor’s fees or similar fees or commissions payable in connection herewith based on any
agreement, arrangement, commitment or understanding with the Company or any Company Subsidiary, or
any action taken by or on behalf of the Company or any Company Subsidiary.
(a) None of the information supplied or to be supplied by the Company in writing for inclusion
or incorporation by reference in (i) the Schedule TO or the Registration Statement, including the
Prospectus, will, at the time they are filed with the SEC, and the Offer Documents at the time they
are distributed or
disseminated, and at the time of the consummation of the Offer, and, in the case of the
Registration Statement, including the Prospectus, at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) the prospectus included in the
Registration Statement relating to the issuance of shares of Parent Common Stock in connection with
the Offer and the Merger (together with any amendments or supplements thereto, the
“Prospectus”), and if applicable, the proxy statement relating to the Company Stockholders
Meeting (together with any amendments or supplements
29
thereto, the “Proxy Statement” (it
being understood and agreed that if a Change in Structure Event occurs, the Prospectus and Proxy
Statement shall be combined in one document and shall be referred to as the Proxy Statement) will,
at the date of mailing to stockholders and at the time of the Company Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Proxy Statement, at the time mailed, will comply as to
form in all material respects with the applicable requirements of the Exchange Act. The
representations and warranties contained in this Section 4.19 will not apply to statements included
in or omissions from the Proxy Statement based upon information furnished in writing to the Company
by Parent or Merger Sub for inclusion in the Proxy Statement.
(b) The Schedule 14D-9, at the time filed with the SEC and at the time distributed or
disseminated, and the Information Statement, as supplemented or amended, if applicable, at the time
filed with the SEC and at the time mailed to stockholders of the Company and at the time such
stockholders vote, or otherwise act, on adoption of this Agreement, will comply as to form and
substance in all material respects with the applicable requirements of the Exchange Act and, at the
time of such filing, at the time of such distribution or dissemination, and at the time of
consummation of the Offer, will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading; provided that this representation and
warranty will not apply to statements or omissions included in the Schedule 14D-9 and the
Information Statement based upon information furnished to the Company in writing by Parent or
Merger Sub specifically for use therein.
Section 4.20
Affiliate Transactions. No executive officer or director of the Company
or any Company Subsidiary or any person owning 5% or more of the Company Common Stock or the
Company Convertible Preferred Stock or, to the Company’s knowledge, any affiliate or family member
of any such officer, director or owner is a party to any Contract with or binding upon the Company
or any Company Subsidiary or has any material interest in any property or assets owned by the
Company or any Company Subsidiary or has engaged within the last twelve (12) months in any
transaction (other than those related to employment or incentive arrangements) with the Company, in
each case, that is material to the Company or is of the type that would be required to be disclosed
under Item 404 of Regulation S-K under the Securities Act.
Section 4.21
Customers and Suppliers. The Company has delivered to Parent a letter
dated as of the date hereof and identified as being the letter referred to in this Section 4.21,
which letter contains a list of the Company’s and Company Subsidiaries’ current ten (10) largest
customers (measured by gross profit), pharmacy manufacturers (measured by rebates paid) and
pharmacy suppliers (measured by pharmacy sales) for the fiscal year ended June 30, 2007 and, with
respect to customers only, the five largest (measured by gross profit) for the six month period
ended December 31, 2007. Since June 30, 2007, there has been no actual, or to the knowledge of the
Company, threatened termination, cancellation, material limitation of, or material adverse
modification or change in, the business relationship of the Company and its Subsidiaries with any
one or more of such customers, brokers or suppliers.
Section 4.22
State Takeover Statutes. Assuming the accuracy of the representations
and warranties made by Parent and Merger Sub in Section 5.15, the Company Board of Directors has
taken all action necessary to exempt Parent, its Subsidiaries and Affiliates, this Agreement, the
Stockholder Agreements, the Offer and the Merger and the other transactions contemplated by this
Agreement or the Stockholder Agreements from the restrictions on business combinations with
interested stockholders set forth in Section 203 of the DGCL. To the knowledge of the Company, no
“moratorium,” “control share,” “fair price” or other anti-takeover law or regulation, other than
Section 203 of the DGCL (collectively, “
Takeover Laws”), is applicable to this Agreement,
the
30
Stockholder Agreements, the Merger or the other transactions contemplated hereby or by the
Stockholder Agreements.
Section 4.23
No Other Representations or Warranties; Investigation by Parent and Merger
Sub. Parent and Merger Sub each acknowledges and agrees that (a) it has had an opportunity to
discuss the business of the Company and the Company Subsidiaries with the Company, (b) it has had
full access to the books and records of the Company and the Company Subsidiaries, (c) it has been
afforded the opportunity to ask questions of and receive answers from the Company and (d) except
for the representations and warranties contained in Section 4, the letter described in Section
4.14(h) and 4.21 (the “
Company Letter”) and the certificate described in Section 8.3(a)
(collectively, the “
Company Representations”) the Company makes no representations or
warranties. Moreover, neither the Company nor any Company Subsidiary will have or be subject to
any liability or obligation to Parent, Merger Sub or any Parent Subsidiary resulting from the
distribution to Parent or Merger Sub, or Parent’s or Merger Sub’s use of, any such information,
including any information, documents, projections, forecasts or other material made available to
Parent or Merger Sub in management presentations in connection with the transactions contemplated
by this Agreement, unless any such information is expressly included in the Company
Representations.
Section 4.24
Good Faith. The Company and its Affiliates have acted and will act in
good faith in the negotiation, delivery and performance of this Agreement and the Stockholder
Agreements and in connection with the transactions contemplated hereby and thereby.
Section 5. Representations and Warranties of Parent, US Corp. and Merger Sub. Parent,
US Corp. and Merger Sub hereby make the representations and warranties to the Company set forth in
this Section 5, except (i) as set forth in the disclosure schedule delivered by Parent to the
Company on the date hereof (the “
Parent Disclosure Schedule”);
provided, however, that
disclosure of any item in any section or subsection of the Parent Disclosure Schedule shall be
deemed disclosure with respect to any other section or subsection only if the relevance of such
item is reasonably apparent on the face of such disclosure, or (ii) as disclosed in any Parent SEC
Report filed prior to the date hereof and available on the Electronic Data Gathering, Analysis and
Retrieval System of the SEC;
provided, however, that all disclosures under “Business — Government
Regulation,” “Risk Factors” and “Forward-Looking Statements” and similar forward looking disclosure
shall not be deemed to qualify the representations and warranties in this Section 5; provided,
further, that any disclosures in such Parent SEC Reports that are not the subject of the first
proviso of this clause (ii) shall only be deemed to qualify a representation or warranty if the
relevance of such disclosure to such representation or warranty is reasonably apparent on the face
of such disclosure;
provided,
further, that the disclosures in the Parent SEC Reports shall not be
deemed to qualify any representations or warranties made in Section 5.3
(a) Each of Parent and each significant subsidiary of Parent (as determined under Rule 1-02(w)
of Regulation S-X) (all such Parent subsidiaries being, collectively, the “Parent
Subsidiaries”) is a corporation or other legal entity duly organized, validly existing and in
good standing (with respect to jurisdictions that recognize
the concept of good standing) under the Laws of its jurisdiction of organization and has the
requisite corporate or similar power and authority to own, lease and operate its properties and
assets it purports to own and to carry on its business as now being conducted, except as would not,
individually or in the aggregate, have a Parent Material Adverse Effect. Parent and each Parent
Subsidiary are qualified or otherwise authorized to transact business as a foreign corporation or
other organization in all jurisdictions where the nature of their business or the ownership,
leasing or operation of their properties make such qualification or authorization necessary, except
for jurisdictions in which the failure to be so qualified or authorized would not, individually or
in the aggregate, have a Parent Material Adverse Effect. “Parent Material Adverse Effect” shall
mean any event, circumstance, development, change or
31
effect that, individually or in the aggregate
with all other events, circumstances, developments, changes and effects, is, or would be,
materially adverse to the business, assets, financial condition or results of operations of the
Parent and its Subsidiaries, taken as a whole; provided, however, that none of the following shall
constitute, or shall be considered in determining whether there has occurred, and no event,
circumstance, change or effect resulting from or arising out of any of the following shall
constitute, a Parent Material Adverse Effect: (A) the announcement of the execution of this
Agreement (including the threatened or actual impact on relationships with customers, vendors,
suppliers, distributors, landlords or employees (including, the threatened or actual loss,
termination, suspension, modification or reduction of, or adverse change in, such relationships)
but only, in each case, to the extent caused by the announcement of the execution of this
Agreement) or any litigation brought by any holder of Parent Common Stock arising or resulting
therefrom, (B) changes in the national or world economy or national or foreign securities, credit
or financial markets or changes in general economic conditions that affect the industries in which
Parent and its Subsidiaries, or their customers, conduct their business (but only, in each case, to
the extent that such changes do not disproportionately affect Parent, its Subsidiaries or their
customers as compared to other companies in such industries), (C) any change in applicable Law or
GAAP or interpretation thereof (but only, in each case, to the extent that such changes do not
disproportionately affect Parent or its Subsidiaries as compared to other companies in such
industries), (D) any failure by Parent to meet any published or internally prepared budgets or
estimates of revenues, earnings or other financial projections, prepared prior to the date of this
Agreement (it being understood and agreed that any events, circumstances, developments, changes and
effects which cause the failure to meet such budgets, estimates or projections may, except as
provided in subsections (A), (B), (C), (E), (F), (G), (H) or (I) of this definition, constitute or
be taken into account in determining whether there has been or would be a Parent Material Adverse
Effect), (E) any outbreak or escalation of war or hostilities, any occurrence or threats of
terrorist acts or any armed hostilities associated therewith and any national or international
calamity, disaster or emergency or any escalation thereof (but only if, in each case, such matters
do not disproportionately affect Parent or its Subsidiaries as compared to other companies in their
industries), (F) any earthquake, hurricane or natural disaster (but only, in each case, to the
extent that such changes do not disproportionately affect Parent or its Subsidiaries as compared to
other companies in such industries), (G) a decline in the price, or a change in the trading volume,
of the Parent Common Stock on the Nasdaq (it being understood and agreed that any events,
circumstances, developments, changes and effects which cause such decline or change may, except as
provided in subsections (A), (B), (C), (D), (E), (F), (H) or (I) of this definition, constitute or
be taken into account in determining whether there has been or would be a Parent Material Adverse
Effect), (H) taking or not taking any actions with the prior written consent of the Company or (I)
compliance with the terms of, and taking any action required by, this Agreement (other than with
respect to Section 5.5, the lead in to Section 7.6 and Section 7.6(a)).
(b) Parent has made available to the Company true, correct and complete copies of the
certificate of incorporation and bylaws, or other organizational documents, of Parent and each
Parent Subsidiary. Parent is not in violation of its certificate of incorporation or bylaws. The
Parent Subsidiaries are not in violation, in any material respect, of their respective certificates
of incorporation or bylaws or other organizational documents.
Section 5.2
Authority to Execute and Perform Agreement. Parent and Merger Sub have
the necessary corporate power and authority to enter into, execute and deliver this Agreement, the
Stockholder
Agreements and each instrument required hereby to be executed and delivered by Parent and/or
Merger Sub at the Closing and to perform their obligations hereunder and thereunder and consummate
the transactions contemplated hereby including the Offer and the Merger. The execution, delivery
and performance of this Agreement, the Stockholder Agreements and each instrument required hereby
to be executed and delivered by Parent and/or Merger Sub at the Closing by Parent and Merger Sub
and the consummation of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of the respective boards of directors of Parent and
Merger Sub, and immediately following the execution and delivery of this Agreement will be duly
authorized by all necessary corporate action on the part of Parent as the sole stockholder of
Merger Sub. This
32
Agreement and the Stockholder Agreements have been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery
hereof by the Company, constitutes a legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, except to the extent that enforcement of the
rights and remedies created hereby is subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application affecting the rights and remedies of creditors and to
general principles of equity (regardless of whether enforceability is considered in a proceeding in
equity or at Law). No vote of holders of capital stock of Parent is necessary to approve this
Agreement, the Stockholder Agreements, the Offer, the Merger and the other transactions
contemplated hereby. The Board of Directors of Parent has approved the issuance of shares of
Parent Common Stock in connection with the Offer and the Merger (the “Parent Share
Issuance”).
(a) The authorized capital stock of Parent consists of an unlimited number of shares of Parent
Common Stock, of which, as of the close of business on February 25, 2008, 20,994,108 shares were
issued and outstanding. All of the issued and outstanding shares of such Parent Common Stock are,
and all shares of Parent Common Stock that may be issued pursuant to this Agreement will, when
issued in accordance with the terms hereof, be, duly authorized, validly issued, fully paid and
nonassessable, and were or will be issued free of any preemptive (or similar) rights. No shares of
Parent Common Stock have been issued in violation of any preemptive (or similar) rights.
(b) As of the close of business on February 25, 2008, Parent has reserved 4,037,500 shares of
Parent Common Stock for issuance pursuant to all of its equity plans (including Parent’s employee
stock purchase plan), of which options to purchase 1,978,427 shares of Parent Common Stock were
outstanding as of February 25, 2008, and 456,311 shares remained available for grant as of such
date. All shares of Parent Common Stock reserved for issuance as specified above shall be, upon
issuance on the terms and conditions specified in the instruments pursuant to which they are
issuable, duly authorized, validly issued, fully paid and nonassessable and will not be issued
subject to any preemptive (or similar) rights.
(c) Except for shares of Parent Common Stock indicated in Section 5.3(a) as issued and
outstanding as of February 25, 2008 and as set forth in Section 5.3(b), as of the date hereof there
are not any shares of Parent Common Stock or other equity or voting securities of Parent issued and
outstanding or reserved for issuance. No options to purchase shares of Parent Common Stock have
been issued or granted since the close of business on February 25, 2008 to the date hereof.
(d) Except with respect to equity securities under Parent equity plans (including Parent’s
employee stock purchase plan), as of the date hereof there are not authorized or outstanding any
subscriptions, options, conversion or exchange rights, warrants, calls, repurchase or redemption
agreements, or other agreements, instruments, contracts, claims or commitments obligating Parent to
issue, transfer, deliver, sell, repurchase or redeem, or cause to be issued, transferred,
delivered, sold, repurchased or redeemed, additional shares of the Parent
Common Stock or other securities of Parent or to make payments with respect to the value of
any of the foregoing or obligating Parent or any Parent Subsidiary to grant, extend or enter into
any such agreement or commitment.
Section 5.4
Parent Subsidiaries. All issued and outstanding shares or other equity
interests of each Parent Subsidiary have been duly authorized and validly issued, are fully paid
and nonassessable and are owned directly or indirectly by Parent free and clear of any Liens,
except for Permitted Liens.
33
of the transactions contemplated hereby and compliance with the terms hereof will not
(whether with or without notice or lapse of time, or both), (i) violate any provision of the
certificate of incorporation or bylaws of Parent or Merger Sub or the comparable organization
documents of any Parent Subsidiary, (ii) violate, conflict with or result in the breach of any of
the terms or conditions of, result in any (or the right to make any) modification of or the
cancellation or loss of a benefit under, require any notice, consent or action under, or otherwise
give any other contracting party the right to terminate, accelerate obligations under or receive
payment or additional rights under, or constitute a default under, any Parent Material Contract,
(iii) violate any Law applicable to Parent or the Parent Subsidiaries or by which any of Parent’s
or the Parent Subsidiaries’ assets or properties is bound or (iv) except for (a) compliance with
any applicable requirements of the Securities Act, the Exchange Act and any other applicable state,
provincial, federal or Canadian securities laws, (b) filings pursuant to the DGCL as contemplated
herein, (c) the filing of a pre-merger notification report under the HSR Act and (d) filings and
approvals required by the Nasdaq or Toronto Stock Exchange rules and regulations, require any
registration or filing with, notice to, or Permit, order, authorization, consent or approval of,
any Governmental Entity, excluding violations, conflicts, breaches, accelerations, rights or
entitlements, and defaults which would not, individually or in the aggregate, have a Parent
Material Adverse Effect or prevent or materially delay the Offer or the Merger or the consummation
of the other transactions contemplated by this Agreement.
(a) Parent has filed all forms, reports, registrations, statements, certifications and other
documents required to be filed by it with, or furnished by Parent to, the SEC for all periods
beginning on or after June 22, 2006 (the “Parent SEC Reports”). The Parent SEC Reports
complied in all material respects with the requirements of, and were prepared in accordance with,
the applicable requirements of the Exchange Act and the Securities Act, and did not, as of their
respective filing dates, contain any untrue statement of a material fact or omit to state a
material fact required to be stated or incorporated by reference therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading. As
of the date of this Agreement, there are no outstanding or unresolved comments in comment letters
received from the SEC. To the knowledge of Parent, as of the date hereof, none of Parent or any
Parent SEC Reports is the subject of ongoing SEC review. No Parent Subsidiary is required to file
or furnish any form, report, registration, statement or other document with the SEC.
(b) The consolidated financial statements contained in the Parent SEC Reports (including the
related notes, where applicable) (the “Parent Financial Statements”) (i) present fairly, in
all material respects, the consolidated financial condition and results of operations and cash
flows and statements of stockholders equity of Parent and its consolidated Subsidiaries as of and
for the periods presented therein (subject, in the case of unaudited quarterly financial
statements, to normal year-end adjustments), (ii) have been prepared in all material respects in
accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) or GAAP
(as applicable) applied on a consistent basis throughout the periods involved, except as otherwise
indicated therein or, in the case of the unaudited quarterly financial statements, as permitted by
Form 10-Q or other applicable filing, and (iii) when filed complied as to form in all material
respects with the rules and regulations of the SEC with respect thereto.
Since December 31, 2006, there has been no material change in Parent’s accounting methods or
principles that would be required to be disclosed in the Parent Financial Statements in accordance
with Canadian GAAP or GAAP (as applicable). Except as would not, individually or in the aggregate,
have a Parent Material Adverse Effect, (i) the management of Parent has implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure
that material information relating to Parent, including the consolidated Parent Subsidiaries, is
made known to the chief executive officer and the chief financial officer of Parent by others
within those entities, and (ii) Parent’s principal executive officer and principal financial
officer have disclosed, based on their most recent evaluation of internal control over financial
reporting, to Parent’s auditors and the audit committee
34
of the Board of Directors of Parent (or
persons performing the equivalent functions): (A) all significant deficiencies and material
weaknesses within their knowledge in the design or operation of internal control over financial
reporting which are reasonably likely to materially adversely affect Parent’s ability to record,
process, summarize and report financial information; and (B) any fraud that involves management or
other employees who have a significant role in Parent’s internal control over financial reporting.
Parent’s principal executive officer and principal financial officer have made, with respect to
Parent SEC Reports, all certifications required by the Xxxxxxxx-Xxxxx Act of 2002 and any related
rules and regulations promulgated by the SEC. As of the date hereof, Parent has not identified any
material weaknesses in the design or operation of the internal controls over financial reporting.
As of the date hereof, neither Parent nor any of Parent Subsidiaries has outstanding, or has
arranged any outstanding, “extensions of credit” to directors or executive officers of Parent
within the meaning of Section 402 of the Xxxxxxxx-Xxxxx Act of 2002.
(c) Neither Parent nor any Parent Subsidiary has any liabilities, whether accrued, absolute,
contingent or otherwise, that would be required by Canadian GAAP to be reflected on a balance
sheet, other than liabilities and obligations (i) to the extent reflected or reserved against on
the consolidated balance sheet of Parent and its consolidated Subsidiaries as of December 31, 2006
(including the notes thereto) included in Parent’s Annual Report on Form 40-F for the fiscal year
ended December 31, 2006, (ii) incurred in connection with the transactions expressly contemplated
herein or (iii) incurred since December 31, 2006 in the ordinary course of business that,
individually or in the aggregate, have not had and would not have a Parent Material Adverse Effect.
(d) Neither the Parent nor any Parent Subsidiary is a party to, or has a legally binding
commitment to enter into, any joint venture, off balance sheet partnership or any similar contract
(including any contract or arrangement relating to any transaction or relationship between or among
the Parent or the Parent Subsidiary, on the one hand, and any unconsolidated affiliate, including
any structured finance, special purpose or limited purpose entity or person, on the other hand, or
any “off balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the
Exchange Act)), where the purpose or intended effect of such contract or arrangement is to avoid
disclosure of any material transaction involving, or material liabilities of, the Parent or any
Parent Subsidiary in the Parent’s published financial statements or other Parent SEC Reports.
Section 5.7
Absence of Certain Changes or Events. Since December 31, 2006, there have
not been any events, circumstances, developments, changes or effects of which Parent has knowledge
that would, individually or in the aggregate, have a Parent Material Adverse Effect. Since
December 31, 2006 through the date hereof, (i) Parent and each Parent Subsidiary have conducted
their respective businesses in the ordinary course of business except when the failure to do so
would not have, individually or in the aggregate, a Parent Material Adverse Effect, and (ii)
neither Parent nor any Parent Subsidiary has taken any action that, if taken after the date hereof,
would be prohibited by Section 7.6(b)(iii) nor have any of them resolved to, agreed to or otherwise
obligated any of them to take any such actions.
(a) Parent and the Parent Subsidiaries have each Permit that is required for the operation of
the business of Parent or any of the Parent Subsidiaries or the ownership or leasing of any
interest in any of their respective properties, except where the failure to have, or the suspension
or cancellation of, any such Permit would not, individually or in the aggregate, have a Parent
Material Adverse Effect. Except as would not, individually or in the aggregate, have a Parent
Material Adverse Effect, (i) all of such Permits are valid and in full force and effect and neither
Parent nor any Parent Subsidiary has violated the terms of such Permits, and (ii) no proceeding is
pending or, to the knowledge of the Parent, threatened in writing to revoke, suspend, cancel,
terminate, or adversely modify any such Permit.
35
(b) Parent and the Parent Subsidiaries are, and since December 31, 2004, have been, in
compliance with all applicable Laws, including, to the extent applicable, (i) rules and regulations
of the Medicare and Medicaid programs and any other federal health care program; (ii) federal and
state Laws relating to health care fraud and abuse; (iii) state Laws relating to Medicaid or any
other state health care or health insurance programs; (iv) federal or state Laws relating to
billing or claims for reimbursement submitted to any third-party payor; (v) any other federal or
state Laws relating to fraudulent, abusive or unlawful practices connected in any way with the
provision of health care items or services, or the billing for or claims for reimbursement for such
items or services provided to a beneficiary of any state, federal or other governmental health care
or health insurance program or any private payor; (vi) state Laws relating to insurance and risk
sharing products, services and arrangements, and (vii) Laws with respect to matters relating to
patient or individual health care information, including, without limitation, the Health Insurance
Portability and Accountability Act of 1996, as amended, and any rules or regulations promulgated
thereunder, except where any failure to be in compliance, individually or in the aggregate, would
not have a Parent Material Adverse Effect. Since December 31, 2004, no third-party payment program
has imposed a fine, penalty or other sanction on Parent or the Parent Subsidiaries, except where
any such imposition would not have, individually or in the aggregate, a Parent Material Adverse
Effect.
(c) Since January 1, 2006 and, to the knowledge of Parent, at any time from January 1, 2001
and prior to January 1, 2006, neither Parent, any Parent Subsidiary, nor any director or executive
officer of Parent or any Parent Subsidiary with respect to actions taken on behalf of Parent or any
Parent Subsidiary, (i) has been assessed a civil money penalty under Section 1128A of the Social
Security Act or any regulations promulgated thereunder, (ii) has been excluded from participation
in any federal health care program or state health care program (as such terms are defined by the
Social Security Act), or (iii) has been convicted of any criminal offense relating to the delivery
of any item or service under a federal health care program relating to the unlawful manufacture,
distribution, prescription, or dispensing of a prescription drug or a controlled substance.
(d) Parent has made available to the Company a summary of all material complaints or concerns
made since December 31, 2006 through Parent’s whistleblower hot-line or equivalent system for
receipt of employee concerns regarding possible violations of Law. No attorney representing Parent
or any of its Subsidiaries, whether or not employed by Parent or any of its Subsidiaries, has
reported evidence of a violation of securities laws, breach of fiduciary duty or similar violation
by Parent or any of its officers, directors, employees or agents to Parent’s chief legal officer,
audit committee (or other committee designated for the purpose) of the Board of Directors of Parent
or the Board of Directors of Parent pursuant to the rules adopted pursuant to Section 307 of the
Xxxxxxxx-Xxxxx Act or in any Parent policy contemplating such reporting, including in instances not
required by those rules.
Section 5.9
Claims, Actions and Proceedings. There are no outstanding orders, writs,
judgments, injunctions, decrees or other requirements of any Governmental Entity against Parent,
any Parent Subsidiary or any of their securities, assets or properties that, individually or in the
aggregate, would have a Parent Material Adverse Effect. There are no Actions or, to the knowledge
of Parent, any governmental investigations or
inquiries pending or overtly threatened against the Parent or any Parent Subsidiary or any of
their assets or properties that, individually or in the aggregate, would have a Parent Material
Adverse Effect (provided that no representation or warranty is being made in this Agreement as to
any Actions commenced after the date hereof challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit the Offer or Merger).
(a) “Parent Material Contract” means Contracts to which Parent or any Parent
Subsidiary is a party or by which any of them is bound that (i) would be required to be filed by
Parent as a “material” Contract pursuant to Item 601(b)(10) of Regulation S-K under the Securities
Act or (ii) is with one of Parent’s ten (10) largest
36
customers (based on revenue to Parent) for the
fiscal year ended December 31, 2007 or Parent’s ten (10) largest vendors (based on expense incurred
by Parent).
(b) Except as would not, individually or in the aggregate, have a Parent Material Adverse
Effect, each of the Parent Material Contracts is in full force and effect and is valid and binding
on the Parent and each Parent Subsidiary party thereto and, to the knowledge of the Parent, each
other party thereto, enforceable against such parties in accordance with their terms, except to the
extent that enforcement of the rights and remedies created thereby is subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general application affecting the
rights and remedies of creditors and to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at Law).
(c) Except as would not, individually or in the aggregate, have a Parent Material Adverse
Effect, (i) neither Parent nor any Parent Subsidiary has breached, is in default under, or has
received written notice of any breach of or default under, any Parent Material Contract, and no
event has occurred that with the lapse of time or the giving of notice or both would constitute a
default thereunder by Parent or any Parent Subsidiary, and (ii) to Parent’s knowledge, no other
party to any Parent Material Contract to which Parent or any Parent Subsidiary is a party is in
breach or violation of, or default under, such Parent Material Contract. A complete and correct
copy of each Parent Material Contract has previously been made available by Parent to the Company
or filed by Parent with the SEC.
Section 5.11
Intellectual Property. Except as would not, individually or in the
aggregate, have a Parent Material Adverse Effect, either Parent or a Parent Subsidiary owns, or is
licensed or otherwise possesses adequate rights to use, all Intellectual Property used in their
respective businesses as currently conducted. Except as would not, individually or in the
aggregate, have a Parent Material Adverse Effect, (i) there are no claims pending or, to the
knowledge of Parent, overtly threatened by any person alleging infringement by Parent or any of the
Parent Subsidiaries for their use of the Intellectual Property of Parent or any of the Parent
Subsidiaries, (ii) to the knowledge of Parent, the conduct of the business of Parent and the Parent
Subsidiaries does not infringe any intellectual property rights of any person, (iii) neither Parent
nor any of the Parent Subsidiaries has made any claim of a violation or infringement by others of
its rights to or in connection with the Intellectual Property of Parent or any of the Parent
Subsidiaries in the last five (5) years, (iv) to the knowledge of the Parent, no person is
infringing any Intellectual Property of Parent or any of the Parent Subsidiaries and (v) Parent
takes reasonable actions to protect the security of its software, systems and networks.
(a) Except as would not, individually or in the aggregate, have a Parent Material Adverse
Effect:
(i) All Tax Returns required to be filed by or with respect to the Parent and the
Parent Subsidiaries have been or will be timely filed with the appropriate Tax
authority. All such Tax Returns are true, correct and complete and all Taxes owed by
the Parent or the Parent Subsidiaries, whether or not shown on any Tax Return, have been
timely paid except for Taxes being contested in good faith and for which adequate
reserves have been established on the Parent Financial Statements, in accordance with
Canadian GAAP, or, if arising after the date of the most recent Parent Financial
Statements, on the Parent’s or the appropriate Parent Subsidiary’s books and records.
(ii) There are no Liens with respect to Taxes upon any of the assets or properties
of the Parent or the Parent Subsidiaries, other than Permitted Liens.
37
(iii) No audit, assessment, examination, dispute, investigation or judicial or
administrative proceeding is currently pending with respect to any Taxes of the Parent
or, to the Parent’s knowledge, the Parent Subsidiaries with respect to which the Parent
or a Parent Subsidiary has been notified in writing. No deficiency for any Taxes has
been proposed or assessed in writing against the Parent or the Parent Subsidiaries,
except for deficiencies which have been paid, settled or withdrawn or which are being
contested in good faith and for which adequate reserves have been established on the
Parent Financial Statements, in accordance with Canadian GAAP, or if arising after the
date of the most recent Parent Financial Statements, on the Parent’s or the appropriate
Parent Subsidiary’s books and records.
(iv) Neither the Parent nor any of the Parent Subsidiaries is a party to any
indemnification, allocation, sharing or similar agreement with respect to Taxes that
would give rise to a material payment or indemnification obligation, other than
agreements among the Parent and the Parent Subsidiaries, customary Tax indemnities
contained in credit or other commercial agreements the primary purpose of which do not
relate to Taxes and agreements with customers, vendors, lessors or similar persons
entered into in the ordinary course of business.
(v) All withholding and payroll Tax requirements required to be complied with by
the Parent and the Parent Subsidiaries (including requirements to deduct, withhold and
pay over amounts to any Tax authority and to comply with associated reporting and record
keeping requirements) have been satisfied or accrued.
(b) Neither the Parent nor any Parent Subsidiary has distributed the stock of another company
in a transaction that was purported or intended to be governed by Section 355(a)(1)(A) or Section
361 of the Code in a transaction occurring within the past five years.
(a) None of the information supplied or to be supplied by Parent in writing for inclusion or
incorporation by reference in (i) the Schedule 14D-9 will, at the time filed with the SEC, contain
any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading or (ii) Proxy Statement will, at the date of mailing to stockholders and
at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading. The
Registration Statement and the Schedule TO, at the time filed, will comply as to form in all
material respects with the applicable requirements of the Securities Act and the Exchange Act and
the Schedule TO at the time it is filed, and the Registration Statement at the time it becomes
effective under the Securities Act, will not contain any untrue
statement of a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading. The representations and warranties contained in this Section 5.13 will not
apply to statements included in or omissions from the Schedule TO or the Registration Statement
based upon information furnished to Parent in writing by the Company for inclusion in the
Registration Statement.
(b) The information with respect to Parent and any of its Subsidiaries that Parent furnishes
to the Company specifically for use by the Company in the Schedule 14D-9 or the Information
Statement will not contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, (i) in the case of the
Schedule 14D-9, at
38
the time of the filing of the Schedule 14D-9 and at the time of any distribution
or dissemination thereof and at the consummation of the Offer and (ii) in the case of the
Information Statement, as supplemented or amended, if applicable, at the time of the filing of such
Information Statement or any amendment or supplement thereto or at the time it is first mailed to
stockholders of the Company and at the time such stockholders vote, or otherwise act, on adoption
of this Agreement.
Section 5.14
Brokers. Other than Xxxxxxxx Xxxxx Xxxxxx & Xxxxx, no broker, finder,
agent or similar intermediary has acted on behalf of Parent or Merger Sub in connection with this
Agreement or the transactions contemplated hereby, and there are no brokerage commissions, finders’
fees or similar fees or commissions payable in connection herewith based on any agreement,
arrangement or understanding with Parent or Merger Sub or any of their respective affiliates, or
any action taken by Parent or Merger Sub or any of their respective affiliates.
(a) Merger Sub has been formed solely for the purpose of engaging in the transactions
contemplated hereby and prior to the Effective Time will have engaged in no other business
activities and will have incurred no liabilities or obligations other than as contemplated herein.
(b) As of the date hereof and through and including the Effective Time, Parent shall directly
own all of the equity of US Corp. and Parent shall indirectly own all of the equity securities of
Merger Sub.
(c) As of immediately prior to entering into this Agreement and the Stockholder Agreements,
none of Parent, US Corp. or Merger Sub, alone or together with any other person, was at any time,
or became, an “interested stockholder” under the applicable provisions of the DGCL or has taken any
action that would cause the restrictions on business combinations with interested stockholders set
forth in Section 203 of the DGCL to be applicable to this Agreement, the Merger or any of the
transactions contemplated hereby. None of Parent, US Corp. or Merger Sub owns (directly or
indirectly, beneficially or of record) or is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each case, any shares of capital
stock of the Company (other than as contemplated by this Agreement or the Stockholder Agreements).
(d) To the knowledge of Parent, no “moratorium,” “control share,” “fair price” or other
anti-takeover law or regulation is applicable to this Agreement, the Offer or Merger or the other
transactions contemplated hereby which would require action by the Board of Directors of Parent.
Section 5.16
Solvency. Assuming the accuracy of the representations and warranties of
the Company (without giving effect to any qualifications as to knowledge of the Company,
materiality, Company Material Adverse Effect or similar qualifications or any disclosures in the
Company SEC Reports or the Company
Disclosure Schedule) as of the earlier of the Acceptance Date or the Closing, immediately
after giving effect to all of the transactions contemplated by this Agreement, including, without
limitation, the payment of the aggregate Cash Consideration and payment of all related fees and
expenses, the Surviving Corporation and Parent will be Solvent. For purposes of this Section 5.16,
the term “
Solvent” with respect to the Surviving Corporation and Parent means that, as of
any date of determination, (a) the amount of the fair saleable value of the assets of Parent and
the Surviving Corporation and their respective Subsidiaries, taken as a whole, exceeds, as of such
date, the sum of (i) the value of all liabilities of Parent and the Surviving Corporation and their
respective Subsidiaries, taken as a whole, including contingent and other liabilities, as of such
date, as such terms are generally determined in accordance with the applicable Delaware, Canadian
or federal Laws governing determinations of the solvency of debtors, and (ii) the amount that will
be required to pay the probable liabilities of Parent, the Surviving Corporation and their
respective Subsidiaries, taken as a whole, on their existing debts (including contingent
liabilities) as such debts become
39
absolute and matured; (b) Parent and the Surviving Corporation
will not have, as of such date, an unreasonably small amount of capital for the operation of the
businesses in which they are engaged or proposed to be engaged following such date; (c) Parent and
the Surviving Corporation will be able to pay their respective liabilities, including contingent
and other liabilities, as they mature in the ordinary course of business; and (d) any other
solvency requirement set forth in the DGCL or pursuant to Delaware or Canadian or federal Laws
applicable to Parent or the Surviving Corporation has been satisfied.
Section 5.17
Financing. Parent has delivered to the Company a true and complete copy
of the executed commitment letter (the “
Debt Commitment Letter”) from GE Capital
Corporation (the “
Lender”) to provide debt financing in an aggregate amount set forth
therein (the “
Debt Financing”). Other than as permitted pursuant to Section 7.9, the Debt
Commitment Letter has not been amended or modified, no such amendment or modification is
contemplated, and, as of the date hereof, the commitments contained in such letter have not been
withdrawn or rescinded in any respect. There are no conditions precedent or other contingencies
related to the funding of the full amount of the Debt Financing, other than as set forth in the
Debt Commitment Letter (the “
Disclosed Conditions”), and no Person has any right to impose,
and none of Parent, US Corp. or Merger Sub has any obligation to accept, (i) any condition
precedent to such funding other than the Disclosed Conditions nor (ii) any reduction to the
aggregate amount available under the Debt Commitment Letter below an amount that when combined with
Parent’s other cash and/or cash equivalents will be sufficient to pay the Transaction Amount on the
earlier of the Acceptance Date or the Closing (or any term or condition not included in the Debt
Commitment Letter which would have the effect of reducing the aggregate amount under the Debt
Commitment Letter below an amount that when combined with Parent’s other cash and/or cash
equivalents will be sufficient to pay the Transaction Amount on the earlier of the Acceptance Date
or the Closing). Parent, US Corp. or Merger Sub has fully paid any and all commitment fees or
other fees in connection with the Debt Commitment Letter that are payable on or prior to the date
hereof and, as of the date hereof, the Debt Commitment Letter (or, if applicable, any alternative
debt commitment letter entered into pursuant to Section 7.9) is in full force and effect and is the
valid, binding and enforceable obligation of US Corp. and, to the knowledge of Parent, the other
parties thereto. The Debt Commitment Letter may, in accordance with the provisions of this
Agreement, be superseded at the option of Parent after the date of this Agreement but prior to the
earlier of the Acceptance Date or the Effective Time by an instrument (the “
New Debt Commitment
Letter”) replacing the existing Debt Commitment Letter, provided that the terms of the New Debt
Commitment Letter shall not (A) expand upon the conditions precedent to the Debt Financing set
forth in the Debt Commitment Letter as of the date hereof, (B) delay the earlier of the Acceptance
Date or the Closing or (C) reduce the aggregate amount available under the Debt Commitment Letter
below an amount that when combined with Parent’s other cash and/or cash equivalents will be
sufficient to pay the Transaction Amount on the earlier of the Acceptance Date or the Closing (or
include any term or condition not in the Debt Commitment Letter which would have the effect of
reducing the aggregate amount under the Debt Commitment Letter below an amount that when combined
with Parent’s other cash and/or cash equivalents will be sufficient to pay the Transaction Amount
on the earlier of the Acceptance Date or the Closing). In such event, the
term “Debt Commitment Letter” as used herein shall be deemed to be to the New Debt Commitment
Letter to the extent then in effect. Assuming the Debt Financing is funded and assuming the
accuracy of the representations and warranties set forth in Section 4.3 and compliance with Section
6.1(b) in all material respects, the net proceeds contemplated by the Debt Commitment Letter
together with Parent’s other cash and/or cash equivalents will in the aggregate
be sufficient for
Parent, US Corp. and Merger Sub to pay the aggregate cash to be paid pursuant to the Offer, the
Cash Consideration and any other payments contemplated in this Agreement to be paid by Parent on
the Acceptance Date and the Closing Date and to pay all fees and expenses of Parent and the Parent
Subsidiaries and the Company and the Company Subsidiaries related to the Debt Financing, the Merger
or any other transactions contemplated by this Agreement (such amount, the “
Transaction
Amount”). As of the date of this Agreement, no event has occurred which, with or without
notice, lapse of time or both, would constitute a default on the part of Parent or Merger Sub under
the Debt Commitment Letter, and, as of the date of this Agreement, Parent does not
40
have any reason
to believe that any of the conditions to the Debt Financing will not be satisfied or that the Debt
Financing will not be available to Parent, US Corp. or Merger Sub on the earlier of the Acceptance
Date or the Closing.
Section 5.18
No Other Representations or Warranties; Investigation by the Company.
The Company acknowledges and agrees that (a) it has had an opportunity to discuss the business of
Parent, US Corp. and Merger Sub with Parent, (b) it has had full access to the books and records of
Parent, US Corp. and Merger Sub, (c) it has been afforded the opportunity to ask questions of and
receive answers from Parent and (d) except for the representations and warranties contained in this
Section 5, Parent, US Corp. and Merger Sub make no representations and warranties. Moreover
neither Parent, US Corp., Merger Sub nor any other person will have or be subject to any liability
or obligation to the Company or any other person resulting from the distribution to the Company, or
the Company’s use of, any such information, including any information, documents, projections,
forecasts or other material made available to the Company in diligence or management presentations
in connection with the transactions contemplated by this Agreement, unless any such information is
expressly included in a representation or warranty contained in this Section 5.
Section 5.19
Good Faith. Parent and its Affiliates have acted and will act in good
faith in the negotiation, delivery and performance of this Agreement and the Stockholder Agreements
and in connection with the transactions contemplated hereby and thereby.
Section 6.1
Conduct of Business. During the period from the date of this Agreement
until the earlier of the Acceptance Date, the Closing Date or the termination of this Agreement,
the Company and each Company Subsidiary shall, except as required by Law, as expressly contemplated
by this Agreement, as set forth on Section 6.1 of the Company Disclosure Schedule or to the extent
that Parent shall otherwise consent in writing (not to be unreasonably withheld, conditioned or
delayed), conduct its business in all material respects in the ordinary course of its business as
currently conducted. Without limiting the generality of the foregoing, without the prior written
consent of Parent (not to be unreasonably withheld, conditioned or delayed), during the period from
the date hereof and continuing until the earlier of the Acceptance Date, the Closing Date or the
termination of this Agreement, the Company shall and shall cause the Company Subsidiaries to
observe the following covenants, in each case, except as required by Law or as expressly
contemplated by this Agreement or as set forth on Section 6.1 of the Company Disclosure Schedule:
(i)
Preservation of the Business; Maintenance of Properties, Material
Contracts. To the extent consistent with Section 6.1 above and not otherwise
prohibited by this Agreement, use reasonable best efforts to (A) preserve the business
of the Company and its Subsidiaries, keep available the services of the current
officers, employees and consultants of the Company and its Subsidiaries and preserve the
present relationships of the Company and its Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has significant business
relations, (B) advertise, promote and market the Company’s products, (C) keep the
Company’s and its Subsidiaries’ material properties substantially intact, preserve their
goodwill and business, and maintain all physical properties in good repair and
condition, ordinary wear and tear excepted, (D) perform and comply in all material
respects with the terms of its Material Contracts, and (E) maintain, and comply in all
material respects with, all material Permits; and
41
(ii)
Insurance. Use reasonable best efforts to keep in effect general
liability, casualty, product liability, workers compensation, directors’ and officers’
liability and other material insurance policies in coverage scope and amounts
substantially similar to those in effect at the date hereof.
(i)
Compensation. (1)(A) Change the compensation payable to any officer,
employee, agent or consultant or (B) enter into or amend any employment, change in
control, bonus, severance, termination, retention or other agreement or arrangement with
any officer, employee, agent or consultant of the Company or a Subsidiary, or adopt, or
increase the benefits (including fringe benefits), severance or termination pay under,
any employee benefit plan or agreement or otherwise, except (x) in each case, as
required by Law or in accordance with existing Contracts or Plans, and (y) in the case
of compensation for officers (other than executive officers), employees, agents or
consultants, in the ordinary course of business consistent with past compensation
practices, or (2) make any prohibited loans or advances to any of its officers,
employees, agents or consultants, or make any material change in its existing borrowing
or lending arrangements for or on behalf of any such persons pursuant to a Plan or
otherwise;
provided, however, that the foregoing clause (1) shall not restrict the
Company or any of its Subsidiaries from entering into or making available to newly hired
employees or to employees in the context of promotions based on job performance or
workplace requirements, in each case, in the ordinary course of business, plans,
agreements, benefits and compensation arrangements (including incentive grants) that
have a value that is consistent with the past practice of making compensation and
benefits available to newly hired or promoted employees in similar positions;
(ii)
Capital Stock. Split, combine or reclassify any of its capital stock
or make any change in the number of shares of its capital stock authorized, issued or
outstanding or grant, encumber, dispose of, sell or otherwise issue or authorize the
issuance of any share of capital stock, any other voting security or any security
convertible into, or any option, warrant or other right to purchase (including any
equity-based award), or convert any obligation into, shares of its capital stock or any
other voting security, declare, set aside, make or pay any dividend or other
distribution with respect to any shares of its capital stock, sell or transfer any
shares of its capital stock, or acquire, redeem or otherwise repurchase any shares of
its capital stock or any rights, warrants or options to purchase any of its capital
stock, or any securities convertible into or exchangeable for any such shares;
provided,
however, that the foregoing clause shall not restrict: (1) the issuance of shares of
Company Common
Stock as required by Company Options upon the exercise of such Company Options, (2)
the repurchase or cancellation of Restricted Shares or other shares of Company Common
Stock in accordance with the terms of the applicable award agreements or similar
arrangements to satisfy withholding obligations upon the vesting of Restricted Shares or
the exercise of Company Options, (3) the conversion of Company Convertible Preferred
Stock in accordance with the Certificate of Designations, (4) the acceptance of shares
of Company Common Stock as payment of the exercise price of Company Options or for
withholding taxes incurred in connection with the exercise of Company Options in
accordance with the terms of the applicable award agreements, or (5) the payment of
quarterly cash dividends and cash dividends that have been accrued but not paid on the
Company Convertible Preferred Stock in accordance with the Certificate of Designations;
42
(iii)
Certificate of Incorporation and By Laws. Except as required by Law
or the rules and regulations of the Nasdaq, amend, or otherwise alter or modify in any
respect, the certificate of incorporation or bylaws or comparable organizational
documents of the Company or any Subsidiary;
(iv)
Disposition of Assets. Transfer, lease, license, sell, mortgage,
pledge, or otherwise dispose of or encumber any tangible or intangible asset or related
assets of the Company or any of its Subsidiaries with a value in excess of $200,000
individually or $500,000 in the aggregate, other than sales and non-exclusive licenses
of products and services by the Company and its Subsidiaries in the ordinary course of
business consistent with past practice;
(v)
Acquisitions. (A) Acquire by merging or consolidating with, by
purchasing a substantial portion of the assets of or equity in or by any other manner,
any business or any Person or division thereof or (B) acquire any other assets, other
than such other assets acquired in the ordinary course of business consistent with past
practice or permitted pursuant to clause (vi);
(vi)
Capital Expenditures. Authorize or make any capital expenditures in
any fiscal quarter that are greater than $2 million in the aggregate;
(vii)
Indebtedness. Incur any indebtedness for borrowed money, guaranty
any such indebtedness or make any loans, advances or capital contributions to, or other
investments in, any other Person, other than indebtedness, loans, advances, capital
contributions and investments between the Company and any wholly-owned Subsidiary of the
Company;
(viii)
Accounting Policies. Except as may be required as a result of a
change in Law, changes in GAAP or Regulation S-X of the SEC or as required by a
Governmental Entity, change any of the accounting practices or principles used by it;
(ix) Writing Up or Down Assets. Write up, write down or write off the book
value of any material assets of the Company and its Subsidiaries, other than (i) in the
ordinary course of business or (ii) as may be required by GAAP, the Financial Accounting
Standards Board or Regulation S-X;
(x)
Settlements. Settle or compromise any pending or threatened Action
which (a) is material to the Company and its Subsidiaries taken as a whole, (b) requires
payment to or by the Company or any Subsidiary (exclusive of attorneys’ fees, including
success fees) in excess of $300,000, (c) involves material restrictions on the business
activities of the Company or any of its
Affiliates (including Parent and its Subsidiaries after the Closing), or (d) would
involve the issuance of securities of the Company or any Company Subsidiary;
(xi)
Contracts. (A) Except in the ordinary course of business consistent
with past practice, enter into, amend, modify, terminate or extend the term of a
Material Contract that is a Material Contract because of any of clauses (i) through
(vii) of Section 4.9(a) or (B) enter into, amend, modify, terminate or extend the term
of any Material Contract that is a Material Contract (or would after such amendment or
modification be a Material Contract) in whole or in part because of clause
(viii) or (ix) of Section 4.9.
(xii)
Obligations. Except as set forth in subsection (x) or as required by
Law or any judgment by a court of competent jurisdiction, waive or release any right or
claim or pay,
43
discharge or satisfy any claims, liabilities or obligations, other than
the payment, discharge or satisfaction, in the ordinary course of business consistent
with past practice or in accordance with their respective terms, of liabilities
reflected or reserved against in the most recent Company SEC Reports filed prior to the
date hereof, or incurred in the ordinary course of business consistent with past
practice;
(xiii)
Tax Filings, Elections. Prepare or file any Tax Return inconsistent
with past practice or, on any such Tax Return, take any position, make any election, or
adopt any method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods.
(xiv)
Extraordinary Transactions. Adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, or recapitalization of the Company or
any of its Subsidiaries (other than this Agreement and the Merger or in compliance with
Section 6.2);
(xv)
Plans. Except as required by Law (including Section 409A of the Code)
or Contracts (including Plans) in existence on the date hereof or as otherwise expressly
permitted by this Agreement, establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option, stock
appreciation right, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or employees of
the Company or any Subsidiary, pay any discretionary bonuses to any employee of the
Company or any Subsidiary, except for matching under the Company’s 401(k) plan; or
(xvi)
Obligations. Resolve to, agree to or otherwise obligate itself to do
any of the foregoing.
(c)
No Control of the Company’s Business. Parent acknowledges and agrees that: (i)
nothing contained in this Agreement shall give Parent, directly or indirectly, the right to control
or direct the Company’s or its Subsidiaries’ operations prior to the earlier of the Acceptance Date
or Effective Time, (ii) prior to the earlier of the Acceptance Date or the Effective Time, each of
the Company and Parent shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision over its and its Subsidiaries’ respective operations, and (iii)
notwithstanding anything to the contrary set forth in this Agreement, no consent of Parent shall be
required with respect to any matter set forth in this Section 6.1 to the extent the requirement of
such consent would be inconsistent with applicable Law.
(a) Upon execution and delivery of this Agreement, the Company will cease and cause to be
terminated all existing solicitations, discussions and negotiations by the Company or any of its
Subsidiaries or any of their Representatives with any persons with respect to any Acquisition
Proposal or any offer or proposal or inquiry that may reasonably be expected to lead to an
Acquisition Proposal. Except as provided in Section 6.2(b) or (c), the Company shall not, shall
not permit any of its Subsidiaries to, and shall use its reasonable best efforts to ensure that any
affiliates, officers, directors, employees, investment bankers, attorneys, accountants, financial
or other advisors or other agents (collectively, “Representatives”) of the Company or any
of its Subsidiaries do not, directly or indirectly, (i) solicit, initiate, knowingly encourage or
facilitate (including by way of furnishing non-public information) the submission of an Acquisition
Proposal or any proposal, offer or
44
inquiry that may reasonably be expected to lead to an
Acquisition Proposal, (ii) enter into any letter of intent, memorandum of understanding, agreement,
option agreement or other agreement relating to an Acquisition Proposal or any proposal, offer or
inquiry that may reasonably be expected to lead to an Acquisition Proposal, or (iii) participate or
enter into or engage in negotiations or discussions with, or provide any non-public information or
data to, any person (other than Parent or any of its affiliates or Representatives in their
capacity as such) relating to any Acquisition Proposal or any proposal, offer or inquiry that may
reasonably be expected to lead to an Acquisition Proposal. “Acquisition Proposal” means
(1) an offer or proposal from any Person or group other than Parent or any of its affiliates to
acquire, directly or indirectly, pursuant to any transaction or series of related transactions
(including pursuant to any consolidation, merger, business combination, recapitalization,
liquidation, dissolution or similar transaction) (A) twenty percent (20%) or more of the
outstanding shares of equity or voting securities of the Company or (B) twenty percent (20%) or
more of the consolidated assets of the Company (including stock of Subsidiaries of the Company),
(2) any tender or exchange offer that if consummated would result in any Person or group of Persons
beneficially owning 20% or more of the outstanding shares of equity or voting securities of the
Company or (3) any merger, consolidation, business combination, recapitalization, liquidation or
similar transaction involving the Company or any of its Subsidiaries (other than a merger,
consolidation, business combination, recapitalization, liquidation or similar transaction involving
solely the Company and/or one or more wholly owned Subsidiaries.).
(b) Notwithstanding the foregoing, prior to the earlier of (A) the Acceptance Date and (B)
obtaining the Company Stockholder Approval (such date and time, the “Relevant Date”), the
Company (i) may, and may authorize and permit its Representatives to, pursuant to a confidentiality
agreement with terms no less favorable in the aggregate to the Company than the terms of the
Confidentiality Agreement (except for such changes as are necessary to allow the Company to comply
with the terms of this Agreement), furnish information concerning, and provide access to, its
business, properties, employees and assets to any Person (and its Representatives acting in such
capacity) that makes, after the date hereof, an Acquisition Proposal (and the potential financing
sources of such Person in their capacity as such), provided that any such information must be
provided to Parent prior to or substantially concurrent with the time of its provision to such
third party to the extent not previously made available to Parent, and (ii) may, and may authorize
and permit its Representatives to, participate, engage or assist in discussions and negotiations
with any Person (and its Representatives acting in such capacity) that makes, after the date
hereof, an Acquisition Proposal (and the potential financing sources of such Person in their
capacity as such) with respect to such Acquisition Proposal if, but only if, in the case of both
clause (i) and clause (ii): (x) such Acquisition Proposal was not solicited in violation of
Section 6.2(a) and the Company Board of Directors (or any committee thereof) determines in good
faith, after consultation with its financial advisor and outside counsel, that such Acquisition
Proposal is or is reasonably likely to lead to a Superior Proposal; and (y) the Company Board of
Directors (or any committee thereof) determines in good faith, after consultation with its outside
counsel, that the failure to take such action is or would reasonably likely be inconsistent with
the Company Board of Directors’ fiduciary duties under applicable Law. “Superior Proposal”
means a written Acquisition Proposal (substituting “seventy percent (70%) or more” for each
reference to “twenty percent (20%) or more” in the definition thereof) that the Company Board of
Directors (or any committee thereof) determines (i) is reasonably likely to be consummated and (ii)
if consummated would result in a transaction more favorable, from a financial point of view, to the
Company’s stockholders than the transactions contemplated by this Agreement, taking into
account all of the terms and conditions of such proposal and this Agreement (including any written
proposal from Parent to amend the terms of this Agreement). The Company shall as promptly as
practicable, and in any event within the earlier of (i) one business day or (ii) 48 hours after
receipt of any Acquisition Proposal or any offer, proposal or inquiry that may reasonably be
expected to lead to an Acquisition Proposal or after any request for information is sought or
initiated, notify Parent orally and in writing and disclose the material terms of such Acquisition
Proposal, proposal, offer or inquiry, including the identity of the Person or Persons making such
Acquisition Proposal, proposal, offer or inquiry and provide a copy thereof if in writing and any
related available material documentation or correspondence from such Person or Persons or any of
their respective Representatives to the Company, any Company Subsidiary or any of their respective
Representatives and from the Company, any Company Subsidiary or any of their respective
Representatives to such Person or Persons or their respective Representatives (it being understood
that delivery of
45
such notice to Parent in accordance with the notice provisions of this Agreement,
shall not, in and of itself, entitle Parent to terminate this Agreement pursuant to Section 9.1).
The Company will keep Parent informed on a prompt basis of the status and any material discussions,
negotiations and developments (including material amendments and proposed material amendments)
relating to any Acquisition Proposal or any such offer, proposal or inquiry. The Company agrees
that it will promptly request each Person that has heretofore executed a confidentiality agreement
in connection with any Acquisition Proposal to return or destroy all confidential information
heretofore furnished to such Person by or on behalf of it or any of its Subsidiaries.
(c) Except as set forth in this subsection (c) or subsection (d), neither the Company Board of
Directors nor any committee thereof shall (i) withdraw or modify (or publicly propose to withdraw
or modify), in a manner adverse to Parent or Merger Sub, the approval or recommendation of the
Company Board of Directors of this Agreement, the Offer or the Merger, the Stockholder Agreements
or the transactions contemplated hereby or thereby or the Company Recommendation (any such action
under this clause (i), a “Change in Recommendation”), (ii) approve, recommend or adopt (or
publicly propose to approve, recommend or adopt) any Acquisition Proposal, or (iii) approve,
recommend, adopt or allow the Company to enter into any letter of intent, memorandum of
understanding, option agreement or similar arrangement with respect to any Acquisition Proposal
(other than the confidentiality agreement referred to in Section 6.2(b)). Notwithstanding the
foregoing if after the date hereof and prior to the Relevant Date the Company receives an
Acquisition Proposal, then prior to the Relevant Date, (x) the Company Board of Directors (or any
committee thereof) shall be permitted to make a Change in Recommendation if it determines in good
faith, after consultation with its outside counsel, that the failure to take such action is or
would reasonably likely be inconsistent with the Company Board of Directors’ fiduciary duties under
applicable Law and (y) the Company may enter into a definitive agreement with respect to such
Acquisition Proposal and/or recommend or approve such Acquisition Proposal, in the case of each of
clause (x) and clause (y), if the Company Board of Directors (or a committee thereof) determines in
good faith, after consultation with its outside counsel, that the failure to take such action is or
would reasonably likely be inconsistent with the Company Board of Directors’ fiduciary duties under
applicable Law, determines in good faith, after consultation with its financial advisor and outside
counsel, that such Acquisition Proposal constitutes a Superior Proposal and, concurrently with
entering into such definitive agreement, making such Change in Recommendation or recommending or
approving such Acquisition Proposal terminates this Agreement pursuant to Section 9.1(f) and pays
the applicable termination fee to Parent concurrently with such termination. The Company shall not
be entitled to terminate this Agreement pursuant to Section 9.1(f) or make a Change in
Recommendation in response to such Superior Proposal or enter into an agreement with respect to
such Superior Proposal or recommend or approve such Superior Proposal (A) until after the second
(2nd) business day following the Company’s delivery to Parent of a written notice (a
“Notice of Superior Proposal”) advising Parent that the Company intends to take such action
and specifying the terms and conditions of the Superior Proposal that is the basis of such action
and providing Parent with a copy of all agreements and proposed agreements and all material
correspondence and other documentation from such Person or Persons or any of their respective
Representatives to the Company, any Company Subsidiary or any of their respective
Representatives and from the Company, any Company Subsidiary or any of their respective
Representatives to such Person or Persons or their respective Representatives relating to such
Superior Proposal (it being understood and agreed that (1) in determining whether to cause or
permit the Company to so terminate this Agreement or take such other actions, the Company Board of
Directors (or a committee thereof) shall take into account any changes to the terms of this
Agreement proposed by Parent to the Company in any written proposal in response to a Notice of
Superior Proposal or otherwise, and (2) any material amendment to the terms of such Superior
Proposal (it being agreed that any amendment to the financial terms thereof is a material
amendment) shall require a new Notice of Superior Proposal and a new two (2) business day period),
(B) unless during the applicable notice period after providing the Notice of Superior Proposal, the
Company has, and has caused its Representatives to, negotiate with Parent and its Representatives
in good faith to make such adjustments in the terms and conditions of this Agreement so that such
Acquisition Proposal would no longer constitute a Superior Proposal, (C) unless the Company has
46
complied in all material respects with this Section 6.2 and (D) unless and until the Company has
paid, or concurrently pays, to Parent the termination fee due Parent pursuant to Section 9.2.
(d) In addition, and notwithstanding the foregoing, at any time prior to the Relevant Date the
Company Board of Directors (or a committee thereof) may, other than in response to an Acquisition
Proposal, make a Change in Recommendation if the Company Board of Directors (or a committee
thereof) determines in good faith, after consultation with its outside counsel, that the failure to
make a Change in Recommendation is or would reasonably likely be inconsistent with the Company
Board of Directors’ fiduciary duties under applicable Law; provided, however, that, neither the
Company Board of Directors (nor any committee thereof) shall be entitled to exercise its right to
make a Change in Recommendation pursuant to this sentence unless the Company has provided to Parent
at least two business days’ prior written notice advising Parent that the Company Board of
Directors intends to take such action and specifying the reasons therefor in reasonable detail.
(e) Any Change in Recommendation shall not change the approval of this Agreement, the
Stockholder Agreements or any other approval of the Company Board of Directors in any respect that
would have the effect of causing any state (including Delaware) corporate takeover statute or other
similar statute to be applicable to the transactions contemplated hereby or thereby, including the
Offer and the Merger.
(f) Nothing contained in this Section 6.2 or any other provision of this Agreement shall
prohibit the Company or the Company Board of Directors (or any committee thereof) from taking and
disclosing to the Company’s stockholders a position with respect to any tender or exchange offer by
a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from
making any disclosure to the Company’s stockholders, if in any such case the Company Board of
Directors (or any committee thereof) determines in good faith (after consultation with its outside
counsel) that it is required to do so under applicable Law; provided, however, that nothing in this
Section 6.2(f) nor the taking of any action in accordance with this Section 6.2 shall limit or
modify in any way the right of Parent to terminate this Agreement pursuant to Section 9.1;
provided, further however, that any such disclosure (other than a “stop, look and listen” or
similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act) shall be
deemed to be a Change in Recommendation, unless the Company Board of Directors expressly and
concurrently with such disclosure (i) reaffirms its recommendation to its stockholders in favor of
this Agreement, the Offer and the Merger and that they tender their shares in the Offer and (ii)
rejects any other Acquisition Proposal.
(g) Notwithstanding anything to the contrary contained in this Agreement, unless this
Agreement is terminated in accordance with Section 9.1, (i) the obligation of the Company to call,
give notice of, convene and hold the Company Stockholders Meeting and to hold a vote of the
Company’s stockholders on the adoption of this Agreement and the Merger at the Company Stockholders
Meeting shall not be limited or otherwise affected by the commencement, disclosure, announcement or
submission to it of any Acquisition Proposal (whether
or not a Superior Proposal), or by a Change in Recommendation, (ii) in any case in which a
Change in Recommendation occurs, the Company shall nevertheless submit this Agreement to a vote of
its stockholders, and (iii) the Company agrees that it shall not submit to the vote of its
stockholders any Acquisition Proposal (whether or not a Superior Proposal) or propose to do so.
(h) If any Representative of the Company or any of its Affiliates takes any action that the
Company is not permitted to take under this Section 6.2, it shall be deemed to be a breach of this
Section 6.2 by the Company.
47
(a) Without limiting any additional rights that any Continuing Employee may have under any
Plans, except as provided in Section 6.3(a) of the Company Disclosure Schedule, until the first
year anniversary of the Effective Time (the “Benefits Continuation Period”), the Surviving
Corporation shall pay or cause to be paid to each employee who continues as an employee of the
Company, its Subsidiaries or the Surviving Corporation during the Benefits Continuation Period (the
“Continuing Employees”) salary, wages, cash incentive opportunities, severance, medical
benefits and other welfare benefit plans, programs and arrangements which are at least comparable
in the aggregate to those provided by Parent to similarly situated employees of Parent; provided,
that with respect to Continuing Employees who are subject to employment and/or change in control
agreements that have not been superseded by agreements with Parent (the “Employment
Agreements”), the Surviving Corporation shall expressly assume such Employment Agreements and
fulfill all obligations thereunder.
(b) The Surviving Corporation shall use reasonable best efforts to (i) waive any applicable
pre-existing condition exclusions and waiting periods with respect to participation and coverage
requirements in any replacement or successor welfare benefit plan of the Surviving Corporation that
a Continuing Employee is eligible to participate in following the Effective Time to the extent such
exclusions or waiting periods were inapplicable to, or had been satisfied by, such Continuing
Employee immediately prior to the Effective Time under the relevant Plan in which such Continuing
Employee participated, (ii) provide each such Continuing Employee with credit for any co-payments
and deductible paid prior to the Effective Time (to the same extent such credit was given under the
analogous Plan prior to the Effective Time) in satisfying any applicable deductibles or
out-of-pocket requirements and (iii) to the extent that any Continuing Employee is allowed to
participate in any employee benefit plan of Parent, the Surviving Corporation or any of their
subsidiaries following the Effective Time, cause such plan to recognize the service of such
Continuing Employee with the Company and its Subsidiaries prior to the Effective Time for purposes
of eligibility to participate, vesting and vacation and severance benefit accrual (but not for
benefit accrual under any other plan) to the extent of such service.
(c) Parent and Company acknowledge and agree that the provisions contained in this Section 6.3
shall not interfere with the right of Parent or the Surviving Corporation to amend, modify or
terminate any Plan (subject to the provisions of Section 6.3(a) and (b) above) or to terminate the
employment of any Continuing Employee for any reason, subject to the terms of applicable Employment
Agreements.
(d) Prior to the Effective Time, the Company shall take all such steps as may be reasonably
necessary (to the extent permitted under applicable Law) to cause any dispositions of Company
Common Stock (including derivative securities with respect to Company Common Stock) resulting from
the Merger or the other transactions contemplated by this Agreement by each individual who is
subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the
Company to be exempt under Rule 16b-3 promulgated under the Exchange Act.
(a) As soon as reasonably practicable following a Change in Structure Event, each of the
Company and Parent shall prepare and file with the SEC the Proxy Statement in preliminary form and
Parent shall prepare and file with the SEC any amendments necessary to the Registration Statement
to reflect the Change in Structure Event. Each of the Company, Parent and Merger Sub shall use
their reasonable best efforts to respond as promptly as practicable to any comments of the SEC or
its staff with respect thereto. Each of Parent and Merger Sub shall use their reasonable best
efforts to have the Registration Statement as so amended declared effective under the Securities
Act as promptly as practicable following the filing thereof. The Company shall use its reasonable
best efforts to have the Proxy Statement cleared by the SEC as promptly as practicable following
the filing thereof.
48
Following a Change in Event Structure, as promptly as practicable after the
Registration Statement shall have become effective, the Company shall distribute the Proxy
Statement to its stockholders. The Company and Parent shall notify the other promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Registration Statement or Proxy Statement or for additional
information and shall supply the other with copies of all correspondence between the Company or any
of its Representatives, on the one hand, and the SEC or its staff, on the other hand, with respect
to the Proxy Statement and between Parent or any of its Representatives, on the one hand, and the
SEC or its staff, on the other hand, with respect to the Registration Statement. Parent and the
Company shall cooperate with each other and provide to each other all information necessary in
order to prepare the Registration Statement and the Proxy Statement, and shall provide promptly to
the other party any information such party may obtain that could necessitate amending any such
document. If at any time prior to the Effective Time there shall occur (i) any event with respect
to the Company or any of its Subsidiaries or with respect to other information supplied by the
Company for inclusion in the Registration Statement or the Proxy Statement or (ii) any event with
respect to Parent or any of its subsidiaries or with respect to information supplied by Parent for
inclusion in the Registration Statement or the Proxy Statement, in either case, which event is
required to be described in an amendment of, or a supplement to, the Registration Statement or the
Proxy Statement, such event shall be so described and such amendment or supplement shall be
promptly filed with the SEC and, as required by law, disseminated to the stockholders of the
Company. No filing of, or amendment or supplement to, the Registration Statement or the Proxy
Statement (other than Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K) will be made by Parent or the Company without providing the other party the
opportunity to review and comment thereon.
(b) As soon as reasonably practicable following the Acceptance Date, if the adoption of the
Agreement by the Company’s stockholders is required by applicable Law to consummate the Merger, the
Company shall prepare and file with the SEC an Information Statement pursuant to Regulation 14C
(the “Information Statement”) in preliminary form. The Company shall use its reasonable
best efforts to have the Information Statement cleared by the SEC as promptly as practicable
following the filing thereof and shall respond as promptly as practicable to any comments of the
SEC or its staff with respect thereto. As promptly as practicable after filing with the SEC, the
Company shall distribute the Information Statement to its stockholders. The Company shall notify
Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Information Statement or for additional
information and shall supply Parent with copies of all correspondence between the Company or any of
its Representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to
the Information Statement. Parent and Merger Sub shall cooperate with the Company and provide to
the Company all information necessary in order to prepare the Information Statement, and shall
provide promptly to the Company any information such party may obtain that could necessitate
amending the Information Statement. If at any time prior to the Effective Time there shall occur
(i) any event with respect to the Company or any of its Subsidiaries or with respect to other
information supplied by the
Company for inclusion in the Information Statement or (ii) any event with respect to Parent or
any of its Subsidiaries or with respect to other information supplied by Parent for inclusion in
the Information Statement, which event is required to be described in an amendment of, or a
supplement to, the Information Statement, such event shall be so described and such amendment or
supplement shall be promptly filed with the SEC and, as required by law, disseminated to the
stockholders of the Company.
(c) Each of Parent and the Company shall use reasonable best efforts to cause to be delivered
to the other a “comfort letter” of its independent auditors, dated the date two business days prior
to the date on which the Registration Statement becomes effective (whether or not after a Change in
Structure Event).
49
(a) The Company shall, as soon as practicable following the earlier of (i) the Acceptance Date
if the adoption of this Agreement by the Company’s stockholders is required by applicable Law in
order to consummate the Merger, and (ii) the date of any Change in Structure Event, duly call, give
notice of, convene and hold a meeting of its stockholders (the “Company Stockholders
Meeting”) for the purpose of seeking the Company Stockholder Approval, provided that if the
Offer shall have been consummated and the adoption of this Agreement by the Company’s stockholders
is required by applicable Law in order to consummate the Merger, the Company shall seek the Company
Stockholder Approval by written consent of the stockholders of the Company in lieu of at a meeting
of its stockholders if Parent so requests. Unless the Company Board of Directors or a committee
thereof has made a Change in Recommendation in accordance with Section 6.2(c) or 6.2(d), the
Company Board of Directors (and any committee thereof) shall recommend to its stockholders that
they approve and adopt this Agreement and shall include the Company Recommendation in the Proxy
Statement or Information Statement, as applicable. Unless the Company Recommendation shall have
been modified or withdrawn in accordance with Section 6.2(c) or 6.2(d), the Company shall use its
reasonable best efforts to solicit the Company Stockholder Approval. Notwithstanding anything to
the contrary in the preceding sentence and for avoidance of doubt, at any time prior to the Company
Stockholder Approval, the Company may adjourn or postpone the Company Stockholders Meeting to make
disclosure to the stockholders of the Company which the Company Board of Directors determines in
good faith is required by the fiduciary duties of the Company Board of Directors under applicable
Law following a Change in Recommendation in accordance with Section 6.2(c) or 6.2(d) or, prior to
the Acceptance Date, in response to an Acquisition Proposal that the Company Board of Directors (or
any committee thereof) determines in good faith after consultation with its outside counsel that
such Acquisition Proposal is reasonably likely to lead to a Superior Proposal and that failure to
take such action is or would reasonably likely be inconsistent with its fiduciary duties under
applicable Law; provided that (A) the Company make such disclosure as promptly as practicable and
(B) the Company hold the Company Stockholders Meeting as promptly as practicable after such
postponement or adjournment.
(b) Following the Acceptance Date if the approval of the stockholders of the Company is
required to consummate the Merger, Parent shall vote (or consent with respect to) or cause to be
voted (or a consent to be given with respect to) any shares of Company Stock beneficially owned by
it or any of its Subsidiaries or with respect to which it or any of its Subsidiaries has the power
(by agreement, proxy or otherwise) to cause to be voted (or to provide a consent) in favor of the
adoption and approval of this Agreement at the Company Stockholders Meeting and at all adjournments
or postponements thereof (or, if applicable, by any action of stockholders of the Company by
consent in lieu of a meeting).
Section 7.3
Access to Information; Confidentiality. Prior to the Effective Time,
except as otherwise prohibited by applicable Law, the terms of any Contract to which the Company or
any Subsidiary is a party (provided that the Company has used its commercially reasonable efforts
to obtain the consent of such other party to such Contract or establish a workaround to such
prohibition) or as would be reasonably expected to violate
the attorney-client privilege of the Company or any Subsidiary (it being agreed that the
parties shall use their reasonable best efforts to cause such information to be provided in a
manner that does not cause such violation), the Company shall, and shall cause the Company
Subsidiaries to, afford to Parent and its directors, employees, representatives, financial
advisors, lenders, legal counsel, accountants and other advisors and representatives, such access
to the books and records, financial, operating and other data, assets, properties, facilities,
plants, offices, auditors, authorized representatives, business and operations of the Company as is
reasonably requested by Parent in connection with the transactions contemplated hereby. Any
investigation and examination by Parent shall be conducted at reasonable times upon reasonable
advance notice and under reasonable circumstances so as to minimize disruption to or impairment of
the Company’s business. In order that Parent may have a full opportunity to make such
investigation and, provided such persons are bound by the Confidentiality Agreement, or have
otherwise agreed to be bound by the provisions of such agreement applicable to representatives, the
Company shall
50
furnish the representatives of Parent during such period with all such information
and copies of such documents concerning the affairs of the Company in the Company’s possession as
such representatives may reasonably request. The information and documents provided pursuant to
this Section 7.3 shall be kept confidential and otherwise held in accordance with the terms of the
Confidentiality Agreement, which shall remain in full force and effect notwithstanding the
execution and delivery or termination of this Agreement.
(a) As promptly as practicable after the date hereof, each of Parent, Merger Sub and the
Company shall use reasonable best efforts to make, and shall cause their affiliates or owners to
use reasonable best efforts to make, all filings, notices, petitions, statements, registrations,
submissions of information, applications or submissions of other documents required by any
Governmental Entity in connection with the transactions contemplated hereby, including, without
limitation: (i) the filings identified on the Company Disclosure Schedule that are required to be
made with a Governmental Entity, (ii) pre-merger notification reports to be filed with the United
States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States
Department of Justice as required by the HSR Act (which filing shall be made as promptly as
practicable), and (iii) any filings required under the Securities Act, the Exchange Act, and any
applicable state or provincial securities or “blue sky” laws, or any other applicable Laws or rules
and regulations of any Governmental Entity relating to, and material to the consummation of, the
Offer and the Merger. In the event the Company does not obtain a determination from the Delaware
Commissioner of Insurance that the Company is either directly or indirectly or through its
affiliates primarily engaged in a business other than the business of insurance (the
“Determination”), Parent shall, as promptly as practicable after the date the Company has
received notification from the Delaware Commissioner of Insurance that the Determination will not
be granted, file a Form A application with the Delaware Department of Insurance. Parent shall use
reasonable best efforts to obtain the approval of any Governmental Entity that requires a Form A
application in connection with the transactions contemplated hereby.
(b) Subject to restrictions required by Law, each of Parent, Merger Sub, and the Company shall
promptly supply, and shall cause their affiliates promptly to supply, the others with any
information which may be reasonably required in order to make any filings or applications pursuant
to Section 7.4(a).
(c) Subject to applicable confidentiality restrictions or restrictions required by Law, each
of Parent, Merger Sub and the Company shall notify the others promptly upon the receipt of: (i) any
comments or questions from any officials of any Governmental Entity in connection with any filings
made pursuant hereto, or pursuant to the Offer or the Merger and (ii) any request by any officials
of any Governmental Entity for amendments or supplements to any filings made pursuant to any
applicable Laws, or for answers to any questions, or for the production of any documents, relating
to an investigation of the Offer or the Merger by any Governmental Entity. Whenever any event
occurs that is required to be set forth in an amendment or supplement
to any filing made pursuant to Section 7.4(a), Parent, Merger Sub or the Company, as the case may be, shall
promptly inform the others of such occurrence and cooperate in filing with the applicable
Governmental Entity such amendment or supplement. Without limiting the generality of the
foregoing, each party shall provide to the other parties (or their respective advisors) upon
request copies of all correspondence between such party and any Governmental Entity relating to the
Offer or the Merger. The parties may, as they deem advisable and necessary, designate any
competitively sensitive materials provided to the other under this Section as “outside counsel
only.” Such materials and the information contained therein shall be given only to outside counsel
of the recipient and will not be disclosed by such outside counsel to employees, officers, or
directors of the recipient without the advance written consent of the party providing such
materials. In addition, to the extent reasonably practicable, all discussions, telephone calls,
and meetings with a Governmental Entity regarding the Offer or the Merger shall include
representatives of Parent, Merger Sub, and the Company. Subject to applicable Law, the parties
will consult and cooperate with each other in
51
connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, and proposals made or submitted to any Governmental
Entity regarding the Offer or the Merger by or on behalf of any party.
(d) Upon the terms and subject to the conditions set forth in this Agreement, each of the
Company, on the one hand, and Parent and Merger Sub, on the other hand, agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective the Offer and the Merger, including using its reasonable
best efforts to accomplish the following: (i) the causing of all of the Offer Conditions and all of
the conditions set forth in Section 8 to the other parties’ obligations to consummate the Offer and
the Merger to be satisfied, (ii) the obtaining of all necessary actions or non-actions, expirations
of all necessary waiting periods, waivers, consents, clearances, approvals, orders and
authorizations from Governmental Entities required by it and the making of all necessary
registrations, declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) required by it, (iii) the obtaining of all necessary consents,
approvals or waivers it is required to obtain from third parties; provided, however, that the
Company shall not agree to make any concessions, to modify its business or operations, to make any
payments or to waive any rights or to modify or amend any Contract in connection with obtaining
such consents, approvals or waivers without the prior written consent of Parent (not to be
unreasonably withheld, conditioned or delayed), (iv) the defending of any Actions, whether judicial
or administrative, challenging this Agreement or the consummation of the Merger to which it is a
party, including seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed, and (v) the execution or delivery of any additional
instruments necessary to consummate the Offer and the Merger and to carry out fully the purposes of
this Agreement. In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and directors of the
Surviving Corporation and Parent shall use all reasonable best efforts to take, or cause to be
taken, all such necessary actions. Without limiting the generality of the foregoing, the parties
shall request and shall use reasonable best efforts to obtain early termination of the waiting
period provided for in the HSR Act. Notwithstanding anything herein to the contrary, Parent shall
not be required to take or accept or to cause its affiliates to take or accept (and the Company
shall not agree to and shall cause the Company Subsidiaries not to agree to), any action or
condition that, when taken together with all other actions or conditions, would in Parent’s good
faith judgment result in a Company Material Adverse Effect or a Parent Material Adverse Effect. No
action taken by the Company, any Subsidiary or any of their Representatives in compliance with the
express terms of this Agreement, including without limitation Section 6.2, shall be deemed to be a
breach of this Section 7.4.
(a) From and after the earlier of the Acceptance Date or the Effective Time, Parent shall
cause the certificate of incorporation and bylaws of the Company and the Surviving Corporation to
contain provisions with respect to indemnification, advancement of expenses and exculpation not
less favorable than those
set forth in the certificate of incorporation and bylaws of the Company as of the date hereof,
which provisions shall not be, for a period of six (6) years from the Effective Time (or until such
later date as any claims then still pending shall have been resolved) amended, repealed or
otherwise modified in any manner that would adversely affect the rights thereunder of individuals
who at or prior to the Effective Time were directors or officers of the Company or any of its
Subsidiaries. Until the six (6) year anniversary of the Effective Time (or until such later date
as any claims then still pending shall have been resolved), Parent shall, and shall cause the
Company and the Surviving Corporation to, honor and fulfill in all respects the obligations of (i)
the Company and the Surviving Corporation under their respective certificates of incorporation and
bylaws and (ii) the Company pursuant to indemnification agreements with the Company’s directors,
officers, employees or agents existing at or prior to the Effective Time to the fullest extent
permitted by applicable Law.
52
(b) The Company shall, to the fullest extent permitted under applicable Law, indemnify, defend
and hold harmless, and, from and after the earlier of the Acceptance Date or the Effective Time,
the Company and the Surviving Corporation shall, and Parent shall cause the Company or the
Surviving Corporation (as applicable) to, indemnify, defend and hold harmless, to the fullest
extent permitted under applicable Law, each present and former director or officer of the Company
or any of its Subsidiaries (collectively, the “Indemnified Parties”) against any costs or
expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any Action, investigation or inquiry, whether civil,
criminal, administrative or investigative, arising out of or pertaining to (x) the fact that the
Indemnified Party is or was an officer, director, employee, agent or other fiduciary of the Company
or any Subsidiary of the Company or (y) any act or omission by an Indemnified Party in the
Indemnified Party’s capacity as a director, officer, employee or agent of the Company or any of its
Subsidiaries or taken at the request of the Company or any of its Subsidiaries (including in
connection with serving at the request of the Company or any of its Subsidiaries as a director,
officer, employee, agent, trustee or fiduciary of another Person (including any employee benefit
plan)) or (z) this Agreement or the transactions contemplated by this Agreement, whether in any
case asserted or arising before or after the Closing Date. Without limiting the generality of the
foregoing, if any Indemnified Party becomes involved in any actual or threatened Action,
investigation or inquiry with respect to which such Indemnified Party is seeking indemnification
pursuant to this Section 7.5, the Company or the Surviving Corporation (as applicable) shall, and
Parent shall cause the Company or the Surviving Corporation (as applicable) to, to the fullest
extent permitted by Law, promptly (and in any event no later than twenty (20) days following any
request therefor) advance to such Indemnified Party his or her reasonable legal expenses (including
the reasonable cost of any investigation and preparation incurred in connection therewith);
provided that any person to whom expenses are advanced provides an undertaking, to the extent then
required by the DGCL, to repay such advances if it is finally judicially determined that such
person is not entitled to indemnification.
(c) Parent shall be entitled (but shall not be obligated) to control the defense of any such
Action, investigation or inquiry with counsel of its own choosing reasonably acceptable to the
Indemnified Party. Parent, the Company and the Surviving Corporation shall not be liable for any
settlement effected without Parent’s written consent (not to be unreasonably withheld, conditioned
or delayed). Parent, the Company and the Surviving Corporation shall cooperate with an Indemnified
Party in the defense of any matter for which such Indemnified Party is seeking indemnification
hereunder. The Indemnified Party shall cooperate with Parent, the Company and the Surviving
Corporation in the defense of any matter for which such Indemnified Party is seeking
indemnification hereunder. Neither Parent nor the Surviving Corporation shall settle any such
Action, investigation or inquiry without the prior written consent of the Indemnified Party (not to
be unreasonably withheld, conditioned or delayed) unless such settlement (i) includes an
unconditional release of the Indemnified Party and (ii) includes only the payment of money.
(d) Parent shall provide and maintain in effect, or shall cause the Surviving Corporation to
provide and maintain in effect, for an aggregate period of not less than six (6) years from the
Effective Time, for the benefit of the current and former directors and officers of the Company and
its Subsidiaries an insurance and indemnification policy that provides coverage for acts or
omissions occurring at or prior to the Effective Time (including, without limitation, for acts or
omissions occurring in connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby) (the “D&O Insurance”) that is at least as favorable (with
respect to coverage, amounts, limits, deductibles and conditions) as the Company’s existing policy;
provided, however, that Parent and the Surviving Corporation shall not be required to pay an annual
premium for the D&O Insurance in excess of 250% of the annual premium currently paid by the Company
for such coverage (the “Company’s Current Premium”). If such premiums for such insurance
would at any time exceed 250% of the Company’s Current Premium, then Parent shall maintain the
maximum amount of coverage under a policy having the same deductible as is available for such 250%
of the Company’s Current Premium. The Company represents
53
and warrants to Parent that the Company’s
Current Premium is as set forth on Section 7.5(d) or the Company Disclosure Schedule.
Notwithstanding the foregoing, Parent shall use its reasonable best efforts to cause coverage to be
extended under the Company’s D&O Insurance by obtaining a six-year “tail” policy, provided that the
cost of such tail coverage does not exceed the amount as set forth on Section 7.5(d) of the Company
Disclosure Schedule. If Parent is unable to obtain such tail policy, Parent shall provide the
Company with notice thereof at least five business days prior to the earlier of the Acceptance Date
and the Closing. If the Company receives such notice from Parent, the Company may purchase such
tail policy, provided that the cost of such tail coverage does not exceed the amount as set forth
on Section 7.5(d) of the Company Disclosure Schedule. Such tail policy, whether purchased by Parent
or the Company, shall satisfy Parent’s and the Surviving Corporation’s obligations under this
Section 7.5(d). Nothing in this Agreement is intended to, shall be construed to or shall release,
waive or impair any rights to directors’ and officers’ insurance claims under any policy that is or
has been in existence with respect to the Company or any of its Subsidiaries or any of their
officers or directors, it being understood and agreed that the indemnification provided for in this
Section 7.5 is not in substitution for any such claims under such policies.
(e) This Section 7.5 shall survive the consummation of the Merger at the Effective Time, is
intended to benefit and provide third party rights to the Indemnified Parties, shall be binding on
Parent and the Surviving Corporation and their successors and assigns and shall be enforceable by
the Indemnified Parties and their respective heirs and representatives. In the event Parent or 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 all or substantially all of its properties and
assets to any person, then, and in each such case, proper provision shall be made so that the
successors and assigns of Parent or the Surviving Corporation, as the case may be, shall expressly
assume and succeed to the obligations set forth in this Section 7.5.
(f) If any Indemnified Party makes any claim for indemnification or advancement of expenses
under this Section 7.5 that is denied by Parent and/or the Company or the Surviving Corporation,
and a court of competent jurisdiction determines that the Indemnified Party is entitled to such
indemnification or advancement of expenses, then Parent, the Company or the Surviving Corporation
shall pay the Indemnified Party’s costs and expenses, including reasonable legal fees and expenses,
incurred by the Indemnified Party in connection with pursuing its claims.
Section 7.6
Conduct of Parent’s Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement or the Closing
Date, Parent and each Parent Subsidiary shall, except as required by Law, as expressly contemplated
by this Agreement, as set forth on Section 7.6 of the Parent Disclosure Schedule or to the extent
that the Company shall otherwise consent in writing (not to be unreasonably withheld, conditioned
or delayed), conduct its business in all material respects in the
ordinary course of its business as currently conducted except where the failure to do so would
not have a Parent Material Adverse Effect or materially delay the Closing:
(a)
Affirmative Covenants Pending Closing. Parent shall and shall cause its
Subsidiaries to, to the extent consistent with Section 7.6 above and not otherwise prohibited by
this Agreement, use reasonable best efforts to (A) preserve the business of Parent and its
Subsidiaries (B) advertise, promote and market Parent’s products, (C) keep Parent’s and its
Subsidiaries’ material properties substantially intact, preserve their goodwill and business, and
maintain all physical properties in good repair and condition, ordinary wear and tear excepted, (D)
perform and comply in all material respects with the terms of the Parent Material Contracts, and
(E) maintain, and comply in all material respects with, all material Permits.
(b)
Negative Covenants Pending Closing. Without the prior written consent of the
Company (not to be unreasonably withheld, conditioned or delayed), during the period from the date
hereof and continuing
54
until the earlier of the termination of this Agreement or the Closing Date,
Parent shall not and shall cause the Parent Subsidiaries not to, in each case, except as required
by Law or as expressly contemplated by this Agreement or as set forth on Section 7.6 of the Parent
Disclosure Schedule:
(i)
Capital Stock. Split, combine or reclassify any of its capital stock,
sell or otherwise issue any shares of capital stock or any security convertible into
shares of its capital stock or declare, set aside, make or pay any dividend or other
distribution with respect to any shares of its capital stock or acquire, redeem or
otherwise repurchase any shares of its capital stock; provided, however, that the
foregoing clause shall not restrict: (1) the grant of options to purchase Parent Common
Stock after the date hereof, (2) the issuance of shares of Parent Common Stock upon the
exercise of options to purchase Parent Common Stock, including options issued after the
date hereof, (3) the grant of restricted shares of Parent Common Stock after the date
hereof, (4) the repurchase or cancellation of restricted or other shares of Parent
Common Stock in accordance with the terms of the applicable award agreements or similar
arrangements to satisfy withholding obligations upon the vesting of restricted shares of
Parent Common Stock or the exercise of options to purchase Parent Common Stock, (5) the
issuance of shares of Parent Common Stock in accordance with the terms of Parent’s
Employee Stock Purchase Plan, or (6) the acceptance of shares of Parent Common Stock as
payment of the exercise price of options to purchase Parent Common Stock or for
withholding taxes incurred in connection with the exercise of options to purchase Parent
Common Stock in accordance with the terms of the applicable award agreements;
(ii)
Certificate of Incorporation and By Laws. Except as required by Law
or the rules and regulations of the Nasdaq or Toronto Stock Exchange, amend, or
otherwise alter or modify in any respect, the certificate of incorporation or bylaws of
Parent in a manner that adversely affects the rights of holders of Parent Company Stock;
(iii)
Extraordinary Transactions. Adopt a plan of complete or partial
liquidation, dissolution, consolidation, or recapitalization of Parent;
(iv)
Obligations. Resolve to, agree to or otherwise obligate itself to do
any of the foregoing.
Section 7.7
Public Disclosure. The initial press release concerning this Agreement or
the transactions contemplated hereby shall be a joint press release and, thereafter, so long as
this Agreement is in effect, neither Parent, Merger Sub nor the Company will disseminate any press
release or other public announcement concerning this Agreement or the transactions contemplated by
this Agreement to any third party, except as may be
required by Law or by any listing agreement with the Nasdaq or the Toronto Stock Exchange,
without the prior consent of each of the other parties hereto, which consent shall not be
unreasonably withheld, conditioned or delayed;
provided, however, that, except as provided in
Section 6.2, Parent’s consent will not be required, and the Company need not consult with Parent,
in connection with any press release or public statement to be issued or made with respect to any
Acquisition Proposal or with respect to any Change in Recommendation;
provided, further, that the
Company’s consent will not be required, and Parent need not consult with the Company, in connection
with any press release or public statement to be issued or made with respect to any Acquisition
Proposal or with respect to any Change in Recommendation. Notwithstanding the foregoing, without
prior consent of Parent, the Company (a) may communicate with employees, customers, vendors and
suppliers in a manner consistent with its past practice in compliance with applicable Law (provided
that, with respect to communications concerning this Agreement or the transactions contemplated
hereby, such communications shall be consistent with the terms of this Agreement and information
previously supplied by Parent) and (b) may disseminate the information included in a press release
or other document previously approved for external distribution by Parent.
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Section 7.8
Registration Rights Agreement and other Agreements. The Company shall take all
actions necessary to cause (a) the Registration Rights Agreement, dated as of March 19, 2004, by
and among the Company, New Mountain Partners, L.P., New Mountain Affiliated Partners, L.P. and such
other persons who become signatories thereto as provided therein and (b) (i) any obligation owed by
the Company or any Company Subsidiary to New Mountain Partners, L.P., New Mountain Affiliated
Partners, L.P. or any of their Affiliates and any agreement to which the Company or any Company
Subsidiary, on the one hand, and New Mountain Partners, L.P., New Mountain Affiliated Partners,
L.P. or any of their Affiliates, on the other hand, is a party (other than the Stockholder
Agreements and this Agreement) and (ii) any of the agreements listed in Section 7.8 of the Parent
Disclosure Schedule and any obligations thereunder to be terminated (in each case without any
payment, obligation or liability), effective as of and contingent upon the earlier of the
Acceptance Date and the Closing, such that such agreement shall be of no further force or effect
immediately following the earlier of the Acceptance Date and the Closing (excluding any
compensatory and indemnification arrangements with individuals who are officers or directors of the
Company described in the Company Disclosure Schedules).
Section 7.9
Financing (a) Each of Parent, US Corp. and Merger Sub shall use their reasonable best
efforts to take, or cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or advisable to arrange and obtain the Debt Financing on the terms and conditions
described in the Debt Commitment Letter (provided that Parent , US Corp. and Merger Sub may replace
or amend the Debt Commitment Letter to add lenders, lead arrangers, bookrunners, syndication agents
or similar entities who had not executed the Debt Commitment Letter as of the date hereof, or
otherwise so long as the terms would not (A) expand upon the conditions precedent to the Debt
Financing as set forth in the Debt Commitment Letter as of the date hereof, (B) delay the
Acceptance Date or the Closing or (C) reduce the aggregate amount available under the Debt
Commitment Letter below an amount that when combined with Parent’s other cash and/or cash
equivalents is sufficient to pay the Transaction Amount on the earlier of the Acceptance Date or
the Closing (or include any term or condition not in the Debt Commitment Letter which would have
the effect of reducing the aggregate amount under the Debt Commitment Letter below an amount that
when combined with Parent’s other cash and/or cash equivalents is sufficient to pay the Transaction
Amount on the earlier of the Acceptance Date or the Closing), including using reasonable best
efforts to (i) maintain in effect the Debt Commitment Letter, (ii) negotiate and cause US Corp. to
enter into definitive agreements with respect thereto on terms and conditions contemplated by the
Debt Commitment Letter, (iii) satisfy on a timely basis all conditions applicable to Parent, US
Corp. and Merger Sub to obtain the Debt Financing and to comply with their
obligations thereunder, and (iv) consummate the Debt Financing at or prior to the earlier of
the Acceptance Date or the Closing. If any portion of the Debt Financing becomes unavailable on
the terms and conditions contemplated in the Debt Commitment Letter, Parent, US Corp. and Merger
Sub shall use their reasonable best efforts to arrange and obtain alternative financing from
alternative sources in an amount sufficient to consummate the transactions contemplated by this
Agreement on terms not materially less favorable to Parent, US Corp. and Merger Sub (as determined,
in the good faith judgment of Parent, US Corp. and Merger Sub), than those in the Debt Commitment
Letter as promptly as practicable following the occurrence of such event.
(b) Prior to the Closing, the Company shall provide to Parent, US Corp. and Merger Sub, and
shall cause its Subsidiaries to, and shall cause the respective officers, employees and advisors,
including legal and accounting, of the Company and its Subsidiaries to, provide to Parent and
Merger Sub cooperation as is customary and may be reasonably requested by Parent in connection with
the arrangement of the Debt Financing (provided that such requested cooperation does not
unreasonably interfere with the ongoing operations of the Company and the Company Subsidiaries),
including (i) participating in meetings and marketing presentations at times reasonably acceptable
to the Company, (ii) furnishing customary information (including financial statements) for rating
agency presentations, offering documents, private placement memoranda, bank information memoranda
and similar documents reasonably required in connection with the Debt Financing (provided such
presentations,
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memoranda or other documents need not be prepared or issued by the Company or any
Company Subsidiaries), (iii) cooperating in the preparation and execution and delivery of any
pledge and security documents, currency or interest hedging arrangements or other definitive
financing documents or other certificates, legal opinions and documents as may be reasonably
requested by Parent or otherwise facilitating the pledging of collateral as may be reasonably
requested by Parent; provided that any obligations contained in such documents shall be effective
no earlier than as of the Effective Time, (iv) furnishing Parent, US Corp. and Merger Sub and their
Debt Financing sources as promptly as practicable with financial and other pertinent information
regarding the Company and its Subsidiaries as may be reasonably requested by Parent, (v) obtaining
customary accountants’ comfort letters, accountants’ consents, legal opinions, surveys and title
insurance as reasonably requested by Parent and (vi) taking all actions reasonably necessary to (A)
permit the lender under the Debt Commitment Letter to evaluate the Company’s and its Subsidiaries’
current assets, cash management and accounting systems, policies and procedures relating thereto
for the purpose of establishing collateral arrangements; provided, however, that such access and
information shall only be provided to the extent that in the reasonable judgment of the Company
such access or the provision of such information would not violate applicable Law and (B) establish
bank and other accounts and blocked account agreements and lock box arrangements in connection with
the foregoing, provided that such accounts, agreements and arrangements will not become active or
take effect until the Effective Time, and, shall be at the expense of Parent, (vii) executing a
customary representation letter in respect of information provided by the Company or the Company
Subsidiaries in writing expressly for use in connection with the Debt Financing or the syndication
thereof, for the benefit of the arrangers of the Debt Financing and lenders and proposed lenders to
Parent, US Corp. and Merger Sub in the Debt Financing; provided, that Parent, US Corp. and Merger
Sub may not place, and hereby disclaim, any reliance by either of them upon such a representation
letter. Notwithstanding the foregoing, none of the Company or any of its Subsidiaries shall be
required to pay any commitment or other similar fee or make any other payment other than reasonable
out-of-pocket costs or incur any other liability prior to the Effective Time or provide or agree to
provide any indemnity in connection with the Debt Financing or any of the foregoing, unless such
liability or indemnity is effective only if and when the Merger is consummated. If this Agreement
is terminated prior to the Effective Time, Parent shall, promptly upon request by the Company,
reimburse the Company for all documented reasonable out-of-pocket costs incurred by the Company or
the Company Subsidiaries in connection with such cooperation, provided that the Company furnish
Parent with a notice prior to incurring costs which exceed $100,000 in the aggregate. The Company
and its counsel shall be given a reasonable opportunity to review and comment on any materials that
are to be presented during any road shows conducted in connection with the Debt Financing to the
extent such materials include or are derived from information provided by the Company
or the Company Subsidiaries for use in connection with the Debt Financing or the syndication
thereof, and Parent shall give due consideration to all reasonable additions, deletions or changes
suggested thereto by the Company and its counsel. If this Agreement is terminated prior to the
Effective Time, Parent, US Corp. and Merger Sub shall, on a joint and several basis, indemnify and
hold harmless the Company, the Company Subsidiaries and their respective Representatives from and
against any and all out of pocket losses and expenses suffered or incurred by them in connection
with third-party claims arising out of or resulting from the arrangement of the Debt Financing or
any alternative financing and any information utilized in connection therewith except for any
matters arising out of or resulting from the gross negligence or willful misconduct of any such
person. The Company hereby consents to the use of its and its Subsidiaries’ logos in connection
with the Debt Financing; provided, that such logos are used solely in a manner that is not intended
to or reasonably likely to harm or disparage the Company or any of its Subsidiaries or the
reputation or goodwill of the Company or any of its Subsidiaries.
Section 7.10
Stock Exchange Listing. Parent shall use its reasonable best efforts to
cause the shares of Parent Common Stock to be issued in connection with the Offer and the Merger to
be approved for listing upon the Effective Time on Nasdaq and the Toronto Stock Exchange as
promptly as practicable after the date hereof, but in no event later than the earlier of the
Acceptance Date or the Closing Date.
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Section 7.11
Takeover Laws. The Company and the Company Board of Directors shall (1)
use reasonable best efforts to ensure that no Takeover Law is or becomes applicable to this
Agreement, the Stockholder Agreements, the Offer, the Merger or any of the other transactions
contemplated by this Agreement or the Stockholder Agreements and (2) if any Takeover Law becomes
applicable to this Agreement, the Stockholder Agreements, the Offer, the Merger or any of the other
transactions contemplated by this Agreement or the Stockholder Agreements, use reasonable best
efforts to ensure that the Offer, the Merger and the other transactions contemplated by this
Agreement and the Stockholder Agreements may be consummated as promptly as practicable on the terms
contemplated by this Agreement or the Stockholder Agreements, as applicable, and otherwise to
minimize the effect of such Law on this Agreement, the Stockholder Agreements, the Offer, the
Merger and the other transactions contemplated by this Agreement and the Stockholder Agreements.
Each party shall give prompt notice to the other parties of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would reasonably be expected
to cause any representation or warranty made by such party in this Agreement to be untrue or
inaccurate in any material respect at the Closing, or would reasonably be expected to cause any
condition set forth in Section 8 or Annex B not to be satisfied in any material respect at the
Closing, and (ii) any failure of such party or any of its representatives to comply with or satisfy
in all material respects any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided however that no such notification shall affect the representations,
warranties, covenants or agreement of the parties (or the remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
Immediately following the public announcement of the execution and delivery of this Agreement,
the Company shall file the Certificate of Amendment with the Secretary of State of the State of
Delaware with an effective date and time of the time of filing. The Company shall not amend,
modify or terminate the Certificate of Amendment.
(a) If required by Law to be obtained before the Merger can be consummated, the Company
Stockholder Approval shall have been obtained.
(b) There shall be no order or preliminary or permanent injunction of a court of competent
jurisdiction, including any temporary restraining order, in effect, and no Governmental Entity
shall have enacted, issued, promulgated, enforced or entered any statute, law, ordinance, rule,
regulation, judgment or decree, preventing, prohibiting or making illegal the consummation of the
Merger or the other transactions contemplated by this Agreement (collectively, an “Order”).
No Governmental Entity shall have instituted any proceeding that is pending seeking any such
Order.
(c) The shares of Parent Common Stock issuable in connection with the Merger shall have been
authorized for listing on Nasdaq and the Toronto Stock Exchange, subject to official notice of
issuance.
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(d) The Registration Statement shall have become effective in accordance with the provisions
of the Securities Act and all applicable blue sky securities filings, permits or approvals shall
have been made or received in accordance with applicable Laws. No stop order suspending the
effectiveness of the Registration Statement shall have been issued by the SEC or any state
securities administrator and no proceedings for that purpose shall be pending, or to the knowledge
of Parent or the Company, threatened by the SEC or any state securities administrator.
(e) The waiting period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated. All other notices, reports and
other filings required to be made prior to the Effective Time by the Company or Parent or any of
their respective Subsidiaries with, and all other consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by the Company or Parent or any
of their respective Subsidiaries from, any Governmental Entity in connection with the execution and
delivery of this Agreement and the consummation of the Merger and the other transactions
contemplated hereby by the Company and Parent shall have been made or obtained, as the case may be,
except for any failure which would not, individually or in the aggregate, render the Merger or any
of the transactions contemplated hereby illegal or result in a Company Material Adverse Effect or
Parent Material Adverse Effect. Either (i) the Company shall have secured a determination from the
Delaware Commissioner of Insurance that the Company is primarily engaged in business other than the
business of insurance or (ii) the acquisition of control of NMHC Group Solutions, Inc. in
connection with the transactions contemplated hereby shall have been approved by the Delaware
Department of Insurance. Parent shall have received the approvals of any Governmental Entity that
requires a Form A application in connection with the transactions contemplated hereby. Parent
and/or the Company shall have filed a “pre acquisition notification” with the Delaware Commissioner
of Insurance and the applicable waiting period shall have expired or been terminated.
(f) If the transactions contemplated by this Agreement are being effected by means of the
Offer followed by the Second Step Merger, Merger Sub shall have accepted for payment shares of
Company Common Stock pursuant to the Offer.
If the transactions contemplated by this Agreement are being effected by means of the Offer
followed by the Second Step Merger, the conditions in the second sentence of Section 8.1(b),
Section 8.1(c), the first sentence of Section 8.1(d) and all of Section 8.1(e) shall not be conditions to the obligation of the
parties to effect the Second Step Merger.
(a) The representations and warranties of Parent, US Corp. and Merger Sub set forth in
Sections 5.2, 5.3, 5.15(c) and 5.16 shall be true and correct in all material respects as of the
date of this Agreement and as of the Effective Time as though made on and as of the Effective Time
(except to the extent any such representation and warranty expressly speaks as of a specified date
which shall be true and correct in all material respects as of such specified date). The
representations and warranties of Parent set forth in this Agreement, other than those listed in
the preceding sentence, shall be true and correct as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time (except to the extent any such
representation and warranty expressly speaks as of a specified date which shall be true and correct
in all respects as of such specified date) unless the inaccuracies (without giving effect to any
knowledge, materiality or Parent Material Adverse Effect qualifications or exceptions contained
therein) in respect of such representations and warranties, taking all the
59
inaccuracies in respect
of all such representations and warranties together in their entirety, have not had and would not
result in a Parent Material Adverse Effect. The Company shall have received a certificate dated
the Closing Date and signed on behalf of Parent by a duly authorized officer of Parent to such
effect.
(b) Each of Parent, US Corp. and Merger Sub shall have performed in all material respects all
obligations and complied in all material respects with all agreements and covenants of it to be
performed and complied with by it under this Agreement. The Company shall have received a
certificate dated the Closing Date and signed on behalf of Parent by a duly authorized officer of
Parent to such effect.
(c) Since the date hereof, there shall not have been any events, circumstances, development,
changes and effects that, individually or in the aggregate with other such events, circumstances,
developments, changes and effects, has had, or would have, a Parent Material Adverse Effect.
Section 8.3 Conditions to the Obligations of Parent, US Corp. and Merger Sub to Effect the
One Step Merger. The obligation of Parent, US Corp. and Merger Sub to effect the One Step
Merger shall be subject to the fulfillment at or prior to the Effective Time of the following
additional conditions:
(a) The representations and warranties of the Company set forth in Sections 4.2, 4.3, 4.4
(with respect to significant Company Subsidiaries, as determined under Rule 1-02(w) of Regulation
S-X), 4.18 and 4.22 shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time as though made on and as of the Effective Time (except to
the extent any such representation and warranty expressly speaks as of a specified date which shall
be true and correct in all material respects as of such specified date). The representations and
warranties of the Company set forth in this Agreement, other than those listed in the preceding
sentence, shall be true and correct as of the date of this Agreement and as of the Effective Time
as though made on and as of the Effective Time (except to the extent any such representation and
warranty expressly speaks as of a specified date which shall be true and correct in all respects as
of such specified date) unless the inaccuracies (without giving effect to any knowledge,
materiality or Company Material Adverse Effect qualifications or exceptions contained therein) in
respect of such representations and warranties, taking all the inaccuracies in respect of all such
representations and warranties together in their entirety, have not had and would not result in a
Company Material Adverse Effect or, after giving effect to the Merger, a Parent Material Adverse
Effect. Parent shall have
received a certificate dated the Closing Date and signed on behalf of the Company by a duly
authorized officer of the Company to such effect.
(b) The Company shall have performed in all material respects all obligations and complied in
all material respects with all agreements and covenants of the Company to be performed and complied
with by it under this Agreement. Parent shall have received a certificate dated the Closing Date
and signed on behalf of the Company by a duly authorized officer of the Company to such effect.
(c) Since the date hereof, there shall not have been any events, circumstances, developments,
changes and effects that, individually or in the aggregate with other such events, circumstances,
developments, changes and effects, has had, or would have, a Company Material Adverse Effect.
(d) Parent shall have received the Debt Financing on terms consistent with the Debt Commitment
Letter or if the Debt Financing contemplated by the Debt Commitment Letter is unavailable, Parent
shall have received the alternative financing described in Section 7.9(a).
(e) The total number of Dissenting Shares shall not exceed ten percent (10%) of the issued and
outstanding shares of Company Stock as of the Effective Time, and Parent shall have received a certificate
60
dated the Closing Date and signed on behalf of the Company by a duly authorized officer
of the Company to such effect.
Section 8.4
Frustration of Closing Conditions. None of the Company, Parent, or Merger
Sub may rely on the failure of any condition set forth in this Section 8 to be satisfied if such
failure was caused by such party’s breach of this Agreement.
This Agreement may be terminated and the transactions contemplated hereby may be abandoned at
any time:
(a) by mutual written consent of Parent and the Company authorized by Parent’s Board of
Directors and by the Company Board of Directors (and, if such termination is after the Acceptance
Date, by the Continuing Directors);
(b) by either Parent or the Company, if shares of Company Common Stock have not been accepted
for payment pursuant to the Offer, or, if the transactions contemplated hereby are being effected
as a One Step Merger, if the Merger has not occurred by August 1, 2008 (the “End Date”);
provided, however, that the right to terminate this Agreement pursuant to this Section 9.1(b) shall
not be available to any party whose action or failure to fulfill any obligation under this
Agreement has been the principal cause of, or resulted in, the failure of shares of Company Common
Stock to have been accepted for payment pursuant to the Offer or the Merger to occur (as
applicable) on or before the End Date;
(c) by either Parent or the Company, if a Governmental Entity shall have issued a final,
non-appealable Order; provided, however, that the right to terminate this Agreement pursuant to
this Section 9.1(c) shall not be available to any party who has not used its reasonable best
efforts to cause such Order to be lifted or otherwise taken such action as is required to comply
with Section 7.4;
(d) by Parent prior to the Relevant Date, if (i) the Company Board of Directors shall not have
included the Company Recommendation in the Schedule 14D-9, in the Prospectus and/or in the Proxy
Statement or a Change in Recommendation shall have occurred, (ii) the Company Board of Directors
(or any committee thereof) shall have approved, recommended, or submitted to its stockholders any
Acquisition Proposal or the Company or any of its Subsidiaries or Affiliates shall have entered
into any agreement to effect an Acquisition Proposal, (iii) the Company Board of Directors (or any
committee thereof) shall have publicly proposed to do any of the foregoing in clauses (i) or (ii),
or (iv) a tender offer or exchange offer for 20% or more of the outstanding shares of capital stock
of the Company is commenced, and the Company Board of Directors fails to recommend against
acceptance of such tender offer or exchange offer by its shareholders within 10 business days after
such commencement (including by taking no position with respect to the acceptance of such tender
offer or exchange offer by its shareholders) (it being understood and agreed that any “stop, look
and listen” disclosure prior to the end of such period shall not be a failure to recommend against
such tender offer or exchange offer);
(e) by the Company,
(i) prior to the Closing Date, if the transactions contemplated hereby are being
effected as a One Step Merger, if there have been any breaches of, or inaccuracies in,
any representations, warranties, covenants or agreements of Parent, US Corp. or Merger
Sub set forth in
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this Agreement, or any such representation and warranty shall have
become untrue after the date of this Agreement, in each case such that Section 8.2(a) or
Section 8.2(b) would not be satisfied and such breach or condition is not curable or, if
curable, is not cured within thirty (30) days after written notice thereof is given by
the Company to Parent; provided that the Company is not then in breach of any
representation, warranty, covenant or agreement contained in this Agreement that would
cause any of the conditions in Section 8.1, 8.3(a) or 8.3(b) not to be satisfied; or
(ii) prior to the Acceptance Date, if the transactions contemplated hereby are
being effected by means of the Offer followed by the Second Step Merger, (A) if (1) the
representations and warranties of Parent, US Corp. or Merger Sub set forth in Sections
5.2, 5.3, 5.15(c) and 5.16 shall not be true and correct in all material respects as of
the date of this Agreement and as of the Acceptance Date as though made on and as of the
Acceptance Date (or, to the extent any such representation and warranty expressly speaks
as of a specified date, such representation and warranty shall not be true and correct
in all material respects as of such specified date), or (2) if the representations and
warranties of Parent set forth in this Agreement, other than those listed in clause (1)
above, shall not be true and correct as of the date of this Agreement and as of the
Acceptance Date as though made on and as of the Acceptance Date (or, to the extent any
such representation and warranty expressly speaks as of a specified date, such
representation and warranty shall not be true and correct in all respects as of such
specified date) unless the inaccuracies (without giving effect to any knowledge,
materiality or Parent Material Adverse Effect qualifications or exceptions contained
therein) in respect of such representations and warranties, taking all the inaccuracies
in respect of all such representations and warranties together in their entirety, have
not had and would not result in a Parent Material Adverse Effect or (B) if each of
Parent and Merger Sub shall not have performed in all material respects all obligations
and complied in all material respects with all agreements and covenants of it to be
performed and complied with by it under this Agreement, and, in the case of each of
clause (A) and (B), such breach or condition is not curable or, if curable, is not cured
within thirty (30) days after written notice thereof is given by the Company to Parent;
provided that, in the case of each of clause (A) and (B), the Company is not then in
breach of any representation, warranty, covenant or agreement contained in this
Agreement that would cause any of the conditions in Annex B not to be satisfied;
(f) by the Company prior to the Relevant Date in order to enter a transaction that is a
Superior Proposal in accordance with, and subject to the terms and conditions of Section 6.2(c);
(g) by Parent,
(i) prior to the Closing Date, if the transactions contemplated hereby are being
effected as a One Step Merger, if there have been any breaches of, or inaccuracies in,
any representations, warranties, covenants or agreements of the Company set forth in
this Agreement, or any such representation and warranty shall have become untrue after
the date of this Agreement, in each case such that Section 8.3(a) or Section 8.3(b)
would not be satisfied and such breach or condition is not curable or, if curable, is
not cured within thirty (30) days after written notice thereof is given by the Parent to
the Company; provided that Parent, US Corp. and Merger Sub are not then in breach of any
representation, warranty, covenant or agreement contained in this Agreement that would
cause any of the conditions in Section 8.1, 8.2(a) or 8.2(b) not to be satisfied; or
(ii) prior to the Acceptance Date, if the transactions contemplated hereby are
being effected by means of the Offer followed by the Second Step Merger, if there have
been any breaches of, or inaccuracies in, any representations, warranties, covenants or
agreements of the Company set forth in this Agreement, or any such representation and
warranty shall have become untrue after the
62
date of this Agreement, in each case such
that clause (a) or (b) of Annex B would not be satisfied and such breach or condition is
not curable or, if curable, is not cured within thirty (30) days after written notice
thereof is given by the Parent to the Company; provided that Parent, US Corp. and Merger
Sub are not then in breach of any representation, warranty, covenant or agreement
contained in this Agreement that would cause any of the conditions in Section 8.1,
8.2(a) or 8.2(b) not to be satisfied; or
(h) by either Parent or the Company if, at the Company Stockholders Meeting (including any
adjournment or postponement thereof), the Company Stockholder Approval shall not have been
obtained.
(a) Any termination of this Agreement under Section 9.1 hereof will be effective immediately
upon the delivery of a valid written notice of the terminating party to the other parties hereto
and, if then due, payment of the termination fee required pursuant to this Section 9.2. In the
event of termination of this Agreement as provided in Section 9.1 hereof, this Agreement shall
forthwith become null and void and be of no further force or effect, except for the last sentence
of Section 7.3, Section 7.7, Section 7.9(b), Xxxxxxx 0, Xxxxxxx 00, the Confidentiality Agreement,
dated as of January 23, 2008, between the Company and Parent (the “Parent Confidentiality
Agreement”) and the Confidentiality Agreement, each of which shall remain in full force and
effect in accordance with the terms thereof and survive any termination of this Agreement,
provided, however, that, nothing herein shall relieve a party from liability for damages for any
willful breach hereof occurring prior to such termination. If a party brings a claim after the
termination of this Agreement for a willful breach hereof occurring prior to such termination, the
party that is determined by a final and non appealable order to have lost such claim shall pay the
reasonable legal fees and expenses of the other party.
(b) If the Company terminates this Agreement pursuant to Section 9.1(f), the Company shall pay
to Parent a termination fee of $5,000,000.00 (the “Termination Fee”) concurrently with the
termination of this Agreement by the Company.
(c) If Parent terminates this Agreement pursuant to Section 9.1(d), the Company shall pay to
Parent the Termination Fee no later than one business day following such termination.
(d) If Parent or the Company terminates this Agreement pursuant to Section 9.1(b), and if (i)
after the date hereof and prior to the End Date, an Acquisition Proposal was disclosed to the
Company, is publicly announced or generally made known to the Company’s stockholders, or any Person
or group of Persons informs the Company or publicly announces or makes generally known to the
Company’s stockholders that it intends to make an Acquisition Proposal subject to this Agreement
being terminated, and (ii) within twelve (12) months after the date of such termination, the
Company enters into a definitive agreement with respect to any Acquisition Proposal or an
Acquisition Proposal is consummated, the Company shall pay to Parent the Termination Fee
concurrently with the earlier of the entry into such definitive agreement or consummation of any
Acquisition Proposal; provided, that, solely for purposes of this Section 9.2(d), the term
Acquisition Proposal shall have the meaning ascribed thereto in Section 6.2(a), except that all
references to twenty percent (20%) or more therein shall be changed to a majority or more.
(e) If Parent or the Company terminates this Agreement pursuant to Section 9.1(h), and if (i)
after the date hereof and prior to the Company Stockholders Meeting, an Acquisition Proposal was
disclosed to the Company, is publicly announced or generally made known to the Company’s
stockholders, or any Person or group of Persons informs the Company or publicly announces or makes
generally known to the Company’s stockholders that it intends to make an Acquisition Proposal
subject to this Agreement being terminated, and (ii) within twelve (12) months after the date of
such termination, the Company enters into a definitive agreement with respect to any
63
Acquisition Proposal or an Acquisition Proposal is consummated, the Company shall pay to Parent the Termination
Fee concurrently with the earlier of the entry into such definitive agreement or consummation of
any Acquisition Proposal; provided, that, solely for purposes of this Section 9.2(e), the term
Acquisition Proposal shall have the meaning ascribed thereto in Section 6.2(a), except that all
references to twenty percent (20%) or more therein shall be changed to a majority or more.
(f) If Parent terminates this Agreement pursuant to Section 9.1(g), and if (i) after the date
hereof and prior to the date of such termination, an Acquisition Proposal was disclosed to the
Company, is publicly announced or generally made known to the Company’s stockholders, or any Person
or group of Persons informs the Company or publicly announces or makes generally known to the
Company’s stockholders that it intends to make an Acquisition Proposal subject to this Agreement
being terminated, and (ii) within twelve (12) months after the date of such termination, the
Company enters into a definitive agreement with respect to any Acquisition Proposal, or an
Acquisition Proposal is consummated, the Company shall pay to Parent the Termination Fee
concurrently with the earlier of the entry into such definitive agreement or consummation of any
Acquisition Proposal; provided, that, solely for purposes of this Section 9.2(f), the term
Acquisition Proposal shall have the meaning ascribed thereto in Section 6.2(a), except that all
references to twenty percent (20%) or more therein shall be changed to a majority or more.
(g) If this Agreement is terminated by Parent or the Company pursuant to Section 9.1(h) or
Parent pursuant to Section 9.1(g), then the Company shall reimburse Parent upon demand for all
reasonable out-of-pocket expenses incurred or paid by or on behalf of Parent or any Affiliate of
Parent in connection with this Agreement (including the Debt Commitment Letter and the transactions
contemplated thereby), the Offer, the Merger and the other transactions contemplated by this
Agreement, including all fees and expenses of counsel, investment banking firms, accountants and
consultants and lenders; provided, however, that the Company shall not be obligated to make
payments pursuant to this Section 9.2(g) in excess of $2,000,000.00; provided, further, than any
payments by the Company made pursuant to this Section 9.2(g) shall be credited against any
Termination Fee that is or becomes payable.
(h) The Company acknowledges that the agreements contained in this Section 9.2 are an integral
part of the transactions contemplated by this Agreement, and that, without these agreements, Parent
would
not enter into this Agreement; accordingly, if the Company fails promptly to pay the amount
due pursuant to Section 9.2(a) through 9.2(g), as applicable, and, in order to obtain such payment,
Parent commences a suit which results in a final non-appealable judgment against the Company, the
Company shall pay to Parent its reasonable attorneys’ fees and expenses actually incurred in
connection with such suit, together with interest on the amount of the fee at the prime rate of
X.X. Xxxxxx Chase N.A. in effect on the date such payment was required to be made from the date
such payment was required to be made until the date such payment is actually made. All amounts to
be paid pursuant to this Section 9.2 shall be paid by wire transfer of immediately available funds
to an account specified in writing by Parent.
Section 9.3
Fees and Expenses. Except as otherwise expressly provided in Section
7.5(b), Section 7.5(f), Section 7.9(b) and Section 9.2, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the transactions contemplated by this Agreement are
consummated, including all out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, financing sources, hedging counterparties, experts and consultants
to a party hereto) incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this Agreement, including the
preparation, printing, filing and mailing of, the Proxy Statement, the solicitation of the Company
Stockholder Approval,
64
regulatory filings and notices and all other matters related to the closing
of the transactions contemplated by this Agreement.
Section 9.4
Amendment. This Agreement may be amended by the parties hereto at any
time before or after obtaining the Company Stockholder Approval, but if the Company Stockholder
Approval shall have been obtained, thereafter no amendment shall be made which by law requires
further approval by the Company’s stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf of each of the
parties hereto. In addition, following the election or appointment of Parent’s designees to the
Company Board of Directors pursuant to Section 1.3(a) and until the Effective Time, any amendment
of this Agreement shall only be effected if there are in office one or more Continuing Directors
and such action is approved by a majority of the Continuing Directors then in office (or by the
sole Continuing Director if there shall be only one Continuing Director).
Section 9.5
Waiver. At any time prior to the Effective Time, each party hereto may,
by action authorized by its Board of Directors, (a) extend the time for the performance of any of
the obligations or other acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any documents delivered
pursuant hereto, or (c) waive compliance with any of the agreements of any other party or any
conditions to its own obligations;
provided, that any such extension or waiver shall be binding
upon a party only if such extension or waiver is set forth in a writing executed by such party;
provided, further, that such extension or waiver shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. In addition, following the election or appointment
of Parent’s designees to the Company Board of Directors pursuant to Section 1.3(a) and until the
Effective Time, any waiver of compliance with any of the agreements or conditions contained herein
for the benefit of the Company or its stockholders (other than Parent, Merger Sub or their
Affiliates), officers, directors or employees shall only be effected if there are in office one or
more Continuing Directors and such waiver is approved by a majority of the Continuing Directors
then in office (or by the sole Continuing Director if there shall be only one Continuing Director).
Section 10.1
Entire Agreement. This Agreement, together with the Company Disclosure
Schedule, the Company Letter, the Parent Disclosure Schedule and the Stockholder Agreements and the
Registration Rights Agreement (as defined in the Stockholder Agreement), contains the entire
agreement among the
parties with respect to the Offer, the Merger and related transactions, and supersedes all
prior agreements, written or oral, among the parties with respect thereto, other than the
Confidentiality Agreement and the Parent Confidentiality Agreement, each of which shall survive
execution of this Agreement and shall terminate in accordance with the provisions thereof. EACH
PARTY HERETO ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED
IN THIS AGREEMENT, NONE OF THE PARTIES HERETO HAVE MADE OR HAVE RELIED UPON, OR OTHERWISE BEEN
INDUCED BY, ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY
OTHER PURPORTED REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES OR AFFILIATES,
WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE OFFER, THE MERGER, OR ANY OTHER
TRANSACTIONS CONTEMPLATED HEREUNDER, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE
OTHER’S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE
OF THE FOREGOING.
Section 10.2
No Survival. None of the representations, warranties and, except as
provided in the following sentence, covenants contained herein or in any instrument delivered
pursuant to this Agreement shall
65
survive the Effective Time. This Section 10, the agreements of
Parent and the Company in Sections 1, 2, 3, 6.3 and 7.5 and those other covenants and agreements
contained herein that by their terms apply, or that are to be performed in whole or in part, after
the Effective Time shall survive the consummation of the Merger.
Section 10.3
Parent Guarantee. Parent agrees to take all action necessary to cause US
Corp. and Merger Sub or the Surviving Corporation, as applicable, and, during the period between
the Acceptance Date and the Effective Time, the Company, to perform all of its agreements,
covenants and obligations under this Agreement. Parent unconditionally guarantees to the Company
the full and complete performance by US Corp. and by Merger Sub or the Surviving Corporation, as
applicable, of their respective obligations under this Agreement and shall be liable for any breach
of any representation, warranty, covenant or obligation of US Corp. and of Merger Sub or the
Surviving Corporation, as applicable, under this Agreement. Parent hereby waives diligence,
presentment, demand of performance, filing of any claim, any right to require any proceeding first
against US Corp. or Merger Sub or the Surviving Corporation, as applicable, protest, notice and all
demands whatsoever in connection with the performance of its obligations set forth in this Section
10.3.
Section 10.4
Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given when delivered in person, by overnight
courier, by facsimile transmission (with receipt confirmed by telephone or by automatic
transmission report) or two (2) business days after being sent by registered or certified mail
(postage prepaid, return receipt requested), as follows:
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(a) If to Parent , US Corp. or Merger Sub:
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With copies (which shall not
constitute notice) to: |
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SXC Health Solutions Corp.
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Sidley Austin LLP |
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SXC Health Solutions, Inc.
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One South Dearborn St. |
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Comet Merger Corporation
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Xxxxxxx, Xxxxxxxx 00000 |
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c/o SXC Health Solutions Corp.
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Telephone: (000) 000-0000 |
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0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
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Facsimile: (000) 000-0000 |
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Lisle, Illinois 60532-3246
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Attn.: Xxxx X. Xxxxxxxx |
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Facsimile: (000) 000-0000
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Xxxxx X. Xxxxxxxx |
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Attn.: Chief Financial Officer |
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(b) If to the Company:
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With copies (which shall not constitute notice) to: |
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National Medical Health Card Systems, Inc.
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Bass, Xxxxx & Xxxx PLC |
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00 Xxxxxx Xxxx Xxxxx
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000 Xxxxxxxxx Xxxxxx, Xxxxx 0000 |
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Xxxx Xxxxxxxxxx, XX 00000
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Xxxxxxxxx, XX 00000 |
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Telephone: (000) 000-0000
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Telephone: (000) 000-0000 |
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Facsimile: (000) 000-0000
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Facsimile: (000) 000-0000 |
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Attn.: Xxxxxx XxXxxx
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Attn: J. Xxxxx Xxxxxx, Esq. |
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Xxxxxxxx X. Xxxxxx, Esq. |
66
Any party may by notice given in accordance with this Section 10.4 to the other parties designate
another address or person for receipt of notices hereunder. Rejection or other refusal to accept
or the inability to deliver because of changed address or facsimile number of which no notice was
given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or
inability to deliver.
(a) This Agreement shall not be assigned by any of the parties hereto (whether by operation of
Law or otherwise) without the prior written consent of the other parties; provided, that Parent, US
Corp. or Merger Sub may assign any of its rights hereunder (but effective only if and when the
Merger is consummated) to any of the lenders in connection with obtaining the Debt Financing.
Subject to the preceding sentence, but without relieving any party (including any assignor) hereto
of any obligation hereunder, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(b) Other than as set forth in Section 7.5, this Agreement is not intended to and shall not
confer any rights or remedies hereunder upon any Person other than Parent, US Corp., Merger Sub and
the Company.
Section 10.6
Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall
remain in full force and effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree shall remain in full force and
effect to the extent not held invalid or unenforceable. The parties further agree to
negotiate in good faith to replace such invalid or unenforceable provision of this Agreement, or
invalid or unenforceable portion thereof, with a valid and enforceable provision that will achieve,
to the extent possible, the economic, business and other purposes of such invalid or unenforceable
provision or portion thereof.
Section 10.7
Governing Law. This Agreement, and all claims or causes of action (whether at law, in
contract or in tort) that may be based upon, arise out of or relate to this Agreement or the
negotiation, execution or performance hereof, shall be governed by and construed in accordance with
the Laws of the State of Delaware, without giving effect to any choice or conflict of Law provision
or rule (whether of the State of Delaware or any other jurisdiction) that would cause the
application of the Laws of any jurisdiction other than the State of Delaware.
Section 10.8
Submission to Jurisdiction; Waiver. Each of the Company, Parent, US Corp. and Merger
Sub irrevocably submits to the jurisdiction of any Delaware state court or any federal court
sitting in the State of Delaware in any Action arising out of or relating to this Agreement, and
hereby irrevocably agrees that all claims in respect of such Action may be heard and determined in
such Delaware state or federal court. Each of the Company, Parent, US Corp. and Merger Sub hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any Action with respect to this Agreement, (a) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by applicable Law, that (i) the Action in any
such court is brought in an inconvenient forum, (ii) the venue of such Action is improper or (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such courts. EACH OF
THE COMPANY, PARENT, US CORP. AND MERGER SUB WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAWS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING
TO THIS AGREEMENT.
67
Section 10.9
Specific Enforcement. The parties recognize and agree that if for any reason any of
the provisions of this Agreement are not performed in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury could be caused for which money
damages would not be an adequate remedy. Accordingly, each party agrees that, in addition to all
other remedies available to it any other party shall be entitled to seek an injunction (without
posting a bond or other undertaking) to enforce compliance with the provisions of this Agreement or
to restrain any violation or threatened violation of the provisions of this Agreement.
(a) When a reference is made in this Agreement to a Section, subsection or clause, such
reference shall be to a Section, subsection or clause of this Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this Agreement.
(c) This Agreement is the result of the joint efforts of Parent and the Company, and each
provision hereof has been subject to the mutual consultation, negotiation and agreement of the
parties and there shall be no construction against any party based on any presumption of that
party’s involvement in the drafting thereof.
(d) To the extent this Agreement refers to information or documents having been made available
(or delivered or provided) to Parent, the Company shall be deemed to have satisfied such obligation
if the Company or its Representatives made such information or document available prior to the date
hereof through the Xxxxxxx online data room to Parent and its Representatives.
(e) The term “affiliate” or “Affiliate” means a person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common control with, the
first-mentioned person.
(f) The term “business day” means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or in the case of determining a date when any payment
is due, any day on which banks are not required or authorized to close in the City of New York.
(g) The words “include,” “includes” or “including” shall be deemed to be followed by the words
“without limitation.”
(h) The term “knowledge” of the Company shall mean the actual knowledge of the officers of the
Company listed on Section 10.10(h) of the Company Disclosure Schedule. The term “knowledge” of
Parent shall mean the actual knowledge of the officers of Parent listed on Section 10.10(h) of the
Parent Disclosure Schedule.
(i) The disclosure of any matter or item in the Company Disclosure Schedule or the Parent
Disclosure Schedule shall not be deemed to constitute an acknowledgement that such matter or item
is required to be disclosed therein or is a material exception to a representation, warranty,
covenant or condition set forth in this Agreement and shall not be used as a basis for interpreting
the terms “material,” “materially,” “materiality,” “Company Material Adverse Effect” or “Parent
Material Adverse Effect” or any word or phrase of similar import and does not mean that such matter
or item would, with any other matter or item, have, individually or in the aggregate, a Company
Material Adverse Effect or a Parent Material Adverse Effect. The inclusion of a dollar amount in
any representation, warranty, covenant or agreement shall not be construed as an acknowledgement
that such dollar amount is a material amount and such dollar amount shall not be used as a basis
for interpreting the
68
terms “material,” “materially,” “materiality,” “Company Material Adverse
Effect” or “Parent Material Adverse Effect” or any word or phrase of similar import. Certain
matters have been disclosed in the Company Disclosure Schedule for informational purposes only.
Certain matters have been disclosed in the Parent Disclosure Schedule for informational purposes
only.
(j) The term “person” or “Person” shall mean any individual, corporation (including any
non-profit corporation), general partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or Governmental Entity.
(k) The term “subsidiary” or “Subsidiary,” with respect to any Person, means any other Person
of which the first Person owns, directly or indirectly, securities or other ownership interests
having voting power to elect a majority of the board of directors or other persons performing
similar functions (or, if there are no such voting interests, more than 50% of the equity interests
of the second Person).
Section 10.11
No Waiver of Rights. No failure or delay on the part of any party hereto in the exercise of any right hereunder
will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor will any single or partial exercise of any such
right preclude other or further exercise thereof or of any other right.
Section 10.12
Counterparts; Facsimile Signatures. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which together shall constitute
one and the same instrument. Facsimile signatures shall be acceptable and binding.
Whenever this Agreement requires any Subsidiary of Parent or of the Company to take any action,
such requirement shall be deemed to include an undertaking on the part of Parent or the Company, as
the case may be, to cause such Subsidiary to take such action.
[Remainder of page intentionally left blank.]
69
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NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. |
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By:
Name:
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/s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
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Title:
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Chairman and Interim C.E.O. |
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SXC HEALTH SOLUTIONS CORP. |
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By: |
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/s/ Xxxxxx X. Xxxxx |
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Name:
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Xxxxxx X. Xxxxx
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Title:
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Chairman and Chief Executive Officer |
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SXC HEALTH SOLUTIONS, INC. |
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By:
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/s/ Xxxxxx X. Xxxxx
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Name:
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Xxxxxx X. Xxxxx |
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Title:
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Chairman and Chief Executive Officer |
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COMET MERGER CORPORATION |
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By:
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/s/ Xxxxxx X. Xxxxx
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Name:
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Xxxxxx X. Xxxxx |
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Title:
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President |
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Signature Page to Agreement and Plan of Merger
ANNEX A
Index of Defined Terms
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Section |
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Acceptance Date |
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1.1 |
(d) |
Acquisition Proposal |
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6.2 |
(a) |
Actions |
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4.8 |
affiliate |
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10.10 |
(e) |
Agreement |
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Preamble |
Benefits Continuation Period |
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6.3 |
(a) |
Book-Entry Shares |
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3.4 |
(a) |
business day |
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10.10 |
(f) |
Cash Consideration |
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3.1 |
(a) |
Canadian GAAP |
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5.6 |
(b) |
Certificates |
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3.4 |
(a) |
Certificate of Amendment |
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4.2 |
Certificate of Designations |
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4.3 |
(a) |
Certificate of Merger |
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2.1 |
(a) |
Change in Recommendation |
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6.2 |
(c) |
Change in Structure Event |
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1.5 |
Closing |
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2.2 |
Closing Date |
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2.2 |
Code |
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3.5 |
Company |
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Preamble |
Company Board of Directors |
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Recitals |
Company Common Stock |
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Recitals |
Company Convertible Preferred Stock |
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1.1 |
(a) |
Company Disclosure Schedule |
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4 |
Company Insurance Policies |
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4.12 |
Company Intellectual Property |
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4.10 |
Company Letter |
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4.23 |
Company Material Adverse Effect |
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4.1 |
(a) |
Company Options |
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3.3 |
(a) |
Company Recommendation |
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1.2 |
(a) |
Company Representations |
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4.23 |
Company Requisite Vote |
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4.2 |
Company SEC Reports |
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4.5 |
(a) |
Company Share Value |
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3.3 |
(a) |
Company Stock |
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1.1 |
(b) |
Company Stockholder Approval |
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4.2 |
Company Stockholders Meeting |
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7.2 |
(a) |
Company Subsidiary |
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4.1 |
(a) |
Confidentiality Agreement |
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1.2 |
(b) |
Continuing Directors |
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1.3 |
(c) |
Continuing Employees |
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6.3 |
(a) |
Contract |
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4.9 |
(a) |
Controlled Group |
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4.14 |
(b) |
A-1
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Section |
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Current Premium |
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7.5 |
(d) |
D&O Insurance |
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7.5 |
(d) |
Debt Commitment Letter |
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5.17 |
Debt Financing |
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5.17 |
Determination |
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7.4 |
(a) |
Disclosed Conditions |
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5.17 |
Dissenting Shares |
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3.2 |
(a) |
DGCL |
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Recitals |
Effective Time |
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2.1 |
(a) |
Employment Agreements |
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6.3 |
(a) |
End Date |
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9.1 |
(b) |
Environmental Laws |
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4.16 |
(b) |
Environmental Permits |
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4.16 |
(b) |
Equity Incentive Plans |
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3.3 |
(a) |
ERISA |
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4.14 |
(a) |
Exchange Act |
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4.3 |
(f) |
Exchange Agent |
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3.4 |
(a) |
Exchange Fund |
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3.4 |
(b) |
Exchange Ratio |
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3.1 |
(a) |
Excluded Shares |
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3.1 |
(a) |
Existing Orders |
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4.8 |
Financial Statements |
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4.5 |
(b) |
FTC |
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7.4 |
(a) |
GAAP |
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4.5 |
(b) |
Governmental Entity |
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4.1 |
(a) |
Hazardous Substances |
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4.16 |
(b) |
HSR Act |
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4.17 |
Indemnified Parties |
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7.5 |
(b) |
Initial Offer Period |
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1.1 |
(c) |
Intellectual Property |
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4.10 |
IRS |
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4.14 |
(a) |
knowledge |
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10.10 |
(h) |
Laws |
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4.1 |
(a) |
Lender |
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5.17 |
Liens |
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4.4 |
(a) |
Material Contract |
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4.9 |
(a) |
Merger |
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Recitals |
Merger Consideration |
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3.1 |
(a) |
Merger Sub |
|
Preamble |
Minimum Condition |
|
|
1.1 |
(b) |
Nasdaq |
|
|
1.1 |
(c) |
New Debt Commitment Letter |
|
|
5.17 |
Notice of Superior Proposal |
|
|
6.2 |
(c) |
Offer |
|
Recitals |
Offer Conditions |
|
|
1.1 |
(b) |
Offer Documents |
|
|
1.1 |
(g) |
Offer Price |
|
Recitals |
One Step Merger |
|
Recitals |
A-2
|
|
|
|
|
|
|
|
Section |
|
|
|
|
Option Share Equivalent |
|
|
3.3 |
(a) |
Order |
|
|
8.1 |
(b) |
Parent |
|
Preamble |
Parent Common Stock |
|
Recitals |
Parent Confidentiality Agreement |
|
|
9.2 |
(a) |
Parent Disclosure Schedule |
|
|
5 |
Parent Financial Statements |
|
|
5.6 |
(b) |
Parent Material Adverse Effect |
|
|
5.1 |
Parent Material Contract |
|
|
5.10 |
(a) |
Parent SEC Reports |
|
|
5.6 |
(a) |
Parent Share Issuance |
|
|
5.2 |
Parent Subsidiaries |
|
|
5.1 |
(a) |
Permits |
|
|
4.7 |
(a) |
Permitted Liens |
|
|
4.11 |
person |
|
|
10.10 |
(j) |
Plan |
|
|
4.14 |
(a) |
Preliminary Prospectus |
|
|
1.1 |
(g) |
Prospectus |
|
|
1.1 |
(q) |
Proxy Statement |
|
|
4.19 |
Registration Statement |
|
|
1.1 |
(g) |
Release |
|
|
4.16 |
(c) |
Relevant Date |
|
|
6.2 |
(b) |
Representatives |
|
|
6.2 |
(a) |
Restricted Shares |
|
|
3.3 |
(b) |
Schedule 14D-9 |
|
|
1.2 |
(c) |
Schedule TO |
|
|
1.1 |
(g) |
SEC |
|
|
1.1 |
Second Step Merger |
|
Recitals |
Securities Act |
|
|
4.5 |
(a) |
Short Form Condition |
|
ANNEX B |
Solvent |
|
|
5.16 |
Stock Consideration |
|
|
3.1 |
(a) |
Stockholder Agreement |
|
Recitals |
Stockholder Party |
|
Recitals |
Subsequent Offering Period |
|
|
1.1 |
(c) |
Subsidiary |
|
|
10.10 |
(k) |
Superior Proposal |
|
|
6.2 |
(b) |
Surviving Corporation |
|
|
2.1 |
(b) |
Takeover Laws |
|
|
4.22 |
Tax |
|
|
4.13 |
(a) |
Taxable |
|
|
4.13 |
(a) |
Tax Return |
|
|
4.13 |
(a) |
Termination Fee |
|
|
9.2 |
(b) |
Top-Up Closing |
|
|
1.1 |
(c) |
Top-Up Option |
|
|
1.4 |
(a) |
Top-Up Exercise Notice |
|
|
1.4 |
(a) |
Top-Up Option Shares |
|
|
1.4 |
(a) |
Transaction Amount |
|
|
5.17 |
A-3
|
|
|
|
|
|
|
Section |
|
|
|
|
US Corp. |
|
Preamble |
A-4
ANNEX B
Conditions of Offer
Capitalized terms used but not defined in this Annex B have the meanings set forth in the
Agreement and Plan of Merger to which this Annex B is attached (the “Agreement”). Notwithstanding
any other provision of the Offer, Merger Sub shall not be required to accept for payment or,
subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Merger Sub’s obligation to pay for or return tendered shares of the
Company Common Stock promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to above, the payment for,
any tendered shares of the Company Common Stock, and (subject to the provisions of the Agreement)
may terminate the Offer and not accept for payment any tendered shares if (i) the Minimum Condition
shall not have been satisfied at the expiration of the Offer (as it may be extended in accordance
with the terms of Section 1.1.(c)), (ii) there shall be any order or preliminary or permanent
injunction of a court of competent jurisdiction, including any temporary restraining order, in
effect, or any Governmental Entity shall have enacted, issued, promulgated, enforced or entered any
statute, law, ordinance, rule, regulation, judgment or decree, preventing, prohibiting or making
illegal the consummation of the Offer, the Merger or the other transactions contemplated by the
Agreement or any Governmental Entity shall have instituted any proceeding that is pending seeking
any such an order, (iii) the shares of Parent Common Stock issuable in connection with the Offer
and the Merger have not been authorized for listing on Nasdaq and the Toronto Stock Exchange,
subject to official notice of issuance, (iv) the Registration Statement shall not have become
effective in accordance with the provisions of the Securities Act or any applicable blue sky
securities filings, permits or approvals shall not have been made or received in accordance with
applicable Laws, (v) any stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC or any state securities administrator or any proceedings for that
purpose shall be pending, or to the knowledge of Parent or the Company, threatened by the SEC or
any state securities administrator, (vi) the waiting period (and any extension thereof) applicable
to the consummation of the Offer and the Merger under the HSR Act shall not have expired or been
terminated, (vii) any other notices, reports and other filings required to be made prior to the
Effective Time by the Company or Parent or any of their respective Subsidiaries with, and all other
consents, registrations, approvals, permits and authorizations required to be obtained prior to the
Effective Time by the Company or Parent or any of their respective Subsidiaries from, any
Governmental Entity in connection with the execution and delivery of the Agreement and the
consummation of the Offer, the Merger and the other transactions contemplated by the Agreement by
the Company and Parent and their respective Subsidiaries shall not have been made or obtained, as
the case may be, except for any failure which would not, individually or on the aggregate, render
the Offer or the Merger or any of the transactions contemplated hereby illegal or result in a
Company Material Adverse Effect or Parent Material Adverse Effect, (viii) (1) the Company shall not
have secured a determination from the Delaware Commissioner of Insurance that the Company is
primarily engaged in business other than the business of insurance or (2) the acquisition of
control of NMHC Group Solutions, Inc. in connection with the transactions contemplated hereby shall
not have been approved by the Delaware Department of Insurance, (ix) the Agreement shall have been
terminated or a Change in Structure Event shall have occurred, (x) Merger Sub will not be able to
effect a short-form merger pursuant to Section 253 of the DGCL promptly following the Acceptance
Date (without the acquisition of any additional shares of Company Common Stock other than the Top
Up Option Shares, by Merger Sub or any of its Affiliates or any reduction in the number of shares
of Company Common Stock then outstanding) (the “Short Form Condition”), (xi) Parent shall
not have received the approvals of any Governmental Entity that requires a Form A application in
connection with the transactions contemplated hereby, (xii) Parent and/or the Company shall not
have filed
B-1
a “pre acquisition notification” with the Delaware Commissioner of Insurance or the applicable
waiting period shall not have expired or been terminated or (xiii) any of the following conditions
exists:
(a) The representations and warranties of the Company set forth in Sections 4.2, 4.3, 4.4
(with respect to significant Company Subsidiaries, as determined under Rule 1-02(w) of Regulation
S-X), 4.18 and 4.22 of the Agreement shall not be true and correct in all material respects as of
the date of the Agreement and at and as of immediately prior to the expiration of the Offer as if
made at and as of such time (except to the extent any such representation and warranty expressly
speaks as of a specified date which shall be true and correct in all material respects as of such
specified date). The representations and warranties of the Company set forth in the Agreement,
other than those listed in the preceding sentence, shall not be true and correct as of the date of
the Agreement and at and as of immediately prior to the expiration of the Offer as if made at and
as of such time (except to the extent any such representation and warranty expressly speaks as of a
specified date which shall be true and correct in all respects as of such specified date) unless
the inaccuracies (without giving effect to any knowledge, materiality or Company Material Adverse
Effect qualifications or exceptions contained therein) in respect of such representations and
warranties, taking all the inaccuracies in respect of all such representations and warranties
together in their entirety, have not had and would not result in a Company Material Adverse Effect
or, after giving effect to the Merger, a Parent Material Adverse Effect. Parent shall not have
received a certificate dated the Closing Date and signed on behalf of the Company by a duly
authorized officer of the Company to such effect.
(b) The Company shall have failed to performed in all material respects all obligations or
shall have failed to comply in all material respects with all agreements and covenants of the
Company to be performed and complied with by it under the Agreement. Parent shall not have
received a certificate dated the Closing Date and signed on behalf of the Company by a duly
authorized officer of the Company to such effect.
(c) Since the date hereof, there shall have been any events, circumstances, developments,
changes and effects that, individually or in the aggregate with other such events, circumstances,
developments, changes and effects, has had, or would have, a Company Material Adverse Effect.
(d) Parent shall not have received the Debt Financing on terms consistent with the Debt
Commitment Letter and if the Debt Financing contemplated by the Debt Commitment Letter is
unavailable, Parent shall not have received the alternative financing described in Section 7.9(a).
(e) The Offer shall have been otherwise terminated with the prior written consent of the
Company.
The foregoing conditions are for the sole benefit of Parent, US Corp. and Merger Sub and, except
for the Minimum Condition, may be waived (if legally permitted) by Parent, US Corp. or Merger Sub,
in whole or in part at any time and from time to time, in the sole and absolute discretion of
Parent and Merger Sub, provided that the Minimum Condition may be waived in part to the extent such
waiver would not result in Merger Sub purchasing less than a majority of the outstanding shares of
Company Common Stock (treating each share of Company Convertible Preferred Stock as having been
converted into Company Common Stock pursuant to the Certificate of Designations). The failure of
Parent, US Corp. or Merger Sub at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time, in each case, prior to the acceptance for payment of
tendered shares of the Company Common Stock.
B-2
Annex C
Form of Stockholders Agreement
STOCKHOLDER AGREEMENT
BY AND AMONG
NEW MOUNTAIN PARTNERS, L.P.,
AND
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
DATED AS OF FEBRUARY 25, 2008
C-1
INDEX OF DEFINED TERMS
|
|
|
|
|
|
|
Page |
Agreement |
|
|
1 |
|
Beneficial Ownership |
|
|
2 |
|
Beneficially Own |
|
|
2 |
|
Beneficially Owned |
|
|
2 |
|
Claims |
|
|
11 |
|
Company |
|
|
1 |
|
Company Common Stock |
|
|
1 |
|
Company Convertible Preferred Stock |
|
|
1 |
|
Company Stock |
|
|
1 |
|
Covered Shares |
|
|
2 |
|
Depositary |
|
|
3 |
|
Encumbrance |
|
|
2 |
|
Existing Shares |
|
|
2 |
|
Fundamental Amendment |
|
|
13 |
|
Grantees |
|
|
5 |
|
Lock-Up Period |
|
|
8 |
|
Meeting Right |
|
|
12 |
|
Merger |
|
|
1 |
|
|
|
|
1 |
|
Merger Sub |
|
|
1 |
|
Offer |
|
|
1 |
|
Operative Date |
|
|
2 |
|
Other Stockholder |
|
|
2 |
|
Parent |
|
|
1 |
|
Prohibited Activity |
|
|
11 |
|
Registration Rights Agreement |
|
|
8 |
|
Releasees |
|
|
11 |
|
Section 3.1(a) Matters |
|
|
5 |
|
Stockholder |
|
|
1 |
|
Tender Documents |
|
|
3 |
|
Traded Securities |
|
|
11 |
|
Transfer |
|
|
2 |
|
US Corp. |
|
|
1 |
|
Valuation Period |
|
|
11 |
|
C-2
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of February 25, 2008 (this “
Agreement”), by and among
SXC Health Solutions Corp., a corporation organized under the laws of Yukon Territory, Canada
(“
Parent”), New Mountain Partners, L.P., a Delaware limited partnership (the
“
Stockholder”), and National Medical Health Card Systems, Inc., a Delaware corporation (the
“
Company”).
WHEREAS, concurrently with the execution of this Agreement, Parent, SXC Health Solutions,
Inc., a Texas corporation (“US Corp.”), Comet Merger Corporation, a newly-formed Delaware
corporation that is wholly-owned by US Corp. and an indirect wholly-owned subsidiary of Parent
(“Merger Sub”), and the Company are entering into an Agreement and Plan of Merger, dated as
of the date hereof (as amended, supplemented, restated or otherwise modified from time to time, the
“Merger Agreement”) pursuant to which, among other things, Merger Sub will commence an
exchange offer (the “
Offer”) to acquire all of the outstanding shares of common stock, par
value $0.001 per share, of the Company (“
Company Common Stock”), and following the
consummation of the Offer (or, subject to certain conditions, in lieu thereof), Merger Sub will
merge with and into the Company (the “
Merger”) and each outstanding share of Company Common
Stock and each outstanding share, if any, of the Company’s Series A 7% Convertible Preferred Stock,
par value $0.10 per share (“
Company Convertible Preferred Stock”, and together with the
Company Common Stock, “
Company Stock”), will be converted into the right to receive the
merger consideration specified therein.
ARTICLE I
GENERAL
1.1.
Defined Terms . The following capitalized terms, as used in this Agreement, shall have the meanings set forth
below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed
thereto in the
Merger Agreement.
C-3
“Beneficial Ownership” by a Person of any securities includes ownership by any Person
who, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares (i) voting power which includes the power to vote, or to direct the voting
of, such security; and/or (ii) investment power which includes the power to dispose, or to direct
the disposition, of such security; and shall otherwise be interpreted in accordance with the term
“beneficial ownership” as defined in Rule 13d-3 adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended; provided that for purposes of
determining Beneficial Ownership, a Person shall be deemed to be the Beneficial Owner of any
securities which such Person has, at any time during the term of this Agreement, the right to
acquire pursuant to any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise (irrespective of whether the right to
acquire such securities is exercisable immediately or only after the passage of time, including the
passage of time in excess of 60 days, the satisfaction of any conditions, the occurrence of any
event or any combination of the foregoing). The terms “Beneficially Own” and
“Beneficially Owned” shall have a correlative meaning.
“Covered Shares” means, with respect to the Stockholder, the Stockholder’s Existing
Shares, together with any shares of Company Stock or other voting capital stock of the Company and
any securities convertible into or exercisable or exchangeable for shares of Company Stock or other
voting capital stock of the Company, in each case, that the Stockholder acquires Beneficial
Ownership of on or after the date hereof.
“Encumbrance” means any security interest, pledge, mortgage, lien (statutory or
other), charge, option to purchase, lease or other right to acquire any interest or any claim,
restriction, covenant, title defect, hypothecation, assignment, deposit arrangement or other
encumbrance of any kind or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or other title
retention agreement), excluding restrictions under securities laws and excluding any Encumbrance
set forth in the Certificate of Designations.
“Existing Shares” means, with respect to the Stockholder, the number of shares of
Company Stock Beneficially Owned and owned of record by the Stockholder, as set forth in the
recitals.
“
Operative Date” means the Acceptance Date, if the transactions contemplated by the
Merger Agreement are effected by means of the Offer followed by the Second Step Merger, and means
the Closing, if the transactions contemplated by the
Merger Agreement are effected as a One Step
Merger.
“Other Stockholder” means New Mountain Affiliated Investors, L.P., a Delaware limited
partnership and the holder of the outstanding shares of Company Convertible Preferred Stock not
held by the Stockholder.
“Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber,
hypothecate or similarly dispose of (by merger (including by conversion into securities or other
consideration), by tendering into any tender or exchange offer, by operation of law or otherwise),
either voluntarily or involuntarily, or to enter into any contract, option or other
C-4
arrangement or
understanding with respect to the voting of or sale, transfer, assignment, pledge, encumbrance,
hypothecation or similar disposition of (by merger, by tendering into any tender or exchange offer,
by operation of law or otherwise) (but does not include any conversion of the Company Convertible
Preferred Stock into Company Common Stock after the Certificate of Amendment has become effective).
ARTICLE II
TENDERING
2.1. Agreement to Tender.
(a) The Stockholder hereby agrees that, within five business days after commencement of the
Offer, the Stockholder shall validly tender or cause to be tendered in the Offer all of the shares
of Company Stock represented by the Stockholder’s Covered Shares pursuant to and in accordance with
the terms of the Offer, by delivering to the depositary designated in the Offer (the
“Depositary”) (i) an executed letter of transmittal with respect to the Covered Shares,
(ii) a certificate or certificates representing the Covered Shares, (iii) all other documents or
instruments required to be delivered pursuant to the terms of the Offer, and (iv) a letter of
instruction signed by the Stockholder instructing the Company to convert the Covered Shares into
Company Common Stock effective upon receipt of a certificate from an executive officer of Parent
stating that (1) all of the conditions to the Offer (other than the Minimum Condition) have been
satisfied or waived, (2) upon the conversion by the Stockholder of its Covered Shares into Company
Common Stock and the conversion by the Other Stockholder of the shares of Company Stock owned by it
into Company Common Stock, the Minimum Condition will have been satisfied, and (3) Merger Sub
stands ready to, and will, immediately following such conversion by the Stockholder and the Other
Stockholder, accept for payment all shares of Company Common Stock validly tendered in the Offer
and not theretofore withdrawn (all of the foregoing documents, the “Tender Documents”).
(b) The Stockholder hereby agrees that once the Tender Documents shall have been delivered to
the Depositary, the Stockholder will not withdraw, nor permit the withdrawal of, any Tender
Documents from the Offer, unless and until (i) the Offer shall have been terminated by Merger Sub
in accordance with the terms of the
Merger Agreement, or (ii) this Agreement shall have been
terminated in accordance with Section 6.1.
(c) Notwithstanding the provisions of Sections 2.1(a) and 2.1(b), in the event of a Change in
Recommendation made in compliance with the
Merger Agreement, the obligation of the Stockholder to
tender and not withdraw its Covered Shares in the manner set forth in this Section 2.1 shall only
apply to an aggregate number of Covered Shares that is equal to 30% of the total number of shares
of Company Stock outstanding on the Acceptance Date, and the Stockholder may or may not tender the
balance of its Covered Shares in the Offer, and may
withdraw from the Offer all or any portion of such balance of its Covered Shares that it may
previously have tendered, as the Stockholder, in its sole discretion, determines.
C-5
ARTICLE III
VOTING
3.1. Agreement to Vote.
(a) The Stockholder hereby irrevocably and unconditionally agrees that during the period
beginning on the date hereof and ending on the earliest of (x) the Operative Date, (y) the
termination of the
Merger Agreement in accordance with its terms or (z) the termination of this
Agreement in accordance with its terms, at the Company Stockholders Meeting and at any other
meeting of the stockholders of the Company, however called, including any adjournment or
postponement thereof, and in connection with any written consent of the stockholders of the
Company, the Stockholder shall, in each case, to the fullest extent that such matters are submitted
for the vote or written consent of the Stockholder and that the Covered Shares are entitled to vote
thereon or consent thereto:
(i) appear at each such meeting or otherwise cause the Covered Shares as to which the
Stockholder controls the right to vote to be counted as present thereat for purposes of
calculating a quorum; and
(ii) vote (or cause to be voted), in person or by proxy, or deliver (or cause to be
delivered) a written consent covering, all of the Covered Shares as to which the Stockholder
controls the right to vote (or, if applicable, only such portion of the Covered Shares as is
provided in Section 3.1(b)) (i) in favor of the adoption of the
Merger Agreement and any
related proposal in furtherance thereof, as reasonably requested by Parent, submitted for
the vote or written consent of stockholders; (ii) against any action or agreement submitted
for the vote or written consent of stockholders that the Stockholder knows is in opposition
to, or competitive or materially inconsistent with, the Offer or the Merger or that the
Stockholder knows would result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company contained in the Merger Agreement, or of
the Stockholder contained in this Agreement; and (iii) against any Acquisition Proposal and
against any other action, agreement or transaction submitted for the vote or written consent
of stockholders that the Stockholder knows would impede, interfere with, delay, postpone,
discourage, frustrate the purposes of or adversely affect the Offer, the Merger or the other
transactions contemplated by the Merger Agreement or this Agreement or the performance by
the Company of its obligations under the Merger Agreement or by the Stockholder of its
obligations under this Agreement, including, but not limited to: (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business combination
involving the Company or any subsidiary of the Company; (B) any sale, lease or transfer of a
material amount of assets of the Company (including capital stock or other equity interest
in its Subsidiaries) or any subsidiary of the Company; (C) any reorganization,
recapitalization, dissolution or liquidation of the Company or any
subsidiary of the Company; (D) any change in a majority of the board of directors of
the Company; (E) any amendment to the Company’s certificate of incorporation or bylaws
(except for any amendment to increase the authorized capital stock); and (F) any change in
the capitalization of the Company or the Company’s corporate structure.
C-6
The obligations of the Stockholder specified in this Section 3.1(a) shall apply whether or not the
Offer, the Merger or any action described above is recommended by the Board of Directors of the
Company. Any such vote shall be cast (or consent shall be given) by the Stockholder in accordance
with such procedures relating thereto so as to ensure that it is duly counted, including for
purposes of determining whether a quorum is present.
(b) Notwithstanding the provisions of Section 3.1(a), in the event of a Change in
Recommendation made in compliance with the Merger Agreement, the obligation of the Stockholder to
vote (or cause to be voted), or to deliver (or cause to be delivered) a written consent with
respect to, the Covered Shares in the manner set forth in this Section 3.1 shall, with respect to
any combined vote of holders of Company Common Stock and Company Convertible Preferred Stock, only
apply to an aggregate number of Covered Shares entitled to vote in respect of such matter that is
equal to 30% of the total vote of the shares of Company Stock entitled to vote in respect of such
matter, and shall terminate, together with the authority of each of the proxies set forth in
Section 3.3, with respect to the balance of the Covered Shares, and the Stockholder may vote (or
cause to be voted), or deliver (or cause to be delivered) a written consent with respect to, such
balance of its Covered Shares as the Stockholder, in its sole discretion, determines.
3.2. No Inconsistent Agreements. The Stockholder hereby covenants and agrees that,
except for this Agreement or as set forth in Section 7 of the Certificate of Designations, and
except as may be permitted by Section 5.4(b), it (a) has not entered into, and shall not enter into
at any time while this Agreement remains in effect, any voting agreement or voting trust with
respect to the Covered Shares with respect to any of the matters described in Section 3.1(a)(ii)
(the “Section 3.1(a) Matters”), (b) has not granted, and shall not grant at any time while
this Agreement remains in effect (except pursuant to Section 3.3), a proxy, consent or power of
attorney with respect to the Covered Shares with respect to any of the Section 3.1(a) Matters and
(c) has not knowingly taken and shall not knowingly take any action that would make any
representation or warranty of the Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling the Stockholder from performing any of its obligations under this
Agreement.
3.3. Proxy. Without in any way limiting the Stockholder’s right to vote the Covered Shares
in its sole discretion on any matters other than the Section 3.1(a) Matters that may be submitted
to a stockholder vote, consent or other approval, the Stockholder hereby irrevocably appoints as
its proxy and attorney-in-fact, Xxxxxx Xxxxx and Xxxxxxx Xxxx, pursuant to a proxy to be delivered
to Parent substantially in the form attached hereto as Annex A, in their respective capacities as
officers of Parent, and any individual who shall hereafter succeed to any such officer of Parent,
and any other Person designated in writing by Parent (collectively, the “Grantees”), each
of them individually, with full power of substitution, to vote or execute written consents
with respect to the Covered Shares as to which the Stockholder controls the right to vote in
accordance with Section 3.1 (or, if applicable, only such portion of the Covered Shares as is
provided in Section 3.1(b)) and, in the discretion of the Grantees, with respect to any proposed
postponements or adjournments of any annual or special meeting of the stockholders of the Company
at which any of the Section 3.1(a) Matters was to be considered. This proxy is coupled with an
interest and shall be irrevocable until the earliest of (i) the Operative Date, (ii) the
termination of the Merger Agreement in accordance with its terms, or (iii) the termination of
C-7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Stockholder. The Stockholder hereby represents
and warrants to Parent as follows:
(a) Organization; Authorization; Validity of Agreement; Necessary Action . The
Stockholder is duly organized and is validly existing and in good standing under the laws of the
jurisdiction of its formation. The Stockholder has full power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery by the Stockholder of this Agreement, the
performance by it of its obligations hereunder and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by the Stockholder and no other actions
or proceedings on the part of the Stockholder or any stockholder thereof are necessary to authorize
the execution and delivery by it of this Agreement, the performance by it of its obligations
hereunder or the consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Stockholder and, assuming this Agreement constitutes a
valid and binding obligation of the other parties hereto, constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(b) Ownership. The Stockholder’s Existing Shares are, and all of the Covered Shares
owned by the Stockholder from the date hereof through and on the Operative Date will be,
Beneficially Owned and owned of record by the Stockholder, except that, in the case of the
Offer, the Company Convertible Preferred Stock will have been converted into Company Common
Stock in accordance with the terms of this Agreement. The Stockholder has good and marketable
title to the Stockholder’s Existing Shares, free and clear of any Encumbrances. As of the date
hereof, the Stockholder’s Existing Shares constitute all of the shares of Company Stock
Beneficially Owned or owned of record by the Stockholder. Except for the rights granted to Parent
hereby, the Stockholder has and will have at all times through the Operative Date sole voting power
(including the right to control such vote as contemplated herein)
with respect to the Section
3.1(a) Matters, sole power of disposition, sole power to issue instructions with respect to
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the Section
3.1(a) Matters, and sole power to agree to all of the matters set forth in this Agreement,
in each case, with respect to all of the Stockholder’s Existing Shares and with respect to all of
the Covered Shares owned by the Stockholder at all times through the Operative Date.
(c) No Violation. The execution, delivery and performance of this Agreement by the
Stockholder does not and will not (whether with or without notice or lapse of time, or both) (i)
violate any provision of the certificate of formation or bylaws or other comparable governing
documents, as applicable, of the Stockholder, (ii) violate, conflict with or result in the breach
of any of the terms or conditions of, result in any (or the right to make any) modification of or
the cancellation or loss of a benefit under, require any notice, consent or action under, or
otherwise give any Person the right to terminate, accelerate obligations under or receive payment
or additional rights under, or constitute a default under, any Contract to which the Stockholder is
a party or by which it is bound or (iii) violate any Law applicable to the Stockholder or by which
any of the Stockholder’s assets or properties is bound, except for any of the foregoing as would
not, either individually or in the aggregate, impair the ability of the Stockholder to perform its
obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
(d) Consents and Approvals. Other than compliance with applicable securities laws and
Laws relating to competition (including any filing under the HSR Act), the execution and delivery
of this Agreement by the Stockholder does not, and the performance by the Stockholder of its
obligations under this Agreement and the consummation by it of the transactions contemplated hereby
will not, require the Stockholder to obtain any consent, approval, authorization or permit of, or
to make any filing with or notification to, any Governmental Entity, except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, either individually or in the aggregate, prevent or delay the performance
by the Stockholder of any of its obligations under this Agreement.
(e) Absence of Litigation. As of the date hereof, there is no Action pending or, to
the knowledge of the Stockholder, threatened against the Stockholder or any of its Affiliates
before or by any Governmental Entity that would impair the ability of the Stockholder to perform
its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
(f) Finder’s Fees. Except as disclosed pursuant to the Merger Agreement, no
investment banker, broker, finder or other intermediary is entitled to a fee or commission from
Parent, US Corp., Merger Sub or the Company in respect of this Agreement based upon any arrangement
or agreement made by or at the direction of the Stockholder.
(g) Reliance by Parent, US Corp. and Merger Sub. The Stockholder understands and
acknowledges that Parent, US Corp. and Merger Sub are entering into the Merger Agreement in
reliance upon the Stockholder’s execution and delivery of this Agreement and the representations
and warranties of the Stockholder contained herein.
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ARTICLE V
OTHER COVENANTS
5.1. Prohibition on Transfers, Other Actions.
(a) Except as permitted by Section 5.4(b), the Stockholder hereby agrees not to (i) Transfer
any of the Covered Shares, Beneficial Ownership thereof or any other interest specifically therein
(including by tendering into another tender or exchange offer), except to participate in the Offer
or the Merger; (ii) enter into any agreement, arrangement or understanding with any Person (other
than Parent, US Corp. or Merger Sub), or knowingly take any other action, that violates or
conflicts with the Stockholder’s representations, warranties, covenants and obligations under this
Agreement; or (iii) knowingly take any action that could restrict or otherwise affect the
Stockholder’s legal power, authority and right to comply with and perform its covenants and
obligations under this Agreement. Any Transfer in violation of this provision shall be void.
(b) The Stockholder hereby covenants and agrees that for a period of one year following the
Operative Date (the “Lock-Up Period”), the Stockholder shall not Transfer, or consent to
any Transfer of, any shares of Parent Common Stock, or any interest therein, or enter into any
Contract, option or other arrangement (including any profit sharing or other derivative
arrangement) with respect to the Transfer of, any shares of Parent Common Stock or any interest
therein to any person; provided that the Stockholder may participate during the Lock-Up
Period with respect to its shares of Parent Common Stock in any merger, tender offer or other
business combination or other transaction, in each case, which the Board of Directors of Parent has
recommended to Parent’s stockholders. The Stockholder hereby agrees that, in order to ensure
compliance with the restrictions referred to herein, Parent may issue appropriate “stop transfer”
instructions to its transfer agent in respect of the Stockholder’s Parent Common Stock. Parent
agrees that it will cause any stop transfer instructions imposed pursuant to this Section 5.1(b) to
be lifted, and any legended certificates of Parent Common Stock delivered to the Stockholder
pursuant to the Merger Agreement to be replaced with certificates not bearing such legend, promptly
following the termination of the Lock-Up Period. The restrictions on transfer provided in this
Section 5.1(b) shall be in addition to any restrictions on transfer of the Parent Common Stock
imposed by any applicable Laws.
5.2. Registration Rights Agreement. Concurrently with the execution of this
Agreement, Parent and the Stockholder are entering into a Registration Rights Agreement (the
“Registration Rights Agreement”).
5.3. Stock Dividends, etc. In the event of a stock split, stock dividend or distribution, or any change in the Company
Stock by reason of any split-up, reverse stock split, recapitalization, combination,
reclassification, exchange of shares or the like, the terms “Existing Shares” and “Covered Shares”
shall be deemed to refer to and include such shares as well as all such stock dividends and
distributions and any securities into which or for which any or all of such shares may be changed
or exchanged or which are received in such transaction.
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5.4. No Solicitation.
(a) The Stockholder hereby agrees that during the term of this Agreement, except as permitted
by Section 5.4(b), it shall not, and shall use its reasonable best efforts to ensure that any of
its Affiliates or Representatives do not, directly or indirectly, (i) solicit, initiate, knowingly
encourage or facilitate (including by way of furnishing non-public information) the submission of
an Acquisition Proposal or any proposal, offer or inquiry that may reasonably be expected to lead
to an Acquisition Proposal, (ii) participate or enter into or engage in negotiations or discussions
with, or provide any non-public information or data to, any person (other than Parent or any of its
affiliates or representatives) relating to any Acquisition Proposal or any proposal, offer or
inquiry that may reasonably be expected to lead to an Acquisition Proposal, (iii) make or
participate in, directly or indirectly, a “solicitation” of “proxies” (as such terms are used in
the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or
influence any Person with respect to the voting of, any shares of Company Stock in connection with
any vote or other action on any of the Section 3.1(a) Matters, other than to recommend that
stockholders of the Company vote in favor of the adoption of the Merger Agreement and as otherwise
expressly provided in this Agreement or to otherwise vote or consent with respect to Covered Shares
in a manner that would not violate Section 3.1, (iv) vote, approve, adopt or recommend, or publicly
propose to approve, adopt or recommend, any letter of intent, memorandum of understanding,
agreement, option agreement or other agreement relating to an Acquisition Proposal or any proposal,
offer or inquiry that may reasonably be expected to lead to an Acquisition Proposal, or (v) agree
to do any of the foregoing. The Stockholder hereby agrees immediately to cease and cause to be
terminated all existing solicitations, discussions or negotiations with any Person with respect to
any Acquisition Proposal or any offer, proposal or inquiry that may reasonably be expected to lead
to an Acquisition Proposal, and will inform its Affiliates and Representatives of the obligations
undertaken by the Stockholder pursuant to this Agreement, including this Section 5.4(a). If any of
the Stockholder’s Affiliates or Representatives takes any action that the Stockholder is not
permitted to take under this Section 5.4, it shall be deemed to be a breach of this Section 5.4 by
the Stockholder. Notwithstanding anything in this Agreement (including the immediately preceding
sentence) to the contrary, no action taken by the Company or any of its Affiliates or
Representatives in compliance with Section 6.2 of the Merger Agreement shall be a violation by the
Stockholder of this Section 5.4(a).
(b) Notwithstanding anything contained in this Agreement to the contrary, in the event that
the Company Board of Directors exercises its rights under Section 6.2 of the Merger Agreement to
(i) furnish information concerning, and provide access to, the Company’s business, properties,
employees and assets to any Person or Persons (and their Representatives
acting in such capacity), and/or (ii) participate, engage or assist in discussions and
negotiations with any Person or Persons (and their Representatives acting in such capacity), in
each case, in compliance with Section 6.2 of the Merger Agreement, then (x) the Stockholder and its
Representatives likewise may furnish any such information to such Person or Persons, provide such
Person or Persons with any such access, and/or participate, engage or assist in any such
discussions and negotiations with such Person or Persons; provided that any action taken by
the Stockholder shall be taken only in coordination with the Company Board of Directors, and (y) in
connection with the Company’s termination of the Merger Agreement pursuant to Section 9.1(f)
thereof in order to enter into a transaction which is a Superior Proposal, the Stockholder shall be
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entitled to enter into a voting or other support agreement with the Person making the Superior
Proposal, provided that the effectiveness of such agreement shall be conditioned on the
termination of the Merger Agreement in compliance with Section 6.2(c) thereof.
5.5. Notice of Acquisitions; Proposals Regarding Prohibited Transactions. The Stockholder
hereby agrees to notify Parent in writing (a) as promptly as practicable (and in any event within
one business day following such acquisition by the Stockholder) of the number of any additional
shares of Company Stock or other securities of the Company of which the Stockholder acquires
Beneficial Ownership on or after the date hereof and (b) as promptly as practicable (and in any
event within the earlier of (i) one business day or (ii) 48 hours) after receipt by the Stockholder
of any Acquisition Proposal or any offer, proposal or inquiry that may reasonably be expected to
lead to an Acquisition Proposal or after any request for information is sought from or initiated
with the Stockholder, and shall disclose the material terms of such Acquisition Proposal, proposal,
offer or inquiry, including the identity of the Person or Persons making such Acquisition Proposal,
proposal, offer or inquiry (unless prohibited by the confidentiality agreement with such Person)
and provide a copy thereof if in writing and any related available material documentation or
correspondence. The Stockholder will keep Parent informed on a prompt basis of the status and any
material discussions or negotiations (including material amendments and proposed material
amendments) relating to any Acquisition Proposal or any such offer, proposal or inquiry.
5.6. Stockholder Profit.
(a) In the event that the Merger Agreement shall have been terminated under circumstances in
which a Termination Fee is payable or may be payable by the Company to Parent with respect to such
termination upon the occurrence of certain events specified in the Merger Agreement, but in each
case, subject to such Termination Fee actually becoming payable under the Merger Agreement, the
Stockholder shall pay to Parent an amount equal to 50% of the Stockholder’s profit (determined in
accordance with Section 5.6(b) below) from the sale or other Transfer of any Covered Shares
pursuant to an Acquisition Proposal (including a Superior Proposal) so long as the agreement with
respect to such Acquisition Proposal is entered into or such Acquisition Proposal is consummated
within 12 months of the termination of this Agreement. Payment shall be made promptly upon the
receipt by the Stockholder of the proceeds from such sale or other disposition and shall only be
required to be paid if such sale or other disposition is completed or, if later, when the
Termination Fee is paid.
(b) For purposes of this Section 5.6, the profit of the Stockholder shall equal (A) the
aggregate consideration for or on account of the Covered Shares that were sold or otherwise
Transferred as described in Section 5.6(a) including extraordinary distributions directly or
indirectly made in connection with any Acquisition Proposal, valuing any non-cash consideration
(including any residual interest in the Company) at its fair market value on the date of such
consummation, less (B) the product of (x) $11.50 and (y) the number of Covered Shares so sold or
otherwise Transferred by the Stockholder.
(c) For purposes of this Section 5.6, the fair market value of any non-cash consideration
consisting of:
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(i) securities listed on a national securities exchange or traded or quoted on the
Nasdaq (“Traded Securities”) shall be equal to the average closing price per share
of such security as reported on the composite trading system of such exchange or by Nasdaq
for the five trading days ending on the trading day immediately prior to the date of the
value determination (the “Valuation Period”); and
(ii) consideration which is other than cash or Traded Securities shall be determined by
a nationally recognized independent investment banking firm mutually agreed upon by Parent
and the Stockholder within ten business days of the event requiring selection of such
banking firm; provided, however, that if the parties are unable to agree
within two business days after the date of such event as to the investment banking firm,
then the parties shall each select one firm, and those firms shall select a third investment
banking firm, which third firm shall make such determination; provided,
further, that the fees and expenses of such investment banking firm shall be borne
equally by Parent and the Stockholder. The determination of the investment-banking firm
shall be binding upon the parties.
(d) Any payment of profit under this Section 5.6 shall be paid in the same proportion of cash
and non-cash consideration as the aggregate consideration received by the Stockholder in the
Acquisition Proposal or other disposition.
(e) In the event that the Merger Agreement shall have been terminated under circumstances in
which a Termination Fee is payable or may be payable by the Company to Parent with respect to such
termination upon the occurrence of certain events specified in the Merger Agreement, then the
Stockholder shall not, until the 12-month anniversary of the termination of this Agreement,
Transfer any of the Covered Shares (i) to its limited partners or (ii) to any of its Affiliates
unless such Affiliate agrees in writing to be bound by the provisions of this Section 5.6.
(f) Neither the Stockholder nor Parent shall, and each shall use its reasonable best efforts
to ensure that its respective Affiliates do not, engage in any Prohibited Activity with respect to
any subject Traded Securities during an applicable Valuation Period. “Prohibited Activity”
means any acquisition or disposition, in open market transactions, private transactions or
otherwise, during the Valuation Period of any of the subject Traded Securities or any securities
convertible into or exchangeable for or derivative of the subject Traded Securities or
any other action, in the case of any of the foregoing, taken intentionally for the purpose of
manipulating the price of the subject Traded Securities during the Valuation Period.
5.7. Release. From and after the Effective Time, the Stockholder finally and forever
releases Parent and the Company, and their respective successors, assigns, officers, directors,
employees and all affiliates and Subsidiaries, past and present, of Parent and the Company (the
“Releasees”) from each and every agreement, commitment, indebtedness, obligation and claim
of every nature and kind whatsoever, known or unknown, suspected or unsuspected (each, a
“Claim” and collectively, the “Claims”) that (A) the Stockholder may have had in
the past, may have as of the date hereof or, to the extent arising from or in connection with any
act, omission or state of facts taken or existing on or prior to the date hereof, may have after
the date hereof against any of the Releasees and (B) has arisen or arises directly out of the
Stockholder’s interest
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as a stockholder of the Company or any of its Subsidiaries; except with
respect to any such Claims arising under this Agreement, the Merger Agreement, the Registration
Rights Agreement and the transactions contemplated hereby and thereby, and any Claim by the
Stockholder for failure by the Company to pay all accrued and unpaid dividends on the Company
Convertible Preferred Stock prior to the Operative Date.
5.8. Waiver of Appraisal Rights. The Stockholder agrees not to exercise any rights of
appraisal or any dissenters’ rights that the Stockholder may have (whether under applicable Law or
otherwise) or could potentially have or acquire in connection with the Merger.
5.9. Further Assurances. From time to time, at Parent’s request and without further
consideration, the Stockholder shall execute and deliver such additional documents and take all
such further action as may be reasonably necessary to effect the actions and consummate the
transactions contemplated by this Agreement.
5.10. Disclosure. Neither Parent, the Company nor the Stockholder will issue any
press release or make any other public statement, and shall not authorize or permit any of its
Subsidiaries or Affiliates or any of its or their Representatives to issue any press release or
make any other public statement with respect to the Merger Agreement, this Agreement, the
Registration Rights Agreement or any of the transactions contemplated by the Merger Agreement, this
Agreement or the Registration Rights Agreement without the prior written consent of the other
parties hereto (such consent not to be unreasonably withheld, conditioned or delayed), except as
may be required by Law or by any listing requirement with the Nasdaq or the Toronto Stock Exchange,
including any filings required under the Securities Act or the Exchange Act.
5.11. Meeting Rights. During the Lock-Up Period, the Stockholder shall be entitled to
meet one time in each calendar quarter with the Chief Executive Officer and the Chief Financial
Officer of Parent (the “Meeting Right”). The Stockholder may exercise the Meeting Right by
providing written notice to Parent at least ten business days in advance of any such meeting. The
time, place and method of each meeting shall be as reasonably agreed by the parties. The
Other Stockholder shall be entitled to attend any such meeting.
5.12. Rule 144. Parent agrees to use its reasonable best efforts to file all reports
required to be filed by it under the Exchange Act to the extent required to enable the Stockholder,
after the expiration of the Lock-Up Period, to sell the Parent Common Stock pursuant to and in
accordance with Rule 144.
5.13. Affiliate Agreements. The Stockholder shall take all actions necessary to cause
(a) the Registration Rights Agreement, dated as of March 19, 2004, by and among the Company, the
Stockholder, the Other Stockholder, and such other persons who became signatories thereto as
provided therein and (b) the Management Rights Letter, dated as of March 19, 2004, by and between
the Stockholder and the Company to be terminated (without any payment), effective as of and
contingent upon the earlier to occur of the Acceptance Date and the Effective Time, such that such
agreements shall be of no further force or effect immediately thereafter. The Stockholder has
approved the Certificate of Amendment. The Stockholder hereby waives its right of first offer
under the Amended and Restated Preferred Stock Purchase Agreement, dated
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as of November 26, 2003,
by and between the Company and the Stockholder, in connection with the Merger Agreement and the
transactions contemplated thereby.
ARTICLE VI
MISCELLANEOUS
6.1. Termination. This Agreement shall remain in effect until the earliest to occur of
(i) the termination of the Merger Agreement in accordance with its terms, and (ii) the delivery of
written notice of termination by the Stockholder to Parent following any Fundamental Amendment
effected without the prior written consent of the Stockholder, and upon the occurrence of the
earliest of such events this Agreement shall terminate and be of no further force;
provided, however, that the provisions of Section 5.6, this Section 6.1, the last
sentence of Section 6.2(a) and Sections 6.4 through 6.13 shall survive any termination of this
Agreement. Nothing in this Section 6.1 and no termination of this Agreement shall relieve or
otherwise limit any party of liability for willful breach of this Agreement. “Fundamental
Amendment” means the execution by the Company, Parent, US Corp. and Merger Sub of an amendment
to, or waiver by the Company, Parent, US Corp. or Merger Sub of any provision of, the Offer or the
Merger Agreement that reduces the amount of the Offer Price or the Merger Consideration, changes
the form of the Offer Price or the Merger Consideration to include or substitute therefor a form
other than cash and Parent Common Stock, or decreases the ratio of cash to Parent Common Stock
included in the Offer Price or the Merger Consideration. If the Stockholder does not exercise the
termination right described above within five business days following the date the Stockholder is
notified that such Fundamental Amendment is effected, then this Agreement shall give effect to any
modified terms incorporated from the Merger Agreement and, except as so modified, shall continue in
full force and effect.
6.2. Legends; Stop Transfer Order.
(a) In furtherance of this Agreement, the Stockholder hereby authorizes and instructs the
Company to instruct its transfer agent to enter a stop transfer order with respect to all of the
Covered Shares held of record by the Stockholder and to legend the share certificates. The Company
agrees that as promptly as practicable after the date of this Agreement it shall give such stop
transfer instructions to the transfer agent for the Company Stock and to legend the share
certificates. The Company agrees that, (i) if this Agreement is terminated in accordance with
Section 6.1, then, promptly following the termination of this Agreement, (ii) if Merger Sub accepts
the Covered Shares for payment pursuant to the terms of the Offer, then, concurrently with such
acceptance (and in any event within such time as would not delay receipt by the Stockholder of the
Offer Price), or (iii) if the transactions contemplated by the Merger Agreement are effected as a
One Step Merger, then, immediately following the Closing (and in any event within such time as
would not delay receipt by the Stockholder of the Merger Consideration), the Company will cause any
stop transfer instructions imposed pursuant to this Section 6.2 to be lifted and any legended
certificates delivered pursuant to this Section 6.2 to be replaced with certificates not bearing
such legend.
(b) Each certificate representing Covered Shares held of record by the Stockholder shall bear
the following legend on the face thereof:
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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON VOTING,
TRANSFER AND CERTAIN OTHER LIMITATIONS SET FORTH IN THAT CERTAIN STOCKHOLDER AGREEMENT DATED AS OF
FEBRUARY 25, 2008, AMONG
SXC HEALTH SOLUTIONS CORP., NEW MOUNTAIN PARTNERS, L.P. AND NATIONAL
MEDICAL HEALTH CARD SYSTEMS, INC., AS THE SAME MAY BE AMENDED FROM TIME TO TIME, COPIES OF WHICH
STOCKHOLDER AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF NATIONAL MEDICAL HEALTH CARD SYSTEMS,
INC.”
The Stockholder will cause all of its Existing Shares held of record by the Stockholder and
any securities that become Covered Shares held of record by the Stockholder after the date hereof
to be delivered to the Company for the purpose of applying such legend (if not so endorsed upon
issuance). The Company shall return to the delivering party, as promptly as possible, any
securities so delivered. The delivery of such securities by the delivering party shall not in any
way affect such party’s rights with respect to such securities.
6.3. No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in
Parent any direct or indirect ownership or incidence of ownership of or with respect to any Covered
Shares, except as otherwise provided herein. All rights, ownership and economic benefits of and
relating to the Covered Shares shall remain vested in and belong to the Stockholder, and Parent
shall have no
authority to direct the Stockholder in the voting or disposition of any of the Covered Shares,
except as otherwise provided herein.
6.4. Notices.
(a) All notices and other communications hereunder shall be in writing and shall be deemed
given if delivered personally, by facsimile (upon telephonic confirmation of receipt), on the first
business day following the date of dispatch if delivered by a recognized next day courier service
or on the third business day following the date of mailing if delivered by registered or certified
mail, return receipt requested, post prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in writing in accordance
with this Section 6.4 by the party to receive such notice.
SXC Health Solutions Corp.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Chief Financial Officer
Sidley Austin LLP
0 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
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Attention: Xxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
|
(ii) |
|
if to the Company, to: |
National Medical Health Card Systems, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx XxXxxx, Esq.
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: J. Xxxxx Xxxxxx, Esq.
Xxxxxxxx X. Xxxxxx, Esq.
|
(iii) |
|
if to the Stockholder, to: |
New Mountain Partners, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxx
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx LLP
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
(b) A copy of all notices and other communications from Parent or Merger Sub to the Company
(and vice versa) under the Merger Agreement shall be sent at the same time to the Stockholder at
the above address, with a copy to its counsel at the above address, and the provisions of this
Section 6.4 shall apply to such notices and communications; provided that no failure to
provide such notice to the Stockholder shall relieve the Stockholder of its obligations under this
Agreement.
6.5. Interpretation. The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to this Agreement unless
otherwise specified. Whenever the words “include,” “includes” or “including” are used in this
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Agreement, they shall be deemed to be followed by the words “without limitation.” The meanings
given to terms defined herein shall be equally applicable to both the singular and plural forms of
such terms. The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This
Agreement is the product of negotiation by the parties having the assistance of counsel and other
advisers. It is the intention of the parties that this Agreement not be construed more strictly
with regard to one party than with regard to the others.
6.6. Counterparts. This Agreement may be executed by facsimile and in counterparts, all of
which shall be considered one and the same agreement and shall become effective when counterparts
have been signed by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
6.7. Entire Agreement. This Agreement, the Registration Rights Agreement and, to the extent referenced herein, the
Merger Agreement, together with the several agreements and other documents and instruments referred
to herein or therein or annexed hereto or thereto, embody the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and supersede and preempt any
prior understandings, agreements or representations by or among the parties, written and oral, that
may have related to the subject matter hereof in any way.
6.8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. (a) This
Agreement, and all claims or causes of action (whether at law, in contract or in tort) that may be
based upon, arise out of or relate to this Agreement or the negotiation, execution or performance
hereof, shall be governed by and construed in accordance with the Laws of the State of Delaware,
without giving effect to any choice or conflict of Law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of Delaware. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the Court of Chancery of the State of Delaware (and any appellate
court of the State of Delaware) and the Federal courts of the United States of America located in
the State of Delaware, this being in addition to any other remedy to which they are entitled at law
or in equity. Each of the parties hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any Action with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to lawfully serve process, (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced in such courts
(whether through service of notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted by
applicable Law, that (i) the Action in any such court is brought in an inconvenient forum, (ii) the
venue of such Action is improper or (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
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(b) Each party hereto hereby waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any Action arising out of or relating to this
Agreement. Each party hereto (i) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such party would not, in the event of any
Action, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties
hereto have been induced to enter into this Agreement, by, among other things, the mutual waiver
and certifications in this Section 6.8.
6.9. Amendment; Waiver; Expenses.
(a) This Agreement may not be amended except by an instrument in writing signed by each of the
parties hereto. Each party may waive any right of such party hereunder by
an instrument in writing signed by such party and delivered to Parent, the Company and the
Stockholder.
(b) The Stockholder agrees that it is solely responsible (without reimbursement from the
Company) for all costs and expenses (including all fees and expenses of counsel) incurred by the
Stockholder in connection with this Agreement and the Registration Rights Agreement.
6.10. Remedies. All rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not alternative, and the
exercise or beginning of the exercise of any thereof by any party shall not preclude the
simultaneous or later exercise of any other such right, power or remedy by such party.
6.11. Severability. Any term or provision of this Agreement which is determined by a court
of competent jurisdiction to be invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering
invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction, and if any provision of this Agreement is determined to be so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is enforceable, in all
cases so long as neither the economic nor legal substance of the transactions contemplated hereby
is affected in any manner adverse to any party or its stockholders or partners, as applicable.
Upon any such determination, the parties shall negotiate in good faith in an effort to agree upon a
suitable and equitable substitute provision to effect the original intent of the parties as closely
as possible and to the end that the transactions contemplated hereby shall be fulfilled to the
maximum extent possible.
6.12. Successors and Assigns; Third Party Beneficiaries. Neither this Agreement nor any of
the rights or obligations of any party under this Agreement shall be assigned, in whole or in part
(by operation of law or otherwise), by any party without the prior written consent of the other
parties hereto. Subject to the foregoing, this Agreement shall bind and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer on any Person other than the
parties hereto or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
C-19
6.13. Stockholder Capacity. The restrictions and covenants of the Stockholder hereunder
shall not be binding, and shall have no effect, in any way with respect to any director or officer
of the Company or any of its Subsidiaries in such Person’s capacity as such a director or officer,
nor shall any action taken by any such director or officer in his or her capacity as such be deemed
a breach by the Stockholder of this Agreement.
[Remainder of this page intentionally left blank]
C-20
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SXC HEALTH SOLUTIONS CORP. |
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By:
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Name:
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Title:
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NEW MOUNTAIN PARTNERS, L.P. |
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By:
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New Mountain Investments, L.P., |
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its general partner |
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By:
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New Mountain GP, LLC, |
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its general partner |
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By:
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NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. |
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By:
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C-21
ANNEX A
IRREVOCABLE PROXY
Dated as of February 25, 2008
The undersigned Stockholder (the “Stockholder”) of National Medical Health Card
Systems, Inc., a Delaware corporation (the “Company”), hereby irrevocably (to the fullest
extent permitted by law) appoints Xxxxxx Xxxxx and Xxxxxxx Xxxx, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and resubstitution, to
vote and exercise all voting and related rights (to the full extent that the undersigned is
entitled to do so) with respect to all of the shares of capital stock of the Company that now are
or hereafter may be beneficially owned by the undersigned, and any and all other shares or
securities of the Company issued or issuable in respect thereof on or after the date hereof
(collectively, the “Covered Shares”), in accordance with the terms of this Proxy. The
Covered Shares beneficially owned by the Stockholder as of the date of this Proxy are listed on the
signature page of this Proxy, along with the number(s) of the stock certificate(s) representing
such Covered Shares. Upon the Stockholder’s execution of this Proxy, any and all prior proxies
given by the undersigned with respect to any Covered Shares are hereby revoked and terminated, and
the Stockholder agrees not to grant any subsequent proxies with respect to the Covered Shares, with
respect to any of the matters referred to in any of clauses (a) through (c) below until after the
Expiration Time (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by law), is coupled with an
interest and is granted pursuant to that certain Stockholder Agreement of even date herewith (the
“Stockholder Agreement”) by and among SXC Health Solutions Corp., a corporation organized
under the laws of Yukon Territory, Canada (“Parent”), the Company and the undersigned
Stockholder of the Company, and is granted in consideration of Parent entering into that certain
Agreement and Plan of Merger of even date herewith (as it may hereafter be amended from time to
time in accordance with the provisions thereof, the “Merger Agreement”) by and among
Parent, SXC Health Solutions, Inc., a Texas corporation (“US Corp.”), Comet Merger
Corporation, a newly-formed Delaware corporation that is wholly-owned by US Corp. and an indirect
wholly-owned subsidiary of Parent (“Merger Sub”), and the Company. The Merger Agreement
provides that Merger Sub will commence an exchange offer (the “Offer”) to acquire all of
the outstanding shares of common stock, par value $0.001 per share, of the Company (“Company
Common Stock”), and following the consummation of the Offer (or, subject to certain conditions,
in lieu thereof), Merger Sub will merge with and into the Company (the “Merger”) and the
Stockholder will be entitled to receive the merger consideration specified therein. The term
“Expiration Time”, as used in this Proxy, shall mean the earliest to occur of (i) the
Operative Date, (ii) the termination of the Merger Agreement in accordance with its terms, and
(iii) the termination of the Stockholder Agreement in accordance with its terms.
The attorneys and proxies named above, and each of them, are hereby authorized and empowered
by the Stockholder, at any time prior to the Expiration Time, to act as the Stockholder’s attorney
and proxy to vote all of the Covered Shares (or, if applicable, only such portion of the Covered
Shares as is provided in Section 3.1(b) of the Stockholder Agreement), and to exercise all voting,
consent and similar rights of the undersigned with respect to all of the
C-22
Covered Shares (or, if applicable, only such portion of the Covered Shares as is provided in
Section 3.1(b) of the Stockholder Agreement) (including, without limitation, the power to execute
and deliver written consents) at every annual or special meeting of stockholders of the Company
(and at every adjournment or postponement thereof), and in every written consent in lieu of such
meeting:
(a) in favor of the adoption of the Merger Agreement and any related proposal in furtherance
thereof, as reasonably requested by Parent, submitted for the vote or written consent of
stockholders;
(b) against any action or agreement submitted for the vote or written consent of stockholders
that the Stockholder knows is in opposition to, or competitive or materially inconsistent with, the
Offer or the Merger or that the Stockholder knows would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company contained in the
Merger Agreement, or of the Stockholder contained in the Stockholder Agreement; and
(c) against any Acquisition Proposal (as defined in the Merger Agreement) and against any
other action, agreement or transaction submitted for the vote or written consent of stockholders
that the Stockholder knows would impede, interfere with, delay, postpone, discourage, frustrate the
purposes of or adversely affect the Offer or the Merger or the other transactions contemplated by
the Merger Agreement or the Stockholder Agreement or the performance by the Company of its
obligations under the Merger Agreement or by the Stockholder of its obligations under the
Stockholder Agreement, including, but not limited to: (A) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the Company or any
subsidiary of the Company; (B) any sale, lease or transfer of a material amount of assets of the
Company (including capital stock or other equity interests in its Subsidiaries) or any subsidiary
of the Company; (C) any reorganization, recapitalization, dissolution or liquidation of the Company
or any subsidiary of the Company; (D) any change in a majority of the board of directors of the
Company; (E) any amendment to the Company’s certificate of incorporation or bylaws (except for any
amendment to increase the authorized capital stock); and (F) any change in the capitalization of
the Company or the Company’s corporate structure.
Any term or provision of this Proxy that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in any other situation
or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares
that any term or provision hereof is invalid or unenforceable, the Stockholder agrees that the
court making such determination shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Proxy shall be enforceable as so modified.
In the event such court does not exercise the power granted to it in the prior sentence, the
Stockholder agrees to replace such invalid or unenforceable term or provision with
C-23
a valid and enforceable term or provision that will achieve, to the extent possible, the economic,
business and other purposes of such invalid or unenforceable term.
The restrictions and covenants of the Stockholder hereunder shall not be binding, and shall
have no effect, in any way with respect to any director or officer of the Company or any of its
Subsidiaries in such Person’s capacity as such a director or officer, nor shall any action taken by
any such director or officer in his or her capacity as such be deemed a breach by the Stockholder
of this Proxy.
Any obligation of the Stockholder hereunder shall be binding upon the successors and assigns
of the Stockholder.
This Proxy shall terminate, and be of no further force and effect, automatically upon the
Expiration Time.
[signature page follows]
C-24
COUNTERPART SIGNATURE PAGE
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NEW MOUNTAIN PARTNERS, L.P. |
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By:
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New Mountain Investments, L.P., |
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its general partner |
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By:
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New Mountain GP, LLC, |
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its general partner |
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By:
Name:
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Title:
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NUMBER OF OUTSTANDING SHARES OF COMPANY STOCK BENEFICIALLY OWNED BY THE
STOCKHOLDER:
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SERIES A 7% CONVERTIBLE PREFERRED STOCK
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6,790,797 |
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COMMON STOCK
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6,790,797 (upon conversion) |
New Mountain Partners, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx LLP
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
C-25
STOCKHOLDER AGREEMENT
BY AND AMONG
SXC HEALTH SOLUTIONS CORP.,
NEW MOUNTAIN AFFILIATED INVESTORS, L.P.,
AND
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
DATED AS OF FEBRUARY 25, 2008
C-26
INDEX OF DEFINED TERMS
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Agreement |
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1 |
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Beneficial Ownership |
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Beneficially Own |
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2 |
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Beneficially Owned |
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2 |
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Claims |
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Company |
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1 |
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Company Common Stock |
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1 |
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Company Convertible Preferred Stock |
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1 |
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Company Stock |
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1 |
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Covered Shares |
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2 |
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Depositary |
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3 |
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Encumbrance |
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2 |
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Existing Shares |
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2 |
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Fundamental Amendment |
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12 |
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Grantees |
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5 |
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Lock-Up Period |
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8 |
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Merger |
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1 |
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Merger Agreement |
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1 |
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Merger Sub |
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1 |
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Offer |
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Operative Date |
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2 |
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Other Stockholder |
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2 |
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Parent |
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1 |
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Prohibited Activity |
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11 |
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Registration Rights Agreement |
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Releasees |
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11 |
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Section 3.1(a) Matters |
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5 |
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Stockholder |
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1 |
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Tender Documents |
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3 |
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Traded Securities |
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10 |
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Transfer |
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US Corp. |
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Valuation Period |
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10 |
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C-27
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of February 25, 2008 (this “Agreement”), by and among
SXC Health Solutions Corp., a corporation organized under the laws of Yukon Territory, Canada
(“Parent”), New Mountain Affiliated Investors, L.P., a Delaware limited partnership (the
“Stockholder”), and National Medical Health Card Systems, Inc., a Delaware corporation (the
“Company”).
WHEREAS, concurrently with the execution of this Agreement, Parent, SXC Health Solutions,
Inc., a Texas corporation (“US Corp.”), Comet Merger Corporation, a newly-formed Delaware
corporation that is wholly-owned by US Corp. and an indirect wholly-owned subsidiary of Parent
(“Merger Sub”), and the Company are entering into an Agreement and Plan of Merger, dated as
of the date hereof (as amended, supplemented, restated or otherwise modified from time to time, the
“Merger Agreement”) pursuant to which, among other things, Merger Sub will commence an
exchange offer (the “Offer”) to acquire all of the outstanding shares of common stock, par
value $0.001 per share, of the Company (“Company Common Stock”), and following the
consummation of the Offer (or, subject to certain conditions, in lieu thereof), Merger Sub will
merge with and into the Company (the “Merger”) and each outstanding share of Company Common
Stock and each outstanding share, if any, of the Company’s Series A 7% Convertible Preferred Stock,
par value $0.10 per share (“Company Convertible Preferred Stock”, and together with the
Company Common Stock, “Company Stock”), will be converted into the right to receive the
merger consideration specified therein.
ARTICLE I
GENERAL
1.1. Defined Terms. The following capitalized terms, as used in this Agreement, shall have the meanings set forth
below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed
thereto in the Merger Agreement.
C-28
“Beneficial Ownership” by a Person of any securities includes ownership by any Person
who, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares (i) voting power which includes the power to vote, or to direct the voting
of, such security; and/or (ii) investment power which includes the power to dispose, or to direct
the disposition, of such security; and shall otherwise be interpreted in accordance with the term
“beneficial ownership” as defined in Rule 13d-3 adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended; provided that for purposes of
determining Beneficial Ownership, a Person shall be deemed to be the Beneficial Owner of any
securities which such Person has, at any time during the term of this Agreement, the right to
acquire pursuant to any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise (irrespective of whether the right to
acquire such securities is exercisable immediately or only after the passage of time, including the
passage of time in excess of 60 days, the satisfaction of any conditions, the occurrence of any
event or any combination of the foregoing). The terms “Beneficially Own” and
“Beneficially Owned” shall have a correlative meaning.
“Covered Shares” means, with respect to the Stockholder, the Stockholder’s Existing
Shares, together with any shares of Company Stock or other voting capital stock of the Company and
any securities convertible into or exercisable or exchangeable for shares of Company Stock or other
voting capital stock of the Company, in each case, that the Stockholder acquires Beneficial
Ownership of on or after the date hereof.
“Encumbrance” means any security interest, pledge, mortgage, lien (statutory or
other), charge, option to purchase, lease or other right to acquire any interest or any claim,
restriction, covenant, title defect, hypothecation, assignment, deposit arrangement or other
encumbrance of any kind or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or other title
retention agreement), excluding restrictions under securities laws and excluding any Encumbrance
set forth in the Certificate of Designations.
“Existing Shares” means, with respect to the Stockholder, the number of shares of
Company Stock Beneficially Owned and owned of record by the Stockholder, as set forth in the
recitals.
“Operative Date” means the Acceptance Date, if the transactions contemplated by the
Merger Agreement are effected by means of the Offer followed by the Second Step Merger, and means
the Closing, if the transactions contemplated by the Merger Agreement are effected as a One Step
Merger.
“Other Stockholder” means New Mountain Partners, L.P., a Delaware limited partnership
and the holder of the outstanding shares of Company Convertible Preferred Stock not held by the
Stockholder.
“Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber,
hypothecate or similarly dispose of (by merger (including by conversion into securities or other
consideration), by tendering into any tender or exchange offer, by operation of law or otherwise),
either voluntarily or involuntarily, or to enter into any contract, option or other
C-29
arrangement or
understanding with respect to the voting of or sale, transfer, assignment, pledge, encumbrance,
hypothecation or similar disposition of (by merger, by tendering into any tender or exchange offer,
by operation of law or otherwise) (but does not include any conversion of the Company Convertible
Preferred Stock into Company Common Stock after the Certificate of Amendment has become effective).
ARTICLE II
TENDERING
2.1. Agreement to Tender.
(a) The Stockholder hereby agrees that, within five business days after commencement of the
Offer, the Stockholder shall validly tender or cause to be tendered in the Offer all of the shares
of Company Stock represented by the Stockholder’s Covered Shares pursuant to and in accordance with
the terms of the Offer, by delivering to the depositary designated in the Offer (the
“Depositary”) (i) an executed letter of transmittal with respect to the Covered Shares,
(ii) a certificate or certificates representing the Covered Shares, (iii) all other documents or
instruments required to be delivered pursuant to the terms of the Offer, and (iv) a letter of
instruction signed by the Stockholder instructing the Company to convert the Covered Shares into
Company Common Stock effective upon receipt of a certificate from an executive officer of Parent
stating that (1) all of the conditions to the Offer (other than the Minimum Condition) have been
satisfied or waived, (2) upon the conversion by the Stockholder of its Covered Shares into Company
Common Stock and the conversion by the Other Stockholder of the shares of Company Stock owned by it
into Company Common Stock, the Minimum Condition will have been satisfied, and (3) Merger Sub
stands ready to, and will, immediately following such conversion by the Stockholder and the Other
Stockholder, accept for payment all shares of Company Common Stock validly tendered in the Offer
and not theretofore withdrawn (all of the foregoing documents, the “Tender Documents”).
(b) The Stockholder hereby agrees that once the Tender Documents shall have been delivered to
the Depositary, the Stockholder will not withdraw, nor permit the withdrawal of, any Tender
Documents from the Offer, unless and until (i) the Offer shall have been terminated by Merger Sub
in accordance with the terms of the Merger Agreement, or (ii) this Agreement shall have been
terminated in accordance with Section 6.1.
(c) Notwithstanding the provisions of Sections 2.1(a) and 2.1(b), in the event of a Change in
Recommendation made in compliance with the Merger Agreement, the obligation of the Stockholder to
tender and not withdraw its Covered Shares in the manner set forth in this Section 2.1 shall
terminate automatically without any further action by any party, and the Stockholder may or may not
tender all or any portion of its Covered Shares in the Offer, and may withdraw from the Offer all
or any portion of its Covered Shares that it may previously have tendered, as the Stockholder, in
its sole discretion, determines.
C-30
ARTICLE III
VOTING
3.1. Agreement to Vote.
(a) The Stockholder hereby irrevocably and unconditionally agrees that during the period
beginning on the date hereof and ending on the earliest of (x) the Operative Date, (y) the
termination of the Merger Agreement in accordance with its terms or (z) the termination of this
Agreement in accordance with its terms, at the Company Stockholders Meeting and at any other
meeting of the stockholders of the Company, however called, including any adjournment or
postponement thereof, and in connection with any written consent of the stockholders of the
Company, the Stockholder shall, in each case, to the fullest extent that such matters are submitted
for the vote or written consent of the Stockholder and that the Covered Shares are entitled to vote
thereon or consent thereto:
(i) appear at each such meeting or otherwise cause the Covered Shares as to which the
Stockholder controls the right to vote to be counted as present thereat for purposes of
calculating a quorum; and
(ii) vote (or cause to be voted), in person or by proxy, or deliver (or cause to be
delivered) a written consent covering, all of the Covered Shares as to which the Stockholder
controls the right to vote (i) in favor of the adoption of the Merger Agreement and any
related proposal in furtherance thereof, as reasonably requested by Parent, submitted for
the vote or written consent of stockholders; (ii) against any action or agreement submitted
for the vote or written consent of stockholders that the Stockholder knows is in opposition
to, or competitive or materially inconsistent with, the Offer or the Merger or that the
Stockholder knows would result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company contained in the Merger Agreement, or of
the Stockholder contained in this Agreement; and (iii) against any Acquisition Proposal and
against any other action, agreement or transaction submitted for the vote or written consent
of stockholders that the Stockholder knows would impede, interfere with, delay, postpone,
discourage, frustrate the purposes of or adversely affect the Offer, the Merger or the other
transactions contemplated by the Merger Agreement or this Agreement or the performance by
the Company of its obligations under the Merger Agreement or by the Stockholder of its
obligations under this Agreement, including, but not limited to: (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business combination
involving the Company or any subsidiary of the Company; (B) any sale, lease or transfer of a
material amount of assets of the Company (including capital stock or other equity interest
in its Subsidiaries) or any subsidiary of the Company; (C) any reorganization,
recapitalization, dissolution or liquidation of the Company or any subsidiary of the
Company; (D) any change in a majority of the board of directors of the Company; (E) any
amendment to the Company’s certificate of incorporation or bylaws (except for any amendment
to increase the authorized capital stock); and (F) any change in the capitalization of the
Company or the Company’s corporate structure.
C-31
Any such vote shall be cast (or consent shall be given) by the Stockholder in accordance with such
procedures relating thereto so as to ensure that it is duly counted, including for purposes of
determining whether a quorum is present.
(b) Notwithstanding the provisions of Section 3.1(a), in the event of a Change in
Recommendation made in compliance with the Merger Agreement, the obligation of the Stockholder to
vote (or cause to be voted), or to deliver (or cause to be delivered) a written consent with
respect to, the Covered Shares in the manner set forth in this Section 3.1 shall terminate,
together with the authority of each of the proxies set forth in Section 3.3, and the Stockholder
may vote (or cause to be voted), or deliver (or cause to be delivered) a written consent with
respect to, the Covered Shares as the Stockholder, in its sole discretion, determines.
3.2. No Inconsistent Agreements. The Stockholder hereby covenants and agrees that,
except for this Agreement or as set forth in Section 7 of the Certificate of Designations, and
except as may be permitted by Section 5.4(b), it (a) has not entered into, and shall not enter into
at any time while this Agreement remains in effect, any voting agreement or voting trust with
respect to the Covered Shares with respect to any of the matters described in Section 3.1(a)(ii)
(the “Section 3.1(a) Matters”), (b) has not granted, and shall not grant at any time while
this Agreement remains in effect (except pursuant to Section 3.3), a proxy, consent or power of
attorney with respect to the Covered Shares with respect to any of the Section 3.1(a) Matters and
(c) has not knowingly taken and shall not knowingly take any action that would make any
representation or warranty of the Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling the Stockholder from performing any of its obligations under this
Agreement.
3.3. Proxy. Without in any way limiting the Stockholder’s right to vote the Covered Shares
in its sole discretion on any matters other than the Section 3.1(a) Matters that may be submitted
to a stockholder vote, consent or other approval, the Stockholder hereby irrevocably appoints as
its proxy and attorney-in-fact, Xxxxxx Xxxxx and Xxxxxxx Xxxx, pursuant to a proxy to be delivered
to Parent substantially in the form attached hereto as Annex A, in their respective capacities as
officers of Parent, and any individual who shall hereafter succeed to any such officer of Parent,
and any other Person designated in writing by Parent (collectively, the “Grantees”), each
of them individually, with full power of substitution, to vote or execute written consents with
respect to the Covered Shares as to which the Stockholder controls the right to vote in accordance
with Section 3.1 and, in the discretion of the Grantees, with respect to any proposed postponements
or adjournments of any annual or special meeting of the stockholders of the Company at which any of
the Section 3.1(a) Matters was to be considered. This proxy is coupled with an interest and shall
be irrevocable until the earliest of (i) the Operative Date, (ii) a Change in Recommendation, (iii)
the termination of the Merger Agreement in accordance with its terms, or (iv) the termination of
this Agreement in accordance with its terms, in which event this proxy shall automatically be
revoked without any further action by any party. The Stockholder will take such further action or
execute such other instruments as may be necessary to effectuate the intent of this proxy and
hereby revokes any proxy previously granted by it with respect to the Covered Shares with respect
to any of the Section 3.1(a) Matters. So long as the proxy granted under this Section 3.3 is a
valid uncontested proxy that is effective to deliver the
votes of the Covered Shares, the Stockholder shall be deemed to be fulfilling its obligations under
Section 3.1. If Parent believes that such proxy is not a valid proxy or if Parent otherwise
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does not wish to utilize the proxy, Parent will so notify the Stockholder in writing so that the
Stockholder will be able to perform its obligations under Section 3.1.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Stockholder. The Stockholder hereby represents
and warrants to Parent as follows:
(a) Organization; Authorization; Validity of Agreement; Necessary Action . The
Stockholder is duly organized and is validly existing and in good standing under the laws of the
jurisdiction of its formation. The Stockholder has full power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery by the Stockholder of this Agreement, the
performance by it of its obligations hereunder and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by the Stockholder and no other actions
or proceedings on the part of the Stockholder or any stockholder thereof are necessary to authorize
the execution and delivery by it of this Agreement, the performance by it of its obligations
hereunder or the consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Stockholder and, assuming this Agreement constitutes a
valid and binding obligation of the other parties hereto, constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(b) Ownership. The Stockholder’s Existing Shares are, and all of the Covered Shares
owned by the Stockholder from the date hereof through and on the Operative Date will be,
Beneficially Owned and owned of record by the Stockholder, except that, in the case of the Offer,
the Company Convertible Preferred Stock will have been converted into Company Common Stock in
accordance with the terms of this Agreement. The Stockholder has good and marketable title to the
Stockholder’s Existing Shares, free and clear of any Encumbrances. As of the date hereof, the
Stockholder’s Existing Shares constitute all of the shares of Company Stock Beneficially Owned or
owned of record by the Stockholder. Except for the rights granted to Parent hereby, the
Stockholder has and will have at all times through the Operative Date sole voting power (including
the right to control such vote as contemplated herein) with respect to the Section 3.1(a) Matters,
sole power of disposition, sole power to issue instructions with respect to the Section 3.1(a)
Matters, and sole power to agree to all of the matters set forth in this Agreement, in each case,
with respect to all of the Stockholder’s Existing Shares and with respect to all of the Covered
Shares owned by the Stockholder at all times through the Operative Date.
(c) No Violation. The execution, delivery and performance of this Agreement by the
Stockholder does not and will not (whether with or without notice or lapse of time, or both) (i)
violate any provision of the certificate of formation or bylaws or other comparable governing
documents, as applicable, of the Stockholder, (ii) violate, conflict with or result in the
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breach of any of the terms or conditions of, result in any (or the right to make any) modification of or
the cancellation or loss of a benefit under, require any notice, consent or action under, or
otherwise give any Person the right to terminate, accelerate obligations under or receive payment
or additional rights under, or constitute a default under, any Contract to which the Stockholder is
a party or by which it is bound or (iii) violate any Law applicable to the Stockholder or by which
any of the Stockholder’s assets or properties is bound, except for any of the foregoing as would
not, either individually or in the aggregate, impair the ability of the Stockholder to perform its
obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.
(d) Consents and Approvals. Other than compliance with applicable securities laws and
Laws relating to competition (including any filing under the HSR Act), the execution and delivery
of this Agreement by the Stockholder does not, and the performance by the Stockholder of its
obligations under this Agreement and the consummation by it of the transactions contemplated hereby
will not, require the Stockholder to obtain any consent, approval, authorization or permit of, or
to make any filing with or notification to, any Governmental Entity, except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, either individually or in the aggregate, prevent or delay the performance
by the Stockholder of any of its obligations under this Agreement.
ARTICLE V
(a) Except as permitted by Section 5.4(b), the Stockholder hereby agrees not to (i) Transfer
any of the Covered Shares, Beneficial Ownership thereof or any other interest specifically therein
(including by tendering into another tender or exchange offer), except to participate in the Offer
or the Merger; (ii) enter into any agreement, arrangement or understanding with any Person (other
than Parent, US Corp. or Merger Sub), or knowingly take
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any other action, that violates or
conflicts with the Stockholder’s representations, warranties, covenants and obligations under this
Agreement; or (iii) knowingly take any action that could restrict or otherwise affect the
Stockholder’s legal power, authority and right to comply with and perform its covenants and
obligations under this Agreement. Any Transfer in violation of this provision shall be void.
(b) The Stockholder hereby covenants and agrees that for a period of one year following the
Operative Date (the “Lock-Up Period”), the Stockholder shall not Transfer, or consent to
any Transfer of, any shares of Parent Common Stock, or any interest therein, or enter into any
Contract, option or other arrangement (including any profit sharing or other derivative
arrangement) with respect to the Transfer of, any shares of Parent Common Stock or any interest
therein to any person; provided that the Stockholder may participate during the Lock-Up
Period with respect to its shares of Parent Common Stock in any merger, tender offer or other
business combination or other transaction, in each case, which the Board of Directors of Parent has
recommended to Parent’s stockholders. The Stockholder hereby agrees that, in order to ensure
compliance with the restrictions referred to herein, Parent may issue appropriate “stop transfer”
instructions to its transfer agent in respect of the Stockholder’s Parent Common Stock. Parent
agrees that it will cause any stop transfer instructions imposed pursuant to this Section 5.1(b) to
be lifted, and any legended certificates of Parent Common Stock delivered to the Stockholder
pursuant to the Merger Agreement to be replaced with certificates not bearing such legend, promptly
following the termination of the Lock-Up Period. The restrictions on transfer provided in this
Section 5.1(b) shall be in addition to any restrictions on transfer of the Parent Common Stock
imposed by any applicable Laws.
5.2.
Registration Rights Agreement. Concurrently with the execution of this
Agreement, Parent and the Stockholder are entering into a Registration Rights Agreement (the
“
Registration Rights Agreement”).
5.3.
Stock Dividends, etc. In the event of a stock split, stock dividend or distribution,
or any change in the Company Stock by reason of any split-up, reverse stock split,
recapitalization, combination, reclassification, exchange of shares or the like, the terms
“Existing Shares” and “Covered Shares” shall be deemed to refer to and include such shares as well
as all such stock dividends and distributions and any securities into which or for which any or all
of such shares may be changed or exchanged or which are received in such transaction.
(a) The Stockholder hereby agrees that during the term of this Agreement, except as permitted
by Section 5.4(b), it shall not, and shall use its reasonable best efforts to ensure that any of
its Affiliates or Representatives do not, directly or indirectly, (i) solicit, initiate, knowingly
encourage or facilitate (including by way of furnishing non-public information) the submission of
an Acquisition Proposal or any proposal, offer or inquiry that may reasonably be expected to lead
to an Acquisition Proposal, (ii) participate or enter into or engage in negotiations or discussions
with, or provide any non-public information or data to, any person (other than Parent or any of its
affiliates or representatives) relating to any Acquisition Proposal or any proposal, offer or
inquiry that may reasonably be expected to lead to an Acquisition Proposal, (iii) make or
participate in, directly or indirectly, a “solicitation” of
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“proxies” (as such terms are used in
the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or
influence any Person with respect to the voting of, any shares of Company Stock in connection with
any vote or other action on any of the Section 3.1(a) Matters, other than to recommend that
stockholders of the Company vote in favor of the adoption of the Merger Agreement and as otherwise
expressly provided in this Agreement or to otherwise vote or consent with respect to Covered Shares
in a manner that would not violate Section 3.1, (iv) vote, approve, adopt or recommend, or publicly
propose to approve, adopt or recommend, any letter of intent, memorandum of understanding,
agreement, option agreement or other agreement relating to an Acquisition Proposal or any proposal,
offer or inquiry that may reasonably be expected to lead to an Acquisition Proposal, or (v) agree
to do any of the foregoing. The Stockholder hereby agrees immediately to cease and cause to be
terminated all existing solicitations, discussions or negotiations with any Person with respect to
any Acquisition Proposal or any offer, proposal or inquiry that may reasonably be expected to lead
to an Acquisition Proposal, and will inform its Affiliates and Representatives of the obligations
undertaken by the Stockholder pursuant to this Agreement, including this Section 5.4(a). If any of
the Stockholder’s Affiliates or Representatives takes any action that the Stockholder is not
permitted to take under this Section 5.4, it shall be deemed to be a breach of this Section 5.4 by
the Stockholder. Notwithstanding anything in this Agreement (including the immediately preceding
sentence) to the contrary, no action taken by the Company or any of its Affiliates or
Representatives in compliance with Section 6.2 of the Merger Agreement shall be a violation by the
Stockholder of this Section 5.4(a).
(b) Notwithstanding anything contained in this Agreement to the contrary, in the event that
the Company Board of Directors exercises its rights under Section 6.2 of the Merger Agreement to
(i) furnish information concerning, and provide access to, the Company’s business, properties,
employees and assets to any Person or Persons (and their Representatives acting in such capacity),
and/or (ii) participate, engage or assist in discussions and negotiations with any Person or
Persons (and their Representatives acting in such capacity), in each case, in compliance with
Section 6.2 of the Merger Agreement, then (x) the Stockholder and its Representatives likewise may
furnish any such information to such Person or Persons, provide such Person or Persons with any
such access, and/or participate, engage or assist in any such discussions and negotiations with
such Person or Persons; provided that any action taken by the Stockholder shall be taken
only in coordination with the Company Board of Directors, and (y) in connection with the Company’s
termination of the Merger Agreement pursuant to Section 9.1(f) thereof in order to enter into a
transaction which is a Superior Proposal, the Stockholder shall be entitled to enter into a voting
or other support agreement with the Person making the Superior
Proposal, provided that the effectiveness of such agreement shall be conditioned on
the termination of the Merger Agreement in compliance with Section 6.2(c) thereof.
5.5.
Notice of Acquisitions; Proposals Regarding Prohibited Transactions. The Stockholder
hereby agrees to notify Parent in writing (a) as promptly as practicable (and in any event within
one business day following such acquisition by the Stockholder) of the number of any additional
shares of Company Stock or other securities of the Company of which the Stockholder acquires
Beneficial Ownership on or after the date hereof and (b) as promptly as practicable (and in any
event within the earlier of (i) one business day or (ii) 48 hours) after receipt by the Stockholder
of any Acquisition Proposal or any offer, proposal or inquiry that may reasonably be expected to
lead to an Acquisition Proposal or after any request for information is
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sought from or initiated
with the Stockholder, and shall disclose the material terms of such Acquisition Proposal, proposal,
offer or inquiry, including the identity of the Person or Persons making such Acquisition Proposal,
proposal, offer or inquiry (unless prohibited by the confidentiality agreement with such Person)
and provide a copy thereof if in writing and any related available material documentation or
correspondence. The Stockholder will keep Parent informed on a prompt basis of the status and any
material discussions or negotiations (including material amendments and proposed material
amendments) relating to any Acquisition Proposal or any such offer, proposal or inquiry.
(a) In the event that the Merger Agreement shall have been terminated under circumstances in
which a Termination Fee is payable or may be payable by the Company to Parent with respect to such
termination upon the occurrence of certain events specified in the Merger Agreement, but in each
case, subject to such Termination Fee actually becoming payable under the Merger Agreement, the
Stockholder shall pay to Parent an amount equal to 50% of the Stockholder’s profit (determined in
accordance with Section 5.6(b) below) from the sale or other Transfer of any Covered Shares
pursuant to an Acquisition Proposal (including a Superior Proposal) so long as the agreement with
respect to such Acquisition Proposal is entered into or such Acquisition Proposal is consummated
within 12 months of the termination of this Agreement. Payment shall be made promptly upon the
receipt by the Stockholder of the proceeds from such sale or other disposition and shall only be
required to be paid if such sale or other disposition is completed or, if later, when the
Termination Fee is paid.
(b) For purposes of this Section 5.6, the profit of the Stockholder shall equal (A) the
aggregate consideration for or on account of the Covered Shares that were sold or otherwise
Transferred as described in Section 5.6(a) including extraordinary distributions directly or
indirectly made in connection with any Acquisition Proposal, valuing any non-cash consideration
(including any residual interest in the Company) at its fair market value on the date of such
consummation, less (B) the product of (x) $11.50 and (y) the number of Covered Shares so sold or
otherwise Transferred by the Stockholder.
(c) For purposes of this Section 5.6, the fair market value of any non-cash consideration
consisting of:
(i) securities listed on a national securities exchange or traded or quoted on the
Nasdaq (“Traded Securities”) shall be equal to the average closing price per share
of such security as reported on the composite trading system of such exchange or by Nasdaq
for the five trading days ending on the trading day immediately prior to the date of the
value determination (the “Valuation Period”); and
(ii) consideration which is other than cash or Traded Securities shall be determined by
a nationally recognized independent investment banking firm mutually agreed upon by Parent
and the Stockholder within ten business days of the event requiring selection of such
banking firm; provided, however, that if the parties are unable to agree
within two business days after the date of such event as to the investment banking firm,
then the parties shall each select one firm, and those firms shall select a
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third investment
banking firm, which third firm shall make such determination; provided,
further, that the fees and expenses of such investment banking firm shall be borne
equally by Parent and the Stockholder. The determination of the investment-banking firm
shall be binding upon the parties.
(d) Any payment of profit under this Section 5.6 shall be paid in the same proportion of cash
and non-cash consideration as the aggregate consideration received by the Stockholder in the
Acquisition Proposal or other disposition.
(e) In the event that the Merger Agreement shall have been terminated under circumstances in
which a Termination Fee is payable or may be payable by the Company to Parent with respect to such
termination upon the occurrence of certain events specified in the Merger Agreement, then the
Stockholder shall not, until the 12-month anniversary of the termination of this Agreement,
Transfer any of the Covered Shares (i) to its limited partners or (ii) to any of its Affiliates
unless such Affiliate agrees in writing to be bound by the provisions of this Section 5.6.
(f) Neither the Stockholder nor Parent shall, and each shall use its reasonable best efforts
to ensure that its respective Affiliates do not, engage in any Prohibited Activity with respect to
any subject Traded Securities during an applicable Valuation Period. “Prohibited Activity”
means any acquisition or disposition, in open market transactions, private transactions or
otherwise, during the Valuation Period of any of the subject Traded Securities or any securities
convertible into or exchangeable for or derivative of the subject Traded Securities or any other
action, in the case of any of the foregoing, taken intentionally for the purpose of manipulating
the price of the subject Traded Securities during the Valuation Period.
5.7.
Release. From and after the Effective Time, the Stockholder finally and forever
releases Parent and the Company, and their respective successors, assigns, officers, directors,
employees and all affiliates and Subsidiaries, past and present, of Parent and the Company (the
“
Releasees”) from each and every agreement, commitment, indebtedness, obligation and claim
of every nature and kind whatsoever, known or unknown, suspected or unsuspected (each, a
“
Claim” and collectively, the “
Claims”) that (A) the Stockholder may have had
in the past, may have as of the date hereof or, to the extent arising from or in connection with
any act, omission or state of facts taken or existing on or prior to the date hereof, may have
after the date hereof against any of the Releasees and (B) has arisen or arises directly out of the
Stockholder’s interest as a stockholder of the Company or any of its Subsidiaries; except with
respect to any such Claims arising under this Agreement, the Merger Agreement, the Registration
Rights Agreement and the transactions contemplated hereby and thereby, and any Claim by the
Stockholder for failure by the Company to pay all accrued and unpaid dividends on the Company
Convertible Preferred Stock prior to the Operative Date.
5.8.
Waiver of Appraisal Rights. The Stockholder agrees not to exercise any rights of
appraisal or any dissenters’ rights that the Stockholder may have (whether under applicable Law or
otherwise) or could potentially have or acquire in connection with the Merger.
5.9.
Further Assurances. From time to time, at Parent’s request and without further
consideration, the Stockholder shall execute and deliver such additional documents and take all
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such further action as may be reasonably necessary to effect the actions and consummate the
transactions contemplated by this Agreement.
5.10.
Disclosure. Neither Parent, the Company nor the Stockholder will issue any
press release or make any other public statement, and shall not authorize or permit any of its
Subsidiaries or Affiliates or any of its or their Representatives to issue any press release or
make any other public statement with respect to the Merger Agreement, this Agreement, the
Registration Rights Agreement or any of the transactions contemplated by the Merger Agreement, this
Agreement or the Registration Rights Agreement without the prior written consent of the other
parties hereto (such consent not to be unreasonably withheld, conditioned or delayed), except as
may be required by Law or by any listing requirement with the Nasdaq or the Toronto Stock Exchange,
including any filings required under the Securities Act or the Exchange Act.
5.11.
Meeting Rights. During the Lock-Up Period, the Stockholder shall be entitled to
attend any meeting held pursuant to the Other Stockholder’s exercise of its right to meet each
calendar quarter with the Chief Executive Officer and the Chief Financial Officer of Parent.
5.12.
Rule 144. Parent agrees to use its reasonable best efforts to file all reports
required to be filed by it under the Exchange Act to the extent required to enable the Stockholder,
after the expiration of the Lock-Up Period, to sell the Parent Common Stock pursuant to and in
accordance with Rule 144.
5.13.
Affiliate Agreements. The Stockholder shall take all actions necessary to cause
the Registration Rights Agreement, dated as of March 19, 2004, by and among the Company, the
Stockholder, the Other Stockholder, and such other persons who became signatories thereto as
provided therein to be terminated (without any payment), effective as of and contingent upon the
earlier to occur of the Acceptance Date and the Effective Time, such that such agreement shall
be of no further force or effect immediately thereafter. The Stockholder has approved the
Certificate of Amendment. The Stockholder hereby waives its right of first offer under the Amended
and Restated Preferred Stock Purchase Agreement, dated as of November 26, 2003, by and between the
Company and the Stockholder, in connection with the Merger Agreement and the transactions
contemplated thereby.
ARTICLE VI
6.1.
Termination. This Agreement shall remain in effect until the earliest to occur of
(i) the termination of the Merger Agreement in accordance with its terms, and (ii) the delivery of
written notice of termination by the Stockholder to Parent following any Fundamental Amendment
effected without the prior written consent of the Stockholder, and upon the occurrence of the
earliest of such events this Agreement shall terminate and be of no further force;
provided,
however, that the provisions of Section 5.6, this Section 6.1, the last
sentence of Section 6.2(a) and Sections 6.4 through 6.13 shall survive any termination of this
Agreement. Nothing in this Section 6.1 and no termination of this Agreement shall relieve or
otherwise limit any party of liability for willful breach of this Agreement. “
Fundamental
Amendment” means
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the execution by the Company, Parent, US Corp. and Merger Sub of an amendment
to, or waiver by the Company, Parent, US Corp. or Merger Sub of any provision of, the Offer or the
Merger Agreement that reduces the amount of the Offer Price or the Merger Consideration, changes
the form of the Offer Price or the Merger Consideration to include or substitute therefor a form
other than cash and Parent Common Stock, or decreases the ratio of cash to Parent Common Stock
included in the Offer Price or the Merger Consideration. If the Stockholder does not exercise the
termination right described above within five business days following the date the Stockholder is
notified that such Fundamental Amendment is effected, then this Agreement shall give effect to any
modified terms incorporated from the Merger Agreement and, except as so modified, shall continue in
full force and effect.
(a) In furtherance of this Agreement, the Stockholder hereby authorizes and instructs the
Company to instruct its transfer agent to enter a stop transfer order with respect to all of the
Covered Shares held of record by the Stockholder and to legend the share certificates. The Company
agrees that as promptly as practicable after the date of this Agreement it shall give such stop
transfer instructions to the transfer agent for the Company Stock and to legend the share
certificates. The Company agrees that, (i) if this Agreement is terminated in accordance with
Section 6.1, then, promptly following the termination of this Agreement, (ii) if Merger Sub accepts
the Covered Shares for payment pursuant to the terms of the Offer, then, concurrently with such
acceptance (and in any event within such time as would not delay receipt by the
Stockholder of the Offer Price), or (iii) if the transactions contemplated by the Merger
Agreement are effected as a One Step Merger, then, immediately following the Closing (and in any
event within such time as would not delay receipt by the Stockholder of the Merger Consideration),
the Company will cause any stop transfer instructions imposed pursuant to this Section 6.2 to be
lifted and any legended certificates delivered pursuant to this Section 6.2 to be replaced with
certificates not bearing such legend.
(b) Each certificate representing Covered Shares held of record by the Stockholder shall bear
the following legend on the face thereof:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON VOTING,
TRANSFER AND CERTAIN OTHER LIMITATIONS SET FORTH IN THAT CERTAIN STOCKHOLDER AGREEMENT DATED AS OF
FEBRUARY 25, 2008, AMONG SXC HEALTH SOLUTIONS CORP., NEW MOUNTAIN AFFILIATED INVESTORS, L.P. AND
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC., AS THE SAME MAY BE AMENDED FROM TIME TO TIME, COPIES OF
WHICH STOCKHOLDER AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF NATIONAL MEDICAL HEALTH CARD
SYSTEMS, INC.”
The Stockholder will cause all of its Existing Shares held of record by the Stockholder and
any securities that become Covered Shares held of record by the Stockholder after the date hereof
to be delivered to the Company for the purpose of applying such legend (if not so endorsed upon
issuance). The Company shall return to the delivering party, as promptly as possible, any
securities so delivered. The delivery of such securities by the delivering party shall not in any
way affect such party’s rights with respect to such securities.
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6.3.
No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in
Parent any direct or indirect ownership or incidence of ownership of or with respect to any Covered
Shares, except as otherwise provided herein. All rights, ownership and economic benefits of and
relating to the Covered Shares shall remain vested in and belong to the Stockholder, and Parent
shall have no authority to direct the Stockholder in the voting or disposition of any of the
Covered Shares, except as otherwise provided herein.
(a) All notices and other communications hereunder shall be in writing and shall be deemed
given if delivered personally, by facsimile (upon telephonic confirmation of receipt), on the first
business day following the date of dispatch if delivered by a recognized next day courier service
or on the third business day following the date of mailing if delivered by registered or certified
mail, return receipt requested, post prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in writing in accordance
with this Section 6.4 by the party to receive such notice.
(i) if to Parent, to:
SXC Health Solutions Corp.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Sidley Austin LLP
0 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
(ii) if to the Company, to:
National Medical Health Card Systems, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx XxXxxx, Esq.
with a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
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Fax: (000) 000-0000
Attention: J. Xxxxx Xxxxxx, Esq.
Xxxxxxxx X. Xxxxxx, Esq.
(iii) if to the Stockholder, to:
New Mountain Affiliated Investors, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxx
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx LLP
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
(b) A copy of all notices and other communications from Parent or Merger Sub to the Company
(and vice versa) under the Merger Agreement shall be sent at the same time to the Stockholder at
the above address, with a copy to its counsel at the above address, and the provisions of this
Section 6.4 shall apply to such notices and communications; provided that no failure to
provide such notice to the Stockholder shall relieve the Stockholder of its obligations under this
Agreement.
6.5.
Interpretation. The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to this Agreement unless
otherwise specified. Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation.” The meanings
given to terms defined herein shall be equally applicable to both the singular and plural forms of
such terms. The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This
Agreement is the product of negotiation by the parties having the assistance of counsel and other
advisers. It is the intention of the parties that this Agreement not be construed more strictly
with regard to one party than with regard to the others.
6.6.
Counterparts. This Agreement may be executed by facsimile and in counterparts, all of
which shall be considered one and the same agreement and shall become effective when counterparts
have been signed by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
6.7.
Entire Agreement. This Agreement, the Registration Rights Agreement and, to the
extent referenced herein, the Merger Agreement, together with the several agreements and other
documents and instruments referred to herein or therein or annexed hereto or thereto,
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embody the complete agreement and understanding among the parties hereto with respect to the subject matter
hereof and supersede and preempt any prior understandings, agreements or representations by or
among the parties, written and oral, that may have related to the subject matter hereof in any way.
6.8.
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. (a) This
Agreement, and all claims or causes of action (whether at law, in contract or in tort) that may be
based upon, arise out of or relate to this Agreement or the negotiation, execution or performance
hereof, shall be governed by and construed in accordance with the Laws of the State of Delaware,
without giving effect to any choice or conflict of Law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of Delaware. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement in the Court of
Chancery of the State of Delaware (and any appellate court of the State of Delaware) and the
Federal courts of the United States of America located in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity. Each of the parties
hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any Action with respect to this Agreement, (a) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by applicable Law, that (i) the Action in any
such court is brought in an inconvenient forum, (ii) the venue of such Action is improper or (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
(b) Each party hereto hereby waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any Action arising out of or relating to this
Agreement. Each party hereto (i) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such party would not, in the event of any
Action, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties
hereto have been induced to enter into this Agreement, by, among other things, the mutual waiver
and certifications in this Section 6.8.
(a) This Agreement may not be amended except by an instrument in writing signed by each of the
parties hereto. Each party may waive any right of such party hereunder by an instrument in writing
signed by such party and delivered to Parent, the Company and the Stockholder.
(b) The Stockholder agrees that it is solely responsible (without reimbursement from the
Company) for all costs and expenses (including all fees and expenses of
C-43
counsel) incurred by the
Stockholder in connection with this Agreement and the Registration Rights Agreement.
6.10.
Remedies. All rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not alternative, and the
exercise or beginning of the exercise of any thereof by any party shall not preclude the
simultaneous or later exercise of any other such right, power or remedy by such party.
6.11.
Severability. Any term or provision of this Agreement which is determined by a court
of competent jurisdiction to be invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering
invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other jurisdiction, and
if any provision of this Agreement is determined to be so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable, in all cases so long as
neither the economic nor legal substance of the transactions contemplated hereby is affected in any
manner adverse to any party or its stockholders or partners, as applicable. Upon any such
determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect the original intent of the parties as closely as possible
and to the end that the transactions contemplated hereby shall be fulfilled to the maximum extent
possible.
6.12.
Successors and Assigns; Third Party Beneficiaries. Neither this Agreement nor any of
the rights or obligations of any party under this Agreement shall be assigned, in whole or in part
(by operation of law or otherwise), by any party without the prior written consent of the other
parties hereto. Subject to the foregoing, this Agreement shall bind and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer on any Person other than the
parties hereto or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
6.13.
Stockholder Capacity. The restrictions and covenants of the Stockholder hereunder
shall not be binding, and shall have no effect, in any way with respect to any director or officer
of the Company or any of its Subsidiaries in such Person’s capacity as such a director or officer,
nor shall any action taken by any such director or officer in his or her capacity as such be deemed
a breach by the Stockholder of this Agreement.
[Remainder of this page intentionally left blank]
C-44
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SXC HEALTH SOLUTIONS CORP. |
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By:
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NEW MOUNTAIN AFFILIATED INVESTORS, L.P. |
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By:
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New Mountain GP, LLC,
its general partner |
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By:
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NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC. |
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By:
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C-45
ANNEX A
IRREVOCABLE PROXY
Dated as of February 25, 2008
The undersigned Stockholder (the “Stockholder”) of National Medical Health Card
Systems, Inc., a Delaware corporation (the “Company”), hereby irrevocably (to the fullest
extent permitted by law) appoints Xxxxxx Xxxxx and Xxxxxxx Xxxx, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and resubstitution, to
vote and exercise all voting and related rights (to the full extent that the undersigned is
entitled to do so) with respect to all of the shares of capital stock of the Company that now are
or hereafter may be beneficially owned by the undersigned, and any and all other shares or
securities of the Company issued or issuable in respect thereof on or after the date hereof
(collectively, the “Covered Shares”), in accordance with the terms of this Proxy. The
Covered Shares beneficially owned by the Stockholder as of the date of this Proxy are listed on the
signature page of this Proxy, along with the number(s) of the stock certificate(s) representing
such Covered Shares. Upon the Stockholder’s execution of this Proxy, any and all prior proxies
given by the undersigned with respect to any Covered Shares are hereby revoked and terminated, and
the Stockholder agrees not to grant any subsequent proxies with respect to the Covered Shares, with
respect to any of the matters referred to in any of clauses (a) through (c) below until after the
Expiration Time (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by law), is coupled with an
interest and is granted pursuant to that certain Stockholder Agreement of even date herewith (the
“Stockholder Agreement”) by and among SXC Health Solutions Corp., a corporation organized
under the laws of Yukon Territory, Canada (“Parent”), the Company and the undersigned
Stockholder of the Company, and is granted in consideration of Parent entering into that certain
Agreement and Plan of Merger of even date herewith (as it may hereafter be amended from time to
time in accordance with the provisions thereof, the “Merger Agreement”) by and among
Parent, SXC Health Solutions, Inc., a Texas corporation (“US Corp.”), Comet Merger
Corporation, a newly-formed Delaware corporation that is wholly-owned by US Corp. and an indirect
wholly-owned subsidiary of Parent (“Merger Sub”), and the Company. The Merger Agreement
provides that Merger Sub will commence an exchange offer (the “Offer”) to acquire all of
the outstanding shares of common stock, par value $0.001 per share, of the Company (“Company
Common Stock”), and following the consummation of the Offer (or, subject to certain conditions,
in lieu thereof), Merger Sub will merge with and into the Company (the “Merger”) and the
Stockholder will be entitled to receive the merger consideration specified therein. The term
“Expiration Time”, as used in this Proxy, shall mean the earliest to occur of (i) the
Operative Date, (ii) a Change in Recommendation, (iii) the termination of the Merger Agreement in
accordance with its terms, and (iv) the termination of the Stockholder Agreement in accordance with
its terms.
The attorneys and proxies named above, and each of them, are hereby authorized and empowered
by the Stockholder, at any time prior to the Expiration Time, to act as the Stockholder’s attorney
and proxy to vote all of the Covered Shares, and to exercise all voting, consent and similar rights
of the undersigned with respect to all of the Covered Shares
C-46
(including, without limitation, the power to execute and deliver written consents) at every annual
or special meeting of stockholders of the Company (and at every adjournment or postponement
thereof), and in every written consent in lieu of such meeting:
(a) in favor of the adoption of the Merger Agreement and any related proposal in furtherance
thereof, as reasonably requested by Parent, submitted for the vote or written consent of
stockholders;
(b) against any action or agreement submitted for the vote or written consent of stockholders
that the Stockholder knows is in opposition to, or competitive or materially inconsistent with, the
Offer or the Merger or that the Stockholder knows would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company contained in the
Merger Agreement, or of the Stockholder contained in the Stockholder Agreement; and
(c) against any Acquisition Proposal (as defined in the Merger Agreement) and against any
other action, agreement or transaction submitted for the vote or written consent of stockholders
that the Stockholder knows would impede, interfere with, delay, postpone, discourage, frustrate the
purposes of or adversely affect the Offer or the Merger or the other transactions contemplated by
the Merger Agreement or the Stockholder Agreement or the performance by the Company of its
obligations under the Merger Agreement or by the Stockholder of its obligations under the
Stockholder Agreement, including, but not limited to: (A) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the Company or any
subsidiary of the Company; (B) any sale, lease or transfer of a material amount of assets of the
Company (including capital stock or other equity interests in its Subsidiaries) or any subsidiary
of the Company; (C) any reorganization, recapitalization, dissolution or liquidation of the Company
or any subsidiary of the Company; (D) any change in a majority of the board of directors of the
Company; (E) any amendment to the Company’s certificate of incorporation or bylaws (except for any
amendment to increase the authorized capital stock); and (F) any change in the capitalization of
the Company or the Company’s corporate structure.
Any term or provision of this Proxy that is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in any other situation
or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares
that any term or provision hereof is invalid or unenforceable, the Stockholder agrees that the
court making such determination shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Proxy shall be enforceable as so modified.
In the event such court does not exercise the power granted to it in the prior sentence, the
Stockholder agrees to replace such invalid or unenforceable term or provision with a valid and
enforceable term or provision that will achieve, to the extent possible, the economic, business and
other purposes of such invalid or unenforceable term.
C-47
The restrictions and covenants of the Stockholder hereunder shall not be binding, and shall
have no effect, in any way with respect to any director or officer of the Company or any of its
Subsidiaries in such Person’s capacity as such a director or officer, nor shall any action taken by
any such director or officer in his or her capacity as such be deemed a breach by the Stockholder
of this Proxy.
Any obligation of the Stockholder hereunder shall be binding upon the successors and assigns
of the Stockholder.
This Proxy shall terminate, and be of no further force and effect, automatically upon the
Expiration Time.
[signature page follows]
C-48
COUNTERPART SIGNATURE PAGE
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NEW MOUNTAIN AFFILIATED INVESTORS, L.P. |
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By:
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New Mountain GP, LLC,
its general partner |
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By:
Name:
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Title:
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NUMBER OF OUTSTANDING SHARES OF COMPANY STOCK BENEFICIALLY OWNED BY THE
STOCKHOLDER:
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SERIES A 7% CONVERTIBLE PREFERRED STOCK |
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165,725 |
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COMMON STOCK |
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165,725 (upon conversion) |
Stockholder Address:
New Mountain Affiliated Investors, L.P.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx LLP
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
C-49
Annex D
Certificate of Amendment
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A 7% CONVERTIBLE PREFERRED STOCK OF
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
(Pursuant to Section 242 of the General Corporation Law of the State of Delaware)
National Medical Health Card Systems, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
1. That by resolution of the Board of Directors of the Corporation (the “Board”) pursuant to
Section 151(g) of the General Corporation Law of the State of Delaware, and by a Certificate of
Designations, Preferences and Rights (the “Series A Certificate of Designations”) filed in the
office of the Secretary of the State of Delaware effective as of March 19, 2004, the Corporation
authorized shares of Series A 7% Convertible Preferred Stock, $0.10 par value per share, of the
Corporation (the “Series A Preferred Stock”) and established the powers, designations, preferences
and relative, participating, optional and other rights of the Series A Preferred Stock and the
qualifications, limitations and restrictions thereof.
2. That the Board deemed it advisable to amend the Series A Certificate of Designations as set
forth herein (the “Amendment to the Series A Certificate of Designations”).
3. That the stockholders of the Corporation adopted the Amendment to the Series A Certificate
of Designations in accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
4. That the Series A Certificate of Designations is hereby amended as follows:
Section 3(a)(iii) is deleted in its entirety and replaced with the following:
(iii) Each such dividend shall be payable on the applicable Dividend Payment
Date to the holders of record of shares of the Series A Preferred Stock, as they
appear on the stock ledger of the Corporation at
D-1
the close of business on the day immediately preceding such Dividend Payment
Date. Any dividend that is not otherwise paid in cash on the applicable Dividend
Payment Date (whether due to the Corporation’s inability to pay such dividend in
cash or otherwise) shall automatically, and without any action on the part of the
Corporation, accrue and compound and be added to the Accrued Value on such Dividend
Payment Date. Once such dividends have been added to the Accrued Value, dividends
shall accrue and accumulate thereon in accordance with clause (i) or (ii) of this
Section 3(a), as applicable, until such time, if any, as such dividends, together
with all accrued and unpaid dividends thereon, are subsequently paid in cash by the
Corporation (at which time such dividends, to the extent paid as aforesaid, shall
be deducted from the Accrued Value). Dividends shall cease to accrue and
accumulate in respect of the Series A Preferred Stock on the Optional Redemption
Date, the Redemption Date or the Conversion Date for such shares as the case may
be, unless (1) in the case of the Optional Redemption Date or the Redemption Date,
the Corporation fails to pay any amount necessary for such redemption (including
any accrued but unpaid dividends required to be paid at such time) when due in
accordance with Section 4(c) or Section 5(c) hereof, as applicable, or, (2) in the
case of a Conversion Date, the Corporation fails to deliver certificates
representing the Common Stock or other assets or securities issuable upon such
conversion within three Business Days of the Conversion Date; in the case of either
clause (1) or (2) above, dividends shall continue to accumulate and accrue from the
Redemption Date or the Conversion Date, as the case may be, at the rate indicated
above, or from the Optional Redemption Date as set forth in Section 4(f), until
such payment (and payment of such additional dividends) and/or delivery (and
delivery of such additional shares or money owed by reason of the continued
accumulation and accrual of dividends) is made. Any holder may request in writing
that the Corporation pay any dividend or all dividends authorized with respect to
any or all Dividend Payment Dates by means of wire transfer to an account specified
by the holder in such notice. Such notice shall not apply to a Dividend Payment
Date if received less than five days prior thereto.
Section 6 is amended to add the following paragraph (e):
(e) Notwithstanding anything to the contrary in this Certificate of
Designations, (i) neither the entry into the Merger Agreement or the Stockholder
Agreements by the Corporation or any of the other parties thereto, nor the exercise
by Parent or Merger Sub of any of their rights under the Merger Agreement or the
Stockholder Agreements, nor the consummation of the Offer or the Merger, shall
constitute a Change in Control or Liquidation, and (ii) if shares are accepted for
payment in the
D-2
Offer in accordance with the terms of the Offer, any shares of Series A
Preferred Stock outstanding immediately prior to such acceptance for payment shall,
upon their conversion into shares of Common Stock, only have the right to receive
the Offer Price, or, if the One Step Merger is consummated, any shares of Series A
Preferred Stock outstanding immediately prior to the One Step Merger shall be
converted into the right to receive only the Merger Consideration.
Section 8 is amended to add the following paragraph (g):
(g) Notwithstanding anything to the contrary in this Certificate of
Designations, from and after the date of the Merger Agreement until the termination
of the Merger Agreement in accordance with its terms, any shares of Series A
Preferred Stock that convert into shares of Common Stock shall convert at a ratio
of one share of Common Stock for each share of Series A Preferred Stock and no
adjustment shall be made to such ratio.
Section 11 is amended to add the following definitions:
“Board of Directors” means the Board of Directors of the Corporation.
“DGCL” means the General Corporation Law of the State of Delaware.
“Merger” has the meaning set forth in the Merger Agreement.
“Merger Agreement” means the Agreement and Plan of Merger, dated as of
February 25, 2008, by and among the Corporation, SXC Health Solutions Corp.
(“Parent”), SXC Health Solutions, Inc. and Comet Merger Corporation, as amended
from time to time; a copy of the Merger Agreement will be made available without
charge to any stockholder of the Corporation upon request.
“Merger Consideration” has the meaning set forth in the Merger Agreement.
“Offer” has the meaning set forth in the Merger Agreement.
“Offer Price” has the meaning set forth in the Merger Agreement.
“One Step Merger” has the meaning set forth in the Merger Agreement.
“Parent” has the meaning set forth in the definition of Merger Agreement.
D-3
“Stockholder Agreement” has the meaning set forth in the Merger Agreement.
D-4
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NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
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D-5