EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PHYSICIAN SALES & SERVICE, INC.,
PSS MERGER CORP.,
AND
GULF SOUTH MEDICAL SUPPLY, INC.
Dated as of December 14, 1997
TABLE OF CONTENTS
Page
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PARTIES................................................................ 1
PREAMBLE............................................................... 1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER........................... 1
1.1 Merger........................................................ 1
1.2 Time and Placing of Closing................................... 1
1.3 Effective Time................................................ 1
1.4 Execution of Stock Option Agreements.......................... 2
ARTICLE 2 - TERMS OF MERGER............................................ 2
2.1 Charter....................................................... 2
2.2 Bylaws........................................................ 2
2.3 Directors and Officers........................................ 2
ARTICLE 3 - MANNER OF CONVERTING SECURITIES............................ 3
3.1 Conversion of Shares.......................................... 3
3.2 Anti-Dilution Provisions...................................... 3
3.3 Shares Held by Gazelle or PSS................................. 3
3.4 Fractional Shares............................................. 3
3.5 Conversion of Stock Options................................... 3
3.6 Gazelle Warrants.............................................. 4
ARTICLE 4 - EXCHANGE OF SHARES......................................... 5
4.1 Exchange Procedures........................................... 5
4.2 Rights of Former Gazelle Stockholders......................... 5
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF GAZELLE.................. 6
5.1 Organization, Standing, and Power............................. 6
5.2 Authority of Gazelle; No Breach By Agreement.................. 6
5.3 Capital Stock................................................. 7
5.4 Gazelle Subsidiaries.......................................... 7
5.5 SEC Filings; Financial Statements............................. 8
5.6 Absence of Undisclosed Liabilities............................ 8
5.7 Absence of Certain Changes or Events.......................... 8
5.8 Tax Matters................................................... 8
5.9 Assets........................................................ 9
5.10 Intellectual Property......................................... 10
5.11 Environmental Matters......................................... 10
5.12 Compliance with Laws.......................................... 11
5.13 Labor Relations............................................... 11
5.14 Employee Benefit Plans........................................ 12
5.15 Material Contracts............................................ 13
5.16 Legal Proceedings............................................. 13
5.17 Reports....................................................... 13
5.18 Statements True and Correct................................... 14
5.19 Accounting, Tax and Regulatory Matters........................ 14
5.20 State Takeover Laws........................................... 14
5.21 Opinion of Financial Advisor.................................. 14
5.22 Board Recommendation.......................................... 14
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF PSS...................... 15
6.1 Organization, Standing, and Power............................. 15
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6.2 Authority of PSS; No Breach By Agreement....................... 15
6.3 Capital Stock.................................................. 16
6.4 PSS Subsidiaries............................................... 16
6.5 SEC Filings; Financial Statements.............................. 17
6.6 Absence of Undisclosed Liabilities............................. 17
6.7 Absence of Certain Changes or Events........................... 17
6.8 Tax Matters.................................................... 17
6.9 Assets......................................................... 18
6.10 Intellectual Property.......................................... 19
6.11 Environmental Matters.......................................... 19
6.12 Compliance with Laws........................................... 20
6.13 Labor Relations................................................ 20
6.14 Employee Benefit Plans......................................... 20
6.15 Material Contracts............................................. 22
6.16 Legal Proceedings.............................................. 22
6.17 Reports........................................................ 22
6.18 Statements True and Correct.................................... 22
6.19 Authority of Merger Corp....................................... 23
6.20 Accounting, Tax and Regulatory Matters......................... 23
6.21 Opinion of Financial Advisor................................... 23
6.22 Board Recommendation........................................... 23
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION................... 24
7.1 Affirmative Covenants of Gazelle............................... 24
7.2 Negative Covenants of Gazelle.................................. 24
7.3 Covenants of PSS............................................... 25
7.4 Adverse Changes in Condition................................... 26
7.5 Reports........................................................ 26
ARTICLE 8 - ADDITIONAL AGREEMENTS...................................... 27
8.1 Registration Statement; Proxy Statement; Stockholder Approval.. 27
8.2 Nasdaq Listing................................................. 27
8.3 Applications; Antitrust Notification........................... 27
8.4 Filings with State Offices..................................... 28
8.5 Agreement as to Efforts to Consummate.......................... 28
8.6 Investigation and Confidentiality.............................. 28
8.7 Press Releases................................................. 28
8.8 No Solicitation................................................ 28
8.9 Accounting and Tax Treatment................................... 29
8.10 State Takeover Laws............................................ 29
8.11 Agreements of Affiliates....................................... 29
8.12 Employee Benefits and Contracts................................ 29
8.13 Indemnification and Insurance.................................. 30
8.14 Voting Agreements.............................................. 31
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.......... 31
9.1 Conditions to Obligations of Each Party........................ 31
9.2 Conditions to Obligations of PSS............................... 32
9.3 Conditions to Obligations of Gazelle........................... 33
ARTICLE 10 - TERMINATION............................................... 34
10.1 Termination.................................................... 34
10.2 Effect of Termination.......................................... 35
10.3 Non-Survival of Representations and Covenants.................. 35
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ARTICLE 11 - MISCELLANEOUS............................................. 35
11.1 Definitions................................................... 35
11.2 Expenses...................................................... 42
11.3 Brokers and Finders........................................... 43
11.4 Entire Agreement.............................................. 43
11.5 Amendments.................................................... 43
11.6 Waivers....................................................... 44
11.7 Assignment.................................................... 44
11.8 Notices....................................................... 44
11.9 Governing Law................................................. 45
11.10 Counterparts.................................................. 45
11.11 Captions; Articles and Sections............................... 45
11.12 Interpretations............................................... 45
11.13 Enforcement of Agreement...................................... 45
11.14 Severability.................................................. 45
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LIST OF EXHIBITS
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Exhibit Number Description
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1.1 Form of GSMS Stock Option Agreement ((S)(S) 1.4, 11.1).
1.2 Form of PSS Stock Option Agreement ((S)(S) 1.4, 11.1).
2.1 Form of agreement of affiliates of GSMS ((S)(S) 8.11, 9.2(g)).
2.2 Form of agreement of affiliates of PSS ((S)(S) 8.11, 9.2(g))).
3 Matters as to which Xxxxx, Xxxxxxx & Xxxxxxxxx LLP will opine ((S) 9.2(d)).
4 Matters as to which Xxxxxx & Bird LLP will opine ((S) 9.3(d)).
5.1 GSMS Voting Agreement ((S) 8.14).
5.2 PSS Voting Agreement ((S) 8.14).
6 Xxxxx Employment Agreement
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AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of December 14, 1997, by and among PHYSICIAN SALES & SERVICE, INC.
("PSS"), a Florida corporation; PSS MERGER CORP. ("Merger Corp."), a Delaware
corporation; and GULF SOUTH MEDICAL SUPPLY, INC. ("GSMS"), a Delaware
corporation.
Preamble
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The respective Boards of Directors of GSMS, Merger Corp. and PSS are of the
opinion that the transactions described herein are in the best interests of the
parties to this Agreement and their respective stockholders. This Agreement
provides for the acquisition of GSMS by PSS pursuant to the merger of Merger
Corp. with and into GSMS. At the effective time of such merger, the outstanding
shares of capital stock of GSMS shall be converted into the right to receive
shares of common stock of PSS (except as provided herein). As a result,
stockholders of GSMS shall become stockholders of PSS and GSMS shall continue to
conduct its business and operations as a wholly owned subsidiary of PSS. The
transactions described in this Agreement are subject to the approvals of the
stockholders of GSMS, the stockholders of PSS, expiration of the required
waiting period under the HSR Act, and the satisfaction of certain other
conditions described in this Agreement. It is the intention of the parties to
this Agreement that, for federal income tax purposes, the Merger shall qualify
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code, and for accounting purposes shall qualify for treatment as a
pooling of interests.
Immediately after the execution and delivery of this Agreement, and as a
condition and inducement to the willingness of PSS and GSMS to enter into this
Agreement, GSMS and PSS are entering into stock option agreements pursuant to
which GSMS is granting to PSS an option to purchase shares of GSMS Common Stock
and PSS is granting to GSMS an option to purchase shares of PSS Common Stock.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
representations, warranties, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
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Effective Time, Merger Corp. shall be merged with and into GSMS in accordance
with the applicable provisions of the DGCL (the "Merger"). GSMS shall be the
Surviving Corporation resulting from the Merger and shall become a wholly owned
Subsidiary of PSS and shall continue to be governed by the Laws of the State of
Delaware. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of GSMS, Merger Corp. and PSS and by PSS, as the sole stockholder of
Merger Corp.
1.2 Time and Place of Closing. The closing of the transactions
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contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such location as may be mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by
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this Agreement shall become effective on the date and at the time the
Certificate of Merger reflecting the Merger shall become effective
with the Secretary of State of the State of Delaware (the "Effective Time").
Subject to the terms and conditions hereof, unless otherwise mutually agreed
upon in writing by the authorized officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the first
business day following the last to occur of (i) the effective date (including
expiration of any applicable waiting period) of the last required Consent of any
Regulatory Authority having authority over and approving or exempting the
Merger, and (ii) the date on which the stockholders of GSMS and PSS approve this
Agreement.
1.4 Execution of Stock Option Agreements. Simultaneously with the
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execution of this Agreement by the Parties and as a condition thereto, GSMS and
PSS are executing and delivering the GSMS Stock Option Agreement in
substantially the form of Exhibit 1.1 and the PSS Stock Option Agreement in
substantially the form of Exhibit 1.2.
ARTICLE 2
TERMS OF MERGER
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2.1 CHARTER. The Certificate of Incorporation of GSMS in effect
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immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed;
provided that such Certificate of Incorporation shall be amended at Closing to
the satisfaction of PSS.
2.2 Bylaws. The Bylaws of Merger Corp. in effect immediately prior to
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the Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 Directors and Officers.
----------------------
(a) The directors of Merger Corp. in office immediately prior to the
Effective Time, together with such additional persons as may thereafter be
elected (which shall include those current directors of GSMS who shall not
become directors of PSS pursuant to Section 2.3(b)), shall serve as the
directors of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation. The officers of Merger
Corp. in office immediately prior to the Effective Time, together with such
additional persons as may thereafter be elected, shall serve as the officers of
the Surviving Corporation from and after the Effective Time in accordance with
the Bylaws of the Surviving Corporation.
(b) Immediately following the Effective Time, PSS shall take, or cause to
be taken, such action as may be required in order to (i) increase the size of
its Board of Directors from nine persons to ten persons, with four Class I
directors, three Class II directors and three Class III directors, (ii) accept
the resignations of four current PSS directors, (iii) appoint or cause to be
elected Xxxxxx X. Xxxxx ("Xxxxx") and two additional Persons who are currently
directors of GSMS to be selected by the Board of Directors of GSMS as directors
of PSS to serve in Class I, Class II and Class III, respectively, and (iv)
appoint a Nominating Committee composed of Xxxxx and such other persons as the
PSS Board of Directors shall determine for the purpose of designating two
independent persons to fill the two vacancies on the PSS Board of Directors as
soon as reasonably practicable.
(c) Immediately following the Effective Time, PSS shall take, or cause to
be taken, such action as may be necessary to cause each of the Audit Committee
and Compensation Committee of the Board of Directors of PSS to include at least
one member who shall have served on the Board of Directors of GSMS immediately
prior to the Effective Time.
(d) Immediately following the Effective Time, Xxxxx shall be elected
President and Chief Operating Officer of PSS, pursuant to the terms of the Xxxxx
Employment Agreement.
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ARTICLE 3
MANNER OF CONVERTING SECURITIES
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3.1 Conversion of Shares. Subject to the provisions of this Article
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3, at the Effective Time, by virtue of the Merger and without any action on the
part of PSS, GSMS, Merger Corp. or the stockholders of any of the foregoing, the
shares of the constituent corporations shall be converted as follows:
(a) Each share of capital stock of PSS issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Merger Corp. Common Stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into one share of GSMS Common Stock.
(c) Each share of GSMS Common Stock (excluding shares held by any
GSMS Entity or any PSS Entity) issued and outstanding immediately prior to
the Effective Time shall cease to be outstanding and shall be converted into
and exchanged for the right to receive 1.75 shares of PSS Common Stock (the
"Exchange Ratio").
3.2 Anti-Dilution Provisions. The Exchange Ratio shall be proportionately
------------------------
adjusted to reflect fully the effect of any stock split, stock dividend
(including any dividend or distribution of securities convertible into PSS
Common Stock), recapitalization, reorganization or other like change with
respect to such stock if the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
recapitalization, reorganization or similar change for which a record date is
not established) shall be prior to the Effective Time.
3.3 Shares Held by GSMS or PSS. Each of the shares of GSMS Common Stock
--------------------------
held by any GSMS Entity or by any PSS Entity shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
3.4 Fractional Shares. Notwithstanding any other provision of this
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Agreement, each holder of shares of GSMS Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of PSS Common Stock (after taking into account all certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest and rounded
to the nearest whole cent) in an amount equal to such fractional part of a share
of PSS Common Stock multiplied by the market value of one share of PSS Common
Stock at the Effective Time. The market value of one share of PSS Common Stock
at the Effective Time shall be the average of the last sale price of a share of
such common stock on the Nasdaq National Market (as reported by The Wall Street
Journal or, if not reported thereby, any other authoritative source selected by
PSS) for the ten most recent days that PSS Common Stock has traded, ending on
the last trading day preceding the Effective Time. No such holder will be
entitled to dividends, voting rights, or any other rights as a stockholder in
respect of any fractional shares.
3.5 Conversion of Stock Options.
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(a) At the Effective Time, each option granted by GSMS to purchase shares
of GSMS Common Stock, which is outstanding immediately prior thereto (an
"Option" or, collectively, the "Options"), granted by the GSMS under the GSMS
Stock Plans or otherwise, whether or not exercisable, shall be converted into
and become rights with respect to PSS Common Stock, and PSS shall assume each
Option, in accordance with the terms of the GSMS Stock Option Plan and stock
option agreement by which it is evidenced, except that from and after the
Effective Time, (i) PSS and its Compensation Committee shall be substituted for
GSMS and the Committee of GSMS's Board of Directors (including, if applicable,
the entire Board of Directors of GSMS) administering the GSMS Stock Plans, (ii)
each Option assumed by PSS may be exercised solely for shares of PSS Common
Stock, (iii) the number of shares of PSS Common Stock subject to such Option
shall be equal to the number of whole shares
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(rounded down to the nearest whole share) of GSMS Common Stock subject to such
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
and (iv) the per share exercise price under each such Option shall be adjusted
by dividing the per share exercise price under each such Option by the Exchange
Ratio and rounding up to the nearest whole cent. Notwithstanding the provisions
of clauses (iii) and (iv) of the first sentence of this Section 3.5(a), each
Option which is an "incentive stock option" shall be adjusted as required by
Section 424 of the Code, and the regulations promulgated thereunder, so as not
to constitute a modification, extension or renewal of such Option, within the
meaning of Section 424(h) of the Code.
(b) Prior to the Effective Time, GSMS shall use its reasonable best efforts
to obtain all necessary consents or releases from holders of Options under any
of the GSMS Stock Plans or otherwise and take all such other lawful action as
may be necessary to give effect to the transactions contemplated by this
Section.
(c) As soon as practicable after the Effective Time, PSS shall deliver to
the holders of Options appropriate notices setting forth such holders' rights
pursuant to the GSMS Stock Plans and the agreements evidencing the grants of
such Options shall continue in effect on the same terms and conditions (subject
to adjustments required by this Section 3.5 after giving effect to the Merger
and the provisions set forth above). If necessary, PSS shall comply with the
terms of the GSMS Stock Plans and ensure, to the extent lawful and practicable,
and subject to the provisions of, the GSMS Stock Plans, that Options which
qualified as incentive stock options prior to the Effective Time of the Merger
continue to qualify as incentive stock options after the Effective Time of the
Merger.
(d) PSS shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of PSS Common Stock for delivery upon the exercise
of Options. As soon as practicable after the Effective Time, PSS shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of PSS Common
Stock subject to such Options and shall use its reasonable best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain outstanding. With respect
to those individuals who subsequent to the Merger will be subject to the
reporting requirements under Section 16(a) of the 1934 Act, where applicable,
PSS shall administer the GSMS Stock Plans in a manner that complies with Rule
16b-3 promulgated under the 1934 Act to the extent the GSMS Stock Plans complied
with such rule prior to the Merger.
3.6 GSMS Warrants.
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(a) At the Effective Time, PSS shall assume the obligations of GSMS under
the GSMS common stock purchase warrants outstanding at the Effective Time and
thereafter, upon exercise, the warrantholder shall receive the number of shares
of PSS Common Stock equal to the product of (i) the Exchange Ratio and (ii) the
number of shares of GSMS Common Stock for which such warrant could have been
exercised immediately prior to the Merger.
(b) As soon as practicable after the Effective Time of the Merger, PSS
shall deliver to the holders of the GSMS warrants appropriate notices setting
forth such holders' rights pursuant to the applicable warrant agreements with
respect thereto to the extent required by the terms of the warrant agreements
with respect thereto.
(c) PSS shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of PSS Common Stock for delivery upon exercise of
the GSMS warrants. As soon as practicable after the Effective Time, PSS shall
file a registration statement or registration statements on Form S-3 (or any
successor or other appropriate form), with respect to the shares of PSS Common
Stock issuable upon exercise of the warrants and shall use its reasonable
efforts, subject to the terms of the warrant agreements, to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as the warrant agreements require.
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ARTICLE 4
EXCHANGE OF SHARES
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4.1 Exchange Procedures. Promptly after the Effective Time, PSS shall
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cause the exchange agent selected by PSS (the "Exchange Agent") to mail to each
holder of record of a certificate or certificates which represented shares of
GSMS Common Stock immediately prior to the Effective Time (the "Certificates")
appropriate transmittal materials and instructions (which shall specify that
delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon proper delivery of such Certificates to the Exchange
Agent). The Certificate or Certificates of GSMS Common Stock so delivered shall
be duly endorsed as the Exchange Agent may require. In the event of a transfer
of ownership of shares of GSMS Common Stock represented by Certificates that are
not registered in the transfer records of GSMS, the consideration provided in
Section 3.1 may be issued to a transferee if the Certificates representing such
shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been paid. If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(i) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as PSS
and the Exchange Agent may reasonably require and (iii) any other documents
necessary to evidence and effect the bona fide exchange thereof, the Exchange
Agent shall issue to such holder the consideration into which the shares
represented by such lost, stolen, mislaid or destroyed Certificate shall have
been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of GSMS Common
Stock (other than shares to be canceled pursuant to Section 3.3) issued and
outstanding at the Effective Time shall surrender the Certificate or
Certificates representing such shares to the Exchange Agent and shall promptly
upon surrender thereof receive in exchange therefor the consideration provided
in Section 3.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2. To
the extent required by Section 3.4, each holder of shares of GSMS Common Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the Certificate or Certificates, cash in lieu of any fractional share of PSS
Common Stock to which such holder may be otherwise entitled (without interest).
PSS shall not be obligated to deliver the consideration to which any former
holder of GSMS Common Stock is entitled as a result of the Merger until such
holder surrenders such holder's Certificate or Certificates for exchange as
provided in this Section 4.1. Any other provision of this Agreement
notwithstanding, neither PSS, the Surviving Corporation nor the Exchange Agent
shall be liable to a holder of GSMS Common Stock for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar Law. Adoption of this Agreement by the
stockholders of GSMS shall constitute ratification of the appointment of the
Exchange Agent.
4.2 Rights of Former GSMS Stockholders. At the Effective Time, the stock
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transfer books of GSMS shall be closed as to holders of GSMS Common Stock
immediately prior to the Effective Time and no transfer of GSMS Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 4.1, each Certificate
theretofore representing shares of GSMS Common Stock (other than shares to be
canceled pursuant to Section 3.3) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration provided
in Sections 3.1 and 3.4 in exchange therefor, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which have been declared or made
by GSMS in respect of such shares of GSMS Common Stock in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time. To the
extent permitted by Law, former stockholders of record of GSMS shall be entitled
to vote after the Effective Time at any meeting of PSS stockholders the number
of whole shares of PSS Common Stock into which their respective shares of GSMS
Common Stock are converted, regardless of whether such holders have exchanged
their Certificates for certificates representing PSS Common Stock in accordance
with the provisions of this Agreement. Whenever a dividend or other distribution
is declared by PSS on the PSS Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares of PSS Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of PSS Common Stock as of any time subsequent to the Effective
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Time shall be delivered to the holder of any Certificate until such holder
surrenders such Certificate for exchange as provided in Section 4.1. However,
upon surrender of such Certificate, both the PSS Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered dividends and cash payments payable hereunder
(without interest) shall be delivered and paid with respect to each share
represented by such Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF GSMS
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GSMS hereby represents and warrants to PSS as follows:
5.1 Organization, Standing, and Power. GSMS is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Delaware, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. Except as
disclosed in Section 5.1 of the GSMS Disclosure Memorandum, GSMS is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed would not have, individually or in the aggregate,
a GSMS Material Adverse Effect. The minute book and other organizational
documents for GSMS have been made available to PSS for its review and, except as
disclosed in Section 5.1 of the GSMS Disclosure Memorandum, are true and
complete in all material respects as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and stockholders thereof.
5.2 Authority of GSMS; No Breach By Agreement.
-----------------------------------------
(a) GSMS has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of GSMS,
subject to the approval of this Agreement by the holders of a majority of the
outstanding shares of GSMS Common Stock, which is the only stockholder vote
required for approval of this Agreement and consummation of the Merger by GSMS.
Subject to such requisite stockholder approval, and assuming due authorization,
execution and delivery by PSS and Merger Corp., this Agreement represents a
legal, valid, and binding obligation of GSMS, enforceable against GSMS in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by GSMS,
nor the consummation by GSMS of the transactions contemplated hereby, nor
compliance by GSMS with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of GSMS's Certificate of Incorporation or
Bylaws or the certificate or articles of incorporation or bylaws of any GSMS
Subsidiary or any resolution adopted by the board of directors or the
stockholders of any GSMS Entity, or (ii) except as disclosed in Section 5.2(b)
of the GSMS Disclosure Memorandum, constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any GSMS Entity under, any Contract or Permit of any GSMS Entity, where
such Default or Lien, or any failure to obtain such Consent, would have,
individually or in the aggregate, a GSMS Material Adverse Effect, or, (iii)
subject to receipt of the requisite Consents referred to in Section 9.1(b),
constitute or result in a Default under, or require any Consent pursuant to, any
Law or Order applicable to any GSMS Entity or any of their respective material
Assets.
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(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service, or under the
HSR Act, and other than Consents, filings, or notifications which, if not
obtained or made, would not have, individually or in the aggregate, a GSMS
Material Adverse Effect, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by GSMS of the Merger and
the other transactions contemplated in this Agreement.
5.3 Capital Stock.
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(a) The authorized capital stock of GSMS consists of (i) 30,000,000
shares of GSMS Common Stock, of which 16,347,064 shares are issued and
outstanding as of the date of this Agreement, and (ii) 1,000,000 shares of
preferred stock, par value $0.01 per share, none of which are issued and
outstanding. All of the issued and outstanding shares of capital stock of GSMS
are duly and validly issued and outstanding and are fully paid and non-
assessable. None of the outstanding shares of capital stock of GSMS has been
issued in violation of any preemptive rights of the current or past stockholders
of GSMS.
(b) Except as set forth in Section 5.3(a), or as provided in the
GSMS Stock Option Agreement, or as disclosed in Section 5.3(b) of the GSMS
Disclosure Memorandum, there are no shares of capital stock or other equity
securities of GSMS outstanding and no outstanding Equity Rights relating to the
capital stock of GSMS.
5.4 GSMS Subsidiaries. GSMS has disclosed in Section 5.4 of the GSMS
-----------------
Disclosure Memorandum all of the GSMS Subsidiaries that are corporations
(identifying with respect to each GSMS Subsidiary its jurisdiction of
incorporation, each jurisdiction in which it is qualified and/or licensed to
transact business, and the number of shares owned by GSMS and percentage
ownership interest represented by such share ownership) and all of the GSMS
Subsidiaries that are general or limited partnerships, limited liability
companies, or other non-corporate entities (identifying the Law under which such
entity is organized, each jurisdiction in which it is qualified and/or licensed
to transact business, and the amount and nature of the ownership interest
therein). Except as disclosed in Section 5.4 of the GSMS Disclosure Memorandum,
GSMS or one of its wholly owned Subsidiaries owns all of the issued and
outstanding shares of capital stock (or other equity interests) of each GSMS
Subsidiary. No capital stock (or other equity interest) of any GSMS Subsidiary
is or may become required to be issued (other than to another GSMS Entity) by
reason of any Equity Rights, and there are no Contracts by which any GSMS
Subsidiary is bound to issue (other than to another GSMS Entity) additional
shares of its capital stock (or other equity interests) or Equity Rights or by
which any GSMS Entity is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any GSMS Subsidiary (other than to another
GSMS Entity). There are no Contracts relating to the rights of any GSMS Entity
to vote or to dispose of any shares of the capital stock (or other equity
interests) of any GSMS Subsidiary. All of the shares of capital stock (or other
equity interests) of each GSMS Subsidiary held by a GSMS Entity are fully paid
and non-assessable and are owned by the GSMS Entity free and clear of any Lien.
Except as disclosed in Section 5.4 of the GSMS Disclosure Memorandum, each GSMS
Subsidiary is a corporation, and each such Subsidiary is duly organized, validly
existing, and (as to corporations) in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its Assets and
to carry on its business as now conducted. Except as disclosed in Section 5.4
of the GSMS Disclosure Memorandum, each GSMS Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed would not have, individually or in the aggregate, a GSMS
Material Adverse Effect. The minute book and other organizational documents for
each GSMS Subsidiary have been made available to PSS for its review, and, except
as disclosed in Section 5.4 of the GSMS Disclosure Memorandum, are true and
complete in all material respects as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and stockholders thereof.
-7-
5.5 SEC Filings; Financial Statements.
---------------------------------
(a) GSMS has timely filed and made available to PSS all SEC
Documents required to be filed by GSMS since it became subject to the periodic
reporting requirements of the Securities Laws (the "GSMS SEC Reports"). The GSMS
SEC Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Laws and (ii) did not, at the time
they were filed (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated in such
GSMS SEC Reports or necessary in order to make the statements in such GSMS SEC
Reports, in light of the circumstances under which they were made, not
misleading. No GSMS Subsidiary is required to file any SEC Documents.
(b) Each of the GSMS Financial Statements (including, in each case,
any related notes) contained in the GSMS SEC Reports, including any GSMS SEC
Reports filed after the date of this Agreement until the Effective Time,
complied or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited interim statements, as permitted by Form
10-Q of the SEC), and fairly presented or will fairly present in all material
respects the consolidated financial position of GSMS and its Subsidiaries as at
the respective dates and the consolidated results of operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect.
5.6 Absence of Undisclosed Liabilities. No GSMS Entity has any
----------------------------------
Liabilities except Liabilities which are accrued or reserved against in the
consolidated balance sheets of GSMS as of December 31, 1996 and September 30,
1997, included in the GSMS Financial Statements delivered prior to the date of
this Agreement or reflected in the notes thereto, or incurred since September
30, 1997 in the ordinary course of business consistent with past practices,
except those Liabilities which would not have a GSMS Material Adverse Effect.
Except as disclosed in Section 5.6 of the GSMS Disclosure Memorandum, no GSMS
Entity has incurred or paid any Liability since September 30, 1997, except for
such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice and which would not have, individually or
in the aggregate, a GSMS Material Adverse Effect or (ii) in connection with the
transactions contemplated by this Agreement. Except as disclosed in Section 5.6
of the GSMS Disclosure Memorandum, no GSMS Entity is directly or indirectly
liable, by guarantee, indemnity, or otherwise, upon or with respect to, or
obligated, by discount or repurchase agreement or in any other way, to provide
funds in respect to, or obligated to guarantee or assume any Liability or any
Person for any amount in excess of $250,000.
5.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
GSMS Financial Statements delivered prior to the date of this Agreement or as
disclosed in Section 5.7 of the GSMS Disclosure Memorandum, (i) since December
31, 1996, there has been no GSMS Material Adverse Effect, and (ii) since
September 30, 1997, the GSMS Entities have not taken any action, or failed to
take any action, prior to the date of this Agreement, which action or failure,
if taken after the date of this Agreement, would represent or result in a
material breach or violation of any of the covenants and agreements of GSMS
provided in Article 7.
5.8 Tax Matters.
-----------
(a) All Tax Returns required to be filed by or on behalf of any of
the GSMS Entities have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are complete
and accurate in all material respects. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes, except as reserved against in the GSMS Financial
Statements or as disclosed in Section 5.8 of the GSMS Disclosure Memorandum.
GSMS's federal income Tax Returns have been audited by the IRS and accepted
through December 31, 1995. All Taxes and other Liabilities due with respect to
completed and settled
-8-
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the GSMS Entities, except for any
such Liens which would not have a GSMS Material Adverse Effect.
(b) Except as set forth in Section 5.8 of the GSMS Disclosure
Memorandum, none of the GSMS Entities has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due (excluding
such statutes that relate to years currently under examination by the Internal
Revenue Service or other applicable taxing authorities) that is currently in
effect.
(c) The provision for any Taxes due or to become due for any of the
GSMS Entities for the period or periods through and including the date of the
respective GSMS Financial Statements that has been made and is reflected on such
GSMS Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the GSMS Entities have been provided for in
accordance with GAAP.
(e) None of the GSMS Entities is a party to any Tax allocation or
sharing agreement and none of the GSMS Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was GSMS) or has any Liability for Taxes of any
Person (other than GSMS and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the GSMS Entities is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the GSMS Disclosure
Memorandum, none of the GSMS Entities has made any payments, is obligated to
make any payments, or is a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the GSMS Entities that occurred during or after
any Taxable Period in which the GSMS Entities incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1996.
(i) No GSMS Entity has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
5.9 Assets.
------
(a) Except as disclosed in Section 5.9 of the GSMS Disclosure
Memorandum or as disclosed or reserved against in the GSMS Financial Statements,
the GSMS Entities have good and marketable title, free and clear of all Liens,
to all of their respective Assets, except for any such Liens or other defects of
title which would not have a GSMS Material Adverse Effect. All tangible
properties used in the businesses of the GSMS Entities are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with GSMS's past practices.
(b) All items of inventory, net of reserves, of the GSMS Entities
reflected on the most recent balance sheet included in the GSMS Financial
Statements delivered prior to the date of this Agreement and prior to the
Effective Time consisted and will consist, as applicable, of items of a quality
and quantity usable and saleable in the ordinary course of business consistent
with past practices and conform to generally accepted standards in the industry
in which the GSMS Entities are a part.
-9-
(c) The accounts receivable of the GSMS Entities as set forth on
the most recent balance sheet included in the GSMS Financial Statements
delivered prior to the date of this Agreement or arising since the date thereof
are valid and genuine; have arisen solely out of bona fide sales and deliveries
of goods, performance of services and other business transactions in the
ordinary course of business consistent with past practice; are not subject to
valid defenses, set-offs or counterclaims; and are recorded at the full amount
thereof less, in the case of accounts receivable appearing on the most recent
balance sheet included in the GSMS Financial Statements delivered prior to the
date of this Agreement, the recorded allowance for collection losses on such
balance sheet. The allowance for collection losses on such balance sheet has
been determined in accordance with GAAP.
(d) Except as disclosed in Section 5.9 of the GSMS Disclosure
Memorandum, all Assets which are material to GSMS's business on a consolidated
basis, held under leases or subleases by any of the GSMS Entities, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(e) The GSMS Entities currently maintain insurance similar in
amounts, scope, and coverage to that maintained by other peer organizations.
None of the GSMS Entities has received notice from any insurance carrier that
(i) any policy of insurance will be canceled or that coverage thereunder will be
reduced or eliminated, or (ii) premium costs with respect to such policies of
insurance will be substantially increased. Except as disclosed in Section 5.9 of
the GSMS Disclosure Memorandum, there are presently no claims for amounts
exceeding in any individual case $50,000 pending under such policies of
insurance and no notices of claims in excess of such amounts have been given by
any GSMS Entity under such policies.
(f) The Assets of the GSMS Entities include all Assets required to
operate the business of the GSMS Entities as presently conducted.
5.10 Intellectual Property. Each GSMS Entity owns or has a license to
---------------------
use all of the Intellectual Property used by such GSMS Entity in the course of
its business. Each GSMS Entity is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such GSMS Entity in
connection with such GSMS Entity's business operations, and such GSMS Entity has
the right to convey by sale or license any Intellectual Property so conveyed.
No GSMS Entity is in Default under any of its Intellectual Property licenses.
No proceedings have been instituted, or are pending or to the Knowledge of GSMS
threatened, which challenge the rights of any GSMS Entity with respect to
Intellectual Property used, sold or licensed by such GSMS Entity in the course
of its business, nor has any person claimed or alleged any rights to such
Intellectual Property. The conduct of the business of the GSMS Entities does
not infringe any Intellectual Property of any other person. Except as disclosed
in Section 5.10 of the GSMS Disclosure Memorandum, no GSMS Entity is obligated
to pay any recurring royalties to any Person with respect to any such
Intellectual Property.
5.11 Environmental Matters.
---------------------
(a) Each GSMS Entity and its Properties are, and have been, in
compliance with all Environmental Laws, except for violations which would not
have, individually or in the aggregate, a GSMS Material Adverse Effect.
(b) There is no Litigation pending or threatened before any court,
governmental agency, or authority or other forum in which any GSMS Entity or any
of its Properties (or GSMS in respect of such Property) has been or, with
respect to threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release, discharge, spillage, or disposal into the environment
of any Hazardous Material, whether or not occurring at, on, under, adjacent to,
or affecting (or potentially affecting) a site owned, leased, or operated by any
GSMS Entity or any of its Properties, except for such Litigation pending or
threatened that would not have, individually or in the aggregate, a GSMS
-10-
Material Adverse Effect, nor is there any reasonable basis for any Litigation of
a type described in this sentence, except such as would not have, individually
or in the aggregate, a GSMS Material Adverse Effect.
(c) During the period of (i) any GSMS Entity's ownership or
operation of any of their respective current Properties, or (ii) any GSMS
Entity's holding of a security interest in a Property, there have been no
releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, adjacent to, or affecting (or reasonably likely to affect) such
properties, except such as would not have, individually or in the aggregate, a
GSMS Material Adverse Effect. Prior to the period of (i) any GSMS Entity's
ownership or operation of any of their respective current properties, or (ii)
any GSMS Entity's holding of a security interest in a Property, to the Knowledge
of GSMS, there were no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, or affecting any such Property, except such as
would not have, individually or in the aggregate, a GSMS Material Adverse
Effect.
5.12 Compliance with Laws. Except as disclosed in Section 5.12 of the
--------------------
GSMS Disclosure Memorandum, each GSMS Entity has in effect all Permits necessary
for it to own, lease, or operate its material Assets and to carry on its
business as now conducted, except for those Permits the absence of which would
not have, individually or in the aggregate, a GSMS Material Adverse Effect, and
there has occurred no Default under any such Permit, other than Defaults which
would not have, individually or in the aggregate, a GSMS Material Adverse
Effect. Except as disclosed in Section 5.12 of the GSMS Disclosure Memorandum,
none of the GSMS Entities:
(a) is in Default under any of the provisions of its Certificate or
Articles of Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to
it or by which its properties are bound, except for Defaults which would not
have, individually or in the aggregate, a GSMS Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any GSMS Entity is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance would have, individually or in the aggregate, a GSMS Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of
which would have, individually or in the aggregate, a GSMS Material Adverse
Effect, or (iii) requiring any GSMS Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment,
or memorandum of understanding, or to adopt any Board resolution or similar
undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to PSS.
5.13 Labor Relations. No GSMS Entity is the subject of any Litigation
---------------
asserting that it or any other GSMS Entity has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other GSMS Entity to bargain with any
labor organization as to wages or conditions of employment, nor is any GSMS
Entity party to any collective bargaining agreement, nor is there any strike or
other labor dispute involving any GSMS Entity, pending or threatened, or to the
Knowledge of GSMS, is there any activity involving any GSMS Entity's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
-11-
5.14 Employee Benefit Plans.
----------------------
(a) GSMS has disclosed in Section 5.14 of the GSMS Disclosure
Memorandum, and has delivered or made available to PSS prior to the execution of
this Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by any GSMS Entity or ERISA Affiliate thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "GSMS Benefit Plans"). Any of the
GSMS Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "GSMS ERISA Plan."
Each GSMS ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code) is referred to herein as a "GSMS
Pension Plan." No GSMS Pension Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(b) All GSMS Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which would have, individually or in the aggregate, a
GSMS Material Adverse Effect. Each GSMS ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and GSMS is
not aware of any circumstances likely to result in revocation of any such
favorable determination letter. No GSMS Entity has engaged in a transaction with
respect to any GSMS Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject any GSMS Entity to a
Tax imposed by either Section 4975 of the Internal Revenue Code or Section
502(i) of ERISA.
(c) No GSMS Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, based on actuarial
assumptions set forth for such plan's most recent actuarial valuation. Since the
date of the most recent actuarial valuation, there has been (i) no material
change in the financial position of a GSMS Pension Plan, (ii) no change in the
actuarial assumptions with respect to any GSMS Pension Plan, and (iii) no
increase in benefits under any GSMS Pension Plan as a result of plan amendments
or changes in applicable Law which would have, individually or in the aggregate,
a GSMS Material Adverse Effect or materially adversely affect the funding status
of any such plan. Neither any GSMS Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any GSMS Entity, or the single-employer plan of any ERISA
Affiliate has an "accumulated funding deficiency" within the meaning of Section
412 of the Internal Revenue Code or Section 302 of ERISA. No GSMS Entity has
provided, or is required to provide, security to a GSMS Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Internal Revenue Code.
(d) Within the six-year period preceding the Effective Time, no
Liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by any GSMS Entity with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. No GSMS Entity has incurred any withdrawal Liability with respect to
a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any GSMS Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the GSMS Disclosure
Memorandum, no GSMS Entity has any Liability for retiree health and life
benefits under any of the GSMS Benefit Plans and there are no restrictions on
the rights of such GSMS Entity to amend or terminate any such retiree health or
benefit Plan without incurring any Liability thereunder.
-12-
(f) Except as disclosed in Section 5.14 of the GSMS Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any GSMS Entity from
any GSMS Entity under any GSMS Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any GSMS Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any GSMS Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the GSMS Financial Statements to the extent
required by and in accordance with GAAP.
5.15 Material Contracts. Except as disclosed in Section 5.15 of the GSMS
------------------
Disclosure Memorandum or otherwise reflected in the GSMS Financial Statements,
none of the GSMS Entities, nor any of their respective Assets, businesses, or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract providing for aggregate payments to any Person in any calendar year in
excess of $75,000, (ii) any Contract relating to the borrowing of money by any
GSMS Entity or the guarantee by any GSMS Entity of any such obligation (other
than Contracts evidencing trade payables and Contracts relating to borrowings or
guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts any GSMS Entity from engaging in any business activities
in any geographic area, line of business or otherwise in competition with any
other Person, (iv) any Contract between or among GSMS Entities, (v) any Contract
relating to the purchase or sale of any goods or services (other than Contracts
entered into in the ordinary course of business and involving payments under any
individual Contract not in excess of $250,000), and (vi) any other Contract or
amendment thereto that would be required to be filed as an exhibit to a Form 10-
K filed by GSMS with the SEC as of the date of this Agreement (together with all
Contracts referred to in Sections 5.9(d) and (e) and 5.14(a), the "GSMS
Contracts"). With respect to each GSMS Contract and except as disclosed in
Section 5.15 of the GSMS Disclosure Memorandum: (i) the Contract is in full
force and effect; (ii) no GSMS Entity is in Default thereunder, other than
Defaults which would not have, individually or in the aggregate, a GSMS Material
Adverse Effect; (iii) no GSMS Entity has repudiated or waived any material
provision of any such Contract; and (iv) no other party to any such Contract is,
to the Knowledge of GSMS, in Default in any respect, other than Defaults which
would not have, individually or in the aggregate, a GSMS Material Adverse
Effect, or has repudiated or waived any material provision thereunder. All of
the indebtedness of any GSMS Entity for money borrowed is prepayable at any time
by such GSMS Entity without penalty or premium.
5.16 Legal Proceedings. Except as disclosed in Section 5.16 of the
-----------------
GSMS Disclosure Memorandum, there is no Litigation pending, or, to the Knowledge
of GSMS, threatened (or unasserted but considered probable of assertion and
which if asserted would have at least a reasonable probability of an unfavorable
outcome) against any GSMS Entity, or against any director, employee or employee
benefit plan of any GSMS Entity, or against any Asset, interest, or right of any
of them, that would have, individually or in the aggregate, a GSMS Material
Adverse Effect, nor are there any Orders of any Regulatory Authorities, other
governmental authorities, or arbitrators outstanding against any GSMS Entity,
that would have, individually or in the aggregate, a GSMS Material Adverse
Effect. Section 5.16 of the GSMS Disclosure Memorandum contains a summary of
all Litigation pending as of the date of this Agreement to which any GSMS Entity
is a party and which names a GSMS Entity as a defendant or cross-defendant.
5.17 Reports. Since January 1, 1993, or the date of organization if
-------
later, each GSMS Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities (except failures to file which
would not have, individually or in the aggregate, a GSMS Material Adverse
Effect). As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied in
all material respects
-13-
with all applicable Laws. As of its respective date, each such report and
document did not, in all material respects, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.18 Statements True and Correct. No statement, certificate, instrument,
---------------------------
or other writing furnished or to be furnished by any GSMS Entity or any
Affiliate thereof to PSS pursuant to this Agreement or any other document,
agreement, or instrument delivered pursuant hereto contains or will contain any
untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any GSMS Entity or, to GSMS's Knowledge, any Affiliate thereof for
inclusion in the Joint Proxy Statement to be mailed to each Party's stockholders
in connection with the Stockholders' Meetings, and any other documents to be
filed by a GSMS Entity or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and with respect to the
Joint Proxy Statement, when first mailed to the stockholders of GSMS and PSS, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Joint Proxy Statement or any amendment thereof or supplement thereto, at the
time of the Stockholders' Meetings, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meetings. All documents that any GSMS Entity or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
5.19 Accounting, Tax and Regulatory Matters. No GSMS Entity or, to
--------------------------------------
GSMS's Knowledge, any Affiliate thereof has taken or agreed to take any action
that will (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.20 State Takeover Laws. Each GSMS Entity has taken all necessary
-------------------
action to exempt the transactions contemplated by this Agreement from, or if
necessary to challenge the validity or applicability of, any applicable
"moratorium," "fair price," "business combination," "control share," or other
anti-takeover Laws (collectively, "Takeover Laws") under the DGCL.
5.21 Opinion of Financial Advisor. GSMS has received the opinion of
----------------------------
NationsBanc Xxxxxxxxxx Securities, Inc., dated the date of this Agreement, to
the effect that, as of the date thereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of GSMS Common Stock, a signed copy of
which will be delivered to PSS promptly after receipt thereof.
5.22 Board Recommendation. The Board of Directors of GSMS, at a meeting
--------------------
duly called and held, has by unanimous vote of those directors present (who
constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, and
the GSMS Stock Option Agreement and the transactions contemplated thereby, taken
together, are fair to and in the best interests of the stockholders and (ii)
resolved to recommend that the holders of the shares of GSMS Common Stock
approve this Agreement.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PSS
-------------------------------------
PSS hereby represents and warrants to GSMS as follows:
6.1 ORGANIZATION, STANDING, AND POWER. PSS is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Florida, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its material Assets. PSS is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed would not have, individually or in the aggregate,
a PSS Material Adverse Effect. The minute book and other organizational
documents for PSS have been made available to GSMS for its review and, except as
disclosed in Section 6.1 of the PSS Disclosure Memorandum, are true and complete
in all material respects as in effect as of the date of this Agreement and
accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and stockholders thereof.
6.2 Authority of PSS; No Breach By Agreement.
----------------------------------------
(a) PSS has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of PSS, subject to the approval
of (i) an amendment to the Articles of Incorporation of PSS to increase the
authorized capital stock of PSS, and (ii) the issuance of the shares of PSS
Common Stock pursuant to the Merger by a majority of the votes cast at the PSS
Stockholders' Meeting (assuming for such purpose that the votes cast in respect
of such proposal represent a majority of the outstanding PSS Common Stock),
which are the only stockholder votes required for approval of this Agreement and
consummation of the merger by PSS. Subject to such requisite stockholder
approval, and assuming due authorization, execution and delivery by GSMS, this
Agreement represents a legal, valid, and binding obligation of PSS, enforceable
against PSS in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
(b) Neither the execution and delivery of this Agreement by PSS or
Merger Corp., nor the consummation by PSS or Merger Corp. of the transactions
contemplated hereby, nor compliance by PSS or Merger Corp. with any of the
provisions hereof, will (i) subject to the approval of an amendment to the
Articles of Incorporation of PSS to increase the authorized capital stock of
PSS, conflict with or result in a breach of any provision of PSS's Articles of
Incorporation or Merger Corp.'s Certificate of Incorporation or either of their
Bylaws or any resolution adopted by the board of directors or the stockholders
of any PSS Entity, or (ii) except as disclosed in Section 6.2(b) of the PSS
Disclosure Memorandum, constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of any
PSS Entity under, any Contract or Permit of any PSS Entity, where such Default
or Lien, or any failure to obtain such Consent, would have, individually or in
the aggregate, a PSS Material Adverse Effect, or, (iii) subject to receipt of
the requisite Consents referred to in Section 9.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to any PSS Entity or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service, or under the
HSR Act, and other than Consents, filings, or notifications which, if not
obtained or made, would not have, individually or in the aggregate, a PSS
Material Adverse Effect, no notice to, filing with, or Consent of, any public
body or
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authority is necessary for the consummation by PSS or Merger Corp. of the Merger
and the other transactions contemplated in this Agreement.
6.3 Capital Stock.
-------------
(a) The authorized capital stock of PSS consists of (i) 60,000,000
shares of PSS Common Stock, of which 40,696,097 shares are issued and
outstanding as of the date of this Agreement, and (ii) 1,000,000 shares of PSS
Preferred Stock, none of which are issued and outstanding. All of the issued and
outstanding shares of PSS Capital Stock are, and all of the shares of PSS Common
Stock to be issued in exchange for shares of GSMS Common Stock upon consummation
of the Merger, when issued in accordance with the terms of this Agreement, will
be, duly and validly issued and outstanding and fully paid and non-assessable.
None of the outstanding shares of PSS Capital Stock has been, and none of the
shares of PSS Common Stock to be issued in exchange for shares of GSMS Common
Stock upon consummation of the Merger will be, issued in violation of any
preemptive rights of the current or past stockholders of PSS.
(b) Except as set forth in Section 6.3(a) or in the PSS Stock
Option Agreement, or as disclosed in Section 6.3(b) of the PSS Disclosure
Memorandum, there are no shares of capital stock or other equity securities of
PSS outstanding and no outstanding Equity Rights relating to the capital stock
of PSS.
6.4 PSS Subsidiaries. PSS has disclosed in Section 6.4 of the PSS
----------------
Disclosure Memorandum all of the PSS Subsidiaries as of the date of this
Agreement that are corporations (identifying its jurisdiction of incorporation,
each jurisdiction in which the character of its Assets or the nature or conduct
of its business requires it to be qualified and/or licensed to transact
business, and the number of shares owned and percentage ownership interest
represented by such share ownership) and all of the PSS Subsidiaries that are
general or limited partnerships or other non-corporate entities (identifying the
Law under which such entity is organized, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the amount and nature of
the ownership interest therein). Except as disclosed in Section 6.4 of the PSS
Disclosure Memorandum, PSS or one of its wholly owned Subsidiaries owns all of
the issued and outstanding shares of capital stock (or other equity interests)
of each PSS Subsidiary. No capital stock (or other equity interest) of any PSS
Subsidiary are or may become required to be issued (other than to another PSS
Entity) by reason of any Equity Rights, and there are no Contracts by which any
PSS Subsidiary is bound to issue (other than to another PSS Entity) additional
shares of its capital stock (or other equity interests) or Equity Rights or by
which any PSS Entity is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any PSS Subsidiary (other than to another
PSS Entity). There are no Contracts relating to the rights of any PSS Entity to
vote or to dispose of any shares of the capital stock (or other equity
interests) of any PSS Subsidiary. All of the shares of capital stock (or other
equity interests) of each PSS Subsidiary held by a PSS Entity are fully paid and
non-assessable and are owned by the PSS Entity free and clear of any Lien.
Except as disclosed in Section 6.4 of the PSS Disclosure Memorandum, each PSS
Subsidiary is a corporation, and is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease and operate its Assets and to carry on its business as now
conducted. Each PSS Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed would
not have, individually or in the aggregate, a PSS Material Adverse Effect. The
minute book and other organizational documents for each PSS Subsidiary have been
made available to GSMS for its review, and, except as disclosed in Section 5.4
of the PSS Disclosure Memorandum, are true and complete in all material respects
as in effect as of the date of this Agreement and accurately reflect in all
material respects all amendments thereto and all proceedings of the Board of
Directors and stockholders thereof.
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6.5 SEC Filings; Financial Statements.
---------------------------------
(a) PSS has timely filed and made available to GSMS all SEC Documents
required to be filed by PSS since it became subject to the periodic reporting
requirements of the Securities Laws (the "PSS SEC Reports"). The PSS SEC
Reports (i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Laws and (ii) did not, at the time
they were filed (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated in such
PSS SEC Reports or necessary in order to make the statements in such PSS SEC
Reports, in light of the circumstances under which they were made, not
misleading. No PSS Subsidiary is required to file any SEC Documents.
(b) Each of the PSS Financial Statements (including, in each case, any
related notes) contained in the PSS SEC Reports, including any PSS SEC Reports
filed after the date of this Agreement until the Effective Time, complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case of
unaudited interim statements, as permitted by Form 10-Q of the SEC), and fairly
presented in all material respects the consolidated financial position of PSS
and its Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount or
effect.
6.6 Absence of Undisclosed Liabilities. No PSS Entity has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a PSS Material Adverse Effect, except Liabilities which are accrued
or reserved against in the consolidated balance sheets of PSS as of March 28,
1997 and September 30, 1997, included in the PSS Financial Statements delivered
prior to the date of this Agreement or reflected in the notes thereto, or except
as disclosed in Section 6.6 of the PSS Disclosure Memorandum, incurred since
September 30, 1997 in the ordinary course of business consistent with past
practices, except those Liabilities which would not have a PSS Material Adverse
Effect. Except as disclosed in Section 6.6 of the PSS Disclosure Memorandum, no
PSS Entity has incurred or paid any Liability since September 30, 1997, except
for such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice and which would have, individually or in
the aggregate, a PSS Material Adverse Effect or (ii) in connection with the
transactions contemplated by this Agreement.
6.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
PSS Financial Statements delivered prior to the date of this Agreement or as
disclosed in Section 6.7 of the PSS Disclosure Memorandum, (i) since March 28,
1997, there has been no PSS Material Adverse Effect, and (ii) since September
30, 1997, the PSS Entities have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of PSS provided in Article
7.
6.8 Tax Matters.
-----------
(a) All Tax Returns required to be filed by or on behalf of any of
the PSS Entities have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before March
28, 1997, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, and all Tax Returns filed are complete
and accurate in all material respects. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes, except as reserved against in the PSS Financial Statements
or as disclosed in Section 6.8 of the PSS Disclosure Memorandum. PSS's federal
income Tax Returns have been audited and accepted through March 31, 1994. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid. There are no Liens with
respect to Taxes upon any of the Assets of the PSS entities, except for any such
Liens which would not have a PSS Material Adverse Effect.
-17-
(b) None of the PSS Entities has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for any of the
PSS Entities for the period or periods through and including the date of the
respective PSS Financial Statements that has been made and is reflected on such
PSS Financial Statements is sufficient to cover all such Taxes.
(d) Deferred Taxes of the PSS Entities have been provided for in
accordance with GAAP.
(e) None of the PSS Entities is a party to any Tax allocation or
sharing agreement and none of the PSS Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was PSS) or has any Liability for Taxes of any
Person (other than PSS and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the PSS Entities is in compliance with, and its records
contain all information and documents (including properly completed IRS Forms W-
9) necessary to comply with, all applicable information reporting and Tax
withholding requirements under federal, state, and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 6.8 of the PSS Disclosure
Memorandum, none of the PSS Entities has made any payments, is obligated to make
any payments, or is a party to any Contract that could obligate it to make any
payments that would be disallowed as a deduction under Section 280G or 162(m) of
the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal
Revenue Code Section 382(g), of the PSS Entities that occurred during or after
any Taxable Period in which the PSS Entities incurred a net operating loss that
carries over to any Taxable Period ending after December 31, 1996.
(i) Except as set forth in Section 6.8 of the PSS Disclosure
Memorandum, no PSS Entity has or has had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
6.9 Assets.
------
(a) Except as disclosed in Section 6.9 of the PSS Disclosure
Memorandum or as disclosed or reserved against in the PSS Financial Statements,
the PSS Entities have good and marketable title, free and clear of all Liens, to
all of their respective Assets, except for any such Liens or other defects of
title which would not have a PSS Material Adverse Effect. All tangible
properties used in the businesses of the PSS Entities are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with PSS's past practices.
(b) All items of inventory, net of reserves, of the PSS Entities
reflected on the most recent balance sheet included in the PSS Financial
Statements delivered prior to the date of this Agreement and prior to the
Effective Time consisted and will consist, as applicable, of items of a quality
and quantity usable and saleable in the ordinary course of business consistent
with past practices and conform to generally accepted standards in the industry
in which the PSS Entities are a part.
(c) The accounts receivable of the PSS Entities as set forth on the
most recent balance sheet included in the PSS Financial Statements delivered
prior to the date of this Agreement or arising since the date
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thereof are valid and genuine; have arisen solely out of bona fide sales and
deliveries of goods, performance of services and other business transactions in
the ordinary course of business consistent with past practice; are not subject
to valid defenses, set-offs or counterclaims; and are recorded at the full
amount thereof less, in the case of accounts receivable appearing on the most
recent balance sheet included in the PSS Financial Statements delivered prior to
the date of this Agreement, the recorded allowance for collection losses on such
balance sheet. The allowance for collection losses on such balance sheet has
been determined in accordance with GAAP.
(d) All Assets which are material to PSS's business on a
consolidated basis, held under leases or subleases by any of the PSS Entities,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(e) The PSS Entities currently maintain insurance similar in
amounts, scope and coverage to that maintained by other peer organizations. None
of the PSS Entities has received notice from any insurance carrier that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. Except as disclosed in Section 6.9 of the PSS
Disclosure Memorandum, there are presently no claims pending under such policies
of insurance and no notices have been given by any PSS Entity under such
policies.
(f) The Assets of the PSS Entities include all assets required to
operate the business of the PSS Entities as presently conducted.
6.10 Intellectual Property. Each PSS Entity owns or has a license to use
---------------------
all of the Intellectual Property used by such PSS Entity in the course of its
business. Each PSS Entity is the owner of or has a license to any Intellectual
Property sold or licensed to a third party by such PSS Entity in connection with
such PSS Entity's business operations, and such PSS Entity has the right to
convey by sale or license any Intellectual Property so conveyed. No PSS Entity
is in Default under any of its Intellectual Property licenses. No proceedings
have been instituted, or are pending or to the Knowledge of PSS threatened,
which challenge the rights of any PSS Entity with respect to Intellectual
Property used, sold or licensed by such PSS Entity in the course of its
business, nor has any person claimed or alleged any rights to such Intellectual
Property. The conduct of the business of the PSS Entities does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 6.10
of the PSS Disclosure Memorandum, no PSS Entity is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property.
6.11 Environmental Matters.
---------------------
(a) Each PSS Entity and its Properties are, and have been, in
compliance with all Environmental Laws, except for violations which would not
have, individually or in the aggregate, a PSS Material Adverse Effect.
(b) There is no Litigation pending or threatened before any court,
governmental agency, or authority or other forum in which any PSS Entity or any
of its Properties (or PSS in respect of such Property) has been or, with respect
to threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release, discharge, spillage, or disposal into the environment
of any Hazardous Material, whether or not occurring at, on, under, adjacent to,
or affecting (or potentially affecting) a site owned, leased, or operated by any
PSS Entity or any of its Properties, except for such Litigation pending or
threatened that would not have, individually or in the aggregate, a PSS Material
Adverse Effect, nor is there any reasonable basis for any Litigation of a type
described in this sentence, except such as would not have, individually or in
the aggregate, a PSS Material Adverse Effect.
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(c) During the period of (i) any PSS Entity's ownership or operation
of any of their respective current properties, or (ii) any PSS Entity's holding
of a security interest in a Property, there have been no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, adjacent to, or
affecting (or reasonably likely to affect) such Properties, except such as would
not have, individually or in the aggregate, a PSS Material Adverse Effect. Prior
to the period of (i) any PSS Entity's ownership or operation of any of their
respective current properties, or (ii) any PSS Entity's holding of a security
interest in a Property, to the Knowledge of PSS, there were no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under, or
affecting any such Property, except such as would not have, individually or in
the aggregate, a GSMS Material Adverse Effect.
6.12 Compliance with Laws. Each PSS Entity has in effect all Permits
--------------------
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which
would not have, individually or in the aggregate, a PSS Material Adverse Effect,
and there has occurred no Default under any such Permit, other than Defaults
which would not have, individually or in the aggregate, a PSS Material Adverse
Effect. Except as disclosed in Section 6.12 of the PSS Disclosure Memorandum,
none of the PSS Entities:
(a) is in Default under its Articles of Incorporation or Bylaws
(or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to it
or by which its properties are bound, except for Defaults which would not
have, individually or in the aggregate, a PSS Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any PSS Entity is not in compliance with any of the Laws or Orders which
such governmental authority or Regulatory Authority enforces, where such
noncompliance would have, individually or in the aggregate, a PSS Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of
which would have, individually or in the aggregate, a PSS Material Adverse
Effect, or (iii) requiring any PSS Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment
or memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to GSMS.
6.13 Labor Relations. No PSS Entity is the subject of any Litigation
---------------
asserting that it or any other PSS Entity has committed an unfair labor practice
(within the meaning of the National Labor Relations Act or comparable state law)
or seeking to compel it or any other PSS Entity to bargain with any labor
organization as to wages or conditions of employment, nor is any PSS Entity
party to any collective bargaining agreement, nor is there any strike or other
labor dispute involving any PSS Entity, pending or threatened, or to the
Knowledge of PSS, is there any activity involving any PSS Entity's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
6.14 Employee Benefit Plans.
----------------------
(a) PSS has delivered or made available to GSMS prior to the
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in
-20-
Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or
in part by, or contributed to by any PSS Entity or ERISA Affiliate thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "PSS Benefit Plans"). Any of the
PSS Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "PSS ERISA Plan."
Each PSS ERISA Plan which is also a "defined benefit plan" (as defined in
Section 414(j) of the Internal Revenue Code) is referred to herein as a "PSS
Pension Plan." No PSS Pension Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(b) All PSS Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a PSS Material Adverse Effect. Each PSS ERISA Plan which is intended
to be qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and PSS is not
aware of any circumstances likely to result in revocation of any such favorable
determination letter. No PSS Entity has engaged in a transaction with respect
to any PSS Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any PSS Entity to a Tax imposed by
either Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No PSS Pension Plan has any "unfunded current liability," as that term
is defined in Section 302(d)(8)(A) of ERISA, based on actuarial assumptions set
forth for such plan's most recent actuarial valuation. Since the date of the
most recent actuarial valuation, there has been (i) no material change in the
financial position of a PSS Pension Plan, (ii) no change in the actuarial
assumptions with respect to any PSS Pension Plan, and (iii) no increase in
benefits under any PSS Pension Plan as a result of plan amendments or changes in
applicable Law which would have, individually or in the aggregate, a PSS
Material Adverse Effect or materially adversely affect the funding status of any
such plan. Neither any PSS Pension Plan nor any "single-employer plan," within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any PSS Entity, or the single-employer plan of any ERISA Affiliate has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. No PSS Entity has provided, or
is required to provide, security to a PSS Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Internal
Revenue Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV of ERISA has been or is expected to be
incurred by any PSS Entity with respect to any ongoing, frozen or terminated
single-employer plan or the single-employer plan of any ERISA Affiliate. No PSS
Entity has incurred any withdrawal Liability with respect to a multiemployer
plan under Subtitle B of Title IV of ERISA (regardless of whether based on
contributions of an ERISA Affiliate). No notice of a "reportable event," within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any PSS Pension Plan or
by any ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.14 of the PSS Disclosure Memorandum,
no PSS Entity has any Liability for retiree health and life benefits under any
of the PSS Benefit Plans and there are no restrictions on the rights of such PSS
Entity to amend or terminate any such retiree health or benefit Plan without
incurring any Liability thereunder.
(f) Except as disclosed in Section 6.14 of the PSS Disclosure Memorandum,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, or otherwise) becoming
due to any director or any employee of any PSS Entity from any PSS Entity under
any PSS Benefit Plan or otherwise, (ii) increase any benefits otherwise payable
under any PSS Benefit Plan, or (iii) result in any acceleration of the time of
payment or vesting of any such benefit.
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(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any PSS Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the PSS Financial Statements to the extent required
by and in accordance with GAAP.
6.15 Material Contracts. Except as disclosed in Section 6.15 of the
------------------
PSS Disclosure Memorandum or otherwise reflected in the PSS Financial
Statements, none of the PSS Entities, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $75,000, (ii) any Contract relating to the borrowing
of money by any PSS Entity or the guarantee by any PSS Entity of any such
obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts any PSS Entity from engaging in
any business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract relating to the purchase or
sale of any goods or services (other than Contracts entered into in the ordinary
course of business and involving payments under any individual contract not in
excess of $250,000, or (v) any other Contract or amendment thereto that would be
required to be filed as an exhibit to a Form 10-K filed by PSS with the SEC as
of the date of this Agreement that has not been filed as an exhibit to PSS's
Form 10-K filed for the fiscal year ended March 28, 1997, or in an SEC Document
and identified to GSMS (together with all Contracts referred to in Sections
6.9(d) and (e) and 6.14(a), the "PSS Contracts"). With respect to each PSS
Contract and except as disclosed in Section 6.15 of the PSS Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no PSS Entity is
in Default thereunder, other than Defaults which would not have, individually or
in the aggregate, a PSS Material Adverse Effect; (iii) no PSS Entity has
repudiated or waived any material provision of any such Contract; and (iv) no
other party to any such Contract is, to the Knowledge of PSS, in Default in any
respect, other than Defaults which would not have, individually or in the
aggregate, a PSS Material Adverse Effect, or has repudiated or waived any
material provision thereunder. All of the indebtedness of any PSS Entity for
money borrowed is prepayable at any time by such PSS Entity without penalty or
premium.
6.16 Legal Proceedings. There is no Litigation pending, or, to the
-----------------
Knowledge of PSS, threatened (or unasserted but considered probable of assertion
and which if asserted would have at least a reasonable probability of an
unfavorable outcome) against any PSS Entity, or against any director, employee
or employee benefit plan of any PSS Entity, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in the
aggregate, a PSS Material Adverse Effect, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any PSS Entity, that are reasonably likely to have,
individually or in the aggregate, a PSS Material Adverse Effect. Section 6.16
of the PSS Disclosure Memorandum contains a summary of all Litigation pending as
of the date of this Agreement to which any PSS Entity is a party and which names
a PSS Entity as a defendant or cross-defendant or for which any PSS Entity has
potential Liability.
6.17 Reports. Except as disclosed in Section 6.17 of the PSS
-------
Disclosure Memorandum, since January 1, 1993, or the date of organization if
later, each PSS Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities. As of their respective dates, each
of such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document did not, in all
material respects, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
6.18 Statements True and Correct. No statement, certificate,
---------------------------
instrument or other writing furnished or to be furnished by any PSS Entity or
any Affiliate thereof to GSMS pursuant to this Agreement or any other document,
agreement or instrument delivered pursuant hereto contains or will contain any
untrue statement
-22-
of material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied by any PSS
Entity or, to PSS's Knowledge, any Affiliate thereof for inclusion in the
Registration Statement to be filed by PSS with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any PSS Entity or any Affiliate thereof for inclusion in the Joint
Proxy Statement to be mailed to each Party's stockholders in connection with the
Stockholders' Meetings, and any other documents to be filed by any PSS Entity or
any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Joint Proxy Statement,
when first mailed to the stockholders of GSMS and PSS, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Joint Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Stockholders'
Meetings, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meetings. All documents that any PSS Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
6.19 Authority of Merger Corp. Merger Corp. was formed solely for the
-------------------------
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby. Merger Corp. is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware as a wholly owned
Subsidiary of PSS. The authorized capital stock of Merger Corp. shall consist
of 1,000 shares of Merger Corp. Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by PSS free and clear of
any Lien. Merger Corp. has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Merger
Corp.. This Agreement represents a legal, valid, and binding obligation of
Merger Corp., enforceable against Merger Corp. in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
PSS, as the sole stockholder of Merger Corp., will vote prior to the Effective
Time the shares of Merger Corp. Common Stock in favor of approval of this
Agreement, as and to the extent required by applicable Law and no other vote of
holders of securities of Merger Corp. is necessary.
6.20 Accounting, Tax and Regulatory Matters. No PSS Entity or any
--------------------------------------
Affiliate thereof has taken or agreed to take any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (i) prevent the Merger
from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.21 Opinion of Financial Advisor. PSS has received the opinion of BT
----------------------------
Alex. Xxxxx Incorporated, dated the date of this Agreement, to the effect that
the Exchange Ratio is fair, from a financial point of view, to PSS and its
shareholders, a signed copy of which will be delivered to GSMS promptly after
receipt thereof.
6.22 Board Recommendation. The Board of Directors of PSS, at a
--------------------
meeting duly called and held, has by unanimous vote of those directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, and
the PSS Stock Option
-23-
Agreement and the transactions contemplated thereby, taken together, are fair to
and in the best interests of the stockholders and (ii) resolved to recommend
that the holders of the shares of PSS Common Stock approve this Agreement.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Affirmative Covenants of GSMS. From the date of this Agreement
-----------------------------
until the earlier of the Effective Time or the termination of this Agreement,
unless the prior written consent of PSS shall have been obtained, which consent
will not be unreasonably withheld, and except as otherwise expressly
contemplated herein or as disclosed in Section 7.1 of the GSMS Disclosure
Memorandum, GSMS shall and shall cause each of its Subsidiaries to (a) operate
its business only in the usual, regular, and ordinary course, (b) use
commercially reasonable efforts consistent with past practices and policies to
preserve intact its business organization and Assets, (c) use commercially
reasonable efforts consistent with past practices and policies to keep available
the services of the present officers, employees and consultants of GSMS and its
subsidiaries and to preserve the present relationship of GSMS and its
Subsidiaries with customers, suppliers and other persons, and (d) take no action
which would (i) materially and adversely affect the ability of any Party to
obtain any material Consents required for the transactions contemplated hereby
without imposition of a condition or restriction of the type referred to in the
last sentences of Section 9.1(b) or 9.1(c), or (ii) materially and adversely
affect the ability of any Party to perform its covenants and agreements under
this Agreement.
7.2 Negative Covenants of GSMS. From the date of this Agreement until
--------------------------
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of PSS shall have been obtained, which consent will
not be unreasonably withheld, and except as otherwise expressly contemplated
herein, GSMS covenants and agrees that it will not do or agree or commit to do,
or permit any of its Subsidiaries to do or agree or commit to do, any of the
following:
(a) amend the Certificate or Articles of Incorporation, Bylaws or
other governing instruments of any GSMS Entity, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a GSMS Entity to another GSMS
Entity) in excess of an aggregate of $250,000 (for the GSMS Entities on a
consolidated basis) except in the ordinary course of the business consistent
with past practices, or impose, or suffer the imposition, on any material
Asset of any GSMS Entity of any Lien or permit any such Lien to exist (other
than in connection with Liens in effect as of the date hereof that are
disclosed in the GSMS Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any GSMS Entity, or declare or pay any dividend or make any
other distribution in respect of GSMS's capital stock; or
(d) except for this Agreement, or pursuant to the exercise of stock
options or common stock purchase warrants outstanding as of the date hereof
and pursuant to the terms thereof in existence on the date hereof, or
pursuant to the GSMS Stock Option Agreement, or as disclosed in Section
7.2(d) of the GSMS Disclosure Memorandum, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of GSMS Common Stock or any other capital
stock of any GSMS Entity, or any stock appreciation rights, or any option,
warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any
GSMS Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of GSMS Common
-24-
Stock, or sell, lease, mortgage or otherwise dispose of or otherwise encumber
(x) any shares of capital stock of any GSMS Subsidiary (unless any such
shares of stock are sold or otherwise transferred to another GSMS Entity) or
(y) any material Asset other than in the ordinary course of business for
reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of three
years or less, and except as set forth in Section 7.2(f) of the GSMS
Disclosure Memorandum, purchase any securities or make any material
investment, either by purchase of stock of securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person other than
a wholly owned GSMS Subsidiary, or otherwise acquire direct or indirect
control over any Person, other than in connection with (i) foreclosures in
the ordinary course of business, or (iii) the creation of new wholly owned
Subsidiaries organized to conduct or continue activities otherwise permitted
by this Agreement; or
(g) grant any increase in compensation or benefits to the employees
or officers of any GSMS Entity, except as disclosed in Section 7.2(g) of the
GSMS Disclosure Memorandum or as required by Law; pay any severance or
termination pay or any bonus other than consistent with policies or with
written Contracts in effect on the date of this Agreement and disclosed in
Section 7.2(g) of the GSMS Disclosure Memorandum; and enter into or amend any
severance agreements with officers of any GSMS Entity; grant any material
increase in fees or other increases in compensation or other benefits to
directors of any GSMS Entity except in accordance with past practice
disclosed in Section 7.2(g) of the GSMS Disclosure Memorandum; or voluntarily
accelerate the vesting of any stock options or other stock-based compensation
or employee benefits or other Equity Rights; or
(h) enter into or amend any employment Contract between any GSMS
Entity and any Person having a salary thereunder in excess of $50,000 per
year (unless such amendment is required by Law) that the GSMS Entity does not
have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the
Effective Time; or
(i) adopt any new employee benefit plan of any GSMS Entity or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any GSMS Entity other than as disclosed in
Section 7.2(i) of the GSMS Disclosure Memorandum or any such change that is
required by Law or that, in the opinion of counsel, is necessary or advisable
to maintain the tax qualified status of any such plan, or make any
distributions from such employee benefit plans, except as required by Law,
the terms of such plans or consistent with past practice; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or GAAP;
or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any GSMS Entity
for material money damages or restrictions upon the operations of any GSMS
Entity; or
(l) except in the ordinary course of business, enter into, modify,
amend or terminate any material Contract (including any loan Contract with an
unpaid balance exceeding $250,000) or waive, release, compromise or assign
any material rights or claims.
7.3 Covenants of PSS. From the date of this Agreement until the
----------------
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of GSMS shall have been obtained, which consent will not
be unreasonably withheld, and except as otherwise expressly contemplated herein,
PSS covenants and agrees that it shall and shall cause each of its Subsidiaries
to (w) operate its business only in the usual, regular, and ordinary course, (x)
use commercially reasonable efforts consistent with past practices and policies
to preserve
-25-
intact its business organization and Assets and maintain its rights and
franchises, (y) use commercially reasonable efforts consistent with past
practices and policies to keep available the services of the present officers,
employees and consultants of PSS and its subsidiaries and to preserve the
present relationship of PSS and its Subsidiaries with customers, suppliers and
other persons, and (z) take no action which would (i) materially and adversely
affect the ability of any Party to obtain any material Consents required for the
transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c), or (ii) materially and adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement; provided, that the
foregoing shall not prevent any PSS Entity from discontinuing or disposing of
any of its Assets or business which is not material if such action is, in the
judgment of PSS, desirable in the conduct of the business of PSS and its
Subsidiaries. PSS further covenants and agrees that it will not do or agree or
commit to do, or permit any of its Subsidiaries to do or agree or commit to do,
any of the following without the prior written consent of GSMS, which consent
shall not be unreasonably withheld:
(a) amend the Articles of Incorporation or Bylaws of PSS, in each
case, in any manner adverse to the holders of GSMS Common Stock;
(b) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in applicable Tax Laws or regulatory accounting
requirements or GAAP;
(c) except for this Agreement, or pursuant to the PSS Stock Option
Agreement, issue, sell, pledge, encumber, authorize the issuance of, enter
into any Contract to issue, sell, pledge, encumber, or authorize the issuance
of, or otherwise permit to become outstanding, any additional shares of PSS
Common Stock or any other capital stock of any PSS Entity, or any stock
appreciation rights, or any option, warrant, or other Equity Right; provided,
however, that nothing contained herein shall prevent or limit PSS from
issuing (i) employee stock options in the ordinary course of business and
consistent with past practices, or (ii) issuing securities in connection with
business acquisitions of third parties, unless the issuance of such
securities would require the approval of the shareholders of PSS under
applicable Law; or
(d) enter into any agreement with any Person to acquire the business
of such Person for a purchase price in excess of $75,000,000 whether payable
in shares of PSS Common Stock, cash, or notes.
Notwithstanding anything contained in Section 7.3 or elsewhere in this Agreement
to the contrary, PSS may adopt, prior to the Effective Time, a shareholder
protection rights agreement and declare a dividend of one right thereunder for
each share of PSS Common Stock outstanding as of a record date and the adoption
of such a shareholder protection rights agreement and the declaration of such a
dividend shall not constitute a breach or violation of any representation,
warranty, covenant or agreement of PSS contained in this Agreement.
7.4 Adverse Changes in Condition. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a GSMS Material Adverse Effect or a PSS Material Adverse Effect, as
applicable, or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
7.5 Reports. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed. If financial statements are
contained in any such reports filed with the SEC, such financial statements will
fairly present the consolidated financial position of the entity filing such
statements as of the dates indicated and the consolidated results of operations,
changes in stockholders' equity, and cash flows for the periods then ended in
accordance with GAAP (subject in the case of interim financial statements to
normal recurring year-end adjustments that are not material). As of their
respective dates, such reports filed with the SEC will comply in all material
respects with the Securities Laws and will not
-26-
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in all material respects in accordance
with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 Registration Statement; Proxy Statement; Stockholder Approval. As
-------------------------------------------------------------
soon as reasonably practicable after execution of this Agreement, PSS shall
prepare and file the Registration Statement with the SEC, and shall use its
reasonable efforts to cause the Registration Statement to become effective under
the 1933 Act and take any action required to be taken under the applicable state
Blue Sky or securities Laws in connection with the issuance of the shares of PSS
Common Stock upon consummation of the Merger. GSMS shall cooperate in the
preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as PSS may
reasonably request in connection with such action. GSMS shall call a
Stockholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and the Merger and such other related
matters as it deems appropriate. PSS shall call a Stockholders' Meeting, to be
held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon the issuance of
shares of PSS Common Stock pursuant to the Merger and such other related matters
as it deems appropriate, including an amendment to the Articles of Incorporation
of PSS to increase the authorized capital stock of PSS. In connection with the
Stockholders' Meetings, (i) GSMS and PSS shall prepare and file with the SEC a
Joint Proxy Statement and mail such Joint Proxy Statement to their respective
stockholders, (ii) the Parties shall furnish to each other all information
concerning them that they may reasonably request in connection with such Joint
Proxy Statement, (iii) the Board of Directors of GSMS and PSS shall recommend to
their respective stockholders the approval of the matters submitted for approval
(unless the Board of Directors of either PSS or GSMS, after having consulted
with and considered the advice of outside legal counsel, determines in good
faith that the making of such recommendation, or the failure to withdraw or
modify its recommendation, would constitute a breach of fiduciary duties of the
members of such Board of Directors to its stockholders under applicable law),
and (iv) the Board of Directors and officers of GSMS and PSS shall use their
commercially reasonable efforts to obtain such stockholders' approval (unless
the Board of Directors of GSMS or PSS, after having consulted with and
considered the advice of outside counsel, determines in good faith that the
taking of such actions would constitute a breach of fiduciary duties of the
members of such Board of Directors to GSMS's stockholder under applicable law).
PSS and GSMS shall make all necessary filings with respect to the Merger under
the Securities Laws.
8.2 Nasdaq Listing. PSS shall use its reasonable efforts to list on
--------------
the Nasdaq National Market, (i) prior to the Effective Time, the shares of PSS
Common Stock to be issued to the holders of GSMS Common Stock pursuant to the
Merger, and (ii) not later than the effective date of any registration statement
filed with the SEC pursuant to Section 3.5(d) hereof, the PSS Common Stock
underlying the Options and the GSMS common stock purchase warrants. PSS shall
give all notices and make all filings with the NASD required in connection with
the transactions contemplated herein.
8.3 Applications; Antitrust Notification. PSS shall promptly prepare
------------------------------------
and file, and GSMS shall cooperate in the preparation and, where appropriate,
filing of, applications with all Regulatory Authorities having jurisdiction over
the transactions contemplated by this Agreement seeking the requisite Consents
necessary to consummate the transactions contemplated by this Agreement. To the
extent required by the HSR Act, each of the Parties will promptly file with the
United States Federal Trade Commission and the United States Department of
Justice the notification and report form required for the transactions
contemplated hereby and any supplemental or additional information which may
reasonably be requested in connection therewith pursuant to the HSR Act and will
comply in all material respects with the requirements of the HSR Act. The
Parties shall deliver to each other copies of all filings, correspondence and
orders to and from all Regulatory Authorities in connection with the
transactions contemplated hereby.
-27-
8.4 Filings with State Offices. Upon the terms and subject to the
--------------------------
conditions of this Agreement, GSMS shall execute and file the Certificate of
Merger with the Secretary of State of the State of Delaware in connection with
the Closing.
8.5 Agreement as to Efforts to Consummate. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its commercially
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement or the
GSMS Stock Option Agreement or the PSS Stock Option Agreement, as applicable.
Each Party shall use, and shall cause each of its Subsidiaries to use, its
commercially reasonable efforts to obtain all material Consents necessary or
desirable (in the good faith judgment of the Board of Directors of such Party)
for the consummation of the transactions contemplated by this Agreement.
8.6 Investigation and Confidentiality.
---------------------------------
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) The Parties' respective obligations under the Confidentiality
Agreement are hereby reaffirmed and adopted, and incorporated by reference
herein.
(c) GSMS shall use its commercially reasonable efforts to exercise its
rights under confidentiality agreements entered into with Persons which were
considering an Acquisition Proposal with respect to GSMS to preserve the
confidentiality of the information relating to the GSMS Entities provided to
such Persons and their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a GSMS Material Adverse Effect
or a PSS Material Adverse Effect, as applicable.
8.7 Press Releases. Prior to the Effective Time, GSMS and PSS shall
--------------
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
8.8 No Solicitation. Except with respect to this Agreement and the
---------------
transactions contemplated hereby, no GSMS Entity or PSS Entity nor any Affiliate
thereof nor any Representatives thereof retained by any GSMS Entity or any PSS
Entity shall directly or indirectly solicit any Acquisition Proposal by any
Person. Except to the extent the Board of Directors of GSMS or PSS, as the case
may be, after having consulted with and considered the advice of outside
counsel, determines in good faith that the failure to take such actions would
constitute a breach of fiduciary duties of the members of such Board of
Directors to its stockholders under applicable law, no GSMS Entity or PSS
Entity, as the case may be, or any Affiliate or Representative thereof shall
-28-
furnish any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal, but GSMS or PSS, as the case may be, may communicate
information about such an Acquisition Proposal to its stockholders if and to the
extent that it is required to do so in order to comply with its legal
obligations as advised by outside counsel. Any actions by a Party pursuant to
the preceding sentence will not constitute a breach of Section 8.8 or any other
provision hereof. Either Party shall promptly advise the other following the
receipt of any Acquisition Proposal and the details thereof, including, without
limitation, the proposed acquisition price and acquiror, and advise such other
Party of any developments with respect to such Acquisition Proposal promptly
upon the occurrence thereof. Each Party shall (i) immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Affiliates and
Representatives not to engage in any of the foregoing.
8.9 Accounting and Tax Treatment. Each of the Parties undertakes and
----------------------------
agrees to use its commercially reasonable efforts to cause the Merger, and to
take no action which would cause the Merger not, to qualify for treatment as a
pooling of interests for accounting purposes or as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code for federal income tax
purposes.
8.10 State Takeover Laws. Each GSMS Entity and each Stockholder shall
-------------------
take all necessary steps to exempt the transactions contemplated by this
Agreement from, or if necessary to challenge the validity or applicability of,
any applicable Takeover Law under the DGCL.
8.11 Agreements of Affiliates. GSMS has disclosed in Section 8.11 of the
------------------------
GSMS Disclosure Memorandum all Persons whom it reasonably believes is an
"affiliate" of GSMS for purposes of Rule 145 under the 1933 Act. GSMS shall use
its reasonable efforts to cause each such Person to deliver to PSS not later
than 10 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 2.1, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of GSMS Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of PSS Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and, because the Merger is to be accounted
for by the pooling-of-interests method of accounting, until such time as
financial results covering at least 30 days of combined operations of PSS and
GSMS have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. Because the Merger is to be
accounted for using the pooling-of-interests method of accounting, shares of PSS
Common Stock issued to such affiliates of GSMS in exchange for shares of GSMS
Common Stock shall not be transferable until such time as financial results
covering at least 30 days of combined operations of PSS and GSMS have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, regardless of whether each such affiliate has
provided the written agreement referred to in this Section 8.11 (and PSS shall
be entitled to place restrictive legends upon certificates for shares of PSS
Common Stock issued to affiliates of GSMS pursuant to this Agreement to enforce
the provisions of this Section 8.11). PSS shall not be required to maintain the
effectiveness of the Registration Statement under the 1933 Act for the purposes
of resale of PSS Common Stock by such affiliates. PSS has disclosed in Section
8.11 of the PSS Disclosure Memorandum all Persons whom it reasonably believes is
an "affiliate" of PSS. PSS shall use its reasonable efforts to cause each such
Person to execute and deliver not later than 10 days after the date of this
Agreement, a written agreement, substantially in the form of Exhibit 2.2,
providing that such Person shall not sell, pledge, transfer or otherwise dispose
of any shares of PSS Common Stock until such time as financial results covering
at least 30 days of combined operations of PSS and GSMS have been published
within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies.
8.12 Employee Benefits and Contracts. Following the Effective Time, PSS
-------------------------------
shall provide generally to officers and employees of the GSMS Entities employee
benefits under employee benefit and welfare plans (other than stock option or
other plans involving the potential issuance of PSS Common Stock), on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the PSS Entities to their similarly situated officers and
employees. For purposes of participation, vesting and (except in the case of
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PSS retirement plans) benefit accrual under PSS's employee benefit plans, the
service of the employees of the GSMS Entities prior to the Effective Time shall
be treated as service with a PSS Entity participating in such employee benefit
plans. PSS also shall cause the Surviving Corporation and its Subsidiaries to
honor in accordance with their terms all employment, severance, consulting and
other compensation Contracts disclosed in Section 8.12 of the GSMS Disclosure
Memorandum to PSS between any GSMS Entity and any current or former director,
officer, or employee thereof, and all provisions for vested benefits or other
vested amounts earned or accrued through the Effective Time under the GSMS
Benefit Plans.
8.13 Indemnification and Insurance.
-----------------------------
(a) The By-Laws of the Surviving Corporation shall contain the provisions
with respect to indemnification set forth in the By-Laws of GSMS on the date
hereof, which provisions shall not be amended, repealed or otherwise modified
for a period of six (6) years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who on or prior to the
Effective Time were directors, officers, employees or agents of GSMS, unless
such modification is required by law.
(b) After the Effective Time, PSS will, and will cause the Surviving
Corporation to, indemnify and hold harmless the present and former officers,
directors, employees and agents of GSMS (the "Indemnified Parties") in respect
of acts or omissions occurring on or prior to the Effective Time to the extent
and subject to the terms of GSMS's Certificate of Incorporation and Bylaws or
any indemnification agreement with GSMS officers and directors to which GSMS is
a party, in each case in effect on the date hereof; provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable law. Without limitation of the foregoing, and subject to
GSMS's Certificate of Incorporation or Bylaws or any applicable indemnification
agreement in effect on this date, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation in
connection with any matter relating to this Agreement or the transactions
contemplated hereby occurring on or prior to the Effective Time, PSS shall, or
cause the Surviving Corporation to, pay as incurred such Indemnified Party's
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith.
(d) To the extent there is any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) against an
Indemnified Party that arises out of or pertains to any action or omission in
his or her capacity as a director, officer, employee, fiduciary or agent of GSMS
occurring prior to the Effective Time, or arises out of or pertains to the
transactions contemplated by this Agreement for a period of six years after the
Effective Time (whether arising before or after the Effective Time), such
Indemnified Party shall be entitled to be represented by counsel and following
the Effective Time, and subject to GSMS's Certificate of Incorporation or Bylaws
or any applicable indemnification agreement in effect on this date, the
Surviving Corporation and PSS shall pay the reasonable fees and expenses of such
counsel promptly after statements therefor are received and the Surviving
Corporation and PSS will cooperate in the defense of any such matter; provided,
however, that neither the Surviving Corporation not PSS shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims.
(e) PSS will cause the Surviving Corporation to obtain "tail" directors'
and officers' liability insurance to be effective for a period of six (6) years
following the Effective Time, covering those persons who are currently covered
by GSMS's directors' and officers' liability insurance policy (a copy of which
has been made available to PSS) on terms comparable to those now applicable to
directors and officers of GSMS; provided, that in no event shall the Surviving
Corporation be required to expend in excess of 150% of the annual premium
currently paid for such coverage; and provided, further, that if the premium for
such coverage exceeds such amount, the Surviving Corporation shall purchase a
policy with the greatest coverage available for such 150% of the annual premium.
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8.14 Voting Agreements. Simultaneously with execution and delivery of
-----------------
this Agreement, PSS and certain shareholders of GSMS have entered into the GSMS
Voting Agreement in the form of Exhibit 5.1 hereto and GSMS and certain
shareholders of PSS have entered into the PSS Voting Agreement in the form of
Exhibit 5.2 hereto.
8.15 Accountants' Letters.
--------------------
(a) GSMS shall cause PSS to receive from Ernst & Young LLP letters dated
not more than five days prior to (i) the date of the Joint Proxy Statement and
(ii) the Effective Time, with respect to certain financial information regarding
GSMS, in form and substance reasonably satisfactory to PSS, which letters shall
be based upon customary specified procedures undertaken by such firm in
accordance with Statement of Auditing Standard Nos. 72 and 75.
(b) PSS shall cause GSMS to receive from Xxxxxx Xxxxxxxx LLP letters dated
not more than five days prior to (i) the date of the Joint Proxy Statement and
(ii) the Effective Time, with respect to certain financial information regarding
PSS, in form and substance reasonably satisfactory to GSMS, which letters shall
be based upon customary specified procedures undertaken by such firm in
accordance with Statement of Auditing Standard Nos. 72 and 75.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 Conditions to Obligations of Each Party. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6:
(a) Stockholder Approval. The stockholders of GSMS shall have
--------------------
approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law, by the provisions of any governing instruments, or by the rules of the
NASD. The stockholders of PSS shall have approved (i) the issuance of shares
of PSS Common Stock pursuant to the Merger, as and to the extent required by
Law, by the provisions of any governing instruments, or by the rules of the
NASD, and (ii) an amendment to the Articles of Incorporation of PSS to
increase the authorized capital stock of PSS.
(b) Regulatory Approvals. All Consents of, filings and registrations
--------------------
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of PSS would so materially and adversely
impact the conduct of the combined businesses of GSMS and PSS that, had such
condition or requirement been known, such Party would not, in its reasonable
judgment, have entered into this Agreement.
(c) Consents and Approvals. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those
referred to in Section 9.1(b)) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, would have,
individually or in the aggregate, a GSMS Material Adverse Effect or a PSS
Material Adverse Effect, as applicable.
(d) Legal Proceedings. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether
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temporary, preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal the consummation of the transactions
contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of
the Registration Statement shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals
under state securities Laws or the 1933 Act or 1934 Act relating to the
issuance or trading of the shares of PSS Common Stock issuable pursuant to
the Merger shall have been received.
(f) Nasdaq Listing. The shares of PSS Common Stock issuable pursuant
--------------
to the Merger shall have been approved for listing on the Nasdaq National
Market, subject to official notice of issuance.
(g) Tax Matters. Each Party shall have received a written opinion of
-----------
counsel from Xxxxxx & Bird LLP, in form reasonably satisfactory to such
Parties (the "Tax Opinion"), to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) the exchange in the Merger of GSMS Common Stock
for PSS Common Stock will not give rise to gain or loss to the stockholders
of GSMS with respect to such exchange (except to the extent of any cash
received), and (iii) none of GSMS, Merger Corp. or PSS will recognize gain or
loss as a consequence of the Merger (except for amounts resulting from any
required change in accounting methods and any income and deferred gain
recognized pursuant to Treasury regulations issued under Section 1502 of the
Internal Revenue Code). In rendering such Tax Opinion, such counsel shall be
entitled to rely upon representations of officers of GSMS and PSS reasonably
satisfactory in form and substance to such counsel.
9.2 Conditions to Obligations of PSS. The obligations of PSS to
--------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by PSS pursuant to Section 11.6(a):
(a) Representations and Warranties. The representations and
------------------------------
warranties of GSMS contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time with the same force and
effect as if made at and as of such time, except for (i) changes contemplated
by this Agreement and (ii) those representations and warranties which address
matters only as of a particular date (which shall be true and correct as of
such date).
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of GSMS to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. GSMS shall have delivered to PSS (i) a certificate,
------------
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to GSMS and in Section 9.2(a)
and 9.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by GSMS's Board of Directors and stockholders evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as PSS and its counsel
shall request.
(d) Opinion of Counsel. PSS shall have received an opinion of Xxxxx,
------------------
Xxxxxxx & Xxxxxxxxx LLP, counsel to GSMS, dated as of the Effective Time, in
form reasonably acceptable to PSS, and substantially covering such matters
set forth in Exhibit 3.
(e) Pooling Letters. PSS shall have received letters, addressed to
---------------
PSS, in form and substance reasonably acceptable to PSS, from Xxxxxx Xxxxxxxx
LLP, dated the date of this Agreement to the
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effect that PSS and its Subsidiaries qualify as an entity that may be a party
to a business combination for which the pooling-of-interests accounting
method would be available, and dated as of the Effective Time to the effect
that the Merger will qualify for pooling-of-interests accounting treatment.
PSS also shall have received letters, dated the date of this Agreement and as
of the Effective Time, addressed to PSS, in form and substance reasonably
acceptable to PSS, from Ernst & Young LLP to the effect that GSMS and its
Subsidiaries qualify as an entity that may be party to a business combination
for which the pooling-of-interest accounting method would be available.
(f) Affiliates Agreements. PSS shall have received from each
---------------------
affiliate of GSMS and each affiliate of PSS the affiliates letters referred
to in Section 8.11.
(g) Xxxxx Employment. Xxxxx shall have executed and delivered to PSS
-----------------
an employment agreement in form and substance reasonably satisfactory to PSS
and on terms and conditions no less favorable to Xxxxx than those contained
in the Xxxxx Employment Agreement.
9.3 Conditions to Obligations of GSMS. The obligations of GSMS to
---------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by GSMS pursuant to Section 11.6(b):
(a) Representations and Warranties. The representations and
------------------------------
warranties of PSS contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time with the same force and
effect as if made at and as of such time, except for (i) changes contemplated
by this Agreement and (ii) those representations and warranties which address
matters only as of a particular date (which shall be true and correct as of
such date).
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of PSS to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. PSS shall have delivered to GSMS (i) a certificate,
------------
dated as of the Effective Time and signed on its behalf by its chief
executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to PSS and in Section 9.3(a)
and 9.3(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by PSS's Board of Directors and stockholders and Merger Corp.'s Board
of Directors and sole stockholder evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all
in such reasonable detail as GSMS and its counsel shall request.
(d) Opinion of Counsel. GSMS shall have received an opinion of
------------------
Xxxxxx & Bird LLP, counsel to PSS, dated as of the Effective Time, in form
reasonably acceptable to GSMS, and substantially covering such matters set
forth in Exhibit 4.
(e) Pooling Letters. GSMS shall have received letters, addressed to
---------------
GSMS, in form and substance reasonably acceptable to GSMS, from Xxxxxx
Xxxxxxxx LLP, dated the date of this Agreement to the effect that PSS and its
Subsidiaries qualify as an entity that may be a party to a business
combination for which the pooling-of-interests accounting method would be
available, and dated as of the Effective Time to the effect that the Merger
will qualify for pooling-of-interests accounting treatment. GSMS also shall
have received letters, dated the date of this Agreement and as of the
Effective Time, addressed to GSMS, in form and substance reasonably
acceptable to GSMS, from Ernst & Young LLP to the effect that GSMS and its
Subsidiaries qualify as a business entity that may be a party to a business
combination for which the pooling-of-interests method of accounting would be
available.
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(f) Affiliates Agreements. GSMS shall have received from each
---------------------
affiliate of GSMS and each affiliate of PSS the affiliates letters referred
to in Section 8.11.
ARTICLE 10
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision of this
-----------
Agreement, and notwithstanding the approval of this Agreement by the
stockholders of GSMS and PSS or both, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of PSS and GSMS; or
(b) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any representation or warranty contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach, such that the
conditions set forth in Sections 9.2(a) and 9.3(a), as applicable, would not
then be satisfied by the breaching Party; or
(c) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of
written notice to the breaching Party of such breach, such that the
conditions set forth in Sections 9.2(b) and 9.3(b), as applicable, would not
then be satisfied by the breaching Party; or
(d) By either Party (provided that the terminating Party in not then
in material breach of any representation, warranty, covenant or other
agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final non-
appealable action of such authority or if any action taken by such authority
is not appealed within the time limit for appeal such that the conditions set
forth in Section 9.1(c) would not be satisfied, or (ii) the stockholders of
GSMS or PSS fail to vote their approval of the matters relating to this
Agreement and the transactions contemplated hereby at the Stockholders'
Meetings where such matters were presented to such stockholders for approval
and voted upon; or
(e) By either Party in the event that the Merger shall not have been
consummated by June 30, 1998, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of
this Agreement by the Party electing to terminate pursuant to this Section
10.1(e); or
(f) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the
Merger cannot be satisfied or fulfilled by the date specified in Section
10.1(e); or
(g) by either Party, if: (i) the Board of Directors of GSMS shall have
authorized, recommended, publicly proposed or publicly announced an intention
to authorize, recommend or propose to the stockholders of GSMS, or has
entered into an agreement with any Person (other than PSS) to effect an
alternative Acquisition Proposal or (ii) a tender offer or exchange offer for
25% or more of the outstanding shares of GSMS Common Stock is commenced and
the Board of Directors of GSMS recommends that the stockholders of the
Company tender their shares in such tender or exchange offer; provided that
GSMS shall not be entitled to exercise any termination rights under clause
(i) or (ii) of this Section 10.1(g) unless (x) any
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action of the Board of Directors of GSMS is taken in good faith by the Board
of Directors of GSMS after consultation with and consideration of the advice
of its outside counsel and financial advisors, in order to discharge properly
its fiduciary duties to its stockholders and (y) such Party has complied with
its obligations in Section 8.8;
(h) by PSS, if the Board of Directors of GSMS shall withdraw, modify
or change its approval or recommendation of this Agreement or the Merger in a
manner adverse to PSS, provided that PSS is not then in material breach of
any representation, warranty, covenant or agreement contained in this
Agreement;
(i) by either Party, if: (i) the Board of Directors of PSS shall have
authorized, recommended, publicly proposed or publicly announced an intention
to authorize, recommend or propose to the stockholders of PSS, or has entered
into an agreement with any Person (other than GSMS) to effect an Acquisition
Proposal or (ii) a tender offer or exchange offer for 25% or more of the
outstanding shares of PSS Common Stock is commenced and the Board of
Directors of PSS recommends that the stockholders of PSS tender their shares
in such tender or exchange offer; provided that PSS shall not be entitled to
exercise any termination rights under clause (i) or (ii) of this Section
10.1(g) unless (x) any such Acquisition Proposal is conditioned upon the
termination by PSS of this Agreement, (y) any action of the Board of
Directors of PSS is taken in good faith by the Board of Directors of PSS
after consultation with and consideration of the advice of its outside
counsel and financial advisors, in order to discharge properly its fiduciary
duties to its stockholders and (z) such Party has complied with its
obligations in Section 8.8; or
(j) By GSMS, if the Board of Directors of PSS shall withdraw, modify
or change its approval or recommendation of the issuance of the PSS Common
Stock pursuant to this Agreement, provided that GSMS is not then in material
breach of any representation, warranty, covenant or agreement contained in
this Agreement.
10.2 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.6(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination. The Stock Option Agreements shall be governed by their own
terms as to their termination.
10.3 Non-Survival of Representations and Covenants. The respective
---------------------------------------------
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except this Section 10.3 and
Articles 1, 2, 3, 4 and 11 and Sections 8.12 and 8.13
ARTICLE 11
MISCELLANEOUS
-------------
11.1 Definitions.
-----------
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Acquisition Proposal" with respect to a Party shall mean (a) a
merger, consolidation or similar transaction in which the Party is not the
surviving corporation or shall become a subsidiary of
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another corporation, (b) except as permitted pursuant to the terms of this
Agreement, the disposition, by sale, lease, exchange or otherwise, of Assets
representing 15% or more of the consolidated Assets of such Party, (c) the
issuance, sale or other disposition of (including by way of merger,
consolidation, shares exchanged or any similar transaction) securities
representing 20% of more of the voting power of such Party.
"Affiliate" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; or (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger, including
the Exhibits (other than the Stock Option Agreements) delivered pursuant
hereto and incorporated herein by reference.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not carried
on the books and records of such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and wherever located.
"Certificate of Merger" shall mean the Certificate of Merger to be
executed by GSMS and filed with the Secretary of State of the State of
Delaware relating to the Merger as contemplated by Section 1.1.
"Closing Date" shall mean the date on which the Closing occurs.
"Confidentiality Agreement" shall mean that certain Confidentiality
Agreement, dated November 20, 1997, between GSMS and PSS.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that
is binding on any Person or its capital stock, Assets or business.
"Default" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a GSMS Material
Adverse Effect or a PSS Material Adverse Effect, as applicable.
"DGCL" shall mean the Delaware General Corporation Law.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection
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Agency and state and local agencies with jurisdiction over, and including
common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
any Hazardous Material.
"Equity Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exhibits" 1.1, 1.2, 2, 3 and 4 shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred
to in this Agreement and any other related instrument or document without
being attached hereto.
"FBCA" shall mean the Florida Business Corporation Act.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GSMS Common Stock" shall mean the $0.01 par value common stock of
GSMS.
"GSMS Disclosure Memorandum" shall mean the written information
entitled "GSMS, Inc. Disclosure Memorandum" delivered prior to the date of
this Agreement to PSS describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is
being made. Information disclosed with respect to one Section shall not be
deemed to be disclosed for purposes of any other Section not specifically
referenced with respect thereto.
"GSMS Entities" shall mean, collectively, GSMS and all GSMS
Subsidiaries.
"GSMS Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of GSMS as of
September 30, 1997, and as of December 31, 1996 and 1995, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
September 30, 1997, and for each of the three fiscal years ended December 31,
1996, 1995 and 1994, as filed by GSMS in SEC Documents, and (ii) the
consolidated balance sheets of GSMS (including related notes and schedules,
if any) and related statements of income, changes in stockholders' equity,
and cash flows (including related notes and schedules, if any) included in
SEC Documents filed with respect to periods ended subsequent to September 30,
1997.
"GSMS Material Adverse Effect" shall mean an event, change or
occurrence which, individually or in the aggregate, has a material adverse
impact on (i) the financial position, business, or results of operations of
GSMS and its Subsidiaries, taken as a whole, or (ii) the ability of GSMS to
perform its obligations under this Agreement or to consummate the Merger or
the other transactions contemplated by this Agreement.
"GSMS Stock Option Agreement" shall mean the stock option agreement of
even date herewith substantially in the form of Exhibit 1.1 hereto.
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"GSMS Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of GSMS designated as follows: 1992 Stock Plan
and 1997 Stock Plan.
"GSMS Subsidiaries" shall mean the Subsidiaries of GSMS, which shall
include the GSMS Subsidiaries described in Section 5.4 and any corporation or
other organization acquired as a Subsidiary of GSMS in the future and held as
a Subsidiary by GSMS at the Effective Time.
"GSMS Voting Agreement" shall mean the Voting Agreement in the form of
Exhibit 5.1 hereto executed and delivered as of the date of this Agreement by
GSMS and certain shareholders of PSS identified on Schedule I of such voting
agreement.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance, or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"Xxxxx Employment Agreement" shall mean an Employment Agreement, to be
negotiated in good faith by the parties, which shall be on terms no less
favorable to Xxxxx than those set forth in Exhibit 6 and which shall provide
for the payment of salary, bonus and benefits to Xxxxx which are not less
that those payable to Xxxxx by GSMS on the date of this Agreement.
"HSR Act" shall mean Section 7A of the Xxxxxxx Act, as added by Title
II of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises, know-
how, inventions, and other intellectual property rights.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"Joint Proxy Statement/Prospectus" shall mean the proxy statement used
by GSMS and PSS to solicit the approval of their respective stockholders of
the transactions contemplated by this Agreement, which shall include the
prospectus of PSS relating to the issuance of the PSS Common Stock to holders
of GSMS Common Stock.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are known after due inquiry by the officers and directors of such Person.
"Law" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency, guaranty
or endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course
of business) of any type, whether accrued, absolute or contingent, liquidated
or unliquidated, matured or unmatured, or otherwise.
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"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, and (iii) Liens which do not materially impair the use of or title
to the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to it),
or the transactions contemplated by this Agreement.
"Merger Corp. Common Stock" shall mean the $0.01 par value common
stock of Merger Corp.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq National Market" shall mean the National Market System of the
National Association of Securities Dealers Automated Quotations System.
"Property" shall mean any property owned, leased, or operated by the
Party in question or by any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest or other interest (including an interest in
a fiduciary capacity), and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"Party" shall mean either GSMS or PSS, and "Parties" shall mean both
GSMS and PSS.
"Permit" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PSS Capital Stock" shall mean, collectively, the PSS Common Stock,
the PSS Preferred Stock and any other class or series of capital stock of PSS.
"PSS Common Stock" shall mean the $0.01 par value common stock of PSS,
together with any associated rights which may be granted under any shareholder
protection rights agreement which may be adopted by PSS after this date.
"PSS Disclosure Memorandum" shall mean the written information
entitled "PHYSICIAN SALES & SERVICE, INC. Disclosure Memorandum" delivered prior
to the date of this Agreement to GSMS describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being
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made. Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically referenced with
respect thereto.
"PSS Entities" shall mean, collectively, PSS and all PSS Subsidiaries.
"PSS Financial Statements" shall mean (i) the consolidated balance
sheets (including related notes and schedules, if any) of PSS as of September
30, 1997, and as of March 28, 1997 and 1996, and the related statements of
income, changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) for the six months ended September 30, 1997, and for each
of the three fiscal years ended March 28, 1997, March 29, 1996 and March 30,
1995, as filed by PSS in SEC Documents, and (ii) the consolidated balance sheets
of PSS (including related notes and schedules, if any) and related statements of
income, changes in stockholders' equity, and cash flows (including related notes
and schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to September 30, 1997.
"PSS Material Adverse Effect" shall mean an event, change or
occurrence which, individually or in the aggregate, has a material adverse
impact on (i) the financial position, business, or results of operations of PSS
and its Subsidiaries, taken as a whole, or (ii) the ability of PSS to perform
its obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement.
"PSS Preferred Stock" shall mean the $0.01 par value preferred stock
of PSS.
"PSS Stock Option Agreement" shall mean the stock option agreement of
even date herewith substantially in the form of Exhibit 1.2 hereto.
"PSS Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of PSS designated as follows: Amended and
Restated 1994 Long-Term Stock Plan, Amended and Restated Long-Term Incentive
Plan, Annual Incentive Plan, Amended and Restated Directors' Stock Plan,
Incentive Stock Option Plan, Xxxxxx Medical Stock Option Plans and the ELITE
Deferred Compensation Plan and Stock Option Grant Program.
"PSS Subsidiaries" shall mean the Subsidiaries of PSS, which shall
include the PSS Subsidiaries described in Section 6.4 and any corporation or
other organization acquired as a Subsidiary of PSS in the future and held as a
Subsidiary by PSS at the Effective Time.
"PSS Voting Agreement" shall mean the Voting Agreement in the form of
Exhibit 5.2 hereto executed and delivered as of the date of this Agreement by
GSMS and certain shareholders of PSS identified on Schedule I of such voting
agreement.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or post-effective
amendments or supplements thereto, filed with the SEC by PSS under the 1933 Act
with respect to the shares of PSS Common Stock to be issued to the stockholders
of GSMS in connection with the transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the SEC, the NASD,
the Federal Trade Commission, the United States Department of Justice, and all
other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.
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"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules, and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of any Regulatory Authority promulgated thereunder.
"Stock Option Agreements" shall mean the GSMS Stock Option Agreement
and the PSS Stock Option Agreement.
"Stockholders' Meetings" shall mean the respective meetings of the
stockholders of GSMS and PSS to be held pursuant to Section 8.1, including
any adjournment or adjournments thereof.
"Subsidiaries" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its parent
(provided, there shall not be included any such entity the equity securities
of which are owned or controlled in a fiduciary capacity), (ii) in the case
of partnerships, serves as a general partner, (iii) in the case of a limited
liability company, serves as a managing member, or (iv) otherwise has the
ability to elect a majority of the directors, trustees or managing members
thereof.
"Surviving Corporation" shall mean GSMS as the surviving corporation
resulting from the Merger.
"Tax Return" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary
group that includes a Party or its Subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single
business and unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum,
estimated, or other tax or governmental fee of any kind whatsoever, imposes
or required to be withheld by the United States or any state, county, local
or foreign government or subdivision or agency thereof, including any
interest, penalties, and additions imposed thereon or with respect thereto.
(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
Closing Section 1.2
Effective Time Section 1.3
ERISA Affiliate Section 5.14(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
PSS Benefit Plans Section 6.14
PSS Contracts Section 6.15
PSS ERISA Plan Section 6.14
PSS Pension Plan Section 6.14
PSS SEC Reports Section 6.5(a)
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GSMS Benefit Plans Section 5.14
GSMS Contracts Section 5.15
GSMS ERISA Plan Section 5.14
GSMS Options Section 3.6
GSMS Pension Plan Section 5.14
GSMS SEC Reports Section 5.5(a)
Merger Section 1.1
Takeover Laws Section 5.20
Tax Opinion Section 9.1(h)
(c) Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
11.2 Expenses.
--------
(a) Except as otherwise provided in this Section 11.2, each of
the Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel, except that each of the Parties shall bear and pay
one-half of the filing fees payable in connection with the Registration
Statement and the Joint Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Joint Proxy
Statement.
(b) Notwithstanding the foregoing Section 11.2(a),
(i) if this Agreement is terminated by PSS pursuant to any
of Sections 10.1(b), 10.1(c), 10.1(d)(ii) (as relates to approval of GSMS's
stockholders) or 10.1(f) (but only on the basis of the failure of GSMS to
satisfy any of the conditions enumerated in Section 9.2, other than Section
9.2(d), (e) (as relates to PSS), (f) or (g) (as relates to Affiliates of
PSS)), or
(ii) if the Merger is not consummated as a result of the
failure of GSMS to satisfy any of the conditions set forth in Section 9.1(a)
(as such section relates to approval by the stockholders of GSMS), Section
9.2 (other than Section 9.2(d), (e) (as relates to PSS), (f) or (g) (as
relates to Affiliates of PSS)), or
(iii) if this Agreement is terminated pursuant to Section
10.1(g) or (h),
then GSMS shall promptly pay PSS the sum of (x) $20,000,000, which amount
represents the Parties' best estimate of the value of the management time,
overhead, opportunity costs and other unallocated costs of PSS incurred by or on
behalf of PSS in connection with the transactions contemplated by this Agreement
which cannot be calculated with certainty, plus (y) all the out-of-pocket costs
and expenses of PSS, including costs of counsel, investment bankers, actuaries
and accountants up to but not exceeding an additional $1,000,000; provided,
however, that in no event shall the amount paid under clause (x) plus the excess
of (A) the "Section 8 Repurchase Consideration" (as such term is defined in the
GSMS Stock Option Agreement and regardless of whether such repurchase option is
exercised) over (B) (1) the aggregate purchase price paid for such shares if the
option has been exercised or (2) the purchase price under the option if the
option has not been exercised exceed $24,000,000.
(c) Notwithstanding the foregoing Section 11.2(a),
(i) if this Agreement is terminated by GSMS pursuant to any
of Sections 10.1(b), 10.1(c), 10.1(d)(ii) (as relates to approval of PSS's
stockholders) or 10.1(f) (but only on the basis of the failure of PSS to
satisfy any of the conditions enumerated in Section 9.3, other than Section
9.3(d), (e) (as relates to GSMS) or (f) (as relates to Affiliates of GSMS)),
or
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(ii) if the Merger is not consummated as a result of the
failure of PSS to satisfy any of the conditions set forth in Section 9.1(a)
(as such section relates to approval by the stockholders of PSS), Section 9.3
(other than Section 9.3(d), (e) (as relates to GSMS) or (f) (as relates to
Affiliates of GSMS)), or
(iii) if this Agreement is terminated pursuant to Section
10.1(i) or (j),
then PSS shall promptly pay GSMS the sum of (x) $20,000,000, which amount
represents the Parties' best estimate of the value of the management time,
overhead, opportunity costs and other unallocated costs of GSMS incurred by or
on behalf of GSMS in connection with the transactions contemplated by this
Agreement which cannot be calculated with certainty, plus (y) all the out-of-
pocket costs and expenses of GSMS, including costs of counsel, investment
bankers, actuaries and accountants up to but not exceeding an additional
$1,000,000; provided, however, that in no event shall the amount paid under
clause (x) plus the excess of (A) the "Section 8 Repurchase Consideration" (as
such term is defined in the GSMS Stock Option Agreement and regardless of
whether such repurchase option is exercised) over (B) (1) the aggregate purchase
price paid for such shares if the option has been exercised or (2) the purchase
price under the option if the option has not been exercised exceed $24,000,000.
(d) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the non-
breaching Party.
11.3 Brokers and Finders. Except for NationsBanc Xxxxxxxxxx
-------------------
Securities, Inc. as to GSMS and except for BT Alex. Xxxxx Incorporated as to
PSS, each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed any broker or finder
or incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by GSMS or by PSS, each of GSMS and
PSS, as the case may be, agrees to indemnify and hold the other Party harmless
of and from any Liability in respect of any such claim.
11.4 Entire Agreement. Except as otherwise expressly provided herein,
----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, other than as provided in Sections 8.12
and 8.13.
11.5 Amendments. To the extent permitted by Law, this Agreement may
----------
be amended by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after stockholder approval of
this Agreement has been obtained; provided, that after any such approval by the
holders of GSMS Common Stock, there shall be made no amendment that requires
further approval by such stockholders without the further approval of such
stockholders; and further provided, that after any such approval by the holders
of PSS Common Stock, the provisions of this Agreement relating to the manner or
basis in which shares of GSMS Common Stock will be exchanged for shares of PSS
Common Stock shall not be amended after the Stockholders' Meetings in a manner
adverse to the holders of PSS Common Stock without any requisite approval of the
holders of the issued and outstanding shares of PSS Common Stock entitled to
vote thereon.
11.6 Waivers.
-------
(a) Prior to or at the Effective Time, PSS, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by GSMS, to waive or extend the time for the compliance or fulfillment
by GSMS of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the
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obligations of PSS under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of PSS.
(b) Prior to or at the Effective Time, GSMS, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by PSS, to waive or extend the time for the compliance or fulfillment
by PSS of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of GSMS under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing signed
by a duly authorized officer of GSMS.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 Assignment. Except as expressly contemplated hereby, neither
----------
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 Notices. All notices or other communications which are required
-------
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
GSMS: Gulf South Medical Supply, Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx Xxxxx Xxxxxxxxx
Copy to Counsel: Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Xx.
PSS: Physician Sales & Service, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
Attention: Xxxxx X. Xxxxx
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Copy to Counsel: Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telecopy Number: (000) 000-0000
Attention: J. Xxxxxxx Xxxxxx
11.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the Laws of the State of Delaware, without regard
to any applicable conflicts of Laws.
11.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 Captions; Articles and Sections. The captions contained in this
-------------------------------
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
11.12 Interpretations. The parties acknowledge and agree that this
---------------
Agreement has been reviewed, negotiated, and accepted by all parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and intentions
of all parties hereto. Both Parties contributed to the drafting of this
Agreement.
11.13 Enforcement of Agreement. The Parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
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 hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
11.14 Severability. Any term or provision of this Agreement which is
------------
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. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed on its behalf by its duly authorized officers as of the day and year
first above written.
PHYSICIAN SALES & SERVICE, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
President and Chief Executive Officer
PSS MERGER CORP.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
President
GULF SOUTH MEDICAL SUPPLY, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
President
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