EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
MCKESSON CORPORATION
SPIRIT ACQUISITION CORPORATION
AND
D&K HEALTHCARE RESOURCES, INC.
DATED AS OF JULY 8, 2005
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS............................................................................................ 2
SECTION 1.01 Definitions...................................................................................... 2
ARTICLE II THE OFFER............................................................................................. 12
SECTION 2.01 The Offer........................................................................................ 12
SECTION 2.02 Company Action................................................................................... 16
SECTION 2.03 Directors........................................................................................ 18
ARTICLE III THE MERGER........................................................................................... 20
SECTION 3.01 The Merger....................................................................................... 20
SECTION 3.02 Effective Time; Closing.......................................................................... 20
SECTION 3.03 Effect of the Merger............................................................................. 21
SECTION 3.04 Certificate of Incorporation; By-laws............................................................ 21
SECTION 3.05 Directors and Officers........................................................................... 22
SECTION 3.06 Conversion of Securities......................................................................... 22
SECTION 3.07 Employee Stock Options........................................................................... 23
SECTION 3.08 Dissenting Shares................................................................................ 24
SECTION 3.09 Surrender of Shares; Stock Transfer Books........................................................ 25
SECTION 3.10 Subsequent Actions............................................................................... 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 27
SECTION 4.01 Organization and Qualification; Subsidiaries..................................................... 28
SECTION 4.02 Certificate of Incorporation and By-laws......................................................... 28
SECTION 4.03 Capitalization................................................................................... 29
SECTION 4.04 Authority Relative to This Agreement............................................................. 30
SECTION 4.05 No Conflict; Required Filings and Consents....................................................... 31
SECTION 4.06 Permits; Compliance.............................................................................. 33
SECTION 4.07 SEC Filings; Financial Statements................................................................ 34
SECTION 4.08 Absence of Certain Changes or Events............................................................. 37
SECTION 4.09 Absence of Litigation............................................................................ 38
SECTION 4.10 Employee Benefit Plans........................................................................... 39
SECTION 4.11 Labor and Employment Matters..................................................................... 43
SECTION 4.12 Offer Documents; Schedule 14D-9; Proxy Statement................................................. 45
SECTION 4.13 Property and Leases.............................................................................. 46
SECTION 4.14 Taxes............................................................................................ 48
SECTION 4.15 Environmental Matters............................................................................ 51
SECTION 4.16 Action with Respect to Rights Agreement.......................................................... 53
SECTION 4.17 Material Contracts............................................................................... 53
SECTION 4.18 Insurance........................................................................................ 58
SECTION 4.19 Brokers.......................................................................................... 59
SECTION 4.20 Intellectual Property............................................................................ 59
SECTION 4.21 Accounting or Audit Irregularities............................................................... 63
SECTION 4.22 Accounts Receivable.............................................................................. 64
SECTION 4.23 Inventory........................................................................................ 64
SECTION 4.24 Healthcare Regulatory and FDA Compliance......................................................... 65
SECTION 4.25 Secondary Markets................................................................................ 67
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SECTION 4.26 Customers........................................................................................ 68
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER................................................. 69
SECTION 5.01 Corporate Organization........................................................................... 69
SECTION 5.02 Authority Relative to This Agreement............................................................. 69
SECTION 5.03 No Conflict; Required Filings and Consents....................................................... 70
SECTION 5.04 Financing........................................................................................ 71
SECTION 5.05 Offer Documents; Proxy Statement................................................................. 71
SECTION 5.06 Brokers.......................................................................................... 72
SECTION 5.07 Absence of Litigation............................................................................ 72
SECTION 5.08 Company Stock.................................................................................... 73
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER................................................................ 73
SECTION 6.01 Conduct of Business by the Company Pending the Merger............................................ 73
ARTICLE VII ADDITIONAL AGREEMENTS................................................................................ 77
SECTION 7.01 Stockholders' Meeting............................................................................ 77
SECTION 7.02 Proxy Statement.................................................................................. 78
SECTION 7.03 Access to Information; Confidentiality........................................................... 79
SECTION 7.04 No Solicitation of Transactions.................................................................. 79
SECTION 7.05 Employee Benefits Matters........................................................................ 84
SECTION 7.06 Directors' and Officers' Indemnification and Insurance........................................... 85
SECTION 7.07 Notification of Certain Matters.................................................................. 89
SECTION 7.08 Further Action; Reasonable Efforts............................................................... 89
SECTION 7.09 Public Announcements............................................................................. 90
ARTICLE VIII CONDITIONS TO THE MERGER............................................................................ 90
SECTION 8.01 Conditions to the Merger......................................................................... 90
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..................................................................... 91
SECTION 9.01 Termination...................................................................................... 91
SECTION 9.02 Effect of Termination............................................................................ 94
SECTION 9.03 Fees and Expenses................................................................................ 94
SECTION 9.04 Amendment........................................................................................ 95
SECTION 9.05 Waiver........................................................................................... 96
ARTICLE X GENERAL PROVISIONS..................................................................................... 96
SECTION 10.01 Nonsurvival of Representations and Warranties................................................... 96
SECTION 10.02 Notices......................................................................................... 96
SECTION 10.03 Severability.................................................................................... 98
SECTION 10.04 Entire Agreement; Assignment.................................................................... 98
SECTION 10.05 Parties in Interest............................................................................. 98
SECTION 10.06 Specific Performance............................................................................ 99
SECTION 10.07 Governing Law................................................................................... 99
SECTION 10.08 Waiver of Jury Trial............................................................................ 100
SECTION 10.09 Headings........................................................................................ 100
SECTION 10.10 Counterparts.................................................................................... 100
Annex A Conditions to the Offer............................................................................... A-1
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AGREEMENT AND PLAN OF MERGER, dated as of July 8, 2005 (this "Agreement"),
among McKesson Corporation, a Delaware corporation ("Parent"), Spirit
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and D&K Healthcare Resources, Inc., a Delaware corporation
(the "Company").
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company have
each determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, in furtherance of such acquisition, it is proposed that Purchaser
shall make a cash tender offer (the "Offer") to acquire all the shares of common
stock, par value $0.01 per share, of the Company, together with the associated
Rights (as defined herein) (collectively, "Shares") that are issued and
outstanding for $14.50 per Share (such amount, or any greater amount per Share
paid pursuant to the Offer, being the "Per Share Amount"), net to the seller in
cash, upon the terms and subject to the conditions of this Agreement and the
Offer;
WHEREAS, the Board of Directors of the Company (the "Board") has approved
the making of the Offer and resolved to recommend that holders of Shares tender
their Shares pursuant to the Offer;
WHEREAS, as a condition and inducement to Parent to enter into this
Agreement and incur the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, certain of the directors and executive
officers of the Company have entered into a Stockholder Support Agreement
pursuant to which each such person has agreed to tender the Shares held by such
person in the Offer;
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of Parent, Purchaser and the Company have each approved this Agreement and
declared its advisability and
approved the merger (the "Merger") of Purchaser with and into the Company in
accordance with the General Corporation Law of the State of Delaware ("Delaware
Law"), following the consummation of the Offer and upon the terms and subject to
the conditions set forth herein and
WHEREAS, approval by the Board of the Offer and the Merger constituted the
approval required by Section 203(a)(1) of Delaware Law.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.
(a) For purposes of this Agreement:
"80% Items" means those s.k.u.'s of pharmaceutical products which,
individually, have the highest carrying values as would be reflected on a
consolidated balance sheet of the Company and the Subsidiaries dated as of the
date of Parent's physical inspection of the inventory provided for under Clause
(m) of Annex A and which, in the aggregate, account for not less than eighty
percent (80%) of the carrying value of the pharmaceutical inventories of the
Company and the Subsidiaries, taken as a whole.
"Acquisition Proposal" means (i) any proposal or offer from any
person relating to any direct or indirect acquisition of (A) all or a
substantial part of the assets of the Company or of any Subsidiary or (B) over
fifteen percent (15%) of any class of equity securities of the Company or of any
Subsidiary; (ii) any tender offer or exchange offer, as defined pursuant to the
Exchange Act, that, if consummated, would result in any person beneficially
owning fifteen percent (15%) or more of any class of equity securities of the
Company or any Subsidiary; or
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(iii) any merger, consolidation, business combination, sale of all or a
substantial part of the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any Subsidiary, other than the
Transactions.
"Adjusted Service Level" means the quotient of lines filled plus
"manufacturers cannot supply" lines divided by lines ordered. For purposes of
this definition, lines for which fifty percent (50%) or fewer of the items
ordered are shipped shall be deemed not filled, provided that lines for which a
customer is placed on allocation because the customer's orders substantially
exceed the customer's customary orders of such line items shall be deemed
filled.
"affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified person.
"beneficial owner", with respect to any Shares, means a person who
shall be deemed to be the beneficial owner of such Shares (i) which such person
or any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject to the passage of time or other conditions) pursuant to
any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
Shares.
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"Business Day" means any day, other than a Saturday, Sunday, or a
Federal holiday, and shall consist of the time period from 12:01 a.m. through
12:00 midnight Eastern Standard Time.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Intellectual Property Rights" means any Intellectual
Property Rights: purported to be owned by the Company or any Subsidiary.
"Company Registered Intellectual Property Rights" means Registered
Intellectual Property Rights within the Company Intellectual Property Rights.
"Company Systems" shall mean all computer, hardware, software,
systems, and equipment (including embedded microcontrollers in non-computer
equipment) embedded within or required to operate the current products of the
Company and the Subsidiaries, and/or material to or necessary for the Company
and the Subsidiaries to carry on their businesses as currently conducted.
"Computer Software" means all computer programs (whether in source
code or object code form and including, without limitation, any and all software
implementations of algorithms, models and methodologies), and all data bases,
compilations and documentation (including, without limitation, user, operator,
and training manuals) related to the foregoing.
"Contract" means any note, bond, mortgage, indenture, contract,
agreement, lease license, permit, franchise or other obligation or instrument,
whether or not in writing.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise.
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"Documentation" means a document or documents containing information
recording each distribution of any given Drug, from sale by a pharmaceutical
manufacturer, through acquisition and sale by any wholesale distributor or
repackager, until final sale to a pharmacy or other person administering or
dispensing the Drug. The information required to be included in a Drug's
Documentation must at least detail the amount of the Drug, its dosage form and
strength, its lot numbers, the name and address of each owner of the Drug and
his or her signature, its shipping information, including the name and address
of each person certifying delivery or receipt of the Drug, and a certification
that the recipient has authenticated the Documentation. It must also include the
name, address, telephone number and, if available, email contact information of
each wholesale distributor involved in the chain of custody of the Drug.
"Drug" means any drug (including, but not limited to, finished
dosage forms or active ingredients) that is subject to, defined by, or described
by Section 503(b) of the Federal Food, Drug and Cosmetic Act.
"Environmental Laws" means any foreign, federal, state, or local
laws, regulations, ordinances, requirements of any Governmental Authorities and
common law relating to (i) releases or threatened releases of Hazardous
Substances or materials containing Hazardous Substances; (ii) the manufacture,
handling, transport, use, treatment, storage or disposal of, and exposure to,
Hazardous Substances or materials containing Hazardous Substances; or (iii)
pollution or protection of the environment, health, safety or natural resources.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company or any Subsidiary that,
together with the Company or
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any Subsidiary, is treated as a single employer within the meaning of Section
414(b), (c), (m) or (o) of the Code.
"Firm" means an independent accounting firm of national reputation
selected by Parent and the Company or, if Parent and the Company are unable,
within two (2) Business Days after the Company's notice to Parent of a Dispute,
to select the "Firm", then an independent accounting firm of national reputation
selected by the primary auditing firms of the Company and Parent.
"Hazardous Substances" means (i) those substances defined in or
regulated under the following United States federal statutes and their state
counterparts, as each may be amended from time to time, and all regulations
thereunder: the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
Act and the Clean Air Act; (ii) petroleum and petroleum products, including
crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any
mixtures thereof; (iv) polychlorinated biphenyls, asbestos, radon, mold and
fungus; (v) any other contaminant; and (vi) any substance, material or waste
regulated by any Governmental Authority pursuant to any Environmental Law.
"HIPAA" means the Health Insurance Portability and Accountability
Act of 1996, Pub. L. No. 104-191, as amended, and all rules and regulations
promulgated thereunder.
"Identified Customers" means the two customers of the Company
identified in Section 1.1(a) of the Disclosure Schedule.
"Intellectual Property Rights" means any or all legal rights in,
arising out of or associated with any patents, trade secrets, copyrights,
trademarks or domain names.
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"knowledge" means the actual knowledge after due and diligent
inquiry (and what such person should have known after due and diligent inquiry)
of the Chairman of the Board and Chief Executive Officer, the President and
Chief Operating Officer, the Senior Vice President and Chief Financial Officer,
the Senior Vice President Sales and Business Development, the Vice President,
General Counsel and Secretary, the Vice President and Controller, the Vice
President Purchasing, the Director of Compliance and the Senior Vice President
Operations and Chief Information Technology Officer of the Company
(collectively, the "Knowledge Group"); provided, however, that due and diligent
inquiry shall not require any member of the Knowledge Group to make inquiry of
any person who is not a member of the Knowledge Group.
"License Agreements" means all material written agreements between
the Company or any Subsidiary, and third parties, other than those which have
expired or been terminated for reasons unrelated to breach, and in which: (i)
such third party has licensed or granted to the Company or any Subsidiary any
right to use, exploit, practice, sell or distribute any of such third party's
Intellectual Property Rights or Technology ("Inbound License Agreements"); or
(ii) the Company or any Subsidiary (x) has granted to such third party any right
to use, exploit, practice, sell or distribute any Company Intellectual Property
Rights or Technology, or (y) has agreed to any restriction on the right of
Company or any Subsidiary (as the case may be) to use or enforce any Company
Intellectual Property Rights or any Technology owned by the Company or any
subsidiary ((x) and/or (y), "Outbound License Agreements").
"Material Adverse Effect" means, when used in connection with the
Company or any Subsidiary, any event, circumstance, change or effect that is or
is reasonably likely to be materially adverse to the business, operations,
condition (financial or otherwise) or results of operations of the Company and
the Subsidiaries, taken as a whole; except, in each case, for any
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such event, circumstance, change or effect resulting from (i) the loss by the
Company and/or its Subsidiaries of either or both of the Identified Customers as
a result of the Company's failure to obtain consents under the change of control
provisions contained in such customers' contracts with the Company, (ii) any
seasonal reduction in the revenues or earnings of the Company that is of a
magnitude consistent with prior periods, (iii) changes in United States
economic, financial market, political or regulatory conditions generally, (iv)
changes in the wholesale drug distribution industry (the "Industry"), which do
not disproportionately affect the Company as compared to others in the Industry
in any material respect, (v) the loss by the Company and/or the Subsidiaries of
any customers or employees primarily as a result of (A) any public announcement
by Parent or the Company (which, in the case of the Company, is made in
accordance with the requirements of this Agreement, the Offer, the Merger or the
other transactions contemplated by this Agreement) or (B) any public
announcement by Parent of its intentions with respect to the future conduct of
the business of the Company and the Subsidiaries after consummation of the Offer
and the Merger, provided that, in case either (A) or (B) above applies, (1)
there has been no loss by the Company and/or the Subsidiaries of any customers
or employees primarily as a result of (x) misfeasance or malfeasance by the
Company, the Subsidiaries or any of their respective officers, directors or
employees, (y) pricing action by the Company and/or any Subsidiary
disproportionate to general industry pricing or (z) the Company and the
Subsidiaries having an Adjusted Service Level of ninety-two percent (92%) or
less and (2) such loss or losses in the case of this proviso, individually or in
the aggregate, would reasonably be expected to materially and adversely affect
the business, operations, condition financial or otherwise or results of
operations of the Company and its Subsidiaries, taken as a whole, (vi) any
actions taken, or failures to take action, or such other effects, changes or
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occurrences to which Parent has separately consented in writing or (vii)
terrorist activities, war or armed hostilities if the effect thereof would
reasonably be expected to be transitory.
"person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government.
"Registered Intellectual Property Rights" shall mean Internet domain
name registrations and any legal rights in, arising out of or associated with
any applications (including written invention disclosures that have not yet been
filed) for, or registrations or issuances or grants of, any Intellectual
Property Rights before or by any governmental authority responsible for issuing
or registering any of the Intellectual Property Rights, other than those which
have been formally abandoned or formally allowed to lapse by the Company in the
ordinary course of business in accordance with the exercise of reasonable
business judgment.
"subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means an affiliate controlled by such
person, directly or indirectly, through one or more intermediaries.
"Superior Proposal" means a bona fide, written Acquisition Proposal
which the Board determines in good faith, after consultation with its financial
and legal advisors, taking into account all legal, financial, regulatory and
other aspects of the proposal and the person making the proposal (including any
break-up fees, expense reimbursement provisions and conditions to consummation),
(i) is more favorable to the stockholders of the Company (in their capacities as
stockholders) from a financial point of view than the Transactions (including
any adjustment to the terms and conditions proposed by Parent in response to
such proposal) and (ii)
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is fully financed or reasonably capable of being fully financed, reasonably
likely to receive all required governmental approvals on a timely basis and
otherwise reasonably likely of being completed on the terms proposed on a timely
basis; provided that, for purposes of this definition of "Superior Proposal,"
the term Acquisition Proposal shall have the meaning assigned to such term in
this Section 1.01 except that any reference to "over fifteen percent (15%) of
any class of equity securities" or "fifteen percent (15%) or more of any class
of equity securities" in the definition of "Acquisition Proposal" shall be
deemed to be a reference to "a majority of the equity securities" and
"Acquisition Proposal" shall only be deemed to refer to a transaction involving
the Company.
"Tax" or "Taxes" shall mean any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Authority, including, without
limitation: with respect to income, franchise, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value-added or gains taxes; license, registration and documentation
fees; and customs duties, tariffs and similar charges.
"Tax Returns" shall mean all returns, information returns,
estimates, reports and other documents relating to Taxes filed or required to be
filed with any Governmental Authority.
"Technology" means all processes, apparatuses, systems, formulae,
algorithms, data, models, plans, methodologies, theories, ideas, techniques,
discoveries, disclosures, inventions, Computer Software, information or
know-how, and other technological subject matter.
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(b) The following terms have the meaning set forth in the Sections
set forth below:
Defined Term Location of Definition
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Action 4.09
Agreement Preamble
Board Recitals
Certificate of Merger 3.02
Certificates 3.09(b)
Company Preamble
Company Preferred Stock 4.03
Company Stock Option 3.07
Company Stock Plans 3.07
Confidentiality Agreement 7.03(b)
Completion Date Paragraph (l) of Annex A
Delaware Law Recitals
Disclosure Schedule Introduction to Article IV
Dispute Paragraph (l) of Annex A
Dispute Resolution Period Paragraph (l) of Annex A
Dissenting Shares 3.08(a)
Effective Time 3.02
Environmental Permits 4.15
ERISA 4.10(a)
Exchange Act 2.01(a)
FDA 4.24.(h)
Fee 9.03(a)
GAAP 4.07(b)
Governmental Authority 4.05(b)
Governmental Entity 4.05(b)
HSR Act 2.01(a)
Indemnified Parties 7.06(a)
Insurance Amount 7.06(b)
IRS 4.10(a)
Law 4.05(a)
Liens 4.13(b)
Material Contracts 4.17(b)
Merger Recitals
Merger Consideration 2.01(a)
Minimum Condition 2.01(a)
Multiemployer Plan 4.10(b)
Multiple Employer Plan 4.10(b)
Nasdaq 4.05(b)
Non-Material Computer Software 4.20(b)
Offer Recitals
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Defined Term Location of Definition
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Offer Documents 2.01(b)
Offer to Purchase 2.01(b)
Original Directors 2.03
Outlook 4.07(f)
Parent Preamble
Paying Agent 3.09(a)
Permits 4.06
Permitted Liens 4.13(b)
Per Share Amount Recitals
Plans 4.10(a)
Proxy Statement 4.12
Purchaser Preamble
Rights 4.03
Rights Agreement 4.03
Schedule 14D-9 2.02(b)
Schedule TO 2.01(b)
SEC 2.01(a)
SEC Reports 4.07(a)
Securities Act 4.07(a)
Shares Recitals
SOX Act 4.07(a)
Stockholders' Meeting 7.01(a)
Subsidiary 4.01(a)
Surviving Corporation 3.03
Tax Claim 4.14
Transactions 2.02(a)
2004 Balance Sheet 4.07(c)
WARN Act 4.11(e)
ARTICLE II
THE OFFER
SECTION 2.01 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 9.01 and that none of the events set forth in Annex A
hereto shall have occurred and be continuing, Purchaser shall commence the Offer
as promptly as reasonably practicable (and in any event within ten Business
Days) after the date hereof. The obligation of Purchaser to accept for payment
Shares tendered pursuant to the Offer shall be subject to the condition (the
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"Minimum Condition") that at least the number of Shares that shall constitute a
majority of the then outstanding Shares on an as-if-converted basis (including,
without limitation, all Shares issuable upon the conversion of any convertible
securities or upon the exercise of any options, warrants or rights (other than
the Rights)) shall have been validly tendered and not withdrawn prior to the
expiration of the Offer and also shall be subject to the satisfaction of each of
the other conditions set forth in Annex A hereto. Purchaser expressly reserves
the right (i) to waive any such condition, (ii) to increase the price per Share
payable in the Offer and (iii) to make any other changes in the terms of the
Offer; provided, however, that in the case of clause (iii) no other change may
be made which (w) decreases the Per Share Amount payable in the Offer, (x)
reduces the maximum number of Shares to be purchased in the Offer, (y) imposes
conditions to the Offer in addition to those set forth in Annex A hereto or (z)
is otherwise disadvantageous to the stockholders of the Company. Subject to the
prior satisfaction or waiver by Parent or Purchaser of the Minimum Condition and
the other conditions of the Offer set forth in Annex A hereto, Purchaser shall
consummate the Offer in accordance with its terms and accept for payment and pay
for all Shares tendered pursuant to the Offer as soon as practicable after
Purchaser is legally permitted to do so under applicable law. Notwithstanding
the foregoing, Purchaser may, without the consent of the Company, (i) extend the
Offer beyond the scheduled expiration date, which shall be 20 Business Days
following the commencement of the Offer, if, at the scheduled expiration of the
Offer, any of the conditions to Purchaser's obligation to accept for payment
Shares, shall not be satisfied or waived, or (ii) extend the Offer for any
period required by any rule, regulation or interpretation of the Securities and
Exchange Commission (the "SEC"), or the staff thereof, applicable to the Offer.
In addition, if, on the initial scheduled expiration date and each subsequent
scheduled expiration date of the Offer, the sole condition or
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conditions remaining unsatisfied are the failure of the waiting period under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), to have expired or been terminated and/or, if there is a Dispute that is
pending or continuing, the Dispute Resolution Period shall not have expired ,
then Purchaser shall extend the Offer from time to time until the fifth Business
Day after the later to occur of (i) expiration or termination of the applicable
waiting period under the HSR Act or (ii) the expiration of the Dispute
Resolution Period. Purchaser may, in its sole discretion, provide a "subsequent
offering period" in accordance with Rule 14d-11 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Purchaser shall not terminate the
Offer prior to any scheduled expiration date (as the same may be extended or
required to be extended) without the written consent of the Company except in
the event that Purchaser terminates this Agreement pursuant to Section 9.01. The
Per Share Amount shall, subject to applicable withholding of taxes, be net to
the seller in cash, upon the terms and subject to the conditions of the Offer.
Purchaser shall pay for all Shares validly tendered and not withdrawn promptly
following the acceptance of Shares for payment pursuant to the Offer.
Notwithstanding the immediately preceding sentence and subject to the applicable
rules of the SEC and the terms and conditions of the Offer, Purchaser expressly
reserves the right to delay payment for Shares in order to comply in whole or in
part with applicable laws. Any such delay shall be effected in compliance with
Rule 14e-l(c) under the Exchange Act. If the payment equal to the Per Share
Amount in cash (the "Merger Consideration") is to be made to a person other than
the person in whose name the surrendered certificate formerly evidencing Shares
is registered on the stock transfer books of the Company, it shall be a
condition of payment that the certificate so surrendered shall be endorsed
properly or otherwise be in proper form for transfer and that the person
requesting such payment shall have paid all transfer and
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other taxes required by reason of the payment of the Merger Consideration to a
person other than the registered holder of the certificate surrendered, or shall
have established to the satisfaction of Purchaser that such taxes either have
been paid or are not applicable.
(b) As promptly as reasonably practicable on the date of
commencement of the Offer, Purchaser shall file with the SEC a Tender Offer
Statement on Schedule TO (together with all amendments and supplements thereto,
the "Schedule TO") with respect to the Offer. The Schedule TO shall contain or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and forms of the related letter of transmittal and any related summary
advertisement (the Schedule TO, the Offer to Purchase and such other documents,
together with all supplements and amendments thereto, being referred to herein
collectively as the "Offer Documents"). Parent, Purchaser and the Company agree
to correct promptly any information provided by any of them for use in the Offer
Documents that shall have become false or misleading and to correct any material
omissions, and Parent and Purchaser further agree to take all steps necessary to
cause the Schedule TO, as so corrected, to be filed with the SEC, and the other
Offer Documents, as so corrected, to be disseminated to holders of Shares, in
each case as and to the extent required by applicable federal securities laws.
The Company and its counsel shall be given a reasonable opportunity to review
the Offer Documents before they are filed with the SEC, and Parent and Purchaser
shall give due consideration to all the reasonable additions, deletions or
changes suggested thereto by the Company and its counsel. In addition, Parent
and Purchaser agree to provide the Company and its counsel with any comments,
whether written or oral, that Parent, Purchaser or their counsel may receive
from time to time from the SEC or its staff with respect to the Offer Documents
promptly after Parent's or Purchaser's, as the case may be, receipt of such
comments, and any written or oral responses thereto. The Company and its
15
counsel shall be given a reasonable opportunity to review any such written
responses and Parent and Purchaser shall give due consideration to all
reasonable additions, deletions or changes suggested thereto by the Company and
its counsel. If the Offer is terminated or withdrawn by Purchaser, or this
Agreement is terminated prior to the purchase of Shares in the Offer, Parent and
Purchaser shall promptly return, and shall cause any depository or paying agent,
including the Paying Agent (as hereinafter defined), acting on behalf of Parent
and Purchaser, to return all tendered Shares to the registered holders thereof.
SECTION 2.02 Company Action.
(a) The Company hereby approves of and consents to the Offer and
represents that (i) the Board, at a meeting duly called and held on July 8,
2005, has unanimously (A) determined that this Agreement and the transactions
contemplated hereby, including each of the Offer and the Merger (collectively,
the "Transactions") are fair to, and in the best interests of, the holders of
Shares, (B) approved, adopted and declared advisable this Agreement and the
Transactions (such approval and adoption having been made in accordance with
Delaware Law) and (C) resolved to recommend that the holders of Shares accept
the Offer and tender Shares pursuant to the Offer, and approve and adopt this
Agreement and the Transactions, and (ii) Citigroup Global Markets, Inc. has
delivered to the Board an opinion, which will be confirmed promptly in writing,
that the $14.50 per Share dollar amount to be received by the holders of Shares
pursuant to each of the Offer and the Merger is fair to the holders of Shares
from a financial point of view. The Company hereby consents to the inclusion in
the Offer Documents of the recommendation of the Board described in the
immediately preceding sentence, and the Company shall not withdraw or modify
such recommendation in any manner adverse to Purchaser or Parent except as
provided in Section 7.04(c). The Company has been
16
advised by its directors and executive officers that they intend either to
tender all Shares beneficially owned by them to Purchaser pursuant to the Offer
or to vote such Shares in favor of the approval and adoption by the stockholders
of the Company of this Agreement and the Transactions.
(b) As promptly as reasonably practicable on the date of
commencement of the Offer, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing, except as
provided in Section 7.04(c), the recommendation of the Board described in
Section 2.02(a), and shall disseminate the Schedule 14D-9 to the extent required
by Rule 14d-9 promulgated under the Exchange Act and any other applicable
federal securities laws. The Company, Parent and Purchaser agree to correct
promptly any information provided by any of them for use in the Schedule 14D-9
which shall have become false or misleading and to correct any material
omissions, and the Company further agrees to take all steps necessary to cause
the Schedule 14D-9, as so corrected, to be filed with the SEC and disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent, Purchaser and their counsel shall be given a
reasonable opportunity to review the Schedule 14D-9 before it is filed with the
SEC and the Company shall give due consideration to all reasonable additions,
deletions or changes suggested thereto by Parent, Purchaser and their counsel.
In addition, the Company agrees to provide Parent, Purchaser and their counsel
with any comments, whether written or oral, that the Company or its counsel may
receive from time to time from the SEC or its staff with respect to the Schedule
14D-9 promptly after the Company's receipt of such comments, and any written or
oral responses thereto. Parent, Purchaser and their counsel shall be given a
reasonable opportunity to review any such written responses and the Company
shall
17
give due consideration to all reasonable additions, deletions or changes
suggested thereto by Parent, Purchaser and their counsel.
(c) The Company shall promptly furnish Parent or Purchaser with
mailing labels containing the names and addresses of all record holders of
Shares and with security position listings of Shares held in stock depositories,
each as of a recent date, together with all other available listings and
computer files containing names, addresses and security position listings of
record holders and beneficial owners of Shares. The Company shall promptly
furnish Purchaser with such additional information, including, without
limitation, updated listings and computer files of stockholders, mailing labels
and security position listings, and such other assistance in disseminating the
Offer Documents to holders of Shares as Parent or Purchaser may reasonably
request. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Purchaser
shall hold in confidence the information contained in such labels, listings and
files, shall use such information only in connection with the Transactions, and,
if this Agreement shall be terminated in accordance with Section 9.01, shall
deliver to the Company all copies of such information then in their possession.
SECTION 2.03 Directors.Promptly upon the purchase of and payment for any
Shares by Parent or Purchaser pursuant to the Offer (provided the Shares so
purchased represent at least a majority of the Shares issued and outstanding),
Parent shall be entitled to designate such number of directors, rounded to the
nearest whole number, on the Board as is equal to the product of the total
number of directors on the Board (giving effect to the directors designated by
Parent pursuant to this sentence) multiplied by the percentage that the number
of Shares so
18
accepted for payment bears to the total number of Shares then outstanding. In
furtherance of Parent's rights under this Section 2.03, the Company shall, upon
Parent or Purchaser's request, use all reasonable efforts promptly either to
increase the size of the Board or to secure the resignations of such number of
its incumbent directors, or both, as is necessary to enable Parent's designees
to be so elected to the Board, and shall take all actions available to the
Company to cause Parent's designees to be so elected. At such time, the Company
shall also cause persons designated by Parent to have appropriate representation
on (i) each committee of the Board, (ii) each board of directors (or similar
body) of each Subsidiary and (iii) each committee (or similar body) of each such
board. The Company shall promptly take all actions required pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 2.03, including mailing to
stockholders (as part of the Schedule 14D-9 or otherwise) the information
required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's
designees to be elected to the Board (provided that Purchaser shall have
provided to the Company on a timely basis all information required to be
included with respect to Purchaser's designees). In the event that Parent's
designees are elected to the Board, until the Effective Time (as defined below),
the Board shall have at least three directors who are directors on the date of
this Agreement (the "Original Directors"); provided that, in such event, if the
number of Original Directors is reduced below three for any reason whatsoever,
any remaining Original Directors (or Original Director, if there be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Original Directors for purposes of this Agreement or, if
no Original Director then remains, the other directors shall designate three
persons to fill such vacancies who shall not be stockholders, affiliates or
associates of Parent or Purchaser, and such persons shall be deemed to be
Original Directors for
19
purposes of this Agreement. Notwithstanding anything in this Agreement to the
contrary, if Parent's designees are elected to the Board before the Effective
Time, the affirmative vote of a majority of the Original Directors shall be
required for the Company to (a) amend or terminate this Agreement or agree or
consent to any amendment or termination of this Agreement, (b) exercise or waive
any of the Company's rights, benefits or remedies hereunder, (c) extend the time
for performance of Parent's and Purchaser's respective obligations under this
Agreement, (d) take any other action by the Board under or in connection with
this Agreement, (e) amend the Certificate of Incorporation or Bylaws of the
Company or (f) approve any other action by the Company which could adversely
affect the interests of the stockholders of the Company (other than Parent,
Purchaser and their affiliates (other than the Company and its Subsidiaries)),
with respect to the Transactions.
ARTICLE III
THE MERGER
SECTION 3.01 The Merger.Upon the terms and subject to the conditions set
forth in Article VIII, and in accordance with Delaware Law, Purchaser shall be
merged with and into the Company.
SECTION 3.02 Effective Time; Xxxxxxx.Xx promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VIII, the parties hereto shall cause the Merger to be consummated by filing this
Agreement or a certificate of merger or certificate of ownership and merger with
the Secretary of State of the State of Delaware (the "Certificate of Merger"),
in such form as is required by, and executed in accordance with, the relevant
provisions of Delaware Law (the date and time of such filing being the
"Effective Time"). Prior to such filing, a closing shall be held at the offices
of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Four Embarcadero Center, Xxx
Xxxxxxxxx, XX 00000, or such other place
20
as the parties shall agree, for the purpose of confirming the satisfaction or
waiver, as the case may be, of the conditions set forth in Article VIII.
SECTION 3.03 Effect of the Xxxxxx.Xx a result of the Merger, the separate
corporate existence of Purchaser shall cease and the Company shall continue as
the surviving corporation of the Merger (the "Surviving Corporation"). At the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Purchaser shall vest in the
Surviving Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of the Company and Purchaser shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation.
SECTION 3.04 Certificate of Incorporation; By-laws.
(a) At the Effective Time, subject to Sections 7.06(b) and (c), the
Certificate of Incorporation of Purchaser, as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation; provided, however, that, at the Effective Time, Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is D&K Healthcare Resources, Inc."
(b) Unless otherwise determined by Parent prior to the Effective
Time, and subject to Sections 7.06(b) and (c), the By-laws of Purchaser, as in
effect immediately prior to the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such By-laws.
21
SECTION 3.05 Directors and Officers.The directors of Purchaser immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified or until their earlier death,
resignation or removal.
SECTION 3.06 Conversion of Xxxxxxxxxx.Xx the Effective Time, by virtue of
the Merger and without any action on the part of Purchaser, the Company or the
holders of any of the following securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 3.06(b)
and any Dissenting Shares (as hereinafter defined), but including restricted
Shares (whether vested or unvested) issued under Company Stock Plans (defined
below)) shall be canceled and shall be converted automatically into the right to
receive an amount equal to the Merger Consideration payable, without interest,
to the holder of such Share, upon surrender, in the manner provided in Section
3.09, of the certificate that formerly evidenced such Share;
(b) Each Share held in the treasury of the Company and each Share
owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company immediately prior to the Effective Time shall be
canceled without any conversion thereof and no payment or distribution shall be
made with respect thereto; and
(c) Each share of common stock, par value $0.001 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time shall
be converted into and
22
exchanged for one validly issued, fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
SECTION 3.07 Employee Stock Options.Effective as of the Effective Time,
the Company shall (i) terminate the Company's Amended and Restated 2001 Long
Term Incentive Plan, its 1992 Long Term Incentive Plan and its 1993 Stock Option
Plan, each as amended through the date of this Agreement (the "Company Stock
Plans"), and (ii) cancel, at the Effective Time, each outstanding option to
purchase shares of Company Common Stock granted under the Company Stock Plans or
otherwise (each, a "Company Stock Option") that is outstanding and unexercised
as of such date. Each holder of a Company Stock Option that is outstanding and
unexercised at the Effective Time (whether or not such option has vested) shall
be entitled to receive from the Surviving Corporation immediately after the
Effective Time, in exchange for the cancellation of such Company Stock Option,
an amount in cash equal to the excess, if any, of (x) the Per Share Amount over
(y) the per share exercise price of such Company Stock Option, multiplied by the
number of shares of Company Common Stock subject to such Company Stock Option as
of the Effective Time. Any such payment shall be subject to all applicable
federal, state and local tax withholding requirements. To the extent that
amounts are so withheld by Parent, Purchaser, the Surviving Corporation or the
Paying Agent, such amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of Shares in respect of which such deduction
and withholding was made by Parent, Purchaser, the Surviving Corporation or the
Paying Agent. The Company shall take all necessary action to approve the
disposition of the Company Stock Options in connection with the Transactions to
the extent necessary to exempt such dispositions and acquisitions under Rule
l6b-3 of the Exchange Act,
23
and shall take all necessary action to effect the treatment of the Company Stock
Plans and Company Stock Options set forth in this Section 3.07, including
obtaining all necessary consents.
SECTION 3.08 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
Shares that are outstanding immediately prior to the Effective Time and that are
held by stockholders who shall have neither voted in favor of the Merger nor
consented thereto in writing and who shall have demanded properly in writing
appraisal for such Shares in accordance with Section 262 of Delaware Law
(collectively, the "Dissenting Shares") shall not be converted into, or
represent the right to receive, the Merger Consideration. Such stockholders
shall be entitled to receive payment of the appraised value of such Shares held
by them in accordance with the provisions of such Section 262, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Shares under such Section 262 shall thereupon be deemed to have been converted
into, and to have become exchangeable for, as of the Effective Time, the right
to receive the Merger Consideration, without any interest thereon, upon
surrender, in the manner provided in Section 3.09, of the certificate or
certificates that formerly evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other instruments served pursuant to Delaware Law and received by the Company
relating to rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under
Delaware Law. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
24
SECTION 3.09 Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, Purchaser shall designate a bank or
trust company to act as agent (the "Paying Agent") for the holders of Shares to
receive the funds to which holders of Shares shall become entitled pursuant to
Section 3.06(a). For purposes of determining the amount of Merger Consideration
to be so deposited, Parent and Purchaser shall assume that no stockholder of the
Company will perfect any right to appraisal of his, her or its Shares. Such
funds shall be invested by the Paying Agent as directed by Parent or the
Surviving Corporation, in its sole discretion, pending payment thereof by the
Paying Agent to the holders of the Shares. Earnings from such investments shall
be the sole and exclusive property of Parent and the Surviving Corporation, and
no part of such earnings shall accrue to the benefit of holders of Shares.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each person who was, at the Effective Time, a holder
of record of Shares entitled to receive the Merger Consideration pursuant to
Section 3.06(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be canceled. No
interest shall accrue or be paid on the Merger
25
Consideration payable upon the surrender of any Certificate for the benefit of
the holder of such Certificate. If the payment equal to the Merger Consideration
is to be made to a person other than the person in whose name the surrendered
certificate formerly evidencing Shares is registered on the stock transfer books
of the Company, it shall be a condition of payment that the certificate so
surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the certificate
surrendered, or shall have established to the satisfaction of Purchaser that
such taxes either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and, thereafter, such holders shall be entitled to look to the
Surviving Corporation (subject to abandoned property, escheat and other similar
laws) only as general creditors thereof with respect to any Merger Consideration
that may be payable upon due surrender of the Certificates held by them.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Share for any Merger Consideration
delivered in respect of such Share to a public official pursuant to any
abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the
26
holders of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided herein or by applicable law.
SECTION 3.10 Subsequent Actions.If at any time after the Effective Time
the Surviving Corporation shall determine, in its sole discretion, or shall be
advised, that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of either of the Company
or Purchaser acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger or otherwise to carry out this Agreement,
then the officers and directors of the Surviving Corporation shall be authorized
to execute and deliver, in the name and on behalf of either the Company or
Purchaser, all such deeds, bills of sale, instruments of conveyance, assignments
and assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title or interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company's disclosure schedule delivered to
Parent prior to the execution of this Agreement (the "Disclosure Schedule"), the
Company represents and warrants to Parent and Purchaser as set forth below. Each
disclosure set forth in the Disclosure Schedule is identified by reference to,
or has been grouped under a heading referring to, a specific individual section
of this Agreement and disclosure made pursuant to any section thereof shall be
deemed to be disclosed on each of the other sections of the Disclosure Schedule
to the extent the
27
applicability of the disclosure to such other section is reasonably apparent on
its face from the disclosure made.
SECTION 4.01 Organization and Qualification; Subsidiaries.
(a) Each of the Company and each subsidiary of the Company
("Subsidiary") is a corporation duly organized, validly existing and, to the
extent applicable, in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted. The Company and each
Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except where the failure to
have such good standing, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. Section 4.01(a) of the Disclosure
Schedule lists jurisdictions in which the Company and each Subsidiary is
qualified as a foreign corporation.
(b) Except as disclosed in Section 4.01(b) of the Disclosure
Schedule, the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any corporation, partnership, joint venture
or other business association or entity.
SECTION 4.02 Certificate of Incorporation and By-laws.The Company has
heretofore furnished to Parent a complete and correct copy of the Certificate of
Incorporation and the By-laws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificate of
Incorporation, By-laws or equivalent organizational documents are in full force
and effect. Neither the Company nor any Subsidiary is in violation of
28
any of the provisions of its Certificate of Incorporation, By-laws or equivalent
organizational documents.
SECTION 4.03 Capitalization.The authorized capital stock of the Company
consists of 25,000,000 Shares and 1,000,000 shares of preferred stock, no par
value ("Company Preferred Stock"). As of the date hereof, (a) 14,260,856 Shares
are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable, (b) 1,249,300 Shares are held in the treasury of
the Company, (c) no Shares are held by any Subsidiary or affiliate of the
Company, (d) 49,230 Shares are reserved for future issuance pursuant to employee
stock options, restricted stock or any stock or stock-related incentive rights
to be granted pursuant to the Company Stock Plans, (e) 1,510,666 Shares are
issuable upon the exercise of existing options to purchase Shares, and (f)
297,970 Shares are subject to outstanding restricted stock agreements. As of the
date hereof, no shares of Company Preferred Stock are issued and outstanding.
Except as set forth in this Section 4.03 and Section 4.03 of the Disclosure
Schedule, and except for the rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of November 12, 1998 (the "Rights Agreement"), between the
Company and Xxxxxx Trust and Savings Bank, as rights agent, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of the Company or
any Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, or any other security
exercisable or exchangeable for, or convertible into, any such shares or other
equity interests in, the Company or any Subsidiary. All Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be, when issued, duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding contractual obligations,
29
arrangements or commitments of any character of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any Shares, any other capital stock of,
or other equity interest in the Company or any Subsidiary or to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Subsidiary or any other person. There are no bonds,
debentures, notes or other indebtedness of the Company or any Subsidiary having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company or any
Subsidiary may vote. Each outstanding share of capital stock of each Subsidiary
is duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by the Company or another Subsidiary free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or any Subsidiary's voting rights,
charges and other encumbrances of any nature whatsoever.
SECTION 4.04 Authority Relative to This Agreement.The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Transactions. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
Transactions (other than, with respect to the Merger, the approval and adoption
of this Agreement by the holders of a majority of the then-outstanding Shares,
if and to the extent required by applicable law, and the filing and recordation
of appropriate merger documents as required by Delaware Law). This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Purchaser,
30
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. Assuming the accuracy of
the representation and warranty set forth in Section 5.08, the action taken by
the Board in approving this Agreement and the Transactions is sufficient to
render inapplicable to this Agreement and the Transactions the restrictions on
business combinations contained in Section 203 of the Delaware Law.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws or equivalent
organizational documents of the Company or any Subsidiary, (ii) assuming all
consents, approvals, authorizations and other actions described in Section
4.05(b) have been obtained or taken, conflict with or violate any federal,
state, local or foreign statute, law, ordinance, regulation, rule, agency
requirement, code, executive order, injunction, judgment, decree, arbitral award
or other order ("Law") applicable to the Company or any Subsidiary or by which
any property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in any breach of or constitute a default (or an event which, with
notice or lapse of time or both, would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or other encumbrance on any property or asset
of the Company or any Subsidiary pursuant to,
31
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation, except, with respect to
clauses (ii) and (iii), (1) as set forth in Section 4.05 of the Disclosure
Schedule and (2) for any such conflicts, violations, breaches, defaults or other
occurrences which, individually or in the aggregate, would not reasonably be
expected to prevent or materially delay consummation of the Offer or the Merger
or otherwise would not reasonably be expected to prevent or materially delay the
Company from performing its obligations under this Agreement and would not
reasonably be expected to have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any United States federal, state, county, foreign or local governmental,
regulatory or administrative authority, agency, instrumentality or commission (a
"Governmental Entity") or any court, tribunal, or judicial or arbitral body
(together with a Governmental Entity, a "Governmental Authority"), except for
(i) compliance with any applicable requirements of the Exchange Act, (ii) any
filings as may be required under Delaware Law in connection with the Merger,
(iii) filings permits, authorizations, consents and approvals as may be required
under the HSR Act, (iv) the filing with the SEC and the Nasdaq National Market,
Inc. ("Nasdaq") of (A) the Schedule 14D-9, (B) the Proxy Statement (as
hereinafter defined) if stockholder approval is required by law, (C) the
information required by Rule 14f-1 under the Exchange Act and (D) such reports
under Section 13(a) of the Exchange Act as may be required in connection with
this Agreement and the Transactions, (v) such filings and approvals as may be
required by any applicable state securities or blue sky laws, and (vi) where the
failure to obtain such consents, approvals, authorizations or permits, or
32
to make such filings or notifications, individually or in the aggregate, would
not reasonably be expected to prevent or materially delay consummation of the
Offer or the Merger, or otherwise would not reasonably be expected to prevent or
materially delay the Company from performing its obligations under this
Agreement, and would not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.06 Permits; Compliance.
(a) Except as set forth in Part I of Section 4.06 of the Disclosure
Schedule, each of the Company and each Subsidiary is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Authority necessary for each of the Company and the Subsidiaries to own, lease
and operate its properties and to carry on its business as it is now being
conducted (the "Permits"), except where the failure to have, or the suspension
or cancellation of, any of the Permits, individually or in the aggregate, would
not reasonably be expected to prevent or materially delay consummation of the
Offer or the Merger or otherwise would not reasonably be expected to prevent or
materially delay the Company from performing its obligations under this
Agreement and would not reasonably be expected to have a Material Adverse
Effect. As of the date hereof, no suspension or cancellation of any of the
Permits, is pending or, to the knowledge of the Company, threatened, except
where the failure to have, or the suspension or cancellation of, any of the
Permits, individually or in the aggregate, would not reasonably be expected to
prevent or materially delay consummation of the Offer or the Merger or otherwise
would not reasonably be expected to prevent or materially delay the Company from
performing its obligations under this Agreement and would not reasonably be
expected to have a Material Adverse Effect. Except as set forth in Part II of
Section 4.06 of the Disclosure
33
Schedule, neither the Company nor any Subsidiary is in conflict with, in default
under, or in breach or violation of, (a) any Law applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (b) any Contract to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound, except for any such
conflicts, defaults, breaches or violations that, individually or in the
aggregate, would not reasonably be expected to prevent or materially delay
consummation of the Offer or the Merger or otherwise would not reasonably be
expected to prevent or materially delay the Company from performing its
obligations under this Agreement and would not reasonably be expected to have a
Material Adverse Effect.
SECTION 4.07 SEC Filings; Financial Statements.
(a) Except as set forth in Section 4.07(a) of the Disclosure
Schedule, the Company has timely filed all forms, reports and documents
(including exhibits and other information incorporated therein) required to be
filed by it with the SEC since June 30, 2002 (the forms, reports and other
documents referred to above being, collectively, the "SEC Reports"). The SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act of 1933, as amended (the "Securities Act") and the rules and regulations
promulgated thereunder or the Exchange Act and in the rules and regulations
promulgated thereunder, as the case may be, applicable to such SEC Reports, (ii)
the SEC Reports, as of their respective dates (and, if amended or superseded by
a filing prior to the date of this Agreement or the expiration of the Offer,
then on the date of such filing), complied in all material respects with all
requirements of the Securities Act or the Exchange Act, as the case may be, and,
in each case, the rules and regulations promulgated thereunder, applicable to
such SEC Reports and (iii) did not, at the time
34
they were filed, or, if amended, as of the date of such amendment, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading. No
Subsidiary is required to file any form, report or other document with the SEC.
The SEC Reports included or, with respect to such reports filed after the date
hereof, will include all certificates required to be included therein pursuant
to Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002, as amended (the "SOX
Act"), and the internal control report and attestation of the Company's outside
auditors required by Section 404 of the SOX Act.
(b) The Company is in compliance in all material respects with the
applicable provisions of the SOX Act and the applicable listing and governance
rules and regulations of the Nasdaq. The Company has implemented disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) to
ensure that material information relating to the Company is made known to the
management of the Company by others within those entities. The Company and each
Subsidiary (i) makes and keeps accurate books and records and (ii) maintains
internal accounting controls which provide reasonable assurance that (a)
transactions are executed in accordance with management's general or specific
authorization, (b) transactions are recorded as necessary to permit preparation
of its financial statements in conformity with GAAP and to maintain
accountability for its assets, (c) access to its assets is permitted only in
accordance with management's general or specific authorization and (d) the
reported accounting for its assets and liabilities is compared with existing
assets and liabilities at reasonable intervals. The Company has prepared a plan
to comply with the requirements of Section 404 of the SOX Act on the date by
which it must comply with such requirements.
35
Except as set forth in Section 4.07(b) of the Disclosure Schedule, the Company
is not aware of any reason it will not comply with the requirements of Section
404 of the SOX Act on the applicable compliance date and has no knowledge of any
"significant deficiency" or "material weakness" in the Company's internal
controls. For purposes of this Agreement, the terms "significant deficiency" and
"material weakness" shall have the meanings assigned to them in the Statements
of Auditing Standards No. 60, as in effect on the date hereof.
(c) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the SEC Reports was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each fairly presents, in all material
respects, the consolidated financial position, results of operations and cash
flows of the Company and its consolidated Subsidiaries as at the respective
dates thereof and for the respective periods indicated therein, except as
otherwise noted therein (subject, in the case of unaudited statements, to normal
and recurring year-end adjustments which are not, individually or in the
aggregate, material).
(d) Except as and to the extent set forth on the consolidated
balance sheet of the Company and the consolidated Subsidiaries as at June 30,
2004, including the notes thereto (the "2004 Balance Sheet"), neither the
Company nor any Subsidiary has any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise), except for liabilities and
obligations, incurred in the ordinary course of business consistent with past
practice since June 30, 2004, which, individually or in the aggregate, would not
reasonably be expected to prevent or materially delay consummation of the Offer
or the Merger or otherwise would not reasonably be expected to prevent or
materially delay the Company from performing
36
its obligations under this Agreement and would not reasonably be expected to
have a Material Adverse Effect.
(e) The Company has heretofore furnished to Parent complete and
correct copies of all amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
(f) Set forth on Section 4.07(f) of the Disclosure Schedule is the
most recently prepared financial outlook for the Company and Subsidiaries for
fiscal year 2006 (the "Outlook"). Management of the Company prepared the Outlook
in good faith based upon assumptions it believes are reasonable as of the date
hereof; it is understood that all projections are subject to significant
uncertainties and that no representation is being made hereby that the projected
results will be achieved.
(g) There are no uninstalled Units that have been recorded into
income by the Company or any Subsidiary. For purposes of the immediately
preceding sentence, "Units" has the meaning assigned to such term under the
Purchasing Agreement by and between Parata Systems, LLC and Spirit effective as
of July 21, 2003, as amended by the Addendum to the Purchasing Agreement dated
April 30, 2004.
SECTION 4.08 Absence of Certain Changes or Events.Since June 30, 2004,
except as set forth in Section 4.08 of the Disclosure Schedule or in the SEC
Reports, or as expressly contemplated by this Agreement, (a) the Company and the
Subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice, (b) there has not been any Material
Adverse Effect or the occurrence of any event, circumstance or change that would
reasonably be expected to have a Material Adverse Effect, and (c) neither the
37
Company nor any Subsidiary has taken any action that, if taken after the date of
this Agreement, would constitute a breach of any of the covenants set forth in
Section 6.01.
SECTION 4.09 Absence of Litigation.Except as set forth in Section 4.09(a)
of the Disclosure Schedule, there is no litigation, suit, claim, action,
proceeding or investigation (an "Action") pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary, or any property or
asset of the Company or any Subsidiary, before any Governmental Authority that
(a) individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or (b) seeks to or would, individually or in the
aggregate, reasonably be expected to materially delay or prevent the
consummation of any Transaction. None of the Company, any Subsidiary or any
property or asset of the Company or any Subsidiary is subject to any continuing
order of, consent decree, settlement agreement or similar written agreement
with, or, to the knowledge of the Company, continuing investigation by, any
Governmental Authority, or any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority that, individually or in
the aggregate, would reasonably be expected to prevent or materially delay
consummation of the Offer or the Merger or otherwise would reasonably be
expected to prevent or materially delay the Company from performing its
obligations under this Agreement or would reasonably be expected to have a
Material Adverse Effect. Except as disclosed in Section 4.09(b) of the
Disclosure Schedule, none of the Company or any Subsidiary or, to the knowledge
of the Company, any of their respective officers, directors or employees, or any
vendor or customer of the Company or any Subsidiary, is the subject of, has been
named in or has received any notice of any investigation by any Governmental
Authority relating to the diversion of any Drugs, or to alleged involvement in
unauthorized or
38
unlawful Drug resale, or the distribution or sale of adulterated, misbranded,
subpotent, or expired Drugs.
SECTION 4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the Disclosure Schedule lists (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, profit
sharing, savings, retirement, stock option, stock purchase, restricted stock,
incentive, deferred compensation, fringe benefit, perquisite, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs, policies, agreements or arrangements, and all employment, consulting,
change in control, termination, severance, retention or other Contracts or
agreements (which, in the case of any employment agreement or Contract, is
material), whether legally enforceable or not, to which the Company, any
Subsidiary or any ERISA Affiliate is a party, with respect to which the Company,
any Subsidiary or any ERISA Affiliate has any obligation or which are
maintained, contributed to or sponsored by the Company, any Subsidiary or any
ERISA Affiliate for the benefit of any current or former employee, officer,
consultant or director of the Company, any Subsidiary and (ii) any material
arrangements, understandings or Contracts between the Company, any Subsidiary or
any ERISA Affiliate and any current or former employee, officer, consultant or
director of the Company or any Subsidiary including, without limitation, any
arrangements, understandings or Contracts relating in any way to a sale of the
Company or any Subsidiary (collectively, the "Plans"). Except as set forth in
Section 4.10(a) of the Disclosure Schedule, each Plan is in writing and the
Company has furnished to Parent a true and complete copy of each Plan and all
amendments thereto, and has delivered to Parent a true and complete copy of each
material document, if any, prepared in connection with each such Plan,
including, without
39
limitation, (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description, summary of material modifications and prospectus,
(iii) the most recently filed Internal Revenue Service ("IRS") Form 5500 for the
three most recent plan years, (iv) the most recently received IRS determination
letter for each Plan that is intended to be qualified under Section 401(a) of
the Code, and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Neither the Company nor any
Subsidiary has any express or implied commitment, whether legally enforceable or
not, (i) to create, incur liability with respect to or cause to exist any other
employee benefit plan, program, policy, agreement or arrangement, (ii) to enter
into any Contract or agreement to provide compensation or benefits to any
individual, or (iii) to modify, change or terminate any Plan, other than with
respect to a modification, change or termination required by this Agreement or
by Law.
(b) Except as set forth in Part I of Section 4.10(b) of the
Disclosure Schedule, neither the Company, any Subsidiary, or any ERISA
Affiliates has any obligation under a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or a single
employer plan (within the meaning of Section 4001(a)(15) of ERISA) for which the
Company or any Subsidiary could incur liability under Section 4063 or 4064 of
ERISA (a "Multiple Employer Plan"). Except as set forth in Part I of Section
4.10(b) of the Disclosure Schedule, neither the Company nor any Subsidiary would
incur any multiemployer withdrawal liability were either to withdraw or
partially withdraw from any multiemployer plan. Except as set forth in Part II
of Section 4.10(b) of the Disclosure Schedule, none of the Plans (i) obligates
the Company or any Subsidiary to pay separation, severance, termination or
similar-type benefits solely or partially as a result of any transaction
contemplated by this Agreement, or (ii) obligates the Company or any Subsidiary
to make any payment or
40
provide any benefit as a result of a "change in control", within the meaning of
such term under Section 280G of the Code. Except as set forth in Part II of
Section 4.10(b) of the Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not, either alone or in combination with
another event, (A) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee, officer, consultant or director or
(B) require the immediate funding or financing of any compensation or benefits.
Except as set forth in Part III of Section 4.10(b) of the Disclosure Schedule,
or as required by Part 6 of Title I of ERISA, none of the Plans provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer, director or consultant of the Company or any
Subsidiary. Each of the Plans is subject only to the Laws of the United States
or a political subdivision thereof.
(c) Except as set forth in Section 4.10(c) of the Disclosure
Schedule, each Plan is now and has been operated in all respects in accordance
with its terms and in all material respects in accordance with the requirements
of all applicable Laws including, without limitation, ERISA and the Code. Except
as set forth in Section 4.10(c) of the Disclosure Schedule, the Company and the
Subsidiaries and, to the knowledge of the Company, any ERISA Affiliate, have
performed all obligations required to be performed by them under, are not in any
respect in default under or in violation of, and have no knowledge of any
default or violation by any party to, any Plan. No Action or audit by any
Governmental Entity is pending or, to the knowledge of the Company, threatened
with respect to any Plan (other than claims for benefits in the ordinary course)
and no fact or event exists that could give rise to any such Action or audit.
(d) Each Plan that is intended to be qualified under Section 401(a)
of the Code has timely received a favorable determination letter from the IRS
covering all of the provisions
41
applicable to the Plan for which determination letters are currently available
that the Plan is so qualified and each trust established in connection with any
Plan which is intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the IRS that it is
so exempt, and no fact or event has occurred since the date of such
determination letter or letters from the IRS to adversely affect the qualified
status of any such Plan or the exempt status of any such trust.
(e) Except as set forth in Section 4.10(e) of the Disclosure
Schedule, there has not been any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan. None
of the Company, any Subsidiary or any ERISA Affiliate has incurred any liability
under, arising out of or by operation of Title IV of ERISA, including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA, or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and
no fact or event exists which could give rise to any such liability. Except as
set forth in Section 4.10(e) of the Disclosure Schedule, no Plan is subject to
Title IV or Section 302 of ERISA or Section 412 of the Code.
(f) Except as set forth in Section 4.10(f) of the Disclosure
Schedule, all contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates.
(g) Neither the Company, nor any Subsidiary has used the services of
workers provided by third party contract labor suppliers, temporary employees,
"leased employees" (as that term is defined in Section 414(n) of the Code), or
individuals who have provided services as independent contractors to an extent
that would reasonably be expected to result in the
42
disqualification of any Plans or the imposition of penalties or excise taxes
with respect to such plans by the IRS or the U.S. Department of Labor.
(h) Except as set forth in Section 4.10(h) of the Disclosure
Schedule, no amounts payable under any Plan will fail to be deductible for
federal income tax purposes by virtue of Section 280G or Section 162(m) of the
Code by reason of the transactions contemplated by this Agreement or otherwise.
SECTION 4.11 Labor and Employment Matters.
(a) Except as set forth in Section 4.11(a) of the Disclosure
Schedule, (i) there are no controversies, lawsuits, actions, grievances,
investigations or charges pending or, to the knowledge of the Company,
threatened between the Company or any Subsidiary and any of their respective
employees, which, individually or in the aggregate, would reasonably be expected
to prevent or materially delay consummation of the Offer or the Merger or
otherwise would reasonably be expected to prevent or materially delay the
Company from performing its obligations under this Agreement or would reasonably
be expected to have a Material Adverse Effect; (ii) neither the Company nor any
Subsidiary is a party to any collective bargaining agreement or other Contract
with a labor union applicable to persons employed by the Company or any
Subsidiary, nor, to the knowledge of the Company, are there currently any
activities or proceedings of any labor union to organize any such employees nor
have there been any such activities for the past five (5) years; (iii) to the
knowledge of the Company, neither the Company nor any Subsidiary has breached or
otherwise failed to comply with any provision of any such agreement or Contract,
and there are no grievances outstanding against the Company or any Subsidiary
under any such collective bargaining agreement or Contract; (iv) to the
knowledge of the Company, there are no unfair labor practice complaints pending
against the Company or any
43
Subsidiary before the National Labor Relations Board or any current union
representation questions involving employees of the Company or any Subsidiary;
and (v) there is no strike, slowdown, work stoppage or lockout, or, to the
knowledge of the Company, threat thereof, by or with respect to any employees of
the Company or any Subsidiary nor has there been any such occurrence for the
past five (5) years.
(b) The Company and the Subsidiaries are in material compliance with
all applicable laws relating to the employment of labor, including those related
to wages, hours, collective bargaining, discrimination, plant closures, layoffs
and the payment and withholding of taxes and other sums as required by the
appropriate Governmental Authority. The Company and the Subsidiaries have paid
in full to all employees or adequately accrued for in accordance with GAAP
consistently applied all wages, salaries, commissions, bonuses, benefits and
other compensation due to or on behalf of such employees and there is no claim
with respect to payment of wages, salary or overtime pay that has been asserted
or is now pending or threatened before any Governmental Authority with respect
to any persons currently or formerly employed by the Company or any Subsidiary.
Neither the Company nor any Subsidiary is a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices. To the knowledge of the Company, there is no
charge or proceeding with respect to a violation of any occupational safety or
health standards that has been asserted or is now pending or threatened with
respect to the Company. Except as set forth in Section 4.11(b) of the Disclosure
Schedule, to the knowledge of the Company, there is no charge of discrimination
in employment or employment practices, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category,
which has been asserted or is now pending or threatened before the United States
Equal
44
Employment Opportunity Commission, or any other Governmental Authority in any
jurisdiction in which the Company or any Subsidiary have employed or employ any
person.
(c) The Company and its Subsidiaries are and have been in compliance
with all notice and other requirements of the Worker Adjustment and Retaining
Notification Act (the "WARN Act") and any similar state or local statute. Except
as set forth in Section 4.11(c) of the Disclosure Schedule, no employee of the
Company or its Subsidiaries has suffered an "employment loss" (as defined in the
WARN Act) during the ninety (90)-day period prior to the execution of this
Agreement; provided however, that the Company will update this disclosure as
necessary to reflect all "employment losses" in the ninety (90)-day period prior
to the Effective Time, other than "employment losses" caused by Purchaser.
SECTION 4.12 Offer Documents; Schedule 14D-9; Proxy Statement.Neither the
Schedule l4D-9 nor any information supplied by the Company for inclusion in the
Offer Documents shall, at the times the Schedule 14D-9, the Offer Documents or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
Neither the proxy statement to be sent to the stockholders of the Company in
connection with the Stockholders' Meeting (as hereinafter defined) or the
information statement to be sent to such stockholders, as appropriate (such
proxy statement or information statement, as amended or supplemented, being
referred to herein as the "Proxy Statement"), shall, at the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders of the Company, at the time of the Stockholders' Meeting and at the
Effective Time, contain any statement which, at the time
45
and in light of the circumstances under which it was made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meeting which
shall have become false or misleading. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by the Parent or Purchaser or any of their representatives for
inclusion in any of the foregoing documents. The Schedule 14D-9 and the Proxy
Statement shall comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
SECTION 4.13 Property and Leases.
(a) The Company and the Subsidiaries have good and marketable title
to all their properties and assets required to conduct their respective
businesses as currently conducted, with only such exceptions as would not
reasonably be expected to have a Material Adverse Effect.
(b) Part I of Section 4.13(b) of the Disclosure Schedule sets forth
a list of each parcel of real property owned by the Company or any Subsidiary.
Except as set forth in Part II of Section 4.13(b) of the Disclosure Schedule,
each parcel of real property owned or leased by the Company or any Subsidiary
(i) is owned or leased free and clear of all mortgages, pledges, liens, security
interests, conditional and installment sale agreements, encumbrances, charges,
easements, rights of way or other encumbrance to title, or any option, right of
first refusal, or right of first offer or other claims of third parties of any
kind (collectively, "Liens"), other than (A) statutory Liens for current taxes
and assessments not yet past due, (B) inchoate mechanics' and materialmen's
Liens for construction in progress, (C) workmen's, repairmen's,
46
warehousemen's and carriers' Liens arising in the ordinary course of business of
the Company or such Subsidiary consistent with past practice, and (D) all
matters of record, Liens and other imperfections of title and encumbrances that,
together with the Liens described in Clauses (A) through (C), individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect (collectively, "Permitted Liens"), and (ii) is neither subject to any
governmental decree or order to be sold nor is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the knowledge of the Company, has any such condemnation,
expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party, and
all amendments and modifications thereto, are, except as set forth on Section
4.13(c) of the Disclosure Schedule, in full force and effect and have not been
modified or amended, and there exists no default under any such lease by the
Company or any Subsidiary, nor any event which, with notice or lapse of time or
both, would constitute a default thereunder by the Company or any Subsidiary,
except as, individually or in the aggregate, would not reasonably be expected to
prevent or materially delay consummation of the Offer or the Merger or otherwise
would not reasonably be expected to prevent or materially delay the Company from
performing its obligations under this Agreement and would not reasonably be
expected to have a Material Adverse Effect.
(d) There are no contractual or legal restrictions that preclude or
restrict the ability to use any real property owned or leased by the Company or
any Subsidiary for the purposes for which it is currently being used, except
where the existence of such restrictions, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, there are no material latent defects or material
47
adverse physical conditions affecting the real property, and improvements
thereon, owned or leased by the Company or any Subsidiary other than those that,
individually or in the aggregate, would not reasonably be expected to prevent or
materially delay consummation of the Offer or the Merger or otherwise would not
reasonably be expected to prevent or materially delay the Company from
performing its obligations under this Agreement and would not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.14 Taxes.Each of the Company and the Subsidiaries have timely
filed (or there has been filed on their behalf) all material Tax Returns
required to be filed, and all such Tax Returns are true, correct and complete,
and have timely paid and discharged all material Taxes required to be paid or
discharged, other than such payments as are being contested in good faith by
appropriate proceedings and for which adequate reserves have been established on
the 2004 Balance Sheet. No Governmental Authority has proposed, asserted or
assessed against the Company or any Subsidiary any deficiency or claim for any
Taxes which has not subsequently been paid in full; there are no federal, state,
local or foreign audits, actions, suits, proceedings, investigations, claims, or
administrative or other proceedings relating to Taxes or any Tax Returns of the
Company or any Subsidiary (each, a "Tax Claim" and collectively "Tax Claims")
now pending; and neither the Company nor any Subsidiary has received any notice
of any proposed Tax Claims. Neither the Company nor any Subsidiary has granted
any waiver of or comparable consent regarding any statute of limitations with
respect to, or any extension of a period for the assessment of any Tax. The
reserve for Taxes set forth on the face of the 2004 Balance Sheet (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) are adequate for the payment of Taxes not yet due and
payable, as determined in accordance with GAAP, and since the date of the 2004
Balance Sheet neither
48
the Company nor any Subsidiary has incurred any liability for Taxes other than
in the ordinary course of business. There are no Tax liens upon any property or
assets of the Company or any Subsidiary except statutory liens for current Taxes
not yet due. Except as set forth in Section 4.14 of the Disclosure Schedule, no
power of attorney granted by or with respect to the Company or any Subsidiary
relating to Taxes is currently in force. Except as set forth in Section 4.14 of
the Disclosure Schedule, neither the Company nor any Subsidiary is required to
include in income any adjustment pursuant to Section 481 of the Code by reason
of a voluntary change in accounting method initiated by the Company or any of
the Subsidiaries, and the IRS has not initiated or proposed any such adjustment
or change in accounting method. Except as set forth in Section 4.14 of the
Disclosure Schedule, there are no limitations on the ability of the Company or
any Subsidiary to utilize or carry forward any net operating loss pursuant to
Code Section 382 (or any corresponding or similar provision of state, local or
foreign Tax law), nor any limitations with respect to any Tax attribute
described in Code Section 383 (or any corresponding or similar provision of
state, local or foreign Tax law). Except as set forth in the financial
statements described in Section 4.07, neither the Company nor any of the
Subsidiaries has entered into a transaction which is being accounted for under
the installment method of Section 453 of the Code. Except as set forth in
Section 4.14 of the Disclosure Schedule, neither the Company nor any Subsidiary
has received any ruling from any Governmental Authority relating to Taxes and no
closing agreement pursuant to Section 7121 of the Code (or similar provisions of
state, local or foreign law) has been entered into by or with respect to the
Company or any Subsidiary. No jurisdiction where the Company or any Subsidiary
does not file a Tax Return has made a claim that the Company or any Subsidiary
is required to file a Tax Return for such jurisdiction. Each of the Company and
the Subsidiaries has complied with all applicable
49
rules and regulations relating to the withholding of Taxes and has withheld and
paid over to the relevant Governmental Authority all Taxes required to have been
withheld and paid, including, without limitation, withholding in connection with
payments to employees, independent contractors, creditors, stockholders or other
third parties. The Company has not been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. Neither the Company
nor any Subsidiary has been a member of any affiliated group within the meaning
of Section 1504(a) of the Code, or any similar affiliated or consolidated group
for Tax purposes under state, local or foreign law (other than a group, the
common parent of which is the Company). Neither the Company nor any Subsidiary
is liable for any Tax imposed on any other person or entity under Treasury
Regulation Section 1.1502-6 for any similar provision of state, local, or
foreign tax law) as a transferee or successor, or is bound by or has any
obligation under any Tax sharing, Tax indemnification, or similar agreement,
contract or arrangement, whether written on unwritten. Neither the Company nor
any Subsidiary was or will be required to include any item of income in, or
exclude any item of deduction from, taxable income for (i) the taxable year of
the Company ending on June 30, 2005 or (ii) any taxable period (or portion
thereof) ending on or after the date on which the Effective Time occurs,
respectively, as a result of any intercompany transaction, deferred intercompany
gain or excess loss account as described in Treasury Regulations under Code
Section 1502 (or any corresponding or similar provision of state, local or
foreign Tax law). During the five (5)-year period ending on the date hereof,
neither the Company nor any Subsidiary has been a "distributing corporation" or
a "controlled corporation" in a distribution of stock to any person qualifying
for tax-free treatment under Section 355 of the Code, either in the two (2)
years prior to the date of this Agreement, or in a distribution which
50
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated under this Agreement. The Tax Returns of the Company
and the Subsidiaries have been examined by the Internal Revenue Service (or the
applicable statutes of limitation for the assessment of Taxes for such periods
have expired) for all periods through and including June 30, 2001, and as of the
date hereof no material adjustments have been asserted as a result of such
examinations which have not been resolved and fully paid, or reserved on the
financial statements in accordance with GAAP. Neither the Company nor any
Subsidiary has engaged in any transaction that gives rise to (i) a registration
obligation with respect to any person under Section 6111 of the Code or the
regulations thereunder, (ii) a list maintenance obligation with respect to any
person under Section 6112 of the Code or the regulations thereunder, or (iii) a
disclosure obligation as a "reportable transaction" under Section 6011 of the
Code and the regulations thereunder. Except as set forth in Section 4.14 of the
Disclosure Schedule, neither the Company nor any subsidiary or affiliate of the
Company has or participates in any deferred compensation or other agreements,
arrangements or plans subject to the application of Section 409A of the Code
("Section 409A Plans"), and any such Section 409A Plans which the Company or any
subsidiary or affiliate of the Company has or participates in is full compliance
with the requirements of Section 409A of the Code taking into account the
provisions of Internal Revenue Service Notice 2005-1 and any other rules,
regulations or guidance promulgated under Section 409A of the Code.
SECTION 4.15 Environmental Matters.Except as described in Section 4.15 of
the Disclosure Schedule or that would not reasonably be expected to have a
Material Adverse Effect, (a) neither the Company nor any Subsidiary has violated
and is in violation of any Environmental Law and, to the knowledge of the
Company, there are no circumstances that may
51
prevent or interfere with compliance with Environmental Laws in the future; (b)
to the knowledge of the Company, none of the properties currently or formerly
owned, leased or operated by the Company or any Subsidiary (including, without
limitation, soils and surface and ground waters) are contaminated with any
Hazardous Substance; (c) neither the Company nor any Subsidiary is actually, or,
to the knowledge of the Company, potentially or allegedly liable for any
off-site contamination by Hazardous Substances; (d) neither the Company nor any
Subsidiary is actually, potentially or allegedly liable under any Environmental
Law (including, without limitation, pending or threatened liens or Actions); (e)
the Company and the Subsidiaries have all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits");
(f) the Company and the Subsidiaries have always been and are in compliance with
its Environmental Permits and, to the knowledge of the Company, there are no
past or present actions, activities, circumstances, conditions, events or
incidents that could form the basis of any Action against the Company, any
Subsidiary or against any person or entity whose liability the Company or any
Subsidiary has retained or assumed either contractually or by operation of law,
or that otherwise could result in any costs or liabilities under Environmental
Law; and (g) neither the execution of this Agreement nor the consummation of the
Transactions will require any investigation, remediation or other action with
respect to Hazardous Substances, or any notice to or consent of Governmental
Authorities or third parties, pursuant to any applicable Environmental Law or
Environmental Permit. The Company has provided to Parent all material
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of or reasonably available to the Company
and its Subsidiaries regarding environmental matters pertaining to the
environmental condition of the business of the Company
52
and its Subsidiaries, or the compliance (or noncompliance) by the Company and
its Subsidiaries with any Environmental Laws.
SECTION 4.16 Action with Respect to Rights Agreement.The Board has taken
all necessary action with respect to the Rights Agreement so that (a) none of
the execution or delivery of this Agreement, the making of the Offer, the
acceptance for payment of Shares by Purchaser pursuant to the Offer, the
consummation of the Merger, the purchase of Shares or the consummation of any
other Transaction will result in (i) the Rights becoming exercisable, or (ii)
the Rights becoming evidenced by, and transferable pursuant to, certificates
separate from the certificates representing Shares, and (b) the Rights will
expire pursuant to the terms of the Rights Agreement at the Effective Time.
SECTION 4.17 Material Contracts.
(a) The corresponding subsections of Section 4.17 of the Disclosure
Schedule contain a list or a description of all of the following Contracts to
which the Company or any Subsidiary is a party or to which the Company, any
Subsidiary or any of their respective properties or other assets is subject:
(i) Advertising Contracts requiring or which would reasonably
be expected to require payments or expenditures by the Company or
any Subsidiary in excess of $100,000 in any twelve (12)-month
period;
(ii) Contracts with any Governmental Authority;
(iii) Contracts (A) under which the Company or any Subsidiary
has incurred any indebtedness for borrowed money that is currently
outstanding and has a principal amount in excess of $100,000, (B) in
respect of the indebtedness or other obligations of any third party,
including, without limitation any guarantee
53
thereof or similar arrangement by the Company or any Subsidiary, (C)
granting or pursuant to which is created or granted a Lien (other
than a Lien described in clauses (A) through (C) of the definition
of Permitted Liens) on any of the properties or assets of the
Company or any Subsidiary, (D) associated with off balance sheet
financing, including but not limited to arrangements for the sale of
receivables and (E) relating to any interest rate, currency or
commodity derivative, swap or hedging transaction;
(iv) Contracts containing (I) a covenant not to compete
applicable to the Company or any Subsidiary, (II) any other covenant
limiting or restricting (or purporting to limit or restrict) the
freedom of the Company or any Subsidiary (A) to develop,
manufacture, market, distribute or sell any products or services or
to extend in the future any line of products or services into other
forms, (B) to enter into or compete in any line of business or
geographic area or with any person or (C) to hire any individual or
entity or group of individuals or entities, (III) any other covenant
limiting or restricting (or purporting to limit or restrict) the
Company or any Subsidiary from transacting any business or dealing
in any manner with any other person or entity or (IV) Contracts
which, after the consummation of the transactions contemplated by
this Agreement, would have the effect of creating or imposing on, or
otherwise making applicable to, the Company or any Subsidiary any of
the restrictions or limitations described in the foregoing;
54
(v) Power of attorney or Contracts that result (or would
reasonably be expected to result) in any person or entity holding a
power of attorney from the Company or any Subsidiary;
(vi) License Agreements and any other Contracts pursuant to
which the Company or any Subsidiary obtains from a third party the
right to use, exploit, practice, sell or distribute Intellectual
Property Rights of or controlled by a third party or the Company
grants to a third party the right to use, exploit, practice, sell or
distribute Intellectual Property Rights, confidential information or
other proprietary rights and process of the Company or any
Subsidiary;
(vii) Contracts for employment required to be listed in
Section 4.10(a) of the Disclosure Schedule and collective bargaining
agreements and other Contract with any labor union or association
representing employees of the Company or any Subsidiary;
(viii) (I) Management, service, consulting and other similar
type of Contracts that are in writing and (II) material management,
service, consulting and other similar type of Contracts that are not
in writing, (excluding, in the case of Clauses (I) and (II),
Contracts for employment listed in Section 4.17(a) of the Disclosure
Schedule pursuant to subsection (vii) above);
(ix) (I) Contracts with customers (including, without
limitation, group purchasing organizations, buying groups or similar
organizations), suppliers, distributors or other sales
representatives likely to involve consideration of more than
$500,000;
55
(x) Contracts pursuant to which the Company or any Subsidiary
has received or which would reasonably be expected to receive
payments in respect of services provided to pharmaceutical suppliers
or suppliers of medical or surgical goods;
(xi) Contracts relating to the consignment or warehousing of
inventory or products of the Company or any Subsidiary;
(xii) Contracts establishing, creating or relating to any
partnership, joint venture, limited liability company, limited
liability partnership or similar entity;
(xiii) Contracts providing for "earn-outs", "savings
guarantees", "performance guarantees", or other contingent payments
by the Company or any Subsidiary which would reasonably be expected
to be in excess of $100,000 during any twelve (12)-month period;
(xiv) Contracts with any director, officer, employee or
affiliate of the Company or any Subsidiary or, to the knowledge of
the Company, any stockholder of the Company or, in each case, any
immediate family member thereof (excluding Contracts for employment
listed in Section 4.17(a) of the Disclosure Schedule pursuant to
subsection (vii) above);
(xv) Contracts in respect of (A) the lease or sublease of any
real or personal property, (B) the sale or purchase of any real
property and (C) the release, transportation or disposal of
Hazardous Materials, or the clean-up, abatement or other action
relating to Hazardous Materials or Environmental Laws;
56
(xvi) Contracts pursuant to which the Company or any
Subsidiary receives or would reasonably be expected to receive
payments of administrative fees from pharmaceutical suppliers or
suppliers of medical or surgical goods;
(xvii) Individual Contracts or groups of related Contracts
pursuant to which a customer (including, without limitation, group
purchasing organizations, buying groups or similar organizations)
and/or its affiliates purchase both distribution services and
automation products or other technology from the Company or any
Subsidiary;
(xviii) Contracts in connection with which the Company or any
Subsidiary may receive personal health information (as such term is
defined in HIPAA);
(xix) Contracts pursuant to which the Company or, to the
Knowledge of the Company, any Subsidiary has assigned any of its
rights with respect to any antitrust or similar claims with respect
to branded pharmaceuticals products;
(xx) Stock purchase agreements, asset purchase agreements or
other acquisition or divestiture Contracts relating to material
transactions since January 1, 2002; and
(xxi) All other Contracts, whether or not made in the ordinary
course of business, which are material to the Company, any
Subsidiary or the conduct of their respective businesses, or the
absence, breach or termination of which, individually or in the
aggregate, would reasonably be expected to prevent or materially
delay consummation of the Offer or the Merger or otherwise would
reasonably be expected to prevent or materially delay the Company
from
57
performing its obligations under this Agreement or would reasonably
be expected to have a Material Adverse Effect.
(b) The Contracts required to be listed or described on Schedule
4.17(a) of the Disclosure Schedule are referred to herein as "Material
Contracts". Except as, individually or in the aggregate, would not reasonably be
expected to prevent or materially delay consummation of the Offer or the Merger
or otherwise would not reasonably be expected to prevent or materially delay the
Company from performing its obligations under this Agreement and would not
reasonably be expected to have a Material Adverse Effect and except as set forth
in Section 4.17(b) of the Disclosure Schedule, (i) each Material Contract is a
legal, valid and binding agreement, and none of the Material Contracts is in
default by its terms or has been canceled by the other party; (ii) to the
Company's knowledge, no other party is in breach or violation of, or default
under, any Material Contract; (iii) the Company and the Subsidiaries are not in
receipt of any claim of default under any Material Contract; and (iv) neither
the execution of this Agreement nor the consummation of any Transaction shall
constitute default, give rise to cancellation rights, result in the acceleration
of any obligation or the creation of any Lien or otherwise would reasonably be
expected to adversely affect any of the Company's rights under any Material
Contract. The Company has furnished or made available to Parent true and
complete copies of all Material Contracts that have not been filed with the SEC
and included in the Exhibits Index to the Company's Annual Report on Form 10-K
for its fiscal year ended June 30, 2004, including any amendments thereto.
SECTION 4.18 Insurance.
(a) Section 4.18(a) of the Disclosure Schedule sets forth, with
respect to each insurance policy, other than insurance policies relating to
Plans under which the Company or any
58
Subsidiary is insured, a named insured or otherwise the principal beneficiary of
coverage which is currently in effect, (i) the names of the insurer, the
principal insured and each named insured, (ii) the policy number, (iii) the
period, scope and amount of coverage and (iv) the premium charged.
(b) With respect to each such insurance policy: (i) the policy is
legal, valid, binding and enforceable in accordance with its terms and is in
full force and effect; (ii) all premiums due and payable to date under such
policy have been paid; and (iii) neither the Company nor any Subsidiary is in
material breach or default (including any such breach or default with respect to
the payment of premiums or the giving of notice), and, to the knowledge of the
Company, no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination or modification,
under the policy.
(c) At no time subsequent to January 1, 2001 has the Company or any
Subsidiary (i) been denied any insurance or indemnity bond coverage which it has
requested or (ii) made any material reduction in the scope or amount of its
insurance coverage.
SECTION 4.19 Brokers. No broker, finder or investment banker (other than
Citigroup Global Markets Inc.) is entitled to any brokerage, finder's or other
fee or commission in connection with the Transactions based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Parent a complete and correct copy of all agreements between the Company and
Citigroup Global Markets, Inc. pursuant to which such firm would be entitled to
any payment relating to the Transactions.
SECTION 4.20 Intellectual Property.
(a) Ownership of Intellectual Property Rights. Section 4.20(a) of
the Disclosure Schedule lists all Company Registered Intellectual Property
Rights, identifying in
59
each case the inventors/authors, status, filing date, and
issuance/registration/grant date, and prosecution status thereof. The Company or
the Subsidiaries own all right, title, and interest (including the sole right to
enforce) free and clear of all encumbrances in and to all Company Intellectual
Property Rights, and with respect to Company Registered Intellectual Property
Rights is listed in the records of the appropriate United States, state or
foreign authority as the sole owner for each item thereof.
(b) Software. For purposes of this section, "Company Software" means
all Computer Software (other than Computer Software that is generally available
on nondiscriminatory pricing terms and which has an individual acquisition cost
of $1000 or less, hereafter "Non-Material Computer Software") that was developed
by or for, is owned by, or otherwise used in the business of the Company or the
Subsidiaries. Except as set forth on Section 4.20(b) of the Disclosure Schedule:
(i) no source code for any Company Software owned by the Company or any
Subsidiary has been disclosed, delivered, licensed, or is subject to any source
code escrow obligation, to a third party; and (ii) no portion of the Company
Software is subject to any "open source" license (whether to or from a third
party).
(c) Licenses. Except as set forth on Section 4.20(c) of the
Disclosure Schedule: (i) Each License Agreement is valid and binding on all
parties thereto and enforceable in accordance with its terms; (ii) none of the
Outbound License Agreements from the Company or any Subsidiary grants any third
party exclusive rights, or the right to sublicense, under any Company
Intellectual Property Rights; (iii) the Company and the Subsidiaries have not
performed any act, or permitted any omission, that would give rise to a right of
termination under any License Agreements; (iv) to the knowledge of the Company,
no other party to any License
60
Agreement has performed any act, or permitted any omission, that would give rise
to a right of termination thereunder.
(d) No Restrictions. There are no forbearances to xxx, consents,
judgments, orders or similar obligations, other than the License Agreements,
that do or may: (i) restrict the rights of the Company and any Subsidiary to use
or enforce any Intellectual Property Rights; (ii) restrict the conduct of the
business of the Company and any Subsidiary in order to accommodate a third
party's Intellectual Property Rights; or (iii) grant any third party any right
with respect to any Company Intellectual Property Rights.
(e) No Infringement by Company. Except as set forth on Section
4.20(e) of the Disclosure Schedule: (i) to the knowledge of the Company, there
are no allegations, claims or notices to the effect that the conduct of the
business of the Company or any Subsidiary, or any act, product or service
thereof, has, does or may infringe, misappropriate or otherwise violate the
Intellectual Property Rights of any third party or constitute unfair competition
or unfair trade practices; and (ii) neither the Company nor any Subsidiary has
obtained opinions or memoranda of counsel relating to infringement, validity or
enforceability of any third party Intellectual Property Rights.
(f) No Third Party Infringers. To the knowledge of the Company, no
third party has infringed or misappropriated, or is likely to infringe or
misappropriate, any Company Intellectual Property Rights.
(g) Validity and Enforceability. To the knowledge of the Company:
(i) the Company Intellectual Property Rights are subsisting, in full force and
effect, are valid and enforceable, and (in the case of Company Registered
Intellectual Property Rights) have not expired or been cancelled or
61
abandoned, except where such expiration, cancellation or abandonment is
consistent with the exercise of reasonable business judgment; (ii) neither the
Company nor any Subsidiary has done, or failed to do, any act or thing which may
prejudice the validity or enforceability of any Company Intellectual Property
Rights; (iii) all necessary registration, maintenance and renewal fees currently
due have been made, and all necessary documents, recordations and certificates
have been filed, for the purposes of maintaining such Registered Company
Intellectual Property Rights; and (iv) each of the patents and patent
applications within the Company Registered Intellectual Property Rights has been
prosecuted in compliance with all applicable rules, policies, and procedures of
the United States Patent and Trademark Office or applicable foreign patent
agencies
(h) Third Party Developers. All Technology developed by a third
party (including any current or former employee of the Company or any
Subsidiary) for the Company or any Subsidiary: (i) was developed pursuant to a
written agreement with such third party covering such Technology; and (ii) the
Company and the Subsidiary, pursuant to such agreement, have either: (x)
obtained sole ownership of, and the sole right to enforce, all Intellectual
Property Rights arising therefrom; or (y) obtained a valid and unrestricted
right to exploit all Intellectual Property Rights relating thereto.
(i) Trade Secrets. Except as set forth on Section 4.20(j) of the
Disclosure Schedule: (i) the Company and the Subsidiaries have taken all
necessary steps to protect their trade secrets, and any trade secrets of third
parties provided thereto, according to the laws of the applicable jurisdictions
where such trade secrets are developed, practiced or disclosed; (ii) the Company
and the Subsidiaries have used commercially reasonable efforts to enforce a
policy requiring parties having access to such trade secrets to execute a
written agreement which provides reasonable protection for such trade secrets
and which does not allow use or disclosure
62
of such trade secrets by the recipient upon the expiration of any specified
period of time; (iii) except pursuant to such agreements, there has been no
disclosure by the Company or any Subsidiary of any such trade secrets; and (iv)
to the knowledge of the Company, no party to any such agreement is in breach
thereof.
SECTION 4.21 Accounting or Audit Irregularities.Except as set forth in
Section 4.21 of the Disclosure Schedule, from June 30, 2001 to the date hereof,
none of the Company, any Subsidiary or, to the Company's knowledge, any
director, officer or auditor of the Company or any Subsidiary, has received or
otherwise had or obtained knowledge of any material complaint, allegation,
assertion or claim, whether made in writing or made orally to any director,
officer or auditor of the Company or any Subsidiary, regarding the accounting or
auditing practices, procedures, methodologies or methods of the Company or any
of its Subsidiaries or their respective internal accounting controls, including
any complaint, allegation, assertion or claim that the Company or any of its
Subsidiaries has engaged in questionable accounting or auditing practices. No
attorney representing the Company or any of its Subsidiaries, whether or not
employed by the Company or any of its Subsidiaries, has reported evidence of a
material violation of securities laws, breach of fiduciary duty or similar
violation by the Company or any of its officers, directors, employees or agents
to the Company's Board of Directors or any committee thereof or to any director
or officer of the Company. From June 30, 2004 to the date hereof, there have
been no internal investigations regarding accounting or revenue recognition
discussed with, reviewed by or initiated at the direction of the chief executive
officer, chief financial officer, general counsel or similar legal officer, the
Company's Board of Directors or any committee thereof.
63
SECTION 4.22 Accounts Receivable. All accounts receivable of the Company
and its Subsidiaries reflected on the 2004 Balance Sheet or arising thereafter
have arisen from bona fide transactions in the ordinary course of business
consistent with past practices and in accordance with SEC regulations and GAAP
applied on a consistent basis and are not subject to valid defenses, setoffs or
counterclaims. The Company's reserve for contractual allowances and doubtful
accounts is adequate and has been calculated in a manner consistent with past
practices. Since June 30, 2004, neither the Company nor any of its Subsidiaries
has modified or changed in any material respect its sales practices or methods
including, without limitation, such practices or methods in accordance with
which the Company or any of its Subsidiaries sell goods, fill orders or record
sales.
SECTION 4.23 Inventory. The inventories of the Company and each
Subsidiary, whether or not shown on the 2004 Balance Sheet or thereafter
acquired by the Company or any Subsidiary, consisted of items of a quantity and
quality usable or salable in the ordinary course of business, consistent with
past practice. Since the date of the 2004 Balance Sheet, the Company and the
Subsidiaries have continued to replenish inventories in a normal and customary
manner consistent with past practices. Neither the Company nor any Subsidiary
has received written or oral notice that it will experience in the foreseeable
future any material difficulty in obtaining, in the desired quantity and quality
and at a reasonable price and upon reasonable terms and conditions, the products
it distributes. The values at which inventories are carried reflect the
inventory valuation policy of the Company and the Subsidiaries, which is
consistent with its past practice and in accordance with GAAP applied on a
consistent basis. Since the date of the 2004 Balance Sheet, due provision has
been made on the books of the Company and the Subsidiaries in the ordinary
course of business, consistent with past practice
64
and in accordance with GAAP applied on a consistent basis, to provide for all
slow-moving, obsolete, or unusable inventories and such inventory reserves are
adequate to provide for such slow-moving, obsolete or unusable inventory and
inventory shrinkage. As of the date hereof, the Company's and the Subsidiaries'
inventory on hand and commitments to purchase inventory do not exceed, in the
aggregate, an amount greater than $600,000,000.
SECTION 4.24 Healthcare Regulatory and FDA Compliance.
(a) Each of the Company and the Subsidiaries is and has been
conducted in material compliance with all applicable Laws (including, without
limitation, Laws relating to Medicare, Medicaid and confidentiality of health
information).
(b) Except as set forth on Section 4.24(b) of the Disclosure
Schedule, none of the Company, its Subsidiaries or their respective officers,
directors, or employees has been charged with or, to the knowledge of the
Company, is now under investigation with respect to a violation (with respect to
Company and the Subsidiaries) of any applicable Law, including without
limitation any Medicare, Medicaid or other Federal Health Care Program-related
offense.
(c) Except as set forth on Section 4.24(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to, or bound by, any
order or corporate integrity agreement or other formal or informal agreement
with any Governmental Authority. Each of the Company and the Subsidiaries has
filed all material reports required to be filed with any Governmental Authority,
and all such reports are accurate and complete in all material respects.
(d) None of the Company, any Subsidiary or any of their respective
officers, directors or employees (i) has been debarred, excluded or suspended
from participation in Medicare, Medicaid or other Federal Health Care Program
(as defined under the Social Security Act, as amended); (ii) has had a civil
monetary penalty assessed against it, him or her under Section 1128A of the
Social Security
65
Act; or (iii) is currently listed on the General Services Administration
published list of parties excluded from federal procurement programs and
non-procurement programs.
(e) None of the Company, any Subsidiary or any of their respective
officers, directors or employees has engaged in any activity which is in
violation of the federal Medicare or federal or state Medicaid statutes,
Sections 1128, 1128A, 1128B, 1128C or 1877 of the Social Security Act (42 U.S.C.
Sections 1320a-7, 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the federal TRICARE
statute (10 U.S.C. Section 1071 et seq.), the False Claims Act (31 U.S.C.
Section 3729 et seq.), the False Statements Accountability Act (18 U.S.C.
Section 1001), the Program Fraud Civil Remedies Act (31 U.S.C. Section 3801 et
seq.), the anti-fraud and related provisions of the Health Insurance Portability
and Accountability Act of 1996 (e.g., 18 U.S.C. Sections 1035 and 1347), or
related regulations or other federal or state laws and regulations, including,
but not limited to, the following: (A) knowingly and willfully offering, paying,
soliciting or receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or kind (1) in
return for referring an individual to a person for the furnishing or arranging
for the furnishing of any item or service for which payment may be made in whole
or in part by any Federal Health Care Program (as defined under the Social
Security Act, as amended); or (2) in return for purchasing, leasing, or
ordering, or arranging, or arranging for or recommending purchasing, leasing, or
ordering any good, facility, service, or item for which payment may be made in
whole or in part by any Federal Health Care Program (as defined under the Social
Security Act, as amended); or (B) any other activity which violates any state or
federal law relating to prohibiting fraudulent, abusive or unlawful practices
connected in any way with
66
the provision of health care items or services or the billing for such items or
services provided to a beneficiary of any Federal Health Care Program (as
defined under the Social Security Act, as amended).
(f) To the knowledge of the Company, no person has filed or
threatened to file against the Company or any Subsidiary an action under any
federal or state whistleblower statute, including, without limitation, under the
federal False Claims Act (31 U.S.C. Section 3730).
(g) The business and operations of each of the Company and each
Subsidiary are in compliance in all material respects with all applicable Laws
relating to patient or individual health care information, including, without
limitation, the Administrative Simplification requirements of HIPAA.
(h) Each of the Company and each Subsidiary is in compliance, in all
material respects, with all applicable statutes, rules, regulations, standards,
guidelines, policies and orders (including, without limitation, with respect to
radioactive, hazardous or toxic pharmaceuticals) administered or issued by the
U.S. Food and Drug Administration (the "FDA") and by all other applicable
federal, state or local entities regulating any drug, medical device, biologic,
radioactive, hazardous or toxic pharmaceuticals or any other item regulated
under such or similar laws. The Company has no knowledge of any act or omission
that would furnish a reasonable basis for the FDA or other federal, state or
local governmental entity to issue to the Company or any Subsidiary a Warning
Letter, untitled letter, Section 305 notice or other similar communication that
calls, or may call, regulatory compliance into question.
SECTION 4.25 Secondary Markets.
(a) The Company has provided to Parent a list of all persons from
whom the Company or a Subsidiary has purchased any Drugs, other than the
manufacturer thereof, since
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July 1, 2003. The Company and its Subsidiaries have received all Documentation
with respect to Drugs purchased from persons other than the manufacturer thereof
that is required by applicable Law, has authenticated such Documentation in
accordance with applicable Law and has retained such Documentation or copies
thereof in accordance with Applicable Law.
(b) The Company has provided to Parent a list of all wholesale
distributors (as such term is defined in the Federal Prescription Drug Marketing
Act) to whom the Company or a Subsidiary has sold any Drug since July 1, 2003.
The Company and its Subsidiaries have provided all Documentation, if any,
regarding the sale of such Drugs as required by and in accordance with
applicable Law.
SECTION 4.26 Customers. Section 4.26(a) of the Disclosure Schedule sets
forth a list of the top 20 customers (by dollar volume and excluding national
accounts and dock-to-dock sales) of the Company and the Subsidiaries for the
twelve (12)-month period ended March 31, 2005 and Section 4.26(b) of the
Disclosure Schedule sets for a list of the top 20 customers (by dollar volume
and including only national accounts and dock-to-dock sales) of the Company and
the Subsidiaries for the twelve (12)-month period ended March 31, 2005. No such
customer has canceled or otherwise terminated, or communicated to the Company or
any Subsidiary that it intends to cancel or otherwise terminate, its
relationship with the Company and/or any Subsidiary, or has decreased materially
its usage of the services or products of the Company or any Subsidiary, and to
the Company's knowledge, no such customer intends to cancel or otherwise
terminate its relationship with the Company or any Subsidiary or to decrease
materially its usage of the services or products of the Company or any
Subsidiary; provided, however, that after the date hereof, no such cancellation,
termination, communication or decrease
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shall result in a breach of this Section 4.26 unless such cancellation,
termination, communication or decrease would reasonably be expected to have a
Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 5.01 Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted.
SECTION 5.02 Authority Relative to This Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by Parent and Purchaser of the Transactions have
been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has been duly and validly
executed and delivered by Parent and Purchaser and, assuming due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Purchaser enforceable against each of Parent
and Purchaser in accordance with its terms except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency or other similar laws, now or
hereafter in effect,
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affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, (i) conflict with or violate the Certificate of Incorporation or
By-laws of either Parent or Purchaser, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 5.03(b) have
been obtained and all filings and obligations described in Section 5.03(b) have
been made, conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to Parent or Purchaser or by which any property or asset of
either of them is bound or affected, or (iii) result in any breach of, or
constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Purchaser
is a party or by which Parent or Purchaser or any property or asset of either of
them is bound or affected, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, breaches, defaults or other occurrences which,
individually or in the aggregate, would not reasonably be expected to prevent or
materially delay consummation of the Transactions or otherwise would not
reasonably be expected to prevent Parent and Purchaser from performing their
material obligations under this Agreement.
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(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with, or notification to, any Governmental Authority on the part of Parent or
Purchaser, except for (i) compliance with any applicable requirements of the
Exchange Act, (ii) any filings as may be required under Delaware Law in
connection with the Merger, (iii) filings, permits, authorizations, consents and
approvals as may be required under the HSR Act, (iv) the filing with the SEC and
the Nasdaq of (A) the Schedule TO, (B) the Proxy Statement if stockholder
approval is required by law, (C) the information required by Rule 14f-1 under
the Exchange Act and (D) such reports under Section 13(a) of the Exchange Act as
may be required in connection with this Agreement and the Transactions, (v) such
filings and approvals as may be required by any applicable state securities or
blue sky laws, and (vi) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
individually or in the aggregate, would not reasonably be expected to prevent or
materially delay consummation of the Transactions, or otherwise would not
reasonably be expected to prevent Parent or Purchaser from performing their
material obligations under this Agreement.
SECTION 5.04 Financing. Parent has and will have through the Effective
Time access to sufficient funds to permit Purchaser to consummate all the
Transactions, including, without limitation, acquiring all the outstanding
Shares in the Offer and the Merger.
SECTION 5.05 Offer Documents; Proxy Statement. The Offer Documents shall
not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
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the statements made therein, in the light of the circumstances under which they
were made, not misleading. The information supplied by Parent for inclusion in
the Proxy Statement shall not, at the date the Proxy Statement (or any amendment
or supplement thereto) is first mailed to stockholders of the Company, or at the
time of the Stockholders' Meeting, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not false or misleading, or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders' Meeting which shall have become false or
misleading. Notwithstanding the foregoing, Parent and Purchaser make no
representation or warranty with respect to any information supplied by the
Company or any of its representatives for inclusion in any of the foregoing
documents or the Offer Documents. The Offer Documents shall comply in all
material respects as to form with the requirements of the Exchange Act and the
rules and regulations thereunder.
SECTION 5.06 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or
Purchaser.
SECTION 5.07 Absence of Litigation. There is no Action pending or, to the
knowledge of Parent and the Purchaser, threatened against Parent or the
Purchaser, or any property or asset of Parent or the Purchaser, before any
Governmental Authority that seeks to materially delay or prevent the
consummation of any Transaction. Neither Parent nor the Purchaser nor any
property or asset of Parent or the Purchaser is subject to any continuing order
of, consent decree, settlement agreement or similar written agreement with, or,
to the knowledge of Parent or the Purchaser, continuing investigation by, any
Governmental Authority, or any
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order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority that, individually or in the aggregate, would reasonably
be expected to prevent or materially delay consummation of the Offer or the
Merger or otherwise would reasonably be expected to prevent or materially delay
Parent or the Purchaser from performing their material obligations under this
Agreement.
SECTION 5.08 Company Stock. Each of Parent and Purchaser is not, nor at
any time during the last three (3) years has it been, an "interested
stockholder" of the Company as defined in Section 203 of Delaware Law. Each of
Parent and Purchaser does not own (directly or indirectly, beneficially or of
record) and is not a party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in each case, any
shares of capital stock of the Company (other than as contemplated by this
Agreement).
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.01 Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, except (a) as expressly contemplated by this
Agreement and Section 6.01 of the Disclosure Schedule, (b) in the ordinary
course of business consistent with past practice which would not require the
approval of the Board or (c) as agreed in writing by Parent, after the date
hereof, the Company shall use its commercially reasonable efforts to preserve
substantially intact the business organization of the Company and the
Subsidiaries, to keep available the services of the current officers, employees
and consultants of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers and
other persons with which the Company or any Subsidiary has significant business
relations, and neither the Company nor any Subsidiary shall, directly or
indirectly, do, or propose to do, any of the following:
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(c) amend or otherwise change or modify its Certificate of
Incorporation or By-laws or equivalent organizational documents;
(d) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any shares
of any class of capital stock of the Company or any Subsidiary, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company or any Subsidiary
(except for the issuance of a maximum of 1,808,636 Shares issuable pursuant to
options, restricted stock or other equity awards outstanding on the date hereof
under the Company Stock Plans and other agreements), or (ii) any assets of the
Company or any Subsidiary, except in the ordinary course of business and in a
manner consistent with past practice;
(e) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock except for cash dividends paid in amounts and at times
consistent with past practice;
(f) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(g) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets or any other business
combination) any corporation, partnership, other business organization or any
division thereof, any real property or any material amount of assets; (ii) incur
any indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise become responsible for, the obligations of
any person, or make any loans or advances, except in the ordinary course of
business and consistent with past
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practice; (iii) enter into, amend, modify or terminate any derivative, swap or
hedging arrangement or Contract; (iv) enter into any Contract or agreement other
than in the ordinary course of business and consistent with past practice; (v)
authorize, or make any commitment with respect to, any single capital
expenditure which is in excess of $250,000 or capital expenditures which are, in
the aggregate, in excess of $1,000,000 for the Company and the Subsidiaries
taken as a whole; or (vi) enter into, amend or modify any Contract, commitment
or arrangement with respect to any matter set forth in this Section 6.01(g),
except, with respect to matters described in clauses (ii) or (iv) of this
Section 6.01(g) in the ordinary course of business and consistent with past
practice;
(h) hire or terminate any employee except in the ordinary course of
business consistent with past practice or increase the salary, bonus or other
compensation payable or to become payable or the benefits (including, fringe
benefits or perquisites) provided to its current or former directors, officers,
other employees or consultants, except for increases in the ordinary course of
business and consistent with past practice in salaries or wages of employees of
the Company or any Subsidiary who are not directors or officers of the Company,
or grant or increase any bonus, incentive compensation, retention payments,
severance change-in-control or termination pay to, or enter into, amend or
modify any employment, consulting, change-in-control or severance agreement
with, any current or former director, officer, other employee or consultant of
the Company or of any Subsidiary, or establish, adopt, enter into, amend or
modify (including any amendment or modification that increases or accelerates
payment or requires any funding), except as required by Law, any collective
bargaining or other Contract with a labor union, bonus, profit-sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, change-in-control, severance or
75
other plan, program, agreement, trust, fund, policy or arrangement for the
benefit of any current or former director, officer, other employee or
consultant;
(i) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures, except as required by GAAP as advised by the
Company's regular independent public accountants;
(j) make any tax election or settle or compromise any material
United States federal, state or local income tax liability;
(k) enter into, amend, modify or consent to the termination of any
Material Contract, or amend, waive, modify or consent to the termination of the
Company's or any Subsidiary's rights thereunder, other than in the ordinary
course of business and consistent with past practice;
(l) redeem the Rights or amend, modify or take any action under the
Rights Plan (except as contemplated by Section 4.16);
(m) settle, compromise or make any payment with respect to any
material Action, other than in the ordinary course of business consistent with
past practice;
(n) enter into, amend or modify any contract with any officer or
director of the Company or any stockholder of the Company holding five percent
(5%) or more of the Company's outstanding Shares;
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(o) take any action that would reasonably be expected to cause any
of the representations and warranties of the Company contained in this Agreement
that is qualified as to materiality or Material Adverse Effect to not be true
and correct in any respect or any such representation or warranty that is not so
qualified to not be true and correct in any material respect; or
(p) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment, to do any of the foregoing.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through the Board, shall, in accordance with applicable law
and the Company's Certificate of Incorporation and By-laws, (i) duly call, give
notice of, convene and hold an annual or special meeting of its stockholders as
promptly as practicable following consummation of the Offer for the purpose of
considering and taking action on this Agreement and the Transactions (the
"Stockholders' Meeting") and (ii) (A) except as provided in Section 7.04(c),
include in the Proxy Statement, and not subsequently withdraw or modify in any
manner adverse to Purchaser or Parent, the recommendation of the Board that the
stockholders of the Company approve and adopt this Agreement and the
Transactions and (B) use all reasonable efforts to obtain such approval and
adoption. At the Stockholders' Meeting, Parent and Purchaser shall cause all
Shares then owned by them and their subsidiaries to be voted in favor of the
approval and adoption of this Agreement and the Transactions.
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(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least ninety percent (90%) of the then outstanding Shares, the
parties shall take all necessary and appropriate action to cause the Merger to
become effective, in accordance with Section 253 of Delaware Law, as promptly as
reasonably practicable after such acquisition, without a meeting of the
stockholders of the Company.
SECTION 7.02 Proxy Statement. If approval of the Company's stockholders is
required by applicable law to consummate the Merger, promptly following
consummation of the Offer, the Company shall file the Proxy Statement with the
SEC under the Exchange Act, and shall use all reasonable efforts to have the
Proxy Statement cleared by the SEC. Parent, Purchaser and the Company shall
cooperate with each other in the preparation of the Proxy Statement, and the
Company shall notify Parent of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information and shall provide to Parent
promptly copies of all correspondence between the Company or any representative
of the Company and the SEC. The Company shall give Parent and its counsel the
opportunity to review the Proxy Statement, including all amendments and
supplements thereto, prior to its being filed with the SEC and shall give Parent
and its counsel the opportunity to review all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC. Each of the Company, Parent and Purchaser agrees to use all
reasonable efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC and to cause the Proxy
Statement and all required amendments and supplements thereto to be mailed to
the holders of Shares entitled to vote at the Stockholders' Meeting at the
earliest practicable time.
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SECTION 7.03 Access to Information; Confidentiality.
(a) From the date hereof until the Effective Time, the Company
shall, and shall cause the Subsidiaries and the officers, directors, employees,
auditors and agents of the Company and the Subsidiaries to, afford the officers,
employees and agents of Parent and Purchaser access at all reasonable times to
the officers, employees, agents, properties, offices, plants and other
facilities, books and records of the Company and each Subsidiary, shall furnish
Parent and Purchaser with such financial, operating and other data and
information as Parent or Purchaser, through its officers, employees or agents,
may reasonably request and shall provide access to the inventories of the
Company and take all action to facilitate the physical inventory inspection
contemplated by clause (l) of Annex A.
(b) All information obtained by Parent or Purchaser pursuant to this
Section 7.03 shall be kept confidential in accordance with the confidentiality
agreement, dated March 24, 2005, as subsequently amended (the "Confidentiality
Agreement"), between Parent and the Company.
SECTION 7.04 No Solicitation of Transactions.
(a) The Company shall, and shall cause its Subsidiaries and each of
their respective affiliates, directors, officers, employees, agents and
representatives (including any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of its
Subsidiaries) to immediately cease any discussions or negotiations with any
other parties that may be ongoing with respect to the possibility or
consideration of any Acquisition Proposal. From the date of this Agreement
through the Effective Time, the Company shall not, nor shall it permit any of
its Subsidiaries to, nor shall it authorize or permit any of its or its
Subsidiaries' directors, officers or employees or any investment banker,
financial
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advisor, attorney, accountant or other representative retained by it or any of
its Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information or
assistance), or take any other action designed to facilitate or encourage any
inquiries or the making of any proposal that constitutes, or is reasonably
likely to lead to, any Acquisition Proposal, (ii) participate in any discussions
or negotiations regarding, or provide any nonpublic information or data to any
person relating to, any Acquisition Proposal or (iii) make or authorize any
statement, recommendation or solicitation in support of, or execute or enter
into, or propose to execute or enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option agreement or other
similar agreement related to, any Acquisition Proposal. Any violation of the
foregoing restrictions by any representative of the Company or any of its
Subsidiaries, whether or not such representative is so authorized and whether or
not such representative is purporting to act on behalf of the Company or
otherwise, shall be deemed to be a breach of this Agreement by the Company.
(b) Notwithstanding the foregoing, until the consummation of the
Offer the Board shall be permitted to engage in discussions and negotiations
with, or provide nonpublic information or data to, any person in response to an
unsolicited, bona fide written Acquisition Proposal by such person first made
after the date of this Agreement that did not result from a breach of this
Section 7.04 which the Board concludes in good faith (after consultation with
outside counsel and its financial advisor) constitutes or would reasonably be
expected to lead to a Superior Proposal, only (1) if and only to the extent that
the Board reasonably determines in good faith (after consultation with outside
legal counsel) that it is required to do so in order to comply with its
fiduciary duties under applicable law, (2) if, prior to furnishing such
information to or entering into negotiations or discussions with such person,
the Company enters into a
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confidentiality agreement with such person having provisions that are no less
restrictive to such person than those applicable to Parent and contained in the
Confidentiality Agreement and (3) if the Company complies with all of the terms
of this Section 7.04. The Company shall notify Parent as promptly as practicable
(and in no event later than 24 hours) after receipt of any Acquisition Proposal,
or any request for nonpublic information relating to the Company or any of its
Subsidiaries by any person or that informs the Company or any of its
Subsidiaries that it is considering making, or has made, an Acquisition
Proposal, or any inquiry from any person seeking to have discussions or
negotiations with the Company relating to a possible Acquisition Proposal. Such
notice shall be made orally and confirmed in writing, and shall indicate the
identity of the person making the Acquisition Proposal, inquiry or request and
the material terms and conditions of any inquiries, proposals or offers
(including a copy thereof if in writing and any related documentation or
correspondence). The Company shall also notify Parent, in writing, as promptly
as practicable (and in no event later than 24 hours prior to) any meeting of the
Board called to consider any Acquisition Proposal or any such inquiry or to
consider providing nonpublic information to any person. The Company shall notify
Parent, in writing, of any decision of the Board as to whether to consider such
Acquisition Proposal or inquiry or to enter into discussions or negotiations
concerning any Acquisition Proposal or to provide nonpublic information or data
to any person, which notice shall be given as promptly as practicable after such
meeting (and in any event no later than 24 hours after such determination was
reached and 24 hours prior to entering into any discussions or negotiations or
providing any nonpublic information or data to any person). The Company agrees
that it shall keep Parent informed of the status and terms of any such
inquiries, proposals, offers, discussions or negotiations on a current basis,
including by: delivering a copy of all documentation and
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correspondence relating thereto promptly upon receipts thereof, delivering to
Parent the information delivered to such person to the extent such information
was not previously provided to Parent and providing Parent with 24 hours prior
notice of each Board meeting called to discuss or consider any Acquisition
Proposal.
(c) The Board shall not (i) withdraw, modify or change, in a manner
adverse to Parent or Purchaser, the Board's recommendation to accept the Offer
or (ii) approve, enter into or recommend that stockholders approve or accept a
Superior Proposal unless, prior to the consummation of the Offer, the Board
determines in good faith after consultation with the Company's financial
advisors and outside legal counsel, that an Acquisition Proposal constitutes a
Superior Proposal and that failure to do so would result in a reasonable
likelihood of a breach of the fiduciary duties of the Board under applicable
law, in which case, the Board may (subject to this and the following sentences)
withdraw, modify or change, in a manner adverse to Parent or Purchaser, the
Board's recommendation and take and disclose to the stockholders of the Company
a position with respect to the Superior Proposal and, to the extent applicable,
comply with Rule 14e-2 promulgated under the Exchange Act with respect to such
Superior Proposal by disclosing such withdrawn, modified or changed Board
recommendation and any recommendation with respect to such Superior Proposal in
connection with a tender or exchange offer for the Company's securities,
provided that: (1) the Company shall have notified Parent, in writing no later
than five (5) Business Days' prior to the Board's withdrawing or changing its
recommendation, that the Board has determined (after consultation with its
financial advisors and outside legal counsel) that the Acquisition Proposal
constitutes a Superior Proposal and that Board intends to withdraw or change its
recommendation with respect to the Offer or approve, recommend, or enter into an
agreement with respect to, the Superior Proposal, which notice shall
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include the identity of the person making the Superior Proposal and a copy of
the final terms of the Superior Proposal; (2) during such five (5) Business Day
period, the Board shall have given due consideration to any proposals made by
Parent to adjust the Offer and the Transactions; and (3) the Board shall have
determined (A) after consultation with its financial advisor, that any such
proposal made by or on behalf of Parent is less favorable to the stockholders of
the Company than the Superior Proposal and (B) after consultation with outside
legal counsel, it would result in a reasonable likelihood that the Board would
breach its fiduciary duties to the stockholders of the Company under applicable
law if it failed to withdraw or change its recommendation with respect to the
Offer and the Transactions or failed to approve or enter into the Superior
Proposal or recommend that the stockholders of the Company accept or approve the
Superior Proposal. The Board shall not, in connection with any such withdrawal,
modification or change of its recommendation, take any action to change the
approval of the Board for purposes of causing any state takeover statute or
other state law or the Rights Agreement to be applicable to the transactions
contemplated hereby, including this Agreement, the Offer and the Merger,
provided, however, that this sentence shall not prohibit the Company from
withdrawing, modifying or changing its recommendation or approving or entering
into or recommending any Superior Proposal under the circumstances and subject
to the conditions set forth in this Section 7.04(c). Nothing contained in this
Section 7.04 shall prohibit the Company or its Subsidiaries from taking and
disclosing to its stockholders a position as required by Rule 14e-2(a) or Rule
14d-9 promulgated under the Exchange Act; provided, however, that compliance
with such rules shall not in any way limit or modify the effect that any action
taken pursuant to such rules has under any other provision of this Agreement.
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(d) The Company agrees that (i) it will, and will cause its
Subsidiaries and their respective officers, directors, agents, representatives
and advisors to, cease immediately and terminate any and all existing
activities, discussions or negotiations with any third parties conducted
heretofore with respect to any Acquisition Proposal, and (ii) it will not
release any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which it or any its Subsidiaries is a party with respect
to any Acquisition Proposal.
SECTION 7.05 Employee Benefits Matters. Parent agrees that from and after
the Effective Time, Parent shall cause the Surviving Corporation to honor in
accordance with their terms the employment contracts of the Company set forth in
Section 7.05 of the Disclosure Schedule. Employees of the Surviving Corporation
and its subsidiaries will be provided with employee benefits that are in the
aggregate no less favorable than those employee benefits that are provided to
similarly situated employees of Parent and its subsidiaries. Employees of the
Company or any Subsidiary shall receive credit for purposes of eligibility to
participate and vesting (but not for benefit accruals, determination of levels
of benefits or any other purposes) under any employee benefit plan, program or
arrangement established or maintained by the Surviving Corporation or any of its
subsidiaries for service accrued or deemed accrued prior to the Effective Time
with the Company or any Subsidiary to the same extent such service was taken
into account for such purposes under comparable Plans prior to the Effective
Time; provided, however, that such crediting of service shall not operate to
duplicate any benefit or the funding of any such benefit. Notwithstanding the
foregoing, nothing in this Section 7.05 nor any other provision of this
Agreement shall limit the ability or right of the Parent or the Surviving
Corporation and their subsidiaries to terminate the employment of any of their
respective employees after the Effective Time or to terminate or amend any Plan.
Prior to the Effective
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Time, if requested by Parent, the Company shall terminate the Company's Code
Section 401(k) plan (the "Company 401(k) Plan") in accordance with all
provisions of applicable law, and each participant in the Company 401(k) Plan
shall have the right to receive a distribution of such participant's account
balance in the Company 401(k) Plan (subject to, and in accordance with, the
provisions of the plan and applicable law).
SECTION 7.06 Directors' and Officers' Indemnification and Insurance.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including any such claim, action, suit, proceeding or investigation in which any
person who is now, or has been at any time prior to the date of this Agreement,
or who becomes prior to the Effective Time, a director or officer of the Company
or any of its Subsidiaries (the "Indemnified Parties") is, or is threatened to
be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to (i) the fact that he is or was a director or officer of
the Company or any of its Subsidiaries or (ii) this Agreement or any of the
Transactions, whether in any case asserted or arising before or after the
Effective Time, the parties hereto agree to cooperate and use their best efforts
to defend against and respond thereto. It is understood and agreed that after
the Effective Time, Parent shall and shall cause the Surviving Corporation to,
indemnify and hold harmless, to the fullest extent permitted by law, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including advances of reasonable attorney's fees and expenses prior to
the final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim,
85
action, suit, proceeding or investigation (whether asserted or arising before or
after the Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with Parent; provided, however, that:
(1) Parent shall have the right to assume the defense thereof and upon such
assumption Parent shall not be liable to any Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if Parent
elects not to assume such defense or counsel for the Indemnified Parties
reasonably advises that there are (under applicable standards of professional
conduct) issues which raise conflicts of interest between Parent and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with Parent, and Parent shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties; (2)
Parent shall in all cases be obligated pursuant to this paragraph to pay for
only one firm or counsel and any necessary local counsel for all Indemnified
Parties except that if counsel for the Indemnified Parties reasonably advises
that there are (under applicable standards of professional conduct) issues which
raise conflicts of interest among one or more of the Indemnified Parties, Parent
will be obligated to pay for separate counsel such Indemnified Parties as to
which there are conflicts; (3) Parent shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed); and (4) Parent shall have no obligation
hereunder to any Indemnified Party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. It is agreed and understood
that Parent's agreement to provide the indemnification contemplated hereunder is
no way intended to expand the scope of the
86
indemnification obligations beyond that which a corporation would be permitted
to provide to its own officers or directors under Delaware Law. Any Indemnified
Party wishing to claim Indemnification under this Section 7.06, upon learning of
any such claim, action, suit, proceeding or investigation, shall promptly notify
Parent thereof, provided that the failure to so notify Parent shall not affect
the obligations of Parent under this Section 7.06 except to the extent such
failure to notify prejudices Parent. Parent's obligations under this Section
7.06 shall continue in full force and effect for a period of six (6) years from
the Effective Time; provided, however, that all rights to indemnification in
respect of any claim (a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim.
(b) Parent shall cause the Surviving Corporation to maintain in
effect for a period of six (6) years from the Effective Time the current
directors' and officers' liability insurance policy maintained by the Company
(provided that Parent may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not less
advantageous than such current policy) covering the persons serving as officers
and directors of the Company on the date of this Agreement with respect to acts
or omissions occurring prior to the Effective Time which were committed by such
officers and directors in their capacity as such; provided, however, that in no
event shall Parent be required to expend on an annual basis more than three
hundred percent (300%) of the current amount expended by the Company (the
"Insurance Amount") to maintain or procure insurance coverage; and further
provided that if Parent is unable to maintain or obtain the insurance called for
by this Section 7.06(b) Parent shall use all reasonable efforts to obtain as
much comparable insurance as is available for the Insurance Amount; and
provided, further, that notwithstanding the foregoing, the obligations under
this Section 7.06(b) may be satisfied if the Surviving Corporation purchases a
"tail" policy
87
under the Company's existing directors' and officers' insurance policy that (i)
has an effective term of six (6) years from the Effective Time, (ii) covers
those persons who are officers and directors of the Company on the date of this
Agreement, for actions and omissions occurring on or prior to the Effective Time
and (iii) contains terms and conditions (including without limitation coverage
amounts) that are at least as favorable in the aggregate as the terms and
conditions of the Company's directors' and officers' insurance policy in effect
on the date hereof.
(c) Until six years from the Effective Time, unless otherwise
required by applicable law, the certificate of incorporation and bylaws of the
Surviving Corporation shall contain provisions no less favorable with respect to
the elimination of liability of directors and the indemnification of directors
and officers (including as to advancement of expenses) than are set forth in the
Restated Certificate of Incorporation and Bylaws of the Company, as in effect on
the date hereof.
(d) In the event the Parent, Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or Surviving Company or entity of such consolidation
or merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
the Parent or the Surviving Corporation, as the case may be, assume the
obligations set forth in this Section 7.06.
(e) The provisions of this Section 7.06 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives and
88
shall not be deemed exclusive of any other rights to which an Indemnified Party
is entitled, whether pursuant to law, contract or otherwise.
SECTION 7.07 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event the occurrence or
non-occurrence of which reasonably would reasonably be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (b) any failure of the Company, Parent or
Purchaser, as the case may be, to comply with or satisfy any covenant or
agreement required to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 7.07 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 7.08 Further Action; Reasonable Efforts.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall (i) make promptly (and in any event within five (5)
Business Days after execution of this Agreement) its respective filings, and
thereafter make any other required submissions, under the HSR Act with respect
to the Transactions and (ii) use all reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions, including, without limitation,
using all reasonable efforts to obtain all Permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company and the Subsidiaries as are necessary for
the consummation of the Transactions and to fulfill the conditions to the Offer
and the Merger. In case, at any time after the Effective Time, any further
action is necessary or desirable to carry out
89
the purposes of this Agreement, the proper officers and directors of each party
to this Agreement shall use all reasonable efforts to take all such action.
Parent or the Purchaser will pay all filing fees associated with the HSR
submission.
(b) Each of the parties hereto agrees to cooperate and use all
reasonable efforts to vigorously contest and resist any Action, including
administrative or judicial Action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the Transactions, including, without limitation, by
vigorously pursuing all available avenues of administrative and judicial appeal.
SECTION 7.09 Public Announcements. Parent, Purchaser and the Company agree
that no public release or announcement concerning the Transactions, the Offer or
the Merger shall be issued by any party without the prior consent of the other
party (which consent shall not be unreasonably withheld), except as such release
or announcement may be required by Law or the rules or regulations of any United
States securities exchange or Nasdaq, in which case the party required to make
the release or announcement shall use its reasonable efforts to allow the other
party time to comment on such release or announcement in advance of such
issuance.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Merger. The obligations of each party to
effect the Merger shall be subject to the satisfaction or waiver in writing, at
or prior to the Effective Time, of the following conditions:
(a) Stockholder Approval. If and to the extent required by Delaware
Law, this Agreement and the Transactions shall have been approved and adopted by
the affirmative vote of the stockholders of the Company;
90
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated;
(c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the acquisition
of Shares by Parent or Purchaser or any affiliate of either of them illegal or
otherwise restricting, preventing or prohibiting consummation of the
Transactions; and
(d) Offer. Purchaser or its permitted assignee shall have purchased
all Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the Transactions by the stockholders of the Company:
(a) By mutual written consent of each of Parent, Purchaser and the
Company duly authorized by the Boards of Directors of Parent, Purchaser and the
Company; or
(b) By Parent, Purchaser or the Company if (i) the Effective Time
shall not have occurred on or before January 8, 2006, at any time thereafter;
provided, however, that the right to terminate this Agreement under this Section
9.01(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date or (ii) any
Governmental Authority shall have enacted, issued, promulgated, enforced or
entered any injunction, order, decree or ruling (whether temporary, preliminary
or permanent) which has become final and
91
nonappealable and has the effect of making consummation of the Offer or the
Merger illegal or otherwise preventing or prohibiting consummation of the Offer
or the Merger; or
(c) By Parent if due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in Annex A hereto,
Purchaser shall have (A) failed to commence the Offer within ten (10) Business
Days following the date of this Agreement, (B) terminated the Offer or the Offer
shall have expired in accordance with its terms, in each case, without Purchaser
having accepted any Shares for payment thereunder or (C) failed to accept Shares
for payment pursuant to the Offer within ninety (90) days following the
commencement of the Offer (provided, however, that the applicable time period
specified in clause (C) above shall be extended until the earlier to occur of
(x) the fifth Business Day following the expiration or termination of any
applicable waiting period under the HSR Act and, if there is a Dispute pending
and continuing, the expiration of the Dispute Resolution Period and (y) January
8, 2006), unless such action or inaction under clauses (A), (B) or (C) shall
have been caused by or resulted from the failure of Parent or Purchaser to
perform, in any material respect, any of their material covenants or agreements
contained in this Agreement, or the material breach by Parent or Purchaser of
any of their material representations or warranties contained in this Agreement;
or
(d) By Parent, if prior to the purchase of Shares pursuant to the
Offer, (i) the Board shall have failed to include in the Schedule 14D-9 or the
Proxy Statement, its approval or recommendation of this Agreement, the Offer,
the Merger or any other Transaction, (ii) the Board or any committee thereof
shall have withdrawn or modified in a manner adverse to Purchaser or Parent its
approval or recommendation of this Agreement, the Offer, the Merger or any other
Transaction, (iii) the Company shall have exercised a right with respect to a
Superior
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Proposal referenced in Section 7.04 and shall, directly or through its
representatives, continue discussions with any third party concerning a Superior
Proposal for more than ten (10) days after the date of receipt of such Superior
Proposal, (iv) an Acquisition Proposal that is publicly disclosed shall have
been commenced, publicly proposed or communicated to the Company which contains
a proposal as to price (without regard to whether such proposal specifies a
specific price or a range of potential prices) and the Company shall not have
rejected such proposal within ten (10) Business Days of its receipt or, if
sooner, the date its existence first becomes publicly disclosed, (v) any person
other than Parent or Purchaser shall have become the beneficial owner of more
than fifteen percent (15%) of the Shares (either on a primary or a fully-diluted
basis) and shall have become "Acquiring Person" as defined in Rights Agreement,
(vi) the Board shall have recommended or approved any Acquisition Proposal,
(vii) the Company shall have breached any of its obligations under Section 7.04
of this Agreement that results in a person making an Acquisition Proposal,
(viii) the Company shall have materially breached its obligations under this
Agreement by reason of a failure to file the Schedule 14D-9 in accordance with
Section 2.02, or (ix) the Board shall have resolved to do any of the foregoing;
or
(e) By the Company, upon approval of the Board, if Purchaser shall
have (A) failed to commence the Offer within ten (10) Business Days following
the date of this Agreement, (B) terminated the Offer or the Offer shall have
expired in accordance with its terms, in each case, without Purchaser having
accepted any Shares for payment thereunder or (C) failed to accept Shares for
payment pursuant to the Offer within ninety (90) days following the commencement
of the Offer (provided, however, that the applicable time period specified in
Clause (C) above shall be extended until the earlier to occur of (x) the fifth
Business Day following the expiration or termination of any applicable waiting
period under the HSR Act and,
93
if there is a Dispute pending and continuing, the expiration of the Dispute
Resolution Period and (y) January 8, 2006), unless such action or inaction under
Clauses (A), (B) or (C) shall have been caused by or resulted from the failure
of the Company to perform, in any material respect, any of its material
covenants or agreements contained in this Agreement or the material breach by
the Company of any of its material representations or warranties contained in
this Agreement; or
(f) By the Company, upon approval of the Board, if prior to the
purchase of any Shares pursuant to the Offer, the Board determines in good faith
that failure to do so would result in a reasonable likelihood of a breach of its
fiduciary duties under applicable law (after consultation with outside legal
counsel) in order to enter into a definitive written agreement with respect to a
Superior Proposal, provided that: (i) the Company shall have complied in all
respects with Section 7.04 (including, without limitation, Section 7.04(c) and
(ii) the Company has made full payment of all amounts due to Parent and
Purchaser under Section 9.03.
SECTION 9.02 Effect of Xxxxxxxxxxx.Xx the event of the termination of this
Agreement pursuant to Section 9.01, this Agreement shall forthwith become void,
and there shall be no liability on the part of any party hereto, except (a) as
set forth in Section 9.03 and (b) nothing herein shall relieve any party from
liability for any breach hereof prior to the date of such termination; provided,
however, that the Confidentiality Agreement shall survive any termination of
this Agreement.
SECTION 9.03 Fees and Expenses.
(a) In the event that:
(i) any person shall have commenced, publicly proposed or
communicated to the Company an Acquisition Proposal that is publicly
disclosed or any person has publicly proposed or communicated to the
94
Company an intention (whether or not conditional) to make an
Acquisition Proposal and (A) the Offer shall have remained open for
at least 20 Business Days, (B) the Minimum Condition shall not have
been satisfied, (C) this Agreement shall have been terminated
pursuant to Section 9.01(b) or 9.01(c) and (D) the Company enters
into an agreement with respect to an Acquisition Proposal, or an
Acquisition Proposal is consummated, in each case within twelve
(12)-months after such termination of this Agreement;
(ii) this Agreement is terminated pursuant to clauses (i),
(ii), (iii), (v), (vi) or (viii) of Section 9.01(d) or 9.01(f); or
(iii) this Agreement is terminated (A) pursuant to clauses
(iv), (vii) or (ix) of Section 9.01(d) and (B) the Company enters
into an agreement with respect to an Acquisition Proposal or an
Acquisition Proposal is consummated, in each case within twelve (12)
months after such termination of this Agreement.
then, in any such event, the Company shall pay Parent promptly (but in no event
later than the day the first of such events shall have occurred) a fee of $10.21
million (the "Fee"), which amount shall be payable in immediately available
funds.
(b) Except as set forth in Section 7.08(a) and this Section 9.03,
all costs and expenses incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such expenses, whether or not
any Transaction is consummated.
SECTION 9.04 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to
95
the Effective Time; provided, however, that, after the approval and adoption of
this Agreement and the Transactions by the stockholders of the Company, no
amendment may be made that would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto.
SECTION 9.05 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of any other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any agreement of any other party
or any condition to its own obligations contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby. Failure to take any action to terminate
this Agreement pursuant to Section 9.01, if such termination is permitted
pursuant thereto, shall not give rise to an inference that a party entitled to
so terminate this Agreement has waived its right to do so.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant hereto shall survive the Effective Time, provided that this Section
10.01 shall not limit any covenant or agreement of the parties, which covenants
and agreements shall survive in accordance with their terms.
SECTION 10.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered by hand or
sent by telecopy or by registered or certified mail (postage prepaid, return
receipt requested) or express mail or
96
reputable overnight courier service to the respective parties and shall be
deemed given when so delivered by hand or telecopied, or if mailed, three (3)
days after mailing (one business day in the case of overnight mail or overnight
courier service) at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.02):
If to Parent or Purchaser:
McKesson Corporation
Xxx Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company:
D&K Healthcare Resources, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: X. Xxxx Xxxxxxxxx, III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxxxx XXX
Xxx Xxxxxxxxxxxx Xxxxxx, Xxxxx 0000
000 Xxxxx Xxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
97
SECTION 10.03 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 10.04 Entire Agreement; Assignment. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned (whether pursuant to a merger, by operation of
law or otherwise), except that Parent and Purchaser may assign all or any of
their rights and obligations hereunder to any affiliate of Parent, provided that
no such assignment shall relieve the assigning party of its obligations
hereunder if such assignee does not perform such obligations.
SECTION 10.05 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than the first sentence of Section 7.05 and Section
7.06 (which are intended to be for the benefit of the persons covered thereby
and may be enforced by such persons). Without limiting the foregoing, it is
expressly
98
understood and agreed that the provisions of Section 7.05 (other than the first
sentence of Section 7.05) are statements of intent and, except as provided
above, no employee of the Company or the Surviving Corporation or any other
person (including any party hereto) shall have any rights or remedies, including
rights of enforcement, with respect thereto and no such employee of the Company
or the Surviving Corporation or other person is or is intended to be a
third-party beneficiary thereof.
SECTION 10.06 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement were
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 10.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that State. Each of the parties
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the Court of Chancery of the State of Delaware, and any
appellate court thereof, for any litigation arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the transactions
contemplated hereby or thereby, to the extent the Court of Chancery has
jurisdiction over the claims alleged in such litigation, or, if the Court of
Chancery does not have jurisdiction over the claims alleged in such litigation,
the courts of the State of Delaware and of the United States of America located
in the State of Delaware, and each of the parties hereby irrevocably and
unconditionally (i) agrees not to commence any such litigation except in such
courts, (ii) waives any objection to the laying of venue of any such litigation
in such Delaware courts and (iii) agrees not to plead or claim in any Delaware
court that such litigation brought therein has been brought in an inconvenient
99
forum. Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 10.02. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 10.08 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.08.
SECTION 10.09 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.10 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in two or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
MCKESSON CORPORATION
By: /s/ Marc. X. Xxxx
-------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President Corporate
Strategy and Business Development
SPIRIT ACQUISITION CORPORATION
By: /s/ Xxxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxxx Xxxxx
Title: Vice President and Secretary
D&K HEALTHCARE RESOURCES, INC.
By: /s/ X. Xxxx Xxxxxxxxx, III
-------------------------------------
Name: X. Xxxx Xxxxxxxxx, III
Title: Chairman and Chief Executive Officer
ANNEX A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment any Shares tendered pursuant to the Offer, and
may extend, terminate or amend the Offer, if (i) immediately prior to the
expiration of the Offer, the Minimum Condition shall not have been satisfied,
(ii) any applicable waiting period under the HSR Act shall not have expired or
been terminated prior to the expiration of the Offer, or (iii) at any time on or
after the date of this Agreement and prior to the expiration of the Offer, any
of the following conditions shall exist:
(a) there shall have been instituted any Action by any Governmental
Entity (i) challenging or seeking to make illegal, materially delay, or
otherwise, directly or indirectly, restrain or prohibit or make materially
more costly, the making of the Offer, the acceptance for payment of any
Shares by Parent, Purchaser or any other affiliate of Parent, or the
purchase of Shares, or the consummation of any other Transaction, or
seeking to obtain material damages in connection with any Transaction;
(ii) seeking to prohibit or limit materially the ownership or operation by
the Company, Parent or any of their subsidiaries of all or any of the
business or assets of the Company, Parent or any of their subsidiaries
that is material to either Parent and its subsidiaries or the Company and
the Subsidiaries, in either case, taken as a whole, or to compel the
Company, Parent or any of their subsidiaries, as a result of the
Transactions, to dispose of or to hold separate all or any portion of the
business or assets of the Company, Parent or any of their subsidiaries
that is material to either Parent and its subsidiaries or the Company and
the Subsidiaries, in each case, taken as a whole; (iii) seeking to impose
or confirm any limitation on the ability of Parent, Purchaser or any
A-1
other affiliate of Parent to exercise effectively full rights of ownership
of any Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offer or otherwise on all matters
properly presented to the Company's stockholders, including, without
limitation, the approval and adoption of this Agreement and the
Transactions; (iv) seeking to require divestiture by Parent, Purchaser or
any other affiliate of Parent of any Shares; or (v) which, individually or
in the aggregate, otherwise would reasonably be expected to prevent or
materially delay consummation of the Offer or the Merger or otherwise
would reasonably be expected to prevent or materially delay the Company
from performing its obligations under this Agreement or would reasonably
be expected to have a Material Adverse Effect;
(b) any Governmental Authority shall have issued an order, decree,
injunction or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting or materially delaying or preventing
the Transactions and such order, decree, injunction, ruling or other
action shall have become final and non-appealable;
(c) there shall have been any statute, rule, regulation, legislation
or interpretation enacted, promulgated, amended or issued applicable to
(i) Parent, the Company or any subsidiary or affiliate of Parent or the
Company or (ii) any Transaction, by any United States or Governmental
Authority with appropriate jurisdiction, other than the routine
application of the waiting period provisions of the HSR Act to the Offer
or the Merger, that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above;
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(d) since the date of the Merger Agreement, any Material Adverse
Effect, or any occurrence, circumstance or event that is reasonably likely
to result in a Material Adverse Effect, shall have occurred;
(e) there shall have occurred (i) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (ii) any limitation (whether or not
mandatory) by any United States Governmental Entity on the extension of
credit generally by banks or other financial institutions, or (iii) in the
case of either of the foregoing existing at the time of the commencement
of the Offer, a material acceleration or worsening thereof;
(f) any representation or warranty of the Company in the Agreement
that is qualified as to materiality or Material Adverse Effect shall not
be true and correct in any respect or any such representation or warranty
that is not so qualified shall not be true and correct in any material
respect, in each case as if such representation or warranty was made as of
such time on or after the date of this Agreement;
(g) the Company shall have failed to perform, in any material
respect, any obligation or to comply, in any material respect, with any
agreement or covenant of the Company to be performed or complied with by
it under the Agreement; provided Parent shall have given notice to the
Company in reasonable detail of such failure to perform or comply and, if
such failure is capable of cure within thirty (30) days, the Company shall
not have cured any such failure capable of cure within thirty (30) days
after receipt of such notice;
(h) the Board of Directors or any committee thereof shall have (i)
withdrawn, or modified or changed in a manner adverse to the Transactions,
to Parent or to Purchaser (including by amendment of the Schedule 14D-9),
its recommendation of the Offer, this
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Agreement, or the Merger, (ii) recommended any Acquisition Proposal, (iii)
taken a neutral position or made no recommendation with respect to another
proposal or offer (other than by Parent or Purchaser) after a reasonable
amount of time (and in no event more than ten (10) Business Days following
receipt thereof) has elapsed for the Board or any committee thereof to
review and make a recommendation with respect thereto or (iv) resolved to
do any of the foregoing;
(i) the Purchaser shall have failed to receive a certificate
executed by the Company's President or a Vice President of the Company on
behalf of the Company, dated as of the scheduled expiration of the Offer,
to the effect that the conditions set forth in paragraphs (f), (g), (i),
and (l) of this Annex A have not occurred;
(j) the Agreement shall have been terminated in accordance with its
terms;
(k) Purchaser and the Company shall have agreed in writing that
Purchaser shall terminate the Offer or postpone the acceptance for payment
of Shares thereunder; or
(l) the useable and saleable (and not expired or short-dated)
inventories of the eighty percent (80%) Items of the Company and the
Subsidiaries, taken as a whole, as determined by Parent after physical
inspection thereof and valued in accordance with GAAP consistently applied
with the past practices of the Company, have a realizable value (net of
reserves) more than five percent (5%) less than the carrying value of the
inventories of the eighty percent (80%) Items of the Company and its
Subsidiaries, taken as whole, reflected on the consolidated balance sheet
of the Company and its Subsidiaries dated as of the date of such physical
inspection of the inventory; provided, however, that (A) Parent shall have
conducted its physical inspection as promptly as practicable and in any
event within five (5) Business Days after the later of (x) the date of
this Agreement and (y) the date Parent shall
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have been given full access to the facilities of the Company and the
Subsidiaries required by Parent to conduct the physical inspection of the
inventories contemplated by this clause (the "Completion Date"), (B) if
Parent shall have determined that this condition has not been satisfied,
Parent shall have notified the Company of such determination within five
(5) Business Days after the Completion Date, which notice shall include
Parent's calculations and a detailed explanation of the basis upon which
Parent contends the condition has not been satisfied and (C) if the
Company shall have notified Parent within two (2) Business Days after
Parent's notice that the Company disputes (a "Dispute") Parent's
calculations, the Firm shall not have determined (which determination
shall be final and binding upon the parties), after review the positions
of Parent and the Company with respect to the Dispute and the performance
of appropriate testing procedures (as reasonably determined by the Firm)
and in any event within thirty (30) calendar days (the "Dispute Resolution
Period") after its acceptance of its selection, that this condition has
been satisfied, (it being understood that Parent and the Company will
promptly provide to the Firm all information it reasonably requests to
assist it to reach its determination and will instruct the Firm to
endeavor to make its determination as promptly as practicable),
which, in the reasonable judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances (including action or inaction by Parent or
Purchaser) giving rise to such condition, makes it inadvisable to proceed with
the Offer and/or with such acceptance for payment of the Shares; provided,
however, that Purchaser may not terminate the Offer on the basis of a condition
that exists as a result of a breach by Parent or Purchaser of their respective
obligations under this Agreement.
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The foregoing conditions are for the sole benefit of Parent and Purchaser,
may be waived by Parent or Purchaser, in whole or in part, at any time and from
time to time in the sole discretion of Parent or Purchaser. The failure by
Parent or Purchaser at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time-to-time.
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