AGREEMENT AND PLAN OF MERGER Dated as of August 27, 2007 among MEDCO HEALTH SOLUTIONS, INC., MACQ CORP. and POLYMEDICA CORPORATION
Exhibit 2.1
EXECUTION VERSION
Dated as of August 27, 2007
among
MEDCO HEALTH SOLUTIONS, INC.,
MACQ CORP.
and
POLYMEDICA CORPORATION
This AGREEMENT AND PLAN OF MERGER, dated as of August 27, 2007 (this “Agreement”), is
among MEDCO HEALTH SOLUTIONS, INC., a Delaware corporation (“Parent”), MACQ CORP., a
Massachusetts corporation and a wholly owned Subsidiary of Parent (“Merger Sub”), and
POLYMEDICA CORPORATION, a Massachusetts corporation (the “Company”). Certain terms used in
this Agreement are used as defined in Section 8.11.
WHEREAS, the Board of Directors of each of the Company and Merger Sub has approved and
declared advisable, and in the best interests of the Company and Merger Sub, as applicable, and the
Board of Directors of Parent has approved, this Agreement and the merger of Merger Sub with and
into the Company (the “Merger”) upon the terms and subject to the conditions set forth in
this Agreement.
WHEREAS, prior to or contemporaneously with the execution and delivery of this Agreement,
certain executives of the Company have executed and delivered to Parent certain letter agreements
confirming that they will remain employed by the Company following the Closing contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements
contained in this Agreement, and intending to be legally bound hereby, Parent, Merger Sub and the
Company hereby agree as follows:
ARTICLE I
The Merger
SECTION 1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Massachusetts Business Corporation Act (the
“MBCA”), at the Effective Time Merger Sub shall be merged with and into the Company, and
the separate corporate existence of Merger Sub shall thereupon cease, and the Company shall be the
surviving corporation in the Merger (the “Surviving Corporation”).
SECTION 1.2 Closing. The closing of the Merger (the “Closing”) shall take
place at 10:00 a.m. (New York time) on a date to be specified by the parties, which date shall be
no later than the second business day after satisfaction or waiver of the conditions set forth in
Article VI (other than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions at such time), at the offices of
Weil, Gotshal & Xxxxxx LLP, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, unless
another time, date or place is agreed to in writing by the parties hereto. The date on which the
Closing actually occurs hereinafter is referred to as the “Closing Date”.
SECTION 1.3 Effective Time. Subject to the provisions of this Agreement, as soon as
practicable on the Closing Date the parties shall file with the Secretary of the Commonwealth of
Massachusetts articles of
merger, executed in accordance with, and in such form as is required by, the relevant
provisions of the MBCA (the “Articles of Merger”).
The Merger shall become effective upon
the filing of the Articles of Merger or at such later time and date as is agreed to by the parties
hereto (the time and date at which the Merger becomes effective is herein referred to as the
“Effective Time”).
SECTION 1.4 Effects of the Merger. The Merger shall have the effects set forth herein
and in applicable provisions of the MBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
SECTION 1.5 Articles of Organization and By-laws of the Surviving Corporation. The
articles of organization of the Company shall be amended and restated in their entirety at the
Effective Time to be substantially in the form attached hereto as Exhibit A. At the Effective
Time, the by-laws of the Company shall be amended in their entirety at the Effective Time to be
substantially in the form attached hereto as Exhibit B.
SECTION 1.6 Directors and Officers of the Surviving Corporation.
(a) Each of the parties hereto shall take all necessary action to cause the directors of
Merger Sub immediately prior to the Effective Time to be the directors of the Surviving Corporation
immediately following the Effective Time, until their respective successors are duly elected or
appointed and qualified or their earlier death, resignation or removal in accordance with the
articles of organization and by-laws of the Surviving Corporation.
(b) Each of the parties hereto shall take all necessary action to cause the officers of Merger
Sub immediately prior to the Effective Time to be the officers of the Surviving Corporation until
their respective successors are duly appointed and qualified or their earlier death, resignation or
removal in accordance with the articles of organization and by-laws of the Surviving Corporation.
ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates; Company Stock Options
Exchange of Certificates; Company Stock Options
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, the Company or the holders of any shares of
common stock, par
value $0.01 per share, of the Company (“Company Common Stock”) or any shares of
capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each share of capital stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
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(b) Parent-Owned Stock. Any shares of Company Common Stock owned by Parent or Merger
Sub shall be automatically canceled and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance
with Section 2.1(b) and Dissenting Shares) shall be converted into the right to receive $53.00 in
cash, without interest (the “Merger Consideration”). As of the Effective Time, all such
shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and each holder of a certificate (or evidence of shares in book-entry
form) which immediately prior to the Effective Time represented any such shares of Company Common
Stock (each, a “Certificate”) shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration to be paid in consideration therefor upon surrender
of such Certificate in accordance with Section 2.2(b), without interest.
SECTION 2.2 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall designate Equiserve Trust
Company or another bank or trust company reasonably acceptable to the Company to act as agent for
the holders of shares of Company Common Stock in connection with the Merger (the “Paying
Agent”) to receive, on terms reasonably acceptable to the Company, for the benefit of holders
of shares of Company Common Stock, the aggregate Merger Consideration to which holders of shares of
Company Common Stock shall become entitled pursuant to Section 2.1(c). Parent shall deposit, or
cause to be deposited, such aggregate Merger Consideration with the Paying Agent at or prior to the
Effective Time. The Paying Agent shall invest such aggregate Merger Consideration in any of (i)
direct obligations of the United States of America, (ii) obligations for which the full faith and
credit of the United States of America is pledged to provide for the payment of principal and
interest, (iii) commercial paper rated the highest quality by either Xxxxx’x Investors Service,
Inc. or Standard and Poor’s Ratings Services or (iv) money market funds investing solely in a
combination of the foregoing. Any net profit resulting from, or income or interest produced by,
such investments, shall be payable to Parent.
(b) Payment Procedures. Promptly after the Effective Time (but in no event more than
five business days thereafter), the Surviving Corporation shall cause the Paying Agent to mail to
each holder of record of Company Common Stock (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent, and
which shall be in such form and shall have such other customary provisions (including customary
provisions with respect to delivery of an “agent’s message” with respect to shares held in
book-entry form) as Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender
of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions (and such other customary
documents as may reasonably be required by the Paying Agent), the holder of such Certificate shall
be entitled to receive in exchange therefor the Merger
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Consideration, without interest, for each
share of Company Common Stock formerly represented by such Certificate, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on any amount payable
upon due surrender of the Certificates. If payment of the Merger Consideration is to be made to a
Person other than the Person in whose name the surrendered Certificate is registered, it shall be a
condition of payment that (x) the Certificate so surrendered shall be properly endorsed or shall
otherwise be in proper form for transfer and be accompanied by all documents required to evidence
such transfer and (y) the Person requesting such payment shall have paid any transfer and other
Taxes required by reason of the payment of the Merger Consideration to a Person other than the
registered holder of such Certificate surrendered or shall have established to the reasonable
satisfaction of the Surviving Corporation that such Taxes either have been paid or are not
applicable. Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to receive the Merger
Consideration as contemplated by this Article II, without interest.
(c) Transfer Books; No Further Ownership Rights in Company Stock. The Merger
Consideration paid in respect of shares of Company Common Stock upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of Company Common Stock previously
represented by such Certificates, and at the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. From and after the Effective Time, the
holders of Certificates that evidenced ownership of shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with respect to such shares
of Company Common Stock, except as otherwise provided for herein or by applicable Law. Subject to
the last sentence of Section 2.2(e), if, at any time after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(d) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the
posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity
against any claim that may be made against it with respect to such Certificate, the Paying Agent
will pay, in exchange for such lost, stolen or destroyed
Certificate, the applicable Merger Consideration to be paid in respect of the shares of
Company Common Stock formerly represented by such Certificate, as contemplated by this Article II.
(e) Termination of Fund. At any time following the six-month anniversary of the
Closing Date, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to
it any funds (including any interest received with respect thereto) that had been made available to
the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter such
holders shall be entitled to look only to Parent or the Surviving Corporation (subject to abandoned
property, escheat or other similar Laws) as
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general creditors thereof with respect to the payment
of any Merger Consideration that may be payable upon surrender of any Certificates held by such
holders, as determined pursuant to this Agreement, without any interest thereon. Any amounts
remaining unclaimed by such holders at such time at which such amounts would otherwise escheat to
or become property of any Governmental Authority shall become, to the extent permitted by
applicable Law, the property of Parent, free and clear of all claims or interest of any Person
previously entitled thereto.
(f) No Liability. Notwithstanding any provision of this Agreement to the contrary,
none of the parties hereto, the Surviving Corporation or the Paying Agent shall be liable to any
Person for Merger Consideration delivered to a public official pursuant to any applicable abandoned
property, escheat or similar Law.
(g) Withholding Taxes. Parent, the Surviving Corporation and the Paying Agent shall
be entitled to deduct and withhold from the consideration otherwise payable to a holder of shares
of Company Common Stock pursuant to this Agreement such amounts as may be required to be deducted
and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder (the “Code”), or under any
provision of state, local or foreign Tax Law. The withholding party shall timely remit such
withheld amounts to the appropriate taxing authority, and such amounts shall be treated for all
purposes of this Agreement as having been paid to the Person in respect of which such deduction and
withholding was made. If any withholding obligation may be avoided by such holder providing
information or documentation to Parent, the Surviving Corporation or the Paying Agent, such
information shall be requested prior to any such withholding.
SECTION 2.3 Appraisal/Dissenters’ Rights. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior
to the Effective Time and which are held by a shareholder who did not vote in favor of the Merger
(or consent thereto in writing) and who is entitled to demand and properly demands appraisal of
such shares (the “Dissenting Shares”) pursuant to, and who complies in all respects with,
the provisions of Part 13 of the MBCA (the “Dissenting Shareholders”), shall not be
converted into or be exchangeable for the right to receive the Merger Consideration, but instead
such holder shall be entitled to payment of the fair value of such shares in accordance with the
provisions of Part 13 of the MBCA (and at the Effective Time, such Dissenting Shares shall no
longer be
outstanding and shall automatically be canceled and shall cease to exist, and such holder
shall cease to have any rights with respect thereto, except the right to receive the fair value of
such Dissenting Shares in accordance with the provisions of Part 13 of the MBCA), unless and until
such holder shall have failed to perfect or shall have effectively withdrawn or lost rights to
appraisal under the MBCA. If any Dissenting Shareholder shall have failed to perfect or shall have
effectively withdrawn or lost such right, such holder’s shares of Company Common Stock shall
thereupon be treated as if they had been converted into and become exchangeable for the right to
receive, as of the Effective Time, the Merger Consideration for each such share of Company Common
Stock, in accordance with Section 2.1, without any interest thereon. The Company shall give Parent
(i) prompt notice of any written demands for appraisal of any shares of Company Common Stock,
attempted withdrawals of such demands and any other
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instruments served pursuant to the MBCA and
received by the Company relating to shareholders’ rights of appraisal, and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to demands for appraisal
under the MBCA.
SECTION 2.4 Company Stock Options and Restricted Shares.
(a) The Company shall provide that, at the Effective Time, all options outstanding immediately
prior to the Effective Time that represent the right to acquire shares of Company Common Stock
(each, an “Option”) granted under any plan listed in Section 2.4 of the Company Disclosure
Schedule (a “Company Stock Plan”) shall be cancelled and each holder of an Option, whether
or not vested, shall be paid in full satisfaction of such Option, a cash amount equal to the Option
Consideration for each share of Company Common Stock then subject to the Option, including any such
shares as to which the Option has not vested. For purposes of this Agreement, “Option
Consideration” means, with respect to any share of Company Common Stock issuable under a
particular Option, an amount equal to the excess, if any, of (i) the Merger Consideration per share
of Company Common Stock over (ii) the exercise price payable in respect of such share of Company
Common Stock issuable under such Option. The cash payments to be made to holders of Options
pursuant to this Section 2.4(a) shall be made by the Surviving Corporation as soon as reasonably
practicable after the Closing Date.
(b) The Company shall provide that each share of Company Common Stock granted subject to
vesting or other lapse restrictions pursuant to any Company Stock Plan (the “Company Restricted
Common Stock”) which is outstanding immediately prior to the Effective Time shall vest and
become free of such restrictions as of the Effective Time and at the Effective Time the holder
thereof shall, subject to this Article II, be entitled to receive the Merger Consideration with
respect to each such Company Restricted Common Stock.
(c) Withholding Taxes. Parent, the Surviving Corporation and the Paying Agent shall
be entitled to deduct and withhold from the consideration otherwise payable to a holder of any
Option or any shares of Company Restricted Common Stock pursuant to this Agreement such amounts as
may be required to be deducted and withheld with respect to the making of such payment under the
Code or under any provision of state, local
or foreign Tax Law. The withholding party shall timely remit such withheld amounts to the
appropriate taxing authority, and such amounts shall be treated for all purposes of this Agreement
as having been paid to the Person in respect of which such deduction and withholding was made. If
any withholding obligation may be avoided by such holder providing information or documentation to
Parent, the Surviving Corporation or the Paying Agent, such information shall be requested prior to
any such withholding.
(d) At or prior to the Effective Time, the Company, the Board of Directors and the
compensation committee, as applicable, shall adopt any resolutions and take any actions which are
necessary to effectuate the provisions of Section 2.4(a) and 2.4(b). The Company shall take all
actions necessary to ensure that from and after the Effective Time neither Parent nor the Surviving
Corporation will be required to deliver shares of Company Common Stock or other capital stock of
the Company to any Person pursuant to or in
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settlement of Company Options or Company Restricted
Common Stock after the Effective Time.
SECTION 2.5 Treatment of the Warrants. The Warrants shall be treated as set forth in
Section 5.14.
SECTION 2.6 Adjustments. Notwithstanding any provision of this Article II to the
contrary, if between the date of this Agreement and the Effective Time the outstanding shares of
Company Common Stock shall have been changed into a different number of shares or a different class
by reason of the occurrence or record date of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, exchange of shares or similar transaction, the Merger
Consideration shall be appropriately adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or similar transaction.
ARTICLE III
Representations and Warranties of the Company
Except as disclosed in (a) the disclosure schedule delivered by the Company to Parent (the
“Company Disclosure Schedule”) prior to the execution of this Agreement (with specific
reference to the section of this Agreement to which the information stated in such disclosure
relates; provided that (i) disclosure in any section of such Company Disclosure Schedule shall be
deemed to be disclosed with respect to any other section of this Agreement only to the extent that
it is reasonably apparent on the face of the Company Disclosure Schedule that such disclosure is
applicable to such other section notwithstanding the omission of a reference or cross reference
thereto and (ii) the mere inclusion of an item in such Company Disclosure Schedule as an exception
to a representation or warranty shall not be deemed an admission that such item represents a
material exception or material fact, event or circumstance or that such item has had, would have or
would reasonably be expected to have a Material Adverse Effect) or (b) in the Company SEC Documents
filed on or after June 13, 2005 and prior to the date of this Agreement, but excluding (x) any risk
factor
disclosure contained in any such Company SEC Documents under the heading “Risk Factors” or
“Cautionary Note Regarding Forward-Looking Statements” or similar heading and (y) all exhibits and
schedules thereto and documents incorporated by reference therein, the Company hereby represents
and warrants, on behalf of itself and each of its Subsidiaries, on a joint and several basis, to
Parent and Merger Sub as follows:
SECTION 3.1 Organization, Standing and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and in good standing under
the Laws of the Commonwealth of Massachusetts and has all requisite corporate power and authority
necessary to own, lease and operate all of its properties and assets and to carry on its business
as it is now being conducted. The Company is duly licensed or qualified to do business and is in
good standing (or equivalent status) in each jurisdiction in which the nature of the business
conducted by it or the character or location of the properties and assets owned or leased by it
makes such licensing or qualification
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necessary, except where the failure to be so licensed,
qualified or in good standing (or equivalent status) does not have, or would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. For
purposes of this Agreement, “Material Adverse Effect” means any change, circumstance,
event, occurrence or effect that has occurred that, when taken together with all other adverse
changes, circumstances, events, occurrences or effects that have occurred, is or is reasonably
likely to be, materially adverse to the business, assets, liabilities, results of operations or
financial condition of the Company and its Subsidiaries taken as a whole, except to the extent
resulting from (i) (A) the general economic conditions in the United States or any change in any
United States federal or state statute, rule or regulation or any change in Medicare, Medicaid or
other governmental healthcare reimbursement policy, or (B) the commencement, continuation or
escalation of a war or a material act of terrorism; provided that with respect to clauses (i)(A)
and (i)(B), such changes, circumstances, events, occurrences or effects do not adversely affect the
Company and its Subsidiaries in a meaningfully disproportionate manner as compared to other
companies of similar size in such industries in which the Company and its Subsidiaries operate;
(ii) resulting from or attributable to any loss of, or adverse change in, the relationship of the
Company with its customers, employees or suppliers that was proximately caused by the announcement
of this Agreement or the consummation of the Transactions or (iii) any decline in the market price
or change in trading volume of the capital stock of the Company or any failure to meet publicly
announced revenue or earnings projections (it being understood that the underlying cause or causes
of any such decline, change or failure may be deemed to constitute, in and of itself or themselves,
a Material Adverse Effect and may be taken into consideration when determining whether there has
occurred a Material Adverse Effect).
(b) Each of the Company’s Subsidiaries is duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its organization. The name and jurisdiction of
organization of each Subsidiary is set forth on Section 3.1(b) of the Company Disclosure Schedule.
All the outstanding shares of capital stock of, or other equity interests in, each such Subsidiary
are owned directly or indirectly by the Company free and clear of all liens, pledges, security
interests and transfer restrictions, except for such transfer restrictions
of general applicability as may be provided under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the “Securities Act”), and other
applicable securities Laws. Each of the Company’s Subsidiaries has all requisite corporate power
and authority necessary to own, lease and operate all of its properties and assets and to carry on
its businesses as they are now being conducted. Each of the Company’s Subsidiaries is duly
licensed or qualified to do business in, and is in good standing (or equivalent status) in, each
jurisdiction in which the nature of the business conducted by such Subsidiary, or the character or
location of the properties and assets owned or leased by such Subsidiary, makes such licensing or
qualification necessary, except where the failure to be so licensed, qualified or in good standing
(or equivalent status) does not have, or would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(c) The Company has made available to Parent complete and correct copies of the articles of
organization and by-laws of the Company and the organizational documents of each of its
Subsidiaries, as amended to the date of this Agreement (the “Company Charter Documents”).
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SECTION 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of fifty million (50,000,000) shares
of Company Common Stock and three million one hundred twelve thousand one hundred sixty-four
(3,112,164) shares of preferred stock, par value $0.01 per share (“Company Preferred
Stock”). At the close of business on August 24, 2007 (the “Reference Date”) (except
for the 4,530,586 shares of Company Common Stock referred to in clause (ii) below, which is true as
of March 31, 2007), (i) 23,464,250 shares of Company Common Stock were issued and outstanding (of
which 503,480 shares were Company Restricted Stock), (ii) 4,530,586 shares of Company Common Stock
were reserved for issuance under the Company Stock Plans (of which 2,842,303 shares of Company
Common Stock were subject to outstanding Options granted under the Company Stock Plans) and
11,798,426 shares of Company Common Stock were reserved for issuance upon conversion of the Notes
and Warrants and (iii) no shares of Company Preferred Stock were issued or outstanding. Since the
Reference Date, no shares of Company Common Stock or Company Preferred Stock have been issued
except pursuant to the exercise of Options granted under Company Stock Plans as of the close of
Business on the Reference Date. The Company has made available to Parent a correct and complete
list, as of July 31, 2007, of Options and Company Restricted Stock, including the holder, date of
grant, term, number of shares of Company Common Stock and, where applicable, exercise price and
vesting schedule, including whether the vesting will be accelerated by the execution of this
Agreement or consummation of the Merger or by termination of employment or change of position
following consummation of the Merger. Section 3.2(a) of the Company Disclosure Schedule contains
a correct and complete list of Options and Company Restricted Stock granted or issued since July
31, 2007, including, with respect to each, the information specified in the previous sentence. All
outstanding shares of the capital stock of the Company have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights. Except as set forth above, (A)
there are no outstanding options or other rights of any kind which obligate the Company or any of
its
Subsidiaries to issue or deliver any shares of capital stock, voting securities or other
equity interests of the Company or any securities or obligations convertible into or exchangeable
into or exercisable for any shares of capital stock, voting securities or other equity interests of
the Company (collectively, “Company Securities”); (B) there are no outstanding obligations
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities; and (C) there are no other options, calls, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued capital stock of
the Company to which the Company or any of its Subsidiaries is a party. No bonds, debentures,
notes or other indebtedness of the Company having a right to vote (or convertible into or
exercisable for securities having the right to vote) on any matters on which the holders of capital
stock of the Company may vote are issued and outstanding.
(b) Each of the outstanding shares of capital stock, voting securities or other equity
interests of each Subsidiary of the Company is duly authorized, validly issued, fully paid,
nonassessable and free of any preemptive rights, and all such securities are owned by the Company
or another wholly-owned Subsidiary of the Company and are owned free and clear of all liens,
charges, pledges, security interests, claims or other encumbrances (each, a “Lien”). There
are no (i) preemptive rights, outstanding options, warrants,
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conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or other
rights of any kind which obligate the Company or any of its Subsidiaries to issue or deliver any
shares of capital stock, voting securities or other equity interests of any Company Subsidiary or
any securities or obligations convertible into or exchangeable into or exercisable for any shares
of capital stock, voting securities or other equity interest of a Company Subsidiary, (ii)
outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any securities or obligations convertible into or exchangeable into or
exercisable for any shares of capital stock, voting securities or other equity interests of a
Company Subsidiary; or (iii) other options, calls, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued capital stock of
any Subsidiary of the Company to which the Company or any of its Subsidiaries is a party. None of
the Subsidiaries of the Company owns any Company Common Stock.
(c) Except as described in Section 3.2(c) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries directly or indirectly owns 5% or more of the outstanding
equity or similar interests in, or any interest convertible into or exchangeable or exercisable for
5% or more of the equity or similar interests in, any corporation, partnership, limited liability
company, joint venture or other business association or entity (other than the Company
Subsidiaries).
SECTION 3.3 Authority; Noncontravention; Voting Requirements.
(a) The Company has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and, subject to obtaining the Company Shareholder
Approval, to consummate the Transactions. The execution, delivery and performance by the Company
of this Agreement, and the consummation by it of the Transactions, have been duly authorized and
approved by its
Board of Directors, and except for obtaining the Company Shareholder Approval, no other
corporate action on the part of the Company is necessary to authorize the execution, delivery and
performance by the Company of this Agreement and the consummation by it of the Transactions. This
Agreement has been duly executed and delivered by the Company and, assuming due authorization,
execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms, except
that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar Laws of general application affecting or relating to
the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity,
whether considered in a proceeding at Law or in equity (the “Bankruptcy and Equity
Exception”).
(b) The Company’s Board of Directors, at a meeting duly called and held, has unanimously (i)
approved and declared advisable and in the best interests of the Company this Agreement and the
Merger, and (ii) directed that this Agreement be submitted to the shareholders of the Company for
approval and resolved to recommend that shareholders of the Company approve this Agreement.
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(c) Neither the execution and delivery of this Agreement by the Company nor the consummation
by the Company of the Transactions, nor compliance by the Company with any of the terms or
provisions hereof, will (i) conflict with or violate any provision of the Company Charter Documents
or the comparable governing documents of the Company’s Subsidiaries or (ii) assuming that the
authorizations, consents and approvals referred to in Section 3.4 and the Company Shareholder
Approval are obtained and the filings referred to in Section 3.4 are made, (x) violate any Law,
Order, license or permit of any Governmental Authority applicable to the Company or any of its
Subsidiaries, (y) violate or constitute a default under, give to others any right of termination,
amendment, acceleration or cancellation of any payment or other obligation pursuant to, cause any
additional amounts to be payable under, or result in the creation of a Lien on any property or
asset of the Company or any of its Subsidiaries pursuant to, any of the terms, conditions or
provisions of any loan or credit agreement, debenture, note, bond, mortgage, indenture, deed of
trust, lease, contract, permit, license, arrangement, instrument, obligation, restricted stock
award, option agreement or other agreement (each, a “Contract”) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any property
or asset of any of them is bound or affected, except, in the case of clause (ii), for such
violations or defaults that do not have, or would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
(d) The affirmative vote (in person or by proxy) of the holders of at least two-thirds of the
outstanding shares of Company Common Stock at the Company Shareholders Meeting, or any adjournment
or postponement thereof, in favor of the adoption of this Agreement (the “Company Shareholder
Approval”) is the only vote or approval of the holders of any class or series of capital stock
of the Company or any of its Subsidiaries which is necessary to adopt this Agreement and approve
the Transactions.
SECTION 3.4 Governmental Approvals. Except for (i) the filing with the SEC of a proxy
statement relating to the Company Shareholders Meeting (as amended or supplemented from time to
time, the “Proxy Statement”), and other filings required under, and compliance with other
applicable requirements of, the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the, “Exchange Act”), and the rules of The Nasdaq Stock
Market, (ii) the filing of the Articles of Merger with the Secretary of the Commonwealth of
Massachusetts pursuant to the MBCA, and (iii) filings required under, and compliance with other
applicable requirements of, the HSR Act, no consents or approvals of, or filings, declarations or
registrations with, any Governmental Authority are necessary for the execution and delivery of this
Agreement by the Company and the consummation by the Company of the Transactions, other than such
other consents, approvals, filings, declarations or registrations that, if not obtained, made or
given, would not have, or would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or prevent, materially delay or materially impair the
consummation of the Transactions.
SECTION 3.5 Company SEC Documents; Undisclosed Liabilities.
(a) The Company and its Subsidiaries have filed all registration statements, forms, reports,
schedules, statements, proxy statements and other similar
11
documents required to be filed with the
SEC since January 1, 2005 (collectively, and in each case including all amendments, supplements,
exhibits, financial statements and schedules thereto and documents incorporated by reference
therein, the “Company SEC Documents”). As of their respective filing dates, the Company
SEC Documents complied or, if not yet filed, will comply in all material respects with the
requirements of the Exchange Act and the Securities Act, as the case may be, applicable to such
Company SEC Documents, and none of the Company SEC Documents as of such respective dates (or, if
amended or superseded prior to the date of this Agreement, the date of the filing of such
amendment, with respect to the disclosures that are amended or superseded) contained, and none of
the Company SEC Documents filed with the SEC subsequent to the date of this Agreement will contain
as of the date of filing, any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) All of the financial statements of the Company included in the Company SEC Documents, in
each case, including any related notes thereto, have been (or, in the case of Company SEC Documents
not filed as of the date hereof, will be) prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes thereto) and fairly
present (or, in the case of Company SEC Documents not filed as of the date hereof, will fairly
present) the consolidated financial position of the Company and its consolidated Subsidiaries as of
the dates thereof and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited interim statements, as may be permitted by Form 10-Q
of the SEC and subject, in the case of such unaudited statements, to normal, recurring adjustments.
(c) Neither the Company nor any of its Subsidiaries has any liabilities of any kind
whatsoever, whether or not accrued and whether or not contingent or absolute, except liabilities
(i) reflected or reserved against on the balance sheet of the Company and its Subsidiaries as of
March 31, 2007 (the “Balance Sheet Date”) (including the notes thereto) included in the
Company SEC Documents, (ii) incurred after the Balance Sheet Date in the ordinary course of
business, (iii) incurred pursuant to this Agreement or (iv) that have not had, or would not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or
prevent, materially delay or materially impair the consummation of the Transactions.
(d) The Company is in compliance in all material respects with the applicable listing and
corporate governance rules and regulations of the Nasdaq Stock Market. Except as permitted by the
Exchange Act, including Sections 13(k)(2) and (3) or rules of the SEC, since the enactment of the
Xxxxxxxx-Xxxxx Act, neither the Company nor any of its Affiliates has made, arranged or modified
(in any material way) any extensions of credit in the form of a personal loan to any executive
officer or director of the Company.
(e) The Company has established and maintains internal controls over financial reporting and
disclosure controls and procedures (as such terms are defined in Rule 13a-15 and Rule 15d-15 under
the Exchange Act); such disclosure controls and procedures are effective to ensure that information
relating to the Company, including its consolidated Subsidiaries, required to be disclosed by the
Company in the reports that it files or submits
12
under the Exchange Act is accumulated and
communicated to the Company’s principal executive officer and its principal financial officer to
allow timely decisions regarding required disclosure; and such disclosure controls and procedures
are effective to ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms. The Company’s principal executive
officer and its principal financial officer have disclosed, based on their most recent evaluation,
to the Company’s auditors and the audit committee of the Board of Directors of the Company (x) all
significant deficiencies in the design or operation of internal controls which could adversely
affect the Company’s ability to record, process, summarize and report financial data and have
identified for the Company’s auditors any material weaknesses in internal controls and (y) any
fraud, whether or not material, that involves management or other employees who have a significant
role in the Company’s internal controls. The Company has made available to Parent (i) a summary of
any such disclosure made by management to the Company’s auditors and audit committee since January
1, 2005 (the “Applicable Date”) and (ii) any material communication since the Applicable
Date made by management or the Company’s auditors to the audit committee required or contemplated
by listing standards of the Nasdaq Stock Market, the audit committee’s charter or professional
standards of the Public Company Accounting Oversight Board. Since the Applicable Date, no material
complaints from any source regarding accounting, internal accounting controls or auditing matters,
and no material concerns from Company employees regarding questionable accounting or auditing
matters, have been received by the Company. The Company has made available to Parent a summary of
all material complaints or material concerns relating to other matters made since the Applicable
Date through the Company’s whistleblower hot line or equivalent system for receipt of employee
concerns regarding possible violations of
Law. No attorney representing the Company or any of its Subsidiaries, whether or not employed
by the Company or any of its Subsidiaries, has reported evidence of a violation of securities laws,
breach of fiduciary duty or similar violation by the Company or any of its officers, directors,
employees or agents to the Company’s chief legal officer, audit committee (or other committee
designated for the purpose) of the Board of Directors or the Board of Directors pursuant to the
rules adopted pursuant to Section 307 of the Xxxxxxxx-Xxxxx Act or any Company policy contemplating
such reporting, including in instances not required by those rules. The principal executive
officer of the Company and the principal financial officer of the Company (and each former
principal executive officer of the Company and each former principal financial officer of the
Company, as applicable) have made the certifications required by the Xxxxxxxx-Xxxxx Act of 2002
(the “Xxxxxxxx-Xxxxx Act”), and the rules and regulations of the SEC promulgated thereunder
with respect to the Company’s filings pursuant to the Exchange Act. For purposes of the preceding
sentence, “principal executive officer” and “principal financial officer” shall have the meanings
given to such terms in the Xxxxxxxx-Xxxxx Act.
SECTION 3.6 Absence of Certain Changes. Since the Balance Sheet Date (a) the Company
and its Subsidiaries have carried on and operated their respective businesses in all material
respects in the ordinary course of business, (b) there has not been any event, change or occurrence
that has had, or would reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, and (c) there has not been (i) any declaration, setting aside or payment of any
dividend or any other distribution with respect to any of the
13
capital stock of the Company or any
of its Subsidiaries, (ii) any material change in accounting methods, principles or practices
employed by the Company or (iii) any other action of the type described in Sections 5.2(a) or
5.2(b) which, had such action been taken after the date of this Agreement, would require approval
of Parent.
SECTION 3.7 Legal Proceedings. There is no pending or, to the Knowledge of the
Company, threatened, legal or administrative proceeding, claim, suit, litigation, action,
investigation, audit, hearing, indictment, arbitration or other similar proceedings
(“Litigation”) against the Company or any of its Subsidiaries, or any of their respective
executive officers or directors that, if determined adversely to the Company or such officers or
directors, would reasonably be expected to (a) involve fines, penalties, payments, costs or
expenses in excess of $100,000 in the case of any single matter or $500,000 in the case of any
group of related matters, (b) result in any such Person being excluded from participation in any
federal health care program or state health care program, (c) materially impair the ability of the
Company or any of its Subsidiaries to conduct their businesses, or use any of their material
properties or assets, as presently conducted or used, (d) prevent, materially delay or materially
impair the consummation of the transactions contemplated by this Agreement, or (e) have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries is subject to any injunction, or
is subject to any order, directive, judgment, award, ruling, settlement, stipulation or decree
imposed by or before any Governmental Authority (“Order”) that has resulted in, or would
reasonably be expected to result in, any material detriment to the Company or any of its
Subsidiaries.
SECTION 3.8 Compliance With Laws; Permits. The Company and its Subsidiaries are in
compliance with all federal, state and local laws, statutes, ordinances, codes, rules, regulations,
directives, decrees and Orders of Governmental Authorities (collectively, “Laws”)
(excluding compliance with Laws regarding the payment of Taxes, which is governed by Section 3.10,
compliance with Laws applicable to the Company Plans, which is governed by Section 3.11, compliance
with Environmental Laws, which is governed by Section 3.12, and compliance with Health Care Laws,
which is governed by Section 3.22), applicable to the Company or any of its Subsidiaries or by
which any property, business or asset of the Company or any of its Subsidiaries is bound or
affected, except for such non-compliance that is not, and would not reasonably be expected to be,
individually or in the aggregate, materially detrimental to the Company and any of its
Subsidiaries, taken as a whole, or prevent, materially delay or materially impair the consummation
of the Transactions. No investigation by any Governmental Authority with respect to the Company or
any of its Subsidiaries is pending or, to the Knowledge of the Company, threatened, nor, to the
Knowledge of the Company, has any United States federal or state Governmental Authority indicated
an intention to conduct the same. To the Knowledge of the Company, no material change is required
in the Company’s or any of its Subsidiaries’ processes, properties or procedures in connection with
any such Laws, and the Company has not received any overt notice or communication of any material
noncompliance with any such Laws that has not been cured as of the date of this Agreement. The
Company and its Subsidiaries each has obtained and is in compliance with all permits, licenses,
certifications, approvals, registrations, consents, authorizations, franchises, variances,
exemptions and orders issued or granted by a Governmental Authority (“Licenses”) necessary
to conduct its business as presently conducted, except those the absence of which would not
reasonably be expected to
14
be, individually or in the aggregate, materially detrimental to the
Company and its Subsidiaries, taken as a whole, or prevent, materially delay or materially impair
the consummation of the Transactions.
SECTION 3.9 Information Supplied. The Proxy Statement will not, on the date it is
first mailed to shareholders of the Company and at the time of the Company Shareholders 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 are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the applicable requirements of the Exchange Act. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to information supplied by
or on behalf of Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement.
SECTION 3.10 Tax Matters.
(a) Each of the Company and its Subsidiaries has timely filed, or has caused to be timely
filed on its behalf (taking into account any extension of time within which to file), all federal
income and other material Tax Returns (as hereinafter defined) required to be filed by it under
applicable Laws, all such filed Tax Returns are correct and complete in all material respects, and
all Taxes shown to be due on such Tax Returns and all
other material Taxes due have been paid, except for those Taxes being contested in good faith
(as set forth on Section 3.10(a) of the Company Disclosure Schedule) and for which adequate
reserves have been established in the Company’s financial statements. Neither the Company nor any
of its Subsidiaries is the beneficiary of any extension of time with which to file any material Tax
Return. No deficiency with respect to any amount of Taxes has been proposed, asserted or assessed
against the Company or any of its Subsidiaries, which has not been fully paid or adequately
reserved for in the Company SEC Documents. There are no Liens for Taxes (other than taxes not yet
due and payable) upon any assets of the Company or its Subsidiaries. To the Knowledge of the
Company, since December 31, 2003, the Company has not received written notice from an authority in
a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the
Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction.
(b) Each of the Company and its Subsidiaries has withheld and paid over to the relevant taxing
authority all Taxes required to be withheld and paid in connection with any amounts paid or owing
to employees, independent contractors, creditors, shareholders or any other third party except for
such Taxes that, individually or in the aggregate, would not have, or be reasonably expected to
have, a Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries knows of any proposed or threatened Tax
Claims by any Governmental Authority to assess any additional Taxes for any period for which Tax
Returns have been filed that, if unpaid, would have, or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. As of the date hereof, no audits or
administrative or judicial Tax Proceedings are pending or being conducted with respect to the
Company or any of its Subsidiaries by any Governmental Authority and no notice of a deficiency or
proposed adjustment for any
15
amount of Tax has been received. The Company Disclosure Schedule lists
all federal, state, local and foreign income Tax Returns filed with respect to the Company or its
Subsidiaries for taxable periods ended on or after December 31, 2002. Further, the Company has
made available to Parent copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Company or any of its Subsidiaries
filed or received since December 31, 2002.
(d) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in
respect of material Taxes or agreed to any extension of time with respect to a material Tax
assessment or deficiency.
(e) Neither the Company nor any of its Subsidiaries will be required to include any material
item of income in, or exclude any material item of deduction from, taxable income for any taxable
period ending after the Closing as a result of any: (i) change in method of accounting for a period
ending on or prior to Closing; (ii) intercompany transaction or excess loss account described in
U.S. Treasury Regulations under Section 1502 of the Code (or any corresponding or similar
provisions of state, local or foreign income Tax law); (iii) installment sale or open transaction
disposition made on or prior to Closing; or (iv) prepaid amount received on or prior to Closing.
(f) Neither the Company nor any of its Subsidiaries has distributed stock of another Person,
or has had its stock distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Sections 355 or 361 of the Code after December 31, 1999.
(g) Neither the Company nor any of its Subsidiaries is a party to any Contract that (i) has
resulted or could result in the payment of any “excess parachute payment” within the meaning of
Section 280G of the Code (or any corresponding provision of state, local, or foreign Tax Law) or
(ii) has resulted in any amount paid not having been fully deductible as a result of Section 162(m)
of the Code (or any corresponding provision of state, local or foreign Tax law). Neither the
Company nor any of its Subsidiaries has entered into, or otherwise participated (directly or
indirectly) in, any “reportable transaction” within the meaning of U.S. Treasury Regulation Section
1.6011-4(b) or has received a written opinion from a tax advisor that was intended to provide
protection against a tax penalty. Neither the Company nor any of its Subsidiaries has been a
United States Real Property Holding Corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. As of the Closing,
neither the Company nor any of its Subsidiaries will be a party to or bound by any Tax allocation
or sharing agreement pursuant to which it will have any potential liability to any Person (other
than the Company or any of its Subsidiaries) after the Closing Date.
(h) Neither the Company nor any of its Subsidiaries (i) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a group the common parent of
which was the Company) or (ii) has any liability for the Taxes of any Person (other than the
Company or any of its Subsidiaries) under U.S. Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by contract or otherwise.
16
(i) As of the date hereof, no closing agreement pursuant to Section 7121 of the Code (or any
other similar provision of state, local or foreign Tax Law), private letter ruling, technical
advice memorandum, or similar agreement or ruling has been entered into, requested or received by
or with respect to the Company or any of its Subsidiaries.
(j) For purposes of this Agreement: (i) “Tax” or “Taxes” shall mean (A) all
federal, state, local or foreign taxes, charges, fees, imposts, levies or other assessments,
including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code), franchise, profits, registration,
alternative or add-on minimum, property and estimated taxes, customs duties, fees, assessments and
charges of any kind whatsoever or similar taxes imposed on the income properties or operations of
the Company or any of its Subsidiaries, (B) all interest, penalties, fines, additions to tax or
additional amounts imposed by any Governmental Authority in connection with any item described in
clause (A), and (C) any transferee liability in respect of any items described in clauses (A)
and/or (B) payable by reason of contract, assumption, transferee liability, operation of Law, U.S.
Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof of any analogous
or similar
provision under Law) or otherwise, and (ii) “Tax Returns” shall mean any return,
report, claim for refund, estimate, declaration, information return or statement or other similar
document relating to or required to be filed with any Governmental Authority with respect to Taxes,
including any schedule or attachment thereto, and including any amendment thereof.
SECTION 3.11 Employee Benefits and Labor Matters.
(a) Section 3.11(a) of the Company 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”)), (ii) all Company travel policies and plans and employee reimbursement policies
thereunder, (iii) all employment, consulting, non-competition, employee non-solicitation, or other
compensation agreements, and all collective bargaining agreements, and (iv) all bonus or other
incentive compensation, equity or equity-based compensation (including stock option, phantom stock
or stock ownership), stock purchase, deferred compensation, change in control, severance,
termination, profit-sharing, leave of absence, vacation, medical, life insurance or other death
benefit, educational assistance, Section 125 cafeteria, dependant care, fringe benefit, pension and
welfare benefit plans, policies, agreements or arrangements, in each case as to which the Company
or any of its Subsidiaries has any liability, contingent or otherwise, with respect to any current
or former employee, independent contractor or director (collectively (i) through (iv), the
“Company Plans”). Correct and complete copies of the following documents with respect to
each of the Company Plans have been made available to Parent by the Company, to the extent
applicable: (a) all plan documents and amendments thereto, (b) the two most recent annual reports
on Form 5500 to the extent any such report was required by applicable Law, (c) the most recent
summary plan description for each Company Plan for which such a summary plan description is
required by applicable Law, (d) each currently effective trust agreement and insurance or group
annuity contract and (e) the most recent favorable determination letter from the Internal Revenue
Service for each Company Plan which is
17
intended to be qualified under Section 401(a) of the Code.
Each Company Plan (excluding any Company Plan which is a “multiemployer plan” as defined in Section
3(37) of ERISA): (i) has been administered in accordance with its terms and (ii) is in compliance
with the applicable provisions of ERISA, the Code and other Laws, except, in the case of (i) or
(ii), for any instances of noncompliance that, individually or in the aggregate, would not have, or
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect.
(b) Except as would not have, or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect:
(i) Each Company Plan has been administered in accordance with its terms, and the Company and
each of its Subsidiaries and all of the Company Plans are in compliance with the applicable
provisions of ERISA, the Code and other applicable Laws as to the Company Plans, and all
contributions required under each Company Plan have been made in full on a timely and proper basis.
(ii) With respect to the Company Plans, individually and in the aggregate, no event has
occurred and, to the Knowledge of the Company, there exists no condition or set of circumstances,
including claims, audits and investigations, in connection with which the Company or any of its
Subsidiaries could be subject to any tax, penalty or other liability under ERISA, the Code or any
other applicable Law, except for making contributions, or the payment of claims in the ordinary
course of the operation of any such Company Plans.
(iii) Each Company Plan that is intended to comply with the provisions of Section 401(a) of
the Code is qualified and exempt from income taxes under Sections 401(a) and 501(a), respectively,
of the Code, and to the Knowledge of the Company, nothing has occurred (or failed to occur) that
would adversely affect such qualification.
(iv) No “employee welfare benefit plans” (as defined in Section 3(1) of ERISA) under which the
Company or any of its Subsidiaries has any liability provides benefits to, or on behalf of, any
former employee after the termination of employment except where the benefit is required by Section
4980B of the Code or similar state or local Law.
(v) Each individual who is classified by the Company or any of its Subsidiaries as an
“employee” or as an “independent contractor” is properly so classified.
(vi) Each Company Option (A) was granted in compliance with all applicable Laws and all of the
terms and conditions of the Company Stock Plan pursuant to which it was issued, (B) issued after
January 1, 2005 has an exercise price per share of Company Common Stock equal to or greater than
the fair market value of a share of Company Common Stock on the date of such grant, (C) has a grant
date identical to the date on which the Company’s Board of Directors or Compensation Committee
actually awarded such Company Option, (D) qualifies for the tax and accounting treatment afforded
to such
18
Company Option in the Company’s tax returns and the Company Reports, respectively, and (E)
complies with the requirements of Section 409A of the Code.
(vii) Each Company Plan which is a nonqualified deferred compensation plan has been operated
in compliance with the applicable requirements of Section 409A of the Code.
(c) Neither the Company nor any Company Subsidiary maintains, contributes to (nor has within
the past six years maintained or contributed to) or is obligated to maintain or contribute to, or
has any actual or contingent liability under, any benefit plan that is subject to Title IV of ERISA
or Section 412 of the Code or is otherwise a “defined benefit pension plan” (as defined in Section
3(35) of ERISA) or a “multiemployer employer” (as defined in Section 3(37) of ERISA).
(d) Neither the Company nor any of the Company Subsidiaries is or has been, since April 1,
2001, a party to, or bound by, or conducted negotiations regarding, any collective bargaining
agreement or other contracts, arrangements, agreements or
understandings with a labor union or similar organization that was certified by the National
Labor Relations Board (“NLRB”) or voluntarily recognized or recognized under Law.
(e) Except as would not have, or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect,
(i) There is no existing, pending or, to the Knowledge of the Company, threatened, (i)
walkout, lockout, strike, slowdown, hand billing, picketing, work stoppage (sympathetic or
otherwise), or work interruption (each, a “Concerted Action”) involving the employees of
the Company or any of its Subsidiaries, (ii) unfair labor practice charge or complaint, labor
dispute, labor arbitration proceeding or any other matter before the NLRB or any other comparable
state agency against or involving the Company or any of its Subsidiaries, (iii) election petition
or proceeding by a labor union or representative thereof to organize any employees of the Company
or any of its Subsidiaries, (iv) certification or decertification question relating to collective
bargaining units at the premises of the Company or any of its Subsidiaries or (v) grievance or
arbitration demand against the Company or any of its Subsidiaries whether or not filed pursuant to
a collective bargaining agreement.
(ii) None of the Company, any of its Subsidiaries or any of their respective representatives
or employees has committed an unfair labor practice in connection with the operation of the
respective businesses of the Company or any of its Subsidiaries.
(iii) The Company and its Subsidiaries are in compliance with all applicable Laws respecting
labor, employment, fair employment practices, terms and conditions of employment, workers’
compensation, occupational safety, plant closings, mass layoffs and wages and hours.
(f) To the Knowledge of the Company, neither the employees of the Company nor the employees of
any of its Subsidiaries have engaged in a material Concerted Action in the past three years.
19
(g) The Company and its Subsidiaries have properly accrued on their books and records all
material unpaid but accrued wages, salaries and other paid time-off.
(h) None of the execution and delivery of this Agreement, nor shareholder approval of this
Agreement, nor the consummation of any transaction contemplated by this Agreement (alone or in
conjunction with a termination of employment) will (v) trigger any funding (through a grantor trust
or otherwise) of any compensation or benefits under any Company Plan, (w) entitle any employees of
the Company or any of its subsidiaries to severance pay or any increase in severance pay upon any
termination of employment after the date hereof, (x) accelerate the time of payment or vesting or
result in any payment of compensation or benefits under, increase the amount payable or result in
any other material obligation pursuant to, any of the Company Plans, or (y) limit or restrict the
right of the Company or, after the consummation of the transactions contemplated hereby, Parent to
merge, amend or terminate any of the Company Plans.
SECTION 3.12 Environmental Matters. Except as would not have, or would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) no written
notice, notification, demand, request for information, citation, summons, complaint or order from
any Person has been received by the Company or any of its Subsidiaries, or, to the Knowledge of the
Company, threatened, by any Person against the Company or any of its Subsidiaries, and no action,
claim, suit, arbitration, or proceeding is pending or, to the Knowledge of the Company, threatened
by any Person, that alleges that the Company or any of its Subsidiaries is not in compliance with
or has any liability under any Environmental Law or otherwise addresses any matters involving
Hazardous Materials or relating to or arising out of any Environmental Law; (b) neither the Company
nor any of its Subsidiaries has any outstanding liabilities or obligations under any Order relating
to any Environmental Law; (c) the Company and its Subsidiaries are and have been in compliance with
all Environmental Laws, including possessing and complying with all Permits required for their
operations under applicable Environmental Laws, and there are no proceedings pending or, to the
Knowledge of the Company, threatened to cancel, revoke, modify, or not renew any such Permit; (d)
there is no Environmental Claim pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or, to the Knowledge of the Company, against any Person whose
liability for any Environmental Claim the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law; and (e) the Company and its Subsidiaries do
not have any Environmental Liabilities and, to the Knowledge of the Company, no events (including
Releases or Threatened Releases of Hazardous Materials), facts, circumstances or conditions
relating to, arising from, associated with or attributable to any operations of the Company or any
of its Subsidiaries (including any activities involving Hazardous Materials) or any real property
currently or formerly owned, operated, used or leased by the Company or its Subsidiaries or
operations thereon would reasonably be expected to result in Environmental Liabilities.
SECTION 3.13 Properties.
(a) Section 3.13(a) of the Company Disclosure Schedule contains a true and complete list of
all real property owned by the Company or any of its Subsidiaries (collectively with all land,
buildings, structures, fixtures and improvements located thereon
20
the “Owned Real Property”)
and for each parcel of Owned Real Property, contains a correct street address of such Owned Real
Property.
(b) Section 3.13(b) of the Company Disclosure Schedule contains a true and complete list of
all real property leased, subleased, licensed or otherwise occupied (whether as a tenant, subtenant
or pursuant to other occupancy arrangements) by the Company or any of its Subsidiaries
(collectively, including the improvements thereon, the “Leased Real Property”), and for
each Leased Real Property, identifies the street address of such Leased Real Property, and, in the
case of any lease in respect thereof that is set to expire or is subject to renewal during the
one-year period immediately following the date of this Agreement, the expiration date of such lease
and a description of any terms that have been proposed in regard to any renewal thereof. True and
complete copies of all agreements under which the Company or any Subsidiary is the landlord,
sublandlord, tenant, subtenant, or
occupant (each a “Real Property Lease”) that have not been terminated or expired as of
the date thereof have been made available to Parent.
(c) The Company and/or its Subsidiaries have good and marketable fee simple title to all
material Owned Real Property and valid leasehold estates in all material Leased Real Property
free and clear of all Liens, except Permitted Liens.
(d) Other than the Real Property Leases, none of the material Owned Real Property or the
material Leased Real Property is subject to any lease, sublease, license or other agreement
granting to any other Person any right to the use, occupancy or enjoyment of such Owned Real
Property or Leased Real Property or any part thereof. There are no outstanding options or rights
of first refusal to purchase any Owned Real Property, or any portion of the Owned Real Property
or interest therein.
(e) Each material Real Property Lease is in full force and effect and constitutes the valid
and legally binding obligation of the Company or its Subsidiaries, enforceable in accordance with
its terms (subject to the Bankruptcy and Equity Exception), and there is no material default or
event which, with notice, lapse of time or both, would constitute a material default or permit
termination or material modification or acceleration of obligations by any third party under any
material Real Property Lease either by the Company or its Subsidiaries party thereto or, to the
Knowledge of the Company, by any other party thereto or prevent, materially delay or materially
impair the consummation of the transactions contemplated by this Agreement.
(f) There does not exist any pending material condemnation or eminent domain proceedings
that affect any material Owned Real Property or, to the Knowledge of the Company, any such
proceedings that affect any material Leased Real Property or, to the Knowledge of the Company,
any threatened material condemnation or eminent domain proceedings that affect any material Owned
Real Property or material Leased Real Property, and neither the Company nor its Subsidiaries have
received any written notice of the intention of any Governmental Authority or other Person to
take or use any Owned Real Property or Leased Real Property.
21
SECTION 3.14 Intellectual Property.
(a) Section 3.14 of the Company Disclosure Schedule sets forth a true and complete list of all
(i) registered Intellectual Property owned by the Company and its Subsidiaries and (ii) Material
Intellectual Property (as hereinafter defined) of the Company and its Subsidiaries. Neither the
Company nor any of its Subsidiaries have distributed to any third party the CIS customer relations
software or the LIS customer relations software.
(b) Section 3.14 of the Company Disclosure Schedule sets forth a true and complete list of all
Contracts under which the Company or its Subsidiaries have licensed any Material Intellectual
Property from any third party or under which the Company or its Subsidiaries license any Material
Intellectual Property to any third party and any other
Contract that concerns the Company’s rights under or to Material Intellectual Property
(“Material Intellectual Property Contracts”).
(c) Subject to Section 3.14(d) (including the Knowledge qualifiers contained therein), the
Company and its Subsidiaries own, or possess adequate licenses or other valid rights to use (in
each case, free and clear of any Liens, other than Permitted Liens) all Intellectual Property used
in the business of the Company and/or its Subsidiaries as currently conducted.
(d) To the Knowledge of the Company, the conduct of the business and operations of the Company
and its Subsidiaries and the use of Intellectual Property by the Company and its Subsidiaries do
not infringe, misappropriate, dilute or otherwise violate (“Infringe”) the Intellectual
Property rights of any Person.
(e) Neither the Company nor any Subsidiary, nor to the Knowledge of the Company, any other
party, is or is alleged to be in breach or default under any Material Intellectual Property
Contract, which default, either standing alone or with the passage of time, will give the
counterparty thereto the right to terminate, restrict or modify, to the detriment of the Company or
its Subsidiaries, the Company’s or the relevant Subsidiary’s rights thereunder or cause additional
fees to be paid thereunder by the Company or its Subsidiaries, nor the Company’s Knowledge does a
valid basis exist for any such claim. All of the Material Intellectual Property Contracts are, to
the Knowledge of the Company, valid and enforceable.
(f) Neither the Company nor any Subsidiary has received notice of any claim, that seeks to
cancel, limit or challenge the ownership, or any right to use of the Company or any of its
Subsidiaries, or the validity or enforceability, of any registered Intellectual Property or
Material Intellectual Property owned by or Material Intellectual Property licensed to the Company
or its Subsidiaries, and no Litigation or Order is pending or outstanding or, to the Knowledge of
the Company, threatened, in which such cancellation, limitation or challenge is sought or brought.
(g) To the Knowledge of the Company, no Person is or may be Infringing any Intellectual
Property owned by or exclusively licensed to the Company or its
22
Subsidiaries, which infringement
is, or is reasonably likely to be, material to the Company and its Subsidiaries, taken as a whole.
(h) Neither the Company nor any of its Subsidiaries has received any notice, written or
otherwise, of any assertion or claim with respect to any registered Intellectual Property or
Material Intellectual Property owned by or Material Intellectual Property licensed to the Company
or its Subsidiaries.
(i) To the Knowledge of the Company, no Material Intellectual Property owned by or exclusively
licensed to the Company or its Subsidiaries is being used or enforced in a manner that would result
in the abandonment, cancellation or unenforceability of such Intellectual Property. To the
Knowledge of the Company, no registered Intellectual
Property or Material Intellectual Property owned by or Material Intellectual Property licensed
to the Company or any of its Subsidiaries is invalid or unenforceable.
(j) The Company and its Subsidiaries take reasonable measures to (i) protect, maintain and
preserve the Material Intellectual Property owned by the Company and/or its Subsidiaries and (ii)
protect the confidentiality of the Trade Secrets included in Material Intellectual Property owned,
used or held by the Company and/or its Subsidiaries.
(k) The Company and its Subsidiaries (i) take reasonable actions to protect the
confidentiality, integrity and security of its software, databases, systems, networks and Internet
sites and all information stored or contained therein or transmitted thereby from any unauthorized
use, access, interruption or modification by third parties; and (ii) use reliable encryption (or
equivalent) protection to protect the security and integrity of transactions executed through its
software. The information technology systems used by the Company and its Subsidiaries have not
failed or malfunctioned in the past two years in a manner that had a material impact on the
business of the Company and its Subsidiaries, taken as a whole. The Company and its Subsidiaries
have implemented reasonable back up, security and disaster recovery technology consistent with
industry practices.
(l) For purposes of this Agreement, “Intellectual Property” means (i) all trademarks,
trademark rights, trade names, trade name rights, trade dress and other indications of origin,
corporate names, brand names, logos, slogans, certification rights, service marks, service xxxx
rights, service names, service name rights, business and product names, applications for trademarks
and for service marks, domain names, and other proprietary rights and information, the goodwill
associated with the foregoing and registration in any jurisdiction of, and applications in any
jurisdictions to register, the foregoing, including any extension, modification or renewal of any
such registration or application; (ii) all inventions, discoveries, developments, ideas, formulae,
processes, industrial models, designs, methodologies, technical information, manufacturing,
engineering and technical drawings, know-how (whether patentable or unpatentable and whether or not
reduced to practice), in any jurisdiction, all improvements thereto, and all patents, patent
rights, applications for patents (including divisions, re-examinations, continuations,
continuations in part and renewal applications), and any renewals, extensions or reissues thereof
or similar legal protections related thereto, in any jurisdiction; (iii) nonpublic information
(including without limitation customer and supplier lists), trade secrets and
23
confidential
information and rights in any jurisdiction to limit the use or disclosure thereof by any Person
(“Trade Secrets”); (iv) copyrights and copyright rights, writings and other works in any
media, whether copyrightable or not, in any jurisdiction, and all registrations or applications for
registration of copyrights in any jurisdiction, and any renewals, restorations or extensions
thereof; (v) all computer software and computer programs (including data, databases and related
documentation and source code); (vi) any other intellectual property or proprietary rights; (vii)
all copies and tangible documentation related to any of the foregoing and (viii) any claims or
causes of action arising out of or relating to any infringement, dilution, misappropriation or
other violation of any of the foregoing including the right to receive all proceeds and damages
therefrom. “Material Intellectual Property” means any Intellectual Property the unavailability of
which would be materially detrimental to the Company and its Subsidiaries, taken as a whole.
SECTION 3.15 Material Contracts.
(a) As of the date hereof, neither the Company nor any of its Subsidiaries is a party to or
bound by:
(i) any Contract under which the Company or any of its Subsidiaries has (A) incurred any
indebtedness for borrowed money that is currently owing or (B) given any guarantee in respect of
indebtedness for borrowed money, in each case under clauses (A) and (B), having an aggregate
principal amount in excess of $100,000;
(ii) any Contract that purports to limit, curtail or restrict the ability of the Company or
any of its Subsidiaries (or any Affiliate thereof, including Parent and its Subsidiaries following
the Effective Time) to compete or provide services in any material respect in any market segment
and/or geographic area or line of business, or to hire or solicit the hire for employment of any
individual or group;
(iii) any Contract (other than a Contract described in one of the other provisions of this
Section without regard to any threshold contained therein) that involves annual expenditures by the
Company or any of its Subsidiaries in excess of $1,000,000 and is not otherwise cancelable by the
Company or any of its Subsidiaries without any financial or other penalty on 90-days’ or less
notice;
(iv) any Contract (other than a Contract described in one of the other provisions of this
Section without regard to any threshold contained therein) that involves annual revenue to the
Company or any of its Subsidiaries in excess of $1,000,000;
(v) any purchase, sale or supply Contract that contains volume requirements or commitments,
exclusive or preferred purchasing arrangements or promotional requirements;
(vi) any Contract described by Sections 3.15(a)(i)-3.15(a)(v) or Sections
3.15(a)(vii)-3.15(a)(xiv) that contains any “change of control” or similar provisions that would
restrict or impair the ability of the Company or any of its Subsidiaries (or any Affiliate thereof,
including Parent and its Subsidiaries following the Effective Time) to engage in any actions or
transactions, including any provisions granting any third party a
24
right to early termination or
requiring consent of a third party, receipt of payment or accelerated vesting under such Contract;
(vii) any purchase, sale, supply or other Contract that contains any “most favored nation” or
equivalent preferential pricing terms for the benefit of any Person other than the Company or its
Subsidiaries;
(viii) Contracts that would be required to be filed as an exhibit to a Form 10-K filed by the
Company with the SEC on the date hereof;
(ix) any letter of intent, letter of understanding, memorandum of understanding, proposal,
request for proposal, bid or other similar document with regard to
any acquisition (including by merger) of capital stock or assets (except for ordinary course
purchases of inventory or similar goods) of any other Person;
(x) any Contract containing any standstill or similar agreement pursuant to which the Company
or any of its Subsidiaries (or any Affiliate thereof, including Parent and its Subsidiaries
following the Effective Time) has agreed not to acquire assets or securities of another Person, or
propose or offer to do so;
(xi) any Contract that (I) would require the licensing or disposition of any material assets,
property or line of business of the Company or its Subsidiaries or, after the Effective Time,
Parent or its Subsidiaries (or any Affiliate thereof), or (II) prohibits or limits the right of the
Company or any of its Subsidiaries (or any Affiliate thereof, including Parent and its Subsidiaries
following the Effective Time) to use, transfer, license, distribute or enforce any of their
respective Material Intellectual Property rights;
(xii) any Contract between the Company or any of its Subsidiaries and any director or officer
of the Company or any Person beneficially owning five percent or more of the outstanding Company
Common Stock, other than Contracts with respect to Company Restricted Stock or Options;
(xiii) any Contract providing for indemnification by the Company or any of its Subsidiaries of
any Person, except for any such Contract that is (x) not material to the Company or any of its
Subsidiaries, (y) entered into in the ordinary course of business or (z) otherwise set forth in the
Company Disclosure Schedule; and
(xiv) any Contract that contains a put, call or similar right pursuant to which the Company or
any of its Subsidiaries could be required to purchase or sell, as applicable, any equity interests
of any Person or assets that have a fair market value or purchase price of more than $1,000,000.
The Contracts contemplated by this Section 3.15(a) are referred to collectively as the
“Material Contracts”).
(b) The Company has heretofore made available to Parent true, correct and complete copies of
the Material Contracts. Each of the Material Contracts constitutes the valid and legally binding
obligation of the Company or its Subsidiaries, enforceable in
25
accordance with its terms (subject to
the Bankruptcy and Equity Exception), and is in full force and effect, except as would not have, or
would not reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect.
(c) To the Knowledge of the Company, there are no existing material defaults or breaches by
the Company under any Material Contract (or events or conditions which, with notice or lapse of
time or both, would constitute a material default or breach), and to the Knowledge of the Company,
there are no such material defaults (or events or conditions which, with notice or lapse of time or
both, would constitute a material default or breach) by any other party to any Material Contract.
The Company has no Knowledge of any pending or threatened bankruptcy or similar proceeding with
respect to any party to any
Material Contract which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(d) Other than the Contracts set forth in Section 3.15 of the Company Disclosure Schedule, the
Company is not a party to or bound by any Contract described in Section 3.15(a)(ii), (x) or (xi)
that would be binding on Parent or its Subsidiaries (other than the Company and its Subsidiaries)
following the Effective Time.
SECTION 3.16 Opinion of Financial Advisor. The Board of Directors of the Company has
received the opinion of Deutsche Bank Securities Inc. (“Deutsche Bank”), dated the date of
this Agreement, to the effect that, as of such date, and subject to the various assumptions and
qualifications set forth therein, the Merger Consideration to be received by holders of the Company
Common Stock is fair, from a financial point of view, to such holders, a signed copy of which
opinion will be delivered to Parent for informational purposes promptly after receipt thereof by
the Company.
SECTION 3.17 Brokers and Other Advisors. Except for Deutsche Bank, the fees and
expenses of which will be paid by the Company, no broker, investment banker, financial advisor or
other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or
commission, or the reimbursement of expenses, in connection with the Transactions based upon
arrangements made by or on behalf of the Company or any of its Subsidiaries. The Company has made
available to Parent a complete and correct copy of any agreements between the Company and Deutsche
Bank pursuant to which such firm would be entitled to any payment relating to this Agreement, the
Merger or the other Transactions.
SECTION 3.18 State Takeover Laws. The provisions of Sections 110C, 110D and 110F of
the Massachusetts Corporation-Related Laws are inapplicable to this Agreement, the Merger and the
Transactions. No other “fair price”, “moratorium”, “control share acquisition”, other state
takeover statutes (such statutes, collectively with Sections 110C, 110D and 110F of the
Massachusetts Corporation-Related Law, “Takeover Statutes”) or any anti-takeover provision
in the Company Charter Documents are applicable to the Merger, this Agreement or the Transactions.
SECTION 3.19 Shareholders’ Rights Agreement. Neither the Company nor any of its
Subsidiaries currently has in effect, or intends to adopt, a shareholders’ rights agreement or any
similar plan or agreement that limits or impairs the ability of any person to
26
purchase or become
the direct or indirect beneficial owner of, shares of Company Common Stock or any other equity or
debt securities of the Company or any of its Subsidiaries.
SECTION 3.20 Transactions with Affiliates. Except for a person’s ownership of Company
Common Stock or for customary compensation and benefits received in the ordinary course of business
as an
employee or director of the Company or any of its Subsidiaries, to the extent disclosed in the
Company SEC Documents filed prior to the date of this Agreement, no director, officer or other
Affiliate of the Company or any of its Subsidiaries, or any entity in which, to the Knowledge of
the Company, any such director, officer or other Affiliate owns, individually or in the aggregate,
any beneficial interest (other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 5% of the stock of which is
beneficially owned by any such Person): (i) receives any material benefit from any contract,
arrangement or understanding with or relating to the business or operations of the Company or any
of its Subsidiaries; (ii) is a party to or receives any material benefit from any loan,
arrangement, understanding, agreement or contract for or relating to indebtedness of the Company or
any of its Subsidiaries; or (iii) has any material interest in any property (real, personal or
mixed), tangible or intangible, used, or currently intended to be used, in the business or
operations of the Company or any of its Subsidiaries.
SECTION 3.21 Change of Control Agreements. Except as contemplated by Section 5.11 of
this Agreement and except for the Merger Consideration, neither the execution and delivery of this
Agreement nor the consummation of the Merger will (either alone or in conjunction with any other
event) (i) result in any payment or benefit to any employee of the Company or any of its
Subsidiaries or (ii) result in any payment or benefit to any director or officer of the Company or
any of its Subsidiaries.
SECTION 3.22 Regulatory Compliance.
(a) Except as would not be reasonably likely to be materially detrimental to the Company and
its Subsidiaries taken as a whole, the Company and each of its Subsidiaries have all licenses,
franchises, permits, certificates, approvals and billing and other authorizations (collectively,
“Permits”) necessary for the conduct of their respective businesses and the use of their
properties and assets as presently conducted and used, and the Company’s and its Subsidiaries’
respective employees and agents have all Permits necessary for the conduct of their professional
activities. Except as would not be reasonably likely to be materially detrimental to the Company
and its Subsidiaries taken as a whole, the Company and each of its Subsidiaries have had at all
times during the previous three years all Permits necessary for the conduct of their respective
businesses and the use of their properties and assets as conducted and used at such respective
times. Except as would not be reasonably likely to be materially detrimental to the Company and
its Subsidiaries taken as a whole, to the Knowledge of the Company, the Company’s and its
Subsidiaries’ respective employees have had at all times during the previous three years all
Permits necessary for the conduct of their professional activities at such respective times.
Except as would not be reasonably likely to be materially detrimental to the Company and its
Subsidiaries taken as a whole, neither the Company nor any of its Subsidiaries has received written
notice from any Governmental Authority, nor does the Company have Knowledge, that any such Permit
is
27
subject to revocation, suspension, or any other disciplinary or adverse administrative action by
any Governmental Authority. Except as would not be reasonably likely to be materially detrimental
to the Company and its Subsidiaries taken as a whole, no Permit applicable to the
Company or any of its Subsidiaries is subject to a consent order or any other final adverse
disciplinary or administrative action, any of which is still in force and effect.
(b) Except as would not be reasonably likely to be materially detrimental to the Company and
its Subsidiaries taken as a whole, the Company and each of its Subsidiaries are in compliance with
all Health Care Laws and the terms of all Permits to the extent applicable to the Company or any of
its Subsidiaries, or any of its or their respective businesses or operations. Except as would not
be reasonably likely to be materially detrimental to the Company and its Subsidiaries taken as a
whole, no aspect of the Company’s or any of its Subsidiaries’ respective businesses or operations
is reasonably likely to cease to comply with any Health Care Law or the terms of any Permit.
(c) Neither the Company nor any of its Subsidiaries, nor to the Knowledge of the Company, any
director, officer or employee of the Company or any of its Subsidiaries, is currently, or has been
at any time since February 6, 2005: (i) excluded from participation in any federal health care
program or state health care program, (ii) convicted of any criminal offense in respect of any
Health Care Law, other than those individuals identified in Section 3.22(c)(iii) below, (iii)
convicted of any criminal offense that falls within the ambit of 42 U.S.C. § 1320a-7(a)
but has not yet been excluded, debarred, suspended or otherwise declared ineligible, (iv)
debarred or disqualified from participation in regulated activities for any violation or alleged
violation of any Health Care Law, but who is not excluded or otherwise listed in the listing
described in Section 3.22(c)(v) below, (v) listed on the General Services Administration List of
Parties Excluded from Federal Programs, or (vi) a party to or subject to, or, to the Knowledge of
the Company, threatened to be made a party to or subject to, any action or proceeding concerning
any of the matters described in clauses (i), (ii), (iii), (iv) or (v).
(d) The Company and each of its Subsidiaries have developed a plan and time line (the
“Compliance Plan”) for coming into compliance with all Health Care Laws that have been
passed or adopted prior to the date of this Agreement but which are not yet applicable, or contain
provisions that are not yet applicable, to the Company but which are reasonably likely to be become
applicable to the Company or its Subsidiaries within twelve months of the date hereof and have
implemented, or are currently implementing, the provisions of the Compliance Plan to ensure that
the Company and each of its Subsidiaries will be in compliance with such Laws at such time as they
become applicable to the Company, except for failures to comply with any of the foregoing that are
not, and would not reasonably be expected to be, individually or in the aggregate, materially
detrimental to the Company and its Subsidiaries taken as a whole.
(e) Except as would not be reasonably likely to be materially detrimental to the Company and
its Subsidiaries taken as a whole, the Company and each of its Subsidiaries are in compliance with
all applicable Laws, including all Health Care Laws, governing marketing or promotional activities,
including, without limitation, requirements administered by the Federal Trade Commission, the
Federal Communications Commission, the Centers
for
28
Medicare and Medicaid, and other federal and state regulatory agencies such as “do not call”
and “do not fax” registries.
(f) Except as would not be reasonably likely to be materially detrimental to the Company and
its Subsidiaries taken as a whole, and except in compliance with applicable Laws, including all
Health Care Laws, neither the Company nor any of its Subsidiaries: (i) makes available to any
Person for free or a nominal charge any ancillary supplies, goods, services, coupons, vouchers or
discount cards or programs, (ii) has any financial relationships as defined in 42 U.S.C. §
1395nn(a) with physicians, or (iii) receives any payments from manufacturers other than customary
rebates, and purchase discounts, and other non-monetary benefits.
(g) Since November 8, 2004, to the Knowledge of the Company, neither the Company nor any of
its Subsidiaries has engaged in any conduct that would be reasonably likely to result in or
constitute a Material Breach of the Corporate Integrity Agreement (as defined therein) among the
Company, certain of its Subsidiaries and the Office of the Inspector General of the Department of
Health and Human Services (“OIG”) dated November 8, 2004 (“CIA”), including,
without limitation, the training and education obligations, disclosure program, screening
requirements, notification requirements and reporting obligations set forth therein, except as
disclosed to the OIG, provided that the foregoing representation and warranty is not made with
respect to any business, operation or Subsidiary at a time when such business, operation or
Subsidiary was not owned, directly or indirectly, by the Company. No Stipulated Penalty has been
assessed, and no Material Breach has occurred under the CIA. The Company has provided Parent with,
and specifically identified to Parent, true and complete copies of (i) all notices, reports,
certifications and other communications submitted by the Company to the OIG pursuant to the CIA,
and (ii) all notices, demand letters and other communications received by the Company from the OIG
pursuant to the CIA.
SECTION 3.23 Ethical Business Practices. None of the Company, any Subsidiary, or to
the Knowledge of the Company, any directors, officers, agents or employees of the Company or any of
its Subsidiaries has, on behalf of the Company or any of its Subsidiaries, (a) used any funds for
unlawful contributions, unlawful gifts, unlawful entertainment or other unlawful expenses relating
to political activity, (b) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (c) made any payment in the nature of
criminal bribery.
SECTION 3.24 Insurance. All material insurance policies (“Policies”) with
respect to the business and assets of the Company and its Subsidiaries are in full force and
effect. Neither the Company nor any of its Subsidiaries is in material breach or default, and
neither the Company nor any of its Subsidiaries have taken any action or failed to take any action
which, with notice or the lapse of time, would constitute such a breach or default, or permit
termination or modification of any of the Policies. With respect to each of the legal proceedings
set forth in the Company SEC Documents, no such insurer has informed the Company or any of its
Subsidiaries of any
denial of coverage. The Company and its Subsidiaries have not received any written notice of
cancellation of any of the Policies. To
29
the Knowledge of the Company, all appropriate insurers
under the Policies have been timely notified of all potentially insurable material losses and
pending litigation, and all appropriate actions have been taken to timely file all claims in
respect of such insurable matters.
SECTION 3.25 No Other Representations or Warranties. Except for the representations
and warranties made by the Company in this Article III, neither the Company nor any other Person
makes any representation or warranty to Parent or Merger Sub in this Agreement or any other
Contract with respect to the Company or its Subsidiaries or their respective business, operations,
assets, liabilities, condition (financial or otherwise) or prospects, notwithstanding the delivery
or disclosure to Parent or any of its Affiliates or representatives of any documentation, forecasts
or other information with respect to any one or more of the foregoing.
ARTICLE IV
Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub jointly and severally represent and warrant to the Company:
SECTION 4.1 Organization; Standing. Parent is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware and Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws of the
Commonwealth of Massachusetts.
SECTION 4.2 Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all necessary corporate power and authority to execute
and deliver this Agreement, to perform their respective obligations hereunder and to consummate the
Transactions. The execution, delivery and performance by Parent and Merger Sub of this Agreement,
and the consummation by Parent and Merger Sub of the Transactions, have been duly authorized and
approved by their respective boards of directors and adopted by Parent as the sole shareholder of
Merger Sub, and no other corporate action on the part of Parent and Merger Sub is necessary to
authorize the execution, delivery and performance by Parent and Merger Sub of this Agreement and
the consummation by them of the Transactions. This Agreement has been duly executed and delivered
by Parent and Merger Sub and, assuming due authorization, execution and delivery hereof by the
Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub,
enforceable against each of them in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
(b) Neither the execution and delivery of this Agreement by Parent and Merger Sub, nor the
consummation by Parent or Merger Sub of the Transactions, nor compliance by Parent or Merger Sub
with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the
certificate of incorporation or articles of organization, as applicable, or bylaws of Parent or
Merger Sub or (ii) assuming that the authorizations, consents and approvals referred to in Section
4.3 are obtained and the filings referred to in Section 4.3 are made, (x) violate any Law,
judgment, award, writ or injunction
30
of any Governmental Authority applicable to Parent or any of
its Subsidiaries, (y) violate or constitute a default under any of the terms, conditions or
provisions of any Contract to which Parent, Merger Sub or any of their respective Subsidiaries is a
party or by which Parent, Merger Sub or any of their respective Subsidiaries or any property or
asset of any of them is bound or affected, except, in the case of clause (ii), for such violations
or defaults as would not reasonably be expected to impair in any material respect the ability of
Parent or Merger Sub to perform its obligations hereunder or prevent or materially delay
consummation of the Transactions (a “Parent Material Adverse Effect”).
SECTION 4.3 Governmental Approvals. Except for (i) filings required under, and
compliance with other applicable requirements of, the Exchange Act and the rules of The New York
Stock Exchange, (ii) the filing of the Articles of Merger with the Secretary of the Commonwealth of
Massachusetts pursuant to the MBCA and (iii) filings required under, and compliance with other
applicable requirements of, the HSR Act, no consents or approvals of, or filings, declarations or
registrations with, any Governmental Authority are necessary for the execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Transactions, other than such other consents, approvals, filings, declarations or registrations
that, if not obtained, made or given, would not have or would not reasonably be expected to have a
Parent Material Adverse Effect.
SECTION 4.4 Information Supplied. The information supplied by Parent for inclusion
(or incorporation by reference) in the Proxy Statement will not, on the date it is first mailed to
shareholders of the Company and at the time of the Company Shareholders 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 the light of the circumstances under which
they are made, not misleading. Notwithstanding the foregoing, Parent and Merger Sub make no
representation or warranty with respect to information supplied by or on behalf of the Company for
inclusion or incorporation by reference in the Proxy Statement.
SECTION 4.5 Ownership and Operations of Merger Sub. Parent owns, directly or
indirectly, all of the outstanding capital stock of Merger Sub. Merger Sub was formed solely for
the purpose of engaging in the Transactions, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
SECTION 4.6 Capital Resources. Parent and Merger Sub collectively will have at the
Effective Time, sufficient cash
and cash equivalents available to pay the aggregate Merger Consideration and Option
Consideration and to perform their respective obligations under this Agreement.
SECTION 4.7 Brokers and Other Advisors. Except for Lazard Frères & Co., the fees and
expenses of which will be paid by Parent, no broker, investment banker, financial advisor or other
Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or
commission in connection with the Transactions based upon arrangements made by or on behalf of
Parent or any of its Subsidiaries.
31
ARTICLE V
Additional Covenants and Agreements
SECTION 5.1 Preparation of the Proxy Statement; Shareholders Meeting.
(a) As soon as reasonably practicable following the date of this Agreement (and in any event
within twenty days after the date of this Agreement), the Company shall prepare and file with the
SEC the Proxy Statement. Unless a Company Adverse Recommendation Change (as defined in Section
5.3(d)) shall have occurred prior to the mailing of the Proxy Statement to the Company’s
shareholders, the Company shall include in the Proxy Statement the unanimous recommendation of the
Board of Directors that the shareholders of the Company vote in favor of the adoption of this
Agreement and the written opinion of Deutsche Bank, dated as of the date hereof, to the effect set
forth in Section 3.16. Parent, Merger Sub and the Company will cooperate and consult with each
other in the preparation of the Proxy Statement. Without limiting the generality of the foregoing,
each of Parent and Merger Sub will furnish to the Company the information relating to it required
by the Exchange Act and the rules and regulations promulgated thereunder to be set forth in the
Proxy Statement. The Company shall use its reasonable best efforts to resolve, in consultation
with Parent, all SEC comments with respect to the Proxy Statement as promptly as practicable after
receipt thereof and to cause the Proxy Statement to be mailed to the Company’s shareholders as soon
as practicable after the Proxy Statement is cleared by the SEC. Each of Parent, Merger Sub and the
Company agree to correct any information provided by it for use in the Proxy Statement which shall
have become false or misleading. The Company shall as soon as reasonably practicable (i) notify
Parent and Merger Sub of the receipt of any comments from the SEC with respect to the Proxy
Statement and any request by the SEC for any amendment to the Proxy Statement or for additional
information and (ii) provide Parent with copies of all written correspondence between the Company
and its Representatives, on the one hand, and the SEC, on the other hand, with respect to the Proxy
Statement. No amendment or supplement to the Proxy Statement will be made by the Company without
consultation with Parent.
(b) As soon as reasonably practicable following the date the Proxy Statement is cleared by the
SEC, the Company, acting through its Board of Directors, shall
duly call, give notice of, convene and hold a meeting of its shareholders for the purpose of
adopting this Agreement (the “Company Shareholders Meeting”), which meeting shall be held
on a date no later than the date that is thirty business days following the date the Proxy
Statement is first mailed to the Company’s shareholders. The Company shall take all action
necessary in accordance with applicable Law, the Company’s articles of organization and the
Company’s by-laws to duly call, give notice of and convene the Company Shareholders Meeting, and
shall not postpone or adjourn such meeting except to the extent required by applicable Law. Unless
the Board of Directors of the Company has made a Company Adverse Recommendation Change or has
entered into a Company Acquisition Agreement (as defined in Section 5.3(d)) as permitted by this
Agreement, the Company shall use its reasonable best efforts to solicit from holders of shares of
Company Common Stock entitled to vote at the Company Shareholders Meeting proxies in favor of
adoption of this Agreement
32
and to secure the vote or consent of such holders required by the MBCA
or this Agreement to effect the Merger.
SECTION 5.2 Conduct of Business.
(a) Except as expressly contemplated by this Agreement or as required by applicable Law or as
expressly contemplated by Section 5.2 of the Company Disclosure Schedule, during the period from
the date of this Agreement until the Effective Time, unless Parent otherwise consents (which
consent shall not be unreasonably withheld or delayed), the Company shall use its reasonable best
efforts to, and shall cause its Subsidiaries to use their reasonable best efforts to, conduct its
and their respective businesses in the ordinary course consistent with past practice and preserve
intact its and their present business organizations, keep available the services of its and their
present executive officers and key employees, preserve its and their relationships with
Governmental Authorities and Persons having significant business dealings with the Company or any
of its Subsidiaries and take no action which would adversely affect or delay in any material
respect the ability of either Parent or the Company to obtain any necessary approvals of any
Governmental Authority required for the Transactions.
(b) During the period from the date of this Agreement until the Effective Time, neither the
Company nor its Subsidiaries shall, unless Parent otherwise consents in writing (which written
consent shall not be unreasonably withheld or delayed):
(i) (A) issue, sell, pledge, dispose of, grant, transfer, encumber, or
authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license,
guarantee or encumbrance of, any shares of its capital stock, or any securities or
rights convertible into, exchangeable or exercisable for, or evidencing the right to
subscribe for any shares of capital stock of the Company or any of its Subsidiaries,
or any rights, warrants or options to purchase any shares of capital stock of the
Company or any of its Subsidiaries, or any securities or rights convertible into,
exchangeable or exercisable for, or evidencing the right to subscribe for, any
shares of capital stock of the Company or any of its Subsidiaries or any options,
warrants or other rights of any kind to acquire any shares of such capital stock or
such convertible or exchangeable securities;
provided that the Company may issue shares of Company Common Stock upon the
exercise of Options that are outstanding on the date of this Agreement; (B)
reclassify, split, combine, subdivide, redeem, purchase or otherwise acquire any of
its outstanding shares of capital stock, other than Options or shares of Company
Restricted Stock pursuant to arrangements in effect on the date hereof and disclosed
in the Company Disclosure Schedule as of the date of this Agreement; (C) declare,
set aside for payment, make or pay any dividend on, or make any other distribution
in respect of (whether such dividend or distribution is payable in cash, stock
property or otherwise), any shares of its capital stock; (D) split, combine,
subdivide or reclassify any shares of its capital stock; (E) enter into or modify
any agreement with respect to the voting of the Company or any of its Subsidiaries
capital stock; or (F)
33
amend any material term of any security of the Company or any
of its Subsidiaries;
(ii) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, or issue or sell any debt securities or warrants or
other rights to acquire any debt security of the Company or any of its Subsidiaries,
other than amounts not in excess of $100,000 in the aggregate outstanding at any
time and borrowings in the ordinary course consistent with past practice of business
pursuant to existing lines of credit;
(iii) make any loans or advances to, or investment in, any Person in excess of
$1,000,000 in the aggregate other than loans or advances between any of the
Company’s Subsidiaries or between the Company and any of its Subsidiaries and
advances of reasonable and customary expenses made to officers, directors and
employees pursuant to existing indemnification obligations in compliance with
applicable Laws;
(iv) create or incur any Lien other than Permitted Liens which arise in the
ordinary course of business consistent with past practice;
(v) sell, transfer, lease, license, mortgage, pledge, surrender, encumber,
divest, cancel, abandon or allow to lapse or expire, otherwise dispose of, or agree
to sell, transfer, lease, license, mortgage, pledge, surrender, encumber, divest,
cancel, abandon or allow to lapse or expire or otherwise dispose of, any of its
material properties, assets, licenses, operations, rights, product lines, businesses
or interests therein (including Intellectual Property) except (A) sales, leases,
rentals and licenses in the ordinary course of business consistent with past
practice, (B) pursuant to Contracts in force on the date of this Agreement, (C)
dispositions of obsolete or worthless assets or (D) transfers among the Company and
its Subsidiaries;
(vi) let lapse, abandon or cancel any Material Intellectual Property owned by
the Company or its Subsidiaries, except if consistent with reasonable business
judgment, such Intellectual Property is no longer useful to the Company or any of
its Subsidiaries;
(vii) make capital expenditures in excess of $250,000 in the aggregate which
are not budgeted for in the Company’s current business plan as disclosed in the
Company Disclosure Schedule as of the date of this Agreement;
(viii) make any acquisition (including by merger) of the capital stock or
assets (except for ordinary course purchases of inventory or similar goods
consistent with past practice) of any other Person;
(ix) mortgage or pledge any of its material assets or properties;
(x) merge or consolidate with any other Person in any transaction;
34
(xi) form or commence the operations of any business or any corporation,
partnership, limited liability company, joint venture, business association or other
business organization or division thereof that would be material to the Company and
its Subsidiaries as a whole;
(xii) increase the salary, bonus or compensation of any directors, officers or
employees of the Company or any of its Subsidiaries except for normal increases as a
result of promotions of non-officer employees, in each case in the ordinary course
of business and consistent with past practices or as required by applicable Law, or
make any other change in employment terms for any such Persons or promote any Person
to a position that is an officer (for purposes of this Section 5.1, an “officer”
shall be deemed to be any employee of the Company or any of its Subsidiaries with a
title of Director (or any equivalent thereof) or higher);
(xiii) pay any bonus to any director, officer of employee; provided, however,
that if the Effective Time occurs after March 30, 2008 then the Company may, in
accordance with the terms and pursuant to the conditions set forth in the Company
Plans as exist on the date hereof and after providing a copy of such calculations to
Parent pay bonuses to the extent earned and accrued;
(xiv) enter into any new, or amend any existing, employment agreement, or enter
into any new, or amend any existing, severance agreement or other Contract that
would result in any payment or benefit to, any director, officer or employee of the
Company or any Subsidiary or enter into any new, or amend any existing, Company
Plans of the Company or any of its Subsidiaries;
(xv) change any actuarial or other assumptions used to calculate funding
obligations with respect to any Company Plan or to change the manner in which
contributions to such plans are made or the basis on which such contributions are
determined, except as may be required by GAAP; or forgive any loans to directors,
officers or employees of the Company or any of its Subsidiaries;
(xvi) make or change any Tax election, request any private letter ruling or
similar Tax determination letter, enter into any closing agreement (other than a
closing agreement with respect to the resolution of the current IRS audit described
on Section 3.10 of the Company Disclosure Schedule) or settle or compromise any Tax
liability involving amounts in excess of $100,000 in the aggregate, in each case,
other than in the ordinary course of business;
(xvii) make any changes in financial or tax accounting methods, principles or
practices (or change an annual accounting period), except insofar as may be required
by a change in GAAP or applicable Law;
35
(xviii) amend the Company Charter Documents or the governing documents of any
of the Company’s Subsidiaries;
(xix) enter into, amend or cancel any lease of real property with annual
payment obligations in excess of $250,000;
(xx) other than in the ordinary course of business consistent with past
practice, enter into, amend or cancel any Material Contract or Material Intellectual
Property Contract or Contract that would be a Material Contract if entered into as
of the date hereof;
(xxi) pay, discharge, settle or satisfy any claims in any Litigation (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) involving
amounts in excess of $100,000 in the aggregate or involving injunctive relief;
(xxii) adopt a plan or agreement of complete or partial liquidation or
dissolution;
(xxiii) take any action or omit to take any action that is reasonably likely to
result in any of the conditions to the Merger set forth in Article VII not being
satisfied; or
(xxiv)agree in writing to take any of the foregoing actions.
SECTION 5.3 No Solicitation.
(a) The Company shall not, and shall cause its Subsidiaries and their respective directors,
officers and employees not to, and shall use its best efforts to instruct and cause each investment
banker, financial advisor, attorney, accountant or other advisor, agent and representative retained
by the Company or any Subsidiary (collectively, “Representatives”) not to, directly or
indirectly, (i) solicit, initiate, cause, encourage, or knowingly take any other action to
facilitate, the making of any Takeover Proposal or any inquiry, offer or proposal that may
reasonably be expected to lead to a Takeover Proposal or (ii) other than referring Persons to a
publicly available copy of this Section 5.3, engage in,
continue or otherwise participate in any discussions or negotiations regarding, or furnish to
any Person any non-public information in connection with, any Takeover Proposal or any inquiry,
offer or proposal that may reasonably be expected to lead to, a Takeover Proposal. The Company
shall, and shall cause its Subsidiaries and instruct its Representatives to, immediately cease and
cause to be terminated all existing discussions or negotiations with any Person previously
conducted with respect to any Takeover Proposal and will promptly request each Person that has
heretofore executed a confidentiality agreement in connection with any Takeover Proposal to return
or destroy all confidential information heretofore furnished to such Person by or on behalf of the
Company or any of its Subsidiaries.
(b) Notwithstanding anything to the contrary in the foregoing paragraph, at any time prior to
obtaining the Company Shareholder Approval, in response to a Takeover Proposal that was not
solicited by the Company in breach of Section 5.3(a), the Company
36
may (i) furnish information with
respect to the Company and its Subsidiaries to the Person making a bona fide Takeover Proposal
providing for the acquisition of more than 50% of the consolidated assets or total voting power of
the equity securities of the Company (and such Person’s Representatives) pursuant to a
confidentiality agreement no less restrictive of such Person than the Confidentiality Agreement;
provided that all such information (to the extent that such information has not been previously
provided or made available to Parent) is provided or made available to Parent prior to or
substantially concurrent with the time it is provided or made available to such Person, as the case
may be, and (ii) participate in discussions or negotiations with the Person making such a Takeover
Proposal (and its Representatives) regarding such Takeover Proposal; provided that prior to
providing any such information or participating in any such discussions or negotiations, (A) the
Board of Directors of the Company, after consultation with and having considered the advice of its
independent financial advisor, determines in good faith that such Takeover Proposal constitutes or
is reasonably likely to result in a Superior Proposal and (B) the Board of Directors of the
Company, after consultation with and having considered the advice of outside legal counsel,
determines in good faith that failure to take such action would result in a reasonable probability
that the Board of Directors of the Company would breach its fiduciary duties under applicable Law.
(c) Upon receipt of any Takeover Proposal, the Company shall provide prompt (but in no event
less than twenty-four hours after receipt of any Takeover Proposal) written notice to Parent of the
receipt of any such Takeover Proposal, indicating in connection with such notice the material terms
and conditions of such Takeover Proposal, the identity of such Person making any such Takeover
Proposal and the Company’s current intention with respect to furnishing information to, or entering
into discussions or negotiations with, such Person, and thereafter shall promptly keep Parent
informed of the status and material terms of any such Takeover Proposal.
(d) Except as expressly permitted by this Section 5.3(d), the Board of Directors of the
Company shall not (i)(A) withhold, withdraw, qualify or modify, or propose publicly to withhold,
withdraw, qualify or modify, in a manner adverse to Parent or Merger Sub, the unanimous
recommendation of the Board of Directors of the Company that the shareholders of the Company adopt
this Agreement (the “Company Board Recommendation”) or (B) approve or recommend or propose
publicly to approve or recommend, any transaction
involving a Takeover Proposal (any action described in this clause (i) being referred to as a
“Company Adverse Recommendation Change”) or (ii) approve, authorize, permit or cause the
Company or any of its Subsidiaries to enter into any letter of intent, memorandum of understanding,
agreement in principle or merger, acquisition or similar agreement with respect to any Takeover
Proposal (other than a confidentiality agreement that complies with Section 5.3(b)) (each, a
“Company Acquisition Agreement”). Notwithstanding the foregoing, but subject to Section
5.3(c), if prior to obtaining the Company Shareholder Approval, the Board of Directors of the
Company makes a determination that it has received a Superior Proposal, and after consultation with
and having considered the advice of outside legal counsel determines in good faith that failure to
take such action would result in a reasonable probability that the Board of Directors of the
Company would breach its fiduciary duties under applicable Law, the Board of Directors of the
Company may make a Company Adverse Recommendation Change, and (after taking the steps required
below) the Company or its
37
Subsidiaries may enter into a Company Acquisition Agreement with respect
to such Superior Proposal, if the Company shall have complied with the provisions of this Section
5.3(d) and, concurrently with entering into such Company Acquisition Agreement, shall have
terminated this Agreement pursuant to Section 7.1(d)(ii) and paid all amounts payable under Section
7.3, but the Company or its Subsidiaries may only enter into a Company Acquisition Agreement with
respect to such Superior Proposal at a time that is on or after the fifth day (or the third day, in
the case of a material amendment to a Superior Proposal) following Parent’s receipt of written
notice advising Parent that the Board of Directors of the Company is prepared to accept a Superior
Proposal. Such written notice shall specify the material terms and conditions of such Superior
Proposal (and include a copy of any proposed agreements, understandings or other accompanying
documentation related thereto), identify the Person making such Superior Proposal and state that
the Board of Directors of the Company intends to authorize the Company to and cause the Company to
enter into the Company Acquisition Agreement attached thereto. During such five-day period (or
three-day period in the case of a material amendment), the Company shall negotiate in good faith
with Parent in order to provide an opportunity for Parent to propose such adjustments to the terms
and conditions of this Agreement as would enable the Board of Directors of the Company to proceed
with the Transactions contemplated by this Agreement.
(e) For purposes of this Agreement:
“Takeover Proposal” means any inquiry, proposal or offer from any Person (other than
Parent and its Subsidiaries), directly or indirectly, whether in one transaction or a series of
transactions, relating to any (A) direct or indirect acquisition of assets of the Company and its
Subsidiaries (including securities of Subsidiaries, but excluding sales of assets in the ordinary
course of business) equal to 20% or more of the Company’s consolidated assets or to which 20% or
more of the Company’s revenues or earnings on a consolidated basis are attributable, (B) direct or
indirect acquisition of 20% or more of the outstanding Company Common Stock, (C) tender offer or
exchange offer that if consummated would result in any Person beneficially owning 20% or more of
the outstanding Company Common Stock or (D) merger, consolidation, share exchange, business
combination, joint venture, recapitalization, liquidation, dissolution, reorganization or similar
transaction involving the Company, in each case, other than the Transactions.
“Superior Proposal” means an unsolicited, bona fide written proposal or offer to
acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than
50% of the equity securities of the Company or all or substantially all of the assets of the
Company and its Subsidiaries on a consolidated basis, made by a third party, and which is otherwise
on terms and conditions which the Board of Directors of the Company determines in good faith (after
consultation with outside legal counsel and a financial advisor of national reputation and in light
of all relevant circumstances, including (i) all the terms and conditions of such proposal and this
Agreement, (ii) any proposed changes to this Agreement that may be proposed by Parent in response
to such Superior Proposal, (iii) whether, in the good faith judgment of the Board of Directors of
the Company, the third party is reasonably able to finance the alternative transaction, and (iv)
the ability and timing for satisfaction of the conditions to closing the Merger and such
alternative transaction) to be more favorable to the
38
Company’s shareholders, from a financial point
of view, than the Merger and the other Transactions (on the most recently amended or modified
terms, if amended or modified).
(f) Nothing in this Section 5.3 shall prohibit the Board of Directors of the Company from
taking and disclosing to the Company’s shareholders a position contemplated by Rule 14e-2(a) or
Rule 14d-9 promulgated under the Exchange Act, or other applicable Law, if such Board determines in
good faith, after consultation with outside counsel, that making such disclosure is necessary for
the Company or the members of the Company’s Board of Directors to comply with its or their
disclosure obligations under applicable Law; provided, however, that neither the Company nor its
Board of Directors shall, except as specifically contemplated by Section 5.3(b), make a Company
Adverse Recommendation Change (it being understood and agreed that any “stop, look and listen”
communication required to be provided by the Board of Directors to the shareholders of the Company
pursuant to Rule 14d-9(f) of the Exchange Act shall not constitute a Company Adverse Recommendation
Change and any such communication shall publicly affirm the Company Board Recommendation). In
addition, it is understood and agreed that, for purposes of this Agreement (including Article VII),
a factually accurate public statement by the Company that only describes the Company’s receipt of a
Takeover Proposal and the operation of this Agreement with respect thereto shall not be deemed a
withdrawal, qualification or modification, or proposal by the Board of Directors of the Company to
withdraw, qualify or modify, such Board’s recommendation of this Agreement or the Transactions, or
an approval or recommendation with respect to such Takeover Proposal, so long as such statement
publicly affirms the Company Board Recommendation.
SECTION 5.4 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of the parties hereto shall
cooperate with the other parties and use (and shall cause their respective Subsidiaries to use)
their respective reasonable best efforts to promptly (i) take, or cause to be taken, all actions,
and do, or cause to be done, all things, reasonably necessary, to cause the conditions to Closing
to be satisfied as promptly as practicable and to consummate and make effective, as promptly as
practicable, the Transactions, including preparing and filing promptly and fully all documentation
to effect all necessary filings, notices, petitions, statements, registrations, submissions of
information, applications and other documents
(including any required or recommended filings under applicable Antitrust Laws), (ii) obtain
all approvals, consents, registrations, permits, authorizations and other confirmations from any
Governmental Authority or third party reasonably necessary to consummate the Transactions and (iii)
obtain all approvals, consents, authorizations or other confirmation from any third party in
connection with any Contract to which the Company or any of its Subsidiaries is a party. For
purposes hereof, “Antitrust Laws” means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other applicable Laws
issued by a United States or federal or state Governmental Authority that are designed or intended
to prohibit, restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade or lessening of competition through merger or acquisition.
39
(b) In furtherance and not in limitation of the foregoing, (i) each party hereto agrees to
make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect
to the Transactions as promptly as practicable and in any event within five business days of the
date hereof and to supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and use its reasonable best efforts to take,
or cause to be taken, all other actions consistent with this Section 5.4 necessary to cause the
expiration or termination of the applicable waiting periods under the HSR Act (including any
extensions thereof) as soon as practicable and (ii) the Company and Parent shall each use its
reasonable best efforts to (x) take all action reasonably necessary to ensure that no state
takeover statute or similar Law is or becomes applicable to any of the Transactions and (y) if any
state takeover statute or similar Law becomes applicable to any of the Transactions, take all
action reasonably necessary to enable the Transactions to be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise minimize the effect of such Law on the
Transactions.
(c) Each of the parties hereto shall use its reasonable best efforts to (i) cooperate in all
respects with each other in connection with any filing or submission with a Governmental Authority
in connection with the Transactions and in connection with any investigation or other inquiry by or
before a Governmental Authority relating to the Transactions, including any governmental inquiry,
investigation or proceeding initiated by a private party, and (ii) keep the other party informed in
all material respects and on a reasonably timely basis of any communication received by such party
from, or given by such party to, the Federal Trade Commission, the Antitrust Division of the
Department of Justice or any other Governmental Authority and of any communication received or
given by a private party in connection with any governmental inquiry, investigation or proceeding,
in each case regarding any of the Transactions. Subject to applicable Laws relating to the
exchange of information, Parent shall have the right to direct all matters with any Governmental
Entity consistent with its obligations hereunder; provided that each of the parties hereto shall
have the right to review in advance, and to the extent practicable each will consult the other on,
all the information relating to the other parties and their respective Subsidiaries, as the case
may be, that appears in any filing made with, or written materials submitted to, any third party
and/or any Governmental Authority in connection with any governmental inquiry, investigation or
proceeding with respect to the Transactions. Subject to applicable Laws relating to the exchange
of information, each party shall have the right to
attend or be promptly and fully informed following material conferences and meetings between
the other party and regulators concerning the Transactions.
(d) In furtherance and not in limitation of the covenants of the parties contained in this
Section 5.4, each of the parties hereto shall use its reasonable best efforts to resolve such
objections, if any, as may be asserted by a Governmental Authority or other Person with respect to
the Transactions. Without limiting any other provision hereof, Parent and the Company shall each
use its reasonable best efforts to avoid the entry of, or to have vacated or terminated, any
decree, order or judgment that would restrain, prevent or delay the consummation of the
Transactions.
(e) Notwithstanding anything to the contrary in this Section 5.4, neither Parent nor the
Company shall be required in order to resolve any objections asserted by any
40
Governmental Authority
with respect to the Transactions to divest or agree to the divestiture of any businesses, product
lines or assets, or take or agree to take any other action or agree to any limitation or
restriction, that the Board of Directors of Parent reasonably determines in good faith, after
considering the advice of its management and legal and financial advisors, (i) would have, or would
reasonably be expected to have, individually or in the aggregate, (A) a Material Adverse Effect or
(B) a change, circumstance, event, occurrence or effect on Parent, the Company and/or any of their
respective subsidiaries that would constitute a Material Adverse Effect if it were to occur with
respect to a comparable amount of assets, licenses, operations, rights, product lines, businesses
or interest therein of the Company and its Subsidiaries or (ii) would materially impair the overall
benefits expected, as of the date hereof, to be realized from the consummation of the Transactions.
SECTION 5.5 Public Announcements. The initial press release with respect to the
execution of this Agreement shall be a joint press release to be reasonably agreed upon by Parent
and the Company. Thereafter, neither the Company nor Parent shall issue or cause the publication
of any press release or other public announcement (to the extent not previously issued or made in
accordance with this Agreement) with respect to the Merger, this Agreement or the other
Transactions (other than, in the case of Parent, in connection with a Takeover Proposal or Superior
Proposal) without the prior consent of the other party (which consent shall not be unreasonably
withheld or delayed), except as may be required by Law or by any applicable listing agreement with
a national securities exchange or Nasdaq as determined in the good faith judgment of the party
proposing to make such release (in which case such party shall not issue or cause the publication
of such press release or other public announcement without prior consultation with the other
party).
SECTION 5.6 Access to Information; Confidentiality. Subject to applicable Laws
relating to the exchange of information, the Company shall afford to Parent and Parent’s
Representatives reasonable access during normal business hours to the Company’s properties, books,
Contracts, records and employees, and the Company shall furnish promptly to Parent (i) a copy of
each report, schedule and other document filed by it pursuant to the requirements of Federal or
state securities Laws and (ii) other information concerning its business and properties as Parent
may reasonably request; provided, however,
that (i) no information provided pursuant to this Section 5.6 shall affect or be deemed to
modify any representation or warranty made by the Company herein and (ii) the Company shall not be
obligated to provide such access or information if the Company determines, in its reasonable
judgment after consultation with outside legal counsel, that doing so would violate applicable Law
or a Contract or obligation of confidentiality owing to a third party (if the Company shall have
used reasonable best efforts to obtain the consent of such third party to such inspection or
disclosure) or jeopardize the protection of an attorney-client privilege (if the Company shall have
used its reasonable best efforts to enter into an agreement that would preserve such privilege).
Until the Effective Time, the information provided will be subject to the terms of the
Confidentiality Agreement.
SECTION 5.7 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) any notice or other communication received by such
41
party from any Governmental
Authority in connection with the Transactions or from any Person alleging that the consent of such
Person is or may be required in connection with the Transactions, if the subject matter of such
communication or the failure of such party to obtain such consent could be material to the Company,
the Surviving Corporation or Parent and (ii) any actions, suits, claims, investigations or
proceedings commenced or, to such party’s knowledge, threatened against, relating to or involving
or otherwise affecting such party or any of its Subsidiaries which relate to the Transactions.
(b) Between the date hereof and the Effective Time, Parent will confer in good faith on a
regular basis with one or more representatives of the Company designated to Parent regarding
satisfaction of the conditions to Closing set forth in Article VI of this Agreement. Parent
acknowledges that the Company does not and will not waive any rights it may have under this
Agreement as a result of such consultations. If any event or matter arises after the date of this
Agreement which, if existing or occurring at the date of this Agreement, (i) would have been
required to be set forth or described by the Company in the Company Disclosure Schedule or (ii)
would have caused a representation or warranty in Article III or Article IV hereof, as applicable,
to be violated as of such date, then the Company or Parent, as applicable, shall, for informational
purposes only, deliver to Parent or the Company, as applicable, updated disclosures to reflect such
event or matter as of the Effective Time (except that with respect to Section 3.7, the IRS audit
disclosed on Section 3.10 of the Company Disclosure Schedule or any notification from a
Governmental Authority with respect to federal licensing matters, then the Company shall, for
informational purposes only, deliver to Parent updated disclosures to reflect such event or matter
on or before the first business day following the tenth day after the end of each month prior to
the Effective Time and at the Effective Time); provided, however, that such supplemental disclosure
shall not be required to disclose any such event or matter and the Company Disclosure Schedule
shall not be required to be updated with respect to representations or warranties that are
expressly made as of a specific date. Notwithstanding anything to the contrary in this Section
5.7(b), the receipt or acceptance by Parent of any updated Company Disclosure Schedule shall not
constitute a waiver of any inaccuracies or breaches of any representation or warranty made or to be
made by the Company, shall not be deemed
disclosed for purposes of determining satisfaction of the condition contained in Section
6.2(a), and shall not prevent Parent from terminating this Agreement pursuant to Section 7.1(c)(i)
at any time at or prior to the Closing Date in accordance with the terms of this Agreement.
(c) If any event or matter arises after the date of this Agreement that has had, or would
reasonably be expected to have, a Material Adverse Effect, the Company shall promptly after
becoming aware of such event or matter communicate the occurrence of such event or matter to Parent
and in any event shall communicate such event or matter to Parent in writing within five days of
first becoming aware of such event or matter. Notwithstanding anything to the contrary in this
Section 5.7(c), the receipt or acceptance by Parent of any such communication shall not constitute
a waiver of any inaccuracies or breaches of any representation or warranty made or to be made by
the Company, shall not be deemed disclosed for purposes of determining satisfaction of the
condition contained in Section 6.2(a), and shall not prevent Parent from terminating this Agreement
pursuant to Section 7.1(c)(i) at any time at or prior to the Closing Date in accordance with the
terms of
42
this Agreement. The Company shall use reasonable best efforts to promptly furnish to
Parent notification of any pending or threatened bankruptcy or similar proceeding known to the
Company involving any party to any Material Contract.
SECTION 5.8 Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall cause (including by providing adequate
funding to) the Surviving Corporation to, and the Surviving Corporation shall (i) indemnify and
hold harmless each individual who at the Effective Time is, or at any time prior to the Effective
Time was, a director or officer of the Company or of a Subsidiary of the Company (each, an
“Indemnitee” and, collectively, the “Indemnitees”) with respect to all claims,
liabilities, losses, damages, judgments, fines, penalties, costs (including amounts paid in
settlement or compromise) and shall also advance expenses as incurred to the fullest extent
permitted by applicable law (including fees and expenses of legal counsel) in connection with any
claim, suit, action, proceeding or investigation (whether civil, criminal, administrative or
investigative), whenever asserted, based on or arising out of, in whole or in part, (A) the fact
that an Indemnitee was a director or officer of the Company or such Subsidiary or (B) acts or
omissions by an Indemnitee in the Indemnitee’s capacity as a director, officer, employee or agent
of the Company or such Subsidiary or taken at the request of the Company or such Subsidiary
(including in connection with serving at the request of the Company or such Subsidiary as a
director, officer, employee, agent, trustee or fiduciary of another Person (including any employee
benefit plan)), in each case under (A) or (B), at, or at any time prior to, the Effective Time
(including acts or omissions occurring in connection with the Transactions), to the fullest extent
permitted under the MBCA, and (ii) assume all obligations of the Company and such Subsidiaries to
the Indemnitees in respect of indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time, in each case as provided in (x) the Company
Charter Documents and the organizational documents of such Subsidiaries as currently in effect and
(y) the indemnification agreements listed in Section 5.8(a) of the Company Disclosure Schedule,
which shall survive the Transactions and continue in full force and effect in accordance with
their respective terms, provided the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such Person is not entitled
to indemnification; and provided, further, that any determination required to be made with respect
to whether an officer’s or director’s conduct complies with the standards set forth under the MBCA
or the Company Charter Documents, the organizational documents of the Company’s Subsidiaries or the
indemnification agreements listed in Section 5.8(a) of the Company Disclosure Schedule, as the case
may be, shall be made by independent counsel selected by the Surviving Corporation. Parent agrees
to consult with independent legal counsel selected by the Indemnitee in connection with any
determination required to be made with respect to whether an Indemnitee’s conduct complies with the
standards set forth in the MBCA or the Company Charter Documents, the organizational documents of
the Company’s Subsidiaries or the indemnification agreements listed in Section 5.8(a) of the
Company Disclosure Schedule, as the case may be.
(b) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section
5.8, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly
notify Parent thereof, but the failure to so notify shall not
43
relieve Parent or the Surviving
Corporation of any liability it may have to such Indemnified Party except to the extent such
failure materially prejudices the indemnifying party. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent
or the Surviving Corporation shall have the right to assume the defense thereof and Parent and the
Surviving Corporation shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection
with the defense thereof, except that if Parent or the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between Parent or the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Parent or the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, however, that Parent and the Surviving
Corporation shall be obligated pursuant to this paragraph (b) to pay for only one firm of counsel
for all Indemnified Parties in any jurisdiction unless the use of one counsel for such Indemnified
Parties would present such counsel with a conflict of interest; provided that the fewest number of
counsels necessary to avoid conflicts of interest shall be used, (ii) the Indemnified Parties will
cooperate in the defense of any such matter and (iii) Parent and the Surviving Corporation shall
not be liable for any settlement effected without their prior written consent; and provided,
further, that Parent and the Surviving Corporation shall not have any obligation hereunder to any
Indemnified Party if and when a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final, that the indemnification of such Indemnified Party in
the manner contemplated hereby is prohibited by applicable Law.
(c) Prior to the Effective Time, the Company shall and, if the Company is unable to, Parent
shall use its reasonable best efforts to cause the Surviving Corporation as of the Effective Time
to obtain and fully pay for “tail” insurance policies (providing only for the Side A coverage for
Indemnified Parties where the existing policies also include Side B coverage for the Company) with
a claims period of at least six years from and after the
Effective Time from an insurance carrier with the same or better credit rating as the
Company’s current insurance carrier with respect to directors’ and officers’ liability insurance
and fiduciary liability insurance (collectively, “D&O Insurance”) with benefits and levels
of coverage at least as favorable as the Company’s existing policies with respect to matters
existing or occurring at or prior to the Effective Time (including in connection with this
Agreement or the transactions or actions contemplated hereby); provided, however, that in no event
shall the Company expend for such policies a premium amount in excess of the amount set forth in
the Company Disclosure Schedule.
(d) If the “tail” insurance described in Section 5.8(c) is not obtained, for the six-year
period commencing immediately after the Effective Time, Parent shall maintain in effect the
Company’s current directors’ and officers’ liability insurance covering acts or omissions occurring
at or prior to the Effective Time with respect to those Persons who are currently (and any
additional Persons who at or prior to the Effective Time were or become) covered by the Company’s
directors’ and officers’ liability insurance policies on terms with respect to such coverage, and
in amount, not less favorable to such individuals than those of such policies in effect on the date
hereof (or Parent may substitute therefor policies, issued by
44
reputable insurers, of at least the
same coverage with respect to matters occurring prior to the Effective Time); provided, however,
that, if the aggregate premiums for such insurance shall exceed 300% of the current aggregate
annual premium, then Parent shall provide or cause to be provided policies for the applicable
individuals with the best coverage as shall then be available at an annual premium of 300% of the
current aggregate annual premium and; provided further, that any substitution or replacement of
existing policies shall not result in any gaps or lapses of coverage with respect to facts, events,
acts or omissions occurring at or prior to the Effective Time.
(e) The provisions of this Section 5.8 are (i) intended to be for the benefit of, and shall be
enforceable by, each Indemnitee, his or her heirs and his or her representatives, but only after
the Effective Time, and (ii) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or otherwise. The
obligations of Parent and the Surviving Corporation under this Section 5.8 shall not be terminated
or modified in such a manner as to adversely affect the rights of any Indemnitee to whom this
Section 5.8 applies unless (x) such termination or modification is required by applicable Law or
(y) the affected Indemnitee shall have consented in writing to such termination or modification (it
being expressly agreed that the Indemnitees to whom this Section 5.8 applies shall be third party
beneficiaries of this Section 5.8).
SECTION 5.9 Fees and Expenses. Except as provided in Section 7.3, all fees and
expenses incurred in connection with this Agreement and the Transactions shall be paid by the party
incurring such fees or expenses, whether or not the Transactions are consummated.
SECTION 5.10 Rule 16b-3. Prior to the Effective Time, the Company shall take such
steps as may be reasonably requested by any party hereto to cause dispositions of Company equity
securities (including derivative securities) pursuant to the transactions contemplated by this
Agreement by each individual
who is a director or officer of the Company to be exempt under Rule 16b-3 promulgated under
the Exchange Act to the extent permitted by applicable law.
SECTION 5.11 Employee Matters.
(a) Parent shall continue at least through December 31, 2007 to provide to individuals who are
employed by the Company or its Subsidiaries as of the Effective Time and who remain employed by the
Company or any of its Subsidiaries immediately after the Effective Time (the “Company
Employees”) with compensation and benefits that are substantially comparable in the aggregate
to the compensation and benefits that the Company provided immediately before the Effective Time to
rank-and-file employees generally under the Company Plans (except for compensation and benefits
under any equity compensation plans or any deferred compensation plans (other than any 401(k)
plans)). To the same extent service was recognized under the Company Plans, Parent or one of its
Subsidiaries shall recognize the service of Company Employees with the Company prior to the
Effective Time as service with Parent and its Subsidiaries in connection with participation in any
401(k) plan and any welfare benefit plans and policies (including vacations and holiday policies)
made
45
available to Company Employees by Parent or one of its Subsidiaries following the Effective
Time for purposes of satisfying any service requirements related to waiting periods, vesting
periods and eligibility periods and any requirements for any benefits related to seniority (but
excluding benefit accruals under any pension plans or rights to post-retirement medical benefits or
post-retirement life insurance benefits). Parent will (i) allow the Company Employees to continue
to participate in the Company Plans which provide medical benefits to such employees at the
Effective Time and which are shown on Schedule 5.11(a) (each a “Company Medical Plan”)
through December 31, 2007 and (ii) (A) provide coverage under a replacement plan or plans for each
Company Medical Plan effective January 1, 2008 and either waive (if a replacement plan is
self-insured) or use commercially reasonable efforts to cause an insurance company to waive (if a
replacement plan is insured) under any such replacement plan all limitations as to pre-existing and
at-work conditions, if any, with respect to any participation and coverage requirements applicable
to each Company Employee who was a participant in a Company Medical Plan on December 31, 2007 to
the same extent such limitations were not applicable under the Company Medical Plans and (B)
provide a credit for 2008 under any replacement plan to each Company Employee for any co-payments,
deductibles and out-of-pocket expenses paid by such employee under a Company Medical Plan during
the plan year for a Company Medical Plan which ends on December 31, 2007 unless there were more
than 12 calendar months in such plan year.
(b) Notwithstanding the foregoing, nothing contained herein shall (1) be treated as an
amendment of any particular Company Plan, (2) give any third party any right to enforce the
provisions of this Section 5.11 or (3) obligate Parent, the Surviving Corporation or any of their
Affiliates to (i) maintain any particular Company Plan or (ii) retain the employment of any
particular employee.
(c) From and after the Effective Time, Parent shall, or shall cause the Company to, make
payments to the employees identified on Schedule 5.11(c) in such amounts and on the terms and
subject to the conditions set forth therein.
(d) Prior to making any written or material oral communications to the directors, officers or
employees of the Company or any of its Subsidiaries pertaining to compensation or benefit matters
that are affected by the transactions contemplated by this Agreement, the Company shall provide
Parent with a copy of the intended communication, Parent shall have a reasonable period of time to
review and comment on the communication, and Parent and the Company shall cooperate in providing
any such mutually agreeable communication.
(e) As soon as practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate, any committee of the Board of Directors of the Company administering
the Company’s 1992 and 2001 Employee Stock Purchase Plans (the “ESPPs”)), shall adopt such
resolutions or take such other actions as may be required to provide that with respect to the ESPPs
(A) participants may not increase their payroll deductions or purchase elections from those in
effect on the date of this
46
Agreement, (B) no purchase period shall be commenced after the date of
this Agreement, (C) each participant’s outstanding right to purchase shares of Company Common Stock
under the ESPPs shall be suspended immediately following the end of the purchase period in effect
on the date of this Agreement or if earlier, each participant’s outstanding right to purchase
shares of Company Common Stock under the ESPPs shall terminate on the day immediately prior to the
day on which the Effective Time occurs; provided that, in either case, all amounts allocated to
each participant’s account under the ESPPs as of such date shall thereupon be used to purchase from
the Company whole shares of shares of Company Common Stock at the applicable price for the then
outstanding purchase period and (D) the ESPPs shall terminate immediately prior to the Effective
Time.
SECTION 5.12 Delisting. The Company shall cooperate with Parent and use its
reasonable best efforts to cause the Company’s securities to be de-listed from The NASDAQ Stock
Market and de-registered under the Exchange Act as soon as practicable following the Effective
Time.
SECTION 5.13 No Rights Plan. The Company shall not adopt, and shall cause its
Subsidiaries not to adopt, any shareholders’ rights agreement or any similar plan or agreement that
limits or impairs the ability of any person to purchase or become the direct or indirect beneficial
owner of, shares of Company Common Stock or any other equity or debt securities of the Company or
any of its Subsidiaries.
SECTION 5.14 Securities and Instruments.
(a) Prior to the Effective Time the parties shall cause their respective representatives to
consult with each other regarding the tax treatment of the Notes, the Warrants and the Convertible
Note Hedge, and the Company shall not take any actions reasonably likely to jeopardize the
treatment of the Notes, the Warrants and the Convertible Note Hedge as a synthetic debt instrument
for United States Federal income Tax purposes without Parent’s prior written consent.
(b) Prior to the Effective Time the Company shall not amend, modify or terminate any agreement
or contract entered into in connection with the Warrants or the Convertible Note Hedge, or agree to
do so, without Parent’s prior written consent.
(c) Prior to the Effective Time the Company shall not amend, modify or terminate the indenture
and other agreements with third parties relating to the Notes, or agree to do so, or fail to
perform its obligations pursuant to such indenture and agreements, without Parent’s prior written
consent.
(d) For the avoidance of doubt, no provision of this Section 5.14 shall prohibit the Company
from complying with the terms of the indenture and other agreements with third parties governing
the Notes, the Warrants or the Convertible Note Hedge.
ARTICLE VI
Conditions Precedent
SECTION 6.1 Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligations of each party hereto to effect the Merger shall be subject to the
47
satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date
of the following conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval shall have been
obtained.
(b) Antitrust. The waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No Law enacted, promulgated, issued, entered,
amended or enforced by any Governmental Authority in the United States (collectively,
“Restraints”) shall be in effect enjoining, restraining, preventing or prohibiting
consummation of the Merger or making the consummation of the Merger illegal.
SECTION 6.2 Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are further subject to the satisfaction (or waiver, if
permissible under applicable Law) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties in Sections
3.2, 3.3(a), 3.15(d), 3.18 and 3.19 shall be true and correct in all material respects, at the time
made and as of the Closing Date as if made at and as of such time (except, in each case, to the
extent expressly made as of an earlier date, in which case as of such earlier date). All other
representations and warranties entertained in Article III, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse Effect, shall be true and
correct as of the date hereof and the Closing Date as if made on and as of the Closing Date, (or,
if given as of a specific date, at and as of such date), except where the failure or failures to be
so true and correct have not had, or would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. Parent shall have received a certificate signed on
behalf of the Company by an officer of the Company to such effect. Any supplemental disclosures
pursuant to Section 5.7(b) or (c) shall be disregarded for purposes of this Section 6.2(a).
(b) Performance of Obligations of the Company. The Company shall have performed in
all material respects all obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the
Company by an officer of the Company to such effect.
(c) No Material Adverse Effect. Since the date of this Agreement, there shall have
not occurred a Material Adverse Effect.
SECTION 6.3 Conditions to Obligations of the Company. The obligation of the Company
to effect the Merger is further subject to the satisfaction (or waiver, if permissible under
applicable Law) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of Parent and
Merger Sub contained in this Agreement, without giving effect to any supplemental disclosures
otherwise permitted pursuant to Section 5.7(b) or (c) and
48
disregarding all qualifications and
exceptions contained therein relating to materiality or Parent Material Adverse Effect, shall be
true and correct as of the date hereof and the Closing Date as if made on and as of the Closing
Date (or, if given as of a specific date, at and as of such date), except where the failure or
failures to be so true and correct have not had, or would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. The Company shall have
received a certificate signed on behalf of Parent by an officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub shall
have performed in all material respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed
on behalf of Parent by an officer of Parent to such effect.
ARTICLE VII
Termination
SECTION 7.1 Termination. This Agreement may be terminated by written notice and the
Transactions abandoned at any time prior to the Effective Time, whether before or after receipt of
the Company Shareholder Approval:
(a) by the mutual written consent of the Company and Parent duly authorized by each of their
respective Boards of Directors;
(b) by either of the Company or Parent:
(i) if the Merger shall not have been consummated on or before the
150th day following the date of this Agreement (the “Walk-Away
Date”); provided, however, that if on the Walk-Away Date the condition to
Closing set forth in Section 6.1(b) shall not have been satisfied but all other
conditions to Closing shall be satisfied or shall be capable of being satisfied,
then the Walk-Away Date shall be extended to the 180th day following the
date of this Agreement; provided further, however, that the right to terminate this
Agreement under this Section 7.1(b)(i) shall not be available to a party if the
failure of the Merger to have been consummated on or before the Walk-Away Date was
primarily due to the failure of such party to perform any of its obligations under
this Agreement;
(ii) if any Restraint having the effect set forth in Section 6.1(c) shall be in
effect and shall have become final and non-appealable; provided, however, that the
party terminating this Agreement pursuant to this Section 7.1(b)(ii) shall have
complied with Section 5.4; or
(iii) if (A) the Company Shareholder Approval shall not have been obtained at
the Company Shareholders Meeting duly convened therefor or any adjournment or
postponement thereof or (B) the number of shares of Company Common Stock represented
in person or by proxy at the Company
49
Shareholders Meeting or any such adjournment or
postponement shall be less than the minimum number of shares of Company Common Stock
necessary to constitute a quorum for the transaction of business at the Company
Shareholders Meeting;
(c) By Parent,
(i) if the Company shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements set forth in this
Agreement, which breach or failure to perform (A) would give rise to the failure of
a condition set forth in Section 6.2(a) or (b) and (B) cannot be cured by the
Walk-Away Date or, if curable, has not been cured in all material respects prior to
the earlier to occur of (x) the Walk-Away Date and (y) the date that is 30 days
after written notice thereof shall have been given to the Company; or
(ii) if (A) the Board of Directors of the Company (x) shall have made a Company
Adverse Recommendation Change or (y) causes the Company to enter into a Company
Acquisition Agreement with respect to a Takeover Proposal, or (B) either (I) the
Company shall have failed to duly notice, convene and hold the Company Shareholders
Meeting prior to the time required by Section 5.1(b), or
(II) the minimum number of shares of Company Common Stock necessary to constitute a quorum for the transaction
of business shall have been represented in person or by proxy at the Company
Shareholders Meeting, and the Company shall have failed to take a vote of
shareholders on the Merger and this Agreement at such Company Shareholders Meeting,
or (C) at any time following receipt of a Takeover Proposal, the Company’s Board of
Directors shall have failed to reaffirm the Company Board Recommendation as promptly
as practicable after receipt of any written request to do so from Parent (but in any
event prior to the earlier of (x) the date prior to the date of the Stockholders
Meeting and (y) ten Business Days after the Company’s receipt of such Takeover
Proposal); or
(iii) if a tender offer or exchange offer that, if successful, would result in
any person or group becoming a beneficial owner of 50% or more of the
outstanding shares of Company Common Stock is publicly disclosed (other than by Parent or an
affiliate of Parent) and the Company’s Board of Directors either recommends that the
shareholders of the Company tender their shares in such tender offer or exchange
offer or fails prior to the earlier of (x) the date prior to the date of the
Stockholders Meeting and (ii) ten Business Days after the commencement of such
tender offer or exchange offer to unequivocally recommend that the shareholders of
the Company not tender their shares in such tender offer or exchange offer; or
50
(d) By the Company,
(i) if Parent shall have breached or failed to perform any of its
representations, warranties, covenants or other agreements set forth in this
Agreement, which breach or failure to perform (A) would give rise to the failure of
a condition set forth in Section 6.3 and (B) cannot be cured or shall not have been
cured in all material respects within 30 days after written notice thereof shall
have been received by the Parent (for purposes of clarity, a termination by the
Company pursuant to this Section 7.1(d)(i) shall not, in and of itself, constitute a
Company Adverse Recommendation Change); or
(ii) if it enters into a definitive Company Acquisition Agreement providing for
a Superior Proposal in compliance with Section 5.3(d) and pays the Termination Fee
pursuant to Section 7.3(a).
SECTION 7.2 Effect of Termination. In the event of the termination of this Agreement
as provided in Section 7.1, written notice thereof shall be given to the other party or parties,
specifying the provision hereof pursuant to which such termination is made, and this Agreement
shall forthwith become null and void (other than Sections 5.9, 7.2 and 7.3, Article VIII and the
last sentence of Section 5.6, and the Confidentiality Agreement in accordance with its terms, all
of which shall survive termination of this Agreement), and there shall be no liability on the part
of Parent, Merger Sub or the Company or their respective directors, officers and Affiliates, except
(i) the Company may have liability as provided in Section 7.3, and (ii) nothing in this Section 7.2
shall relieve any party from liability for fraud or any willful breach of this Agreement.
SECTION 7.3 Termination Fee.
(a) If (x) Parent exercises its right to terminate this Agreement under Section 7.1(c)(ii) or
Section 7.1(c)(iii), or (y) the Company exercises its right to terminate this Agreement under
Section 7.1(b)(i) or (iii) at a time when Parent is entitled to terminate this Agreement pursuant
to Section 7.1(c)(ii) or Section 7.1(c)(iii), or (z) the Company exercises its right to terminate
this Agreement under Section 7.1(d)(ii), the Company shall pay to Parent (i) $52,500,000 (the
“Termination Fee”) and (ii) all reasonable documented out-of-pocket fees and expenses
(including, without limitation, reasonable fees and expenses of counsel, accountants, investment
bankers, experts and consultants) incurred by Parent in connection with the Transactions or related
to the authorization, preparation, negotiation, financing, execution and performance of this
Agreement and the transactions contemplated hereby up to a maximum amount of $6,000,000 (the
“Parent Expenses”). Payments under this Section 7.3(a) shall be made concurrently with
termination under Section 7.1(b)(i) or (iii) or Section 7.1(d)(ii) and, in the case of a
termination under Section 7.1(c)(ii) or (c)(iii), within five business days of Parent’s demand
therefor.
(b) If (i) either Parent or the Company exercises its right to terminate this Agreement under
Section 7.1(b)(i) or 7.1(b)(iii) or Parent exercises its right to terminate this
Agreement under Section 7.1(c)(i), and (ii) prior to such termination the Company or any of
its Subsidiaries has received an Alternative Proposal (or an Alternative Proposal or an
51
intention
to make an Alternative Proposal has been publicly announced), then the Company shall pay to Parent
the Parent Expenses within five business days of Parent’s demand therefor. In addition, if within
twelve months after the termination of this Agreement as described in the previous sentence, the
Company consummates any Alternative Proposal or enters into an Acquisition Agreement relating to
any Alternative Proposal and subsequently consummates such Acquisition Proposal within eighteen
months after termination of this Agreement, then the Company shall pay to Parent the Termination
Fee within five business days of Parent’s demand therefor.
(c) For purposes of this Agreement, “Alternative Proposal” means, other than the
Transactions, any offer or proposal with respect to (i) a merger, consolidation, business
combination, reorganization, recapitalization, joint venture, liquidation, dissolution or similar
transaction involving the Company pursuant to which the shareholders of the Company, immediately
prior to such transaction, would own less than 75% of the voting equity securities of the entity
surviving or resulting from such transaction (or the ultimate parent entity thereof), (ii) any
purchase or other acquisition of 50% or more of the consolidated assets of the Company or (iii) any
purchase or other acquisition (by tender offer, exchange offer or otherwise) of 50% or more of the
outstanding voting equity securities of the Company.
(d) All payments under this Section 7.3 shall be made by wire transfer of immediately
available funds to an account designated by the party entitled to receive such payment. Each of
the parties hereto acknowledges that the agreements contained in this Section 7.3 are an integral
part of the transactions contemplated by this Agreement, and that, without these agreements, the
Company, Parent and Merger Sub would not enter into this Agreement. Accordingly, if the Company
fails to pay in a timely manner any of the amounts due pursuant to this Section 7.3, and, in order
to obtain such payment, Parent makes a claim that results in a judgment against the Company, the
Company shall pay to Parent its reasonable fees and expenses (including reasonable attorneys’ fees
and expenses) in connection with such suit, together with interest on the amounts set forth in this
Section 7.3 at the prime rate of Citibank, N.A. in effect on the date such payment was required to
be made.
(e) Notwithstanding anything to the contrary contained herein, in no event shall the Company
be obligated to make more than one payment of the Parent Expenses or the Termination Fee.
ARTICLE VIII
Miscellaneous
SECTION 8.1 No Survival of Representations and Warranties. The representations,
warranties and agreements in this Agreement shall terminate at the Effective Time or, except as
otherwise provided in Section 7.2, upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements that contemplate
performance after the Effective Time shall survive the Effective Time and those set forth in
Sections 5.9, 7.2 and 7.3 and this Article VIII shall survive termination indefinitely. The
52
Confidentiality Agreement shall (a) survive termination of this Agreement in accordance with its
terms and (b) terminate as of the Effective Time.
SECTION 8.2 Amendment or Supplement. At any time prior to the Effective Time, this
Agreement may be amended or supplemented in any and all respects, whether before or after receipt
of the Company Shareholder Approval, by written agreement of duly authorized officers of the
parties hereto; provided, however, that following approval of the Transactions by the shareholders
of the Company, there shall be no amendment or change to the provisions hereof which by Law would
require further approval by the shareholders of the Company without such approval.
SECTION 8.3 Extension of Time, Waiver, Etc. At any time prior to the Effective Time,
any party may, subject to applicable Law, (a) waive any inaccuracies in the representations and
warranties of any other party hereto, (b) extend the time for the performance of any of the
obligations or acts of any other party hereto or (c) waive compliance by the other party with any
of the agreements contained herein or, except as otherwise provided herein, waive any of such
party’s conditions, but in any such case, only by means of a writing duly executed by the party to
be charged. Notwithstanding the foregoing, no failure or delay by the Company, Parent or Merger
Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the exercise of any
other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of such party.
SECTION 8.4 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by
any of the parties without the prior written consent of the other parties; provided, however, that
Merger Sub may freely assign its rights to a Subsidiary of Parent without such prior written
approval, but no such assignment shall relieve Merger Sub of any of its obligations hereunder.
Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the parties hereto and their respective successors and permitted assigns.
Any purported assignment not permitted under this Section shall be null and void.
SECTION 8.5 Counterparts. This Agreement may be executed in counterparts (each of
which shall be deemed to be an original but all of which taken together shall constitute one and
the same agreement) and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the Company Disclosure Schedule, the exhibits hereto, the documents and
instruments relating to the Merger referred to herein and the Confidentiality Agreement (a)
constitute the entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties, with respect to the subject matter of this Agreement and the
Confidentiality Agreement and (b) are not intended to and shall not confer upon any Person other
than the parties hereto any rights, benefits or remedies except, after the Effective Time, the
right to receive the Merger Consideration pursuant to Section 2.2 and the
53
provisions of Section
5.8, it being agreed by the parties that the rights created thereby shall not arise unless and
until the Effective Time occurs. Parent and Merger Sub shall be jointly and severally liable for
the breach of this Agreement by either Parent or Merger Sub.
SECTION 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by, and construed in accordance with, (i) for purposes of
Article I, Article II and provisions relating to the fiduciary duties of the board of directors of
the Company and the MBCA, the Laws of the Commonwealth of Massachusetts (without regard to its
principles of conflicts of laws), applicable to contracts executed in and to be performed entirely
within that Commonwealth and (ii) in respect of all other provisions of this Agreement, the Laws of
the State of Delaware applicable to contracts executed in and to be performed entirely within such
State.
(b) Each party irrevocably and unconditionally (i) consents to submit to the jurisdiction of
the courts of the State of Delaware and of the United States of America located in the State of
Delaware for any action, suit or proceeding arising out of or relating to this agreement (and each
party irrevocably and unconditionally agrees not to commence any such action, suit or proceeding
except in such courts), (ii) waives any objection to the laying of venue of any such action, suit
or proceeding in any such courts and (iii) waives and agrees not to plead or claim that any such
action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
(c) Each of the parties hereto hereby irrevocably waives any and all rights to trial by jury
in any legal proceeding arising out of or related to this Agreement.
SECTION 8.8 Specific Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in the courts of the State of
Delaware and of the United States of America located in the State of Delaware, without bond or
other security being required.
SECTION 8.9 Notices. All notices, requests and other communications to any party
hereunder shall be in writing and shall be deemed given upon receipt if delivered personally,
facsimiled (which is confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses:
If to Parent or Merger Sub, to:
Medco Health Solutions, Inc.
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx
Facsimile: (000) 000-0000
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx Xxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx
Facsimile: (000) 000-0000
54
with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
If to the Company, to:
PolyMedica Corporation
000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Xxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Xxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
or such other address or facsimile number as such party may hereafter specify by like notice to the
other parties hereto. Any notices, requests and other communications received after 5 P.M. in the
place of receipt shall be deemed received on the next succeeding business day in the place of
receipt.
SECTION 8.10 Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or incapable of being
enforced by any rule of Law or public policy, all other terms, provisions and conditions of this
Agreement shall nevertheless remain in full force and effect. 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 to the fullest extent permitted by applicable Law in an acceptable
manner to the end that the Transactions are fulfilled to the extent possible.
SECTION 8.11 Definitions.
(a) As used in this Agreement, the following terms have the meanings ascribed thereto below:
“Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, controls, or is controlled by, or is under common control with, such Person. For this
purpose, “control” (including, with its correlative meanings, “controlled by” and “under common
control with”) shall mean the possession, directly or indirectly, of the power to
55
direct or cause
the direction of management or policies of a Person, whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise.
“business day” shall mean a day except a Saturday, a Sunday or other day on which the
SEC or banks in the City of New York are authorized or required by Law to be closed.
“Confidentiality Agreement” shall mean that certain Confidentiality Agreement, dated
as of August 9, 2007 between Parent and the Company, as such agreement may be amended from time to
time.
“Convertible Note Hedge” means the transactions entered into pursuant to (1) that
certain confirmation between the Company and Bank of America, N.A., dated September 13, 2006 and
carrying the Bank of American, N.A. Reference Number 24058 and (2) that certain confirmation
between the Company and Deutsche Bank AG acting through its London branch (“DB”), dated September
13, 2006 and carrying the DB Reference Number NY-NY-OC 130732-1.
“Environmental Laws” means any and all federal and state Laws for the protection of
the environment, natural resources or human health and safety, including regulations, rules,
standards and Permits issued by any court, administrative agency or commission or other
Governmental Authority under such laws, and shall include without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. §§ 9601 et seq.), the Clean Air
Act (42 U.S.C. §§ 7401 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et
seq.), the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Occupational Safety and Health Act (29
U.S.C. §§ 651 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.) the Safe
Drinking Water Act (42 U.S.C. §§ 300f et seq.), and their state and local counterparts and any and
all Laws, regulations or otherwise relating to Hazardous Materials, pollution, or contamination of
the environment.
“Environmental Claim” means any claim (including contractual claims and
indemnification claims), action, cause of action, investigation or notice (written or oral) that
would reasonably be expected to result in liability to, or expenditures by, in either case, outside
the ordinary course of business, the Company or any of its Subsidiaries in excess of $50,000 by any
Person alleging potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) based on or resulting from (i) the
presence, or Release into the environment, of any Hazardous Material at any location,
currently or formerly owned, operated, used or leased by the Company or any of its Subsidiaries, as
applicable, or (ii) circumstances forming the basis of any violation, or alleged violation, of or
other liability arising under any Environmental Law.
“Environmental Liabilities” with respect to any Person, shall mean any and all
liabilities (including those based on strict liability) of or relating to such Person or any of its
Subsidiaries (including any entity which is, in whole or in part, a predecessor of such Person or
any of such Subsidiaries), whether vested or unvested, contingent or fixed, including
56
contractual,
which (i) arise under applicable Environmental Laws or with respect to Hazardous Materials and (ii)
relate to actions occurring or conditions existing on or prior to the Closing Date.
“GAAP” shall mean generally accepted accounting principles in the United States.
“Governmental Authority” shall mean any government, court, regulatory or
administrative agency, commission or authority or other governmental instrumentality, federal,
state or local, domestic, foreign or multinational.
“Hazardous Material” shall mean all pollutants, all contaminants, and all substances,
mixtures, chemicals, wastes, products, by products, or materials in any form or condition listed,
characterized or otherwise regulated as hazardous, toxic, explosive, dangerous, flammable or
radioactive under any Environmental Law or the presence of which in the environment is prohibited
limited, regulated, or can serve as the basis of liability including (i) petroleum, petroleum
products, petroleum wastes, asbestos or polychlorinated biphenyls and (ii) in the United States,
all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National
Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5.
“Health Care Laws” shall mean any and all federal and state Laws regarding healthcare
or the delivery of medical services, including (i) all rules and regulations of the Medicare and
Medicaid programs, and any other federal or state health care programs; (ii) all Laws relating to
health care fraud and abuse, including (A) the Xxxx-Xxxxxxxx Xxx, 00 X.X.X. § 0000x 0x(x), (X) the
Federal Civil Monetary Penalties statute, 42 U.S.C. § 1320a 7a, (C) the federal physician
self-referral prohibition, 42 U.S.C. § 1395nn, 42 C.F.R. § 411.351 et seq., (D) the False Claims
Act, 31 U.S.C. § 3729 et seq., (E) any and all parallel state Laws relating to health care fraud
and abuse; and (F) any other federal or state Laws relating to fraudulent, abusive or unlawful
practices connected in any way with the provision of health care items or services, or the billing
for or claims for reimbursement for such items or services provided to a beneficiary of any state,
federal or other governmental health care or health insurance program or any private payor; (iii)
federal or state Laws relating to billing or claims for reimbursement submitted to any third party
payor; (iv) federal or state Laws relating to the practice of medicine, nursing, pharmacy, and any
other healthcare-related profession, occupation, or activity (including, without limitation,
product distribution and dispensing); (v) federal or state Laws related to the provision of
laboratory services; (vi) the Federal Food, Drug and Cosmetic Act, the Public Health Service Act,
the Controlled
Substances Act, the Poison Prevention Packaging Act, and all other federal and state Laws
relating to the manufacture, purchase, sale, packaging, repackaging, labeling, advertising,
handling, provision, distribution, prescribing, compounding, dispensing, importation, exportation,
or disposal of any medical equipment, supplies, devices or similar products or services, any drugs
or drug-related products, or any listed chemicals or related products of any kind bought or sold by
the Company or any of its Subsidiaries; and (vii) the Health Insurance Portability and
Accountability Act of 1996 (“HIPAA”), as amended, and any rules or regulations promulgated
thereunder.
57
“HSR Act” shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
“Knowledge” shall mean, in the case of the Company, the actual knowledge after due
inquiry and investigation, as of the date of this Agreement, of the individuals listed on Exhibit
C.
“Notes” means the Company’s 1.0% Convertible Subordinated Notes due September 15,
2011.
“Permitted Liens” shall mean (i) any Liens for Taxes not yet due and payable or which
are being contested in good faith by appropriate proceedings, (ii) carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other similar liens, (iii) pledges or deposits in
connection with workers’ compensation, unemployment insurance and other social security
legislation, (iv) easements, rights-of-way, covenants, restrictions and other similar encumbrances
of record as of the date hereof, (v) easements, rights-of-way, covenants, restrictions and other
similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not
material in amount and that do not, in any case, materially detract from the value or the use of
the property subject thereto, (vi) statutory landlords’ liens and liens granted to landlords under
any lease, (vii) any purchase money security interests, equipment leases or similar financing
arrangements, and (viii) any Liens securing obligations under $250,000.
“Person” shall mean an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity, including a Governmental Authority.
“Recognized Channel” refers generally to the legal department, compliance department,
and human resources department, as well as pharmacists-in-charge, the persons listed on Exhibit C
hereto, and any other employee of the Company or any of its Subsidiaries with a title of Vice
President (or any equivalent thereof) or higher.
“Release” means any release, spill, emission, discharge, leaking, pumping, pouring,
emitting, emptying, escaping, dumping, injection, deposit, disposal, dispersal, leaching or
migration into the indoor or outdoor environment (including, without limitation, ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil, surface water,
groundwater or property or the abandonment of tanks, drums, or other closed receptacles containing
any Hazardous Materials.
“Subsidiary” when used with respect to any party, shall mean any corporation, limited
liability company, partnership, association, trust or other entity of which securities or other
ownership interests representing more than 50% of the equity and more than 50% of the ordinary
voting power (or, in the case of a partnership, more than 50% of the general partnership interests)
are, as of such date, owned by such party or one or more Subsidiaries of such party or by such
party and one or more Subsidiaries of such party.
“Transactions” refers collectively to this Agreement and the transactions contemplated
hereby, including the Merger.
58
“Warrants” means the transactions entered into pursuant to (1) that certain
confirmation between the Company and Bank of America, N.A., dated September 13, 2006 and carrying
the Bank of America, N.A., Reference Number 24060 and (2) that certain confirmation between the
Company and DB and carrying the DB Reference Number NY-NY-OC 130731-1.
SECTION 8.12 Interpretation.
(a) When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule,
such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by the words
“without limitation”. The words “hereof”, “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. All terms defined in this Agreement shall
have the defined meanings when used in any document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such term. Any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and instruments
incorporated therein. References to a Person are also to its permitted assigns and successors.
(b) The parties hereto have participated jointly in the negotiation and drafting of this
Agreement and, in the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
[signature page follows]
59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.
| MEDCO HEALTH SOLUTIONS, INC. |
||||
| By: | /s/ Xxxxx X. Xxxx, Xx. | |||
| Name: | Xxxxx X. Xxxx, Xx. | |||
| Title: | Chairman & CEO | |||
| MACQ CORP. |
||||
| By: | /s/ Xxxx X. Xxxxxxxx | |||
| Name: | Xxxx X. Xxxxxxxx | |||
| Title: | President | |||
| POLYMEDICA CORPORATION |
||||
| By: | /s/ Xxxxxxx Xxxx | |||
| Name: | Xxxxxxx Xxxx | |||
| Title: | Chief Executive Officer | |||
TABLE OF CONTENTS
ARTICLE I THE MERGER |
1 | |||
Section 1.1 The Merger |
1 | |||
Section 1.2 Closing |
1 | |||
Section 1.3 Effective Time |
1 | |||
Section 1.4 Effects of the Merger |
2 | |||
Section 1.5 Articles of Organization and By-laws of the Surviving Corporation |
2 | |||
Section 1.6 Directors and Officers of the Surviving Corporation |
2 | |||
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES; COMPANY STOCK OPTIONS |
2 | |||
Section 2.1 Effect on Capital Stock |
2 | |||
Section 2.2 Exchange of Certificates |
3 | |||
Section 2.3 Appraisal/Dissenters’ Rights |
5 | |||
Section 2.4 Company Stock Options and Restricted Shares |
6 | |||
Section 2.5 Treatment of the Warrants |
7 | |||
Section 2.6 Adjustments |
7 | |||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
7 | |||
Section 3.1 Organization, Standing and Corporate Power |
7 | |||
Section 3.2 Capitalization |
9 | |||
Section 3.3 Authority; Noncontravention; Voting Requirements |
10 | |||
Section 3.4 Governmental Approvals |
11 | |||
Section 3.5 Company SEC Documents; Undisclosed Liabilities |
11 | |||
Section 3.6 Absence of Certain Changes |
13 | |||
Section 3.7 Legal Proceedings |
14 | |||
Section 3.8 Compliance With Laws; Permits |
14 | |||
Section 3.9 Information Supplied |
15 | |||
Section 3.10 Tax Matters |
15 | |||
Section 3.11 Employee Benefits and Labor Matters |
17 |
TABLE OF CONTENTS
(continued)
(continued)
Section 3.12 Environmental Matters |
20 | |||
Section 3.13 Properties |
20 | |||
Section 3.14 Intellectual Property |
22 | |||
Section 3.15 Material Contracts |
24 | |||
Section 3.16 Opinion of Financial Advisor |
26 | |||
Section 3.17 Brokers and Other Advisors |
26 | |||
Section 3.18 State Takeover Laws |
26 | |||
Section 3.19 Shareholders’ Rights Agreement |
26 | |||
Section 3.20 Transactions with Affiliates |
27 | |||
Section 3.21 Change of Control Agreements |
27 | |||
Section 3.22 Regulatory Compliance |
27 | |||
Section 3.23 Ethical Business Practices |
29 | |||
Section 3.24 Insurance |
29 | |||
Section 3.25 No Other Representations or Warranties |
30 | |||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
30 | |||
Section 4.1 Organization; Standing |
30 | |||
Section 4.2 Authority; Noncontravention |
30 | |||
Section 4.3 Governmental Approvals |
31 | |||
Section 4.4 Information Supplied |
31 | |||
Section 4.5 Ownership and Operations of Merger Sub |
31 | |||
Section 4.6 Capital Resources |
31 | |||
Section 4.7 Brokers and Other Advisors |
31 | |||
ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS |
32 | |||
Section 5.1 Preparation of the Proxy Statement; Shareholders Meeting |
32 | |||
Section 5.2 Conduct of Business |
33 | |||
Section 5.3 No Solicitation |
36 | |||
Section 5.4 Reasonable Best Efforts |
39 | |||
Section 5.5 Public Announcements |
41 |
ii
TABLE OF CONTENTS
(continued)
(continued)
Section 5.6 Access to Information; Confidentiality |
41 | |||
Section 5.7 Notification of Certain Matters |
41 | |||
Section 5.8 Indemnification and Insurance |
43 | |||
Section 5.9 Fees and Expenses |
45 | |||
Section 5.10 Rule 16b-3 |
45 | |||
Section 5.11 Employee Matters |
45 | |||
Section 5.12 Delisting |
47 | |||
Section 5.13 No Rights Plan |
47 | |||
Section 5.14 Securities and Instruments |
47 | |||
ARTICLE VI CONDITIONS PRECEDENT |
48 | |||
Section 6.1 Conditions to Each Party’s Obligation to Effect the Merger |
47 | |||
Section 6.2 Conditions to Obligations of Parent and Merger Sub |
48 | |||
Section 6.3 Conditions to Obligations of the Company |
48 | |||
ARTICLE VII TERMINATION |
49 | |||
Section 7.1 Termination |
49 | |||
Section 7.2 Effect of Termination |
51 | |||
Section 7.3 Termination Fee |
51 | |||
ARTICLE VIII MISCELLANEOUS |
52 | |||
Section 8.1 No Survival of Representations and Warranties |
52 | |||
Section 8.2 Amendment or Supplement |
53 | |||
Section 8.3 Extension of Time, Waiver, Etc |
53 | |||
Section 8.4 Assignment |
53 | |||
Section 8.5 Counterparts |
53 | |||
Section 8.6 Entire Agreement; No Third-Party Beneficiaries |
53 | |||
Section 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial |
54 | |||
Section 8.8 Specific Enforcement |
54 | |||
Section 8.9 Notices |
54 | |||
Section 8.10 Severability |
55 | |||
Section 8.11 Definitions |
55 |
iii
TABLE OF CONTENTS
(continued)
(continued)
Section 8.12 Interpretation |
59 | |||
Exhibit A Form of Articles of Organization of Surviving Corporation |
||||
Exhibit B Form of By-laws of Surviving Corporation |
||||
Exhibit C Individuals deemed to have “Knowledge” |
iv
