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EXHIBIT 2.01
MERGER AGREEMENT
DATED AS OF DECEMBER 14, 1998
BY AND AMONG
QUINTILES TRANSNATIONAL CORP.,
QTRN ACQUISITION CORP.,
AND
PHARMACEUTICAL MARKETING SERVICES INC.
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MERGER AGREEMENT, dated as of December 14, 1998, by and among Quintiles
Transnational Corp., a North Carolina corporation ("Parent"), QTRN Acquisition
Corp., a North Carolina corporation and a direct wholly-owned subsidiary of
Parent ("Sub"), and Pharmaceutical Marketing Services Inc., a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have determined that the merger of the Company with and into Sub (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, would be fair and in the best interests of their respective
stockholders;
WHEREAS, such Boards of Directors have approved the Merger, pursuant to
which each share of common stock, par value $.01 per share, of the Company (the
"Company Common Stock", which term also refers to and includes, unless the
context otherwise requires, the associated Rights, as defined in Section 8.04)
issued and outstanding immediately prior to the Effective Time of the Merger (as
defined in Section 1.03), other than shares owned directly by the Company,
Parent or Sub, will be converted into the right to receive, at the election of
each holder of Company Common Stock, either (i) common stock, par value $.01 per
share, of Parent ("Parent Common Stock") or (ii) Parent Common Stock and a
Contingent Value Payment (individually a "CVP" and collectively the "CVPs"),
pursuant to the terms and conditions of the CVPs as described in Exhibit A
hereto;
WHEREAS, the Merger and this Agreement require the vote of the holders
of a majority of the outstanding shares of the Company Common Stock for the
approval thereof (the "Company Stockholder Approval");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition of Parent's willingness to enter into this Agreement, Parent
and the Company are entering into a stock option agreement, dated as of the date
hereof, in the form of Exhibit B hereto (the "Stock Option Agreement"), pursuant
to which the Company is granting Parent an option to purchase shares of Company
Common Stock;
WHEREAS, Parent, Sub, and the Company desire to make certain
representations, warranties, covenants, and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and the Stock Option
Agreement, the parties agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the North Carolina Business
Corporation Act (the "NCBA") and the Delaware General Corporation Law (the
"DGCL"), the Company shall be merged with and into Sub at the Effective Time of
the Merger. At the Effective Time of the Merger, the separate existence of the
Company shall cease, and the Sub shall continue as the surviving corporation.
SECTION 1.02. CLOSING. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.01, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. on the first business day after satisfaction of the conditions set
forth in Article VI (or as soon as practicable thereafter following satisfaction
or waiver of the conditions set forth in Article VI) (the "Closing Date"), at
the offices of Smith, Anderson, Blount, Dorsett, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.L.P.,
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another
date, time or place is agreed to in writing by the parties hereto.
SECTION 1.03. EFFECTIVE TIME OF THE MERGER. Upon the Closing, the
parties shall file with the Secretary of State of the State of North Carolina
and the Secretary of State of the State of Delaware articles (or certificate in
Delaware) of merger (the "Articles of Merger") executed in accordance with the
relevant provisions of the NCBCA and the DGCL and shall make all other filings
or recordings required under the NCBCA and the DGCL. The Merger shall become
effective at such time on the Closing Date as the Articles of Merger are duly
filed with the Secretary of State of the State of North Carolina and the
Secretary of State of the State of Delaware, or at such other time on the
Closing Date as is permissible in accordance with the NCBCA and the DGCL and as
Sub and the Company shall agree should be specified in the Articles of Merger
(the time the Merger becomes effective being the "Effective Time of the
Merger").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the applicable provisions of the NCBCA and the DGCL. As used
herein, "Surviving Corporation" shall mean and refer to the Sub, at and after
the Effective Time of the Merger, as the surviving corporation in the Merger.
SECTION 1.05. ARTICLES OF INCORPORATION; BY-LAWS.
(a) At the Effective Time of the Merger, and without any
further action on the part of the Company or Sub, the articles of incorporation
of Sub as in effect immediately prior to the Effective Time of the Merger shall
be the articles of incorporation of the Surviving Corporation at the Effective
Time of the Merger until thereafter amended as provided therein or by applicable
law, except that the name of Sub in such articles of incorporation will be
changed to be Quintiles ▇▇▇▇▇-▇▇▇▇▇, Inc.
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(b) At the Effective Time of the Merger, and without any
further action on the part of the Company or Sub, the by-laws of Sub as in
effect immediately prior to the Effective Time of the Merger shall be the
by-laws of the Surviving Corporation at the Effective Time of the Merger until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. DIRECTORS. The directors of Sub immediately prior to the
Effective Time of the Merger shall be the directors of the Surviving Corporation
at the Effective Time of the Merger, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
SECTION 1.07. OFFICERS. The officers of Sub immediately prior to the
Effective Time of the Merger shall be the officers of the Surviving Corporation
at the Effective Time of the Merger, until the earlier of their resignation or
removal or until their respective successors are duly elected or appointed and
qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the
Company, Sub or any holder of any shares of Company Common Stock or any shares
of capital stock of Sub:
(a) Cancellation of Treasury Stock and Parent-Owned
Company Common Stock. Each share of Company Common Stock that is owned by the
Company, Parent or Sub shall automatically be cancelled and retired and shall
cease to exist, and no cash, Parent Common Stock, CVPs or other consideration
shall be delivered or deliverable in exchange therefor.
(b) Conversion of Company Common Stock. Subject to
Section 2.02(e), each issued and outstanding share of Company Common Stock
(other than shares cancelled pursuant to Section 2.01(a)) shall be converted
into the right to receive, at the election of the holder thereof, either (i) on
the Closing Date, that fraction of a fully paid and nonassessable share of
Parent Common Stock determined by dividing Fifteen Dollars and Forty Cents
($15.40) by the "Average Trading Price" (the "Exchange Ratio") or (ii) (A) on
the Closing Date, that fraction of a fully paid and nonassessable share of
Parent Common Stock determined by dividing the Exchange Ratio in half and (B) at
any time on or prior to the Maturity Date (as defined in Exhibit A), as
specified by such holder, that fraction of a fully paid and nonassessable share
of Parent Common Stock determined by dividing the Exchange Ratio in half and (C)
on the Maturity Date, on the terms but subject to the further conditions
described in Exhibit A and the following two sentences, a CVP (the consideration
described in each of subparagraphs 2.01(b)(i) and 2.01(b)(ii) herein is
individually referred to as the "Per Share Merger Consideration"). For each
share of Parent Common Stock received by a former holder of Company Common Stock
on the Maturity Date, Parent shall pay to such holder, on the terms but subject
to the further conditions set forth in Exhibit A, cash equal to the amount, if
any, as determined by Parent, by which the Average Trading Price exceeds the CVP
Average Trading
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Price (as defined in Exhibit A). Shares of Parent Common Stock received by a
former holder of Company Common Stock prior to the Maturity Date shall not give
rise to any entitlement to a CVP. For purposes of this Agreement, "Average
Trading Price" shall mean the average of the closing prices per share of the
Parent Common Stock on the Nasdaq National Market (or such United States
exchange on which the Parent Common Stock is then listed) for the aggregate of
ten (10) trading days ending on the day which is two (2) days immediately
preceding the Closing Date.
(c) Cancellation and Retirement of Company Common Stock.
As of the Effective Time of the Merger, all shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time of the Merger
shall no longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares of Company Common Stock (collectively, the "Certificates") shall, to the
extent such Certificate represents such shares, cease to have any rights with
respect thereto, except the right to receive the Parent Common Stock and CVPs
(and cash in lieu of fractional shares) to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 2.02.
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. As of the Effective Time of the
Merger, Parent shall enter into an agreement with a bank or trust company
organized under the laws of the United States or any state thereof with capital,
surplus and undivided profits of at least Five Hundred Million Dollars
($500,000,000) as may be designated by Parent (and acceptable to the Company)
(the "Exchange Agent") which shall provide that Parent shall deposit, or cause
to be deposited, with the Exchange Agent, for the benefit of holders of the
Certificates, for exchange in accordance with this Article II, certificates
representing the shares of Parent Common Stock (such certificates for shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto with a record date on or after the Effective Time of the Merger and any
cash payable in lieu of any fractional shares of Parent Common Stock, being
hereinafter referred to as the "Exchange Fund"), issuable pursuant to Section
2.01 in exchange for outstanding shares of Company Common Stock.
(b) Exchange Procedures. Parent shall use commercially
reasonable efforts to cause the Exchange Agent to mail, as soon as reasonably
practicable after the Effective Time of the Merger, to each holder of record of
Certificates immediately prior to the Effective Time of the Merger whose shares
were converted pursuant to Section 2.01(b), (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 Exchange
Agent, and which shall be in such form and have such other provisions as Parent
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for, at the election of such holder, either (A)
certificates representing all of the shares of Parent Common Stock issuable
immediately to such holder or (B) certificates representing half of the shares
of Parent Common Stock issuable immediately to such holder, with certificates
representing the remaining half of the shares of Parent Common Stock issuable to
such holder and the CVPs to be issued or paid, as the case may be, on or prior
to the Maturity Date. The Letter of Transmittal shall also include instructions
for former holders of Certificates who elect to receive Per Share Merger
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Consideration in accordance with Section 2.01(b)(ii) to specify the time of
issuance of Parent Common Stock pursuant to Section 2.01(b)(ii)(B). Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, the holder of such Certificate, in
accordance with its election, shall be entitled to receive in exchange therefor
either (x) a certificate representing that number of whole shares of Parent
Common Stock which such holder has the right to receive in respect of the
Certificate surrendered pursuant to the provisions of this Article II (after
taking into account all shares of Company Common Stock then held by such holder)
and cash in lieu of any fractional shares of Parent Common Stock as contemplated
by Section 2.02(e) (such certificate and cash in lieu of any fractional shares
to be issued and paid immediately) or (y) (A) a certificate representing half of
that number of whole shares of Parent Common Stock which such holder has a right
to receive in respect of the Certificate surrendered pursuant to the provisions
of this Article II (after taking into account all shares of Company Common Stock
then held by such holder) and cash in lieu of any fractional shares of Parent
Common Stock as contemplated by Section 2.02(e), (B) a certificate representing
the remaining whole shares of Parent Common Stock which such holder has a right
to receive (such certificate to be issued at the time or times specified by such
holder) and (C) a CVP, and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock may
be issued to a transferee if the Certificate is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time of the Merger to represent only the
Parent Common Stock and CVPs into which the shares of Company Common Stock
represented by such Certificate have been converted as provided in this Article
II and the right to receive upon such surrender cash in lieu of any fractional
shares of Parent Common Stock as contemplated by this Section 2.02.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date on or after the Effective Time of the Merger shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.02(e), in each
case until the surrender of such Certificate in accordance with this Article II.
Subject to the effect of applicable laws, following surrender of any such
Certificate there also shall be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor
without interest (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and the amount of any dividends
or other distributions with a record date on or after the Effective Time of the
Merger theretofore paid (but withheld pursuant to the immediately preceding
sentence) with respect to such whole shares of Parent Common Stock, and (ii) at
the appropriate payment date, the amount of any dividends or other distributions
with a record date on or after the Effective Time of the Merger but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
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(d) No Further Ownership Rights in Company Common Stock.
All shares of Parent Common Stock and CVPs issued and made upon conversion of
shares of Company Common Stock in accordance with the terms hereof, and all cash
paid pursuant to Sections 2.02(c) and 2.02(e), shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock (including with respect to the Rights), and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding prior
to the Effective Time of the Merger. If, after the Effective Time of the Merger,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article II.
(e) No Fractional Shares.
(i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent. In lieu
of such issuance of fractional shares, Parent shall pay each holder of
Certificates an amount in cash equal to the product obtained by multiplying (a)
the fractional share interest to which such holder (after taking into account
all shares of Company Common Stock held immediately prior to the Effective Time
of the Merger by such holder) would otherwise be entitled by (b) the Average
Trading Price.
(ii) As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of
Certificates with respect to any fractional share interests, the Exchange Agent
shall make available such amounts to such holders of Certificates, subject to
and in accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund deposited with the Exchange Agent pursuant to this Section 2.02
which remains undistributed to the holders of the Certificates for six months
after the Effective Time of the Merger shall be delivered to Parent, upon
demand, and any holders of Certificates prior to the Merger who have not
theretofore complied with this Article II shall thereafter look only to Parent
and only as general creditors thereof for payment of their claim for Parent
Common Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock to which such
holders may be entitled.
(g) No Liability. None of Parent, Sub, the Company or the
Exchange Agent shall be liable to any person in respect of any shares of Parent
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to three years after the Effective Time of the Merger, or
immediately prior to such earlier date on which any Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock or any dividends or
distributions with respect to Parent Common Stock would otherwise escheat to or
become the property of any Governmental Entity (as defined in Section 3.01(d)),
any such Parent Common Stock or cash shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
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(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Parent on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Parent. The Exchange Fund may be invested by the Exchange Agent, as
directed by Parent, in (i) obligations of or guaranteed by the United States,
(ii) commercial paper rated A-1, P-1 or A-2, P-2, and (iii) time deposits with,
including certificates of deposits issued by, any office located in the United
States of any bank or trust company organized under Federal law or under the law
of any state of the United States or of the District of Columbia and that has
capital, surplus and undivided profits of at least Five Hundred Million Dollars
($500,000,000), and any net earnings with respect thereto shall be paid to
Parent as and when requested by Parent. If, for any reason (including losses),
the Exchange Fund is inadequate to pay the amounts to which holders of shares of
Company Common Stock shall be entitled, Parent shall be liable for and shall
deposit in the Exchange Fund sufficient funds to make the required payments.
SECTION 2.03. TREATMENT OF OPTIONS.
(a) At the Effective Time of the Merger, each outstanding
option to purchase Company Common Stock (a "Company Stock Option") issued
pursuant to the Company's Non-Employee Directors' Stock Option Plan (the
"Director Plan") or the Company's Stock Option and Restricted Stock Purchase
Plan (the "Option Plan" and, collectively with the Director Plan, the "Company
Stock Plans"), whether vested or unvested, shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Company Stock Option, those shares of Parent Common Stock and CVPs which
the holder of such Company Stock Option would have been entitled to receive
pursuant to the Merger if such holder had exercised such option in full
immediately prior to the Effective Time of the Merger (utilizing the Exchange
Ratio as set forth in Section 2.01 of this Agreement), at a price per share
equal to (y) the aggregate exercise price for the shares of Company Common Stock
purchasable pursuant to such Company Stock Option divided by (z) the number of
full shares of Parent Common Stock deemed purchasable pursuant to such Company
Stock Option (a "Converted Option"); provided, however, that in the case of any
option to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code ("incentive stock options"), the option price, the
number of shares of Parent Common Stock purchasable pursuant to such option and
the terms and conditions of exercise of such option shall be determined in order
to comply with Section 424(a) of the Code. If the relevant Company Stock Option
is not exercised prior to the Maturity Date (as defined in Exhibit A), any CVPs
due pursuant thereto shall terminate and become null and void. If the relevant
Company Stock Option is exercised, in whole or in part prior to the Maturity
Date (as defined in Exhibit A), upon the sale of any shares of Parent Common
Stock received upon the exercise of the relevant Company Stock Option, the CVPs
due pursuant to such shares sold shall terminate and become null and void.
(b) As soon as practicable after the Effective Time of
the Merger, Parent shall deliver to the holders of Company Stock Options
appropriate notices setting forth such holders' rights pursuant to the Company
Stock Plans and the agreements evidencing the grants of such Company Stock
Options shall continue in effect on the same terms and conditions (subject to
adjustments required by this Section 2.03 after giving effect to the Merger and
the provisions set forth above and until otherwise determined). If necessary,
Parent shall comply with the terms of
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the Company Stock Plans and ensure, to the extent required by, and subject to
the provisions of, the Company Stock Plans, that Company Stock Options that
qualified as incentive stock options prior to the Effective Time of the Merger
continue to qualify as incentive stock options after the Effective Time of the
Merger.
(c) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon exercise of Company Stock Options. At the Effective Time of the
Merger, Parent shall file a registration statement on Form S-8, as the case may
be (or any successor or other appropriate forms), or another appropriate form,
with respect to the shares of Parent Common Stock and CVPs subject to such
options and shall use its reasonable efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding. With respect to those individuals who subsequent to
the Merger will be subject to the reporting requirements under Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), where
applicable, Parent shall administer the Company Stock Plans in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act to the extent the
Company Stock Plans complied with such rule prior to the Merger.
SECTION 2.04. TREATMENT OF DEBT SECURITIES.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 7.01 hereof, the Company shall issue a
notice of redemption for all of the Company's outstanding 6 1/4% Convertible
Subordinated Debentures due 2003 (the "Debentures") at such price and on such
other terms and conditions as are specified for the redemption of all of the
Debentures under the indenture (the "Indenture) in effect therefor (the "Debt
Redemption"), with the Debt Redemption to occur on February 1, 1999 (the
"Redemption Date"). Prior to the Effective Time and in any event not later than
one business day prior to the Redemption Date, the Company shall deposit with
the Trustee (as defined in the Indenture) an amount in cash sufficient to redeem
the Debentures in full, together with interest accrued thereon to the Redemption
Date. The Company covenants and agrees that, subject to the terms and conditions
of this Agreement, including but not limited to the conditions in the Debt
Redemption, it will redeem the Debentures on the Redemption Date.
(b) All mailings to the holders of the Debentures in
connection with the Debt Redemption shall be subject to the prior review,
comment and approval of Parent (which approval shall not be unreasonably
withheld or delayed).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth in the disclosure schedule (each section of which qualifies the
correspondingly numbered representation and warranty only) of the Company
attached hereto (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of
the Company and each of its Subsidiaries (as defined in Section 3.01(b)) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of the Company
and each of its Subsidiaries is duly qualified or licensed to do business and is
in good standing in each jurisdiction (domestic or foreign) in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) could
not reasonably be expected to have a Material Adverse Effect (as defined in
Section 8.04) with respect to the Company. The Company has made available to
Parent complete and correct copies of the Company's Amended Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), and the
Company's Amended and Restated By-laws, as amended (the "By-Laws"), as currently
in effect and identified on Section 3.01(a) of the Company Disclosure Schedule.
The Company has made available to Parent and Sub complete and correct copies of
the certificates of incorporation and by-laws (or other organizational
documents) of each of the Company's Subsidiaries, in each case as amended to the
date of this Agreement.
(b) Subsidiaries. The only direct or indirect
subsidiaries (as defined in Section 8.04) of the Company are those listed in
Section 3.01(b) of the Company Disclosure Schedule (collectively, the
"Subsidiaries"). All of the outstanding shares of capital stock of each
subsidiary of the Company have been validly issued and are fully paid and
nonassessable and, except as disclosed in Section 3.01(b) of the Company
Disclosure Schedule, are owned (of record and beneficially) by the Company, by
another wholly owned subsidiary of the Company or by the Company and another
such wholly owned subsidiary, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the ownership interests set forth in Section
3.01(b) of the Company Disclosure Schedule, the Company does not own, directly
or indirectly, any capital stock or other ownership interest in any corporation,
partnership, limited liability company, business association, joint venture or
other entity.
(c) Capital Structure. The authorized capital stock of
the Company consists of 25,000,000 shares of Company Common Stock, par value
$.01 per share, and 5,000,000 shares of preferred stock, par value $.01 per
share ("Company Preferred Stock"). As of the close of business on September 30,
1998, there were: (i) 12,396,721 shares of Company Common Stock issued and
outstanding; (ii) 918,254 shares of Company Common Stock held in the treasury of
the Company or held by Subsidiaries; (iii) 2,370,000 shares of Company Common
Stock reserved for issuance upon exercise of Company Stock Options available for
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grant pursuant to the Company Stock Plans; and (iv) 2,450,000 shares of Company
Common Stock issuable upon conversion of currently outstanding Debentures. As of
the close of business on September 30, 1998, there were 1,993,900 shares of
Company Common Stock issuable upon exercise of awarded but unexercised Company
Stock Options, with an exercise price per each awarded but unexercised Company
Stock Option as is set forth in Section 3.01(c)(iii) of the Company Disclosure
Schedule. Except as set forth above, as of the close of business on September
30, 1998, there were no shares of capital stock or other equity securities of
the Company issued, reserved for issuance or outstanding. All outstanding shares
of capital stock of the Company are, and all shares which may be issued pursuant
to the Company Stock Plans and the Debentures will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. All securities issued by the Company were issued in
compliance in all material respects with all applicable federal and state
securities laws and all applicable rules and regulations promulgated thereunder.
Other than the Debentures, there are no outstanding bonds, debentures, notes or
other indebtedness or debt securities of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote (collectively,
"Voting Debt"). Except as set forth above and except pursuant to the Stock
Option Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound obligating the Company or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity or voting securities of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Other than the Stock Option
Agreement and except as disclosed in Section 3.01(c) of the Company Disclosure
Schedule, (i) there are no outstanding contractual obligations, commitments,
understandings or arrangements of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of the Company or any of its Subsidiaries and (ii) to
the knowledge of the Company, there are no irrevocable proxies with respect to
shares of capital stock of the Company or any of its Subsidiaries. Except as set
forth in Section 3.01(c) of the Company Disclosure Schedule, there are no
agreements or arrangements pursuant to which the Company is or could be required
to register shares of Company Common Stock or other securities of the Company or
any of its Subsidiaries under the Securities Act of 1933, as amended (the
"Securities Act"), or other agreements or arrangements with or, to the knowledge
of the Company, among any securityholders of the Company or any of its
Subsidiaries with respect to securities of the Company or any of its
Subsidiaries.
Since September 30, 1998, except as disclosed in Section
3.01(c) of the Company Disclosure Schedule, the Company has not (A) issued or
permitted to be issued any shares of capital stock, or securities exercisable
for or convertible into shares of capital stock, of the Company or any of its
Subsidiaries, other than (1) pursuant to the Stock Option Agreement, (2) the
grant of any employee stock options prior to the date of this Agreement pursuant
to the Company Stock Plans, (3) the issuance of Company Common Stock upon
exercise of the options granted pursuant to the Company Stock Plans prior to the
date of this Agreement and (4) upon conversion of Debentures outstanding on such
date; (B) repurchased, redeemed or otherwise acquired, directly or indirectly
through one or more Subsidiaries, any shares of capital
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stock of the Company or any of its Subsidiaries; or (C) declared, set aside,
made or paid to the stockholders of the Company or any of its Subsidiaries
dividends or other distributions on the outstanding shares of capital stock of
the Company or any of its Subsidiaries (excluding dividends declared, set aside,
made or paid by wholly-owned Subsidiaries to the Company or any wholly owned
Subsidiaries).
(d) Authority; Noncontravention. The Company has the
requisite corporate power and authority to enter into each of this Agreement and
the Stock Option Agreement and, subject to the Company Stockholder Approval in
the case of this Agreement, to consummate the transactions contemplated hereby
and thereby. The execution and delivery of each of this Agreement and the Stock
Option Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
this Agreement, to the Company Stockholder Approval. This Agreement and the
Stock Option Agreement have been duly executed and delivered by the Company and
(assuming due authorization, execution and delivery by Parent and Sub)
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. Except as set forth in Section
3.01(d) of the Company Disclosure Schedule (and except for the "Repurchase
Rights" of holders of the Debentures), the execution and delivery of each of
this Agreement and the Stock Option Agreement does not, and the consummation by
the Company of the transactions contemplated by each of this Agreement and the
Stock Option Agreement and compliance by the Company with the provisions hereof
and thereof will not, conflict with, or result in any breach or violation of, or
any default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of, or a "put"
right with respect to any obligation under, or to a loss of a material benefit
under, or result in the creation of any Lien under, (i) the Certificate of
Incorporation or By-laws or the comparable charter or organizational documents
of any of the Company's Subsidiaries, (ii) any loan or credit agreement, note,
note purchase agreement, bond, mortgage, indenture, lease or any other contract,
agreement, instrument, permit, concession, franchise or license to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective properties or assets are bound or
(iii) subject to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law, ordinance, rule,
regulation or arbitration award applicable to the Company or any of its
Subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults,
rights, losses or Liens that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect with respect to the
Company. No consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any international organization, the
government of the United States of America, any other nation or any political
subdivision thereof, whether state, provincial, local or otherwise, or any
court, administrative agency or commission or other governmental authority,
regulatory body or agency, domestic or foreign (a "Governmental Entity"), or any
other third party is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Stock Option Agreement by the Company or the consummation by the Company of
the transactions
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contemplated hereby and thereby or the performance by the Company of its
obligations hereunder or thereunder, except for (i) such filings, if any, in
connection with or compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the National Association of Securities
Dealers (the "NASD"), the provisions of the DGCL, the provisions of the NCBCA,
the Securities Act of 1933, as amended (the "Securities Act"), Section 4043 of
ERISA and the Exchange Act as may be required in connection with this Agreement
and the Stock Option Agreement and the transactions contemplated hereby and
thereby, (iii) the filing of the Articles of Merger with the Secretary of State
of the State of North Carolina and the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations, filings or
notices the failure of which to make or obtain, individually or in the
aggregate, could not reasonably be expected to (x) prevent or materially delay
consummation of the Merger or the transactions contemplated hereby or
performance of the Company's obligations hereunder or under the Stock Option
Agreement or (y) have a Material Adverse Effect with respect to the Company.
(e) SEC Documents; Undisclosed Liabilities. The Company
has filed with the Securities and Exchange Commission (the "SEC") all reports,
schedules, forms, statements and other documents required pursuant to the
Securities Act and the Exchange Act since July 1, 1995 (collectively, and in
each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "SEC Documents"). Except as set forth in
Section 3.01(e) of the Company Disclosure Schedule, as of their respective
dates, the SEC Documents complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
SEC Documents. As of their respective dates, (i) none of the SEC Documents
(including any and all financial statements included therein) filed pursuant to
the Securities Act or any rule or regulation thereunder contained 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 not
misleading and (ii) none of the SEC Documents (including any and all financial
statements included therein) filed pursuant to the Exchange Act or any rule or
regulation thereunder contained 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 the light of the circumstances under
which they were made, not misleading. Except to the extent that information
contained in any SEC Document has been revised or superseded by a later filed
SEC Document, none of the SEC Documents (including any and all financial
statements included therein) contains any untrue statement of a material fact or
omits to state a 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 were made, not misleading. The consolidated financial statements of
the Company included in all SEC Documents filed since July 1, 1995 (the "SEC
Financial Statements") and the unaudited consolidated quarterly financial
statements for the period ending September 30, 1998 which have been provided to
Parent (the "Interim Financial Statements") comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
consolidated quarterly financial statements, as permitted by Form 10-Q of the
SEC), applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto). The SEC Financial
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Statements and the Interim Financial Statements 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 quarterly
statements, to normal recurring audit adjustments). Except as disclosed in
Section 3.01(e) of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally accepted
accounting principles to be recognized or disclosed on a consolidated balance
sheet of the Company and its Subsidiaries or in the notes thereto, except (i)
liabilities reflected in the unaudited consolidated balance sheet of the Company
as of September 30, 1998 or the notes thereto set forth in the Interim Financial
Statements (the "Interim Balance Sheet"), (ii) liabilities disclosed in any
Recent SEC Document and (iii) liabilities incurred since September 30, 1998 in
the ordinary course of business consistent with past practice.
(f) Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement of Parent on Form S-4 to be filed
with the SEC in connection with the issuance of Parent securities in the Merger
(the "Form S-4") will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Proxy Statement will, at the date
it is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting (as defined in Section 5.01(c)), 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. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated thereunder, except
that no representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied in writing by
Parent or Sub specifically for inclusion or incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as
disclosed in Section 3.01(g) of the Company Disclosure Schedule or in the Recent
SEC Documents (as defined in Section 8.04), since June 30, 1998, each of the
Company and each of its Subsidiaries has conducted its business only in the
ordinary course consistent with past practice, and there is not and has not been
since June 30, 1998: (i) any Material Adverse Change (as defined in Section
8.04) with respect to the Company; (ii) any material change by the Company in
its accounting methods, principles or practices, except as required by
concurrent changes in generally accepted accounting principles, (iii) any
material reevaluation by the Company of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off notes
or accounts receivable other than in the ordinary course, (iv) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company's capital stock, (v) any
condition, event or occurrence which individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect with respect to the
Company or give rise to a Material Adverse Change with respect to the Company;
(vi) any action or failure to act which, if it had been taken or not taken after
the execution of this Agreement, would have required the consent of Parent
pursuant to this Agreement; or (vii) any
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condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to prevent or materially delay the ability of the Company
to consummate the transactions contemplated by this Agreement or the Stock
Option Agreement or perform its obligations hereunder or thereunder.
(h) Litigation; Labor Matters; Compliance with Laws.
(i) Except as disclosed in Section 3.01(h)(i) of
the Company Disclosure Schedule or in the Recent SEC Documents, there is (1) no
suit, action, arbitration or proceeding pending, and (2) to the knowledge of the
Company, no suit, action, arbitration or proceeding threatened against or
investigation pending, in each case with respect to the Company or any of its
Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect with respect to the Company or
prevent or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement or the Stock Option Agreement or to
perform its obligations hereunder or thereunder, nor is there any judgment,
decree, citation, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries which,
individually or in the aggregate, has or could reasonably be expected to have a
Material Adverse Effect with respect to the Company or prevent or materially
delay the ability of the Company to consummate the transactions contemplated by
this Agreement or the Stock Option Agreement or to perform its obligations
hereunder or thereunder. To the knowledge of the Company, except as disclosed in
Section 3.01(h)(i) of the Company Disclosure Schedule or in the Recent SEC
Documents, there is no reasonable basis for any action, suit, arbitration or
proceeding that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect with respect to the Company or prevent or
materially delay the ability of the Company to consummate the transactions
contemplated by this Agreement or the Stock Option Agreement or to perform its
obligations hereunder or thereunder.
(ii) Section 3.01(h)(ii) of the Company
Disclosure Schedule contains an accurate list of all of the Company's and each
Subsidiary's employees, showing for each his or her department and 1998 and 1999
annual salary and bonus. Except as disclosed in Section 3.01(h)(ii) of the
Company Disclosure Schedule or in the Recent SEC Documents, (1) neither the
Company nor any of its Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization; (2) to the knowledge of the Company, neither the
Company nor any of its Subsidiaries is the subject of any proceeding asserting
that it or any of its Subsidiaries has committed an unfair labor practice or
seeking to compel it to bargain with any labor organization as to wages or
conditions of employment; (3) there is no strike, work stoppage or other similar
labor dispute involving it or any of its Subsidiaries pending or, to its
knowledge, threatened; (4) no grievance is pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect with respect to the Company; (5) to the knowledge of the
Company, the Company and each of its Subsidiaries is in compliance with all
applicable laws (domestic and foreign), agreements, contracts, and policies
relating to employment, employment practices, wages, hours and terms and
conditions of employment except for failures so to comply, if any, that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect with respect to the Company; (6) the Company and each of
its
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Subsidiaries has complied in all material respects with its payment obligations
to all bonuses, benefits and other compensation due and payable to such
employees under any policy, practice, agreement, plan, program of the Company or
any of its Subsidiaries or any statute or other law; (7) neither the Company nor
any of its Subsidiaries is liable for any severance pay, retention bonus or
other payments to any employee or former employee arising from the transactions
contemplated hereunder, termination of employment or otherwise under any
compensation, benefit or severance policy, practice, agreement, plan, or program
of the Company or any of its Subsidiaries, nor to the knowledge of the Company
will the Company or any of its Subsidiaries have any liability which exists or
arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or as a result of the termination by the Company or any of its
Subsidiaries of any persons employed by the Company or any of its Subsidiaries
on or prior to the Effective Time of the Merger, excluding any such payment or
liability which does not exceed $25,000 (or does exceed $25,000 solely as a
result of statutory regulations governing severance payments) individually or
$250,000 in the aggregate with all such other payments not disclosed in Section
3.01(h)(ii) of the Company Disclosure Schedule; and (8) the Company and each of
its Subsidiaries is in compliance with its obligations pursuant to the Worker
Adjustment and Retraining Notification Act of 1988 ("WARN"), to the extent
applicable, and all other employee notification and bargaining obligations
arising under any collective bargaining agreement or statute.
(iii) Each of the Company and each of its
Subsidiaries holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to the operation of
the businesses of the Company and its Subsidiaries, taken as a whole (the
"Company Permits"). The Company and its Subsidiaries are in compliance with the
terms of the Company Permits, except where the failure so to comply,
individually or in the aggregate, would not have a Material Adverse Effect with
respect to the Company. Except as disclosed in Section 3.01(h)(iii) of the
Company Disclosure Schedule, the businesses of the Company and its Subsidiaries
are not being conducted in violation of any law (domestic or foreign), ordinance
or regulation of any Governmental Entity, except for possible violations which,
individually or in the aggregate, do not and could not reasonably be expected to
have a Material Adverse Effect with respect to the Company.
(iv) Except as disclosed in Section 3.01(h)(iv)
of the Company Disclosure Schedule, each of the Company and each of its
Subsidiaries have in the past duly complied, and are presently duly complying,
with all applicable laws (whether statutory or otherwise), rules, regulations,
orders, judgments or decrees (the "Laws") of all Governmental Entities,
including, without limitation, privacy and data protection Laws of any
Governmental Entity, except where the failure to have so complied or to be
presently complying would neither have a Material Adverse Effect with respect to
the Company nor constitute violations of criminal laws that could subject the
Company or any Subsidiary to criminal liability. Neither the Company nor any
Subsidiary has received any notification of or has any knowledge of any asserted
material failure by it to comply with any of such Laws.
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(i) Employee Benefit Plans.
(i) Section 3.01(i) of the Company Disclosure
Schedule contains a true and complete list of each "employee benefit plan"
(within the meaning of section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), governmental plan or government-mandated or
arrangement providing for pension or welfare or other employee benefits for
which contributions are required under any applicable Law ("Governmental
Plans"), stock purchase, stock option, severance, employment, change-in-control,
fringe benefit, collective bargaining, bonus, incentive, deferred compensation
and all other employee benefit plans, agreements, programs, policies or other
arrangements relating to employment, benefits or entitlements, whether or not
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future as a result of the transactions contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not under which any employee or former employee of the Company or any
of its Subsidiaries has any present or future right to benefits or under which
the Company or any of its Subsidiaries has any present or future liability. All
such plans, agreements, programs, policies and arrangements are herein
collectively referred to as the "Company Plans."
(ii) With respect to each Company Plan, the
Company has delivered to Parent a current, accurate and complete copy (or, to
the extent no such copy exists, an accurate description) thereof and, to the
extent applicable, (A) any related trust agreement, annuity contract or other
funding instrument; (B) the most recent determination letter; (C) the current
summary plan description and other written communications by the Company to its
employees concerning the extent of the benefits provided under a Company Plan;
and (D) for the most recent year (i) the Form 5500 and attached schedules; (ii)
audited financial statements; (iii) actuarial valuation reports; and (iv)
attorney's response to an auditor's request for information.
(iii) (A) Each Company Plan has been established
and administered in material compliance with its terms and with the applicable
provisions of ERISA, the Code and other applicable laws, rules and regulations
(including the applicable laws, rules and regulations of any foreign
jurisdiction); (B) each Company Plan which is intended to be qualified within
the meaning of Section 401(a) of the Code is so qualified and, except for the
▇▇▇▇▇-▇▇▇▇▇ 401(k) and Profit Sharing Plan, has received a favorable
determination letter as to its qualification and nothing has occurred, whether
by action or failure to act, which would cause the loss of such qualification;
(C) with respect to any Company Plan, no actions, suits or claims (other than
routine claims for benefits in the ordinary course) are pending or, to the
knowledge of the Company, threatened, no facts or circumstances exist which
could give rise to any such actions, suits or claims and the Company will
promptly notify Parent in writing of any pending claims or, to the knowledge of
the Company, any threatened claims arising between the date hereof and the
Effective Time of the Merger; (D) neither the Company nor, to the knowledge of
the Company, any other party has engaged in a prohibited transaction, as such
term is defined under Section 4975 of the Code or ERISA Section 406, which would
subject the Company or Parent or its Subsidiaries to any material taxes,
penalties or other liabilities under the Code or ERISA; (E) no event has
occurred and no condition exists that would subject the Company, either directly
or by reason of its affiliation with any member of its "Controlled Group"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of
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Sections 414(b), (c), (m) or (o) of the Code), to any material tax, fine or
penalty imposed by ERISA, the Code or other applicable laws, rules and
regulations (including the applicable laws, rules and regulations of any foreign
jurisdiction); (F) all insurance premiums required to be paid and all
contributions required to be made under the terms of any Company Plan, the Code,
ERISA or other applicable laws, rules and regulations (including the applicable
laws, rules and regulations of any foreign jurisdiction) as of the Effective
Time of the Merger have been or will be timely paid or made prior thereto and
adequate reserves have been provided for on the Company's balance sheet for any
premiums (or portions thereof) and for all benefits attributable to service on
or prior to the Effective Time of the Merger; (G) except for the Source
Informatics America, PMSI ▇▇▇▇▇-▇▇▇▇▇ and ▇▇▇▇▇ America 401(k) Retirement Plan,
each Company Plan with respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the most recent Form
since the date thereof; and (H) no Company Plan provides for an increase in
benefits on or after the Effective Time of the Merger.
(iv) No Company Plan is subject to Title IV of
ERISA, and no Company Plan is a multiemployer plan as defined in Section
4001(A)(3) of ERISA. The Company has never been required to contribute to or
sponsored any multiemployer plan or any plan subject to Title IV of ERISA.
(v) Except as set forth in Section 3.01(i)(v) of
the Company Disclosure Schedule, no Company Plan exists which could result in
the payment to any Company employee of any money or other property or rights or
accelerate or provide any other rights or benefits to any Company employee as a
result of the transactions contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of Section 280G
of the Code.
(vi) (i) Each Company Plan which is intended to
meet the requirements for tax-favored treatment under Subchapter B of Chapter 1
of Subtitle A of the Code meets such requirements; and (ii) the Company has
received a favorable determination from the Internal Revenue Service with
respect to any trust intended to be qualified within the meaning of Section
501(c)(9) of the Code.
(vii) Except as provided in Section 3.01(i)(vii)
of the Company Disclosure Schedule, no independent contractor or other contract
employee has participated or is entitled to participate in any Company Plan.
(viii) The Employee Stock Purchase Plan approved by
the Board of Directors of the Company on December 30, 1997 (the "Employee Stock
Purchase Plan") has not been put into effect and no person, including any
employee of the Company or any of its Subsidiaries, has purchased or has any
right to purchase any shares of capital stock of the Company thereunder.
(j) Taxes.
(i) Except as disclosed in Section 3.01(j) of
the Company Disclosure Schedule: (A) the Company and each of its Subsidiaries,
and any consolidated, combined, unitary or aggregate group of which the Company
or any of its Subsidiaries is or has been a
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member has timely filed all Tax Returns required to be filed by it, or requests
for extensions to file such Tax Returns have been timely filed, granted and have
not expired; (B) all such Tax Returns are complete and correct in all material
respects; (C) the Company and each of its Subsidiaries, and any consolidated,
combined, unitary or aggregate group of which the Company or any of it
Subsidiaries is or has been a member, has paid all Taxes due or has provided
adequate reserves in its financial statements (other than in respect of deferred
taxes) for any Taxes that have not been paid; (D) no material claim for unpaid
Taxes has been asserted by a Tax authority or has become a lien against the
property of the Company or any of its Subsidiaries (other than with respect to
Taxes not yet due and payable) or is being asserted against the Company or any
of its Subsidiaries; (E) no audit or other proceeding with respect to any Taxes
due from or with respect to the Company or any of its Subsidiaries or any Tax
Return filed by the Company or any of its Subsidiaries is being conducted by any
governmental or Tax authority and the Company and its Subsidiaries have not
received notification in writing that any such audit or other proceeding with
respect to Taxes or any Tax Return is pending; (F) no extension of the statute
of limitations on the assessment of any Taxes has been granted by the Company or
any of its Subsidiaries; and (G) neither the Company nor any of its Subsidiaries
is subject to liability for Taxes of any Person (other than the Company or its
Subsidiaries), including, without limitation, liability arising from the
application of Treasury Regulation section 1.1502-6 or any analogous provision
of state, local or foreign law, or as a transferee or successor, by contract, or
otherwise. As used herein, "Taxes" shall mean all taxes of any kind, including,
without limitation, those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, social security, transfer, net worth, excise, severance,
stamp, occupation, premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts imposed by any governmental authority, domestic or foreign. As used
herein, "Tax Return" shall mean any return, report or statement required to be
filed with any governmental authority with respect to Taxes.
(ii) Except as disclosed in Section 3.01(j)(ii)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries holds any indebtedness of Parent or any of its Subsidiaries.
(iii) Except as disclosed in Section 3.01(j)(iii)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries nor any other Person on behalf of the Company or any of its
Subsidiaries has agreed to or is required to make (or has pending any
application to make) any adjustments pursuant to Section 481(a) of the Code or
any similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its Subsidiaries.
(iv) Except as set forth in Section 3.01(j)(iv)
of the Company Disclosure Schedule, none of the assets of the Company or any of
its Subsidiaries is (i) property required to be treated as being owned by
another person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, or (ii) "tax-exempt use property"
within the meaning of Section 168(h)(1) of the Code.
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(v) None of the issued and outstanding Company
Common Stock is subject to a "substantial risk of forfeiture" within the meaning
of Section 83 of the Code.
(k) Properties. Except as disclosed in Section 3.01(k) of
the Company Disclosure Schedule, the Company or one of its Subsidiaries (i) has
good and marketable title to all the properties and assets (A) reflected in the
Interim Balance Sheet as being owned by the Company or one of its Subsidiaries
(other than any such properties or assets sold or disposed of since September
30, 1998 in the ordinary course of business consistent with past practice) and
(B) acquired after September 30, 1998 which are material to the Company's
business on a consolidated basis, in each case free and clear of all Liens,
except statutory Liens securing payments not yet due and such Liens as do not
materially affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties and (ii) is the lessee of all leasehold estates (x) reflected in the
Interim Balance Sheet and (y) acquired after September 30, 1998 which are
material to its business on a consolidated basis (except for leases that have
expired by their terms since the date thereof) and is in possession of the
properties purported to be leased thereunder, and each such lease is in full
force and effect and constitutes a legal, valid and binding obligation of, and
is legally enforceable against, the respective parties thereto (except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing), and
there is no default thereunder by the lessee or, to the Company's knowledge, the
lessor that, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect with respect to the Company. The Company has not
received written notice and does not otherwise have knowledge of any pending,
threatened or contemplated condemnation proceeding affecting any premises owned
or leased by the Company or any of its Subsidiaries or any part thereof or of
any sale or other disposition of any such owned or leased premises or any part
thereof in lieu of condemnation.
(l) Environmental Matters. Except as could not reasonably
be expected to result in any liability under or relating to Environmental Laws
(as defined in Section 8.04) to the Company or any of its Subsidiaries which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect with respect to the Company:
(i) each of the Company and each of its
Subsidiaries holds and is, and has been, in compliance with all Environmental
Permits (as defined in Section 8.04), and each of the Company and each of its
Subsidiaries is, and has been, otherwise in compliance with all Environmental
Laws and, to the knowledge of the Company, there are no conditions that might
prevent or interfere with such compliance in the future;
(ii) neither the Company nor any of its
Subsidiaries has received any written Environmental Claim or has knowledge of
any other Environmental Claim or threatened Environmental Claim;
(iii) neither the Company nor any of its
Subsidiaries has entered into any consent decree, order or agreement under or
relating to any Environmental Law;
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(iv) there are no past (including, without
limitation, with respect to assets or businesses formerly owned, leased or
operated by the Company or any of its Subsidiaries) or present actions,
activities, events, conditions or circumstances, including without limitation
the release, threatened release, emission, discharge, generation, treatment,
storage or disposal of Hazardous Materials, that could reasonably be expected to
give rise to liability of the Company or any of its Subsidiaries under any
Environmental Laws; and
(v) no modification, revocation, reissuance,
alteration, transfer, or amendment of the Environmental Permits, or any review
by, or approval of, any third party of the Environmental Permits is required in
connection with the execution or delivery of this Agreement or the consummation
of the transactions contemplated hereby or the continuation of the business of
the Company or any of its Subsidiaries following such consummation.
(m) Contracts; Debt Instruments.
(i) Neither the Company nor any of its
Subsidiaries is, or has received any notice or has any knowledge that any other
party is, or by virtue of the transactions contemplated hereby, will be, in
default in any respect under any contract, agreement, commitment, arrangement,
lease, policy or other instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any such subsidiary is bound,
except for those defaults which could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect with respect
to the Company; and, to the knowledge of the Company, there has not occurred any
event, nor will this transaction by its terms cause the occurrence of any event,
that with the lapse of time or the giving of notice or both would constitute
such a default.
(ii) The Company has made available to Parent (x)
true and correct copies (or accurate English translations) of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any indebtedness (as defined in section 8.04) of
the Company or any of its Subsidiaries in an aggregate principal amount in
excess of $500,000 is outstanding or may be incurred and (y) accurate
information regarding the respective principal amounts currently outstanding
thereunder.
(iii) Except as set forth in Section 3.01(m)(iii)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or bound by any non-competition agreement or any
other agreement nor is there any judgment, decree, injunction, rule or order of
any Governmental Authority or arbitrator outstanding against the Company or any
of its Subsidiaries, that, following the Effective Time of the Merger, would
impose any material restriction on the ability of Parent or any of its
subsidiaries, now or hereafter acquired, (including the Company and its
Subsidiaries) to conduct any of the businesses currently conducted by any of
them or which purports to limit or restrict in any material respect the manner
in which, or the geographic area in which, Parent or any of its subsidiaries
(including the Company and its Subsidiaries) is entitled to conduct all or any
material portion of the business of Parent, the Company or any of their
subsidiaries.
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(iv) Except as set forth in Section 3.01(m)(iv)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to or bound by any agreement which, pursuant to the
requirements of Form 10-K under the Exchange Act, would be required to be filed
as an exhibit to an Annual Report on Form 10-K of the Company, except agreements
included or incorporated by reference as exhibits to the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1998 or any Recent SEC Document.
(v) Set forth in Section 3.01(m)(v) of the
Company Disclosure Schedule are all: (a) (i) data supply and data processing
contracts involving payments by the Company and its Subsidiaries in excess of
$250,000 on an annualized basis, (ii) customer contracts between the Company or
any of its Subsidiaries and third parties involving payments by customers
exceeding $250,000 per annum; (b) contracts between the Company or any of its
Subsidiaries, on the one hand, and any of their respective directors, officers,
employees or affiliates or any former directors, officers, employees or
affiliates, on the other hand involving payments in excess of $75,000 per annum;
(c) joint venture and/or agreements and development agreements to which the
Company or any of its Subsidiaries is a party; and (d) contracts between the
Company or any of its Subsidiaries, on the one hand, and any of National Data
Corporation, IMS Health Incorporated, or Source Informatics Inc., on the other
hand.
(vi) Section 3.01(m)(vi) of the Company
Disclosure Schedule lists all charter client and partner client agreements to or
by which the Company or any of its Subsidiaries was a party or bound immediately
prior to August 5, 1998, all of which have been transferred to IMS Health
Incorporated.
(vii) As of the date hereof, with respect to each
of its current customers, and as of the date of the Effective Time of the Merger
with respect to at least all of its current customers who accounted for at least
90% of the Company's revenue for the quarter ended September 30, 1998, except as
disclosed in Section 3.01(m)(vii) of the Company Disclosure Schedule, the
Company has no knowledge that any such customer intends to terminate or
otherwise modify its relationship with the Company or its Subsidiaries or to
decrease or limit the services rendered or products sold by the Company or its
Subsidiaries.
(n) Brokers. Except as disclosed in Section 3.01(n) of
the Company Disclosure Schedule, no broker, investment banker, financial advisor
or other person, whose fees and expenses will be paid by the Company (pursuant
to fee agreements which have been provided to Parent), is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement or the Stock
Option Agreement based upon arrangements made by or on behalf of the Company.
The Company agrees to indemnify Parent and Sub and to hold Parent and Sub
harmless from and against any and all claims, liabilities or obligations with
respect to any other fee, commission or expense asserted by any person on the
basis of any act or statement alleged to have been made by the Company or any of
its affiliates.
(o) Opinion of Financial Advisor. The Company has
received as of the date of this Agreement the opinion of ▇▇ ▇▇▇▇▇ Securities
Corporation to the effect that, as of such date, the Per Share Merger
Consideration is fair, from a financial point of view, to the holders of Company
Common Stock (other than Parent and its affiliates).
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(p) Board Recommendation; State Antitakeover Law. The
Board of Directors of the Company, at a meeting duly called and held, has by
unanimous vote of those directors present (i) determined that this Agreement and
the Stock Option Agreement and the transactions contemplated hereby and thereby,
including the Merger, taken together, are fair to and in the best interests of
the stockholders of the Company, approved the Stock Option Agreement for the
purposes of Section 203(a)(i) of the DGCL and has taken all other actions
necessary on the part of the Company to render the restrictions on business
combinations contained in Section 203 of the DGCL inapplicable to this
Agreement, the Merger and the Stock Option Agreement and (ii) resolved to
declare the Merger "advisable" and to recommend that the holders of the shares
of Company Common Stock adopt this Agreement and the transactions contemplated
herein, including the Merger.
(q) Required Company Vote. The Company Stockholder
Approval, being the affirmative vote of a majority of the outstanding shares of
the Company Common Stock, is the only vote of the holders of any class or series
of the Company's securities necessary to approve this Agreement, the Merger and
the other transactions contemplated hereby. There is no vote of the holders of
any class or series of the Company's securities necessary to approve the Stock
Option Agreement.
(r) Intellectual Property.
(i) Except as otherwise noted in Section
3.01(r)(i) of the Company Disclosure Schedule, the Company or one of its
Subsidiaries owns or has the right to use all Intellectual Property material to
the operation of the business of the Company and its Subsidiaries as currently
conducted or to products or services currently under development by the Company
or any of its Subsidiaries (collectively, "Material Intellectual Property"), and
has the right to use, license, sublicense or assign the same without liability
to, or any requirement of consent from, any other person or party; in this
regard, to the knowledge of the Company, no facts or circumstances exist which
would affect the validity, subsistence or existence of any Material Intellectual
Property. Except as set forth in Section 3.01(r)(i) of the Company Disclosure
Schedule, all Material Intellectual Property is either owned by the Company or
its Subsidiaries free and clear of all Liens or is used pursuant to an agreement
or license and each such agreement or license is valid and enforceable and in
full force and effect and neither the Company nor any of its Subsidiaries is in
default under or in breach of any such license or agreement and, to the
knowledge of the Company, none of the licensors is in default under or in breach
of any such license or agreement. Unless otherwise noted in Section 3.01(r)(i)
of the Company Disclosure Schedule, (i) none of the Material Intellectual
Property infringes or otherwise conflicts with any proprietary or other right of
any person or party; (ii) there is no pending or threatened litigation,
adversarial proceeding, administrative action or other challenge or claim
relating to any of the Material Intellectual Property; (iii) there is no
outstanding judgment, order, writ, injunction or decree relating to any of the
Material Intellectual Property; (iv) there is currently no infringement by any
third party of any of the Material Intellectual Property; and (v) the Material
Intellectual Property owned, used or possessed by the Company or its
Subsidiaries is sufficient and adequate to conduct the business of the Company
and its Subsidiaries to the full extent as such business is currently conducted.
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(ii) Except as otherwise noted in Section
3.01(r)(ii) of the Company Disclosure Schedule, each of the Company and each of
its Subsidiaries has taken reasonable steps to protect, maintain and safeguard
their Material Intellectual Property, including any Material Intellectual
Property for which improper or unauthorized disclosure would impair its value or
validity, and has executed appropriate nondisclosure agreements and made
appropriate filings and registrations in connection with the foregoing.
(iii) The Company or one of its Subsidiaries is
the sole and exclusive owner of all Software (which term includes, without
limitation, all computer programs, whether in source code or object code form,
algorithms, edit controls, methodologies, applications, flow charts and any and
all systems documentation (including, but not limited to, data entry and data
processing procedures, report generation and quality control procedures), logic
and designs for all programs, and file layouts and written narratives of all
procedures used in the coding or maintenance of the foregoing) that is required
to conduct the businesses of the Company and its Subsidiaries to the full extent
such businesses are currently conducted. Set forth in Section 3.01(r)(iii)(a) of
the Company Disclosure Schedule is a true and complete list of all Software
owned by the Company or any of its Subsidiaries. Except as set forth in Section
3.01(r)(iii)(b) of the Company Disclosure Schedule, all of the Software owned by
the Company or any of its Subsidiaries is Year 2000 Compliant (as defined in
Section 8.04). Notwithstanding anything to the contrary set forth in this
Section 3.01(r)(iii), the term "Software" does not include any software used or
held for use by the Company or its Subsidiaries and not owned by the Company or
its Subsidiaries, including but not limited to any software licensed or leased
by third parties to the Company or its Subsidiaries and commonly available
"shrink wrap" software copyrighted by third parties (collectively, the "Third
Party Software"). All of the Third Party Software required to conduct the
businesses of the Company and its Subsidiaries to the full extent such
businesses are currently conducted is used pursuant to an agreement or license
and each such agreement or license is valid and enforceable and in full force
and effect and neither the Company nor any of its Subsidiaries is in default
under or in breach of any such license or agreement and, to the knowledge of the
Company, none of the licensors is in default under or in breach of any such
license or agreement. To the Company's knowledge, except as set forth in Section
3.01(r)(iii)(c) of the Company Disclosure Schedule, all of the Third Party
Software is Year 2000 Compliant.
(iv) The Company or one of its Subsidiaries is
the sole and exclusive owner of all Databases (which term includes, without
limitation, all databases, documentation and written narratives of all
procedures used in connection with the collection, processing and distribution
of data contained in the databases) that are required to conduct the businesses
of the Company and its Subsidiaries to the full extent such businesses are
currently conducted. The Databases, together with the Third Party Databases (as
defined below), contain that data heretofore used by the Company and its
Subsidiaries in the operation of their respective businesses. Set forth in
Section 3.01(r)(iv)(a) of the Company Disclosure Schedule is a true and complete
list of all Databases owned by the Company or any of its Subsidiaries. Except as
set forth in Section 3.01(r)(iv)(b) of the Company Disclosure Schedule, the
Databases are Year 2000 Compliant. Notwithstanding anything to the contrary set
forth in this Section 3.01(r)(iv), the term "Databases" does not include any
databases used or held for use by the Company and its Subsidiaries and not owned
by the Company and its Subsidiaries, including, but not limited to, any
databases licensed or leased by third parties to the Company and databases
generally
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available to the public (collectively, the "Third Party Databases"). All of the
Third Party Databases required to conduct the businesses of the Company and its
Subsidiaries to the full extent such businesses are currently conducted are used
pursuant to an agreement or license and each such agreement or license is valid
and enforceable and in full force and effect and neither the Company nor any of
its Subsidiaries is in default under or in breach of any such license or
agreement and, to the knowledge of the Company, none of the licensors is in
default under or in breach of any such license or agreement. To the Company's
knowledge, except as set forth in Section 3.01(r)(iv)(d) of the Company
Disclosure Schedule, all of the Third Party Databases are Year 2000 Compliant.
(v) Except as set forth in Section 3.01(r)(v) of
the Company Disclosure Schedule, to the knowledge of the Company, no
confidential or trade secret information of the Company or any of its
Subsidiaries has been provided to any party except subject to written
confidentiality agreements.
(s) Ownership of Parent Common Stock. Neither the Company
nor, to its knowledge, any of its affiliates or associates (as such terms are
defined under the Exchange Act), (i) beneficially owns, directly or indirectly,
or (ii) is a party to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of, in each case, shares of
capital stock of Parent which in the aggregate represent 5% or more of the
outstanding shares of such capital stock.
(t) Rights Agreement.
(i) The Rights Agreement has been amended so as
to provide that neither Parent nor Sub will become an "Acquiring Person" or a
"Principal Party" and that no "Triggering Event", "Section 14 Event," "Shares
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Agreement) will occur as a result of the public announcement of or
approval, execution or delivery of this Agreement or the Stock Option Agreement
or the public announcement of or consummation of the Merger or the acquisition
of shares of Company Common Stock by Parent pursuant to the Stock Option
Agreement.
(ii) The Board of Directors of the Company has
not exercised its option to exchange the Rights for shares of Company Common
Stock as set forth in Section 25 of the Rights Agreement.
(iii) The Company has taken all actions necessary
with respect to all of the outstanding Rights so that, immediately prior to and
after the Effective Time of the Merger, (A) neither Company nor Parent or Sub
will have any obligations under the Rights or the Rights Agreement and (B) the
holders of the Rights will have no rights under the Rights or the Rights
Agreement, including without limitation the right to exercise the Rights set
forth in Section 8 of the Rights Agreement.
(u) Investment Company Act of 1940. The Company is not
and prior to the Effective Time of the Merger will not be an "investment
company", "unit investment trust", "management company", "closed-end company",
"open-end company", "face-amount certificate
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company" or an entity "controlled" by an "investment company" that is required
to be registered under Section 8 of the United States Investment Company Act of
1940, as amended.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent
and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of
Parent and Sub is duly organized, validly existing and in good standing under
the laws of the State of North Carolina and has the requisite corporate power
and authority to carry on its business as now being conducted. Each of Parent
and Sub is duly qualified or licensed to do business and is in good standing in
each jurisdiction (domestic or foreign) in which the nature of its business or
the ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) could not reasonably be expected
to have a Material Adverse Effect with respect to Parent. Parent has made
available to the Company complete and correct copies of the articles of
incorporation and by-laws of Parent and of Sub.
(b) Capital Structure.
(i) As of the date of this Agreement, the
authorized capital stock of Parent consists of 200,000,000 shares of Parent
Common Stock, 25,000,000 shares of preferred stock, par value $.01 per share, of
Parent (the "Parent Preferred Stock"). As of the close of business on June 30,
1998, there were: (i) 75,612,627 shares of Parent Common Stock issued and
outstanding; (ii) 2,435,843 shares of Parent Common Stock reserved for issuance
upon exercise of stock options available for grant pursuant to Parent's stock
option and stock purchase plans (such plans, collectively, the "Parent Stock
Plans"); (iii) 5,152,560 shares of Parent Common Stock issuable upon exercise of
awarded but unexercised stock options; (iv) 3,474,250 shares of Parent Common
Stock issuable upon conversion of outstanding 4 1/4% Convertible Subordinated
Notes due 2000 (the "Parent Notes") and (v) no shares of Parent Preferred Stock
outstanding. Except as set forth above, as of the close of business on June 30,
1998 there were no shares of capital stock or other equity securities of Parent
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of Parent are, and all shares which may be issued as described above will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. Except for the Parent Notes, at the time
of the execution of this Agreement, there are no outstanding bonds, debentures,
notes or other indebtedness or debt securities of Parent having the right to
vote (or convertible into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of Parent may vote. Except as set
forth above or in Section 3.02(b) of the disclosure schedule delivered by Parent
and Sub to the Company at the time of the execution of this Agreement (the
"Parent Disclosure Schedule"), there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which Parent is a party or by which it is bound obligating Parent
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of Parent or
obligating Parent to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding contractual obligations, commitments, understandings or
arrangements of Parent to
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repurchase, redeem or otherwise acquire or make any payment in respect of any
shares of capital stock of Parent.
(ii) From June 30, 1998 to the date of this
Agreement, except as set forth in Section 3.02(b) of the Parent Disclosure
Schedule, Parent did not (A) issue or permit to be issued any shares of capital
stock, or securities exercisable for or convertible into shares of capital
stock, of Parent, other than pursuant to or as permitted by the terms of the
Parent Stock Plans; (B) repurchase, redeem or otherwise acquire, directly or
indirectly through one or more subsidiaries, any shares of capital stock of
Parent; or (C) declare, set aside, make or pay to the stockholders of Parent
dividends or other distributions on the outstanding shares of capital stock of
Parent.
(iii) The authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $.01 per share, all of which
have been validly issued, are fully paid and nonassessable and are owned by
Parent, free and clear of any Lien.
(iv) As of the Closing Date, all the issued and
outstanding shares of the common stock of Sub will be owned by Parent free and
clear of any Lien.
(c) Authority; Noncontravention. Parent and Sub have all
requisite corporate power and authority to enter into each of this Agreement and
the Stock Option Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of each of this Agreement and the
Stock Option Agreement by Parent and Sub and the consummation by Parent and Sub
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and Sub. This Agreement and
the Stock Option Agreement have been duly executed and delivered by each of
Parent and Sub, as applicable, and (assuming due authorization, execution and
delivery by the Company) constitute valid and binding obligations of Parent and
Sub, as applicable, enforceable against them in accordance with their terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing. The
execution and delivery of each of this Agreement and the Stock Option Agreement
does not, and the consummation by Parent and Sub of the transactions
contemplated by this Agreement and compliance by Parent and Sub, as applicable,
with the provisions of this Agreement and the Stock Option Agreement will not,
conflict with, or result in any breach or violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of, or a "put" right with respect to
any obligation under, or to a loss of a material benefit under, or result in the
creation of any Lien under, (i) the articles of incorporation or by-laws of
Parent, Sub or any other subsidiary of Parent, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or any other contract,
agreement, instrument, permit, concession, franchise or license to which Parent,
Sub or any other subsidiary of Parent is a party or by which any of their
respective properties or assets are bound or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule, regulation or arbitration award
applicable to Parent, Sub or any other subsidiary of Parent or their respective
properties or assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, breaches, violations, defaults, rights, losses or Liens that
individually or in the
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aggregate could not reasonably be expected to have a Material Adverse Effect
with respect to Parent. No consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any Governmental Entity
or any other third party is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement or the Stock Option
Agreement by Parent and Sub, as applicable, or the consummation by Parent and
Sub of any of the transactions contemplated hereby or thereby, except for (i)
such filings, if any in connection with or compliance with the HSR Act, the
NASD, the provisions of the DGCL, the provisions of the NCBCA, the Securities
Act, Section 4043 of ERISA and the Exchange Act as may be required in connection
with this Agreement, the Stock Option Agreement and the transactions
contemplated hereby and thereby, (ii) such other consents, approvals, orders,
authorizations, registrations, declarations, filings or notices as may be
required under the "takeover" or "blue sky" laws of various states and (iii)
such other consents, approvals, orders, authorizations, registrations,
declarations, filings or notices the failure of which to make or obtain,
individually or in the aggregate, could not reasonably be expected to (x)
prevent or materially delay consummation of the Merger or the other transactions
contemplated hereby or performance of Parent's and Sub's obligations hereunder
or under the Stock Option Agreement or (y) have a Material Adverse Effect with
respect to Parent.
(d) Parent SEC Documents; Undisclosed Liabilities. Except as
set forth in Section 3.02(d) of the Parent Disclosure Schedule, Parent has filed
with the SEC all reports, schedules, forms, statements and other documents
required to be filed by it pursuant to the Securities Act and the Exchange Act
since November 1, 1996 (collectively, and in each case including all exhibits
and schedules thereto and documents incorporated by reference therein, the
"Parent SEC Documents"). Except as set forth in Section 3.02(d) of the Parent
Disclosure Schedule, as of their respective dates, the Parent SEC Documents
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents (including any and all financial
statements included therein) as of such dates contained 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 the light of
the circumstances under which they were made, not misleading. Except as set
forth in Section 3.02(d) of the Parent Disclosure Schedule, except to the extent
that information contained in any Parent SEC Document has been revised or
superseded by a later filed Parent SEC Document, none of the Parent SEC
Documents (including any and all financial statements included therein) contains
any untrue statement of a material fact or omits to state a 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 were made, not
misleading. Except as disclosed in Section 3.02(d) of the Parent Disclosure
Schedule, the consolidated financial statements of Parent included in all Parent
SEC Documents filed since November 1, 1996 (the "Parent SEC Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited consolidated quarterly
financial statements, as permitted by Form 10-Q of the SEC), applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Parent
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended
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(subject, in the case of unaudited quarterly statements, to normal recurring
year-end audit adjustments).
(e) Information Supplied. None of the information supplied or
to be supplied by Parent or Sub for inclusion or incorporation by reference in
(i) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Proxy Statement will, at the date
it is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
are made, not misleading. The Form S-4 will comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent or Sub with respect to statements made or incorporated by reference
therein based on information supplied in writing by the Company specifically for
inclusion or incorporation by reference therein.
(f) Absence of Certain Changes or Events. Except as disclosed
in Section 3.02(f) of the Parent Disclosure Schedule, since December 31, 1997,
there is not and has not been: (i) any Material Adverse Change with respect to
Parent; (ii) any condition, event or occurrence which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect or
give rise to a Material Adverse Change with respect to Parent; or (iii) any
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to prevent or materially delay the ability of Parent and
Sub to consummate the transactions contemplated by this Agreement or the Stock
Option Agreement or perform its obligations hereunder or thereunder.
(g) Litigation; Compliance with Laws.
(i) Except as disclosed in Section 3.02(g)(i)
of the Parent Disclosure Schedule or in the Parent SEC Documents, there is (1)
no suit, action, arbitration or proceeding pending, and (2) to the knowledge of
Parent, no suit, action, arbitration or proceeding threatened against or
investigation pending, in each case with respect to Parent or any of its
subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect with respect to Parent or prevent or
materially delay the ability of Parent and Sub to consummate the transactions
contemplated by this Agreement or to perform their obligations hereunder and
under the Stock Option Agreement nor is there any judgment, decree, citation,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Parent or any of its subsidiaries which, individually or in the
aggregate, has or could reasonably be expected to have a Material Adverse Effect
with respect to the Parent or prevent or materially delay the ability of the
Parent to consummate transactions contemplated by this Agreement or the Stock
Option Agreement or to perform its obligations hereunder or thereunder. To the
knowledge of Parent, except as disclosed in Section 3.02(g)(i) of the Parent
Disclosure Schedule or in any SEC Document filed by Parent prior to the date of
this Agreement with respect to any period ending, or date occurring, after
December 31, 1997, there is no reasonable basis for any action, suit,
arbitration or proceeding that, individually or in the
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aggregate, could reasonably be expected to have a Material Adverse Effect with
respect to Parent or prevent or materially delay the ability of Parent or Sub to
consummate the transactions contemplated by this Agreement or the Stock Option
Agreement or to perform their obligations hereunder or thereunder.
(ii) Except as disclosed in Section 3.02(g)(ii)
of the Parent Disclosure Schedule, the businesses of Parent and its subsidiaries
are not being conducted in violation of any law (domestic or foreign), ordinance
or regulation of any Governmental Entity, except for possible violations which,
individually or in the aggregate, do not and could not reasonably be expected to
have a Material Adverse Effect with respect to Parent.
(h) Brokers. 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 contemplated
by this Agreement or the Stock Option Agreement based upon arrangements made by
or on behalf of Parent or Sub. Parent agrees to indemnify the Company and to
hold the Company harmless from and against any and all claims, liabilities or
obligations with respect to any other fee, commission or expense asserted by any
person on the basis of any act or statement alleged to have been made by Parent
or its affiliates.
(i) Interim Operations of Sub. Sub was formed on November 4,
1998 solely for the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
(j) Required Vote. This Agreement has been approved by Parent,
as the sole stockholder of Sub. No other vote of holders of any class or series
of securities of Parent or Sub is necessary to approve this Agreement, the
Merger, the Stock Option Agreement and the transactions contemplated hereby and
thereby.
(k) Ownership of Company Common Stock. Except as contemplated
by the Stock Option Agreement, neither Parent nor, to its knowledge, any of its
affiliates or associates (as such terms are defined under the Exchange Act), (i)
beneficially owns, directly or indirectly, or (ii) is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of capital stock of the Company, which in the
aggregate represent 5% or more of the outstanding shares of such capital stock.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
SECTION 4.01. CONDUCT OF BUSINESS.
(a) Conduct of Business by the Company. During the period from
the date of this Agreement to the Effective Time of the Merger (except as
otherwise expressly contemplated by the terms of this Agreement), and except as
approved by Parent, the Company shall, and shall cause each of its Subsidiaries
to, act and carry on its and their respective businesses in
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the ordinary course of business consistent with past practice and use its and
their respective reasonable efforts to preserve substantially intact its and
their current business organizations, keep available the services of its and
their current officers and employees and preserve its and their relationships
with customers, suppliers, licensors, licensees, advertisers, distributors and
others having significant business dealings with it and them. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time of the Merger, the Company shall not, and shall
not permit any of its Subsidiaries to:
(i) (x) declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of its capital stock,
other than dividends and distributions by a direct or indirect wholly owned
domestic Subsidiary to its parent, (y) split, combine or reclassify any capital
stock of the Company or any of its Subsidiaries or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of the Company or any of its Subsidiaries, or (z)
purchase, redeem or otherwise acquire any shares of capital stock of the Company
or any of its Subsidiaries or any other securities thereof (other than the
Debentures as contemplated by Section 2.04) or any rights, warrants or options
to acquire any such shares or other securities;
(ii) authorize for issuance, issue, deliver, sell,
pledge or otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible securities
or any other securities or equity equivalents (including without limitation
stock appreciation rights), other than the issuance of Company Common Stock upon
the exercise of Company Stock Options awarded prior to the date of this
Agreement but unexercised on the date of this Agreement in accordance with their
present terms;
(iii) (A) amend the Certificate of Incorporation or
By-Laws or comparable charter or organizational documents of any Subsidiary, or
(B) amend or terminate the Rights Agreement;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division thereof;
(v) other than as set forth in Section 4.01(a)(v)
of the Company Disclosure Schedule with respect to the disposition of certain
assets, sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets other than any such
properties or assets the value of which do not exceed $100,000 individually and
$250,000 in the aggregate, except sales of inventory in the ordinary course of
business consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money
or guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
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economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice and
intercompany indebtedness between the Company and its wholly-owned Subsidiaries
or between such wholly owned Subsidiaries, or (B) make any loans, advances or
capital contributions to, or investments in, any other person, other than to the
Company or any direct or indirect wholly owned Subsidiary, or (C) invest or hold
cash or cash equivalents in instruments with a maturity date exceeding 90 days,
(D) or use any cash outside the ordinary course of the PMSI ▇▇▇▇▇-▇▇▇▇▇, Inc.
business except as set forth on Schedule 4.01(a)(vi).
(vii) acquire or agree to acquire any assets, other
than inventory in the ordinary course of business consistent with past practice,
or make or agree to make any capital expenditures, except capital expenditures
that either are contemplated (with respect to both nature and amount) by the
Company's capital budget for the fiscal year ending June 30, 1999 (a true and
correct copy of which is included in Schedule 4.01(a)(vii) of the Company
Disclosure Schedule) or do not exceed $100,000 in the aggregate;
(viii) other than as set forth in Section 4.01(c)
(viii) of the Company Disclosure Schedule, pay, discharge or satisfy any claims
(including claims of stockholders), liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), except for the
payment, discharge or satisfaction of (x) liabilities or obligations in the
ordinary course of business consistent with past practice or in accordance with
their terms as in effect on the date hereof and other liabilities and
obligations not exceeding $100,000 individually or $250,000 in the aggregate, or
(y) claims settled or compromised to the extent permitted by Section
4.01(a)(xii), or waive, release, grant, or transfer any rights of material value
or modify or change in any material respect any existing material license,
lease, contract or other document, other than in the ordinary course of business
consistent with past practice;
(ix) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(x) enter into or amend any collective
bargaining agreement;
(xi) change any material accounting principle
used by it, except as required by generally accepted accounting principles;
(xii) settle or compromise any litigation or claim
(whether or not commenced prior to the date of this Agreement), other than
settlements or compromises of litigation or claims that neither provide for
injunctive or similar relief that could be material to the business or
operations of the Company or any of its Subsidiaries nor require payments (after
giving effect to insurance proceeds actually received or reasonably believed by
management of the Company to be receivable) in settlement or compromise
exceeding $50,000 provided that the aggregate amount paid in connection with the
settlement or compromise of all such litigation matters shall not exceed
$250,000;
(xiii) engage in any transaction with, or enter into
any agreement, arrangement, or understanding with, directly or indirectly,
any of the Company's affiliates,
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including, without limitation, any transactions, agreements, arrangements or
understandings with any affiliate or other Person covered under Item 404 of SEC
Regulation S-K that would be required to be disclosed under such Item 404, other
than such transactions of the same general nature, scope and magnitude as are
disclosed in the Company SEC Documents;
(xiv) other than as set forth in Section 4.01(a)
(xiv) of the Company Disclosure Schedule, transfer to any person or entity any
rights to its Intellectual Property, other than the provision of data or the
granting of end-user licenses in the ordinary course of business consistent with
past practice to customers of the Company or its Subsidiaries;
(xv) enter into or amend any agreement pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or technology; or
(xvi) authorize, or commit or agree to take, any of
the foregoing actions.
(b) Changes in Employment Arrangements. Other than as set
forth in Section 4.01(b) of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries shall (i) adopt or amend (except as may be required
by law) any Company Plan for the benefit or welfare of any employee, officer,
director or former director, officer or employee other than increases for
individuals (other than executive officers and directors) in the ordinary course
of business consistent with past practice, increase the compensation or fringe
benefits of any director, officer, employee or former director, officer or
employee or pay any benefit not required by any existing plan, arrangement or
agreement or (ii) take any action to implement the Employee Stock Purchase Plan.
(c) Severance. Except as contemplated by the proviso to the
immediately preceding paragraph (b), neither the Company nor any of its
Subsidiaries shall grant any new or modified severance or termination
arrangement or increase or accelerate any benefits payable under its severance
or termination pay policies in effect on the date hereof.
(d) WARN. Neither the Company nor any of its Subsidiaries
shall effectuate a "plant closing" or "mass layoff," as those terms are defined
in WARN, or similar restructuring affecting in whole or in part any site of
employment, facility, operating unit or employee of the Company or any of its
Subsidiaries, without notifying Parent and Sub in advance and without complying
with the notice requirements and other provisions of WARN or any applicable
foreign laws or regulations.
(e) Tax Elections. Other than as set forth in Section 4.01(e)
of the Company Disclosure Schedule, except as consistent with past practice,
neither the Company nor any of its Subsidiaries shall make any tax election or
settle or compromise any federal, state, local or foreign tax liability.
(f) Tax-Free Reorganization Treatment. No party shall, and
none shall permit any of its subsidiaries to, intentionally take or cause to be
taken any action which would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code.
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(g) Nominee Shares. The Company shall cause any person who
owns any shares of capital stock of any of the Company's Subsidiaries, whether
in trust or pursuant to any other nominee arrangement with the Company or any of
its Subsidiaries, to transfer, effective not later than the Effective Time of
the Merger, all right, title and interest in and to such shares to Parent or any
person designated by Parent.
(h) Other Actions. Neither the Company nor Parent shall, or
shall permit any of their respective subsidiaries to (i) intentionally take any
action or fail to take any action that, if taken or not taken on or prior to the
date of this Agreement, would have resulted in any of its representations and
warranties set forth in this Agreement being untrue in any material respect
other than the possible issuance of securities by Parent after the date of this
Agreement, or (ii) intentionally take any action that would or reasonably might
be expected to result in any of the conditions to the Merger set forth in
Article VI not being satisfied or in a violation of any provision of the Stock
Option Agreement. The Company and Parent shall promptly advise the other party
orally and in writing of (x) any action or failure to act of the type set forth
in clause (i) above, (y) the failure by such party to comply with any covenant,
condition or agreement hereunder or under the Stock Option Agreement and (z) any
event which could reasonably be expected to cause the conditions set forth in
Article VI not being satisfied; provided, however, that no such notice shall
affect the representations, warranties, covenants and agreement of the parties
or the conditions to their obligations hereunder.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF FORM S-4 AND PROXY STATEMENT; STOCKHOLDER
MEETING.
(a) Promptly following the date of this Agreement, the Company
shall prepare the Proxy Statement, and Parent shall prepare and file (or cause
to be prepared and filed) with the SEC the Form S-4 in which the Proxy Statement
will be included. Parent and the Company shall each use its reasonable efforts
to have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use its reasonable efforts to
cause the Proxy Statement to be mailed to the Company's stockholders as promptly
as practicable after the Form S-4 is declared effective under the Securities
Act. Parent shall also take any action (other than qualifying to do business in
any state in which it is not now so qualified or filing a general consent to
service of process) required to be taken under any applicable state securities
laws in connection with the registration and qualification of the Parent
securities to be issued in the Merger, and the Company shall furnish all
information relating to the Company and its stockholders as may be reasonably
requested in connection with any such action. The information provided and to be
provided by Parent, Sub and the Company, respectively, (i) for use in the Form
S-4, at the time the Form S-4 becomes effective, shall be true and accurate in
all material respects and shall not omit to state a material fact required to be
stated therein or necessary to make such information not misleading and (ii) for
use in the Proxy Statement, on the date the Proxy Statement is mailed to the
Company's stockholders and on the date of the Stockholders Meeting referred to
below, shall be true and correct in all material respects and shall not omit to
state any material fact required to be stated therein or necessary in order to
make such information, in the light of the circumstances under which the
statements therein were made, not misleading, and the Company and Parent each
agree to correct any information provided by it for use in the Form S-4 and/or
the Proxy Statement which shall have become false or misleading.
(b) All mailings to the Company's stockholders in connection
with the Merger, including the Proxy Statement, shall be subject to the prior
review, comment and approval of Parent (such approval not to be unreasonably
withheld or delayed).
(c) The Company will, as promptly as practicable following the
date of this Agreement and in consultation with Parent, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Stockholders Meeting")
for the purpose of adopting this Agreement and the transactions contemplated by
this Agreement to the extent required by the DGCL. The Company will, through its
Board of Directors, recommend to its stockholders approval of the foregoing
matters, as set forth in Section 3.01(p); provided, however, that the Board of
Directors of the Company may fail to make or withdraw or modify such
recommendation, but only to the extent that the Board of Directors of the
Company shall have concluded in good faith on the basis of written advice from
outside counsel that the failure to take such action would be contrary to the
fiduciary duties of the Board of Directors of the Company to the stockholders of
the Company under applicable law. Any such recommendation, together with a copy
of the opinion referred to in Section 3.01(o), shall be included in the Proxy
Statement. The Company
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will use its best efforts to hold such meeting as soon as practicable after the
Form S-4 shall have been declared effective.
SECTION 5.02. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Each of the Company and Parent shall, and shall cause its
respective subsidiaries, officers, employees, counsel, financial advisors and
other representatives to, afford to the other party and its representatives
reasonable access during normal business hours, during the period prior to the
Effective Time of the Merger, to its properties, books, contracts, commitments,
personnel and records, and, during such period, each of the Company and Parent
shall, and shall cause its respective subsidiaries, officers, employees and
representatives to, furnish promptly to the other party (i) a copy of each
report, schedule, registration statement and other document filed by it during
such period pursuant to the requirements of Federal or state securities laws and
(ii) all other information concerning its business, properties, financial
condition, operations and personnel as such other party may from time to time
reasonably request. Each of the Company and Parent will hold, and will cause its
respective directors, officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information in confidence to the extent required by, and in accordance with, the
provisions of the confidentiality agreement, dated October 13, 1998, between
Parent and the Company (the "Confidentiality Agreement"), which Confidentiality
Agreement (except for Section 2 thereof) shall continue in full force and effect
following the execution and delivery of this Agreement.
(b) No investigation pursuant to this Section 5.02 or
otherwise shall affect any representations or warranties of the parties herein
or the conditions to the obligations of the parties hereto.
SECTION 5.03. REASONABLE EFFORTS. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by this Agreement, including
(i) obtaining all consents, approvals, waivers, licenses, permits or
authorizations as are required to be obtained (or, which if not obtained, would
result in an event of default, termination or acceleration of any agreement or
any put right under any agreement) under any applicable law or regulation or
from any Governmental Entities or third parties in connection with the
transactions contemplated by this Agreement, (ii) defending any lawsuits or
other proceedings challenging this Agreement and (iii) accepting and delivering
additional instruments necessary to consummate the transactions contemplated by
this Agreement. The parties agree that each of Parent and Sub, on the one hand,
and the Company, on the other hand, shall have the opportunity to negotiate and
consult directly with all applicable Governmental Entities and third parties in
connection with their consideration of the transactions contemplated by this
Agreement. Notwithstanding anything in this Section 5.03 to the contrary,
neither party shall be required to: (i) expend material sums of money or grant
material financial or other accommodations to any party, (ii) divest any
material operations or (iii) set aside any material assets in order to satisfy
the terms of this Section 5.03.
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SECTION 5.04. INDEMNIFICATION.
(a) From and after the Effective Time of the Merger, Parent
and the Surviving Corporation shall indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time of the Merger, eligible for indemnification
pursuant to the Certificate of Incorporation and By-Laws of the Company or the
comparable charter or organizational documents of any Subsidiary (the
"Indemnified Parties") against (i) all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement of or in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or employee of the Company or any of its
Subsidiaries, pertaining to any matter existing or occurring at or prior to the
Effective Time of the Merger, whether asserted or claimed prior to, or at or
after, the Effective Time of the Merger (the "Indemnified Liabilities") and (ii)
all Indemnified Liabilities based in whole or in part on, or arising in whole or
in part out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the extent the Company or such Subsidiary would have
been permitted under the Certificate of Incorporation and By-laws, or such other
constituent organizational documents, as the case may be, to indemnify such
person. Nothing contained herein shall limit any rights to indemnification which
any Indemnified Party may have under any indemnification agreement or the
Certificate of Incorporation or By-Laws or the constituent organizational
documents of any Subsidiary. In the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Parties (whether
arising before or after the Effective Time of the Merger), (i) any counsel
retained by the Indemnified Parties for any period after the Effective Time of
the Merger shall be reasonably satisfactory to Parent and the Surviving
Corporation (it being understood that Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
Kristol is acceptable to Parent and the Surviving Corporation); (ii) after the
Effective Time of the Merger, 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; and (iii) after the Effective Time
of the Merger, the Surviving Corporation will cooperate in the defense of any
such matter, provided that the Surviving Corporation shall not be liable for any
settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 5.04, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Parent and the Surviving
Corporation (but the failure so to notify Parent or the Surviving Corporation
shall not relieve them from any liability which they may have under this Section
5.04 except to the extent such failure materially prejudices Parent and the
Surviving Corporation), and shall deliver to Parent and the Surviving
Corporation the undertaking, if any, required by Section 145(e) of the DGCL.
Parent and the Surviving Corporation shall be liable for the fees and expenses
hereunder with respect to only one law firm to represent the Indemnified Parties
as a group with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict between the positions of any two
or more Indemnified Parties that would preclude or render inadvisable joint or
multiple representation of such parties.
(b) Parent shall cause to be maintained in effect for three
years from the Effective Time of the Merger directors' and officers' liability
insurance coverage covering persons who are directors and officers of the
Company on the date of this Agreement, with respect to matters occurring prior
to the Effective Time of the Merger, and containing terms and
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conditions which are not less advantageous to such persons than the policies of
the Company in effect on the date hereof (the "Company Insurance"); provided
that Parent shall not be required to spend annually in excess of 150% of the
annual premium for the Company Insurance paid by the Company as of the date of
this Agreement (the "Current Premium"), which Current Premium the Company
represents is Two Hundred Eight Thousand Dollars ($208,000) per annum; provided,
further, that if Parent would be required to spend annually in excess of 150% of
the Current Premium to obtain insurance having terms not less advantageous than
the Company Insurance, the Surviving Corporation will be required to spend up to
such amount to maintain or procure as much insurance coverage as can be procured
for such premium.
SECTION 5.05. PUBLIC ANNOUNCEMENTS. Neither Parent and Sub, on the one
hand, nor the Company, on the other hand, will issue any press release or public
statement with respect to the transactions contemplated by this Agreement and
the Stock Option Agreement, including the Merger, without the other party's
prior consent (such consent not to be unreasonably withheld or delayed), except
as may be required by applicable law, court process or by obligations pursuant
to any agreement with any securities exchange or quotation system on which
securities of the disclosing party are listed or quoted. In addition to the
foregoing, Parent, Sub and the Company will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
such press release or other public statements with respect to such transactions.
The parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
SECTION 5.06. NO SOLICITATION.
(a) Neither the Company nor any of its Subsidiaries shall
(whether directly or indirectly through advisors, agents or other
intermediaries), nor shall the Company or any of its Subsidiaries authorize or
permit any of its or their officers, directors, agents, representatives or
advisors to, (a) solicit, initiate or take any action knowingly to encourage or
facilitate the submission of inquiries, proposals or offers from any person
(other than Sub or Parent) relating to (i) any acquisition or purchase of 15% or
more of the consolidated assets of the Company and its Subsidiaries or of over
15% of any class of equity securities of the Company or any of its Subsidiaries,
(ii) any tender offer (including a self tender offer) or exchange offer that if
consummated would result in any Person (as defined in Section 8.02) beneficially
owning 15% or more of any class of equity securities of the Company or any of
its significant Subsidiaries, (iii) any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute more
than 15% of the consolidated assets of the Company other than the transactions
contemplated by this Agreement, or (iv) any other transaction the consummation
of which would or could reasonably be expected to impede, interfere with,
prevent or delay the Merger (collectively, "Transaction Proposals"), or agree to
or endorse any Transaction Proposal, or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties or assets
or any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person (other than Sub or Parent) to do or seek any of the foregoing; provided,
however, that the foregoing shall not prohibit the Company (either directly or
indirectly
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through advisors, agents or other intermediaries) from (i) furnishing
information pursuant to an appropriate confidentiality letter (which letter
shall not be less favorable to the Company in any material respect than the
Confidentiality Agreement) concerning the Company and its businesses, properties
or assets to a third party who has made an unsolicited bona fide written
Transaction Proposal, (ii) engaging in discussions or negotiations with such a
third party who has made an unsolicited bona fide written Transaction Proposal,
(iii) following receipt of an unsolicited bona fide written Transaction
Proposal, taking and disclosing to its stockholders a position contemplated by
Rule 14d-9 or Rule 14e-2(a) under the Exchange Act or otherwise making
disclosure to its stockholders, (iv) following receipt of an unsolicited bona
fide written Transaction Proposal, failing to make or withdrawing, modifying or
amending its recommendation referred to in Section 3.01(p), and/or (v) taking
any action required to be taken by the Company pursuant to an order by any court
of competent jurisdiction (other than an order that has been reversed, withdrawn
or stayed), but in each case referred to in the foregoing clauses (i) through
(v) only to the extent that the Board of Directors of the Company shall have
concluded in good faith on the basis of written advice from outside counsel that
the failure to take such action would be contrary to the fiduciary duties of the
Board of Directors of the Company to the stockholders of the Company under
applicable law; provided, further, that, to the extent that it may do so without
acting in a manner contrary to its fiduciary duties under applicable law, the
Board of Directors of the Company shall advise Parent promptly prior to the
taking of any such action and, in addition, if the Board of Directors of the
Company receives a Transaction Proposal, then the Company shall promptly inform
Parent of the material terms and conditions of such proposal and the identity of
the person making it. The Company and each of its Subsidiaries will immediately
cease and cause its officers, directors, employees, affiliates, advisors, agents
and other intermediaries to cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any of the
foregoing, and shall use its reasonable efforts to cause any such parties in
possession of confidential information about the Company that was furnished by
or on behalf of the Company to return or destroy all such information in the
possession of any such party or in the possession of any agent or advisor of any
such party.
(b) Except as set forth in this Section 5.06(b), the Board of
Directors of the Company shall not (i) fail to make or withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation of the Merger and this Agreement by the Board of Directors of the
Company, (ii) approve or recommend, or propose to approve or recommend, any
Transaction Proposal or (iii) cause the Company to enter into any agreement
(including, without limitation, any letter of intent) with respect to any
Transaction Proposal. Notwithstanding the foregoing, if the Board of Directors
of the Company, after consultation with and based upon the written advice of
outside legal counsel, determine in good faith that it is necessary to do so in
order to comply with its fiduciary duties to the stockholders of the Company
under applicable law, the Board of Directors of the Company may approve or
recommend a Superior Proposal (as defined below) or cause the Company to enter
into an agreement with respect to a Superior Proposal, but in each case only (i)
after providing reasonable written notice to Parent (a "Notice of Superior
Proposal") advising Parent that the Board of Directors of the Company has
received a Superior Proposal, specifying the terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal and
(ii) if Parent does not make within three business days of Parent's receipt of
the Notice of Superior Proposal, an offer which the Board of Directors of the
Company, after consultation with
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its financial advisors, determines is superior to such Superior Proposal. The
term "Superior Proposal" means any Transaction Proposal that the Board of
Directors of the Company determines in its good faith judgment (after
consultation with a financial advisor of nationally recognized reputation) to be
more favorable to the Company's stockholders than the Merger, including as part
of such determination, that, as to any cash consideration to be paid pursuant to
the Superior Proposal, the person making the Superior Proposal has all requisite
funds on hand or has provided customary financing commitments for the requisite
funds.
SECTION 5.07. BENEFIT MATTERS. From and after the Effective Time of the
Merger, Parent shall accord to all employees of the Company and its Subsidiaries
that become Continuing Employees benefits that Parent normally makes available
to its employees under Parent employee benefit plans (as defined in Section 3(3)
of ERISA), in each case as if such Continuing Employee had been employed by
Parent for the length of time such Continuing Employee has been employed by the
Company (provided no such amount of time shall be credited for purposes of the
vesting or other provisions of any option, other than Converted Options, granted
to any such Continuing Employee to purchase shares of Parent Common Stock).
SECTION 5.08. NASDAQ LISTING. Parent shall use all reasonable efforts
to cause the shares of Parent Common Stock to be issued in the Merger and the
shares of Parent Common Stock to be reserved for issuance upon exercise or
conversion of Company Stock Options to be approved for listing on the Nasdaq
National Market System, subject to official notice of issuance.
SECTION 5.09. TAKEOVER STATUTE. If any "fair price", "moratorium",
"control share acquisition", "interested shareholder" or other similar
anti-takeover statute or regulation is or may become applicable to the Merger or
the other transactions contemplated by this Agreement or the Stock Option
Agreement, each of Parent and the Company and their respective boards of
directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement or the Stock Option Agreement, as the case
may be, or the Merger and otherwise act to eliminate or minimize the effects of
such statute or regulation on such transactions.
SECTION 5.10. SUPPLEMENTAL DISCLOSURE. The Company shall give prompt
written notice to Parent, and Parent shall give prompt written notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or nonoccurrence, of which would be likely to cause (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (y) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (ii) any failure of the Company or Parent, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.10 shall not have any effect for the
purpose of determining the satisfaction of the conditions set forth in Article
VI of this Agreement or otherwise limit or affect the remedies available
hereunder to any party.
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ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger and the
other transactions contemplated herein shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by applicable law:
(a) Effectiveness of Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order suspending
the effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or Parent, threatened by the SEC. Any material "blue sky" and other
state securities laws applicable to the registration and qualification of the
Parent securities issuable or required to be reserved for issuance pursuant to
this Agreement shall have been complied with.
(b) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(c) No Order. No Governmental Entity or federal, state or
foreign court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which materially restricts, prevents or prohibits consummation of
the Merger or any transaction contemplated by this Agreement; provided, however,
that the parties shall use all reasonable efforts to cause any such decree,
judgment, injunction or other order to be vacated or lifted.
(d) HSR Act and Other Waiting Periods. The applicable waiting
period under the HSR Act shall have expired or been terminated and all other
waiting periods specified under applicable laws, and all extensions thereof, the
passing of which is legally required prior to the consummation of the Merger,
shall have expired or been terminated.
(e) NASDAQ Listing. The shares of Parent Common Stock issuable
to stockholders of the Company in accordance with this Agreement shall have been
authorized for listing on the Nasdaq National Market upon official notice of
issuance.
(f) Other Approvals. Other than the filing of merger documents
in accordance with the NCBCA and DGCL, all authorizations, consents, waivers,
orders or approvals required to be obtained, and all filings, notices or
declarations required to be made, by the Company and Parent prior to the
consummation of the Merger and the other transactions contemplated hereunder
shall have been obtained from, and made with, all required Governmental Entities
except for such authorizations, consents, waivers, orders, approvals, filings,
notices or declarations the failure to obtain or make which would not have a
Material Adverse Effect with respect to Parent.
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SECTION 6.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND SUB.
The obligations of Parent and Sub to effect the Merger and the transactions
contemplated in this Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this Agreement that
is qualified as to "materiality," "Material Adverse Change" or "Material Adverse
Effect" shall be true and correct, each of the other representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects and the Company Disclosure Schedule and each of the
schedules attached to this Agreement shall be true and correct in all material
respects, in each case as of the Closing Date as though made on and as of the
Closing Date, except (i) for changes specifically permitted by this Agreement
and (ii) that those representations and warranties which address matters only as
of a particular date shall have been true and correct as of such date. Parent
shall have received a certificate of the chief executive officer and chief
financial officer of the Company to such effect.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date. Parent shall have received a certificate of the chief executive
officer and chief financial officer of the Company to that effect.
(c) No Litigation. There shall not be pending or threatened by
any Governmental Entity any suit, action or proceeding (i) challenging or
seeking to restrain or prohibit the consummation of the Merger or any other
transaction contemplated by this Agreement or the Stock Option Agreement or
seeking to obtain from the Company, Sub or Parent or any of their respective
affiliates any material amount of damages, (ii) seeking to prohibit or limit the
ownership or operation by Parent or the Company or any of their respective
affiliates of any material portion of their business or assets or to dispose of
or hold separate any material portion of their business or assets, as a result
of the Merger or any other transaction contemplated by this Agreement or the
Stock Option Agreement, (iii) seeking to impose limitations on the ability of
Parent to acquire or hold, or exercise full rights of ownership of, any shares
of the common stock of the Surviving Corporation, including, without limitation,
the right to vote such common stock on all matters properly presented to the
stockholders of the surviving corporation or (iv) seeking to prohibit Parent or
any of its Subsidiaries from effectively controlling in any material respect the
business or operations of the Company and its Subsidiaries taken as a whole. No
suit, action or proceeding by any other person shall be pending that seeks any
of the relief or remedies described in clauses (i) through (iv) of the
immediately preceding sentence as to which there is a reasonable possibility of
success or that otherwise could reasonably be expected to have a Material
Adverse Effect with respect to Parent or the Company.
(d) Third Party Approvals. All consents, waivers or approvals
required to be obtained from third parties under contracts, agreements or
similar instruments to which the Company or any of its Subsidiaries is a party,
or by which any of them is bound, in connection with the Merger and the other
transactions contemplated hereby shall have been obtained, except to the extent
that the failure to obtain such consents, waivers or approvals would not, in
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the aggregate, result in violations, defaults (with or without notice or lapse
of time or both), rights of termination, cancellation or acceleration, or losses
of benefit that would have a Material Adverse Effect with respect to the Company
or Parent.
(e) Rights Agreement. None of the events described in Section
8, Section 14 or Section 25, or the second sentence of Section 3(a) of the
Rights Agreement shall have occurred. The right of the Board of Directors of the
Company to redeem the Rights pursuant to Section 24 of the Rights Agreement
shall be in effect and the Rights shall not have become nonredeemable and shall
not become nonredeemable upon consummation of the Merger.
(f) Employment Agreements. The Employment Agreements
identified on Schedule 6.02(f), substantially in the form of Exhibit C attached
hereto (collectively, the "Employment Agreements") shall have been executed and
delivered to Parent.
(g) Tax Opinion. Parent shall have received an opinion of
Smith, Anderson, Blount, Dorsett, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.L.C., counsel to
Parent, in form and substance reasonably satisfactory to Parent, to the effect
that the Merger will qualify as a reorganization within the meaning of Section
368 of the Code. The issuance of such opinion shall be conditioned on the
receipt by such counsel of representation letters from each of Parent, Sub and
the Company and in each case, in form and substance reasonably satisfactory to
Smith, Anderson, Blount, Dorsett, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.L.C. The specific
provisions of each such representation letter shall be in form and substance
reasonably satisfactory to such counsel, and each such representation letter
shall be dated on or before the date of such opinion and shall not have been
withdrawn or modified in any material respect.
(h) Key Man Life Insurance. The Company shall have obtained
and maintain in full force and effect key man life insurance on the life of ▇▇▇
▇▇▇▇▇, in form and substance reasonably satisfactory to Parent, in the amount of
Five Million Dollars ($5,000,000) with all proceeds payable to the Company.
SECTION 6.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Sub contained in this Agreement
that is qualified as to "materiality," "Material Adverse Change" or "Material
Adverse Effect" shall be true and correct, and each of the other representations
and warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects, in each case as of the Closing Date as though
made on and as of the Closing Date, except (i) for changes specifically
permitted by this Agreement and (ii) that those representations and warranties
which address matters only as of a particular date shall remain true and correct
as of such date. The Company shall have received a certificate of a duly
authorized officer of Parent and Sub to such effect.
(b) Agreements and Covenants. Parent and Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement
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to be performed or complied with by them on or prior to the Closing Date. The
Company shall have received a certificate of a duly authorized officer of Parent
and Sub to that effect.
(c) Tax Opinion. The Company shall have received an opinion of
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol, counsel to the Company, in form
and substance reasonably satisfactory to the Company, to the effect that the
Merger will qualify as a reorganization within the meaning of Section 368 of the
Code. The issuance of such opinion shall be conditioned on the receipt by such
counsel of representation letters from each of Parent, Sub, and the Company, in
each case, in form and substance reasonably satisfactory to Reboul, MacMurray,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol. The specific provisions of each such representation
letter shall be in form and substance reasonably satisfactory to such counsel,
and each such representation letter shall be dated on or before the date of such
opinion and shall not have been withdrawn or modified in any material respect.
(d) Bringdown Opinion of Financial Advisor. The Company shall
have received a bringdown of the ▇▇ ▇▇▇▇▇ Securities Corporation opinion dated
as of December 14, 1998, to the effect that as of a date within ten (10) days
prior to the mailing of the Company's Proxy Statement to the Company's
stockholders in connection with the Merger, the Per Share Merger Consideration
is fair, from a financial point of view, to the holders of Company Common Stock
(other than Parent and its affiliates).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated and
abandoned at any time prior to the Effective Time of the Merger, whether before
or after the Company Stockholder Approval:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
or
(c) by the Company if the Merger shall not have been
consummated on or before May 15, 1999 (other than due to the failure of the
Company to perform its obligations under this Agreement required to be performed
at or prior to the Effective Time of the Merger), or by Parent if the Merger
shall not have been consummated on or before May 15, 1999 (other than due to the
failure of Parent to perform its obligations under this Agreement required to be
performed at or prior to the Effective Time of the Merger); or
(d) by either Parent or the Company if at the duly held
meeting of the stockholders of the Company (including any adjournment thereof)
held for the purpose of voting on the Merger, this Agreement and the
consummation of the transactions contemplated hereby, the holders of a majority
of the outstanding shares of Company Common Stock shall not have
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approved the Merger, this Agreement and the consummation of the transactions
contemplated hereby; or
(e) by Parent, if the Company or its Board of Directors shall
have (1) withdrawn, modified or amended in any respect adverse to Parent its
approval or recommendation of this Agreement or any of the transactions
contemplated herein (it being understood that a communication by the Company
that contains only the information described in Rule 14d-9(e) under the Exchange
Act shall not be deemed to be such a modification or amendment or an action
described in clause (5) below), (2) failed as promptly as practicable after the
Form S-4 is declared effective to mail the Proxy Statement to its stockholders
or failed to include in such statement such recommendation, (3) recommended any
Transaction Proposal from a person other than Parent or any of its affiliates,
(4) resolved to do any of the foregoing or (5) in response to the commencement
of any tender offer or exchange offer for more than 15% of the outstanding
shares of Company Common Stock, not recommended rejection of such tender offer
or exchange offer; or
(f) by the Company, if, pursuant to and in compliance with
Section 5.06 hereof, the Board of Directors of the Company has approved or
recommended a Superior Proposal; or
(g) by the Company upon written notice to the Parent prior to
10:00 a.m. on the day scheduled for the Stockholders Meeting set forth in the
proxy material mailed to the Company's stockholders, if the Average Trading
Price is more than $62.325; provided that the Company shall not be entitled to
terminate this Agreement pursuant to this paragraph (g) if, within twenty-four
(24) hours after the Company notifies Parent in writing of any such proposed
termination, Parent agrees in writing that the Exchange Ratio shall be equal to
0.247091857; or
(h) by Parent upon written notice to the Company prior to
10:00 a.m. on the day scheduled for the Stockholders Meeting set forth in the
proxy material mailed to the Company's stockholders, if the Average Trading
Price is less than $41.55; provided that Parent shall not be entitled to
terminate this Agreement pursuant to this paragraph (h) if, within twenty-four
(24) hours after the Parent notifies the Company of any such proposed
termination, the Company agrees in writing that the Exchange Ratio shall be
equal to 0.370637786.
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of
this Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.01(n), Section 3.02(h), the last sentence of Section
5.02(a) (and the provisions of the Confidentiality Agreement referred to
therein, other than Section 2 thereof), this Section 7.02, Section 8.02, Section
8.07 and Section 8.08. Nothing contained in this Section shall relieve any party
for any breach of the representations, warranties, covenants or agreements set
forth in this Agreement (including, without limitation, liability for damages as
a result of any such breach that gives rise to an inability to satisfy any of
the conditions to Closing set forth in Article VI).
SECTION 7.03. AMENDMENT. This Agreement, including the Schedules
hereto, may be amended at the sole discretion and agreement of all of the
parties hereto at any time before or
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after any required approval of matters presented in connection with the Merger
by the stockholders of the Company; provided, however, that after any such
approval, there shall be made no amendment that by law requires further approval
by such stockholders without the further approval of such stockholders. This
Agreement, including the Schedules hereto, may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the Effective
Time of the Merger, the parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights. No single or partial exercise of any
right, remedy, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
Any waiver shall be effective only in the specific instance and for the specific
purpose for which given and shall not constitute a waiver to any subsequent or
other exercise of any right, remedy, power or privilege hereunder.
SECTION 7.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR
WAIVER. A termination of this Agreement pursuant to Section 7.01, an amendment
of this Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require in the case of Parent, Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time of the
Merger and all such representations and warranties will be extinguished on
consummation of the Merger and neither the Company, Parent, Sub, nor any
officer, director or employee or stockholder of any of them shall be under any
liability whatsoever with respect to any such representation or warranty after
such time. This Section 8.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time of
the Merger.
SECTION 8.02. FEES AND EXPENSES.
(a) (i) If this Agreement shall have been terminated in
accordance with its terms (except pursuant to Section 7.01(b)) and either of the
following shall have occurred: (A) prior to such termination, any corporation
(including the Company or any of its Subsidiaries or affiliates), partnership,
person, other entity or "group" (as referred to in Section 13(d)(3) of the
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Exchange Act) other than Parent, Sub or any of their respective affiliates
(collectively, "Persons"), shall have become the beneficial owner of more than
15% of the outstanding shares of Company Common Stock; or (B)(x) prior to such
termination, any Person shall have made, or proposed, communicated or disclosed
in a manner which is or otherwise becomes public a bona fide intention to make a
Transaction Proposal (including by making such a Transaction Proposal) and (y)
on or prior to September 15, 1999, the Company either consummates with a Person
a transaction the proposal of which would otherwise qualify as a Transaction
Proposal under Section 5.06 or enters into a definitive agreement with a Person
with respect to a transaction the proposal of which would otherwise qualify as a
Transaction Proposal under Section 5.06 (whether or not such Person is the
Person referred to in clause (x) above); or (ii) if this Agreement is terminated
pursuant to (A) Section 7.01(e) or (B) Section 7.01(f); then the Company shall,
(1) in the case of clauses (a)(i)(A) and (a)(ii)(A) above, promptly, but in no
event later than one business day after the termination of this Agreement, (2)
in the case of clause (a)(i)(B) above, promptly, but in no event later than one
business day after an event specified in subclause (y) thereof shall have
occurred, and (3) in the case of clause (a)(ii)(B) above, prior to (and as a
precondition to) termination under Section 7.01(f) pay Parent a fee of
$8,000,000 in cash which fee shall be payable in same day funds. No termination
of this Agreement at a time when a fee is reasonably expected to be payable
pursuant to this Section 8.02(a) following termination of this Agreement shall
be effective until such fee is paid.
(b) In addition, in any case in which a fee is payable
pursuant to paragraph (a) above, the Company shall promptly reimburse Parent and
Sub for documented reasonable out-of-pocket expenses incurred by either of them
in connection with this Agreement and the Stock Option Agreement, including
reasonable accounting, investment banking and legal fees and expenses; provided
that the amount of such reimbursement shall not exceed $1,000,000 in the
aggregate.
(c) Except as provided otherwise in paragraphs (a) and (b)
above, all costs and expenses incurred in connection with this Agreement and the
Stock Option Agreement and the transactions contemplated hereby and thereby
shall be paid by the party incurring such expenses, except that the cost of
filing, printing and distributing the Proxy Statement and the Form S-4 shall be
borne equally by Parent and the Company.
SECTION 8.03. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) or transmitted by confirmed facsimile to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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(a) if to Parent or Sub, to
Quintiles Transnational Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Riverbirch Building, Suite 200
Durham, North Carolina 27703
Attention: General Counsel
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Smith, Anderson, Blount, Dorsett,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to
Pharmaceutical Marketing Services Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Reboul, MacMurray, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Kristol
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 8.04. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person;
(b) "Continuing Employees" means all persons who are actively
employed on a full-time basis by the Company or its Subsidiaries immediately
following the Effective Time of the Merger, other than such persons who are
actively employed on a full-time basis by the Company or any of its Subsidiaries
other than PMSI ▇▇▇▇▇-▇▇▇▇▇, Inc., if any, as may be identified in writing by
Parent to the Company not less than five business days prior to the Closing
Date;
(c) "Environmental Claim" means any written or oral notice,
claim, demand, action, suit, complaint, proceeding or other communication by any
person alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
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governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based on or resulting
from (A) the presence, discharge, emission, release or threatened release of any
Hazardous Materials at any location, whether or not owned, leased or operated by
the Company or any of its Subsidiaries, (B) circumstances forming the basis of
any violation or alleged violation of any Environmental Law or Environmental
Permit or (C) otherwise relating to obligations or liabilities under any
Environmental Laws;
(d) "Environmental Laws" means all applicable foreign,
federal, state, provincial and local statutes, rules, regulations, ordinances,
orders, decrees and common or civil law relating in any manner to contamination,
pollution or protection of human health or the environment, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act, the Solid Waste Disposal Act, the Clean Air Act, the Clean Water Act, the
Toxic Substances Control Act, the Occupational Safety and Health Act, the
Emergency Planning and Community-Right-to-Know Act, the Safe Drinking Water Act,
all as amended, and similar state and foreign laws;
(e) "Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required under Environmental
Laws for the Company and its Subsidiaries to conduct their operations and
businesses;
(f) "Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum (including crude oil or
any fraction thereof) and petroleum products, friable asbestos and
asbestos-containing materials, pollutants, contaminants and all other materials,
and substances regulated pursuant to, or that could reasonably be expected to
provide the basis of liability under, any Environmental Law;
(g) "indebtedness" means, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such person, (B) all obligations
of such person evidenced by bonds, debentures, notes or similar instruments, (C)
all obligations of such person under conditional sale or other title retention
agreements relating to property purchased by such person, (D) all obligations of
such person issued or assumed as the deferred purchase price of property or
services (excluding obligations of such person to creditors for raw materials,
inventory, services and supplies incurred in the ordinary course of such
person's business), (E) all capitalized lease obligations of such person, (F)
all obligations of others secured by any Lien on property or assets owned or
acquired by such person, whether or not the obligations secured thereby have
been assumed, (G) all obligations of such person under interest rate or currency
hedging transactions (valued at the termination value thereof), (H) all letters
of credit issued for the account of such person and (I) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person;
(h) "Intellectual Property" means all rights, privileges and
priorities provided under federal, state, foreign and multinational law relating
to intellectual property, whether registered or unregistered, including, without
limitation, all (i) (a) inventions, discoveries, processes, formulae, designs,
methods, techniques, procedures, concepts, developments, technology, and
confidential information, new and useful improvements thereof and know-how
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relating thereto, whether or not patented or eligible for patent protection; (b)
copyrights and copyrightable works, including computer applications, programs,
Software, Databases and related items; (c) trademarks, service marks, trade
names, brand names, product names, corporate names, logos and trade dress, the
goodwill of any business symbolized thereby, and all common-law rights relating
thereto; and (d) trade secrets, data and other confidential information; and
(ii) all registrations, applications, recordings, and licenses or other similar
agreements related to the foregoing;
(i) "knowledge" means, with respect to any matter, (i) in the
case of Parent, the knowledge of any director or executive officer of Parent
after due inquiry into such matter and (ii) in the case of the Company, the
knowledge of Messrs. Turner, Davies, ▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ after due inquiry into
such matter;
(j) "Material Adverse Change" means, when used with respect to
the Company or Parent, any change that, either individually or in the aggregate
with all other such changes, is materially adverse to the Company or Parent, as
the case may be, and their respective subsidiaries taken as a whole;
(k) "Material Adverse Effect" means, when used with respect to
the Company or Parent, any change, effect, event or occurrence that, either
individually or in the aggregate with all other such changes, effects, events
and occurrences, either (a) is materially adverse to the business, properties,
financial condition or results of operations of the Company or Parent, as the
case may be, and their respective subsidiaries taken as a whole, or (b) will be
materially adverse to the business, properties, financial condition or results
of operations of Parent and its subsidiaries (including the Surviving
Corporation) taken as a whole following the Effective Time of the Merger;
(l) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity;
(m) "Recent SEC Documents" means any SEC Documents filed by
the Company prior to the date of this Agreement with respect to any period
ending, or any date occurring, on or after June 30, 1998; and
(n) "Rights" means the rights to acquire one-third of a share
of Company Common Stock pursuant to the Rights Agreement;
(o) "Rights Agreement" means the Rights Agreement dated as of
January 28, 1998 between the Company and ▇▇▇▇▇▇ Trust Company of New York;
(p) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person; and
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(q) "Year 2000 Compliant" means, when used with respect to any
software or database, that such software or database will operate accurately
and, without interruption, accept, possess and in all manner retain full
functionality when referring to, or involving, any year or date in the twentieth
or twenty-first centuries.
SECTION 8.05. INTERPRETATION. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to 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".
SECTION 8.06. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered 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 8.07. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement and the other agreements referred to herein 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. All exhibits and schedules referred to in this Agreement, including
without limitation the Company Disclosure Schedule, are intended to be and
hereby are specifically made a part of this Agreement. This Agreement, other
than Section 5.04, is not intended to confer upon any person other than the
parties any rights or remedies.
SECTION 8.08. GOVERNING LAW. The interpretation and construction of
this Agreement, and all matters relating hereto, shall be governed by, and
construed in accordance with, the laws of the State of North Carolina, without
regard to the choice of law principles thereof.
SECTION 8.09. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties hereto. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.10. 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.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
QUINTILES TRANSNATIONAL CORP.
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Sr. Vice President
QTRN ACQUISITION CORP.
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Sr. Vice President
PHARMACEUTICAL MARKETING SERVICES INC.
By:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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LIST OF OMITTED SCHEDULES AND EXHIBITS TO MERGER AGREEMENT
Company Disclosure Schedule
Section 3.01(a) Organization, Standing and Corporate Power
Section 3.01(b) Subsidiaries
Section 3.01(c) Capital Structure
Section 3.01(d) Authority; Noncontravention
Section 3.01(e) SEC Documents; Undisclosed Liabilities
Section 3.01(g) Absence of Certain Changes or Events
Section 3.01(h) Litigation; Labor Matters; Compliance with Laws
Section 3.01(i) Employee Benefit Plans
Section 3.01(j) Taxes
Section 3.01(k) Properties
Section 3.01(m) Contracts; Debt Instruments
Section 3.01(n) Brokers
Section 3.01(r) Intellectual Property
Section 4.01(a) Conduct of Business by the Company
Section 4.01(b) Changes in Employment Arrangements
Section 4.01(e) Tax Elections
Parent Disclosure Schedule
Section 3.02(b) Capital Structure
Section 3.02(d) SEC Documents; Undisclosed Liabilities
Section 3.02(f) Absence of Certain Changes or Events
Section 3.02(g) Litigation; Compliance with Laws
Section 6.02(f) Employment Agreements
Exhibit C Form of Employment Agreement
The Company hereby agrees to furnish supplementally a copy of any Omitted
Schedules and Exhibits to the Commission upon request.
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