AGREEMENT AND PLAN OF MERGER dated as of August 12, 2008 among LONGS DRUG STORES CORPORATION, CVS CAREMARK CORPORATION and BLUE MERGERSUB CORP.
Exhibit
2.1
EXECUTION
COPY
AGREEMENT
AND PLAN OF MERGER
dated as
of
August
12, 2008
among
LONGS
DRUG STORES CORPORATION,
CVS
CAREMARK CORPORATION
and
BLUE
MERGERSUB CORP.
TABLE
OF CONTENTS
Page
|
ARTICLE
I
DEFINITIONS
|
|
|
Section
1.01. Definitions
|
2
|
|
Section
1.02. Other
Definitional and Interpretative Provisions
|
7
|
|
ARTICLE
2
|
|
|
The
Offer
|
|
|
Section
2.01. The
Offer
|
8
|
|
Section
2.02. Company
Action
|
10
|
|
Section
2.03. Directors
|
11
|
|
Section
2.04. Top-Up
Option
|
12
|
|
ARTICLE
3
|
|
|
The
Merger
|
|
|
Section
3.01. The
Merger
|
14
|
|
Section
3.02. Conversion
of Shares
|
15
|
|
Section
3.03. Surrender
and Payment
|
15
|
|
Section
3.04. No
Dissenters’ or Appraisal Rights
|
17
|
|
Section
3.05. Stock
Options, Performance Shares and Restricted
Shares
|
17
|
|
Section
3.06. Adjustments
|
18
|
|
Section
3.07. Withholding
Rights
|
18
|
|
Section
3.08. Lost
Certificates
|
18
|
|
ARTICLE
4
|
|
|
The
Surviving Corporation
|
|
|
Section
4.01. Articles of
Incorporation
|
18
|
|
Section
4.02. Bylaws
|
19
|
|
Section
4.03. Directors
and Officers
|
19
|
|
ARTICLE
5
|
|
|
Representations
and Warranties of the Company
|
|
|
Section
5.01. Corporate
Existence and Power
|
19
|
|
Section
5.02. Corporate
Authorization
|
19
|
|
Section
5.03. Governmental
Authorization
|
20
|
|
Section
5.04. Non-contravention
|
20
|
|
Section
5.05. Capitalization
|
21
|
i
|
Section
5.06. Subsidiaries
|
22
|
|
Section
5.07. SEC
Filings and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
|
23
|
|
Section
5.08. Financial
Statements
|
24
|
|
Section
5.09. Disclosure
Documents
|
25
|
|
Section
5.10. Absence
of Certain Changes
|
25
|
|
Section
5.11. No
Undisclosed Material Liabilities
|
26
|
|
Section
5.12. Compliance
with Laws and Court Orders
|
26
|
|
Section
5.13. Litigation
|
26
|
|
Section
5.14. Regulatory
Compliance.
|
27
|
|
Section
5.15. Taxes
|
29
|
|
Section
5.16. Employee
Benefit Plans
|
31
|
|
Section
5.17. Environmental
Matters
|
33
|
|
Section
5.18. Properties
|
34
|
|
Section
5.19. Intellectual
Property
|
35
|
|
Section
5.20. Material
Contracts
|
35
|
|
Section
5.21. Finders’
Fees
|
37
|
|
Section
5.22. Opinion
of Financial Advisor
|
37
|
|
Section
5.23. Antitakeover
Statutes
|
37
|
|
Section
5.24. No
Other Representations or Warranties
|
38
|
|
ARTICLE
6
|
|
|
Representations
and Warranties of Parent
|
|
|
Section
6.01. Corporate
Existence and Power
|
38
|
|
Section
6.02. Corporate
Authorization
|
38
|
|
Section
6.03. Governmental
Authorization
|
39
|
|
Section
6.04. Non-contravention
|
39
|
|
Section
6.05. Disclosure
Documents
|
39
|
|
Section
6.06. Finders’
Fees
|
40
|
|
Section
6.07. Financing
|
40
|
|
Section
6.08. Interim
Operations of Merger Subsidiary
|
40
|
|
Section
6.09. Litigation
|
40
|
|
Section
6.10. Company
Stock
|
41
|
|
Section
6.11. No
Other Representations or Warranties
|
41
|
|
ARTICLE
7
|
|
|
Covenants
of the Company
|
|
|
Section
7.01. Conduct
of the Company
|
41
|
|
Section
7.02. Stockholder
Meeting; Proxy Material
|
45
|
|
Section
7.03. Access
to Information
|
46
|
|
Section
7.04. No
Solicitation; Change of Recommendation
|
46
|
|
Section
7.05. Compensation
Arrangements
|
50
|
ii
|
ARTICLE
8
|
|
|
Covenants
of Parent
|
|
|
Section
8.01. Obligations
of Merger Subsidiary
|
50
|
|
Section
8.02. Voting
of Shares
|
50
|
|
Section
8.03. Director
and Officer Liability
|
50
|
|
Section
8.04. Employee
Matters
|
52
|
|
ARTICLE
9
|
|
|
Covenants
of Parent and the Company
|
|
|
Section
9.01. Reasonable
Best
Efforts
|
54
|
|
Section
9.02. HSR
Clearance
|
55
|
|
Section
9.03. Cooperation
|
56
|
|
Section
9.04. Public
Announcements
|
57
|
|
Section
9.05. Further
Assurances
|
57
|
|
Section
9.06. Merger
Without Meeting of Stockholders
|
57
|
|
Section
9.07. Notices
of Certain Events
|
57
|
|
Section
9.08. Takeover
Statutes
|
58
|
|
ARTICLE
10
|
|
|
Conditions
to the Merger
|
|
|
Section
10.01. Conditions
to the Obligations of Each Party
|
58
|
|
ARTICLE
11
|
|
|
Termination
|
|
|
Section
11.01. Termination
|
59
|
|
Section
11.02. Effect
of Termination
|
60
|
|
ARTICLE
12
|
|
|
Miscellaneous
|
|
|
Section
12.01. Notices
|
61
|
|
Section
12.02. Survival
of Representations and Warranties
|
62
|
|
Section
12.03. Amendments
and Waivers
|
62
|
|
Section
12.04. Expenses
|
62
|
|
Section
12.05. Disclosure
Schedule References
|
63
|
|
Section
12.06. Binding
Effect; Benefit; Assignment
|
64
|
|
Section
12.07. Governing
Law
|
64
|
|
Section
12.08. Jurisdiction
|
65
|
|
Section
12.09. WAIVER
OF JURY TRIAL
|
66
|
|
Section
12.10. Counterparts;
Effectiveness
|
66
|
|
Section
12.11. Entire
Agreement
|
66
|
iii
|
Section
12.12. Severability
|
66
|
|
Section
12.13. Specific
Performance
|
67
|
iv
AGREEMENT
AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER (this “Agreement”)
dated as of August 12, 2008, among Longs Drug Stores Corporation, a Maryland
corporation (the “Company”),CVS
Caremark Corporation, a Delaware corporation (“Parent”),
and Blue MergerSub Corp., a Maryland corporation and a wholly-owned indirect
subsidiary of Parent (“Merger
Subsidiary”).
WHEREAS,
the respective boards of directors of Parent and Merger Subsidiary have
determined that it is in the best interests of their respective stockholders,
and the board of directors of the Company (the “Board
of Directors”) has determined that it is advisable, for Parent to acquire
the Company on the terms and conditions set forth herein;
WHEREAS,
on the terms and conditions set forth herein, Merger Subsidiary has agreed to
commence a tender offer (as it may be amended from time to time as permitted by
this Agreement, the “Offer”)
to purchase all outstanding shares of common stock, par value $0.50 per share,
of the Company (“Shares”)
at a price of $71.50 per Share, in cash without interest (such price, or any
higher price as may be paid in the Offer in accordance with this Agreement, the
“Offer
Price”);
WHEREAS,
following consummation of the Offer, Merger Subsidiary will be merged with and
into the Company (the “Merger”),
with the Company surviving the Merger as a direct or indirect wholly owned
subsidiary of Parent in accordance with the Maryland General Corporation Law
(“Maryland
Law”), and each Share that is not tendered and accepted pursuant to the
Offer (other than Shares owned by Parent or any direct or indirect wholly owned
subsidiary of Parent or the Company) will thereupon be canceled and converted
into the right to receive cash in an amount equal to the Offer Price, in each
case, on the terms and conditions set forth herein;
WHEREAS,
the Board of Directors (A) has, by unanimous vote, (i) determined that this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, are advisable and in the best interests of the Company and its
stockholders on the terms and conditions set forth herein and (ii) adopted
this Agreement and approved the transactions contemplated hereby, including the
Offer and the Merger, on the terms and conditions substantially as set forth
herein, and (B) has unanimously resolved to recommend that the Company’s
stockholders accept the Offer, tender their Shares into the Offer and, if
required by Applicable Law, approve the Merger; and
WHEREAS,
the respective boards of directors of Parent and Merger Subsidiary have adopted,
approved and declared advisable, and Parent has caused the sole stockholder of
Merger Subsidiary to approve, this Agreement providing
for the
Offer and the Merger in accordance with Maryland Law upon the terms and
conditions set forth herein.
NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements contained in this Agreement, and intending to be legally bound
hereby, Parent, Merger Subsidiary and the Company hereby agree as
follows:
ARTICLE
1
Definitions
Section
1.01. Definitions. (a)
As used herein, the following terms have the following
meanings:
“Acquisition
Proposal” means, other than the transactions contemplated by this
Agreement, any Third-Party offer, proposal or inquiry relating to, or any
Third-Party indication of interest in, (i) any acquisition or purchase, direct
or indirect, of 15% or more of the consolidated assets of the Company and its
Subsidiaries or 15% or more of any class of equity or voting securities of the
Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute 15% or more of the consolidated assets of the Company,
(ii) any tender offer (including a self-tender offer) or exchange offer that, if
consummated, would result in any Third Party beneficially owning 15% or more of
any class of equity or voting securities of the Company or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute 15% or
more of the consolidated assets of the Company, (iii) a merger, consolidation,
share exchange, business combination, sale of substantially all the assets,
reorganization, recapitalization, liquidation, dissolution or other similar
transaction involving the Company or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute 15% or more of the consolidated
assets of the Company or (iv) any other transaction the consummation of which
could reasonably be expected to impede, interfere with, prevent or materially
delay the Offer or Merger or that could reasonably be expected to dilute
materially the benefits to Parent of the transactions contemplated
hereby.
“Affiliate”
means, with respect to any Person, any other Person directly or indirectly
controlling, controlled by or under common control with such
Person.
“Applicable
Law” means, with respect to any Person, any foreign, federal, state or
local law (statutory, common or otherwise), constitution, treaty, convention,
ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling
or other similar requirement enacted, adopted, promulgated or applied by a
2
Governmental
Authority that is binding upon or applicable to such Person, as amended unless
expressly specified otherwise.
“Business
Day” means a day other than Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by Applicable
Law to close.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Company
Balance Sheet” means the consolidated balance sheet of the Company as of
January 31, 2008 and the footnotes thereto set forth in the Company
10-K.
“Company
Balance Sheet Date” means January 31, 2008.
“Company
Disclosure Schedule” means the disclosure schedule dated the
date hereof regarding this Agreement that has been provided by the Company to
Parent and Merger Subsidiary.
“Company
Material Adverse Effect” means a material adverse effect on (i) the
condition (financial or otherwise), business, assets or results of operations of
the Company and its Subsidiaries, taken as a whole, excluding any effect arising
out of or resulting from (A) changes in the financial or securities markets or
general economic or political conditions in the United States not having a
materially disproportionate effect on the Company and its Subsidiaries, taken as
a whole, (B) changes (including changes of Applicable Law or applicable
accounting regulations) or conditions generally affecting the industry or the
geographic markets in which the Company and its Subsidiaries operate and not
specifically relating to or having a materially disproportionate effect on the
Company and its Subsidiaries, taken as a whole, (C) acts of war, sabotage or
terrorism or natural disasters involving the United States of America not having
a materially disproportionate effect on the Company and its Subsidiaries, taken
as a whole, or (D) the announcement or consummation of the transactions
contemplated by this Agreement, or (ii) the Company’s ability to consummate the
transactions contemplated by this Agreement.
“Company
10-K” means the Company’s annual report on Form 10-K for the fiscal year
ended January 31, 2008.
“Environmental
Laws” means any Applicable Laws or any agreement with any Governmental
Authority or other third party, relating to human health and safety, the
environment or to Hazardous Substances.
“Environmental
Permits”
means all permits, licenses, franchises, certificates, approvals and other
similar authorizations of Governmental
3
Authorities
relating to or required by Environmental Laws and affecting, or relating to, the
business of the Company or any of its Subsidiaries as currently
conducted.
“ERISA”
means the Employee Retirement Income Security Act of 1974.
“ERISA
Affiliate” of any entity means any other entity that, together with such
entity, would be treated as a single employer under Section 414 of the
Code.
“GAAP”
means generally accepted accounting principles in the United
States.
“Governmental
Authority” means any transnational, domestic or foreign federal, state or
local, governmental, regulatory or administrative authority, department, court,
agency or official, including any political subdivision thereof.
“Hazardous
Substance” means any pollutant, contaminant, waste or chemical or any
toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance, waste or material, or any substance, waste or material having any
constituent elements displaying any of the foregoing characteristics, including
any substance, waste or material regulated under any Environmental
Law.
“HSR
Act” means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976.
“Intellectual
Property” means (i) trademarks, service marks, brand names, certification
marks, trade dress, domain names and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application, (ii)
inventions and discoveries, whether patentable or not, in any jurisdiction,
patents, applications for patents (including divisions, continuations,
continuations in part and renewal applications), and any renewals, extensions or
reissues thereof, in any jurisdiction, (iii) Trade Secrets, (iv) writings and
other works, whether copyrightable or not, in any jurisdiction, and any and all
copyright rights, whether registered or not, and registrations or applications
for registration of copyrights in any jurisdiction, and any renewals or
extensions thereof, (v) moral rights, database rights, design rights, industrial
property rights, publicity rights and privacy rights and (vi) any similar
intellectual property or proprietary rights.
“IT
Assets” means computers, computer software, firmware, middleware,
servers, workstations, routers, hubs, switches, data communications lines and
all
4
other
information technology equipment, and all associated documentation owned by the
Company or its Subsidiaries or licensed or leased by the Company or its
Subsidiaries pursuant to written agreement (excluding any public networks and
“off-the-shelf” or “shrink-wrap” items).
“knowledge”
of (i) the Company means the knowledge of any of the individuals set forth on
Section 1.01 of the Company Disclosure Schedule after reasonable inquiry and
(ii) Parent or any of its Subsidiaries means the knowledge of any of the
individuals set forth on Section 1.01 of the Parent Disclosure Schedule after
reasonable inquiry.
“Lien”
means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, encumbrance or other adverse claim of any kind in
respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien, any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
“1933
Act” means the Securities Act of 1933.
“1934
Act” means the Securities Exchange Act of 1934.
“Parent
Disclosure Schedule” means the disclosure schedule dated the date hereof
regarding this Agreement that has been provided by Parent to the
Company.
“Parent
Material Adverse Effect” means a material adverse effect on Parent’s
ability to consummate the transactions contemplated by this
Agreement.
“Permitted
Liens” means any Lien that is (i) not material in amount and (ii) does
not materially detract from the value of, or materially impair the existing use
of, the asset affected by such Lien.
“Person”
means an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
“▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act” means the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
“SEC”
means the Securities and Exchange Commission.
“Subsidiary”
means, with respect to any Person, any entity of which securities or other
ownership interests having ordinary voting power to elect a
5
majority
of the board of directors or other persons performing similar functions are at
any time directly or indirectly owned by such Person.
“Third
Party” means any Person, including as defined in Section 13(d) of
the 1934 Act, other than Parent or any of its Affiliates.
“WARN
Act” means the Worker Adjustment and Retraining Notification
Act.
(b) Each
of the following terms is defined in the Section set forth opposite such
term:
|
Term
|
Section
|
|
|
Acceptance
Time
|
2.01
|
|
|
Adverse
Recommendation Change
|
7.04
|
|
|
Agreement
|
Preamble
|
|
|
Board
of Directors
|
Preamble
|
|
|
Certificates
|
3.03
|
|
|
Closing
|
3.01
|
|
|
Company
Board Recommendation
|
5.02
|
|
|
Company
Disclosure Documents
|
5.09
|
|
|
Company
Financial Advisor
|
5.21
|
|
|
Company
Proxy Statement
|
5.09
|
|
|
Company
Restricted Share
|
3.05
|
|
|
Company
SEC Documents
|
5.07
|
|
|
Company
Securities
|
5.05
|
|
|
Company
Stock Option
|
3.05
|
|
|
Company
Subsidiary Securities
|
5.06
|
|
|
Company
Stockholder Meeting
|
7.02
|
|
|
Compensation
Arrangement
|
5.16
|
|
|
Compensation
Arrangement Approvals
|
5.16
|
|
|
Compensation
Committee
|
5.16
|
|
|
Confidentiality
Agreement
|
7.03
|
|
|
Continuing
Employees
|
8.04
|
|
|
D&O
Insurance
|
8.03
|
|
|
Deemed
Assignment Transaction
|
9.03
|
|
|
Effective
Time
|
3.01
|
|
|
Employee
Plans
|
5.16
|
|
|
End
Date
|
11.01
|
|
|
Exchange
Agent
|
3.03
|
|
|
Healthcare
Information Laws
|
11.01
|
|
|
Healthcare
Regulatory Approvals
|
5.03
|
|
|
Indemnified
Person
|
8.03
|
|
|
Independent
Directors
|
2.03
|
|
6
|
Lease
|
5.18
|
|
|
Maryland
Law
|
Preamble
|
|
|
Material
Contracts
|
5.20
|
|
|
Merger
|
Preamble
|
|
|
Merger
Consideration
|
3.02
|
|
|
MEWA
|
5.16
|
|
|
Minimum
Condition
|
2.01
|
|
|
Multiemployer
Plan
|
5.16
|
|
|
Notice
of Merger
|
2.01
|
|
|
NYSE
|
2.04
|
|
|
Offer
|
Preamble
|
|
|
Offer
Documents
|
2.01
|
|
|
Offer
Price
|
Preamble
|
|
|
Payment
Event
|
12.04
|
|
|
Performance
Share
|
3.05
|
|
|
Permits
|
5.01
|
|
|
Process
Agent
|
12.08
|
|
|
Representatives
|
7.03
|
|
|
Requisite
Short-Form Merger Shares
|
2.04
|
|
|
Schedule
TO
|
2.01
|
|
|
Schedule
14D-9
|
2.02
|
|
|
Shares
|
Preamble
|
|
|
Subsequent
Offering Period
|
2.01
|
|
|
Superior
Proposal
|
7.04
|
|
|
Surviving
Corporation
|
3.01
|
|
|
Takeover
Statute
|
2.02
|
|
|
Tax
|
5.15
|
|
|
Taxing
Authority
|
5.15
|
|
|
Tax
Return
|
5.15
|
|
|
Tax
Sharing Agreements
|
5.15
|
|
|
Top-Up
Notice
|
2.04
|
|
|
Top-Up
Option
|
2.04
|
|
|
Top-Up
Shares
|
2.04
|
|
|
Uncertificated
Shares
|
3.03
|
|
Section
1.02. Other
Definitional and Interpretative Provisions. The words
“hereof”, “herein” and “hereunder” and words of like import used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof. References to Articles, Sections, Exhibits,
Annexes and Schedules are to Articles, Sections, Exhibits, Annexes and Schedules
of this Agreement unless otherwise specified. Any capitalized terms
used in any Exhibit, Annex or Schedule but not
7
otherwise
defined therein, shall have the meaning as defined in this
Agreement. Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the
words “include”, “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limitation”, whether or not
they are in fact followed by those words or words of like
import. “Writing”, “written” and comparable terms refer to printing,
typing and other means of reproducing words (including electronic media) in a
visible form. References to any statute shall be deemed to refer to
such statute as amended from time to time and to any rules or regulations
promulgated thereunder. References to any agreement or contract are
to that agreement or contract as amended, modified or supplemented from time to
time in accordance with the terms hereof and thereof; provided
that, with respect to any agreement or contract listed on any schedules hereto,
all such amendments, modifications or supplements must also be listed in the
appropriate schedule. References to any Person include the successors
and permitted assigns of that Person. References from or through any
date mean, unless otherwise specified, from and including or through and
including, respectively.
ARTICLE
2
The
Offer
8
Company,
Merger Subsidiary shall have the right to extend the Offer for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer or any period required by Applicable Law
and (y) if any condition to the Offer is not satisfied or waived on any
scheduled expiration date of the Offer, Merger Subsidiary shall extend the Offer
from time to time until such conditions are satisfied or waived; provided,
in each case, that Merger Subsidiary shall not be required to extend the Offer
beyond the End Date. Following expiration of the Offer, Merger
Subsidiary may, in its sole discretion, provide a subsequent offering period
(“Subsequent
Offering Period”) in accordance with Rule 14d-11 of the 1934
Act. Merger Subsidiary shall not terminate or withdraw the Offer
other than in connection with the termination of this Agreement in accordance
with Article 11 hereof. Subject to the foregoing, including the
requirements of Rule 14d-11, and upon the terms and subject to the conditions of
the Offer, Merger Subsidiary shall, and Parent shall cause it to, accept for
payment and pay for, as promptly as practicable after the expiration of the
Offer, all Shares (i) validly tendered and not withdrawn pursuant to the Offer
and (ii) validly tendered in the Subsequent Offering Period (the time at which
Shares are first accepted for payment under the Offer, the “Acceptance
Time”).
(b) On
the date of commencement of the Offer, Parent and Merger Subsidiary
shall (i) file with the SEC a Tender Offer Statement on Schedule TO with
respect to the Offer (together with all amendments and supplements thereto and
including exhibits thereto, the “Schedule
TO”) that shall include the summary term sheet required thereby and, as
exhibits, the Offer to Purchase and a form of letter of transmittal and summary
advertisement and other appropriate ancillary Offer documents (collectively,
together with any amendments or supplements thereto, the “Offer
Documents”) and (ii) cause the Offer Documents, along with the
notice of the Merger required by Section 3-106(d)(1) of Maryland Law (the “Notice
of Merger”), to be disseminated to holders of Shares. Each of
Parent, Merger Subsidiary and the Company agrees promptly to correct any
information provided by it for use in the Schedule TO, the Offer Documents or
the Notice of Merger if and to the extent that such information shall have
become (or shall become known to be) false or misleading in any material
respect. Parent and Merger Subsidiary shall use their reasonable best
efforts to cause the Schedule TO as so corrected to be filed with the SEC and
the Offer Documents as so corrected to be disseminated to holders of Shares, in
each case, as soon as reasonably practicable and as and to the extent required
by applicable U.S. federal securities laws. The Company and its
counsel shall be given a reasonable opportunity to review and comment on the
Schedule TO and the Offer Documents each time before any such document is filed
with the SEC, and Parent and Merger Subsidiary shall give reasonable and good
faith consideration to any comments made by the Company and its
counsel. Parent and Merger Subsidiary shall provide the Company and
its counsel with (i) any comments or other communications, whether written or
oral, that Parent, Merger Subsidiary or their
9
counsel
may receive from time to time from the SEC or its staff with respect to the
Schedule TO or Offer Documents promptly after receipt of those comments or other
communications and (ii) a reasonable opportunity to participate in the response
of Parent and Merger Subsidiary to those comments and to provide comments on
that response (to which reasonable and good faith consideration shall be
given).
Section
2.02. Company
Action. (a) The Company hereby consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held has
unanimously (i) determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, are advisable and in the best
interests of the Company and its stockholders, (ii) adopted this Agreement and
approved the transactions contemplated hereby, including the Offer and the
Merger, in accordance with the requirements of Maryland Law, (iii) resolved,
subject to Section 7.04(b), to recommend acceptance of the Offer and, if
required by Applicable Law, approval of the Merger by its stockholders and (iv)
taken all other actions necessary to exempt the Offer, the Merger, this
Agreement and the transactions contemplated hereby from any “fair price”,
“moratorium”, “control share acquisition”, “interested stockholder”, “business
combination” or other similar statute or regulation promulgated by a
Governmental Authority (“Takeover
Statute”). The Company has been advised that all of its
directors and executive officers who own Shares intend to tender their Shares
pursuant to the Offer. The Company shall promptly furnish Parent with
a list of its stockholders, mailing labels and any available listing or computer
file containing the names and addresses of all record holders of Shares and
lists of securities positions of Shares held in stock depositories, in each
case, true and correct as of the most recent practicable date, and shall provide
to Parent such additional information (including updated lists of stockholders,
mailing labels and lists of securities positions) and such other assistance as
Parent may reasonably request in connection with the
Offer.
(b) On
the day that the Offer is commenced, the Company shall file with the SEC and
disseminate to holders of Shares, in each case, as and to the extent required by
applicable U.S. federal securities laws, a Solicitation/Recommendation Statement
on Schedule 14D-9 (together with any amendments or supplements thereto, the
“Schedule
14D-9”) that, subject to Section 7.04(b), shall reflect the
recommendations of the Board of Directors referred to above. Each of
the Company, Parent and Merger Subsidiary agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the
extent that it shall have become false or misleading in any material
respect. The Company shall use its reasonable best efforts to cause
the Schedule 14D-9 as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case, as soon as reasonably
practicable and as and to the extent required by applicable U.S. federal
securities laws. Parent and its
10
counsel
shall be given a reasonable opportunity to review and comment on the
Schedule 14D-9 each time before it is filed with the SEC, and the Company
shall give reasonable and good faith consideration to any comments made by
Parent, Merger Subsidiary and their counsel. The Company shall
provide Parent, Merger Subsidiary and their counsel with (i) any comments or
other communications, whether written or oral, that the Company or its counsel
may receive from time to time from the SEC or its staff with respect to the
Schedule 14D-9 promptly after receipt of those comments or other communications
and (ii) a reasonable opportunity to participate in the Company’s response to
those comments and to provide comments on that response (to which reasonable and
good faith consideration shall be given).
(b) The
Company’s obligations to appoint Parent’s designees to the Board of Directors
shall be subject to Section 14(f) of the 1934 Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions,
and shall include in the Schedule 14D-9 such information with respect to the
Company and its officers and directors, as Section 14(f) and Rule 14f-1
require in order to fulfill its obligations under this
Section. Parent shall supply to the Company in writing and be solely
responsible for any information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and
Rule 14f-1 and the Company’s obligations under Section 2.03(b) shall be
subject to the receipt of such information.
11
(c) Following
the election or appointment of Parent’s designees pursuant to Section 2.03(a)
and until the Effective Time, the approval of a majority of the directors of the
Company then in office who were not designated by Parent (the “Independent
Directors”) shall be required to authorize (and such authorization shall
constitute the authorization of the Board of Directors and no other action on
the part of the Company, including any action by any other director of the
Company, shall be required to authorize) any termination of this Agreement by
the Company, any amendment of this Agreement requiring action by the Board of
Directors, any extension of time for performance of any obligation or action
hereunder by Parent or Merger Subsidiary and any waiver of compliance with any
of the agreements or conditions contained herein for the benefit of the
Company.
Section
2.04. Top-Up
Option. (a) Subject to Section
2.04(b) and Section
2.04(c), the Company grants to Merger Subsidiary an irrevocable option, for so
long as this Agreement has not been terminated pursuant to the provisions hereof
(the “Top-Up
Option”), to purchase from the Company up to the number of authorized and
unissued Shares equal to the number of Shares that, when added to the number of
Shares owned by Merger Subsidiary at the time of exercise of the Top-Up Option,
constitutes one Share more than the number of Shares (the “Requisite
Short-Form Merger Shares”) entitled to cast 90% of all the votes entitled
to be cast by each group or class of shares entitled to vote as a group or class
on the Merger after the issuance of all Shares to be issued upon exercise of the
Top-Up Option, calculated on a fully-diluted basis or, as may be elected by
Parent, on a primary basis at the Effective Time (such Shares to be issued upon
exercise of the Top-Up Option, the “Top-Up
Shares”).
(b) The
Top-Up Option may be exercised by Merger Subsidiary, in whole or in part, only
once, at any time during the ten Business Day period following the Acceptance
Time, or if any Subsequent Offering Period is provided, during the ten Business
Day period following the expiration date of the Subsequent Offering Period, and
only if Merger Subsidiary shall own as of such time less than the Requisite
Short-Form Merger Shares; provided
that notwithstanding anything in this Agreement to the contrary, the Top-Up
Option shall not be exercisable to the extent (i) the issuance of the
Top-Up Shares would require approval of the Company’s stockholders under Rule
312 of The New York Stock Exchange (the “NYSE”)
(unless a waiver or exemption therefrom is obtained from the NYSE), (ii)
the number of Shares issuable upon exercise of the Top-Up Option would exceed
the number of authorized but unissued Shares or (iii) any other provision
of Applicable Law or judgment, injunction, order or decree shall prohibit the
exercise of the Top-Up Option or the delivery of the Top-Up
Shares. The aggregate purchase price payable for the Top-Up Shares
being purchased by Merger Subsidiary pursuant to the Top-Up Option shall be
determined by multiplying the number of such Shares by the Offer Price, without
12
interest. Such
purchase price may be paid by Merger Subsidiary, at its election, either
entirely in cash or by executing and delivering to the Company a promissory note
having a principal amount equal to such purchase price. Any such
promissory note shall bear interest at the rate of 3% per annum, shall mature on
the first anniversary of the date of execution and delivery of such promissory
note and may be prepaid without premium or penalty.
(c) In
the event Merger Subsidiary wishes to exercise the Top-Up Option, Merger
Subsidiary shall deliver to the Company a notice (the “Top-Up
Notice”) setting forth (i) the number of Top-Up Shares that Merger
Subsidiary intends to purchase pursuant to the Top-Up Option, (ii) the
manner in which Merger Subsidiary intends to pay the applicable purchase price
and (iii) the place and time at which the closing of the purchase of such
Top-Up Shares by Merger Subsidiary is to take place. The Top-Up
Notice shall also include an undertaking signed by Parent and Merger Subsidiary
that, as promptly as practicable following such exercise of the Top-Up Option,
Merger Subsidiary intends to (and Merger Subsidiary shall, and Parent shall
cause Merger Subsidiary to, as promptly as practicable after such exercise)
consummate the Merger in accordance with Section 3-106 of Maryland Law and as
contemplated by Section
9.06. At the closing of the purchase of the Top-Up Shares, Parent and
Merger Subsidiary shall cause to be delivered to the Company the consideration
required to be delivered in exchange for the Top-Up Shares, and the Company
shall cause to be issued to Merger Subsidiary a certificate representing the
Top-Up Shares. The parties hereto agree to use their reasonable best
efforts to cause the closing of the purchase of the Top-Up Shares to occur on
the same day that the Top-Up Notice is deemed received by the Company pursuant
to Section
12.01, and if not so consummated on such day, as promptly thereafter as
possible. The parties further agree to use their reasonable best
efforts to cause the Merger to be consummated in accordance with Section 3-106
of Maryland Law and as contemplated by Section 9.06 as close in time as possible
to (including, to the extent possible, on the same day as) the issuance of the
Top-Up Shares.
(d) Parent
and Merger Subsidiary understand that the Top-Up Shares will not be registered
under the 1933 Act and will be issued in reliance upon an exemption thereunder
for transactions not involving a public offering. Each of Parent and
Merger Subsidiary represents, warrants and agrees that the Top-Up Option is
being, and the Top-Up Shares will be, acquired by Merger Subsidiary for the
purpose of investment and not with a view to or for resale in connection with
any distribution thereof within the meaning of the 1933 Act. Any
certificates evidencing Top-Up Shares shall include any legends required by
applicable securities laws.
(e)
Parent and the Company shall use their respective reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, and
13
assist and
cooperate with each other in doing, all things necessary or desirable to procure
from the NYSE or any other Governmental Authority any necessary waiver or other
exemption from the requirements of NYSE Rule 312 or other Applicable Law in
order to enable the issuance of the Top-Up Shares to occur without the need to
obtain the approval of holders of a majority of the Shares present and voting at
the Company Stockholder Meeting.
ARTICLE
3
The
Merger
(b) Subject
to the provisions of Article 10, the closing of the Merger (the “Closing”)
shall take place in New York City at the offices of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ as soon as possible, but in any
event no earlier than 30 days after the date of the Notice of Merger and no
later than two Business Days after the date the conditions set forth in Article
10 (other
than conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or, to the extent permissible, waiver of those
conditions at the Closing) have been satisfied or, to the extent permissible,
waived by
the party or parties entitled to the benefit of such conditions, or at such
other place, at such other time or on such other date as Parent and the Company
may mutually agree.
(c) At
the Closing, the Company and Merger Subsidiary shall file articles of merger
with the State Department of Assessments and Taxation of Maryland and make all
other filings or recordings required by Maryland Law in connection with the
Merger. The Merger shall become effective at such time (the “Effective
Time”) as the articles of merger are duly accepted by the State
Department of Assessments and Taxation of Maryland or at such later time as may
be specified in the articles of merger.
(d) From
and after the Effective Time, the Surviving Corporation shall possess all the
rights, powers, privileges and franchises and be subject to all of the
obligations, liabilities, restrictions and disabilities of the Company and
Merger Subsidiary, all as provided under Maryland Law.
14
(a) except
as otherwise provided in Section 3.02(b) or Section 3.02(c), each Share
outstanding immediately prior to the Effective Time shall be converted
automatically into the right to receive the Offer Price, in cash without
interest (the “Merger
Consideration”);
(b) each
Share held by any Subsidiary of the Company immediately prior to the Effective
Time shall be converted into such number of shares of stock of the Surviving
Corporation such that each such Subsidiary owns the same percentage of the
outstanding capital stock of the Surviving Corporation immediately following the
Effective Time as such Subsidiary owned in the Company immediately prior to the
Effective Time;
(c) each
Share owned by Parent or any of its Subsidiaries immediately prior to the
Effective Time shall be canceled, and no payment shall be made with respect
thereto; and
(d) each
share of common stock of Merger Subsidiary outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock of
the Surviving Corporation with the same rights, powers and privileges as the
shares so converted and shall constitute the only outstanding shares of capital
stock of the Surviving Corporation (except for any such shares resulting from
the conversion of Shares pursuant to Section 3.02(b)).
(b) Each
holder of Shares that have been converted into the right to receive the Merger
Consideration shall be entitled to receive, upon (i) surrender to the
Exchange Agent of a Certificate, together with a properly completed letter of
15
transmittal,
or (ii) receipt of an “agent’s message” by the Exchange Agent (or such
other evidence, if any, of transfer as the Exchange Agent may reasonably
request) in the case of a book-entry transfer of Uncertificated Shares, the
Merger Consideration payable for each Share represented by a Certificate or for
each Uncertificated Share. Until so surrendered or transferred, as
the case may be, each such Certificate or Uncertificated Share shall represent
after the Effective Time for all purposes only the right to receive the Merger
Consideration.
(c) If
any portion of the Merger Consideration is to be paid to a Person other than the
Person in whose name the surrendered Certificate or the transferred
Uncertificated Share is registered, it shall be a condition to such payment
that (i) either such Certificate shall be properly endorsed or shall
otherwise be in proper form for transfer or such Uncertificated Share shall be
properly transferred and (ii) the Person requesting such payment shall pay
to the Exchange Agent any transfer or other Taxes required as a result of such
payment to a Person other than the registered holder of such Certificate or
Uncertificated Share or establish to the satisfaction of the Exchange Agent that
such Tax has been paid or is not payable.
(d) After
the Effective Time, there shall be no further registration of transfers of
Shares. If, after the Effective Time, Certificates or Uncertificated
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for the Merger Consideration provided for, and in accordance with the
procedures set forth, in this Article 3.
(e) Any
portion of the Merger Consideration made available to the Exchange Agent
pursuant to Section 3.03(a) (and any interest or other income earned thereon)
that remains unclaimed by the holders of Shares six months after the Effective
Time shall be returned to the Surviving Corporation upon demand, and any such
holder who has not exchanged such Shares for the Merger Consideration in
accordance with this Section 3.03 prior to that time shall thereafter look only
to the Surviving Corporation for payment of the Merger Consideration in respect
of such Shares without any interest thereon. Notwithstanding the
foregoing, none of Parent, the Company, the Exchange Agent, the Surviving
Company or any of their respective Affiliates shall be liable to any holder of
Shares for any amount paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Any amounts remaining unclaimed by
holders of Shares two years after the Effective Time (or such earlier date
immediately prior to such time when the amounts would otherwise escheat to or
become property of any Governmental Authority) shall become, to the extent
permitted by Applicable Law, the property of the Surviving Corporation free and
clear of any claims or interest of any Person previously entitled
thereto.
(f) Any
portion of the Merger Consideration made available to the Exchange Agent
pursuant to Section 3.03(a) to pay for Shares for which appraisal
16
rights
have been perfected shall be returned to the Surviving Corporation, upon
demand.
(b) At
the Acceptance Time, each then-outstanding right to earn a restricted Share
under the Company’s performance-based restricted stock grant program (a “Performance
Share”) shall be deemed earned (i) at maximum, if such Performance Share
relates to the 2008/2009 performance cycle, and (ii) target, if such
Performance Share relates to the 2009/2010 performance cycle; provided,
however,
that the portion of such 2009/2010 performance award that is not dependent
solely on the Company’s performance in 2009 shall be prorated by a fraction, the
numerator of which is the number of days, elapsed between February 1, 2008 and
the Acceptance Time and the denominator of which is the number of days in the
full 2009/2010 performance cycle. Earned Performance Shares shall be
fully vested and converted into the right to receive the Merger Consideration at
the Acceptance Time, and any Performance Shares not earned in accordance with
the foregoing shall be cancelled without consideration.
(c) At
the Acceptance Time, each then-outstanding restricted Share granted under any
equity or compensation plan or arrangement of the Company (a “Company
Restricted Share”) shall vest (and all restrictions thereon shall
immediately lapse) and shall be converted into the right to receive the Merger
Consideration in accordance with Section 3.02(a).
(d) The
Company shall pay the holders of Company Stock Options and Performance Shares
the cash payments described in this Section 3.05 as soon as reasonably
practicable after the Acceptance Time, but in any event no later than the
earlier of (i) the Company’s next payroll cycle occurring after the
five-day
17
period
following the Acceptance Time or (ii) ten Business Days following the
Acceptance Time.
Section
3.07. Withholding
Rights. Notwithstanding anything to the contrary contained
herein, each of the Surviving Corporation and Parent shall be entitled to deduct
and withhold from the consideration otherwise payable to any Person pursuant to
Articles 2 and 3 such amounts as it is required to deduct and withhold with
respect to the making of such payment under any provision of Tax law, and if any
such amounts are deducted and withheld, the Surviving Corporation or Parent, as
the case may be, shall timely pay such amounts over to the appropriate
Government Authority. If the Surviving Corporation or Parent, as the
case may be, so withholds amounts, such amounts shall be treated for all
purposes of this Agreement as having been paid to the Person in respect of which
the Surviving Corporation or Parent, as the case may be, made such deduction and
withholding.
Section
3.08. Lost
Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the completion of the
letter of transmittal by such Person and, if required by the Surviving
Corporation, the posting by such Person of a bond, in such reasonable amount as
the Surviving Corporation may direct, as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent shall pay,
in exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration to be paid in respect of the Shares represented by such
Certificate, as contemplated by this Article 3.
ARTICLE
4
Section
4.01. Articles
of Incorporation. The articles of incorporation of the Company
in effect at the Effective Time shall be the articles of incorporation of the
Surviving Corporation until amended in accordance with Applicable
Law.
18
Section
4.02. Bylaws. The
bylaws of Merger Subsidiary in effect at the Effective Time shall be the bylaws
of the Surviving Corporation until amended in accordance with Applicable
Law.
ARTICLE
5
Representations
and Warranties of the Company
Subject to
Section 12.05, except as set forth in the Company Disclosure Schedule, the
Company represents and warrants to Parent that:
Section
5.01. Corporate
Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Maryland, has all corporate powers and has, and has had at all relevant
times, all governmental licenses, authorizations, permits, consents and
approvals (“Permits”)
required to carry on its business as now conducted, except for those Permits the
absence of which would not have, individually or in the aggregate, a Company
Material Adverse Effect. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company has
heretofore made available to Parent true and complete copies of the articles of
incorporation and bylaws of the Company as currently in
effect.
Section
5.02. Corporate
Authorization. (a) The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Company’s corporate powers and,
except for the affirmative vote of the holders of two-thirds of the outstanding
Shares in connection with the consummation of the Merger (if required by
Applicable Law), have been duly authorized by all necessary corporate action on
the part of the Company. The affirmative vote of the holders of
two-thirds of the outstanding Shares entitled to vote thereon (if required by
Applicable Law) is the only vote of the holders of any of the Company’s capital
stock necessary in connection with the consummation of the
Merger. Assuming due authorization, execution and delivery hereof by
Parent and Merger Subsidiary, this Agreement constitutes a valid and binding
agreement of the
19
Company
enforceable against the Company in accordance with its terms (subject, in the
case of enforceability, to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws affecting creditors’ rights
generally and general principles of equity).
(b) At
a meeting duly called and held, the Board of Directors has (i) unanimously
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are advisable and in the best interests of
the Company and its stockholders, (ii) unanimously adopted this Agreement
and approved the transactions contemplated hereby, including the Offer and the
Merger, and (iii) unanimously resolved (subject to Section 7.04) to
recommend acceptance of the Offer and approval of the Merger by its stockholders
(such recommendation, the “Company
Board Recommendation”).
Section
5.03. Governmental
Authorization. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any Governmental Authority, other than (i) the filing and
acceptance for the record of articles of merger with respect to the Merger with
the State Department of Assessments and Taxation of Maryland and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (ii) compliance with any applicable requirements of
the HSR Act, (iii) compliance with any applicable requirements of the 1933 Act,
the 1934 Act and any other applicable state or federal securities laws, (iv)
actions required by applicable Food and Drug Administration, Drug Enforcement
Administration, Medicare/Medicaid, state boards of pharmacy and governmental
controlled substances, federal and state insurance and other federal and state
Governmental Authorities with jurisdiction over the dispensing or distribution
of pharmaceutical products or over the provision of health care items or
services, pharmacy benefit management services, durable medical equipment,
insurance and risk sharing arrangements and products and services, third-party
administrator, utilization review and liquor authorities approvals, in each
case, to the extent applicable (the “Healthcare
Regulatory Approvals”), (v) applicable requirements of the rules and
regulations of the NYSE, (vi) actions required by the Nevada Gaming Commission
and the Nevada State Gaming Control Board and (vii) any actions or filings the
absence of which would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
Section
5.04. Non-contravention. The
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
contravene, conflict with, or result in any violation or breach of any provision
of the articles of incorporation or bylaws of the Company, (ii) assuming
compliance with the
20
matters
referred to in Section 5.03, contravene, conflict with, or result in a violation
or breach of any provision of any Applicable Law, (iii) assuming compliance with
the matters referred to in Section 5.03, require any consent or other action by
any Person under, constitute a default, or an event that, with or without notice
or lapse of time or both, would constitute a default, under, or cause or permit
the termination, cancellation, acceleration or other change of any right or
obligation or the loss of any benefit to which the Company or any of its
Subsidiaries is entitled under any provision of any agreement or other
instrument binding upon the Company or any of its Subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of the Company and
its Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries, with only such exceptions, in
the case of each of clauses (ii) through (iv), as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(b) Section
5.05(b) of the Company Disclosure Schedule contains a complete and correct list
of (A) each outstanding Employee Stock Option, including the holder, date of
grant, exercise price, vesting schedule and number of Shares subject thereto,
(B) each outstanding Company Restricted Share, including the holder, date of
grant and number vested and (C) each outstanding Performance Share, including
the holder, date of grant and number of Shares subject thereto.
(c) There
are outstanding no bonds, debentures, notes or other indebtedness 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. Except as set forth in this Section 5.05
21
and for
changes since August 6, 2008 resulting from the exercise of employee stock
options outstanding on such date, there are no issued, reserved for issuance or
outstanding (i) shares of capital stock of or voting securities of the
Company, (ii) securities of the Company convertible into or exchangeable
for shares of capital stock or voting securities of the Company, (iii)
warrants, calls, options or other rights to acquire from the Company, or other
obligation of the Company to issue, any capital stock or voting securities of
the Company or (iv) restricted shares, stock appreciation rights,
performance units, contingent value rights, “phantom” stock or similar
securities or rights that are derivative of, or provide economic benefits based,
directly or indirectly, on the value or price of, any capital stock or voting
securities of the Company (the items in clauses (i) though (iv) being referred
to collectively as the “Company
Securities”). There are no outstanding obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any of the Company Securities. Neither the Company nor any of its
Subsidiaries is a party to any voting agreement with respect to the voting of
any Company Securities.
(b) All
of the outstanding capital stock of, or other voting securities or ownership
interests in, each Subsidiary of the Company is owned by the Company, directly
or indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership
interests). There are no issued, reserved for issuance or
outstanding (i) securities of the Company or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock of or other voting
securities of or ownership interests in any Subsidiary of the Company, (ii)
warrants, calls, options or other rights to acquire from the Company or any of
its Subsidiaries, or other obligations of the Company or any of its Subsidiaries
to issue, any capital stock of or other voting securities or ownership interests
in, or any securities convertible into or exchangeable for any capital stock or
other voting securities of or ownership interests in, any Subsidiary of the
Company or (iii) restricted shares, stock
22
appreciation
rights, performance units, contingent value rights, “phantom” stock or similar
securities or rights that are derivative of, or provide economic benefits based,
directly or indirectly, on the value or price of, any capital stock of, or other
voting securities of or ownership interests in, any Subsidiary of the Company
(the items in clauses (i) through (iii) being referred to collectively as the
“Company
Subsidiary Securities”). There are no outstanding obligations
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any of the Company Subsidiary Securities. Except for the
capital stock or other equity or voting interests of its Subsidiaries, the
Company does not own, directly or indirectly, any capital stock or other equity
or voting interests in any Person.
(b) As
of its filing date (and as of the date of any amendment), each Company SEC
Document complied, and each Company SEC Document filed subsequent to the date
hereof will comply, as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may be.
(c) As
of its filing date (or, if amended or superseded by a filing prior to the date
hereof, on the date of such filing), each Company SEC Document filed pursuant to
the 1934 Act did not, and each Company SEC Document filed subsequent to the date
hereof will not, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading.
(d) Each
Company SEC Document that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such
registration statement or amendment became effective, did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(e) The
Company has established and maintains disclosure controls and procedures (as
defined in Rule 13a-15 under the 1934 Act). Such disclosure controls
and procedures are designed to ensure that material information relating to the
Company, including its consolidated Subsidiaries, is made known to the Company’s
principal executive officer and its principal financial officer by others within
those entities, particularly during the periods in which the periodic reports
required under the 1934 Act are being prepared. Such disclosure
controls and
23
procedures
are effective in timely alerting the Company’s principal executive officer and
principal financial officer to material information required to be included in
the Company’s periodic and current reports required under the 1934
Act. For purposes of this Agreement, “principal executive officer”
and “principal financial officer” shall have the meanings given to such terms in
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(f) The
Company has established and maintained a system of internal controls over
financial reporting (as defined in Rule 13a-15 under the ▇▇▇▇ ▇▇▇) sufficient to
provide reasonable assurance regarding the reliability of the Company’s
financial reporting and the preparation of Company financial statements for
external purposes in accordance with GAAP. The Company has disclosed,
based on its most recent evaluation of internal controls prior to the date
hereof, to the Company’s auditors and audit committee (i) any significant
deficiencies and material weaknesses in the design or operation of internal
controls which are reasonably likely to adversely affect the Company’s ability
to record, process, summarize and report financial information and (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in internal controls. The Company has made
available to Parent a summary of any such disclosure made by management to the
Company’s auditors and audit committee since January 1, 2005.
(g) There
are no outstanding loans or other extensions of credit made by the Company or
any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under
the ▇▇▇▇ ▇▇▇) or director of the Company. The Company has not, since
the enactment of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, taken any action prohibited by Section
402 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(h) The
Company has complied in all material respects with the applicable listing and
corporate governance rules and regulations of the New York Stock
Exchange.
(i) Each
of the principal executive officer and principal financial officer of the
Company (or each former principal executive officer and principal financial
officer of the Company, as applicable) have made all certifications required by
Rule 13a-14 and 15d-14 under the 1934 Act and Sections 302 and 906 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and any related rules and regulations promulgated by the SEC
and the NYSE, and the statements contained in any such certifications are
complete and correct.
24
may be
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end audit adjustments in the case of any unaudited
interim financial statements).
Section
5.09. Disclosure
Documents. (a) Each document required to be filed by the
Company with the SEC or required to be distributed or otherwise disseminated to
the Company’s stockholders in connection with the transactions contemplated by
this Agreement (the “Company
Disclosure Documents”), including the Schedule 14D-9, the proxy or
information statement of the Company (the “Company
Proxy Statement”), if any, to be filed with the SEC in connection with
the Merger, and any amendments or supplements thereto, when filed, distributed
or disseminated, as applicable, will comply as to form in all material respects
with the applicable requirements of the 1934 Act.
(b) (i)
The Company Proxy Statement, as supplemented or amended, if applicable, at the
time such Company Proxy Statement or any amendment or supplement thereto is
first mailed to stockholders of the Company and at the time such stockholders
vote on approval of the Merger and at the Effective Time, and (ii) Company
Disclosure Document (other than the Company Proxy Statement), at the time of the
filing of such Company Disclosure Document or any supplement or amendment
thereto and at the time of any distribution or dissemination thereof, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 5.09(b) will not apply
to statements or omissions included in the Company Disclosure Documents based
upon information furnished to the Company in writing by Parent or Merger
Subsidiary specifically for use therein.
(c) The
information with respect to the Company or any of its Subsidiaries that the
Company furnishes to Parent or Merger Subsidiary in writing specifically for use
in the Schedule TO and the Offer Documents, at the time of the filing of the
Schedule TO, at the time of any distribution or dissemination of the Offer
Documents and at the time of the consummation of the Offer, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
25
circumstances
or facts that has had or would reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect.
(b) Since
the Company Balance Sheet Date through the date hereof, (i) there has
not been any action taken by the Company or any of its Subsidiaries that, if
such action had been taken during the period from the date of this Agreement
through the Effective Time without Parent’s consent, would constitute a breach
of Section 7.01(b), (g), (h), (i), (m)(ii) or (n) and (ii) none of the
Company or any of its Subsidiaries have settled any matter referenced in clauses
(A), (B) or (C) of Section 7.01(m).
Section
5.11. No
Undisclosed Material Liabilities. There are no material
liabilities or obligations of the Company or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, that would be required by GAAP to be reflected on a consolidated
balance sheet of the Company and its Subsidiaries (or in the notes thereto)
other than (a) liabilities or obligations disclosed in or reflected or reserved
against in the Company’s consolidated balance sheet or in the notes thereto
included in the Company’s most recent 10-Q filed prior to the date of this
Agreement and (b) liabilities or obligations incurred in the ordinary course of
business consistent with past practices since the date of the Company’s
consolidated balance sheet included in the Company’s most recent 10-Q filed
prior to the date of this Agreement.
Section
5.12. Compliance
with Laws and Court Orders. The Company and each of its
Subsidiaries is and has been in compliance with, and to the knowledge of the
Company is not under investigation with respect to and has not been threatened
to be charged with or given notice of any violation of, any Applicable Law,
except for failures to comply or violations that would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section
5.13. Litigation. There
is no material action, suit, arbitration, investigation or proceeding (or any
reasonable basis therefor) pending against, or, to the knowledge of the Company,
threatened against or affecting, the Company or any of its Subsidiaries or any
of their respective properties, or, to the actual knowledge of the Company,
threatened against or affecting, any current or former officer, director or
employee of the Company or any of its Subsidiaries or any Person for whom the
Company or any of its Subsidiaries may be liable, before (or, in the case of
threatened actions, suits, investigations or proceedings, that would be before)
or by any Governmental Authority (including any of the Food and Drug
Administration, Department of Health and Human Services, the Drug Enforcement
Administration, state Medicaid agencies, state pharmacy boards and other federal
or state Governmental Authorities with jurisdiction over
the
26
dispensing
or distribution of pharmaceutical products or over the provision of health care
items or services) or arbitrator.
Section
5.14. Regulatory
Compliance.
(a) The
Permits of the Company and each of its Subsidiaries are valid and in full force
and effect, and no violation or default exists under any such Permit, except
where the failure to hold any such Permit, the invalidity of such Permit or the
existence of any such violation or default would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse
Effect. Assuming all Healthcare Regulatory Approvals are obtained,
the Merger, in and of itself, would not cause the revocation or cancellation of
any Permit except where the revocation or cancellation of such Permit would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(b) Neither
the Company nor any of its Subsidiaries has received written notice from any
Governmental Authority that (i) alleges any material noncompliance (or that
the Company or any of its Subsidiaries is under investigation or the subject of
an inquiry by any such Governmental Authority for such alleged material
noncompliance) with any Applicable Law, (ii) asserts any material
risk-based capital deficiency or (iii) would be reasonably likely to result
in a material fine, assessment or cease and desist order, or the suspension,
revocation or material limitation or restriction of any material
Permit. Since August 1, 2003, (A) neither the Company nor any of its
Subsidiaries has entered into any agreement or settlement with any Governmental
Authority with respect to its material non-compliance with, or material
violation of, any Applicable Law and (B) to the knowledge of the Company, no
such agreement or settlement has been in effect.
(c) The
Company and each of its Subsidiaries, and to the knowledge of Company, all
officers and directors of the Company or any of its Subsidiaries, are in
material compliance with, to the extent applicable, (i) all laws, rules and
regulations of the Medicare and Medicaid programs, including the Medicare Part D
program and Medicare Advantage program, any guidance interpreting such laws
rules and regulations, and any other federal health care program; (ii) all
federal laws, rules, regulations and applicable guidance relating to health care
fraud and abuse, including: (A) the Anti-Kickback Law, 42 U.S.C. § 1320a-7b, 42
C.F.R. § 1001.952, (B) the federal false coding statute, 42 U.S.C. § 1320a-7a,
(C) the federal physician self-referral prohibition, 42 U.S.C. § 1395nn, 42
C.F.R. § 411.351 et seq., (D) the false claims act, 31 U.S.C. § 3729 et
seq.; (iii) any and all state laws relating to health care fraud and
abuse; (iv) state laws relating to Medicaid or any other state health care
or health insurance programs; (v) federal or state laws relating to billing
or claims for reimbursement submitted to any
27
third-party
payor; (vi) any other federal or state laws relating to fraudulent, abusive
or unlawful practices connected in any way with the provision of health care
items or services, or the billing for or claims for reimbursement for such items
or services provided to a beneficiary of any state, federal or other
governmental health care or health insurance program or any private payor;
and (vii) any and all federal and state laws relating to insurance, third
party administrator, utilization review and risk sharing products, services and
arrangements and the like.
(d) There
is no claim, action, suit, investigation or administrative or other legal
proceeding pending against, or, to the knowledge of Company, threatened against
or affecting, the Company or any of its Subsidiaries relating to the Company’s
or any Subsidiary’s participation in any federal, state or private third-party
payment program. No federal, state or private third-party payment
program has imposed a material fine, penalty or other sanction on the Company or
any of its Subsidiaries and none of the Company or any of its Subsidiaries has
been excluded or suspended from participation in any such program.
(e) Since
August 1, 2002, none of the Company, any of its Subsidiaries, to the knowledge
of the Company, or any director or officer of the Company or any of its
Subsidiaries, with respect to actions taken on behalf of the Company or any of
its Subsidiaries, (i) has been assessed a civil money penalty under Section
1128A of the Social Security Act or any regulations promulgated thereunder, (ii)
has been excluded from participation in any federal health care program or state
health care program (as such terms are defined by the Social Security
Act), (iii) has been convicted of any criminal offense relating to the
delivery of any item or service under a federal health care program relating to
the unlawful manufacture, distribution, prescription, or dispensing of a
prescription drug or a controlled substance or (iv) is a party to or
subject to any action or proceeding concerning any of the matters described
above in clauses (i) through (iii).
(f) The
Company and each of its Subsidiaries are in material compliance with all
Applicable Law with respect to matters relating to patient or individual health
care information, including the Health Insurance Portability and Accountability
Act of 1996, Pub. L. No. 104−191 and any rules or regulations promulgated
thereunder (collectively, the “Healthcare
Information Laws”).
(g) The
Company and each of its Subsidiaries (i) are in material compliance with
all Applicable Laws and any other applicable guidance relating to the operation
of pharmacies, the repackaging of drug products, the wholesale distribution of
prescription drugs or controlled substances, and the dispensing of prescription
drugs or controlled substances, (ii) are in material compliance with all
Applicable Laws and any other applicable guidance relating to the labeling,
packaging, advertising, or adulteration of prescription drugs or
controlled
28
substances
and (iii) are not subject to any material sanction or other material
adverse action by any Governmental Authority for the matters described above in
clause (i) and (ii).
(h) The
Company and each of its Subsidiaries has filed all material regulatory reports,
schedules, statements, documents, filings, submissions, forms, registrations and
other documents, together with any amendments required to be made with respect
thereto, that each was required to file with any Governmental Authority,
including state health and insurance regulatory authorities and any applicable
Federal regulatory authorities, and have timely paid all material fees and
assessments due and payable in connection therewith.
(i) All
premium rates, rating plans and policy terms established and used by the Company
and each of its Subsidiaries that are required to be filed with and/or approved
by Governmental Authorities have been in all material respects so filed and/or
approved, the premiums charged conform in all material respects to the premiums
so filed and/or approved and comply in all material respects with the Applicable
Laws, and to the Company’s knowledge, no such premiums are subject to any
material investigation by any Governmental Authority.
(j) The
Company and its Subsidiaries have implemented policies, procedures and/or
programs designed to assure that its agents and employees are in material
compliance within all Applicable Laws, including laws, regulations, directives
and opinions of Governmental Authorities relating to advertising, licensing,
marketing and sales practices. Each of the Company and its
Subsidiaries and, to the knowledge of the Company, each broker, producer,
consultant, agent or third-party service provider acting on behalf of the
Company or any of its Subsidiaries, has marketed, administered, sold and issued
insurance and health care benefit products in compliance in all material
respects with all Applicable Laws.
Section
5.15. Taxes.
(a) Except as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, (i) each Tax Return required by
Applicable Law to be filed with any Taxing Authority by, or on behalf of, the
Company or any of its Subsidiaries has been filed when due in accordance with
all Applicable Laws and (ii) each such Tax Return is true and
complete.
(b) Except
as would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, (i) the Company and each of its Subsidiaries
has timely paid to the appropriate Taxing Authority all Taxes that are required
to be paid by any of them, including any Taxes required to be withheld from
amounts owing to any employee, partner, independent contractor,
29
creditor,
stockholder or with respect to any payments of royalties, and (ii) adequate
accruals and reserves (as determined in accordance with GAAP) have been or will
be established for Taxes attributable to taxable periods (or portions thereof)
commencing on the day following the Company Balance Sheet Date.
(c) The
consolidated federal income Tax Returns for the affiliated group of which the
Company is the common parent through the Tax year ended January 30, 2003 have
been examined and the examinations have been closed or are Tax Returns with
respect to which the applicable period for assessment under Applicable Law,
after giving effect to extensions or waivers, has expired.
(d) Except
as would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, there is no written claim, audit, suit or other
administrative or court proceeding now pending or, to the Company’s knowledge,
threatened against or with respect to the Company or its Subsidiaries in respect
of any federal or state income or other material Tax, and no written notice
thereof has been received.
(e) There
are no Liens for Taxes on any of the assets of the Company or any of its
Subsidiaries other than Permitted Liens.
(f) During
the two-year period ending on the date hereof, neither the Company nor any of
its Subsidiaries was a distributing corporation or a controlled corporation in a
transaction intended to be governed by Section 355 of the Code.
(g) Neither
the Company nor any of its Subsidiaries is, or has been, a party to any material
written Tax Sharing Agreement (other than an agreement exclusively between or
among the Company and its Subsidiaries) pursuant to which it will have any
obligation to make any payments for Taxes after the Effective Time.
(h) Neither
the Company nor any of its Subsidiaries (i) has participated in a “listed
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2)
or (ii) has filed, or currently expects to file, an Internal Revenue
Service Form 8886.
(i) “Tax”
means any (i) tax, governmental fee or other like assessment or charge of
any kind whatsoever (including withholding on amounts paid to or by any Person),
together with any interest, penalty, addition to tax or additional amount
imposed by any Governmental Authority (a “Taxing
Authority”) responsible for the imposition of any such tax (domestic or
foreign), and any liability for any of the foregoing as transferee,
and (ii) liability for the payment of any amount of the type described in
clause (i) as a result of being or having been before the Effective Time a
member of an affiliated, consolidated, combined or
30
unitary
group, or a party to any agreement or arrangement, as a result of which
liability to a Taxing Authority is determined or taken into account with
reference to the activities of any other Person. “Tax
Return” means any report, return, document, declaration or other
information or filing required to be supplied to any Taxing Authority with
respect to Taxes, including information returns, any documents with respect to
or accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information. “Tax
Sharing Agreements” means all existing agreements or arrangements
(whether or not written) binding a party or any of its Subsidiaries that provide
for the allocation, apportionment, sharing or assignment of any Tax liability or
benefit, or the transfer or assignment of income, revenues, receipts, or gains
for the purpose of determining any Person’s Tax liability (excluding any
indemnification agreement or arrangement pertaining to the sale or lease of
assets or subsidiaries).
Section
5.16. Employee
Benefit Plans. (a) Schedule 5.16(a) contains
a correct and complete list identifying each material “employee benefit plan,”
as defined in Section 3(3) of ERISA, each employment, severance or similar
contract, plan, arrangement or policy and each other plan or arrangement
(written or oral) providing for compensation, bonuses, profit-sharing, stock
option or other stock-related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance (including any self-insured
arrangements), health or medical benefits, employee assistance program,
disability or sick leave benefits, workers’ compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by the Company or
any Subsidiary and covers any employee or former employee of the Company or any
of its Subsidiaries, or with respect to which the Company or any of its
Subsidiaries has any liability, whether current or contingent. Copies
of such plans (and, if applicable, related trust or funding agreements or
insurance policies) and all amendments thereto and written interpretations
thereof have been furnished or made available to Parent together with the most
recent annual report (Form 5500 including, if applicable, Schedule B thereto)
and tax return (Form 990) prepared in connection with any such plan or
trust. Such plans are referred to collectively herein as the “Employee
Plans.”
(b) Neither
the Company nor any Subsidiary nor any predecessor thereof sponsors, maintains
or contributes to, or has in the six years prior to the date hereof sponsored,
maintained or contributed to, any single employer or multiple employer plan
subject to Title IV of ERISA.
(c) Neither
the Company nor any Subsidiary nor any predecessor thereof contributes to, or
has in the six years prior to the date hereof contributed to, any multiemployer
plan, as defined in Section 3(37) of ERISA (a
31
“Multiemployer
Plan”), or any multiple employer welfare arrangement, as defined in
Section 3(40) of ERISA (a “MEWA”).
(d) Each
Employee Plan that is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter, or has pending or has time
remaining in which to file, an application for such determination from the
Internal Revenue Service, and the Company is not aware of any reason why any
such determination letter would reasonably be expected to be revoked or not be
issued. The Company has made available to Parent copies of the most
recent Internal Revenue Service determination letters with respect to each such
Employee Plan. Each Employee Plan has been maintained in material
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including ERISA and the Code, which are
applicable to such Employee Plan. No material events have occurred
with respect to any Employee Plan that could result in payment by or assessment
or Lien against the Company or any of its ERISA Affiliates of any material
excise taxes under Sections 417, 4972, 4975, 4976, 4977, 4979, 4980B, 4980D,
4980E or 5000 of the Code or Title IV of ERISA.
(e) The
consummation by the Company of the transactions contemplated by this Agreement
will not (either alone or together with any other event) entitle any current or
former employee or independent contractor of the Company or any of its
Subsidiaries to severance pay or accelerate the time of payment or vesting or
trigger any payment of funding (through a grantor trust or otherwise) of
compensation or benefits (including acceleration of vesting or exercise of an
incentive award) under, increase the amount payable or trigger any other
material obligation pursuant to, any Employee Plan. There is no
contract, plan or arrangement (written or otherwise) covering any employee or
former employee of the Company or any of its Subsidiaries that, individually or
collectively, would entitle any employee or former employee to any severance or
other payment solely as a result of the transactions contemplated hereby, or
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code. Section 5.16(e) of
the Company Disclosure Schedule lists all the agreements, arrangements and other
instruments which give rise to an obligation to make or set aside in a trust or
other funding vehicle amounts payable to or on behalf of the officers of the
Company and its Subsidiaries as a result of the transactions contemplated by
this Agreement and/or any subsequent employment termination (whether by the
Company or the officer), true and complete copies of which have been previously
provided or made available to Parent.
(f) Neither
the Company nor any of its Subsidiaries has any liability in respect of
post-retirement health, medical or life insurance benefits for retired,
32
former or
current employees of the Company or its Subsidiaries except as required to avoid
excise tax under Section 4980B of the Code.
(g) Since
the Company Balance Sheet Date and through the date hereof, there has been no
amendment to, or change in employee participation or coverage under, an Employee
Plan which would increase materially the expense of maintaining such Employee
Plan above the level of the expense incurred in respect thereof for the fiscal
year ended January 31, 2008 and was made other than in the ordinary course of
business.
(h) Neither
the Company nor any of its Subsidiaries is a party to or subject to, or is
currently negotiating in connection with entering into, any collective
bargaining agreement or other contract or understanding with a labor union or
organization, in each case that would cover the employees of the Company or its
Subsidiaries.
(i) There
is no action, suit, investigation, audit or proceeding pending against or
involving or, to the knowledge of the Company, threatened against or involving,
any Employee Plan before any court or arbitrator or any state, federal or local
governmental body, agency or official that would reasonably be expected to
result in material liability to the Company.
(j) Since
the Company Balance Sheet Date and through the date hereof, neither the Company
nor any of its Subsidiaries has effectuated or announced (i) a “plant
closing” (as defined in the WARN Act) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Company or any of its Subsidiaries; (ii) a “mass layoff” (as defined in
the WARN Act); or (iii) such other transaction, layoff, reduction in force
or employment terminations sufficient in number to trigger application of any
similar Applicable Law.
(k) The
Compensation Committee of the Board of Directors (the “Compensation
Committee”) has approved each Employee Plan pursuant to which
consideration is payable to any officer, director or employee (each, a “Compensation
Arrangement”) as an “employment compensation, severance or other employee
benefit arrangement” within the meaning of Rule 14d-10(d)(2) under the 1934 Act
(the approvals referred to above, the “Compensation
Arrangement Approvals”). The Board of Directors has determined
that the Compensation Committee is composed solely of “independent directors” in
accordance with the requirements of Rule 14d-10(d)(2) under the Exchange Act and
the instructions thereto.
33
Adverse
Effect: (i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed, no
penalty has been assessed, and no investigation, action, claim, suit, proceeding
or review (or any basis therefor) is pending or, to the knowledge of the
Company, is threatened by any Governmental Authority or other Person relating to
the Company or any of its Subsidiaries and relating to or arising out of any
Environmental Law or Environmental Permit; (ii) the Company and its Subsidiaries
are and have been in compliance with all Environmental Laws and all
Environmental Permits; and (iii) there are no liabilities or obligations of the
Company or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise arising under or
relating to any Environmental Law, Environmental Permit or Hazardous Substance
and, to the knowledge of the Company, there is no condition, situation or set of
circumstances that could reasonably be expected to result in or be the basis for
any such liability or obligation.
(b) Neither
the Company nor any of its Subsidiaries owns, leases or operates or has owned,
leased or operated any real property, or conducts or has conducted any
operations, in New Jersey or Connecticut.
(c) For
purposes of this Section 5.17, the terms “Company”
and “Subsidiaries”
shall include any entity that is, in whole or in part, a predecessor of the
Company or any of its Subsidiaries.
Section
5.18. Properties. (a)
Except as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries
have good title to, or valid leasehold interests in, all property and assets
reflected on the Company Balance Sheet or acquired after the Balance Sheet Date,
except as have been disposed of since the Company Balance Sheet Date in the
ordinary course of business consistent with past practice.
(b) Except
as would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, (i) each lease, sublease or license (each, a
“Lease”)
under which the Company or any of its Subsidiaries leases, subleases or licenses
any real property is valid and in full force and effect and (ii) neither the
Company nor any of its Subsidiaries, nor to the Company’s knowledge any other
party to a Lease, has violated any provision of, or taken or failed to take any
act which, with or without notice, lapse of time, or both, would constitute a
default under the provisions of such Lease, and neither the Company nor any of
its Subsidiaries has received notice that it has breached, violated or defaulted
under any Lease.
(c) Section
5.18 of the Company Disclosure Schedule contains a true and complete list
of (i) each Lease that relates to any retail store of the Company
34
or any of
its Subsidiaries that (A) was a top 100 retail store of the Company and its
Subsidiaries based on revenues generated during the twelve months ending January
31, 2008 or (B) is located in Hawaii, in each case, together with the expiration
date of the current term thereof, a description of any renewal options
thereunder and the annual rent for the remaining term thereof and (ii) all
plans of the Company or any of its Subsidiaries as of the date hereof to (A)
enter into any Lease, together with the status of such commitment as of the date
hereof, (B) modify, extend, renew or terminate any Lease existing on the date
hereof, (C) sell, purchase or acquire any real estate or (D) close any of the
stores of the Company or any of its Subsidiaries that are open on the date
hereof. Except as set forth on Section 5.18 of the Company Disclosure
Schedule, as of the date hereof, neither the Company nor any of its Subsidiaries
has any plans or intentions to take, or make any commitment to take, any of the
foregoing actions.
Section
5.19. Intellectual
Property. Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect: (i) the Company and each of its Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted; (ii) neither Company nor its Subsidiaries have infringed,
misappropriated or otherwise violated the Intellectual Property rights of any
Person; (iii) to the knowledge of the Company, no Person has challenged,
infringed, misappropriated or otherwise violated any Intellectual Property right
owned by and/or licensed to the Company or its Subsidiaries; (iv) neither the
Company nor any of its Subsidiaries has received any written notice or otherwise
has knowledge of any pending claim, action, suit, order or proceeding with
respect to any Intellectual Property used by the Company or any of its
Subsidiaries or alleging that any services provided, processes used or products
manufactured, used, imported, offered for sale or sold by the Company or any of
its Subsidiaries infringes, misappropriates or otherwise violates any
Intellectual Property rights of any Person; (v) the consummation of the
transactions contemplated by this Agreement will not alter, encumber, impair or
extinguish any Intellectual Property right of the Company or any of its
Subsidiaries or impair the right of Parent to develop, use, sell, license or
dispose of, or to bring any action for the infringement of, any Intellectual
Property right of the Company or any of its Subsidiaries; (vi) the IT Assets
operate and perform in a manner that permits the Company and its Subsidiaries to
conduct their respective businesses as currently conducted and to the knowledge
of the Company, no Person has gained unauthorized access to the IT Assets; and
(vii) the Company and its Subsidiaries have implemented reasonable backup and
disaster recovery technology consistent with industry
practices.
Section
5.20. Material
Contracts. (a) As of the date hereof, neither the Company nor
any Subsidiary is a party to or bound by:
35
(i) any
agreement relating to the pharmacy benefit administration and management
services business owned or operated by the Company or any of its Subsidiaries
that would reasonably be expected to generate net annualized revenues in an
amount in excess of $5 million;
(ii) any
material partnership, joint venture or other similar agreement or
arrangement;
(iii) any
agreement entered into after January 31, 2007 relating to the acquisition or
disposition of any material business (whether by merger, sale of stock, sale of
assets or otherwise);
(iv) any
agreement for the purchase or sale of materials, supplies, goods, services,
equipment or other assets providing for either annual payments by or to the
Company and its Subsidiaries of $30 million or more that cannot be terminated on
not more than 60 days’ notice without payment by the Company or any Subsidiary
of any material penalty;
(v) any
agreement relating to indebtedness for borrowed money or the deferred purchase
price of property (in either case, whether incurred, assumed, guaranteed or
secured by any asset) with an aggregate committed or outstanding principal
amount exceeding $10 million;
(vi) any
agreement containing any provision or covenant limiting in any material respect
the ability of the Company or any of its Subsidiaries (or, after the
consummation of the Merger, Parent, the Surviving Corporation or any of their
respective Subsidiaries) to (A) sell any products or services of or to any
other Person or in any geographic region, (B) engage in any line of
business or (C) compete with or to obtain products or services from any
Person or limiting the ability of any Person to provide products or services to
the Company or any of its Subsidiaries (or, after the consummation of the
Merger, Parent, the Surviving Corporation or any of their respective
Subsidiaries);
(vii) any
agreement between the Company or any of its Subsidiaries, on the one hand, and
any Affiliate, director or officer (or, to the Company’s knowledge, any of their
respective Affiliates), on the other hand in each case of the type and amount
that would be required to be disclosed in the Company’s annual proxy statement
under Item 404 of Regulation S-K under the 1933 Act that has not been previously
disclosed in the Company SEC Documents; or
36
(viii) any
agreement that requires annual payments in excess of $5 million or is otherwise
material containing any provision pursuant to which the execution, delivery and
performance of this Agreement, or the consummation of the transactions
contemplated hereby, would require any consent or other action by any Person
thereunder, constitute a default, or an event that, with or without notice or
lapse of time or both, would constitute a default, thereunder, or cause or
permit the termination, cancellation, acceleration or other change of any right
or obligation or the loss of any benefit to which the Company or any of its
Subsidiaries is entitled thereunder.
(b) Except
for breaches, violations or defaults which would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, (i)
each contract disclosed or required to be disclosed in Section 5.20 of the
Company Disclosure Schedule (each, a “Material
Contract”) is valid and in full force and effect and (ii) neither the
Company nor any of its Subsidiaries, nor to the Company’s knowledge any other
party to any Material Contract, has violated any provision of, or taken any
action which, with or without notice, lapse of time, or both, would constitute a
default under the provisions of such Material Contract, and neither the Company
nor any of its Subsidiaries has received notice that it has breached, violated
or defaulted under, or providing for the termination of, any Material
Contract.
Section
5.21. Finders’
Fees. Except for ▇.▇. ▇▇▇▇▇▇ Securities, Inc. (the “Company
Financial Advisor”), a copy of whose engagement agreement has been
provided to Parent, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the
Company or any of its Subsidiaries who might be entitled to any fee or
commission from the Company or any of its Affiliates in connection with the
transactions contemplated by this Agreement.
Section
5.22. Opinion
of Financial Advisor. The Company has received the opinion of
the Company Financial Advisor, to the effect that, as of the date of this
Agreement, the Offer Price is fair to the Company and its stockholders from a
financial point of view.
Section
5.23. Antitakeover
Statutes. (a) The Company has taken all action necessary to
exempt the Offer, the Merger, this Agreement and the transactions contemplated
hereby from any Takeover Statute, and, accordingly, no Takeover Statute applies
or purports to apply to any such transactions.
(b) The
Company has taken all action necessary to render Article Twelfth of the
Company’s restated articles of incorporation, as amended,
37
inapplicable
to the Offer, the Merger, this Agreement and the transactions contemplated
hereby.
Section
5.24. No
Other Representations or Warranties. Except for the
representations and warranties set forth in this Article 5, no representation or
warranty of any kind whatsoever, express or implied, at law or in equity, is
made or shall be deemed to have been made by or on behalf of the Company to
Parent or Merger Subsidiary, and the Company hereby disclaims any such
representation or warranty, whether by or on behalf of the Company, and
notwithstanding the delivery or disclosure to Parent or Merger Subsidiary, or
any of their Representatives, Affiliates or any other person of any
documentation or other information by the Company or any of its Representatives
or any other person with respect to any one or more of the
foregoing.
ARTICLE
6
Parent
represents and warrants to the Company that:
38
39
Proxy
Statement or any amendment or supplement thereto is first mailed to stockholders
of the Company and at the time such stockholders vote on approval of the Merger
and at the Effective Time, and (ii) in the case of any Company Disclosure
Document other than the Company Proxy Statement, at the time of the filing of
such Company Disclosure Document or any supplement or amendment thereto and at
the time of any distribution or dissemination thereof.
(b) The
Schedule TO, when filed, and the Offer Documents, when distributed or
disseminated, will comply as to form in all material respects with the
applicable requirements of the 1934 Act and, at the time of such filing, at the
time of such distribution or dissemination and at the time of consummation of
the Offer, will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading; provided
that the representations and warranties contained in this Section 6.05(b) will
not apply to statements or omissions included in the Schedule TO and the Offer
Documents based upon information furnished in writing to Parent or Merger
Subsidiary by the Company specifically for use therein.
Section
6.08. Interim
Operations of Merger Subsidiary. Merger Subsidiary was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
Section
6.09. Litigation. There
is no action, suit, arbitration, investigation or proceeding (or any reasonable
basis therefor) pending against, or, to the knowledge of Parent, threatened
against or affecting, Parent or any of its Subsidiaries or any of their
respective properties before (or, in the case of threatened actions, suits,
investigations or proceedings, that would be before) or by any Governmental
Authority (including any of the Food and Drug Administration, Department of
Health and Human Services, the Drug Enforcement Administration, state Medicaid
agencies, state pharmacy boards and
40
other
federal or state Governmental Authorities with jurisdiction over the dispensing
or distribution of pharmaceutical products or over the provision of health care
items or services) or arbitrator that would reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
Section
6.10. Company
Stock. Neither Parent nor any of its Affiliates is, nor at any
time during the last two years has been, an “interested stockholder” of the
Company as defined under Section 3-603 of Maryland Law. Neither
Parent nor any of its Affiliates beneficially owns (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, or is the record holder of
Shares, and is not a party to any agreement (other than this Agreement),
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any Shares.
Section
6.11. No
Other Representations or Warranties. Except for the
representations and warranties set forth in this Article 6, no representation or
warranty of any kind whatsoever, express or implied, at law or in equity, is
made or shall be deemed to have been made by or on behalf of Parent or Merger
Subsidiary to the Company, and Parent and Merger Subsidiary hereby disclaim any
such representation or warranty, whether by or on behalf of Parent or Merger
Subsidiary, and notwithstanding the delivery or disclosure to the Company, or
any of their Representatives, Affiliates or any other person of any
documentation or other information by Parent, Merger Subsidiary or any of their
respective Representatives or any other person with respect to any one or more
of the foregoing.
ARTICLE
7
Covenants
of the Company
The
Company agrees that:
Section
7.01. Conduct
of the Company. From the date hereof until the earlier of the
Effective Time and the termination of this Agreement in accordance with its
terms, except as set forth in Section 7.01 of the Company Disclosure
Schedule, the Company shall, and shall cause each of its Subsidiaries
to, conduct its business in the ordinary course consistent with past practice
and use its reasonable best efforts to (i) preserve intact its present business
organization, (ii) maintain in effect all of its Permits, (iii) keep
available the services of its directors, officers, employees and consultants and
(iv) maintain satisfactory relationships with its customers, lenders, suppliers
and others having significant business relationships with it. Without
limiting the generality of the foregoing, except as expressly contemplated by
this Agreement or as set forth in Section 7.01
41
of the
Company Disclosure Schedule, the Company shall not, nor shall it permit any of
its Subsidiaries to:
(a) amend
its articles of incorporation, bylaws or other similar organizational documents
(whether by merger, consolidation or otherwise);
(b) (i)
split, combine or reclassify any shares of its capital stock, (ii)
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
except for dividends by any of its wholly-owned Subsidiaries on a pro
rata basis to the equity owners thereof and for regular quarterly cash
dividends by the Company with customary record and payment dates on the shares
of Company Stock not in excess of $0.14 per share per quarter or (iii) redeem,
repurchase or otherwise acquire or offer to redeem, repurchase or otherwise
acquire any Company Securities or any Company Subsidiary Securities except
for (A) acquisitions of Company Common Stock tendered by holders of Company
Stock Options, Performance Shares and Company Restricted Shares outstanding on
the date hereof to satisfy obligations to pay the exercise price and/or tax
withholding obligations with respect thereto in the ordinary course of business
consistent with past practice and in accordance with the terms of the applicable
benefit plan or arrangement in effect on the date hereof or (B)
acquisitions of Company Common Stock to satisfy the Company’s obligations under
the Company’s employee stock ownership plan in effect on the date hereof in the
ordinary course of business consistent with past practice and in accordance with
the such plan;
(c) (i)
issue, deliver or sell, or authorize the issuance, delivery or sale of, any
shares of any Company Securities or Company Subsidiary Securities, other than
the issuance of (A) any shares of Company Stock upon the exercise of
Company Stock Options that are outstanding on the date of this Agreement in
accordance with the terms of those Company Stock Options on the date of this
Agreement, (B) any shares of Company Common Stock upon the settlement of
Performance Shares that are granted prior to the date of this Agreement in
accordance with the terms of those Performance Shares on the date of this
Agreement and (C) any Company Subsidiary Securities to the Company or any
other Subsidiary of the Company or (ii) amend any term of any Company Security
or any Company Subsidiary Security (in each case, whether by merger,
consolidation or otherwise);
(d) incur
any capital expenditures or any obligations or liabilities in respect thereof,
except for (i) those contemplated by the capital expenditure budget that is
attached to Section 7.01(d) of the Company Disclosure Schedule (so long as (x)
the purchase price for any “prescription file buy” (excluding the portion of the
purchase price attributable to inventory purchased in connection therewith) does
not exceed $1 million and (y) the purchase price for any
42
pharmacy
store acquisition does not exceed $3 million (excluding the portion of the
purchase price attributable to inventory purchased in connection
therewith)), (ii) any unbudgeted capital expenditures in an amount not to
exceed $250,000 individually or $1 million in the aggregate during any fiscal
year of the Company and (iii) any unbudgeted capital expenditures for
routine repairs and maintenance in the ordinary course of business consistent
with past practice;
(e) acquire
(by merger, consolidation, acquisition of stock or assets or otherwise),
directly or indirectly, any assets, securities, properties, interests or
businesses having an aggregate value in excess of $100,000, other than
acquisitions or purchases (i) of supplies and inventory in the ordinary
course of business of the Company and its Subsidiaries in a manner that is
consistent with past practice or (ii) permitted pursuant to Section
7.01(d);
(f) enter
into any Lease or Lease commitment (or change the status of any plan disclosed
on Section 5.18 of the Company Disclosure Schedule), modify, renew, extend or
terminate any existing Lease or sell, purchase or acquire or enter into any
agreement to purchase or acquire any real estate or close any of the stores of
the Company or any of its Subsidiaries that are open on the date hereof, in each
case, other than (i) pursuant to commitments disclosed on Section 5.18 of
the Company Disclosure Schedule, (ii) prior to the expiration or
termination of any applicable waiting period under the HSR Act, in the ordinary
course of business consistent with past practice so long as the Company provides
to Parent at least five Business Days’ prior written notice of its intention to
take such action and (iii) following expiration or termination of any
applicable waiting period under the HSR Act, modifications, renewals or
extensions of existing leases in the ordinary course of business consistent with
past practice so long as the Company provides to Parent at least three Business
Days’ prior written notice of its intention to take such action and Parent does
not reasonably object to such action during such three-day period;
(g) sell,
lease or otherwise transfer, or create or incur any Lien, other than Permitted
Liens, on, any of the Company’s or its Subsidiaries’ material assets,
securities, properties, interests or businesses, other than sales of inventory
and store merchandise in the ordinary course of business consistent with past
practice;
(h) other
than in connection with actions permitted by Section 7.01(d) or Section 7.01(e),
make any loans, advances or capital contributions to, or investments in, any
other Person, other than (i) in the ordinary course of business consistent
with past practice or (ii) between the Company and any of its Subsidiaries
or between any of the Company’s Subsidiaries;
43
(i) create,
incur, assume, suffer to exist or otherwise be liable with respect to any
indebtedness for borrowed money or guarantees thereof, other than (i) in the
ordinary course of business and in amounts and on terms consistent with past
practices, (ii) under credit facilities as in effect as of the date hereof or
entered into in compliance with this Agreement or (iii) between the Company and
any of its Subsidiaries or between any of the Company’s
Subsidiaries;
(j) (i)
except for any contracts, agreements, arrangements and understandings of the
type referenced in Section 5.20(a)(i) entered into in the ordinary course of
business consistent with past practice, enter into any contract, agreement,
arrangement or understanding that would constitute a Material Contract if it had
been entered into as of the date hereof or (ii) terminate, amend or modify in
any material respect, any Material Contract or otherwise waive, release or
assign any material rights, claims or benefits of the Company or any of its
Subsidiaries in a manner adverse to the Company;
(k) (i)
grant or increase any rights to severance or termination pay to (or amend any
existing arrangement with) any current or former employee, officer or director
of the Company or any of its Subsidiaries except for payment of severance
benefits in connection with individual terminations of employment in the
ordinary course of business consistent with the severance pay plan set forth on
Section 8.04(d) of the Company Disclosure Schedule, (ii) increase benefits
payable under any existing severance or termination pay policies or employment,
change in control, retention, sale or bonus agreement or similar agreement,
(iii) enter into any employment, change in control, retention, sale bonus,
deferred compensation or other similar agreement (or amend any such existing
agreement) with any current or former employee, officer or director of the
Company or any of its Subsidiaries, (iv) establish, adopt or amend (except as
required by Applicable Law or in order to effectuate the provisions of Section
3.05 of this Agreement) any collective bargaining, bonus, profit-sharing,
thrift, pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any current or
former employee, officer or director of the Company or any of its Subsidiaries
or (v) increase compensation, bonus or other benefits payable to any current or
former employee, officer or director of the Company or any of its Subsidiaries
except for regularly scheduled merit increases in salaries paid to current
employees that are not officers or senior vice presidents or above (which
regularly scheduled increases shall for the avoidance of doubt not include
market or promotion adjustments) in the ordinary course consistent with past
practices and as necessary to comply with Applicable Law;
(l) change
the Company’s methods of financial accounting, except as required by concurrent
changes in GAAP or in Regulation S-X of the 1934 Act, as agreed to by its
independent public accountants;
44
(m) (i)
settle, or offer or propose to settle, (A) any material litigation,
investigation, arbitration, proceeding or other claim involving or against the
Company or any of its Subsidiaries, (B) any stockholder litigation or
dispute against the Company or any of its officers or directors or (C) any
litigation, arbitration, proceeding or dispute that relates to the transactions
contemplated hereby except, in the case of clauses (A) and (B), if settlement
involves an amount not to exceed $1 million individually or $5 million in the
aggregate and settlement does not impose any non-monetary restrictions on the
Company or any of its Subsidiaries that has not been approved by Parent (such
approval not to be unreasonably withheld or delayed and, in any event, given or
withheld within four Business Days after receipt of notice thereof) or (ii)
enter into any consent order or decree;
(n) (i)
make or change any material Tax election, change any annual Tax accounting
period, adopt or change any material method of Tax accounting, materially amend
any Tax Returns or file claims for material Tax refunds, or (ii) enter into any
material closing agreement, settle any material Tax claim, audit or assessment,
or surrender any right to claim a material Tax refund, offset or other reduction
in Tax liability, in each case in an amount not to exceed $1 million
individually or $5 million in the aggregate;
(o) take
any action that would make any representation or warranty of the Company
hereunder, inaccurate in any respect at, or as of any time before, the Effective
Time;
(p) withdraw
or modify, or permit the withdrawal or modification of, the Compensation
Arrangement Approvals; or
(q) agree,
resolve or commit to do any of the foregoing.
Section
7.02. Stockholder
Meeting; Proxy Material. The Company shall cause a meeting of
its stockholders (the “Company
Stockholder Meeting”) to be duly called and held as soon as reasonably
practicable after the Acceptance Time (or, as applicable, the consummation of
any Subsequent Offering Period) for the purpose of voting on the approval of the
Merger, unless Maryland Law does not require a vote of stockholders of the
Company for consummation of the Merger. The Board of Directors shall
recommend approval of the Merger by the Company’s stockholders. In
connection with such meeting, the Company shall (i) promptly prepare and file
with the SEC, use its reasonable best efforts to have cleared by the SEC and
thereafter mail to its stockholders as promptly as practicable the Company Proxy
Statement and all other proxy materials required by Applicable Law for any such
meeting, (ii) use its reasonable best efforts to obtain the approval by its
stockholders of the Merger (if required by Applicable
45
Law) and
(iii) otherwise comply with all legal requirements applicable to any such
meeting.
Section
7.03. Access
to Information. From the date hereof until the Effective Time
and subject to Applicable Law and the Confidentiality Agreement dated as of July
8, 2008 between the Company and Parent (the “Confidentiality
Agreement”), the Company shall, upon reasonable notice and request, (i)
give Parent and its officers, directors, employees, investment bankers,
attorneys, accountants, consultants or other agents or advisors (“Representatives”)
reasonable access to the offices, properties, books and records of the Company
and its Subsidiaries, (ii) furnish to Parent and its Representatives such
financial and operating data and other information as such Persons may
reasonably request and (iii) instruct the Representatives of the Company and its
Subsidiaries to cooperate with Parent in its investigation of the Company and
its Subsidiaries. Any investigation pursuant to this Section shall be
conducted in such manner as not to interfere unreasonably with the conduct of
the business of the Company and its Subsidiaries. No information or
knowledge obtained by Parent in any investigation pursuant to this Section shall
affect or be deemed to modify any representation or warranty made by the Company
hereunder. Nothing contained in this Section 7.03 shall, prior to the
Acceptance Time, require the Company to take any action that would, in the good
faith judgment of the Company, constitute a waiver of the attorney client or
similar privilege or trade secret protection held by the Company or any of its
Subsidiaries;
provided, however, that the Company shall make a good faith effort to
accommodate any request from Parent for access or information pursuant to this
Section in a manner that does not result in such a
waiver.
46
or any of
its Subsidiaries, (v) approve any transaction, or any Person becoming an
“interested stockholder”, under Section 3-603 of Maryland Law, or exempt any
transaction or Person from any other Antitakeover Statute, or (vi) enter into
any agreement in principle, letter of intent, term sheet, merger agreement,
purchase agreement, option agreement or other similar instrument relating to an
Acquisition Proposal. It is agreed that, subject to Section 7.04(b),
any violation of the restrictions on the Company set forth in this Section by
any Representative of the Company or any of its Subsidiaries shall be a breach
of this Section by the Company.
(b) Exceptions. Notwithstanding
Section 7.04(a), at any time prior to the Acceptance Time:
(i) the
Company, directly or indirectly through advisors, agents or other
intermediaries, may (A) engage in negotiations or discussions with any Third
Party and its Representatives that, subject to the Company’s compliance with
Section 7.04(a), has made a bona
fide Acquisition Proposal that the Board of Directors reasonably believes
will lead to a Superior Proposal and (B) furnish to such Third Party or its
Representatives non-public information relating to the Company or any of its
Subsidiaries pursuant to a confidentiality agreement with such Third Party with
terms no less favorable to the Company than those contained in the
Confidentiality Agreement; provided
that all such information (to the extent that such information has not been
previously provided or made available to Parent) is provided or made available
to Parent, as the case may be, prior to or substantially concurrently with the
time it is provided or made available to such Third Party); and
(ii) following
receipt of such Superior Proposal, (A) the Board of Directors may make an
Adverse Recommendation Change and (B) concurrently with the termination of this
Agreement pursuant to Section 11.01(d)(ii), take the actions set forth in
Sections 7.04(a)(v) and 7.04(a)(vi);
in each
case referred to in the foregoing clauses (i) and (ii) only if the Board of
Directors determines in good faith, after consultation with outside legal
counsel, that the failure to take such action would be inconsistent with the
statutory duty of the members of the Board of Directors, as directors, under
Maryland Law.
In addition, nothing
contained herein shall prevent the Board of Directors from (A) complying with
Rule 14e-2(a) under the 1934 Act or Item 1012(a) of Regulation M-A under the
1934 Act with regard to an Acquisition Proposal, so long as any action taken or
statement made to so comply is consistent with this Section 7.04 (provided
that any such action taken or statement made that relates to
47
an
Acquisition Proposal shall be deemed to be an Adverse Recommendation Change
unless the Board of Directors reaffirms the Company Board Recommendation in such
statement or in connection with such action) or (B) issuing a “stop, look and
listen” disclosure or similar communication of the type contemplated by Rule
14d-9(f) under the 1934 Act.
(c) Required
Notices. The Board of Directors shall not take any of the
actions referred to in Section 7.04(b) unless the Company shall have delivered
to Parent a prior written notice advising Parent that it intends to take such
action, and, after taking such action, the Company shall continue to advise
Parent on a current basis of the status and terms of any discussions and
negotiations with the Third Party. In addition, the Company shall
notify Parent promptly (but in no event later than 24 hours) after receipt by
the Company (or any of its Representatives) of any Acquisition Proposal, any
inquiry or request for discussion from a Third Party regarding an Acquisition
Proposal or any request for information relating to the Company or any of its
Subsidiaries or for access to the business, properties, assets, books or records
of the Company or any of its Subsidiaries by any Third Party that may be
considering making, or has made, an Acquisition Proposal. The Company
shall provide such notice orally and in writing and shall identify the Third
Party making, and the terms and conditions of, any such Acquisition Proposal,
indication or request, and shall promptly (but in no event later than 24 hours
after receipt) provide to Parent copies of all correspondence and written
materials sent or provided to the Company or any of its Subsidiaries that
describe any terms or conditions of any Acquisition Proposal. Any
material amendment to any Acquisition Proposal will be deemed to be a new
Acquisition Proposal for purposes of the Company’s compliance with this Section
7.04(c).
(d) “Last
Look”. Further, the Board of Directors of the Company shall
not make an Adverse Recommendation Change, unless (i) it has received an
Acquisition Proposal that constitutes a Superior Proposal, (ii) the Company
promptly notifies Parent in writing at least five Business Days before taking
that action of its intention to do so, attaching the most current version of the
proposed agreement under which such Superior Proposal is proposed to be
consummated and the identity of the third party making the Acquisition Proposal,
and (iii) Parent does not make, within five Business Days after its receipt
of that written notification, an offer that is at least as favorable to the
stockholders of the Company as such Superior Proposal (it being understood and
agreed that any amendment to the financial terms or other material terms of such
Superior Proposal shall require a new written notification from the Company and
a new five Business Day period under this Section 7.04(d)).
(e) Termination
Right. If, prior to the Acceptance Time, the Board of
Directors shall have made an Adverse Recommendation Change in compliance
48
with the
terms of this Agreement (including Section 7.04(d)), the Company shall have the
right to terminate this Agreement so long as (i) at least 20 Business Days have
elapsed from the date the Company publicly announced such Adverse Recommendation
Change, (ii) at least 20 Business Days have elapsed from the date the Third
Party making such Superior Proposal publicly announced any material amendment to
any of the terms or conditions of such Superior Proposal (it being understood
that any change to the financial terms shall be deemed a material amendment),
(iii) at least 10 Business Days have elapsed from the date of any bona
fide increase by Parent of the Offer Price with a view to satisfying the
Minimum Condition and (iv) the Minimum Condition is not satisfied; provided
that, simultaneously with any termination pursuant to this Section 7.04(e), the
Company shall pay the amount due pursuant to Section 12.04(b) in connection with
such termination.
(f) Definition
of Superior Proposal. For purposes of this Agreement, “Superior
Proposal” means a bona
fide, unsolicited written Acquisition Proposal for at least a majority of
the outstanding Shares on terms that the Board of Directors determines in good
faith by a majority vote, after considering the advice of a financial advisor of
nationally recognized reputation and outside legal counsel and taking into
account all the terms and conditions of the Acquisition Proposal, including any
break-up fees, expense reimbursement provisions and conditions to consummation,
are more favorable and provide greater value to all of the Company’s
stockholders than as provided hereunder (taking into account any proposal by
Parent to amend the terms of this Agreement pursuant to Section 7.04(d)) which
the Board of Directors determines is reasonably likely to be consummated without
undue delay relative to the transactions contemplated by this Agreement and for
which financing, if a cash transaction (whether in whole or in part), is then
fully committed or reasonably determined to be available by the Board of
Directors.
(g) Obligation
to Terminate Existing Discussions, Etc. The Company shall, and
shall cause its Subsidiaries and its and their Representatives to, cease
immediately and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any Third Party and its
Representatives conducted prior to the date hereof with respect to any
Acquisition Proposal. The Company shall promptly request that each
Third Party, if any, that has executed a confidentiality agreement within the
24-month period prior to the date hereof that is still in effect in accordance
with the terms thereof in connection with its consideration of any Acquisition
Proposal return or destroy all confidential information heretofore furnished to
such Person by or on behalf of the Company or any of its Subsidiaries (and all
analyses and other materials prepared by or on behalf of such Person that
contains, reflects or analyzes that information) in accordance with the terms of
such confidentiality agreement. The Company shall
49
use its
reasonable best efforts to secure certifications of such return or destruction
from such other Persons as promptly as practicable.
Section
7.05. Compensation
Arrangements. Prior to the Effective Time, the Company (acting
through its Compensation Committee) will take all steps that may be necessary or
advisable to cause each Compensation Arrangement entered into by the Company or
any of its Subsidiaries on or, subject to the restrictions contained in this
Agreement, after the date hereof to be approved by the Compensation Committee
(comprised solely of “independent directors” determined in the manner described
in the last sentence of Section 5.16(k)) as an “employment compensation,
severance or other employee benefit arrangement” within the meaning of Rule
14d-10(d)(2) under the 1934 Act and to satisfy the requirements of the
non-exclusive safe harbor set forth in Rule 14d−10(d) of the 1934
Act.
ARTICLE
8
Covenants
of Parent
Parent
agrees that:
(a) For
six years after the Acceptance Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless each current and former officer,
director, trustee, member, fiduciary and agent of the Company and its Affiliates
and each person who served as a fiduciary under or with respect to any employee
benefit plan (within the meaning of Section 3(3) of ERISA) (each, together with
such person’s heirs, executors or administrators, an “Indemnified
Person”) against any costs or expenses (including advancing attorneys’
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Person to the fullest extent
permitted by
50
Applicable
Law; provided,
however,
that such advance shall be conditioned upon the Surviving Company’s receipt of
an undertaking by or on behalf of the Indemnified Person to repay such amount if
it shall be ultimately determined by final judgment of a court of competent
jurisdiction that the Indemnified Person is not entitled to be indemnified
pursuant to this Section 8.03(a)), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any actual or
threatened claim, action, suit, arbitration, proceeding or investigation in
respect of or arising out of acts or omissions occurring or alleged to have
occurred at or prior to the Acceptance Time to the fullest extent permitted by
Maryland Law or any other Applicable Law or provided under the Company’s
articles of incorporation and bylaws in effect on the date hereof; provided
that such indemnification shall be subject to any limitation imposed from time
to time under Applicable Law. In the event of any such action, Parent
and the Surviving Corporation shall cooperate with the Indemnified Person in the
defense of any such action.
(b) Parent
shall cause the Surviving Corporation to continue in full force and effect for a
period of six years from the Acceptance Time the provisions in existence in the
Company’s and its Subsidiaries’ articles of incorporation and bylaws and other
organizational documents in effect on the date of this Agreement regarding
elimination of liability of directors, indemnification and exculpation of
officers, directors and employees and advancement of expenses.
(c) For
six years after the Acceptance Time, Parent shall cause the Surviving
Corporation to provide officers’ and directors’ liability, fiduciary liability
and similar insurance (collectively, “D&O
Insurance”) of the Company in respect of acts or omissions occurring
prior to the Acceptance Time covering each Indemnified Person currently covered
by the Company’s D&O Insurance policies on terms with respect to coverage
and amount no less favorable than those of such policy in effect on the date
hereof as well as covering claims brought against each Indemnified Person under
ERISA (or a six-year prepaid “tail policy” on terms and conditions reasonably
acceptable to Parent providing coverage, benefits and terms no less favorable to
the Indemnified Persons than the Company’s current such policy as well as
covering claims brought against each Indemnified Person under ERISA; for the
avoidance of doubt, the Company may purchase such “tail policy” at its option
prior to the Acceptance Time, and, in such case, Parent shall cause such policy
to be in full force and effect for its full term, and cause all obligations
thereunder to be honored by the Surviving Corporation); provided
that, in satisfying its obligation under this Section 8.03(c), the Surviving
Corporation shall not be obligated to pay annual amounts in the aggregate in
excess of 300% of the amount per annum the Company paid in its last full fiscal
year, which amount is set forth in Section 8.03(c) of the Company Disclosure
Schedule; and provided
further
that, if the aggregate annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall
51
be
obligated to obtain a policy with the greatest coverage available, with respect
to matters occurring prior to the Acceptance Time, for a cost not exceeding such
amount.
(d) If
Parent, the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 8.03.
(e) The
rights of each Indemnified Person under this Section 8.03 shall be in addition
to any rights such Person may have under the articles of incorporation or bylaws
of the Company or any of its Subsidiaries, under Maryland Law or any other
Applicable Law or under any agreement of any Indemnified Person with the Company
or any of its Subsidiaries. These rights shall survive consummation
of the Merger and are intended to benefit, and shall be enforceable by, each
Indemnified Person.
Section
8.04. Employee
Matters.
(a) From the Acceptance Time until a period of one year following the Effective
Time, Parent shall provide to all employees of the Company or any of its
Subsidiaries as of the Acceptance Time who continue employment with the Company
or any of its Affiliates after the Acceptance Time or the Surviving Corporation
or any of its Affiliates after the Effective Time (“Continuing
Employees”) with (i) base salary or base wages that are no less than the
base salary or base wages provided to each such Continuing Employee immediately
prior to the Acceptance Time and (ii) other compensation and benefits that are
in the aggregate substantially comparable to such other compensation and
benefits provided by the Company and its Subsidiaries as in effect immediately
prior to the Acceptance Time other than equity-based
compensation. Notwithstanding the foregoing or anything else
contained herein to the contrary, following the Effective Time the Continuing
Employees shall be considered and be eligible for equity-based compensation
awards denominated in the equity of Parent on a basis that is no less favorable
than applies to similarly situated employees of Parent and its Subsidiaries, as
determined by Parent in its sole discretion.
(b) With
respect to any compensation and/or benefit program, policy or arrangement
maintained by Parent or any of its Subsidiaries, including the Surviving
Corporation, in which any Continuing Employee becomes a participant, such
Continuing Employee shall receive full credit (for purposes of eligibility to
participate, vesting, and benefit level and accrual, where applicable under the
compensation and/or benefit programs, policies or arrangements of Parent or any
52
of its
Subsidiaries), for service with the Company or any of its Subsidiaries (or
predecessor employers to the extent the Company provides such past service
credit) to the same extent that such service was recognized as of the Effective
Time under a comparable plan of the Company and its Subsidiaries in which the
Continuing Employee participated (or if no comparable plan exists, under the
Company’s 401(k) plan), except for benefit accrual under any final average pay
defined benefit pension plan. Notwithstanding the foregoing, no
provision of this Section 8.04(b) shall be interpreted to preclude Parent and/or
its Subsidiaries from maintaining, establishing, or amending any programs,
policies or arrangements to provide a level of benefits or rate of benefit
accrual that differs from the Company’s plans, as long as the Continuing
Employee’s service credit is recognized for purposes of such applicable
provisions, to the extent relevant thereto.
(c) Parent
shall waive, or cause to be waived, any pre-existing condition limitations,
exclusions, actively-at-work requirements and waiting periods under any welfare
benefit plan maintained by Parent or any of its Subsidiaries in which the
Continuing Employees (and their eligible dependents) are eligible to participate
from and after the Acceptance Time, except to the extent that such pre-existing
condition limitations, exclusions, actively-at-work requirements and waiting
periods would not have been satisfied or waived under the comparable plan of the
Company and its Subsidiaries in which the Continuing Employee
participated. If a Continuing Employee commences participation in any
health benefit plan of Parent or any of its Subsidiaries after the commencement
of a calendar year, to the extent commercially practicable, Parent shall cause
such plan to recognize the dollar amount of all co-payments, deductibles and
similar expenses incurred by such Continuing Employee (and his or her eligible
dependents) during such calendar year for purposes of satisfying such calendar
year’s deductible and co-payment limitations under the relevant welfare benefit
plans in which such Continuing Employee (and dependents) commences
participation.
(d) From
the Acceptance Time and for a period of one year following the Effective Time,
Parent shall provide, or shall cause to be provided, to each employee of the
Company and its Subsidiaries who suffers a termination of employment under the
circumstances described on Section 8.04(d) of the Company Disclosure Schedule
severance benefits in accordance with Section 8.04(d) of the Company Disclosure
Schedule (taking into account such Company Employee’s service as required
pursuant to Section 8.04(c) above).
(e) As
of the Acceptance Time, Parent shall and shall cause the Company and its
Subsidiaries to, and from and after the Effective Time shall cause the Surviving
Corporation and its Subsidiaries to, effectuate the agreements set forth in
Section 8.04(e) of the Company Disclosure Schedule.
53
(f) Nothing
in this Section 8.04 shall (i) be treated as an amendment of, or
undertaking to amend any benefit plan, (ii) except as provided in Section
8.04(d) above, prohibit Parent or any of its Subsidiaries, including the
Surviving Corporation, from amending or terminating any employee benefit
plan, (iii) require Parent, the Surviving Corporation or any of their
respective Subsidiaries to continue the employment of any employees for any
period of time or (iv) confer any rights or benefits on any person other
than the parties to this Agreement.
ARTICLE
9
Covenants
of Parent and the Company
The
parties hereto agree that:
(b) Subject
to Section 9.02, Parent and the Company shall use reasonable best efforts
to: (i) prepare, as soon as practicable, all filings and other
presentations in connection with seeking any regulatory approval, exemption or
other authorization from any Governmental Authority necessary to consummate the
transactions contemplated hereby; (ii) prosecute such filings and other
presentations with diligence; and (iii) oppose any objections to, appeals
from or petitions to reconsider or reopen any such approval by Persons not party
to this Agreement. Parent and the Company shall use reasonable best
efforts to facilitate obtaining any final order or orders approving such
transactions, consistent with this Agreement and/or to remove any impediment to
the consummation of the transactions contemplated hereby. Parent and
the Company shall use reasonable best efforts to furnish all information in
connection with the approvals of or filings with any Governmental Authority and
shall promptly cooperate with and furnish information in connection with any
such requirements imposed upon Parent or any of its Subsidiaries in connection
with this Agreement and the transactions contemplated hereby. Subject
to Section 9.02, Parent shall use reasonable best efforts to obtain any consent,
authorization, order or approval of, or any exemption by, and to remove any
impediment imposed by any Governmental Authority to allow the consummation of
the transactions contemplated hereby. Parent and the Company shall
each advise the other party promptly of any material communication received by
such party or any of its
54
Affiliates
from the Federal Trade Commission, Department of Justice, any state attorney
general or any other Governmental Authority regarding any of the transactions
contemplated hereby, and of any understandings, undertakings or agreements (oral
or written) such party proposes to make or enter into with the Federal Trade
Commission, Department of Justice, any state attorney general or any other
Governmental Authority in connection with the transactions contemplated
hereby. Parent and Company shall each consult with the other in
advance of any material meetings with the Federal Trade Commission, Department
of Justice, any state attorney general or any other Governmental
Authority.
Section
9.02. HSR
Clearance. (a) In furtherance and not in limitation of Section
9.01, each of Parent and the Company shall make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable and thereafter make
any other required submissions with respect to the transactions contemplated
hereby under the HSR Act and to take all other appropriate actions reasonably
necessary, proper or advisable to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as
practicable.
(b) Without
limiting the foregoing, Parent shall promptly take, in order to consummate the
transactions contemplated hereby, all actions necessary to (i) secure the
expiration or termination of any applicable waiting period under the HSR Act
and (ii) resolve any objections asserted with respect to the transactions
contemplated under this Agreement under any antitrust Applicable Law or the
Federal Trade Commission Act, raised by any Governmental Authority, and to
prevent the entry of any court order and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order that would prevent,
prohibit, restrict or delay the consummation of the transactions contemplated
hereby, including (A) executing settlements, undertakings, consent decrees,
stipulations or other agreements with any Governmental Authority (or with any
private party, but only in this latter case, in order to vacate, lift, reverse,
overturn, settle or otherwise resolve any decree, judgment, injunction or other
order that prevents, prohibits, restricts or delays the consummation of the
transactions contemplated hereby that may be issued by any court or other
Governmental Authority in favor of that third party), (B) selling, divesting or
otherwise conveying particular assets or categories of assets or businesses of
Parent and its Subsidiaries, (C) agreeing to sell, divest or otherwise convey
any particular assets or categories of assets or businesses of the Company and
its Subsidiaries contemporaneously with or subsequent to the Acceptance Time and
(D) permitting the Company to sell, divest or otherwise convey any of the
particular assets or categories of assets or businesses of the Company or any of
its Subsidiaries prior to the Effective Time. All such efforts shall
be unconditional and shall not be qualified by best efforts and no actions taken
pursuant to this
55
Section
9.02 shall be considered for purposes of determining whether a Company Material
Adverse Effect has occurred. Parent shall respond to and seek to
resolve as promptly as reasonably practicable any objections asserted by any
Governmental Authority with respect to the transactions contemplated under this
Agreement. Notwithstanding anything in the foregoing or in Section
9.01 or anything otherwise contained in this Agreement that may in any such case
be deemed to the contrary, the parties hereto understand and agree that Parent
shall not be required to take any action, agree to any matter or accept any
remedy of any type set forth in the foregoing provisions of this Section 9.02
with respect to or involving any assets of Parent, the Company or any of their
respective Subsidiaries that generated or represented an amount equal to 30% or
more of the Company’s consolidated operating profit for the twelve month period
ending January 31, 2008.
(b) In
furtherance and not in limitation of the foregoing, the Company shall use its
reasonable best efforts to obtain consents from the landlords under those Leases
of the Company or any of its Subsidiaries that would require the landlord’s
consent in connection with the transactions contemplated in this Agreement,
including a merger or change of control of the tenant under any of the Leases or
that deem any such transaction to be an assignment of such Lease requiring the
landlord’s consent (either, a “Deemed
Assignment Transaction”); provided
that Parent shall promptly reimburse the Company for all out-of-pocket
expenses incurred by the Company to any landlord in connection with obtaining
such consents; provided
further that any payment made by the Company to any landlord shall be
subject to the prior written consent of Parent (such consent not to be
unreasonably withheld or delayed). The Company agrees, in connection
with requests for consents to landlords for Leases pursuant to the foregoing
sentence, to make requests as soon as practicable after the date hereof and to
pursue such requests in a good faith and diligent manner. The Company
further agrees to provide Parent with detailed progress reports on such
requested consents on at least a weekly basis. Parent agrees to
cooperate with the Company’s efforts and to use its reasonable best efforts to
obtain such consents by supplying any
56
commercially
reasonable information requested by the landlords who are considering such
requests. In addition, in connection with those Leases of the Company
or any of its Subsidiaries that merely require that the tenant provide notices
before or after a Deemed Assignment Transaction, the Company agrees to send such
notices to those landlords identified in writing by Parent in the form prepared
by Parent and within the timeframes identified by Parent. Parent
hereby indemnifies the Company and its Affiliates against and agrees to hold
each of them harmless from any and all damage, loss, liability and expense
(including reasonable attorneys’ fees and expenses) actually incurred or
suffered by the Company or any of its Affiliates arising out of the Company
complying with its obligations set forth in the foregoing sentence.
Section
9.07. Notices
of Certain Events. Each
of the Company and Parent shall promptly notify the other
of:
57
(a) any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions contemplated by
this Agreement;
(b) any
notice or other communication from any Governmental Authority in connection with
the transactions contemplated by this Agreement;
(c) any
actions, suits, claims, investigations or proceedings commenced or, to its
knowledge, threatened against, relating to or involving or otherwise affecting
the Company or any of its Subsidiaries or Parent or any of its Subsidiaries that
relate to the consummation of the transactions contemplated by this
Agreement;
(d) any
inaccuracy of any representation or warranty contained in this Agreement at any
time during the term hereof that would reasonably be expected to cause any
condition set forth in Article 10 not to be satisfied; and
(e) any
failure of that party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder;
provided
that the delivery of any notice pursuant to this Section 9.07 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving that notice.
Section
9.08. Takeover
Statutes. If any Takeover Statute shall become applicable to
the transactions contemplated hereby, each of the Company, Parent and Merger
Subsidiary and the respective members of their boards of directors shall, to the
extent permitted by Applicable Law, use reasonable best efforts to grant such
approvals and take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated herein and otherwise act to eliminate or minimize the
effects of such Takeover Statute on the transactions contemplated
hereby.
ARTICLE
10
Conditions
to the Merger
(a) if
required by Maryland Law, the Merger shall have been approved by the
stockholders of the Company in accordance with Maryland Law;
58
(b) no
Applicable Law shall prohibit the consummation of the Merger;
(c) at
least 30 days shall have passed since the date of the Notice of Merger;
and
(d) the
Acceptance Time shall have occurred.
ARTICLE
11
Termination
Section
11.01. Termination. This
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time (notwithstanding any approval of this Agreement by the
stockholders of the Company):
(a) by
mutual written agreement of the Company and Parent;
(b) by
either the Company or Parent if:
(i) the
Offer has not been consummated on or before August 12, 2009 (the “End
Date”); provided
that the right to terminate this Agreement pursuant to this Section 11.01(b)(i)
shall not be available to any party whose breach of any provision of this
Agreement results in the failure of the Offer to be consummated on or before
such time; or
(ii) there
shall be any Applicable Law that (A) makes acceptance for payment of, and
payment for, the Shares pursuant to the Offer or consummation of the Merger
illegal or otherwise prohibited or (B) enjoins Merger Subsidiary from accepting
for payment of, and paying for, the Shares pursuant to the Offer or the Company
or Parent from consummating the Merger and such injunction shall have become
final and nonappealable.
(c) by
Parent if, prior to the Acceptance Time:
(i) an
Adverse Recommendation Change shall have occurred;
(ii) there
shall have been an intentional and material breach of Section 7.04;
or
(iii) the
Company shall have breached or failed to perform any of its representations,
warranties, covenants or agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition set
forth in clauses (iii) or (iv) of paragraph (b) of
59
Annex I
and (B) is either incurable or, if curable, is not cured by the Company by
the earlier of (x) 30 days following receipt by the Company of written notice of
such breach or failure and (y) the End Date; provided that, at the time of the
delivery of such written notice, Parent shall not be in material breach of its
obligations under this Agreement.
(d) by
the Company if:
(i) prior
to the Acceptance Time, Parent or Merger Subsidiary shall have (A) breached
or failed to perform in any material respect any of its covenants or obligations
required to be performed by it under this Agreement or (B) breached any of
its representations or warranties (without regard to materiality or Parent
Material Adverse Effect qualifiers contained therein), which breach or failure,
in the case of clause (A) would reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect and, in either clause (A) or
(B) is either incurable or, if curable, is not cured by Parent by the earlier of
(x) 30 days following receipt by Parent of written notice of such breach or
failure and (y) the End Date; provided,
at the time of the delivery of such written notice, the Company shall not be in
material breach of its obligations under this Agreement; or
(ii) pursuant
to Section 7.04(e).
The party
desiring to terminate this Agreement pursuant to this Section 11.01 (other than
pursuant to Section
11.01(a)) shall give notice of such termination to the other
party.
Section
11.02. Effect
of Termination. If
this Agreement is terminated pursuant to Section 11.01, this Agreement shall
become void and of no effect without liability of any party (or any stockholder,
director, officer, employee, agent, consultant or representative of such party)
to the other party hereto; provided
that, if such termination shall result from the intentional (a) failure of
either party to fulfill a condition to the performance of the obligations of the
other party or (b) failure of either party to perform a covenant hereof,
such party shall be fully liable for any and all liabilities and damages
incurred or suffered by the other party as a result of such
failure. The provisions of Article 12 shall survive any termination
hereof pursuant to Section 11.01.
60
ARTICLE
12
Section
12.01. Notices. All
notices, requests and other communications to any party hereunder shall be in
writing (including facsimile transmission) and shall be
given,
if to
Parent or Merger Subsidiary, to:
CVS
Caremark Corporation
▇▇▇ ▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
General Counsel
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a
copy to:
▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to the
Company, to:
Longs Drug
Stores Corporation
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a
copy to:
Wachtell
Lipton ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such
other address or facsimile number as such party may hereafter specify for the
purpose by notice under this Section 12.01 to the other parties
hereto. All such notices, requests and other communications shall be
deemed received on the
61
date of
receipt by the recipient thereof if received prior to 5 p.m. New York City time
on a Business Day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received on
the next succeeding Business Day in the place of receipt.
Section
12.02. Survival
of Representations and Warranties. The representations and
warranties contained herein and in any certificate or other writing delivered
pursuant hereto shall not survive the Effective Time.
Section
12.03. Amendments
and Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, but only if,
such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement or, in the case of a waiver, by each
party against whom the waiver is to be effective; provided
that (i) after the Acceptance Time, (A) no amendment shall be made which
decreases the Offer Price or the Merger Consideration and (B) any such amendment
will require the approval of a majority of the Independent Directors and (ii)
after the approval of the Merger by the stockholders of the Company (if required
by Maryland Law), there shall be made no amendment that by law requires further
approval by stockholders of the Company without the further approval of such
stockholders.
(b) No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
Applicable Law.
Section
12.04. Expenses. (a)
General. Except as otherwise provided in this Section 12.04 and
Section 9.03(b), all costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or
expense.
(b) Termination
Fee.
(i) If
this Agreement is terminated by Parent pursuant to Section 11.01(c)(i) or
Section 11.01(c)(ii) or by the Company pursuant to Section 11.01(d)(ii), then
the Company shall pay to Parent in immediately available funds $115,000,000
minus
all amounts reimbursed by the Company pursuant to Section 12.04(c) (the “Termination
Fee”), in the case of termination by the Company, simultaneously with
such termination and, in the case of termination by Parent, within one Business
Day after such termination.
62
(ii) If (A)
this Agreement is terminated by Parent or the Company pursuant to Section
11.01(b)(i), (B) prior to such termination, a bona
fide Acquisition Proposal shall have been publicly announced or otherwise
been communicated to the Board of Directors or the Company’s stockholders
and (C) within 12 months following the date of such termination, the
Company shall have entered into a definitive agreement with respect to or
recommended to its stockholders an Acquisition Proposal or an Acquisition
Proposal shall have been consummated (provided
that, in each case, for purposes of this clause (C), each reference to
“15%” in the definition of Acquisition Proposal shall be deemed to be a
reference to “50%”), then the Company shall pay to Parent in immediately
available funds, concurrently with the occurrence of the applicable event
described in clause (C), the Termination Fee.
For the
avoidance of doubt, in no event shall the Company be required to pay more than
one Termination Fee.
(c) Reimbursement. If
this Merger Agreement shall have been terminated pursuant to Section 11.01(b)(i)
due to a failure of the Minimum Condition to be satisfied, the Company shall
reimburse Parent and its Affiliates (by wire transfer of immediately available
funds), no later than two Business Days after submission of reasonable
documentation thereof, for 100% of their reasonable out-of-pocket fees and
expenses (including reasonable fees and expenses of their counsel) up to $10
million actually incurred by any of them in connection with this Agreement and
the transactions contemplated hereby (including, for the sake of clarity, those
incurred in connection with the negotiation and consideration thereof and the
due diligence investigation of the Company and its Subsidiaries).
(d) Sole
Remedy. The Company acknowledges that the agreements contained
in this Section 12.04 are an integral part of the transactions contemplated by
this Agreement and that, without these agreements, Parent and Merger Subsidiary
would not enter into this Agreement. Notwithstanding anything to the
contrary in this Agreement, each of Parent and Merger Subsidiary acknowledges
and agrees on behalf of itself and its Affiliates that in the event that the
Termination Fee becomes payable and is paid by the Company pursuant to this
Section 12.04, the right to receive the Termination Fee shall constitute each of
Parent’s and Merger Subsidiary’s and each of their Affiliates and
Representatives sole and exclusive remedy under this Agreement.
Section
12.05. Disclosure
Schedule References. The parties hereto agree that any
reference in a particular Section of either the Company Disclosure Schedule or
the Parent Disclosure Schedule shall only be deemed to be an exception to (or,
as applicable, a disclosure for purposes of) (a) the
63
representations
and warranties (or covenants, as applicable) of the relevant party that are
contained in the corresponding Section of this Agreement and (b) any other
representations and warranties of such party that is contained in this
Agreement, but only if the relevance of that reference as an exception to (or a
disclosure for purposes of) such representations and warranties would be readily
apparent to a reasonable person who has read that reference and such
representations and warranties, without any independent knowledge on the part of
the reader regarding the matter(s) so disclosed. Disclosure of any
fact or item in any Schedule to the Agreement (i) shall not be considered an
admission by the disclosing party that such item or fact (or any non-disclosed
item or information of comparable or greater significance) represents a material
exception or fact, event or circumstance or that such item has had or is
reasonably expected to result in, as applicable, a Parent Material Adverse
Effect or a Company Material Adverse Effect, or that such item or fact will in
fact exceed any applicable threshold limitation set forth in the Agreement and
(ii) shall not be construed as an admission by the disclosing party of any
non-compliance with, or violation of, any third party rights (including but not
limited to any intellectual property rights) or any law, regulation, order,
judgment or decree of any Governmental Authority, such disclosures having been
made solely for the purposes of creating exceptions to the representations made
herein or of disclosing any information required to be disclosed under the
Agreement.
Section
12.06. Binding
Effect; Benefit; Assignment. (a) The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except as
provided in Section 8.03 only, no provision of this Agreement is intended to
confer any rights, benefits, remedies, obligations or liabilities hereunder upon
any Person other than the parties hereto and their respective successors and
assigns.
(b) No
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of each other
party hereto, except that Parent or Merger Subsidiary may transfer or assign its
rights and obligations under this Agreement, in whole or from time to time in
part, to one or more of its Affiliates or designees (which Affiliates and/or
designees may pay all or any portion of the consideration payable by Parent
and/or Merger Subsidiary pursuant to this Agreement) at any time; provided
that such transfer or assignment shall not (i) relieve Parent or Merger
Subsidiary of its obligations under this Agreement or prejudice the rights of
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer or Shares converted into cash pursuant to the
Merger or (ii) be reasonably likely to delay consummation of the
transactions contemplated hereby.
Section
12.07. Governing
Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, without regard to
64
the
conflicts of law rules of such state, except to the extent that Maryland Law
mandatorily applies to the matters arising under or in connection with this
Agreement.
Section
12.08. Jurisdiction.
(a) The parties hereto agree that any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby or the negotiation,
interpretation, validity or performance of this Agreement, or the transactions
contemplated hereby (including the Offer and the Merger) and the rights and
obligations arising hereunder, or for recognition and enforcement of any
judgment in respect of this Agreement and the rights and obligations arising
hereunder whether brought by any party or any of its Affiliates or any of their
respective successors or assigns or against any party or its Affiliates or any
of their respective successors or assigns, shall be brought and determined
exclusively in the Delaware Court of Chancery, or in the event (but only in the
event) that such court does not have jurisdiction over such action or
proceeding, in the United States District Court for the District of Delaware, or
in the event (but only in the event) that neither such court has jurisdiction
over such action or proceeding, the Delaware Superior Court, and each of the
parties hereby irrevocably consents to the exclusive jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees
that service of process on such party as provided in Section 12.01 shall be
deemed effective service of process on such party.
(b) EACH
OF PARENT, MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY DESIGNATES THE
CORPORATION TRUST COMPANY (IN SUCH CAPACITY, THE “PROCESS
AGENT”), WITH AN OFFICE AT ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE,
FOR AND ON ITS BEHALF SERVICE OF PROCESS IN SUCH JURISDICTION IN ANY LEGAL
ACTION OR PROCEEDINGS WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENT
EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND SUCH SERVICE SHALL BE DEEMED
COMPLETE UPON DELIVERY THEREOF TO THE PROCESS AGENT; PROVIDED THAT IN THE CASE
OF ANY SUCH SERVICE UPON THE PROCESS AGENT, THE PARTY EFFECTING SUCH SERVICE
SHALL ALSO DELIVER A COPY THEREOF TO EACH OTHER SUCH PARTY IN THE MANNER
PROVIDED IN
65
SECTION
12.01 OF THIS AGREEMENT. EACH PARTY SHALL TAKE ALL SUCH ACTION AS MAY
BE NECESSARY TO CONTINUE SAID APPOINTMENT IN FULL FORCE AND EFFECT OR TO APPOINT
ANOTHER AGENT SO THAT SUCH PARTY WILL AT ALL TIMES HAVE AN AGENT FOR SERVICE OF
PROCESS FOR THE ABOVE PURPOSES IN WILMINGTON, DELAWARE. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY MANNER
PERMITTED BY APPLICABLE LAW. EACH PARTY EXPRESSLY ACKNOWLEDGES THAT
THE FOREGOING WAIVER IS INTENDED TO BE IRREVOCABLE UNDER THE LAWS OF THE STATE
OF DELAWARE AND OF THE UNITED STATES OF AMERICA.
Section
12.09. WAIVER
OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section
12.10. Counterparts;
Effectiveness. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by all of the other parties hereto. Until and unless
each party has received a counterpart hereof signed by the other party hereto,
this Agreement shall have no effect and no party shall have any right or
obligation hereunder (whether by virtue of any other oral or written agreement
or other communication).
Section
12.12. Severability. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other Governmental Authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such a determination, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an
66
acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
Section
12.13. Specific
Performance. The
parties hereto agree that irreparable damage would occur if any provision of
this Agreement were not performed in accordance with the terms hereof and that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement or to enforce specifically the performance of the
terms and provisions hereof in any federal court located in the State of
Delaware or any Delaware state court, in addition to any other remedy to which
they are entitled at law or in equity.
[The
remainder of this page has been intentionally left blank; the next
page
is the signature page.]
67
IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed by
their respective authorized officers as of the date set forth on the cover page
of this Agreement.
|
LONGS
DRUG STORES CORPORATION
|
||||
|
By:
|
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|||
| Name: |
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||
| Title: |
Chairman,
President and
Chief
Executive Officer
|
|||
|
CVS
CAREMARK CORPORATION
|
||||
|
By:
|
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇
|
|||
| Name: |
▇▇▇▇▇▇
▇. ▇▇▇▇
|
|||
| Title: |
Chairman,
President and
Chief
Executive Officer
|
|||
|
BLUE
MERGERSUB CORP.
|
||||
|
By:
|
/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|||
| Name: |
▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|||
| Title: |
President
|
|||
ANNEX
I
Conditions
to the Offer
Each
capitalized term used in this Annex I but not otherwise defined herein shall
have the meaning assigned to such term in the Agreement and Plan of Merger to
which it is attached (the “Agreement”).
Notwithstanding
any other provision of the Agreement, Merger Subsidiary shall not be required to
accept for payment or pay for any Shares, and, only after complying with any
obligation to extend the expiration date of the Offer pursuant to Section
2.01(a) of the Agreement, may terminate the Offer, if:
(a) prior
to the expiration of the Offer, (i) the Minimum Condition shall not have
been satisfied or (ii) the applicable waiting period (and any extension
thereof) under the HSR Act shall not have expired or been terminated;
or
(b) at
any time on or after the date of the Agreement and prior to the expiration of
the Offer, any of the following conditions exists:
(i) there
shall be instituted or pending any action or proceeding (or any investigation or
other inquiry that is reasonably likely to result in such action or proceeding)
by any Governmental Authority challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
making of the Offer, the acceptance for payment of or payment for some or all of
the Shares by Parent or Merger Subsidiary or the consummation of the
Merger;
(ii) there
shall have been any action taken, or any Applicable Law shall have been
proposed, enacted, enforced, promulgated, issued or deemed applicable to the
Offer or the Merger, by any Governmental Authority, other than the application
of the waiting period provisions of the HSR Act to the Offer or the Merger, that
would or is reasonably likely, directly or indirectly, to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
making of the Offer, the acceptance for payment of or payment for some or all of
the Shares by Parent or Merger Subsidiary or the consummation of the
Merger;
(iii) (A)
the representations and warranties of the Company contained in any of Sections
5.01, 5.02, 5.03, 5.05(a) or 5.21 of the Agreement shall not be true and correct
in all material respects at and as of immediately prior to the expiration of the
Offer as if made at and as of such time (other than such representation and
warranty that by their terms
address
matters only as of another specified time, which shall be true and correct in
all material respects only as of such time) or (B) the other representations and
warranties of the Company contained in the Agreement (disregarding all
materiality and Company Material Adverse Effect qualifications contained
therein) shall not be true and correct at and as of immediately prior to the
expiration of the Offer as if made at and as of such time (other than
representations and warranties that by their terms address matters only as of
another specified time, which shall be true and correct only as of such time),
except, in the case of clause (B) only, for such matters as have not had and
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect;
(iv) the
Company shall have breached or failed to perform in all material respects any of
its covenants or obligations to be performed or complied with by it under the
Agreement prior to such time;
(v) the
Company shall have failed to deliver to Parent a certificate signed by an
executive officer of the Company dated as of the date on which the Offer expires
certifying that the conditions specified in clauses (iii) and (iv) of this
paragraph (b) do not exist; or
(vi) the
Agreement shall have been terminated in accordance with its terms.
2