<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
(Amendment No. 1)
----------------------
NOVACARE EMPLOYEE SERVICES, INC.
(Name of Subject Company)
NEW PLATO ACQUISITION, INC.
PLATO HOLDINGS, INC.
(Bidders)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
66986 Q10
(CUSIP Number of Class of Securities)
------------------
Gregory M. Case
Plato Holdings, Inc.
455 South Gulph Road, Suite 410
King of Prussia, PA 19406
Telephone: (610) 265-0286
Facsimile: (610) 265-4959
(Name, Address and Telephone Number of Person authorized to
Receive Notices and Communications on Behalf of Bidders)
Copy to:
Louis A. Goodman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Telephone: (617) 573-4800
Facsimile: (617) 573-4822
----------------------
CALCULATION OF FILING FEE
================================================================================
Transaction Valuation* $75,685,000 Amount of Filing Fee $15,137
================================================================================
* Estimated for purposes of calculating the amount of the filing fee only.
The filing fee calculation assumes the purchase of 30,274,000 shares of
common stock, $0.01 par value per share (the "Shares"), of NovaCare
Employee Services, Inc. at a price of $2.50 per Share in cash, without
interest. The filing fee calculation is based on the 30,274,000 Shares
outstanding as of September 8, 1999. The amount of the filing fee,
calculated in accordance with Regulation 240.0-11 of the Securities
Exchange Act of 1934, as amended, equals 1/50th of one percent of the
aggregate value of the transaction.
[X] Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: $15,137
Form or Registration No.: Schedule 14D-1 (File No. 005-53619)
Filing Party: Plato Holdings, Inc.
Date Filed: September 15, 1999
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CUSIP NO. -66986 Q10 14D-1
================================================================================
1. Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
New Plato Acquisition, Inc. IRS ID No. 23-3014292
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use only
- --------------------------------------------------------------------------------
4. Source of Funds
AF; BK
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Item 2(e) or 2(f) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned by
Each Reporting Person
none
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7)
Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
Not applicable
- --------------------------------------------------------------------------------
10. Type of Reporting Person
CO
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2
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CUSIP NO. 313135 10 5 14D-1
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1. Names of Reporting Persons
S.S. or I.R.S. Identification Nos. of Above Persons
Plato Holdings, Inc. IRS Id No. 23-3014291
- --------------------------------------------------------------------------------
2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC Use only
- --------------------------------------------------------------------------------
4. Source of Funds
AF; BK
- --------------------------------------------------------------------------------
5. Check Box if Disclosure of Legal Proceedings is
Required Pursuant to Item 2(e) or 2(f) [ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7. Aggregate Amount Beneficially Owned By
Each Reporting Person
none
- --------------------------------------------------------------------------------
8. Check Box if the Aggregate Amount in Row (7)
Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
9. Percent of Class Represented by Amount in Row (7)
Not applicable.
- --------------------------------------------------------------------------------
10. 10. Type of Reporting Person
CO; HC
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3
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TENDER OFFER
This Amendment No. 1 (this "Amendment") amends and supplements the Tender
Offer Statement on Schedule 14D-1 filed on September 15, 1999 (as amended, the
"Schedule 14D-1"), by New Plato Acquisition, Inc., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Plato Holdings, Inc., a Delaware
corporation ("Parent"), relating to the Purchaser's tender offer for all
outstanding shares of common stock, par value $0.01 per share, of NovaCare
Employee Services, Inc., a Delaware corporation (the "Company"), upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
September 15, 1999 (the "Offer to Purchase"). Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Schedule 14D-1 and the Offer to Purchase. Except as amended and supplemented
hereby, the Schedule 14D-1 remains in effect.
Item 11. Materials to be Filed as Exhibits.
Item 11 is hereby amended and supplemented by the correction of the
following typographical errors in Exhibit (c)(1), Agreement and Plan of Merger,
dated as of September 8, 1999, by and among Parent, Purchaser and the Company
(the "Merger Agreement"):
(1) The reference to "BancBoston" in Section 3.24 of the Merger Agreement
is hereby changed to "CIBC World Markets"; and
(2) The cross reference to Section 7.2(b)(v) in Section 7.2 of the Merger
Agreement is hereby changed to cross reference Section 7.1(d)(v).
The corrected Merger Agreement, in its entirety, is attached hereto.
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SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: September 20, 1999
NEW PLATO ACQUISITION, INC.
BY: /s/ Eric B. Lass
------------------------------------
NAME: Eric B. Lass
TITLE: Vice President
PLATO HOLDINGS, INC.
BY: /s/ Eric B. Lass
------------------------------------
NAME: Eric B. Lass
TITLE: Vice President
5
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INDEX TO EXHIBITS
Exhibit
(a)(1) -- Offer to Purchase, dated September 15, 1999.
(a)(2) -- Letter of Transmittal.
(a)(3) -- Notice of Guaranteed Delivery.
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) -- Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) -- Summary Advertisement.
(b) -- BHF (USA) Capital Corporation Loan Term Sheet.
(c)(1) -- Agreement and Plan of Merger, dated as of September 8, 1999, by and
among Parent, Purchaser and the Company./1/
(c)(2) -- Stockholder Agreement, dated as of September 8, 1999, by and between
Parent, the Company, NovaCare, Inc., and NC Resources, Inc.
(c)(3) -- Short Form Merger Option Agreement, dated as of September 8, 1999,
among Parent, Purchaser and the Company.
(c)(4) -- Confidentiality Agreement, dated as of March 25, 1999, by and
between NovaCare, Inc., the Company and Fidelity Capital Associates,
Inc.
(c)(5) -- Confidentiality Agreement, dated as of March 26, 1999, by and
between NovaCare, Inc., the Company and Patricof & Co.
Ventures, Inc.
(c)(6) -- Confidentiality Agreement, dated as of February 12, 1999, by and
between NovaCare, Inc., the Company and AFLAC Incorporated.
(c)(7) -- Exclusivity Agreement, dated as of August 16, 1999, by and among
NovaCare, Inc., the Company and the Equity Investors.
(c)(8) -- Letter Agreement, dated as of September 8, 1999, by and between
NovaCare, Inc., the Company and the Equity Investors.
(d) -- None.
(e) -- Not Applicable.
(f) -- None.
- --------
/1/ Filed herewith.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PLATO HOLDINGS, INC.,
NEW PLATO ACQUISITION, INC.
AND
NOVACARE EMPLOYEE SERVICES, INC.
dated as of
September 8, 1999
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TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER............................................... 1
RECITALS................................................................... 1
ARTICLE I THE OFFER AND MERGER............................................. 2
1.1 The Offer; Merger Election...................................... 2
1.2 Company Actions................................................. 4
1.3 Directors....................................................... 5
1.4 The Merger...................................................... 7
1.5 Effective Time.................................................. 7
1.6 Closing......................................................... 7
1.7 Certificate of Incorporation of the Surviving Corporation....... 8
1.8 By-Laws of the Surviving Corporation............................ 8
1.9 Directors and Officers of the Surviving Incorporation........... 8
1.10 Subsequent Actions.............................................. 8
1.11 Stockholders' Meeting........................................... 9
1.12 Merger Without Meeting of Stockholders.......................... 10
ARTICLE II CONVERSION OF SECURITIES........................................ 10
2.1 Conversion of Capital Stock..................................... 10
2.2 Exchange of Certificates........................................ 12
2.3 Withholding Taxes............................................... 14
2.4 Appraisal Rights................................................ 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 15
3.1 Organization and Qualification; Company Subsidiaries............ 15
3.2 Conflicts....................................................... 16
3.3 Capitalization.................................................. 16
3.4 SEC Reports: Financial Statements; Undisclosed Liabilities...... 18
3.5 Schedule 14D-9; Offer Documents; Proxy Statement................ 19
3.6 Absence of Certain Changes...................................... 20
3.7 Taxes........................................................... 20
3.8 Real Property Owned or Leased................................... 23
3.9 Title to Assets................................................. 23
3.10 Contractual and Other Obligations............................... 23
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3.11 Employee Benefit Plans....................................... 25
3.12 Labor Relations.............................................. 26
3.13 Insurance.................................................... 27
3.14 Litigation................................................... 28
3.15 Permits; Compliance with Applicable Law...................... 28
3.16 Bank Accounts................................................ 30
3.17 Intellectual Property........................................ 31
3.18 Consents..................................................... 32
3.19 Foreign Person............................................... 33
3.20 Authority.................................................... 33
3.21 Board Approvals Regarding Transactions ...................... 33
3.22 Vote Required................................................ 34
3.23 Approvals; Antitakeover Provisions........................... 34
3.24 Brokers and Finders.......................................... 34
3.25 Fairness Opinion............................................. 34
3.26 Compensation................................................. 35
3.27 Full Disclosure.............................................. 35
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............. 35
4.1 Organization and Qualification............................... 35
4.2 Authority.................................................... 35
4.3 Consents and Approvals; No Violation......................... 36
4.4 Interim Operations of Sub.................................... 37
4.5 Financing.................................................... 37
4.6 Share Ownership.............................................. 37
4.7 Information in Proxy Statement and Schedule 14D-9............ 37
4.8 Brokers and Finders.......................................... 38
ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS........................... 38
5.1 Interim Operations of the Company............................. 38
5.2 Alternative Proposals......................................... 43
5.3 Reasonable Best Efforts....................................... 45
5.4 Access to Information......................................... 47
5.5 Publicity..................................................... 47
5.6 State Takeover Laws........................................... 47
5.7 Directors' and Officers' Insurance and Indemnification........ 48
5.8 Conduct of Business of Sub.................................... 49
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5.9 Transfer of Stockholder's Shares.............................. 49
5.10 Notification of Certain Matters............................... 49
5.11 Company Employees............................................. 50
5.12 Guaranty...................................................... 50
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER...................... 51
6.1 Conditions to Each Party's Obligations to Effect the Merger... 51
ARTICLE VII TERMINATION.................................................. 52
7.1 Termination................................................... 52
7.2 Effect of Termination......................................... 55
ARTICLE VIII MISCELLANEOUS AND GENERAL................................... 56
8.1 Payment of Expenses and Other Payments........................ 56
8.2 Survival of Representations and Warranties;
Survival of Confidentiality Agreement......................... 56
8.3 Modification or Amendment..................................... 56
8.4 Waiver of Conditions.......................................... 56
8.5 Counterparts.................................................. 57
8.6 Governing Law................................................. 57
8.7 Notices....................................................... 57
8.8 Entire Agreement, Assignment.................................. 58
8.9 Parties in Interest........................................... 59
8.10 Obligation of Parent.......................................... 59
8.11 Validity...................................................... 59
8.12 Captions...................................................... 59
8.13 Specific Performance.......................................... 59
8.14 "Knowledge" of the Company.................................... 59
8.15 Confidentiality............................................... 60
ARTICLE IX DEFINITIONS................................................... 60
9.1 Certain Definitions........................................... 60
ANNEX A.................................................................. 65
-iv-
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CONDITIONS TO THE OFFER................................................... 65
-v-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
8, 1999, by and among Plato Holdings, Inc., a Delaware corporation ("Parent"),
New Plato Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and NovaCare Employee Services, Inc., a Delaware
corporation (the "Company"). Capitalized terms used herein and not defined in
the specific Section in which they are used shall have the meanings assigned to
such terms in Article IX hereof.
RECITALS
WHEREAS, the Board of Directors of each of Parent, Sub and the Company
has approved, and deems it advisable and in the best interests of its respective
stockholders to consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth herein;
WHEREAS, in furtherance thereof, it is proposed that Parent make a
cash tender offer (the "Offer") to acquire any and all shares of the issued and
out standing common stock, $0.01 par value, of the Company (referred to herein
as either the "Shares" or "Company Common Stock") for $2.50 per share, net to
the seller in cash or, in the alternative, at Parent's election, to purchase
Shares from NC Resources, Inc., a Delaware corporation and the holder of
record of 19,400,000 Shares of the Company ("Target Parent"), pursuant to the
Stockholder Agreement (as defined below) and thereafter to acquire the remaining
Shares pursuant to the Merger provided for herein; and
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent, Sub and the Company has approved this Agreement and
the Merger (as defined in Section 1.4 hereof) following the Offer in accordance
with the General Corporation Law of the State of Delaware (the "DGCL") and upon
the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Company (the "Company Board")
has determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the holders of such Shares and has resolved to recommend
that the holders of such Shares accept the Offer and approve this Agreement and
each of the transactions contemplated by this Agreement, including the Offer and
the
1
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Merger (the "Transactions"), upon the terms and subject to the conditions set
forth herein; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
WHEREAS, as a condition and inducement to Parent's and Sub's entering
into this Agreement and incurring the obligations set forth herein, Target
Parent and NovaCare, Inc., a Delaware corporation and the holder of all of the
issued and outstanding capital stock of Target Parent ("Ultimate Parent"),
concurrently herewith, are executing a stockholder agreement (the "Stockholder
Agreement") dated as of the date hereof, with Parent and Sub, pursuant to which
Target Parent is agreeing, among other things, to grant Parent a proxy with
respect to the voting of such Shares and to tender the Shares held by it in the
Offer or, at Parent's election, to sell such Shares to Sub on the terms and
conditions set forth therein, and Ultimate Parent is agreeing to hold a meeting
of its stockholders to approve certain of the transactions contemplated by the
Stockholder Agreement; and
WHEREAS, as a further condition and inducement to Parent's and Sub's
entering into this Agreement and incurring the obligations set forth herein, the
Company, concurrently herewith, is executing a Short Form Merger Option
Agreement (the "Stock Option Agreement"), dated as of the date hereof, with
Parent and Sub pursuant to which the Company is granting to Sub an option to
purchase Shares on the terms and subject to the conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, Parent,
Sub and the Company hereby agree as follows:
ARTICLE I
THE OFFER AND MERGER
1.1 The Offer; Merger Election.
--------------------------
(a) Within five business days following the date hereof, Sub
shall commence (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) a cash tender offer to acquire any
2
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and all Shares at a price of $2.50 per Share, net to the seller in cash (such
price, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price") and, subject to there being validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Shares which, when added to the Shares, if any, beneficially owned by Parent or
Sub, would constitute a majority of the Shares outstanding on a fully diluted
basis (the "Minimum Condition") and to the other conditions set forth in Annex A
hereto (any of which may be waived in whole or in part by Sub in its sole
discretion), Sub shall, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment and pay for Shares
tendered as soon as it is legally permitted to do so under Applicable Law. The
obligations of Sub to commence the Offer and to accept for payment and to pay
for any Shares validly tendered on or prior to the expiration of the Offer and
not withdrawn shall be subject only to the conditions set forth in Annex A
hereto. The Offer shall be made by means of an offer to purchase (the "Offer to
Purchase") containing the terms set forth in this Agreement, the Minimum
Condition and the conditions set forth in Annex A hereto. Sub expressly reserves
the right to amend any of the terms and conditions of the Offer; provided, that
Sub shall not without the prior written consent of the Company (such consent to
be authorized by the Company Board or a duly authorized committee thereof) (i)
decrease the Offer Price, (ii) decrease the number of Shares sought, (iii)
change the form of consideration to be paid pursuant to the Offer, (iv) impose
conditions to the Offer in addition to those set forth in Annex A hereto, (v)
amend any other term or condition of the Offer in any manner adverse to the
holders of the Shares or (vi) extend the expiration date of the Offer.
Notwithstanding the foregoing, Sub may, without the consent of the Company, (A)
extend the Offer, if at the initial scheduled or any extended expiration date of
the Offer any of the conditions of the Offer shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, (B) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the United States Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer, (C) extend the Offer for up to ten business
days if there have not been validly tendered and not withdrawn prior to the
expiration of the Offer such number of Shares that, together with Shares, if
any, beneficially owned by Parent or Sub, would constitute at least 90% of the
fully diluted Shares as of the date of determination, provided that all other
conditions to the Offer are satisfied or waived and (D) extend the Offer for any
reason for up to two business days; provided, that no more than three extensions
--------
in the aggregate shall be permitted under clauses (C) and (D) of this sentence.
In addition, the Offer Price may be increased and the Offer may be extended to
the extent required by law, in each case without the consent of the Company.
3
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(b) On the date the Offer is commenced, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will include, as
exhibits, the Offer to Purchase and a form of letter of transmittal and summary
advertisement (collectively, together with any amendments and supplements
thereto, the "Offer Documents").
(c) Parent and Sub further agree to take all steps necessary to
cause the Offer Documents to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Each of Parent and Sub, on the one hand, and the
Company, on the other hand, agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that it shall have
become false and misleading in any material respect and Parent and Sub further
agree to take all steps necessary to cause the Offer Documents as so corrected
to be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws. The
Company and its counsel shall be given a reasonable opportunity to review the
Schedule 14D-1 and the Offer Documents before they are filed with the SEC. In
addition, Parent and Sub agree to provide the Company and its counsel in writing
with any comments, whether written or oral, that Parent, Sub or their counsel
may receive from time to time from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments or other
communications.
1.2 Company Actions.
----------------
(a) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto and
including the exhibits thereto, the "Schedule 14D-9") containing the
recommendation described in Section 3.21 hereof. At the time the Offer Documents
are first mailed to the stockholders of the Company, the Company shall mail or
cause to be mailed to the stockholders of the Company such Schedule 14D-9
together with such Offer Documents. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws. Each of the Company, on the one hand, and Parent and Sub, on the other
hand, agrees promptly to correct any
4
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information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false and misleading in any material respect and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given a reasonable opportunity
to review the Schedule 14D-9 before it is filed with the SEC. In addition, the
Company agrees to provide Parent, Sub and their counsel in writing with any
comments, whether written or oral, that the Company or its counsel may receive
from time to time from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments or other communications.
(b) In connection with the Offer and the Merger, if requested by
Sub, the Company shall promptly furnish or cause to be furnished to Sub mailing
labels, security position listings and any available listing or computer file
containing the names and addresses of the record holders of the Shares as of a
recent date, and shall furnish Sub with such information and assistance as Sub
or its agents may reasonably request in communicating the Offer to the
stockholders of the Company. Except for such steps as are necessary to
disseminate the Offer Documents, Parent and Sub shall hold in confidence the
information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, will use such information
only in connection with the Offer and the Merger, and, if this Agreement is
term-mated, will upon request of the Company deliver or cause to be delivered to
the Company all copies of such information then in its possession or the
possession of its agents or representatives.
1.3 Directors.
---------
(a) Promptly upon the purchase of and payment for Shares by
Parent or any of its subsidiaries which represent at least a majority of the
then outstanding shares of Company Common Stock, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number, on the
Company Board as is equal to the product of the total number of directors on the
Company Board (giving effect to the directors designated by Parent pursuant to
this sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Sub, Parent and any of their Affiliates (including Shares
so accepted for payment) bears to the total number of shares of Company Common
Stock then outstanding (on a fully diluted basis). The Company shall take all
action necessary to cause Parent's designees to be elected or appointed to the
Company Board and to secure the
5
<PAGE>
resignations of such number of its incumbent directors as is necessary to enable
Parent's designees to be so elected or appointed. At such times, the Company
will cause individuals designated by Parent to constitute the same percentage
(rounded up to the nearest whole number) as such individuals represent on the
Company Board of (A) each committee of the Company Board and (B) each board of
directors (and committee thereof) of each Company Subsidiary (as defined in
Section 3.1 hereof) in each case to the extent permitted by Applicable Law or
the rules or applicable listing agreement of any stock exchange or over-the-
counter market on which the Company Common Stock is listed or traded.
Notwithstanding the foregoing, until the Effective Time (as defined in Section
1.5 hereof), the Company shall use its best efforts to retain as members of the
Company Board at least two directors that are directors of the Company on the
date hereof (the "Independent Directors"); provided, that subsequent to the
-------- ----
purchase of and payment for Shares pursuant to the Offer, Parent shall always
have its designees represent at least a majority of the entire Company Board.
The Company's obligations under this Section 1.3(a) shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to such Section 14(f) and Rule
l4f-1 in order to fulfill its obligations under this Section 1.3(a), including
mailing to stockholders the information required by such Section 14(f) and Rule
14f-1 as is necessary to enable Parent's designees to be elected or appointed to
the Company Board. Parent or Sub shall supply the Company any information with
respect to either of them and their nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The provisions of this Section
1.3 are in addition to and shall not limit any rights which Sub, Parent or any
of their Affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise.
(b) In the event that Parent's designees are elected or
appointed to the Company Board, until the Effective Time, the Company shall use
its best efforts to maintain as members of the Company Board at least two
directors who are Independent Directors, provided that, in such event, if the
number of Independent Directors shall be reduced below two for any reason
whatsoever, the remaining Independent Director, if any, shall be entitled to
designate a person to fill such vacancy who shall be deemed to be an Independent
Director for purposes of this Agreement or, if no Independent Director then
remains, the other directors shall designate two persons to fill such vacancies
who shall not be stockholders, Affiliates or associates of Parent or Sub, and
each such person shall be deemed to be an Independent Director, for purposes of
this Agreement. Notwithstanding anything in this Agreement to the contrary, in
the event that Parent's designees constitute a
6
<PAGE>
majority of the directors on the Company Board, the affirmative vote of a
majority of the Independent Directors shall be required after the acceptance for
payment of Shares pursuant to the Offer and prior to the Effective Time, to (a)
amend or termi nate this Agreement by the Company, (b) exercise or waive any of
the Company's rights, benefits or remedies hereunder if such exercise or waiver
materially and adversely affects holders of Shares other than Parent or Sub, (c)
take action with respect to the retention of counsel and other advisors in
connection with the transac tions contemplated hereby or (d) take any other
action under or in connection with this Agreement if such action materially and
adversely affects holders of Shares other than Parent or Sub; provided, that if
-------- ----
there shall be no such directors, such actions may be effected by unanimous vote
of the entire Company Board. The Independent Directors shall have the right to
retain, at the expense of the Company, one separate firm of counsel to represent
them in connection with the Transactions.
1.4 The Merger. Subject to the terms and conditions of this
----------
Agreement, the Company and Sub shall consummate a merger (the "Merger") pursuant
to which (a) Sub shall be merged with and into the Company and the separate
corporate existence of Sub shall thereupon cease, (b) the Company shall be the
successor or surviving corporation in the Merger and shall continue to be
governed by the laws of the State of Delaware and (c) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers
and franchises shall continue unaffected by the Merger. The corporation
surviving the Merger is sometimes hereinafter referred to as the "Surviving
Corporation." The Merger shall have the effects set forth in the DGCL.
1.5 Effective Time. Parent, Sub and the Company will cause a
--------------
Certificate of Merger (the "Certificate of Merger") to be executed and filed on
the date of the Closing (as defined in Section 1.6 hereof) (or on such other
date as Parent and the Company may agree) with the Secretary of State of the
State of Delaware (the "Secretary of State") as provided in the DGCL. The
Merger shall become effective at the time at which the Certificate of Merger has
been duly filed with the Secretary of State or at such time as is agreed upon by
the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
1.6 Closing. The closing of the Merger (the "Closing") shall take
-------
place at 10:00 a.m., local time, on a date to be specified by Parent or Sub,
which shall be no later than the second business day after the satisfaction or
waiver of all of the conditions set forth in Article VI hereof (the "Closing
Date") at the offices of
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Blank Rome Comisky & McCauley LLP, One Logan Square, Philadelphia, Pennsylvania
19103, unless another date, time or place is agreed to in writing by the parties
hereto.
1.7 Certificate of Incorporation of the Surviving Corporation. The
---------------------------------------------------------
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by Applicable Law and such
Certificate of Incorporation.
1.8 By-Laws of the Surviving Corporation. The By-Laws of the
------------------------------------
Company, as in effect immediately prior to the Effective Time, shall be the By-
Laws of the Surviving Corporation until thereafter amended as provided by
Applicable Law, the Certificate of Incorporation of the Surviving Corporation
and such By-Laws.
1.9 Directors and Officers of the Surviving Incorporation. The
-----------------------------------------------------
directors of Sub at the Effective Time and the officers of the Company at the
Effective Time shall be the initial directors and officers, respectively, of the
Surviving Corporation until their respective successors have been duly elected
or appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation and
By-Laws.
1.10 Subsequent Actions. If at any time after the Effective Time, the
------------------
Surviving Corporation will consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Sub acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger
or otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of either the Company or Sub, all such deeds, bills of sale,
instruments of conveyance, assignments and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
8
<PAGE>
1.11 Stockholders' Meeting.
---------------------
(a) If required by Applicable Law in order to consummate the
Merger, the Company, acting through the Company Board, shall, in accordance with
Applicable Law:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Special Meeting") as soon as practicable
following the acceptance for payment and purchase of Shares by Sub pursuant
to the Offer for the purpose of considering and taking action upon the
approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and shall
obtain and furnish the information required to be included by the SEC in
the Proxy Statement (as hereinafter defined) and, after consultation with
Parent, to respond promptly to any comments made by the SEC with respect
to the preliminary proxy or information statement and cause a definitive
proxy or information statement, including any amendment or supplement
thereto (the "Proxy Statement"), to be mailed to its stockholders, provided
that no amendment or supplement to the Proxy Statement will be made by the
Company without consultation with Parent and its counsel,
(iii) include in the Proxy Statement the recommendation of
the Company Board that stockholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement; and
(iv) use its best efforts to solicit from holders of
Shares proxies in favor of the Merger and shall take all other action
necessary or, in the reasonable opinion of Parent, advisable to secure any
vote or consent of stockholders required by the DGCL to effect the Merger.
(b) Parent agrees that it will provide the Company with the
information concerning Parent and Sub required to be included in the Proxy State
ment and will vote, or cause to be voted, all of the Shares then owned by it,
Sub or
9
<PAGE>
any of its other subsidiaries and Affiliates in favor of the approval of the
Merger and the adoption of this Agreement; provided that this Section 1.11(b)
shall not apply to Shares held in any client or customer accounts over which FMR
Corp. or any of its Affiliates has investment management or advisory
responsibilities, including any of the Fidelity Investments mutual funds.
(c) The Company represents that the Proxy Statement (or any
amendment thereof or supplement thereto) at the date mailed to Company
stockholders and at the time of the Special Meeting, if any, will not contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company with respect
to statements made therein based on information supplied by Parent or Sub in
writing for inclusion in the Proxy Statement. If at any time prior to the
Effective Time, any event with respect to the Company, Stockholder or any of the
Company Subsidiaries should occur which is required to be described in a
supplement to the Proxy Statement, such event shall be so described, and such
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. With respect to the information
relating to the Company or Stockholder, the Proxy Statement will comply as to
form and substance in all material respects with the requirements of the
Exchange Act.
1.12 Merger Without Meeting of Stockholders. Notwithstanding Section
--------------------------------------
1.11 hereof, in the event that Parent, Sub or any other subsidiary of Parent
shall acquire in the aggregate a number of the outstanding Shares, pursuant to
the Offer or otherwise, sufficient to enable Sub or the Company to cause the
Merger to become effective under Applicable Law without a meeting of
stockholders of the Company, the parties hereto shall, at the request of Parent
and subject to Article VI hereof, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stock holders of the Company, in accordance
with Section 253 of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue
---------------------------
of the Merger and without any action on the part of the holders of any shares
10
<PAGE>
of Company Common Stock or common stock, par value $.01 per share, of Sub ("Sub
Common Stock"):
(a) Sub Common Stock. Each issued and outstanding share of Sub
----------------
Common Stock shall be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
-----------------------------------------------------
shares of Company Common Stock that are owned by the Company as treasury stock
and any shares of Company Common Stock owned by Parent, Sub or any other wholly
owned subsidiary of Parent shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each share of Company Common Stock
--------------------
issued and outstanding (other than Shares to be cancelled in accordance with
Section 2.1 (b) hereof and Dissenting Shares (as defined in Section 2.4
hereof)), shall be converted into the right to receive the Offer Price, payable
to the holder thereof, without interest (the "Merger Consideration"), upon
surrender of the certificate formerly representing such share of Company Common
Stock in the manner provided in Section 2.2 hereof. All such shares of Company
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor, without interest, upon the surrender of such certificate in accordance
with Section 2.2 hereof or the right, if any, to receive payment from the
Surviving Corporation of the " fair value" of such Shares in accordance with
Section 262 of the DGCL.
(d) Stock Options. Information concerning outstanding stock
-------------
options to purchase Shares ("Options") granted under the Company's stock option
plans and agreements (the "Option Plans") (including the names of the optionees,
the dates of grant, the number of shares subject to such options and the
exercise prices of such options) is set forth in Section 2.1(d) of the
disclosure schedule delivered to Parent and Sub by the Company concurrently with
the execution hereof (the "Company Disclosure Schedule"). In consideration for
the cancellation of the outstanding "in the money" Options pursuant to this
Section 2.1(d), the Company shall pay to the holders of such Options an amount,
in cash, equal to the product of (A) the difference between the Offer Price and
the per share exercise price of such Options multiplied by (B) the number of
Shares covered by such Options.
11
<PAGE>
The Company agrees that with respect to all outstanding "underwater" Options,
the Company shall, prior to completion of the Offer, obtain agreements from the
holders of Options who are senior management, executive officers, and/or
directors of the Company and the officers and directors of Ultimate Parent
deemed to have been founders of the Company, as set forth in Section 2.1(d) of
the Company Disclosure Schedule, to cancel their Options and shall use its best
efforts to obtain agreements from all other holders of Options to cancel their
Options, and, after such cancellation pursuant to this Section 2.1(d), there
shall be outstanding no more than an aggregate of underwater Options to purchase
75,000 shares held by such other holders of Options.
2.2 Exchange of Certificates.
-------------------------
(a) Paying Agent. Parent shall designate a bank or trust company
------------
reasonably acceptable to the Company to act as agent for the holders of shares
of Company Common Stock in connection with the Merger (the "Paying Agent") to
receive the funds to which holders of shares of Company Common Stock shall
become entitled pursuant to Section 2.1(c) hereof. Parent shall, from time to
time, make available to the Paying Agent funds in amounts and at times necessary
for the payment of the Merger Consideration as provided herein. Such funds shall
be invested by the Paying Agent as directed by Parent. Earnings from such
investments shall be the sole and exclusive property of Parent, and no part of
such earnings shall accrue to the benefit of holders of Shares.
(b) Exchange Procedures. As soon as reasonably practicable, but
-------------------
in no event more than five business days, after the Effective Time, Parent shall
cause the Paying Agent to mail to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.1 hereof into the right to receive the
Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions not inconsistent with this Agreement as
Parent may reasonably specify) and (ii) instructions for use of such letter of
transmittal in effecting the surrender of the Certificates in exchange for
payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger
12
<PAGE>
Consideration for each share of Company Common Stock formerly represented by
such Certificate and the Certificate so surrendered shall forthwith be
cancelled. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger Consideration
in cash as contemplated by this Section 2.2. No interest shall be paid or will
accrue on the Merger Consideration payable to holders of Certificates pursuant
to the provisions of this Article II.
(c) Transfer Books; No Further Ownership Rights in Company
------------------------------------------------------
Common Stock. At the Effective Time, the stock transfer books of the Company
- ------------
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares, except as
otherwise provided for herein or by Applicable Law. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund, No Liability. At any time following
---------------------------------
six months after the Effective Time, the Surviving Corporation shall be entitled
to require the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
none of Parent, the Surviving Corporation or the Paying Agent shall be liable to
any holder of a Certificate for Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
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<PAGE>
(e) 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 with such assurances
as the Paying Agent may, in its discretion require, and, if required by the
Surviving Corpo ration, 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 Paying Agent
shall pay in exchange for such lost, stolen or destroyed Certificates the Merger
Consideration pursuant to this Agreement.
2.3 Withholding Taxes. Parent and Sub shall be entitled to deduct and
-----------------
withhold, or cause the Paying Agent to deduct and withhold, from the Offer Price
or the Merger Consideration payable to a holder of Shares pursuant to the Offer
or the Merger any withholding and stock transfer Taxes (as defined in Section
3.8 hereof) and such amounts as are required under the Code or any applicable
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Parent or Sub, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by Parent or Sub.
2.4 Appraisal Rights. Notwithstanding anything in this Agreement to
----------------
the contrary, Shares (the "Dissenting Shares") that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
did not vote in favor of the Merger and who comply with all of the relevant
provisions of Section 262 of the DGCL (the "Dissenting Stockholders") shall not
be converted into or be exchangeable for the right to receive the Merger
Consideration, unless and until such holders shall have failed to perfect or
shall have effectively withdrawn or lost their rights to appraisal under the
DGCL, but the holders thereof shall be entitled to only such rights as are
granted by the DGCL. If any Dissenting Stockholder shall have failed to perfect
or shall have effectively withdrawn or lost such right, such holder's Shares
shall thereupon be converted into and become exchangeable for the right to
receive, as of the Effective Time, the Merger Consideration without any interest
thereon, upon surrender of the Certificate or Certificates representing such
Shares pursuant to Section 2.2 hereof. The Company shall give Parent (i) prompt
notice of any written demands for appraisal of any Shares, attempted withdrawals
of such demands and any other instruments served pursuant to the DGCL and
received by the Company relating to the stockholders' rights of appraisal and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal
14
<PAGE>
under the DGCL. Neither the Company nor the Surviving Corporation shall, except
with the prior written consent of Parent, voluntarily make any payment with
respect to, or settle or offer to settle, any such demand for payment. If any
Dissenting Stockholder shall fail to perfect or shall have effectively withdrawn
or lost the right to dissent, the Shares held by such Dissenting Stockholder
shall thereupon be treated as though such Shares had been converted into the
right to receive the Merger Consideration pursuant to Section 2.1 (c) hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub as follows:
3.1 Organization and Qualification; Company Subsidiaries. The
----------------------------------------------------
Company and each of its subsidiaries (each a "Company Subsidiary" and
collectively, the "Company Subsidiaries") is validly existing and in good
standing under the laws of the jurisdiction of its organization, and has all
requisite corporate or partnership (as applicable) power, authority and legal
right to own, operate and lease its assets and properties and to conduct the
businesses in which it is now engaged. The Company and each Company Subsidiary
is duly qualified and in good standing to transact business as a foreign
corporation or limited partnership (as applicable) in all jurisdictions wherein
it is required to be so qualified, except where the failure to be so qualified
would not have, individually or in the aggregate, a Company Material Adverse
Effect. Neither the Company nor any Company Subsidiary conducts business in any
jurisdiction outside of the United States. The Company does not have any
subsidiaries other than the Company Subsidiaries listed in Section 3.1 of the
Company Disclosure Schedule. Except as set forth in Section 3.1 of the Com
pany Disclosure Schedule, the Company, directly or indirectly through a wholly
owned Company Subsidiary, owns of record and beneficially all of the issued and
outstanding shares of capital stock of each Company Subsidiary, free and clear
of all Liens. Other than the Company Subsidiaries and other than as set forth
in Section 3.1 of the Company Disclosure Schedule, the Company does not own any
capital stock or other proprietary interest, directly or indirectly, in any
corporation, association, trust, partnership, joint venture, limited liability
company or other entity nor is the Company bound by any agreement to acquire any
such capital stock or other proprietary interest. Copies of the Certificate of
Incorporation and By-Laws of the Company and each Company Subsidiary which is a
corporation and copies of the Certificate of Limited Partnership and Agreement
of Limited Partnership of each Company Subsidiary which is a limited partnership
have been heretofore made
15
<PAGE>
available to Parent and Sub, which copies are complete and correct and include
all amendments, modifications or supplements thereto.
3.2 Conflicts. Neither the execution, delivery or performance of
---------
this Agreement or the Stock Option Agreement by the Company, nor the
consummation of the Transactions contemplated hereby or thereby to be
consummated by the Company, (a) violates any provision of the Certificate of
Incorporation or By-Laws or other organizational documents of the Company or any
Company Subsidiary or (b) constitutes a violation of any Applicable Law. Except
as set forth in Section 3.2 of the Company Disclosure Schedule, neither the
execution, delivery or performance of this Agreement or the Stock Option
Agreement by the Company nor the consumma tion of the Transactions contemplated
hereby or thereby to be consummated by the Company, with or without notice
and/or lapse of time, (i) violates, conflicts with, results in any breach of any
of the terms of, or results in the termination or modification of, or the
exercise or acceleration of any right or remedy under, any Company Material
Contract (as defined in Section 3.10 hereof), any other contract of the Company
or any Company Subsidiary, or other obligation to which the Company or any
Company Subsidiary is subject, (ii) violates, conflicts with, results in any
breach of any of the terms of, or results in the termination, modification or
revocation of, any Permit held by the Company or any Company Subsidiary, or
(iii) results in the creation of any Lien on any of the assets or properties
owned or used by the Company or any Company Subsidiary, except where such
violation, conflict, breach, termination or Lien would not have, individually or
in the aggregate, a Company Material Adverse Effect.
3.3 Capitalization. The authorized capital stock of the Company
--------------
consists of: (i) 60,000,000 Shares, of which, as of the date hereof, 30,274,000
Shares were issued and outstanding and (ii) 1,000,000 shares of preferred stock,
$0.01 par value per share, none of which, as of the date hereof, were issued and
outstanding. As of the date hereof, 2,271,250 Shares were reserved for issuance
upon exercise of outstanding Options under the 1997 Stock Option Plan, as
amended, with an exercise price range of a minimum exercise price of $2.80 and a
maximum exercise price of $9.13. All outstanding shares of capital stock and
other equity securities of the Company and each Company Subsidiary are, and all
Shares which may be issued pursuant to the exercise of outstanding Options and
as earn-out payments pursuant to the Acquisition Agreements, will be, when so
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no bonds, debentures, notes or other
indebtedness or securities of the Company or of any Company Subsidiary issued
and outstanding which have the right to vote (or are
16
<PAGE>
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company or any Company Subsidiary may
vote. Except as set forth above or in Section 2.1(d) of the Company Disclosure
Schedule and except for a maximum of 6,124,000 Shares which may be issued
pursuant to earn-out arrangements contained in the Acquisition Agreements (as
defined in Section 3.10 hereof) assuming that the targets set forth in the
projections delivered to Parent by the Company with respect to earn-out
obligations to which the Company or any Company Subsidiary is subject pursuant
to the Acquisition Agreements and assuming that the applicable market price of
the Shares is equal to the Offer Price (it being understood that all earn-out
obligations can be satisfied in cash), as of the date of this Agreement: (i) no
shares of capital stock or other securities of the Company are issued, reserved
for issuance or outstanding, (ii) there are no stock appreciation rights,
phantom stock units, restricted stock grants, contingent stock grants or Benefit
Plans (as defined in Section 3.11 hereof) which grant awards of any of the
foregoing, and there are no other outstanding contractual rights to which the
Company is a party the value of which is based on the value of Shares; and (iii)
except as set forth above, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any Company Subsidiary is a party or by
which any of them is bound obligating the Company or any Company Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, shares of
capital stock or other securities of the Company or of any Company Subsidiary or
obligating the Company or any Company Subsidiary to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Except as set forth in Section 3.3 of the
Company Disclosure Schedule, there are no programs in place, nor any outstanding
contractual obligations of the Company or any Company Subsidiary, to repurchase,
redeem or otherwise acquire any shares of capital stock or other equity
securities of the Company or any Company Subsidiary or to provide funds to make
any investment (in the form of a loan, capital contribution or otherwise) in any
Company Subsidiary or any other entity. There are no voting trusts or other
agreements or understandings to which the Company or any Company Subsidiary is a
party with respect to the voting of the capital stock or other equity securities
of the Company or any Company Subsidiary. Except as set forth in Section 3.3 of
the Company Disclosure Schedule, no indebtedness of the Company or any Company
Subsidiary or as to which the Company or any Company Subsidiary has given a
guarantee or by which any of their respective assets or properties are bound
contains any restriction upon (i) the prepayment of any indebtedness of the
Company or any Company Subsidiary, (ii) the incurrence of indebtedness by the
Company or any Company Subsidiary or (iii) the ability of the Company or any
17
<PAGE>
Company Subsidiary to grant any Lien on the properties or assets of the Company
or any Company Subsidiary. Except as set forth in Section 3.3 of the Company
Disclosure Schedule, each outstanding share of capital stock or other equity
interest of each Company Subsidiary is owned by the Company or a Company
Subsidiary that is wholly owned by the Company, free and clear of all Liens.
3.4 SEC Reports: Financial Statements; Undisclosed Liabilities.
----------------------------------------------------------
(a) The Company has filed all forms, reports, schedules,
statements and other documents required to be filed by it with the SEC since its
inception pursuant to the federal securities laws and the SEC rules and
regulations thereunder, all of which, as of their respective dates, complied in
all material respects with applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, as the case may
be, and the applicable rules and regulations of the SEC thereunder
(collectively, the "Company SEC Reports"). None of the Company SEC Reports,
including, without limitation, any financial statements or schedules included
therein, as of their respective dates, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The financial statements (including the related notes
thereto) of the Company included in the Company SEC Reports comply in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
conformity with generally accepted accounting principles ("GAAP ") in the United
States applied on a consistent basis during the periods involved (except as
otherwise noted therein), and present fairly the consolidated financial position
of the Company and its consolidated Company Subsidiaries as of their respective
dates, and the consolidated results of their operations and cash flows for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
(c) Except (i) as set forth in Section 3.4(c) of the Company
Disclosure Schedule, (ii) as set forth in the consolidated balance sheet of the
Company as of March 31, 1999 set forth in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999 (the "Balance Sheet") and (iii)
for current liabilities and obligations incurred in the ordinary course of
business consistent with past practice since March 31, 1999 (and not materially
different in type or amount),
18
<PAGE>
neither the Company nor any Company Subsidiary has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise).
(d) All accounts receivable of the Company and each Company
Subsidiary that are reflected in the Balance Sheet or on the accounting records
of the Company and the Company Subsidiaries as of the date any Shares have been
accepted for payment pursuant to the Offer represent and will represent valid
obligations arising from sales actually made or services actually performed in
the ordinary course of business. Section 3.4(d) of the Company Disclosure
Schedule contains a complete and accurate aged accounts receivable list of the
Company and the Company Subsidiaries as of June 30, 1999. As of the date any
Shares have been accepted for payment pursuant to the Offer, there shall have
been no material increase in the accounts receivable of the Company and the
Company Subsidiaries that are 30 days or more past due. Unless paid prior to the
date any Shares have been accepted for payment pursuant to the Offer, the
accounts receivable of the Company and each Company Subsidiary are or will be as
of the date any Shares have been accepted for payment pursuant to the Offer,
collectible net of the respective reserves shown in Section 3.4(d) of the
Company Disclosure Schedule or on the accounting records of the Company and each
Company Subsidiary as of the date any Shares have been accepted for payment
pursuant to the Offer (which reserves are adequate and calculated consistent
with past practice and, in the case of the reserves as of the date any Shares
have been accepted for payment pursuant to the Offer, will not represent a
greater percentage of the 30 days or more past due accounts receivable as of
such date than the reserves reflected in Section 3.4(d) of the Company
Disclosure Schedule represented of such past due accounts receivable reflected
therein).
3.5 Schedule 14D-9; Offer Documents; Proxy Statement. Neither the
------------------------------------------------
Schedule 14D-9, any other document required to be filed by the Company with the
SEC in connection with the Transactions, nor any information supplied by the
Company for inclusion in the Offer Documents shall, at the respective times the
Schedule 14D-9, any such other filings by the Company, the Offer Documents or
any amendments or supplements thereto are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement, if any, will not, on the date the Proxy
Statement (including any amendment or supplement thereto) is first mailed to
stockholders of the Company and at the time of the Special Meeting, contain any
untrue statement of a material fact, or omit to state any
19
<PAGE>
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading and the Proxy Statement will not, at the time of the
Special Meeting, omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Special Meeting which shall have become false or misleading in
any material respect. The Schedule 14D-9, any other document required to be
filed by the Company with the SEC in connection with the Transactions, and the
Proxy Statement will, when filed by the Company with the SEC, comply as to form
in all material respects with the applicable provisions of the Exchange Act and
the rules and regulations thereunder. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to the statements made in any
of the foregoing documents based on and in conformity with information supplied
in writing by or on behalf of Parent or Sub specifically for inclusion therein.
3.6 Absence of Certain Changes. Except as set forth in Section 3.6
--------------------------
of the Company Disclosure Schedule or in the Company SEC Reports, since the date
of the Balance Sheet, (i) the Company and each Company Subsidiary has conducted
its respective business in all material respects in the ordinary and usual
course consistent with past practice, (ii) there has not occurred any events or
changes (including the incurrence of any liabilities of any nature, whether or
not accrued, contingent or otherwise) having or reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect, and (iii)
neither the Company nor any Company Subsidiary has taken any action that would
have been prohibited by Section 5.1 if such section applied to the period
between the date of the Balance Sheet and the date hereof.
3.7 Taxes. Except as set forth in Section 3.7 of the Company
-----
Disclosure Schedule:
(a) The Company and each Company Subsidiary has filed or caused
to be filed on a timely basis all material returns, reports or other
declarations relating to Taxes required to be filed by it (the "Tax Returns"),
all of which were complete and correct in all material respects and the Company
and each Company Subsidiary has timely paid or caused to be paid all federal
income and all material other federal, state, local and foreign taxes
(including, but not limited to, income, franchise, property (real, tangible and
intangible), sales, use, unemployment, withholding, gross receipts, business
license, transfer, capital, net worth, gains, excise, social security and
workers' compensation taxes and estimated income and franchise
20
<PAGE>
tax payments, and penalties, interest and fines with respect to any thereof)
(collectively, "Taxes") due and payable by it. Since their respective dates of
acquisition, the taxable income of the Company and each Company Subsidiary has
been included in the consolidated federal income Tax Returns of the Company to
the extent required to be included under the Code and in the consolidated,
combined or unitary state income Tax Returns of the Company to the extent
required to be included under applicable state income Tax rules.
(b) With respect to any Taxes of the Company or any Company
Subsidiary not yet due and payable, adequate reserves and accruals for such
Taxes have been made in the Financial Statements or in the books and records of
the Company.
(c) Neither the Company nor any Company Subsidiary has received
written notice from any taxing authority of any material deficiency, claim or
other dispute relating to the payment or assessment of any Taxes for any period
which remains unsettled at the date hereof, and the Company has no reasonable
basis to believe that any such deficiency, claim or other dispute exists
materially in excess of reserves and accruals set forth in the Financial
Statements or in the books and records of the Company or of any Company
Subsidiary.
(d) Neither the Company nor any Company Subsidiary has executed
any waiver of any statute of limitations on the assessment or collection of
Taxes with respect to the Company or any Company Subsidiary or executed any
agreement in each case now in effect extending the period of time to assess or
collect any Taxes with respect to the Company and the Company Subsidiary.
(e) There are no material Liens for Taxes (other than Permitted
Liens) upon or, to the knowledge of the Company, threatened against any assets
of the Company or any Company Subsidiary.
(f) Neither the Company nor any Company Subsidiary has been or
currently is a party to any pending or, to the knowledge of the Company,
threatened action, proceeding or assessment by any taxing authority, foreign or
domestic, relating to the Company or any Company Subsidiary.
(g) No election under Section 341(f) of the Code has been or
will be made to treat the Company or any Company Subsidiary as a "consenting
corporation" as defined in such Section 341(f).
21
<PAGE>
(h) Neither the Company nor any Company Subsidiary is or has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code.
(i) The Company and each Company Subsidiary has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee (including, to the Company's knowledge,
Worksite Employees), independent contractor, creditor, stockholder, or other
third party.
(j) The Company has delivered or caused to be delivered to
Parent correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by the Company or any Company Subsidiary, as the case may be, since the
inception thereof.
(k) Neither the Company nor any Company Subsidiary has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code Section 280G.
(l) The Company and each Company Subsidiary (during such time as
it was a Company Subsidiary) has disclosed on its federal income Tax Returns all
positions taken therein that could, in the reasonable judgment of the Company,
give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
(m) Neither the Company nor any Company Subsidiary is a party to
any Tax allocation or sharing agreement. Neither the Company nor any Company
Subsidiary (A) has been a member of an affiliated group (other than the group of
which they are now a member) filing a consolidated federal income Tax Return or
(B) to the Company's knowledge, has any liability for the Taxes of any person or
entity (other than the Company and the Company Subsidiaries) under Treasury
Regulation Section 1. 1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(n) Section 3.7 of the Company Disclosure Schedule sets forth
the Company's Tax basis in each Company Subsidiary as of the date of this
Agreement.
22
<PAGE>
(o) There have been no changes in tax accounting methods by the
Company or any Company Subsidiary which have resulted or will result in an
adjustment under Code Section 481.
(p) Neither the Company nor any Company Subsidiary has an
"excess loss account" within the meaning of Treasury Regulation Section 1.1502-
19(a) with respect to its investment in any other subsidiary corporation.
3.8 Real Property Owned or Leased. Neither the Company nor any
-----------------------------
Company Subsidiary owns any real property. A list of all real property leased by
the Company and each Company Subsidiary is set forth in Section 3.8 of the
Company Disclosure Schedule. Except as set forth in Section 3.8 of the Company
Disclosure Schedule, all such leased real property is held subject to written
leases under which neither the Company nor any Company Subsidiary has received a
written notice of any existing defaults or events of default or events which
with notice or lapse of time or both would constitute defaults on the part of
the Company or any Company Subsidiary, except for any such default which would
not have, individually or in the aggregate, a Company Material Adverse Effect.
3.9 Title to Assets. Except as set forth in Section 3.9 of the
-----------------
Company Disclosure Schedule, the Company and each Company Subsidiary has (i)
good and valid title to all of the properties and assets which they own, free
and clear of all Liens except for Permitted Liens, and (ii) leases or has the
right to use pursuant to valid and binding contracts (as to which no material
default exists) all of the material properties and assets leased or used by
them. The Company and each Company Subsidiary leases, owns or has the right to
use all material properties and assets necessary for the operation of its
business as currently conducted.
3.10 Contractual and Other Obligations. Section 3.10 of the Company
---------------------------------
Disclosure Schedule sets forth a true and complete list, as of the date hereof,
and the Company has delivered to Parent a complete and correct copy of each of
the following to which the Company or any Company Subsidiary is a party: (i)
each agreement for the provision of professional employer services to the ten
largest subscribers based on the number of covered employees and all other
material agreements and contracts to which the Company or any Company Subsidiary
is a party, (ii) all non-competition agreements or any other agreements or
obligations which purport to limit in any material respect the manner in which,
or the localities in which, the business of the Company or any of the Company
Subsidiaries may be
23
<PAGE>
conducted, (iii) all agreements, arrangements or understandings with any
director, officer or Affiliate that would be required to be disclosed under Item
404 of Regulation S-K under the Securities Act, including all agreements with
Ultimate Parent or any of its other direct or indirect subsidiaries whether or
not required to be disclosed under Item 404, (iv) all voting or other agreements
governing how any Shares shall be voted, (v) all acquisition, merger, asset
purchase or sale agreements pursuant to which the Company acquired any of the
Company Subsidiaries or any other company, operation or business (the
"Acquisition Agreements"), (vi) all contracts or other agreements which would
prohibit or materially delay the consummation of the Merger or any of the
Transactions, (vii) all contracts or other agreements evidencing or relating to
indebtedness for money borrowed by the Company or any Company Subsidiary, (viii)
all contracts or other agreements not entered into in the ordinary course of
business involving an amount in excess of $250,000, (ix) all material licenses,
sublicenses, contracts or other agreements to which the Company or any Company
Subsidiary is a party and pursuant to which any person or entity is authorized
to use any Company Intellectual Property or pursuant to which the Company or any
Company Subsidiary is authorized to use the Intellectual Property of another
person or entity, and (x) all employment or severance contracts or agreements
with officers or key employees of the Company and each Company Subsidiary and
all agreements or arrangements that provide for any payment by the Company or
any Company Subsidiary upon a change of control (all contracts of the type
described in clauses (i) - (x) whether existing as of the date hereof or entered
into at any time between the date hereof and the Closing being referred to
herein as "Company Material Contracts"). Each Company Material Contract is valid
and binding on the Company (or, to the extent a Company Subsidiary is a party,
such Company Subsidiary) and is in full force and effect, and the Company and
Company Subsidiary have performed in all material respects all obligations
required to be performed by them to date under each Company Material Contract.
Neither the Company nor any Company Subsidiary knows of, or has received notice
of, any violation or default under (nor, to the knowledge of the Company, does
there exist any condition which with the passage of time or the giving of notice
or both would result in such a violation or default under) any Company Material
Contract by either the Company or a Company Subsidiary, as the case may be, or
any other party to a Company Material Contract, except for violations or
defaults which would not, individually or in the aggregate, result in a Company
Material Adverse Effect. Originals or true, correct and complete copies of all
Company Material Contracts have been provided or made available to Parent. The
Company has delivered to Parent the standard forms of agreement used by the
Company and the Company Subsidiaries for the provision of professional employer
services, and, except for the agreements entered into with Ultimate Parent,
24
<PAGE>
Hanger Orthopedic Group, Inc., and The Boston Financial Group Limited
Partnership, each agreement entered into by the Company or a Company Subsidiary
(during such time as it was a Company Subsidiary) with a subscriber for the
provision of such services is substantially the same as one of the standard
forms of agreement. The Company has sent a Notice of Termination to the
shareholders of Unified Management Corporation and its affiliated corporations
(collectively, "Unified") notifying Unified and the shareholders of Unified of
the Company's termination of the Agreement of Purchase and Sale dated as of June
16, 1999 by and among Unified, the shareholders of Unified and the Company.
3.11 Employee Benefit Plans.
----------------------
Except as set forth in Section 3.11 of the Company Disclosure Schedule:
(a) Neither the Company nor any Company Subsidiary maintains or
sponsors, nor is required to make contributions to, any pension, profit-sharing,
bonus, incentive, welfare or other employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or any other material employee benefit program (such plans and related
trusts, insurance and annuity contracts, funding media and related agreements
and arrangements, other than any "multiemployer plan" (within the meaning of
Section 3(37) or Section 4001(a)(3) of ERISA), being hereinafter referred to as
the "Benefit Plans" and such multiemployer plans being hereinafter referred to
as the "Multiemployer Plans");
(b) Each Benefit Plan complies in all material respects with all
requirements of ERISA and the Code;
(c) Each Benefit Plan that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service as to such qualification within the period of time
prescribed by law;
(d) Neither the Company nor any Company Subsidiary maintains,
sponsors or contributes to (nor is required to contribute to) any Multiemployer
Plan;
(e) No Benefit Plan is a "defined benefit plan" (within the
meaning of Section 3(35) of ERISA);
25
<PAGE>
(f) Neither the Company nor any Company Subsidiary has engaged
in, and the Company has no knowledge of any fiduciary or other "disqualified
person or party in interest" of any Benefit Plan of any Company Subsidiary that
has engaged in, any "prohibited transaction" (within the meaning of Section 406
of ERISA or Section 4975(c) of the Code); and
(g) There are no claims, actions, lawsuits, proceedings,
investigations or audits pending or, to the knowledge of the Company, threatened
against any of the Benefit Plans, the assets of any of the trusts under such
plans, the plan sponsor, the plan administrator or any fiduciary of any of the
Benefit Plans (other than routine benefit claims) and, to the knowledge of the
Company, there is no basis for any such claim, action, lawsuit, proceeding,
investigation or audit.
3.12 Labor Relations.
---------------
(a) The Company and each Company Subsidiary and, to the
knowledge of the Company, to the extent that the Company has direct control over
Worksite Employees (as hereinafter defined), the related worksite employers, are
in compliance in all material respects with all Applicable Laws relating to
employment of its employees, including, to the Company's knowledge, Worksite
Employees, including, but not limited to, those governing employment practices,
the terms and conditions of employment, compensation, payment of wages, health
and safety, labor relations and plant closings for its employees, including, to
the Company's knowledge, Worksite Employees. There are no material audits or
investigations pending or, to the knowledge of the Company, threatened by any
Governmental Authority against the Company or any Company Subsidiary for the
enforcement of any such laws.
(b) Except as set forth in Section 3.12 of the Company
Disclosure Schedule, (i) neither the Company nor any Company Subsidiary is
subject to any strike, work stoppage, lockout or other concerted activity or, to
the knowledge of the Company, any threats thereof; (ii) neither the Company nor
any Company Subsidiary is a party to or bound by any collective bargaining
agreement with any labor organization or other representative of any of its
employees or Worksite Employees, and no such contract, collective bargaining
agreement or other agreement is currently being negotiated by or on behalf of
the Company or any Company Subsidiary; (iii) to the knowledge of the Company,
there is no activity or proceeding by any labor organization or other group
seeking to represent employees or to
26
<PAGE>
organize any employees of the Company or any Company Subsidiary, or, to the
knowledge of the Company, to the extent that the Company has direct control over
Worksite Employees, any Worksite Employees, or any questions concerning
representation; and (iv) there is no unfair labor practice, labor dispute (other
than routine individual grievances), demand for arbitration or arbitration
proceeding pending or, to the knowledge of the Company, threatened involving the
Company or any Company Subsidiary or, to the knowledge of the Company, to the
extent that the Company has direct control over Worksite Employees, any related
worksite employer, on the one hand, and any employees of the Company or any
Company Subsidiary including Worksite Employees, on the other.
(c) Except as limited by any employment contracts listed in
Section 3.10 of the Company Disclosure Schedule, and except for any limitations
of general application which may be imposed under Applicable Law, the Company
and each Company Subsidiary has the right to terminate the employment of each of
its employees (excluding Worksite Employees) at will and without incurring any
material penalty or liability.
(d) As of June 30, 1999, the number of worksite employees of the
Company' s customers of whom the Company may be deemed a "co-employer"
("Worksite Employees") was 54,313. As of June 30, 1999, the Company and each
Company Subsidiary had paid all salaries, wages, employer's portion of social
security, Medicare premiums, federal and state employment Taxes, health care and
workers' compensation costs and state unemployment Taxes with respect to all of
its employees, including, to the Company's knowledge, Worksite Employees, due
and payable by such date and since June 30, 1999 the Company has continued and
will continue to pay such amounts as they have become due and payable.
(e) Neither the Company nor any Company Subsidiary is a
contractor or subcontractor of any Governmental Entity.
3.13 Insurance. Set forth in Section 3.13 of the Company Disclosure
----------
Schedule is a list as of the date hereof of the property and casualty insurance
policies maintained by the Company and each of the Company Subsidiaries or by
Ultimate Parent or any of its other direct or indirect subsidiaries on behalf of
the Company or any Company Subsidiary. All such policies are in full force and
effect, all premiums due thereon have been paid and the Company and each of the
Company Subsidiaries has complied in all material respects with the applicable
provisions of such policies. Neither the Company nor any Company Subsidiary has
been advised
27
<PAGE>
of any defense to coverage in connection with any claim asserted or noticed by
the Company or any Company Subsidiary under or in connection with any of its
existing insurance policies. Neither the Company nor any Company Subsidiary has
received any notice from or on behalf of any insurance carrier issuing policies
or binders relating to or covering the Company or any Company Subsidiary that
there will be a cancellation or non-renewal of existing policies or binders or
that the Company or any Company Subsidiary will be required to materially modify
any of their respective methods of doing business. Section 3.13 of the Company
Disclosure Schedule sets forth a list of all states in which the Company or any
Company Subsidiary participates in a worker's compensation self-insured fund.
There are no audits pending or, to the knowledge of the Company, threatened by
any Governmental Authority with respect to any worker's compensation self-
insured fund in which the Company or any Company Subsidiary participates.
3.14 Litigation. Except as described or provided for in the Company
----------
SEC Reports or as set forth in Section 3.14 of the Company Disclosure Schedule,
there is no (i) litigation, arbitration, investigation or other legal proceeding
(collectively, "Actions") pending or, to the knowledge of the Company,
threatened against either the Company or any of the Company Subsidiaries, except
for any such Action which is not reasonably likely to result in liability to the
Company or any Company Subsidiary in excess of $100,000, individually, or
$500,000, in the aggregate, or (ii) outstanding judgment, order, writ,
injunction or decree, or application, request or motion therefor, relating to or
including the Company or any Company Subsidiary or their respective properties,
assets or businesses.
3.15 Permits; Compliance with Applicable Law.
----------------------------------------
(a) General. Except as set forth in Section 3.15(a) of the
-------
Company Disclosure Schedule, the Company and each of the Company Subsidiaries is
in compliance in all material respects with all Applicable Law relating to it
and its respective assets and properties.
(b) Permits. Except as set forth in Section 3.15(b) of the
Company Disclosure Schedule, the permits, licenses, approvals, franchises and
authorizations (collectively, but excluding Environmental Permits, the
"Permits") issued to or held by the Company and the Company Subsidiaries are all
material Permits required for the ownership, operation and use by them of their
properties and assets and for the conduct of the business in which they are
presently engaged. Neither the Company nor any Company Subsidiary is in default
under, or in violation
28
<PAGE>
of, any such Permits, and such Permits are in full force and effect, except
where such default or violation or the failure to be in effect would not have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) Environmental. Except as set forth in Section 3.15 (c) of
-------------
the Company Disclosure Schedule or in the Company SEC Reports:
(i) The Company and each Company Subsidiary and,
to the knowledge of the Company, to the extent the Company has
direct control over Worksite Employees, each related worksite
employer is in compliance in all material respects with the
provisions of all federal, state and local laws, codes and
ordinances relating to the protection of public health, the
environment or natural resources, and all rules and regulations
promulgated thereunder (the "Environmental Laws"), including with
respect to the Company and each Company Subsidiary, the real
property leased by the Company and each Company Subsidiary listed
in Section 3.8 of the Company Disclosure Schedule and the
improvements thereon (all such leased real property and
improvements thereon hereinafter referred to collectively as the
"Premises").
(ii) The Company and each Company Subsidiary and,
to the knowledge of the Company, to the extent the Company has
direct control over Worksite Employees, each related worksite
employer has obtained all required federal, state and local permits,
licenses, certificates and approvals applicable to the Company or
any Company Subsidiary or any such worksite employer, as the case
may be, of their respective businesses (the "Environmental Permits")
including relating to (A) air emissions, (B) discharges to surface
water or ground water, (C) noise emissions, (D) solid or liquid
waste disposal, and (E) the use, generation, storage, transportation
or disposal of toxic or hazardous substances or wastes (intended
hereby and hereafter to include any and all such materials listed
in any Environmental Law, as hazardous or potentially hazardous
(including, without limitation, (1) any chemical, compound, material
or substance that is defined, listed in, or otherwise classified
pursuant to, any of the Environmental Laws as a "hazardous substance",
"hazardous material", "hazardous waste", "toxic substance," "toxic
pollutant," "contaminant" or "pollutant" and (2) petroleum, natural
gas, natural gas
29
<PAGE>
liquids, liquefied natural gas, and synthetic gas) (collectively,
"Hazardous Substances"), except where the failure to have obtained
or maintained any such Environmental Permit would not have,
individually or in the aggregate, a Company Material Adverse Effect.
(iii) Neither the Company, any Company Subsidiary,
nor, to the knowledge of the Company, to the extent the Company has
direct control over Worksite Employees, any related worksite employer
has received any written notice of any material violations of any
Environmental Law which have not been cured, relating to the use,
ownership or occupancy of any of the Premises or relating to the
business of the Company or any Company Subsidiary or any worksite
employer, as the case may be.
(iv) Neither the Company, any Company Subsidiary
nor, to the knowledge of the Company, to the extent the Company
has direct control over Worksite Employees, any related worksite
employer, has engaged in the generation, storage, treatment,
recycling, transportation, release or disposal of any Hazardous
Substance, except in compliance in all material respects with
applicable Environmental Laws.
(v) No Hazardous Substances have been released
or disposed of on the Premises, except in quantities that are not
reasonably likely to have a Company Material Adverse Effect, and
to the Company's knowledge, no real property to which the Company
or any Company Subsidiary has, directly or indirectly, transported
or arranged for the transportation of any Hazardous Substances, is
listed on the National Priorities List promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), on CERCLIS (as defined in
CERCLA) or on any similar federal, state or foreign list of sites
requiring investigation or clean-up.
3.16 Bank Accounts. The Company has delivered to Parent a list as of
--------------
the date hereof of all bank and securities accounts and lockboxes maintained by
the Company or any Company Subsidiary, a list of persons authorized to sign on
behalf of the Company or any Company Subsidiary with respect to each such
account and a list of persons with authorized access to each such lockbox.
30
<PAGE>
3.17 Intellectual Property.
---------------------
(a) The Company and each Company Subsidiary own, free and clear
of all Liens, or are licensed or otherwise possess legally enforceable rights to
use, all Intellectual Property that is used or proposed to be used in and
material to its respective business ("Company Intellectual Property"). The
Company Intellectual Property constitutes all Intellectual Property necessary to
enable the Company and each Company Subsidiary to conduct its respective
business as currently conducted and as proposed to be conducted. The Company and
each Company Subsidiary has taken all commercially reasonable steps to protect
and preserve its rights in the Company Intellectual Property and the
confidentiality of all Company Intellectual Property.
(b) Section 3.17 of the Company Disclosure Schedule lists, for
the Company Intellectual Property owned by the Company or any Company
Subsidiary, all U.S. and foreign (i) patents and patent applications; (ii)
Trademark applications and registrations, and material unregistered Trademarks;
and (iii) copyright registrations and applications. To the knowledge of the
Company, all Company Intellectual Property rights are valid and subsisting and
are not the subject of any challenge and all applications that have been filed
with respect to Company Intellectual Property are still pending in good standing
and have not been abandoned.
(c) To the knowledge of the Company, the conduct of the
Company's and any Company Subsidiary's business as currently conducted or
proposed to be conducted does not infringe upon or conflict with any
Intellectual Property or other proprietary rights of any other person or entity.
Neither the Company nor any Company Subsidiary has received any notice or
otherwise has knowledge of any claim or threatened claim involving actual,
alleged, or potential infringement, misappropriation or unlawful use by the
Company or any Company Subsidiary of any Intellectual Property owned or used by
any other person or entity. To the knowledge of the Company, no other person or
entity is infringing, misappropriating or making any unlawful use of, and no
Intellectual Property owned or used by any other person or entity infringes or
conflicts with, any Company Intellectual Property.
(d) Except as set forth in Section 3.17 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary (i) has
licensed any Company Intellectual Property to any person or entity on an
exclusive
31
<PAGE>
basis or is a party to or bound by any agreement limiting its ability to exploit
fully any Company Intellectual Property, other than licenses in the ordinary
course of business, (ii) is obligated to make any payment to any person or
entity for the use of any Company Intellectual Property, other than pursuant to
licenses in the ordinary course of business, or (iii) has developed jointly with
any other person or entity any Company Intellectual Property with respect to
which such other person or entity has any rights.
(e) To the Company's knowledge, all Date Data and Date-Sensitive
Systems are, or as a result of the Company's ongoing remediation efforts will by
September 30, 1999 be, Year 2000 Compliant in all material respects. "Date Data"
means any data of any type that includes date information or which is otherwise
derived from, dependent on or related to date information. "Date-Sensitive
System" means any Software, microcode or hardware system or component, including
any electronic or electronically controlled system or component, that processes
any Date Data and that is installed, in development or on order by the Company
or any Company Subsidiary for its internal use, or which the Company or any
Company Subsidiary sells, leases, licenses, assigns or otherwise provides, or
the provision or operation of which the Company or any Company Subsidiary
provides the benefit to its customers, vendors, suppliers, affiliates or any
other third party. "Year 2000 Compliant" means (i) with respect to Date Data,
that such data is in proper format and accurate for all dates in the twentieth
and twenty-first centuries, and (ii) with respect to Date-Sensitive Systems,
that each such system is able accurately to process date data such that neither
its performance nor its operation will be materially adversely affected by the
passage of any date, including, without limitation, the advent of the year 2000
or the passage from the twentieth century into the twenty-first century. The
Company has obtained written representations or assurances from each entity that
(x) provides Date Data to the Company or any Company Subsidiary, (y) processes
in any way Date Data for the Company or any Company Subsidiary, or (z) otherwise
provides any material product or service to the Company or any Company
Subsidiary that is dependent on Year 2000 Compliant Date Data or a Year 2000
Compliant Date-Sensitive System, that all of such entity's Date Data and Date-
Sensitive Systems that are used for, or on behalf of, the Company or any Company
Subsidiary are Year 2000 Compliant.
3.18 Consents. Except as may be required under The Hart-Scott-Rodino
--------
Antitrust Improvements Act of 1976, as amended ("HSR"), and except as set forth
in Section 3.18 of the Company Disclosure Schedule, no consents, approvals or
authorizations of, or filings with, any Governmental Authority or any other
person or
32
<PAGE>
entity are required in connection with the execution, delivery or performance of
this Agreement or the Stock Option Agreement by the Company and the consummation
of the transactions contemplated hereby or thereby to be consummated by the
Company, except where the failure to obtain such consents, approvals, or
authorizations, or make such filings, would not prevent or delay consummation of
the Transactions in any material respect, or otherwise prevent the Company from
performing its obligations under this Agreement and the Stock Option Agreement,
and would not have, individually or in the aggregate, a Company Material Adverse
Effect.
3.19 Foreign Person. The Company is not a foreign person within the
--------------
meaning of Section 1445(f)(3) of the Code.
3.20 Authority. The Company has the requisite corporate power and
---------
authority to execute and deliver this Agreement and the Stock Option Agreement,
to perform its obligations hereunder and thereunder and to consummate the
Transactions. The execution, delivery and performance of this Agreement and the
Stock Option Agreement and the consummation by the Company of the Transactions
have been duly and validly authorized by the Company Board and no other
corporate action on the part of the Company is necessary to authorize this
Agreement or the Stock Option Agreement or to consummate the Transactions (other
than, with respect to the Merger, the approval of this Agreement by the holders
of a majority of the outstanding Shares in accordance with the DGCL). This
Agreement and the Stock Option Agreement have been duly and validly executed and
delivered by the Company and, assuming this Agreement and the Stock Option
Agreement constitute the valid and binding agreement of Parent and Sub,
constitutes the valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, except that the
enforcement hereof and thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
3.21 Board Approvals Regarding Transactions. The Company Board, at a
--------------------------------------
meeting duly called and held, has (i) unanimously determined that each of this
Agreement, the Stock Option Agreement, the Offer and the Merger are advisable
and in the best interests of the stockholders of the Company, (ii) approved this
Agreement, the Stock Option Agreement, the Transactions and the Stockholder
Agreement, (iii) resolved to recommend that the stockholders of the Company
accept the Offer, tender their Shares to Sub pursuant to the Offer and approve
and adopt this
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Agreement, the Stock Option Agreement and the Merger, and (iv) consented to the
transfer to Sub of all such Shares, and none of the aforesaid actions by the
Company Board has been amended, rescinded or modified. The action taken by the
Company Board constitutes approval of the Merger, the other Transactions, the
Stock Option Agreement and the Stockholder Agreement by the Company Board under
the provisions of Section 203 of the DGCL such that Section 203 of the DGCL does
not apply to this Agreement, the Transactions, the Stock Option Agreement or the
Stockholder Agreement. No other state takeover statute is applicable to the
Merger, the other Transactions or the Stockholder Agreement.
3.22 Vote Required. The affirmative vote of the holders of a bare
-------------
majority of the outstanding Shares is the only vote of the holders of any class
or series of the Company's capital stock necessary to approve the Merger. No
vote of any class or series of the Company's capital stock is necessary to
approve any of the Transactions other than the Merger.
3.23 Approvals; Antitakeover Provisions. The Company has taken all
----------------------------------
action necessary to approve the Transactions under the DGCL (except for
shareholder approval and the filing of a Certificate of Merger), including, but
not limited to, all actions required to render the provisions of Section 203 of
the DGCL restricting business combinations with "interested stockholders"
inapplicable to the Transactions.
3.24 Brokers and Finders. Other than the fee payable by the Company
-------------------
to CIBC World Markets Corp. ("CIBC World Markets"), no investment banking,
brokerage, finders, advisory or similar fee or commission is payable by the
Company or any Company Subsidiary to any investment banker, broker, finder,
advisor, consultant or intermediary, in connection with this Agreement, the
Stock Option Agreement or the Transactions. The Company has provided Parent true
and correct copies of all agreements with CIBC World Markets as to which the
Company and/or any Company Subsidiary could have any liabilities.
3.25 Fairness Opinion. The Company Board has received the opinion of
----------------
CIBC World Markets dated September 8, 1999, to the effect that, as of such date,
and based upon the assumptions made, matters considered, and limits of review
set forth therein, the applicable Merger Consideration is fair to the
stockholders of the Company, other than to the Ultimate Parent, from a financial
point of view.
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3.26 Compensation. Set forth in Section 3.26 of the Company
------------
Disclosure Schedule is a list as of the date hereof of all material written
agreements, plans or arrangements by which the Company or any Company Subsidiary
is bound with regard to compensation, bonus, incentive, stock option, stock
purchase, severance pay or other benefits or perquisites, other than any
agreements, plans or arrangements listed in Section 3.11 of the Company
Disclosure Schedule or solely with respect to Worksite Employees, and (b) a list
as of the date hereof of all employees of the Company or any Company Subsidiary
(other than Worksite Employees) entitled to receive salary at an annual rate in
excess of $50,000 and their respective positions and annual salaries.
3.27 Full Disclosure. No representation or warranty by the Company in
---------------
this Agreement or in the Stock Option Agreement and no statement by the Company
contained in any exhibit, disclosure schedule, or certificate contemplated by
this Agreement or in the Stock Option Agreement contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub represents and warrants, jointly and severally,
to the Company that:
4.1 Organization and Qualification. Each of Parent and Sub is a
------------------------------
corporation, duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization. Each of Parent and Sub is
qualified and in good standing as a foreign corporation, in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by it
require such qualification, except where the failure to so qualify or be in good
standing would not materially impair or delay the ability of Parent or Sub to
consummate the Transactions (a "Parent Material Adverse Effect").
4.2 Authority. Each of Parent and Sub has the requisite corporate
---------
power and authority to execute and deliver this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Stock Option
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Agreement and the consummation by Parent and Sub of the Transactions have been
duly and validly authorized by the Board of Directors of each of Parent and Sub
and by Parent as the sole stockholder of Sub, and no other corporate action on
the part of Parent and Sub is necessary to authorize this Agreement or the Stock
Option Agreement or to consummate the Transactions. This Agreement and the Stock
Option Agreement have been duly and validly executed and delivered by each of
Parent and Sub and, assuming this Agreement and the Stock Option Agreement
constitute the valid and binding agreements of the Company, constitute the valid
and binding agreements of each of Parent and Sub, enforceable against each of
them in accordance with its terms, except that the enforcement hereof or thereof
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation.
------------------------------------
(a) Except as set forth in Section 4.3(a) of the disclosure
schedule delivered to the Company by Parent concurrently with the execution
hereof (the "Parent Disclosure Schedule"), neither the execution, delivery and
performance of this Agreement or the Stock Option Agreement by Parent or Sub nor
the consummation by Parent or Sub of the Transactions contemplated hereby or
thereby to be consummated by Parent or Sub will require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, other than (A) in connection with the applicable requirements of the HSR
Act, (B) pursuant to the applicable requirements of the Exchange Act, (C) the
filing of the Certificate of Merger pursuant to the DGCL and appropriate
documents with the relevant authorities of other states in which Parent or Sub
is authorized to do business, or (D) as may be required by any applicable state
corporation, securities or "blue sky" laws or state takeover laws. Parent will
use its reasonable best efforts to obtain and deliver to the Company executed
counterpart copies of all consents referred to in the preceding sentence prior
to consummation of the Offer.
(b) Neither the execution, delivery and performance of this
Agreement or the Stock Option Agreement by Parent or Sub nor the consummation by
Parent or Sub of the Transactions will (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation or the By-Laws of either
Parent or Sub; (ii) subject to obtaining the required third party consents set
forth in Section 4.3(a) of the Parent Disclosure Schedule, result in a violation
or breach of, or
36
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constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or Lien or
other charge or encumbrance) under any of the terms, conditions or provisions of
any note, license, agreement or other instrument or obligation to which Parent
or Sub is a party or by which either of them or any of their respective assets
may be bound; or (iii) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 4.3(a) hereof are
duly and timely obtained or made, violate any order, writ, injunction, decree,
statute, rule or regulation in effect as of the date of this Agreement and
applicable to Parent or Sub or any of their respective assets, excluding from
the foregoing clauses (ii) and (iii) such violations, breaches or defaults (or
rights of termination, cancellation or acceleration or Liens or other charges or
encumbrances) which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
4.4 Interim Operations of Sub. Sub was formed solely for the purpose
-------------------------
of engaging in the Transactions and has not engaged in any business activities
or conducted any operations other than in connection with the Transactions.
4.5 Financing. As of the date hereof and at the expiration of the
---------
Offer and at the Effective Time, either Parent or Sub has and will have
available all the funds, or has written binding commitments from financial
institutions or other sources to obtain all the funds, necessary to purchase all
of the Shares pursuant to the Offer and the Merger and to pay all fees, expenses
and payments payable by Parent or Sub related to the Transactions.
4.6 Share Ownership. Except for shares owned by Affiliates of FMR
---------------
Corp. in the ordinary course of business, none of Parent, Sub nor any of their
respective "affiliates" or "associates" (as such terms are defined in Rule 12b-2
under the Exchange Act) beneficially owns any Shares.
4.7 Information in Proxy Statement and Schedule 14D-9. None of the
-------------------------------------------------
information supplied by Parent or Sub for inclusion or incorporation by
reference in the Proxy Statement or the Schedule 14D-9 will, at the date mailed
to stockholders and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to Parent or Sub should occur
which is required to be described in a supple-
37
<PAGE>
ment to the Proxy Statement or the Schedule 14D-9, such event shall be so
described, and such supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. With respect
to information relating to Parent or Sub, the Proxy Statement will comply in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
4.8 Brokers and Finders. Parent and Sub have not employed any
-------------------
investment banker, broker, finder, advisor, consultant or intermediary in
connection with the Transactions which would be entitled to any investment
banking, brokerage, finder's, advisory or similar fee or commission in
connection with this Agreement, or the Stock Option Agreement or the
Transactions.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Interim Operations of the Company. Except as set forth in
---------------------------------
Section 5.1 of the Company Disclosure Schedule, during the period from the date
of this Agreement to the Effective Time or termination of this Agreement
pursuant to Section 7.1 hereof (unless Parent shall otherwise agree in writing
and except as expressly provided by this Agreement), the Company shall, and
shall cause each Company Subsidiary to, conduct its operations according to its
ordinary and usual course of business in substantially the same manner as
heretofore conducted and use its reasonable best efforts to preserve intact its
current business organization, keep available the services of its current
officers and subject to the prudent management of workforce needs, its employees
(including all Worksite Employees, except to the extent required by clients of
the Company), preserve its relationships with customers, suppliers and others
having business dealings with it, consult with Parent concerning important
business matters affecting the Company and the Company's Subsidiaries and
periodically report to Parent concerning the status of the business, operations
and finances of the Company and the Company Subsidiaries. Without limiting the
generality of the foregoing, and except as expressly provided by this Agreement
or as set forth in Section 5.1 of the Company Disclosure Schedule, the Company
shall not and shall not permit any Company Subsidiary to, without the prior
written consent of Parent:
(i) directly or indirectly amend its Certificate of
Incorporation or By-Laws or similar organizational documents;
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<PAGE>
(ii) (A) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to the
Company's capital stock or that of any Company Subsidiary, except that a
wholly owned Company Subsidiary may declare and pay a dividend or make an
advance to its parent or the Company, (B) redeem, purchase or otherwise
acquire directly or indirectly any shares of any class or series of the
Company's capital stock or that of any Company Subsidiary or any instrument
or security which consists of or includes a right to acquire such shares;
(C) issue, sell, transfer, pledge, dispose of or encumber any shares of any
class or series of the Company's capital stock or that of any Company
Subsidiary or voting debt, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to
acquire, any shares of any class or series of the Company's capital stock
or that of any Company Subsidiary or voting debt, other than Shares issued
upon the exercise of Options outstanding on the date hereof in accordance
with the Option Plans as in effect on the date hereof; or (D) split,
combine or reclassify the outstanding capital stock of the Company or of
any Company Subsidiary;
(iii) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing an equity interest in a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, joint venture, association or other business
organization or division thereof, or (B) any assets, except purchases of
assets in the ordinary course of business consistent with past practices
and which individually do not exceed $50,000 or in the aggregate do not
exceed $100,000;
(iv) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion), the corporate structures or
ownership of the Company or any Company Subsidiary;
(v) make any new capital expenditure or expenditures which
exceed the amounts budgeted therefor in the fiscal year ending June 30,
2000 budget for the Company provided to Parent;
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(vi) (A) amend, terminate or transfer any Company Material
Contract except in the ordinary course of business consistent with past
practice and provided that any such amendment, termination or transfer does
--------
not have, individually or in the aggregate, a Company Material Adverse
Effect, (B) waive, release or assign any material rights or claims, (C)
enter into any contract that would be a Company Material Contract pursuant
to clauses (ii) through (viii) of Section 3.10, or (D) enter into any
agreement for the provision of professional employer services except in the
ordinary course of business consistent with past practices;
(vii) transfer, lease, license, sell or dispose of any of
their respective assets other than dispositions in the ordinary course of
business and consistent with past practice; provided that the fair market
--------
value of assets sold does not exceed $50,000 in any single transaction or
$100,000 in the aggregate;
(viii) mortgage, pledge or encumber any of their respective
assets;
(ix) enter into or amend any employment or severance
agreement or any other agreement or arrangement that provides for payment
upon a change of control with or grant any severance or termination pay to
any officer, director or employee (including Worksite Employees, except to
the extent required by clients of the Company) of the Company or any
Company Subsidiary;
(x) except, as required to comply with applicable law or
expressly provided in this Agreement, (A) adopt, enter into, amend or
increase the amount or accelerate the payment or vesting of any benefit or
award or amount payable, under any Benefit Plan or other contract,
agreement, commitment, arrangement, plan, trust, fund or policy maintained
by, contributed to or entered into by the Company or any Company Subsidiary
for the current or future benefit or welfare of any director, officer or
current or former employee, except to the extent necessary to coordinate
any such Benefit Plans with the terms of this Agreement, (B) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (other than Worksite Employees) or consultant
of the
40
<PAGE>
Company or any Company Subsidiary (other than normal recurring increases in
wages to employees who are not officers or directors or Affiliates in the
ordinary course of business consistent with past practice), (C) pay any
benefit not provided for under any Benefit Plan, (D) grant any awards under
any bonus, incentive, performance or other compensation plan or arrangement
or Benefit Plan (including the grant of stock options, stock appreciation
rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any Benefit
Plans or agreements or awards made thereunder) or (E) take any action to
fund or in any other way secure the payment of compensation or benefits
under any employee plan, agreement, contract or arrangement or Benefit
Plan;
(xi) (A) incur or assume any long-term indebtedness for
borrowed funds, or except in the ordinary course of business, incur or
assume any short-term indebtedness for borrowed funds in amounts not
consistent with past practice, provided, that the aggregate of such short-
term indebtedness and long-term indebtedness outstanding does not exceed
$3,300,000 at any given time, (B) modify the terms of any indebtedness or
other liability except as set forth in Section 5.1 of the Company
Disclosure Schedule, (C) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person (except for checks endorsed for collection
in the ordinary course of business) or (D) make any loans, advances or
capital contributions to, or investments in any other person (other than to
wholly owned Company Subsidiaries and other than (x) travel advances to
employees in the ordinary course of business consistent with past practices
and (y) publicly traded securities constituting less than 1.0% of the
outstanding equity of the issuing entity);
(xii) change any of the accounting methods used by it
unless required by changes in GAAP;
(xiii) make any material election relating to Taxes, change
any material election relating to Taxes already made, adopt any material
accounting method relating to Taxes, change any material accounting method
relating to Taxes unless required by changes in GAAP, enter into any
closing agreement relating to Taxes,
41
<PAGE>
settle any claim or assessment relating to Taxes or consent to any claim or
assessment relating to Taxes or any waiver of the statute of limitations
for any such claim or assessment;
(xiv) pay, release, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, release, discharge or
satisfaction of (A) any such claims, liabilities or obligations, in the
ordinary course of business and consistent with past practice, and (B)
claims, liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the notes
thereto) of the Company and its consolidated Company Subsidiaries filed
with the SEC prior to the date hereof;
(xv) amend in any material respect, renew, terminate or
cause to be extended any lease, agreement or arrangement relating to any of
its leased properties or enter into any lease, agreement or arrangement
with respect to any real property;
(xvi) permit any insurance policy having the Company or
any Company Subsidiary as a beneficiary or a loss payable payee to be
cancelled or terminated unless comparable replacement coverage is obtained,
provided that written notice has been provided to Parent and the premium
therefor is reasonably acceptable to Parent ;
(xvii) take, or agree or commit to take, any action that
would or is reasonably likely to result in any of the conditions to the
Offer set forth in Annex A or any of the conditions to the consummation of
the Merger set forth in Article VI hereof not being satisfied, or would
make any representation or warranty of the Company contained herein
inaccurate in any material respect at, or as of any time prior to, the
Effective Time, or that would materially impair the ability of the Company,
Parent, Sub or the holders of Shares to consummate the Offer or the Merger
in accordance with the terms hereof or materially delay such consummation;
and
(xviii) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize,
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recommend, propose or publicly announce an intention to do any of the
foregoing.
5.2 Alternative Proposals.
---------------------
(a) Neither the Company nor any Company Subsidiary or Affiliate
shall (and neither the Company nor any Company Subsidiary or Affiliate shall
authorize or permit any of their respective officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, to), directly or indirectly, solicit, initiate or
encourage any inquiry, proposal or offer, or participate in or initiate
discussions or negotiations with, or provide any information to, any person or
group (other than Parent, any of its Affiliates or representatives), concerning
any proposal or offer for a merger, share exchange, consolidation,
recapitalization, asset acquisition or other business combination or similar
transaction involving the Company or any Company Subsidiary or any proposal or
offer to acquire an equity interest representing 20% or more of the outstanding
Common Stock or voting power in, or 20% or more of the fair market value of the
assets of, the Company or any Company Subsidiary other than the Transactions (an
''Alternative Proposal"), or otherwise cooperate in any way with, or participate
in, facilitate or actively encourage any effort or attempt by, any person or
group (other than Parent, any of its Affiliates or representatives) to do or
seek any of the foregoing, except that nothing contained in this Section 5.2 or
any other provision hereof shall prior to the time of acceptance of Shares for
payment pursuant to the Offer prohibit the Company or the Company Board from (i)
taking and disclosing to the Company's stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act, or (ii) making such disclosure to the
Company's stockholders as, in the good faith judgment of the Company Board,
after receiving advice from outside counsel, is required under Applicable Law,
provided that the Company may not, except as permitted by Section 5.2(b) hereof,
withdraw or modify, or propose to withdraw or modify, its position with respect
to the Offer or the Merger or approve or recommend, or propose to approve or
recommend, any Alternative Proposal, or enter into any letter of intent,
agreement in principle or definitive agreement with respect to any Alternative
Proposal. Upon execution of this Agreement, the Company will immediately cease
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Notwithstanding the foregoing,
prior to the time of acceptance of Shares for payment pursuant to the Offer, the
Company may, subject to providing prior written notice to Parent of its decision
to take such action, furnish information concerning its business, properties
43
<PAGE>
or assets to any corporation, partnership, person or other entity or group in
response to a Superior Proposal that is submitted by such entity or group, and
may, subject to providing prior written notice to Parent of its decision to take
such action, negotiate and participate in discussions and negotiations with such
entity or group concerning a Superior Proposal (as defined below) if (A) such
entity or group has on an unsolicited basis submitted a bona fide written
proposal to the Company Board to acquire more than a majority of the Shares then
outstanding on a fully diluted basis or all or substantially all of the assets
of the Company, which the Company Board determines in good faith, based on the
written advice of the Company's financial advisors, to be more favorable from a
financial point of view to the Company' s stockholders than the Offer and the
Merger, and which is neither subject to the receipt of any necessary financing
nor otherwise on terms less favorable than the terms hereof and which in the
opinion of the Company Board, based on the written advice of the Company's
financial advisors, such entity or group has the financial capacity to
consummate (a "Superior Proposal"), (B) the Company Board believes in good
faith, based on the advice of its outside legal counsel, that such action is
reasonably necessary in order for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under Applicable Law, (C) the Company
furnishes such information to such entity or group pursuant to an appropriate
confidentiality agreement on terms no less favorable to the Company than the
Confidentiality Agreement, and (D) neither the Company nor any Company
Subsidiary or Affiliate, nor any of their respective officers, directors,
employees, representatives or agents, shall have violated any of the
restrictions set forth in this Section 5.2. The Company will immediately notify
Parent of the existence of any proposal, discussion, negotiation or inquiry
received by the Company, and the Company will immediately communicate to Parent
the terms of any proposal, discussion, negotiation or inquiry which it may
receive (and will immediately provide to Parent copies of any written materials
received by the Company in connection with such proposal, discussion,
negotiation or inquiry) and the identity of the party making such proposal or
inquiry or engaging in such discussion or negotiation. The Company will promptly
provide to Parent any non-public information concerning the Company provided to
any other party which was not previously provided to Parent.
(b) Except as set forth below in this subsection (b), neither
the Company Board nor any committee thereof shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by the Company Board or any such committee of the
Offer, this Agreement or the Merger, (ii) approve or recommend or propose to
approve or recommend, any Alternative Proposal or (iii) cause the Company to
enter into any
44
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letter of intent, agreement in principle or definitive agreement with respect to
any Alternative Proposal. Notwithstanding the foregoing, prior to the time of
acceptance for payment of Shares pursuant to the Offer, the Company Board may
withdraw or modify its approval or recommendation of the Offer, this Agreement
or the Merger if (A) the Company has received a Superior Proposal which is then
pending and which the Company Board has determined to recommend to the Company's
stockholders, (B) the Company Board concludes, in good faith, based on the
advice of its outside legal counsel, that in light of such Superior Proposal,
the withdrawal or modification of such approval or recommendation is reasonably
necessary in order for the Company Board to comply with its fiduciary
obligations to the Company's stockholders under Applicable Law, (C) the Company
notifies Parent at least five business days prior to taking any action with
respect to such Superior Proposal or the withdrawal or modification of its
approval or recommendation, specifying the material terms and conditions of such
Superior Proposal, and identifying the person making such Superior Proposal; and
(D) the Company gives Parent at least five business days after the Company gives
notice to Parent pursuant to clause (C) to match or better such Superior
Proposal and Parent fails to or decides not to do so within such five-day
period.
5.3 Reasonable Best Efforts.
------------------------
(a) Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Parent, Sub and the Company agree to use their
respective reasonable best efforts (x) to take, or cause to be taken, all
actions, and (y) to do, or cause to be done, all things necessary, proper or
advisable (subject to any Applicable Laws) to consummate and make effective the
Merger and the other Transactions as promptly as practicable including, but not
limited to (i) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the Merger and the other Transactions
and the taking of such actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions or waivers by any third party or
Governmental Entity, (ii) the preparation of any disclosure documents reasonably
requested by Parent in order to facilitate financing of any of the Transactions
and (iii) the satisfaction of the other parties' conditions to Closing. In
addition, no party hereto shall take any action after the date hereof that would
reasonably be expected to delay materially the obtaining of, or result in not
obtaining, any permission, approval or consent from any Governmental Entity
necessary to be obtained prior to Closing. Notwithstanding the foregoing, or any
other covenant herein contained, in connection with the receipt of any necessary
approvals under the HSR Act, neither the Company nor any Company Subsidiary
shall be entitled to
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divest or hold separate or otherwise take or commit to take any action that
limits Parent's or Sub's freedom of action with respect to, or their ability to
retain, the Company or any Company Subsidiary or any material portions thereof
or any of the businesses, product lines, properties or assets of the Company or
any Company Subsidiary, without Parent's prior written consent.
(b) Prior to the Closing, subject to Applicable Law, each party
shall promptly consult with the other parties hereto with respect to, provide
any necessary information with respect to, and provide the other parties (or
their respective counsel) with copies of, all filings made by such party with
any Governmental Entity or any other information supplied by such party to a
Governmental Entity in connection with this Agreement, the Merger and the other
Transactions. Each party hereto shall promptly inform the other parties of any
communication from any Governmental Entity regarding any of the Transactions. If
any party hereto or Affiliate thereof receives a request for additional
information or documentary material from any such Governmental Entity with
respect to any of the Transactions, then such party shall endeavor in good faith
to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other parties, an appropriate response in compliance with
such request. To the extent that transfers, amendments or modifications of
Permits (including Environmental Permits) are required as a result of the
execution of this Agreement or consummation of any of the Transactions, the
Company shall use its reasonable best efforts to effect such transfers,
amendments or modifications.
(c) The Company and Parent shall file, as soon as practicable,
notifications under the HSR Act and respond as promptly as practicable to any
inquiries received from the Federal Trade Commission and the Antitrust Division
of the Department of Justice for additional information or documentation and
respond as promptly as practicable to all inquiries and requests received from
any State Attorney General or other Governmental Entity in connection with
antitrust matters. Concurrently with the filing of notifications under the HSR
Act or as soon thereafter as practicable, the Company and Parent shall each
request early termination of the HSR Act waiting period.
(d) Notwithstanding the foregoing, except as provided in Section
7.1(b)(ii), nothing contained in this Agreement shall be deemed to require the
Company, Parent or Sub to commence any litigation against any entity in order to
facilitate the consummation of any of the Transactions or to defend against any
46
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litigation brought by any Governmental Entity seeking to prevent the
consummation of any of the Transactions.
5.4 Access to Information. To the extent permitted by applicable
---------------------
law, upon reasonable notice, the Company shall (and shall cause each Company
Subsidiary to), afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
the Company shall (and shall cause each Company Subsidiary to), furnish promptly
to Parent (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of the federal securities laws and (b) all other information concerning its
business, properties and personnel as Parent may reasonably request. Access
shall include the right to conduct such management information systems, risk
management and environmental studies as Parent, in its discretion, shall
reasonably deem appropriate. After the time the persons designated by Parent
have been elected to, and shall constitute a majority of, the Company Board
pursuant to Section 1.3 hereof (the "Appointment Date"), the Company shall
provide Parent and such persons as Parent shall designate with such information,
at any time as Parent shall request. Until the Effective Time, unless otherwise
required by law or in order to comply with disclosure requirements applicable to
the Offer Documents or the Proxy Statement, Parent will hold any such
information which is nonpublic in confidence in accordance with the
Confidentiality Agreements, dated as of May 24, 1999 and May 26, 1999 (the
"Confidentiality Agreements"), entered into by and among the members of Parent
and the Company.
5.5 Publicity. The initial press release with respect to the
---------
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, until the Appointment Date or the date the
Transactions are terminated or abandoned, neither the Company, Parent nor any of
their respective Affiliates shall issue or cause the publication of any press
release or other announcement with respect to the Merger, this Agreement or the
other Transactions without prior consultation with the other parties, except to
the extent required by law, the rules and regulations of any national securities
exchange or over-the-counter market or by any listing agreement with a national
securities exchange or over-the-counter market.
5.6 State Takeover Laws. Notwithstanding any other provision in this
-------------------
Agreement, in no event shall the approval given by the Company Board with
47
<PAGE>
respect to Section 203 of the DGCL be withdrawn, revoked or modified by the
Company Board. If any state takeover statute other than Section 203 of the DGCL
becomes or is deemed to become applicable to the Company, the Stockholder
Agreement, the Offer, the Share Purchase, the acquisition of Shares pursuant to
the Offer or the Merger, the Company shall take all action necessary to render
such statute inapplicable to all of the foregoing.
5.7 Directors' and Officers' Insurance and Indemnification.
-------------------------------------------------------
(a) The Company shall, to the fullest extent permitted under the
applicable provisions of the DGCL, the terms of the Company's Certificate of
Incorporation or By-Laws and regardless of whether the Merger becomes effective,
indemnify and hold harmless, and, after the Effective Time, the Surviving
Corporation shall, to the fullest extent permitted under the applicable
provisions of the DGCL, indemnify and hold harmless, each present and former
director, officer or employee of the Company or any Company Subsidiary
(collectively, the "Company Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees), judgments, losses, claims, damages and
liabilities incurred in connection with, and amounts paid in settlement of, any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative and wherever asserted, brought or filed, based
on the fact that such person is or was a director, officer or employee of the
Company or any Company Subsidiary and (x) arising out of or pertaining to the
Transactions or (y) otherwise with respect to any acts or omissions or alleged
acts or omissions occurring at or prior to the Effective Time, in each case for
a period of six years after the Effective Time. In the event of any such claim,
action, suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) any counsel retained by the Company Indemnified Parties for
any period after the Effective Time must be reasonably satisfactory to the
Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation
shall pay the reasonable fees and expenses of such counsel, promptly after
statements therefor are received, and (iii) the Surviving Corporation will
cooperate in the defense of any such matter; provided, however, that the
--------- -------
Surviving Corporation shall not be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld or
delayed); and provided, further, that, in the event that any claim or claims for
-------- -------
indemnification are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims. The Company Indemnified Parties as a
group shall be reimbursed for the costs of only one law firm to represent them
with respect to any single action unless there is, under applicable standards of
profes-
48
<PAGE>
sional conduct, a conflict on any significant issue between the positions of any
two or more Company Indemnified Parties. The indemnity agreements of the
Surviving Corporation in this Section 5.7 (a) shall extend, on the same terms
to, and shall inure to the benefit of and shall be enforceable by, each person
or entity who controls, or in the past controlled, any present or former
director, officer or employee of the Company or any Company Subsidiary.
(b) At the Closing, the Surviving Corporation shall purchase
directors' and officers' liability tail insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been made available to Parent) for a period of six
years on terms (including the amounts of coverage and the amounts of
deductibles, if any) that are no less favorable to the covered persons than the
terms now applicable to them under the Company's current policy; provided,
--------
however, that in no event shall the Surviving Corporation be required to expend
- -------
more than $125,000; and provided, further, that, if the premium for such
-------- -------
coverage exceeds such amount, the Surviving Corporation shall purchase a policy
with the greatest coverage available for such amount,
(c) This Section 5.7 shall survive the consummation of the
Merger at the Effective Time, and shall be binding on all successors and assigns
of the Surviving Corporation (including any transferee of all or substantially
all the assets of Parent or the Surviving Corporation).
5.8 Conduct of Business of Sub. During the period of time from the
--------------------------
date of this Agreement to the Effective Time, Sub shall not engage in any
activities of any nature except as provided in or contemplated by this
Agreement.
5.9 Transfer of Stockholder's Shares. The Company hereby waives any
--------------------------------
rights the Company may have under any agreement or otherwise to object to the
transfer to Sub or Parent of any or all Shares held by Stockholder and hereby
covenants not to consent to the transfer of any Shares held by Stockholder to
any other person unless (i) the Company will have obtained the specific, prior
written consent of Parent with respect to any such transfer or (ii) this
Agreement will have been terminated pursuant to Article VII hereof.
5.10 Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to Parent of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or warranty
49
<PAGE>
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (ii) any material failure of the Company
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder, provided, however, that the delivery of any
notice pursuant to this Section 5.10 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
5.11 Company Employees. The Surviving Corporation will (i) continue
-----------------
to provide each person (other than Worksite Employees) employed by the Company
or any Company Subsidiary on the Closing Date and who continue to be employed by
the Company or any Company Subsidiary thereafter such benefits and salary
comparable in the aggregate to the benefits and salary previously paid or
provided by the Company or any Company Subsidiary, as applicable (other than
stock options or stock awards), as of the Closing Date for a period ending on
the first anniversary of the Effective Time and (ii) grant to each such person
credit for his/her years of service with the Company or any Company Subsidiary,
as applicable, for purposes of calculating such person's right to participate in
applicable benefit plans and programs and the level of such participation.
5.12 Guaranty. The Company shall as promptly as practicable after the
--------
date hereof, and in any event prior to the purchase of any Shares pursuant to
the Offer, obtain (i) a guaranty from Ultimate Parent in form and substance
reasonably satisfactory to Parent, pursuant to which Ultimate Parent shall
guaranty to Parent the earnings before interest, taxes, depreciation and
amortization (EBITDA) projected to be received by the Company under the
Subscriber Services Agreement, dated as of July 1, 1999, by and between Ultimate
Parent and the Company, relating to Ultimate Parent's PROH Division (the "PROH
Contract"), which such EBITDA amounts are set forth in Schedule 5.12 and (ii) an
irrevocable letter of credit or surety bond from a reputable and financially
sound financial institution or insurance company, or such other security, in
each case in form and substance reasonably satisfactory to Parent securing the
EBITDA payable with respect to the guaranty described in clause (i) or with
respect to the PROH Contract, as the case may be, and the EBITDA set forth in
Schedule 5.12 projected to be received by the Company under the Subscriber
Services Agreement dated as of July 1, 1999 by and between Ultimate Parent and
the Company relating to Ultimate Parent's Support Services Division.
50
<PAGE>
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Each Party's Obligations to Effect the Merger. The
-----------------------------------------------------------
respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or Sub, as the case may be, to the extent permitted by
Applicable Law:
(a) Stockholder Approval. This Agreement shall have been duly
--------------------
approved and adopted by the requisite vote of the stockholders of the Company,
if required by Applicable Law, in order to consummate the Merger.
(b) Stockholder's Stockholder Approval. The Required Stockholder
----------------------------------
Approval (as defined in the Stockholder Agreement) shall have been obtained.
(c) Injunction. There shall not be (i) in effect any statute,
----------
rule, regulation, executive o rder, decree, ruling or injunction or other order
of any Governmental Entity directing that the Transactions contemplated herein
or in the Irrevocable Proxy not be consummated or otherwise materially limiting
or restricting ownership or the operation of the business of the Surviving
Corporation, or (ii) pending by any Governmental Entity any suit, action or
proceeding, the subject matter of which involves the Transactions, which is
reasonably likely to materially adversely affect Parent, Sub or the Company.
(d) Governmental Filings and Consents. Subject to the terms and
---------------------------------
provisions herein provided, all consents, orders and approvals required of all
Governmental Entities for the consummation of the Merger and the other
Transactions shall have been obtained and be in effect at the Effective Time,
other than non-material consents, orders or approvals, and the waiting periods
under the HSR Act shall have expired or been terminated.
(e) Consummation of the Offer. The purchase of Shares pursuant
-------------------------
to the Offer or the Share Purchase shall have occurred.
51
<PAGE>
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger
-----------
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof.
(a) By the mutual consent of Parent, Sub and the Company.
(b) By either the Company or Parent:
(i) if the Effective Time shall not have occurred on or
prior to December 31, 1999; provided, however, that the right to terminate
--------- -------
this Agreement under this Section 7.1 (b)(i) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of Parent or Sub, as the case may
be, to purchase shares of Company Common Stock pursuant to the Offer on or
prior to such date;
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their respective reasonable best
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the acceptance for payment of, or payment for, Shares
pursuant to the Offer, the Merger or the other Transactions and such order,
decree, ruling or other action shall have become final and non-appealable;
or
(iii) if the Required Stockholder Approval shall not have
been obtained at the meeting of the stockholders of Ultimate Parent to be
held in accordance with the Stockholder Agreement.
(c) By the Company:
(i) if Parent, Sub or any of their Affiliates shall have
failed to commence the Offer in accordance with Section 1 hereof, provided,
--------
that the Company may not terminate this Agreement
52
<PAGE>
pursuant to this Section 7.1 (c)(i) if the Company is at such time in
material breach of its obligations under this Agreement;
(ii) if, prior to the purchase of Shares by Sub pursuant to
the Offer, the Company Board shall have withdrawn or modified in a manner
adverse to Parent or Sub its approval or recommendation of the Offer, this
Agreement or the Merger in order to permit the Company to enter into a
definitive agreement with respect to a Superior Offer, which is then
pending, provided the Company has complied with all of the provisions of
Section 5.2(b), including the notice provisions therein; or
(iii) if Parent or Sub shall have breached in any material
respect any of their respective representations, warranties, covenants or
other agreements contained in this Agreement or the Stock Option Agreement,
which breach cannot be or has not been cured within 30 days after the
giving of written notice by the Company to Parent or Sub, as applicable.
(d) By Parent or Sub:
(i) if, prior to the purchase of Shares by Sub pursuant to
the Offer, (A) the Company shall have notified or been required by Section
5.2 hereof to notify Parent of its decision to furnish information
concerning its business, properties or assets to or shall have negotiated
or participated in negotiations or discussions with a person or entity
other than Parent, Sub or their Affiliates concerning a Superior Proposal
(B), the Company Board shall have withdrawn, modified or changed in a
manner adverse to Parent or Sub its approval or recommendation of the
Offer, this Agreement or the Merger or shall have recommended an
Alternative Proposal, (C) the Company shall have executed a letter of
intent, agreement in principle or definitive agreement relating to an
Alternative Proposal or similar business combination with a person or
entity other than Parent, Sub or their Affiliates, or (D) the Ultimate
Parent board of directors shall have withdrawn, modified or changed in a
manner adverse to Parent or Sub its approval of the transactions
contemplated by the Stockholder Agreement or its approval or recommendation
of the sale of its
53
<PAGE>
interest in NCES as set forth in Ultimate Parent's Proxy Statement dated
August 13, 1999;
(ii) if, prior to the purchase of Shares by Sub pursuant to
the Offer, the Company shall have breached any of its representations,
warranties, covenants or other agreements contained in this Agreement or
the Stock Option Agreement, which breach would give rise to the failure of
the condition set forth in paragraph (c) of Annex A hereto and cannot be or
has not been cured within 30 days after the giving of written notice by
Parent or Sub to the Company;
(iii) if Target Parent or Ultimate Parent shall have
breached any of its representations, warranties, covenants or other
agreements contained in the Stockholder Agreement, which breach cannot be
or has not been cured within 30 days of the giving of written notice by
Parent or Sub to Target Parent or Ultimate Parent, as applicable;
(iv) if Ultimate Parent has not received all consents and
approvals from its lenders necessary to consummate the Transactions on the
terms and conditions set forth in this Agreement and the Stockholder
Agreement, including the unconditional release of all Liens on the Shares
held by Target Parent, and has not delivered evidence of such consents and
approvals (including release of such Liens) to Parent;
(v) if the Company shall not have obtained and delivered
to Parent the guaranty and letter of credit or surety bond or other
security in accordance with Section 5.12 of this Agreement;
(vi) if the Company and the Company Subsidiaries shall
incur or assume indebtedness in excess of the amounts set forth in Section
5.1(xi) of this Agreement; or
(vii) if the Company shall not be removed as a co-indemnitor
with respect to the Liberty Bond (as defined in the Stockholder Agreement)
in accordance with Section 4.06 of the Stockholder Agreement.
54
<PAGE>
7.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement as provided in Section 7.1 hereof, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
become null and void, and there shall be no liability on the part of Parent,
Sub, the Company or their respective directors, officers, employees,
representatives, agents, advisors or stockholders other than the obligations
pursuant to this Section 7.2, except that the agreements contained in Section
5.5 and the provisions of this Section 7.2 and Article VIII hereof shall survive
the termination hereof; provided, however, that if (w) the Company terminates
-------- -------
this Agreement pursuant to Section 7.1(c)(ii) hereof; (x) the Company enters
into an agreement which accepts or implements a Superior Proposal; or (y) Parent
or Sub terminate this Agreement pursuant to Sections 7.1(d)(i)(B), 7.1(d)(i)(C),
7.1(d)(i)(D), 7.1(d)(iii), 7.1(d)(iv) or 7.1(d)(vii) hereof, then within one
business day following such termination the Company shall pay to Parent by wire
transfer of immediately available funds a fee equal to $4,500,000; provided
--------
further that if Parent or Sub terminate this Agreement pursuant to Sections
- -------
7.1(d)(i)(A), 7.1 (d)(ii), 7.1(d)(v) or 7.1(d)(vi) hereof or the Company,
Parent or Sub terminate this Agreement pursuant to Section 7.1(b)(iii) hereof,
the Company shall pay to Parent all of Parent's and Sub's reasonable out-of-
pocket expenses and fees (including without limitation fees and expenses payable
to counsel, accountants, experts and consultants, banks, investment banking
firms and other financial institutions and their respective agents and counsel)
actually incurred by Parent and Sub in connection with the transactions
contemplated by this Agreement, the Offer, the Merger and the Stockholder
Agreement promptly upon receipt of a reasonably itemized statement therefor;
provided further that if the Company, Parent or Sub terminate this Agreement
- ----------------
pursuant to Section 7.1(b)(iii) or 7.1(d)(v), but within one year after the date
of such termination, the Company shall have executed a letter of intent,
agreement in principle or definitive agreement relating to an Alternative
Proposal or similar business combination with a person or entity other than
Parent, Sub or their Affiliates, then within one business day following the
execution of such letter or agreement, the Company shall pay to Parent by wire
transfer of immediately available funds a fee equal to the difference between
$4,500,000, less the amount actually paid by the Company to Parent pursuant to
the immediately preceding proviso of this Section 7.2. Nothing contained in this
Section 7.2 shall relieve any party from liability for fraud or for willful
breach of this Agreement.
55
<PAGE>
ARTICLE VII
MISCELLANEOUS AND GENERAL
8.1 Payment of Expenses and Other Payments. Whether or not the
--------------------------------------
Merger shall be consummated, each party hereto shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and the
consummation of the Transactions, except as otherwise provided in Section 7.2
hereof.
8.2 Survival of Representations and Warranties; Survival of
-------------------------------------------------------
Confidentiality Agreement. The representations and warranties made herein shall
- -------------------------
not survive beyond the earlier of termination of this Agreement or the Effective
Time. This Section 8.2 shall not limit any covenant or agreement of the parties
hereto which by its terms contemplates performance after the Effective Time. In
the event of the termination of this Agreement for any reason whatsoever, the
Confidentiality Agreements shall remain in full force and effect, provided,
however, that if this Agreement is terminated by the Company pursuant to Section
7.1(c)(ii) hereof, the first two sentences of paragraph 5 and all of paragraph 6
of the Confidentiality Agreements shall be of no force or effect.
8.3 Modification or Amendment. Subject to the applicable provisions
-------------------------
of the DGCL, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties; provided, however, that
-------- -------
after approval of this Agreement by the stockholders of the Company, no
amendment shall be made which reduces or changes the consideration payable in
the Merger or adversely affects the rights of the Company's stockholders
hereunder without the approval of such stockholders.
8.4 Waiver of Conditions. Except as otherwise provided in this
--------------------
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party or parties
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
56
<PAGE>
8.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
8.7 Notices. Any notice, request, instruction or other document to
-------
be given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight courier),
as follows:
(a) If to the Company, to
NovaCare Employee Services, Inc.
2621 Van Buren Avenue
Norristown, Pennsylvania 19403
Telephone no.: (610) 650-4813
Facsimile no.: (610) 650-4706
Attention: President
with copies to:
Haythe & Curley
237 Park Avenue
20th Floor
New York, New York 10017
Telephone no.: (212) 880-6000
Facsimile no.: (212) 682-0200
Attention: Andrew J. Beck, Esq.
(b) If to Parent or Sub, to
Plato Holdings, Inc.
c/o Patricof & Co. Ventures, Inc.
455 South Gulph Road, Suite 410
King of Prussia, Pennsylvania 19406
Telephone no.: (610) 265-0286
Facsimile no.: (610) 265-4959
57
<PAGE>
Attention: Gregory M. Case
with copies to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Telephone no.: (215) 569-5544
Facsimile no.: (215) 569-5628
Attention: Arthur H. Miller, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, Massachusetts 02108
Telephone no.: (617) 573-4800
Facsimile no.: (617) 573-4822
Attention: Louis A. Goodman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC. 20005
Telephone no.: (202) 371-7000
Facsimile no.: (202) 393-5760
Attention: Marcia R. Nirenstein, Esq.
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
8.8 Entire Agreement, Assignment. This Agreement and the
----------------------------
Confidentiality Agreements(a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise without the prior written consent of the other
parties; except that Parent and Sub may assign, in its sole discretion, any or
all of its rights, interests and obligations hereunder to Parent or to any
direct or indirect wholly owned subsidiary of Parent or to any other entity
owned by the same members of Parent. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective permitted successors and assigns.
58
<PAGE>
8.9 Parties in Interest. Nothing in this Agreement, express or
--------------------
implied, other than the right to receive the consideration payable in the Merger
pursuant to Article II hereof and as provided in Section 5.7 hereof, is intended
to or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
8.10 Obligation of Parent. Whenever this Agreement requires Sub to
--------------------
take any action, such requirement shall be deemed to include an undertaking on
the part of Parent to cause Sub to take such action and a guarantee of the
performance thereof.
8.11 Validity. If any term, provision, covenant or restriction of
--------
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, 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.
8.12 Captions. The Article, Section and paragraph captions herein are
--------
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
8.13 Specific Performance. Each of the parties hereto acknowledges
--------------------
and agrees that in the event of any breach of this Agreement, each non-breaching
party would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement in any action instituted in a court of competent jurisdiction.
8.14 "Knowledge" of the Company. For purposes of this Agreement,
-------------------------
unless otherwise expressly provided where the term is used, "knowledge" of the
Company will be deemed to mean (i) the actual knowledge of any director or
executive officer of the Company or any Company Subsidiary and (ii) the
knowledge that any such director or executive officer would have had if he or
she, in connection with the confirmation of the accuracy of the representations
and warranties of the
59
<PAGE>
Company in this Agreement, had made due inquiry of the officers, employees,
advisors, and agents of the Company or any Company Subsidiary who are primarily
responsible for the subject matter of such representations and warranties.
8.15 Confidentiality. During the period from the date of this
---------------
Agreement to the Effective Date, the Company shall, and shall cause each Company
Subsidiary to, maintain the confidentiality of all confidential information
given to them by Parent or Sub or any Affiliate of Parent or Sub, in connection
with this Agreement, in the same manner that the recipient of the information
maintains the confidentiality of its own confidential information. If this
Agreement is terminated in accordance with Article VII, the Company shall, and
shall cause each Company Subsidiary to, promptly return all such confidential
information and materials, and the provisions of the foregoing sentence shall
survive such termination indefinitely. The Company acknowledges that any breach
of this Section 8.15 may cause irreparable injury to Parent or Sub for which
money damages could not adequately compensate. If there is such a breach, the
aggrieved parties shall be entitled, in addition to all other rights or remedies
it may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining the breaching parties from continuing such
breach. The existence of any claim or cause of action which any of the breaching
parties may have against the aggrieved parties shall not constitute a defense or
bar to the enforcement of this Section 8.15.
ARTICLE IX
DEFINITIONS
9.1 Certain Definitions. The following terms when used herein shall
-------------------
have the meanings assigned to them below (certain other terms are defined
elsewhere herein):
"Actions" shall have the meaning set forth in Section 3.14 hereof.
"Affiliate" means a person or entity who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, another person.
"Applicable Law" shall mean the collective reference to any law, rule,
regulation, ordinance, writ, judgment, injunction, decree, determination, award
or other order of any Governmental Authority, in each case excluding any and all
Environmental Laws.
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"Benefit Plan" shall have the meaning set forth in Section 3.11
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Common Stock" shall have the meaning set forth in the
recitals hereof.
"Company Material Adverse Effect" shall mean a material adverse effect
or any development that, insofar as can be reasonably foreseen, is likely to
have a material adverse effect on the assets, properties, businesses, results of
operations or financial condition of the Company and the Company Subsidiaries,
taken as a whole, and in any case after application of the proceeds of any
insurance or indemnity under any contract or agreement to which the Company,
Parent or Sub (or any Affiliate thereof) is a party; provided that the term
"Company Material Adverse Effect" as used herein shall not include any effect
attributable to changes in the economy generally.
"Company Material Contracts" shall have the meaning set forth in
Section 3.10 hereof.
"Confidentiality Agreement" shall have the meaning set forth in
Section 5.4 hereof.
"Control" (including the terms "controlling", "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of the
person, whether through stock ownership, voting rights, governing boards or
otherwise.
"Environmental Laws" shall have the meaning set forth in Section
3.15(c) hereof.
"Environmental Permits" shall have the meaning set forth in Section
3.15(c) hereof.
"ERISA" shall have the meaning set forth in Section 3.11(a) hereof.
"GAAP" shall have the meaning set forth in Section 3.4(b) hereof.
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"Governmental Authority" or "Governmental Entity" shall mean the
collective reference to any court, tribunal, government, or governmental agency,
authority or instrumentality, domestic or foreign.
"Intellectual Property" shall mean trademarks, service marks, trade
names, Internet domain names, designs, logos, slogans, and general intangibles
of like nature, together with all goodwill, registrations and applications
related to the foregoing (collectively, "Trademarks"); patents and industrial
design registrations or applications (including any continuations, divisionals,
continuations-in-part, renewals, reissues, and applications for any of the
foregoing); software; "mask works" (as defined under 17 USC (S)901) and any
registrations and applications for "mask works"; technology, trade secrets and
other confidential information, know-how, proprietary processes, formulae,
algorithms, models, and methodologies (collectively, "Trade Secrets").
"Lien" shall mean any mortgage, pledge, encumbrance, charge or other
security interest of any kind or nature whatsoever.
"Permits" shall have the meaning set forth in Section 3.15(b) hereof.
"Permitted Liens" shall mean:
(a) Liens for Taxes not yet due or which are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect to contested Taxes are maintained on the books of the Company;
(b) pledges or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
social security legislation;
(c) easements, rights-of-way, restrictions and other similar
encumbrances previously incurred in the ordinary course of business which, in
respect of properties or assets of the Company or any Company Subsidiary, are
not material, and which, in the case of such encumbrances on the assets or
properties of the Company or any Company Subsidiary, do not materially detract
from the value of any such properties or assets or materially interfere with any
present use of such properties or assets;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
are
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not overdue for a period of more than 90 days or which are being contested in
good faith by appropriate proceedings;
(e) deposits to secure the performance of bids, contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(f) statutory and contractual Liens on the property of the
Company or any Company Subsidiary in favor of landlords securing leases; and
(g) Liens in existence on the date of this Agreement listed in
Section 3.9 to the Company Disclosure Schedule.
"Shares" shall have the meaning set forth in the recitals hereof.
"Taxes" shall have the meaning set forth in Section 3.7 hereof. "Tax
Returns" shall have the meaning set forth in Section 3.7 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
PLATO HOLDINGS, INC.
By:/s/ Gregory M. Case
---------------------------
Name: Gregory M. Case
Title: President
NEW PLATO ACQUISITION, INC.
By:/s/ Gregory M. Case
---------------------------
Name: Gregory M. Case
Title: President
NOVACARE EMPLOYEE SERVICES, INC.
By:/s/ Loren J. Hulber
---------------------------
Name: Loren J. Hulber
Title: President & CEO
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ANNEX A
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CONDITIONS TO THE OFFER
-----------------------
The capitalized terms used in this Annex A shall have the meanings
ascribed to them in the Agreement and Plan of Merger to which it is attached,
except that the term "Merger Agreement" shall be deemed to refer to such
Agreement and Plan of Merger.
Notwithstanding any other provisions of the Offer, and in addition to
(and not in limitation of) Sub's rights to extend and amend the Offer as
provided in the Merger Agreement, Sub shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to Sub's obligation to
pay for or return tendered Shares promptly after termination or withdrawal of
the Offer), pay for, and may delay the acceptance for payment of or, subject to
the restriction referred to above, the payment for, any tendered Shares, and may
terminate the Offer if in the reasonable judgment of Sub (i) any applicable
waiting period under the HSR Act has not expired or terminated prior to the
expiration of the Offer, (ii) the Minimum Condition has not been satisfied,
(iii) the Required Stockholder Approval (as defined in the Stockholder
Agreement) shall not have been obtained, or (iv) at any time on or after the
date hereof, and before the time of payment for any Shares (whether or not any
Shares have theretofore been accepted for payment pursuant to the Offer)
pursuant to the Offer any of the following events shall occur:
(a) there shall be pending or threatened by any Governmental
Authority, or the Company, Parent or Sub shall have received notice from an
attorney representing a party of such party's intent to commence any suit,
action or proceeding which (i) seeks to prohibit or delay the making or
consummation of the Offer or the Merger, (ii) seeks to challenge, prohibit,
delay or make illegal or materially more costly the acquisition by Parent or Sub
of any Shares pursuant to the Offer, the Stockholder Agreement, the Stock Option
Agreement or the acceptance for payment, payment for or purchase of Shares
pursuant to, or consummation of, the Offer or the Merger or seeks to make
illegal the transactions contemplated by the Stockholder Agreement or the Stock
Option Agreement or otherwise directly or indirectly to restrain, prohibit or
delay the transactions contemplated by the Stockholder Agreement or the Stock
Option Agreement, (iii) seeks to require divestiture by Parent or any of its
subsidiaries or Affiliates of any Shares or impose limitations on the ability of
Parent or any of its subsidiaries or Affiliates to exercise full rights of
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ownership of the Shares purchased by it, including the right to vote on all
matters, (iv) seeks to impose limitations on the ability of Parent or any of its
subsidiaries or Affiliates effectively to acquire, hold or operate, or to
require Parent, Sub or the Company or any of their respective subsidiaries or
Affiliates to dispose of or hold separate, any material portion of the business
or assets of Parent, Sub or the Company or any of their respective subsidiaries,
or (v) would reasonably be expected to have a Company Material Adverse Effect;
(b) there shall be any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted, issued or made
applicable, in each case after the date of the Merger Agreement, to the Offer or
the Merger or any other action shall be taken by any Governmental Entity that is
reasonably likely, directly or indirectly, to result in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) the representations and warranties of the Company set forth
in the Merger Agreement or the Stock Option Agreement (without giving effect to
any qualification regarding materiality) shall not be true and accurate as of
the date of this Agreement and as of the date of consummation of the Offer as
though made on or as of such date except those representations and warranties
that address matters only as of a particular date or only with respect to a
specified period of time which need only be true and accurate as of such date or
with respect to such period, all of which failures to be true and accurate in
the aggregate has had or would reasonably be expected to have a Company Material
Adverse Effect; or the Company shall have breached or failed in any material
respect to perform or comply with any material obligation, agreement or covenant
required by the Merger Agreement or the Stock Option Agreement to be performed
or complied with by it;
(d) the Merger Agreement shall have been terminated in
accordance with its terms;
(e) the Company shall have entered into a definitive agreement,
letter of intent or agreement in principle with any person with respect to an
Alternative Proposal;
(f) the Company shall have notified or been required by Section
5.2 hereof to notify Parent of its decision to furnish information concerning
its business, properties or assets to or shall have negotiated or participated
in negotiations or discussions with a person or entity other than Parent, Sub or
their
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Affiliates concerning a Superior Proposal, withdrawn, or modified or changed in
a manner adverse to Parent or Sub (including by amendment of the Schedule 14D-9)
its recommendation of the Offer, the Merger Agreement, or the Merger, or
recommended an Alternative Proposal, or shall have resolved to do any of the
foregoing;
(g) there shall have occurred (1) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange, the American Stock Exchange or in the Nasdaq National Market System,
for a period in excess of three hours (excluding suspensions or limitations
resulting solely from physical damage or interference with such exchanges not
related to market conditions), (2) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or not
mandatory), (3) any limitation or proposed limitation (whether or not mandatory)
by any United States Governmental Authority or agency on the extension of credit
by financial institutions, (4) any decline in the Dow Jones Industrial Average
or the Standard & Poor's 500 Index in excess of 25% measured from the close of
business on the date of this Agreement or (5) in the case of any of the
situations in clauses (1) through (4) inclusive, existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(h) the Company, Target Parent or Ultimate Parent pursuant to or
within the meaning of Title 11, U.S. Code or any similar federal or state law
for the relief of debtors ("Bankruptcy Law"): (1) commences a voluntary case,
(2) consents to the entry of an order for relief against it in an involuntary
case, (3) consents to the appointment of a receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law (a "Custodian") of it or
for all or substantially all of its property, (4) makes a general assignment for
the benefit of its creditors, or (5) generally is not paying its debts as they
become due;
(i) a court of competent jurisdiction enters an order or decree
under the Bankruptcy Law that; (1) is for relief against the Company in an
involuntary case, (2) appoints a Custodian of the Company, Target Parent or
Ultimate Parent or for all or substantially all of the property of the Company,
Target Parent or Ultimate Parent, or (3) orders the liquidation of the Company,
Target Parent or Ultimate Parent, and the order or decree remains unstayed and
in effect for 60 days;
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(j) there shall have occurred any change, condition, event or
development that has or is reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect;
(k) either Target Parent or Ultimate Parent shall be in breach
of the Stockholder Agreement;
(l) the Company shall not have obtained the consents of holders
of outstanding Options to purchase Shares to cancel such Options in accordance
with Section 2.1(d) of the Merger Agreement;
(m) the Company shall not have delivered to Parent and Sub an
opinion from a reputable firm to the effect that Ultimate Parent and the Company
are solvent as of the time any Shares are accepted for payment;
(n) Ultimate Parent shall not have obtained all consents of, and
approvals to, the Transactions from its lenders in accordance with Section 4.04
of the Stockholder Agreement and delivered evidence of such consents and
approvals to Parent and Sub;
(o) the Company shall not have obtained and delivered to Parent
the guaranty and letter of credit or surety bond or other security in accordance
with Section 5.12 of the Merger Agreement;
(p) if the Company and the Company Subsidiaries shall have
incurred or assumed indebtedness in excess of the amounts set forth in Section
5.1(xi) of the Merger Agreement; or
(q) the Company shall not have been removed as co-indemnitor
with respect to the Liberty Bond in accordance with Section 4.06 of the
Stockholder Agreement.
which in the reasonable judgment of Parent or Sub, in any such case, and
regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payments. The foregoing conditions are for the sole benefit of Sub and Parent
and may be waived by Parent or Sub, in whole or in part at any time and from
time to time in the sole discretion of Parent or Sub. The failure by Parent or
Sub at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and
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from time to time. Any determination by Parent or Sub concerning any condition
or event described in this Annex A shall be final and binding upon all parties.
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