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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported): December 14, 1997
Gulf South Medical Supply, Inc.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-21512 06-1251310
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File number) Identification No.)
One Woodgreen Place, Madison, MS 39110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (601) 856-5900
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Item 5. Other Events
On December 14, 1997, Gulf South Medical Supply, Inc. ("GSMS"), Physician
Sales & Service, Inc. ("PSS") and PSS Merger Corp. entered into a certain
Agreement and Plan of Merger (the "Merger Agreement"), providing for the merger
(the "Merger") of Merger Corp. with and into GSMS.
Pursuant to the Merger, each share of the $.01 par value common stock of
GSMS ("GSMS Common Stock") issued and outstanding at the effective time of the
Merger (other than treasury shares) will be exchanged for 1.75 shares of the
$.01 par value common stock of PSS ("PSS common stock"). Consummation of the
Merger is subject to approval of the shareholders of both PSS and GSMS and
various state and federal regulatory agencies and other customary conditions.
The Merger Agreement is attached hereto as Exhibit 2.1 and is hereby
incorporated by reference.
Further agreements entered into in connection with the Merger Agreement,
specifically the Stock Option Agreement dated December 14, 1997 between GSMS and
PSSI, the Stock Option Agreement dated December 14, 1997 between PSSI and GSMS,
the form of Voting Agreement dated December 14, 1997 between GSMS and certain
PSSI stockholders, the form of Voting Agreement dated December 14, 1997 between
PSSI and certain GSMS stockholders, the form of Affiliate Agreement dated
December 14, 1997 between GSMS and certain PSSI stockholders, the form of
Affiliate Agreement dated December 14, 1997 between PSSI and certain GSMS
stockholders, are attached hereto as Exhibits 99.1, 99.2, 99.3, 99.4, 99.5, and
99.6, respectively, and are incorporated by reference.
The information contained in the joint press release of Gulf South Medical
Supply, Inc. and Physician Sales & Service, Inc. dated December 15, 1997
attached as Exhibit 99.7 is hereby incorporated by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired. None.
(b) Pro Forma Financial Information. None.
(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger dated as of December 14, 1997
by and among Physician Sales & Service, Inc., a Florida
corporation, PSS Merger Corp., a Delaware corporation, and
Gulf South Medical Supply, Inc., a Delaware corporation.
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Exhibit No. Description
----------- -----------
99.1 Stock Option Agreement dated December 14, 1997 between Gulf
South Medical Supply, Inc., a Delaware corporation, and
Physician Sales & Service, Inc., a Florida corporation.
99.2 Stock Option Agreement dated December 14, 1997 between
Physician Sales & Service, Inc., a Florida corporation, and
Gulf South Medical Supply, Inc., a Delaware corporation.
99.3 Form of Voting Agreement dated December 14, 1997 between
Gulf South Medical Supply, Inc., a Delaware corporation,
and certain stockholders of Physician Sales & Service,
Inc., a Florida corporation.
99.4 Form of Voting Agreement dated December 14, 1997 between
Physician Sales & Service, Inc., a Florida corporation, and
certain stockholders of Gulf South Medical Supply, Inc., a
Delaware corporation.
99.5 Form of Affiliate Agreement dated December 14, 1997 between
Gulf South Medical Supply, Inc., a Delaware corporation,
and certain stockholders of Physician Sales & Service,
Inc., a Florida corporation.
99.6 Form of Affiliate Agreement dated December 14, 1997 between
Physician Sales & Service, Inc., a Florida corporation, and
certain stockholders of Gulf South Medical Supply, Inc., a
Delaware corporation.
99.7 Joint press release of Physician Sales & Service, Inc. and
Gulf South Medical Supply, Inc. dated December 15, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto authorized.
GULF SOUTH MEDICAL SUPPLY, INC.
Date: December 22, 1997
By:/s/ Stanton Keith Pritchard
-------------------------------------------
Stanton Keith Pritchard
Senior Vice President, Business Development
and Administration, General Counsel and
Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Page No. in
Sequentially
Numbered
Exhibit No. Description Copy
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<S> <C>
2.1 Agreement and Plan of Merger dated as of December 14, 1997
by and among Physician Sales & Service, Inc., a Florida
corporation, PSS Merger Corp., a Delaware corporation, and
Gulf South Medical Supply, Inc., a Delaware corporation.
99.1 Stock Option Agreement dated December 14, 1997 between Gulf
South Medical Supply, Inc., a Delaware corporation, and
Physician Sales & Service, Inc., a Florida corporation.
99.2 Stock Option Agreement dated December 14, 1997 between
Physician Sales & Service, Inc., a Florida corporation, and
Gulf South Medical Supply, Inc., a Delaware corporation.
99.3 Form of Voting Agreement dated December 14, 1997 between
Gulf South Medical Supply, Inc., a Delaware corporation,
and certain stockholders of Physician Sales & Service,
Inc., a Florida corporation.
99.4 Form of Voting Agreement dated December 14, 1997 between
Physician Sales & Service, Inc., a Florida corporation, and
certain stockholders of Gulf South Medical Supply, Inc., a
Delaware corporation.
99.5 Form of Affiliate Agreement dated December 14, 1997 between
Gulf South Medical Supply, Inc., a Delaware corporation,
and certain stockholders of Physician Sales & Service,
Inc., a Florida corporation.
99.6 Form of Affiliate Agreement dated December 14, 1997 between
Physician Sales & Service, Inc., a Florida corporation, and
certain stockholders of Gulf South Medical Supply, Inc., a
Delaware corporation.
99.7 Joint press release of Physician Sales & Service, Inc. and
Gulf South Medical Supply, Inc. dated December 15, 1997.
</TABLE>
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PHYSICIAN SALES & SERVICE, INC.,
PSS MERGER CORP.,
AND
GULF SOUTH MEDICAL SUPPLY, INC.
DATED AS OF DECEMBER 14, 1997
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TABLE OF CONTENTS
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PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time and Placing of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Execution of Stock Option Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 - TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 - MANNER OF CONVERTING SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Shares Held by Gazelle or PSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Conversion of Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Gazelle Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 4 - EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Rights of Former Gazelle Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF GAZELLE . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Authority of Gazelle; No Breach By Agreement . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 Gazelle Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.9 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.13 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.19 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.20 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.21 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.22 Board Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF PSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<TABLE>
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6.2 Authority of PSS; No Breach By Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 PSS Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.9 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.10 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.13 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.19 Authority of Merger Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.20 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.21 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.22 Board Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Affirmative Covenants of Gazelle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Negative Covenants of Gazelle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Covenants of PSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Registration Statement; Proxy Statement; Stockholder Approval . . . . . . . . . . . . . . . 27
8.2 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Applications; Antitrust Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4 Filings with State Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.5 Agreement as to Efforts to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.6 Investigation and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.8 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.9 Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.10 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.11 Agreements of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.12 Employee Benefits and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.13 Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.14 Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Conditions to Obligations of PSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 Conditions to Obligations of Gazelle . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 10 - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Non-Survival of Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
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<TABLE>
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ARTICLE 11 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.11 Captions; Articles and Sections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.12 Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.13 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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1.1 Form of GSMS Stock Option Agreement (Sections 1.4, 11.1).
1.2 Form of PSS Stock Option Agreement (Sections 1.4, 11.1).
2.1 Form of agreement of affiliates of GSMS (Sections 8.11, 9.2(g)).
2.2 Form of agreement of affiliates of PSS (Sections 8.11, 9.2(g))).
3 Matters as to which Testa, Hurwitz & Thibeault LLP will opine (Section 9.2(d)).
4 Matters as to which Alston & Bird LLP will opine (Section 9.3(d)).
5.1 GSMS Voting Agreement (Section 8.14).
5.2 PSS Voting Agreement (Section 8.14).
6 Hixon Employment Agreement
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of December 14, 1997, by and among PHYSICIAN SALES & SERVICE,
INC. ("PSS"), a Florida corporation; PSS MERGER CORP. ("Merger Corp."), a
Delaware corporation; and GULF SOUTH MEDICAL SUPPLY, INC. ("GSMS"), a Delaware
corporation.
PREAMBLE
The respective Boards of Directors of GSMS, Merger Corp. and PSS
are of the opinion that the transactions described herein are in the best
interests of the parties to this Agreement and their respective stockholders.
This Agreement provides for the acquisition of GSMS by PSS pursuant to the
merger of Merger Corp. with and into GSMS. At the effective time of such
merger, the outstanding shares of capital stock of GSMS shall be converted into
the right to receive shares of common stock of PSS (except as provided herein).
As a result, stockholders of GSMS shall become stockholders of PSS and GSMS
shall continue to conduct its business and operations as a wholly owned
subsidiary of PSS. The transactions described in this Agreement are subject to
the approvals of the stockholders of GSMS, the stockholders of PSS, expiration
of the required waiting period under the HSR Act, and the satisfaction of
certain other conditions described in this Agreement. It is the intention of
the parties to this Agreement that, for federal income tax purposes, the Merger
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, and for accounting purposes shall qualify for treatment
as a pooling of interests.
Immediately after the execution and delivery of this Agreement,
and as a condition and inducement to the willingness of PSS and GSMS to enter
into this Agreement, GSMS and PSS are entering into stock option agreements
pursuant to which GSMS is granting to PSS an option to purchase shares of GSMS
Common Stock and PSS is granting to GSMS an option to purchase shares of PSS
Common Stock.
Certain terms used in this Agreement are defined in Section 11.1
of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
representations, warranties, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Corp. shall be merged with and into
GSMS in accordance with the applicable provisions of the DGCL (the "Merger").
GSMS shall be the Surviving Corporation resulting from the Merger and shall
become a wholly owned Subsidiary of PSS and shall continue to be governed by
the Laws of the State of Delaware. The Merger shall be consummated pursuant to
the terms of this Agreement, which has been approved and adopted by the
respective Boards of Directors of GSMS, Merger Corp. and PSS and by PSS, as the
sole stockholder of Merger Corp.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such location as may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Certificate of Merger reflecting the Merger shall become effective
with the Secretary of State of the State of Delaware (the "Effective Time").
Subject to the terms and conditions
<PAGE> 7
hereof, unless otherwise mutually agreed upon in writing by the authorized
officers of each Party, the Parties shall use their reasonable efforts to cause
the Effective Time to occur on the first business day following the last to
occur of (i) the effective date (including expiration of any applicable waiting
period) of the last required Consent of any Regulatory Authority having
authority over and approving or exempting the Merger, and (ii) the date on
which the stockholders of GSMS and PSS approve this Agreement.
1.4 EXECUTION OF STOCK OPTION AGREEMENTS. Simultaneously with
the execution of this Agreement by the Parties and as a condition thereto, GSMS
and PSS are executing and delivering the GSMS Stock Option Agreement in
substantially the form of Exhibit 1.1 and the PSS Stock Option Agreement in
substantially the form of Exhibit 1.2.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Certificate of Incorporation of GSMS in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed;
provided that such Certificate of Incorporation shall be amended at Closing to
the satisfaction of PSS.
2.2 BYLAWS. The Bylaws of Merger Corp. in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until duly amended or repealed.
2.3 DIRECTORS AND OFFICERS.
(a) The directors of Merger Corp. in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected (which shall include those current directors of GSMS who shall not
become directors of PSS pursuant to Section 2.3(b)), shall serve as the
directors of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation. The officers of
Merger Corp. in office immediately prior to the Effective Time, together with
such additional persons as may thereafter be elected, shall serve as the
officers of the Surviving Corporation from and after the Effective Time in
accordance with the Bylaws of the Surviving Corporation.
(b) Immediately following the Effective Time, PSS shall take, or
cause to be taken, such action as may be required in order to (i) increase the
size of its Board of Directors from nine persons to ten persons, with four
Class I directors, three Class II directors and three Class III directors, (ii)
accept the resignations of four current PSS directors, (iii) appoint or cause
to be elected Thomas G. Hixon ("Hixon") and two additional Persons who are
currently directors of GSMS to be selected by the Board of Directors of GSMS as
directors of PSS to serve in Class I, Class II and Class III, respectively, and
(iv) appoint a Nominating Committee composed of Hixon and such other persons as
the PSS Board of Directors shall determine for the purpose of designating two
independent persons to fill the two vacancies on the PSS Board of Directors as
soon as reasonably practicable.
(c) Immediately following the Effective Time, PSS shall take, or
cause to be taken, such action as may be necessary to cause each of the Audit
Committee and Compensation Committee of the Board of Directors of PSS to
include at least one member who shall have served on the Board of Directors of
GSMS immediately prior to the Effective Time.
(d) Immediately following the Effective Time, Hixon shall be
elected President and Chief Operating Officer of PSS, pursuant to the terms of
the Hixon Employment Agreement.
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ARTICLE 3
MANNER OF CONVERTING SECURITIES
3.1 CONVERSION OF SHARES. Subject to the provisions of this
Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of PSS, GSMS, Merger Corp. or the stockholders of any of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of capital stock of PSS issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding from and after the Effective Time.
(b) Each share of Merger Corp. Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of GSMS Common Stock.
(c) Each share of GSMS Common Stock (excluding shares
held by any GSMS Entity or any PSS Entity) issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall be converted
into and exchanged for the right to receive 1.75 shares of PSS Common Stock
(the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. The Exchange Ratio shall be
proportionately adjusted to reflect fully the effect of any stock split, stock
dividend (including any dividend or distribution of securities convertible into
PSS Common Stock), recapitalization, reorganization or other like change with
respect to such stock if the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split,
recapitalization, reorganization or similar change for which a record date is
not established) shall be prior to the Effective Time.
3.3 SHARES HELD BY GSMS OR PSS. Each of the shares of GSMS
Common Stock held by any GSMS Entity or by any PSS Entity shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, each holder of shares of GSMS Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of PSS Common Stock (after taking into account all certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest and
rounded to the nearest whole cent) in an amount equal to such fractional part
of a share of PSS Common Stock multiplied by the market value of one share of
PSS Common Stock at the Effective Time. The market value of one share of PSS
Common Stock at the Effective Time shall be the average of the last sale price
of a share of such common stock on the Nasdaq National Market (as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by PSS) for the ten most recent days that PSS Common Stock has
traded, ending on the last trading day preceding the Effective Time. No such
holder will be entitled to dividends, voting rights, or any other rights as a
stockholder in respect of any fractional shares.
3.5 CONVERSION OF STOCK OPTIONS.
(a) At the Effective Time, each option granted by GSMS to purchase
shares of GSMS Common Stock, which is outstanding immediately prior thereto (an
"Option" or, collectively, the "Options"), granted by the GSMS under the GSMS
Stock Plans or otherwise, whether or not exercisable, shall be converted into
and become rights with respect to PSS Common Stock, and PSS shall assume each
Option, in accordance with the terms of the GSMS Stock Option Plan and stock
option agreement by which it is evidenced, except that from and after the
Effective Time, (i) PSS and its Compensation Committee shall be substituted for
GSMS and the Committee of GSMS's Board of Directors (including, if applicable,
the entire Board of Directors of GSMS) administering the GSMS Stock Plans, (ii)
each Option assumed by PSS may be exercised solely for shares of PSS Common
Stock, (iii) the number of shares of PSS Common Stock subject to such Option
shall be equal to the number of whole shares (rounded down to the nearest whole
share) of GSMS Common Stock subject to such Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, and (iv) the per share
exercise price under each such Option shall be adjusted by
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dividing the per share exercise price under each such Option by the Exchange
Ratio and rounding up to the nearest whole cent. Notwithstanding the
provisions of clauses (iii) and (iv) of the first sentence of this Section
3.5(a), each Option which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Code, and the regulations promulgated
thereunder, so as not to constitute a modification, extension or renewal of
such Option, within the meaning of Section 424(h) of the Code.
(b) Prior to the Effective Time, GSMS shall use its reasonable best
efforts to obtain all necessary consents or releases from holders of Options
under any of the GSMS Stock Plans or otherwise and take all such other lawful
action as may be necessary to give effect to the transactions contemplated by
this Section.
(c) As soon as practicable after the Effective Time, PSS shall deliver
to the holders of Options appropriate notices setting forth such holders'
rights pursuant to the GSMS Stock Plans and the agreements evidencing the
grants of such Options shall continue in effect on the same terms and
conditions (subject to adjustments required by this Section 3.5 after giving
effect to the Merger and the provisions set forth above). If necessary, PSS
shall comply with the terms of the GSMS Stock Plans and ensure, to the extent
lawful and practicable, and subject to the provisions of, the GSMS Stock Plans,
that Options which qualified as incentive stock options prior to the Effective
Time of the Merger continue to qualify as incentive stock options after the
Effective Time of the Merger.
(d) PSS shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of PSS Common Stock for delivery upon
the exercise of Options. As soon as practicable after the Effective Time, PSS
shall file a registration statement on Form S-3 or Form S-8, as the case may be
(or any successor or other appropriate forms), with respect to the shares of
PSS Common Stock subject to such Options and shall use its reasonable best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the 1934 Act, where
applicable, PSS shall administer the GSMS Stock Plans in a manner that complies
with Rule 16b-3 promulgated under the 1934 Act to the extent the GSMS Stock
Plans complied with such rule prior to the Merger.
3.6 GSMS WARRANTS.
(a) At the Effective Time, PSS shall assume the obligations of GSMS
under the GSMS common stock purchase warrants outstanding at the Effective Time
and thereafter, upon exercise, the warrantholder shall receive the number of
shares of PSS Common Stock equal to the product of (i) the Exchange Ratio and
(ii) the number of shares of GSMS Common Stock for which such warrant could
have been exercised immediately prior to the Merger.
(b) As soon as practicable after the Effective Time of the Merger, PSS
shall deliver to the holders of the GSMS warrants appropriate notices setting
forth such holders' rights pursuant to the applicable warrant agreements with
respect thereto to the extent required by the terms of the warrant agreements
with respect thereto.
(c) PSS shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of PSS Common Stock for delivery upon
exercise of the GSMS warrants. As soon as practicable after the Effective
Time, PSS shall file a registration statement or registration statements on
Form S-3 (or any successor or other appropriate form), with respect to the
shares of PSS Common Stock issuable upon exercise of the warrants and shall use
its reasonable efforts, subject to the terms of the warrant agreements, to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as the warrant agreements require.
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ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, PSS
shall cause the exchange agent selected by PSS (the "Exchange Agent") to mail
to each holder of record of a certificate or certificates which represented
shares of GSMS Common Stock immediately prior to the Effective Time (the
"Certificates") appropriate transmittal materials and instructions (which shall
specify that delivery shall be effected, and risk of loss and title to such
Certificates shall pass, only upon proper delivery of such Certificates to the
Exchange Agent). The Certificate or Certificates of GSMS Common Stock so
delivered shall be duly endorsed as the Exchange Agent may require. In the
event of a transfer of ownership of shares of GSMS Common Stock represented by
Certificates that are not registered in the transfer records of GSMS, the
consideration provided in Section 3.1 may be issued to a transferee if the
Certificates representing such shares are delivered to the Exchange Agent,
accompanied by all documents required to evidence such transfer and by evidence
satisfactory to the Exchange Agent that any applicable stock transfer taxes
have been paid. If any Certificate shall have been lost, stolen, mislaid or
destroyed, upon receipt of (i) an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii) such
bond, security or indemnity as PSS and the Exchange Agent may reasonably
require and (iii) any other documents necessary to evidence and effect the bona
fide exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the shares represented by such lost, stolen, mislaid
or destroyed Certificate shall have been converted. The Exchange Agent may
establish such other reasonable and customary rules and procedures in
connection with its duties as it may deem appropriate. After the Effective
Time, each holder of shares of GSMS Common Stock (other than shares to be
canceled pursuant to Section 3.3) issued and outstanding at the Effective Time
shall surrender the Certificate or Certificates representing such shares to the
Exchange Agent and shall promptly upon surrender thereof receive in exchange
therefor the consideration provided in Section 3.1, together with all
undelivered dividends or distributions in respect of such shares (without
interest thereon) pursuant to Section 4.2. To the extent required by Section
3.4, each holder of shares of GSMS Common Stock issued and outstanding at the
Effective Time also shall receive, upon surrender of the Certificate or
Certificates, cash in lieu of any fractional share of PSS Common Stock to which
such holder may be otherwise entitled (without interest). PSS shall not be
obligated to deliver the consideration to which any former holder of GSMS
Common Stock is entitled as a result of the Merger until such holder surrenders
such holder's Certificate or Certificates for exchange as provided in this
Section 4.1. Any other provision of this Agreement notwithstanding, neither
PSS, the Surviving Corporation nor the Exchange Agent shall be liable to a
holder of GSMS Common Stock for any amounts paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat or similar Law. Adoption of this Agreement by the stockholders of GSMS
shall constitute ratification of the appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER GSMS STOCKHOLDERS. At the Effective Time,
the stock transfer books of GSMS shall be closed as to holders of GSMS Common
Stock immediately prior to the Effective Time and no transfer of GSMS Common
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1, each
Certificate theretofore representing shares of GSMS Common Stock (other than
shares to be canceled pursuant to Section 3.3) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.4 in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by GSMS in respect of such shares of GSMS Common
Stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Time. To the extent permitted by Law, former stockholders of
record of GSMS shall be entitled to vote after the Effective Time at any
meeting of PSS stockholders the number of whole shares of PSS Common Stock into
which their respective shares of GSMS Common Stock are converted, regardless of
whether such holders have exchanged their Certificates for certificates
representing PSS Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by PSS on the
PSS Common Stock, the record date for which is at or after the Effective Time,
the declaration shall include dividends or other distributions on all shares of
PSS Common Stock issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of PSS Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
Certificate until such holder surrenders such Certificate for exchange as
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provided in Section 4.1. However, upon surrender of such Certificate, both the
PSS Common Stock certificate (together with all such undelivered dividends or
other distributions without interest) and any undelivered dividends and cash
payments payable hereunder (without interest) shall be delivered and paid with
respect to each share represented by such Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF GSMS
GSMS hereby represents and warrants to PSS as follows:
5.1 ORGANIZATION, STANDING, AND POWER. GSMS is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Delaware, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its material Assets.
Except as disclosed in Section 5.1 of the GSMS Disclosure Memorandum, GSMS is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed would not have, individually
or in the aggregate, a GSMS Material Adverse Effect. The minute book and other
organizational documents for GSMS have been made available to PSS for its
review and, except as disclosed in Section 5.1 of the GSMS Disclosure
Memorandum, are true and complete in all material respects as in effect as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
stockholders thereof.
5.2 AUTHORITY OF GSMS; NO BREACH BY AGREEMENT.
(a) GSMS has the corporate power and authority necessary
to execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
GSMS, subject to the approval of this Agreement by the holders of a majority of
the outstanding shares of GSMS Common Stock, which is the only stockholder vote
required for approval of this Agreement and consummation of the Merger by GSMS.
Subject to such requisite stockholder approval, and assuming due authorization,
execution and delivery by PSS and Merger Corp., this Agreement represents a
legal, valid, and binding obligation of GSMS, enforceable against GSMS in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement
by GSMS, nor the consummation by GSMS of the transactions contemplated hereby,
nor compliance by GSMS with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of GSMS's Certificate of
Incorporation or Bylaws or the certificate or articles of incorporation or
bylaws of any GSMS Subsidiary or any resolution adopted by the board of
directors or the stockholders of any GSMS Entity, or (ii) except as disclosed
in Section 5.2(b) of the GSMS Disclosure Memorandum, constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any GSMS Entity under, any Contract or Permit of any
GSMS Entity, where such Default or Lien, or any failure to obtain such Consent,
would have, individually or in the aggregate, a GSMS Material Adverse Effect,
or, (iii) subject to receipt of the requisite Consents referred to in Section
9.1(b), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to any GSMS Entity or any of their
respective material Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service, or under the HSR
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Act, and other than Consents, filings, or notifications which, if not obtained
or made, would not have, individually or in the aggregate, a GSMS Material
Adverse Effect, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by GSMS of the Merger and the other
transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of GSMS consists of (i)
30,000,000 shares of GSMS Common Stock, of which 16,347,064 shares are issued
and outstanding as of the date of this Agreement, and (ii) 1,000,000 shares of
preferred stock, par value $0.01 per share, none of which are issued and
outstanding. All of the issued and outstanding shares of capital stock of GSMS
are duly and validly issued and outstanding and are fully paid and
non-assessable. None of the outstanding shares of capital stock of GSMS has
been issued in violation of any preemptive rights of the current or past
stockholders of GSMS.
(b) Except as set forth in Section 5.3(a), or as provided
in the GSMS Stock Option Agreement, or as disclosed in Section 5.3(b) of the
GSMS Disclosure Memorandum, there are no shares of capital stock or other
equity securities of GSMS outstanding and no outstanding Equity Rights relating
to the capital stock of GSMS.
5.4 GSMS SUBSIDIARIES. GSMS has disclosed in Section 5.4 of the
GSMS Disclosure Memorandum all of the GSMS Subsidiaries that are corporations
(identifying with respect to each GSMS Subsidiary its jurisdiction of
incorporation, each jurisdiction in which it is qualified and/or licensed to
transact business, and the number of shares owned by GSMS and percentage
ownership interest represented by such share ownership) and all of the GSMS
Subsidiaries that are general or limited partnerships, limited liability
companies, or other non-corporate entities (identifying the Law under which
such entity is organized, each jurisdiction in which it is qualified and/or
licensed to transact business, and the amount and nature of the ownership
interest therein). Except as disclosed in Section 5.4 of the GSMS Disclosure
Memorandum, GSMS or one of its wholly owned Subsidiaries owns all of the issued
and outstanding shares of capital stock (or other equity interests) of each
GSMS Subsidiary. No capital stock (or other equity interest) of any GSMS
Subsidiary is or may become required to be issued (other than to another GSMS
Entity) by reason of any Equity Rights, and there are no Contracts by which any
GSMS Subsidiary is bound to issue (other than to another GSMS Entity)
additional shares of its capital stock (or other equity interests) or Equity
Rights or by which any GSMS Entity is or may be bound to transfer any shares of
the capital stock (or other equity interests) of any GSMS Subsidiary (other
than to another GSMS Entity). There are no Contracts relating to the rights of
any GSMS Entity to vote or to dispose of any shares of the capital stock (or
other equity interests) of any GSMS Subsidiary. All of the shares of capital
stock (or other equity interests) of each GSMS Subsidiary held by a GSMS Entity
are fully paid and non-assessable and are owned by the GSMS Entity free and
clear of any Lien. Except as disclosed in Section 5.4 of the GSMS Disclosure
Memorandum, each GSMS Subsidiary is a corporation, and each such Subsidiary is
duly organized, validly existing, and (as to corporations) in good standing
under the Laws of the jurisdiction in which it is incorporated or organized,
and has the corporate power and authority necessary for it to own, lease, and
operate its Assets and to carry on its business as now conducted. Except as
disclosed in Section 5.4 of the GSMS Disclosure Memorandum, each GSMS
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed would not
have, individually or in the aggregate, a GSMS Material Adverse Effect. The
minute book and other organizational documents for each GSMS Subsidiary have
been made available to PSS for its review, and, except as disclosed in Section
5.4 of the GSMS Disclosure Memorandum, are true and complete in all material
respects as in effect as of the date of this Agreement and accurately reflect
in all material respects all amendments thereto and all proceedings of the
Board of Directors and stockholders thereof.
5.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) GSMS has timely filed and made available to PSS all
SEC Documents required to be filed by GSMS since it became subject to the
periodic reporting requirements of the Securities Laws (the "GSMS
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SEC Reports"). The GSMS SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Laws and
(ii) did not, at the time they were filed (or, if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material
fact required to be stated in such GSMS SEC Reports or necessary in order to
make the statements in such GSMS SEC Reports, in light of the circumstances
under which they were made, not misleading. No GSMS Subsidiary is required to
file any SEC Documents.
(b) Each of the GSMS Financial Statements (including, in
each case, any related notes) contained in the GSMS SEC Reports, including any
GSMS SEC Reports filed after the date of this Agreement until the Effective
Time, complied or will comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
or will be prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to
such financial statements or, in the case of unaudited interim statements, as
permitted by Form 10-Q of the SEC), and fairly presented or will fairly present
in all material respects the consolidated financial position of GSMS and its
Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount or effect.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No GSMS Entity has any
Liabilities except Liabilities which are accrued or reserved against in the
consolidated balance sheets of GSMS as of December 31, 1996 and September 30,
1997, included in the GSMS Financial Statements delivered prior to the date of
this Agreement or reflected in the notes thereto, or incurred since September
30, 1997 in the ordinary course of business consistent with past practices,
except those Liabilities which would not have a GSMS Material Adverse Effect.
Except as disclosed in Section 5.6 of the GSMS Disclosure Memorandum, no GSMS
Entity has incurred or paid any Liability since September 30, 1997, except for
such Liabilities incurred or paid (i) in the ordinary course of business
consistent with past business practice and which would not have, individually
or in the aggregate, a GSMS Material Adverse Effect or (ii) in connection with
the transactions contemplated by this Agreement. Except as disclosed in
Section 5.6 of the GSMS Disclosure Memorandum, no GSMS Entity is directly or
indirectly liable, by guarantee, indemnity, or otherwise, upon or with respect
to, or obligated, by discount or repurchase agreement or in any other way, to
provide funds in respect to, or obligated to guarantee or assume any Liability
or any Person for any amount in excess of $250,000.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the GSMS Financial Statements delivered prior to the date of this Agreement
or as disclosed in Section 5.7 of the GSMS Disclosure Memorandum, (i) since
December 31, 1996, there has been no GSMS Material Adverse Effect, and (ii)
since September 30, 1997, the GSMS Entities have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action or
failure, if taken after the date of this Agreement, would represent or result
in a material breach or violation of any of the covenants and agreements of
GSMS provided in Article 7.
5.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of any of the GSMS Entities have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before December 31, 1996, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, and all Tax Returns filed
are complete and accurate in all material respects. All Taxes shown on filed
Tax Returns have been paid. There is no audit examination, deficiency, or
refund Litigation with respect to any Taxes, except as reserved against in the
GSMS Financial Statements or as disclosed in Section 5.8 of the GSMS Disclosure
Memorandum. GSMS's federal income Tax Returns have been audited by the IRS and
accepted through December 31, 1995. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation have been
paid. There are no Liens with respect to Taxes upon any of the Assets of the
GSMS Entities, except for any such Liens which would not have a GSMS Material
Adverse Effect.
(b) Except as set forth in Section 5.8 of the GSMS
Disclosure Memorandum, none of the GSMS Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of
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any Tax due (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service or other applicable taxing
authorities) that is currently in effect.
(c) The provision for any Taxes due or to become due for
any of the GSMS Entities for the period or periods through and including the
date of the respective GSMS Financial Statements that has been made and is
reflected on such GSMS Financial Statements is sufficient to cover all such
Taxes.
(d) Deferred Taxes of the GSMS Entities have been
provided for in accordance with GAAP.
(e) None of the GSMS Entities is a party to any Tax
allocation or sharing agreement and none of the GSMS Entities has been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was GSMS) or has any Liability for
Taxes of any Person (other than GSMS and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or
foreign Law) as a transferee or successor or by Contract or otherwise.
(f) Each of the GSMS Entities is in compliance with, and
its records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information reporting
and Tax withholding requirements under federal, state, and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 5.8 of the GSMS
Disclosure Memorandum, none of the GSMS Entities has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 280G or 162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of the GSMS Entities that occurred during
or after any Taxable Period in which the GSMS Entities incurred a net operating
loss that carries over to any Taxable Period ending after December 31, 1996.
(i) No GSMS Entity has or has had in any foreign country
a permanent establishment, as defined in any applicable tax treaty or
convention between the United States and such foreign country.
5.9 ASSETS.
(a) Except as disclosed in Section 5.9 of the GSMS
Disclosure Memorandum or as disclosed or reserved against in the GSMS Financial
Statements, the GSMS Entities have good and marketable title, free and clear of
all Liens, to all of their respective Assets, except for any such Liens or
other defects of title which would not have a GSMS Material Adverse Effect.
All tangible properties used in the businesses of the GSMS Entities are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with GSMS's past practices.
(b) All items of inventory, net of reserves, of the GSMS
Entities reflected on the most recent balance sheet included in the GSMS
Financial Statements delivered prior to the date of this Agreement and prior to
the Effective Time consisted and will consist, as applicable, of items of a
quality and quantity usable and saleable in the ordinary course of business
consistent with past practices and conform to generally accepted standards in
the industry in which the GSMS Entities are a part.
(c) The accounts receivable of the GSMS Entities as set
forth on the most recent balance sheet included in the GSMS Financial
Statements delivered prior to the date of this Agreement or arising since the
date thereof are valid and genuine; have arisen solely out of bona fide sales
and deliveries of goods, performance of services and other business
transactions in the ordinary course of business consistent with past practice;
are not subject to valid defenses, set-offs or counterclaims; and are recorded
at the full amount thereof less, in the case of accounts receivable appearing
on the most recent balance sheet included in the GSMS Financial Statements
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delivered prior to the date of this Agreement, the recorded allowance for
collection losses on such balance sheet. The allowance for collection losses
on such balance sheet has been determined in accordance with GAAP.
(d) Except as disclosed in Section 5.9 of the GSMS
Disclosure Memorandum, all Assets which are material to GSMS's business on a
consolidated basis, held under leases or subleases by any of the GSMS Entities,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect.
(e) The GSMS Entities currently maintain insurance
similar in amounts, scope, and coverage to that maintained by other peer
organizations. None of the GSMS Entities has received notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. Except
as disclosed in Section 5.9 of the GSMS Disclosure Memorandum, there are
presently no claims for amounts exceeding in any individual case $50,000
pending under such policies of insurance and no notices of claims in excess of
such amounts have been given by any GSMS Entity under such policies.
(f) The Assets of the GSMS Entities include all Assets
required to operate the business of the GSMS Entities as presently conducted.
5.10 INTELLECTUAL PROPERTY. Each GSMS Entity owns or has a
license to use all of the Intellectual Property used by such GSMS Entity in the
course of its business. Each GSMS Entity is the owner of or has a license to
any Intellectual Property sold or licensed to a third party by such GSMS Entity
in connection with such GSMS Entity's business operations, and such GSMS Entity
has the right to convey by sale or license any Intellectual Property so
conveyed. No GSMS Entity is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted, or are pending or to the
Knowledge of GSMS threatened, which challenge the rights of any GSMS Entity
with respect to Intellectual Property used, sold or licensed by such GSMS
Entity in the course of its business, nor has any person claimed or alleged any
rights to such Intellectual Property. The conduct of the business of the GSMS
Entities does not infringe any Intellectual Property of any other person.
Except as disclosed in Section 5.10 of the GSMS Disclosure Memorandum, no GSMS
Entity is obligated to pay any recurring royalties to any Person with respect
to any such Intellectual Property.
5.11 ENVIRONMENTAL MATTERS.
(a) Each GSMS Entity and its Properties are, and have
been, in compliance with all Environmental Laws, except for violations which
would not have, individually or in the aggregate, a GSMS Material Adverse
Effect.
(b) There is no Litigation pending or threatened before
any court, governmental agency, or authority or other forum in which any GSMS
Entity or any of its Properties (or GSMS in respect of such Property) has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release, discharge, spillage, or disposal into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any GSMS Entity or any of its Properties, except for such
Litigation pending or threatened that would not have, individually or in the
aggregate, a GSMS Material Adverse Effect, nor is there any reasonable basis
for any Litigation of a type described in this sentence, except such as would
not have, individually or in the aggregate, a GSMS Material Adverse Effect.
(c) During the period of (i) any GSMS Entity's ownership
or operation of any of their respective current Properties, or (ii) any GSMS
Entity's holding of a security interest in a Property, there have been no
releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, adjacent to, or affecting (or reasonably likely to affect) such
properties, except such as would not have, individually or in the aggregate, a
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GSMS Material Adverse Effect. Prior to the period of (i) any GSMS Entity's
ownership or operation of any of their respective current properties, or (ii)
any GSMS Entity's holding of a security interest in a Property, to the
Knowledge of GSMS, there were no releases, discharges, spillages, or disposals
of Hazardous Material in, on, under, or affecting any such Property, except
such as would not have, individually or in the aggregate, a GSMS Material
Adverse Effect.
5.12 COMPLIANCE WITH LAWS. Except as disclosed in Section 5.12
of the GSMS Disclosure Memorandum, each GSMS Entity has in effect all Permits
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which
would not have, individually or in the aggregate, a GSMS Material Adverse
Effect, and there has occurred no Default under any such Permit, other than
Defaults which would not have, individually or in the aggregate, a GSMS
Material Adverse Effect. Except as disclosed in Section 5.12 of the GSMS
Disclosure Memorandum, none of the GSMS Entities:
(a) is in Default under any of the provisions of its
Certificate or Articles of Incorporation or Bylaws (or other governing
instruments);
(b) is in Default under any Laws, Orders, or Permits
applicable to it or by which its properties are bound, except for Defaults
which would not have, individually or in the aggregate, a GSMS Material Adverse
Effect; or
(c) since January 1, 1993, has received any notification
or communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any GSMS Entity is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance would have, individually or in the aggregate, a GSMS Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of which
would have, individually or in the aggregate, a GSMS Material Adverse Effect, or
(iii) requiring any GSMS Entity to enter into or consent to the issuance of a
cease and desist order, formal agreement, directive, commitment, or memorandum
of understanding, or to adopt any Board resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to PSS.
5.13 LABOR RELATIONS. No GSMS Entity is the subject of any
Litigation asserting that it or any other GSMS Entity has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other GSMS Entity to
bargain with any labor organization as to wages or conditions of employment,
nor is any GSMS Entity party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving any GSMS Entity, pending or
threatened, or to the Knowledge of GSMS, is there any activity involving any
GSMS Entity's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
(a) GSMS has disclosed in Section 5.14 of the GSMS
Disclosure Memorandum, and has delivered or made available to PSS prior to the
execution of this Agreement copies in each case of, all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any GSMS Entity or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors,
or other beneficiaries are eligible to participate (collectively, the "GSMS
Benefit Plans"). Any of the GSMS Benefit Plans which is an
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"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "GSMS ERISA Plan." Each GSMS ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "GSMS Pension Plan." No GSMS
Pension Plan is or has been a multiemployer plan within the meaning of Section
3(37) of ERISA.
(b) All GSMS Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which would have, individually or in the
aggregate, a GSMS Material Adverse Effect. Each GSMS ERISA Plan which is
intended to be qualified under Section 401(a) of the Internal Revenue Code has
received a favorable determination letter from the Internal Revenue Service,
and GSMS is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. No GSMS Entity has engaged in a
transaction with respect to any GSMS Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject any
GSMS Entity to a Tax imposed by either Section 4975 of the Internal Revenue
Code or Section 502(i) of ERISA.
(c) No GSMS Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, based on
actuarial assumptions set forth for such plan's most recent actuarial
valuation. Since the date of the most recent actuarial valuation, there has
been (i) no material change in the financial position of a GSMS Pension Plan,
(ii) no change in the actuarial assumptions with respect to any GSMS Pension
Plan, and (iii) no increase in benefits under any GSMS Pension Plan as a result
of plan amendments or changes in applicable Law which would have, individually
or in the aggregate, a GSMS Material Adverse Effect or materially adversely
affect the funding status of any such plan. Neither any GSMS Pension Plan nor
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any GSMS Entity, or the single-employer
plan of any ERISA Affiliate has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA.
No GSMS Entity has provided, or is required to provide, security to a GSMS
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the Effective
Time, no Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any GSMS Entity with respect to any ongoing, frozen,
or terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. No GSMS Entity has incurred any withdrawal Liability with respect
to a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any GSMS Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the GSMS
Disclosure Memorandum, no GSMS Entity has any Liability for retiree health and
life benefits under any of the GSMS Benefit Plans and there are no restrictions
on the rights of such GSMS Entity to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.14 of the GSMS
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any GSMS Entity from
any GSMS Entity under any GSMS Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any GSMS Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any GSMS Entity and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the GSMS Financial Statements to the extent
required by and in accordance with GAAP.
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5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of
the GSMS Disclosure Memorandum or otherwise reflected in the GSMS Financial
Statements, none of the GSMS Entities, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting,
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $75,000, (ii) any Contract relating to the borrowing
of money by any GSMS Entity or the guarantee by any GSMS Entity of any such
obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts any GSMS Entity from engaging in
any business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract between or among GSMS
Entities, (v) any Contract relating to the purchase or sale of any goods or
services (other than Contracts entered into in the ordinary course of business
and involving payments under any individual Contract not in excess of $250,000),
and (vi) any other Contract or amendment thereto that would be required to be
filed as an exhibit to a Form 10-K filed by GSMS with the SEC as of the date of
this Agreement (together with all Contracts referred to in Sections 5.9(d) and
(e) and 5.14(a), the "GSMS Contracts"). With respect to each GSMS Contract and
except as disclosed in Section 5.15 of the GSMS Disclosure Memorandum: (i) the
Contract is in full force and effect; (ii) no GSMS Entity is in Default
thereunder, other than Defaults which would not have, individually or in the
aggregate, a GSMS Material Adverse Effect; (iii) no GSMS Entity has repudiated
or waived any material provision of any such Contract; and (iv) no other party
to any such Contract is, to the Knowledge of GSMS, in Default in any respect,
other than Defaults which would not have, individually or in the aggregate, a
GSMS Material Adverse Effect, or has repudiated or waived any material provision
thereunder. All of the indebtedness of any GSMS Entity for money borrowed is
prepayable at any time by such GSMS Entity without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of
the GSMS Disclosure Memorandum, there is no Litigation pending, or, to the
Knowledge of GSMS, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any GSMS Entity, or against any director,
employee or employee benefit plan of any GSMS Entity, or against any Asset,
interest, or right of any of them, that would have, individually or in the
aggregate, a GSMS Material Adverse Effect, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any GSMS Entity, that would have, individually or in the
aggregate, a GSMS Material Adverse Effect. Section 5.16 of the GSMS Disclosure
Memorandum contains a summary of all Litigation pending as of the date of this
Agreement to which any GSMS Entity is a party and which names a GSMS Entity as
a defendant or cross-defendant.
5.17 REPORTS. Since January 1, 1993, or the date of organization
if later, each GSMS Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities (except failures to file which
would not have, individually or in the aggregate, a GSMS Material Adverse
Effect). As of their respective dates, each of such reports and documents,
including the financial statements, exhibits, and schedules thereto, complied in
all material respects with all applicable Laws. As of its respective date, each
such report and document did not, in all material respects, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by any GSMS Entity or
any Affiliate thereof to PSS pursuant to this Agreement or any other document,
agreement, or instrument delivered pursuant hereto contains or will contain any
untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to
be supplied by any GSMS Entity or, to GSMS's Knowledge, any Affiliate thereof
for inclusion in the Joint Proxy Statement to be mailed to each Party's
stockholders in connection with the Stockholders' Meetings, and any other
documents to be filed by a GSMS Entity or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Joint Proxy Statement, when first mailed to the stockholders of GSMS and
PSS, be false or misleading with respect to any material fact, or omit to state
any material fact necessary to make the statements therein, in light of the
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circumstances under which they were made, not misleading, or, in the case of
the Joint Proxy Statement or any amendment thereof or supplement thereto, at
the time of the Stockholders' Meetings, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Stockholders' Meetings. All documents that any GSMS Entity or
any Affiliate thereof is responsible for filing with any Regulatory Authority
in connection with the transactions contemplated hereby will comply as to form
in all material respects with the provisions of applicable Law.
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No GSMS Entity or,
to GSMS's Knowledge, any Affiliate thereof has taken or agreed to take any
action that will (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
5.20 STATE TAKEOVER LAWS. Each GSMS Entity has taken all
necessary action to exempt the transactions contemplated by this Agreement
from, or if necessary to challenge the validity or applicability of, any
applicable "moratorium," "fair price," "business combination," "control share,"
or other anti-takeover Laws (collectively, "Takeover Laws") under the DGCL.
5.21 OPINION OF FINANCIAL ADVISOR. GSMS has received the opinion
of NationsBanc Montgomery Securities, Inc., dated the date of this Agreement,
to the effect that, as of the date thereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of GSMS Common Stock, a signed copy of
which will be delivered to PSS promptly after receipt thereof.
5.22 BOARD RECOMMENDATION. The Board of Directors of GSMS, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, and
the GSMS Stock Option Agreement and the transactions contemplated thereby,
taken together, are fair to and in the best interests of the stockholders and
(ii) resolved to recommend that the holders of the shares of GSMS Common Stock
approve this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PSS
PSS hereby represents and warrants to GSMS as follows:
6.1 ORGANIZATION, STANDING, AND POWER. PSS is a corporation
duly organized, validly existing, and in good standing under the Laws of the
State of Florida, and has the corporate power and authority to carry on its
business as now conducted and to own, lease and operate its material Assets.
PSS is duly qualified or licensed to transact business as a foreign corporation
in good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed would not have, individually
or in the aggregate, a PSS Material Adverse Effect. The minute book and other
organizational documents for PSS have been made available to GSMS for its
review and, except as disclosed in Section 6.1 of the PSS Disclosure
Memorandum, are true and complete in all material respects as in effect as of
the date of this Agreement and accurately reflect in all material respects all
amendments thereto and all proceedings of the Board of Directors and
stockholders thereof.
6.2 AUTHORITY OF PSS; NO BREACH BY AGREEMENT.
(a) PSS has the corporate power and authority necessary
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution,
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delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of PSS, subject to the approval of (i) an amendment to the Articles of
Incorporation of PSS to increase the authorized capital stock of PSS, and (ii)
the issuance of the shares of PSS Common Stock pursuant to the Merger by a
majority of the votes cast at the PSS Stockholders' Meeting (assuming for such
purpose that the votes cast in respect of such proposal represent a majority of
the outstanding PSS Common Stock), which are the only stockholder votes
required for approval of this Agreement and consummation of the merger by PSS.
Subject to such requisite stockholder approval, and assuming due authorization,
execution and delivery by GSMS, this Agreement represents a legal, valid, and
binding obligation of PSS, enforceable against PSS in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement
by PSS or Merger Corp., nor the consummation by PSS or Merger Corp. of the
transactions contemplated hereby, nor compliance by PSS or Merger Corp. with
any of the provisions hereof, will (i) subject to the approval of an amendment
to the Articles of Incorporation of PSS to increase the authorized capital
stock of PSS, conflict with or result in a breach of any provision of PSS's
Articles of Incorporation or Merger Corp.'s Certificate of Incorporation or
either of their Bylaws or any resolution adopted by the board of directors or
the stockholders of any PSS Entity, or (ii) except as disclosed in Section
6.2(b) of the PSS Disclosure Memorandum, constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any
Lien on any Asset of any PSS Entity under, any Contract or Permit of any PSS
Entity, where such Default or Lien, or any failure to obtain such Consent,
would have, individually or in the aggregate, a PSS Material Adverse Effect,
or, (iii) subject to receipt of the requisite Consents referred to in Section
9.1(b), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to any PSS Entity or any of their
respective material Assets.
(c) Other than in connection or compliance with the
provisions of the Securities Laws, applicable state corporate and securities
Laws, and rules of the NASD, and other than Consents required from Regulatory
Authorities, and other than notices to or filings with the Internal Revenue
Service, or under the HSR Act, and other than Consents, filings, or
notifications which, if not obtained or made, would not have, individually or
in the aggregate, a PSS Material Adverse Effect, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
PSS or Merger Corp. of the Merger and the other transactions contemplated in
this Agreement.
6.3 CAPITAL STOCK.
(a) The authorized capital stock of PSS consists of (i)
60,000,000 shares of PSS Common Stock, of which 40,696,097 shares are issued
and outstanding as of the date of this Agreement, and (ii) 1,000,000 shares of
PSS Preferred Stock, none of which are issued and outstanding. All of the
issued and outstanding shares of PSS Capital Stock are, and all of the shares
of PSS Common Stock to be issued in exchange for shares of GSMS Common Stock
upon consummation of the Merger, when issued in accordance with the terms of
this Agreement, will be, duly and validly issued and outstanding and fully paid
and non-assessable. None of the outstanding shares of PSS Capital Stock has
been, and none of the shares of PSS Common Stock to be issued in exchange for
shares of GSMS Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past stockholders of PSS.
(b) Except as set forth in Section 6.3(a) or in the PSS
Stock Option Agreement, or as disclosed in Section 6.3(b) of the PSS Disclosure
Memorandum, there are no shares of capital stock or other equity securities of
PSS outstanding and no outstanding Equity Rights relating to the capital stock
of PSS.
6.4 PSS SUBSIDIARIES. PSS has disclosed in Section 6.4 of the
PSS Disclosure Memorandum all of the PSS Subsidiaries as of the date of this
Agreement that are corporations (identifying its jurisdiction of incorporation,
each jurisdiction in which the character of its Assets or the nature or conduct
of its business requires
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it to be qualified and/or licensed to transact business, and the number of
shares owned and percentage ownership interest represented by such share
ownership) and all of the PSS Subsidiaries that are general or limited
partnerships or other non-corporate entities (identifying the Law under which
such entity is organized, each jurisdiction in which the character of its
Assets or the nature or conduct of its business requires it to be qualified
and/or licensed to transact business, and the amount and nature of the
ownership interest therein). Except as disclosed in Section 6.4 of the PSS
Disclosure Memorandum, PSS or one of its wholly owned Subsidiaries owns all of
the issued and outstanding shares of capital stock (or other equity interests)
of each PSS Subsidiary. No capital stock (or other equity interest) of any PSS
Subsidiary are or may become required to be issued (other than to another PSS
Entity) by reason of any Equity Rights, and there are no Contracts by which any
PSS Subsidiary is bound to issue (other than to another PSS Entity) additional
shares of its capital stock (or other equity interests) or Equity Rights or by
which any PSS Entity is or may be bound to transfer any shares of the capital
stock (or other equity interests) of any PSS Subsidiary (other than to another
PSS Entity). There are no Contracts relating to the rights of any PSS Entity
to vote or to dispose of any shares of the capital stock (or other equity
interests) of any PSS Subsidiary. All of the shares of capital stock (or other
equity interests) of each PSS Subsidiary held by a PSS Entity are fully paid
and non-assessable and are owned by the PSS Entity free and clear of any Lien.
Except as disclosed in Section 6.4 of the PSS Disclosure Memorandum, each PSS
Subsidiary is a corporation, and is duly organized, validly existing, and (as
to corporations) in good standing under the Laws of the jurisdiction in which
it is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease and operate its Assets and to carry on its
business as now conducted. Each PSS Subsidiary is duly qualified or licensed
to transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets
or the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so qualified
or licensed would not have, individually or in the aggregate, a PSS Material
Adverse Effect. The minute book and other organizational documents for each
PSS Subsidiary have been made available to GSMS for its review, and, except as
disclosed in Section 5.4 of the PSS Disclosure Memorandum, are true and
complete in all material respects as in effect as of the date of this Agreement
and accurately reflect in all material respects all amendments thereto and all
proceedings of the Board of Directors and stockholders thereof.
6.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) PSS has timely filed and made available to GSMS all
SEC Documents required to be filed by PSS since it became subject to the
periodic reporting requirements of the Securities Laws (the "PSS SEC Reports").
The PSS SEC Reports (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Laws and (ii) did not, at
the time they were filed (or, if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such PSS SEC Reports or necessary in order to make the statements in
such PSS SEC Reports, in light of the circumstances under which they were made,
not misleading. No PSS Subsidiary is required to file any SEC Documents.
(b) Each of the PSS Financial Statements (including, in
each case, any related notes) contained in the PSS SEC Reports, including any
PSS SEC Reports filed after the date of this Agreement until the Effective
Time, complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim statements, as permitted by Form 10-Q of
the SEC), and fairly presented in all material respects the consolidated
financial position of PSS and its Subsidiaries as at the respective dates and
the consolidated results of operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No PSS Entity has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a PSS Material Adverse Effect, except Liabilities which are accrued
or reserved against in the consolidated balance sheets of PSS as of March 28,
1997 and September 30, 1997, included in the PSS Financial Statements delivered
prior to the date of this Agreement or reflected in the notes thereto, or
except as disclosed in Section 6.6 of the PSS Disclosure Memorandum, incurred
since September 30,
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1997 in the ordinary course of business consistent with past practices, except
those Liabilities which would not have a PSS Material Adverse Effect. Except
as disclosed in Section 6.6 of the PSS Disclosure Memorandum, no PSS Entity has
incurred or paid any Liability since September 30, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which would have, individually or in the
aggregate, a PSS Material Adverse Effect or (ii) in connection with the
transactions contemplated by this Agreement.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the PSS Financial Statements delivered prior to the date of this Agreement
or as disclosed in Section 6.7 of the PSS Disclosure Memorandum, (i) since
March 28, 1997, there has been no PSS Material Adverse Effect, and (ii) since
September 30, 1997, the PSS Entities have not taken any action, or failed to
take any action, prior to the date of this Agreement, which action or failure,
if taken after the date of this Agreement, would represent or result in a
material breach or violation of any of the covenants and agreements of PSS
provided in Article 7.
6.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of any of the PSS Entities have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before March 28, 1997, and on or before the date of the most recent fiscal year
end immediately preceding the Effective Time, and all Tax Returns filed are
complete and accurate in all material respects. All Taxes shown on filed Tax
Returns have been paid. There is no audit examination, deficiency, or refund
Litigation with respect to any Taxes, except as reserved against in the PSS
Financial Statements or as disclosed in Section 6.8 of the PSS Disclosure
Memorandum. PSS's federal income Tax Returns have been audited and accepted
through March 31, 1994. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid.
There are no Liens with respect to Taxes upon any of the Assets of the PSS
entities, except for any such Liens which would not have a PSS Material Adverse
Effect.
(b) None of the PSS Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that relate to years currently under examination
by the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(c) The provision for any Taxes due or to become due for
any of the PSS Entities for the period or periods through and including the
date of the respective PSS Financial Statements that has been made and is
reflected on such PSS Financial Statements is sufficient to cover all such
Taxes.
(d) Deferred Taxes of the PSS Entities have been provided
for in accordance with GAAP.
(e) None of the PSS Entities is a party to any Tax
allocation or sharing agreement and none of the PSS Entities has been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was PSS) or has any Liability for Taxes
of any Person (other than PSS and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
(f) Each of the PSS Entities is in compliance with, and
its records contain all information and documents (including properly completed
IRS Forms W-9) necessary to comply with, all applicable information reporting
and Tax withholding requirements under federal, state, and local Tax Laws, and
such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code.
(g) Except as disclosed in Section 6.8 of the PSS
Disclosure Memorandum, none of the PSS Entities has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 280G or 162(m) of the Internal Revenue Code.
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(h) There has not been an ownership change, as defined in
Internal Revenue Code Section 382(g), of the PSS Entities that occurred during
or after any Taxable Period in which the PSS Entities incurred a net operating
loss that carries over to any Taxable Period ending after December 31, 1996.
(i) Except as set forth in Section 6.8 of the PSS
Disclosure Memorandum, no PSS Entity has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
6.9 ASSETS.
(a) Except as disclosed in Section 6.9 of the PSS
Disclosure Memorandum or as disclosed or reserved against in the PSS Financial
Statements, the PSS Entities have good and marketable title, free and clear of
all Liens, to all of their respective Assets, except for any such Liens or
other defects of title which would not have a PSS Material Adverse Effect. All
tangible properties used in the businesses of the PSS Entities are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with PSS's past practices.
(b) All items of inventory, net of reserves, of the PSS
Entities reflected on the most recent balance sheet included in the PSS
Financial Statements delivered prior to the date of this Agreement and prior to
the Effective Time consisted and will consist, as applicable, of items of a
quality and quantity usable and saleable in the ordinary course of business
consistent with past practices and conform to generally accepted standards in
the industry in which the PSS Entities are a part.
(c) The accounts receivable of the PSS Entities as set
forth on the most recent balance sheet included in the PSS Financial Statements
delivered prior to the date of this Agreement or arising since the date thereof
are valid and genuine; have arisen solely out of bona fide sales and deliveries
of goods, performance of services and other business transactions in the
ordinary course of business consistent with past practice; are not subject to
valid defenses, set-offs or counterclaims; and are recorded at the full amount
thereof less, in the case of accounts receivable appearing on the most recent
balance sheet included in the PSS Financial Statements delivered prior to the
date of this Agreement, the recorded allowance for collection losses on such
balance sheet. The allowance for collection losses on such balance sheet has
been determined in accordance with GAAP.
(d) All Assets which are material to PSS's business on a
consolidated basis, held under leases or subleases by any of the PSS Entities,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect.
(e) The PSS Entities currently maintain insurance similar
in amounts, scope and coverage to that maintained by other peer organizations.
None of the PSS Entities has received notice from any insurance carrier that
(i) such insurance will be canceled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. Except as disclosed in Section 6.9 of the PSS
Disclosure Memorandum, there are presently no claims pending under such
policies of insurance and no notices have been given by any PSS Entity under
such policies.
(f) The Assets of the PSS Entities include all assets
required to operate the business of the PSS Entities as presently conducted.
6.10 INTELLECTUAL PROPERTY. Each PSS Entity owns or has a
license to use all of the Intellectual Property used by such PSS Entity in the
course of its business. Each PSS Entity is the owner of or has a license to
any Intellectual Property sold or licensed to a third party by such PSS Entity
in connection with such PSS Entity's business operations, and such PSS Entity
has the right to convey by sale or license any Intellectual Property so
conveyed. No PSS Entity is in Default under any of its Intellectual Property
licenses. No proceedings have been
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instituted, or are pending or to the Knowledge of PSS threatened, which
challenge the rights of any PSS Entity with respect to Intellectual Property
used, sold or licensed by such PSS Entity in the course of its business, nor
has any person claimed or alleged any rights to such Intellectual Property.
The conduct of the business of the PSS Entities does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 6.10
of the PSS Disclosure Memorandum, no PSS Entity is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property.
6.11 ENVIRONMENTAL MATTERS.
(a) Each PSS Entity and its Properties are, and have
been, in compliance with all Environmental Laws, except for violations which
would not have, individually or in the aggregate, a PSS Material Adverse
Effect.
(b) There is no Litigation pending or threatened before
any court, governmental agency, or authority or other forum in which any PSS
Entity or any of its Properties (or PSS in respect of such Property) has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release, discharge, spillage, or disposal into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any PSS Entity or any of its Properties, except for such Litigation
pending or threatened that would not have, individually or in the aggregate, a
PSS Material Adverse Effect, nor is there any reasonable basis for any
Litigation of a type described in this sentence, except such as would not have,
individually or in the aggregate, a PSS Material Adverse Effect.
(c) During the period of (i) any PSS Entity's ownership
or operation of any of their respective current properties, or (ii) any PSS
Entity's holding of a security interest in a Property, there have been no
releases, discharges, spillages, or disposals of Hazardous Material in, on,
under, adjacent to, or affecting (or reasonably likely to affect) such
Properties, except such as would not have, individually or in the aggregate, a
PSS Material Adverse Effect. Prior to the period of (i) any PSS Entity's
ownership or operation of any of their respective current properties, or (ii)
any PSS Entity's holding of a security interest in a Property, to the Knowledge
of PSS, there were no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, or affecting any such Property, except such
as would not have, individually or in the aggregate, a GSMS Material Adverse
Effect.
6.12 COMPLIANCE WITH LAWS. Each PSS Entity has in effect all
Permits necessary for it to own, lease or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which would not have, individually or in the aggregate, a PSS Material Adverse
Effect, and there has occurred no Default under any such Permit, other than
Defaults which would not have, individually or in the aggregate, a PSS Material
Adverse Effect. Except as disclosed in Section 6.12 of the PSS Disclosure
Memorandum, none of the PSS Entities:
(a) is in Default under its Articles of Incorporation or
Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits
applicable to it or by which its properties are bound, except for Defaults which
would not have, individually or in the aggregate, a PSS Material Adverse
Effect; or
(c) since January 1, 1993, has received any notification
or communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting that
any PSS Entity is not in compliance with any of the Laws or Orders which such
governmental authority or Regulatory Authority enforces, where such
noncompliance would have, individually or in the aggregate, a PSS Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of which
would have, individually or in the aggregate, a PSS Material Adverse Effect, or
(iii) requiring any PSS Entity to enter into or consent to the issuance of a
cease and desist order, formal
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agreement, directive, commitment or memorandum of understanding, or to adopt
any Board resolution or similar undertaking, which restricts materially the
conduct of its business.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to GSMS.
6.13 LABOR RELATIONS. No PSS Entity is the subject of any
Litigation asserting that it or any other PSS Entity has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other PSS Entity to
bargain with any labor organization as to wages or conditions of employment,
nor is any PSS Entity party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving any PSS Entity, pending or
threatened, or to the Knowledge of PSS, is there any activity involving any PSS
Entity's employees seeking to certify a collective bargaining unit or engaging
in any other organization activity.
6.14 EMPLOYEE BENEFIT PLANS.
(a) PSS has delivered or made available to GSMS prior to
the execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by,
sponsored in whole or in part by, or contributed to by any PSS Entity or ERISA
Affiliate thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries and under which
employees, retirees, dependents, spouses, directors, independent contractors,
or other beneficiaries are eligible to participate (collectively, the "PSS
Benefit Plans"). Any of the PSS Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "PSS ERISA Plan." Each PSS ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j) of the Internal Revenue Code) is
referred to herein as a "PSS Pension Plan." No PSS Pension Plan is or has been
a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All PSS Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a PSS Material Adverse Effect. Each PSS
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and PSS is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. No PSS Entity
has engaged in a transaction with respect to any PSS Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any PSS Entity to a Tax imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA.
(c) No PSS Pension Plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, based on
actuarial assumptions set forth for such plan's most recent actuarial
valuation. Since the date of the most recent actuarial valuation, there has
been (i) no material change in the financial position of a PSS Pension Plan,
(ii) no change in the actuarial assumptions with respect to any PSS Pension
Plan, and (iii) no increase in benefits under any PSS Pension Plan as a result
of plan amendments or changes in applicable Law which would have, individually
or in the aggregate, a PSS Material Adverse Effect or materially adversely
affect the funding status of any such plan. Neither any PSS Pension Plan nor
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any PSS Entity, or the single-employer plan
of any ERISA Affiliate has an "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA.
No PSS Entity has provided, or is required to provide, security to a PSS
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code.
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(d) Within the six-year period preceding the Effective
Time, no Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by any PSS Entity with respect to any ongoing, frozen
or terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. No PSS Entity has incurred any withdrawal Liability with respect to
a multiemployer plan under Subtitle B of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any PSS Pension Plan or by any ERISA Affiliate within the 12-month period
ending on the date hereof.
(e) Except as disclosed in Section 6.14 of the PSS
Disclosure Memorandum, no PSS Entity has any Liability for retiree health and
life benefits under any of the PSS Benefit Plans and there are no restrictions
on the rights of such PSS Entity to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 6.14 of the PSS
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any PSS Entity from
any PSS Entity under any PSS Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any PSS Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any PSS Entity and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the PSS Financial Statements to the extent
required by and in accordance with GAAP.
6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15 of
the PSS Disclosure Memorandum or otherwise reflected in the PSS Financial
Statements, none of the PSS Entities, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound or affected by, or
receives benefits under, (i) any employment, severance, termination, consulting
or retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $75,000, (ii) any Contract relating to the borrowing
of money by any PSS Entity or the guarantee by any PSS Entity of any such
obligation (other than Contracts evidencing trade payables and Contracts
relating to borrowings or guarantees made in the ordinary course of business),
(iii) any Contract which prohibits or restricts any PSS Entity from engaging in
any business activities in any geographic area, line of business or otherwise
in competition with any other Person, (iv) any Contract relating to the
purchase or sale of any goods or services (other than Contracts entered into in
the ordinary course of business and involving payments under any individual
contract not in excess of $250,000, or (v) any other Contract or amendment
thereto that would be required to be filed as an exhibit to a Form 10-K filed
by PSS with the SEC as of the date of this Agreement that has not been filed as
an exhibit to PSS's Form 10-K filed for the fiscal year ended March 28, 1997,
or in an SEC Document and identified to GSMS (together with all Contracts
referred to in Sections 6.9(d) and (e) and 6.14(a), the "PSS Contracts"). With
respect to each PSS Contract and except as disclosed in Section 6.15 of the PSS
Disclosure Memorandum: (i) the Contract is in full force and effect; (ii) no
PSS Entity is in Default thereunder, other than Defaults which would not have,
individually or in the aggregate, a PSS Material Adverse Effect; (iii) no PSS
Entity has repudiated or waived any material provision of any such Contract;
and (iv) no other party to any such Contract is, to the Knowledge of PSS, in
Default in any respect, other than Defaults which would not have, individually
or in the aggregate, a PSS Material Adverse Effect, or has repudiated or waived
any material provision thereunder. All of the indebtedness of any PSS Entity
for money borrowed is prepayable at any time by such PSS Entity without penalty
or premium.
6.16 LEGAL PROCEEDINGS. There is no Litigation pending, or, to
the Knowledge of PSS, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any PSS Entity, or against any director,
employee or employee
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benefit plan of any PSS Entity, or against any Asset, interest, or right of any
of them, that is reasonably likely to have, individually or in the aggregate, a
PSS Material Adverse Effect, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any PSS Entity, that are reasonably likely to have, individually or in the
aggregate, a PSS Material Adverse Effect. Section 6.16 of the PSS Disclosure
Memorandum contains a summary of all Litigation pending as of the date of this
Agreement to which any PSS Entity is a party and which names a PSS Entity as a
defendant or cross-defendant or for which any PSS Entity has potential
Liability.
6.17 REPORTS. Except as disclosed in Section 6.17 of the PSS
Disclosure Memorandum, since January 1, 1993, or the date of organization if
later, each PSS Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities. As of their respective dates,
each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of its respective date, each such report and document did
not, in all material respects, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any PSS Entity or
any Affiliate thereof to GSMS pursuant to this Agreement or any other document,
agreement or instrument delivered pursuant hereto contains or will contain any
untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to
be supplied by any PSS Entity or, to PSS's Knowledge, any Affiliate thereof for
inclusion in the Registration Statement to be filed by PSS with the SEC, will,
when the Registration Statement becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied
or to be supplied by any PSS Entity or any Affiliate thereof for inclusion in
the Joint Proxy Statement to be mailed to each Party's stockholders in
connection with the Stockholders' Meetings, and any other documents to be filed
by any PSS Entity or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Joint Proxy
Statement, when first mailed to the stockholders of GSMS and PSS, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Joint Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Stockholders' Meetings, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for the
Stockholders' Meetings. All documents that any PSS Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
6.19 AUTHORITY OF MERGER CORP. Merger Corp. was formed solely
for the purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its operations only
as contemplated hereby. Merger Corp. is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware as a
wholly owned Subsidiary of PSS. The authorized capital stock of Merger Corp.
shall consist of 1,000 shares of Merger Corp. Common Stock, all of which is
validly issued and outstanding, fully paid and nonassessable and is owned by
PSS free and clear of any Lien. Merger Corp. has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Merger Corp.. This Agreement represents a legal, valid, and binding
obligation of Merger Corp., enforceable against Merger Corp. in accordance with
its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought). PSS, as the sole stockholder of Merger Corp., will vote prior
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to the Effective Time the shares of Merger Corp. Common Stock in favor of
approval of this Agreement, as and to the extent required by applicable Law and
no other vote of holders of securities of Merger Corp. is necessary.
6.20 ACCOUNTING, TAX AND REGULATORY MATTERS. No PSS Entity or
any Affiliate thereof has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger from qualifying for pooling-of-interests accounting treatment or as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 9.1(b) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
6.21 OPINION OF FINANCIAL ADVISOR. PSS has received the opinion
of BT Alex. Brown Incorporated, dated the date of this Agreement, to the effect
that the Exchange Ratio is fair, from a financial point of view, to PSS and its
shareholders, a signed copy of which will be delivered to GSMS promptly after
receipt thereof.
6.22 BOARD RECOMMENDATION. The Board of Directors of PSS, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted all of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, and
the PSS Stock Option Agreement and the transactions contemplated thereby, taken
together, are fair to and in the best interests of the stockholders and (ii)
resolved to recommend that the holders of the shares of PSS Common Stock
approve this Agreement.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF GSMS. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of PSS shall have been obtained,
which consent will not be unreasonably withheld, and except as otherwise
expressly contemplated herein or as disclosed in Section 7.1 of the GSMS
Disclosure Memorandum, GSMS shall and shall cause each of its Subsidiaries to
(a) operate its business only in the usual, regular, and ordinary course, (b)
use commercially reasonable efforts consistent with past practices and policies
to preserve intact its business organization and Assets, (c) use commercially
reasonable efforts consistent with past practices and policies to keep
available the services of the present officers, employees and consultants of
GSMS and its subsidiaries and to preserve the present relationship of GSMS and
its Subsidiaries with customers, suppliers and other persons, and (d) take no
action which would (i) materially and adversely affect the ability of any Party
to obtain any material Consents required for the transactions contemplated
hereby without imposition of a condition or restriction of the type referred to
in the last sentences of Section 9.1(b) or 9.1(c), or (ii) materially and
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF GSMS. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
unless the prior written consent of PSS shall have been obtained, which consent
will not be unreasonably withheld, and except as otherwise expressly
contemplated herein, GSMS covenants and agrees that it will not do or agree or
commit to do, or permit any of its Subsidiaries to do or agree or commit to do,
any of the following:
(a) amend the Certificate or Articles of Incorporation,
Bylaws or other governing instruments of any GSMS Entity, or
(b) incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a GSMS Entity to
another GSMS Entity) in excess of an aggregate of $250,000 (for the
GSMS Entities on a consolidated basis) except in the ordinary course of the
business consistent with past practices, or impose, or suffer the imposition, on
any material Asset of any GSMS Entity of any Lien or permit any such Lien to
exist (other than in connection with Liens in effect as of the date hereof that
are disclosed in the GSMS Disclosure Memorandum); or
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(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit plans),
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any GSMS Entity, or declare or pay any dividend
or make any other distribution in respect of GSMS's capital stock; or
(d) except for this Agreement, or pursuant to the
exercise of stock options or common stock purchase warrants outstanding as of
the date hereof and pursuant to the terms thereof in existence on the date
hereof, or pursuant to the GSMS Stock Option Agreement, or as disclosed in
Section 7.2(d) of the GSMS Disclosure Memorandum, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of GSMS Common Stock or any other capital
stock of any GSMS Entity, or any stock appreciation rights, or any option,
warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital
stock of any GSMS Entity or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of GSMS Common Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber (x) any
shares of capital stock of any GSMS Subsidiary (unless any such shares of stock
are sold or otherwise transferred to another GSMS Entity) or (y) any material
Asset other than in the ordinary course of business for reasonable and adequate
consideration; or
(f) except for purchases of U.S. Treasury securities or
U.S. Government agency securities, which in either case have maturities of three
years or less, and except as set forth in Section 7.2(f) of the GSMS Disclosure
Memorandum, purchase any securities or make any material investment, either by
purchase of stock of securities, contributions to capital, Asset transfers, or
purchase of any Assets, in any Person other than a wholly owned GSMS Subsidiary,
or otherwise acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business, or (iii)
the creation of new wholly owned Subsidiaries organized to conduct or continue
activities otherwise permitted by this Agreement; or
(g) grant any increase in compensation or benefits to the
employees or officers of any GSMS Entity, except as disclosed in Section 7.2(g)
of the GSMS Disclosure Memorandum or as required by Law; pay any severance or
termination pay or any bonus other than consistent with policies or with written
Contracts in effect on the date of this Agreement and disclosed in Section
7.2(g) of the GSMS Disclosure Memorandum; and enter into or amend any severance
agreements with officers of any GSMS Entity; grant any material increase in fees
or other increases in compensation or other benefits to directors of any GSMS
Entity except in accordance with past practice disclosed in Section 7.2(g) of
the GSMS Disclosure Memorandum; or voluntarily accelerate the vesting of any
stock options or other stock-based compensation or employee benefits or other
Equity Rights; or
(h) enter into or amend any employment Contract between
any GSMS Entity and any Person having a salary thereunder in excess of $50,000
per year (unless such amendment is required by Law) that the GSMS Entity does
not have the unconditional right to terminate without Liability (other than
Liability for services already rendered), at any time on or after the Effective
Time; or
(i) adopt any new employee benefit plan of any GSMS
Entity or terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any GSMS Entity other than as disclosed in
Section 7.2(i) of the GSMS Disclosure Memorandum or any such change that is
required by Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan, or make any distributions
from such employee benefit plans, except as required by Law, the terms of such
plans or consistent with past practice; or
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<PAGE> 30
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be appropriate
to conform to changes in Tax Laws or regulatory accounting requirements or GAAP;
or
(k) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any GSMS Entity
for material money damages or restrictions upon the operations of any GSMS
Entity; or
(l) except in the ordinary course of business, enter
into, modify, amend or terminate any material Contract (including any loan
Contract with an unpaid balance exceeding $250,000) or waive, release,
compromise or assign any material rights or claims.
7.3 COVENANTS OF PSS. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of GSMS shall have been obtained, which consent will not
be unreasonably withheld, and except as otherwise expressly contemplated
herein, PSS covenants and agrees that it shall and shall cause each of its
Subsidiaries to (w) operate its business only in the usual, regular, and
ordinary course, (x) use commercially reasonable efforts consistent with past
practices and policies to preserve intact its business organization and Assets
and maintain its rights and franchises, (y) use commercially reasonable efforts
consistent with past practices and policies to keep available the services of
the present officers, employees and consultants of PSS and its subsidiaries and
to preserve the present relationship of PSS and its Subsidiaries with
customers, suppliers and other persons, and (z) take no action which would (i)
materially and adversely affect the ability of any Party to obtain any material
Consents required for the transactions contemplated hereby without imposition
of a condition or restriction of the type referred to in the last sentences of
Section 9.1(b) or 9.1(c), or (ii) materially and adversely affect the ability
of any Party to perform its covenants and agreements under this Agreement;
provided, that the foregoing shall not prevent any PSS Entity from
discontinuing or disposing of any of its Assets or business which is not
material if such action is, in the judgment of PSS, desirable in the conduct of
the business of PSS and its Subsidiaries. PSS further covenants and agrees
that it will not do or agree or commit to do, or permit any of its Subsidiaries
to do or agree or commit to do, any of the following without the prior written
consent of GSMS, which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation or Bylaws of PSS,
in each case, in any manner adverse to the holders of GSMS Common Stock;
(b) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be appropriate
to conform to changes in applicable Tax Laws or regulatory accounting
requirements or GAAP;
(c) except for this Agreement, or pursuant to the PSS
Stock Option Agreement, issue, sell, pledge, encumber, authorize the issuance
of, enter into any Contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional shares of
PSS Common Stock or any other capital stock of any PSS Entity, or any stock
appreciation rights, or any option, warrant, or other Equity Right; provided,
however, that nothing contained herein shall prevent or limit PSS from issuing
(i) employee stock options in the ordinary course of business and consistent
with past practices, or (ii) issuing securities in connection with business
acquisitions of third parties, unless the issuance of such securities would
require the approval of the shareholders of PSS under applicable Law; or
(d) enter into any agreement with any Person to acquire the
business of such Person for a purchase price in excess of $75,000,000 whether
payable in shares of PSS Common Stock, cash, or notes.
Notwithstanding anything contained in Section 7.3 or elsewhere in this Agreement
to the contrary, PSS may adopt, prior to the Effective Time, a shareholder
protection rights agreement and declare a dividend of one right thereunder for
each share of PSS Common Stock outstanding as of a record date and the adoption
of such a shareholder protection rights agreement and the declaration of such a
dividend shall not constitute a breach or violation of any representation,
warranty, covenant or agreement of PSS contained in this Agreement.
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7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries which (i) is reasonably likely to have, individually
or in the aggregate, a GSMS Material Adverse Effect or a PSS Material Adverse
Effect, as applicable, or (ii) would cause or constitute a material breach of
any of its representations, warranties, or covenants contained herein, and to
use its reasonable efforts to prevent or promptly to remedy the same.
7.5 REPORTS. Each Party and its Subsidiaries shall file all
reports required to be filed by it with Regulatory Authorities between the date
of this Agreement and the Effective Time and shall deliver to the other Party
copies of all such reports promptly after the same are filed. If financial
statements are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in stockholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
material). As of their respective dates, such reports filed with the SEC will
comply in all material respects with the Securities Laws and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in all material respects in accordance
with Laws applicable to such reports.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; STOCKHOLDER
APPROVAL. As soon as reasonably practicable after execution of this Agreement,
PSS shall prepare and file the Registration Statement with the SEC, and shall
use its reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and take any action required to be taken under the
applicable state Blue Sky or securities Laws in connection with the issuance of
the shares of PSS Common Stock upon consummation of the Merger. GSMS shall
cooperate in the preparation and filing of the Registration Statement and shall
furnish all information concerning it and the holders of its capital stock as
PSS may reasonably request in connection with such action. GSMS shall call a
Stockholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and the Merger and such other related
matters as it deems appropriate. PSS shall call a Stockholders' Meeting, to be
held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon the issuance of
shares of PSS Common Stock pursuant to the Merger and such other related
matters as it deems appropriate, including an amendment to the Articles of
Incorporation of PSS to increase the authorized capital stock of PSS. In
connection with the Stockholders' Meetings, (i) GSMS and PSS shall prepare and
file with the SEC a Joint Proxy Statement and mail such Joint Proxy Statement
to their respective stockholders, (ii) the Parties shall furnish to each other
all information concerning them that they may reasonably request in connection
with such Joint Proxy Statement, (iii) the Board of Directors of GSMS and PSS
shall recommend to their respective stockholders the approval of the matters
submitted for approval (unless the Board of Directors of either PSS or GSMS,
after having consulted with and considered the advice of outside legal counsel,
determines in good faith that the making of such recommendation, or the failure
to withdraw or modify its recommendation, would constitute a breach of
fiduciary duties of the members of such Board of Directors to its stockholders
under applicable law), and (iv) the Board of Directors and officers of GSMS and
PSS shall use their commercially reasonable efforts to obtain such
stockholders' approval (unless the Board of Directors of GSMS or PSS, after
having consulted with and considered the advice of outside counsel, determines
in good faith that the taking of such actions would constitute a breach of
fiduciary duties of the members of such Board of Directors to GSMS's
stockholder under applicable law). PSS and GSMS shall make all necessary
filings with respect to the Merger under the Securities Laws.
8.2 NASDAQ LISTING. PSS shall use its reasonable efforts to
list on the Nasdaq National Market, (i) prior to the Effective Time, the
shares of PSS Common Stock to be issued to the holders of GSMS Common Stock
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<PAGE> 32
pursuant to the Merger, and (ii) not later than the effective date of any
registration statement filed with the SEC pursuant to Section 3.5(d) hereof,
the PSS Common Stock underlying the Options and the GSMS common stock purchase
warrants. PSS shall give all notices and make all filings with the NASD
required in connection with the transactions contemplated herein.
8.3 APPLICATIONS; ANTITRUST NOTIFICATION. PSS shall promptly
prepare and file, and GSMS shall cooperate in the preparation and, where
appropriate, filing of, applications with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by
this Agreement. To the extent required by the HSR Act, each of the Parties
will promptly file with the United States Federal Trade Commission and the
United States Department of Justice the notification and report form required
for the transactions contemplated hereby and any supplemental or additional
information which may reasonably be requested in connection therewith pursuant
to the HSR Act and will comply in all material respects with the requirements
of the HSR Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to
the conditions of this Agreement, GSMS shall execute and file the Certificate
of Merger with the Secretary of State of the State of Delaware in connection
with the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms
and conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its commercially reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its commercially
reasonable efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement or the
GSMS Stock Option Agreement or the PSS Stock Option Agreement, as applicable.
Each Party shall use, and shall cause each of its Subsidiaries to use, its
commercially reasonable efforts to obtain all material Consents necessary or
desirable (in the good faith judgment of the Board of Directors of such Party)
for the consummation of the transactions contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall keep
the other Party advised of all material developments relevant to its business
and to consummation of the Merger and shall permit the other Party to make or
cause to be made such investigation of the business and properties of it and
its Subsidiaries and of their respective financial and legal conditions as the
other Party reasonably requests, provided that such investigation shall be
reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) The Parties' respective obligations under the
Confidentiality Agreement are hereby reaffirmed and adopted, and incorporated
by reference herein.
(c) GSMS shall use its commercially reasonable efforts to
exercise its rights under confidentiality agreements entered into with Persons
which were considering an Acquisition Proposal with respect to GSMS to preserve
the confidentiality of the information relating to the GSMS Entities provided
to such Persons and their Affiliates and Representatives.
(d) Each Party agrees to give the other Party notice as
soon as practicable after any determination by it of any fact or occurrence
relating to the other Party which it has discovered through the course of its
investigation and which represents, or is reasonably likely to represent,
either a material breach of any representation, warranty, covenant or agreement
of the other Party or which has had or is reasonably likely to have a GSMS
Material Adverse Effect or a PSS Material Adverse Effect, as applicable.
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8.7 PRESS RELEASES. Prior to the Effective Time, GSMS and PSS
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 8.7
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 NO SOLICITATION. Except with respect to this Agreement and
the transactions contemplated hereby, no GSMS Entity or PSS Entity nor any
Affiliate thereof nor any Representatives thereof retained by any GSMS Entity
or any PSS Entity shall directly or indirectly solicit any Acquisition Proposal
by any Person. Except to the extent the Board of Directors of GSMS or PSS, as
the case may be, after having consulted with and considered the advice of
outside counsel, determines in good faith that the failure to take such actions
would constitute a breach of fiduciary duties of the members of such Board of
Directors to its stockholders under applicable law, no GSMS Entity or PSS
Entity, as the case may be, or any Affiliate or Representative thereof shall
furnish any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal, but GSMS or PSS, as the case may be, may communicate
information about such an Acquisition Proposal to its stockholders if and to
the extent that it is required to do so in order to comply with its legal
obligations as advised by outside counsel. Any actions by a Party pursuant to
the preceding sentence will not constitute a breach of Section 8.8 or any other
provision hereof. Either Party shall promptly advise the other following the
receipt of any Acquisition Proposal and the details thereof, including, without
limitation, the proposed acquisition price and acquiror, and advise such other
Party of any developments with respect to such Acquisition Proposal promptly
upon the occurrence thereof. Each Party shall (i) immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Affiliates and
Representatives not to engage in any of the foregoing.
8.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties
undertakes and agrees to use its commercially reasonable efforts to cause the
Merger, and to take no action which would cause the Merger not, to qualify for
treatment as a pooling of interests for accounting purposes or as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. Each GSMS Entity and each Stockholder
shall take all necessary steps to exempt the transactions contemplated by this
Agreement from, or if necessary to challenge the validity or applicability of,
any applicable Takeover Law under the DGCL.
8.11 AGREEMENTS OF AFFILIATES. GSMS has disclosed in Section
8.11 of the GSMS Disclosure Memorandum all Persons whom it reasonably believes
is an "affiliate" of GSMS for purposes of Rule 145 under the 1933 Act. GSMS
shall use its reasonable efforts to cause each such Person to deliver to PSS
not later than 10 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 2.1, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of GSMS Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of PSS Common Stock to be received by such Person upon consummation of
the Merger except in compliance with applicable provisions of the 1933 Act and
the rules and regulations thereunder and, because the Merger is to be accounted
for by the pooling-of-interests method of accounting, until such time as
financial results covering at least 30 days of combined operations of PSS and
GSMS have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. Because the Merger is to be
accounted for using the pooling-of-interests method of accounting, shares of
PSS Common Stock issued to such affiliates of GSMS in exchange for shares of
GSMS Common Stock shall not be transferable until such time as financial
results covering at least 30 days of combined operations of PSS and GSMS have
been published within the meaning of Section 201.01 of the SEC's Codification
of Financial Reporting Policies, regardless of whether each such affiliate has
provided the written agreement referred to in this Section 8.11 (and PSS shall
be entitled to place restrictive legends upon certificates for shares of PSS
Common Stock issued to affiliates of GSMS pursuant to this Agreement to enforce
the provisions of this Section 8.11). PSS shall not be required to maintain
the effectiveness of the Registration Statement under the 1933 Act for the
purposes of resale of PSS Common Stock by such affiliates.
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PSS has disclosed in Section 8.11 of the PSS Disclosure Memorandum all Persons
whom it reasonably believes is an "affiliate" of PSS. PSS shall use its
reasonable efforts to cause each such Person to execute and deliver not later
than 10 days after the date of this Agreement, a written agreement,
substantially in the form of Exhibit 2.2, providing that such Person shall not
sell, pledge, transfer or otherwise dispose of any shares of PSS Common Stock
until such time as financial results covering at least 30 days of combined
operations of PSS and GSMS have been published within the meaning of Section
201.01 of the SEC's Codification of Financial Reporting Policies.
8.12 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective
Time, PSS shall provide generally to officers and employees of the GSMS
Entities employee benefits under employee benefit and welfare plans (other than
stock option or other plans involving the potential issuance of PSS Common
Stock), on terms and conditions which when taken as a whole are substantially
similar to those currently provided by the PSS Entities to their similarly
situated officers and employees. For purposes of participation, vesting and
(except in the case of PSS retirement plans) benefit accrual under PSS's
employee benefit plans, the service of the employees of the GSMS Entities prior
to the Effective Time shall be treated as service with a PSS Entity
participating in such employee benefit plans. PSS also shall cause the
Surviving Corporation and its Subsidiaries to honor in accordance with their
terms all employment, severance, consulting and other compensation Contracts
disclosed in Section 8.12 of the GSMS Disclosure Memorandum to PSS between any
GSMS Entity and any current or former director, officer, or employee thereof,
and all provisions for vested benefits or other vested amounts earned or
accrued through the Effective Time under the GSMS Benefit Plans.
8.13 INDEMNIFICATION AND INSURANCE.
(a) The By-Laws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the By-Laws of GSMS on
the date hereof, which provisions shall not be amended, repealed or otherwise
modified for a period of six (6) years from the Effective Time in any manner
that would adversely affect the rights thereunder of individuals who on or
prior to the Effective Time were directors, officers, employees or agents of
GSMS, unless such modification is required by law.
(b) After the Effective Time, PSS will, and will cause the
Surviving Corporation to, indemnify and hold harmless the present and former
officers, directors, employees and agents of GSMS (the "Indemnified Parties")
in respect of acts or omissions occurring on or prior to the Effective Time to
the extent and subject to the terms of GSMS's Certificate of Incorporation and
Bylaws or any indemnification agreement with GSMS officers and directors to
which GSMS is a party, in each case in effect on the date hereof; provided that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law. Without limitation of the foregoing, and subject to
GSMS's Certificate of Incorporation or Bylaws or any applicable indemnification
agreement in effect on this date, in the event any such Indemnified Party is or
becomes involved in any capacity in any action, proceeding or investigation in
connection with any matter relating to this Agreement or the transactions
contemplated hereby occurring on or prior to the Effective Time, PSS shall, or
cause the Surviving Corporation to, pay as incurred such Indemnified Party's
reasonable legal and other expenses (including the cost of any investigation
and preparation) incurred in connection therewith.
(d) To the extent there is any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time) against
an Indemnified Party that arises out of or pertains to any action or omission
in his or her capacity as a director, officer, employee, fiduciary or agent of
GSMS occurring prior to the Effective Time, or arises out of or pertains to the
transactions contemplated by this Agreement for a period of six years after the
Effective Time (whether arising before or after the Effective Time), such
Indemnified Party shall be entitled to be represented by counsel and following
the Effective Time, and subject to GSMS's Certificate of Incorporation or
Bylaws or any applicable indemnification agreement in effect on this date, the
Surviving Corporation and PSS shall pay the reasonable fees and expenses of
such counsel promptly after statements therefor are received and the Surviving
Corporation and PSS will cooperate in the defense of any such matter; provided,
however, that neither the Surviving Corporation not PSS shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld); 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.
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(e) PSS will cause the Surviving Corporation to obtain "tail"
directors' and officers' liability insurance to be effective for a period of
six (6) years following the Effective Time, covering those persons who are
currently covered by GSMS's directors' and officers' liability insurance policy
(a copy of which has been made available to PSS) on terms comparable to those
now applicable to directors and officers of GSMS; provided, that in no event
shall the Surviving Corporation be required to expend in excess of 150% of the
annual premium currently paid for such coverage; 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 150% of
the annual premium.
8.14 VOTING AGREEMENTS. Simultaneously with execution and
delivery of this Agreement, PSS and certain shareholders of GSMS have entered
into the GSMS Voting Agreement in the form of Exhibit 5.1 hereto and GSMS and
certain shareholders of PSS have entered into the PSS Voting Agreement in the
form of Exhibit 5.2 hereto.
8.15 ACCOUNTANTS' LETTERS.
(a) GSMS shall cause PSS to receive from Ernst & Young LLP
letters dated not more than five days prior to (i) the date of the Joint Proxy
Statement and (ii) the Effective Time, with respect to certain financial
information regarding GSMS, in form and substance reasonably satisfactory to
PSS, which letters shall be based upon customary specified procedures
undertaken by such firm in accordance with Statement of Auditing Standard Nos.
72 and 75.
(b) PSS shall cause GSMS to receive from Arthur Andersen LLP
letters dated not more than five days prior to (i) the date of the Joint Proxy
Statement and (ii) the Effective Time, with respect to certain financial
information regarding PSS, in form and substance reasonably satisfactory to
GSMS, which letters shall be based upon customary specified procedures
undertaken by such firm in accordance with Statement of Auditing Standard Nos.
72 and 75.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.6:
(a) STOCKHOLDER APPROVAL. The stockholders of GSMS shall
have approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required
by Law, by the provisions of any governing instruments, or by the rules
of the NASD. The stockholders of PSS shall have approved (i) the
issuance of shares of PSS Common Stock pursuant to the Merger, as and to
the extent required by Law, by the provisions of any governing
instruments, or by the rules of the NASD, and (ii) an amendment to the
Articles of Incorporation of PSS to increase the authorized capital stock
of PSS.
(b) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made
and shall be in full force and effect and all waiting periods required by
Law shall have expired. No Consent obtained from any Regulatory
Authority which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner (including
requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of PSS would so materially and adversely impact the conduct of
the combined businesses of GSMS and PSS that, had such condition or
requirement been known, such Party would not, in its reasonable judgment,
have entered into this Agreement.
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(c) CONSENTS AND APPROVALS. Each Party shall have
obtained any and all Consents required for consummation of the Merger
(other than those referred to in Section 9.1(b)) or for the preventing of
any Default under any Contract or Permit of such Party which, if not
obtained or made, would have, individually or in the aggregate, a GSMS
Material Adverse Effect or a PSS Material Adverse Effect, as applicable.
(d) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal the consummation of the
transactions contemplated by this Agreement.
(e) REGISTRATION STATEMENT. The Registration Statement
shall be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and
all necessary approvals under state securities Laws or the 1933 Act or
1934 Act relating to the issuance or trading of the shares of PSS Common
Stock issuable pursuant to the Merger shall have been received.
(f) NASDAQ LISTING. The shares of PSS Common Stock
issuable pursuant to the Merger shall have been approved for listing on
the Nasdaq National Market, subject to official notice of issuance.
(g) TAX MATTERS. Each Party shall have received a
written opinion of counsel from Alston & Bird LLP, in form reasonably
satisfactory to such Parties (the "Tax Opinion"), to the effect that (i)
the Merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, (ii) the exchange in the Merger of
GSMS Common Stock for PSS Common Stock will not give rise to gain or loss
to the stockholders of GSMS with respect to such exchange (except to the
extent of any cash received), and (iii) none of GSMS, Merger Corp. or PSS
will recognize gain or loss as a consequence of the Merger (except for
amounts resulting from any required change in accounting methods and any
income and deferred gain recognized pursuant to Treasury regulations
issued under Section 1502 of the Internal Revenue Code). In rendering
such Tax Opinion, such counsel shall be entitled to rely upon
representations of officers of GSMS and PSS reasonably satisfactory in
form and substance to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF PSS. The obligations of PSS to
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by PSS pursuant to Section 11.6(a):
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of GSMS contained in this Agreement shall be true and
correct in all material respects at and as of the Effective Time with the
same force and effect as if made at and as of such time, except for (i)
changes contemplated by this Agreement and (ii) those representations and
warranties which address matters only as of a particular date (which
shall be true and correct as of such date).
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of GSMS to be performed and complied
with pursuant to this Agreement and the other agreements contemplated
hereby prior to the Effective Time shall have been duly performed and
complied with in all material respects.
(c) CERTIFICATES. GSMS shall have delivered to PSS (i) a
certificate, dated as of the Effective Time and signed on its behalf by
its chief executive officer and its chief financial officer, to the
effect that the conditions set forth in Section 9.1 as relates to GSMS
and in Section 9.2(a) and 9.2(b) have been satisfied, and (ii) certified
copies of resolutions duly adopted by GSMS's Board of Directors and
stockholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and
the consummation of the transactions contemplated hereby, all in such
reasonable detail as PSS and its counsel shall request.
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(d) OPINION OF COUNSEL. PSS shall have received an
opinion of Testa, Hurwitz & Thibeault LLP, counsel to GSMS, dated as of the
Effective Time, in form reasonably acceptable to PSS, and substantially covering
such matters set forth in Exhibit 3.
(e) POOLING LETTERS. PSS shall have received letters,
addressed to PSS, in form and substance reasonably acceptable to PSS, from
Arthur Andersen LLP, dated the date of this Agreement to the effect that PSS and
its Subsidiaries qualify as an entity that may be a party to a business
combination for which the pooling-of-interests accounting method would be
available, and dated as of the Effective Time to the effect that the Merger will
qualify for pooling-of-interests accounting treatment. PSS also shall have
received letters, dated the date of this Agreement and as of the Effective Time,
addressed to PSS, in form and substance reasonably acceptable to PSS, from Ernst
& Young LLP to the effect that GSMS and its Subsidiaries qualify as an entity
that may be party to a business combination for which the pooling-of-interest
accounting method would be available.
(f) AFFILIATES AGREEMENTS. PSS shall have received from
each affiliate of GSMS and each affiliate of PSS the affiliates letters referred
to in Section 8.11.
(g) HIXON EMPLOYMENT. Hixon shall have executed and
delivered to PSS an employment agreement in form and substance reasonably
satisfactory to PSS and on terms and conditions no less favorable to Hixon than
those contained in the Hixon Employment Agreement.
9.3 CONDITIONS TO OBLIGATIONS OF GSMS. The obligations of GSMS
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by GSMS pursuant to Section 11.6(b):
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of PSS contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time with the same force and
effect as if made at and as of such time, except for (i) changes contemplated by
this Agreement and (ii) those representations and warranties which address
matters only as of a particular date (which shall be true and correct as of such
date).
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of PSS to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby prior to
the Effective Time shall have been duly performed and complied with in all
material respects.
(c) CERTIFICATES. PSS shall have delivered to GSMS (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 9.1 as relates to PSS and in Section 9.3(a) and
9.3(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by PSS's Board of Directors and stockholders and Merger Corp.'s Board of
Directors and sole stockholder evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, all in
such reasonable detail as GSMS and its counsel shall request.
(d) OPINION OF COUNSEL. GSMS shall have received an
opinion of Alston & Bird LLP, counsel to PSS, dated as of the Effective Time, in
form reasonably acceptable to GSMS, and substantially covering such matters set
forth in Exhibit 4.
(e) POOLING LETTERS. GSMS shall have received letters,
addressed to GSMS, in form and substance reasonably acceptable to GSMS, from
Arthur Andersen LLP, dated the date of this Agreement to the effect that PSS and
its Subsidiaries qualify as an entity that may be a party to a business
combination for which the pooling-of-interests accounting method would be
available, and dated as of the Effective Time to the effect that the Merger will
qualify for pooling-of-interests accounting treatment. GSMS also shall have
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received letters, dated the date of this Agreement and as of the Effective Time,
addressed to GSMS, in form and substance reasonably acceptable to GSMS, from
Ernst & Young LLP to the effect that GSMS and its Subsidiaries qualify as a
business entity that may be a party to a business combination for which the
pooling-of-interests method of accounting would be available.
(f) AFFILIATES AGREEMENTS. GSMS shall have received from
each affiliate of GSMS and each affiliate of PSS the affiliates letters
referred to in Section 8.11.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
stockholders of GSMS and PSS or both, this Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of PSS and GSMS; or
(b) By either Party (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event of a material breach
by the other Party of any representation or warranty contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach, such that the conditions set forth
in Sections 9.2(a) and 9.3(a), as applicable, would not then be satisfied by the
breaching Party; or
(c) By either Party (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event of a material breach
by the other Party of any covenant or agreement contained in this Agreement
which cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach, such that the conditions set forth
in Sections 9.2(b) and 9.3(b), as applicable, would not then be satisfied by the
breaching Party; or
(d) By either Party (provided that the terminating Party
in not then in material breach of any representation, warranty, covenant or
other agreement contained in this Agreement) in the event (i) any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final non-appealable
action of such authority or if any action taken by such authority is not
appealed within the time limit for appeal such that the conditions set forth in
Section 9.1(c) would not be satisfied, or (ii) the stockholders of GSMS or PSS
fail to vote their approval of the matters relating to this Agreement and the
transactions contemplated hereby at the Stockholders' Meetings where such
matters were presented to such stockholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall
not have been consummated by June 30, 1998, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
Section 10.1(e); or
(f) By either Party (provided that the terminating Party
is not then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event that any of the
conditions precedent to the obligations of such Party to consummate the Merger
cannot be satisfied or fulfilled by the date specified in Section 10.1(e); or
(g) by either Party, if: (i) the Board of Directors of
GSMS shall have authorized, recommended, publicly proposed or publicly announced
an intention to authorize, recommend or propose to the stockholders of GSMS, or
has entered into an agreement with any Person (other than PSS) to effect an
alternative Acquisition Proposal or (ii) a tender offer or exchange offer for
25% or more of the outstanding
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<PAGE> 39
shares of GSMS Common Stock is commenced and the Board of Directors of GSMS
recommends that the stockholders of the Company tender their shares in such
tender or exchange offer; provided that GSMS shall not be entitled to exercise
any termination rights under clause (i) or (ii) of this Section 10.1(g) unless
(x) any action of the Board of Directors of GSMS is taken in good faith by the
Board of Directors of GSMS after consultation with and consideration of the
advice of its outside counsel and financial advisors, in order to discharge
properly its fiduciary duties to its stockholders and (y) such Party has
complied with its obligations in Section 8.8;
(h) by PSS, if the Board of Directors of GSMS shall
withdraw, modify or change its approval or recommendation of this Agreement or
the Merger in a manner adverse to PSS, provided that PSS is not then in
material breach of any representation, warranty, covenant or agreement
contained in this Agreement;
(i) by either Party, if: (i) the Board of Directors of
PSS shall have authorized, recommended, publicly proposed or publicly announced
an intention to authorize, recommend or propose to the stockholders of PSS, or
has entered into an agreement with any Person (other than GSMS) to effect an
Acquisition Proposal or (ii) a tender offer or exchange offer for 25% or more
of the outstanding shares of PSS Common Stock is commenced and the Board of
Directors of PSS recommends that the stockholders of PSS tender their shares in
such tender or exchange offer; provided that PSS shall not be entitled to
exercise any termination rights under clause (i) or (ii) of this Section
10.1(g) unless (x) any such Acquisition Proposal is conditioned upon the
termination by PSS of this Agreement, (y) any action of the Board of Directors
of PSS is taken in good faith by the Board of Directors of PSS after
consultation with and consideration of the advice of its outside counsel and
financial advisors, in order to discharge properly its fiduciary duties to its
stockholders and (z) such Party has complied with its obligations in Section
8.8; or
(j) By GSMS, if the Board of Directors of PSS shall
withdraw, modify or change its approval or recommendation of the issuance of
the PSS Common Stock pursuant to this Agreement, provided that GSMS is not then
in material breach of any representation, warranty, covenant or agreement
contained in this Agreement.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 8.6(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Sections 10.1(b), 10.1(c) or
10.1(f) shall not relieve the breaching Party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving
rise to such termination. The Stock Option Agreements shall be governed by
their own terms as to their termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The
respective representations, warranties, obligations, covenants, and agreements
of the Parties shall not survive the Effective Time except this Section 10.3
and Articles 1, 2, 3, 4 and 11 and Sections 8.12 and 8.13
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934,
as amended.
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"ACQUISITION PROPOSAL" with respect to a Party shall mean
(a) a merger, consolidation or similar transaction in which the Party is not
the surviving corporation or shall become a subsidiary of another corporation,
(b) except as permitted pursuant to the terms of this Agreement, the
disposition, by sale, lease, exchange or otherwise, of Assets representing 15%
or more of the consolidated Assets of such Party, (c) the issuance, sale or
other disposition of (including by way of merger, consolidation, shares
exchanged or any similar transaction) securities representing 20% of more of
the voting power of such Party.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; or (ii) any officer,
director, partner, employer, or direct or indirect beneficial owner of any 10%
or greater equity or voting interest of such Person
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits (other than the Stock Option Agreements) delivered
pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets,
properties, businesses and rights of such Person of every kind, nature,
character and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or not
carried on the books and records of such Person, and whether or not owned in
the name of such Person or any Affiliate of such Person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger
to be executed by GSMS and filed with the Secretary of State of the State of
Delaware relating to the Merger as contemplated by Section 1.1.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement, dated November 20, 1997, between GSMS and PSS.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant to
any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of any
kind or character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or Permit,
(ii) any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit, where, in any such event, such Default is
reasonably likely to have, individually or in the aggregate, a GSMS Material
Adverse Effect or a PSS Material Adverse Effect, as applicable.
"DGCL" shall mean the Delaware General Corporation Law.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States Environmental
Protection Agency
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and state and local agencies with jurisdiction over, and including common law
in respect of, pollution or protection of the environment, including the
Comprehensive Environmental Response Compensation and Liability Act, as
amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"EQUITY RIGHTS" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXHIBITS" 1.1, 1.2, 2, 3 and 4 shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"FBCA" shall mean the Florida Business Corporation Act.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GSMS COMMON STOCK" shall mean the $0.01 par value common
stock of GSMS.
"GSMS DISCLOSURE MEMORANDUM" shall mean the written
information entitled "GSMS, Inc. Disclosure Memorandum" delivered prior to the
date of this Agreement to PSS describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"GSMS ENTITIES" shall mean, collectively, GSMS and all GSMS
Subsidiaries.
"GSMS FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of GSMS as of
September 30, 1997, and as of December 31, 1996 and 1995, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the nine months ended
September 30, 1997, and for each of the three fiscal years ended December 31,
1996, 1995 and 1994, as filed by GSMS in SEC Documents, and (ii) the
consolidated balance sheets of GSMS (including related notes and schedules, if
any) and related statements of income, changes in stockholders' equity, and
cash flows (including related notes and schedules, if any) included in SEC
Documents filed with respect to periods ended subsequent to September 30, 1997.
"GSMS MATERIAL ADVERSE EFFECT" shall mean an event, change
or occurrence which, individually or in the aggregate, has a material adverse
impact on (i) the financial position, business, or results of operations of
GSMS and its Subsidiaries, taken as a whole, or (ii) the ability of GSMS to
perform its obligations under this Agreement or to consummate the Merger or the
other transactions contemplated by this Agreement.
"GSMS STOCK OPTION AGREEMENT" shall mean the stock option
agreement of even date herewith substantially in the form of Exhibit 1.1 hereto.
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"GSMS STOCK PLANS" shall mean the existing stock option and
other stock-based compensation plans of GSMS designated as follows: 1992 Stock
Plan and 1997 Stock Plan.
"GSMS SUBSIDIARIES" shall mean the Subsidiaries of GSMS,
which shall include the GSMS Subsidiaries described in Section 5.4 and any
corporation or other organization acquired as a Subsidiary of GSMS in the
future and held as a Subsidiary by GSMS at the Effective Time.
"GSMS VOTING AGREEMENT" shall mean the Voting Agreement in
the form of Exhibit 5.1 hereto executed and delivered as of the date of this
Agreement by GSMS and certain shareholders of PSS identified on Schedule I of
such voting agreement.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance
(as those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HIXON EMPLOYMENT AGREEMENT" shall mean an Employment
Agreement, to be negotiated in good faith by the parties, which shall be on
terms no less favorable to Hixon than those set forth in Exhibit 6 and which
shall provide for the payment of salary, bonus and benefits to Hixon which are
not less that those payable to Hixon by GSMS on the date of this Agreement.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added
by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder.
"JOINT PROXY STATEMENT/PROSPECTUS" shall mean the proxy
statement used by GSMS and PSS to solicit the approval of their respective
stockholders of the transactions contemplated by this Agreement, which shall
include the prospectus of PSS relating to the issuance of the PSS Common Stock
to holders of GSMS Common Stock.
"KNOWLEDGE" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean those
facts that are known after due inquiry by the officers and directors of such
Person.
"LAW" shall mean any code, law (including common law),
ordinance, regulation, reporting or licensing requirement, rule, or statute
applicable to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of notes,
bills, checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
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"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, and (iii) Liens which do not materially impair the use of or title
to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, governmental or other
examination or investigation, hearing, administrative or other proceeding
relating to or affecting a Party, its business, its Assets (including Contracts
related to it), or the transactions contemplated by this Agreement.
"MERGER CORP. COMMON STOCK" shall mean the $0.01 par value
common stock of Merger Corp. "NASD" shall mean the National Association of
Securities Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the National Market
System of the National Association of Securities Dealers Automated Quotations
System.
"PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest (including
an interest in a fiduciary capacity), and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property.
"ORDER" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi-judicial decision or award, ruling,
or writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTY" shall mean either GSMS or PSS, and "Parties" shall
mean both GSMS and PSS.
"PERMIT" shall mean any federal, state, local, and
foreign governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party or
that is or may be binding upon or inure to the benefit of any Person or its
securities, Assets, or business.
"PERSON" shall mean a natural person or any legal,
commercial or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited liability
company, trust, business association, group acting in concert, or any person
acting in a representative capacity.
"PSS CAPITAL STOCK" shall mean, collectively, the PSS Common
Stock, the PSS Preferred Stock and any other class or series of capital stock
of PSS.
"PSS COMMON STOCK" shall mean the $0.01 par value common
stock of PSS, together with any associated rights which may be granted under
any shareholder protection rights agreement which may be adopted by PSS after
this date.
"PSS DISCLOSURE MEMORANDUM" shall mean the written
information entitled "PHYSICIAN SALES & SERVICE, INC. Disclosure Memorandum"
delivered prior to the date of this Agreement to GSMS describing in reasonable
detail the matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under which
such disclosure is being made. Information disclosed with respect to one
Section shall not be deemed to be disclosed for purposes of any other Section
not specifically referenced with respect thereto.
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"PSS ENTITIES" shall mean, collectively, PSS and all PSS
Subsidiaries.
"PSS FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of PSS as of
September 30, 1997, and as of March 28, 1997 and 1996, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the six months ended
September 30, 1997, and for each of the three fiscal years ended March 28,
1997, March 29, 1996 and March 30, 1995, as filed by PSS in SEC Documents, and
(ii) the consolidated balance sheets of PSS (including related notes and
schedules, if any) and related statements of income, changes in stockholders'
equity, and cash flows (including related notes and schedules, if any) included
in SEC Documents filed with respect to periods ended subsequent to September
30, 1997.
"PSS MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or in the aggregate, has a material adverse
impact on (i) the financial position, business, or results of operations of PSS
and its Subsidiaries, taken as a whole, or (ii) the ability of PSS to perform
its obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement.
"PSS PREFERRED STOCK" shall mean the $0.01 par value
preferred stock of PSS.
"PSS STOCK OPTION AGREEMENT" shall mean the stock option
agreement of even date herewith substantially in the form of Exhibit 1.2 hereto.
"PSS STOCK PLANS" shall mean the existing stock option and
other stock-based compensation plans of PSS designated as follows: Amended and
Restated 1994 Long-Term Stock Plan, Amended and Restated Long-Term Incentive
Plan, Annual Incentive Plan, Amended and Restated Directors' Stock Plan,
Incentive Stock Option Plan, Taylor Medical Stock Option Plans and the ELITE
Deferred Compensation Plan and Stock Option Grant Program.
"PSS SUBSIDIARIES" shall mean the Subsidiaries of PSS, which
shall include the PSS Subsidiaries described in Section 6.4 and any corporation
or other organization acquired as a Subsidiary of PSS in the future and held as
a Subsidiary by PSS at the Effective Time.
"PSS VOTING AGREEMENT" shall mean the Voting Agreement in
the form of Exhibit 5.2 hereto executed and delivered as of the date of this
Agreement by GSMS and certain shareholders of PSS identified on Schedule I of
such voting agreement.
"REGISTRATION STATEMENT" shall mean the Registration
Statement on Form S-4, or other appropriate form, including any pre-effective
or post-effective amendments or supplements thereto, filed with the SEC by PSS
under the 1933 Act with respect to the shares of PSS Common Stock to be issued
to the stockholders of GSMS in connection with the transactions contemplated by
this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC,
the NASD, the Federal Trade Commission, the United States Department of
Justice, and all other federal, state, county, local or other governmental or
regulatory agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over the
Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative engaged by a
Person.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed, or
required to be filed, by a Party or any of its Subsidiaries with any Regulatory
Authority pursuant to the Securities Laws.
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<PAGE> 45
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the rules
and regulations of any Regulatory Authority promulgated thereunder.
"STOCK OPTION AGREEMENTS" shall mean the GSMS Stock Option
Agreement and the PSS Stock Option Agreement.
"STOCKHOLDERS' MEETINGS" shall mean the respective meetings
of the stockholders of GSMS and PSS to be held pursuant to Section 8.1,
including any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations,
associations, or other business entities of which the entity in question either
(i) owns or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity securities is owned directly or indirectly by
its parent (provided, there shall not be included any such entity the equity
securities of which are owned or controlled in a fiduciary capacity), (ii) in
the case of partnerships, serves as a general partner, (iii) in the case of a
limited liability company, serves as a managing member, or (iv) otherwise has
the ability to elect a majority of the directors, trustees or managing members
thereof.
"SURVIVING CORPORATION" shall mean GSMS as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information
return, or other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county,
local, or foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs duties,
capital stock, paid-up capital, profits, withholding, Social Security, single
business and unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum,
estimated, or other tax or governmental fee of any kind whatsoever, imposes or
required to be withheld by the United States or any state, county, local or
foreign government or subdivision or agency thereof, including any interest,
penalties, and additions imposed thereon or with respect thereto.
(b) The terms set forth below shall have the meanings
ascribed thereto in the referenced sections:
Closing Section 1.2
Effective Time Section 1.3
ERISA Affiliate Section 5.14(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(c)
PSS Benefit Plans Section 6.14
PSS Contracts Section 6.15
PSS ERISA Plan Section 6.14
PSS Pension Plan Section 6.14
PSS SEC Reports Section 6.5(a)
GSMS Benefit Plans Section 5.14
GSMS Contracts Section 5.15
GSMS ERISA Plan Section 5.14
GSMS Options Section 3.6
GSMS Pension Plan Section 5.14
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<PAGE> 46
GSMS SEC Reports Section 5.5(a)
Merger Section 1.1
Takeover Laws Section 5.20
Tax Opinion Section 9.1(h)
(c) Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
11.2 EXPENSES.
(a) Except as otherwise provided in this Section 11.2,
each of the Parties shall bear and pay all direct costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including filing, registration and application fees, printing fees,
and fees and expenses of its own financial or other consultants, investment
bankers, accountants, and counsel, except that each of the Parties shall bear
and pay one-half of the filing fees payable in connection with the Registration
Statement and the Joint Proxy Statement and printing costs incurred in
connection with the printing of the Registration Statement and the Joint Proxy
Statement.
(b) Notwithstanding the foregoing Section 11.2(a),
(i) if this Agreement is terminated by PSS pursuant
to any of Sections 10.1(b), 10.1(c), 10.1(d)(ii) (as relates to approval
of GSMS's stockholders) or 10.1(f) (but only on the basis of the failure
of GSMS to satisfy any of the conditions enumerated in Section 9.2, other
than Section 9.2(d), (e) (as relates to PSS), (f) or (g) (as relates to
Affiliates of PSS)), or
(ii) if the Merger is not consummated as a result of
the failure of GSMS to satisfy any of the conditions set forth in Section
9.1(a) (as such section relates to approval by the stockholders of GSMS),
Section 9.2 (other than Section 9.2(d), (e) (as relates to PSS), (f) or
(g) (as relates to Affiliates of PSS)), or
(iii) if this Agreement is terminated pursuant to
Section 10.1(g) or (h),
then GSMS shall promptly pay PSS the sum of (x) $20,000,000, which amount
represents the Parties' best estimate of the value of the management time,
overhead, opportunity costs and other unallocated costs of PSS incurred by or
on behalf of PSS in connection with the transactions contemplated by this
Agreement which cannot be calculated with certainty, plus (y) all the
out-of-pocket costs and expenses of PSS, including costs of counsel, investment
bankers, actuaries and accountants up to but not exceeding an additional
$1,000,000; provided, however, that in no event shall the amount paid under
clause (x) plus the excess of (A) the "Section 8 Repurchase Consideration" (as
such term is defined in the GSMS Stock Option Agreement and regardless of
whether such repurchase option is exercised) over (B) (1) the aggregate
purchase price paid for such shares if the option has been exercised or (2) the
purchase price under the option if the option has not been exercised exceed
$24,000,000.
(c) Notwithstanding the foregoing Section 11.2(a),
(i) if this Agreement is terminated by GSMS pursuant
to any of Sections 10.1(b), 10.1(c), 10.1(d)(ii) (as relates to approval
of PSS's stockholders) or 10.1(f) (but only on the basis of the failure
of PSS to satisfy any of the conditions enumerated in Section 9.3, other
than Section 9.3(d), (e) (as relates to GSMS) or (f) (as relates to
Affiliates of GSMS)), or
(ii) if the Merger is not consummated as a result of
the failure of PSS to satisfy any of the conditions set forth in Section
9.1(a) (as such section relates to approval by the stockholders of PSS),
Section 9.3 (other than Section 9.3(d), (e) (as relates to GSMS) or (f)
(as relates to Affiliates of GSMS)), or
(iii) if this Agreement is terminated pursuant to
Section 10.1(i) or (j),
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<PAGE> 47
then PSS shall promptly pay GSMS the sum of (x) $20,000,000, which amount
represents the Parties' best estimate of the value of the management time,
overhead, opportunity costs and other unallocated costs of GSMS incurred by or
on behalf of GSMS in connection with the transactions contemplated by this
Agreement which cannot be calculated with certainty, plus (y) all the
out-of-pocket costs and expenses of GSMS, including costs of counsel,
investment bankers, actuaries and accountants up to but not exceeding an
additional $1,000,000; provided, however, that in no event shall the amount
paid under clause (x) plus the excess of (A) the "Section 8 Repurchase
Consideration" (as such term is defined in the GSMS Stock Option Agreement and
regardless of whether such repurchase option is exercised) over (B) (1) the
aggregate purchase price paid for such shares if the option has been exercised
or (2) the purchase price under the option if the option has not been exercised
exceed $24,000,000.
(d) Nothing contained in this Section 11.2 shall
constitute or shall be deemed to constitute liquidated damages for the willful
breach by a Party of the terms of this Agreement or otherwise limit the rights
of the non-breaching Party.
11.3 BROKERS AND FINDERS. Except for NationsBanc Montgomery
Securities, Inc. as to GSMS and except for BT Alex. Brown Incorporated as to
PSS, each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed any broker or finder
or incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by GSMS or by PSS, each of GSMS and
PSS, as the case may be, agrees to indemnify and hold the other Party harmless
of and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements
or understandings with respect thereto, written or oral (except, as to Section
8.6(b), for the Confidentiality Agreement). Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Sections 8.12 and 8.13.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement
may be amended by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after stockholder approval
of this Agreement has been obtained; provided, that after any such approval by
the holders of GSMS Common Stock, there shall be made no amendment that
requires further approval by such stockholders without the further approval of
such stockholders; and further provided, that after any such approval by the
holders of PSS Common Stock, the provisions of this Agreement relating to the
manner or basis in which shares of GSMS Common Stock will be exchanged for
shares of PSS Common Stock shall not be amended after the Stockholders'
Meetings in a manner adverse to the holders of PSS Common Stock without any
requisite approval of the holders of the issued and outstanding shares of PSS
Common Stock entitled to vote thereon.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, PSS, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by GSMS, to waive or extend the time for the compliance
or fulfillment by GSMS of any and all of its obligations under this Agreement,
and to waive any or all of the conditions precedent to the obligations of PSS
under this Agreement, except any condition which, if not satisfied, would
result in the violation of any Law. No such waiver shall be effective unless
in writing signed by a duly authorized officer of PSS.
(b) Prior to or at the Effective Time, GSMS, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by PSS, to waive or extend the time for the compliance
or fulfillment by PSS of any and all
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<PAGE> 48
of its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of GSMS under this Agreement, except
any condition which, if not satisfied, would result in the violation of any
Law. No such waiver shall be effective unless in writing signed by a duly
authorized officer of GSMS.
(c) The failure of any Party at any time or times to
require performance of any provision hereof shall in no manner affect the right
of such Party at a later time to enforce the same or any other provision of
this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be or
construed as a further or continuing waiver of such condition or breach or a
waiver of any other condition or of the breach of any other term of this
Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the Parties and their respective successors
and assigns.
11.8 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, by registered or certified mail, postage
pre-paid, or by courier or overnight carrier, to the persons at the addresses
set forth below (or at such other address as may be provided hereunder), and
shall be deemed to have been delivered as of the date so delivered:
GSMS: Gulf South Medical Supply, Inc.
One Woodgreen Place
Madison, MS 39110
Telecopy Number: (601) 853-4808
Attention: Stanton Keith Pritchard
Copy to Counsel: Testa, Hurwitz & Thibeault, LLP
125 High Street
High Street Tower
Boston, MA 02110
Telecopy Number: (617) 248-7100
Attention: William B. Asher, Jr.
PSS: Physician Sales & Service, Inc.
4345 Southpoint Boulevard
Jacksonville, FL 32216
Telecopy Number: (904) 332-3209
Attention: David A. Smith
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-4777
Attention: J. Vaughan Curtis
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without regard
to any applicable conflicts of Laws.
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<PAGE> 49
11.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in
this Agreement are for reference purposes only and are not part of this
Agreement. Unless otherwise indicated, all references to particular Articles
or Sections shall mean and refer to the referenced Articles and Sections of
this Agreement.
11.12 INTERPRETATIONS. The parties acknowledge and agree that
this Agreement has been reviewed, negotiated, and accepted by all parties and
their attorneys and shall be construed and interpreted according to the
ordinary meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto. Both Parties contributed to the drafting of
this Agreement.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement
to be executed on its behalf by its duly authorized officers as of the day and
year first above written.
PHYSICIAN SALES & SERVICE, INC.
By: /s/ Patrick C. Kelly
--------------------------------------
President
PSS MERGER CORP.
By: /s/ Patrick C. Kelly
--------------------------------------
President
GULF SOUTH MEDICAL SUPPLY, INC.
By: /s/ Thomas G. Hixon
--------------------------------------
President
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<PAGE> 1
EXHIBIT 99.1
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of December 14, 1997, by and between Gulf South Medical Supply, Inc., a Delaware
corporation ("Issuer"), and Physician Sales & Service, Inc., a Florida
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of December 14, 1997 (the "Merger Agreement"),
providing for, among other things, the merger of a wholly owned Subsidiary of
Grantee with and into Issuer, with Issuer as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 3,253,066 shares (as adjusted as set forth herein, the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of common stock, $.01 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $29.06 per share of Issuer
Common Stock.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event;
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (A) the Effective Time, (B) termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence of
a Purchase Event or a Preliminary Purchase Event (other than a termination of
the Merger Agreement by Grantee pursuant to Section 10.1(b) (but only if such
termination was a result of a willful breach by Issuer) or Section 10.1(c)
thereof (each a "Default Termination")), (C) 120 days after a Default
Termination (provided, that if, within 120 days after such termination of the
Merger Agreement, a Purchase Event or a Preliminary Purchase Event shall occur,
then notwithstanding anything to the contrary contained herein (including clause
(D) of this sentence), this Option shall terminate 120 days after the first
occurrence of such an event), and (D) 120 days after any termination of the
Merger Agreement (other than a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event. The term "Holder" shall mean
the holder or holders of the Option from time to time, and which initially is
the Grantee. The rights set forth in Section 8 shall terminate when the right to
exercise the Option terminates (other than as a result of a complete exercise of
the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events
subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any Subsidiary of Grantee) to effect
an Acquisition
<PAGE> 2
Transaction (as defined below). As used herein, the term Acquisition
Transaction shall mean (A) a merger, consolidation or similar transaction
involving Issuer or any of its Subsidiaries (other than transactions solely
between Issuer's Subsidiaries), (B) except as permitted pursuant to Section
7.1 of the Merger Agreement, the disposition, by sale, lease, exchange or
otherwise, of Assets of Issuer or any of its Subsidiaries representing in
either case 15% or more of the consolidated assets of Issuer and its
Subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 25% or more of the voting power of Issuer or any of
its Subsidiaries (any of the foregoing, an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any Subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act), other than a group of which Grantee or any of its
Subsidiaries of Grantee is a member, shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 25% or more of the
then-outstanding shares of Issuer Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively); or
(ii) the holders of Issuer Common Stock shall not have approved
the Merger Agreement at the meeting of such stockholders held for the
purpose of voting on the Merger Agreement, such meeting shall not have been
held or shall have been canceled prior to termination of the Merger
Agreement, or Issuer's Board of Directors shall have withdrawn or modified
in a manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Merger Agreement, in each case after it shall
have been publicly announced that any person (other than Grantee or any
Subsidiary of Grantee) shall have (A) made, or disclosed an intention to
make, a proposal to engage in an Acquisition Transaction, (B) commenced a
Tender Offer or filed a registration statement under the Securities Act
with respect to an Exchange Offer, or (C) filed an application (or given a
notice), whether in draft or final form, under any federal or state statute
or regulation (including a notice filed under the HSR Act) seeking the
Consent to an Acquisition Transaction from any federal or state
governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent and the Closing shall occur immediately following receipt of such
Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Holders (in the aggregate) purchase under the terms
of this Agreement that number of Option Shares which have a "Spread Value" in
excess of the remainder obtained by subtracting (A) all payments under Section
11.2(b) of the Merger Agreement from (B) $24,000,000 (the "Maximum Amount"). For
purposes of this Agreement, "Spread Value" shall mean the difference between (i)
the product of (1) the sum of the total number of Option Shares
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<PAGE> 3
Holder(x)intends to purchase at the Closing Date pursuant to the exercise
of the Option and (y) previously purchased pursuant to the prior exercise of the
Option, and (2) the closing bid price of Issuer Common Stock as quoted on the
Nasdaq National Market on the last trading day immediately preceding the Closing
Date, and (ii) the product of (1) the total number of Option Shares that Holder
(x) intends to purchase at the Closing Date pursuant to the exercise of the
Option and (y) previously purchased pursuant to the prior exercise of the Option
and (2) the applicable Purchase Price of such Option Shares. In the event the
Spread Value exceeds the Maximum Amount, the number of Option Shares which
Holder is entitled to purchase at the Closing Date shall be reduced to that
number of shares necessary such that the Spread Value equals or is less than the
Maximum Amount.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to the Issuer at the address of the Issuer specified in Section 13(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no pre-emptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF DECEMBER
14, 1997. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly executed and
delivered by Issuer. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by
Issuer with any of the provisions hereof will not (i) conflict with or
result in a breach of any provision of its Certificate of Incorporation
or Bylaws or a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, condition or
provisions of any note, bond, debenture, mortgage, indenture, license,
material agreement or other material instrument or obligation to which
Issuer is bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties
or assets. No Consent by any governmental or
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<PAGE> 4
regulatory agency or authority, other than compliance with applicable
federal and state securities laws or the filing of a notification under
the HSR Act, is required of Issuer in connection with the execution and
delivery by Issuer of this Agreement or the consummation by Issuer of the
transactions contemplated hereby.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon
the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Holder to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 7, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid, and
nonassessable, and shall be delivered free and clear of all liens,
claims, charges, and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of Issuer.
(c) The authorized capital stock of Issuer consists of (i) 30,000,000
shares of Gazelle Common Stock, of which 16,347,064 shares are issued and
outstanding at this date, and (ii) 1,000,000 shares of preferred stock,
$.01 par value per share, none of which are issued and outstanding.
Except as disclosed in Section 5.3(b) of the Gazelle Disclosure
Memorandum, there are no other equity securities of Gazelle outstanding
and no outstanding Equity Rights relating to the capital stock of
Gazelle.
6. REPRESENTATIONS AND WARRANTS OF GRANTEE. Grantee hereby represents and
warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or Consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted, without any further action by or on behalf of the
Issuer or Holder, so that, after such issuance, it, together with any shares of
Issuer Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then
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<PAGE> 5
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or
any other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to sell
or otherwise transfer all or substantially all of its Assets to any person,
other than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause (ii),
the Issuer (in each case, such person being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. The Substitute Option Issuer shall also enter
into an agreement with each Holder of the Substitute Option in substantially the
same form as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a merger in which Issuer is the continuing or
surviving person, and (z) the transferee of all or any substantial part
of the Issuer's assets (or the Assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
having the greatest voting rights to be issued by the Substitute Option
Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee or any
Subsidiary of Grantee), (y) the price per share of the Issuer Common
Stock to be paid by any person (other than Grantee or any Subsidiary of
Grantee) pursuant to an agreement with Issuer, and (z) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share on any day as quoted on
the principal trading market or securities exchange on which such shares
are traded as reported by a recognized source chosen by Holder) within
the 30-day period immediately preceding the agreement; provided, that in
the event of a sale of less than all of Issuer's assets, the Assigned
Value shall be the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by Holder (or
by a majority in interest of the Holders if there shall be more than one
Holder (a "Holder Majority")), divided by the number of shares of the
Issuer Common Stock outstanding at the time of such sale. In the event
that an exchange offer is made for the Issuer Common Stock or an
agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for the Issuer Common Stock
shall be determined by a nationally recognized investment banking firm
mutually selected by Holder and Issuer (or if applicable, Acquiring
Corporation), provided that if a mutual selection cannot be made as to
such investment banking firm, it shall be selected by Holder. (If there
shall be more than one Holder, any such selection shall be made by a
Holder Majority.)
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<PAGE> 6
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of the Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by
Issuer, the person merging into Issuer or by any company which controls
or is controlled by such merger person, as Holder may elect.
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Holder equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Holder (or a Holder Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request
of Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder the Option and all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7), multiplied
by the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
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<PAGE> 7
Notwithstanding the foregoing, in no event shall the sum of (A) the remainder
obtained by subtracting (1) the aggregate Purchase Price paid from (2) the
Section 8 Repurchase Consideration plus (B) all payments received by Gator, if
any, under Section 11.2(b) of the Merger Agreement, exceed $24,000,000.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for Consent and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
Consent). If any governmental or regulatory agency or authority disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any governmental or
regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq National
Market, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's Assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an independent nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 50% or
more of the then-outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall be
consummated.
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<PAGE> 8
9. REGISTRATION RIGHTS.
(a) Following termination of the Merger Agreement, Issuer shall,
subject to the conditions of subparagraph (c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities Laws
in connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; provided, that Issuer may elect
to not cause any such shares to be so registered (i) if the underwriters in good
faith object for valid business reasons, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registrations of resales;
provided, further, that such election pursuant to clause (i) may only be made
two times. If some but not all the shares of Issuer Common Stock, with respect
to which Issuer shall have received requests for registration pursuant to this
subparagraph (b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling Holders and any
other person (other than Issuer or any person exercising demand registration
rights in connection with such registration) who or which is permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each Selling Holder bears to the total number of shares
requested to be registered by all persons then desiring to have Issuer Common
Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement pursuant to Section 10.1 thereof, (b) failure to obtain the
requisite stockholder approval pursuant to Section 9.1(a) of the Merger
Agreement, and (c) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a
registration referred to in subparagraph (b) above pursuant to which the
Selling Holders concerned were afforded the opportunity to register such
shares under the Securities Laws and such shares were registered as
requested; and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Option
Shares then outstanding.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration
of 120 days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the
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<PAGE> 9
extent necessary to permit the sale or other disposition of the Option Shares so
registered in accordance with the intended method of distribution for such
shares, provided, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), accounting expenses, legal expenses including the reasonable fees
and expenses of one counsel to the Selling Holders, printing expenses, expenses
of underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
(e) In connection with any registration under subparagraph (a) or
(b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Holder, or by such underwriter, as the case may be,
for all such expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement, that was included by Issuer in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party falls to assume the defense
of such action with counsel' satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then
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<PAGE> 10
the indemnifying party, in lieu of indemnifying such party otherwise entitled
to be indemnified, shall contribute to the amount paid or payable by such
party to be indemnified as a result of such expenses, losses, claims, damages
or liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, all selling stockholders and the underwriters
from the offering of the securities and also the relative fault of Issuer, all
selling stockholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, that in no case shall
any Selling Holder be responsible, in the aggregate, for any amount in excess of
the net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall comply with all reporting requirements and will
do all such other things as may be necessary to permit the expeditious sale at
any time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time,
including, without limitation, Rules 144 and 144A. Issuer shall at its expense
provide Holder with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Laws, or required pursuant to any state securities laws or the rules
of any stock exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the Nasdaq National Market or any other securities
exchange, Issuer, upon the request of Holder, will promptly file an application,
if required, to authorize for quotation or trading or listing the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the Nasdaq National Market or any other securities exchange and will
use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
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<PAGE> 11
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h)) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section
7), it is the express intention of Issuer to allow Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option
by Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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<PAGE> 12
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: GULF SOUTH MEDICAL SUPPLY, INC.
By:. By: /s/ Thomas G. Hixon
-------------------- --------------------
President
[CORPORATE SEAL]
ATTEST: PHYSICIAN SALES & SERVICE, INC.
By:. By: /s/ Patrick C. Kelly
-------------------- ---------------------
President
[CORPORATE SEAL]
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<PAGE> 1
EXHIBIT 99.2
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of December 14, 1997, by and between Physician Sales & Service, Inc., a Florida
corporation ("Issuer"), and Gulf South Medical Supply, Inc., a Delaware
corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of December 14, 1997 (the "Merger Agreement"),
providing for, among other things, the merger of a wholly owned Subsidiary of
Grantee with and into Issuer, with Issuer as the surviving entity; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 8,098,523 shares (as adjusted as set forth herein, the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares) of common stock, $.01 par value per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (subject to adjustment
as set forth herein, the "Purchase Price") equal to $23.00 per share of Issuer
Common Stock.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event;
provided that the Option shall terminate and be of no further force and effect
upon the earliest to occur of (A) the Effective Time, (B) termination of the
Merger Agreement in accordance with the terms thereof prior to the occurrence of
a Purchase Event or a Preliminary Purchase Event (other than a termination of
the Merger Agreement by Grantee pursuant to Section 10.1(b) (but only if such
termination was a result of a willful breach by Issuer) or Section 10.1(c)
thereof (each a "Default Termination")), (C) 120 days after a Default
Termination (provided, that if, within 120 days after such termination of the
Merger Agreement, a Purchase Event or a Preliminary Purchase Event shall occur,
then notwithstanding anything to the contrary contained herein (including clause
(D) of this sentence), this Option shall terminate 120 days after the first
occurrence of such an event), and (D) 120 days after any termination of the
Merger Agreement (other than a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event. The term "Holder" shall mean
the holder or holders of the Option from time to time, and which initially is
the Grantee. The rights set forth in Section 8 shall terminate when the right to
exercise the Option terminates (other than as a result of a complete exercise of
the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an
<PAGE> 2
agreement with any person (other than Grantee or any Subsidiary of
Grantee) to effect an Acquisition Transaction (as defined below). As used
herein, the term Acquisition Transaction shall mean (A) a merger,
consolidation or similar transaction involving Issuer or any of its
Subsidiaries (other than transactions solely between Issuer's
Subsidiaries), (B) except as permitted pursuant to Section 7.1 of the
Merger Agreement, the disposition, by sale, lease, exchange or otherwise,
of Assets of Issuer or any of its Subsidiaries representing in either case
15% or more of the consolidated assets of Issuer and its Subsidiaries, or
(C) the issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 25% or more of the voting power of Issuer or any
of its Subsidiaries (any of the foregoing, an "Acquisition Transaction");
or
(ii) any person (other than Grantee or any Subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act), other than a group of which Grantee or any of its
Subsidiaries of Grantee is a member, shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the then-outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of
the following events:
(i) any person (other than Grantee or any Subsidiary of Grantee) shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 25% or more of the then-outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or
an "Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved the
Merger Agreement and the amendment to the Articles of Incorporation of
Issuer to increase the authorized shares of Gator Common Stock at the
meeting of such stockholders held for such purposes, such meeting shall not
have been held or shall have been canceled prior to termination of the
Merger Agreement, or Issuer's Board of Directors shall have withdrawn or
modified in a manner adverse to Grantee the recommendation of Issuer's
Board of Directors with respect to the Merger Agreement, in each case after
it shall have been publicly announced that any person (other than Grantee
or any Subsidiary of Grantee) shall have (A) made, or disclosed an
intention to make, a proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (C) filed an
application (or given a notice), whether in draft or final form, under any
federal or state statute or regulation (including a notice filed under the
HSR Act) seeking the Consent to an Acquisition Transaction from any federal
or state governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall send
to Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent and the Closing shall occur immediately following receipt of such
Consents (and expiration of any mandatory waiting periods).
(e) Notwithstanding any other provision of this Agreement to the
contrary, in no event shall Holders (in the aggregate) purchase under the terms
of this Agreement that number of Option Shares which have a "Spread Value" in
excess of the remainder obtained by subtracting (A) all payments under Section
11.2(c) of the
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<PAGE> 3
Merger Agreement from (B) $24,000,000 (the "Maximum Amount"). For purposes of
this Agreement, "Spread Value" shall mean the difference between (i) the
product of (1) the sum of the total number of Option Shares Holder(x) intends
to purchase at the Closing Date pursuant to the exercise of the Option and (y)
previously purchased pursuant to the prior exercise of the Option, and (2) the
closing bid price of Issuer Common Stock as quoted on the Nasdaq National
Market on the last trading day immediately preceding the Closing Date, and
(ii) the product of (1) the total number of Option Shares that Holder (x)
intends to purchase at the Closing Date pursuant to the exercise of the Option
and (y) previously purchased pursuant to the prior exercise of the Option and
(2) the applicable Purchase Price of such Option Shares. In the event the Spread
Value exceeds the Maximum Amount, the number of Option Shares which Holder is
entitled to purchase at the Closing Date shall be reduced to that number of
shares necessary such that the Spread Value equals or is less than the Maximum
Amount.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 13(f)
hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a), (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no pre-emptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF DECEMBER
14, 1997. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly executed and
delivered by Issuer. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by
Issuer with any of the provisions hereof will not (i) conflict with or
result in a breach of any provision of its Certificate of Incorporation
or Bylaws or a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, condition or
provisions of any note, bond, debenture, mortgage, indenture, license,
material agreement or other material
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<PAGE> 4
instrument or obligation to which Issuer is bound, or (ii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to Issuer or any of its properties or assets. No Consent by any
governmental or regulatory agency or authority, other than compliance
with applicable federal and state securities laws or the filing of a
notification under the HSR Act, is required of Issuer in connection with
the execution and delivery by Issuer of this Agreement or the
consummation by Issuer of the transactions contemplated hereby.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue, and, at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon
the exercise of the Option terminates, will have reserved for issuance,
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Holder to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 7 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 7, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid, and
nonassessable, and shall be delivered free and clear of all liens,
claims, charges, and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of Issuer.
(c) The authorized capital stock of Issuer consists of (i) 60,000,000
shares of Gator Common Stock, of which 40,696,097 shares are issued and
outstanding at this date, and (ii) 1,000,000 shares of Gator Preferred
Stock, none of which are issued and outstanding. Except as disclosed in
Section 6.3(b) of the Gator Disclosure Memorandum, there are no other
equity securities of Gator outstanding and no outstanding Equity Rights
relating to the capital stock of Gator.
6. REPRESENTATIONS AND WARRANTS OF GRANTEE. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or Consents referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly executed and
delivered by Grantee.
(b) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Laws.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of
a stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted, without any further action by or on behalf of the
Issuer or Holder, so that, after such issuance, it, together with any shares of
Issuer Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of
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<PAGE> 5
such consolidation or merger; (ii) to permit any person, other than Grantee or
one of its Subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company; or (iii) to sell or
otherwise transfer all or substantially all of its Assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of Holder, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls the
Acquiring Corporation, or (z) in the case of a merger described in clause (ii),
the Issuer (in each case, such person being referred to as the "Substitute
Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. The Substitute Option Issuer shall also enter
into an agreement with each Holder of the Substitute Option in substantially the
same form as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a merger in which Issuer is the continuing
or surviving person, and (z) the transferee of all or any substantial
part of the Issuer's assets (or the Assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock
having the greatest voting rights to be issued by the Substitute Option
Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or Exchange
Offer therefor has been made by any person (other than Grantee or any
Subsidiary of Grantee), (y) the price per share of the Issuer Common
Stock to be paid by any person (other than Grantee or any Subsidiary of
Grantee) pursuant to an agreement with Issuer, and (z) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share on any day as quoted on
the principal trading market or securities exchange on which such shares
are traded as reported by a recognized source chosen by Holder) within
the 30-day period immediately preceding the agreement; provided, that in
the event of a sale of less than all of Issuer's assets, the Assigned
Value shall be the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined
by a nationally recognized investment banking firm selected by Holder (or
by a majority in interest of the Holders if there shall be more than one
Holder (a "Holder Majority")), divided by the number of shares of the
Issuer Common Stock outstanding at the time of such sale. In the event
that an exchange offer is made for the Issuer Common Stock or an
agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for the Issuer Common Stock
shall be determined by a nationally recognized investment banking firm
mutually selected by Holder and Issuer (or if applicable, Acquiring
Corporation), provided that if a
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<PAGE> 6
mutual selection cannot be made as to such investment banking firm, it
shall be selected by Holder. (If there shall be more than one Holder, any
such selection shall be made by a Holder Majority.)
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of the Substitute Common
Stock on the day preceding such consolidation, merger or sale; provided
that if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by
Issuer, the person merging into Issuer or by any company which controls
or is controlled by such merger person, as Holder may elect.
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Holder equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by Holder (or a Holder Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9 and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request
of Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d))and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder the Option and all shares of Issuer Common Stock
purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired by Holder pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (y) the
Purchase Price (subject to adjustment pursuant to Section 7), multiplied
by the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid (or, in
the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for
each share of Issuer Common Stock with respect to which the Option has
been exercised and with respect to which Holder then has beneficial
ownership, multiplied by the number of such shares.
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<PAGE> 7
Notwithstanding the foregoing, in no event shall the sum of (A) the remainder
obtained by subtracting (1) the aggregate Purchase Price paid from (2) the
Section 8 Repurchase Consideration plus (B) all payments received by Gazelle, if
any, under Section 11.2(c) of the Merger Agreement, exceed $24,000,000.
(b) If Holder exercises its rights under this Section 8, Issuer
shall, within ten business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or Consent of any governmental or regulatory
agency or authority is required in connection with the payment of all or any
portion of the Section 8 Repurchase Consideration, Holder shall have the ongoing
option to revoke its request for repurchase pursuant to Section 8, in whole or
in part, or to require that Issuer deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and promptly file the required notice or application for Consent and
expeditiously process the same (and each party shall cooperate with the other in
the filing of any such notice or application and the obtaining of any such
Consent). If any governmental or regulatory agency or authority disapproves of
any part of Issuer's proposed repurchase pursuant to this Section 8, Issuer
shall promptly give notice of such fact to Holder. If any governmental or
regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the sum of the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) and the number of shares
covered by the portion of the Option (if any) that has been repurchased. Holder
shall notify Issuer of its determination under the preceding sentence within
five business days of receipt of notice of disapproval of the repurchase.
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock paid for
any such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
National Market (or if Issuer Common Stock is not quoted on the Nasdaq National
Market, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's Assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an independent nationally recognized investment banking
firm selected by Holder and reasonably acceptable to Issuer (which determination
shall be conclusive for all purposes of this Agreement), divided by the number
of shares of the Issuer Common Stock outstanding at the time of such sale. If
the consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally
recognized investment banking firm selected by Holder and reasonably acceptable
to Issuer, which determination shall be conclusive for all purposes of this
Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any Subsidiary of Grantee) shall have acquired
beneficial ownership (as such term is defined in Rule 13d-3 promulgated under
the Exchange Act), or the right to acquire beneficial ownership, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of 50% or
more of the then-outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) shall be
consummated.
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<PAGE> 8
9. REGISTRATION RIGHTS.
(a) Following termination of the Merger Agreement, Issuer shall,
subject to the conditions of subparagraph (c) below, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Holder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Laws if necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Selling Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including, without limitation, a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other securities
for sale under any applicable state securities laws.
(b) If Issuer at any time after the exercise of the Option
proposes to register any shares of Issuer Common Stock under the Securities Laws
in connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to Holder of its intention to do so
and, upon the written request of Holder given within 30 days after receipt of
any such notice (which request shall specify the number of shares of Issuer
Common Stock intended to be included in such underwritten public offering by
Selling Holder), Issuer will cause all such shares, the holders of which shall
have requested participation in such registration, to be so registered and
included in such underwritten public offering; provided, that Issuer may elect
to not cause any such shares to be so registered (i) if the underwriters in good
faith object for valid business reasons, or (ii) in the case of a registration
solely to implement a dividend reinvestment or similar plan, an employee benefit
plan or a registration filed on Form S-4 or any successor form, or a
registration filed on a form which does not permit registrations of resales;
provided, further, that such election pursuant to clause (i) may only be made
two times. If some but not all the shares of Issuer Common Stock, with respect
to which Issuer shall have received requests for registration pursuant to this
subparagraph (b), shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Selling Holders and any
other person (other than Issuer or any person exercising demand registration
rights in connection with such registration) who or which is permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each Selling Holder bears to the total number of shares
requested to be registered by all persons then desiring to have Issuer Common
Stock registered for sale.
(c) Issuer shall use all reasonable efforts to cause each
registration statement referred to in subparagraph (a) above to become effective
and to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective, provided, that
Issuer may delay any registration of Option Shares required pursuant to
subparagraph (a) above for a period not exceeding 90 days provided Issuer shall
in good faith determine that any such registration would adversely affect an
offering or contemplated offering of other securities by Issuer, and Issuer
shall not be required to register Option Shares under the Securities Laws
pursuant to subparagraph (a) above:
(i) prior to the earliest of (a) termination of the Merger
Agreement pursuant to Section 10.1 thereof, (b) failure to obtain the
requisite stockholder approval pursuant to Section 9.1(a) of the Merger
Agreement, and (c) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than two occasions;
(iii) more than once during any calendar year;
(iv) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling
Holders concerned were afforded the opportunity to register such shares
under the Securities Laws and such shares were registered as requested;
and
(v) unless a request therefor is made to Issuer by Selling
Holders holding at least 25% or more of the aggregate number of Option
Shares then outstanding.
In addition to the foregoing, Issuer shall not be required
to maintain the effectiveness of any registration statement after the expiration
of 120 days from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the
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<PAGE> 9
extent necessary to permit the sale or other disposition of the Option Shares so
registered in accordance with the intended method of distribution for such
shares, provided, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of counsel), accounting expenses, legal expenses including the reasonable fees
and expenses of one counsel to the Selling Holders, printing expenses, expenses
of underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration shall be borne by such Selling Holders.
(e) In connection with any registration under subparagraph (a) or
(b) above Issuer hereby indemnifies the Selling Holders, and each underwriter
thereof, including each person, if any, who controls such holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission,
or alleged omission, to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Selling Holder, or by such underwriter, as the case may be,
for all such expenses, losses, claims, damages and liabilities caused by any
untrue, or alleged untrue, statement, that was included by Issuer in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
subparagraph (e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party shall
be entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party falls to assume the defense
of such action with counsel' satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e)
is unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then
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<PAGE> 10
the indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party to
be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, all selling stockholders and the underwriters from
the offering of the securities and also the relative fault of Issuer, all
selling stockholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, that in no case shall
any Selling Holder be responsible, in the aggregate, for any amount in excess of
the net offering proceeds attributable to its Option Shares included in the
offering. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with
other holders.
In connection with any registration pursuant to subparagraph
(a) or (b) above, Issuer and each Selling Holder (other than Grantee) shall
enter into an agreement containing the indemnification provisions of this
subparagraph (e).
(f) Issuer shall comply with all reporting requirements and will
do all such other things as may be necessary to permit the expeditious sale at
any time of any Option Shares by Holder in accordance with and to the extent
permitted by any rule or regulation promulgated by the SEC from time to time,
including, without limitation, Rules 144 and 144A. Issuer shall at its expense
provide Holder with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Laws, or required pursuant to any state securities laws or the rules
of any stock exchange.
(g) Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized for
quotation or trading or listing on the Nasdaq National Market or any other
securities exchange, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the Nasdaq National Market or any other securities exchange and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
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<PAGE> 11
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 12(h)) any rights or
remedies hereunder. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or a federal or state
governmental or regulatory agency or authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section
7), it is the express intention of Issuer to allow Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option
by Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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<PAGE> 12
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ATTEST: PHYSICIAN SALES & SERVICE, INC.
By:. By:/s/ Patrick C. Kelly
-------------------- ----------------------------
[CORPORATE SEAL]
ATTEST: GULF SOUTH MEDICAL SUPPLY, INC.
By:. By:/s/ Thomas G. Hixon
-------------------- ----------------------------
President
[CORPORATE SEAL]
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<PAGE> 1
EXHIBIT 99.3
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of December 14, 1997 (this "Agreement"), is
made and entered into by and among Gulf South Medical Supply, Inc., a Delaware
corporation ("GSMS") and the other parties signatory hereto (each a
"Stockholder").
Preamble
The Stockholder is a stockholder of Physician Sales & Service, Inc. ("PSS")
and desires that PSS, PSS Merger Corp., a wholly owned subsidiary of PSS
("Merger Corp."), and GSMS enter into an Agreement and Plan of Merger dated the
date hereof (as the same may be amended or supplemented, the "Merger Agreement")
with respect to the merger of Merger Corp. with and into GSMS (the "Merger"),
with the result that GSMS becomes a wholly owned subsidiary of PSS. The
Stockholder is executing this Agreement as an inducement to GSMS to enter into
and execute the Merger Agreement.
All capitalized terms used herein which are not defined herein shall have
the same meanings as ascribed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by GSMS of
the Merger Agreement and the mutual covenants, conditions and agreements
contained herein and therein, the parties agree as follows:
1. Representations and Warranties. (a) The Stockholder severally and not
jointly represents and warrants to GSMS as follows:
(i) As of the date hereof, the Stockholder is the record owner of the
PSS Common Stock set forth on Schedule 1 to this Agreement (such
Stockholder's "Shares"). Except for the Stockholder's Shares, the
Stockholder is not the record owner of any shares of PSS Common Stock
(except to the extent the Stockholder disclaims beneficial ownership in
accordance with applicable law). This Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement
of, the Stockholder, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights generally or the availability of
equitable remedies, and the execution and delivery of this Agreement will
not violate or result in a default under any agreement to which Stockholder
is a party.
(ii) Such Stockholder's Shares and the certificates representing such
Shares are now and at all times during the term hereof will be held by such
Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever that would interfere with the voting of the
Shares or the granting of any proxy, except for any such encumbrances or
proxies arising hereunder.
(iii) The Stockholder understands and acknowledges that GSMS is
entering the Merger Agreement in reliance upon the Stockholder's execution
and delivery of this Agreement. The Stockholder acknowledges that the
irrevocable proxy set forth in Section 4 is granted in consideration for
the execution and delivery of the Merger Agreement by GSMS.
(b) GSMS represents and warrants to Stockholder that this Agreement has
been duly authorized, executed and delivered by and constitutes a valid and
binding agreement of, GSMS, enforceable in accordance with its terms except
as enforceability may be limited by applicable
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<PAGE> 2
bankruptcy, insolvency or similar laws affecting creditors rights generally
or the availability of equitable remedies, and the execution and delivery of
this Agreement will not violate or result in a default under any agreement to
which GSMS is a party.
2. Voting Agreement.
(a) The Stockholder severally agrees with, and covenants to, GSMS that at
any meeting of stockholders of PSS called to vote upon the Merger, the Merger
Agreement, and any other matters related thereto, including the amendment to the
Articles of Incorporation to increase the number of authorized shares of PSS
Common Stock (the "Amendment"), or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval with respect to the
Merger, the Merger Agreement and the Amendment is sought, the Stockholder shall
vote (or cause to be voted) the Stockholder's Shares in favor of (i) the
Amendment and (ii) the Merger and the approval of the terms thereof and each of
the other transactions contemplated by the Merger Agreement, provided that the
terms of the Merger Agreement shall not have been amended to increase the
Exchange Ratio payable in the Merger to a greater amount of PSS Common Stock or
otherwise to materially and adversely impair the Stockholder's rights or
increase the Stockholder's obligations thereunder. Stockholder, as a holder of
PSS Common Stock, shall be present in person or by proxy at all meetings of
stockholders of PSS so that all Shares are counted for purposes of determining
the presence of a quorum at such meetings.
(b) This Agreement is intended to bind Stockholder only with respect to the
specific matters set forth herein and solely in his or her capacity as
stockholder, and shall not prohibit, limit or restrict in any manner Stockholder
from acting in Stockholder's capacity as an officer or director of PSS or
exercising or observing Stockholder's fiduciary duties and responsibilities as
an officer and director of PSS.
3. Covenants. The Stockholder severally agrees with, and covenants to, GSMS
as follows:
(a) Prior to the termination of this Agreement, the Stockholder shall not
(i) transfer (which term shall include, without limitation, for the purposes of
this Agreement, any sale, gift, pledge, or consent to any transfer of), any or
all of the Stockholder's Shares or any interest therein, except pursuant to the
Merger; (ii) enter into any contract, option or other agreement or understanding
with respect to any transfer of any or all of such Shares or any interest
therein, (iii) grant any proxy, power of attorney or other authorization in or
with respect to such Shares, except for this Agreement or (iv) deposit such
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares.
(b) The Stockholder hereby waives any rights of appraisal, or rights to
dissent from the Merger, that such Stockholder may have.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Stockholder hereby irrevocably grants to, and appoints, Thomas G.
Hixon, Chief Executive Officer of GSMS, and Stanton Keith Pritchard, Vice
President of GSMS, in their respective capacities as officers of GSMS, and any
individual who shall hereafter succeed to any such office of GSMS, and each of
them individually, the Stockholder's proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of the Stockholder, to
vote the Stockholder's Shares, or grant a consent or approval in respect of such
Shares in favor of (i) the Amendment and (ii) the Merger; the execution and
delivery of the Merger Agreement and approval of the terms thereof, and each of
the other transactions contemplated by the Merger Agreement, provided that the
terms of the Merger Agreement shall not have been amended to increase the
Exchange Ratio payable in the Merger to a greater amount of PSS Common Stock or
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<PAGE> 3
otherwise to adversely impair the Stockholder's rights or increase the
Stockholder's obligations thereunder, whether in his capacity as a
stockholder or in any other capacity.
(b) The Stockholder represents that any proxies heretofore given in
respect of the Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) The Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. The Stockholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully
do or cause to be done by virtue hereof.
5. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation the Stockholder's successors or assigns. In the event of any stock
split, stock dividend, merger, reorganization, recapitalization or other change
in the capital structure of PSS, or the acquisition of additional shares of PSS
Common Stock or other voting securities of PSS by any Stockholder, the number of
Shares subject to the terms of this Agreement shall be adjusted appropriately
and this Agreement and the obligations hereunder shall attach to any additional
shares of PSS Common Stock or other voting securities of PSS issued to or
acquired by the Stockholder.
6. Further Assurances. The Stockholder shall, upon request of GSMS, execute
and deliver any additional documents and take such further actions as may
reasonably be deemed by GSMS or to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote such Stockholder's Shares as
contemplated by Section 4 in GSMS and the other irrevocable proxies described
therein at the expense of GSMS.
7. Termination. This Agreement, and all rights and obligations of the
parties hereunder; including without limitation, the proxy set forth in Section
4, shall terminate upon the first to occur of (i) the Effective Time of the
Merger or (ii) the date upon which the Merger Agreement is terminated in
accordance with its terms.
8. Miscellaneous.
(a) This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement.
(b) This Agreement (including the documents and instruments referred
to herein) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
(c) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(d) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise, by any of the parties without the prior
written consent of the other parties, except as expressly contemplated by
Section 3(a). Any assignment in violation of the foregoing shall be void.
(e) The Stockholder agrees that irreparable damage would occur and
that GSMS would not have any adequate remedy at law in the event that any
of the provisions of this
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<PAGE> 4
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that GSMS shall be
entitled to an injunction or injunctions to prevent breaches by the
Stockholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement, this being in addition to any other remedy
to which they are entitled at law or in equity.
(f) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any extent, (i) be held
by a court of competent jurisdiction to be invalid, void or unenforceable
or (ii) would preclude the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended, or prevent PSS or GSMS from accounting for the Merger as a
pooling of interests, such term, provision, covenant or restriction shall
be modified or voided, as may be necessary to achieve the intent of the
parties to the extent possible, and the remainder of the terms, provisions,
covenants and restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any way
be affected, impaired or invalidated, and shall be enforced to the fullest
extent permitted by law.
(g) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and
signed by such party.
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Voting Agreement as of the day and year first above written.
GULF SOUTH MEDICAL SUPPLY, INC.
By:
----------------------------
Title:
-------------------------
"STOCKHOLDER"
/s/ Patrick C. Kelly
-------------------------------
/s/ John F. Sasen, Jr.
-------------------------------
/s/ David A. Smith
-------------------------------
/s/ James B. Stalling
-------------------------------
/s/ Frederick E. Dell
-------------------------------
/s/ Delmer W. Dallas
-------------------------------
/s/ T. O'Neal Douglas
-------------------------------
/s/ Fred Elefant
-------------------------------
/s/ Delores Kesler
-------------------------------
/s/ William C. Mason
-------------------------------
/s/ James L.L. Tullis
-------------------------------
- 4 -
<PAGE> 5
SCHEDULE 1
----------
Stockholder Name Class Number of Shares Held
- ---------------- ----- ---------------------
- 5 -
<PAGE> 1
EXHIBIT 99.4
VOTING AGREEMENT
THIS VOTING AGREEMENT, dated as of December 14, 1997 (this
"Agreement"), is made and entered into by and among Physician Sales & Service,
Inc., a Florida corporation ("PSS") and the other parties signatory hereto
(each a "Stockholder").
Preamble
The Stockholder is a stockholder of Gulf South Medical Supply, Inc.
("GSMS") and desires that PSS, PSS Merger Corp., a wholly owned subsidiary of
PSS ("Merger Corp."), and GSMS enter into an Agreement and Plan of Merger dated
the date hereof (as the same may be amended or supplemented, the "Merger
Agreement") with respect to the merger of Merger Corp. with and into GSMS (the
"Merger"), with the result that GSMS becomes a wholly owned subsidiary of PSS.
The Stockholder is executing this Agreement as an inducement to PSS to enter
into and execute, and to cause Merger Corp. to enter into and execute, the
Merger Agreement.
All capitalized terms used herein which are not defined herein shall
have the same meanings as ascribed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by PSS
and Merger Corp. of the Merger Agreement and the mutual covenants, conditions
and agreements contained herein and therein, the parties agree as follows:
1. Representations and Warranties. (a) The Stockholder
severally and not jointly represents and warrants to PSS as follows:
(i) As of the date hereof, the Stockholder is the
record owner of the GSMS Common Stock set forth on Schedule 1 to this
Agreement (such Stockholder's "Shares"). Except for the Stockholder's
Shares, the Stockholder is not the record owner of any shares of GSMS
Common Stock (except to the extent the Stockholder disclaims
beneficial ownership in accordance with applicable law). This
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, the Stockholder,
enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors rights generally or the availability of equitable
remedies, and the execution and delivery of this Agreement will not
violate or result in a default under any agreement to which
Stockholder is a party.
(ii) Such Stockholder's Shares and the
certificates representing such Shares are now and at all times during
the term hereof will be held by such Stockholder, free and clear of
all liens, claims, security interests, proxies, voting trusts or
agreements, understandings or arrangements or any other encumbrances
whatsoever that would interfere with the voting of the Shares or the
granting of any proxy, except for any such encumbrances or proxies
arising hereunder.
(iii) The Stockholder understands and acknowledges
that PSS and Merger Corp. are entering the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this
Agreement. The Stockholder acknowledges that the irrevocable proxy
set forth in Section 4 is granted in consideration for the execution
and delivery of the Merger Agreement by PSS and Merger Corp.
- 1 -
<PAGE> 2
(b) PSS represents and warrants to Stockholder that this
Agreement has been duly authorized, executed and delivered by and
constitutes a valid and binding agreement of, PSS, enforceable in
accordance with its terms except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors
rights generally or the availability of equitable remedies, and the
execution and delivery of this Agreement will not violate or result in
a default under any agreement to which PSS is a party.
2. Voting Agreement.
(a) The Stockholder severally agrees with, and covenants
to, PSS that at any meeting of stockholders of GSMS called to vote
upon the Merger, the Merger Agreement, and any other matters related
thereto, or at any adjournment thereof or in any other circumstances
upon which a vote, consent or other approval with respect to the
Merger and the Merger Agreement is sought, the Stockholder shall vote
(or cause to be voted) the Stockholder's Shares in favor of the Merger
and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement, provided that the
terms of the Merger Agreement shall not have been amended to reduce
the Exchange Ratio payable in the Merger to a lesser amount of PSS
Common Stock or otherwise to materially and adversely impair the
Stockholder's rights or increase the Stockholder's obligations
thereunder. Stockholder, as a holder of GSMS Common Stock, shall be
present in person or by proxy at all meetings of stockholders of GSMS
so that all Shares are counted for purposes of determining the
presence of a quorum at such meetings.
(b) This Agreement is intended to bind Stockholder only
with respect to the specific matters set forth herein and solely in
his or her capacity as stockholder, and shall not prohibit, limit or
restrict in any manner Stockholder from acting in Stockholder's
capacity as an officer or director of GSMS or exercising or observing
Stockholder's fiduciary duties and responsibilities as an officer or
director of GSMS.
3. Covenants. The Stockholder severally agrees with, and
covenants to, PSS as follows:
(a) Prior the termination of this Agreement, the
Stockholder shall not (i) transfer (which term shall include, without
limitation, for the purposes of this Agreement, any sale, gift,
pledge, or consent to any transfer of), any or all of the
Stockholder's Shares or any interest therein, except pursuant to the
Merger; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such
Shares or any interest therein, (iii) grant any proxy, power of
attorney or other authorization in or with respect to such Shares,
except for this Agreement or (iv) deposit such Shares into a voting
trust or enter into a voting agreement or arrangement with respect to
such Shares.
(b) The Stockholder hereby waives any rights of
appraisal, or rights to dissent from the Merger, that such Stockholder
may have.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Stockholder hereby irrevocably grants to, and
appoints, Patrick C. Kelly, Chief Executive Officer of PSS, and David
A. Smith, Chief Financial Officer of PSS, in their respective
capacities as officers of PSS, and any individual who shall hereafter
succeed to any such office of PSS, and each of them individually, the
Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of the
Stockholder, to vote the Stockholder's Shares or grant a consent or
approval in respect of such Shares in favor of the Merger, the
execution and delivery of the Merger Agreement and approval of the
terms thereof, and each of the other transactions contemplated by the
Merger Agreement, provided that the terms of the Merger Agreement
shall not have been amended to reduce the Exchange Ratio payable in
the Merger to a lesser amount of PSS Common Stock or otherwise to
adversely impair the
- 2 -
<PAGE> 3
Stockholder's rights or increase the Stockholder's obligations
thereunder, whether in his capacity as a stockholder or in any other
capacity.
(b) The Stockholder represents that any proxies
heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked.
(c) The Stockholder hereby affirms that the irrevocable
proxy set forth in this Section 4 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is
given to secure the performance of the duties of the Stockholder under
this Agreement. The Stockholder hereby further affirms that the
irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. The Stockholder hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to
be done by virtue hereof.
5. Certain Events. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the Stockholder's Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or otherwise,
including without limitation the Stockholder's successors or assigns. In the
event of any stock split, stock dividend, merger, reorganization,
recapitalization or other change in the capital structure of GSMS, or the
acquisition of additional shares of GSMS Common Stock or other voting
securities of GSMS by any Stockholder, the number of Shares subject to the
terms of this Agreement shall be adjusted appropriately and this Agreement and
the obligations hereunder shall attach to any additional shares of GSMS Common
Stock or other voting securities of GSMS issued to or acquired by the
Stockholder.
6. Further Assurances. The Stockholder shall, upon request of
PSS, execute and deliver any additional documents and take such further actions
as may reasonably be deemed by PSS to be necessary or desirable to carry out
the provisions hereof and to vest the power to vote such Stockholder's Shares
as contemplated by Section 4 in PSS and the other irrevocable proxies described
therein at the expense of PSS.
7. Termination. This Agreement, and all rights and obligations
of the parties hereunder; including without limitation, the proxy set forth in
Section 4, shall terminate upon the first to occur of (i) the Effective Time of
the Merger or (ii) the date upon which the Merger Agreement is terminated in
accordance with its terms.
8. Miscellaneous.
(a) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement.
(b) This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement, and
supersedes all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof.
(c) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
(d) Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the
parties without the prior written consent of the other parties, except
as expressly contemplated by Section 3(a). Any assignment in
violation of the foregoing shall be void.
(e) The Stockholder agrees that irreparable damage would
occur and that PSS would not have any adequate remedy at law in the
event that any of the provisions of this
- 3 -
<PAGE> 4
Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that PSS shall be
entitled to an injunction or injunctions to prevent breaches by the
Stockholder of this Agreement and to enforce specifically the terms
and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity..
(f) If any term, provision, covenant or restriction
herein, or the application thereof to any circumstance, shall, to any
extent, (i) be held by a court of competent jurisdiction to be
invalid, void or unenforceable or (ii) would preclude the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended, or prevent PSS or GSMS
from accounting for the Merger as a pooling of interests, such term,
provision, covenant or restriction shall be modified or voided, as may
be necessary to achieve the intent of the parties to the extent
possible, and the remainder of the terms, provisions, covenants and
restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any
way be affected, impaired or invalidated, and shall be enforced to the
fullest extent permitted by law.
(g) No amendment, modification or waiver in respect of
this Agreement shall be effective against any party unless it shall be
in writing and signed by such party.
IN WITNESS WHEREOF, the undersigned parties have executed and
delivered this Voting Agreement as of the day and year first above written.
PHYSICIAN SALES & SERVICE, INC.
By: /s/ Patrick C. Kelly
---------------------------------------
Title: President
------------------------------------
"STOCKHOLDER"
/s/ Thomas G. Hixon
--------------------------
/s/ John L. Vaugh, Jr.
--------------------------
/s/ Steven L. Richardson
--------------------------
/s/ Staton Keith Pritchard
----------------------------------
/s/ Edward Shulman
--------------------------
/s/ David L. Bogetz
--------------------------
/s/ William M. McInnes
--------------------------
/s/ Melvin L. Hecktman
--------------------------
/s/ Guy W. Edwards
--------------------------
/s/ Donna Williamson
--------------------------
- 4 -
<PAGE> 5
SCHEDULE 1
<TABLE>
<CAPTION>
Stockholder Name Class Number of Shares Held
- ---------------- ----- ---------------------
<S> <C> <C>
</TABLE>
- 5 -
<PAGE> 1
EXHIBIT 99.5
AFFILIATE AGREEMENT
Gulf South Medical Supply, Inc.
One Woodgreen Place
Madison, MS 39110
Attention: Thomas G. Hixon
Stanton Keith Pritchard
Gentlemen:
The undersigned is a shareholder of Physician Sales & Service, Inc.
("PSS"), a corporation organized and existing under the laws of the State of
Florida, which proposes to enter with Gulf South Medical Supply, Inc. ("GSMS")
into the transactions described in the Agreement and Plan of Merger, dated as
of December 14, 1997 (the "Agreement"), by and among PSS, PSS Merger Corp.
("Merger Corp.") and GSMS. Under the terms of the Agreement, Merger Corp. will
be merged into and with GSMS (the "Merger"), and the shares of the $.01 par
value common stock of GSMS ("GSMS Common Stock") will be converted into and
exchanged for shares of the $.01 par value common stock of PSS ("PSS Common
Stock"). This Affiliate Agreement represents an agreement between the
undersigned and GSMS regarding certain rights and obligations of the
undersigned in connection with the shares of PSS Common Stock held by the
undersigned.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and GSMS hereby agree as follows:
1. Initial Restriction on Disposition. The undersigned agrees
that he will not sell, transfer, or otherwise dispose of his interests in, or
reduce his risk relative to, any of the shares of PSS Common Stock beneficially
owned by the undersigned from the Effective Time until such time as PSS
notifies the undersigned that the requirements of SEC Accounting Series Release
Nos. 130 and 135 ("ASR 130 and 135") have been met. The undersigned
understands that ASR 130 and 135 relate to publication of financial results of
post-Merger combined operations of PSS and GSMS. PSS agrees that it will
publish such results as promptly as practicable following the Merger in the
sole discretion of PSS, but in any event within 45 days after the end of the
first fiscal quarter of PSS containing the required period of post-Merger
combined operations and that it will notify the undersigned promptly following
such publication.
2. Covenants and Warranties of Undersigned. The undersigned
represents, warrants and agrees that during the 30 days immediately preceding
the Effective Time of the Merger, the undersigned has not sold, transferred, or
otherwise disposed of his interests in, or reduced his risk relative to, any of
the shares of PSS Common Stock beneficially owned by the undersigned as of the
record date for determination of shareholders entitled to vote at the
Shareholders' Meeting of PSS held to approve the Merger.
3. Restrictions on Transfer. The undersigned understands and
agrees that stop transfer instructions with respect to the shares of PSS Common
Stock held by the undersigned will be given to PSS's transfer agent.
4. Understanding of Restrictions on Dispositions. The undersigned
has carefully read the Agreement and this Affiliate Agreement and discussed
their requirements and impact upon his ability to sell, transfer, or otherwise
dispose of the shares of PSS Common Stock held by the undersigned, to the
extent he believes necessary, with his counsel or counsel for PSS.
5. Acknowledgments. The undersigned recognizes and agrees that
the foregoing provisions also apply to all shares of the capital stock of PSS
that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own
at least a 10% beneficial interest or of which any of the foregoing
<PAGE> 2
serves as trustee, executor, or in any similar capacity, and (iv) any
corporation or other organization in which the undersigned, the undersigned's
spouse and any such relative collectively own at least 10% of any class of
equity securities or of the equity interest.
6. Miscellaneous. This Affiliate Agreement is the complete
agreement between GSMS and the undersigned concerning the subject matter
hereof. Any notice required to be sent to any party hereunder shall be sent by
registered or certified mail, return receipt requested, using the addresses set
forth herein or such other address as shall be furnished in writing by the
parties. This Affiliate Agreement shall be governed by the laws of the State
of Florida.
This Affiliate Agreement is executed as of the ____ day of _________,
19__.
Very truly yours,
---------------------------
Name:
----------------------
---------------------------
---------------------------
---------------------------
Address
[add below the signatures of all registered owners
of shares deemed beneficially owned by the affiliate]
---------------------------
Name:
---------------------------
Name:
---------------------------
Name:
AGREED TO AND ACCEPTED as of
, 19
- --------------- --
GULF SOUTH MEDICAL SUPPLY, INC.
By:
-------------------------
- 2 -
<PAGE> 1
EXHIBIT 99.6
AFFILIATE AGREEMENT
Physician Sales & Service, Inc.
4345 Southpoint Boulevard
Jacksonville, Florida 32216
Attention: Patrick C. Kelly
David A. Smith
Gentlemen:
The undersigned is a shareholder of Gulf South Medical Supply, Inc.
("GSMS"), a corporation organized and existing under the laws of the State of
Delaware, and will become a shareholder of Physician Sales & Service, Inc.
("PSS"), a corporation organized and existing under the laws of the State of
Florida, pursuant to the transactions described in the Agreement and Plan of
Merger, dated as of December 14, 1997 (the "Agreement"), by and among PSS, PSS
Merger Corp. ("Merger Corp.") and GSMS. Under the terms of the Agreement,
Merger Corp. will be merged into and with GSMS (the "Merger"), and the shares
of the $.01 par value common stock of GSMS ("GSMS Common Stock") will be
converted into and exchanged for shares of the $.01 par value common stock of
PSS ("PSS Common Stock"). This Affiliate Agreement represents an agreement
between the undersigned and PSS regarding certain rights and obligations of the
undersigned in connection with the shares of PSS to be received by the
undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained herein,
the undersigned and PSS hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as
to GSMS he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that
he will not sell, transfer, or otherwise dispose of his interests in, or reduce
his risk relative to, any of the shares of PSS Common Stock into which his
shares of GSMS Common Stock are converted upon consummation of the Merger until
such time as PSS notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
The undersigned understands that ASR 130 and 135 relate to publication of
financial results of post-Merger combined operations of PSS and GSMS. PSS
agrees that it will publish such results as promptly as practicable following
the Merger in the sole discretion of PSS, but in any event within 45 days after
the end of the first fiscal quarter of PSS containing the required period of
post-Merger combined operations and that it will notify the undersigned
promptly following such publication.
3. Covenants and Warranties of Undersigned. The undersigned
represents, warrants and agrees that:
(a) The PSS Common Stock received by the undersigned as a result
of the Merger will be taken for his own account and not for others,
directly or indirectly, in whole or in part.
(b) PSS has informed the undersigned that any distribution by
the undersigned of PSS Common Stock has not been registered under the
1933 Act and that shares of PSS Common Stock received pursuant to the
Merger can only be sold by the undersigned (1) following registration
under the 1933 Act, or (2) in conformity with the volume and other
requirements of Rule 145(d) promulgated by the SEC as the same now exist
or may hereafter be amended, or (3) to the extent some other exemption
from registration under the 1933 Act might be available. The undersigned
understands that PSS is under no obligation to file a registration
statement with the SEC covering the disposition of the undersigned's
shares of PSS Common
<PAGE> 2
Stock or to take any other action necessary to make compliance with an
exemption from such registration available.
(c) During the 30 days immediately preceding the Effective Time
of the Merger, the undersigned has not sold, transferred, or otherwise
disposed of his interests in, or reduced his risk relative to, any of the
shares of GSMS Common Stock beneficially owned by the undersigned as of
the record date for determination of shareholders entitled to vote at the
Shareholders' Meeting of GSMS held to approve the Merger.
(d) The undersigned is aware that PSS intends to treat the
Merger as a tax-free reorganization under Section 368 of the Internal
Revenue Code ("Code") for federal income tax purposes. The undersigned
agrees to treat the transaction in the same manner as PSS for federal
income tax purposes. The undersigned acknowledges that Section 1.368-
1(b) of the Income Tax Regulations requires "continuity of interest" in
order for the Merger to be treated as tax-free under Section 368 of the
Code. This requirement is satisfied if, taking into account those GSMS
shareholders who receive cash in exchange for their stock, who receive
cash in lieu of fractional shares, or who dissent from the Merger, there
is no plan or intention on the part of the GSMS shareholders to sell or
otherwise dispose of the PSS Common Stock to be received in the Merger
that will reduce such shareholders' ownership to a number of shares
having, in the aggregate, a value at the time of the Merger of less than
50% of the total fair market value of the GSMS Common Stock outstanding
immediately prior to the Merger. The undersigned has no prearrangement,
plan or intention to sell or otherwise dispose of an amount of his PSS
Common Stock to be received in the Merger which would cause the foregoing
requirement not to be satisfied.
4. Restrictions on Transfer. The undersigned understands and agrees
that stop transfer instructions with respect to the shares of PSS Common Stock
received by the undersigned pursuant to the Merger will be given to PSS's
transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests"
and may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as PSS, Inc. ("PSS") has published
the financial results covering at least 30 days of combined operations
after the effective date of the merger through which the business
combination was effected. In addition, the shares represented by this
certificate may not be sold, transferred or otherwise disposed of except
or unless (1) covered by an effective registration statement under the
Securities Act of 1933, as amended, (2) in accordance with (i) Rule
145(d) (in the case of shares issued to an individual who is not an
affiliate of PSS) or (ii) Rule 144 (in the case of shares issued to an
individual who is an affiliate of PSS) of the Rules and Regulations of
such Act, or (3) in accordance with a legal opinion satisfactory to
counsel for PSS that such sale or transfer is otherwise exempt from the
registration requirements of such Act."
Such legend will also be placed on any certificate representing PSS securities
issued subsequent to the original issuance of the PSS Common Stock pursuant to
the Merger as a result of any transfer of such shares or any stock dividend,
stock split, or other recapitalization as long as the PSS Common Stock issued
to the undersigned pursuant to the Merger has not been transferred in such
manner to justify the removal of the legend therefrom. Upon the request of the
undersigned, PSS shall cause the certificates representing the shares of PSS
Common Stock issued to the undersigned in connection with the Merger to be
reissued free of any legend relating to restrictions on transfer by virtue of
ASR 130 and 135 as soon as practicable after the requirements of ASR 130 and
135 have been met. In addition, if the provisions of Rules 144 and 145 are
amended to eliminate restrictions applicable to the PSS Common Stock received
by the undersigned pursuant to the Merger, or at the expiration of the
restrictive period set forth in Rule 145(d), PSS, upon the request of the
undersigned, will cause the certificates representing the shares of PSS Common
Stock issued to the undersigned in connection with the Merger to be reissued
free of any legend relating to the restrictions set forth in Rules 144 and
145(d) upon receipt by PSS of an opinion of its counsel to the effect that such
legend may be removed.
-2-
<PAGE> 3
5. Understanding of Restrictions on Dispositions. The undersigned
has carefully read the Agreement and this Affiliate Agreement and discussed
their requirements and impact upon his ability to sell, transfer, or otherwise
dispose of the shares of PSS Common Stock received by the undersigned, to the
extent he believes necessary, with his counsel or counsel for GSMS.
6. Filing of Reports by PSS. PSS agrees, for a period of three years
after the effective date of the Merger, to file on a timely basis all reports
required to be filed by it pursuant to Section 13 of the Securities Exchange
Act of 1934, as amended, so that the public information provisions of Rule
145(d) promulgated by the SEC as the same are presently in effect will be
available to the undersigned in the event the undersigned desires to transfer
any shares of PSS Common Stock issued to the undersigned pursuant to the
Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
otherwise transfer the shares of PSS Common Stock received by him in connection
with the Merger at any time during the restrictive period set forth in Rule
145(d), the undersigned will provide the necessary representation letter to the
transfer agent for PSS Common Stock together with such additional information
as the transfer agent may reasonably request. If PSS's counsel concludes that
such proposed sale or transfer complies with the requirements of Rule 145(d),
PSS shall cause such counsel to provide such opinions as may be necessary to
PSS's Transfer Agent so that the undersigned may complete the proposed sale or
transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
foregoing provisions also apply to all shares of the capital stock of GSMS and
PSS that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws, which the undersigned agrees may include,
without limitation, shares owned or held in the name of (i) the undersigned's
spouse, (ii) any relative of the undersigned or of the undersigned's spouse who
has the same home as the undersigned, (iii) any trust or estate in which the
undersigned, the undersigned's spouse, and any such relative collectively own
at least a 10% beneficial interest or of which any of the foregoing serves as
trustee, executor, or in any similar capacity, and (iv) any corporation or
other organization in which the undersigned, the undersigned's spouse and any
such relative collectively own at least 10% of any class of equity securities
or of the equity interest. The undersigned further recognizes that, in the
event that the undersigned is a director or officer of PSS or becomes a
director or officer of PSS upon consummation of the Merger, among other things,
any sale of PSS Common Stock by the undersigned within a period of less than
six months following the effective time of the Merger may subject the
undersigned to liability pursuant to Section 16(b) of the Securities Exchange
Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
between PSS and the undersigned concerning the subject matter hereof. Any
notice required to be sent to any party hereunder shall be sent by registered
or certified mail, return receipt requested, using the addresses set forth
herein or such other address as shall be furnished in writing by the parties.
This Affiliate Agreement shall be governed by the laws of the State of
Delaware.
-3-
<PAGE> 4
This Affiliate Agreement is executed as of the ____ day of _________,
19__.
Very truly yours,
-----------------------------------------
Signature
-----------------------------------------
Print Name
-----------------------------------------
-----------------------------------------
Address
[add below the signatures of all registered
owners
of shares deemed beneficially owned by the
affiliate]
-----------------------------------------
Name:
-----------------------------------------
Name:
-----------------------------------------
Name:
AGREED TO AND ACCEPTED as of
, 19
- --------------- --
PHYSICIAN SALES & SERVICE, INC.
By:
-----------------------------
-4-
<PAGE> 1
EXHIBIT 99.7
Monday December 15, 6:31 am Eastern Time
Company Press Release
Physician Sales & Service, Inc. Announces Agreement To Acquire Gulf
South Medical Supply, Inc.
CREATES NATION'S LEADING ALTERNATE-SITE DISTRIBUTOR
JACKSONVILLE, Fla./JACKSON, Miss.--(BUSINESS WIRE)--Dec. 15, 1997-- The Boards
of Directors of Physician Sales & Service, Inc. (Nasdaq/NM:PSSI - news) and Gulf
South Medical Supply, Inc. (Nasdaq/NM:GSMS - news) yesterday unanimously
approved a definitive agreement under which Physician Sales & Service, Inc. will
acquire Gulf South Medical Supply, Inc., forming the largest distributor of
medical products to the alternate-site market, with run-rate revenues of over
$1.3 billion. Under the terms of the agreement, holders of Gulf South Medical
Supply common stock will receive a fixed ratio of 1.75 shares of Physician Sales
& Service common stock for each Gulf South Medical Supply share held. The
transaction is valued at approximately $685 million and is expected to be
accounted for as a pooling of interests. It is subject to approval by the
shareholders of both companies, various state and Federal regulatory agencies,
and other customary conditions. Closing of the transaction is expected in the
first half of 1998.
The combined company will be the leading distributor of medical products to
the physician-office, extended-care and imaging-provider markets. With 981 sales
representatives and 112 service centers, the combined company will serve more
than 130,000 customers in all 50 states.
"This is an extraordinary opportunity," said Patrick C. Kelly, Chairman and
Chief Executive Officer of Physician Sales & Service, Inc. "We have been
pursuing the opportunity to employ our customer-focused distribution
capabilities in this alternate-site market for a long time. This combination not
only provides us this opportunity, but partners us with the preeminent
distributor of medical products to the extended-care market. Gulf South Medical
Supply's materials management expertise, national account focus and
customer-service orientation make it a very complementary fit with the Physician
Sales & Service organization."
Thomas G. Hixon, Gulf South Medical Supply's Chairman and Chief Executive
Officer, commented, "This merger combines the complementary strengths of two
industry leaders and creates the premier alternate-site distributor. Physician
Sales & Service's unmatched focus on customer service, consultative selling
approach and systems expertise will greatly benefit the Gulf South Medical
Supply organization and its customers. This merger is in the best interests of
<PAGE> 2
the shareholders, customers and employees of Gulf South Medical Supply and will
result in a company that is uniquely positioned to address the supply needs of
the rapidly growing alternate-site marketplace."
Mr. Hixon will join Physician Sales & Service as President and Chief
Operating Officer as well as serve as a director of the combined company. The
combined company's ten-member Board of Directors will consist of five Physician
Sales & Service board members, three Gulf South Medical Supply board members and
two newly appointed directors yet to be selected.
Physician Sales & Service also announced that it will change its name to
PSS World Medical, Inc., to better reflect the company's expansion into multiple
medical distribution sectors.
In connection with the merger agreement, Physician Sales & Service and Gulf
South Medical Supply mutually have granted each other an option to purchase up
to 19.9% of the other's common stock, exercisable under certain circumstances.
In the event that the merger is terminated by either company, Physician Sales &
Service and Gulf South Medical Supply have agreed that, in certain
circumstances, a cash termination fee will be paid.
Physician Sales & Service, Inc. is the largest distributor of medical
supplies, equipment and pharmaceuticals to office-based physicians in the United
States. The company also distributes medical supplies in Europe through its
World Medical, Inc. subsidiary. In addition, the company is the largest
distributor of medical diagnostic imaging supplies, chemicals, equipment, and
service to the acute care and alternate-care markets through its subsidiary,
Diagnostic Imaging, Inc.
Gulf South Medical Supply, Inc. is the largest national distributor of
medical supplies and related products to the long- term care industry. The
company provides products and services to approximately 10,000 long-term care
facilities in 50 states. The company's customers range from independent nursing
home operators to large national chains offering a broad range of healthcare
services, as well as home healthcare and subacute, rehabilitation and
transitional care providers. Through its 23 full-service regional distribution
centers, the company offers both national coverage to multi-facility customers
and local service to individual facilities and independent operators.
BT Alex. Brown Incorporated and NationsBanc Montgomery Securities acted as
financial advisors to Physician Sales & Service, Inc. and Gulf South Medical
Supply, Inc., respectively.
This news release contains forward-looking statements and information that
are subject to certain risks, trends and uncertainties detailed in the company's
reports filed with the Securities and Exchange Commission, including business
and economic conditions, competitive forces and the ability to integrate
operations successfully, that could cause results to differ materially from
those projected.
<PAGE> 3
PHYSICIAN SALES & SERVICE, INC./GULF SOUTH MEDICAL SUPPLY, INC.
MERGER FACT SHEET
<TABLE>
<CAPTION>
Physician Gulf South Combined
Sales & Medical (PSS World
Service, Inc. Supply, Inc. Medical, Inc.)
<S> <C> <C> <C>
Stock Market and General
Information:
Headquarters Jacksonville Madison Jacksonville
FL MS FL
Employees 2,700 642 3,342
NASDAQ Symbol PSSI GSMS PSSI
Equity Market Value (in millions)(1) $ 936 $ 685 $ 1,620
Stock Price Per Share(1) $ 23.00 $ 40.25 $ 23.00
Fully-Diluted Shares Outstanding
(in millions) 40.7 17.0 70.5
Operations Data:
Sales and Distribution Centers 89 23 112
Customers Served 120,000 10,000 130,000
Sales Representatives 867 114 981
Delivery Vehicles 620 35 655
SKUs 40,000 18,000 ---
Run-Rate Financial Information
(Quarter ended 9/30/97 annualized
dollars in millions): Run-Rate
Revenue Mix:
Physician Supply 66% 7% 51%
Extended Care -- 93% 23%
Imaging 32% -- 24%
Other 2% -- 2%
Run-Rate Revenue $ 1,012.3 $ 293.5 $ 1,305.7
Run-Rate EBITDA(2) $ 53.5 $ 31.4 $ 84.9
Gross Margin 27.4% 22.8% 26.3%
EBITDA Margin 5.3% 10.7% 6.5%
Other Financial Statistics:
Revenue Growth (Fiscal 1994-1997) 23.5% 41.1% 26.4%
EPS Growth (Fiscal 1994-1997) 48.1% 41.9% 44.2%
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Physician Gulf South Combined
Sales & Medical (PSS World
Service, Inc. Supply, Inc. Medical, Inc.)
<S> <C> <C> <C>
Pro Forma Total Debt/Capitalization(3) 35.2% 0.0% 24.5%
Run-Rate EBITDA(2)/Pro Forma
Interest Expense(3) 4.4x NA 6.9x
Days Sales Outstanding 53 66 56
Inventory Turnover 9.0x 7.5x 8.6x
</TABLE>
(1) Based on exchange ratio of 1.75x and PSS closing stock price of $23.00 on
December 12, 1997.
(2) Excludes merger-related and other one-time charges and includes financing
and other interest income.
(3) Pro forma for $125 million senior subordinated notes offering completed
October 1997
Contact:
Physician Sales & Service, Inc., Jacksonville
Patrick C. Kelly, 904/332-3330
or David A. Smith, 904/281-0011
or
Investor Relations:
Tom Crowley, 904/281-0011
or
New York Media Contact:
Sam Ostrow, 203/328-3018
or
Gulf South Medical Supply, Inc., Jackson
Thomas G. Hixon, 601/853-4823
or
